SECOND DIVISION

[G.R. NO. 164652   : June 8, 2007]

THELMA DUMPIT-MURILLO, Petitioner, v. COURT OF APPEALS, ASSOCIATED BROADCASTING COMPANY, JOSE JAVIER AND EDWARD
TAN, Respondents.
DECISION
QUISUMBING, J.:
This petition seeks to reverse and set aside both the Decision1 dated January 30, 2004 of the Court of Appeals in CA-G.R. SP No. 63125 and its
Resolution2 dated June 23, 2004 denying the motion for reconsideration. The Court of Appeals had overturned the Resolution3 dated August 30, 2000
of the National Labor Relations Commission (NLRC) ruling that petitioner was illegally dismissed.
The facts of the case are as follows:
On October 2, 1995, under Talent Contract No. NT95-1805,4 private respondent Associated Broasting Company (ABC) hired petitioner Thelma Dumpit-
Murillo as a newscaster and co-anchor for Balitang-Balita, an early evening news program. The contract was for a period of three months. It was
renewed under Talent Contracts Nos. NT95-1915, NT96-3002, NT98-4984 and NT99-5649.5 In addition, petitioner's services were engaged for the
program "Live on Five." On September 30, 1999, after four years of repeated renewals, petitioner's talent contract expired. Two weeks after the
expiration of the last contract, petitioner sent a letter to Mr. Jose Javier, Vice President for News and Public Affairs of ABC, informing the latter that
she was still interested in renewing her contract subject to a salary increase. Thereafter, petitioner stopped reporting for work. On November 5, 1999,
she wrote Mr. Javier another letter,6 which we quote verbatim:
xxx
Dear Mr. Javier:
On October 20, 1999, I wrote you a letter in answer to your query by way of a marginal note "what terms and conditions" in response to my first letter
dated October 13, 1999. To date, or for more than fifteen (15) days since then, I have not received any formal written reply. xxx
In view hereof, should I not receive any formal response from you until Monday, November 8, 1999, I will deem it as a constructive dismissal of my
services.
xxx
A month later, petitioner sent a demand letter7 to ABC, demanding: (a) reinstatement to her former position; (b) payment of unpaid wages for
services rendered from September 1 to October 20, 1999 and full backwages; (c) payment of 13th month pay, vacation/sick/service incentive leaves
and other monetary benefits due to a regular employee starting March 31, 1996. ABC replied that a check covering petitioner's talent fees for
September 16 to October 20, 1999 had been processed and prepared, but that the other claims of petitioner had no basis in fact or in law.
On December 20, 1999, petitioner filed a complaint8 against ABC, Mr. Javier and Mr. Edward Tan, for illegal constructive dismissal, nonpayment of
salaries, overtime pay, premium pay, separation pay, holiday pay, service incentive leave pay, vacation/sick leaves and 13th month pay in NLRC-NCR
Case No. 30-12-00985-99. She likewise demanded payment for moral, exemplary and actual damages, as well as for attorney's fees.
The parties agreed to submit the case for resolution after settlement failed during the mandatory conference/conciliation. On March 29, 2000, the
Labor Arbiter dismissed the complaint.9
On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August 30, 2000. The NLRC held that an employer-employee relationship existed
between petitioner and ABC; that the subject talent contract was void; that the petitioner was a regular employee illegally dismissed; and that she
was entitled to reinstatement and backwages or separation pay, aside from 13th month pay and service incentive leave pay, moral and exemplary
damages and attorney's fees. It held as follows:
WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is hereby REVERSED/SET ASIDE and a NEW ONE promulgated:
1) declaring respondents to have illegally dismissed complainant from her regular work therein and thus, ordering them to reinstate her in her former
position without loss of seniority right[s] and other privileges and to pay her full backwages, inclusive of allowances and other benefits, including 13th
month pay based on her said latest rate of P28,000.00/mo. from the date of her illegal dismissal on 21 October 1999 up to finality hereof, or at
complainant's option, to pay her separation pay of one (1) month pay per year of service based on said latest monthly rate, reckoned from date of
hire on 30 September 1995 until finality hereof;
2) to pay complainant's accrued SILP [Service Incentive Leave Pay] of 5 days pay per year and 13th month pay for the years 1999, 1998 and 1997
of P19,236.00 and P84,000.00, respectively and her accrued salary from 16 September 1999 to 20 October 1999 of P32,760.00 plus legal interest at
12% from date of judicial demand on 20 December 1999 until finality hereof;
3) to pay complainant moral damages of P500,000.00, exemplary damages of P350,000.00 and 10% of the total of the adjudged monetary awards as
attorney's fees.
Other monetary claims of complainant are dismissed for lack of merit.
SO ORDERED.10
After its motion for reconsideration was denied, ABC elevated the case to the Court of Appeals in a petition for certiorari under Rule 65. The petition
was first dismissed for failure to attach particular documents,11 but was reinstated on grounds of the higher interest of justice.12
Thereafter, the appellate court ruled that the NLRC committed grave abuse of discretion, and reversed the decision of the NLRC.13 The appellate court
reasoned that petitioner should not be allowed to renege from the stipulations she had voluntarily and knowingly executed by invoking the security of
tenure under the Labor Code. According to the appellate court, petitioner was a fixed-term employee and not a regular employee within the ambit of
Article 28014 of the Labor Code because her job, as anticipated and agreed upon, was only for a specified time.15
Aggrieved, petitioner now comes to this Court on a Petition for Review, raising issues as follows:
I.
THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE HONORABLE COURT OF APPEALS, THE DECISION OF WHICH IS NOT IN ACCORD WITH
LAW OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT[;]
II.
THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE NLRC - FIRST DIVISION, ARE "ANTI-REGULARIZATION DEVICES" WHICH MUST BE
STRUCK DOWN FOR REASONS OF PUBLIC POLICY[;]
III.
BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE THREE-MONTH TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE RELATIONSHIP
WAS CREATED AS PROVIDED FOR UNDER ARTICLE 280 OF THE LABOR CODE[;]
IV.
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A REGULAR EMPLOYEE, THERE WAS A DENIAL OF PETITIONER'S RIGHT TO DUE PROCESS
THUS ENTITLING HER TO THE MONEY CLAIMS AS STATED IN THE COMPLAINT[.]16
The issues for our disposition are: (1) whether or not this Court can review the findings of the Court of Appeals; and (2) whether or not under Rule 45
of the Rules of Court the Court of Appeals committed a reversible error in its Decision.
On the first issue, private respondents contend that the issues raised in the instant petition are mainly factual and that there is no showing that the
said issues have been resolved arbitrarily and without basis. They add that the findings of the Court of Appeals are supported by overwhelming wealth
of evidence on record as well as prevailing jurisprudence on the matter.17
Petitioner however contends that this Court can review the findings of the Court of Appeals, since the appellate court erred in deciding a question of
substance in a way which is not in accord with law or with applicable decisions of this Court.18
We agree with petitioner. Decisions, final orders or resolutions of the Court of Appeals in any case - regardless of the nature of the action or
proceeding involved - may be appealed to this Court through a Petition for Review . This remedy is a continuation of the appellate process over the
original case,19 and considering there is no congruence in the findings of the NLRC and the Court of Appeals regarding the status of employment of
petitioner, an exception to the general rule that this Court is bound by the findings of facts of the appellate court,20 we can review such findings.
On the second issue, private respondents contend that the Court of Appeals did not err when it upheld the validity of the talent contracts voluntarily
entered into by petitioner. It further stated that prevailing jurisprudence has recognized and sustained the absence of employer-employee
relationship between a talent and the media entity which engaged the talent's services on a per talent contract basis, citing the case of Sonza v. ABS-
CBN Broasting Corporation.21
Petitioner avers however that an employer-employee relationship was created when the private respondents started to merely renew the contracts
repeatedly fifteen times or for four consecutive years.22
Again, we agree with petitioner. The Court of Appeals committed reversible error when it held that petitioner was a fixed-term employee. Petitioner
was a regular employee under contemplation of law. The practice of having fixed-term contracts in the industry does not automatically make all talent
contracts valid and compliant with labor law. The assertion that a talent contract exists does not necessarily prevent a regular employment status.23
Further, the Sonza  case is not applicable. In Sonza, the television station did not instruct Sonza how to perform his job. How Sonza delivered his lines,
appeared on television, and sounded on radio were outside the television station's control. Sonza had a free hand on what to say or discuss in his
shows provided he did not attack the television station or its interests. Clearly, the television station did not exercise control over the means and
methods of the performance of Sonza's work.24 In the case at bar, ABC had control over the performance of petitioner's work. Noteworthy too, is the
comparatively low P28,000 monthly pay of petitioner25 vis the P300,000 a month salary of Sonza,26 that all the more bolsters the conclusion that
petitioner was not in the same situation as Sonza.
The contract of employment of petitioner with ABC had the following stipulations:
xxx
1. SCOPE OF SERVICES - TALENT agrees to devote his/her talent, time, attention and best efforts in the performance of his/her duties and
responsibilities as Anchor/Program Host/Newscaster of the Program, in accordance with the direction of ABC and/or its authorized representatives.
1.1. DUTIES AND RESPONSIBILITIES - TALENT shall:
A. Render his/her services as a newscaster on the Program;
b. Be involved in news-gathering operations by conducting interviews on - and off-the-air;
c. Participate in live remote coverages when called upon;
d. Be available for any other news assignment, such as writing, research or camera work;
e. Attend production meetings;
f. On assigned days, be at the studios at least one (1) hour before the live telecasts;
g. Be present promptly at the studios and/or other place of assignment at the time designated by ABC;
h. Keep abreast of the news;
i. Give his/her full cooperation to ABC and its duly authorized representatives in the production and promotion of the Program; andcralawlibrary
j. Perform such other functions as may be assigned to him/her from time to time.
xxx
1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER RULES AND REGULATIONS - TALENT agrees that he/she will promptly and faithfully
comply with the requests and instructions, as well as the program standards, policies, rules and regulations of ABC, the KBP and the government or
any of its agencies and instrumentalities.27
xxx
In Manila Water Company, Inc. v. Pena,28 we said that the elements to determine the existence of an employment 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 most important
element is the employer's control of the employee's conduct, not only as to the result of the work to be done, but also as to the means and methods
to accomplish it.29
The duties of petitioner as enumerated in her employment contract indicate that ABC had control over the work of petitioner. Aside from control,
ABC also dictated the work assignments and payment of petitioner's wages. ABC also had power to dismiss her. All these being present, clearly, there
existed an employment relationship between petitioner and ABC.
Concerning regular employment, the law provides for two kinds of employees, namely: (1) those who are engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether
continuous or broken, with respect to the activity in which they are employed.30 In other words, regular status arises from either the nature of work of
the employee or the duration of his employment.31 In Benares v. Pancho,32 we very succinctly said:
'[T]he primary standard for determining regular employment is the reasonable connection between the particular activity performed by the
employee vis - à -vis the usual trade or business of the employer. This connection can be determined by considering the nature of the work
performed and its relation to the scheme of the particular business or trade in its entirety. If the employee has been performing the job for at least a
year, even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered regular, but only with
respect to such activity and while such activity exists.33
In our view, the requisites for regularity of employment have been met in the instant case. Gleaned from the description of the scope of services
aforementioned, petitioner's work was necessary or desirable in the usual business or trade of the employer which includes, as a pre-condition for its
enfranchisement, its participation in the government's news and public information dissemination. In addition, her work was continuous for a period
of four years. This repeated engagement under contract of hire is indicative of the necessity and desirability of the petitioner's work in private
respondent ABC's business.34
The contention of the appellate court that the contract was characterized by a valid fixed-period employment is untenable. For such contract to be
valid, it should be shown that the fixed period was knowingly and voluntarily agreed upon by the parties. There should have been no force, duress or
improper pressure brought to bear upon the employee; neither should there be any other circumstance that vitiates the employee's consent.35 It
should satisfactorily appear that the employer and the employee dealt with each other on more or less equal terms with no moral dominance being
exercised by the employer over the employee.36 Moreover, fixed-term employment will not be considered valid where, from the circumstances, it is
apparent that periods have been imposed to preclude acquisition of tenurial security by the employee.37
In the case at bar, it does not appear that the employer and employee dealt with each other on equal terms. Understandably, the petitioner could not
object to the terms of her employment contract because she did not want to lose the job that she loved and the workplace that she had grown
accustomed to,38 which is exactly what happened when she finally manifested her intention to negotiate. Being one of the numerous
newscasters/broasters of ABC and desiring to keep her job as a broasting practitioner, petitioner was left with no choice but to affix her signature of
conformity on each renewal of her contract as already prepared by private respondents; otherwise, private respondents would have simply refused to
renew her contract. Patently, the petitioner occupied a position of weakness vis - à-vis the employer. Moreover, private respondents' practice of
repeatedly extending petitioner's 3-month contract for four years is a circumvention of the acquisition of regular status. Hence, there was no valid
fixed-term employment between petitioner and private respondents.
While this Court has recognized the validity of fixed-term employment contracts in a number of cases, it has consistently emphasized that when the
circumstances of a case show that the periods were imposed to block the acquisition of security of tenure, they should be struck down for being
contrary to law, morals, good customs, public order or public policy.39
As a regular employee, petitioner is entitled to security of tenure and can be dismissed only for just cause and after due compliance with procedural
due process. Since private respondents did not observe due process in constructively dismissing the petitioner, we hold that there was an illegal
dismissal.
WHEREFORE, the challenged Decision dated January 30, 2004 and Resolution dated June 23, 2004 of the Court of Appeals in CA-G.R. SP No. 63125,
which held that the petitioner was a fixed-term employee, are REVERSED and SET ASIDE. The NLRC decision is AFFIRMED.
Costs against private respondents.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
 SECOND DIVISION
G.R. No. 204944-45 December 3, 2014
FUJI TELEVISION NETWORK, INC., Petitioner,
vs.
ARLENE S. ESPIRITU, Respondent.

DECISION

LEONEN, J.:

It is the burden of the employer to prove that a person whose services it pays for is an independent contractor rather than a regular employee with or
without a fixed term. That a person has a disease does not per se entitle the employer to terminate his or her services. Termination is the last resort.
At the very least, a competent public health authority must certify that the disease cannot be cured within six ( 6) months, even with appropriate
treatment.

We decide this petition for review1 on certiorari filed by Fuji Television Network, Inc., seeking the reversal of the Court of Appeals’ Decision2 dated
June 25, 2012, affirming with modification the decision3 of the National Labor Relations Commission.

In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc. ("Fuji") asa news correspondent/producer4 "tasked to report
Philippine news to Fuji through its Manila Bureau field office."5 Arlene’s employment contract initially provided for a term of one (1) year but was
successively renewed on a yearly basis with salary adjustment upon every renewal.6 Sometime in January 2009, Arlenewas diagnosed with lung
cancer.7 She informed Fuji about her condition. In turn, the Chief of News Agency of Fuji, Yoshiki Aoki, informed Arlene "that the company will have a
problem renewing her contract"8 since it would be difficult for her to perform her job.9 She "insisted that she was still fit to work as certified by her
attending physician."10

After several verbal and written communications,11 Arlene and Fuji signed a non-renewal contract on May 5, 2009 where it was stipulated that her
contract would no longer be renewed after its expiration on May 31, 2009. The contract also provided that the parties release each other from
liabilities and responsibilities under the employment contract.12

In consideration of the non-renewal contract, Arlene "acknowledged receipt of the total amount of US$18,050.00 representing her monthly salary
from March 2009 to May 2009, year-end bonus, mid-year bonus, and separation pay."13 However, Arlene affixed her signature on the nonrenewal
contract with the initials "U.P." for "under protest."14

On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a complaint for illegal dismissal and attorney’s fees with the National
Capital Region Arbitration Branch of the National Labor Relations Commission. She alleged that she was forced to sign the nonrenewal contract when
Fuji came to know of her illness and that Fuji withheld her salaries and other benefits for March and April 2009 when she refused to sign.15

Arlene claimed that she was left with no other recourse but to sign the non-renewal contract, and it was only upon signing that she was given her
salaries and bonuses, in addition to separation pay equivalent to four (4) years.16

In the decision17 dated September 10, 2009, Labor Arbiter Corazon C. Borbolla dismissed Arlene’s complaint.18 Citing Sonza v. ABS-CBN19 and
applying the four-fold test, the Labor Arbiter held that Arlene was not Fuji’s employee but an independent contractor.20

Arlene appealed before the National Labor Relations Commission. In its decision dated March 5, 2010, the National Labor Relations Commission
reversed the Labor Arbiter’s decision.21 It held that Arlene was a regular employee with respect to the activities for which she was employed since
she continuously rendered services that were deemednecessary and desirable to Fuji’s business.22 The National Labor Relations Commission ordered
Fuji to pay Arlene backwages, computed from the date of her illegal dismissal.23 The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered GRANTING the instant appeal. The Decision of the Labor Arbiter dated 19 September
2009 is hereby REVERSED and SET ASIDE, and a new one is issued ordering respondents-appellees to pay complainant-appellant backwages computed
from the date of her illegal dismissal until finality of this Decision.

SO ORDERED.24

Arlene and Fuji filed separat emotions for reconsideration.25 Both motions were denied by the National Labor Relations Commission for lack of merit
in the resolution dated April 26, 2010.26 From the decision of the National Labor Relations Commission, both parties filed separate petitions for
certiorari27 before the Court of Appeals. The Court of Appeals consolidated the petitions and considered the following issues for resolution:

1) Whether or not Espirituis a regular employee or a fixed-term contractual employee;

2) Whether or not Espiritu was illegally dismissed; and

3) Whether or not Espirituis entitled to damages and attorney’s fees.28

In the assailed decision, the Court of Appeals affirmed the National Labor Relations Commission with the modification that Fuji immediately reinstate
Arlene to her position as News Producer without loss of seniority rights, and pay her backwages, 13th-month pay, mid-year and year-end bonuses,
sick leave and vacation leave with pay until reinstated, moral damages, exemplary damages, attorney’sfees, and legal interest of 12% per annum of
the total monetary awards.29 The Court of Appeals ruled that:

WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki Aoki is DENIED and the petition of Arlene S. Espiritu is
GRANTED. Accordingly, the Decision dated March 5, 2010 of the National Labor Relations Commission, 6th Division in NLRC NCR Case No. 05-06811-
09 and its subsequent Resolution dated April 26, 2010 are hereby AFFIRMED with MODIFICATIONS, as follows:
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu to her position as News Producer without loss of seniority rights
and privileges and to pay her the following:

1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009 (the date of dismissal), until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal, until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per year from the date of dismissal, until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per year from the date of dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from date of dismissal, until reinstated.
7. The amount of ₱100,000.00 as moral damages;
8. The amount of ₱50,000.00 as exemplary damages;
9. Attorney’s fees equivalent to 10% of the total monetary awards herein stated; and
10. Legal interest of twelve percent (12%) per annum of the total monetary awards computed from May 5, 2009, until their full satisfaction.

The Labor Arbiter is hereby DIRECTED to make another recomputation of the above monetary awards consistent with the above directives.

SO ORDERED.30

In arriving at the decision, the Court of Appeals held that Arlene was a regular employee because she was engaged to perform work that was
necessary or desirable in the business of Fuji,31 and the successive renewals of her fixed-term contract resulted in regular employment.32

According to the Court of Appeals, Sonzadoes not apply in order to establish that Arlene was an independent contractor because she was not
contracted on account of any peculiar ability, special talent, or skill.33 The fact that everything used by Arlene in her work was owned by Fuji negated
the idea of job contracting.34

The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed to comply with the requirements of substantive and procedural
due process necessary for her dismissal since she was a regular employee.35

The Court of Appeals found that Arlene did not sign the non-renewal contract voluntarily and that the contract was a mere subterfuge by Fuji to
secure its position that it was her choice not to renew her contract. She was left with no choice since Fuji was decided on severing her employment.36

Fuji filed a motion for reconsideration that was denied in the resolution37 dated December 7, 2012 for failure to raise new matters.38

Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals erred in affirming with modification the National Labor Relations
Commission’s decision, holding that Arlene was a regular employee and that she was illegally dismissed. Fuji also questioned the award of monetary
claims, benefits, and damages.39

Fuji points out that Arlene was hired as a stringer, and it informed her that she would remain one.40 She was hired as an independent contractor as
defined in Sonza.41 Fuji had no control over her work.42 The employment contracts were executed and renewed annually upon Arlene’s insistence to
which Fuji relented because she had skills that distinguished her from ordinary employees.43 Arlene and Fuji dealt on equal terms when they
negotiated and entered into the employment contracts.44 There was no illegal dismissal because she freely agreed not to renew her fixed-term
contract as evidenced by her e-mail correspondences with Yoshiki Aoki.45 In fact, the signing of the non-renewal contract was not necessary to
terminate her employment since "such employment terminated upon expiration of her contract."46 Finally, Fuji had dealt with Arlene in good faith,
thus, she should not have been awarded damages.47

Fuji alleges that it did not need a permanent reporter since the news reported by Arlene could easily be secured from other entities or from the
internet.48 Fuji "never controlled the manner by which she performed her functions."49 It was Arlene who insisted that Fuji execute yearly fixed-term
contracts so that she could negotiate for annual increases in her pay.50

Fuji points out that Arlene reported for work for only five (5) days in February 2009, three (3) days in March 2009, and one (1) day in April 2009.51
Despite the provision in her employment contract that sick leaves in excess of 30 days shall not be paid, Fuji paid Arlene her entire salary for the
months of March, April, and May; four(4) months of separation pay; and a bonus for two and a half months for a total of US$18,050.00.52 Despite
having received the amount of US$18,050.00, Arlene still filed a case for illegal dismissal.53

Fuji further argues that the circumstances would show that Arlene was not illegally dismissed. The decision tonot renew her contract was mutually
agreed upon by the parties as indicated in Arlene’s e-mail54 dated March 11, 2009 where she consented to the non-renewal of her contract but
refused to sign anything.55 Aoki informed Arlene in an e-mail56 dated March 12, 2009 that she did not need to sign a resignation letter and that Fuji
would pay Arlene’s salary and bonus until May 2009 as well as separation pay.57

Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal agreement that she agreed to sign this time.58 This attached version
contained a provision that Fuji shall re-hire her if she was still interested to work for Fuji.59 For Fuji, Arlene’s e-mail showed that she had the power to
bargain.60

Fuji then posits that the Court of Appeals erred when it held that the elements of an employer-employee relationship are present, particularly that of
control;61 that Arlene’s separation from employment upon the expiration of her contract constitutes illegal dismissal;62 that Arlene is entitled to
reinstatement;63 and that Fuji is liable to Arlene for damages and attorney’s fees.64

This petition for review on certiorari under Rule 45 was filed on February 8, 2013.65 On February 27, 2013, Arlene filed a manifestation66 stating that
this court may not take jurisdiction over the case since Fuji failed to authorize Corazon E. Acerden to sign the verification.67 Fuji filed a comment on
the manifestation68 on March 9, 2013.

Based on the arguments of the parties, there are procedural and substantive issues for resolution:
I. Whether the petition for review should be dismissed as Corazon E. Acerden, the signatory of the verification and certification of non forum shopping
of the petition, had no authority to sign the verification and certification on behalf of Fuji;

II. Whether the Court of Appeals correctly determined that no grave abuse of discretion was committed by the National Labor Relations Commission
when it ruled that Arlene was a regular employee, not an independent contractor, and that she was illegally dismissed; and

III. Whether the Court of Appeals properly modified the National Labor Relations Commission’s decision by awarding reinstatement, damages, and
attorney’s fees.

The petition should be dismissed.

Validity of the verification and certification against forum shopping

In its comment on Arlene’s manifestation, Fuji alleges that Corazon was authorized to sign the verification and certification of non-forum shopping
because Mr. Shuji Yano was empowered under the secretary’s certificate to delegate his authority to sign the necessary pleadings, including the
verification and certification against forum shopping.69

On the other hand, Arlene points outthat the authority given to Mr. Shuji Yano and Mr. Jin Eto in the secretary’s certificate is only for the petition for
certiorari before the Court of Appeals.70 Fuji did not attach any board resolution authorizing Corazon orany other person tofile a petition for review
on certiorari with this court.71 Shuji Yano and Jin Eto could not re-delegate the power thatwas delegated to them.72 In addition, the special power of
attorney executed by Shuji Yano in favor of Corazon indicated that she was empowered to sign on behalf of Shuji Yano, and not on behalf of Fuji.73

The Rules of Court requires the

submission of verification and
certification against forum shopping

Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of verification, while Section 5 of the same rule provides the
requirement of certification against forum shopping. These sections state:

SEC. 4. Ver if ica tio n. — Except when otherwise specifically required by law or rule, pleadings need not be under oath, verified or accompanied by
affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his knowledge and
belief.

A pleading required to be verifiedwhich containsa verification based on "information and belief," or upon "knowledge, information and belief," or
lacks a proper verification, shall be treated as an unsigned pleading.

SEC. 5. Certification against forum shopping.— The plaintiff or principal party shall certify under oath in the complaint orother initiatory pleading
asserting a claim for relief or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced
any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other
action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he
should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to
the court wherein his aforesaid complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be
cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings therein shall constitute indirect contempt ofcourt, without prejudice to the
corresponding administrative and criminalactions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the
same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions.

Section 4(e) of Rule 4574 requires that petitions for review should "contain a sworn certification against forum shopping as provided in the last
paragraph of section 2, Rule 42." Section 5 of the same rule provides that failure to comply with any requirement in Section 4 is sufficient ground to
dismiss the petition.

Effects of non-compliance

Uy v. Landbank75 discussed the effect of non-compliance with regard to verification and stated that:

[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such requirement is simply a condition affecting the form of
pleading, the non-compliance of which does not necessarily render the pleading fatally defective. Verification is simply intended to secure an
assurance that the allegations in the pleading are true and correct and not the product of the imagination or a matter of speculation, and that the
pleading is filed in good faith. The court may order the correction of the pleading if the verification is lacking or act on the pleading although it is not
verified, if the attending circumstances are such that strict compliance with the rules may be dispensed with inorder that the ends of justice may
thereby be served.76 (Citations omitted)

Shipside Incorporated v. Court of Appeals77 cited the discussion in Uy and differentiated its effect from non-compliance with the requirement of
certification against forum shopping:

On the other hand, the lack of certification against forum shopping is generally not curable by the submission thereof after the filing of the petition.
Section 5, Rule 45 of the 1997 Rules of Civil Procedure provides that the failure of the petitioner tosubmit the required documents that should
accompany the petition, including the certification against forum shopping, shall be sufficient ground for the dismissal thereof. The same rule applies
to certifications against forum shopping signed by a person on behalf of a corporation which are unaccompanied by proof that said signatory is
authorized to file a petition on behalf of the corporation.78 (Emphasis supplied) Effects of substantial compliance with the requirement of verification
and certification against forum shopping

Although the general rule is that failure to attach a verification and certification against forum shopping isa ground for dismissal, there are cases
where this court allowed substantial compliance.

In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted the required certification one day after filing his electoral protest.80 This court
considered the subsequent filing as substantial compliance since the purpose of filing the certification is to curtail forum shopping.81

In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Peña signed the verification and certification against forum shopping but failed to attach the
board resolution indicating her authority to sign.83 In a motion for reconsideration, LDP Marketing attached the secretary’s certificate quoting the
board resolution that authorized Dela Peña.84 Citing Shipside, this court deemed the belated submission as substantial compliance since LDP
Marketing complied with the requirement; what it failed to do was to attach proof of Dela Peña’s authority to sign.85 Havtor Management Phils., Inc.
v. National Labor Relations Commission86 and General Milling Corporation v. National Labor Relations Commission87 involved petitions that were
dismissed for failure to attach any document showing that the signatory on the verification and certification against forum-shopping was
authorized.88 In both cases, the secretary’s certificate was attached to the motion for reconsideration.89 This court considered the subsequent
submission of proof indicating authority to sign as substantial compliance.90 Altres v. Empleo91 summarized the rules on verification and certification
against forum shopping in this manner:

For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential pronouncements . . . respecting non-compliance with the
requirement on, or submission of defective, verification and certification against forum shopping:

1) A distinction must be made between non-compliance with the requirement on or submission of defective verification, and noncompliance with the
requirement on or submission of defective certification against forum shopping.

2) As to verification, non-compliance therewith or a defect therein does not necessarily render the pleading fatally defective. The court may order its
submission or correction or act on the pleading if the attending circumstances are such that strict compliance with the Rule may be dispensed with in
order that the ends of justice may be served thereby.

3) Verification is deemed substantially complied with when one who has ample knowledge to swear to the truth of the allegations in the complaint or
petition signs the verification, and when matters alleged in the petition have been made in good faith or are true and correct.

4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in verification, is generally not curable by its
subsequent submission or correction thereof, unless there is a need to relax the Rule on the ground of "substantial compliance" or presence of
"special circumstances or compelling reasons."

5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a case; otherwise, those who did not sign will be
dropped as parties to the case. Under reasonable or justifiable circumstances, however, as when all the plaintiffs or petitioners share a common
interest and invoke a common cause of action or defense, the signature of only one of them inthe certification against forum shopping substantially
complies with the Rule.

6) Finally, the certification against forum shopping must be executed by the party-pleader, not by his counsel. If, however, for reasonable or justifiable
reasons, the party-pleader is unable to sign, he must execute a Special Power of Attorney designating his counsel of record to sign on his behalf.92

There was substantial compliance

by Fuji Television Network, Inc.

Being a corporation, Fuji exercises its power to sue and be sued through its board of directors or duly authorized officers and agents. Thus, the
physical act of signing the verification and certification against forum shopping can only be done by natural persons duly authorized either by the
corporate by-laws or a board resolution.93

In its petition for review on certiorari, Fuji attached Hideaki Ota’s secretary’s certificate,94 authorizing Shuji Yano and Jin Eto to represent and sign for
and on behalf of Fuji.95 The secretary’s certificate was duly authenticated96 by Sulpicio Confiado, Consul-General of the Philippines in Japan. Likewise
attached to the petition is the special power of attorney executed by Shuji Yano, authorizing Corazon to sign on his behalf.97 The verification and
certification against forum shopping was signed by Corazon.98

Arlene filed the manifestation dated February 27, 2013, arguing that the petition for review should be dismissed because Corazon was not duly
authorized to sign the verification and certification against forum shopping.

Fuji filed a comment on Arlene’s manifestation, stating that Corazon was properly authorized to sign. On the basis of the secretary’s certificate, Shuji
Yano was empowered to delegate his authority.

Quoting the board resolution dated May 13, 2010, the secretary's certificate states:

(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals, against Philippines’ National Labor Relations Commission ("NLRC") and
Arlene S. Espiritu, pertaining to NLRC-NCR Case No. LAC 00-002697-09, RAB No. 05-06811-00 and entitled "Arlene S. Espiritu v. Fuji Television
Network, Inc./Yoshiki Aoki", and participate in any other subsequent proceeding that may necessarily arise therefrom, including but not limited to the
filing of appeals in the appropriate venue;
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized, to verify and execute the certification against nonforum shopping
which may be necessary or required to be attached to any pleading to [sic] submitted to the Court of Appeals; and the authority to so verify and
certify for the Corporation in favor of the said persons shall subsist and remain effective until the termination of the said case;

....

(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized, to represent and appear on behalf the [sic] Corporation in all stages of
the [sic] this case and in any other proceeding that may necessarily arise thereform [sic], and to act in the Corporation’s name, place and stead to
determine, propose, agree, decide, do, and perform any and all of the following:

1. The possibility of amicable settlement or of submission to alternative mode of dispute resolution;

2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and documents; and
5. Such other matters as may aid in the prompt disposition of the action.99 (Emphasis in the original; Italics omitted)

Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rollera as his attorneys-in-fact.100 The
special power of attorney states:

That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba, Minato-Ku, Tokyo, 137-8088 Japan, and being the
representative of Fuji TV, INc., [sic] (evidenced by the attached Secretary’s Certificate) one of the respondents in NLRC-NCR Case No. 05-06811-00
entitled "Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki", and subsequently docketed before the Court of Appeals asC.A. G.R. S.P. No.
114867 (Consolidated with SP No. 114889) do hereby make, constitute and appoint Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rolleraas my true
and lawful attorneys-infact for me and my name, place and stead to act and represent me in the above-mentioned case, with special power to make
admission/s and stipulations and/or to make and submit as well as to accept and approve compromise proposals upon such terms and conditions and
under such covenants as my attorney-in-fact may deem fit, and to engage the services of Villa Judan and Cruz Law Officesas the legal counsel to
represent the Company in the Supreme Court;

The said Attorneys-in-Fact are hereby further authorized to make, sign, execute and deliver such papers ordocuments as may be necessary in
furtherance of the power thus granted, particularly to sign and execute the verification and certification of non-forum shopping needed to be
filed.101 (Emphasis in the original)

In its comment102 on Arlene’s manifestation, Fuji argues that Shuji Yano could further delegate his authority because the board resolution
empowered him to "act in the Corporation’s name, place and stead to determine, propose, agree, decided [sic], do and perform any and all of the
following: . . . such other matters as may aid in the prompt disposition of the action."103 To clarify, Fuji attached a verification and certification
against forum shopping, but Arlene questions Corazon’s authority to sign. Arlene argues that the secretary’s certificate empowered Shuji Yano to file a
petition for certiorari before the Court of Appeals, and not a petition for review before this court, and that since Shuji Yano’s authority was delegated
to him, he could not further delegate such power. Moreover, Corazon was representing Shuji Yano in his personal capacity, and not in his capacity as
representative of Fuji.

A review of the board resolution quoted in the secretary’s certificate shows that Fuji shall "file a Petition for Certiorari with the Court of Appeals"104
and "participate in any other subsequent proceeding that may necessarily arise therefrom, including but not limited to the filing of appeals in the
appropriate venue,"105 and that Shuji Yano and Jin Eto are authorized to represent Fuji "in any other proceeding that may necessarily arise thereform
[sic]."106 As pointed out by Fuji, Shuji Yano and Jin Eto were also authorized to "act in the Corporation’s name, place and stead to determine,
propose, agree, decide, do, and perform anyand all of the following: . . . 5. Such other matters as may aid in the prompt disposition of the action."107

Considering that the subsequent proceeding that may arise from the petition for certiorari with the Court of Appeals is the filing of a petition for
review with this court, Fuji substantially complied with the procedural requirement.

On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article 1892 of the Civil Code of the Philippines states:

ART. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the
substitute:

(1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent. All acts
of the substitute appointed against the prohibition of the principal shall be void.

The secretary’s certificate does not state that Shuji Yano is prohibited from appointing a substitute. In fact, heis empowered to do acts that will aid in
the resolution of this case.

This court has recognized that there are instances when officials or employees of a corporation can sign the verification and certification against
forum shopping without a board resolution. In Cagayan Valley Drug Corporation v. CIR,108 it was held that:

In sum, we have held that the following officials or employees of the company can sign the verification and certification without need of a board
resolution: (1) the Chairperson of the Board of Directors, (2) the President of a corporation, (3) the General Manager or Acting General Manager, (4)
Personnel Officer, and (5) an Employment Specialist in a labor case.

While the above cases109 do not provide a complete listing of authorized signatories to the verification and certification required by the rules, the
determination of the sufficiency of the authority was done on a case to case basis. The rationale applied in the foregoing cases is to justify the
authority of corporate officers or representatives of the corporation to sign the verification or certificate against forum shopping, being ‘in a position
to verify the truthfulness and correctness of the allegations in the petition.’110
Corazon’s affidavit111 states that she is the "office manager and resident interpreter of the Manila Bureau of Fuji Television Network, Inc."112 and
that she has "held the position for the last twenty-three years."113

As the office manager for 23 years,Corazon can be considered as having knowledge of all matters in Fuji’s Manila Bureau Office and is in a position to
verify "the truthfulness and the correctness of the allegations in the Petition."114

Thus, Fuji substantially complied with the requirements of verification and certification against forum shopping.

Before resolving the substantive issues in this case, this court will discuss the procedural parameters of a Rule 45 petition for review in labor cases.

II

Procedural parameters of petitions for review in labor cases

Article 223 of the Labor Code115 does not provide any mode of appeal for decisions of the National Labor Relations Commission. It merely states that
"[t]he decision of the Commission shall be final and executory after ten (10) calendar days from receipt thereof by the parties." Being final, it is no
longer appealable. However, the finality of the National Labor Relations Commission’s decisions does not mean that there is no more recourse for the
parties.

In St. Martin Funeral Home v. National Labor Relations Commission,116 this court cited several cases117 and rejected the notion that this court had
no jurisdiction to review decisions of the National Labor Relations Commission. It stated that this court had the power to review the acts of the
National Labor Relations Commission to see if it kept within its jurisdiction in deciding cases and alsoas a form of check and balance.118 This court
then clarified that judicial review of National Labor Relations Commission decisions shall be by way of a petition for certiorari under Rule 65. Citing the
doctrine of hierarchy of courts, it further ruled that such petitions shall be filed before the Court of Appeals. From the Court of Appeals, an aggrieved
party may file a petition for review on certiorari under Rule 45.

A petition for certiorari under Rule 65 is an original action where the issue is limited to grave abuse of discretion. As an original action, it cannot be
considered as a continuation of the proceedings of the labor tribunals.

On the other hand, a petition for review on certiorari under Rule 45 is a mode of appeal where the issue is limited to questions of law. In labor cases, a
Rule 45 petition is limited toreviewing whether the Court of Appeals correctly determined the presence or absence of grave abuse of discretion and
deciding other jurisdictional errors of the National Labor Relations Commission.119

In Odango v. National Labor Relations Commission,120 this court explained that a petition for certiorari is an extraordinary remedy that is "available
only and restrictively in truly exceptional cases"121 and that its sole office "is the correction of errors of jurisdiction including commission of grave
abuse of discretion amounting to lack or excess of jurisdiction."122 A petition for certiorari does not include a review of findings of fact since the
findings of the National Labor Relations Commission are accorded finality.123 In cases where the aggrieved party assails the National Labor Relations
Commission’s findings, he or she must be able to show that the Commission "acted capriciously and whimsically or in total disregard of evidence
material to the controversy."124

When a decision of the Court of Appeals under a Rule 65 petition is brought to this court by way of a petition for review under Rule 45, only questions
of law may be decided upon. As held in Meralco Industrial v. National Labor Relations Commission:125

This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court ina petition for review on certiorari under Rule 45 of the
Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are completely devoid of
support from the evidence on record, or the assailed judgment is based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial
agencies like the NLRC, when affirmed by the Court of Appeals, are conclusive upon the parties and binding on this Court.126

Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is instructive on the parameters of judicial review under Rule 45:

As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we discussed the particular parameters of a Rule 45 appeal from the
CA’s Rule 65 decision on a labor case, as follows:

In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the review for jurisdictional error that we undertake
under Rule 65. Furthermore, Rule 45 limits us to the review of questions of law raised against the assailed CA decision. In ruling for legal correctness,
we have to view the CA decision in the same context that the petition for certiorari it ruled upon was presented to it; we have to examine the CA
decision from the prism of whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC decision before it, not on
the basis of whether the NLRC decision on the merits of the case was correct. In other words, we have to be keenly aware that the CA undertook a
Rule 65 review, not a review on appeal, of the NLRC decision challenged before it.129 (Emphasis in the original)

Justice Brion’s dissenting opinion in Abott Laboratories, PhiIippines v. Aicaraz130 discussed that in petitions for review under Rule 45, "the Court
simply determines whether the legal correctness of the CA’s finding that the NLRC ruling . . . had basis in fact and in Iaw."131 In this kind of petition,
the proper question to be raised is, "Did the CA correctly determine whether the NLRC committed grave abuse of discretion in ruling on the case?"132

Justice Brion’s dissenting opinion also laid down the following guidelines:

If the NLRC ruling has basis in the evidence and the applicable law and jurisprudence, then no grave abuse of discretion exists and the CA should so
declare and, accordingly, dismiss the petition. If grave abuse of discretion exists, then the CA must grant the petition and nullify the NLRC ruling,
entering at the same time the ruling that isjustified under the evidence and the governing law, rules and jurisprudence. In our Rule 45 review, this
Court must denythe petition if it finds that the CA correctly acted.133 (Emphasis in the original)

These parameters shall be used in resolving the substantive issues in this petition.
III

Determination of employment status; burden of proof

In this case, there is no question thatArlene rendered services to Fuji. However, Fuji alleges that Arlene was an independent contractor, while Arlene
alleges that she was a regular employee. To resolve this issue, we ascertain whether an employer-employee relationship existed between Fuji and
Arlene.

This court has often used the four-fold test to determine the existence of an employer-employee relationship. Under the four-fold test, the "control
test" is the most important.134 As to how the elements in the four-fold test are proven, this court has discussed that:

[t]here is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant evidence to prove the relationship may be
admitted. Identification cards, cash vouchers, social security registration, appointment letters or employment contracts, payrolls, organization charts,
and personnel lists, serve as evidence of employee status.135

If the facts of this case vis-à-vis the four-fold test show that an employer-employee relationship existed, we then determine the status of Arlene’s
employment, i.e., whether she was a regular employee. Relative to this, we shall analyze Arlene’s fixed-term contract and determine whether it
supports her argument that she was a regular employee, or the argument of Fuji that she was an independent contractor. We shall scrutinize whether
the nature of Arlene’s work was necessary and desirable to Fuji’s business or whether Fuji only needed the output of her work. If the circumstances
show that Arlene’s work was necessary and desirable to Fuji, then she is presumed to be a regular employee. The burden of proving that she was an
independent contractor lies with Fuji.

In labor cases, the quantum of proof required is substantial evidence.136 "Substantial evidence" has been defined as "such amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion."137

If Arlene was a regular employee, we then determine whether she was illegally dismissed. In complaints for illegal dismissal, the burden of proof is on
the employee to prove the fact of dismissal.138 Once the employee establishes the fact of dismissal, supported by substantial evidence, the burden of
proof shifts tothe employer to show that there was a just or authorized cause for the dismissal and that due process was observed.139

IV

Whether the Court of Appeals correctly affirmed the National Labor

Relations Commission’s finding that Arlene was a regular employee

Fuji alleges that Arlene was anindependent contractor, citing Sonza v. ABS-CBN and relying on the following facts: (1) she was hired because of her
skills; (2) her salary was US$1,900.00, which is higher than the normal rate; (3) she had the power to bargain with her employer; and (4) her contract
was for a fixed term. According to Fuji, the Court of Appeals erred when it ruled that Arlene was forcedto sign the non-renewal agreement,
considering that she sent an email with another version of the non-renewal agreement.140 Further, she is not entitled tomoral damages and
attorney’s fees because she acted in bad faith when she filed a labor complaint against Fuji after receiving US$18,050.00 representing her salary and
other benefits.141 Arlene argues that she was a regular employee because Fuji had control and supervision over her work. The news events that she
covered were all based on the instructions of Fuji.142 She maintains that the successive renewal of her employment contracts for four (4) years
indicates that her work was necessary and desirable.143 In addition, Fuji’s payment of separation pay equivalent to one (1) month’s pay per year of
service indicates that she was a regular employee.144 To further support her argument that she was not an independent contractor, she states that
Fuji owns the laptop computer and mini-camera that she used for work.145 Arlene also argues that Sonza is not applicable because she was a plain
reporter for Fuji, unlike Jay Sonza who was a news anchor, talk show host, and who enjoyed a celebrity status.146 On her illness, Arlene points
outthat it was not a ground for her dismissal because her attending physician certified that she was fit to work.147

Arlene admits that she signed the non-renewal agreement with quitclaim, not because she agreed to itsterms, but because she was not in a position
to reject the non-renewal agreement. Further, she badly needed the salary withheld for her sustenance and medication.148 She posits that her
acceptance of separation pay does not bar filing of a complaint for illegal dismissal.149

Article 280 of the Labor Code provides that:

Art. 280. Regular and casual employment.The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph; Provided, That, any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which heis
employed and his employment shall continue while such activity exist.

This provision classifies employees into regular, project, seasonal, and casual. It further classifies regular employees into two kinds: (1) those "engaged
to perform activities which are usually necessary or desirable in the usual business or trade of the employer"; and (2) casual employees who have
"rendered at least one year of service, whether such service is continuous or broken."

Another classification of employees, i.e., employees with fixed-term contracts, was recognized in Brent School, Inc. v. Zamora150 where this court
discussed that:
Logically, the decisive determinant in the term employment should not be the activities that the employee is called upon to perform, but the day
certain agreed upon by the parties for the commencement and termination of their employment relationship, a day certainbeing understood to be
"that which must necessarily come, although it may not be known when."151 (Emphasis in the original)

This court further discussed that there are employment contracts where "a fixed term is an essential and natural appurtenance"152 such as overseas
employment contracts and officers in educational institutions.153

Distinctions among fixed-term

employees, independent contractors,
and regular employees

GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed term contracts laid down in Brentin the following manner:

Cognizant of the possibility of abuse in the utilization of fixed term employment contracts, we emphasized in Brentthat where from the circumstances
it is apparent that the periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down as
contrary to public policy or morals. We thus laid down indications or criteria under which "term employment" cannot be said to be in circumvention
of the law on security of tenure, namely:

1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force, duress, or improper pressure being
brought to bear upon the employee and absent any other circumstances vitiating his consent; or

2) It satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised
by the former or the latter.

These indications, which must be read together, make the Brent doctrine applicable only in a few special cases wherein the employer and employee
are on more or less in equal footing in entering into the contract. The reason for this is evident: whena prospective employee, on account of special
skills or market forces, is in a position to make demands upon the prospective employer, such prospective employee needs less protection than the
ordinary worker. Lesser limitations on the parties’ freedom of contract are thus required for the protection of the employee.155 (Citations omitted)

For as long as the guidelines laid down in Brentare satisfied, this court will recognize the validity of the fixed-term contract.

In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixedterm employment of petitioners because from the time they were hired, they were
informed that their engagement was for a specific period. This court stated that:

[s]imply put, petitioners were notregular employees. While their employment as mixers, packers and machine operators was necessary and desirable
in the usual business ofrespondent company, they were employed temporarily only, during periods when there was heightened demand for
production. Consequently, there could have been no illegal dismissal when their services were terminated on expiration of their contracts. There was
even no need for notice of termination because they knew exactly when their contracts would end. Contracts of employment for a fixed period
terminate on their own at the end of such period.

Contracts of employment for a fixed period are not unlawful. What is objectionable is the practice of some scrupulous employers who try to
circumvent the law protecting workers from the capricious termination of employment.157 (Citation omitted)

Caparoso v. Court of Appeals158 upheld the validity of the fixed-term contract of employment. Caparoso and Quindipan were hired as delivery men
for three (3) months. At the end of the third month, they were hired on a monthly basis. In total, they were hired for five (5) months. They filed a
complaint for illegal dismissal.159 This court ruled that there was no evidence indicating that they were pressured into signing the fixed-term
contracts. There was likewise no proof that their employer was engaged in hiring workers for five (5) months onlyto prevent regularization. In the
absence of these facts, the fixed-term contracts were upheld as valid.160 On the other hand, an independent contractor is defined as:

. . . one who carries on a distinct and independent business and undertakes to perform the job, work, or service on its own account and under one’s
own responsibility according to one’s own manner and method, free from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof.161

In view of the "distinct and independent business" of independent contractors, no employer-employee relationship exists between independent
contractors and their principals. Independent contractors are recognized under Article 106 of the Labor Code:

Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the former’s work,
the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code.

....

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of labor to protect the rights of
workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which
are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latterwere directly employed by him.

In Department Order No. 18-A, Seriesof 2011, of the Department of Labor and Employment, a contractor is defined as having:
Section 3. . . .

....

(c) . . . an arrangement whereby a principal agrees to put out or farm out with a contractor the performance or completion of a specific job, work or
service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within oroutside
the premises of the principal.

This department order also states that there is a trilateral relationship in legitimate job contracting and subcontracting arrangements among the
principal, contractor, and employees of the contractor. There is no employer-employee relationship between the contractor and principal who
engages the contractor’s services, but there is an employer-employee relationship between the contractor and workers hired to accomplish the work
for the principal.162

Jurisprudence has recognized another kind of independent contractor: individuals with unique skills and talents that set them apart from ordinary
employees. There is no trilateral relationship in this case because the independent contractor himself or herself performs the work for the principal.
In other words, the relationship is bilateral.

In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for the Philippine Daily Inquirer. This court ruled that she was an independent
contractor because of her "talent, skill, experience, and her unique viewpoint as a feminist advocate."164 In addition, the Philippine Daily Inquirer did
not have the power of control over Orozco, and she worked at her own pleasure.165

Semblante v. Court of Appeals166 involved a masiador167 and a sentenciador.168 This court ruled that "petitioners performed their functions as
masiadorand sentenciador free from the direction and control of respondents"169 and that the masiador and sentenciador "relied mainly on their
‘expertise that is characteristic of the cockfight gambling.’"170 Hence, no employer-employee relationship existed.

Bernarte v. Philippine Basketball Association171 involved a basketball referee. This court ruled that "a referee is an independent contractor, whose
special skills and independent judgment are required specifically for such position and cannot possibly be controlled by the hiring party."172

In these cases, the workers were found to be independent contractors because of their unique skills and talents and the lack of control over the
means and methods in the performance of their work.

In other words, there are different kinds of independent contractors: those engaged in legitimate job contracting and those who have unique skills
and talents that set them apart from ordinary employees.

Since no employer-employee relationship exists between independent contractors and their principals, their contracts are governed by the Civil Code
provisions on contracts and other applicable laws.173

A contract is defined as "a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to
render some service."174 Parties are free to stipulate on terms and conditions in contracts as long as these "are not contrary to law, morals, good
customs, public order, or public policy."175 This presupposes that the parties to a contract are on equal footing. Theycan bargain on terms and
conditions until they are able to reach an agreement.

On the other hand, contracts of employment are different and have a higher level of regulation because they are impressed with public interest.
Article XIII, Section 3 of the 1987 Constitution provides full protection to labor:

ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS

....

LABOR

Section 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of
employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace.

The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and
the right of enterprises to reasonable returns on investments, and to expansion and growth.

Apart from the constitutional guarantee of protection to labor, Article 1700 of the Civil Code states:

ART. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must
yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed
shop, wages, working conditions, hours of labor and similar subjects.

In contracts of employment, the employer and the employee are not on equal footing. Thus, it is subject to regulatory review by the labor tribunals
and courts of law. The law serves to equalize the unequal. The labor force is a special class that is constitutionally protected because of the inequality
between capital and labor.176 This presupposes that the labor force is weak. However, the level of protection to labor should vary from case to case;
otherwise, the state might appear to be too paternalistic in affording protection to labor. As stated in GMA Network, Inc. v. Pabriga, the ruling in
Brent applies in cases where it appears that the employer and employee are on equal footing.177 This recognizes the fact that not all workers are
weak. To reiterate the discussion in GMA Network v. Pabriga:

The reason for this is evident: when a prospective employee, on account of special skills or market forces, is in a position to make demands upon the
prospective employer, such prospective employee needs less protection than the ordinary worker. Lesser limitations on the parties’ freedom of
contract are thus required for the protection of the employee.178

The level of protection to labor mustbe determined on the basis of the nature of the work, qualifications of the employee, and other relevant
circumstances.

For example, a prospective employee with a bachelor’s degree cannot be said to be on equal footing witha grocery bagger with a high school diploma.
Employees who qualify for jobs requiring special qualifications such as "[having] a Master’s degree" or "[having] passed the licensure exam" are
different from employees who qualify for jobs that require "[being a] high school graduate; withpleasing personality." In these situations, it is clear
that those with special qualifications can bargain with the employer on equal footing. Thus, the level of protection afforded to these employees
should be different.

Fuji’s argument that Arlene was an independent contractor under a fixed-term contract is contradictory. Employees under fixed-term contracts
cannot be independent contractors because in fixed-term contracts, an employer-employee relationship exists. The test in this kind of contract is not
the necessity and desirability of the employee’s activities, "but the day certain agreed upon by the parties for the commencement and termination of
the employment relationship."179 For regular employees, the necessity and desirability of their work in the usual course of the employer’s business
are the determining factors. On the other hand, independent contractors do not have employer-employee relationships with their principals. Hence,
before the status of employment can be determined, the existence of an employer-employee relationship must be established.

The four-fold test180 can be used in determining whether an employeremployee relationship exists. The elements of the four-fold test are the
following: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power of control,
which is the most important element.181

The "power of control" was explained by this court in Corporal, Sr. v. National Labor Relations Commission:182

The power to control refers to the existence of the power and not necessarily to the actual exercise thereof, nor is it essential for the employer to
actually supervise the performance of duties of the employee. It is enough that the employer has the right to wield that power.183 (Citation omitted)

Orozco v. Court of Appeals further elucidated the meaning of "power of control" and stated the following:

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. . . .184 (Citation omitted)

In Locsin, et al. v. Philippine Long Distance Telephone Company,185 the "power of control" was defined as "[the] right to control not only the end to
be achieved but also the means to be used in reaching such end."186

Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v. Court of Appeals187 in determining whether Arlene was an independent
contractor or a regular employee.

In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases involved newscasters and anchors. However, Sonza was held to be
an independent contractor, while Dumpit-Murillo was held to be a regular employee.

Comparison of the Sonza and

Dumpit-Murillo cases using
the four-fold test

Sonza was engaged by ABS-CBN in view of his "unique skills, talent and celebrity status not possessed by ordinary employees."188 His work was for
radio and television programs.189 On the other hand, Dumpit-Murillo was hired by ABC as a newscaster and co-anchor.190 Sonza’s talent fee
amounted to ₱317,000.00 per month, which this court found to be a substantial amount that indicatedhe was an independent contractor rather than
a regular employee.191 Meanwhile, Dumpit-Murillo’s monthly salary was ₱28,000.00, a very low amount compared to what Sonza received.192

Sonza was unable to prove that ABS-CBN could terminate his services apart from breach of contract. There was no indication that he could be
terminated based on just or authorized causes under the Labor Code. In addition, ABS-CBN continued to pay his talent fee under their agreement,
even though his programs were no longer broadcasted.193 Dumpit-Murillo was found to have beenillegally dismissed by her employer when they did
not renew her contract on her fourth year with ABC.194

In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines, how he appeared on television, or how he sounded on radio.195
All that Sonza needed was his talent.196 Further, "ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance
of his work . . . did not meet ABS-CBN’s approval."197 In Dumpit-Murillo, the duties and responsibilities enumerated in her contract was a clear
indication that ABC had control over her work.198

Application of the four-fold test

The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and affirmed the ruling of the National Labor Relations Commission
finding that Arlene was a regular employee. Arlene was hired by Fuji as a news producer, but there was no showing that she was hired because of
unique skills that would distinguish her from ordinary employees. Neither was there any showing that she had a celebrity status. Her monthly salary
amounting to US$1,900.00 appears tobe a substantial sum, especially if compared to her salary whenshe was still connected with GMA.199 Indeed,
wages may indicate whether oneis an independent contractor. Wages may also indicate that an employee is able to bargain with the employer for
better pay. However, wages should not be the conclusive factor in determining whether one is an employee or an independent contractor.

Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her professional employment contract.200 Her contract also indicated that Fuji
had control over her work because she was required to work for eight (8) hours from Monday to Friday, although on flexible time.201 Sonza was not
required to work for eight (8) hours, while Dumpit-Murillo had to be in ABC to do both on-air and off-air tasks.

On the power to control, Arlene alleged that Fuji gave her instructions on what to report.202 Even the mode of transportation in carrying out her
functions was controlled by Fuji. Paragraph 6 of her contract states:

6. During the travel to carry out work, if there is change of place or change of place of work, the train, bus, or public transport shall be used for the
trip. If the Employee uses the private car during the work and there is an accident the Employer shall not be responsible for the damage, which may
be caused to the Employee.203

Thus, the Court of Appeals did not err when it upheld the findings of the National Labor Relations Commission that Arlene was not an independent
contractor.

Having established that an employer-employee relationship existed between Fuji and Arlene, the next questions for resolution are the following: Did
the Court of Appeals correctly affirm the National Labor Relations Commission that Arlene had become a regular employee? Was the nature of
Arlene’s work necessary and desirable for Fuji’s usual course of business?

Arlene was a regular employee

with a fixed-term contract

The test for determining regular employment is whether there is a reasonable connection between the employee’s activities and the usual business of
the employer. Article 280 provides that the nature of work must be "necessary or desirable in the usual business or trade of the employer" as the test
for determining regular employment. As stated in ABS-CBN Broadcasting Corporation v. Nazareno:204

In determining whether an employment should be considered regular or non-regular, the applicable test is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the employer. The standard, supplied by the law itself, is
whether the work undertaken is necessary or desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the
nature of the services rendered and its relation to the general scheme under which the business or trade is pursued in the usual course. It is
distinguished from a specific undertaking that is divorced from the normal activities required incarrying on the particular business or trade.205

However, there may be a situation where an employee’s work is necessary but is not always desirable inthe usual course of business of the employer.
In this situation, there is no regular employment.

In San Miguel Corporation v. National Labor Relations Commission,206 Francisco de Guzman was hired to repair furnaces at San Miguel Corporation’s
Manila glass plant. He had a separate contract for every furnace that he repaired. He filed a complaint for illegal dismissal three (3) years after the end
of his last contract.207 In ruling that de Guzman did not attain the status of a regular employee, this court explained:

Note that the plant where private respondent was employed for only seven months is engaged in the manufacture of glass, an integral component of
the packaging and manufacturing business of petitioner. The process of manufacturing glass requires a furnace, which has a limited operating life.
Petitioner resorted to hiring project or fixed term employees in having said furnaces repaired since said activity is not regularly performed. Said
furnaces are to be repaired or overhauled only in case of need and after being used continuously for a varying period of five (5) to ten (10) years. In
1990, one of the furnaces of petitioner required repair and upgrading. This was an undertaking distinct and separate from petitioner's business of
manufacturing glass. For this purpose, petitioner must hire workers to undertake the said repair and upgrading. . . .

....

Clearly, private respondent was hired for a specific project that was not within the regular business of the corporation. For petitioner is not engaged in
the business of repairing furnaces. Although the activity was necessary to enable petitioner to continue manufacturing glass, the necessity therefor
arose only when a particular furnace reached the end of its life or operating cycle. Or, as in the second undertaking, when a particular furnace
required an emergency repair. In other words, the undertakings where private respondent was hired primarily as helper/bricklayer have specified
goals and purposes which are fulfilled once the designated work was completed. Moreover, such undertakings were also identifiably separate and
distinct from the usual, ordinary or regular business operations of petitioner, which is glass manufacturing. These undertakings, the duration and
scope of which had been determined and made known to private respondent at the time of his employment, clearly indicated the nature of his
employment as a project employee.208

Fuji is engaged in the business of broadcasting,209 including news programming.210 It is based in Japan211 and has overseas offices to cover
international news.212

Based on the record, Fuji’s Manila Bureau Office is a small unit213 and has a few employees.214 As such, Arlene had to do all activities related to
news gathering. Although Fuji insists that Arlene was a stringer, it alleges that her designation was "News Talent/Reporter/Producer."215

A news producer "plans and supervises newscast . . . [and] work[s] with reporters in the field planning and gathering information. . . ."216 Arlene’s
tasks included "[m]onitoring and [g]etting [n]ews [s]tories, [r]eporting interviewing subjects in front of a video camera,"217 "the timely submission of
news and current events reports pertaining to the Philippines[,] and traveling [sic] to [Fuji’s] regional office in Thailand."218 She also had to report for
work in Fuji’s office in Manila from Mondays to Fridays, eight (8) hours per day.219 She had no equipment and had to use the facilities of Fuji to
accomplish her tasks.
The Court of Appeals affirmed the finding of the National Labor Relations Commission that the successive renewals of Arlene’s contract indicated the
necessity and desirability of her work in the usual course of Fuji’s business. Because of this, Arlene had become a regular employee with the right to
security of tenure.220 The Court of Appeals ruled that:

Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila Bureau. She was hired for the primary purpose of news gathering
and reporting to the television network’s headquarters. Espiritu was not contracted on account of any peculiar ability or special talent and skill that
she may possess which the network desires to make use of. Parenthetically, ifit were true that Espiritu is an independent contractor, as claimed by
Fuji, the factthat everything that she uses to perform her job is owned by the company including the laptop computer and mini camera discounts the
idea of job contracting.221

Moreover, the Court of Appeals explained that Fuji’s argument that no employer-employee relationship existed in view of the fixed-term contract
does not persuade because fixed-term contracts of employment are strictly construed.222 Further, the pieces of equipment Arlene used were all
owned by Fuji, showing that she was a regular employee and not an independent contractor.223

The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts that were successively renewed for four (4) years.224 This
court held that "[t]his repeated engagement under contract of hire is indicative of the necessity and desirability of the petitioner’s work in private
respondent ABC’s business."225

With regard to Fuji’s argument that Arlene’s contract was for a fixed term, the Court of Appeals cited Philips Semiconductors, Inc. v. Fadriquela226
and held that where an employee’s contract "had been continuously extended or renewed to the same position, with the same duties and remained
in the employ without any interruption,"227 then such employee is a regular employee. The continuous renewal is a scheme to prevent
regularization. On this basis, the Court of Appeals ruled in favor of Arlene.

As stated in Price, et al. v. Innodata Corp., et al.:228

The employment status of a person is defined and prescribed by law and not by what the parties say it should be. Equally important to consider is that
a contract of employment is impressed with public interest such that labor contracts must yield to the common good. Thus, provisions of applicable
statutes are deemed written into the contract, and the parties are not at liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other.229 (Citations omitted)

Arlene’s contract indicating a fixed term did not automatically mean that she could never be a regular employee. This is precisely what Article 280
seeks to avoid. The ruling in Brent remains as the exception rather than the general rule.

Further, an employee can be a regular employee with a fixed-term contract. The law does not preclude the possibility that a regular employee may
opt to have a fixed-term contract for valid reasons. This was recognized in Brent: For as long as it was the employee who requested, or bargained, that
the contract have a "definite date of termination," or that the fixed-term contract be freely entered into by the employer and the employee, then the
validity of the fixed-term contract will be upheld.230

Whether the Court of Appeals correctly affirmed

the National Labor Relations Commission’s finding of illegal dismissal

Fuji argues that the Court of Appeals erred when it held that Arlene was illegally dismissed, in view of the non-renewal contract voluntarily executed
by the parties. Fuji also argues that Arlene’s contract merely expired; hence, she was not illegally dismissed.231

Arlene alleges that she had no choice but to sign the non-renewal contract because Fuji withheldher salary and benefits.

With regard to this issue, the Court of Appeals held:

We cannot subscribe to Fuji’s assertion that Espiritu’s contract merely expired and that she voluntarily agreed not to renew the same. Even a cursory
perusal of the subject Non-Renewal Contract readily shows that the same was signed by Espiritu under protest. What is apparent is that the Non-
Renewal Contract was crafted merely as a subterfuge to secure Fuji’s position that it was Espiritu’s choice not to renew her contract.232

As a regular employee, Arlene was entitled to security of tenure and could be dismissed only for just or authorized causes and after the observance of
due process.

The right to security of tenureis guaranteed under Article XIII, Section 3 of the 1987 Constitution: ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS

....

LABOR

....

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be provided by law.

Article 279 of the Labor Code also provides for the right to security of tenure and states the following:
Art. 279. Security of tenure.In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause of
when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.

Thus, on the right to security of tenure, no employee shall be dismissed, unless there are just orauthorized causes and only after compliance with
procedural and substantive due process is conducted.

Even probationary employees are entitled to the right to security of tenure. This was explained in Philippine Daily Inquirer, Inc. v. Magtibay, Jr.:233

Within the limited legal six-month probationary period, probationary employees are still entitled to security of tenure. It is expressly provided in the
afore-quoted Article 281 that a probationary employee may be terminated only on two grounds: (a) for just cause, or (b) when he fails to qualify as a
regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement.234
(Citation omitted)

The expiration of Arlene’s contract does not negate the finding of illegal dismissal by Fuji. The manner by which Fuji informed Arlene that her contract
would no longer be renewed is tantamount to constructive dismissal. To make matters worse, Arlene was asked to sign a letter of resignation
prepared by Fuji.235 The existence of a fixed-term contract should not mean that there can be no illegal dismissal. Due process must still be observed
in the pre-termination of fixed-term contracts of employment.

In addition, the Court of Appeals and the National Labor Relations Commission found that Arlene was dismissed because of her health condition. In
the non-renewal agreement executed by Fuji and Arlene, it is stated that:

WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from continuing to effectively perform her functions under the said
Contract such as the timely submission of news and current events reports pertaining to the Philippines and travelling [sic] to the FIRST PARTY’s
regional office in Thailand.236 (Emphasis supplied)

Disease as a ground for termination is recognized under Article 284 of the Labor Code:

Art. 284. Disease as ground for termination. An employer may terminate the services of an employee who has been found to be suffering from any
disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided,
That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is
greater, a fraction of at least six (6) months being considered as one (1) whole year.

Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides:

Sec. 8. Disease as a ground for dismissal.– Where the employee suffers from a disease and his continued employment is prohibited by law or
prejudicial to his healthor to the health of his coemployees, the employer shall not terminate his employment unless there is a certification by a
competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even
with proper medical treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but shall ask
the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal
health.

For dismissal under Article 284 to bevalid, two requirements must be complied with: (1) the employee’s disease cannot be cured within six (6) months
and his "continued employment is prohibited by law or prejudicial to his health as well as to the health of his co-employees"; and (2) certification
issued by a competent public health authority that even with proper medical treatment, the disease cannot be cured within six (6) months.237 The
burden of proving compliance with these requisites is on the employer.238 Noncompliance leads to the conclusion that the dismissal was illegal.239

There is no evidence showing that Arlene was accorded due process. After informing her employer of her lung cancer, she was not given the chance
to present medical certificates. Fuji immediately concluded that Arlene could no longer perform her duties because of chemotherapy. It did not ask
her how her condition would affect her work. Neither did it suggest for her to take a leave, even though she was entitled to sick leaves. Worse, it did
not present any certificate from a competent public health authority. What Fuji did was to inform her thather contract would no longer be renewed,
and when she did not agree, her salary was withheld. Thus, the Court of Appeals correctly upheld the finding of the National Labor Relations
Commission that for failure of Fuji to comply with due process, Arlene was illegally dismissed.240

VI

Whether the Court of Appeals properly modified

the National Labor Relations Commission’s decision
when it awarded reinstatement, damages, and attorney’s fees

The National Labor Relations Commission awarded separation pay in lieu of reinstatement, on the ground that the filing of the complaint for illegal
dismissal may have seriously strained relations between the parties. Backwages were also awarded, to be computed from date of dismissal until the
finality of the National Labor Relations Commission’s decision. However, only backwages were included in the dispositive portion because the
National Labor Relations Commission recognized that Arlene had received separation pay in the amount of US$7,600.00. The Court of Appeals
affirmed the National Labor Relations Commission’s decision but modified it by awarding moral and exemplary damages and attorney’s fees, and all
other benefits Arlene was entitled to under her contract with Fuji. The Court of Appeals also ordered reinstatement, reasoning that the grounds when
separation pay was awarded in lieu of reinstatement were not proven.241

Article 279 of the Labor Code provides:

Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or
when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement. (Emphasis supplied)

The Court of Appeals’ modification of the National Labor Relations Commission’s decision was proper because the law itself provides that illegally
dismissed employees are entitled to reinstatement, backwages including allowances, and all other benefits.

On reinstatement, the National Labor Relations Commission ordered payment of separation pay in lieu of reinstatement, reasoning "that the filing of
the instant suit may have seriously abraded the relationship of the parties so as to render reinstatement impractical."242 The Court of Appeals
reversed this and ordered reinstatement on the ground that separation pay in lieu of reinstatement is allowed only in several instances such as (1)
when the employer has ceased operations; (2) when the employee’s position is no longer available; (3) strained relations; and (4) a substantial period
has lapsed from date of filing to date of finality.243

On this matter, Quijano v. Mercury Drug Corp.244 is instructive:

Well-entrenched is the rule that an illegally dismissed employee is entitled to reinstatement as a matter of right. . . .

To protect labor’s security of tenure, we emphasize that the doctrine of "strained relations" should be strictly applied so as not to deprive an illegally
dismissed employee of his right to reinstatement. Every labor dispute almost always results in "strained relations" and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly dismissed employee can never be reinstated.245 (Citations omitted)

The Court of Appeals reasoned that strained relations are a question of fact that must be supported by evidence.246 No evidence was presented by
Fuji to prove that reinstatement was no longer feasible. Fuji did not allege that it ceased operations or that Arlene’s position was no longer available.
Nothing in the records shows that Arlene’s reinstatement would cause an atmosphere of antagonism in the workplace. Arlene filed her complaint in
2009. Five (5) years are not yet a substantial period247 to bar reinstatement.

On the award of damages, Fuji argues that Arlene is notentitled to the award of damages and attorney’s fees because the non-renewal agreement
contained a quitclaim, which Arlene signed. Quitclaims in labor cases do not bar illegally dismissed employees from filing labor complaints and money
claim. As explained by Arlene, she signed the non-renewal agreement out of necessity. In Land and Housing Development Corporation v. Esquillo,248
this court explained: We have heretofore explained that the reason why quitclaims are commonly frowned upon as contrary to public policy, and why
they are held to be ineffective to bar claims for the full measure of the workers’ legal rights, is the fact that the employer and the employee obviously
do not stand on the same footing. The employer drove the employee to the wall. The latter must have to get holdof money. Because, out of a job, he
had to face the harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of
choice.249

With regard to the Court of Appeals’ award of moral and exemplary damages and attorney’s fees, this court has recognized in several cases that moral
damages are awarded "when the dismissal is attended by bad faith or fraud or constitutes an act oppressive to labor, or is done in a manner contrary
to good morals, good customs or public policy."250 On the other hand, exemplary damages may be awarded when the dismissal was effected "in a
wanton, oppressive or malevolent manner."251

The Court of Appeals and National Labor Relations Commission found that after Arlene had informed Fuji of her cancer, she was informed that there
would be problems in renewing her contract on account of her condition. This information caused Arlene mental anguish, serious anxiety, and
wounded feelings that can be gleaned from the tenor of her email dated March 11, 2009. A portion of her email reads:

I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very weak, you suddenly came to deliver to me the NEWS that you will
no longer renew my contract.1awp++i1 I knew this will come but I never thought that you will be so ‘heartless’ and insensitive to deliver that news
just a month after I informed you that I am sick. I was asking for patience and understanding and your response was not to RENEW my contract.252

Apart from Arlene’s illegal dismissal, the manner of her dismissal was effected in an oppressive approach withher salary and other benefits being
withheld until May 5, 2009, when she had no other choice but to sign the non-renewal contract. Thus, there was legal basis for the Court of Appeals
to modify the National Labor Relations Commission’s decision.

However, Arlene receivedher salary for May 2009.253 Considering that the date of her illegal dismissal was May 5, 2009,254 this amount may be
subtracted from the total monetary award. With regard to the award of attorney’s fees, Article 111 of the Labor Code states that "[i]n cases of
unlawful withholding of wages, the culpable party may be assessed attorney’s fees equivalent to ten percent of the amount of wages recovered."
Likewise, this court has recognized that "in actions for recovery of wages or where an employee was forced to litigate and, thus, incur expenses to
protect his rights and interest, the award of attorney’s fees is legallyand morally justifiable."255 Due to her illegal dismissal, Arlene was forced to
litigate.

In the dispositive portion of its decision, the Court of Appeals awarded legal interest at the rate of 12% per annum.256 In view of this court’s ruling in
Nacar v. Gallery Frames,257 the legal interest shall be reducd to a rate of 6% per annum from July 1, 2013 until full satisfaction.

WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated June 25, 2012 is AFFIRMED with the modification that backwages
shall be computed from June 2009. Legal interest shall be computed at the rate of 6% per annum of the total monetary award from date of finality of
this decision until full satisfaction.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 192084               September 14, 2011
JOSE MEL BERNARTE, Petitioner,
vs.
PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE EMMANUEL M. EALA, and PERRY MARTINEZ, Respondents.
 DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010 Resolution3 of the Court of Appeals in CA-G.R. SP No. 105406. The
Court of Appeals set aside the decision of the National Labor Relations Commission (NLRC), which affirmed the decision of the Labor Arbiter, and held
that petitioner Jose Mel Bernarte is an independent contractor, and not an employee of respondents Philippine Basketball Association (PBA), Jose
Emmanuel M. Eala, and Perry Martinez. The Court of Appeals denied the motion for reconsideration.
The Facts
The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows:
Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as referees. During the leadership of
Commissioner Emilio Bernardino, they were made to sign contracts on a year-to-year basis. During the term of Commissioner Eala, however, changes
were made on the terms of their employment.
Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the All-Filipino Cup which was from February 23,
2003 to June 2003. It was only during the second conference when he was made to sign a one and a half month contract for the period July 1 to
August 5, 2003.
On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him that his contract would not be renewed citing his
unsatisfactory performance on and off the court. It was a total shock for Bernarte who was awarded Referee of the year in 2003. He felt that the
dismissal was caused by his refusal to fix a game upon order of Ernie De Leon.
On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of referees in February 2001. On March 1, 2001, he signed a
contract as trainee. Beginning 2002, he signed a yearly contract as Regular Class C referee. On May 6, 2003, respondent Martinez issued a
memorandum to Guevarra expressing dissatisfaction over his questioning on the assignment of referees officiating out-of-town games. Beginning
February 2004, he was no longer made to sign a contract.
Respondents aver, on the other hand, that complainants entered into two contracts of retainer with the PBA in the year 2003. The first contract was
for the period January 1, 2003 to July 15, 2003; and the second was for September 1 to December 2003. After the lapse of the latter period, PBA
decided not to renew their contracts.
Complainants were not illegally dismissed because they were not employees of the PBA. Their respective contracts of retainer were simply not
renewed. PBA had the prerogative of whether or not to renew their contracts, which they knew were fixed.4
In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee whose dismissal by respondents was illegal. Accordingly, the
Labor Arbiter ordered the reinstatement of petitioner and the payment of backwages, moral and exemplary damages and attorney’s fees, to wit:
WHEREFORE, premises considered all respondents who are here found to have illegally dismissed complainants are hereby ordered to (a) reinstate
complainants within thirty (30) days from the date of receipt of this decision and to solidarily pay complainants:
JOSE MEL RENATO
BERNARTE GUEVARRA

1. backwages from January 1, 2004 up to the finality of this ₱536,250.00 ₱211,250.00

Decision, which to date is

2. moral damages 100,000.00 50,000.00

3. exemplary damages 100,000.00 50,000.00

4. 10% attorney's fees 68,625.00 36,125.00

TOTAL ₱754,875.00 ₱397,375.00

or a total of ₱1,152,250.00
The rest of the claims are hereby dismissed for lack of merit or basis.
SO ORDERED.7
In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiter’s judgment. The dispositive portion of the NLRC’s decision reads:
WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED.
SO ORDERED.9
Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions of the NLRC and Labor Arbiter. The dispositive
portion of the Court of Appeals’ decision reads:
WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008 and Resolution dated August 26, 2008 of the National
Labor Relations Commission are ANNULLED and SET ASIDE. Private respondents’ complaint before the Labor Arbiter is DISMISSED.
SO ORDERED.10
The Court of Appeals’ Ruling
The Court of Appeals found petitioner an independent contractor since respondents did not exercise any form of control over the means and
methods by which petitioner performed his work as a basketball referee. The Court of Appeals held:
While the NLRC agreed that the PBA has no control over the referees’ acts of blowing the whistle and making calls during basketball games, it,
nevertheless, theorized that the said acts refer to the means and methods employed by the referees in officiating basketball games for the illogical
reason that said acts refer only to the referees’ skills. How could a skilled referee perform his job without blowing a whistle and making calls? Worse,
how can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and making calls?
Moreover, this Court disagrees with the Labor Arbiter’s finding (as affirmed by the NLRC) that the Contracts of Retainer show that petitioners have
control over private respondents.
xxxx
Neither do We agree with the NLRC’s affirmance of the Labor Arbiter’s conclusion that private respondents’ repeated hiring made them regular
employees by operation of law.11
The Issues
The main issue in this case is whether petitioner is an employee of respondents, which in turn determines whether petitioner was illegally dismissed.
Petitioner raises the procedural issue of whether the Labor Arbiter’s decision has become final and executory for failure of respondents to appeal with
the NLRC within the reglementary period.
The Ruling of the Court
The petition is bereft of merit.
The Court shall first resolve the procedural issue posed by petitioner.
Petitioner contends that the Labor Arbiter’s Decision of 31 March 2005 became final and executory for failure of respondents to appeal with the NLRC
within the prescribed period. Petitioner claims that the Labor Arbiter’s decision was constructively served on respondents as early as August 2005
while respondents appealed the Arbiter’s decision only on 31 March 2006, way beyond the reglementary period to appeal. Petitioner points out that
service of an unclaimed registered mail is deemed complete five days from the date of first notice of the post master. In this case three notices were
issued by the post office, the last being on 1 August 2005. The unclaimed registered mail was consequently returned to sender. Petitioner presents
the Postmaster’s Certification to prove constructive service of the Labor Arbiter’s decision on respondents. The Postmaster certified:
xxx
That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr., immediately issued the first registry notice to claim on July
12, 2005 by the addressee. The second and third notices were issued on July 21 and August 1, 2005, respectively.
That the subject registered letter was returned to the sender (RTS) because the addressee failed to claim it after our one month retention period
elapsed. Said registered letter was dispatched from this office to Manila CPO (RTS) under bill #6, line 7, page1, column 1, on September 8, 2005.12
Section 10, Rule 13 of the Rules of Court provides:
SEC. 10. Completeness of service. – Personal service is complete upon actual delivery. Service by ordinary mail is complete upon the expiration of ten
(10) days after mailing, unless the court otherwise provides. Service by registered mail is complete upon actual receipt by the addressee, or after five
(5) days from the date he received the first notice of the postmaster, whichever date is earlier.
The rule on service by registered mail contemplates two situations: (1) actual service the completeness of which is determined upon receipt by the
addressee of the registered mail; and (2) constructive service the completeness of which is determined upon expiration of five days from the date the
addressee received the first notice of the postmaster.13
Insofar as constructive service is concerned, there must be conclusive proof that a first notice was duly sent by the postmaster to the addressee.14 Not
only is it required that notice of the registered mail be issued but that it should also be delivered to and received by the addressee.15 Notably, the
presumption that official duty has been regularly performed is not applicable in this situation. It is incumbent upon a party who relies on constructive
service to prove that the notice was sent to, and received by, the addressee.16
The best evidence to prove that notice was sent would be a certification from the postmaster, who should certify not only that the notice was issued
or sent but also as to how, when and to whom the delivery and receipt was made. The mailman may also testify that the notice was actually
delivered.17
In this case, petitioner failed to present any concrete proof as to how, when and to whom the delivery and receipt of the three notices issued by the
post office was made. There is no conclusive evidence showing that the post office notices were actually received by respondents, negating
petitioner’s claim of constructive service of the Labor Arbiter’s decision on respondents. The Postmaster’s Certification does not sufficiently prove that
the three notices were delivered to and received by respondents; it only indicates that the post office issued the three notices. Simply put, the
issuance of the notices by the post office is not equivalent to delivery to and receipt by the addressee of the registered mail. Thus, there is no proof of
completed constructive service of the Labor Arbiter’s decision on respondents.
At any rate, the NLRC declared the issue on the finality of the Labor Arbiter’s decision moot as respondents’ appeal was considered in the interest of
substantial justice. We agree with the NLRC. The ends of justice will be better served if we resolve the instant case on the merits rather than allowing
the substantial issue of whether petitioner is an independent contractor or an employee linger and remain unsettled due to procedural technicalities.
The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual issues are beyond the province of this
Court. However, this rule admits of exceptions, one of which is where there are conflicting findings of fact between the Court of Appeals, on one
hand, and the NLRC and Labor Arbiter, on the other, such as in the present case.18
To determine the existence of an employer-employee relationship, case law has consistently applied the four-fold test, to wit: (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. The so-called "control test" is the most important indicator of the presence or absence of an
employer-employee relationship.19
In this case, PBA admits repeatedly engaging petitioner’s services, as shown in the retainer contracts. PBA pays petitioner a retainer fee, exclusive of
per diem or allowances, as stipulated in the retainer contract. PBA can terminate the retainer contract for petitioner’s violation of its terms and
conditions.
However, respondents argue that the all-important element of control is lacking in this case, making petitioner an independent contractor and not an
employee of respondents.
Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents since the latter exercise control over the performance of his
work. Petitioner cites the following stipulations in the retainer contract which evidence control: (1) respondents classify or rate a referee; (2)
respondents require referees to attend all basketball games organized or authorized by the PBA, at least one hour before the start of the first game of
each day; (3) respondents assign petitioner to officiate ballgames, or to act as alternate referee or substitute; (4) referee agrees to observe and
comply with all the requirements of the PBA governing the conduct of the referees whether on or off the court; (5) referee agrees (a) to keep himself
in good physical, mental, and emotional condition during the life of the contract; (b) to give always his best effort and service, and loyalty to the PBA,
and not to officiate as referee in any basketball game outside of the PBA, without written prior consent of the Commissioner; (c) always to conduct
himself on and off the court according to the highest standards of honesty or morality; and (6) imposition of various sanctions for violation of the
terms and conditions of the contract.
The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner performs his work as a referee officiating a
PBA basketball game. The contractual stipulations do not pertain to, much less dictate, how and when petitioner will blow the whistle and make calls.
On the contrary, they merely serve as rules of conduct or guidelines in order to maintain the integrity of the professional basketball league. As
correctly observed by the Court of Appeals, "how could a skilled referee perform his job without blowing a whistle and making calls? x x x [H]ow can
the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and making calls?"20
In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the relationship between a television and radio station and one of its talents, the
Court held that not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. The Court held:
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. v. 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.22
We agree with respondents that once in the playing court, the referees exercise their own independent judgment, based on the rules of the game, as
to when and how a call or decision is to be made. The referees decide whether an infraction was committed, and the PBA cannot overrule them once
the decision is made on the playing court. The referees are the only, absolute, and final authority on the playing court. Respondents or any of the PBA
officers cannot and do not determine which calls to make or not to make and cannot control the referee when he blows the whistle because such
authority exclusively belongs to the referees. The very nature of petitioner’s job of officiating a professional basketball game undoubtedly calls for
freedom of control by respondents.
Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the referees are required to report for work only
when PBA games are scheduled, which is three times a week spread over an average of only 105 playing days a year, and they officiate games at an
average of two hours per game; and (2) the only deductions from the fees received by the referees are withholding taxes.
In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a week, petitioner is required to report for
work only when PBA games are scheduled or three times a week at two hours per game. In addition, there are no deductions for contributions to the
Social Security System, Philhealth or Pag-Ibig, which are the usual deductions from employees’ salaries. These undisputed circumstances buttress the
fact that petitioner is an independent contractor, and not an employee of respondents.
Furthermore, the applicable foreign case law declares that a referee is an independent contractor, whose special skills and independent judgment are
required specifically for such position and cannot possibly be controlled by the hiring party.
In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of Illinois held that plaintiff, a soccer referee, is an independent
contractor, and not an employee of defendant which is the statutory body that governs soccer in the United States. As such, plaintiff was not entitled
to protection by the Age Discrimination in Employment Act. The U.S. District Court ruled:
Generally, "if an employer has the right to control and direct the work of an individual, not only as to the result to be achieved, but also as to details
by which the result is achieved, an employer/employee relationship is likely to exist." The Court must be careful to distinguish between "control[ling]
the conduct of another party contracting party by setting out in detail his obligations" consistent with the freedom of contract, on the one hand, and
"the discretionary control an employer daily exercises over its employee’s conduct" on the other.
Yonan asserts that the Federation "closely supervised" his performance at each soccer game he officiated by giving him an assessor, discussing his
performance, and controlling what clothes he wore while on the field and traveling. Putting aside that the Federation did not, for the most part,
control what clothes he wore, the Federation did not supervise Yonan, but rather evaluated his performance after matches. That the Federation
evaluated Yonan as a referee does not mean that he was an employee. There is no question that parties retaining independent contractors may judge
the performance of those contractors to determine if the contractual relationship should continue. x x x
It is undisputed that the Federation did not control the way Yonan refereed his games.1âwphi1 He had full discretion and authority, under the Laws of
the Game, to call the game as he saw fit. x x x In a similar vein, subjecting Yonan to qualification standards and procedures like the Federation’s
registration and training requirements does not create an employer/employee relationship. x x x
A position that requires special skills and independent judgment weights in favor of independent contractor status. x x x Unskilled work, on the other
hand, suggests an employment relationship. x x x Here, it is undisputed that soccer refereeing, especially at the professional and international level,
requires "a great deal of skill and natural ability." Yonan asserts that it was the Federation’s training that made him a top referee, and that suggests he
was an employee. Though substantial training supports an employment inference, that inference is dulled significantly or negated when the putative
employer’s activity is the result of a statutory requirement, not the employer’s choice. x x x
In  McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was not an agent of the Tennessee Secondary School Athletic
Association (TSSAA), so the player’s vicarious liability claim against the association should be dismissed. In finding that the umpire is an independent
contractor, the Court of Appeals of Tennesse ruled:
The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played between TSSAA member schools. The TSSAA does not
supervise regular season games. It does not tell an official how to conduct the game beyond the framework established by the rules. The TSSAA does
not, in the vernacular of the case law, control the means and method by which the umpires work.
In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an employee of the former. For a hired party to be
considered an employee, the hiring party must have control over the means and methods by which the hired party is to perform his work, which is
absent in this case. The continuous rehiring by PBA of petitioner simply signifies the renewal of the contract between PBA and petitioner, and
highlights the satisfactory services rendered by petitioner warranting such contract renewal. Conversely, if PBA decides to discontinue petitioner’s
services at the end of the term fixed in the contract, whether for unsatisfactory services, or violation of the terms and conditions of the contract, or
for whatever other reason, the same merely results in the non-renewal of the contract, as in the present case. The non-renewal of the contract
between the parties does not constitute illegal dismissal of petitioner by respondents.
WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice

SECOND DIVISION
G.R. No. 159469               June 8, 2005
ZALDY G. ABELLA and the Members of the PLDT SECURITY PERSONNEL unioN LISTED IN ANNEX "D" OF THIS PETITION, Petitioners,
vs.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY (PLDT CO.) and PEOPLE'S SECURITY INC. (PSI), Respondents.
RESOLUTION
CHICO-NAZARIO, J.:
This case stemmed from a complaint for regularization filed by petitioners1 against respondents before the Arbitration Branch of the National Labor
Relations Commission (NLRC). The petition for review at bar assails the decision2 of the Court of Appeals, affirming the decision3 of the NLRC,
sustaining the earlier decision4 of the Labor Arbiter dismissing petitioners’ complaint against the Philippine Long Distance Telephone Company (PLDT)
and herein respondent People’s Security Incorporated (PSI).
The dispute arose from the following factual milieu:
Respondent PSI entered into an agreement with the PLDT to provide the latter with such number of qualified uniformed and properly armed security
guards for the purpose of guarding and protecting PLDT’s installations and properties from theft, pilferage, intentional damage, trespass or other
unlawful acts. Under the agreement, it was expressly provided that there shall be no employer-employee relationship between the PLDT and the
security guards, which may be supplied to it by PSI, and that the latter shall have the entire charge, control and supervision over the work and services
of the supplied security guards. It was likewise stipulated therein that PSI shall also have the exclusive authority to select, engage, and discharge its
security guards, with full control over their wages, salaries or compensation.lawphil.net
Consequently, respondent PSI deployed security guards to the PLDT. PLDT’s Security Division interviewed these security guards and asked them to fill
out personal data sheets. Those who did not meet the height requirements were sent back by PLDT to PSI.
On 05 June 1995, sixty-five (65) security guards supplied by respondent PSI filed a Complaint5 for regularization against the PLDT with the Labor
Arbiter. The Complaint alleged inter alia that petitioner security guards have been employed by the company through the years commencing from
1982 and that all of them served PLDT directly for more than 1 year. It was further alleged that PSI or other agencies supply security to PLDT, which
entity controls and supervises the complainants’ work through its Security Department. Petitioners likewise alleged that PSI acted as the middleman
in the payment of the minimum pay to the security guards, but no premium for work rendered beyond eight hours was paid to them nor were they
paid their 13th month pay. In sum, the Complaint states that inasmuch as the complainants are under the direct control and supervision of PLDT, they
should be considered as regular employees by the latter with compensation and benefits equivalent to ordinary rank-and-file employees of the same
job grade.
Forthwith, after filing the complaint, the security guards formed the PLDT Company Security Personnel Union with petitioner Zaldy Abella as union
president. A month later, PLDT allegedly ordered PSI to terminate about 25 members of said union who participated in a protest picket in front of the
PLDT Office at the Ramon Cojuangco Building in Makati City.1avvphi1
The Labor Arbiter dismissed the complaint for lack of merit. On appeal, the NLRC affirmed in toto the Labor Arbiter’s decision.
The Court of Appeals, in turn, affirmed the NLRC’s disquisition.6 According to the Court of Appeals, evidence demonstrates that it is respondent PSI
which is petitioners’ employer, not the PLDT inasmuch as the power of selection over the guards lies with the former. The Court of Appeals also took
cognizance of the fact that petitioners have collected their wages from PSI.7
On 29 September 2003, this Court denied the petition for review filed by petitioners assailing the Court of Appeals’ Decision for lack of verified
statement of material date of receipt of the assailed judgment. On 16 March 2005, the Court resolved to deny the motion for reconsideration for lack
of merit and sufficient showing that the Court of Appeals had committed any reversible error in the questioned judgment to warrant the exercise by
this Court of its discretionary appellate jurisdiction.
Undaunted, petitioners moved for reconsideration of our Resolution dated 16 March 2005. Petitioners now urge this Court to ignore technicalities
and brush aside the procedural requirements so this case may be decided "on the merits."
On the postulate that dismissal of appeals based on mere technicalities is frowned upon, we take another look at this petition for review to quell all
doubts that the Court is impervious to petitioners’ cause. Cautious as we are against rendering a decision that may well be a "blow on the
breadbasket of our lowly employees,"8 we are hence rendering a complete adjudication of this case at bar.
Crucial to the resolution of this case is a determination whether or not an employer-employee relationship exists between petitioners and respondent
PLDT.
Philippine Airlines, Inc. v. National Labor Relations Commission9 provides the legal yardstick in addressing this issue. In that case, Unicorn Security
Services, Inc. (USSI) and Philippine Airlines, Inc. (PAL) executed a security service agreement where USSI was designated therein as the contractor. In
determining which between PAL and USSI is the employer of the security guards, we considered the following factors in considering the existence of
an employer-employee relationship: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power to dismiss; and (4)
the power to control the employee’s conduct. Considering these elements, we held in the said case that the security guards of PAL were the
employees of the security agency, not PAL. We explained why-
In the instant case, the security service agreement between PAL and USSI provides the key to such consideration. A careful perusal thereof, especially
the terms and conditions embodied in paragraphs 4, 6, 7, 8, 9, 10, 13 and 20 quoted earlier in this ponencia, demonstrates beyond doubt that USSI -
and not PAL – was the employer of the security guards. It was USSI which (a) selected, engaged or hired and discharged the security guards; (b)
assigned them to PAL according to the number agreed upon; (c) provided, at its own expense, the security guards with firearms and ammunitions; (d)
disciplined and supervised them or controlled their conduct; (e) determined their wages, salaries, and compensation; and (f) paid them salaries or
wages. Even if we disregard the explicit covenant in said agreement that "there exists no employer-employee relationship between CONTRACTOR
and/or his guards on the one hand, and PAL on the other" all other considerations confirm the fact that PAL was not the security guards’
employer.  (Emphasis supplied)
On the first factor, applying PAL v. NLRC  as our guidepost in the case before us, the Labor Arbiter, the NLRC and the Court of Appeals rendered a
consistent finding based on the evidence adduced that it was the PSI, the security provider of the PLDT, which selected, engaged or hired and
discharged the security guards. The Labor Arbiter was no less emphatic –
It is not disputed that complainants applied for work with PSI, submitted the necessary employment documentary requirement with PSI and executed
employment contracts with PSI. Complainants, however, contend that their referral by the PSI to PLDT for further interview and evaluation falls under
the context of "selection and engagement" thereby making them employees of PLDT.
We are not convinced.
Testimonies during the trial reveal that interviews and evaluation were conducted by PLDT to ensure that the standards it set are met by the security
guards. In fact, PLDT rarely failed to accept security guards referred to by PSI but on account of height deficiency. The referral is nothing but for
possible assignment in a designated client which has the inherent prerogative to accept and reject the assignee for justifiable grounds or even
arbitrarily. We are thus convinced that the employer-employee relationship is deemed perfected even before the posting of the complainants with
the PLDT, as assignment only comes after employment.10
We hasten to add on this score that the Labor Arbiter as well as the NLRC and the Court of Appeals found that PSI is a legitimate job contractor
pursuant to Section 8, Rule VII, Book II of the Omnibus Rules Implementing the Labor Code. It is a registered corporation duly licensed by the
Philippine National Police to engage in security business. It has substantial capital and investment in the form of guns, ammunitions, communication
equipments, vehicles, office equipments like computer, typewriters, photocopying machines, etc., and above all, it is servicing clients other than PLDT
like PCIBank, Crown Triumph, and Philippine Cable, among others.11 Here, the security guards which PSI had assigned to PLDT are already the former’s
employees prior to assignment and if the assigned guards to PLDT are rejected by PLDT for reasons germane to the security agreement, then the
rejected or terminated guard may still be assigned to other clients of PSI as in the case of Jonathan Daguno who was posted at PLDT on 21 February
1996 but was subsequently relieved therefrom and assigned at PCIBank Makati Square effective 10 May 1996.12 Therefore, the evidence as it stands is
at odds with petitioners’ assertion that PSI is an "in-house" agency of PLDT so as to call for a piercing of veil of corporate identity as what the Court
has done in De leon, et al. vs. NLRC and Fortune Tobacco Corporation, et al. 13
On the second factor, the Labor Arbiter as well as the NLRC and the Court of Appeals are all in agreement that it is PSI that determined and paid the
petitioners’ wages, salaries, and compensation. As elucidated by the Labor Arbiter, petitioners’ witness testified that his wages were collected and
withdrawn at the office of PSI and PLDT pays PSI for the security services on a lump-sum basis and that the wages of complainants are only a portion
of the total sum. The signature of the PLDT supervisor in the Daily Time Records does not ipso facto make PLDT the employer of complainants
inasmuch as the Labor Arbiter had found that the record is replete with evidence showing that some of the Daily Time Records do not bear the
signature of a PLDT supervisor yet no complaint was lodged for nonpayment of the guard’s wages evidencing that the signature of the PLDT’s
supervisor is not a condition precedent for the payment of wages of the guards. Notably, it was not disputed that complainants enjoy the benefits and
incentives of employees of PSI and that they are reported as employees of PSI with the SSS.14
Anent the third and fourth factors, petitioners capitalize on the delinquency reports prepared by PLDT personnel against some of the security guards
as well as certificates of participation in civil disturbance course, certificates of attendance in first aid training, certificate of completion in fire brigade
training seminar and certificate of completion on restricted land mobile radio telephone operation to show that the petitioners are under the direct
control and supervision of PLDT and that the latter has, in fact, the power to dismiss them.
The Labor Arbiter found from the evidence that the delinquency reports were nothing but reminders of the infractions committed by the petitioners
while on duty which serve as basis for PLDT to recommend the termination of the concerned security guard from PLDT. As already adverted to earlier,
termination of services from PLDT did not ipso facto mean dismissal from PSI inasmuch as some of those pulled out from PLDT were merely detailed
at the other clients of PSI as in the case of Jonathan Daguno, who was merely transferred to PCIBank Makati.
We are likewise in agreement with the Labor Arbiter’s reasoning that said delinquency reports merely served as justifiable, not arbitrary, basis for
PLDT to demand replacement of guards found to have committed infractions while on their tours of duty at PLDT’s premises. In Citytrust Banking
Corporation v. NLRC,15 we upheld the validity of the contract between ADAMS and ESSI to provide security guards to Citytrust and held that the
security guards were the employees of the security agencies, not Citytrust. Specifically we held as valid and controlling the stipulation that the bank
has the option to ask for replacement of the guards or personnel assigned to the bank who, in its judgment, are unsatisfactory, wanting in the
performance of their duties or for any reason at the discretion of the bank. Thus-
In substantially identical language, the contracts between CITYTRUST, on the one hand, and ADAMS and ESSI, on the other, unequivocally declare that
any person that may be assigned by the "CARRIER" (agency) to carry out its obligation under the Agreement should in no sense be considered an
employee of the bank and shall always remain an employee of the CARRIER. The contracts moreover require the CARRIER to give the bank a list of
personnel assigned to render security services to the bank, and make clear that:
1) the CARRIER shall maintain efficient and effective discipline, control and supervision over any and all guards or personnel it may utilize in
performing its obligations under the Agreement;
2) the BANK has the option to ask for the replacement of the CARRIER’s guards or personnel assigned to the BANK who, in its judgment, are
unsatisfactory, wanting in the performance of their duties or for any reason at the discretion of the Bank;. . . .[16] (Emphasis supplied)
As regards the seminars, we defer to the findings of the Labor Arbiter as affirmed by the NLRC and the Court of Appeals that while said seminars were
conducted at the premises of PLDT, it also remains uncontroverted that complainants’ participation was done with the approval and at the expense of
PSI.17 To be sure, it is not uncommon, specially for big aggressive corporations like PLDT, to align or integrate their corporate visions and policies
externally or with that of other entities they deal with such as their suppliers, consultants, or contractors, for that matter. As a case in point,
manufacturing companies usually hold suppliers’ conferences to integrate their suppliers’ corporate goals and visions with their own so that the
manufacturing companies are ensured of the quality and timing of their supplies of materials or services, as the case may be. It is therefore not
surprising that PLDT would demand that security guards assigned to its premises undergo seminars and trainings on certain areas of concern which
are unique to PLDT.
In the same way, it is in the ordinary course of things for big companies such as PLDT to assign their own security personnel and supervisors to
monitor the performance of the security guards as part of the company’s internal check, monitoring and control system in order to rate whether the
security agency it hired is performing at par with PLDT’s set standards.
Furthermore, petitioners’ logic that the certificates of appreciation and/or commendations for good performance issued by PLDT to select security
guards are proof that the latter are under the control and supervision of PLDT is indeed non sequitur. As the Labor Arbiter has found, similar
certificates are also issued as a matter of practice to non-PLDT personnel like members of the Philippine National Police (PNP) and military officers
who have rendered exemplary support and assistance to PLDT.18
The Labor Arbiter likewise rendered the distinct finding as regards petitioner Zaldy Abella that documentary evidence belies his claim that PLDT
directs and supervises him. These documents include his application for employment with PSI, employment contract with PSI, Special Orders of
assignment at the different detachments of PLDT issued by a certain Joreim Aguilar of PSI, his request to PSI for sick leaves and/or vacation leaves,
authority to deduct from his salary death contributions pursuant to the policy of PSI and Order of Relief from PLDT Marikina for AWOL issued by said
Joreim Aguilar of PSI per Special Order dated 12 June 1995.19 Similarly, as found by the Labor Arbiter in the case of petitioner Roberto Basilides, his
201 file reflects PSI Orders on his assignment to PLDT installations and subsequent reassignment to another PCIB client.20
All told, there being no showing that neither the Labor Arbiter nor the NLRC nor the Court of Appeals gravely abused its discretion or otherwise acted
without jurisdiction or in excess of the same,21 this Court is bound by their findings of facts. Indeed, the records reveal that the questioned decision is
duly supported by evidence.22
In fine, while the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every
labor dispute will be automatically decided in favor of labor. The partiality for labor has not in any way diminished our belief that justice is in every
case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.23
WHEREFORE, petitioners’ motion for reconsideration of our Resolution dated 16 March 2005 is hereby DENIED with Finality no compelling reason
having been adduced by petitioners to warrant the reversal thereof. Accordingly, the Decision dated 31 January 2003 and the
Resolution dated 06 August 2003 of the Court of Appeals are hereby AFFIRMED. Costs against petitioners.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice

Republic of the Philippines

SUPREME COURT
FIRST DIVISION
G.R. No. 145443. March 18, 2005
RAQUEL P. CONSULTA, Petitioner,
vs.
COURT OF APPEALS, PAMANA PHILIPPINES, INC., RAZUL Z. REQUESTO, and ALETA TOLENTINO, Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 assailing the Decision of 28 April 2000 and Resolution of 9 October 2000 promulgated by the Court of Appeals ("appellate
court")2 in CA-G.R. SP No. 50462. The appellate court reversed the Resolution of the National Labor Relations Commission ("NLRC") which in turn
affirmed the Labor Arbiter’s Decision.
The Antecedent Facts
Pamana Philippines, Inc. ("Pamana") is engaged in health care business. Raquel P. Consulta ("Consulta") was a Managing Associate of Pamana.
Consulta’s appointment dated 1 December 1987 states:
We are pleased to formally confirm your appointment and confer upon you the authority as MANAGING ASSOCIATE (MA) effective on December 1,
1987 up to January 2, 1988. Your area of operation shall be within Metro Manila.
In this capacity, your principal responsibility is to organize, develop, manage, and maintain a sales division and a full complement of agencies and
Health Consultants (HealthCons) and to submit such number of enrollments and revenue attainments as may be required of your position in
accordance with pertinent Company policies and guidelines. In pursuit of this objective, you are hereby tasked with the responsibilities of recruiting,
training and directing your Supervising Associates (SAs) and the Health Consultants under their respective agencies, for the purpose of promoting our
corporate Love Mission.
In the performance of such duties, you are expected to uphold and promote the Company’s interests and good image and to abide by its principles
and established norms of conduct necessary and appropriate in the discharge of your functions. The authority as MA likewise vests upon you
command responsibility for the actions of your SAs and HealthCons; the Company therefore reserves the right to debit your account for any
accountabilities/financial obligations arising therefrom.
By your acceptance of this appointment, it is understood that you must represent the Company on an exclusive basis, and must not engage directly or
indirectly in activities, nor become affiliated in official or unofficial capacity with companies or organizations which compete or have the same
business as Pamana. It is further understood that his [sic] self-inhibition shall be effective for a period of one year from date of official termination
with the Company arising from any cause whatsoever.
In consideration of your undertaking the assignment and the accompanying duties and responsibilities, you shall be entitled to compensation
computed as follows:
On Initial Membership Fee Entrance Fee 5%
Medical Fee 6%
On Subsequent Membership Fee 6%
You are likewise entitled to participate in sales contests and such other incentives that may be implemented by the Company.
This appointment is on a non-employer-employee relationship basis, and shall be in accordance with the Company Guidelines on Appointment,
Reclassification and Transfer of Sales Associates.3
Sometime in 1987, Consulta negotiated with the Federation of Filipino Civilian Employees Association ("FFCEA") working at the United States Subic
Naval Base for a Health Care Plan for the FFCEA members. Pamana issued Consulta a Certification4 dated 23 November 1987, as follows:
This certifies that the Emerald Group under Ms. Raquel P. Consulta, as Managing Consultant, is duly authorized to negotiate for and in behalf of
PAMANA with the Federation of Filipino Civilian Employees Association covering all U.S. facilities in the Philippines, the coverage of FFCEA members
under the Pamana Golden Care Health Plans.
Upon such negotiation and eventual execution of the contract agreements, entitlements of all benefits due the Emerald Group in it’s [sic] entirely
including it’s [sic] Supervising Consultants and Health Consultants, by of commissions, over-rides and other package of benefits is hereby affirmed,
obligated and confirmed as long as the contracts negotiated and executed are in full force and effect, including any and all renewals made. And
provided further that the herein authorized consultants remain in active status with the Pamana Golden Care sales group.5
On 4 March 1988, Pamana and the U.S. Naval Supply Depot signed the FFCEA account. Consulta, claiming that Pamana did not pay her commission for
the FFCEA account, filed a complaint for unpaid wages or commission against Pamana, its President Razul Z. Requesto ("Requesto"), and its Executive
Vice-President Aleta Tolentino ("Tolentino").
The Rulings of the Labor Arbiter and the NLRC
In a Decision promulgated on 23 June 1993, Labor Arbiter Alex Arcadio Lopez ruled, as follows:
ACCORDINGLY, respondent is hereby ordered to pay complainant her unpaid commission to be computed as against actual transactions between
respondent PAMANA and the contracting Department of U.S. Naval Supply Depot upon presentation of pertinent document.
Respondent is further ordered to pay ten (10%) percent attorney’s fees.
SO ORDERED.6
Pamana, Requesto and Tolentino ("Pamana et al.") appealed the Decision of the Labor Arbiter.
In a Resolution7 promulgated on 22 July 1994, the NLRC dismissed the appeal and affirmed the Decision of the Labor Arbiter. In its Order promulgated
on 3 October 1994, the NLRC denied the motion for reconsideration of Pamana et al.
Pamana et al. filed a petition for certiorari before this Court. In compliance with this Court’s resolution dated 6 February 1995, the Office of the
Solicitor General submitted a Manifestation in Lieu of Comment praying to grant the petition on the ground that Consulta was not an employee of
Pamana. On 23 November 1998, this Court referred the case to the appellate court pursuant to St. Martin Funeral Home v. NLRC.8
The Decision of the Appellate Court
In its Decision promulgated on 28 April 2000, the appellate court reversed the NLRC Decision. The appellate court ruled that Consulta was a
commission agent, not an employee of Pamana. The appellate court also ruled that Consulta should have litigated her claim for unpaid commission in
an ordinary civil action.
Hence, Consulta’s recourse to this Court.
The Issues
The issues are:
1. Whether Consulta was an employee of Pamana.
2. Whether the Labor Arbiter had jurisdiction over Consulta’s claim for unpaid commission.
The Ruling of the Court
We affirm the Decision of the appellate court. Consulta was an independent agent and not an employee of Pamana.
The Four-Fold Test
In Viaña v. Al-Lagadan,9 the Court first laid down the four-fold test to determine the existence of an employer-employee relationship. The four
elements of an employer-employee relationship, which have since been adopted in subsequent jurisprudence,10 are (1) the power to hire; (2) the
payment of wages; (3) the power to dismiss; and (4) the power to control. The power to control is the most important of the four elements.
In Insular Life Assurance Co., Ltd. v. NLRC,11 the Court explained the scope of the power to control, thus:
x x x It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in
relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or
technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not
to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and eschews any
intervention whatsoever in his performance of the engagement.
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.
In the present case, the power to control is missing. Pamana tasked Consulta to organize, develop, manage, and maintain a sales division, submit a
number of enrollments and revenue attainments in accordance with company policies and guidelines, and to recruit, train and direct her Supervising
Associates and Health Consultants.12 However, the manner in which Consulta was to pursue these activities was not subject to the control of Pamana.
Consulta failed to show that she had to report for work at definite hours. The amount of time she devoted to soliciting clients was left entirely to her
discretion. The means and methods of recruiting and training her sales associates, as well as the development, management and maintenance of her
sales division, were left to her sound judgment.
Consulta claims that the documents she submitted show that Pamana had control on the conduct of her work and the means and methods to
accomplish the work. However, the documents only prove the absence of the power to control. The Minutes of the meeting on 31 May 1988 of the
Managing Associates with Fely Whitfield, Vice-President for Sales of Pamana, reflect the following:
At this point Mrs. Whitfield gave some pointers on recruitment and selling techniques and reminded the group that the success of an agency is still
people. The more recruits you have the better is your chance to achieve your quota.
She also announced June be made a recruitment month, and told the MAs to remind their associates that if you cannot sell to a prospect then recruit
him or her.
She also discussed extensively the survey method of selling and recruitment and that the sales associates should be more aggressive in their day to
day sales activity. She reminded the MAs to fill up their recruitment requirements to be able to participate in the monthly and quarterly contest.
xxx
4. Recruitment Campaign
In connection with the Recruitment Campaign for June, Mr. R. Canon13 requested for Management support. He suggested that a recruitment
Advertisement be placed in a leading Metropolitan daily Newspaper. The cost of which was unanimously suggested by MAs that Management
should share at least 50%.
5. MAs agreed to pay in advance their share for the salary of the MAs Secretary.14 (Emphasis supplied)
The Minutes of the 7 June 1988 meeting reflect the following:
III. PRODUCTION & RECRUITMENT INCENTIVES
To help the MAs in their recruitment drive Mrs. Whitfield suggested some incentives to be undertaken by the MAs like (1) cash incentives for
associates that bring in a recruit, (2) cash incentives based on production brought in by these new recruits.
She said that MAs, as businessm[e]n should invest time, effort & money to their work, because it will redown [sic] to their own good anyway, that the
success of their agency should not depend solely on what management could give as incentives but also on incentives of MAs within their agencies. It
should be a concerted effort.
After a thorough discussion on the pros & cons of the suggestions it was agreed that a ₱10.00 per recruit be given to the associate that will recruit and
an additional cash prize based on production of these new recruits.15
Clearly, the Managing Associates only received suggestions from Pamana on how to go about their recruitment and sales activities. They could adopt
the suggestions but the suggestions were not binding on them. They could adopt other methods that they deemed more effective.
Further, the Managing Associates had to ask the Management of Pamana to shoulder half of the advertisement cost for their recruitment campaign.
They shelled out their own resources to bolster their recruitment. They shared in the payment of the salaries of their secretaries. They gave cash
incentives to their sales associates from their own pocket. These circumstances show that the Managing Associates were independent contractors,
not employees, of Pamana.
Finally, Pamana paid Consulta not for labor she performed but only for the results of her labor.16 Without results, Consulta’s labor was her own
burden and loss. Her right to compensation, or to commission, depended on the tangible results of her work17 - whether she brought in paying
recruits. Consulta’s appointment paper provides:
In consideration of your undertaking the assignment and the accompanying duties and responsibilities, you shall be entitled to compensation
computed as follows:
On Initial Membership Fee Entrance Fee 5%
Medical Fee 6%
On Subsequent Membership Fee 6%
You are likewise entitled to participation in sales contests and such other incentives that may be implemented by the Company.18
The Guidelines on Appointment of Associates show that a Managing Associate received the following commissions and bonuses:
3. Compensation Package of Regular MAs
Regular MAs shall be entitled to the following compensation and benefits:
3.1 Compensation
a) Personal Production
Individual/Family Institutional Acct.
commission 30% 30%
bonus 40% -
b) Group Production
overriding commission 6% 6%
bonus 5% -
3.2 Benefits
Participation in all sales contests corresponding to the MA position plus any such other benefits as may be provided for the MA on regular status.19
Aside from commissions, bonuses and other benefits that depended solely on actual sales, Pamana did not pay Consulta any compensation for
managing her sales division, or for recruiting and training her sales consultants. As a Managing Associate, she was only entitled to commissions,
bonuses and other benefits, which depended solely on her sales and on the sales of her group.
The Exclusivity Provision
Consulta’s appointment had an exclusivity provision. The appointment provided that Consulta must represent Pamana on an exclusive basis. She must
not engage directly or indirectly in activities of other companies that compete with the business of Pamana. However, the fact that the appointment
required Consulta to solicit business exclusively for Pamana did not mean that Pamana exercised control over the means and methods of Consulta’s
work as the term control is understood in labor jurisprudence.20 Neither did it make Consulta an employee of Pamana. Pamana did not prohibit
Consulta from engaging in any other business, or from being connected with any other company, for as long as the business or company did not
compete with Pamana’s business.
The prohibition applied for one year after the termination of the contract with Pamana. In one of their meetings, one of the Managing Associates
reported that he was transferring his sales force and account from another company to Pamana.21 The exclusivity provision was a reasonable
restriction designed to prevent similar acts prejudicial to Pamana’s business interest. Article 1306 of the Civil Code provides that "[t]he contracting
parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy."
Jurisdiction over Claim for Unpaid Commission
There being no employer-employee relationship between Pamana and Consulta, the Labor Arbiter and the NLRC had no jurisdiction to entertain and
rule on Consulta’s money claim.
Article 217 of the Labor Code provides:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. - (a) Except as otherwise provided under this Code the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee
relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (₱5,000.00) regardless of
whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitration as may be provided in said agreements.
Consulta filed her action under Article 217(a)(6) of the Labor Code. However, since there was no employer-employee relationship between Pamana
and Consulta, the Labor Arbiter should have dismissed Consulta’s claim for unpaid commission. Consulta’s remedy is to file an ordinary civil action to
litigate her claim.
WHEREFORE, the petition is DISMISSED and the Decision of the Court of Appeals in CA-G.R. SP No. 50462 is AFFIRMED in toto.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.

FIRST DIVISION
G.R. No. 165881             April 19, 2006
OSCAR VILLAMARIA, JR. Petitioner,
vs.
COURT OF APPEALS and JERRY V. BUSTAMANTE, Respondents
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of Court assailing the Decision1 and Resolution2 of the Court of
Appeals (CA) in CA-G.R. SP No. 78720 which set aside the Resolution3 of the National Labor Relations Commission (NLRC) in NCR-30-08-03247-00,
which in turn affirmed the Decision4 of the Labor Arbiter dismissing the complaint filed by respondent Jerry V. Bustamante.
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship engaged in assembling passenger jeepneys with a public
utility franchise to operate along the Baclaran-Sucat route. By 1995, Villamaria stopped assembling jeepneys and retained only nine, four of which he
operated by employing drivers on a "boundary basis." One of those drivers was respondent Bustamante who drove the jeepney with Plate No. PVU-
660. Bustamante remitted P450.00 a day to Villamaria as boundary and kept the residue of his daily earnings as compensation for driving the vehicle.
In August 1997, Villamaria verbally agreed to sell the jeepney to Bustamante under the "boundary-hulog scheme," where Bustamante would remit to
Villarama P550.00 a day for a period of four years; Bustamante would then become the owner of the vehicle and continue to drive the same under
Villamaria’s franchise. It was also agreed that Bustamante would make a downpayment of P10,000.00.
On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng Boundary-Hulog"5 over the
passenger jeepney with Plate No. PVU-660, Chassis No. EVER95-38168-C and Motor No. SL-26647. The parties agreed that if Bustamante failed to pay
the boundary-hulog for three days, Villamaria Motors would hold on to the vehicle until Bustamante paid his arrears, including a penalty of P50.00 a
day; in case Bustamante failed to remit the daily boundary-hulog for a period of one week, the Kasunduan would cease to have legal effect and
Bustamante would have to return the vehicle to Villamaria Motors.
Under the Kasunduan, Bustamante was prohibited from driving the vehicle without prior authority from Villamaria Motors. Thus, Bustamante was
authorized to operate the vehicle to transport passengers only and not for other purposes. He was also required to display an identification card in
front of the windshield of the vehicle; in case of failure to do so, any fine that may be imposed by government authorities would be charged against
his account. Bustamante further obliged himself to pay for the cost of replacing any parts of the vehicle that would be lost or damaged due to his
negligence. In case the vehicle sustained serious damage, Bustamante was obliged to notify Villamaria Motors before commencing repairs.
Bustamante was not allowed to wear slippers, short pants or undershirts while driving. He was required to be polite and respectful towards the
passengers. He was also obliged to notify Villamaria Motors in case the vehicle was leased for two or more days and was required to attend any
meetings which may be called from time to time. Aside from the boundary-hulog, Bustamante was also obliged to pay for the annual registration fees
of the vehicle and the premium for the vehicle’s comprehensive insurance. Bustamante promised to strictly comply with the rules and regulations
imposed by Villamaria for the upkeep and maintenance of the jeepney.
Bustamante continued driving the jeepney under the supervision and control of Villamaria. As agreed upon, he made daily remittances of P550.00 in
payment of the purchase price of the vehicle. Bustamante failed to pay for the annual registration fees of the vehicle, but Villamaria allowed him to
continue driving the jeepney.
In 1999, Bustamante and other drivers who also had the same arrangement with Villamaria Motors failed to pay their respective boundary-hulog. This
prompted Villamaria to serve a "Paalala,"6 reminding them that under the Kasunduan, failure to pay the daily boundary-hulog for one week, would
mean their respective jeepneys would be returned to him without any complaints. He warned the drivers that the Kasunduan would henceforth be
strictly enforced and urged them to comply with their obligation to avoid litigation.
On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and barred the latter from driving the vehicle.
On August 15, 2000, Bustamante filed a Complaint7 for Illegal Dismissal against Villamaria and his wife Teresita. In his Position Paper,8 Bustamante
alleged that he was employed by Villamaria in July 1996 under the boundary system, where he was required to remit P450.00 a day. After one year of
continuously working for them, the spouses Villamaria presented the Kasunduan for his signature, with the assurance that he (Bustamante) would
own the jeepney by March 2001 after paying P550.00 in daily installments and that he would thereafter continue driving the vehicle along the same
route under the same franchise. He further narrated that in July 2000, he informed the Villamaria spouses that the surplus engine of the jeepney
needed to be replaced, and was assured that it would be done. However, he was later arrested and his driver’s license was confiscated because
apparently, the replacement engine that was installed was taken from a stolen vehicle. Due to negotiations with the apprehending authorities, the
jeepney was not impounded. The Villamaria spouses took the jeepney from him on July 24, 2000, and he was no longer allowed to drive the vehicle
since then unless he paid them P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:
WHEREFORE, in the light of the foregoing, it is most respectfully prayed that judgment be rendered ordering the respondents, jointly and severally,
the following:
1. Reinstate complainant to his former position without loss of seniority rights and execute a Deed of Sale in favor of the complainant
relative to the PUJ with Plate No. PVU-660;
2. Ordering the respondents to pay backwages in the amount of P400.00 a day and other benefits computed from July 24, 2000 up to the
time of his actual reinstatement;
3. Ordering respondents to return the amount of P10,000.00 and P180,000.00 for the expenses incurred by the complainant in the repair
and maintenance of the subject jeep;
4. Ordering the respondents to refund the amount of One Hundred (P100.00) Pesos per day counted from August 7, 1997 up to June 2000
or a total of P91,200.00;
5. To pay moral and exemplary damages of not less than P200,000.00;
6. Attorney’s fee[s] of not less than 10% of the monetary award.
Other just and equitable reliefs under the premises are also being prayed for.9
In their Position Paper,10 the spouses Villamaria admitted the existence of the Kasunduan, but alleged that Bustamante failed to pay the P10,000.00
downpayment and the vehicle’s annual registration fees. They further alleged that Bustamante eventually failed to remit the requisite boundary-
hulog of P550.00 a day, which prompted them to issue the Paalaala. Instead of complying with his obligations, Bustamante stopped making his
remittances despite his daily trips and even brought the jeepney to the province without permission. Worse, the jeepney figured in an accident and its
license plate was confiscated; Bustamante even abandoned the vehicle in a gasoline station in Sucat, Parañaque City for two weeks. When the
security guard at the gasoline station requested that the vehicle be retrieved and Teresita Villamaria asked Bustamante for the keys, Bustamante told
her: "Di kunin ninyo." When the vehicle was finally retrieved, the tires were worn, the alternator was gone, and the battery was no longer working.
Citing the cases of Cathedral School of Technology v. NLRC11 and Canlubang Security Agency Corporation v. NLRC,12 the spouses Villamaria argued that
Bustamante was not illegally dismissed since the Kasunduan executed on August 7, 1997 transformed the employer-employee relationship into that
of vendor-vendee. Hence, the spouses concluded, there was no legal basis to hold them liable for illegal dismissal. They prayed that the case be
dismissed for lack of jurisdiction and patent lack of merit.
In his Reply,13 Bustamante claimed that Villamaria exercised control and supervision over the conduct of his employment. He maintained that the
rulings of the Court in National Labor Union v. Dinglasan,14 Magboo v. Bernardo,15 and Citizen's League of Free Workers v. Abbas16 are germane to the
issue as they define the nature of the owner/operator-driver relationship under the boundary system. He further reiterated that it was the Villamaria
spouses who presented the Kasunduan to him and that he conformed thereto only upon their representation that he would own the vehicle after four
years. Moreover, it appeared that the Paalala was duly received by him, as he, together with other drivers, was made to affix his signature on a blank
piece of paper purporting to be an "attendance sheet."
On March 15, 2002, the Labor Arbiter rendered judgment17 in favor of the spouses Villamaria and ordered the complaint dismissed on the following
ratiocination:
Respondents presented the contract of Boundary-Hulog, as well as the PAALALA, to prove their claim that complainant violated the terms of their
contract and afterwards abandoned the vehicle assigned to him. As against the foregoing, [the] complaint’s (sic) mere allegations to the contrary
cannot prevail.
Not having been illegally dismissed, complainant is not entitled to damages and attorney's fees.18
Bustamante appealed the decision to the NLRC,19 insisting that the Kasunduan did not extinguish the employer-employee relationship between him
and Villamaria. While he did not receive fixed wages, he kept only the excess of the boundary-hulog which he was required to remit daily to Villamaria
under the agreement. Bustamante maintained that he remained an employee because he was engaged to perform activities which were necessary or
desirable to Villamaria’s trade or business.
The NLRC rendered judgment20 dismissing the appeal for lack of merit, thus:
WHEREFORE, premises considered, complainant's appeal is hereby DISMISSED for reasons not stated in the Labor Arbiter's decision but mainly on a
jurisdictional issue, there being none over the subject matter of the controversy.21
The NLRC ruled that under the Kasunduan, the juridical relationship between Bustamante and Villamaria was that of vendor and vendee, hence, the
Labor Arbiter had no jurisdiction over the complaint. Bustamante filed a Motion for Reconsideration, which the NLRC resolved to deny on May 30,
2003.22
Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that the NLRC erred
I
IN DISMISSING PETITIONER’S APPEAL "FOR REASON NOT STATED IN THE LABOR ARBITER’S DECISION, BUT MAINLY ON JURISDICTIONAL ISSUE;"
II
IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT DECLARED THAT THE RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN
PETITIONER AND THE PRIVATE RESPONDENT WAS DEFINITELY A MATTER WHICH IS BEYOND THE PROTECTIVE MANTLE OF OUR LABOR LAWS.23
Bustamante insisted that despite the Kasunduan, the relationship between him and Villamaria continued to be that of employer-employee and as
such, the Labor Arbiter had jurisdiction over his complaint. He further alleged that it is common knowledge that operators of passenger jeepneys
(including taxis) pay their drivers not on a regular monthly basis but on commission or boundary basis, or even the boundary-hulog system.
Bustamante asserted that he was dismissed from employment without any lawful or just cause and without due notice.
For his part, Villamaria averred that Bustamante failed to adduce proof of their employer-employee relationship. He further pointed out that the
Dinglasan case pertains to the boundary system and not the boundary-hulog system, hence inapplicable in the instant case. He argued that upon the
execution of the Kasunduan, the juridical tie between him and Bustamante was transformed into a vendor-vendee relationship. Noting that he was
engaged in the manufacture and sale of jeepneys and not in the business of transporting passengers for consideration, Villamaria contended that the
daily fees which Bustmante paid were actually periodic installments for the the vehicle and were not the same fees as understood in the boundary
system. He added that the boundary-hulog plan was basically a scheme to help the driver-buyer earn money and eventually pay for the unit in full,
and for the owner to profit not from the daily earnings of the driver-buyer but from the purchase price of the unit sold. Villamaria further asserted
that the apparently restrictive conditions in the Kasunduan did not mean that the means and method of driver-buyer’s conduct was controlled, but
were mere ways to preserve the vehicle for the benefit of both parties: Villamaria would be able to collect the agreed purchase price, while
Bustamante would be assured that the vehicle would still be in good running condition even after four years. Moreover, the right of vendor to impose
certain conditions on the buyer should be respected until full ownership of the property is vested on the latter. Villamaria insisted that the parallel
circumstances obtaining in Singer Sewing Machine Company v. Drilon24 has analogous application to the instant issue.
In its Decision25 dated August 30, 2004, the CA reversed and set aside the NLRC decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions of the NLRC must be, as they are hereby are, REVERSED AND SET ASIDE, and
judgment entered in favor of petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante separation pay computed from the time of his
employment up to the time of termination based on the prevailing minimum wage at the time of termination; and,
2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante back wages computed from the time of his
dismissal up to March 2001 based on the prevailing minimum wage at the time of his dismissal.
Without Costs.
SO ORDERED.26
The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamante’s complaint. Under the Kasunduan, the relationship between him
and Villamaria was dual: that of vendor-vendee and employer-employee. The CA ratiocinated that Villamaria’s exercise of control over Bustamante’s
conduct in operating the jeepney is inconsistent with the former’s claim that he was not engaged in the transportation business. There was no
evidence that petitioner was allowed to let some other person drive the jeepney.
The CA further held that, while the power to dismiss was not mentioned in the Kasunduan, it did not mean that Villamaria could not exercise it. It
explained that the existence of an employment relationship did not depend on how the worker was paid but on the presence or absence of control
over the means and method of the employee’s work. In this case, Villamaria’s directives (to drive carefully, wear an identification card, don decent
attire, park the vehicle in his garage, and to inform him about provincial trips, etc.) was a means to control the way in which Bustamante was to go
about his work. In view of Villamaria’s supervision and control as employer, the fact that the "boundary" represented installment payments of the
purchase price on the jeepney did not remove the parties’ employer-employee relationship.
While the appellate court recognized that a week’s default in paying the boundary-hulog constituted an additional cause for terminating
Bustamante’s employment, it held that the latter was illegally dismissed. According to the CA, assuming that Bustamante failed to make the required
payments as claimed by Villamaria, the latter nevertheless failed to take steps to recover the unit and waited for Bustamante to abandon it. It also
pointed out that Villamaria neither submitted any police report to support his claim that the vehicle figured in a mishap nor presented the affidavit of
the gas station guard to substantiate the claim that Bustamante abandoned the unit.
Villamaria received a copy of the decision on September 8, 2004, and filed, on September 17, 2004, a motion for reconsideration thereof. The CA
denied the motion in a Resolution27 dated November 2, 2004, and Villamaria received a copy thereof on November 8, 2004.
Villamaria, now petitioner, seeks relief from this Court via petition for review on certiorari under Rule 65 of the Rules of Court, alleging that the CA
committed grave abuse of its discretion amounting to excess or lack of jurisdiction in reversing the decision of the Labor Arbiter and the NLRC. He
claims that the CA erred in ruling that the juridical relationship between him and respondent under the Kasunduan was a combination of employer-
employee and vendor-vendee relationships. The terms and conditions of the Kasunduan clearly state that he and respondent Bustamante had
entered into a conditional deed of sale over the jeepney; as such, their employer-employee relationship had been transformed into that of vendor-
vendee. Petitioner insists that he had the right to reserve his title on the jeepney until after the purchase price thereof had been paid in full.
In his Comment on the petition, respondent avers that the appropriate remedy of petitioner was an appeal via a petition for review on certiorari
under Rule 45 of the Rules of Court and not a special civil action of certiorari under Rule 65. He argues that petitioner failed to establish that the CA
committed grave abuse of its discretion amounting to excess or lack of jurisdiction in its decision, as the said ruling is in accord with law and the
evidence on record.
Respondent further asserts that the Kasunduan presented to him by petitioner which provides for a boundary-hulog scheme was a devious
circumvention of the Labor Code of the Philippines. Respondent insists that his juridical relationship with petitioner is that of employer-employee
because he was engaged to perform activities which were necessary or desirable in the usual business of petitioner, his employer.
In his Reply, petitioner avers that the Rules of Procedure should be liberally construed in his favor; hence, it behooves the Court to resolve the merits
of his petition.
We agree with respondent’s contention that the remedy of petitioner from the CA decision was to file a petition for review on certiorari under Rule
45 of the Rules of Court and not the independent action of certiorari under Rule 65. Petitioner had 15 days from receipt of the CA resolution denying
his motion for the reconsideration within which to file the petition under Rule 45.28 But instead of doing so, he filed a petition for certiorari under Rule
65 on November 22, 2004, which did not, however, suspend the running of the 15-day reglementary period; consequently, the CA decision became
final and executory upon the lapse of the reglementary period for appeal. Thus, on this procedural lapse, the instant petition stands to be dismissed.29
It must be stressed that the recourse to a special civil action under Rule 65 of the Rules of Court is proscribed by the remedy of appeal under Rule 45.
As the Court elaborated in Tomas Claudio Memorial College, Inc. v. Court of Appeals:30
We agree that the remedy of the aggrieved party from a decision or final resolution of the CA is to file a petition for review on certiorari under Rule 45
of the Rules of Court, as amended, on questions of facts or issues of law within fifteen days from notice of the said resolution. Otherwise, the decision
of the CA shall become final and executory. The remedy under Rule 45 of the Rules of Court is a mode of appeal to this Court from the decision of the
CA. It is a continuation of the appellate process over the original case. A review is not a matter of right but is a matter of judicial discretion. The
aggrieved party may, however, assail the decision of the CA via a petition for certiorari under Rule 65 of the Rules of Court within sixty days from
notice of the decision of the CA or its resolution denying the motion for reconsideration of the same. This is based on the premise that in issuing the
assailed decision and resolution, the CA acted with grave abuse of discretion, amounting to excess or lack of jurisdiction and there is no plain, speedy
and adequate remedy in the ordinary course of law. A remedy is considered plain, speedy and adequate if it will promptly relieve the petitioner from
the injurious effect of the judgment and the acts of the lower court.
The aggrieved party is proscribed from filing a petition for certiorari if appeal is available, for the remedies of appeal and certiorari are mutually
exclusive and not alternative or successive. The aggrieved party is, likewise, barred from filing a petition for certiorari if the remedy of appeal is lost
through his negligence. A petition for certiorari is an original action and does not interrupt the course of the principal case unless a temporary
restraining order or a writ of preliminary injunction has been issued against the public respondent from further proceeding. A petition for certiorari
must be based on jurisdictional grounds because, as long as the respondent court acted within its jurisdiction, any error committed by it will amount
to nothing more than an error of judgment which may be corrected or reviewed only by appeal.31
However, we have also ruled that a petition for certiorari under Rule 65 may be considered as filed under Rule 45, conformably with the principle that
rules of procedure are to be construed liberally, provided that the petition is filed within the reglementary period under Section 2, Rule 45 of the
Rules of Court, and where valid and compelling circumstances warrant that the petition be resolved on its merits.32 In this case, the petition was filed
within the reglementary period and petitioner has raised an issue of substance: whether the existence of a boundary-hulog agreement negates the
employer-employee relationship between the vendor and vendee, and, as a corollary, whether the Labor Arbiter has jurisdiction over a complaint for
illegal dismissal in such case.
We resolve these issues in the affirmative.
The rule is that, the nature of an action and the subject matter thereof, as well as, which court or agency of the government has jurisdiction over the
same, are determined by the material allegations of the complaint in relation to the law involved and the character of the reliefs prayed for, whether
or not the complainant/plaintiff is entitled to any or all of such reliefs.33 A prayer or demand for relief is not part of the petition of the cause of action;
nor does it enlarge the cause of action stated or change the legal effect of what is alleged.34 In determining which body has jurisdiction over a case,
the better policy is to consider not only the status or relationship of the parties but also the nature of the action that is the subject of their
controversy.35
Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive original jurisdiction only over the following:
x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty
(30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage, rates of pay, hours of work, and other
terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-
employee relationship, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos
(P5,000.00) regardless of whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining agreements, and those arising from the
interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to
the grievance machinery and voluntary arbitration as may be provided in said agreements.
In the foregoing cases, an employer-employee relationship is an indispensable jurisdictional requisite.36 The jurisdiction of Labor Arbiters and the
NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship which can only be resolved by
reference to the Labor Code, other labor statutes or their collective bargaining agreement.37 Not every dispute between an employer and employee
involves matters that only the Labor Arbiter and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. Actions between
employers and employees where the employer-employee relationship is merely incidental is within the exclusive original jurisdiction of the regular
courts.38 When the principal relief is to be granted under labor legislation or a collective bargaining agreement, the case falls within the exclusive
jurisdiction of the Labor Arbiter and the NLRC even though a claim for damages might be asserted as an incident to such claim.39
We agree with the ruling of the CA that, under the boundary-hulog scheme incorporated in the Kasunduan, a dual juridical relationship was created
between petitioner and respondent: that of employer-employee and vendor-vendee. The Kasunduan did not extinguish the employer-employee
relationship of the parties extant before the execution of said deed.
As early as 1956, the Court ruled in National Labor Union v. Dinglasan40 that the jeepney owner/operator-driver relationship under the boundary
system is that of employer-employee and not lessor-lessee. This doctrine was affirmed, under similar factual settings, in Magboo v. Bernardo41 and
Lantaco, Sr. v. Llamas,42 and was analogously applied to govern the relationships between auto-calesa owner/operator and driver,43 bus
owner/operator and conductor,44 and taxi owner/operator and driver.45
The boundary system is a scheme by an owner/operator engaged in transporting passengers as a common carrier to primarily govern the
compensation of the driver, that is, the latter’s daily earnings are remitted to the owner/operator less the excess of the boundary which represents
the driver’s compensation. Under this system, the owner/operator exercises control and supervision over the driver. It is unlike in lease of chattels
where the lessor loses complete control over the chattel leased but the lessee is still ultimately responsible for the consequences of its use. The
management of the business is still in the hands of the owner/operator, who, being the holder of the certificate of public convenience, must see to it
that the driver follows the route prescribed by the franchising and regulatory authority, and the rules promulgated with regard to the business
operations. The fact that the driver does not receive fixed wages but only the excess of the "boundary" given to the owner/operator is not sufficient
to change the relationship between them. Indubitably, the driver performs activities which are usually necessary or desirable in the usual business or
trade of the owner/operator.46
Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount which represented the boundary of petitioner as well
as respondent’s partial payment (hulog) of the purchase price of the jeepney.
Respondent was entitled to keep the excess of his daily earnings as his daily wage. Thus, the daily remittances also had a dual purpose: that of
petitioner’s boundary and respondent’s partial payment (hulog) for the vehicle. This dual purpose was expressly stated in the Kasunduan. The well-
settled rule is that an obligation is not novated by an instrument that expressly recognizes the old one, changes only the terms of payment, and adds
other obligations not incompatible with the old provisions or where the new contract merely supplements the previous one. 47 The two obligations of
the respondent to remit to petitioner the boundary-hulog can stand together.
In resolving an issue based on contract, this Court must first examine the contract itself, keeping in mind that when the terms of the agreement are
clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulations shall prevail.48 The intention of the
contracting parties should be ascertained by looking at the words used to project their intention, that is, all the words, not just a particular word or
two or more words standing alone. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense
which may result from all of them taken jointly.49 The parts and clauses must be interpreted in relation to one another to give effect to the whole. The
legal effect of a contract is to be determined from the whole read together.50
Under the Kasunduan, petitioner retained supervision and control over the conduct of the respondent as driver of the jeepney, thus:
Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary hulog ay ang mga sumusunod:
1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang sasakyan ipinagkatiwala sa kanya ng TAUHAN NG UNANG PANIG.
2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG IKALAWANG PANIG sa paghahanapbuhay bilang pampasada o
pangangalakal sa malinis at maayos na pamamaraan.
3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG IKALAWANG PANIG sa mga bagay na makapagdudulot ng kahihiyan,
kasiraan o pananagutan sa TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG PANIG.
5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay ng ID Card sa harap ng windshield upang sa pamamagitan nito ay
madaliang malaman kung ang nagmamaneho ay awtorisado ng VILLAMARIA MOTORS o hindi.
6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa kung sakaling mahuli ang sasakyang ito na hindi nakakabit ang ID
card sa wastong lugar o anuman kasalanan o kapabayaan.
7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o piyesa na papalitan ng nasira o nawala ito dahil sa kanyang
kapabayaan.
8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang hinuhulugan pa rin ng TAUHAN NG IKALAWANG PANIG ang nasabing
sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob ng TAUHAN NG UNANG PANIG, ang TAUHAN NG IKALAWANG
PANIG ay obligadong itawag ito muna sa VILLAMARIA MOTORS bago ipagawa sa alin mang Motor Shop na awtorisado ng VILLAMARIA
MOTORS.
10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon ng pamamasada na ang nagmamaneho ay naka-tsinelas, naka
short pants at nakasando lamang. Dapat ang nagmamaneho ay laging nasa maayos ang kasuotan upang igalang ng mga pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver ay magpapakita ng magandang asal sa mga pasaheros at hindi
dapat magsasalita ng masama kung sakali man may pasaherong pilosopo upang maiwasan ang anumang kaguluhan na maaaring
kasangkutan.
12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang TAUHAN NG IKALAWANG PANIG sa loob ng tatlong (3) araw ay ang
opisina ng VILLAMARIA MOTORS ang may karapatang mangasiwa ng nasabing sasakyan hanggang matugunan ang lahat ng responsibilidad.
Ang halagang dapat bayaran sa opisina ay may karagdagang multa ng P50.00 sa araw-araw na ito ay nasa pangangasiwa ng VILLAMARIA
MOTORS.
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay nangangahulugan
na ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG
PANIG.
14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro, comprehensive insurance taon-taon at kahit anong uri ng aksidente
habang ito ay hinuhulugan pa sa TAUHAN NG UNANG PANIG.
15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa tuwing
tatawag ang mga tagapangasiwa nito upang maipaabot ang anumang mungkahi sa ikasusulong ng samahan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga patakaran na magkakaroon ng pagbabago o karagdagan sa mga
darating na panahon at hindi magiging hadlang sa lahat ng mga balakin ng VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at ikakatibay
ng Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa pasahero upang hindi kainisan ng kapwa driver at maiwasan ang
pagkakasangkot sa anumang gulo.
18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan lalo na sa umaga bago pumasada, at sa hapon o gabi naman ay
sisikapin mapanatili ang kalinisan nito.
19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng dalawa o higit pang araw sa lalawigan ay dapat lamang na ipagbigay
alam muna ito sa VILLAMARIA MOTORS upang maiwasan ang mga anumang suliranin.
20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-unahan sa kaninumang sasakyan upang maiwasan ang aksidente.
21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa VILLAMARIA MOTORS mabuti man or masama ay iparating agad
ito sa kinauukulan at iwasan na iparating ito kung [kani-kanino] lamang upang maiwasan ang anumang usapin. Magsadya agad sa opisina ng
VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong sinasang-ayunan at buong sikap na pangangalagaan ng TAUHAN NG
IKALAWANG PANIG ang nasabing sasakyan at gagamitin lamang ito sa paghahanapbuhay at wala nang iba pa.51
The parties expressly agreed that petitioner, as vendor, and respondent, as vendee, entered into a contract to sell the jeepney on a daily installment
basis of P550.00 payable in four years and that petitioner would thereafter become its owner. A contract is one of conditional sale, oftentimes
referred to as contract to sell, if the ownership or title over the
property sold is retained by the vendor, and is not passed to the vendee unless and until there is full payment of the purchase price and/or upon
faithful compliance with the other terms and conditions that may lawfully be stipulated.52 Such payment or satisfaction of other preconditions, as the
case may be, is a positive suspensive condition, the failure of which is not a breach of contract, casual or serious, but simply an event that would
prevent the obligation of the vendor to convey title from acquiring binding force.53 Stated differently, the efficacy or obligatory force of the vendor's
obligation to transfer title is subordinated to the happening of a future and uncertain event so that if the suspensive condition does not take place,
the parties would stand as if the conditional obligation had never existed.54 The vendor may extrajudicially terminate the operation of the contract,
refuse conveyance, and retain the sums or installments already received, where such rights are expressly provided for.55
Under the boundary-hulog scheme, petitioner retained ownership of the jeepney although its material possession was vested in respondent as its
driver. In case respondent failed to make his P550.00 daily installment payment for a week, the agreement would be of no force and effect and
respondent would have to return the jeepney to petitioner; the employer-employee relationship would likewise be terminated unless petitioner
would allow respondent to continue driving the jeepney on a boundary basis of P550.00 daily despite the termination of their vendor-vendee
relationship.
The juridical relationship of employer-employee between petitioner and respondent was not negated by the foregoing stipulation in the Kasunduan,
considering that petitioner retained control of respondent’s conduct as driver of the vehicle. As correctly ruled by the CA:
The exercise of control by private respondent over petitioner’s conduct in operating the jeepney he was driving is inconsistent with private
respondent’s claim that he is, or was, not engaged in the transportation business; that, even if petitioner was allowed to let some other person drive
the unit, it was not shown that he did so; that the existence of an employment relation is not dependent on how the worker is paid but on the
presence or absence of control over the means and method of the work; that the amount earned in excess of the "boundary hulog" is equivalent to
wages; and that the fact that the power of dismissal was not mentioned in the Kasunduan did not mean that private respondent never exercised such
power, or could not exercise such power.
Moreover, requiring petitioner to drive the unit for commercial use, or to wear an identification card, or to don a decent attire, or to park the vehicle
in Villamaria Motors garage, or to inform Villamaria Motors about the fact that the unit would be going out to the province for two days of more, or
to drive the unit carefully, etc. necessarily related to control over the means by which the petitioner was to go about his work; that the ruling
applicable here is not Singer Sewing Machine but National Labor Union since the latter case involved jeepney owners/operators and jeepney drivers,
and that the fact that the "boundary" here represented installment payment of the purchase price on the jeepney did not withdraw the relationship
from that of employer-employee, in view of the overt presence of supervision and control by the employer.56
Neither is such juridical relationship negated by petitioner’s claim that the terms and conditions in the Kasunduan relative to respondent’s behavior
and deportment as driver was for his and respondent’s benefit: to insure that respondent would be able to pay the requisite daily installment of
P550.00, and that the vehicle would still be in good condition despite the lapse of four years. What is primordial is that petitioner retained control
over the conduct of the respondent as driver of the jeepney.
Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is entitled to exercise supervision and control over the respondent, by
seeing to it that the route provided in his franchise, and the rules and regulations of the Land Transportation Regulatory Board are duly complied
with. Moreover, in a business establishment, an identification card is usually provided not just as a security measure but to mainly identify the holder
thereof as a bona fide employee of the firm who issues it.57
As respondent’s employer, it was the burden of petitioner to prove that respondent’s termination from employment was for a lawful or just cause, or,
at the very least, that respondent failed to make his daily remittances of P550.00 as boundary. However, petitioner failed to do so. As correctly ruled
by the appellate court:
It is basic of course that termination of employment must be effected in accordance with law. The just and authorized causes for termination of
employment are enumerated under Articles 282, 283 and 284 of the Labor Code.
Parenthetically, given the peculiarity of the situation of the parties here, the default in the remittance of the boundary hulog for one week or longer
may be considered an additional cause for termination of employment. The reason is because the Kasunduan would be of no force and effect in the
event that the purchaser failed to remit the boundary hulog for one week. The Kasunduan in this case pertinently stipulates:
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay NANGANGAHULUGAN na
ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG na
wala ng paghahabol pa.
Moreover, well-settled is the rule that, the employer has the burden of proving that the dismissal of an employee is for a just cause. The failure of the
employer to discharge this burden means that the dismissal is not justified and that the employee is entitled to reinstatement and back wages.
In the case at bench, private respondent in his position paper before the Labor Arbiter, alleged that petitioner failed to pay the miscellaneous fee of
P10,000.00 and the yearly registration of the unit; that petitioner also stopped remitting the "boundary hulog," prompting him (private respondent) to
issue a "Paalala," which petitioner however ignored; that petitioner even brought the unit to his (petitioner’s) province without informing him (private
respondent) about it; and that petitioner eventually abandoned the vehicle at a gasoline station after figuring in an accident. But private respondent
failed to substantiate these allegations with solid, sufficient proof. Notably, private respondent’s allegation viz, that he retrieved the vehicle from the
gas station, where petitioner abandoned it, contradicted his statement in the Paalala that he would enforce the provision (in the Kasunduan) to the
effect that default in the remittance of the boundary hulog for one week would result in the forfeiture of the unit. The Paalala reads as follows:
"Sa lahat ng mga kumukuha ng sasakyan
"Sa pamamagitan ng ‘BOUNDARY HULOG’
"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na ang paragrapo 13 na nagsasaad na kung hindi kayo makapagbigay ng
Boundary Hulog sa loob ng isang linggo ay kusa ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng wala ng paghahabol pa.
"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong ipatutupad ang nasabing Kasunduan kaya’t aking pinaaalala sa inyong
lahat na tuparin natin ang nakalagay sa kasunduan upang maiwasan natin ito.
"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo makaabot pa sa korte kung sakaling hindi ninyo isasauli ang inyong
sasakyan na hinuhulugan na ang mga magagastos ay kayo pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan ang naging dahilan ng
pagsampa ng kaso.
"Sumasainyo
"Attendance: 8/27/99
"(The Signatures appearing herein
include (sic) that of petitioner’s) (Sgd.)
OSCAR VILLAMARIA, JR."
If it were true that petitioner did not remit the boundary hulog for one week or more, why did private respondent not forthwith take steps to recover
the unit, and why did he have to wait for petitioner to abandon it?1avvphil.net
On another point, private respondent did not submit any police report to support his claim that petitioner really figured in a vehicular mishap. Neither
did he present the affidavit of the guard from the gas station to substantiate his claim that petitioner abandoned the unit there.58
Petitioner’s claim that he opted not to terminate the employment of respondent because of magnanimity is negated by his (petitioner’s) own
evidence that he took the jeepney from the respondent only on July 24, 2000.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 78720 is AFFIRMED. Costs against
petitioner.
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 172101               November 23, 2007
REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY COMMISSION and SOCIAL SECURITY SYSTEM, Petitioners,
vs.
ASIAPRO COOPERATIVE, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the
Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, which annulled and
set aside the Orders of the Social Security Commission (SSC) in SSC Case No. 6-15507-03, dated 17 February 20043 and 16 September
2004,4 respectively, thereby dismissing the petition-complaint dated 12 June 2003 filed by herein petitioner Social Security System (SSS) against herein
respondent.
Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body authorized by law to resolve disputes arising under
Republic Act No. 1161, as amended by Republic Act No. 8282.5 Petitioner SSS is a government corporation created by virtue of Republic Act No. 1161,
as amended. On the other hand, herein respondent Asiapro Cooperative (Asiapro) is a multi-purpose cooperative created pursuant to Republic Act
No. 69386 and duly registered with the Cooperative Development Authority (CDA) on 23 November 1999 with Registration Certificate No. 0-623-
2460.7
The antecedents of this case are as follows:
Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-members are of two categories, to wit: (1) regular
member, who is entitled to all the rights and privileges of membership; and (2) associate member, who has no right to vote and be voted upon and
shall be entitled only to such rights and privileges provided in its by-laws.8 Its primary objectives are to provide savings and credit facilities and to
develop other livelihood services for its owners-members. In the discharge of the aforesaid primary objectives, respondent cooperative entered into
several Service Contracts9 with Stanfilco - a division of DOLE Philippines, Inc. and a company based in Bukidnon. The owners-members do not receive
compensation or wages from the respondent cooperative. Instead, they receive a share in the service surplus10 which the respondent cooperative
earns from different areas of trade it engages in, such as the income derived from the said Service Contracts with Stanfilco. The owners-members get
their income from the service surplus generated by the quality and amount of services they rendered, which is determined by the Board of Directors
of the respondent cooperative.
In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the respondent cooperative, who were assigned to
Stanfilco requested the services of the latter to register them with petitioner SSS as self-employed and to remit their contributions as such. Also, to
comply with Section 19-A of Republic Act No. 1161, as amended by Republic Act No. 8282, the SSS contributions of the said owners-members were
equal to the share of both the employer and the employee.
On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty. Eddie A. Jara, sent a letter11 to the respondent
cooperative, addressed to its Chief Executive Officer (CEO) and General Manager Leo G. Parma, informing the latter that based on the Service
Contracts it executed with Stanfilco, respondent cooperative is actually a manpower contractor supplying employees to Stanfilco and for that reason,
it is an employer of its owners-members working with Stanfilco. Thus, respondent cooperative should register itself with petitioner SSS as an
employer and make the corresponding report and remittance of premium contributions in accordance with the Social Security Law of 1997. On 9
October 2002,12 respondent cooperative, through its counsel, sent a reply to petitioner SSS’s letter asserting that it is not an employer because its
owners-members are the cooperative itself; hence, it cannot be its own employer. Again, on 21 October 2002,13 petitioner SSS sent a letter to
respondent cooperative ordering the latter to register as an employer and report its owners-members as employees for compulsory coverage with
the petitioner SSS. Respondent cooperative continuously ignored the demand of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14 before petitioner SSC against the respondent cooperative and Stanfilco praying that the
respondent cooperative or, in the alternative, Stanfilco be directed to register as an employer and to report respondent cooperative’s owners-
members as covered employees under the compulsory coverage of SSS and to remit the necessary contributions in accordance with the Social
Security Law of 1997. The same was docketed as SSC Case No. 6-15507-03. Respondent cooperative filed its Answer with Motion to Dismiss alleging
that no employer-employee relationship exists between it and its owners-members, thus, petitioner SSC has no jurisdiction over the respondent
cooperative. Stanfilco, on the other hand, filed an Answer with Cross-claim against the respondent cooperative.
On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the respondent cooperative. The respondent cooperative
moved for the reconsideration of the said Order, but it was likewise denied in another Order issued by the SSC dated 16 September 2004.
Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of Time to File a Petition for Review before the Court of
Appeals. Subsequently, respondent cooperative filed a Manifestation stating that it was no longer filing a Petition for Review. In its place, respondent
cooperative filed a Petition for Certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 87236, with the following assignment of errors:
I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC were issued with grave abuse of discretion amounting to a
(sic) lack or excess of jurisdiction in that:
A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the petition a quo, considering that it failed to first resolve
the issue of the existence of an employer-employee relationship between [respondent] cooperative and its owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under the SSS Law with respect to coverage, benefits,
contributions, and related matters, it is respectfully submitted that [petitioner] SSC may only assume jurisdiction in cases where there is no
dispute as to the existence of an employer-employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-employee relationship raised in [respondent’s] Motion to
Dismiss can be preliminarily resolved through summary hearings prior to the hearing on the merits. However, any inquiry beyond a
preliminary determination, as what [petitioner SSC] wants to accomplish, would be to encroach on the jurisdiction of the National Labor
Relations Commission [NLRC], which is the more competent body clothed with power to resolve issues relating to the existence of an
employment relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the petition a quo.
A. [Respondent] is not an employer within the contemplation of the Labor Law but is a multi-purpose cooperative created pursuant to
Republic Act No. 6938 and composed of owners-members, not employees.
B. The rights and obligations of the owners-members of [respondent] cooperative are derived from their Membership Agreements, the
Cooperatives By-Laws, and Republic Act No. 6938, and not from any contract of employment or from the Labor Laws. Moreover, said
owners-members enjoy rights that are not consistent with being mere employees of a company, such as the right to participate and vote in
decision-making for the cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the owners-members of [respondent] cooperative are not paid any compensation
income.15 (Emphasis supplied.)
On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by the respondent cooperative. The decretal portion of the
Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and [16 September 2004], are ANNULLED and SET ASIDE and a
new one is entered DISMISSING the petition-complaint dated [12 June 2003] of [herein petitioner] Social Security System.16
Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was denied by the appellate court in its Resolution dated 20
March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in not finding that the SSC has jurisdiction over the
subject matter and it has a valid basis in denying respondent’s Motion to Dismiss. The said issue is supported by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the [petitioner SSS] under R.A. No. 8282.
II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner SSC after invoking its jurisdiction by filing an
[A]nswer with [M]otion to [D]ismiss before it.
III. The [petitioner SSC] did not act with grave abuse of discretion in denying respondent [cooperative’s] [M]otion to [D]ismiss.
IV. The existence of an employer-employee relationship is a question of fact where presentation of evidence is necessary.
 V. There is an employer-employee relationship between [respondent cooperative] and its [owners-members].
Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS as it involved an issue of whether or not a
worker is entitled to compulsory coverage under the SSS Law. Petitioners avow that Section 5 of Republic Act No. 1161, as amended by Republic Act
No. 8282, expressly confers upon petitioner SSC the power to settle disputes on compulsory coverage, benefits, contributions and penalties thereon
or any other matter related thereto. Likewise, Section 9 of the same law clearly provides that SSS coverage is compulsory upon all employees. Thus,
when petitioner SSS filed a petition-complaint against the respondent cooperative and Stanfilco before the petitioner SSC for the compulsory
coverage of respondent cooperative’s owners-members as well as for collection of unpaid SSS contributions, it was very obvious that the subject
matter of the aforesaid petition-complaint was within the expertise and jurisdiction of the SSC.
Petitioners similarly assert that granting arguendo that there is a prior need to determine the existence of an employer-employee relationship
between the respondent cooperative and its owners-members, said issue does not preclude petitioner SSC from taking cognizance of the aforesaid
petition-complaint. Considering that the principal relief sought in the said petition-complaint has to be resolved by reference to the Social Security
Law and not to the Labor Code or other labor relations statutes, therefore, jurisdiction over the same solely belongs to petitioner SSC.
Petitioners further claim that the denial of the respondent cooperative’s Motion to Dismiss grounded on the alleged lack of employer-employee
relationship does not constitute grave abuse of discretion on the part of petitioner SSC because the latter has the authority and power to deny the
same. Moreover, the existence of an employer-employee relationship is a question of fact where presentation of evidence is necessary. Petitioners
also maintain that the respondent cooperative is already estopped from assailing the jurisdiction of the petitioner SSC because it has already filed its
Answer before it, thus, respondent cooperative has already submitted itself to the jurisdiction of the petitioner SSC.
Finally, petitioners contend that there is an employer-employee relationship between the respondent cooperative and its owners-members. The
respondent cooperative is the employer of its owners-members considering that it undertook to provide services to Stanfilco, the performance of
which is under the full and sole control of the respondent cooperative.
On the other hand, respondent cooperative alleges that its owners-members own the cooperative, thus, no employer-employee relationship can arise
between them. The persons of the employer and the employee are merged in the owners-members themselves. Likewise, respondent cooperative’s
owners-members even requested the respondent cooperative to register them with the petitioner SSS as self-employed individuals. Hence, petitioner
SSC has no jurisdiction over the petition-complaint filed before it by petitioner SSS.
Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner SSC acted with grave abuse of discretion when it
assumed jurisdiction over the petition-complaint without determining first if there was an employer-employee relationship between the respondent
cooperative and its owners-members. Respondent cooperative claims that the question of whether an employer-employee relationship exists
between it and its owners-members is a legal and not a factual issue as the facts are undisputed and need only to be interpreted by the applicable law
and jurisprudence.
Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the jurisdiction of petitioner SSC simply because it filed an
Answer with Motion to Dismiss, especially where the issue of jurisdiction is raised at the very first instance and where the only relief being sought is
the dismissal of the petition-complaint for lack of jurisdiction.
From the foregoing arguments of the parties, the issues may be summarized into:
I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS against the respondent
cooperative.
II. Whether the respondent cooperative is estopped from assailing the jurisdiction of petitioner SSC since it had already filed an Answer with
Motion to Dismiss before the said body.
Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section 1, Rule III of the 1997 SSS Revised Rules of
Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect to coverage, benefits, contributions and penalties thereon or any
other matter related thereto, shall be cognizable by the Commission, x x x. (Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:
Section 1. Jurisdiction. – Any dispute arising under the Social Security Act with respect to coverage, entitlement of benefits, collection and settlement
of contributions and penalties thereon, or any other matter related thereto, shall be cognizable by the Commission after the SSS through its President,
Manager or Officer-in-charge of the Department/Branch/Representative Office concerned had first taken action thereon in writing. (Emphasis
supplied.)
It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS is well within the exclusive domain of the
petitioner SSC. It is important to note, though, that the mandatory coverage under the SSS Law is premised on the existence of an employer-
employee relationship17 except in cases of compulsory coverage of the self-employed.
It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the Motion to Dismiss, determine which court has
jurisdiction over an action; otherwise, the question of jurisdiction would depend almost entirely upon the defendant.18 Moreover, it is well-settled
that once jurisdiction is acquired by the court, it remains with it until the full termination of the case.19 The said principle may be applied even to
quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the respondent cooperative and Stanfilco alleges that
the owners-members of the respondent cooperative are subject to the compulsory coverage of the SSS because they are employees of the
respondent cooperative. Consequently, the respondent cooperative being the employer of its owners-members must register as employer and report
its owners-members as covered members of the SSS and remit the necessary premium contributions in accordance with the Social Security Law of
1997. Accordingly, based on the aforesaid allegations in the petition-complaint filed before the petitioner SSC, the case clearly falls within its
jurisdiction. Although the Answer with Motion to Dismiss filed by the respondent cooperative challenged the jurisdiction of the petitioner SSC on the
alleged lack of employer-employee relationship between itself and its owners-members, the same is not enough to deprive the petitioner SSC of its
jurisdiction over the petition-complaint filed before it. Thus, the petitioner SSC cannot be faulted for initially assuming jurisdiction over the petition-
complaint of the petitioner SSS.
Nonetheless, since the existence of an employer-employee relationship between the respondent cooperative and its owners-members was put in
issue and considering that the compulsory coverage of the SSS Law is predicated on the existence of such relationship, it behooves the petitioner SSC
to determine if there is really an employer-employee relationship that exists between the respondent cooperative and its owners-members.
The question on the existence of an employer-employee relationship is not within the exclusive jurisdiction of the National Labor Relations
Commission (NLRC). Article 217 of the Labor Code enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee
relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (₱5,000.00) regardless of
whether accompanied with a claim for reinstatement.20
Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include issues on the coverage thereof, because
claims are undeniably rooted in the coverage by the system. Hence, the question on the existence of an employer-employee relationship for the
purpose of determining the coverage of the Social Security System is explicitly excluded from the jurisdiction of the NLRC and falls within the
jurisdiction of the SSC which is primarily charged with the duty of settling disputes arising under the Social Security Law of 1997.
On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of compulsory coverage of the owners-members
of the respondent cooperative, this Court agrees with the petitioner SSC when it declared in its Order dated 17 February 2004 that as an incident to
the issue of compulsory coverage, it may inquire into the presence or absence of an employer-employee relationship without need of waiting for a
prior pronouncement or submitting the issue to the NLRC for prior determination. Since both the petitioner SSC and the NLRC are independent bodies
and their jurisdiction are well-defined by the separate statutes creating them, petitioner SSC has the authority to inquire into the relationship existing
between the worker and the person or entity to whom he renders service to determine if the employment, indeed, is one that is excepted by the
Social Security Law of 1997 from compulsory coverage.21
Even before the petitioner SSC could make a determination of the existence of an employer-employee relationship, however, the respondent
cooperative already elevated the Order of the petitioner SSC, denying its Motion to Dismiss, to the Court of Appeals by filing a Petition for Certiorari.
As a consequence thereof, the petitioner SSC became a party to the said Petition for Certiorari pursuant to Section 5(b)22 of Republic Act No. 8282.
The appellate court ruled in favor of the respondent cooperative by declaring that the petitioner SSC has no jurisdiction over the petition-complaint
filed before it because there was no employer-employee relationship between the respondent cooperative and its owners-members. Resultantly, the
petitioners SSS and SSC, representing the Republic of the Philippines, filed a Petition for Review before this Court.
Although as a rule, in the exercise of the Supreme Court’s power of review, the Court is not a trier of facts and the findings of fact of the Court of
Appeals are conclusive and binding on the Court,23 said rule is not without exceptions. There are several recognized exceptions24 in which factual
issues may be resolved by this Court. One of these exceptions finds application in this present case which is, when the findings of fact are conflicting.
There are, indeed, conflicting findings espoused by the petitioner SSC and the appellate court relative to the existence of employer-employee
relationship between the respondent cooperative and its owners-members, which necessitates a departure from the oft-repeated rule that factual
issues may not be the subject of appeals to this Court.
In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and engagement of the
workers; (2) the payment of wages by whatever means; (3) the power of dismissal; and (4) the power to control the worker’s conduct, with the latter
assuming primacy in the overall consideration.25 The most important element is the employer’s control of the employee’s conduct, not only as to the
result of the work to be done, but also as to the means and methods to accomplish.26 The power of control refers to the existence of the power and
not necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is
enough that the employer has the right to wield that power.27 All the aforesaid elements are present in this case.
First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive discretion in the selection and
engagement of the owners-members as well as its team leaders who will be assigned at Stanfilco.28 Second. Wages are defined as "remuneration or
earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained, on a time, task, piece or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for service rendered or to be rendered."29 In this case, the weekly stipends or the so-called shares in the
service surplus given by the respondent cooperative to its owners-members were in reality wages, as the same were equivalent to an amount not
lower than that prescribed by existing labor laws, rules and regulations, including the wage order applicable to the area and industry; or the same
shall not be lower than the prevailing rates of wages.30 It cannot be doubted then that those stipends or shares in the service surplus are indeed
wages, because these are given to the owners-members as compensation in rendering services to respondent cooperative’s client, Stanfilco. Third. It
is also stated in the above-mentioned Service Contracts that it is the respondent cooperative which has the power to investigate, discipline and
remove the owners-members and its team leaders who were rendering services at Stanfilco.31 Fourth. As earlier opined, of the four elements of the
employer-employee relationship, the "control test" is the most important. In the case at bar, it is the respondent cooperative which has the sole
control over the manner and means of performing the services under the Service Contracts with Stanfilco as well as the means and methods of
work.32 Also, the respondent cooperative is solely and entirely responsible for its owners-members, team leaders and other representatives at
Stanfilco.33 All these clearly prove that, indeed, there is an employer-employee relationship between the respondent cooperative and its owners-
members.
It is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly provide that there shall be no employer-
employee relationship between the respondent cooperative and its owners-members.34 This Court, however, cannot give the said provision force and
effect.
As previously pointed out by this Court, an employee-employer relationship actually exists between the respondent cooperative and its owners-
members. The four elements in the four-fold test for the existence of an employment relationship have been complied with. The respondent
cooperative must not be allowed to deny its employment relationship with its owners-members by invoking the questionable Service Contracts
provision, when in actuality, it does exist. The existence of an employer-employee relationship cannot be negated by expressly repudiating it in a
contract, when the terms and surrounding circumstances show otherwise. The employment status of a person is defined and prescribed by law and
not by what the parties say it should be.35
It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and their agreement would have
the force of law between them. However, the agreed terms and conditions must not be contrary to law, morals, customs, public policy or public
order.36 The Service Contract provision in question must be struck down for being contrary to law and public policy since it is apparently being used by
the respondent cooperative merely to circumvent the compulsory coverage of its employees, who are also its owners-members, by the Social Security
Law.
This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja37 wherein it held that:
A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by persons, partnerships, or corporations. Its
owners and/or members are the ones who run and operate the business while the others are its employees x x x.
An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to collective bargaining for certainly an
owner cannot bargain with himself or his co-owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined that employees of
cooperatives who are themselves members of the cooperative have no right to form or join labor organizations for purposes of collective bargaining
for being themselves co-owners of the cooperative.1awp++i1
However, in so far as it involves cooperatives with employees who are not members or co-owners thereof, certainly such employees are entitled to
exercise the rights of all workers to organization, collective bargaining, negotiations and others as are enshrined in the Constitution and existing laws
of the country.
The situation in the aforesaid case is very much different from the present case. The declaration made by the Court in the aforesaid case was made in
the context of whether an employee who is also an owner-member of a cooperative can exercise the right to bargain collectively with the employer
who is the cooperative wherein he is an owner-member. Obviously, an owner-member cannot bargain collectively with the cooperative of which he is
also the owner because an owner cannot bargain with himself. In the instant case, there is no issue regarding an owner-member’s right to bargain
collectively with the cooperative. The question involved here is whether an employer-employee relationship can exist between the cooperative and
an owner-member. In fact, a closer look at Cooperative Rural Bank of Davao City, Inc. will show that it actually recognized that an owner-member of a
cooperative can be its own employee.
It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the Cooperative Development Authority.38 It has its
Board of Directors, which directs and supervises its business; meaning, its Board of Directors is the one in charge in the conduct and management of
its affairs.39 With that, a cooperative can be likened to a corporation with a personality separate and distinct from its owners-members. Consequently,
an owner-member of a cooperative can be an employee of the latter and an employer-employee relationship can exist between them.
In the present case, it is not disputed that the respondent cooperative had registered itself with the Cooperative Development Authority, as
evidenced by its Certificate of Registration No. 0-623-2460.40 In its by-laws,41 its Board of Directors directs, controls, and supervises the business and
manages the property of the respondent cooperative. Clearly then, the management of the affairs of the respondent cooperative is vested in its Board
of Directors and not in its owners-members as a whole. Therefore, it is completely logical that the respondent cooperative, as a juridical person
represented by its Board of Directors, can enter into an employment with its owners-members.
In sum, having declared that there is an employer-employee relationship between the respondent cooperative and its owners-member, we conclude
that the petitioner SSC has jurisdiction over the petition-complaint filed before it by the petitioner SSS. This being our conclusion, it is no longer
necessary to discuss the issue of whether the respondent cooperative was estopped from assailing the jurisdiction of the petitioner SSC when it filed
its Answer with Motion to Dismiss.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No.
87236, dated 5 January 2006 and 20 March 2006, respectively, are hereby REVERSED and SET ASIDE. The Orders of the petitioner SSC dated 17
February 2004 and 16 September 2004 are hereby REINSTATED. The petitioner SSC is hereby DIRECTED to continue hearing the petition-complaint
filed before it by the petitioner SSS as regards the compulsory coverage of the respondent cooperative and its owners-members. No costs.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice

THIRD DIVISION
[G.R. NO. 157214 : June 7, 2005]
PHILIPPINE GLOBAL COMMUNICATIONS, INC., Petitioner, v. RICARDO DE VERA, Respondent.
DECISION
GARCIA, J.:

Before us is this appeal by way of a Petition for Review on Certiorari from the 12 September 2002 Decision1 and the 13 February 2003 Resolution2 of
the Court of Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal dismissal by the National Labor Relations Commission against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation engaged in the business of communication services and allied activities,
while respondent Ricardo De Vera is a physician by profession whom petitioner enlisted to attend to the medical needs of its employees. At the crux
of the controversy is Dr. De Vera's status vis a vis petitioner when the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May 1981,3 offered his services to the petitioner, therein proposing his plan of works
required of a practitioner in industrial medicine, to include the following:
1. Application of preventive medicine including periodic check-up of employees;
2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation services to employees;
3. Management and treatment of employees that may necessitate hospitalization including emergency cases and accidents;
4. Conduct pre-employment physical check-up of prospective employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative function such as accomplishing medical forms, evaluating conditions of employees applying for sick leave
of absence and subsequently issuing proper certification, and all matters referred which are medical in nature.
The parties agreed and formalized respondent's proposal in a document denominated as RETAINERSHIP CONTRACT4 which will be for a period of one
year subject to renewal, it being made clear therein that respondent will cover "the retainership the Company previously had with Dr. K. Eulau" and
that respondent's "retainer fee" will be at P4,000.00 a month. Said contract was renewed yearly.5 The retainership arrangement went on from 1981
to 1994 with changes in the retainer's fee. However, for the years 1995 and 1996, renewal of the contract was only made verbally.
The turning point in the parties' relationship surfaced in December 1996 when Philcom, thru a letter6 bearing on the subject boldly written as
"TERMINATION - RETAINERSHIP CONTRACT", informed De Vera of its decision to discontinue the latter's "retainer's contract with the Company
effective at the close of business hours of December 31, 1996" because management has decided that it would be more practical to provide medical
services to its employees through accredited hospitals near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal dismissal before the National Labor Relations Commission (NLRC), alleging that that he had
been actually employed by Philcom as its company physician since 1981 and was dismissed without due process. He averred that he was designated
as a "company physician on retainer basis" for reasons allegedly known only to Philcom. He likewise professed that since he was not conversant with
labor laws, he did not give much attention to the designation as anyway he worked on a full-time basis and was paid a basic monthly salary plus fringe
benefits, like any other regular employees of Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a decision7 dismissing De Vera's complaint for lack of merit, on the
rationale that as a "retained physician" under a valid contract mutually agreed upon by the parties, De Vera was an "independent contractor" and that
he "was not dismissed but rather his contract with [PHILCOM] ended when said contract was not renewed after December 31, 1996".
On De Vera's appeal to the NLRC, the latter, in a decision8 dated 23 October 2000, reversed (the word used is "modified") that of the Labor Arbiter, on
a finding that De Vera is Philcom's "regular employee" and accordingly directed the company to reinstate him to his former position without loss of
seniority rights and privileges and with full backwages from the date of his dismissal until actual reinstatement. We quote the dispositive portion of
the decision:
WHEREFORE, the assailed decision is modified in that respondent is ordered to reinstate complainant to his former position without loss of seniority
rights and privileges with full backwages from the date of his dismissal until his actual reinstatement computed as follows:

Backwages:

a) Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.
P44,400.00 x 39.33 mos. P1,750,185.00

13th Month Pay:

b) 145,848.75
1/12 of P1,750,185.00

Travelling allowance:
c) 39,330.00
P1,000.00 x 39.33 mos.

GRAND TOTAL P1,935,363.75

The decision stands in other aspects.
SO ORDERED.
With its motion for reconsideration having been denied by the NLRC in its order of 27 February 2001,9 Philcom then went to the Court of Appeals on a
Petition for Certiorari, thereat docketed as CA-G.R. SP No. 65178, imputing grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the NLRC when it reversed the findings of the labor arbiter and awarded thirteenth month pay and traveling allowance to De Vera even as
such award had no basis in fact and in law.
On 12 September 2002, the Court of Appeals rendered a decision,10 modifying that of the NLRC by deleting the award of traveling allowance, and
ordering payment of separation pay to De Vera in lieu of reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of public respondent, dated 23 October 2000, is MODIFIED. The award of traveling
allowance is deleted as the same is hereby DELETED. Instead of reinstatement, private respondent shall be paid separation pay computed at one (1)
month salary for every year of service computed from the time private respondent commenced his employment in 1981 up to the actual payment of
the backwages and separation pay. The awards of backwages and 13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was denied by the appellate court in its resolution of 13 February 2003.11
Hence, Philcom's present recourse on its main submission that -
THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION AND RENDERING THE QUESTIONED
DECISION AND RESOLUTION IN A WAY THAT IS NOT IN ACCORD WITH THE FACTS AND APPLICABLE LAWS AND JURISPRUDENCE WHICH DISTINGUISH
LEGITIMATE JOB CONTRACTING AGREEMENTS FROM THE EMPLOYER-EMPLOYEE RELATIONSHIP.
We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this Court in decisions rendered by the Court of Appeals. There are
instances, however, where the Court departs from this rule and reviews findings of fact so that substantial justice may be served. The exceptional
instances are where:
"xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the inference made is manifestly mistaken;
(3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court of
Appeals went beyond the issues of the case and its findings are contrary to the admissions of both appellant and appellees; (7) the findings of fact of
the Court of Appeals are contrary to those of the trial court; (8) said findings of facts are conclusions without citation of specific evidence on which
they are based; (9) the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and (10)
the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record."12
As we see it, the parties' respective submissions revolve on the primordial issue of whether an employer-employee relationship exists between
petitioner and respondent, the existence of which is, in itself, a question of fact13 well within the province of the NLRC. Nonetheless, given the reality
that the NLRC's findings are at odds with those of the labor arbiter, the Court, consistent with its ruling in Jimenez v. National Labor Relations
Commission,14 is constrained to look deeper into the attendant circumstances obtaining in this case, as appearing on record.
In a long line of decisions,15 the Court, in determining the existence of an employer-employee relationship, has invariably adhered to the four-fold
test, to wit: [1] the selection and engagement of the employee; [2] the payment of wages; [3] the power of dismissal; and [4] the power to control the
employee's conduct, or the so-called "control test", considered to be the most important element.
Applying the four-fold test to this case, we initially find that it was respondent himself who sets the parameters of what his duties would be in offering
his services to petitioner. This is borne by no less than his 15 May 1981 letter16 which, in full, reads:
"May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company physician with your corporation if you deemed it necessary. I have the necessary
qualifications, training and experience required by such position and I am confident that I can serve the best interests of your employees, medically.
My plan of works and targets shall cover the duties and responsibilities required of a practitioner in industrial medicine which includes the following:
1. Application of preventive medicine including periodic check-up of employees;
2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation services to employees;
3. Management and treatment of employees that may necessitate hospitalization including emergency cases and accidents;
4. Conduct pre-employment physical check-up of prospective employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative functions such as accomplishing medical forms, evaluating conditions of employees applying for sick leave
of absence and subsequently issuing proper certification, and all matters referred which are medical in nature.
On the subject of compensation for the services that I propose to render to the corporation, you may state an offer based on your belief that I can
very well qualify for the job having worked with your organization for sometime now.
I shall be very grateful for whatever kind attention you may extend on this matter and hoping that it will merit acceptance, I remain
Very truly yours,
(signed)
RICARDO V. DE VERA, M.D."
Significantly, the foregoing letter was substantially the basis of the labor arbiter's finding that there existed no employer-employee relationship
between petitioner and respondent, in addition to the following factual settings:
The fact that the complainant was not considered an employee was recognized by the complainant himself in a signed letter to the respondent dated
April 21, 1982 attached as Annex G to the respondent's Reply and Rejoinder. Quoting the pertinent portion of said letter:
'To carry out your memo effectively and to provide a systematic and workable time schedule which will serve the best interests of both the present
and absent employee, may I propose an extended two-hour service (1:00-3:00 P.M.) during which period I can devote ample time to both groups
depending upon the urgency of the situation. I shall readjust my private schedule to be available for the herein proposed extended hours, should you
consider this proposal.
As regards compensation for the additional time and services that I shall render to the employees, it is dependent on your evaluation of the merit of
my proposal and your confidence on my ability to carry out efficiently said proposal.'
The tenor of this letter indicates that the complainant was proposing to extend his time with the respondent and seeking additional compensation for
said extension. This shows that the respondent PHILCOM did not have control over the schedule of the complainant as it [is] the complainant who is
proposing his own schedule and asking to be paid for the same. This is proof that the complainant understood that his relationship with the
respondent PHILCOM was a retained physician and not as an employee. If he were an employee he could not negotiate as to his hours of work.
The complainant is a Doctor of Medicine, and presumably, a well-educated person. Yet, the complainant, in his position paper, is claiming that he is
not conversant with the law and did not give much attention to his job title - on a 'retainer basis'. But the same complainant admits in his affidavit that
his service for the respondent was covered by a retainership contract [which] was renewed every year from 1982 to 1994. Upon reading the contract
dated September 6, 1982, signed by the complainant himself (Annex 'C' of Respondent's Position Paper), it clearly states that is a retainership
contract. The retainer fee is indicated thereon and the duration of the contract for one year is also clearly indicated in paragraph 5 of the Retainership
Contract. The complainant cannot claim that he was unaware that the 'contract' was good only for one year, as he signed the same without any
objections. The complainant also accepted its renewal every year thereafter until 1994. As a literate person and educated person, the complainant
cannot claim that he does not know what contract he signed and that it was renewed on a year to year basis.17
The labor arbiter added the indicia, not disputed by respondent, that from the time he started to work with petitioner, he never was included in its
payroll; was never deducted any contribution for remittance to the Social Security System (SSS); and was in fact subjected by petitioner to the ten
(10%) percent withholding tax for his professional fee, in accordance with the National Internal Revenue Code, matters which are simply inconsistent
with an employer-employee relationship. In the precise words of the labor arbiter:
"xxx xxx xxx After more than ten years of services to PHILCOM, the complainant would have noticed that no SSS deductions were made on his
remuneration or that the respondent was deducting the 10% tax for his fees and he surely would have complained about them if he had considered
himself an employee of PHILCOM. But he never raised those issues. An ordinary employee would consider the SSS payments important and thus make
sure they would be paid. The complainant never bothered to ask the respondent to remit his SSS contributions. This clearly shows that the
complainant never considered himself an employee of PHILCOM and thus, respondent need not remit anything to the SSS in favor of the
complainant."18
Clearly, the elements of an employer-employee relationship are wanting in this case. We may add that the records are replete with evidence showing
that respondent had to bill petitioner for his monthly professional fees.19 It simply runs against the grain of common experience to imagine that an
ordinary employee has yet to bill his employer to receive his salary.
We note, too, that the power to terminate the parties' relationship was mutually vested on both. Either may terminate the arrangement at will, with
or without cause.20
Finally, remarkably absent from the parties' arrangement is the element of control, whereby the employer has reserved the right to control the
employee not only as to the result of the work done but also as to the means and methods by which the same is to be accomplished.21
Here, petitioner had no control over the means and methods by which respondent went about performing his work at the company premises. He
could even embark in the private practice of his profession, not to mention the fact that respondent's work hours and the additional compensation
therefor were negotiated upon by the parties.22 In fine, the parties themselves practically agreed on every terms and conditions of respondent's
engagement, which thereby negates the element of control in their relationship. For sure, respondent has never cited even a single instance when
petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the NLRC and the Court of Appeals ruled that respondent is petitioner's regular
employee at the time of his separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondent's written 'retainer contract' was renewed annually from 1981 to 1994 and the alleged
'renewal' for 1995 and 1996, when it was allegedly terminated, was verbal.
Article 280 of the Labor code (sic) provides:
'The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the
season.'
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at
least one (1) year of service, whether such is continuous or broken, shall be considered a regular with respect to the activity in which he is
employed and his employment shall continue while such activity exists.'
Parenthetically, the position of company physician, in the case of petitioner, is usually necessary and desirable because the need for medical attention
of employees cannot be foreseen, hence, it is necessary to have a physician at hand. In fact, the importance and desirability of a physician in a
company premises is recognized by Art. 157 of the Labor Code, which requires the presence of a physician depending on the number of employees
and in the case at bench, in petitioner's case, as found by public respondent, petitioner employs more than 500 employees.
Going back to Art. 280 of the Labor Code, it was made therein clear that the provisions of a written agreement to the contrary notwithstanding or the
existence of a mere oral agreement, if the employee is engaged in the usual business or trade of the employer, more so, that he rendered service for
at least one year, such employee shall be considered as a regular employee. Private respondent herein has been with petitioner since 1981 and his
employment was not for a specific project or undertaking, the period of which was pre-determined and neither the work or service of private
respondent seasonal. (Emphasis by the CA itself).
We disagree to the foregoing ratiocination.
The appellate court's premise that regular employees are those who perform activities which are desirable and necessary for the business of the
employer is not determinative in this case. For, we take it that any agreement may provide that one party shall render services for and in behalf of
another, no matter how necessary for the latter's business, even without being hired as an employee. This set-up is precisely true in the case of an
independent contractorship as well as in an agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not the
yardstick for determining the existence of an employment relationship. As it is, the provision merely distinguishes between two (2) kinds of
employees, i.e., regular and casual. It does not apply where, as here, the very existence of an employment relationship is in dispute.23
Buttressing his contention that he is a regular employee of petitioner, respondent invokes Article 157 of the Labor Code, and argues that he satisfies
all the requirements thereunder. The provision relied upon reads:
ART. 157. Emergency medical and dental services. - It shall be the duty of every employer to furnish his employees in any locality with free medical
and dental attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more than two hundred (200) except when
the employer does not maintain hazardous workplaces, in which case the services of a graduate first-aider shall be provided for the protection of the
workers, where no registered nurse is available. The Secretary of Labor shall provide by appropriate regulations the services that shall be required
where the number of employees does not exceed fifty (50) and shall determine by appropriate order hazardous workplaces for purposes of this
Article;
(b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when the number of employees exceeds
two hundred (200) but not more than three hundred (300); andcralawlibrary
(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic, and an infirmary or emergency hospital with
one bed capacity for every one hundred (100) employees when the number of employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot stay in the premises of the
establishment for at least two (2) hours, in the case of those engaged on part-time basis, and not less than eight (8) hours in the case of those
employed on full-time basis. Where the undertaking is nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject
to such regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and dental treatment and attendance in case
of emergency.
Had only respondent read carefully the very statutory provision invoked by him, he would have noticed that in non-hazardous workplaces, the
employer may engage the services of a physician "on retained basis." As correctly observed by the petitioner, while it is true that the provision
requires employers to engage the services of medical practitioners in certain establishments depending on the number of their employees, nothing is
there in the law which says that medical practitioners so engaged be actually hired as employees,24 adding that the law, as written, only requires the
employer "to retain", not employ, a part-time physician who needed to stay in the premises of the non-hazardous workplace for two (2) hours.25
Respondent takes no issue on the fact that petitioner's business of telecommunications is not hazardous in nature. As such, what applies here is the
last paragraph of Article 157 which, to stress, provides that the employer may engage the services of a physician and dentist "on retained basis",
subject to such regulations as the Secretary of Labor may prescribe. The successive "retainership" agreements of the parties definitely hue to the very
statutory provision relied upon by respondent.
Deeply embedded in our jurisprudence is the rule that courts may not construe a statute that is free from doubt. Where the law is clear and
unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to it that the mandate is obeyed.26 As it is, Article
157 of the Labor Code clearly and unequivocally allows employers in non-hazardous establishments to engage "on retained basis" the service of a
dentist or physician. Nowhere does the law provide that the physician or dentist so engaged thereby becomes a regular employee. The very phrase
that they may be engaged "on retained basis", revolts against the idea that this engagement gives rise to an employer-employee relationship.
With the recognition of the fact that petitioner consistently engaged the services of respondent on a retainer basis, as shown by their various
"retainership contracts", so can petitioner put an end, with or without cause, to their retainership agreement as therein provided.27
We note, however, that even as the contracts entered into by the parties invariably provide for a 60-day notice requirement prior to termination, the
same was not complied with by petitioner when it terminated on 17 December 1996 the verbally-renewed retainership agreement, effective at the
close of business hours of 31 December 1996.
Be that as it may, the record shows, and this is admitted by both parties,28 that execution of the NLRC decision had already been made at the NLRC
despite the pendency of the present recourse. For sure, accounts of petitioner had already been garnished and released to respondent despite the
previous Status Quo Order29 issued by this Court. To all intents and purposes, therefore, the 60-day notice requirement has become moot and
academic if not waived by the respondent himself.
WHEREFORE, the petition is GRANTED and the challenged decision of the Court of Appeals REVERSED and SET ASIDE. The 21 December 1998 decision
of the labor arbiter is REINSTATED.
No pronouncement as to costs.
SO ORDERED.
Panganiban, (Chairman), Corona, and Carpio-Morales, JJ., concur.
Sandoval-Gutierrez, J., on official leave.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 146881             February 5, 2007
COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, Petitioners,
vs.
DR. DEAN N. CLIMACO, Respondent.
 DECISION
AZCUNA, J.:
This is a petition for review on certiorari of the Decision of the Court of Appeals1 promulgated on July 7, 2000, and its Resolution promulgated on
January 30, 2001, denying petitioner’s motion for reconsideration. The Court of Appeals ruled that an employer-employee relationship exists between
respondent Dr. Dean N. Climaco and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-Cola), and that respondent was illegally dismissed.
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer Agreement that
stated:
WHEREAS, the COMPANY desires to engage on a retainer basis the services of a physician and the said DOCTOR is accepting such engagement upon
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter contained, the parties agree as follows:
1. This Agreement shall only be for a period of one (1) year beginning January 1, 1988 up to December 31, 1988. The said term
notwithstanding, either party may terminate the contract upon giving a thirty (30)-day written notice to the other.
2. The compensation to be paid by the company for the services of the DOCTOR is hereby fixed at PESOS: Three Thousand Eight Hundred
(₱3,800.00) per month. The DOCTOR may charge professional fee for hospital services rendered in line with his specialization. All payments
in connection with the Retainer Agreement shall be subject to a withholding tax of ten percent (10%) to be withheld by the COMPANY under
the Expanded Withholding Tax System. In the event the withholding tax rate shall be increased or decreased by appropriate laws, then the
rate herein stipulated shall accordingly be increased or decreased pursuant to such laws.
3. That in consideration of the above mentioned retainer’s fee, the DOCTOR agrees to perform the duties and obligations enumerated in the
COMPREHENSIVE MEDICAL PLAN, hereto attached as Annex "A" and made an integral part of this Retainer Agreement.
4. That the applicable provisions in the Occupational Safety and Health Standards, Ministry of Labor and Employment shall be followed.
5. That the DOCTOR shall be directly responsible to the employee concerned and their dependents for any injury inflicted on, harm done
against or damage caused upon the employee of the COMPANY or their dependents during the course of his examination, treatment or
consultation, if such injury, harm or damage was committed through professional negligence or incompetence or due to the other valid
causes for action.
6. That the DOCTOR shall observe clinic hours at the COMPANY’S premises from Monday to Saturday of a minimum of two (2) hours each
day or a maximum of TWO (2) hours each day or treatment from 7:30 a.m. to 8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless such
schedule is otherwise changed by the COMPANY as [the] situation so warrants, subject to the Labor Code provisions on Occupational Safety
and Health Standards as the COMPANY may determine. It is understood that the DOCTOR shall stay at least two (2) hours a day in the
COMPANY clinic and that such two (2) hours be devoted to the workshift with the most number of employees. It is further understood that
the DOCTOR shall be on call at all times during the other workshifts to attend to emergency case[s];
7. That no employee-employer relationship shall exist between the COMPANY and the DOCTOR whilst this contract is in effect, and in case
of its termination, the DOCTOR shall be entitled only to such retainer fee as may be due him at the time of termination.2
The Comprehensive Medical Plan,3 which contains the duties and responsibilities of respondent, adverted to in the Retainer Agreement, provided:
A. OBJECTIVE
These objectives have been set to give full consideration to [the] employees’ and dependents’ health:
1. Prompt and adequate treatment of occupational and non-occupational injuries and diseases.
2. To protect employees from any occupational health hazard by evaluating health factors related to working conditions.
3. To encourage employees [to] maintain good personal health by setting up employee orientation and education on health, hygiene and
sanitation, nutrition, physical fitness, first aid training, accident prevention and personnel safety.
4. To evaluate other matters relating to health such as absenteeism, leaves and termination.
5. To give family planning motivations.
B. COVERAGE
1. All employees and their dependents are embraced by this program.
2. The health program shall cover pre-employment and annual p.e., hygiene and sanitation, immunizations, family planning, physical fitness
and athletic programs and other activities such as group health education program, safety and first aid classes, organization of health and
safety committees.
3. Periodically, this program will be reviewed and adjusted based on employees’ needs.
C. ACTIVITIES
1. Annual Physical Examination.
2. Consultations, diagnosis and treatment of occupational and non-occupational illnesses and injuries.
3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest rooms.
5. Conduct health education programs and present education materials.
6. Coordinate with Safety Committee in developing specific studies and program to minimize environmental health hazards.
7. Give family planning motivations.
8. Coordinate with Personnel Department regarding physical fitness and athletic programs.
9. Visiting and follow-up treatment of Company employees and their dependents confined in the hospital.
The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one expired on December 31, 1993. Despite the non-
renewal of the Retainer Agreement, respondent continued to perform his functions as company doctor to Coca-Cola until he received a letter4 dated
March 9, 1995 from petitioner company concluding their retainership agreement effective 30 days from receipt thereof.
It is noted that as early as September 1992, petitioner was already making inquiries regarding his status with petitioner company. First, he wrote a
letter addressed to Dr. Willie Sy, the Acting President and Chairperson of the Committee on Membership, Philippine College of Occupational
Medicine. In response, Dr. Sy wrote a letter5 to the Personnel Officer of Coca-Cola Bottlers Phils., Bacolod City, stating that respondent should be
considered as a regular part-time physician, having served the company continuously for four (4) years. He likewise stated that respondent must
receive all the benefits and privileges of an employee under Article 157 (b)6 of the Labor Code.
Petitioner company, however, did not take any action. Hence, respondent made another inquiry directed to the Assistant Regional Director, Bacolod
City District Office of the Department of Labor and Employment (DOLE), who referred the inquiry to the Legal Service of the DOLE, Manila. In his
letter7 dated May 18, 1993, Director Dennis P. Ancheta, Legal Service, DOLE, stated that he believed that an employer-employee relationship existed
between petitioner and respondent based on the Retainer Agreement and the Comprehensive Medical Plan, and the application of the "four-fold"
test. However, Director Ancheta emphasized that the existence of employer-employee relationship is a question of fact. Hence, termination disputes
or money claims arising from employer-employee relations exceeding ₱5,000 may be filed with the National Labor Relations Commission (NLRC). He
stated that their opinion is strictly advisory.
An inquiry was likewise addressed to the Social Security System (SSS). Thereafter, Mr. Romeo R. Tupas, OIC-FID of SSS-Bacolod City, wrote a letter8 to
the Personnel Officer of Coca-Cola Bottlers Phils., Inc. informing the latter that the legal staff of his office was of the opinion that the services of
respondent partake of the nature of work of a regular company doctor and that he was, therefore, subject to social security coverage.
Respondent inquired from the management of petitioner company whether it was agreeable to recognizing him as a regular employee. The
management refused to do so.
On February 24, 1994, respondent filed a Complaint9 before the NLRC, Bacolod City, seeking recognition as a regular employee of petitioner company
and prayed for the payment of all benefits of a regular employee, including 13th Month Pay, Cost of Living Allowance, Holiday Pay, Service Incentive
Leave Pay, and Christmas Bonus. The case was docketed as RAB Case No. 06-02-10138-94.
While the complaint was pending before the Labor Arbiter, respondent received a letter dated March 9, 1995 from petitioner company concluding
their retainership agreement effective thirty (30) days from receipt thereof. This prompted respondent to file a complaint for illegal dismissal against
petitioner company with the NLRC, Bacolod City. The case was docketed as RAB Case No. 06-04-10177-95.
In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr. found that petitioner company lacked the power of control over
respondent’s performance of his duties, and recognized as valid the Retainer Agreement between the parties. Thus, the Labor Arbiter dismissed
respondent’s complaint in the first case, RAB Case No. 06-02-10138-94. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint seeking recognition as a regular employee.
SO ORDERED.11
In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed the case for illegal dismissal (RAB Case No. 06-04-10177-95) in view
of the previous finding of Labor Arbiter Jesus N. Rodriguez, Jr. in RAB Case No. 06-02-10138-94 that complainant therein, Dr. Dean Climaco, is not an
employee of Coca-Cola Bottlers Phils., Inc.
Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City.
In a Decision13 promulgated on November 28, 1997, the NLRC dismissed the appeal in both cases for lack of merit. It declared that no employer-
employee relationship existed between petitioner company and respondent based on the provisions of the Retainer Agreement which contract
governed respondent’s employment.
Respondent’s motion for reconsideration was denied by the NLRC in a Resolution14 promulgated on August 7, 1998.
Respondent filed a petition for review with the Court of Appeals.
In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an employer-employee relationship existed between petitioner company
and respondent after applying the four-fold test: (1) the power to hire the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished.
The Court of Appeals held:
The Retainer Agreement executed by and between the parties, when read together with the Comprehensive Medical Plan which was made an integral
part of the retainer agreements, coupled with the actual services rendered by the petitioner, would show that all the elements of the above test are
present.
First, the agreements provide that "the COMPANY desires to engage on a retainer basis the services of a physician and the said DOCTOR is accepting
such engagement x x x" (Rollo, page 25). This clearly shows that Coca-Cola exercised its power to hire the services of petitioner.
Secondly, paragraph (2) of the agreements showed that petitioner would be entitled to a final compensation of Three Thousand Eight Hundred Pesos
per month, which amount was later raised to Seven Thousand Five Hundred on the latest contract. This would represent the element of payment of
wages.
Thirdly, it was provided in paragraph (1) of the agreements that the same shall be valid for a period of one year. "The said term notwithstanding,
either party may terminate the contract upon giving a thirty (30) day written notice to the other." (Rollo, page 25). This would show that Coca-Cola
had the power of dismissing the petitioner, as it later on did, and this could be done for no particular reason, the sole requirement being the former’s
compliance with the 30-day notice requirement.
Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised the most important element of all, that is, control, over the conduct
of petitioner in the latter’s performance of his duties as a doctor for the company.
It was stated in paragraph (3) that the doctor agrees to perform the duties and obligations enumerated in the Comprehensive Medical Plan referred
to above. In paragraph (6), the fixed and definite hours during which the petitioner must render service to the company is laid down.
We say that there exists Coca-Cola’s power to control petitioner because the particular objectives and activities to be observed and accomplished by
the latter are fixed and set under the Comprehensive Medical Plan which was made an integral part of the retainer agreement. Moreover, the times
for accomplishing these objectives and activities are likewise controlled and determined by the company. Petitioner is subject to definite hours of
work, and due to this, he performs his duties to Coca-Cola not at his own pleasure but according to the schedule dictated by the company.
In addition, petitioner was designated by Coca-Cola to be a member of its Bacolod Plant’s Safety Committee. The minutes of the meeting of the said
committee dated February 16, 1994 included the name of petitioner, as plant physician, as among those comprising the committee.
It was averred by Coca-Cola in its comment that they exercised no control over petitioner for the reason that the latter was not directed as to the
procedure and manner of performing his assigned tasks. It went as far as saying that "petitioner was not told how to immunize, inject, treat or
diagnose the employees of the respondent (Rollo, page 228). We believe that if the "control test" would be interpreted this strictly, it would result in
an absurd and ridiculous situation wherein we could declare that an entity exercises control over another’s activities only in instances where the latter
is directed by the former on each and every stage of performance of the particular activity. Anything less than that would be tantamount to no
control at all.
To our minds, it is sufficient if the task or activity, as well as the means of accomplishing it, is dictated, as in this case where the objectives and
activities were laid out, and the specific time for performing them was fixed by the controlling party.15
Moreover, the Court of Appeals declared that respondent should be classified as a regular employee having rendered six years of service as plant
physician by virtue of several renewed retainer agreements. It underscored the provision in Article 28016 of the Labor Code stating that "any employee
who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to
the activity in which he is employed, and his employment shall continue while such activity exists." Further, it held that the termination of
respondent’s services without any just or authorized cause constituted illegal dismissal.
In addition, the Court of Appeals found that respondent’s dismissal was an act oppressive to labor and was effected in a wanton, oppressive or
malevolent manner which entitled respondent to moral and exemplary damages.
The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations Commission dated November 28, 1997 and its Resolution dated
August 7, 1998 are found to have been issued with grave abuse of discretion in applying the law to the established facts, and are hereby REVERSED
and SET ASIDE, and private respondent Coca-Cola Bottlers, Phils.. Inc. is hereby ordered to:
1. Reinstate the petitioner with full backwages without loss of seniority rights from the time his compensation was withheld up to the time
he is actually reinstated; however, if reinstatement is no longer possible, to pay the petitioner separation pay equivalent to one (1) month’s
salary for every year of service rendered, computed at the rate of his salary at the time he was dismissed, plus backwages.
2. Pay petitioner moral damages in the amount of ₱50,000.00.
3. Pay petitioner exemplary damages in the amount of ₱50,000.00.
4. Give to petitioner all other benefits to which a regular employee of Coca-Cola is entitled from the time petitioner became a regular
employee (one year from effectivity date of employment) until the time of actual payment.
SO ORDERED.17
Petitioner company filed a motion for reconsideration of the Decision of the Court of Appeals.
In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that petitioner company noted that its Decision failed to mention
whether respondent was a full-time or part-time regular employee. It also questioned how the benefits under their Collective Bargaining Agreement
which the Court awarded to respondent could be given to him considering that such benefits were given only to regular employees who render a full
day’s work of not less that eight hours. It was admitted that respondent is only required to work for two hours per day.
The Court of Appeals clarified that respondent was a "regular part-time employee and should be accorded all the proportionate benefits due to this
category of employees of [petitioner] Corporation under the CBA." It sustained its decision on all other matters sought to be reconsidered.
Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The issues are:
1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN
REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, CONTRARY TO THE DECISIONS OF
THE HONORABLE SUPREME COURT ON THE MATTER.
2. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN
REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT
THE WORK OF A PHYSICIAN IS NECESSARY AND DESIRABLE TO THE BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO THE
RULINGS OF THE SUPREME COURT IN ANALOGOUS CASES.
3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN
REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT
THE PETITIONERS EXERCISED CONTROL OVER THE WORK OF THE RESPONDENT.
4. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN
REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE IS
EMPLOYER-EMPLOYEE RELATIONSHIP PURSUANT TO ARTICLE 280 OF THE LABOR CODE.
5. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN
REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE
EXISTED ILLEGAL DISMISSAL WHEN THE EMPLOYENT OF THE RESPONDENT WAS TERMINATED WITHOUT JUST CAUSE.
6. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN
REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE
RESPONDENT IS A REGULAR PART TIME EMPLOYEE WHO IS ENTITLED TO PROPORTIONATE BENEFITS AS A REGULAR PART TIME EMPLOYEE
ACCORDING TO THE PETITIONERS’ CBA.
7. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN
REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE
RESPONDENT IS ENTITLED TO MORAL AND EXEMPLARY DAMAGES.
The main issue in this case is whether or not there exists an employer-employee relationship between the parties. The resolution of the main issue
will determine whether the termination of respondent’s employment is illegal.
The Court, in determining the existence of an employer-employee relationship, has invariably adhered to the four-fold test: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct, or the so-
called "control test," considered to be the most important element.18
The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of this case show that no employer-employee relationship
exists between the parties. The Labor Arbiter and the NLRC correctly found that petitioner company lacked the power of control over the
performance by respondent of his duties. The Labor Arbiter reasoned that the Comprehensive Medical Plan, which contains the respondent’s
objectives, duties and obligations, does not tell respondent "how to conduct his physical examination, how to immunize, or how to diagnose and treat
his patients, employees of [petitioner] company, in each case." He likened this case to that of Neri v. National Labor Relations Commission,19 which
held:
In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a radio/telex operator. However, a
cursory reading of the job description shows that what was sought to be controlled by FEBTC was actually the end result of the task, e.g., that the
daily incoming and outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of the register. The guidelines
were laid down merely to ensure that the desired end result was achieved. It did not, however, tell Neri how the radio/telex machine should be
operated.
In effect, the Labor Arbiter held that petitioner company, through the Comprehensive Medical Plan, provided guidelines merely to ensure that the
end result was achieved, but did not control the means and methods by which respondent performed his assigned tasks.
The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely because the company lacks the power of control that the contract
provides that respondent shall be directly responsible to the employee concerned and their dependents for any injury, harm or damage caused
through professional negligence, incompetence or other valid causes of action.
The Labor Arbiter also correctly found that the provision in the Retainer Agreement that respondent was on call during emergency cases did not make
him a regular employee. He explained, thus:
Likewise, the allegation of complainant that since he is on call at anytime of the day and night makes him a regular employee is off-tangent.
Complainant does not dispute the fact that outside of the two (2) hours that he is required to be at respondent company’s premises, he is not at all
further required to just sit around in the premises and wait for an emergency to occur so as to enable him from using such hours for his own benefit
and advantage. In fact, complainant maintains his own private clinic attending to his private practice in the city, where he services his patients, bills
them accordingly -- and if it is an employee of respondent company who is attended to by him for special treatment that needs hospitalization or
operation, this is subject to a special billing. More often than not, an employee is required to stay in the employer’s workplace or proximately close
thereto that he cannot utilize his time effectively and gainfully for his own purpose. Such is not the prevailing situation here.1awphi1.net
In addition, the Court finds that the schedule of work and the requirement to be on call for emergency cases do not amount to such control, but are
necessary incidents to the Retainership Agreement.
The Court also notes that the Retainership Agreement granted to both parties the power to terminate their relationship upon giving a 30-day notice.
Hence, petitioner company did not wield the sole power of dismissal or termination.
The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the employment of respondent as a retained physician of
petitioner company and upholds the validity of the Retainership Agreement which clearly stated that no employer-employee relationship existed
between the parties. The Agreement also stated that it was only for a period of 1 year beginning January 1, 1988 to December 31, 1998, but it was
renewed on a yearly basis.
Considering that there is no employer-employee relationship between the parties, the termination of the Retainership Agreement, which is in
accordance with the provisions of the Agreement, does not constitute illegal dismissal of respondent. Consequently, there is no basis for the moral
and exemplary damages granted by the Court of Appeals to respondent due to his alleged illegal dismissal.
WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE. The Decision and
Resolution dated November 28, 1997 and August 7, 1998, respectively, of the National Labor Relations Commission are REINSTATED.
No costs.
SO ORDERED.

SECOND DIVISION
G.R. No. 146530            January 17, 2005
PEDRO CHAVEZ, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and ALVIN LEE, Plant Manager, respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the Resolution1 dated December 15, 2000 of the Court of Appeals (CA) reversing its Decision
dated April 28, 2000 in CA-G.R. SP No. 52485. The assailed resolution reinstated the Decision dated July 10, 1998 of the National Labor Relations
Commission (NLRC), dismissing the complaint for illegal dismissal filed by herein petitioner Pedro Chavez. The said NLRC decision similarly reversed its
earlier Decision dated January 27, 1998 which, affirming that of the Labor Arbiter, ruled that the petitioner had been illegally dismissed by
respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons and other packaging materials for export and
distribution. It engaged the services of the petitioner, Pedro Chavez, as truck driver on October 25, 1984. As such, the petitioner was tasked to deliver
the respondent company’s products from its factory in Mariveles, Bataan, to its various customers, mostly in Metro Manila. The respondent company
furnished the petitioner with a truck. Most of the petitioner’s delivery trips were made at nighttime, commencing at 6:00 p.m. from Mariveles, and
returning thereto in the afternoon two or three days after. The deliveries were made in accordance with the routing slips issued by respondent
company indicating the order, time and urgency of delivery. Initially, the petitioner was paid the sum of ₱350.00 per trip. This was later adjusted to
₱480.00 per trip and, at the time of his alleged dismissal, the petitioner was receiving ₱900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent company’s plant manager, his (the petitioner’s) desire to avail
himself of the benefits that the regular employees were receiving such as overtime pay, nightshift differential pay, and 13th month pay, among
others. Although he promised to extend these benefits to the petitioner, respondent Lee failed to actually do so.
On February 20, 1995, the petitioner filed a complaint for regularization with the Regional Arbitration Branch No. III of the NLRC in San Fernando,
Pampanga. Before the case could be heard, respondent company terminated the services of the petitioner. Consequently, on May 25, 1995, the
petitioner filed an amended complaint against the respondents for illegal dismissal, unfair labor practice and non-payment of overtime pay, nightshift
differential pay, 13th month pay, among others. The case was docketed as NLRC Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-employee relationship between the respondent company and the petitioner.
They averred that the petitioner was an independent contractor as evidenced by the contract of service which he and the respondent company
entered into. The said contract provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and the Contractor [referring to Pedro Chavez], by nature
of their specialized line or service jobs, accepts the services to be rendered to the Principal, under the following terms and covenants heretofore
mentioned:
1. That the inland transport delivery/hauling activities to be performed by the contractor to the principal, shall only cover travel route from
Mariveles to Metro Manila. Otherwise, any change to this travel route shall be subject to further agreement by the parties concerned.
2. That the payment to be made by the Principal for any hauling or delivery transport services fully rendered by the Contractor shall be on a
per trip basis depending on the size or classification of the truck being used in the transport service, to wit:
a) If the hauling or delivery service shall require a truck of six wheeler, the payment on a per trip basis from Mariveles to Metro
Manila shall be THREE HUNDRED PESOS (₱300.00) and EFFECTIVE December 15, 1984.
b) If the hauling or delivery service require a truck of ten wheeler, the payment on a per trip basis, following the same route
mentioned, shall be THREE HUNDRED FIFTY (₱350.00) Pesos and Effective December 15, 1984.
3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least two (2) helpers;
4. The Contractor shall exercise direct control and shall be responsible to the Principal for the cost of any damage to, loss of any goods,
cargoes, finished products or the like, while the same are in transit, or due to reckless [sic] of its men utilized for the purpose above
mentioned;
5. That the Contractor shall have absolute control and disciplinary power over its men working for him subject to this agreement, and that
the Contractor shall hold the Principal free and harmless from any liability or claim that may arise by virtue of the Contractor’s non-
compliance to the existing provisions of the Minimum Wage Law, the Employees Compensation Act, the Social Security System Act, or any
other such law or decree that may hereafter be enacted, it being clearly understood that any truck drivers, helpers or men working with and
for the Contractor, are not employees who will be indemnified by the Principal for any such claim, including damages incurred in connection
therewith;
6. This contract shall take effect immediately upon the signing by the parties, subject to renewal on a year-to-year basis.2
This contract of service was dated December 12, 1984. It was subsequently renewed twice, on July 10, 1989 and September 28, 1992. Except for the
rates to be paid to the petitioner, the terms of the contracts were substantially the same. The relationship of the respondent company and the
petitioner was allegedly governed by this contract of service.
The respondents insisted that the petitioner had the sole control over the means and methods by which his work was accomplished. He paid the
wages of his helpers and exercised control over them. As such, the petitioner was not entitled to regularization because he was not an employee of
the respondent company. The respondents, likewise, maintained that they did not dismiss the petitioner. Rather, the severance of his contractual
relation with the respondent company was due to his violation of the terms and conditions of their contract. The petitioner allegedly failed to observe
the minimum degree of diligence in the proper maintenance of the truck he was using, thereby exposing respondent company to unnecessary
significant expenses of overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision dated February 3, 1997, finding the respondents guilty
of illegal dismissal. The Labor Arbiter declared that the petitioner was a regular employee of the respondent company as he was performing a service
that was necessary and desirable to the latter’s business. Moreover, it was noted that the petitioner had discharged his duties as truck driver for the
respondent company for a continuous and uninterrupted period of more than ten years.
The contract of service invoked by the respondents was declared null and void as it constituted a circumvention of the constitutional provision
affording full protection to labor and security of tenure. The Labor Arbiter found that the petitioner’s dismissal was anchored on his insistent demand
to be regularized. Hence, for lack of a valid and just cause therefor and for their failure to observe the due process requirements, the respondents
were found guilty of illegal dismissal. The dispositive portion of the Labor Arbiter’s decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent SUPREME PACKAGING, INC. and/or MR. ALVIN LEE,
Plant Manager, with business address at BEPZ, Mariveles, Bataan guilty of illegal dismissal, ordering said respondent to pay complainant his
separation pay equivalent to one (1) month pay per year of service based on the average monthly pay of ₱10,800.00 in lieu of reinstatement as his
reinstatement back to work will not do any good between the parties as the employment relationship has already become strained and full
backwages from the time his compensation was withheld on February 23, 1995 up to January 31, 1997 (cut-off date) until compliance, otherwise, his
backwages shall continue to run. Also to pay complainant his 13th month pay, night shift differential pay and service incentive leave pay hereunder
computed as follows:
a) Backwages ………………….. ₱248,400.00
b) Separation Pay ………….…... ₱140,400.00
c) 13th month pay ………….……₱ 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL ₱401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorney’s fees.
SO ORDERED.3
The respondents seasonably interposed an appeal with the NLRC. However, the appeal was dismissed by the NLRC in its Decision4 dated January 27,
1998, as it affirmed in toto the decision of the Labor Arbiter. In the said decision, the NLRC characterized the contract of service between the
respondent company and the petitioner as a "scheme" that was resorted to by the respondents who, taking advantage of the petitioner’s
unfamiliarity with the English language and/or legal niceties, wanted to evade the effects and implications of his becoming a regularized employee.5
The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting thereon, the NLRC rendered another Decision6 dated
July 10, 1998, reversing its earlier decision and, this time, holding that no employer-employee relationship existed between the respondent company
and the petitioner. In reconsidering its earlier decision, the NLRC stated that the respondents did not exercise control over the means and methods by
which the petitioner accomplished his delivery services. It upheld the validity of the contract of service as it pointed out that said contract was silent
as to the time by which the petitioner was to make the deliveries and that the petitioner could hire his own helpers whose wages would be paid from
his own account. These factors indicated that the petitioner was an independent contractor, not an employee of the respondent company.
The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the Labor Code on the regularization of employees. Said
contract, including the fixed period of employment contained therein, having been knowingly and voluntarily entered into by the parties thereto was
declared valid citing Brent School, Inc. v. Zamora.7 The NLRC, thus, dismissed the petitioner’s complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the NLRC in its Resolution dated September 7, 1998. He then
filed with this Court a petition for certiorari, which was referred to the CA following the ruling in St. Martin Funeral Home v. NLRC .8
The appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998 Decision of the NLRC and reinstating the decision of the
Labor Arbiter. In the said decision, the CA ruled that the petitioner was a regular employee of the respondent company because as its truck driver, he
performed a service that was indispensable to the latter’s business. Further, he had been the respondent company’s truck driver for ten continuous
years. The CA also reasoned that the petitioner could not be considered an independent contractor since he had no substantial capital in the form of
tools and machinery. In fact, the truck that he drove belonged to the respondent company. The CA also observed that the routing slips that the
respondent company issued to the petitioner showed that it exercised control over the latter. The routing slips indicated the chronological order and
priority of delivery, the urgency of certain deliveries and the time when the goods were to be delivered to the customers.
The CA, likewise, disbelieved the respondents’ claim that the petitioner abandoned his job noting that he just filed a complaint for regularization. This
actuation of the petitioner negated the respondents’ allegation that he abandoned his job. The CA held that the respondents failed to discharge their
burden to show that the petitioner’s dismissal was for a valid and just cause. Accordingly, the respondents were declared guilty of illegal dismissal and
the decision of the Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent company and the petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent workers from attaining the status of regular employment, it is but
necessary for the courts to scrutinize with extreme caution their legality and justness. Where from the circumstances it is apparent that a contract has
been entered into to preclude acquisition of tenurial security by the employee, they should be struck down and disregarded as contrary to public
policy and morals. In this case, the "contract of service" is just another attempt to exploit the unwitting employee and deprive him of the protection of
the Labor Code by making it appear that the stipulations of the parties were governed by the Civil Code as in ordinary transactions.9
However, on motion for reconsideration by the respondents, the CA made a complete turn around as it rendered the assailed Resolution dated
December 15, 2000 upholding the contract of service between the petitioner and the respondent company. In reconsidering its decision, the CA
explained that the extent of control exercised by the respondents over the petitioner was only with respect to the result but not to the means and
methods used by him. The CA cited the following circumstances: (1) the respondents had no say on how the goods were to be delivered to the
customers; (2) the petitioner had the right to employ workers who would be under his direct control; and (3) the petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than ten years was, according to the CA, of no moment because his
status was determined not by the length of service but by the contract of service. This contract, not being contrary to morals, good customs, public
order or public policy, should be given the force and effect of law as between the respondent company and the petitioner. Consequently, the CA
reinstated the July 10, 1998 Decision of the NLRC dismissing the petitioner’s complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution of the appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN GIVING MORE CONSIDERATION
TO THE "CONTRACT OF SERVICE" ENTERED INTO BY PETITIONER AND PRIVATE RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF THE
PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND
REGARDLESS OF THE ORAL AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN REVERSING ITS OWN FINDINGS
THAT PETITIONER IS A REGULAR EMPLOYEE AND IN HOLDING THAT THERE EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PRIVATE
RESPONDENT AND PETITIONER IN AS MUCH AS THE "CONTROL TEST" WHICH IS CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE
EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT.10
The threshold issue that needs to be resolved is whether there existed an employer-employee relationship between the respondent company and the
petitioner. We rule in the affirmative.
The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the employer’s power to control the employee’s conduct.11 The most important element is the employer’s
control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.12 All the
four elements are present in this case.
First. Undeniably, it was the respondents who engaged the services of the petitioner without the intervention of a third party.
Second. Wages are defined as "remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece or commission basis, or other method of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to be done, or for service rendered or to be rendered."13 That the petitioner
was paid on a per trip basis is not significant. This is merely a method of computing compensation and not a basis for determining the existence or
absence of employer-employee relationship. One may be paid on the basis of results or time expended on the work, and may or may not acquire an
employment status, depending on whether the elements of an employer-employee relationship are present or not.14 In this case, it cannot be gainsaid
that the petitioner received compensation from the respondent company for the services that he rendered to the latter.
Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his employees by means of payroll.15 The payroll should
show, among other things, the employee’s rate of pay, deductions made, and the amount actually paid to the employee. Interestingly, the
respondents did not present the payroll to support their claim that the petitioner was not their employee, raising speculations whether this omission
proves that its presentation would be adverse to their case.16
Third. The respondents’ power to dismiss the petitioner was inherent in the fact that they engaged the services of the petitioner as truck driver. They
exercised this power by terminating the petitioner’s services albeit in the guise of "severance of contractual relation" due allegedly to the latter’s
breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee relationship, the "control test" is the most important. Compared to an
employee, an independent contractor is one who carries on a distinct and independent business and undertakes to perform the job, work, or service
on its own account and under its own responsibility according to its own manner and method, free from the control and direction of the principal in
all matters connected with the performance of the work except as to the results thereof.17 Hence, while an independent contractor enjoys
independence and freedom from the control and supervision of his principal, an employee is subject to the employer’s power to control the means
and methods by which the employee’s work is to be performed and accomplished.18
Although the respondents denied that they exercised control over the manner and methods by which the petitioner accomplished his work, a careful
review of the records shows that the latter performed his work as truck driver under the respondents’ supervision and control. Their right of control
was manifested by the following attendant circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck shall be used exclusively to deliver respondent company’s goods; 19
3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either of two specific places only, to wit: at its
office in Metro Manila at 2320 Osmeña Street, Makati City or at BEPZ, Mariveles, Bataan;20 and
4. Respondents determined how, where and when the petitioner would perform his task by issuing to him gate passes and routing slips. 21
a. The routing slips indicated on the column REMARKS, the chronological order and priority of delivery such as 1st drop, 2nd drop,
3rd drop, etc. This meant that the petitioner had to deliver the same according to the order of priority indicated therein.
b. The routing slips, likewise, showed whether the goods were to be delivered urgently or not by the word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the goods were to be delivered to the customers as, for example, the
words "tomorrow morning" was written on slip no. 2776.
These circumstances, to the Court’s mind, prove that the respondents exercised control over the means and methods by which the petitioner
accomplished his work as truck driver of the respondent company. On the other hand, the Court is hard put to believe the respondents’ allegation
that the petitioner was an independent contractor engaged in providing delivery or hauling services when he did not even own the truck used for such
services. Evidently, he did not possess substantial capitalization or investment in the form of tools, machinery and work premises. Moreover, the
petitioner performed the delivery services exclusively for the respondent company for a continuous and uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual circumstances earlier discussed indubitably establish the existence of an
employer-employee relationship between the respondent company and the petitioner. It bears stressing that the existence of an employer-employee
relationship cannot be negated by expressly repudiating it in a contract and providing therein that the employee is an independent contractor when,
as in this case, the facts clearly show otherwise. Indeed, the employment status of a person is defined and prescribed by law and not by what the
parties say it should be.22
Having established that there existed an employer-employee relationship between the respondent company and the petitioner, the Court shall now
determine whether the respondents validly dismissed the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a valid and just cause.23 In this case, the respondents failed to prove any
such cause for the petitioner’s dismissal. They insinuated that the petitioner abandoned his job. To constitute abandonment, these two factors must
concur: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship.24 Obviously, the petitioner did not intend to sever his relationship with the respondent company for at the time that he allegedly
abandoned his job, the petitioner just filed a complaint for regularization, which was forthwith amended to one for illegal dismissal. A charge of
abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal, more so when it includes a prayer for
reinstatement.25
Neither can the respondents’ claim that the petitioner was guilty of gross negligence in the proper maintenance of the truck constitute a valid and just
cause for his dismissal. Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It
evinces a thoughtless disregard of consequences without exerting any effort to avoid them.26 The negligence, to warrant removal from service, should
not merely be gross but also habitual.27 The single and isolated act of the petitioner’s negligence in the proper maintenance of the truck alleged by the
respondents does not amount to "gross and habitual neglect" warranting his dismissal.
The Court agrees with the following findings and conclusion of the Labor Arbiter:
… As against the gratuitous allegation of the respondent that complainant was not dismissed from the service but due to complainant’s breach of
their contractual relation, i.e., his violation of the terms and conditions of the contract, we are very much inclined to believe complainant’s story that
his dismissal from the service was anchored on his insistent demand that he be considered a regular employee. Because complainant in his right
senses will not just abandon for that reason alone his work especially so that it is only his job where he depends chiefly his existence and support for
his family if he was not aggrieved by the respondent when he was told that his services as driver will be terminated on February 23, 1995.28
Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his dismissal illegal. Under Article 279 of the Labor Code,
an employee who is unjustly dismissed is entitled to reinstatement, without loss of seniority rights and other privileges, and to the payment of full
backwages, inclusive of allowances, and other benefits or their monetary equivalent, computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.29 However, as found by the Labor Arbiter, the circumstances obtaining in this case do not warrant the
petitioner’s reinstatement. A more equitable disposition, as held by the Labor Arbiter, would be an award of separation pay equivalent to one month
for every year of service from the time of his illegal dismissal up to the finality of this judgment in addition to his full backwages, allowances and other
benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of the Court of Appeals reversing its Decision dated April 28,
2000 in CA-G.R. SP No. 52485 is REVERSED and SET ASIDE. The Decision dated February 3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-
5, finding the respondents guilty of illegally terminating the employment of petitioner Pedro Chavez, is REINSTATED.
SO ORDERED.

FIRST DIVISION
[G.R. NO. 170087 : August 31, 2006]
ANGELINA FRANCISCO, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO,
DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.
 DECISION
YNARES-SANTIAGO, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and Resolution of the Court of
Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal filed
by herein petitioner Angelina Francisco. The appellate court reversed and set aside the Decision of the National Labor Relations Commission (NLRC)
dated April 15, 2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, 4 in
NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and Corporate Secretary and was
assigned to handle all the accounting needs of the company. She was also designated as Liaison Officer to the City of Makati to secure business
permits, construction permits and other licenses for the initial operation of the company.5
Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she attend any board meeting
nor required to do so. She never prepared any legal document and never represented the company as its Corporate Secretary. However, on some
occasions, she was prevailed upon to sign documentation for the company.6
In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager,
petitioner was assigned to handle recruitment of all employees and perform management administration functions; represent the company in all
dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of
Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation.7
For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing
allowance and a 10% share in the profit of Kasei Corporation.8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a prepared resolution for her
replacement but she was assured that she would still be connected with Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a
meeting of all employees of Kasei Corporation and announced that nothing had changed and that petitioner was still connected with Kasei
Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters.9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total reduction of P22,500.00
as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the company was not earning well. On October 2001, petitioner
did not receive her salary from the company. She made repeated follow-ups with the company cashier but she was advised that the company was not
earning well.10
On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is no longer connected
with the company.11
Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was hired in 1995 as one of its
technical consultants on accounting matters and act concurrently as Corporate Secretary. As technical consultant, petitioner performed her work at
her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office any time she
wanted. The company never interfered with her work except that from time to time, the management would ask her opinion on matters relating to
her profession. Petitioner did not go through the usual procedure of selection of employees, but her services were engaged through a Board
Resolution designating her as technical consultant. The money received by petitioner from the corporation was her professional fee subject to the
10% expanded withholding tax on professionals, and that she was not one of those reported to the BIR or SSS as one of the company's employees.12
Petitioner's designation as technical consultant depended solely upon the will of management. As such, her consultancy may be terminated any time
considering that her services were only temporary in nature and dependent on the needs of the corporation.
To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the years 1999 and 2000 duly
received by the BIR showing that petitioner was not among the employees reported to the BIR, as well as a list of payees subject to expanded
withholding tax which included petitioner. SSS records were also submitted showing that petitioner's latest employer was Seiji Corporation.13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainant's dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and severally pay complainant her
money claims in accordance with the following computation:
A. Backwages 10/2001 - 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 - 09/2001) 22,500.00
c. Housing Allowance (01/2001 - 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorney's fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages that would accrue up to
actual payment of separation pay.
SO ORDERED.14
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay computed at one month per year of service in addition to full backwages from
October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of P100,000.00 and P361,175.00 are
deleted;
3) The award of 10% attorney's fees shall be based on salary differential award only;
4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED.
SO ORDERED.15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated April 15, 2003 is hereby
REVERSED and SET ASIDE and a new one is hereby rendered dismissing the complaint filed by private respondent against Kasei Corporation, et al. for
constructive dismissal.
SO ORDERED.16
The appellate court denied petitioner's motion for reconsideration, hence, the present recourse.
The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between petitioner and private respondent
Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and the Court of Appeals on the
other, there is a need to reexamine the records to determine which of the propositions espoused by the contending parties is supported by
substantial evidence.17
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the existence of an employer-employee
relation. Generally, courts have relied on the so-called right of control test where the person for whom the services are performed reserves a right to
control not only the end to be achieved but also the means to be used in reaching such end. In addition to the standard of right-of-control, the
existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence
of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the parties, owing to the complexity
of such a relationship where several positions have been held by the worker. There are instances when, aside from the employer's power to control
the employee with respect to the means and methods by which the work is to be accomplished, economic realities of the employment relations help
provide a comprehensive analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or some
other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer's power to control the employee with respect
to the means and methods by which the work is to be accomplished; and (2) the underlying economic realities of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of circumstances surrounding the
true nature of the relationship between the parties. This is especially appropriate in this case where there is no written agreement or terms of
reference to base the relationship on; and due to the complexity of the relationship based on the various positions and responsibilities given to the
worker over the period of the latter's employment.
The control test initially found application in the case of Viaña v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where we held
that there is an employer-employee relationship when the person for whom the services are performed reserves the right to control not only the end
achieved but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing between the parties, in addition to the
standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture in determining the existence of an employer-
employee relationship based on an analysis of the totality of economic circumstances of the worker.
Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity, 22 such
as: (1) the extent to which the services performed are an integral part of the employer's business; (2) the extent of the worker's investment in
equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the worker's opportunity for profit and loss; (5) the
amount of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of
the relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer for his continued
employment in that line of business.23
The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued employment in that line
of business.24 In the United States, the touchstone of economic reality in analyzing possible employment relationships for purposes of the Federal
Labor Standards Act is dependency.25 By analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes of
the Labor Code ought to be the economic dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the direct control and
supervision of Seiji Kamura, the corporation's Technical Consultant. She reported for work regularly and served in various capacities as Accountant,
Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting
and tax services to the company and performing functions necessary and desirable for the proper operation of the corporation such as securing
business permits and other licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation because she had served the
company for six years before her dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from August 1, 1999 to December 18, 2000.26 When petitioner was designated
General Manager, respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioner's membership in the SSS as manifested by
a copy of the SSS specimen signature card which was signed by the President of Kasei Corporation and the inclusion of her name in the on-line inquiry
system of the SSS evinces the existence of an employer-employee relationship between petitioner and respondent corporation.27
It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in the latter's line of
business.
In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification card is provided not only as a
security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues it. Together with the cash vouchers
covering petitioner's salaries for the months stated therein, these matters constitute substantial evidence adequate to support a conclusion that
petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the latter were the former's employees.
The coverage of Social Security Law is predicated on the existence of an employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as Corporate Secretary and that
her designation as such was only for convenience. The actual nature of petitioner's job was as Kamura's direct assistant with the duty of acting as
Liaison Officer in representing the company to secure construction permits, license to operate and other requirements imposed by government
agencies. Petitioner was never entrusted with corporate documents of the company, nor required to attend the meeting of the corporation. She was
never privy to the preparation of any document for the corporation, although once in a while she was required to sign prepared documentation for
the company.30
The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly withdrawn by Kamura
himself from the records of the case.31 Regardless of this fact, we are convinced that the allegations in the first affidavit are sufficient to establish that
petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any retraction or recanted
testimony, for it could have been secured by considerations other than to tell the truth and would make solemn trials a mockery and place the
investigation of the truth at the mercy of unscrupulous witnesses.32 A recantation does not necessarily cancel an earlier declaration, but like any other
testimony the same is subject to the test of credibility and should be received with caution.33
Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She was selected and
engaged by the company for compensation, and is economically dependent upon respondent for her continued employment in that line of business.
Her main job function involved accounting and tax services rendered to respondent corporation on a regular basis over an indefinite period of
engagement. Respondent corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly,
respondent corporation had the power to control petitioner with the means and methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September 2001. This amounts to
an illegal termination of employment, where the petitioner is entitled to full backwages. Since the position of petitioner as accountant is one of trust
and confidence, and under the principle of strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement.34
A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an involuntary resignation resulting
in cessation of work resorted to when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a
diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee.35 In Globe Telecom,
Inc. v. Florendo-Flores, 36 we ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable
situation arises which creates an adverse working environment rendering it impossible for such employee to continue working for her employer.
Hence, her severance from the company was not of her own making and therefore amounted to an illegal termination of employment.
In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed. Even as we, in every case,
attempt to carefully balance the fragile relationship between employees and employers, we are mindful of the fact that the policy of the law is to
apply the Labor Code to a greater number of employees. This would enable employees to avail of the benefits accorded to them by law, in line with
the constitutional mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary social economic force
in furtherance of social justice and national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and October 7, 2005,
respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor Relations Commission dated April 15, 2003 in
NLRC NCR CA No. 032766-02, is REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Francisco's full
backwages from the time she was illegally terminated until the date of finality of this decision, and separation pay representing one-half month pay
for every year of service, where a fraction of at least six months shall be considered as one whole year.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 157802               October 13, 2010
MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K. SPENCER, CATHERINE SPENCER, AND ALEX MANCILLA, Petitioners,
vs.
RICARDO R. COROS, Respondent.
DECISION
BERSAMIN, J.:
This case reprises the jurisdictional conundrum of whether a complaint for illegal dismissal is cognizable by the Labor Arbiter (LA) or by the Regional
Trial Court (RTC). The determination of whether the dismissed officer was a regular employee or a corporate officer unravels the conundrum. In the
case of the regular employee, the LA has jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate.
In this appeal via petition for review on certiorari, the petitioners challenge the decision dated September 13, 20021 and the resolution dated April 2,
2003,2 both promulgated in C.A.-G.R. SP No. 65714 entitled Matling Industrial and Commercial Corporation, et al. v. Ricardo R. Coros and National
Labor Relations Commission, whereby by the Court of Appeals (CA) sustained the ruling of the National Labor Relations Commission (NLRC) to the
effect that the LA had jurisdiction because the respondent was not a corporate officer of petitioner Matling Industrial and Commercial Corporation
(Matling).
Antecedents
After his dismissal by Matling as its Vice President for Finance and Administration, the respondent filed on August 10, 2000 a complaint for illegal
suspension and illegal dismissal against Matling and some of its corporate officers (petitioners) in the NLRC, Sub-Regional Arbitration Branch XII, Iligan
City.3
The petitioners moved to dismiss the complaint,4 raising the ground, among others, that the complaint pertained to the jurisdiction of the Securities
and Exchange Commission (SEC) due to the controversy being intra-corporate inasmuch as the respondent was a member of Matling’s Board of
Directors aside from being its Vice-President for Finance and Administration prior to his termination.
The respondent opposed the petitioners’ motion to dismiss,5 insisting that his status as a member of Matling’s Board of Directors was doubtful,
considering that he had not been formally elected as such; that he did not own a single share of stock in Matling, considering that he had been made
to sign in blank an undated indorsement of the certificate of stock he had been given in 1992; that Matling had taken back and retained the certificate
of stock in its custody; and that even assuming that he had been a Director of Matling, he had been removed as the Vice President for Finance and
Administration, not as a Director, a fact that the notice of his termination dated April 10, 2000 showed.
On October 16, 2000, the LA granted the petitioners’ motion to dismiss,6 ruling that the respondent was a corporate officer because he was occupying
the position of Vice President for Finance and Administration and at the same time was a Member of the Board of Directors of Matling; and that,
consequently, his removal was a corporate act of Matling and the controversy resulting from such removal was under the jurisdiction of the SEC,
pursuant to Section 5, paragraph (c) of Presidential Decree No. 902.
Ruling of the NLRC
The respondent appealed to the NLRC,7 urging that:
I
THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION GRANTING APPELLEE’S MOTION TO DISMISS WITHOUT GIVING THE
APPELLANT AN OPPORTUNITY TO FILE HIS OPPOSITION THERETO THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE PROCESS.
II
THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING THE CASE FOR LACK OF JURISDICTION.
On March 13, 2001, the NLRC set aside the dismissal, concluding that the respondent’s complaint for illegal dismissal was properly cognizable by the
LA, not by the SEC, because he was not a corporate officer by virtue of his position in Matling, albeit high ranking and managerial, not being among
the positions listed in Matling’s Constitution and By-Laws.8 The NLRC disposed thuswise:
WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered declaring and holding that the case at bench does not involve any
intracorporate matter. Hence, jurisdiction to hear and act on said case is vested with the Labor Arbiter, not the SEC, considering that the position of
Vice-President for Finance and Administration being held by complainant-appellant is not listed as among respondent's corporate officers.
Accordingly, let the records of this case be REMANDED to the Arbitration Branch of origin in order that the Labor Arbiter below could act on the case
at bench, hear both parties, receive their respective evidence and position papers fully observing the requirements of due process, and resolve the
same with reasonable dispatch.
SO ORDERED.
The petitioners sought reconsideration,9 reiterating that the respondent, being a member of the Board of Directors, was a corporate officer whose
removal was not within the LA’s jurisdiction.
The petitioners later submitted to the NLRC in support of the motion for reconsideration the certified machine copies of Matling’s Amended Articles
of Incorporation and By Laws to prove that the President of Matling was thereby granted "full power to create new offices and appoint the officers
thereto, and the minutes of special meeting held on June 7, 1999 by Matling’s Board of Directors to prove that the respondent was, indeed, a
Member of the Board of Directors.10
Nonetheless, on April 30, 2001, the NLRC denied the petitioners’ motion for reconsideration.11
Ruling of the CA
The petitioners elevated the issue to the CA by petition for certiorari, docketed as C.A.-G.R. No. SP 65714, contending that the NLRC committed grave
abuse of discretion amounting to lack of jurisdiction in reversing the correct decision of the LA.
In its assailed decision promulgated on September 13, 2002,12 the CA dismissed the petition for certiorari, explaining:
For a position to be considered as a corporate office, or, for that matter, for one to be considered as a corporate officer, the position must, if not listed
in the by-laws, have been created by the corporation's board of directors, and the occupant thereof appointed or elected by the same board of
directors or stockholders. This is the implication of the ruling in Tabang v. National Labor Relations Commission, which reads:
"The president, vice president, secretary and treasurer are commonly regarded as the principal or executive officers of a corporation, and modern
corporation statutes usually designate them as the officers of the corporation. However, other offices are sometimes created by the charter or by-
laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation to create additional offices as may be
necessary.
It has been held that an 'office' is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other
hand, an 'employee' usually occupies no office and generally is employed not by action of the directors or stockholders but by the managing officer of
the corporation who also determines the compensation to be paid to such employee."
This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor Relations Commission  and  De Rossi v. National Labor Relations
Commission.
The position of vice-president for administration and finance, which Coros used to hold in the corporation, was not created by the corporation’s board
of directors but only by its president or executive vice-president pursuant to the by-laws of the corporation. Moreover, Coros’ appointment to said
position was not made through any act of the board of directors or stockholders of the corporation. Consequently, the position to which Coros was
appointed and later on removed from, is not a corporate office despite its nomenclature, but an ordinary office in the corporation.
Coros’ alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the labor arbiter.
WHEREFORE, the petition for certiorari is hereby DISMISSED.
SO ORDERED.
The CA denied the petitioners’ motion for reconsideration on April 2, 2003.13
Issue
Thus, the petitioners are now before the Court for a review on certiorari, positing that the respondent was a stockholder/member of the Matling’s
Board of Directors as well as its Vice President for Finance and Administration; and that the CA consequently erred in holding that the LA had
jurisdiction.
The decisive issue is whether the respondent was a corporate officer of Matling or not. The resolution of the issue determines whether the LA or the
RTC had jurisdiction over his complaint for illegal dismissal.
Ruling
The appeal fails.
I
The Law on Jurisdiction in Dismissal Cases
As a rule, the illegal dismissal of an officer or other employee of a private employer is properly cognizable by the LA. This is pursuant to Article 217 (a)
2 of the Labor Code, as amended, which provides as follows:
Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as otherwise provided under this Code, the Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work
and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims arising from
employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five
thousand pesos (₱5,000.00) regardless of whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the grievance machinery and
voluntary arbitration as may be provided in said agreements. (As amended by Section 9, Republic Act No. 6715, March 21, 1989).
Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls under the jurisdiction of the Securities and
Exchange Commission (SEC), because the controversy arises out of intra-corporate or partnership relations between and among stockholders,
members, or associates, or between any or all of them and the corporation, partnership, or association of which they are stockholders, members, or
associates, respectively; and between such corporation, partnership, or association and the State insofar as the controversy concerns their individual
franchise or right to exist as such entity; or because the controversy involves the election or appointment of a director, trustee, officer, or manager of
such corporation, partnership, or association.14 Such controversy, among others, is known as an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act No. 8799,15 otherwise known as The Securities Regulation Code, the SEC’s jurisdiction
over all intra-corporate disputes was transferred to the RTC, pursuant to Section 5.2 of RA No. 8799, to wit:
5.2. The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of
general jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority may designate the
Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving
intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. The
Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
Considering that the respondent’s complaint for illegal dismissal was commenced on August 10, 2000, it might come under the coverage of Section
5.2 of RA No. 8799, supra, should it turn out that the respondent was a corporate, not a regular, officer of Matling.
II
Was the Respondent’s Position of Vice President
for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondent’s position as Vice President for Finance and Administration was a corporate office. If it was, his
dismissal by the Board of Directors rendered the matter an intra-corporate dispute cognizable by the RTC pursuant to RA No. 8799.
The petitioners contend that the position of Vice President for Finance and Administration was a corporate office, having been created by Matling’s
President pursuant to By-Law No. V, as amended,16 to wit:
BY LAW NO. V
Officers
The President shall be the executive head of the corporation; shall preside over the meetings of the stockholders and directors; shall countersign all
certificates, contracts and other instruments of the corporation as authorized by the Board of Directors; shall have full power to hire and discharge
any or all employees of the corporation; shall have full power to create new offices and to appoint the officers thereto as he may deem proper and
necessary in the operations of the corporation and as the progress of the business and welfare of the corporation may demand; shall make reports to
the directors and stockholders and perform all such other duties and functions as are incident to his office or are properly required of him by the
Board of Directors. In case of the absence or disability of the President, the Executive Vice President shall have the power to exercise his functions.
The petitioners argue that the power to create corporate offices and to appoint the individuals to assume the offices was delegated by Matling’s
Board of Directors to its President through By-Law No. V, as amended; and that any office the President created, like the position of the respondent,
was as valid and effective a creation as that made by the Board of Directors, making the office a corporate office. In justification, they cite Tabang v.
National Labor Relations Commission,17 which held that "other offices are sometimes created by the charter or by-laws of a corporation, or the board
of directors may be empowered under the by-laws of a corporation to create additional officers as may be necessary."
The respondent counters that Matling’s By-Laws did not list his position as Vice President for Finance and Administration as one of the corporate
offices; that Matling’s By-Law No. III listed only four corporate officers, namely: President, Executive Vice President, Secretary, and Treasurer; 18 that
the corporate offices contemplated in the phrase "and such other officers as may be provided for in the by-laws" found in Section 25 of the
Corporation Code should be clearly and expressly stated in the By-Laws; that the fact that Matling’s By-Law No. III dealt with Directors & Officers while
its By-Law No. V dealt with Officers proved that there was a differentiation between the officers mentioned in the two provisions, with those classified
under By-Law No. V being ordinary or non-corporate officers; and that the officer, to be considered as a corporate officer, must be elected by the
Board of Directors or the stockholders, for the President could only appoint an employee to a position pursuant to By-Law No. V.
We agree with respondent.
Section 25 of the Corporation Code provides:
Section 25. Corporate officers, quorum.--Immediately after their election, the directors of a corporation must formally organize by the election of a
president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the
Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same
person, except that no one shall act as president and secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws of the corporation. Unless the
articles of incorporation or the by-laws provide for a greater majority, a majority of the number of directors or trustees as fixed in the articles of
incorporation shall constitute a quorum for the transaction of corporate business, and every decision of at least a majority of the directors or trustees
present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of officers which shall require the vote of a
majority of all the members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings.
Conformably with Section 25, a position must be expressly mentioned in the By-Laws in order to be considered as a corporate office. Thus, the
creation of an office pursuant to or under a By-Law enabling provision is not enough to make a position a corporate office. Guerrea v. Lezama,19 the
first ruling on the matter, held that the only officers of a corporation were those given that character either by the Corporation Code or by the By-
Laws; the rest of the corporate officers could be considered only as employees or subordinate officials. Thus, it was held in Easycall Communications
Phils., Inc. v. King:20
An "office" is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an employee
occupies no office and generally is employed not by the action of the directors or stockholders but by the managing officer of the corporation who
also determines the compensation to be paid to such employee.
In this case, respondent was appointed vice president for nationwide expansion by Malonzo, petitioner’'s general manager, not by the board of
directors of petitioner. It was also Malonzo who determined the compensation package of respondent. Thus, respondent was an employee, not a
"corporate officer." The CA was therefore correct in ruling that jurisdiction over the case was properly with the NLRC, not the SEC (now the RTC).
This interpretation is the correct application of Section 25 of the Corporation Code, which plainly states that the corporate officers are the President,
Secretary, Treasurer and such other officers as may be provided for in the By-Laws. Accordingly, the corporate officers in the context of PD No. 902-A
are exclusively those who are given that character either by the Corporation Code or by the corporation’s By-Laws.
A different interpretation can easily leave the way open for the Board of Directors to circumvent the constitutionally guaranteed security of tenure of
the employee by the expedient inclusion in the By-Laws of an enabling clause on the creation of just any corporate officer position.
It is relevant to state in this connection that the SEC, the primary agency administering the Corporation Code, adopted a similar interpretation of
Section 25 of the Corporation Code in its Opinion dated November 25, 1993,21 to wit:
Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever are the corporate officers enumerated in the by-laws are the
exclusive Officers of the corporation and the Board has no power to create other Offices without amending first the corporate By-laws. However, the
Board may create appointive positions other than the positions of corporate Officers, but the persons occupying such positions are not considered
as corporate officers within the meaning of Section 25 of the Corporation Code and are not empowered to exercise the functions of the corporate
Officers, except those functions lawfully delegated to them. Their functions and duties are to be determined by the Board of Directors/Trustees.
Moreover, the Board of Directors of Matling could not validly delegate the power to create a corporate office to the President, in light of Section 25 of
the Corporation Code requiring the Board of Directors itself to elect the corporate officers. Verily, the power to elect the corporate officers was a
discretionary power that the law exclusively vested in the Board of Directors, and could not be delegated to subordinate officers or agents.22 The
office of Vice President for Finance and Administration created by Matling’s President pursuant to By Law No. V was an ordinary, not a corporate,
office.
To emphasize, the power to create new offices and the power to appoint the officers to occupy them vested by By-Law No. V merely allowed
Matling’s President to create non-corporate offices to be occupied by ordinary employees of Matling. Such powers were incidental to the President’s
duties as the executive head of Matling to assist him in the daily operations of the business.
The petitioners’ reliance on Tabang, supra, is misplaced. The statement in Tabang, to the effect that offices not expressly mentioned in the By-Laws
but were created pursuant to a By-Law enabling provision were also considered corporate offices, was plainly obiter dictum due to the position
subject of the controversy being mentioned in the By-Laws. Thus, the Court held therein that the position was a corporate office, and that the
determination of the rights and liabilities arising from the ouster from the position was an intra-corporate controversy within the SEC’s jurisdiction.
In Nacpil v. Intercontinental Broadcasting Corporation, 23  which  may be the more appropriate ruling, the position subject of the controversy was not
expressly mentioned in the By-Laws, but was created pursuant to a By-Law enabling provision authorizing the Board of Directors to create other
offices that the Board of Directors might see fit to create. The Court held there that the position was a corporate office, relying on the obiter
dictum  in Tabang.
Considering that the observations earlier made herein show that the soundness of their dicta is not unassailable, Tabang and Nacpil should no longer
be controlling.
III
Did Respondent’s Status as Director and
Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?
Yet, the petitioners insist that because the respondent was a Director/stockholder of Matling, and relying on Paguio v. National Labor Relations
Commission24 and Ongkingko v. National Labor Relations Commission,25 the NLRC had no jurisdiction over his complaint, considering that any case for
illegal dismissal brought by a stockholder/officer against the corporation was an intra-corporate matter that must fall under the jurisdiction of the SEC
conformably with the context of PD No. 902-A.
The petitioners’ insistence is bereft of basis.
To begin with, the reliance on Paguio  and Ongkingko  is misplaced. In both rulings, the complainants were undeniably corporate officers due to their
positions being expressly mentioned in the By-Laws, aside from the fact that both of them had been duly elected by the respective Boards of
Directors. But the herein respondent’s position of Vice President for Finance and Administration was not expressly mentioned in the By-Laws; neither
was the position of Vice President for Finance and Administration created by Matling’s Board of Directors. Lastly, the President, not the Board of
Directors, appointed him.
True it is that the Court pronounced in Tabang as follows:
Also, an intra-corporate controversy is one which arises between a stockholder and the corporation. There is no distinction, qualification or any
exemption whatsoever. The provision is broad and covers all kinds of controversies between stockholders and corporations.26
However, the Tabang pronouncement is not controlling because it is too sweeping and does not accord with reason, justice, and fair play. In order to
determine whether a dispute constitutes an intra-corporate controversy or not, the Court considers two elements instead, namely: (a) the status or
relationship of the parties; and (b) the nature of the question that is the subject of their controversy. This was our thrust in Viray v. Court of Appeals:27
The establishment of any of the relationships mentioned above will not necessarily always confer jurisdiction over the dispute on the SEC to the
exclusion of regular courts. The statement made in one case that the rule admits of no exceptions or distinctions is not that absolute. The better
policy in determining which body has jurisdiction over a case would be to consider not only the status or relationship of the parties but also the nature
of the question that is the subject of their controversy.
Not every conflict between a corporation and its stockholders involves corporate matters that only the SEC can resolve in the exercise of its
adjudicatory or quasi-judicial powers. If, for example, a person leases an apartment owned by a corporation of which he is a stockholder, there should
be no question that a complaint for his ejectment for non-payment of rentals would still come under the jurisdiction of the regular courts and not of
the SEC. By the same token, if one person injures another in a vehicular accident, the complaint for damages filed by the victim will not come under
the jurisdiction of the SEC simply because of the happenstance that both parties are stockholders of the same corporation. A contrary interpretation
would dissipate the powers of the regular courts and distort the meaning and intent of PD No. 902-A.
In another case, Mainland Construction Co., Inc. v. Movilla,28 the Court reiterated these determinants thuswise:
In order that the SEC (now the regular courts) can take cognizance of a case, the controversy must pertain to any of the following relationships:
a) between the corporation, partnership or association and the public;
b) between the corporation, partnership or association and its stockholders, partners, members or officers;
c) between the corporation, partnership or association and the State as far as its franchise, permit or license to operate is concerned; and
 d) among the stockholders, partners or associates themselves.
The fact that the parties involved in the controversy are all stockholders or that the parties involved are the stockholders and the corporation does
not necessarily place the dispute within the ambit of the jurisdiction of SEC. The better policy to be followed in determining jurisdiction over a case
should be to consider concurrent factors such as the status or relationship of the parties or the nature of the question that is the subject of their
controversy. In the absence of any one of these factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that every
conflict between the corporation and its stockholders would involve such corporate matters as only the SEC can resolve in the exercise of its
adjudicatory or quasi-judicial powers.29
The criteria for distinguishing between corporate officers who may be ousted from office at will, on one hand, and ordinary corporate employees who
may only be terminated for just cause, on the other hand, do not depend on the nature of the services performed, but on the manner of creation of
the office. In the respondent’s case, he was supposedly at once an employee, a stockholder, and a Director of Matling. The circumstances surrounding
his appointment to office must be fully considered to determine whether the dismissal constituted an intra-corporate controversy or a labor
termination dispute. We must also consider whether his status as Director and stockholder had any relation at all to his appointment and subsequent
dismissal as Vice President for Finance and Administration.
Obviously enough, the respondent was not appointed as Vice President for Finance and Administration because of his being a stockholder or Director
of Matling. He had started working for Matling on September 8, 1966, and had been employed continuously for 33 years until his termination on April
17, 2000, first as a bookkeeper, and his climb in 1987 to his last position as Vice President for Finance and Administration had been gradual but
steady, as the following sequence indicates:
1966 – Bookkeeper
1968 – Senior Accountant
1969 – Chief Accountant
1972 – Office Supervisor
1973 – Assistant Treasurer
1978 – Special Assistant for Finance
1980 – Assistant Comptroller
1983 – Finance and Administrative Manager
1985 – Asst. Vice President for Finance and Administration
1987 to April 17, 2000 – Vice President for Finance and Administration
Even though he might have become a stockholder of Matling in 1992, his promotion to the position of Vice President for Finance and Administration
in 1987 was by virtue of the length of quality service he had rendered as an employee of Matling. His subsequent acquisition of the status of
Director/stockholder had no relation to his promotion. Besides, his status of Director/stockholder was unaffected by his dismissal from employment
as Vice President for Finance and Administration.1avvphi1
In Prudential Bank and Trust Company v. Reyes,30 a case involving a lady bank manager who had risen from the ranks but was dismissed, the Court
held that her complaint for illegal dismissal was correctly brought to the NLRC, because she was deemed a regular employee of the bank. The Court
observed thus:
It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963. From that position she rose to become supervisor.
Then in 1982, she was appointed Assistant Vice-President which she occupied until her illegal dismissal on July 19, 1991. The bank’s contention that
she merely holds an elective position and that in effect she is not a regular employee is belied by the nature of her work and her length of service
with the Bank. As earlier stated, she rose from the ranks and has been employed with the Bank since 1963 until the termination of her employment in
1991. As Assistant Vice President of the Foreign Department of the Bank, she is tasked, among others, to collect checks drawn against overseas banks
payable in foreign currency and to ensure the collection of foreign bills or checks purchased, including the signing of transmittal letters covering the
same. It has been stated that "the primary standard of determining regular employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual trade or business of the employer. Additionally, "an employee is regular because of the nature of
work and the length of service, not because of the mode or even the reason for hiring them." As Assistant Vice-President of the Foreign Department
of the Bank she performs tasks integral to the operations of the bank and her length of service with the bank totaling 28 years speaks volumes of her
status as a regular employee of the bank. In fine, as a regular employee, she is entitled to security of tenure; that is, her services may be terminated
only for a just or authorized cause. This being in truth a case of illegal dismissal, it is no wonder then that the Bank endeavored to the very end to
establish loss of trust and confidence and serious misconduct on the part of private respondent but, as will be discussed later, to no avail.
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision of the Court of Appeals.
Costs of suit to be paid by the petitioners.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 201298               February 5, 2014
RAUL C. COSARE, Petitioner,
vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.
DECISION
REYES, J.:
Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court, which assails the Decision2 dated November 24, 2011 and
Resolution3 dated March 26, 2012 of the Court of Appeals (CA) in CA-G.R. SP. No. 117356, wherein the CA ruled that the Regional Trial Court (RTC),
and not the Labor Arbiter (LA), had the jurisdiction over petitioner Raul C. Cosare's (Cosare) complaint for illegal dismissal against Broadcom Asia, Inc.
(Broadcom) and Dante Arevalo (Arevalo), the President of Broadcom (respondents).
The Antecedents
The case stems from a complaint4 for constructive dismissal, illegal suspension and monetary claims filed with the National Capital Region Arbitration
Branch of the National Labor Relations Commission (NLRC) by Cosare against the respondents.
Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo, who was then in the business of selling broadcast equipment
needed by television networks and production houses. In December 2000, Arevalo set up the company Broadcom, still to continue the business of
trading communication and broadcast equipment. Cosare was named an incorporator of Broadcom, having been assigned 100 shares of stock with
par value of ₱1.00 per share.5 In October 2001, Cosare was promoted to the position of Assistant Vice President for Sales (AVP for Sales) and Head of
the Technical Coordination, having a monthly basic net salary and average commissions of ₱18,000.00 and ₱37,000.00, respectively.6
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice President for Sales and thus, became Cosare’s immediate superior. On
March 23, 2009, Cosare sent a confidential memo7 to Arevalo to inform him of the following anomalies which were allegedly being committed by
Abiog against the company: (a) he failed to report to work on time, and would immediately leave the office on the pretext of client visits; (b) he
advised the clients of Broadcom to purchase camera units from its competitors, and received commissions therefor; (c) he shared in the "under the-
table dealings" or "confidential commissions" which Broadcom extended to its clients’ personnel and engineers; and (d) he expressed his complaints
and disgust over Broadcom’s uncompetitive salaries and wages and delay in the payment of other benefits, even in the presence of office staff. Cosare
ended his memo by clarifying that he was not interested in Abiog’s position, but only wanted Arevalo to know of the irregularities for the
corporation’s sake.
Apparently, Arevalo failed to act on Cosare’s accusations. Cosare claimed that he was instead called for a meeting by Arevalo on March 25, 2009,
wherein he was asked to tender his resignation in exchange for "financial assistance" in the amount of ₱300,000.00.8 Cosare refused to comply with
the directive, as signified in a letter9 dated March 26, 2009 which he sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcom’s Manager for Finance and Administration, a memo10 signed by
Arevalo, charging him of serious misconduct and willful breach of trust, and providing in part:
1. A confidential memo was received from the VP for Sales informing me that you had directed, or at the very least tried to persuade, a
customer to purchase a camera from another supplier. Clearly, this action is a gross and willful violation of the trust and confidence this
company has given to you being its AVP for Sales and is an attempt to deprive the company of income from which you, along with the other
employees of this company, derive your salaries and other benefits. x x x.
2. A company vehicle assigned to you with plate no. UNV 402 was found abandoned in another place outside of the office without proper
turnover from you to this office which had assigned said vehicle to you. The vehicle was found to be inoperable and in very bad condition,
which required that the vehicle be towed to a nearby auto repair shop for extensive repairs.
3. You have repeatedly failed to submit regular sales reports informing the company of your activities within and outside of company
premises despite repeated reminders. However, it has been observed that you have been both frequently absent and/or tardy without
proper information to this office or your direct supervisor, the VP for Sales Mr. Alex Abiog, of your whereabouts.
4. You have been remiss in the performance of your duties as a Sales officer as evidenced by the fact that you have not recorded any sales
for the past immediate twelve (12) months. This was inspite of the fact that my office decided to relieve you of your duties as technical
coordinator between Engineering and Sales since June last year so that you could focus and concentrate [on] your activities in sales.11
Cosare was given forty-eight (48) hours from the date of the memo within which to present his explanation on the charges. He was also "suspended
from having access to any and all company files/records and use of company assets effective immediately."12 Thus, Cosare claimed that he was
precluded from reporting for work on March 31, 2009, and was instead instructed to wait at the office’s receiving section. Upon the specific
instructions of Arevalo, he was also prevented by Villareal from retrieving even his personal belongings from the office.
On April 1, 2009, Cosare was totally barred from entering the company premises, and was told to merely wait outside the office building for further
instructions. When no such instructions were given by 8:00 p.m., Cosare was impelled to seek the assistance of the officials of Barangay San Antonio,
Pasig City, and had the incident reported in the barangay blotter.13
On April 2, 2009, Cosare attempted to furnish the company with a Memo14 by which he addressed and denied the accusations cited in Arevalo’s
memo dated March 30, 2009. The respondents refused to receive the memo on the ground of late filing, prompting Cosare to serve a copy thereof by
registered mail. The following day, April 3, 2009, Cosare filed the subject labor complaint, claiming that he was constructively dismissed from
employment by the respondents. He further argued that he was illegally suspended, as he placed no serious and imminent threat to the life or
property of his employer and co-employees.15
In refuting Cosare’s complaint, the respondents argued that Cosare was neither illegally suspended nor dismissed from employment. They also
contended that Cosare committed the following acts inimical to the interests of Broadcom: (a) he failed to sell any broadcast equipment since the
year 2007; (b) he attempted to sell a Panasonic HMC 150 Camera which was to be sourced from a competitor; and (c) he made an unauthorized
request in Broadcom’s name for its principal, Panasonic USA, to issue an invitation for Cosare’s friend, one Alex Paredes, to attend the National
Association of Broadcasters’ Conference in Las Vegas, USA.16 Furthermore, they contended that Cosare abandoned his job17 by continually failing to
report for work beginning April 1, 2009, prompting them to issue on April 14, 2009 a memorandum18 accusing Cosare of absence without leave
beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his Decision19 dismissing the complaint on the ground of Cosare’s failure to
establish that he was dismissed, constructively or otherwise, from his employment. For the LA, what transpired on March 30, 2009 was merely the
respondents’ issuance to Cosare of a show-cause memo, giving him a chance to present his side on the charges against him. He explained:
It is obvious that [Cosare] DID NOT wait for respondents’ action regarding the charges leveled against him in the show-cause memo. What he did was
to pre-empt that action by filing this complaint just a day after he submitted his written explanation. Moreover, by specifically seeking payment of
"Separation Pay" instead of reinstatement, [Cosare’s] motive for filing this case becomes more evident.20
It was also held that Cosare failed to substantiate by documentary evidence his allegations of illegal suspension and non-payment of allowances and
commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA Menese. The dispositive portion of the NLRC Decision reads:
WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents are found guilty of Illegal Constructive Dismissal. Respondents
BROADCOM ASIA, INC. and Dante Arevalo are ordered to pay [Cosare’s] backwages, and separation pay, as well as damages, in the total amount of
₱1,915,458.33, per attached Computation.
SO ORDERED.22
In ruling in favor of Cosare, the NLRC explained that "due weight and credence is accorded to [Cosare’s] contention that he was constructively
dismissed by Respondent Arevalo when he was asked to resign from his employment."23 The fact that Cosare was suspended from using the assets of
Broadcom was also inconsistent with the respondents’ claim that Cosare opted to abandon his employment.
Exemplary damages in the amount of ₱100,000.00 was awarded, given the NLRC’s finding that the termination of Cosare’s employment was effected
by the respondents in bad faith and in a wanton, oppressive and malevolent manner. The claim for unpaid commissions was denied on the ground of
the failure to include it in the prayer of pleadings filed with the LA and in the appeal.
The respondents’ motion for reconsideration was denied.24 Dissatisfied, they filed a petition for certiorari with the CA founded on the following
arguments: (1) the respondents did not have to prove just cause for terminating the employment of Cosare because the latter’s complaint was based
on an alleged constructive dismissal; (2) Cosare resigned and was thus not dismissed from employment; (3) the respondents should not be declared
liable for the payment of Cosare’s monetary claims; and (4) Arevalo should not be held solidarily liable for the judgment award.
In a manifestation filed by the respondents during the pendency of the CA appeal, they raised a new argument, i.e., the case involved an intra-
corporate controversy which was within the jurisdiction of the RTC, instead of the LA.25 They argued that the case involved a complaint against a
corporation filed by a stockholder, who, at the same time, was a corporate officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed Decision26 granting the respondents’ petition. It agreed with the respondents’ contention that
the case involved an intra-corporate controversy which, pursuant to Presidential Decree No. 902-A, as amended, was within the exclusive jurisdiction
of the RTC. It reasoned:
Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was listed as one of its directors. Moreover, he held the position of
[AVP] for Sales which is listed as a corporate office. Generally, the president, vice-president, secretary or treasurer are commonly regarded as the
principal or executive officers of a corporation, and modern corporation statutes usually designate them as the officers of the corporation. However, it
bears mentioning that under Section 25 of the Corporation Code, the Board of Directors of [Broadcom] is allowed to appoint such other officers as it
may deem necessary. Indeed, [Broadcom’s] By-Laws provides:
Article IV
Officer
Section 1. Election / Appointment – Immediately after their election, the Board of Directors shall formally organize by electing the President, the Vice-
President, the Treasurer, and the Secretary at said meeting.
The Board, may, from time to time, appoint such other officers as it may determine to be necessary or proper. x x x
We hold that [the respondents] were able to present substantial evidence that [Cosare] indeed held a corporate office, as evidenced by the General
Information Sheet which was submitted to the Securities and Exchange Commission (SEC) on October 22, 2009.27 (Citations omitted and emphasis
supplied)
Thus, the CA reversed the NLRC decision and resolution, and then entered a new one dismissing the labor complaint on the ground of lack of
jurisdiction, finding it unnecessary to resolve the main issues that were raised in the petition. Cosare filed a motion for reconsideration, but this was
denied by the CA via the Resolution28 dated March 26, 2012. Hence, this petition.
The Present Petition
The pivotal issues for the petition’s full resolution are as follows: (1) whether or not the case instituted by Cosare was an intra-corporate dispute that
was within the original jurisdiction of the RTC, and not of the LAs; and (2) whether or not Cosare was constructively and illegally dismissed from
employment by the respondents.
The Court’s Ruling
The petition is impressed with merit.
Jurisdiction over the controversy
As regards the issue of jurisdiction, the Court has determined that contrary to the ruling of the CA, it is the LA, and not the regular courts, which has
the original jurisdiction over the subject controversy. An intra-corporate controversy, which falls within the jurisdiction of regular courts, has been
regarded in its broad sense to pertain to disputes that involve any of the following relationships: (1) between the corporation, partnership or
association and the public; (2) between the corporation, partnership or association and the state in so far as its franchise, permit or license to operate
is concerned; (3) between the corporation, partnership or association and its stockholders, partners, members or officers; and (4) among the
stockholders, partners or associates, themselves.29 Settled jurisprudence, however, qualifies that when the dispute involves a charge of illegal
dismissal, the action may fall under the jurisdiction of the LAs upon whose jurisdiction, as a rule, falls termination disputes and claims for damages
arising from employer-employee relations as provided in Article 217 of the Labor Code. Consistent with this jurisprudence, the mere fact that Cosare
was a stockholder and an officer of Broadcom at the time the subject controversy developed failed to necessarily make the case an intra-corporate
dispute.
In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished between a "regular employee" and a "corporate officer" for
purposes of establishing the true nature of a dispute or complaint for illegal dismissal and determining which body has jurisdiction over it. Succinctly,
it was explained that "[t]he determination of whether the dismissed officer was a regular employee or corporate officer unravels the conundrum" of
whether a complaint for illegal dismissal is cognizable by the LA or by the RTC. "In case of the regular employee, the LA has jurisdiction; otherwise, the
RTC exercises the legal authority to adjudicate.31
Applying the foregoing to the present case, the LA had the original jurisdiction over the complaint for illegal dismissal because Cosare, although an
officer of Broadcom for being its AVP for Sales, was not a "corporate officer" as the term is defined by law. We emphasized in Real v. Sangu
Philippines, Inc.32 the definition of corporate officers for the purpose of identifying an intra-corporate controversy. Citing Garcia v. Eastern
Telecommunications Philippines, Inc.,33 we held:
" ‘Corporate officers’ in the context of Presidential Decree No. 902-A are those officers of the corporation who are given that character by the
Corporation Code or by the corporation’s by-laws. There are three specific officers whom a corporation must have under Section 25 of the
Corporation Code. These are the president, secretary and the treasurer. The number of officers is not limited to these three. A corporation may have
such other officers as may be provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor or general manager. The number
of corporate officers is thus limited by law and by the corporation’s by-laws."34 (Emphasis ours)
In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of corporate offices:
It has been held that an "office" is created by the charter of the corporation and the officer is elected by the directors and stockholders. On the other
hand, an "employee" usually occupies no office and generally is employed not by action of the directors or stockholders but by the managing officer of
the corporation who also determines the compensation to be paid to such employee.36 (Citations omitted)
As may be deduced from the foregoing, there are two circumstances which must concur in order for an individual to be considered a corporate
officer, as against an ordinary employee or officer, namely: (1) the creation of the position is under the corporation’s charter or by-laws; and (2) the
election of the officer is by the directors or stockholders. It is only when the officer claiming to have been illegally dismissed is classified as such
corporate officer that the issue is deemed an intra-corporate dispute which falls within the jurisdiction of the trial courts.
To support their argument that Cosare was a corporate officer, the respondents referred to Section 1, Article IV of Broadcom’s by-laws, which reads:
ARTICLE IV
OFFICER
Section 1. Election / Appointment – Immediately after their election, the Board of Directors shall formally organize by electing the President, the Vice-
President, the Treasurer, and the Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine to be necessary or proper. Any two (2) or more compatible
positions may be held concurrently by the same person, except that no one shall act as President and Treasurer or Secretary at the same
time.37 (Emphasis ours)
This was also the CA’s main basis in ruling that the matter was an intra-corporate dispute that was within the trial courts’ jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned from the aforequoted provision, the only officers who are specifically listed,
and thus with offices that are created under Broadcom’s by-laws are the following: the President, Vice-President, Treasurer and Secretary. Although a
blanket authority provides for the Board’s appointment of such other officers as it may deem necessary and proper, the respondents failed to
sufficiently establish that the position of AVP for Sales was created by virtue of an act of Broadcom’s board, and that Cosare was specifically elected or
appointed to such position by the directors. No board resolutions to establish such facts form part of the case records. Further, it was held in Marc II
Marketing, Inc. v. Joson38 that an enabling clause in a corporation’s by-laws empowering its board of directors to create additional officers, even with
the subsequent passage of a board resolution to that effect, cannot make such position a corporate office. The board of directors has no power to
create other corporate offices without first amending the corporate by-laws so as to include therein the newly created corporate office.39 "To allow
the creation of a corporate officer position by a simple inclusion in the corporate by-laws of an enabling clause empowering the board of directors to
do so can result in the circumvention of that constitutionally well-protected right [of every employee to security of tenure]."40
The CA’s heavy reliance on the contents of the General Information Sheets41, which were submitted by the respondents during the appeal
proceedings and which plainly provided that Cosare was an "officer" of Broadcom, was clearly misplaced. The said documents could neither govern
nor establish the nature of the office held by Cosare and his appointment thereto. Furthermore, although Cosare could indeed be classified as an
officer as provided in the General Information Sheets, his position could only be deemed a regular office, and not a corporate office as it is defined
under the Corporation Code. Incidentally, the Court noticed that although the Corporate Secretary of Broadcom, Atty. Efren L. Cordero, declared
under oath the truth of the matters set forth in the General Information Sheets, the respondents failed to explain why the General Information Sheet
officially filed with the Securities and Exchange Commission in 2011 and submitted to the CA by the respondents still indicated Cosare as an AVP for
Sales, when among their defenses in the charge of illegal dismissal, they asserted that Cosare had severed his relationship with the corporation since
the year 2009.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the case’s filing did not necessarily make the action an intra-
corporate controversy. "Not all conflicts between the stockholders and the corporation are classified as intra-corporate. There are other facts to
consider in determining whether the dispute involves corporate matters as to consider them as intra-corporate controversies."42 Time and again, the
Court has ruled that in determining the existence of an intra-corporate dispute, the status or relationship of the parties and the nature of the question
that is the subject of the controversy must be taken into account.43 Considering that the pending dispute particularly relates to Cosare’s rights and
obligations as a regular officer of Broadcom, instead of as a stockholder of the corporation, the controversy cannot be deemed intra-corporate. This is
consistent with the "controversy test" explained by the Court in Reyes v. Hon. RTC, Br. 142,44 to wit:
Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of ascertaining whether the
controversy itself is intra-corporate. The controversy must not only be rooted in the existence of an intra-corporate relationship, but must as well
pertain to the enforcement of the parties’ correlative rights and obligations under the Corporation Code and the internal and intra-corporate
regulatory rules of the corporation. If the relationship and its incidents are merely incidental to the controversy or if there will still be conflict even if
the relationship does not exist, then no intra-corporate controversy exists.45 (Citation omitted)
It bears mentioning that even the CA’s finding46 that Cosare was a director of Broadcom when the dispute commenced was unsupported by the case
records, as even the General Information Sheet of 2009 referred to in the CA decision to support such finding failed to provide such detail.
All told, it is then evident that the CA erred in reversing the NLRC’s ruling that favored Cosare solely on the ground that the dispute was an intra-
corporate controversy within the jurisdiction of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it appropriate to rule on the correctness of the NLRC’s ruling finding Cosare to have been
illegally dismissed from employment.
In filing his labor complaint, Cosare maintained that he was constructively dismissed, citing among other circumstances the charges that were hurled
and the suspension that was imposed against him via Arevalo’s memo dated March 30, 2009. Even prior to such charge, he claimed to have been
subjected to mental torture, having been locked out of his files and records and disallowed use of his office computer and access to personal
belongings.47 While Cosare attempted to furnish the respondents with his reply to the charges, the latter refused to accept the same on the ground
that it was filed beyond the 48-hour period which they provided in the memo.
Cosare further referred to the circumstances that allegedly transpired subsequent to the service of the memo, particularly the continued refusal of
the respondents to allow Cosare’s entry into the company’s premises. These incidents were cited in the CA decision as follows:
On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could retrieve his personal belongings, but the latter said that x x x
Arevalo directed her to deny his request, so [Cosare] again waited at the receiving section of the office. On April 1, 2009, [Cosare] was not allowed to
enter the office premises. He was asked to just wait outside of the Tektite (PSE) Towers, where [Broadcom] had its offices, for further instructions on
how and when he could get his personal belongings. [Cosare] waited until 8 p.m. for instructions but none were given. Thus, [Cosare] sought the
assistance of the officials of Barangay San Antonio, Pasig who advised him to file a labor or replevin case to recover his personal belongings. x x
x.48 (Citation omitted)
It is also worth mentioning that a few days before the issuance of the memo dated March 30, 2009, Cosare was allegedly summoned to Arevalo’s
office and was asked to tender his immediate resignation from the company, in exchange for a financial assistance of ₱300,000.00.49 The directive was
said to be founded on Arevalo’s choice to retain Abiog’s employment with the company.50 The respondents failed to refute these claims.
Given the circumstances, the Court agrees with Cosare’s claim of constructive and illegal dismissal. "[C]onstructive dismissal occurs when there is
cessation of work because continued employment is rendered impossible, unreasonable, or unlikely as when there is a demotion in rank or
diminution in pay or when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to the employee leaving the latter with
no other option but to quit."51 In Dimagan v. Dacworks United, Incorporated,52 it was explained:
The test of constructive dismissal is whether a reasonable person in the employee’s position would have felt compelled to give up his position under
the circumstances. It is an act amounting to dismissal but is made to appear as if it were not. Constructive dismissal is therefore a dismissal in disguise.
The law recognizes and resolves this situation in favor of employees in order to protect their rights and interests from the coercive acts of the
employer.53 (Citation omitted)
It is clear from the cited circumstances that the respondents already rejected Cosare’s continued involvement with the company. Even their refusal to
accept the explanation which Cosare tried to tender on April 2, 2009 further evidenced the resolve to deny Cosare of the opportunity to be heard
prior to any decision on the termination of his employment. The respondents allegedly refused acceptance of the explanation as it was filed beyond
the mere 48-hour period which they granted to Cosare under the memo dated March 30, 2009. However, even this limitation was a flaw in the memo
or notice to explain which only further signified the respondents’ discrimination, disdain and insensibility towards Cosare, apparently resorted to by
the respondents in order to deny their employee of the opportunity to fully explain his defenses and ultimately, retain his employment. The Court
emphasized in King of Kings Transport, Inc. v. Mamac54 the standards to be observed by employers in complying with the service of notices prior to
termination:
[T]he first written notice to be served on the employees should contain the specific causes or grounds for termination against them, and a directive
that the employees are given the opportunity to submit their written explanation within a reasonable period. "Reasonable opportunity" under the
Omnibus Rules means every kind of assistance that management must accord to the employees to enable them to prepare adequately for their
defense. This should be construed as a period of at least five (5) calendar days from receipt of the notice to give the employees an opportunity to
study the accusation against them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and defenses, the notice should contain a detailed
narration of the facts and circumstances that will serve as basis for the charge against the employees. A general description of the charge will not
suffice. Lastly, the notice should specifically mention which company rules, if any, are violated and/or which among the grounds under Art. 282 is
being charged against the employees.55 (Citation omitted, underscoring ours, and emphasis supplied)
In sum, the respondents were already resolute on a severance of their working relationship with Cosare, notwithstanding the facts which could have
been established by his explanations and the respondents’ full investigation on the matter. In addition to this, the fact that no further investigation
and final disposition appeared to have been made by the respondents on Cosare’s case only negated the claim that they actually intended to first look
into the matter before making a final determination as to the guilt or innocence of their employee. This also manifested from the fact that even
before Cosare was required to present his side on the charges of serious misconduct and willful breach of trust, he was summoned to Arevalo’s office
and was asked to tender his immediate resignation in exchange for financial assistance.
The clear intent of the respondents to find fault in Cosare was also manifested by their persistent accusation that Cosare abandoned his post,
allegedly signified by his failure to report to work or file a leave of absence beginning April 1, 2009. This was even the subject of a memo56 issued by
Arevalo to Cosare on April 14, 2009, asking him to explain his absence within 48 hours from the date of the memo. As the records clearly indicated,
however, Arevalo placed Cosare under suspension beginning March 30, 2009. The suspension covered access to any and all company files/records
and the use of the assets of the company, with warning that his failure to comply with the memo would be dealt with drastic management action. The
charge of abandonment was inconsistent with this imposed suspension. "Abandonment is the deliberate and unjustified refusal of an employee to
resume his employment. To constitute abandonment of work, two elements must concur: ‘(1) the employee must have failed to report for work or
must have been absent without valid or justifiable reason; and (2) there must have been a clear intention on the part of the employee to sever the
employer- employee relationship manifested by some overt act.’"57 Cosare’s failure to report to work beginning April 1, 2009 was neither voluntary
nor indicative of an intention to sever his employment with Broadcom. It was illogical to be requiring him to report for work, and imputing fault when
he failed to do so after he was specifically denied access to all of the company’s assets. As correctly observed by the NLRC:
[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on April 1, 2009. However[,] the show-cause letter dated March
3[0], 2009 (Annex "F", ibid) suspended [Cosare] from using not only the equipment but the "assets" of Respondent [Broadcom]. This insults rational
thinking because the Respondents tried to mislead us and make [it appear] that [Cosare] failed to report for work when they had in fact had [sic]
placed him on suspension. x x x.58
Following a finding of constructive dismissal, the Court finds no cogent reason to modify the NLRC's monetary awards in Cosare's favor. In Robinsons
Galleria/Robinsons Supermarket Corporation v. Ranchez,59 the Court reiterated that an illegally or constructively dismissed employee is entitled to: (1)
either reinstatement, if viable, or separation pay, if reinstatement is no longer viable; and (2) backwages.60 The award of exemplary damages was also
justified given the NLRC's finding that the respondents acted in bad faith and in a wanton, oppressive and malevolent manner when they dismissed
Cosare. It is also by reason of such bad faith that Arevalo was correctly declared solidarily liable for the monetary awards.
WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and Resolution dated March 26, 2012 of the Court of Appeals in CA-
G.R. SP. No. 117356 are SET ASIDE. The Decision dated August 24, 2010 of the National Labor Relations Commission in favor of petitioner Raul C.
Cosare is AFFIRMED.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 200575               February 5, 2014
INTEL TECHNOLOGY PHILIPPINES, INC., Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND JEREMIAS CABILES, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioner Intel Technology Philippines, Inc. (Intel Phil.). It assails
the October 28, 20111 and February 3, 20122 Resolutions of the Court of Appeals (CA) in CA-G.R. SP No.118880, which dismissed the petition for
certiorari filed by Intel Phil. thereby affirming the September 2, 2010 Decision3 of the National Labor Relations Commission (NLRC) and its February 9,
2011 Resolution. The NLRC decision modified the March 18, 2010 Decision4 of the Labor Arbiter (LA), and held Intel Phil. solely liable for the
retirement benefits of respondent Jeremias Cabiles (Cabiles).
The Facts
This case concerns the eligibility of Cabiles to receive retirement benefits from Intel Phil. granted to employees who had complied with the ten (10)-
year service period requirement of the company.
Cabiles was initially hired by Intel Phil. on April 16, 1997 as an Inventory Analyst. He was subsequently promoted several times over the years and was
also assigned at Intel Arizona and Intel Chengdu. He later applied for a position at Intel Semiconductor Limited Hong Kong (Intel HK).
In a letter,5 dated December 12, 2006, Cabiles was offered the position of Finance Manager by Intel HK. Before accepting the offer, he inquired from
Intel Phil., through an email, the consequences of accepting the newly presented opportunity in Hong Kong, to wit:
Are there any clearance requirements I need to fulfil as I move as a local hire to Hong Kong starting February 1?? I am still on my expat assignment in
Chengdu till it ends January 31. Then immediately I become a HK local employee so I don’t technically repatriate and work back to my home site
Philippines at all. Nevertheless, I still need to close I think my employment there and so that all my ES benefits and clearance will be closed like
conversion of my vacation leaves to cash, carry over of my service tenure in CV to HK etc. Please do let me know what process I need to go through or
would an email notification be enough?
Another issue I would like to clarify is with regard to my retirement benefits. I will celebrate my 10th year of service with Intel on April 16, 2007.
However, because I will be moving to Hong Kong as a local hire starting February 1, would I still be entitled to retirement benefits?? Do we roundup
the years of service if its close enough to 10 years?? If not, what other alternatives I have or do I just lose my years of service at Intel Philippines? Any
possibility that I keep my 9.5 years and start from there when I work in the Philippines again in the future??6
On January 23, 2007, Intel Phil., through Penny Gabronino (Gabronino), replied as follows:
Jerry – you are not eligible to receive your retirement benefit given that you have not reached 10 years of service at the time you moved to Hong
Kong. We do not round up the years of service.
There will [be] no gap in your years of service. So in case that you move back to the Philippines your total tenure of service will be computed less on
the period that you are out of Intel Philippines.7 [Emphasis supplied]
On January 31, 2007, Cabiles signed the job offer.8
On March 8, 2007, Intel Phil. issued Cabiles his "Intel Final Pay Separation Voucher" indicating a net payout of ₱165,857.62. On March 26, 2007,
Cabiles executed a Release, Waiver and Quitclaim (Waiver)9 in favor of Intel Phil. acknowledging receipt of ₱165,857.62 as full and complete
settlement of all benefits due him by reason of his separation from Intel Phil.
On September 8, 2007, after seven (7) months of employment, Cabiles resigned from Intel HK.
About two years thereafter, or on August 18, 2009, Cabiles filed a complaint for non-payment of retirement benefits and for moral and exemplary
damages with the NLRC Regional Arbitration Branch-IV. He insisted that he was employed by Intel for 10 years and 5 months from April 1997 to
September 2007 – a period which included his seven (7) month stint with Intel HK. Thus, he believed he was qualified to avail of the benefits under
the company’s retirement policy allowing an employee who served for 10 years or more to receive retirement benefits.
The Labor Arbiter’s Decision
On March 18, 2010, the LA ordered Intel Phil. together with Grace Ong, Nida delos Santos, Gabronino, and Pia Viloria, to pay Cabiles the amount of
HKD 419,868.77 or its peso equivalent as retirement pay with legal interest and attorney’s fees. The LA held that Cabiles did not sever his employment
with Intel Phil. when he moved to Intel HK, similar to the instances when he was assigned at Intel Arizona and Intel Chengdu. Despite the clarification
made by Intel Phil. regarding his ineligibility to receive retirement benefits, the LA stated that Cabiles could not be faulted if he was made to believe
his non-entitlement to retirement benefits. Thus, it should not prevent him from asserting his right to receive them. Finally, the Waiver executed by
Cabiles when he left Intel Phil., was treated by the LA as no bar for claiming his retirement pay because it merely covered the last salary and
commutation of sick leaves and vacation leaves to the exclusion of retirement benefits. The dispositive portion of the LA decision reads:
WHEREFORE, premises considered, Respondents are hereby ordered to pay complainant the amount of Four Hundred Nineteen Thousand Eight
Hundred Sixty-Eight and 77/100 Hong Kong Dollars (HKD419,868.77) or its Peso equivalent as retirement pay with legal interest until satisfied, and to
pay attorney’s fees equivalent to ten percent (10%) of the judgment award.
SO ORDERED.10
The NLRC Ruling
On appeal, the NLRC affirmed with modification the LA decision. In its September 2, 2010 Decision, the NLRC held Intel Phil. solely liable to pay Cabiles
his retirement benefits. It determined that his decision to move to Intel HK was not definitive proof of permanent severance of his ties with Intel Phil.
It treated his transfer to Hong Kong as akin to his overseas assignments in Arizona and Chengdu. As to the email exchange between Cabiles and Intel
Phil., the NLRC considered the same as insufficient to diminish his right over retirement benefits under the law. Meanwhile, the NLRC disregarded the
Waiver because at the time it was signed, the retirement pay due him had not yet accrued. Hence:
WHEREFORE, the appealed Decision is MODIFIED. Respondent-appellant Intel Technology Phil., Inc. is ordered to pay complainant-appellee Jeremias
Cabiles the sum [xx] of Four Hundred Nineteen Thousand Eight Hundred Sixty Eight and 77/100 Hong Kong Dollars (HKD419,868.77) or its equivalent
in Philippine peso as retirement pay together with legal interest thereon and attorney’s fees computed at ten percent (10%) of the award.
The individual respondents-appellants Grace Ong, Nida delos Santos, Penny Gabronino and Pia Viloria are RELIEVED from any personal liability
resulting from the foregoing.
SO ORDERED.11
Intel Phil. moved for reconsideration but its motion was denied in the NLRC Resolution,12 dated February 9, 2011.
The CA Decision
Aggrieved, Intel Phil. elevated the case to the CA via a petition for certiorari with application for a Temporary Restraining Order (TRO) on April 5, 2011.
The application for TRO was denied in a Resolution, dated July 5, 2011. A motion for reconsideration, dated July 27, 2011, was filed, but it was denied
in a Resolution, dated October 28, 2011, which also dismissed the petition for certiorari.13
On December 1, 2011, Intel Phil. filed a motion for reconsideration.
Earlier, on September 19, 2011, pending disposition of the petition before the CA, the NLRC issued a writ of execution14 against Intel Phil.:
NOW, THEREFORE, you are commanded to proceed to the premises of respondent INTEL TECHNOLOGY PHILIPPINES, INCORPORATED located at
Gateway Business Park, Javalera, General Trias, Cavite or anywhere in the Philippines where it could be located to collect the amount of Three Million
Two Hundred One Thousand Three Hundred Ninety Eight Pesos and Sixty Centavos (₱3,201,398.60) and turn over the same to this Office for
appropriate disposition.
You are likewise directed to collect from the respondents the amount of Thirty One Thousand Five Hundred Ten Pesos (₱31,510.00) representing the
execution fees pursuant to the provisions of the NLRC Manual of Execution of Judgment.
In case you fail to collect the said amount in cash, you are directed to cause the satisfaction of the same out of the respondents’ chattels or movable
goods or in the absence thereof, out of the immovable properties not exempt from execution and return this Writ of Execution to the undersigned
not more than five (5) years from receipt hereof together with the report not later than thirty (30) days from receipt and every thirty (30) days
thereafter pursuant to Section 12, Rule XI of the 2001 NLRC Rules of Procedures.15
As ordered by the NLRC, Intel Phil. satisfied the judgment on December 13, 2011 by paying the amount of ₱3,201,398.60 which included the
applicable withholding taxes due and paid to the Bureau of InternalRevenue. Cabiles received a net amount of ₱2,485,337.35, covered by the Bank of
the Philippine Islands Manager’s Check No. 0000000806.16
By reason thereof, Intel Phil. filed on December 21, 2011 a Supplement to the Petition for Certiorari17 praying, in addition to the reliefs sought in the
main, that the CA order the restitution of all the amounts paid by them pursuant to the NLRC’s writ of execution, dated September 19, 2011.
In its February 3, 2012 Resolution,18 the CA noted without action the supplement to the petition for certiorari of Intel Phil. and denied the December
21, 2011 motion for reconsideration.
Hence, this petition.
ISSUES
I
The Court of Appeals committed serious error in dismissing the Petition for Certiorari without expressing clearly and distinctly the facts and the law on
which its decision was based.
II
The Court of appeals committed serious and reversible error in not finding that respondent NLRC gravely abused its discretion when it ruled that
private respondent was entitled to retire under Intel Philippines’ retirement plan.
III
The Court of Appeals committed serious and reversible error in not finding that respondent NLRC gravely abused its discretion in annulling private
respondent’s quitclaim.
IV
The Court of Appeals committed serious and reversible error in not finding that Cabiles has the legal obligation to return all the amounts paid by Intel
pursuant to the writ of execution.19
Intel Phil. insists as serious error the CA’s affirmation of the NLRC decision holding it liable for the retirement benefits claimed by Cabiles. It contends
that he is disqualified to receive the benefits for his failure to complete the required minimum ten (10) years of service as he resigned to assume new
responsibilities with Intel HK effective February 1, 2007.
Respondent’s Position
In his Comment,20 Cabiles submits (1) that the petition presents questions of fact which cannot be reviewed via Rule 45; and (2) that the CA did not err
when it affirmed the NLRC ruling:
(a) for his entitlement to retirement pay as he was under the employ of Intel Phil. for more than ten (10) years in accordance with the
prevailing retirement policy;
(b) for the nullity of the quitclaim as he was misled to believe that he was disqualified to receive retirement benefits; and
(c) for his right to receive legal interest, damages and attorney’s fees.
Cabiles views his employment with Intel HK as a continuation of his service with Intel Phil. alleging that it was but an assignment by his principal
employer, similar to his assignments to Intel Arizona and Intel Chengdu. Having rendered 9.5 years of service with Intel Phil. and an additional seven
months with Intel HK, he claims that he had completed the required 10 year continuous service21 with Intel Phil., thus, qualifying him for retirement
benefits.
In its Reply, Intel Phil. reiterates the arguments contained in its petition.
The Court’s Ruling
Review of Factual Findings
As a general rule, this Court is not a trier of facts and a petition for review on certiorari under Rule 45 of the Rules of Court must exclusively raise
questions of law.22 Nevertheless, this Court will not hesitate to deviate from what are clearly procedural guidelines and disturb and strike down the
findings of the CA and those of the labor tribunals if there is a showing that they are unsupported by the evidence on record or there was a patent
misappreciation of facts. Indeed, that the impugned decision of the CA is consistent with the findings of the labor tribunals does not per se
conclusively demonstrate its correctness. By way of exception to the general rule, this Court will scrutinize the facts if only to rectify the prejudice and
injustice resulting from an incorrect assessment of the evidence presented.23
It is in this wise that the Court agrees with Intel Phil. that the CA seriously erred in affirming the findings of the NLRC on the face of substantial
evidence showing Cabiles’ disqualification to receive the retirement benefits. The Court, therefore, reverses the ruling of the CA for the reasons
hereinafter discussed.
Cabiles Resigned from Intel Philippines
Cabiles calls the attention of the Court to the lack of evidence proving his resignation. On the contrary, he states that no severance of relationship was
made upon his transfer to Intel HK.
The Court is not convinced.
Resignation is the formal relinquishment of an office,24 the overt act of which is coupled with an intent to renounce. This intent could be inferred from
the acts of the employee before and after the alleged resignation.25
In this case, Cabiles, while still on a temporary assignment in Intel Chengdu, was offered by Intel HK the job of a Finance Manager.
In contemplating whether to accept the offer, Cabiles wrote Intel Phil. providing details and asking as follows:
Are there any clearance requirements I need to fulfil as I move as a local hire to Hong Kong starting February 1?? I am still on my expat assignment in
Chengdu till it ends January 31. Then immediately I become a HK local employee so I don’t technically repatriate and work back to my home site
Philippines at all.
Nevertheless, I still need to close I think my employment there and so that all my ES benefits and clearance will be closed like conversion of my
vacation leaves to cash, carry over of my service tenure in CV to HK etc. Please do let me know what process I need to go through or would an email
notification be enough?
Another issue I would like to clarify is with regard to my retirement benefits. Will celebrate my 10th year of service with Intel on April 16, 2007.
However, because I will be moving to Hong Kong as a local hire starting February 1, would I still be entitled to retirement benefits?? Do we roundup
the years of service if its close enough to 10 years?? If not, what other alternatives I have or do I just lose my years of service at Intel Philippines? Any
possibility that I keep my 9.5 years and start it from there when I work in the Philippines again in the future??26 [Emphases supplied]
This communication manifested two of his main concerns: a) clearance procedures; and b) the probability of getting his retirement pay despite the
non-completion of the required 10 years of employment service. Beyond these concerns, however, was his acceptance of the fact that he would be
ending his relationship with Intel Phil. as his employer. The words he used - local hire, close, clearance – denote nothing but his firm resolve to
voluntarily disassociate himself from Intel Phil. and take on new responsibilities with Intel HK.
Despite a non-favorable reply as to his retirement concerns, Cabiles still accepted the offer of Intel HK.
His acceptance of the offer meant letting go of the retirement benefits he now claims as he was informed through email correspondence that his 9.5
years of service with Intel Phil. would not be rounded off in his favor. He, thus, placed himself in this position, as he chose to be employed in a
company that would pay him more than what he could earn in Chengdu or in the Philippines.
The choice of staying with Intel Phil. vis-à-vis a very attractive opportunity with Intel HK put him in a dilemma. If he would wait to complete ten (10)
years of service with Intel Phil. (in about 4 months) he would enjoy the fruits of his retirement but at the same time it would mean forfeiture of Intel
HK’s compensation offer in the amount of HK $ 942,500.00, an amount a lot bigger than what he would receive under the plan. He decided to forfeit
and became Intel HK’s newest hire.
All these are indicative of the clearest intent of Cabiles to sever ties with Intel Phil. He chose to forego his tenure with Intel Phil., with all its associated
benefits, in favor of a more lucrative job for him and his family with Intel HK.
The position of Cabiles that he was being merely assigned leads the Court to its next point.
No Secondment Contract Exists
Cabiles views his employment in Hong Kong as an assignment or an extension of his employment with Intel Phil. He cited as evidence the offer made
to him as well as the letter, dated January 8, 2007,27 both of which used the word "assignment" in reference to his engagement in Hong Kong as a
clear indication of the alleged continuation of his ties with Intel Phil.
The foregoing arguments of Cabiles, in essence, speak of the "theory of secondment."
The Court, however, is again not convinced.
The continuity, existence or termination of an employer-employee relationship in a typical secondment contract or any employment contract for that
matter is measured by the following yardsticks:
1. the selection and engagement of the employee;
2. the payment of wages;
3. the power of dismissal; and
4. the employer’s power to control the employee’s conduct.28
As applied, all of the above benchmarks ceased upon Cabiles’ assumption of duties with Intel HK on February 1, 2007. Intel HK became the new
employer. It provided Cabiles his compensation. Cabiles then became subject to Hong Kong labor laws, and necessarily, the rights appurtenant
thereto, including the right of Intel HK to fire him on available grounds. Lastly, Intel HK had control and supervision over him as its new Finance
Manager. Evidently, Intel Phil. no longer had any control over him.
Although in various instances, his move to Hong Kong was referred to as an "assignment," it bears stressing that it was categorized as a "permanent
transfer." In Sta. Maria v. Lopez,29 the Court held that "no permanent transfer can take place unless the officer or employee is first removed from the
position held, and then appointed to another position." Undoubtedly, Cabiles’ decision to move to Hong Kong required the abandonment of his
permanent position with Intel Phil. in order for him to assume a position in an entirely different company. Clearly, the "transfer" was more than just
an assignment. It constituted a severance of Cabiles’ relationship with Intel Phil., for the assumption of a position with a different employer, rank,
compensation and benefits.
Hence, Cabiles’ theory of secondment must fail.
The NLRC, however, was of the view that the transfer of Cabiles to Intel HK was similar to his assignments in Intel Chengdu and Intel Arizona.
The Court finds this conclusion baseless.
What distinguishes Intel Chengdu and Intel Arizona from Intel HK is the lack of intervention of Intel Phil. on the matter. In the two previous transfers,
Intel Phil. remained as the principal employer while Cabiles was on a temporary assignment. By virtue of which, it still assumed responsibility for the
payment of compensation and benefits due him. The assignment to Intel HK, on the other hand, was a permanent transfer and Intel Phil. never
participated in any way in the process of his employment there. It was Cabiles himself who took the opportunity and the risk. If it were indeed similar
to Intel Arizona and Intel Chengdu assignments, Intel Philippines would have had a say in it.
Release, Waiver and Quitclaim Valid Terms Are Clear
Contrary to the conclusion affirmed by the CA, the Waiver executed by Cabiles was valid.
In Goodrich Manufacturing Corporation, v. Ativo,30 the Court reiterated the standards that must be observed in determining whether a waiver and
quitclaim had been validly executed:
Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable
settlement, it is binding on the parties and may not later be disowned simply because of a change of mind. It is only where there is clear proof that
the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to
annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he
was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking.
In Callanta v. National Labor Relations Commission,31 this Court ruled that:
It is highly unlikely and incredible for a man of petitioner’s position and educational attainment to so easily succumb to private respondent company’s
alleged pressures without even defending himself nor demanding a final audit report before signing any resignation letter. Assuming that pressure
was indeed exerted against him, there was no urgency for petitioner to sign the resignation letter. He knew the nature of the letter that he was
signing, for as argued by respondent company, petitioner being "a man of high educational attainment and qualification, x x x he is expected to know
the import of everything that he executes, whether written or oral.32
Here, the NLRC concluded in its February 9, 2011 Resolution33 that the Waiver was executed merely to allow Intel Phil. to escape its obligation to pay
the retirement benefits, thus, violative of law, morals, and public policy. The Court, however, sees no clear evidence in the records showing that
Cabiles was constrained into signing the document. Also, it cannot be said that Cabiles did not fully understand the consequences of signing the
Waiver. Being a person well-versed in matters of finance, it would have been impossible for him not to have comprehended the consequences of
signing a waiver. Failing to see any evidence to warrant the disregard of the Waiver, the Court is unable to affirm the CA and, hence, declares it as
valid and binding between Cabiles and Intel Phil..
Assuming the Waiver was valid, the NLRC contended that it could not be construed to cover the claims for the retirement pay because it had not yet
accrued at the time the document was signed by Cabiles.
The Court finds Itself unable to agree.
The terms of the Waiver are clear:
I, Jeremias P. Cabiles, Filipino, of legal age and a resident of xxx hereby acknowledge receipt from Intel Technology Philippines, Inc. (the Company) the
amount of xxx, in full and complete settlement of all benefits due me by reason of my lawful separation from the Company effective February 1, 2007.
In consideration of the foregoing:
1. I release, remise and forever discharge the Company, its successors-in-interest, its stockholders, its officers, directors, agents or employees from
any action, sum of money, damages, claims and demands whatsoever, which in law or in equity I ever had, now have, or which I, my heirs, successors
and assigns hereafter may have by reason of any matter, cause or thing whatsoever, up to the time of these presents, the intention thereof being to
completely and absolutely release the Company, its successors-in-interest, xxx from all liabilities arising wholly, partially, or directly from my
employment with the Company.
x x x           x x x          x x x
5. I acknowledge that I have received all amounts that are now or in the future may be due me from the Company. I also acknowledge that during the
entire period of my employment with the Company, I received or was paid all compensation, benefits and privileges, to which I am entitled under all
laws and policies of the Company by reason of my past employment and/or engagement therewith, and if I hereafter be found in any manner to be
entitled to any amount, the aforementioned monetary amount is a full and final satisfaction of any and all such undisclosed claims. (Emphasis
supplied)34
Suffice it to state that nothing is clearer than the words used in the Waiver duly signed by Cabiles - that all claims, in the present and in the future,
were waived in consideration of his receipt of the amount of ₱165,857.62. Because the waiver included all present and future claims, the non-accrual
of benefits cannot be used as a basis in awarding retirement benefits to him.
Lastly, even if the Court assumes that the Waiver was invalid, Cabiles nonetheless remains disqualified as a recipient of retirement benefits because,
as previously discussed, the ten-year minimum requirement was not satisfied on account of his early resignation.
Cabiles is not entitled to the Retirement Benefits
Having effectively resigned before completing his 10th year anniversary with Intel Phil. and after having validly waived all the benefits due him, if any,
Cabiles is hereby declared ineligible to receive the retirement pay pursuant to the retirement policy of Intel Phil.
For that reason, Cabiles must return all the amounts he received from Intel Phil. pursuant to the Writ of Execution issued by the NLRC, dated
September 19, 2011.
WHEREFORE, the petition is GRANTED. The assailed October 28, 2011 and February 3, 2012 Resolutions of the Court of Appeals are hereby REVERSED
and SET ASIDE.
Respondent Jeremias P. Cabiles is ordered to make restitution to petitioner Intel Technology Philippines Inc. for whatever amounts he received
pursuant to the Writ of Execution issued by the National Labor Relations Commission, dated September 19, 2011.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 195190               July 28, 2014
ROYALE HOMES MARKETING CORPORATION, Petitioner,
vs.
FIDEL P. ALCANTARA [deceased], substituted by his heirs, Respondent.
DECISION
DEL CASTILLO, J.:
Not every form of control that a hiring party imposes on the hired party is indicative of employee-employer relationship. Rules and regulations that
merely serve as guidelines towards the achievement of a mutually desired result without dictating the means and methods of accomplishing it do not
establish employer-employee relationship.1
This Petition for Review on Certiorari2 assails the June 23, 2010 Decision3 of the Court of Appeals (CA) in CA-G.R. SP No. 109998 which (i) reversed and
set aside the February 23, 2009 Decision4 of the National Labor Relations Commission (NLRC), (ii) ordered petitioner Royale Homes Marketing
Corporation (Royale Homes) to pay respondent Fidel P. Alcantara (Alcantara) backwages and separation pay, and (iii) remanded the case to the Labor
Arbiter for the proper determination and computation of said monetary awards.
Also assailed in this Petition isthe January 18, 2011 Resolution5 of the CA denying Royale Homes’ Motion for Reconsideration,6 as well as its
Supplemental7 thereto.
Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara asits Marketing Director for a fixed period of one year.
His work consisted mainly of marketing Royale Homes’ realestate inventories on an exclusive basis. Royale Homes reappointed him for several
consecutive years, the last of which covered the period January 1 to December 31, 2003 where he held the position of Division 5 Vice-President-
Sales.8
Proceedings before the Labor Arbiter
On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal9 against Royale Homes and its President Matilde Robles, Executive Vice-
President for Administration and Finance Ma. Melinda Bernardino, and Executive Vice- President for Sales Carmina Sotto. Alcantara alleged that he is
a regular employee of Royale Homes since he is performing tasks that are necessary and desirable to its business; that in 2003 the company gave him
₱1.2 million for the services he rendered to it; that in the first week of November 2003, however, the executive officers of Royale Homes told him that
they were wondering why he still had the gall to come to office and sit at his table;10 and that the actsof the executive officers of Royale Homes
amounted to his dismissal from work without any valid or just cause and in gross disregard of the proper procedure for dismissing employees. Thus,
he alsoimpleaded the corporate officers who, he averred, effected his dismissal in bad faith and in an oppressive manner.
Alcantara prayed to be reinstated tohis former position without loss of seniority rights and other privileges, as well as to be paid backwages, moral
and exemplary damages, and attorney’s fees. He further sought that the ownership of the Mitsubishi Adventure with Plate No. WHD-945 be
transferred to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that the appointment paper of Alcantara isclear that it
engaged his services as an independent sales contractorfor a fixed term of one year only. He never received any salary, 13th month pay, overtime pay
or holiday pay from Royale Homes as hewas paid purely on commission basis. In addition, Royale Homes had no control on how Alcantara would
accomplish his tasks and responsibilities as he was free to solicit sales at any time and by any manner which he may deem appropriateand necessary.
He is even free to recruit his own sales personnel to assist him in pursuance of his sales target.
According to Royale Homes, Alcantara decided to leave the company after his wife, who was once connectedwith it as a sales agent, had formed a
brokerage company that directly competed with its business, and even recruited some of its sales agents. Although this was against the exclusivity
clause of the contract, Royale Homes still offered to accept Alcantara’s wife back so she could continue to engage in real estate brokerage, albeit
exclusively for Royale Homes. In a special management committee meeting on October 8,2003, however, Alcantara announced publicly and openly
that he would leave the company by the end of October 2003 and that he would no longer finish the unexpired term of his contract. He has decided
to join his wifeand pursue their own brokerage business. Royale Homes accepted Alcantara’s decision. It then threw a despedidaparty in his honor
and, subsequently, appointed a new independent contractor. Two months after herelinquished his post, however, Alcantara appeared in Royale
Homes and submitted a letter claiming that he was illegally dismissed.
Ruling of the Labor Arbiter
On September 7, 2005,the Labor Arbiter rendered a Decision11 holding that Alcantara is an employee of Royale Homes with a fixed-term employment
period from January 1 to December 31, 2003 and that the pre-termination of his contract was against the law.Hence, Alcantara is entitled to an
amount which he may have earned on the average for the unexpired portion of the contract. With regard to the impleaded corporate officers, the
Labor Arbiter absolved them from any liability.
The dispositive portion of the Labor Arbiter’s Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Royale Homes Marketing Corp. to pay the complainant the
total amount of TWO HUNDRED SEVENTY SEVEN THOUSAND PESOS (₱277,000.00) representing his compensation/commission for the unexpired term
of his contract.
All other claims are dismissed for lack of merit.
SO ORDERED.12
Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Homes claimed that the Labor Arbiter grievously erred inruling that there
exists an employer-employee relationship between the parties. It insisted that the contract between them expressly statesthat Alcantara is an
independent contractor and not an ordinary employee. Ithad no control over the means and methods by which he performed his work. RoyaleHomes
likewise assailed the award of ₱277,000.00 for lack of basis as it did not pre-terminate the contract. It was Alcantara who chose not to finish the
contract.
Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term and that he is not entitled to
backwages, reinstatement, unpaid commissions, and damages.
Ruling of the National LaborRelations Commission
On February 23, 2009, the NLRC rendered its Decision,13 ruling that Alcantara is not an employee but a mere independent contractor of Royale
Homes. It based its ruling mainly on the contract which does not require Alcantara to observe regular working hours. He was also free to adopt the
selling methods he deemed most effective and can even recruit sales agents to assist him in marketing the inventories of Royale Homes. The NLRC
also considered the fact that Alcantara was not receiving monthly salary, but was being paid on commission basis as stipulated in the contract. Being
an independent contractor, the NLRC concluded that Alcantara’s Complaint iscognizable by the regular courts.
The falloof the NLRC Decision reads:
WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-Beley dated September 5, 2005 is REVERSED and SET ASIDE and a
NEW ONE rendered dismissing the complaint for lack of jurisdiction.
SO ORDERED.14
Alcantara moved for reconsideration. 15 In a Resolution16 dated May 29, 2009, however, the NLRC denied his motion.
Alcantara thus filed a Petition for Certiorari17 with the CA imputing grave abuse of discretion on the partof the NLRC in ruling that he is not an
employee of Royale Homes and that it is the regular courts which have jurisdiction over the issue of whether the pre-termination of the contract is
valid.
Ruling of the Court of Appeals
On June 23, 2010, the CA promulgated its Decision18 granting Alcantara’s Petition and reversing the NLRC’s Decision. Applying the four-fold and
economic reality tests, it held thatAlcantara is an employee of Royale Homes. Royale Homes exercised some degree of control over Alcantara since his
job, as observed by the CA, is subject to company rules, regulations, and periodic evaluations. He was also bound by the company code of ethics.
Moreover, the exclusivity clause of the contract has made Alcantara economically dependent on Royale Homes, supporting the theory that he is
anemployee of said company.
The CA further held that Alcantara’s termination from employment was without any valid or just cause, and it was carried out in violation of his right
to procedural due process. Thus, the CA ruled that he isentitled to backwages and separation pay, in lieu of reinstatement. Considering,however, that
the CA was not satisfied with the proofadduced to establish the amount of Alcantara’s annual salary, it remanded the caseto the Labor Arbiter to
determine the same and the monetary award he is entitled to. With regard to the corporate officers, the CA absolved them from any liability for want
of clear proof that they assented to the patently unlawful acts or that they are guilty of bad faith orgross negligence. Thus:
WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed decision of the National Labor Relations Commission in NLRC
NCR CASE NO. 00-12-14311-03 NLRC CA NO. 046104-05 dated February 23, 2009 as well as the Resolution dated May 29, 2009 are hereby SET ASIDE
and a new one is entered ordering the respondent company to pay petitioner backwages which shall be computed from the time of his illegal
termination in October 2003 up to the finality of this decision, plus separation pay equivalent to one month salary for every year of service. This case
is REMANDED to the Labor Arbiter for the proper determination and computation of back wages, separation pay and other monetary benefits that
petitioner is entitled to.
SO ORDERED.19
Royale Homes filed a Motion for Reconsideration20 and a Supplemental Motion for Reconsideration.21 In a Resolution22 dated January 18, 2011,
however, the CA denied said motions.
Issues
Hence, this Petition where Royale Homes submits before this Court the following issues for resolution:
A.
WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT REVERSED THE RULING OF THE NLRC DISMISSING THE COMPLAINT OF RESPONDENT FOR LACK OF JURISDICTION
AND CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED[.]
B.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DISREGARDING THE EN BANCRULING OF THIS HONORABLE
COURT IN THE CASEOF TONGKO VS. MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE RULINGS OF SONZA VS. ABS CBN AND CONSULTA
V. CA[.]
C.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DENYING THE MOTION FOR RECONSIDERATION OF
PETITIONER AND IN REFUSING TO CORRECT ITSELF[.]23
Royale Homes contends that its contract with Alcantara is clear and unambiguous −it engaged his services as an independent contractor. This can be
readily seen from the contract stating that no employer-employee relationship exists between the parties; that Alcantara was free to solicit sales at
any time and by any manner he may deem appropriate; that he may recruit sales personnel to assist him in marketing Royale Homes’ inventories;
and, thathis remunerations are dependent on his sales performance.
Royale Homes likewise argues that the CA grievously erred in ruling that it exercised control over Alcantara based on a shallow ground that his
performance is subject to company rules and regulations, code of ethics, periodic evaluation, and exclusivity clause of contract. RoyaleHomes
maintains that it is expected to exercise some degree of control over its independent contractors,but that does not automatically result in the
existence ofemployer-employee relationship. For control to be consideredas a proof tending to establish employer-employee relationship, the same
mustpertain to the means and method of performing the work; not on the relationship of the independent contractors among themselves or their
persons or their source of living.
Royale Homes further asserts that it neither hired nor wielded the power to dismiss Alcantara. It was Alcantara who openly and publicly declared that
he was pre-terminating his fixed-term contract.
The pivotal issue to be resolved in this case is whether Alcantara was an independent contractor or anemployee of Royale Homes.
Our Ruling
The Petition is impressed with merit.
The determination of whether a party who renders services to another is an employee or an independent contractor involves an evaluation of factual
matters which, ordinarily, is not within the province of this Court. In view of the conflicting findings of the tribunals below, however, this Court is
constrained to go over the factual matters involved in this case.24
The juridical relationship of the parties based on their written contract
The primary evidence of the nature of the parties’ relationship in this case is the written contract that they signed and executed in pursuanceof their
mutual agreement. While the existence of employer-employee relationship is a matter of law, the characterization made by the parties in their
contract as to the nature of their juridical relationship cannot be simply ignored, particularly in this case where the parties’ written
contractunequivocally states their intention at the time they entered into it. In Tongko v. The Manufacturers LifeInsurance Co. (Phils.), Inc.,25 it was
held that:
To be sure, the Agreement’s legal characterization of the nature of the relationship cannot be conclusive and binding on the courts; x x x the
characterization of the juridical relationship the Agreement embodied is a matter of law that is for the courts to determine. At the same time, though,
the characterization the parties gave to their relationship in the Agreement cannot simply be brushed aside because it embodiestheir intent at the
time they entered the Agreement, and they were governed by this understanding throughout their relationship. At the very least, the provision on the
absence of employer- employee relationship between the parties can be an aid in considering the Agreement and its implementation, and in
appreciating the other evidence on record.26
In this case, the contract,27 duly signed and not disputed by the parties, conspicuously provides that "no employer-employee relationship exists
between" Royale Homes and Alcantara, as well as his sales agents. It is clear that they did not want to be bound by employer-employee relationship
atthe time ofthe signing of the contract. Thus:
January 24, 2003
MR. FIDEL P. ALCANTARA
13 Rancho I
Marikina City
Dear Mr. Alcantara,
This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES of ROYALE HOMES MARKETING CORPORATION effective January 1, 2003 to
December 31, 2003.
Your appointment entails marketing our real estate inventories on an EXCLUSIVE BASIS under such price, terms and condition to be provided to you
from time to time.
As such, you can solicit sales at any time and by any manner which you deem appropriate and necessary to market our real estate inventories subject
to rules, regulations and code of ethics promulgated by the company. Further, you are free to recruit sales personnel/agents to assist you in
marketing of our inventories provided that your personnel/agents shall first attend the required seminars and briefing to be conducted by us from
time to time for the purpose of familiarizing them of terms and conditionsof sale, the natureof property sold, etc., attendance of which shall be a
condition precedent for their accreditation by us.
That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:
1. Commission override of 0.5% for all option sales beginning January 1, 2003 booked by your sales agents.
2. Budget allocation depending on your division’s sale performance as per our budget guidelines.
 3. Sales incentive and other forms of company support which may be granted from time to time. It is understood, however, that no
employer-employee relationship exists between us, that of your sales personnel/agents, and that you shall hold our company x x x, its
officers and directors, free and harmless from any and all claims of liability and damages arising from and/or incident to the marketing of
our real estate inventories.
We reserve, however, our right to terminate this agreement in case of violation of any company rules and regulations, policies and code of ethics
upon notice for justifiable reason.
Your performance shall be subject toperiodic evaluation based on factors which shall be determined by the management.
If you are amenable to the foregoing terms and conditions, please indicate your conformity by signing on the space provided below and return [to] us
a duplicate copy of this letter, duly accomplished, to constitute as our agreement on the matter.(Emphasis ours)
Since "the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of itsstipulations
should control."28 No construction is even needed asthey already expressly state their intention. Also, this Court adopts the observation of the NLRC
that it is rather strange on the part of Alcantara, an educated man and a veteran sales broker who claimed to be receiving ₱1.2 million as his annual
salary, not to have contested the portion of the contract expressly indicating that he is not an employee of Royale Homes if their true intention were
otherwise.
The juridical relationship of the parties based on Control Test
In determining the existence of an employer-employee relationship, this Court has generally relied on the four-fold test, to wit: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee with
respect to the means and methods by which the work is to be accomplished.29 Among the four, the most determinative factor in ascertaining the
existence of employeremployee relationship is the "right of control test".30 "It is deemed to be such an important factor that the other requisites may
even be disregarded."31 This holds true where the issues to be resolved iswhether a person who performs work for another is the latter’s employee or
is an independent contractor,32 as in this case. For where the person for whom the services are performed reserves the right to control not only the
end to beachieved, but also the means by which such end is reached, employer-employee relationship is deemed to exist.33
In concluding that Alcantara is an employee of RoyaleHomes, the CA ratiocinated that since the performance of his tasks is subject to company rules,
regulations, code of ethics, and periodic evaluation, the element of control is present.
The Court disagrees.
Not every form of control is indicative of employer-employee relationship.1âwphi1 A person who performs work for another and is subjected to its
rules, regulations, and code of ethics does not necessarily become an employee.34 As long as the level of control does not interfere with the means
and methods of accomplishing the assigned tasks, the rules imposed by the hiring party on the hired party do not amount to the labor law concept of
control that is indicative of employer-employee relationship. In Insular Life Assurance Co., Ltd. v. National Labor Relations Commission35 it was
pronounced 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 employeremployee relationship unlike the second, which address
both the result and the means used to achieve it. x x x36
In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and periodic evaluation alluded to byAlcantara do not
involve control over the means and methods by which he was to performhis job. Understandably, Royale Homes has to fix the price, impose
requirements on prospective buyers, and lay down the terms and conditionsof the sale, including the mode of payment, which the independent
contractors must follow. It is also necessary for Royale Homes to allocateits inventories among its independent contractors, determine who has
priority in selling the same, grant commission or allowance based on predetermined criteria, and regularly monitor the result of their marketing and
sales efforts. But tothe mind of this Court, these do not pertain to the means and methods of how Alcantara was to perform and accomplish his task
of soliciting sales. They do not dictate upon him the details of how he would solicit sales or the manner as to how he would transact business with
prospective clients. In Tongko, this Court held that guidelines or rules and regulations that do notpertain to the means or methodsto be employed in
attaining the result are not indicative of control as understood inlabor law. Thus:
From jurisprudence, an important lesson that the first Insular Lifecase teaches us is that a commitment to abide by the rules and regulations of an
insurance company does not ipso factomake the insurance agent an employee. Neither do guidelines somehow restrictive of the insurance agent’s
conduct necessarily indicate "control" as this term is defined in jurisprudence. Guidelines indicative of labor law "control," as the first Insular Lifecase
tells us, should not merely relate to the mutually desirable result intended by the contractual relationship; they must have the nature of dictating the
means or methods to beemployed in attaining the result, or of fixing the methodology and of binding or restricting the party hired to the use of these
means.In fact, results-wise, the principal can impose production quotas and can determine how many agents, with specific territories, ought to be
employed to achieve the company’s objectives. These are management policy decisions that the labor law element of control cannot reach. Our ruling
in these respects in the first Insular Lifecase was practically reiterated in Carungcong. Thus, as will be shown more fully below, Manulife’s codes of
conduct, all of which do not intrude into the insurance agents’ means and manner of conducting their sales and only control them as to the desired
results and Insurance Code norms, cannot be used as basis for a finding that the labor law concept of control existed between Manulife and
Tongko.37 (Emphases in the original)
As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to prove the elements thereof, particularly Royale
Homes’ power of control over the means and methods of accomplishing the work.38 He, however, failed to cite specificrules, regulations or codes of
ethics that supposedly imposed control on his means and methods of soliciting sales and dealing with prospective clients. On the other hand, this case
is replete with instances that negate the element of control and the existence of employer-employee relationship. Notably, Alcantara was not
required to observe definite working hours.39 Except for soliciting sales, RoyaleHomes did not assign other tasks to him. He had full control over the
means and methods of accomplishing his tasks as he can "solicit sales at any time and by any manner which [he may] deem appropriate and
necessary." He performed his tasks on his own account free from the control and direction of Royale Homes in all matters connected therewith,
except as to the results thereof.40
Neither does the repeated hiring of Alcantara prove the existence of employer-employee relationship.41 As discussed above, the absence of control
over the means and methodsdisproves employer-employee relationship. The continuous rehiring of Alcantara simply signifies the renewal of his
contract with Royale Homes, and highlights his satisfactory services warranting the renewal of such contract. Nor does the exclusivity clause of
contract establish the existence of the labor law concept of control. In Consulta v. Court of Appeals,42 it was held that exclusivity of contract does not
necessarily result in employer-employee relationship, viz:
x x x However, the fact that the appointment required Consulta to solicit business exclusively for Pamana did not mean that Pamana exercised control
over the means and methods of Consulta’s work as the term control is understood in labor jurisprudence. Neither did it make Consulta an employee
of Pamana. Pamana did not prohibit Consulta from engaging in any other business, or from being connected with any other company, for aslong as
the business [of the] company did not compete with Pamana’s business.43
The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other business as long as he does not sell projects of Royale
Homes’ competitors. He can engage in selling various other products or engage in unrelated businesses.
Payment of Wages
The element of payment of wages is also absent in thiscase. As provided in the contract, Alcantara’s remunerations consist only of commission
override of 0.5%, budget allocation, sales incentive and other forms of company support. There is no proof that he received fixed monthly salary. No
payslip or payroll was ever presented and there is no proof that Royale Homes deducted from his supposed salary withholding tax or that it registered
him with the Social Security System, Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint merely states a ballpark figure of
his alleged salary of ₱100,000.00, more or less. All of these indicate an independent contractual relationship.44 Besides, if Alcantara indeed
consideredhimself an employee of Royale Homes, then he, an experienced and professional broker, would have complained that he was being denied
statutorily mandated benefits. But for nine consecutive years, he kept mum about it, signifying that he has agreed, consented, and accepted the fact
that he is not entitled tothose employee benefits because he is an independent contractor.
This Court is, therefore,convinced that Alcantara is not an employee of Royale Homes, but a mere independent contractor. The NLRC is, therefore,
correct in concluding that the Labor Arbiter has no jurisdiction over the case and that the same is cognizable by the regular courts.
WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of Appeals in CA-G.R. SP No. 109998 is REVERSED and
SET ASIDE. The February 23, 2009 Decision of the National Labor Relations Commission is REINSTATED and AFFIRMED. SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice

THIRD DIVISION
G.R. No. 187691, January 13, 2016
OLYMPIA HOUSING, INC., Petitioner, v. ALLAN LAPASTORA AND IRENE UBALUBAO, Respondents.
DECISION
REYES, J.:

This is a Petition for Review on Certiorari1 filed under Rule 45 of the Rules of Court, assailing the Decision2 dated April 28, 2009 of the Court of Appeals
(CA) in CA-G.R. SP No. 103699, which affirmed the Decision dated December 28, 2007 and Resolution3 dated February 29, 2008 of the National Labor
Relations Commission (NLRC) in NLRC NCR Case No. 30-03-00976-00.

The instant case stemmed from a complaint for illegal dismissal, payment of backwages and other benefits, and regularization of employment filed by
Allan Lapastora (Lapastora) and Irene Ubalubao (Ubalubao) against Olympic Housing, Inc. (OHI), the entity engaged in the management of the
Olympia Executive Residences (OER), a condominium hotel building situated in Makati City, owned by a Philippine-registered corporation known as
the Olympia Condominium Corporation (OCC). The complaint, which was docketed as NLRC NCR Case No. 30-03-00976-00 (NLRC NCR CA No. 032043-
02), likewise impleaded as defendants the part owner of OHI, Felix Limcaoco (Limcaoco), and Fast Manpower and Allied Services Company, Inc. (Fast
Manpower). Lapastora and Ubalubao alleged that they worked as room attendants of OHI from March 1995 and June 1997, respectively, until they
were placed on floating status on February 24, 2000, through a memorandum sent by Fast Manpower.4chanroblesvirtuallawlibrary

To establish employer-employee relationship with OHI, Lapastora and Ubalubao alleged that they were directly hired by the company and received
salaries directly from its operations clerk, Myrna Jaylo (Jaylo). They also claimed that OHI exercised control over them as they were issued time cards,
disciplinary action reports and checklists of room assignments. It was also OHI which terminated their employment after they petitioned for
regularization. Prior to their dismissal, they were subjected to investigations for their alleged involvement in the theft of personal items and cash
belonging to hotel guests and were summarily dismissed by OHI despite lack of evidence.5chanroblesvirtuallawlibrary

For their part, OHI and Limcaoco alleged that Lapastora and Ubalubao were not employees of the company but of Fast Manpower, with which it had a
contract of services, particularly, for the provision of room attendants. They claimed that Fast Manpower is an independent contractor as it (1)
renders janitorial services to various establishments in Metro Manila, with 500 janitors under its employ; (2) maintains an office where janitors
assemble before they are dispatched to their assignments; (3) exercises the right to select, refuse or change personnel assigned to OHI; and (4)
supervises and pays the wages of its employees.6chanroblesvirtuallawlibrary

Reinforcing OHI's claims, Fast Manpower reiterated that it is a legitimate manpower agency and that it had a valid contract of services with OHI,
pursuant to which Lapastora and Ubalubao were deployed as room attendants. Lapastora and Ubalubao were, however, found to have violated house
rules and regulations and were reprimanded accordingly. It denied the employees' claim that they were dismissed and maintained they were only
placed on floating status for lack of available work assignments.7chanroblesvirtuallawlibrary

Subsequently, on August 22, 2000, a memorandum of agreement was executed, stipulating the transfer of management of the OER from OHI to HSAI-
Raintree, Inc. (HSAI-Raintree). Thereafter, OHI informed the Department of Labor and Employment (DOLE) of its cessation of operations due to the
said change of management and issued notices of termination to all its employees. This occurrence prompted some union officers and members to
file a separate complaint for illegal dismissal and unfair labor practice against OHI, OCC and HSAI-Raintree, docketed as NLRC NCR CN 30-11-04400-00
(CA No. 032193-02), entitled Malonie D. Ocampo, et al. v. Olympia Housing, Inc., et at. (Ocampo v. OHI). This complaint was, however, dismissed for
lack of merit. The complainants therein appealed the said ruling to the NLRC.8chanroblesvirtuallawlibrary

Meanwhile, on May 10, 2002, the Labor Arbiter (LA) rendered a Decision9 in the instant case, holding that Lapastora and Ubalubao were regular
employees of OHI and that they were illegally dismissed. The dispositive portion of the decision reads as follows:
WHEREFORE, finding complainants to have been illegally dismissed and as regular employees of [OHI] the latter is ordered to reinstate complainants
to their former position or substantially equal position without loss of seniority rights and benefits. [OHI] is further ordered to pay complainants
backwages, service incentive leave pay and attorney's fees as follows:
1. Backwages:

[Lapastora] -     P171,616.60 and

[Ubalubao] - P170,573.44 from February 24, 2000 to date of decision which shall further be adjusted until their actual
reinstatement.
2. P3,305.05 - ILP for Lapastora
3. P3,426.04 - SILP for Ubalubao
4. 10% of the money awards as attorney's fees.
Other claims are dismissed for lack of merit.

The claim against [Limcaoco] is hereby dismissed for lack of merit.

SO ORDERED.10chanrobleslaw

In ruling for the existence of employer-employee relationship, the LA held that OHI exercised control and supervision over Lapastora and Ubalubao
through its supervisor, Anamie Lat. The LA likewise noted that documentary evidence consisting of time cards, medical cards and medical examination
reports all indicated OHI as employer of the said employees.  Moreover, the affidavit of OHI's housekeeping coordinator, Jaylo, attested to the fact
that OHI is the one responsible for the selection of employees for its housekeeping department. OHI also paid the salaries of the housekeeping staff
by depositing them to their respective ATM accounts. That there is a contract of services between OHI and Fast Manpower did not rule out the
existence of employer-employee relationship between the former and Lapastora and Ubalubao as it appears that the said contract was a mere ploy to
circumvent the application of pertinent labor laws particularly those relating to security of tenure. The LA pointed out that the business of OHI
necessarily requires the services of housekeeping aides, room boys, chambermaids, janitors and gardeners in its daily operations, which is precisely
the line of work being rendered by Lapastora and Ubalubao.11chanroblesvirtuallawlibrary

Both parties appealed to the NLRC. OHI asseverated that the reinstatement of Lapastora and Ubalubao was no longer possible in view of the transfer
of the management of the OER to HSAI-Raintree.12chanroblesvirtuallawlibrary

On December 28, 2007, the NLRC rendered a decision, dismissing the appeal for lack of merit, the dispositive portion of which reads as follows:
WHEREFORE, premises considered, the appeals of both the respondents and the complainants are DISMISSED, and the Decision of the [LA] is hereby
AFFIRMED. All other claims are dismissed for lack of merit.13chanrobleslaw

The NLRC held that OHI is the employer of Lapastora and Ubalubao since Fast Manpower failed to establish the fact that it is an independent
contractor. Further, it ruled that the memorandum of agreement between OCC and HSAI-Raintree did not render the reinstatement of Lapastora and
Ubalubao impossible since a change in the management does not automatically result in a change of personnel especially when the memorandum
itself did not include a provision on that matter.14chanroblesvirtuallawlibrary

Unyielding, OHI filed its Motion for Reconsideration15 but the NLRC denied the same in a Resolution16 dated February 29, 2008.

In the meantime, in Ocampo v. OHI, the NLRC rendered a Decision17 dated November 22, 2002, upholding the validity of the cessation of OHI's
operations and the consequent termination of all its employees.  It stressed that the cessation of business springs from the management's prerogative
to do what is necessary for the protection of its investment, notwithstanding adverse effect on the employees. The discharge of employees for
economic reasons does not amount to unfair labor practice.18 The said ruling of the NLRC was elevated on petition for certiorari to the CA, which
dismissed the same in Resolutions dated November 28, 200319 and June 23, 2004.20 The mentioned resolutions were appealed to this Court and were
docketed as G.R. No. 164160, which was, however, denied in the Resolution21 dated July 26, 2004 for failure to comply with procedural rules and lack
of reversible error on the part of the CA.chanRoblesvirtualLawlibrary
Ruling of the CA

OHI, upon receipt of the adverse decision in NLRC NCR Case No. 30-03-00976-00, filed a Petition for Certiorari22 with the CA, praying that the Decision
dated December 28, 2007 and Resolution dated February 29, 2008 of the NLRC be set aside. It pointed out that in the related case of Ocampo v. OHI,
the NLRC took into consideration the supervening events which transpired after the supposed termination of Lapastora and Ubalubao, particularly
OHI's closure of business on October 1, 2000. The NLRC then likewise upheld the validity of the closure of business and the consequent termination of
employees in favor of OHI, holding that the measures taken by the company were proper exercises of management prerogative. OHI argued that
since the said disposition of the NLRC in Ocampo v. OHI was affirmed by both the CA and the Supreme Court, the principle of stare decisis becomes
applicable and the issues that had already been resolved in the said case may no longer be relitigated.23 At any rate, OHI argued that it could not be
held liable for illegal dismissal since Lapastora and Ubalubao were not its employees.24chanroblesvirtuallawlibrary

On April 28, 2009, the CA rendered a Decision25 dismissing the petition, the dispositive portion of which reads as follows:
WHEREFORE, the petition for certiorari is DISMISSED.  The NLRC's Decision dated December 28, 2007 and Resolution dated February 29, 2008 in NLRC
NCR Case No. 30-03-00976-00 (NLRC NCR CANo. 032043-02) are AFFIRMED.

SO ORDERED.26chanroblesvirtuallawlibrary

The CA ruled that OHI's cessation of operations on October 1, 2000 is not a supervening event because it transpired long before the promulgation of
the LA's Decision dated May 10, 2002 in the instant case. In the same manner, the ruling of the NLRC in Ocampo v. OHI does not constitute stare
decisis to the present petition because of the apparent dissimilarities in the attendant circumstances. For instance, Ocampo v. OHI was founded on
the union members' allegation that OHI's claim of substantial financial losses to support closure of business lacked evidence, while in the instant case,
Lapastora and Ubalubao claimed illegal dismissal on account of their being placed on floating status after they were implicated in a theft case. The
differences in the facts and issues in the two cases rule out the invocation of the doctrine. The CA added that the prevailing jurisprudence is that the
NLRC decision upholding the validity of the closure of business and retrenchment of employees resulting therefrom will not preclude it from
decreeing the illegality of an employee's dismissal. Considering that OHI failed to prove that the memorandum of agreement between OCC and HSAI-
Raintree had any effect on the employment of Lapastora and Ubalubao or that there is any other valid or authorized cause for their termination from
employment, the CA concluded that they were unlawfully dismissed.27chanroblesvirtuallawlibrary

Unyielding, OHI filed the instant petition, reiterating its arguments before the CA. It added that, even assuming that the facts warrant a finding of
illegal dismissal, the cessation of operations of the company is a supervening event that should limit the award of backwages to Lapastora and
Ubalubao until October 1, 2000 only and justify the deletion of the order of reinstatement. After all, it complied with the notice requirements of the
DOLE for a valid closure of business.28chanroblesvirtuallawlibrary

On April 4, 2011, Ubalubao, on her own behalf, filed a Motion to Dismiss/Withdraw Complaint and Waiver,29 stating that she has decided to accept
the financial assistance in the amount of P50,000.00 offered by OHI, in lieu of all the monetary claims she has against the company, as full and
complete satisfaction of any judgment that may be subsequently rendered in her favor. She likewise informed the Court that she had willingly and
knowingly executed a quitclaim and waiver agreement, releasing OHI from any liability. She thus prayed for the dismissal of the complaint she filed
against OHI.

In a Resolution30 dated January 16, 2012, the Court granted Ubalubao's motion and considered the case closed and terminated as to her part, leaving
Lapastora as the lone respondent in the present petition.chanRoblesvirtualLawlibrary
Ruling of the Court

Lapastora was illegally dismissed

Indisputably, Lapastora was a regular employee of OHI. As found by the LA, he has been under the continuous employ of OHI since March 3, 1995
until he was placed on floating status in February 2000. His uninterrupted employment by OHI, lasting for more than a year, manifests the continuing
need and desirability of his services, which characterize regular employment. Article 280 of the Labor Code provides as follows:
Art. 280. Regular and casual employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking, the
completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such activity exists.

Based on records, OHI is engaged in the business of managing residential and commercial condominium units at the OER. By the nature of its
business, it is imperative that it maintains a pool of housekeeping staff to ensure that the premises remain an uncluttered place of comfort for the
occupants. It is no wonder why Lapastora, among several others, was continuously employed by OHI precisely because of the indispensability of their
services to its business. The fact alone that Lapastora was allowed to work for an unbroken period of almost five years is all the same a reason to
consider him a regular employee.

The attainment of a regular status of employment guarantees the employee's security of tenure that he cannot be unceremoniously terminated from
employment. "To justify fully the dismissal of an employee, the employer must, as a rule, prove that the dismissal was for a just cause and that the
employee was afforded due process prior to dismissal. As a complementary principle, the employer has the onus of proving with clear, accurate,
consistent, and convincing evidence the validity of the dismissal."31chanroblesvirtuallawlibrary

OHI miserably failed to discharge its burdens thus making Lapastora's termination illegal.

On the substantive aspect, it appears that OHI failed to prove that Lapastora's dismissal was grounded on a just or authorized cause. While it claims
that it had called Lapastora's attention several times for tardiness, unexplained absences and loitering, it does not appear from the records that the
latter had been notified of the company's dissatisfaction over his performance and that he was made to explain his supposed infractions. It does not
even show from the records that Lapastora was ever disciplined because of his alleged tardiness. In the same manner, allegations regarding
Lapastora's involvement in the theft of personal items and cash belonging to hotel guests remained unfounded suspicions as they were not proven
despite OHI's probe into the incidents.

On the procedural aspect, OHI admittedly failed to observe the twin notice rule in termination cases. As a rule, the employer is required to furnish the
concerned employee two written notices: (1) a written notice served on the employee specifying the ground or grounds for termination, and giving to
said employee reasonable opportunity within which to explain his side; and (2) a written notice of termination served on the employee indicating that
upon due consideration of all the circumstances, grounds have been established to justify his termination.32 In the present case, Lapastora was not
informed of the charges against him and was denied the opportunity to disprove the same. He was summarily terminated from employment.

OHI argues that no formal notices of investigation, notice of charges or termination was issued to Lapastora since he was not an employee of the
company but of Fast Manpower.

The issue of employer-employee relationship between OHI and Lapastora had been deliberated and ruled upon by the LA and the NLRC in the
affirmative on the basis of the evidence presented by the parties. The LA ruled that Lapastora was under the effective control and supervision of OHI
through the company supervisor. She gave credence to the pertinent records of Lapastora's employment, i.e., timecards, medical records and medical
examinations, which all indicated OHI as his employer. She likewise noted Fast Manpower's failure to establish its capacity as independent contractor
based on the standards provided by law.

That there is an existing contract of services between OHI and Fast Manpower where both parties acknowledged the latter as the employer of the
housekeeping staff, including Lapastora, did not alter established facts proving the contrary. The parties cannot evade the application of labor laws by
mere expedient of a contract considering that labor and employment are matters imbued with public interest. It cannot be subjected to the
agreement of the parties but rather on existing laws designed specifically for the protection of labor. Thus, it had been repeatedly stressed in a
number of jurisprudence that "[a] party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character of its
business,  i.e., whether as labor-only contractor or as job contractor, it being crucial that its character be measured in terms of and determined by the
criteria set by statute."33chanroblesvirtuallawlibrary

The Court finds no compelling reason to deviate from the findings of the LA and NLRC, especially in this case when the same was affirmed by the CA. It
is settled that findings of fact made by LAs, when affirmed by the NLRC, are entitled not only to great respect but even finality and are binding on this
Court especially when they are supported by substantial evidence.34chanroblesvirtuallawlibrary

The principle of stare decisis is not applicable

Still, OHI argues that the legality of the closure of its business had been the subject of the separate case of Ocampo v. OHI, where the NLRC upheld the
validity of the termination of all the employees of OHI due to cessation of operations. It asserts that since the ruling was affirmed by the CA and,
eventually by this Court, the principle of stare decisis becomes applicable. Considering the closure of its business, Lapastora can no longer be
reinstated and should instead be awarded backwages up to the last day of operations of the company only, specifically on October 1,
2000.35chanroblesvirtuallawlibrary

In Ting v. Velez-Ting,36 the Court elaborated on the principle of stare decisis, thus:

The principle of stare decisis enjoins adherence by lower courts to doctrinal rules established by this Court in its final decisions. It is based on the
principle that once a question of law has been examined and decided, it should be deemed settled and closed to further argument. Basically, it is a bar
to any attempt to relitigate the same issues, necessary for two simple reasons: economy and stability. In our jurisdiction, the principle is entrenched in
Article 8 of the Civil Code.37 (Citations omitted)

Verily, the import of the principle is that questions of law that have been decided by this Court and applied in resolving earlier cases shall be deemed
the prevailing rule which shall be binding on future cases dealing on the same intricacies. Apart from saving the precious time of the Court, the
application of this principle is essential to the consistency of the rulings of the Court which is significant in its role as the final arbiter of judicial
controversies.

The CA correctly ruled that the principle of stare decisis finds no relevance in the present case. To begin with, there is no doctrine of law that is
similarly applicable in both the present case and in Ocampo v. OHI. While both are illegal dismissal cases, they are based on completely different sets
of facts and involved distinct issues. In the instant case, Lapastora cries illegal dismissal after he was arbitrarily placed on a floating status on mere
suspicion that he was involved in theft incidents within the company premises without being given the opportunity to explain his side or any formal
investigation of his participation. On the other hand, in Ocampo v. OHI, the petitioners therein questioned the validity of OHI's closure of business and
the eventual termination of all the employees. Thus, the NLRC ruled upon both cases differently.

Nonetheless, the Court finds the recognition of the validity of OHI's cessation of business in the Decision dated November 22, 2002 of the NLRC, which
was affirmed by the CA and this Court, a supervening event which inevitably alters the judgment award in favor of Lapastora. The NLRC noted that
OHI complied with all the statutory requirements, including the filing of a notice of closure with the DOLE and furnishing written notices of
termination to all employees effective 30 days from receipt.38 OHI likewise presented financial statements substantiating its claim that it is operating
at a loss and that the closure of business is necessary to avert further losses.39 The action of the OHI, the NLRC held, is a valid exercise of management
prerogative.

Thus, while the finding of illegal dismissal in favor of Lapastora subsists, his reinstatement was rendered a legal impossibility with OHI's closure of
business. In Galindez v. Rural Bank of Llanera, Inc.,40 the Court noted:
Reinstatement presupposes that the previous position from which one had been removed still exists or there is an unfilled position more or less of
similar nature as the one previously occupied by the employee. Admittedly, no such position is available. Reinstatement therefore becomes a legal
impossibility. The law cannot exact compliance with what is impossible.41chanrobleslaw

Considering the impossibility of Lapastora's reinstatement, the payment of separation pay, in lieu thereof, is proper. The amount of separation pay to
be given to Lapastora must be computed from March 1995, the time he commenced employment with OHI, until the time when the company ceased
operations in October 2000.42 As a twin relief, Lapastora is likewise entitled to the payment of backwages, computed from the time he was unjustly
dismissed, or from February 24, 2000 until October 1, 2000 when his reinstatement was rendered impossible without fault on his
part.43chanroblesvirtuallawlibrary

Finally, for OHI's failure to prove the fact of payment, the Court sustains the award for the payment of service incentive leave pay and 13th month pay.
The rule, as stated in Mantle Trading Services, Inc. and/or Del Rosario v. NLRC, et al.,44 is that "the burden rests on the employer to prove payment,
rather than on the employee to prove nonpayment. The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and
other similar documents — which will show that overtime, differentials, service incentive leave and other claims of workers have been paid — are not
in the possession of the employee but in the custody and absolute control of the employer."45 Considering that OHI did not dispute Lapastora's claim
for nonpayment of the mentioned benefits and opted to disclaim employer-employee relationship, the presumption is that the said claims were not
paid.

The award for attorney's fees of 10% of the monetary awards is likewise sustained considering that Lapastora was forced to litigate and, thus, incurred
expenses to protect his rights and interests.46chanroblesvirtuallawlibrary

WHEREFORE, the Decision dated April 28, 2009 of. the Court of Appeals in CA-G.R. SP No. 103699 is AFFIRMED with MODIFICATION in that OHI is
hereby ORDERED to pay Allan Lapastora the following: (1) separation pay, in lieu of reinstatement, computed from the time of his employment until
the time of its closure of business, or from March 1995 to October 2000; (2) backwages, computed from the time of illegal dismissal until cessation of
business, or from February 24, 2000 to October 1, 2000; (3) service incentive leave pay and 13th  month pay; and (4) attorney's fees.

SO ORDERED.cralawlawlibrary

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-48645 January 7, 1987
"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON, PATRICIO
SERRANO, ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO PARINAS, NORBERTO GALANG, JUANITO NAVARRO, NESTORIO MARCELLANA,
TEOFILO B. CACATIAN, RUFO L. EGUIA, CARLOS SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B. MATIAR, ET AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, OFFICE OF THE PRESIDENT, HON. AMADO G. INCIONG,
UNDERSECRETARY OF LABOR, SAN MIGUEL CORPORATION, GENARO OLIVES, ENRIQUE CAMAHORT, FEDERICO OÑATE, ERNESTO VILLANUEVA,
ANTONIO BOCALING and GODOFREDO CUETO, respondents.
Armando V. Ampil for petitioners.
Siguion Reyna, Montecillo and Ongsiako Law Office for private respondents.

GUTIERREZ, JR., J.:
The elemental question in labor law of whether or not an employer-employee relationship exists between petitioners-members of the "Brotherhood
Labor Unit Movement of the Philippines" (BLUM) and respondent San Miguel Corporation, is the main issue in this petition. The disputed decision of
public respondent Ronaldo Zamora, Presidential Assistant for legal Affairs, contains a brief summary of the facts involved:
1. The records disclose that on July 11, 1969, BLUM filed a complaint with the now defunct Court of Industrial Relations, charging
San Miguel Corporation, and the following officers: Enrique Camahort, Federico Ofiate Feliciano Arceo, Melencio Eugenia Jr.,
Ernesto Villanueva, Antonio Bocaling and Godofredo Cueto of unfair labor practice as set forth in Section 4 (a), sub-sections (1)
and (4) of Republic Act No. 875 and of Legal dismissal. It was alleged that respondents ordered the individual complainants to
disaffiliate from the complainant union; and that management dismissed the individual complainants when they insisted on their
union membership.
On their part, respondents moved for the dismissal of the complaint on the grounds that the complainants are not and have never
been employees of respondent company but employees of the independent contractor; that respondent company has never had
control over the means and methods followed by the independent contractor who enjoyed full authority to hire and control said
employees; and that the individual complainants are barred by estoppel from asserting that they are employees of respondent
company.
While pending with the Court of Industrial Relations CIR pleadings and testimonial and documentary evidences were duly
presented, although the actual hearing was delayed by several postponements. The dispute was taken over by the National Labor
Relations Commission (NLRC) with the decreed abolition of the CIR and the hearing of the case intransferably commenced on
September 8, 1975.
On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which was concurred in by the NLRC in a decision dated
June 28, 1976. The amount of backwages awarded, however, was reduced by NLRC to the equivalent of one (1) year salary.
On appeal, the Secretary in a decision dated June 1, 1977, set aside the NLRC ruling, stressing the absence of an employer-
mployee relationship as borne out by the records of the case. ...
The petitioners strongly argue that there exists an employer-employee relationship between them and the respondent company and that they were
dismissed for unionism, an act constituting unfair labor practice "for which respondents must be made to answer."
Unrebutted evidence and testimony on record establish that the petitioners are workers who have been employed at the San Miguel Parola Glass
Factory since 1961, averaging about seven (7) years of service at the time of their termination. They worked as "cargadores" or "pahinante" at the
SMC Plant loading, unloading, piling or palleting empty bottles and woosen shells to and from company trucks and warehouses. At times, they
accompanied the company trucks on their delivery routes.
The petitioners first reported for work to Superintendent-in-Charge Camahort. They were issued gate passes signed by Camahort and were provided
by the respondent company with the tools, equipment and paraphernalia used in the loading, unloading, piling and hauling operation.
Job orders emanated from Camahort. The orders are then transmitted to an assistant-officer-in-charge. In turn, the assistant informs the
warehousemen and checkers regarding the same. The latter, thereafter, relays said orders to the capatazes or group leaders who then give orders to
the workers as to where, when and what to load, unload, pile, pallet or clean.
Work in the glass factory was neither regular nor continuous, depending wholly on the volume of bottles manufactured to be loaded and unloaded, as
well as the business activity of the company. Work did not necessarily mean a full eight (8) hour day for the petitioners. However, work,at times,
exceeded the eight (8) hour day and necessitated work on Sundays and holidays. For this, they were neither paid overtime nor compensation for work
on Sundays and holidays.
Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the number of cartons and wooden shells they were able to load,
unload, or pile. The group leader notes down the number or volume of work that each individual worker has accomplished. This is then made the
basis of a report or statement which is compared with the notes of the checker and warehousemen as to whether or not they tally. Final approval of
report is by officer-in-charge Camahort. The pay check is given to the group leaders for encashment, distribution, and payment to the petitioners in
accordance with payrolls prepared by said leaders. From the total earnings of the group, the group leader gets a participation or share of ten (10%)
percent plus an additional amount from the earnings of each individual.
The petitioners worked exclusive at the SMC plant, never having been assigned to other companies or departments of SMC plant, even when the
volume of work was at its minimum. When any of the glass furnaces suffered a breakdown, making a shutdown necessary, the petitioners work was
temporarily suspended. Thereafter, the petitioners would return to work at the glass plant.
Sometime in January, 1969, the petitioner workers — numbering one hundred and forty (140) organized and affiliated themselves with the petitioner
union and engaged in union activities. Believing themselves entitled to overtime and holiday pay, the petitioners pressed management, airing other
grievances such as being paid below the minimum wage law, inhuman treatment, being forced to borrow at usurious rates of interest and to buy
raffle tickets, coerced by withholding their salaries, and salary deductions made without their consent. However, their gripes and grievances were not
heeded by the respondents.
On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor Relations in connection with the dismissal of some of its
members who were allegedly castigated for their union membership and warned that should they persist in continuing with their union activities they
would be dismissed from their jobs. Several conciliation conferences were scheduled in order to thresh out their differences, On February 12, 1969,
union member Rogelio Dipad was dismissed from work. At the scheduled conference on February 19, 1969, the complainant union through its officers
headed by National President Artemio Portugal Sr., presented a letter to the respondent company containing proposals and/or labor demands
together with a request for recognition and collective bargaining.
San Miguel refused to bargain with the petitioner union alleging that the workers are not their employees.
On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter, denied entrance to respondent company's glass factory
despite their regularly reporting for work. A complaint for illegal dismissal and unfair labor practice was filed by the petitioners.
The case reaches us now with the same issues to be resolved as when it had begun.
The question of whether an employer-employee relationship exists in a certain situation continues to bedevil the courts. Some businessmen try to
avoid the bringing about of an employer-employee relationship in their enterprises because that judicial relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage, termination pay, and unionism. (Mafinco Trading Corporation v. Ople, 70 SCRA
139).
In determining the existence of an employer-employee relationship, the elements that are generally considered are the following: (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 with
respect to the means and methods by which the work is to be accomplished. It. is the called "control test" that is the most important element
(Investment Planning Corp. of the Phils. v. The Social Security System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario Brothers, Inc. v.
Ople, 131 SCRA 72).
Applying the above criteria, the evidence strongly indicates the existence of an employer-employee relationship between petitioner workers and
respondent San Miguel Corporation. The respondent asserts that the petitioners are employees of the Guaranteed Labor Contractor, an independent
labor contracting firm.
The facts and evidence on record negate respondent SMC's claim.
The existence of an independent contractor relationship is generally established by the following criteria: "whether or not the contractor is carrying
on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the
performance of a specified piece of work; the control and supervision of the work to another; the employer's power with respect to the hiring, firing
and payment of the contractor's workers; the control of the premises; the duty to supply the premises tools, appliances, materials and labor; and the
mode, manner and terms of payment" (56 CJS Master and Servant, Sec. 3(2), 46; See also 27 AM. Jur. Independent Contractor, Sec. 5, 485 and Annex
75 ALR 7260727)
None of the above criteria exists in the case at bar.
Highly unusual and suspect is the absence of a written contract to specify the performance of a specified piece of work, the nature and extent of the
work and the term and duration of the relationship. The records fail to show that a large commercial outfit, such as the San Miguel Corporation,
entered into mere oral agreements of employment or labor contracting where the same would involve considerable expenses and dealings with a
large number of workers over a long period of time. Despite respondent company's allegations not an iota of evidence was offered to prove the same
or its particulars. Such failure makes respondent SMC's stand subject to serious doubts.
Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners had worked continuously and exclusively for the respondent
company's shipping and warehousing department. Considering the length of time that the petitioners have worked with the respondent company,
there is justification to conclude that they were engaged to perform activities necessary or desirable in the usual business or trade of the respondent,
and the petitioners are, therefore regular employees (Phil. Fishing Boat Officers and Engineers Union v. Court of Industrial Relations, 112 SCRA 159
and RJL Martinez Fishing Corporation v. National Labor Relations Commission, 127 SCRA 454).
As we have found in RJL Martinez Fishing Corporation v. National Labor Relations Commission (supra):
... [T]he employer-employee relationship between the parties herein is not coterminous with each loading and unloading job. As
earlier shown, respondents are engaged in the business of fishing. For this purpose, they have a fleet of fishing vessels. Under this
situation, respondents' activity of catching fish is a continuous process and could hardly be considered as seasonal in nature. So
that the activities performed by herein complainants, i.e. unloading the catch of tuna fish from respondents' vessels and then
loading the same to refrigerated vans, are necessary or desirable in the business of respondents. This circumstance makes the
employment of complainants a regular one, in the sense that it does not depend on any specific project or seasonable activity.
(NLRC Decision, p. 94, Rollo).lwphl@itç
so as it with petitioners in the case at bar. In fact, despite past shutdowns of the glass plant for repairs, the petitioners, thereafter, promptly returned
to their jobs, never having been replaced, or assigned elsewhere until the present controversy arose. The term of the petitioners' employment
appears indefinite. The continuity and habituality of petitioners' work bolsters their claim of employee status vis-a-vis respondent company,
Even under the assumption that a contract of employment had indeed been executed between respondent SMC and the alleged labor contractor,
respondent's case will, nevertheless, fail.
Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:
Job contracting. — There is job contracting permissible under the Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.
We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor investment to qualify as an independent contractor
under the law. The premises, tools, equipment and paraphernalia used by the petitioners in their jobs are admittedly all supplied by respondent
company. It is only the manpower or labor force which the alleged contractors supply, suggesting the existence of a "labor only" contracting scheme
prohibited by law (Article 106, 109 of the Labor Code; Section 9(b), Rule VIII, Book III, Implementing Rules and Regulations of the Labor Code). In fact,
even the alleged contractor's office, which consists of a space at respondent company's warehouse, table, chair, typewriter and cabinet, are provided
for by respondent SMC. It is therefore clear that the alleged contractors have no capital outlay involved in the conduct of its business, in the
maintenance thereof or in the payment of its workers' salaries.
The payment of the workers' wages is a critical factor in determining the actuality of an employer-employee relationship whether between
respondent company and petitioners or between the alleged independent contractor and petitioners. It is important to emphasize that in a truly
independent contractor-contractee relationship, the fees are paid directly to the manpower agency in lump sum without indicating or implying that
the basis of such lump sum is the salary per worker multiplied by the number of workers assigned to the company. This is the rule in Social Security
System v. Court of Appeals  (39 SCRA 629, 635).
The alleged independent contractors in the case at bar were paid a lump sum representing only the salaries the workers were entitled to, arrived at
by adding the salaries of each worker which depend on the volume of work they. had accomplished individually. These are based on payrolls, reports
or statements prepared by the workers' group leader, warehousemen and checkers, where they note down the number of cartons, wooden shells and
bottles each worker was able to load, unload, pile or pallet and see whether they tally. The amount paid by respondent company to the alleged
independent contractor considers no business expenses or capital outlay of the latter. Nor is the profit or gain of the alleged contractor in the conduct
of its business provided for as an amount over and above the workers' wages. Instead, the alleged contractor receives a percentage from the total
earnings of all the workers plus an additional amount corresponding to a percentage of the earnings of each individual worker, which, perhaps,
accounts for the petitioners' charge of unauthorized deductions from their salaries by the respondents.
Anent the argument that the petitioners are not employees as they worked on piece basis, we merely have to cite our rulings in Dy Keh Beng v.
International Labor and Marine Union of the Philippines (90 SCRA 161), as follows:
"[C]ircumstances must be construed to determine indeed if payment by the piece is just a method of compensation and does not
define the essence of the relation. Units of time . . . and units of work are in establishments like respondent (sic) just yardsticks
whereby to determine rate of compensation, to be applied whenever agreed upon. We cannot construe payment by the piece
where work is done in such an establishment so as to put the worker completely at liberty to turn him out and take in another at
pleasure."
Article 106 of the Labor Code provides the legal effect of a labor only contracting scheme, to wit:
... the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him.
Firmly establishing respondent SMC's role as employer is the control exercised by it over the petitioners that is, control in the means and
methods/manner by which petitioners are to go about their work, as well as in disciplinary measures imposed by it.
Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as to the means and manner of performing the same is
practically nil. For, how many ways are there to load and unload bottles and wooden shells? The mere concern of both respondent SMC and the
alleged contractor is that the job of having the bottles and wooden shells brought to and from the warehouse be done. More evident and pronounced
is respondent company's right to control in the discipline of petitioners. Documentary evidence presented by the petitioners establish respondent
SMC's right to impose disciplinary measures for violations or infractions of its rules and regulations as well as its right to recommend transfers and
dismissals of the piece workers. The inter-office memoranda submitted in evidence prove the company's control over the petitioners. That
respondent SMC has the power to recommend penalties or dismissal of the piece workers, even as to Abner Bungay who is alleged by SMC to be a
representative of the alleged labor contractor, is the strongest indication of respondent company's right of control over the petitioners as direct
employer. There is no evidence to show that the alleged labor contractor had such right of control or much less had been there to supervise or deal
with the petitioners.
The petitioners were dismissed allegedly because of the shutdown of the glass manufacturing plant. Respondent company would have us believe that
this was a case of retrenchment due to the closure or cessation of operations of the establishment or undertaking. But such is not the case here. The
respondent's shutdown was merely temporary, one of its furnaces needing repair. Operations continued after such repairs, but the petitioners had
already been refused entry to the premises and dismissed from respondent's service. New workers manned their positions. It is apparent that the
closure of respondent's warehouse was merely a ploy to get rid of the petitioners, who were then agitating the respondent company for benefits,
reforms and collective bargaining as a union. There is no showing that petitioners had been remiss in their obligations and inefficient in their jobs to
warrant their separation.
As to the charge of unfair labor practice because of SMC's refusal to bargain with the petitioners, it is clear that the respondent company had an
existing collective bargaining agreement with the IBM union which is the recognized collective bargaining representative at the respondent's glass
plant.
There being a recognized bargaining representative of all employees at the company's glass plant, the petitioners cannot merely form a union and
demand bargaining. The Labor Code provides the proper procedure for the recognition of unions as sole bargaining representatives. This must be
followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel Corporation is hereby ordered to REINSTATE petitioners, with
three (3) years backwages. However, where reinstatement is no longer possible, the respondent SMC is ordered to pay the petitioners separation pay
equivalent to one (1) month pay for every year of service.
SO ORDERED.
Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-80680 January 26, 1989
DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES, EDUARDO R. ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO BONA,
FERDINAND CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES, ELMER ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITA QUIAMBOA, NOMER
MATAGA, VIOLY ESTEBAN and LYDIA ORTEGA, petitioners,
vs.
CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA A. AZARCON, NATIONAL LABOR RELATIONS COMMISSION, and HON. EMERSON C.
TUMANON, respondents.
SARMIENTO,  J.:
On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the National Labor Relations Commission for reinstatement and payment
of various benefits, including minimum wage, overtime pay, holiday pay, thirteen-month pay, and emergency cost of living allowance pay, against the
respondent, the California Manufacturing Company. 1
On October 7, 1986, after the cases had been consolidated, the California Manufacturing Company (California) filed a motion to dismiss as well as a
position paper denying the existence of an employer-employee relation between the petitioners and the company and, consequently, any liability for
payment of money claims. 2 On motion of the petitioners, Livi Manpower Services, Inc. was impleaded as a party-respondent.
It appears that the petitioners were, prior to their stint with California, employees of Livi Manpower Services, Inc. (Livi), which subsequently assigned
them to work as "promotional merchandisers" 3 for the former firm pursuant to a manpower supply agreement. Among other things, the agreement
provided that California "has no control or supervisions whatsoever over [Livi's] workers with respect to how they accomplish their work or perform
[Californias] obligation"; 4 the Livi "is an independent contractor and nothing herein contained shall be construed as creating between [California] and
[Livi] . . . the relationship of principal[-]agent or employer[-]employee'; 5 that "it is hereby agreed that it is the sole responsibility of [Livi] to comply
with all existing as well as future laws, rules and regulations pertinent to employment of labor" 6 and that "[California] is free and harmless from any
liability arising from such laws or from any accident that may befall workers and employees of [Livi] while in the performance of their duties for
[California].7
It was further expressly stipulated that the assignment of workers to California shall be on a "seasonal and contractual basis"; that "[c]ost of living
allowance and the 10 legal holidays will be charged directly to [California] at cost "; and that "[p]ayroll for the preceeding [sic] week [shall] be
delivered by [Livi] at [California's] premises." 8
The petitioners were then made to sign employment contracts with durations of six months, upon the expiration of which they signed new
agreements with the same period, and so on. Unlike regular California employees, who received not less than P2,823.00 a month in addition to a host
of fringe benefits and bonuses, they received P38.56 plus P15.00 in allowance daily.
The petitioners now allege that they had become regular California employees and demand, as a consequence whereof, similar benefits. They
likewise claim that pending further proceedings below, they were notified by California that they would not be rehired. As a result, they filed an
amended complaint charging California with illegal dismissal.
California admits having refused to accept the petitioners back to work but deny liability therefor for the reason that it is not, to begin with, the
petitioners' employer and that the "retrenchment" had been forced by business losses as well as expiration of contracts.9 It appears that thereafter,
Livi re-absorbed them into its labor pool on a "wait-in or standby" status. 10
Amid these factual antecedents, the Court finds the single most important issue to be: Whether the petitioners are California's or Livi's employees.
The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled against the existence of any employer-employee relation between the
petitioners and California ostensibly in the light of the manpower supply contract, supra, and consequently, against the latter's liability as and for the
money claims demanded. In the same breath, however, the labor arbiter absolved Livi from any obligation because the "retrenchment" in question
was allegedly "beyond its control ." 13 He assessed against the firm, nevertheless, separation pay and attorney's fees.
We reverse.
The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject of agreement. Hence, the fact
that the manpower supply agreement between Livi and California had specifically designated the former as the petitioners' employer and had
absolved the latter from any liability as an employer, will not erase either party's obligations as an employer, if an employer-employee relation
otherwise exists between the workers and either firm. At any rate, since the agreement was between Livi and California, they alone are bound by it,
and the petitioners cannot be made to suffer from its adverse consequences.
This Court has consistently ruled that the determination of whether or not there is an employer-employee relation depends upon four standards: (1)
the manner of selection and engagement of the putative employee; (2) the mode of payment of wages; (3) the presence or absence of a power of
dismissal; and (4) the presence or absence of a power to control the putative employee's conduct. 14 Of the four, the right-of-control test has been
held to be the decisive factor. 15
On the other hand, we have likewise held, based on Article 106 of the Labor Code, hereinbelow reproduced:
ART. 106. Contractor or sub-contractor. — Whenever an employee enters into a contract with another person for the
performance of the former's work, the employees of the contractor and of the latter's sub-contractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or sub-contractor fails to pay wages of his employees in accordance with this Code, the employer
shall be jointly and severally liable with his contractor or sub-contractor to such employees to the extent of the work performed
under the contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of
workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties
involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provisions
of this Code.
There is 'labor-only' contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him.
that notwithstanding the absence of a direct employer-employee relationship between the employer in whose favor work had been contracted out by
a "labor-only" contractor, and the employees, the former has the responsibility, together with the "labor-only" contractor, for any valid labor
claims, 16 by operation of law. The reason, so we held, is that the "labor-only" contractor is considered "merely an agent of the employer,"17 and
liability must be shouldered by either one or shared by both. 18
There is no doubt that in the case at bar, Livi performs "manpower services", 19 meaning to say, it contracts out labor in favor of clients. We hold that
it is one notwithstanding its vehement claims to the contrary, and notwithstanding the provision of the contract that it is "an independent
contractor." 20 The nature of one's business is not determined by self-serving appellations one attaches thereto but by the tests provided by statute
and prevailing case law. 21 The bare fact that Livi maintains a separate line of business does not extinguish the equal fact that it has provided California
with workers to pursue the latter's own business. In this connection, we do not agree that the petitioners had been made to perform activities 'which
are not directly related to the general business of manufacturing," 22 California's purported "principal operation activity. " 23 The petitioner's had been
charged with "merchandizing [sic] promotion or sale of the products of [California] in the different sales outlets in Metro Manila including task and
occational [sic] price tagging," 24 an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if Livi had served as its
(California's) promotions or sales arm or agent, or otherwise, rendered a piece of work it (California) could not have itself done; Livi, as a placement
agency, had simply supplied it with the manpower necessary to carry out its (California's) merchandising activities, using its (California's) premises and
equipment. 25
Neither Livi nor California can therefore escape liability, that is, assuming one exists.
The fact that the petitioners have allegedly admitted being Livi's "direct employees" 26 in their complaints is nothing conclusive. For one thing, the fact
that the petitioners were (are), will not absolve California since liability has been imposed by legal operation. For another, and as we indicated, the
relations of parties must be judged from case to case and the decree of law, and not by declarations of parties.
The fact that the petitioners have been hired on a "temporary or seasonal" basis merely is no argument either. As we held in Philippine Bank of
Communications v. NLRC,  27 a temporary or casual employee, under Article 218 of the Labor Code, becomes regular after service of one year, unless
he has been contracted for a specific project. And we cannot say that merchandising is a specific project for the obvious reason that it is an activity
related to the day-to-day operations of California.
It would have been different, we believe, had Livi been discretely a promotions firm, and that California had hired it to perform the latter's
merchandising activities. For then, Livi would have been truly the employer of its employees, and California, its client. The client, in that case, would
have been a mere patron, and not an employer. The employees would not in that event be unlike waiters, who, although at the service of customers,
are not the latter's employees, but of the restaurant. As we pointed out in the Philippine Bank of Communications  case:
xxx xxx xxx
... The undertaking given by CESI in favor of the bank was not the performance of a specific job for instance, the carriage and
delivery of documents and parcels to the addresses thereof. There appear to be many companies today which perform this
discrete service, companies with their own personnel who pick up documents and packages from the offices of a client or
customer, and who deliver such materials utilizing their own delivery vans or motorcycles to the addressees. In the present case,
the undertaking of CESI was to provide its client the bank with a certain number of persons able to carry out the work of
messengers. Such undertaking of CESI was complied with when the requisite number of persons were assigned or seconded to the
petitioner bank. Orpiada utilized the premises and office equipment of the bank and not those of CESI. Messengerial work the
delivery of documents to designated persons whether within or without the bank premises-is of course directly related to the day-
to-day operations of the bank. Section 9(2) quoted above does not require for its applicability that the petitioner must be engaged
in the delivery of items as a distinct and separate line of business.
Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a recruitment and placement corporation placing
bodies, as it were, in different client companies for longer or shorter periods of time, ... 28
In the case at bar, Livi is admittedly an "independent contractor providing temporary services of manpower to its client. " 29 When it thus provided
California with manpower, it supplied California with personnel, as if such personnel had been directly hired by California. Hence, Article 106 of the
Code applies.
The Court need not therefore consider whether it is Livi or California which exercises control over the petitioner vis-a-vis the four barometers referred
to earlier, since by fiction of law, either or both shoulder responsibility.
It is not that by dismissing the terms and conditions of the manpower supply agreement, we have, hence, considered it illegal. Under the Labor Code,
genuine job contracts are permissible, provided they are genuine job contracts. But, as we held in Philippine Bank of Communications, supra, when
such arrangements are resorted to "in anticipation of, and for the very purpose of making possible, the secondment" 30 of the employees from the
true employer, the Court will be justified in expressing its concern. For then that would compromise the rights of the workers, especially their right to
security of tenure.
This brings us to the question: What is the liability of either Livi or California?
The records show that the petitioners bad been given an initial six-month contract, renewed for another six months. Accordingly, under Article 281 of
the Code, they had become regular employees-of-California-and had acquired a secure tenure. Hence, they cannot be separated without due process
of law.
California resists reinstatement on the ground, first, and as we Id, that the petitioners are not its employees, and second, by reason of financial
distress brought about by "unfavorable political and economic atmosphere" 31 "coupled by the February Revolution." 32 As to the first objection, we
reiterate that the petitioners are its employees and who, by virtue of the required one-year length-of-service, have acquired a regular status. As to the
second, we are not convinced that California has shown enough evidence, other than its bare say so, that it had in fact suffered serious business
reverses as a result alone of the prevailing political and economic climate. We further find the attribution to the February Revolution as a cause for its
alleged losses to be gratuitous and without basis in fact.
California should be warned that retrenchment of workers, unless clearly warranted, has serious consequences not only on the State's initiatives to
maintain a stable employment record for the country, but more so, on the workingman himself, amid an environment that is desperately scarce in
jobs. And, the National Labor Relations Commission should have known better than to fall for such unwarranted excuses and nebulous claims.
WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1): SETTING ASIDE the decision, dated March 20, 1987, and the resolution,
dated August 19, 1987; (2) ORDERING the respondent, the California Manufacturing Company, to REINSTATE the petitioners with full status and rights
of regular employees; and (3) ORDERING the respondent, the California Manufacturing Company, and the respondents, Livi Manpower Service, Inc.
and/or Lily-Victoria Azarcon, to PAY, jointly and severally, unto the petitioners: (a) backwages and differential pays effective as and from the time they
had acquired a regular status under the second paragraph, of Section 281, of the Labor Code, but not to exceed three (3) years, and (b) all such other
and further benefits as may be provided by existing collective bargaining agreement(s) or other relations, or by law, beginning such time; and (4)
ORDERING the private respondents to PAY unto the petitioners attorney's fees equivalent to ten (10%) percent of all money claims hereby awarded,
in addition to those money claims. The private respondents are likewise ORDERED to PAY the costs of this suit.
IT IS SO ORDERED.
Melencio-Herrera, (Chairperson), Paras, Padilla and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 155731             September 3, 2007
LOLITA LOPEZ, petitioner,
vs.
BODEGA CITY (Video-Disco Kitchen of the Philippines) and/or ANDRES C. TORRES-YAP, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the July 18, 2002 Decision1 of the Court of Appeals
(CA) in CA-G.R. SP No. 66861, dismissing the petition for certiorari filed before it and affirming the Decision of the National Labor Relations
Commission (NLRC) in NLRC-NCR Case No. 00-03-01729-95; and its Resolution dated October 16, 2002,2 denying petitioner's Motion for
Reconsideration. The NLRC Decision set aside the Decision of the Labor Arbiter finding that Lolita Lopez (petitioner) was illegally dismissed by Bodega
City and/or Andres C. Torres-Yap (respondents).
Respondent Bodega City (Bodega City) is a corporation duly registered and existing under and by virtue of the laws of the Republic of the Philippines,
while respondent Andres C. Torres-Yap (Yap) is its owner/ manager. Petitioner was the "lady keeper" of Bodega City tasked with manning its ladies'
comfort room.
In a letter signed by Yap dated February 10, 1995, petitioner was made to explain why the concessionaire agreement between her and respondents
should not be terminated or suspended in view of an incident that happened on February 3, 1995, wherein petitioner was seen to have acted in a
hostile manner against a lady customer of Bodega City who informed the management that she saw petitioner sleeping while on duty.
In a subsequent letter dated February 25, 1995, Yap informed petitioner that because of the incident that happened on February 3, 1995, respondents
had decided to terminate the concessionaire agreement between them.
On March 1, 1995, petitioner filed with the Arbitration Branch of the NLRC, National Capital Region, Quezon City, a complaint for illegal dismissal
against respondents contending that she was dismissed from her employment without cause and due process.
In their answer, respondents contended that no employer-employee relationship ever existed between them and petitioner; that the latter's services
rendered within the premises of Bodega City was by virtue of a concessionaire agreement she entered into with respondents.
The complaint was dismissed by the Labor Arbiter for lack of merit. However, on appeal, the NLRC set aside the order of dismissal and remanded the
case for further proceedings. Upon remand, the case was assigned to a different Labor Arbiter. Thereafter, hearings were conducted and the parties
were required to submit memoranda and other supporting documents.
On December 28, 1999, the Labor Arbiter rendered judgment finding that petitioner was an employee of respondents and that the latter illegally
dismissed her.3
Respondents filed an appeal with the NLRC. On March 22, 2001, the NLRC issued a Resolution, the dispositive portion of which reads as follows:
WHEREFORE, premises duly considered, the Decision appealed from is hereby ordered SET ASIDE and VACATED, and in its stead, a new one
entered DISMISSING the above-entitled case for lack of merit.4
Petitioner filed a motion for reconsideration of the above-quoted NLRC Resolution, but the NLRC denied the same.
Aggrieved, petitioner filed a Petition for Certiorari with the CA. On July 18, 2002, the CA promulgated the presently assailed Decision dismissing her
special civil action for certiorari. Petitioner moved for reconsideration but her motion was denied.
Hence, herein petition based on the following grounds:
1. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN
EXCESS OF JURISDICTION IN RULING THAT THE NATIONAL LABOR RELATIONS COMMISSION DID NOT COMMIT GRAVE ABUSE OF DISCRETION
IN REVERSING THE DECISION OF THE LABOR ARBITER FINDING PETITIONER TO HAVE BEEN ILLEGALLY DISMISSED BY PRIVATE RESPONDENTS.
2. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN
EXCESS OF JURISDICTION IN RULING THAT PETITIONER WAS NOT AN EMPLOYEE OF PRIVATE RESPONDENTS.5
Petitioner contends that it was wrong for the CA to conclude that even if she did not sign the document evidencing the concessionaire agreement, she
impliedly accepted and thus bound herself to the terms and conditions contained in the said agreement when she continued to perform the task
which was allegedly specified therein for a considerable length of time. Petitioner claims that the concessionaire agreement was only offered to her
during her tenth year of service and after she organized a union and filed a complaint against respondents. Prior to all these, petitioner asserts that
her job as a "lady keeper" was a task assigned to her as an employee of respondents.
Petitioner further argues that her receipt of a special allowance from respondents is a clear evidence that she was an employee of the latter, as the
amount she received was equivalent to the minimum wage at that time.
Petitioner also contends that her identification card clearly shows that she was not a concessionaire but an employee of respondents; that if
respondents really intended the ID card issued to her to be used simply for having access to the premises of Bodega City, then respondents could
have clearly indicated such intent on the said ID card.
Moreover, petitioner submits that the fact that she was required to follow rules and regulations prescribing appropriate conduct while she was in the
premises of Bodega City is clear evidence of the existence of an employer-employee relationship between her and petitioners.
On the other hand, respondents contend that the present petition was filed for the sole purpose of delaying the proceedings of the case; the grounds
relied upon in the instant petition are matters that have been exhaustively discussed by the NLRC and the CA; the present petition raises questions of
fact which are not proper in a petition for review on certiorari under Rule 45 of the Rules of Court; the respective decisions of the NLRC and the CA are
based on evidence presented by both parties; petitioner's compliance with the terms and conditions of the proposed concessionaire contract for a
period of three years is evidence of her implied acceptance of such proposal; petitioner failed to present evidence to prove her allegation that the
subject concessionaire agreement was only proposed to her in her 10th year of employment with respondent company and after she organized a
union and filed a labor complaint against respondents; petitioner failed to present competent documentary and testimonial evidence to prove her
contention that she was an employee of respondents since 1985.
The main issue to be resolved in the present case is whether or not petitioner is an employee of respondents.
The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of fact.6
While it is a settled rule that only errors of law are generally reviewed by this Court in petitions for review on certiorari of CA decisions,7 there are
well-recognized exceptions to this rule, as in this case, when the factual findings of the NLRC as affirmed by the CA contradict those of the Labor
Arbiter.8 In that event, it is this Court's task, in the exercise of its equity jurisdiction, to re-evaluate and review the factual issues by looking into the
records of the case and re-examining the questioned findings.9
It is a basic rule of evidence that each party must prove his affirmative allegation.10 If he claims a right granted by law, he must prove his claim by
competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his opponent.11
The test for determining on whom the burden of proof lies is found in the result of an inquiry as to which party would be successful if no evidence of
such matters were given.12
In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid cause.13 However,
before a case for illegal dismissal can prosper, an employer-employee relationship must first be established.14
In filing a complaint before the Labor Arbiter for illegal dismissal based on the premise that she was an employee of respondent, it is incumbent upon
petitioner to prove the employee-employer relationship by substantial evidence.15
The NLRC and the CA found that petitioner failed to discharge this burden, and the Court finds no cogent reason to depart from their findings.
The Court applies the four-fold test expounded in Abante v. Lamadrid Bearing and Parts Corp.,16 to wit:
To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied the four-fold test, namely: (1) the
manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4) the
presence or absence of the power of control. Of these four, the last one is the most important. The so-called "control test" is commonly
regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the
control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control
not only the end achieved, but also the manner and means to be used in reaching that end.17
To prove the element of payment of wages, petitioner presented a petty cash voucher showing that she received an allowance for five (5) days.18 The
CA did not err when it held that a solitary petty cash voucher did not prove that petitioner had been receiving salary from respondents or that she had
been respondents' employee for 10 years.
Indeed, if petitioner was really an employee of respondents for that length of time, she should have been able to present salary vouchers or pay slips
and not just a single petty cash voucher. The Court agrees with respondents that petitioner could have easily shown other pieces of evidence such as a
contract of employment, SSS or Medicare forms, or certificates of withholding tax on compensation income; or she could have presented witnesses to
prove her contention that she was an employee of respondents. Petitioner failed to do so.
Anent the element of control, petitioner's contention that she was an employee of respondents because she was subject to their control does not
hold water.
Petitioner failed to cite a single instance to prove that she was subject to the control of respondents insofar as the manner in which she should
perform her job as a "lady keeper" was concerned.
It is true that petitioner was required to follow rules and regulations prescribing appropriate conduct while within the premises of Bodega City.
However, this was imposed upon petitioner as part of the terms and conditions in the concessionaire agreement embodied in a 1992 letter of Yap
addressed to petitioner, to wit:
January 6, 1992
Dear Ms. Lolita Lopez,
The new owners of Bodega City, 1121 Food Service Corporation offers to your goodself the concessionaire/contract to provide
independently, customer comfort services to assist users of the ladies comfort room of the Club to further enhance its business, under the
following terms and conditions:
1. You will provide at your own expense, all toilet supplies, useful for the purpose, such as toilet papers, soap, hair pins, safety pins
and other related items or things which in your opinion is beneficial to the services you will undertake;
2. For the entire duration of this concessionaire contract, and during the Club's operating hours, you shall maintain the cleanliness
of the ladies comfort room. Provided, that general cleanliness, sanitation and physical maintenance of said comfort rooms shall be
undertaken by the owners of Bodega City;
3. You shall at all times ensure satisfaction and good services in the discharge of your undertaking. More importantly, you shall
always observe utmost courtesy in dealing with the persons/individuals using said comfort room and shall refrain from doing acts
that may adversely affect the goodwill and business standing of Bodega City;
4. All remunerations, tips, donations given to you by individuals/persons utilizing said comfort rooms and/or guests of Bodega City
shall be waived by the latter to your benefit provided however, that if concessionaire receives tips or donations per day in an
amount exceeding 200% the prevailing minimum wage, then, she shall remit fifty percent (50%) of said amount to Bodega City by
way of royalty or concession fees;
5. This contract shall be for a period of one year and shall be automatically renewed on a yearly basis unless notice of termination
is given thirty (30) days prior to expiration. Any violation of the terms and conditions of this contract shall be a ground for its
immediate revocation and/or termination.
6. It is hereby understood that no employer-employee relationship exists between Bodega City and/or 1121 FoodService
Corporation and your goodself, as you are an independent contractor who has represented to us that you possess the necessary
qualification as such including manpower compliment, equipment, facilities, etc. and that any person you may engage or employ
to work with or assist you in the discharge of your undertaking shall be solely your own employees and/or agents.
1121 FoodService Corporation Bodega City
By:
(Sgd.) ANDRES C. TORRES-YAP
Conforme:
_______________
LOLITA LOPEZ19
Petitioner does not dispute the existence of the letter; neither does she deny that respondents offered her the subject concessionaire agreement.
However, she contends that she could not have entered into the said agreement with respondents because she did not sign the document evidencing
the same.
Settled is the rule that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror.20 For a contract,
to arise, the acceptance must be made known to the offeror.21 Moreover, the acceptance of the thing and the cause, which are to constitute a
contract, may be express or implied as can be inferred from the contemporaneous and subsequent acts of the contracting parties.22 A contract will be
upheld as long as there is proof of consent, subject matter and cause; it is generally obligatory in whatever form it may have been entered into.23
In the present case, the Court finds no cogent reason to disregard the findings of both the CA and the NLRC that while petitioner did not affix her
signature to the document evidencing the subject concessionaire agreement, the fact that she performed the tasks indicated in the said agreement
for a period of three years without any complaint or question only goes to show that she has given her implied acceptance of or consent to the said
agreement.
Petitioner is likewise estopped from denying the existence of the subject concessionaire agreement. She should not, after enjoying the benefits of the
concessionaire agreement with respondents, be allowed to later disown the same through her allegation that she was an employee of the
respondents when the said agreement was terminated by reason of her violation of the terms and conditions thereof.
The principle of estoppel in pais applies wherein -- by one's acts, representations or admissions, or silence when one ought to speak out --
intentionally or through culpable negligence, induces another to believe certain facts to exist and to rightfully rely and act on such belief, so as to be
prejudiced if the former is permitted to deny the existence of those facts.24
Moreover, petitioner failed to dispute the contents of the affidavit25 as well as the testimony26 of Felimon Habitan (Habitan), the concessionaire of the
men's comfort room of Bodega City, that he had personal knowledge of the fact that petitioner was the concessionaire of the ladies' comfort room of
Bodega City.
Petitioner also claims that the concessionaire agreement was offered to her only in her 10th year of service, after she organized a union and filed a
complaint against respondents. However, petitioner's claim remains to be an allegation which is not supported by any evidence. It is a basic rule in
evidence that each party must prove his affirmative allegation,27 that mere allegation is not evidence.28
The Court is not persuaded by petitioner's contention that the Labor Arbiter was correct in concluding that there existed an employer-employee
relationship between respondents and petitioner. A perusal of the Decision29 of the Labor Arbiter shows that his only basis for arriving at such a
conclusion are the bare assertions of petitioner and the fact that the latter did not sign the letter of Yap containing the proposed concessionaire
agreement. However, as earlier discussed, this Court finds no error in the findings of the NLRC and the CA that petitioner is deemed as having given
her consent to the said proposal when she continuously performed the tasks indicated therein for a considerable length of time. For all intents and
purposes, the concessionaire agreement had been perfected.
Petitioner insists that her ID card is sufficient proof of her employment. In Domasig v. National Labor Relations Commission,30 this Court held that the
complainant's ID card and the cash vouchers covering his salaries for the months indicated therein were substantial evidence that he was an
employee of respondents, especially in light of the fact that the latter failed to deny said evidence. This is not the situation in the present case. The
only evidence presented by petitioner as proof of her alleged employment are her ID card and one petty cash voucher for a five-day allowance which
were disputed by respondents.
As to the ID card, it is true that the words "EMPLOYEE'S NAME" appear printed below petitioner's name.31 However, she failed to dispute
respondents' evidence consisting of Habitan's testimony,32 that he and the other "contractors" of Bodega City such as the singers and band
performers, were also issued the same ID cards for the purpose of enabling them to enter the premises of Bodega City.
The Court quotes, with approval, the ruling of the CA on this matter, to wit:
 Nor can petitioners identification card improve her cause any better. It is undisputed that non-employees, such as Felimon Habitan, an
admitted concessionaire, musicians, singers and the like at Bodega City are also issued identification cards. Given this premise, it appears
clear to Us that petitioner's I.D. Card is incompetent proof of an alleged employer-employee relationship between the herein parties.
Viewed in the context of this case, the card is at best a "passport" from management assuring the holder thereof of his unmolested access
to the premises of Bodega City.33
With respect to the petty cash voucher, petitioner failed to refute respondent's claim that it was not given to her for services rendered or on a regular
basis, but simply granted as financial assistance to help her temporarily meet her family's needs.
Hence, going back to the element of control, the concessionaire agreement merely stated that petitioner shall maintain the cleanliness of the ladies'
comfort room and observe courtesy guidelines that would help her obtain the results they wanted to achieve. There is nothing in the agreement
which specifies the methods by which petitioner should achieve these results. Respondents did not indicate the manner in which she should go about
in maintaining the cleanliness of the ladies' comfort room. Neither did respondents determine the means and methods by which petitioner could
ensure the satisfaction of respondent company's customers. In other words, petitioner was given a free hand as to how she would perform her job as
a "lady keeper." In fact, the last paragraph of the concessionaire agreement even allowed petitioner to engage persons to work with or assist her in
the discharge of her functions.34
Moreover, petitioner was not subjected to definite hours or conditions of work. The fact that she was expected to maintain the cleanliness of
respondent company's ladies' comfort room during Bodega City's operating hours does not indicate that her performance of her job was subject to
the control of respondents as to make her an employee of the latter. Instead, the requirement that she had to render her services while Bodega City
was open for business was dictated simply by the very nature of her undertaking, which was to give assistance to the users of the ladies' comfort
room.
In Consulta v. Court of Appeals,35 this Court held:
It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in
relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal
or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual
contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammeled freedom to the party hired
and eschews any intervention whatsoever in his performance of the engagement.
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.36
Lastly, the Court finds that the elements of selection and engagement as well as the power of dismissal are not present in the instant case.
It has been established that there has been no employer-employee relationship between respondents and petitioner. Their contractual relationship
was governed by the concessionaire agreement embodied in the 1992 letter. Thus, petitioner was not dismissed by respondents. Instead, as shown by
the letter of Yap to her dated February 15, 1995,37 their contractual relationship was terminated by reason of respondents' termination of the subject
concessionaire agreement, which was in accordance with the provisions of the agreement in case of violation of its terms and conditions.
In fine, the CA did not err in dismissing the petition for certiorari filed before it by petitioner.
WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.
SO ORDERED.
Ynares-Santiago, Chairperson, Chico-Nazario, Nachura, Reyes, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 164820             March 28, 2007
VICTORY LINER, INC., Petitioner,
vs.
PABLO M. RACE, Respondent.
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari under Rule 45 of the Rules of Court,1 petitioner Victory Liner Inc. seeks to set aside the Decision of the Court of
Appeals dated 26 April 2004 in CA-G.R. SP No. 74010,2 affirming the Decision and Resolution of the National Labor Relations Commission (NLRC) dated
30 July 2002 and 30 August 2002, respectively, in NLRC-CA-029327-01.3 In its Decision and Resolution, the NLRC vacated the Decision4 of Labor Arbiter
Salimathar V. Nambi (Labor Arbiter Nambi) dated 31 July 2001 in NLRC-NCR-00-09-08922-99 and ordered the petitioner to reinstate respondent Pablo
M. Race to his former position as a bus driver without loss of seniority rights and other privileges and benefits with full backwages computed from the
time of his illegal dismissal in January 1998 up to his actual reinstatement.
Culled from the records are the following facts:
In June 1993, respondent was employed by the petitioner as a bus driver. As a requisite for his hiring, the respondent deposited a cash bond in the
amount of ₱10,000.00 to the petitioner. Respondent was assigned to the Alaminos, Pangasinan - Cubao, Quezon City, route on the evening schedule.5
On the night of 24 August 1994, respondent drove his assigned bus from Alaminos, Pangasinan, destined to Cubao, Quezon City. While traversing
Moncada, Tarlac, the bus he was driving was bumped by a Dagupan-bound bus. As a consequence thereof, respondent suffered a fractured left leg
and was rushed to the Country Medical and Trauma Center in Tarlac City where he was operated on and confined from 24 August 1994 up to 10
October 1994. One month after his release from the said hospital, the respondent was confined again for further treatment of his fractured left leg at
the Specialist Group Hospital in Dagupan City. His confinement therein lasted a month. Petitioner shouldered the doctor’s professional fee and the
operation, medication and hospital expenses of the respondent in the aforestated hospitals.6
In January 1998, the respondent, still limping heavily, went to the petitioner’s office to report for work. He was, however, informed by the petitioner
that he was considered resigned from his job. Respondent refused to accede and insisted on having a dialogue with the petitioner’s officer named
Yolanda Montes (Montes). During their meeting, Montes told him that he was deemed to have resigned from his work and to accept a consideration
of ₱50,000.00. Respondent rejected the explanation and offer. Thereafter, before Christmas of 1998, he again conversed with Montes who reiterated
to him that he was regarded as resigned but raised the consideration therein to ₱100,000.00. Respondent rebuffed the increased offer.7
On 30 June 1999, respondent, through his counsel, sent a letter to the petitioner demanding employment-related money claims. There being no
response from the petitioner, the respondent filed before the Labor Arbiter on 1 September 1999 a complaint for (1) unfair labor practice; (2) illegal
dismissal; (3) underpayment of wages; (4) nonpayment of overtime and holiday premium, service incentive leave pay, vacation and sick leave
benefits, 13th month pay; (5) excessive deduction of withholding tax and SSS premium; and (6) moral and exemplary damages and attorney’s fees.
This was docketed as NLRC-NCR-00-09-08922-99.8
In its Position Paper dated 27 March 2000, petitioner claimed that respondent was paid strictly on commission basis; that respondent was a mere field
personnel who performed his duties and functions outside the petitioner’s premises and whose time of work cannot be determined with reasonable
certainty; that petitioner, therefore, was exempted from paying the respondent overtime compensation, night shift differential, holiday pay and
service incentive leave; that notwithstanding the specific exemptions provided for in the Labor Code, the petitioner gave the respondent benefits
better than those received by the other bus drivers of the petitioner; that during his employment, respondent was charged with and found guilty of
numerous offenses which were sufficient bases for his dismissal; that the prescriptive period for the filing of an action or claim for reinstatement and
payment of labor standard benefits is four years from the time the cause of action accrued; and that the respondent’s cause of action against
petitioner had already prescribed because when the former instituted the aforesaid complaint on 1 September 1999, more than five years had
already lapsed from the accrual of his cause of action on 24 August 1994.9
In his Reply dated 30 June 2000, respondent explained that when he stated in his complaint that he was illegally dismissed on 24 August 1994, what
he meant and referred to was the date when he was no longer in a position to drive since he was hospitalized from 24 August 1994 up to 10 October
1994. Respondent also admitted that it was only in January 1998 that he informed the petitioner of his intent to report back for work.10
On 31 July 2001, Labor Arbiter Nambi rendered his Decision dismissing the complaint of respondent for lack of merit. He stated that the prescriptive
period for filing an illegal dismissal case is four years from the dismissal of the employee concerned. Since the respondent stated in his complaint that
he was dismissed from work on 24 August 1994 and he filed the complaint only on 1 September 1999, Labor Arbiter Nambi concluded that
respondent’s cause of action against petitioner had already prescribed. He also noted that respondent committed several labor-related offenses
against the petitioner which may be considered as just causes for the termination of his employment under Article 282 of the Labor Code.
Further, Labor Arbiter Nambi opined that respondent was not a regular employee but a mere field personnel and, therefore, not entitled to service
incentive leave, holiday pay, overtime pay and 13th month pay. He also ruled that respondent failed to present evidence showing that the latter was
entitled to the abovestated money claims. The fallo of the said decision reads:
WHEREFORE, considering that the causes of action in this case rooted from the purported illegal dismissal of Pablo M. Race on August 24, 1994 when
he figured in a vehicular accident, or on October 10, 1994 when he was released from the hospital, and he filed his complaint only on September 1,
1999 after a lapse of more than five (5) years, the action has long prescribed, aside from the fact that there is absolutely no evidence that respondent
Victory Liner, Inc. is guilty of unfair labor practice and unjust dismissal, in addition to its specific exemptions from the letters of Article 82 of the Labor
Code, as amended, the complaint and money claims are hereby DISMISSED by reason of prescription and for utter lack of merit and total absence of
legal and factual basis in support thereof.11
Respondent appealed to the NLRC. On 30 July 2002, the NLRC promulgated its Decision reversing the decision of Labor Arbiter Nambi. It ordered the
reinstatement of the respondent to his former position without loss of seniority rights and other privileges and benefits with full back-wages
computed from the time of his illegal dismissal in January 1998 up to his actual reinstatement. It held that the respondent’s cause of action accrued,
not on 24 August 1994, but in January 1998, when the respondent reported for work but was rejected by the petitioner. Thus, the respondent’s filing
of complaint on 1 September 1999 was well-within the four-year prescriptive period. It also ruled that respondent was illegally dismissed by the
petitioner as the latter failed to accord him due process. It found that the petitioner did not give the respondent a written notice apprising him of acts
or omissions being complained of and a written notice informing him of the termination of his employment. In conclusion, the NLRC stated:
WHEREFORE, in view of all the foregoing, respondent-appellee’s company is hereby ordered to reinstate complainant-appellant to his former position
without loss of seniority rights and other privileges and benefits with full backwages computed from the time of his illegal dismissal on (sic) January
1988 up to his actual reinstatement. Except for this modification, the appealed decision is hereby AFFIRMED.12
Petitioner filed a Motion for Reconsideration of the NLRC Decision alleging, among other things, that the award of backwages to the respondent
computed from January 1988 up to the promulgation of the NLRC Decision on 30 July 2002 was unlawful and unjust considering that respondent was
employed only in June 1993. The NLRC, however, denied the same for lack of merit in its Resolution dated 30 August 2002.
Petitioner assailed the NLRC Decision and Resolution, dated 30 July 2002 and 30 August 2002, respectively, via a Petition for Certiorari to the Court of
Appeals. On 26 April 2004, the Court of Appeals dismissed the Petition, and found no grave abuse of discretion on the part of the NLRC. It ruled that
the NLRC committed a simple typographical error when it stated in the fallo that the backwages of respondent shall be computed from January
1988 instead of January 1998 because in the paragraph prior to the dispositive portion, the NLRC categorically declared that the full backwages of the
respondent was to be computed from January1998. In addition, the NLRC has indicated in its Statement of Facts that respondent was hired by the
petitioner sometime in June 1993. It also held that the respondent’s filing of complaint on 1 September 1999 was within the four-year prescriptive
period since the cause of action accrued when the respondent reported for work in January 1998 and was informed that he was considered resigned.
It ratiocinated that respondent did not abandon his work and, instead, continued to be an employee of petitioner after he was discharged from the
hospital, viz:
Race did not abandon his work and continued to be an employee of Victory Liner, and their contemporaneous conduct show this. He has his pay slip
covering the period of August 1-15, 1998 (p. 114, record), he was consulting the company physician who issued him receipts dated October 28, 1996
and July 21 1997 (p. 115, record), and he wrote a letter dated March 18, 1996 addressed to Gerarda Villa, Vice-President for Victory Liner, signifying
his intention to be a dispatcher or conductor due to his injured leg (p. 116, Record). Further, annexed to Victory Liner’s Consolidated Supplemental
Position Paper and Formal Offer of Evidence with Erratum is Exhibit "6-A-Race" (p. 56, record) submitted before the Labor Arbiter, where Race stated
before the investigator that after his release from the hospital he reported to Victory Liner twice a month. He also said that he filed for a sick leave
which was approved for the maximum of 120 days. After his sick leave, he filed for disability leave, and this was also approved and ran until sometime
in May 1997.13
It also found that the petitioner failed to comply with the requirements of due process in terminating the employment of respondent. The decretal
portion of the said decision reads:
WHEREFORE, the petition is DENIED DUE COURSE and DISMISSED.14
Petitioner filed the instant petition on the following grounds:
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED CONTRARY TO LAW AND JURISPRUDENCE WHEN IT HELD IN THE ASSAILED DECISION THAT:
A.
THE CAUSE OF ACTION OF RESPONDENT FOR ILLEGAL DISMISSAL HAS NOT YET PRESCRIBED DESPITE HAVING BEEN FILED AFTER FOUR (4) YEARS AND
NINE (9) MONTHS FROM THE ACCRUAL OF THE ALLEGED ACTIONABLE WRONG;
B.
RESPONDENT IS ENTITLED TO REINSTATEMENT WITH FULL BACKWAGES AND OTHER BENEFITS CONSIDERING THAT THE TERMINATION OF HIS
EMPLOYMENT BY PETITIONER WAS LEGAL AND JUSTIFIED.15
Anent the first issue, petitioner insisted that respondent had already abandoned his work and ceased to be its employee since November 1994; that
the alleged "pay slip" for the period August 1-15, 1998 was not actually a pay slip but a mere cash advance/monetary aid extended to the respondent
as the large amount of ₱65,000.00 stated therein was clearly inconsistent and disproportionate to the respondent’s low salary of ₱192.00 a day; that
the petitioner merely accommodated the respondent as its former employee when the latter consulted the petitioner’s physician on 28 October 1996
and 21 July 1997; that the respondent’s letter dated 18 March 1996 to the petitioner’s Vice-President Gerarda Villa was only an application for the
position of dispatcher or conductor and that such application was not granted; and that the foregoing circumstances cannot be considered as an
indication of employer-employee relationship between the petitioner and respondent.16
Moreover, petitioner asserted that although the respondent reported for work twice a month after he was discharged from the hospital, it does not
imply that the respondent was still considered as an employee at that time by the petitioner; that it allowed the respondent to have a 120-day sick
leave because the latter was a former employee; and that it granted disability leave to the respondent since the latter was a former employee and
that respondent’s application for disability leave implied an admission on the part of the respondent that he was no longer fit to work as a bus
driver.17
Petitioner also asseverated that, based on the four-fold tests in determining the employer-employee relationship which includes the payment of
wages and power to control the conduct of the employees, the respondent was no longer its employee upon the latter’s discharge from the hospital
in November 1994 because at such time, the respondent was no longer fit to work as a bus driver and respondent did not render services to the
petitioner. Thus, petitioner reasoned that it had no more power to control the conduct of, and it no longer paid any wages to, the respondent.18
Petitioner also argued that the cause of action of respondent had accrued on 10 November 1994; that from 10 November 1994 up to November 1998,
the respondent did not render any services to nor filed a case or action against the petitioner; that the respondent’s filing of a complaint against
petitioner on 1 September 1999 was clearly beyond the four-year prescriptive period allowed by law; that if the reckoning period of the accrual of a
cause of action would be the time when the written demand was made by the respondent on the petitioner, then the four-year prescriptive period
would be interminable as it could be extended to one or more years; that this is not the spirit or intent of the law; that otherwise there is no more
need to provide the four-year prescriptive period as any complainant may simply allow the lapse of four years and file the action thereafter and that it
would be considered as a compliance by simply making a purported demand for reinstatement after more than four years.19
These contentions are devoid of merit.
It should be emphasized at the outset that as a rule, this Court is not a trier of facts and this applies with greater force in labor cases. Hence, factual
findings of quasi-judicial bodies like the NLRC, particularly when they coincide with those of the Labor Arbiter and if supported by substantial
evidence, are accorded respect and even finality by this Court. But where the findings of the NLRC and the Labor Arbiter are contradictory, as in the
present case, this Court may delve into the records and examine for itself the questioned findings.20
In illegal dismissal cases, the employee concerned is given a period of four years from the time of his dismissal within which to institute a complaint.
This is based on Article 1146 of the New Civil Code which states that actions based upon an injury to the rights of the plaintiff must be brought within
four years. We explained the rationale in the case of Callanta v. Carnation Philippines, Inc.,21 thus:
[O]ne’s employment, profession, trade or calling is a "property right," and the wrongful interference therewith is an actionable wrong. The right is
considered to be property within the protection of a constitutional guaranty of due process of law. Clearly then, when one is arbitrarily and unjustly
deprived of his job or means of livelihood, the action instituted to contest the legality of one’s dismissal from employment constitutes, in essence, an
action predicated "upon an injury to the rights of the plaintiff," as contemplated under Art. 1146 of the New Civil Code, which must be brought within
four years.
The four-year prescriptive period shall commence to run only upon the accrual of a cause of action of the worker. It is settled that in illegal dismissal
cases, the cause of action accrues from the time the employment of the worker was unjustly terminated.22 Thus, the four-year prescriptive period
shall be counted and computed from the date of the employee’s dismissal up to the date of the filing of complaint for unlawful termination of
employment.23
Proceeding therefrom, we shall now discuss and determine when the respondent’s cause of action accrued in order to ascertain whether the same
had already prescribed.
It is error to conclude that the employment of the respondent was unjustly terminated on 10 November 1994 because he was, at that time, still
confined at the Specialist Group Hospital, Dagupan City, for further treatment of his fractured left leg. He must be considered as merely on sick leave
at such time. Likewise, the respondent cannot also be deemed as illegally dismissed from work upon his release from the said hospital in December
1994 up to December 1997 since the records show that the respondent still reported for work to the petitioner and was granted sick and disability
leave by the petitioner during the same period.24
The respondent must be considered as unjustly terminated from work in January 1998 since this was the first time he was informed by the petitioner
that he was deemed resigned from his work. During that same occasion, the petitioner, in fact, tried to convince the respondent to accept an amount
of ₱50,000.00 as a consolation for his dismissal but the latter rejected it.25 Thus, it was only at this time that the respondent’s cause of action accrued.
Consequently, the respondent’s filing of complaint for illegal dismissal on 1 September 1999 was well within the four-year prescriptive period.
It is also significant to note that from 10 November 1994 up to December 1997, the petitioner never formally informed the respondent of the fact of
his dismissal either through a written notice or hearing. Indeed, it cannot be gainfully said that respondent was unlawfully dismissed on 10 November
1994 and that the cause of action accrued on that date.
As to the alleged abandonment of work by the respondent on 10 November 1994, it should be emphasized that two factors must be present in order
to constitute an abandonment: (a) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever
employer-employee relationship. The second factor is the more determinative factor and is manifested by overt acts from which it may be deduced
that the employee has no more intention to work. The intent to discontinue the employment must be shown by clear proof that it was deliberate and
unjustified. Mere absence from work does not imply abandonment.26
It is apparent that respondent did not abandon his work. His absence from work for a long period of time was obviously due to the fact that he was
still recuperating from two operations on his fractured leg. Petitioner knew this very well. In fact, petitioner shouldered the respondent’s medication
and hospital expenses during the latter’s confinement and operation in two hospitals.27 Moreover, when the respondent was able to walk, although
limping heavily, he still reported for work to the petitioner and was granted sick and disability leave.28 Clearly then, respondent did not abandon his
job on 10 November 1994.
In the same vein, the employer-employee relationship between the petitioner and respondent cannot be deemed to have been extinguished on 10
November 1994. It should be borne in mind that there are four tests in determining the existence of employer-employee relationship: (1) the manner
of selection and engagement; (2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4) the presence or absence of the
power of control. The so-called "control test" is commonly regarded as the most crucial and determinative indicator of the presence or absence of an
employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are
performed reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end.29
Applying the aforecited tests, the employer-employee relationship between petitioner and respondent continued even after the latter’s discharge
from the hospital in December 1994 up to 1997. Respondent had reported for work to the petitioner after his release from the hospital in December
1994. Subsequently, respondent was also granted a 120-day sick leave and disability leave by the petitioner.30 Respondent also availed himself of the
services of the petitioner’s physician on two occasions after his release from the hospital in December 1994.31
On the other hand, the petitioner failed to establish the fact that the respondent ceased to be its employee on 10 November 1994. Except for its
flimsy reason that the sick leave, disability leave and physician consultations were given to the respondent as mere accommodations for a former
employee, the petitioner did not present any evidence showing that its employer-employee relationship with the respondent was extinguished on 10
November 1994.
Evidently, these circumstances clearly manifest that petitioner exercised control over the respondent and that the latter was still under the
employment of the petitioner even after December 1994.
Given the foregoing considerations, petitioner’s assertion that the respondent’s cause of action accrued on 10 November 1994 must fail.
Apropos the second issue, petitioner contended that the order for the reinstatement of the respondent as bus driver was unconstitutional for being
tantamount to involuntary servitude; that when the respondent filed his complaint for illegal dismissal, the latter no longer desired to be reinstated to
his former position as bus driver; that the respondent’s unwillingness to be reinstated as bus driver was also evident from his letter to the petitioner
where the respondent manifested his intention to be hired as a dispatcher or conductor; and that to reinstate the respondent as bus driver despite
the fact that it is against his will is involuntary servitude.32
Petitioner also argued that the order for the reinstatement was contrary to law; that as a common carrier, it is obliged under the law to observe extra-
ordinary diligence in the conduct of its business; that it will violate such obligation if it will reinstate the respondent as bus driver; that to allow the
respondent to drive a bus, despite the fact that the latter sustained a fractured left leg and was still limping, would imperil the lives of the passengers
and the property of the petitioner; and that the award of backwages to the respondent was unjustified.33
The Labor Code mandates that before an employer may legally dismiss an employee from the service, the requirement of substantial and procedural
due process must be complied with. Under the requirement of substantial due process, the grounds for termination of employment must be based on
just or authorized causes. The following are just causes for the termination of employment under Article 282 of the Labor Code:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his
work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly
authorized representative; and
(e) Other causes analogous to the foregoing.
Abandonment of work, or the deliberate and unjustified refusal of an employee to resume his employment, may be a just cause for the termination of
employment under paragraph (b) of Article 282 of the Labor Code since it is a form of neglect of duty.
As earlier discussed, the petitioner insisted that respondent had already abandoned his work on 10 November 1994 and, thus, the latter’s
employment was deemed terminated as of such date. We, however, found that there was no abandonment of work on the part of the respondent.
Petitioner also alleged that respondent was guilty of insubordination as well as gross and habitual neglect in the performance of his duties for reckless
driving and for being involved in several vehicular accidents.34 The records, nonetheless, failed to show that the said charges were proven and that
respondent was duly informed and heard with regard to the accusations. Since the petitioner, as an employer, is burdened to prove just cause for
terminating the employment of respondent with clear and convincing evidence, and that petitioner failed to discharge this burden, we hold that
respondent was dismissed without just cause by the petitioner.
It has been established that petitioners failed to comply with the requirement of substantial due process in terminating the employment of
respondent. We will now determine whether the petitioner had complied with the procedural aspect of a lawful dismissal.
In the termination of employment, the employer must (a) give the employee a written notice specifying the ground or grounds of termination, giving
to said employee reasonable opportunity within which to explain his side; (b) conduct a hearing or conference during which the employee concerned,
with the assistance of counsel if the employee so desires, is given the opportunity to respond to the charge, present his evidence or rebut the
evidence presented against him; and (c) give the employee a written notice of termination indicating that upon due consideration of all
circumstances, grounds have been established to justify his termination.35
Petitioner miserably failed to comply with the foregoing requirements. There was nothing in the records which evinces that petitioner had sent a
written notice to the respondent informing him of the ground or grounds of his termination or the reason why he was deemed resigned. It does not
also appear that the petitioner held a hearing or conference where the respondent was given the opportunity to answer the charges of abandonment,
insubordination and habitual neglect of duty against him. Neither did the petitioner send a written notice to the respondent informing the latter that
his service is terminated after considering all the circumstances.
In view of the fact that the petitioner neglected to observe the substantial and procedural due process in terminating the employment of respondent,
we rule that the latter was illegally dismissed from work by the petitioner.
Consequently, the respondent is entitled to reinstatement without loss of seniority rights, full backwages, inclusive of allowances, and other benefits
or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement as
provided for under Article 279 of the Labor Code.
It appears, however, that respondent was not seeking reinstatement. In his complaint for illegal dismissal against petitioner, respondent stated:
RELIEF
Complainant/s pray/s for the following:
Reinstatement: No More.36
Respondent also sent to the petitioner a letter applying for the position of a dispatcher or conductor.37 In the said letter, the respondent explained
that since he cannot drive anymore due to his leg injury, he was willing to be hired as a dispatcher or conductor. The abovestated facts obviously
show that respondent was unwilling to be reinstated as a bus driver.
Even assuming that respondent is willing to be reinstated as petitioner’s bus driver, the reinstatement is still unwarranted. There is a serious doubt as
to whether the respondent is physically capable of driving a bus based on the following undisputed facts: (1) respondent was operated on and
confined twice in two different hospitals for a fractured left leg; (2) steel plates were attached to his fractured leg;38 (3) each confinement lasted for a
month; (4) after his discharge from the second confinement, respondent was still limping heavily; (5) when respondent had reported for work to the
petitioner in January 1998, he was also limping;39 and (6) respondent does not have a medical certificate which guarantees that his leg injury has
already healed and that he is now physically capable of driving a bus.
It should be stressed that petitioner is a common carrier and, as such, is obliged to exercise extra-ordinary diligence in transporting its passengers
safely.40 To allow the respondent to drive the petitioner’s bus under such uncertain condition would, undoubtedly, expose to danger the lives of the
passengers and the property of the petitioner. This would place the petitioner in jeopardy of violating its extra-ordinary diligence obligation and, thus,
may be subjected to numerous complaints and court suits. It is clear therefore that the reinstatement of respondent not only would be deleterious to
the riding public but would also put unreasonable burden on the business and interest of the petitioner. In this regard, it should be remembered that
an employer may not be compelled to continue to employ such persons whose continuance in the service will patently be inimical to his interests.41
Based on the foregoing facts and circumstances, the reinstatement of the respondent is no longer feasible. Thus, in lieu of reinstatement, payment to
respondent of separation pay equivalent to one month pay for every year of service is in order.42
WHEREFORE, the petition is PARTLY GRANTED insofar as it prays for the non-reinstatement of respondent. The Decision of the Court of Appeals dated
26 April 2004 in CA-G.R. SP No. 74010, is hereby AFFIRMED with the following MODIFICATIONS: Petitioner is ordered to pay the respondent, in lieu of
reinstatement, separation pay of ONE (1) MONTH PAY for every year of service, and full backwages inclusive of allowances and other benefits or their
monetary equivalent from 1 January 1998 up to the finality of this Decision. No costs.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice

THIRD DIVISION
[G.R. NO. 160905 : July 4, 2008]
BIENVENIDO D. GOMA, Petitioner, v. PAMPLONA PLANTATION INCORPORATED, Respondent.
DECISION

NACHURA, J.:

For review is the Decision1 of the Court of Appeals (CA) dated August 27, 2003 granting respondent Pamplona Plantation, Inc.'s Petition
for Certiorari and its Resolution2 dated November 11, 2003 denying petitioner Bienvenido Goma's motion for reconsideration, in CA-G.R. SP No.
74892.
Petitioner commenced3 the instant suit by filing a complaint for illegal dismissal, underpayment of wages, non-payment of premium pay for holiday
and rest day, five (5) days incentive leave pay, damages and attorney's fees, against the respondent. The case was filed with the Sub-Regional
Arbitration Branch No. VII of Dumaguete City. Petitioner claimed that he worked as a carpenter at the Hacienda Pamplona since 1995; that he worked
from 7:30 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. daily with a salary rate of P90.00 a day paid weekly; and that he worked continuously
until 1997 when he was not given any work assignment.4 On a claim that he was a regular employee, petitioner alleged to have been illegally
dismissed when the respondent refused without just cause to give him work assignment. Thus, he prayed for backwages, salary differential, service
incentive leave pay, damages and attorney's fees.5
On the other hand, respondent denied having hired the petitioner as its regular employee. It instead argued that petitioner was hired by a certain
Antoy Cañaveral, the manager of the hacienda at the time it was owned by Mr. Bower and leased by Manuel Gonzales, a jai-alai pelotari known as
"Ybarra."6 Respondent added that it was not obliged to absorb the employees of the former owner.
In 1995, Pamplona Plantation Leisure Corporation (PPLC) was created for the operation of tourist resorts, hotels and bars. Petitioner, thus, rendered
service in the construction of the facilities of PPLC. If at all, petitioner was a project but not a regular employee.7
On June 28, 1999, Labor Arbiter Geoffrey P. Villahermosa dismissed the case for lack of merit.8 The Labor Arbiter concluded that petitioner was hired
by the former owner, hence, was not an employee of the respondent. Consequently, his money claims were denied.9
On appeal to the National Labor Relations Commission (NLRC), the petitioner obtained favorable judgment when the tribunal reversed and set aside
the Labor Arbiter's decision. The dispositive portion of the NLRC decision reads:
WHEREFORE, the Decision of the Labor Arbiter is hereby SET ASIDE and a new one is hereby issued ORDERING the respondent, Pamplona Plantation
Incorporated, the following:
1) to reinstate the complainant, BIENVENIDO D. GOMA to his former position immediately without loss of seniority rights and other privileges;
2) to pay the same complainant TWELVE THOUSAND THREE HUNDRED FIFTY-NINE PESOS (P12,359.00) in salary differentials;
3) to pay to the same complainant ONE HUNDRED ONE THOUSAND SIX HUNDRED SIXTY PESOS (P101,660.00) in backwages to be updated until actual
reinstatement; andcralawlibrary
4) to pay attorney's fee in the amount of ELEVEN THOUSAND FOUR HUNDRED TWO PESOS (P11,402.00) which is equivalent to ten percent (10%) of
the total judgment award.chanrobles virtual law library
The respondent is further ordered to pay the aggregate amount of ONE HUNDRED FOURTEEN THOUSAND AND NINETEEN PESOS (P114,019.00) to the
complainant through the cashier of this Commission within ten (10) days from receipt hereof.
SO ORDERED.10
Respondent's motion for reconsideration was denied by the NLRC on September 9, 2002.11
The NLRC upheld the existence of an employer-employee relationship, ratiocinating that it was difficult to believe that a simple carpenter from far
away Pamplona would go to Dumaguete City to hire a competent lawyer to help him secure justice if he did not believe that his right as a laborer had
been violated.12 It added that the creation of the PPLC required the tremendous task of constructing hotels, inns, restaurants, bars, boutiques and
service shops, thus involving extensive carpentry work. As an old carpentry hand in the old corporation, the possibility of petitioner's employment was
great.13 The NLRC likewise held that the respondent should have presented its employment records if only to show that petitioner was not included in
its list of employees; its failure to do so was fatal.14 Considering that petitioner worked for the respondent for a period of two years, he was a regular
employee.15
Aggrieved, respondent instituted a special civil action for certiorari under Rule 65 before the Court of Appeals which granted the same; and
consequently annulled and set aside the NLRC decision. The CA disposed, as follows:
WHEREFORE, premises considered, the instant petition is GRANTED. The assailed decision of the NLRC dated October 24, 2000, as well as the
Resolution dated September 9, 2002 in NLRC Case No. V-000882-99, RAB VII-0088-98-D are hereby ANNULLED and SET ASIDE. The complaint is
ordered DISMISSED.
SO ORDERED.16
Contrary to the NLRC's finding, the CA concluded that there was no employer-employee relationship. The CA stressed that petitioner having raised a
positive averment, had the burden of proving the existence of an employer-employee relationship. Respondent, therefore, had no obligation to prove
its negative averment.17 The appellate court further held that while the respondent's business required the performance of occasional repairs and
carpentry work, the retention of a carpenter in its payroll was not necessary or desirable in the conduct of its usual business.18 Lastly, although the
petitioner was an employee of the former owner of the hacienda, the respondent was not required to absorb such employees because employment
contracts are in personam and binding only between the parties.19
Petitioner now comes before this Court raising the sole issue:
WHETHER OR NOT THE DECISION OF [THE] COURT OF APPEALS DATED AUGUST 27, 2003, REVERSING AND SETTING ASIDE THE NLRC (Fourth Division,
Cebu City) RULING THAT THE "PETITIONER WAS NOT ILLEGALLY DISMISSED AS HE WAS NOT AN EMPLOYEE OF RESPONDENT", IS CONTRARY TO LAW
AND JURISPRUDENCE ON WHICH IT WAS BASED, AND NOT IN CONSONANCE WITH THE EVIDENCE ON RECORD.20
The disposition of this petition rests on the resolution of the following questions: 1) Is the petitioner a regular employee of the respondent? 2) If so,
was he illegally dismissed from employment? and 3) Is he entitled to his monetary claims?cralawred
Petitioner insists that he was a regular employee of the respondent corporation. The respondent, on the other hand, counters that it did not hire the
petitioner, hence, he was never an employee, much less a regular one.
Both the Labor Arbiter and the CA concluded that there was no employer-employee relationship between the petitioner and respondent. They based
their conclusion on the alleged admission of the petitioner that he was previously hired by the former owner of the hacienda. Thus, they rationalized
that since the respondent was not obliged to absorb all the employees of the former owner, petitioner's claim of employment could not be sustained.
The NLRC, on the other hand, upheld petitioner's claim of regular employment because of the respondent's failure to present its employment records.
The existence of an employer-employee relationship involves a question of fact which is well within the province of the CA to determine. Nonetheless,
given the reality that the CA's findings are at odds with those of the NLRC, the Court is constrained to probe into the attendant circumstances as
appearing on record.21
A thorough examination of the records compels this Court to reach a conclusion different from that of the CA. It is true that petitioner admitted
having been employed by the former owner prior to 1993 or before the respondent took over the ownership and management of the plantation,
however, he likewise alleged having been hired by the respondent as a carpenter in 1995 and having worked as such for two years until 1997.
Notably, at the outset, respondent categorically denied that it hired the petitioner. Yet, in its petition filed before the CA, respondent made this
admission:
Private respondent [petitioner herein] cannot be considered a regular employee since the nature of his work is merely project in character in relation
to the construction of the facilities of the Pamplona Plantation Leisure Corporation.
He is a project employee as he was hired - 1) for a specific project or undertaking, and 2) the completion or termination of such project or
undertaking has been determined at the time of engagement of the employee. x x x.
xxx
In other words, as regards those workers who worked in 1995 specifically in connection with the construction of the facilities of Pamplona Plantation
Leisure Corporation, their employment was definitely "temporary" in character and not regular employment. Their employment was deemed
terminated by operation of law the moment they had finished the job or activity under which they were employed.22
Thus, departing from its initial stand that it never hired petitioner, the respondent eventually admitted the existence of employer-employee
relationship before the CA. It, however, qualified such admission by claiming that it was PPLC that hired the petitioner and that the nature of his
employment therein was that of a "project" and not "regular" employee.
Parenthetically, this Court in Pamplona Plantation Company, Inc. v. Tinghil23 and Pamplona Plantation Company v. Acosta24 had pierced the veil of
corporate fiction and declared that the two corporations,25 PPLC and the herein respondent, are one and the same.
By setting forth these defenses, respondent, in effect, admitted that petitioner worked for it, albeit in a different capacity. Such an allegation is in the
nature of a negative pregnant, a denial pregnant with the admission of the substantial facts in the pleadings responded to which are not squarely
denied, and amounts to an acknowledgment that petitioner was indeed employed by respondent.26
The employment relationship having been established, the next question we must answer is: Is the petitioner a regular or project employee?
cralawred
We find the petitioner to be a regular employee.
Article 280 of the Labor Code, as amended, provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT. - The provisions of written agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or
undertaking, the completion or termination of which has been determined at the time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such activity exists.
As can be gleaned from this provision, there are two kinds of regular employees, namely: (1) those who are engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether
continuous or broken, with respect to the activity in which they are employed.27 Simply stated, regular employees are classified into: regular
employees by nature of work; and regular employees by years of service. The former refers to those employees who perform a particular activity
which is necessary or desirable in the usual business or trade of the employer, regardless of their length of service; while the latter refers to those
employees who have been performing the job, regardless of the nature thereof, for at least a year.28 If the employee has been performing the job for
at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity, if not indispensability, of that activity to the business.29
Respondent is engaged in the management of the Pamplona Plantation as well as in the operation of tourist resorts, hotels, inns, restaurants, etc.
Petitioner, on the other hand, was engaged to perform carpentry work. His services were needed for a period of two years until such time that the
respondent decided not to give him work assignment anymore. Owing to his length of service, petitioner became a regular employee, by operation of
law.
Respondent argues that, even assuming that petitioner can be considered an employee, he cannot be classified as a regular employee, but merely as a
project employee whose services were hired only with respect to a specific job and only while that specific job existed.
A project employee is assigned to carry out a specific project or undertaking the duration and scope of which are specified at the time the employee is
engaged in the project. A project is a job or undertaking which is distinct, separate and identifiable from the usual or regular undertakings of the
company. A project employee is assigned to a project which begins and ends at determined or determinable times.30
The principal test used to determine whether employees are project employees as distinguished from regular employees, is whether or not the
employees were assigned to carry out a specific project or undertaking, the duration or scope of which was specified at the time the employees were
engaged for that project.31 In this case, apart from respondent's bare allegation that petitioner was a project employee, it had not shown that
petitioner was informed that he would be assigned to a specific project or undertaking. Neither was it established that he was informed of the
duration and scope of such project or undertaking at the time of his engagement.
Most important of all, based on the records, respondent did not report the termination of petitioner's supposed project employment to the
Department of Labor and Employment (DOLE). Department Order No. 19 (as well as the old Policy Instructions No. 20) requires employers to submit a
report of an employee's termination to the nearest public employment office every time the employment is terminated due to a completion of a
project. Respondent's failure to file termination reports, particularly on the cessation of petitioner's employment, was an indication that the
petitioner was not a project but a regular employee.32
We stress herein that the law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining position
necessitates the succor of the State. What determines whether a certain employment is regular or otherwise is not the will or word of the employer,
to which the worker oftentimes acquiesces. Neither is it the procedure of hiring the employee nor the manner of paying the salary or the actual time
spent at work. It is the character of the activities performed by the employer in relation to the particular trade or business of the employer, taking
into account all the circumstances, including the length of time of its performance and its continued existence. Given the attendant circumstances in
the case at bar, it is obvious that one year after he was employed by the respondent, petitioner became a regular employee by operation of law.33
As to the question of whether petitioner was illegally dismissed, we answer in the affirmative.
Well-established is the rule that regular employees enjoy security of tenure and they can only be dismissed for just cause and with due process, i.e.,
after notice and hearing. In cases involving an employee's dismissal, the burden is on the employer to prove that the dismissal was legal. This burden
was not amply discharged by the respondent in this case.
Obviously, petitioner's dismissal was not based on any of the just or authorized causes enumerated under Articles 282,34 28335 and 28436 of the Labor
Code, as amended. After working for the respondent for a period of two years, petitioner was shocked to find out that he was not given any work
assignment anymore. Hence, the requirement of substantive due process was not complied with.
Apart from the requirement that the dismissal of an employee be based on any of the just or authorized causes, the procedure laid down in Book VI,
Rule I, Section 2 (d) of the Omnibus Rules Implementing the Labor Code, must be followed.37 Failure to observe the rules is a violation of the
employee's right to procedural due process.
In view of the non-observance of both substantive and procedural due process, in accordance with the guidelines outlined by this Court in Agabon v.
National Labor Relations Commission,38 we declare that petitioner's dismissal from employment is illegal.39
Having shown that petitioner is a regular employee and that his dismissal was illegal, we now discuss the propriety of the monetary claims of the
petitioner. An illegally dismissed employee is entitled to: (1) either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and
(2) backwages.40
In the instant case, we are prepared to concede the impossibility of the reinstatement of petitioner considering that his position or any equivalent
position may no longer be available in view of the length of time that this case has been pending. Moreover, the protracted litigation may have
seriously abraded the relationship of the parties so as to render reinstatement impractical. Accordingly, petitioner may be awarded separation pay in
lieu of reinstatement.41
Petitioner's separation pay is pegged at the amount equivalent to petitioner's one (1) month pay, or one-half (1/2) month pay for every year of
service, whichever is higher, reckoned from his first day of employment up to finality of this decision. Full backwages, on the other hand, should be
computed from the date of his illegal dismissal until the finality of this decision.
On petitioner's entitlement to attorney's fees, we must take into account the fact that petitioner was illegally dismissed from his employment and
that his wages and other benefits were withheld from him without any valid and legal basis. As a consequence, he was compelled to file an action for
the recovery of his lawful wages and other benefits and, in the process, incurred expenses. On these bases, the Court finds that he is entitled to
attorney's fees equivalent to ten percent (10%) of the monetary award.42
Lastly, we affirm the NLRC's award of salary differential. In light of our foregoing disquisition on the illegality of petitioner's dismissal, and our
adoption of the NLRC's findings, suffice it to state that such issue is a question of fact, and we find no cogent reason to disturb the findings of the
labor tribunal.
WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Court of Appeals dated August 27, 2003 and its Resolution dated
November 11, 2003 in CA-G.R. SP No. 74892 are REVERSED and SET ASIDE. Petitioner is found to have been illegally dismissed from employment and
thus, is ENTITLED to: 1) Salary Differential embodied in the NLRC decision dated October 24, 2000 in NLRC Case No. V-000882-99; 2) Separation Pay;
3) Backwages; and 4) Attorney's fees equivalent to ten percent (10%) of the monetary awards. Upon finality of this judgment, let the records of the
case be remanded to the NLRC for the computation of the exact amounts due the petitioner.
SO ORDERED.
Ynares-Santiago, J., Chairperson, Austria-Martinez, Chico-Nazario, Reyes, JJ., concur.

FIRST DIVISION
[G.R. No. 98107. August 18, 1997.]
BENJAMIN C. JUCO, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION and NATIONAL HOUSING CORPORATION, Respondents.

DECISION
HERMOSISIMA, JR., J.:

This is a petition for certiorari to set aside the Decision of the National Labor Relations Commission (NLRC) dated March 14, 1991, which reversed the
Decision dated May 21, 1990 of Labor Arbiter Manuel R Caday, on the ground of lack of jurisdiction.

Petitioner Benjamin C. Juco was hired as a project engineer of respondent National Housing Corporation (NHC) from November 16, 1970 to May 14,
1975. On May 14, 1975, he was separated from the service for having been implicated in a crime of theft and/or malversation of public
funds.cralawnad

On March 25, 1977, petitioner filed a complaint for illegal dismissal against the NHC with the Department of Labor.
On September 17, 1977, the Labor Arbiter rendered a decision dismissing the complaint on the ground that the NLRC had no jurisdiction over the
case. 1

Petitioner then elevated the case to the NLRC which rendered a decision on December 28, 1982, reversing the decision of the Labor Arbiter. 2

Dissatisfied with the decision of the NLRC, respondent NHC appealed before this Court and on January 17, 1985, we rendered a decision, the
dispositive portion thereof reads as follows:jgc:chanrobles.com.ph

"WHEREFORE, the petition is hereby GRANTED. The questioned decision of the respondent National Labor Relations Commission is SET ASIDE. The
decision of the Labor Arbiter dismissing the case before it for lack of jurisdiction is REINSTATED." 3

On January 6, 1989, petitioner filed with the Civil Service Commission a complaint for illegal dismissal, with preliminary mandatory injunction. 4

On February 6, 1989, respondent NHC moved for the dismissal of the complaint on the ground that the Civil Service Commission has no jurisdiction
over the case. 5

On April 11, 1989, the Civil Service Commission issued an order dismissing the complaint for lack of jurisdiction. It ratiocinated
that:jgc:chanrobles.com.ph

"The Board finds the comment and/or motion to dismiss meritorious. It was not disputed that NHC is a government corporation without an original
charter but organized/created under the Corporation Code.

Article IX, Section 2 (1) of the 1987 Constitution provides:chanrob1es virtual 1aw library

‘The civil service embraces all branches, subdivisions, instrumentalities and agencies of the Government, including government owned and controlled
corporations with original charters.’ (Emphasis supplied)

From the aforequoted constitutional provision, it is clear that respondent NHC is not within the scope of the civil service and is therefore beyond the
jurisdiction of this Board. Moreover, it is pertinent to state that the 1987 Constitution was ratified and became effective on February 2, 1987.

WHEREFORE, for lack of jurisdiction, the instant complaint is hereby dismissed." 6

On April 28, 1989, petitioner filed with respondent NLRC a complaint for illegal dismissal with preliminary mandatory injunction against respondent
NHC. 7

On May 21, 1990, respondent NLRC thru Labor Arbiter Manuel R. Caday ruled that petitioner was illegally dismissed from his employment by
respondent as there was evidence in the record that the criminal case against him was purely fabricated, prompting the trial court to dismiss the
charges against him. Hence, he concluded that the dismissal was illegal as it was devoid of basis, legal or factual.

He further ruled that the complaint is not barred by prescription considering that the period from which to reckon the reglementary period of four
years should be from the date of the receipt of the decision of the Civil Service Commission promulgated on April 11, 1989. He also ratiocinated
that:jgc:chanrobles.com.ph

"It appears . . . complainant filed the complaint for illegal dismissal with the Civil Service Commission on January 6, 1989 and the same was dismissed
on April 11, 1989 after which on April 28, 1989, this case was filed by the complainant. Prior to that, this case was ruled upon by the Supreme Court
on January 17, 1985 which enjoined the complainant to go to the Civil Service Commission which in fact, complainant did. Under the circumstances,
there is merit on the contention that the running of the reglementary period of four (4) years was suspended with the filing of the complaint with the
said Commission. Verily, it was not the fault of the respondent for failing to file the complaint as alleged by the respondent but due to, in the words of
the complainant, a ‘legal knot’ that has to be untangled." 8

Thereafter, the Labor Arbiter rendered a decision, the dispositive portion of which reads:jgc:chanrobles.com.ph

"Premises considered, judgment is hereby rendered declaring the dismissal of the complainant as illegal and ordering the respondent to immediately
reinstate him to his former position without loss of seniority rights with full back wages inclusive of allowance and to his other benefits or equivalent
computed from the time it is withheld from him when he was dismissed on March 27, 1977, until actually reinstated." 9

On June 1, 1990, respondent NHC filed its appeal before the NLRC and on March 14, 1991, the NLRC promulgated a decision which reversed the
decision of Labor Arbiter Manuel R. Caday on the ground of lack of jurisdiction. 10

The primordial issue that confronts us is whether or not public respondent committed grave abuse of discretion in holding that petitioner is not
governed by the Labor Code.

Under the laws then in force, employees of government-owned and/or controlled corporations were governed by the Civil Service Law and not by the
Labor Code. Hence,

Article 277 of the Labor Code (PD 442) then provided:jgc:chanrobles.com.ph

"The terms and conditions of employment of all government employees, including employees of government-owned and controlled corporations shall
be governed by the Civil Service Law, rules and regulations . . ."cralaw virtua1aw library

The 1973 Constitution, Article II-B, Section 1(1), on the other hand provided:jgc:chanrobles.com.ph

"The Civil Service embraces every branch, agency, subdivision and instrumentality of the government, including government-owned or controlled
corporations."cralaw virtua1aw library

Although we had earlier ruled in National Housing Corporation v. Juco, 11 that employees of government-owned and/or controlled corporations,
whether created by special law or formed as subsidiaries under the general Corporation Law, are governed by the Civil Service Law and not by the
Labor Code, this ruling has been supplanted by the 1987 Constitution. Thus, the said Constitution now provides:jgc:chanrobles.com.ph
"The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government owned or controlled
corporations with original charter." (Article IX-B, Section 2[1])

In National Service Corporation (NASECO) v. National Labor Relations Commission, 12 we had the occasion to apply the present Constitution in
deciding whether or not the employees of NASECO are covered by the Civil Service Law or the Labor Code notwithstanding that the case arose at the
time when the 1973 Constitution was still in effect. We ruled that the NLRC has jurisdiction over the employees of NASECO on the ground that it is the
1987 Constitution that governs because it is the Constitution in place at the time of the decision. Furthermore, we ruled that the new phrase "with
original charter" means that government-owned and controlled corporations refer to corporations chartered by special law as distinguished from
corporations organized under the Corporation Code. Thus, NASECO which had been organized under the general incorporation statute and a
subsidiary of the National Investment Development Corporation, which in turn was a subsidiary of the Philippine National Bank, is excluded from the
purview of the Civil Service Commission.chanrobles virtual lawlibrary

We see no cogent reason to depart from the ruling in the aforesaid case.

In the case at bench, the National Housing Corporation is a government owned corporation organized in 1959 in accordance with Executive Order No.
399, otherwise known as the Uniform Charter of Government Corporation, dated January 1, 1959. Its shares of stock are and have been one hundred
percent (100%) owned by the Government from its incorporation under Act 1459, the former corporation law. The government entities that own its
shares of stock are the Government Service Insurance System, the Social Security System, the Development Bank of the Philippines, the National
Investment and Development Corporation and the People’s Homesite and Housing Corporation. 13 Considering the fact that the NHA had been
incorporated under Act 1459, the former corporation law, it is but correct to say that it is a government-owned or controlled corporation whose
employees are subject to the provisions of the Labor Code. This observation is reiterated in the recent case of Trade Union of the Philippines and
Allied Services (TUPAS) v. National Housing Corporation, 14 where we held that the NHA is now within the jurisdiction of the Department of Labor and
Employment, it being a government-owned and/or controlled corporation without an original charter. Furthermore, we also held that the workers or
employees of the NHC (now NHA) undoubtedly have the right to form unions or employee’s organization and that there is no impediment to the
holding of a certification election among them as they are covered by the Labor Code.

Thus, the NLRC erred in dismissing petitioner’s complaint for lack of jurisdiction because the rule now is that the Civil Service now covers only
government-owned or controlled corporations with original charters. 15 Having been incorporated under the Corporation Law, its relations with its
personnel are governed by the Labor Code and come under the jurisdiction of the National Labor Relations Commission.

One final point. Petitioners have been tossed from one forum to another for a simple illegal dismissal case. It is but apt that we put an end to his
dilemma in the interest of justice.

WHEREFORE, the decision of the NLRC in NLRC NCR-04-02036089 dated March 14, 1991 is hereby REVERSED and the Decision of the Labor Arbiter
dated May 21, 1990 is REINSTATED.chanrobles virtuallawlibrary

SO ORDERED.

Padilla, Bellosillo, Vitug and Kapunan, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 79182 September 11, 1991
PNOC-ENERGY DEVELOPMENT CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Third Division) and DANILO MERCADO, respondents.
Bacorro & Associates for petitioner.
Alberto L. Dalmacion for private respondent.

PARAS, J.:
This is a petition for certiorari to set aside the Resolution * dated July 3, 1987 of respondent National Labor Relations Commission (NLRC for brevity)
which affirmed the decision dated April 30, 1986 of Labor Arbiter Vito J. Minoria of the NLRC, Regional Arbitration Branch No. VII at Cebu City in Case
No. RAB-VII-0556-85 entitled "Danilo Mercado, Complainant, vs. Philippine National Oil Company-Energy Development Corporation, Respondent",
ordering the reinstatement of complainant Danilo Mercado and the award of various monetary claims.
The factual background of this case is as follows:
Private respondent Danilo Mercado was first employed by herein petitioner Philippine National Oil Company-Energy Development Corporation
(PNOC-EDC for brevity) on August 13, 1979. He held various positions ranging from clerk, general clerk to shipping clerk during his employment at its
Cebu office until his transfer to its establishment at Palimpinon, Dumaguete, Oriental Negros on September 5, 1984. On June 30, 1985, private
respondent Mercado was dismissed. His last salary was P1,585.00 a month basic pay plus P800.00 living allowance (Labor Arbiter's Decision, Annex
"E" of Petition, Rollo, p. 52).
The grounds for the dismissal of Mercado are allegedly serious acts of dishonesty committed as follows:
1. On ApriI 12, 1985, Danilo Mercado was ordered to purchase 1,400 pieces of nipa shingles from Mrs. Leonardo Nodado of Banilad,
Dumaguete City, for the total purchase price of Pl,680.00. Against company policy, regulations and specific orders, Danilo Mercado
withdrew the nipa shingles from the supplier but paid the amount of P1,000.00 only. Danilo Mercado appropriated the balance of P680.00
for his personal use;
2. In the same transaction stated above, the supplier agreed to give the company a discount of P70.00 which Danilo Mercado did not report
to the company;
3. On March 28, 1985, Danilo Mercado was instructed to contract the services of Fred R. Melon of Dumaguete City, for the fabrication of
rubber stamps, for the total amount of P28.66. Danilo Mercado paid the amount of P20.00 to Fred R. Melon and appropriated for his
personal use the balance of P8.66.
In addition, private respondent, Danilo Mercado violated company rules and regulations in the following instances:
1. On June 5, 1985, Danilo Mercado was absent from work without leave, without proper turn-over of his work, causing disruption and delay
of company work activities;
2. On June 15, 1985, Danilo Mercado went on vacation leave without prior leave, against company policy, rules and regulations. (Petitioner's
Memorandum, Rollo, p. 195).
On September 23, 1985, private respondent Mercado filed a complaint for illegal dismissal, retirement benefits, separation pay, unpaid wages, etc.
against petitioner PNOC-EDC before the NLRC Regional Arbitration Branch No. VII docketed as Case No. RAB-VII-0556-85.
After private respondent Mercado filed his position paper on December 16, 1985 (Annex "B" of the Petition, Rollo, pp. 28-40), petitioner PNOC-EDC
filed its Position Paper/Motion to Dismiss on January 15, 1986, praying for the dismissal of the case on the ground that the Labor Arbiter and/or the
NLRC had no jurisdiction over the case (Annex "C" of the Petition, Rollo, pp. 41-45), which was assailed by private respondent Mercado in his
Opposition to the Position Paper/Motion to Dismiss dated March 12, 1986 (Annex "D" of the Petition, Rollo, pp. 46-50).
The Labor Arbiter ruled in favor of private respondent Mercado. The dispositive onion of said decision reads as follows:
WHEREFORE, in view of the foregoing, respondents are hereby ordered:
1) To reinstate complainant to his former position with full back wages from the date of his dismissal up to the time of his actual
reinstatement without loss of seniority rights and other privileges;
2) To pay complainant the amount of P10,000.00 representing his personal share of his savings account with the respondents;
3) To pay complainants the amount of P30,000.00 moral damages; P20,000.00 exemplary damages and P5,000.00 attorney's fees;
4) To pay complainant the amount of P792.50 as his proportionate 13th month pay for 1985.
Respondents are hereby further ordered to deposit the aforementioned amounts with this Office within ten days from receipt of a copy of
this decision for further disposition.
SO ORDERED.
(Labor Arbiter's Decision, Rollo, p. 56)
The appeal to the NLRC was dismissed for lack of merit on July 3, 1987 and the assailed decision was affirmed.
Hence, this petition.
The issues raised by petitioner in this instant petition are:
1. Whether or not matters of employment affecting the PNOC-EDC, a government-owned and controlled corporation, are within the
jurisdiction of the Labor Arbiter and the NLRC.
2. Assuming the affirmative, whether or not the Labor Arbiter and the NLRC are justified in ordering the reinstatement of private
respondent, payment of his savings, and proportionate 13th month pay and payment of damages as well as attorney's fee.
Petitioner PNOC-EDC alleges that it is a corporation wholly owned and controlled by the government; that the Energy Development Corporation is a
subsidiary of the Philippine National Oil Company which is a government entity created under Presidential Decree No. 334, as amended; that being a
government-owned and controlled corporation, it is governed by the Civil Service Law as provided for in Section 1, Article XII-B of the 1973
Constitution, Section 56 of Presidential Decree No. 807 (Civil Service Decree) and Article 277 of Presidential Decree No. 442, as amended (Labor
Code).
The 1973 Constitution provides:
The Civil Service embraces every branch, agency, subdivision and instrumentality of the government including government-owned or
controlled corporations.
Petitioner PNOC-EDC argued that since Labor Arbiter Minoria rendered the decision at the time when the 1973 Constitution was in force, said decision
is null and void because under the 1973 Constitution, government-owned and controlled corporations were governed by the Civil Service Law. Even
assuming that PNOC-EDC has no original or special charter and Section 2(i), Article IX-B of the 1987 Constitution provides that:
The Civil Service embraces all branches, subdivision, instrumentalities and agencies of the Government, including government-owned or
controlled corporations with original charters.
such circumstances cannot give validity to the decision of the Labor Arbiter (Ibid., pp. 192-193).
This issue has already been laid to rest in the case of PNOC-EDC vs. Leogardo, 175 SCRA 26 (July 5, 1989), involving the same petitioner and the same
issue, where this Court ruled that the doctrine that employees of government-owned and/or con controlled corporations, whether created by special
law or formed as subsidiaries under the General Corporation law are governed by the Civil Service Law and not by the Labor Code, has been
supplanted by the present Constitution. "Thus, under the present state of the law, the test in determining whether a government-owned or
controlled corporation is subject to the Civil Service Law are the manner of its creation, such that government corporations created by special charter
are subject to its provisions while those incorporated under the General Corporation Law are not within its coverage."
Specifically, the PNOC-EDC having been incorporated under the General Corporation Law was held to be a government owned or controlled
corporation whose employees are subject to the provisions of the Labor Code (Ibid.).
The fact that the case arose at the time when the 1973 Constitution was still in effect, does not deprive the NLRC of jurisdiction on the premise that it
is the 1987 Constitution that governs because it is the Constitution in place at the time of the decision (NASECO v. NLRC, G.R. No. 69870, 168 SCRA
122 [1988]).
In the case at bar, the decision of the NLRC was promulgated on July 3, 1987. Accordingly, this case falls squarely under the rulings of the
aforementioned cases.
As regards the second issue, the record shows that PNOC-EDC's accusations of dishonesty and violations of company rules are not supported by
evidence. Nonetheless, while acknowledging the rule that administrative bodies are not governed by the strict rules of evidence, petitioner PNOC-EDC
alleges that the labor arbiter's propensity to decide the case through the position papers submitted by the parties is violative of due process thereby
rendering the decision null and void (Ibid., p. 196).
On the other hand, private respondent contends that as can be seen from petitioner's Motion for Reconsideration and/or Appeal dated July 28, 1986
(Annex "F" of the Petition, Rollo, pp. 57- 64), the latter never questioned the findings of facts of the Labor Arbiter but simply limited its objection to
the lack of legal basis in view of its stand that the NLRC had no jurisdiction over the case (Private Respondent's Memorandum, Rollo, p. 104).
Petitioner PNOC-EDC filed its Position Paper/Motion to Dismiss dated January 15, 1986 (Annex "C" of the Petition Rollo, pp. 41-45) before the
Regional Arbitration Branch No. VII of Cebu City and its Motion for Reconsideration and/or Appeal dated July 28, 1986 (Annex "F" of the Petition,
Rollo, pp. 57-64) before the NLRC of Cebu City. Indisputably, the requirements of due process are satisfied when the parties are given an opportunity
to submit position papers. What the fundamental law abhors is not the absence of previous notice but rather the absolute lack of opportunity to
ventilate a party's side. There is no denial of due process where the party submitted its position paper and flied its motion for reconsideration (Odin
Security Agency vs. De la Serna, 182 SCRA 472 [February 21, 1990]). Petitioner's subsequent Motion for Reconsideration and/or Appeal has the effect
of curing whatever irregularity might have been committed in the proceedings below (T.H. Valderama and Sons, Inc. vs. Drilon, 181 SCRA 308 [January
22, 1990]).
Furthermore, it has been consistently held that findings of administrative agencies which have acquired expertise because their jurisdiction is
confined to specific matters are accorded not only respect but even finality (Asian Construction and Development Corporation vs. NLRC, 187 SCRA 784
[July 27, 1990]; Lopez Sugar Corporation vs. Federation of Free Workers, 189 SCRA 179 [August 30, 1990]). Judicial review by this Court does not go so
far as to evaluate the sufficiency of the evidence but is limited to issues of jurisdiction or grave abuse of discretion (Filipinas Manufacturers Bank vs.
NLRC, 182 SCRA 848 [February 28, 1990]). A careful study of the records shows no substantive reason to depart from these established principles.
While it is true that loss of trust or breach of confidence is a valid ground for dismissing an employee, such loss or breach of trust must have some
basis (Gubac v. NLRC, 187 SCRA 412 [July 13, 1990]). As found by the Labor Arbiter, the accusations of petitioner PNOC-EDC against private
respondent Mercado have no basis. Mrs. Leonardo Nodado, from whom the nipa shingles were purchased, sufficiently explained in her affidavit
(Rollo, p. 36) that the total purchase price of P1,680.00 was paid by respondent Mercado as agreed upon. The alleged discount given by Mrs. Nodado
is not supported by evidence as well as the alleged appropriation of P8.66 from the cost of fabrication of rubber stamps. The Labor Arbiter, likewise,
found no evidence to support the alleged violation of company rules. On the contrary, he found respondent Mercado's explanation in his affidavit
(Rollo, pp. 38-40) as to the alleged violations to be satisfactory. Moreover, these findings were never contradicted by petitioner petitioner PNOC-EDC.
PREMISES CONSIDERED, the petition is DENIED and the resolution of respondent NLRC dated July 3, 1987 is AFFIRMED with the modification that the
moral damages are reduced to Ten Thousand (P10,000.00) Pesos, and the exemplary damages reduced to Five Thousand (P5,000.00) Pesos.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla and Regalado, JJ., concur.
Sarmiento, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 87676 December 20, 1989
REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL PARKS DEVELOPMENT COMMITTEE, petitioner,
vs.
THE HON. COURT OF APPEALS and THE NATIONAL PARKS DEVELOPMENT SUPERVISORY ASSOCIATION & THEIR MEMBERS, respondents.
Bienvenido D. Comia for respondents.

GRIÑO-AQUINO, J.:
The Regional Trial Court of Manila, Branch III, dismissed for lack of jurisdiction, the petitioner's complaint in Civil Case No. 88- 44048 praying for a
declaration of illegality of the strike of the private respondents and to restrain the same. The Court of Appeals denied the petitioner's petition for
certiorari, hence, this petition for review.
The key issue in this case is whether the petitioner, National Parks Development Committee (NPDC), is a government agency, or a private corporation,
for on this issue depends the right of its employees to strike.
This issue came about because although the NPDC was originally created in 1963 under Executive Order No. 30, as the Executive Committee for the
development of the Quezon Memorial, Luneta and other national parks, and later renamed as the National Parks Development Committee under
Executive Order No. 68, on September 21, 1967, it was registered in the Securities and Exchange Commission (SEC) as a non-stock and non-profit
corporation, known as "The National Parks Development Committee, Inc."
However, in August, 1987, the NPDC was ordered by the SEC to show cause why its Certificate of Registration should not be suspended for: (a) failure
to submit the General Information Sheet from 1981 to 1987; (b) failure to submit its Financial Statements from 1981 to 1986; (c) failure to register its
Corporate Books; and (d) failure to operate for a continuous period of at least five (5) years since September 27, 1967.
On August 18, 1987, the NPDC Chairman, Amado Lansang, Jr., informed SEC that his Office had no objection to the suspension, cancellation, or
revocation of the Certificate of Registration of NPDC.
By virtue of Executive Order No. 120 dated January 30, 1989, the NPDC was attached to the Ministry (later Department) of Tourism and provided with
a separate budget subject to audit by the Commission on Audit.
On September 10, 1987, the Civil Service Commission notified NPDC that pursuant to Executive Order No. 120, all appointments and other personnel
actions shall be submitted through the Commission.
Meanwhile, the Rizal Park Supervisory Employees Association, consisting of employees holding supervisory positions in the different areas of the
parks, was organized and it affiliated with the Trade Union of the Philippines and Allied Services (TUPAS) under Certificate No. 1206.
On June 15, 1987, two collective bargaining agreements were entered into between NPDC and NPDCEA (TUPAS local Chapter No. 967) and NPDC and
NPDCSA (TUPAS Chapter No. 1206), for a period of two years or until June 30, 1989.
On March 20, 1988, these unions staged a stake at the Rizal Park, Fort Santiago, Paco Park, and Pook ni Mariang Makiling at Los Banos, Laguna,
alleging unfair labor practices by NPDC.
On March 21, 1988, NPDC filed in the Regional Trial Court in Manila, Branch III, a complaint against the union to declare the strike illegal and to
restrain it on the ground that the strikers, being government employees, have no right to strike although they may form a union.
On March 24, 1988, the lower court dismissed the complaint and lifted the restraining order for lack of jurisdiction. It held that the case "properly falls
under the jurisdiction of the Department of Labor," because "there exists an employer-employee relationship" between NPDC and the strikers, and
"that the acts complained of in the complaint, and which plaintiff seeks to enjoin in this action, fall under paragraph 5 of Article 217 of the Labor Code,
..., in relation to Art. 265 of the same Code, hence, jurisdiction over said acts does not belong to this Court but to the Labor Arbiters of the
Department of Labor." (p. 142, Rollo.).
Petitioner went to the Court of Appeals on certiorari (CA-G.R. SP No. 14204). On March 31, 1989, the Court of appeals affirmed the order of the trial
court, hence, this petition for review. The petitioner alleges that the Court of Appeals erred:
1) in not holding that the NPDC employees are covered by the Civil Service Law; and
2) in ruling that petitioner's labor dispute with its employees is cognizable by the Department of Labor.
We have considered the petition filed by the Solicitor General on behalf of NPDC and the comments thereto and are persuaded that it is meritorious.
In Jesus P. Perlas, Jr. vs. People of the Philippines, G.R. Nos. 84637-39, August 2, 1989, we ruled that the NPDC is an agency of the government, not a
government-owned or controlled corporation, hence, the Sandiganbayan had jurisdiction over its acting director who committed estafa. We held
thus:
The National Parks Development Committee was created originally as an Executive Committee on January 14,1963, for the
development of the Quezon Memorial, Luneta and other national parks (Executive Order No. 30). It was later designated as the
National Parks Development Committee (NPDC) on February 7, 1974 (E.O. No. 69). On January 9, 1966, Mrs. Imelda R. Marcos and
Teodoro F. Valencia were designated Chairman and Vice- Chairman respectively (E.O. No. 3). Despite an attempt to transfer it to
the Bureau of Forest Development, Department of Natural Resources, on December 1, 1975 (Letter of Implementation No. 39,
issued pursuant to PD No. 830, dated November 27, 1975), the NPDC has remained under the Office of the President (E.O. No.
709, dated July 27, 1981).
Since 1977 to 1981, the annual appropriations decrees listed NPDC as a regular government agency under the Office of the
President and allotments for its maintenance and operating expenses were issued direct to NPDC (Exh. 10-A Perlas, Item No. 2, 3).
(Italics ours.)
Since NPDC is a government agency, its employees are covered by civil service rules and regulations (Sec. 2, Article IX, 1987 Constitution). Its
employees are civil service employees (Sec. 14, Executive Order No. 180).
While NPDC employees are allowed under the 1987 Constitution to organize and join unions of their choice, there is as yet no law permitting them to
strike. In case of a labor dispute between the employees and the government, Section 15 of Executive Order No. 180 dated June 1, 1987 provides that
the Public Sector Labor- Management Council, not the Department of Labor and Employment, shall hear the dispute. Clearly, the Court of Appeals and
the lower court erred in holding that the labor dispute between the NPDC and the members of the NPDSA is cognizable by the Department of Labor
and Employment.
WHEREFORE, the petition for review is granted. The decision of the Court of Appeals in CA-G.R. SP No. 14204 is hereby set aside. The private
respondents' complaint should be filed in the Public Sector Labor-Management Council as provided in Section 15 of Executive Order No. 180. Costs
against the private respondents.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
 
G.R. Nos. 109095-109107 February 23, 1995
ELDEPIO LASCO, RODOLFO ELISAN, URBANO BERADOR, FLORENTINO ESTOBIO, MARCELINO MATURAN, FRAEN BALIBAG, CARMELITO GAJOL,
DEMOSTHENES MANTO, SATURNINO BACOL, SATURNINO LASCO, RAMON LOYOLA, JOSENIANO B. ESPINA, all represented by MARIANO R.
ESPINA, petitioner,
vs.
UNITED NATIONS REVOLVING FUND FOR NATURAL RESOURCES EXPLORATION (UNRFNRE) represented by its operations manager, DR. KYRIACOS
LOUCA, OSCAR N. ABELLA, LEON G. GONZAGA, JR., MUSIB M. BUAT, Commissioners of National Labor Relations Commission (NLRC), Fifth Division,
Cagayan de Oro City and IRVING PETILLA, Labor Arbiter of Butuan City, respondents.

QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set aside the Resolution dated January 25, 1993 of the National Labor
Relations Commission (NLRC), Fifth Division, Cagayan de Oro City.
We dismiss the petition.
I
Petitioners were dismissed from their employment with private respondent, the United Nations Revolving Fund for Natural Resources Exploration
(UNRFNRE), which is a special fund and subsidiary organ of the United Nations. The UNRFNRE is involved in a joint project of the Philippine
Government and the United Nations for exploration work in Dinagat Island.
Petitioners are the complainants in NLRC Cases Nos. SRAB 10-03-00067-91 to 10-03-00078-91 and SRAB 10-07-00159-91 for illegal dismissal and
damages.
In its Motion to Dismiss, private respondent alleged that respondent Labor Arbiter had no jurisdiction over its personality since it enjoyed diplomatic
immunity pursuant to the 1946 Convention on the Privileges and Immunities of the United Nations. In support thereof, private respondent attached a
letter from the Department of Foreign Affairs dated August 26, 1991, which acknowledged its immunity from suit. The letter confirmed that private
respondent, being a special fund administered by the United Nations, was covered by the 1946 Convention on the Privileges and Immunities of the
United Nations of which the Philippine Government was an original signatory (Rollo, p. 21).
On November 25, 1991, respondent Labor Arbiter issued an order dismissing the complaints on the ground that private respondent was protected by
diplomatic immunity. The dismissal was based on the letter of the Foreign Office dated September 10, 1991.
Petitioners' motion for reconsideration was denied. Thus, an appeal was filed with the NLRC, which affirmed the dismissal of the complaints in its
Resolution dated January 25, 1993.
Petitioners filed the instant petition for certiorari without first seeking a reconsideration of the NLRC resolution.
II
Article 223 of the Labor Code of the Philippines, as amended, provides that decisions of the NLRC are final and executory. Thus, they may only be
questioned through certiorari as a special civil action under Rule 65 of the Revised Rules of Court.
Ordinarily, certiorari as a special civil action will not lie unless a motion for reconsideration is first filed before the respondent tribunal, to allow it an
opportunity to correct its assigned errors (Liberty Insurance Corporation v. Court of Appeals, 222 SCRA 37 [1993]).
In the case at bench, petitioners' failure to file a motion for reconsideration is fatal to the instant petition. Moreover, the petition lacks any
explanation for such omission, which may merit its being considered as falling under the recognized exceptions to the necessity of filing such motion.
Notwithstanding, we deem it wise to give due course to the petition because of the implications of the issue in our international relations.
Petitioners argued that the acts of mining exploration and exploitation are outside the official functions of an international agency protected by
diplomatic immunity. Even assuming that private respondent was entitled to diplomatic immunity, petitioners insisted that private respondent waived
it when it engaged in exploration work and entered into a contract of employment with petitioners.
Petitioners, likewise, invoked the constitutional mandate that the State shall afford full protection to labor and promote full employment and equality
of employment opportunities for all (1987 Constitution, Art. XIII, Sec. 3).
The Office of the Solicitor General is of the view that private respondent is covered by the mantle of diplomatic immunity. Private respondent is a
specialized agency of the United Nations. Under Article 105 of the Charter of the United Nations:
1. The Organization shall enjoy in the territory of its Members such privileges and immunities as are necessary for the fulfillment
of its purposes.
2. Representatives of the Members of the United Nations and officials of the Organization shall similarly enjoy such privileges and
immunities as are necessary for the independent exercise of their functions in connection with the organization.
Corollary to the cited article is the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations, to which the
Philippines was a signatory (Vol. 1, Philippine Treaty Series, p. 621). We quote Sections 4 and 5 of Article III thereof:
Sec. 4. The specialized agencies, their property and assets, wherever located and by whomsoever held shall enjoy immunity from
every form of legal process except insofar as in any particular case they have expressly waived their immunity. It is, however,
understood that no waiver of immunity shall extend to any measure of execution (Emphasis supplied).
Sec. 5. The premises of the specialized agencies shall be inviolable. The property and assets of the specialized agencies, wherever
located and by whomsoever held, shall be immune from search, requisition, confiscation, expropriation and any other form of
interference, whether by executive, administrative, judicial or legislative action (Emphasis supplied).
As a matter of state policy as expressed in the Constitution, the Philippine Government adopts the generally accepted principles of international law
(1987 Constitution, Art. II, Sec. 2). Being a member of the United Nations and a party to the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations, the Philippine Government adheres to the doctrine of immunity granted to the United Nations and its
specialized agencies. Both treaties have the force and effect of law.
In World Health Organization v. Aquino, 48 SCRA 242, (1972), we had occasion to rule that:
It is a recognized principle of international law and under our system of separation of powers that diplomatic immunity is
essentially a political question and courts should refuse to look beyond a determination by the executive branch of the government,
and where the plea of diplomatic immunity is recognized and affirmed by the executive branch of the government as in the case at
bar, it is then the duty of the courts to accept the claim of immunity upon appropriate suggestion by the principal law officer of
the government, the Solicitor General or other officer acting under his direction. Hence, in adherence to the settled principle that
courts may not so exercise their jurisdiction by seizure and detention of property, as to embarrass the executive arm of the
government in conducting foreign relations, it is accepted doctrine that "in such cases the judicial department of (this)
government follows the action of the political branch and will not embarrass the latter by assuming an antagonistic
jurisdiction (Emphasis supplied).
We recognize the growth of international organizations dedicated to specific universal endeavors, such as health, agriculture, science and technology
and environment. It is not surprising that their existence has evolved into the concept of international immunities. The reason behind the grant of
privileges and immunities to international organizations, its officials and functionaries is to secure them legal and practical independence in fulfilling
their duties (Jenks, International Immunities 17 [1961]).
Immunity is necessary to assure unimpeded performance of their functions. The purpose is "to shield the affairs of international organizations, in
accordance with international practice, from political pressure or control by the host country to the prejudice of member States of the organization,
and to ensure the unhampered performance of their functions" (International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]).
In the International Catholic Migration Commission case, we held that there is no conflict between the constitutional duty of the State to protect the
rights of workers and to promote their welfare, and the grant of immunity to international organizations. Clauses on jurisdictional immunity are now
standard in the charters of the international organizations to guarantee the smooth discharge of their functions.
The diplomatic immunity of private respondent was sufficiently established by the letter of the Department of Foreign Affairs, recognizing and
confirming the immunity of UNRFNRE in accordance with the 1946 Convention on Privileges and Immunities of the United Nations where the
Philippine Government was a party. The issue whether an international organization is entitled to diplomatic immunity is a "political question" and
such determination by the executive branch is conclusive on the courts and quasi-judicial agencies (The Holy See v. Hon. Eriberto U. Rosario, Jr., G.R.
No. 101949, Dec. 1, 1994; International Catholic Migration Commission v. Calleja, supra).
Our courts can only assume jurisdiction over private respondent if it expressly waived its immunity, which is not so in the case at bench (Convention
on the Privileges and Immunities of the Specialized Agencies of the United Nations, Art. III, Sec. 4).
Private respondent is not engaged in a commercial venture in the Philippines. Its presence here is by virtue of a joint project entered into by the
Philippine Government and the United Nations for mineral exploration in Dinagat Island. Its mission is not to exploit our natural resources and gain
pecuniarily thereby but to help improve the quality of life of the people, including that of petitioners.
This is not to say that petitioner have no recourse. Section 31 of the Convention on the Privileges and Immunities of the Specialized Agencies of the
United Nations states that "each specialized agency shall make a provision for appropriate modes of settlement of: (a) disputes arising out of
contracts or other disputes of private character to which the specialized agency is a party."
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.

SECOND DIVISION
[G.R. No. 144672. July 10, 2003.]

SAN MIGUEL CORPORATION, Petitioner, v. MAERC INTEGRATED SERVICES, INC.; and EMERBERTO ORQUE, ROGELIO PRADO, JR., EDDIE SELLE,
ALEJANDRO ANNABIEZA, ANNIAS JUAMO-AS, CONSORCIO MANLOLOYO, ANANIAS ALCONTIN, REY GESTOPA, EDGARDO NUÑEZ, JUNEL
CABATINGAN, PAUL DUMAQUETA, FELIMON ECHAVEZ, VITO SEALANA, DENECIA PALAO, ROBERTO LAPIZ, BALTAZAR LABIO, LEONARDO BONGO, EL
CID ICALINA, JOSE DIOCAMPO, ADELO CANTILLAS, ISAIAS BRANZUELA, RAMON ROSALES, GAUDENCIO PESON, HECTOR CABAÑOG, EDGARDO
DAGMAYAN, ROGELIO CRUZ, ROLANDO ESPINA, BERNARDINO REGIDOR, ARNELIO SUMALINOG, GUMERSINDO ALCONTIN, LORETO NUÑEZ, JOEBE
BOY DAYON, CONRADO MESANQUE, MARCELO PESCADOR, MARCELINO JABAGAT, VICENTE DEVILLERES, VICENTE ALIN, RODOLFO PAHUGOT, RUEL
NAVARES, DANILO ANABIEZA, ALEX JUEN, JUANITO GARCES, SILVINO LIMBAGA, AURELIO JURPACIO, JOVITO LOON, VICTOR TENEDERO, SASING
MORENO, WILFREDO HORTEZUELA, JOSELITO MELENDEZ, ALFREDO GESTOPA, REGINO GABUYA, JORGE GAMUZARNO, LOLITO COCIDO, EFRAIM
YUBAL, VENERANDO ROAMAR, GERARDO BUTALID, HIPOLITO VIDAS, VENGELITO FRIAS, VICENTE CELACIO, CORLITO PESTAÑAS, ERVIN HYROSA,
ROMMEL GUERERO, RODRIGO ENERLAS, FRANCISCO CARBONILLA, NICANOR CUIZON, PEDRO BRIONES, RODOLFO CABALHUG, TEOFILO RICARDO,
DANILO R. DIZON, ALBERTO EMBONG, ALFONSO ECHAVEZ, GONZALO RORACEÑA, MARCELO CARACINA, RAUL BORRES, LINO TONGALAMOS,
ARTEMIO BONGO, JR., ROY AVILA, MELCHOR FREGLO, RAUL CABILLADA, EDDIE CATAB, MELENCIO DURANO, ALLAN RAGO, DOMINADOR
CAPARIDA, JOVITO CATAB, ALBERT LASPIÑAS, ALEX ANABIEZA, NESTOR REYNANTE, EULOGIO GESTOPA, MARIO BOLO, EDERLITO A. BALOCANO,
JOEL PEPITO, REYNALDO LUDIA, MANUEL CINCO, ALLAN AGUSTIN, PABLITO POLEGRATES, CLYDE PRADO, DINDO MISA, ROGER SASING, RAMON
ARCALLANA, GABRIEL SALAS, EDWIN SASAN, DIOSDADO BARRIGA, MOISES SASAN, SINFORIANO CANTAGO, LEONARDO MARTURILLAS, MARIO
RANIS, ALEXANDRO RANIDO, JEROME PRADO, RAUL OYAO, VICTOR CELACIO, GERALDO ROQUE, ZOSIMO CARARATON, VIRGILIO ZANORIA, JOSE
ZANORIA, ALLAN ZANORIA, VICTORINO SENO, TEODULO JUMAO-AS, ALEXANDER HERA, ANTHONY ARANETA, ALDRIN SUSON, VICTOR VERANO,
 RUEL SUFRERENCIA, ALFRED NAPARATE, WENCESLAO BACLOHON, EDUARDO LANGITA, FELIX ORDENEZA, ARSENIO LOGARTA, EDUARDO DELA
VEGA, JOVENTINO CANOOG, ROGELIO ABAPO, RICARDO RAMAS, JOSE BANDIALAN, ANTONIO BASALAN, LYNDON BASALAN, WILFREDO ALIVIANO,
BIENVENIDO ROSARIO, JESUS CAPANGPANGAN, RENATO MENDOZA, ALEJANDRO CATANDEJAN, RUBEN TALABA, FILEMON ECHAVEZ, MARCELINO
CARACENA, IGNACIO MISA, FELICIANO AGBAY, VICTOR MAGLASANG, ARTURO HEYROSA, ALIPIO TIROL, ROSENDO MONDARES, ANICETO LUDIA,
REYNALDO LAVANDERO, REUYAN HERCULANO, TEODULO NIQUE, EMERBERTO ORQUE, ZOSIMO BAOBAO, MEDARDO SINGSON, ANTONIO
PATALINGHUG, ERNESTO SINGSON, ROBERTO TORRES, CESAR ESCARIO, LEODEGARIO DOLLECIN, ALBERTO ANOBA, RODRIGO BISNAR, ZOSIMO
BINGAS, ROSALIO DURAN, SR., ROSALIO DURAN, JR., ROMEO DURAN, ANTONIO ABELLA, MARIANO REPOLLO, POLEGARPO DEGAMO, MARIO
CEREZA, ANTONIO LAOROMILLA, PROCTUSO MAGALLANES, ELADIO TORRES, WARLITO DEMANA, HENRY GEDARO, DOISEDERIO GEMPERAO,
ANICETO GEMPERAO, JERRY CAPAROSO, SERLITO NOYNAY, LUCIANO RECOPELACION, JUANITO GARCES, FELICIANO TORRES, RANILO VILLAREAL,
FERMIN ALIVIANO, JUNJIE LAVISTE, TOMACITO DE CASTRO, JOSELITO CAPILINA, SAMUEL CASQUEJO, LEONARDO NATAD, BENJAMIN SAYSON,
PEDRO INOC, EDWARD FLORES, EDWIN SASAN, JOSE REY INOT, EDGAR CORTES, ROMEO LOMBOG, NICOLAS RIBO, JAIME RUBIN, ORLANDO REGIS,
RICKY ALCONZA, RUDY TAGALOG, VICTORINO TAGALOG, EDWARD COLINA, RONIE GONZAGA, PAUL CABILLADA, WILFREDO MAGALONA, JOEL
PEPITO, PROSPERO MAGLASANG, ALLAN AGUSTIN, FAUSTO BARGAYO, NOMER SANCHEZ, JOLITO ALIN, BIRNING REGIDOR, GARRY DIGNOS, EDWIN
DIGNOS, DARIO DIGNOS, ROGELIO DIGNOS, JIMMY CABIGAS, FERNANDO ANAJAO, ALEX FLORES, FERNANDO REMEDIO, TOTO MOSQUIDA,
ALBERTO YAGONIA, VICTOR BARIQUIT, IGNACIO MISA, ELISEO VILLARENO, MANUEL LAVANDERO, VIRCEDE, MARIO RANIS, JAIME RESPONSO,
MARIANITO AGUIRRE, MARCIAL HERUELA, GODOFREDO TUÑACAO, PERFECTO REGIS, ROEL DEMANA, ELMER CASTILLO, WINEFREDO CALAMOHOY,
RUDY LUCERNAS, ANTONIO CAÑETE, EFRAIM YUBAL, JESUS CAPANGPANGAN, DAMIAN CAPANGPANGAN, TEOFILO CAPANGPANGAN, NILO
CAPANGPANGAN, CORORENO CAPANGPANGAN, EMILIO MONDARES, PONCIANO AGANA, VICENTE DEVILLERES, MARIO ALIPAN, ROMANITO
ALIPAN, ALDEON ROBINSON, FORTUNATO SOCO, CELSO COMPUESTO, WILLIAM ITORALDE, ANTONIO PESCADOR, JEREMIAS RONDERO, ESTROPIO
PUNAY, LEOVIJILDO PUNAY, ROMEO QUILONGQUILONG, WILFREDO GESTOPA, ELISEO SANTOS, HENRY ORIO, JOSE YAP, NICANOR MANAYAGA,
TEODORO SALINAS, ANICETO MONTERO, RAFAELITO VERZOSA, ALEJANDRO RANIDO, HENRY TALABA, ROMULO TALABA, DIOSDADO BESABELA,
SYLVESTRE TORING, EDILBERTO PADILLA, ALLAN HEROSA, ERNESTO SUMALINOG, ARISTON VELASCO, JR., FERNANDO LOPEZ, ALFONSO ECHAVEZ,
NICANOR CUIZON, DOMINADOR CAPARIDA, ZOSIMO CORORATION, ARTEMIO LOVERANES, DIONISIO YAGONIA, VICTOR CELOCIA, HIPOLITO VIDAS,
TEODORO ARCILLAS, MARCELINO HABAGAT, GAUDIOSO LABASAN, LEOPOLDO REGIS, AQUILLO DAMOLE, WILLY ROBLE and NIEL
ZANORIA, Respondents.

DECISION

BELLOSILLO, J.:

TWO HUNDRED NINETY-ONE (291) workers filed their complaints (nine [9] complaints in all) against San Miguel Corporation (petitioner herein) and
Maerc Integrated Services, Inc. (respondent herein), for illegal dismissal, underpayment of wages, non-payment of service incentive leave pays and
other labor standards benefits, and for separation pays from 25 June to 24 October 1991. The complainants alleged that they were hired by San
Miguel Corporation (SMC) through its agent or intermediary Maerc Integrated Services, Inc. (MAERC) to work in two (2) designated workplaces in
Mandaue City: one, inside the SMC premises at the Mandaue Container Services, and another, in the Philphos Warehouse owned by MAERC. They
washed and segregated various kinds of empty bottles used by SMC to sell and distribute its beer beverages to the consuming public. They were paid
on a per piece or pakiao basis except for a few who worked as checkers and were paid on daily wage basis.

Complainants alleged that long before SMC contracted the services of MAERC a majority of them had already been working for SMC under the guise
of being employees of another contractor, Jopard Services, until the services of the latter were terminated on 31 January 1988.

SMC denied liability for the claims and averred that the complainants were not its employees but of MAERC, an independent contractor whose
primary corporate purpose was to engage in the business of cleaning, receiving, sorting, classifying, etc., glass and metal containers.

It appears that SMC entered into a Contract of Services with MAERC engaging its services on a non-exclusive basis for one (1) year beginning 1
February 1988. The contract was renewed for two (2) more years in March 1989. It also provided for its automatic renewal on a month-to-month
basis after the two (2)-year period and required that a written notice to the other party be given thirty (30) days prior to the intended date of
termination, should a party decide to discontinue with the contract.chanrob1es virtua1 law library

In a letter dated 15 May 1991, SMC informed MAERC of the termination of their service contract by the end of June 1991. SMC cited its plans to phase
out its segregation activities starting 1 June 1991 due to the installation of labor and cost-saving devices.

When the service contract was terminated, complainants claimed that SMC stopped them from performing their jobs; that this was tantamount to
their being illegally dismissed by SMC who was their real employer as their activities were directly related, necessary and desirable to the main
business of SMC; and, that MAERC was merely made a tool or a shield by SMC to avoid its liability under the Labor Code.

MAERC for its part admitted that it recruited the complainants and placed them in the bottle segregation project of SMC but maintained that it was
only conveniently used by SMC as an intermediary in operating the project or work directly related to the primary business concern of the latter with
the end in view of avoiding its obligations and responsibilities towards the complaining workers.

The nine (9) cases 1 were consolidated. On 31 January 1995 the Labor Arbiter rendered a decision holding that MAERC was an independent
contractor. 2 He dismissed the complaints for illegal dismissal but ordered MAERC to pay complainants’ separation benefits in the total amount of
P2,334,150.00. MAERC and SMC were also ordered to jointly and severally pay complainants their wage differentials in the amount of P845,117.00
and to pay attorney’s fees in the amount of P317,926.70.

The complainants appealed the Labor Arbiter’s finding that MAERC was an independent contractor and solely liable to pay the amount representing
the separation benefits to the exclusion of SMC, as well as the Labor Arbiter’s failure to grant the Temporary Living Allowance of the complainants.
SMC appealed the award of attorney’s fees.

The National Labor Relations Commission (NLRC) ruled in its 7 January 1997 decision that MAERC was a labor-only contractor and that complainants
were employees of SMC. 3 The NLRC also held that whether MAERC was a job contractor or a labor-only contractor, SMC was still solidarily liable with
MAERC for the latter’s unpaid obligations, citing Art. 109 4 of the Labor Code. Thus, the NLRC modified the judgment of the Labor Arbiter and held
SMC jointly and severally liable with MAERC for complainants’ separation benefits. In addition, both respondents were ordered to pay jointly and
severally an indemnity fee of P2,000.00 to each complainant.

SMC moved for a reconsideration which resulted in the reduction of the award of attorney’s fees from P317,926.70 to P84,511.70. The rest of the
assailed decision was unchanged. 5

On 12 March 1998, SMC filed a petition for certiorari with prayer for the issuance of a temporary restraining order and/or injunction with this Court
which then referred the petition to the Court of Appeals.

On 28 April 2000 the Court of Appeals denied the petition and affirmed the decision of the NLRC. 6 The appellate court also denied SMC’s motion for
reconsideration in a resolution 7 dated 26 July 2000. Hence, petitioner seeks a review of the Court of Appeals’ judgment before this Court.

Petitioner poses the same issues brought up in the appeals court and the pivotal question is whether the complainants are employees of petitioner
SMC or of respondent MAERC.

Relying heavily on the factual findings of the Labor Arbiter, petitioner maintained that MAERC was a legitimate job contractor. It directed this Court’s
attention to the undisputed evidence it claimed to establish this assertion: MAERC is a duly organized stock corporation whose primary purpose is to
engage in the business of cleaning, receiving, sorting, classifying, grouping, sanitizing, packing, delivering, warehousing, trucking and shipping any
glass and/or metal containers and that it had listed in its general information sheet two hundred seventy-eight (278) workers, twenty-two (22)
supervisors, seven (7) managers/officers and a board of directors; it also voluntarily entered into a service contract on a non-exclusive basis with
petitioner from which it earned a gross income of P42,110,568.24 from 17 October 1988 to 27 November 1991; the service contract specified that
MAERC had the selection, engagement and discharge of its personnel, employees or agents or otherwise in the direction and control thereof; MAERC
admitted that it had machinery, equipment and fixed assets used in its business valued at P4,608,080.00; and, it failed to appeal the Labor Arbiter’s
decision which declared it to be an independent contractor and ordered it to solely pay the separation benefits of the complaining workers.

We find no basis to overturn the Court of Appeals and the NLRC. Well-established is the principle that findings of fact of quasi-judicial bodies, like the
NLRC, are accorded with respect, even finality, if supported by substantial evidence. 8 Particularly when passed upon and upheld by the Court of
Appeals, they are binding and conclusive upon the Supreme Court and will not normally be disturbed. 9

This Court has invariably held that in ascertaining an employer-employee relationship, the following factors are considered: (a) the selection and
engagement of employee; (b) the payment of wages; (c) the power of dismissal; and, (d) the power to control an employee’s conduct, the last being
the most important. 10 Application of the aforesaid criteria clearly indicates an employer-employee relationship between petitioner and the
complainants.

Evidence discloses that petitioner played a large and indispensable part in the hiring of MAERC’s workers. It also appears that majority of the
complainants had already been working for SMC long before the signing of the service contract between SMC and MAERC in 1988.

The incorporators of MAERC admitted having supplied and recruited workers for SMC even before MAERC was created. 11 The NLRC also found that
when MAERC was organized into a corporation in February 1988, the complainants who were then already working for SMC were made to go through
the motion of applying for work with Ms. Olga Ouano, President and General Manager of MAERC, upon the instruction of SMC through its supervisors
to make it appear that complainants were hired by MAERC. This was testified to by two (2) of the workers who were segregator and forklift operator
assigned to the Beer Marketing Division at the SMC compound and who had been working with SMC under a purported contractor Jopard Services
since March 1979 and March 1981, respectively. Both witnesses also testified that together with other complainants they continued working for SMC
without break from Jopard Services to MAERC.

As for the payment of workers’ wages, it is conceded that MAERC was paid in lump sum but records suggest that the remuneration was not computed
merely according to the result or the volume of work performed. The memoranda of the labor rates bearing the signature of a Vice-President and
General Manager for the Vismin Beer Operations 12 as well as a director of SMC 13 appended to the contract of service reveal that SMC assumed the
responsibility of paying for the mandated overtime, holiday and rest day pays of the MAERC workers. 14 SMC also paid the employer’s share of the
SSS and Medicare contributions, the 13th month pay, incentive leave pay and maternity benefits. 15 In the lump sum received, MAERC earned a
marginal amount representing the contractor’s share. These lend credence to the complaining workers’ assertion that while MAERC paid the wages of
the complainants, it merely acted as an agent of SMC.

Petitioner insists that the most significant determinant of an employer-employee relationship, i.e., the right to control, is absent. The contract of
services between MAERC and SMC provided that MAERC was an independent contractor and that the workers hired by it "shall not, in any manner
and under any circumstances, be considered employees of the Company, and that the Company has no control or supervision whatsoever over the
conduct of the Contractor or any of its workers in respect to how they accomplish their work or perform the Contractor’s obligations under the
Contract." 16

In deciding the question of control, the language of the contract is not determinative of the parties’ relationship; rather, it is the totality of the facts
and surrounding circumstances of each case. 17

Despite SMCs disclaimer, there are indicia that it actively supervised the complainants. SMC maintained a constant presence in the workplace through
its own checkers. Its asseveration that the checkers were there only to check the end result was belied by the testimony of Carlito R. Singson, head of
the Mandaue Container Service of SMC, that the checkers were also tasked to report on the identity of the workers whose performance or quality of
work was not according to the rules and standards set by SMC. According to Singson, "it (was) necessary to identify the names of those concerned so
that the management [referring to MAERC] could call the attention to make these people improve the quality of work." 18

Viewed alongside the findings of the Labor Arbiter that the MAERC organizational set-up in the bottle segregation project was such that the
segregators/cleaners were supervised by checkers and each checker was also under a supervisor who was in turn under a field supervisor, the
responsibility of watching over the MAERC workers by MAERC personnel became superfluous with the presence of additional checkers from
SMC.chanrob1es virtua1 1aw 1ibrary

Reinforcing the belief that the SMC exerted control over the work performed by the segregators or cleaners, albeit through the instrumentality of
MAERC, were letters by SMC to the MAERC management. These were letters 19 written by a certain Mr. W. Padin 20 addressed to the President and
General Manager of MAERC as well as to its head of operations, 21 and a third letter 22 from Carlito R. Singson also addressed to the President and
General Manager of MAERC. More than just a mere written report of the number of bottles improperly cleaned and/or segregated, the letters named
three (3) workers who were responsible for the rejection of several bottles, specified the infraction committed in the segregation and cleaning, then
recommended the penalty to be imposed. Evidently, these workers were reported by the SMC checkers to the SMC inspector.

While the Labor Arbiter dismissed these letters as merely indicative of the concern in the end-result of the job contracted by MAERC, we find more
credible the contention of the complainants that these were manifestations of the right of petitioner to recommend disciplinary measures over
MAERC employees. Although calling the attention of its contractors as to the quality of their services may reasonably be done by SMC, there appears
to be no need to instruct MAERC as to what disciplinary measures should be imposed on the specific workers who were responsible for rejections of
bottles. This conduct by SMC representatives went beyond a mere reminder with respect to the improperly cleaned/segregated bottles or a genuine
concern in the outcome of the job contracted by MAERC.
Control of the premises in which the contractor’s work was performed was also viewed as another phase of control over the work, and this strongly
tended to disprove the independence of the contractor. 23 In the case at bar, the bulk of the MAERC segregation activities was accomplished at the
MAERC-owned PHILPHOS warehouse but the building along with the machinery and equipment in the facility was actually being rented by SMC. This
is evident from the memoranda of labor rates which included rates for the use of forklifts and the warehouse at the PHILPHOS area, hence, the NLRC’s
conclusion that the payment for the rent was cleverly disguised since MAERC was not in the business of renting warehouses and forklifts. 24

Other instances attesting to SMC’s supervision of the workers are found in the minutes of the meeting held by the SMC officers on 5 December 1988.
Among those matters discussed were the calling of SMC contractors to have workers assigned to segregation to undergo and pass eye examination to
be done by SMC EENT company doctor and a review of compensation/incentive system for segregators to improve the segregation
activities.25cralaw:red

But the most telling evidence is a letter by Mr. Antonio Ouano, Vice-President of MAERC dated 27 May 1991 addressed to Francisco Eizmendi, SMC
President and Chief Executive Officer, asking the latter to reconsider the phasing out of SMC’s segregation activities in Mandaue City. The letter was
not denied but in fact used by SMC to advance its own arguments. 26

Briefly, the letter exposed the actual state of affairs under which MAERC was formed and engaged to handle the segregation project of SMC. It
provided an account of how in 1987 Eizmendi approached the would-be incorporators of MAERC and offered them the business of servicing the SMC
bottle-washing and segregation department in order to avert an impending labor strike. After initial reservations, MAERC incorporators accepted the
offer and before long trial segregation was conducted by SMC at the PHILPHOS warehouse. 27

The letter also set out the circumstances under which MAERC entered into the Contract of Services in 1988 with the assurances of the SMC President
and CEO that the employment of MAERC’s services would be long term to enable it to recover its investments. It was with this understanding that
MAERC undertook borrowings from banking institutions and from affiliate corporations so that it could comply with the demands of SMC to invest in
machinery and facilities.

In sum, the letter attested to an arrangement entered into by the two (2) parties which was not reflected in the Contract of Services. A peculiar
relationship mutually beneficial for a time but nonetheless ended in dispute when SMC decided to prematurely end the contract leaving MAERC to
shoulder all the obligations to the workers.

Petitioner also ascribes as error the failure of the Court of Appeals to apply the ruling in Neri v. NLRC. 28 In that case, it was held that the law did not
require one to possess both substantial capital and investment in the form of tools, equipment, machinery, work premises, among others, to be
considered a job contractor. The second condition to establish permissible job contracting 29 was sufficiently met if one possessed either attribute.

Accordingly, petitioner alleged that the appellate court and the NLRC erred when they declared MAERC a labor-only contractor despite the finding
that MAERC had investments amounting to P4,608,080.00 consisting of buildings, machinery and equipment.

However, in Vinoya v. NLRC, 30 we clarified that it was not enough to show substantial capitalization or investment in the form of tools, equipment,
machinery and work premises, etc., to be considered an independent contractor. In fact, jurisprudential holdings were to the effect that in
determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to,
whether the contractor was carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of specified pieces of work; the control and supervision of the workers; the power of the employer
with respect to the hiring, firing and payment of the workers of the contractor; the control of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode, manner and terms of payment. 31

In Neri, the Court considered not only the fact that respondent Building Care Corporation (BBC) had substantial capitalization but noted that BCC
carried on an independent business and performed its contract according to its own manner and method, free from the control and supervision of its
principal in all matters except as to the results thereof. 32 The Court likewise mentioned that the employees of BCC were engaged to perform specific
special services for their principal. 33 The status of BCC had also been passed upon by the Court in a previous case where it was found to be a
qualified job contractor because it was "a big firm which services among others, a university, an international bank, a big local bank, a hospital center,
government agencies, etc." Furthermore, there were only two (2) complainants in that case who were not only selected and hired by the contractor
before being assigned to work in the Cagayan de Oro branch of FEBTC but the Court also found that the contractor maintained effective supervision
and control over them.

In comparison, MAERC, as earlier discussed, displayed the characteristics of a labor-only contractor. Moreover, while MAERC’s investments in the
form of buildings, tools and equipment amounted to more than P4 Million, we cannot disregard the fact that it was the SMC which required MAERC
to undertake such investments under the understanding that the business relationship between petitioner and MAERC would be on a long term basis.
Nor do we believe MAERC to have an independent business. Not only was it set up to specifically meet the pressing needs of SMC which was then
having labor problems in its segregation division, none of its workers was also ever assigned to any other establishment, thus convincing us that it was
created solely to service the needs of SMC. Naturally, with the severance of relationship between MAERC and SMC followed MAERC’s cessation of
operations, the loss of jobs for the whole MAERC workforce and the resulting actions instituted by the workers.

Petitioner also alleged that the Court of Appeals erred in ruling that "whether MAERC is an independent contractor or a labor-only contractor, SMC is
liable with MAERC for the latter’s unpaid obligations to MAERC’s workers."cralaw virtua1aw library

On this point, we agree with petitioner as distinctions must be made. In legitimate job contracting, the law creates an employer-employee
relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. 34 The principal employer becomes jointly and severally
liable with the job contractor only for the payment of the employees’ wages whenever the contractor fails to pay the same. Other than that, the
principal employer is not responsible for any claim made by the employees.

On the other hand, in labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a
circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of
the labor-only contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes
solidarily liable with the labor-only contractor for all the rightful claims of the employees.chanrob1es virtua1 1aw 1ibrary

This distinction between job contractor and labor-only contractor, however, will not discharge SMC from paying the separation benefits of the
workers, inasmuch as MAERC was shown to be a labor-only contractor; in which case, petitioner’s liability is that of a direct employer and thus
solidarily liable with MAERC.
SMC also failed to comply with the requirement of written notice to both the employees concerned and the Department of Labor and Employment
(DOLE) which must be given at least one (1) month before the intended date of retrenchment. 35 The fines imposed for violations of the notice
requirement have varied. 36 The measure of this award depends on the facts of each case and the gravity of the omission committed by the
employer. 37 For its failure, petitioner was justly ordered to indemnify each displaced worker P2,000.00.

The NLRC and the Court of Appeals affirmed the Labor Arbiter’s award of separation pay to the complainants in the total amount of P2,334,150.00
and of wage differentials in the total amount of P845,117.00. These amounts are the aggregate of the awards due the two hundred ninety-one (291)
complainants as computed by the Labor Arbiter. The following is a summary of the computation of the benefits due the complainants which is part of
the Decision of the Labor Arbiter.

SUMMARY

NAME SALARY SEPARATION TOTAL

DIFFERENTIAL PAY

Case No. 06-1165-9

1. Rogelio Prado, Jr. P3,056.00 P8,190.00 P11,246.00

2. Eddie Selle 3,056.00 8,190.00 11,246.00

3. Alejandro Annabieza 3,056.00 8,190.00 11,246.00

4. Ananias Jumao-as 3,056.00 8,190.00 11,246.00

5. Consorcio Manloloyo 3,056.00 8,190.00 11,246.00

6. Anananias Alcotin 3,056.00 8,190.00 11,246.00

7. Rey Gestopa 2,865.00 8,190.00 11,055.00

8. Edgardo Nuñez 2,865.00 8,190.00 11,055.00

9. Junel Cabatingan 2,865.00 8,190.00 11,055.00

10. Paul Dumaqueta 2,865.00 8,190.00 11,055.00

11. Felimon Echavez 2,843.00 8,190.00 10,673.00

12. Vito Sealana 2,843.00 8,190.00 10,673.00

13. Denecia Palao 2,843.00 8,190.00 10,673.00

14. Roberto Lapiz 3,056.00 8,190.00 11,246.00

15. Baltazar Labio 3,056.00 8,190.00 11,246.00

16. Leonardo Bongo 3,056.00 8,190.00 11,246.00

17. El Cid Icalina 3,056.00 8,190.00 11,246.00

18. Jose Diocampo 3,056.00 8,190.00 11,246.00

19. Adelo Cantillas 3,056.00 8,190.00 11,246.00

20. Isaias Branzuela 3,056.00 8,190.00 11,246.00

21. Ramon Rosales 3,056.00 8,190.00 11,246.00

22. Gaudencio Peson 3,056.00 8,190.00 11,246.00

23. Hector Cabañog 3,056.00 8,190.00 11,246.00

24. Edgardo Dagmayan 3,056.00 8,190.00 11,246.00

25. Rogelio Cruz 3,056.00 8,190.00 11,246.00

26. Rolando Espina 3,056.00 8,190.00 11,246.00

27. Bernardino Regidor 3,056.00 8,190.00 11,246.00

28. Arnelio Sumalinog 3,056.00 8,190.00 11,246.00

29. Gumersindo Alcontin 3,056.00 8,190.00 11,246.00

30. Loreto Nuñez 3,056.00 8,190.00 11,246.00

31. Joebe Boy Dayon 3,056.00 8,190.00 11,246.00

32. Conrado Mesanque 3,056.00 8,190.00 11,246.00

33. Marcelo Pescador 3,056.00 8,190.00 11,246.00

34. Marcelino Jabagat 3,056.00 8,190.00 11,246.00

35. Vicente Devilleres 3,056.00 8,190.00 11,246.00

36. Vicente Alin 3,056.00 8,190.00 11,246.00

37. Rodolfo Pahugot 3,056.00 8,190.00 11,246.00

38. Ruel Navares 3,056.00 8,190.00 11,246.00

39. Danilo Anabieza 3,056.00 8,190.00 11,246.00

40. Alex Juen 3,056.00 8,190.00 11,246.00

41. Juanito Garces 3,056.00 8,190.00 11,246.00

42. Silvino Limbaga 3,056.00 8,190.00 11,246.00

43. Aurelio Jurpacio 3,056.00 8,190.00 11,246.00

44. Jovito Loon 3,056.00 8,190.00 11,246.00

45. Victor Tenedero 3,056.00 8,190.00 11,246.00

46. Sasing Moreno 3,056.00 8,190.00 11,246.00

47. Wilfredo Hortezuela 3,056.00 8,190.00 11,246.00

48. Joselito Melendez 3,056.00 8,190.00 11,246.00

49. Alfredo Gestopa 3,056.00 8,190.00 11,246.00

50. Regino Gabuya 3,056.00 8,190.00 11,246.00

51. Jorge Gamuzarno 3,056.00 8,190.00 11,246.00

52. Lolito Cocido 3,056.00 8,190.00 11,246.00

53. Efraim Yubal 3,056.00 8,190.00 11,246.00

54. Venerando Roamar 3,056.00 8,190.00 11,246.00

55. Gerardo Butalid 3,056.00 8,190.00 11,246.00

56. Hipolito Vidas 3,056.00 8,190.00 11,246.00

57. Vengelito Frias 3,056.00 8,190.00 11,246.00

58. Vicente Celacio 3,056.00 8,190.00 11,246.00

59. Corlito Pestañas 3,056.00 8,190.00 11,246.00

60. Ervin Hyrosa 3,056.00 8,190.00 11,246.00

61. Rommel Guerero 3,056.00 8,190.00 11,246.00

62. Rodrigo Enerlas 3,056.00 8,190.00 11,246.00

63. Francisco Carbonilla 3,056.00 8,190.00 11,246.00

64. Nicanor Cuizon 3,056.00 8,190.00 11,246.00

65. Pedro Briones 3,056.00 8,190.00 11,246.00

66. Rodolfo Cabalhug 3,056.00 8,190.00 11,246.00

67. Teofilo Ricardo 3,056.00 8,190.00 11,246.00

68. Danilo R. Dizon 3,056.00 8,190.00 11,246.00

69. Alberto Embong 3,056.00 8,190.00 11,246.00

70. Alfonso Echavez 3,056.00 8,190.00 11,246.00

71. Gonzalo Roraceña 3,056.00 8,190.00 11,246.00

72. Marcelo Caracina 3,056.00 8,190.00 11,246.00

73. Raul Borres 3,056.00 8,190.00 11,246.00

74. Lino Tongalamos 3,056.00 8,190.00 11,246.00

75. Artemio Bongo, Jr. 3,056.00 8,190.00 11,246.00

76. Roy Avila 3,056.00 8,190.00 11,246.00

77. Melchor Freglo 3,056.00 8,190.00 11,246.00

78. Raul Cabillada 3,056.00 8,190.00 11,246.00

79. Eddie Catab 3,056.00 8,190.00 11,246.00

80. Melencio Durano 3,056.00 8,190.00 11,246.00

81. Allan Rago 3,056.00 8,190.00 11,246.00

82. Dominador Caparida 3,056.00 8,190.00 11,246.00

83. Jovito Catab 3,056.00 8,190.00 11,246.00

84. Albert Laspiñas 3,056.00 8,190.00 11,246.00

85. Alex Anabieza 3,056.00 8,190.00 11,246.00

86. Nestor Reynante 3,056.00 8,190.00 11,246.00

87. Eulogio Estopa 3,056.00 8,190.00 11,246.00

88. Mario Bolo 3,056.00 8,190.00 11,246.00

89. Ederlito A. Balocano 3,056.00 8,190.00 11,246.00

90. Joel Pepito 3,056.00 8,190.00 11,246.00

91. Reynaldo Ludia 3,056.00 5,460.00 8,516.00

92. Manuel Cinco 3,056.00 5,460.00 8,516.00

93. Allan Agustin 3,056.00 8,190.00 11,246.00

94. Pablito Polegrates 3,056.00 8,190.00 11,246.00

95. Clyde Prado 3,056.00 8,190.00 11,246.00

96. Dindo Misa 3,056.00 8,190.00 11,246.00

97. Roger Sasing 3,056.00 8,190.00 11,246.00

98. Ramon Arcallana 3,056.00 8,190.00 11,246.00

99. Gabriel Salas 3,056.00 8,190.00 11,246.00

100. Edwin Sasan 3,056.00 8,190.00 11,246.00

101. Diosdado Barriga 3,056.00 8,190.00 11,246.00

102. Moises Sasan 3,056.00 8,190.00 11,246.00

103. Sinforiano Cantago 3,056.00 8,190.00 11,246.00

104. Leonardo Marturillas 3,056.00 8,190.00 11,246.00

105. Mario Ranis 3,056.00 8,190.00 11,246.00

106. Alejandro Ranido 3,056.00 8,190.00 11,246.00

107. Jerome Prado 3,056.00 8,190.00 11,246.00

108. Raul Oyao 3,056.00 8,190.00 11,246.00

109. Victor Celacio 3,056.00 5,460.00 8,516.00

TOTAL P330,621.00 P884,520.00 P1,215,141.00

Case No. 07-1177-91

110. Gerardo Roque P3,056.00 P5,460.00 P8,516.00

Case No. 07-1176-91

111. Zosimo Cararaton P3,056.00 P8,192.00 P11,246.00

Case No. 07-1219-91

112. Virgilio Zanoria P3,056.00 P5,460.00 P8,516.00

113. Jose Zanoria 3,056.00 5,460.00 8,516.00

114. Allan Zanoria 3,056.00 5,460.00 8,516.00

115. Victorino Seno 3,056.00 5,460.00 8,516.00

116. Teodulo Jumao-as 3,056.00 5,460.00 8,516.00

117. Alexander Hera 3,056.00 5,460.00 8,516.00

118. Anthony Araneta 3,056.00 5,460.00 8,516.00

119. Aldrin Suson 3,056.00 5,460.00 8,516.00

120. Victor Verano 3,056.00 5,460.00 8,516.00

121. Ruel Sufrerencia 3,056.00 5,460.00 8,516.00

122. Alfred Naparate 3,056.00 5,460.00 8,516.00

123. Wenceslao Baclohon 3,056.00 8,190.00 11,246.00

124. Eduardo Langita 3,056.00 8,190.00 11,246.00

TOTAL P39,728.00 P76,440.00 P116,168.00

Case No. 07-1283-91

125. Feliz Ordeneza P2,816.00 P8,190.00 P11,006.00

126. Arsenio Logarta 3,056.00 8,190.00 11,246.00

127. Eduardo dela Vega 3,056.00 8,190.00 11,246.00

128. Joventino Canoog 3,056.00 8,190.00 11,246.00

TOTAL P11,984.00 P32,760.00 P44,744.00

Case No. 10-1584-91

129. Regelio Abapo P3,056.00 P8,190.00 P11,246.00

Case No. 08-1321-91

130. Ricardo Ramas P3,056.00 P8,190.00 P11,246.00

Case No. 09-1507-91

131. Jose Bandialan P2,816.00 P8,190.00 P11,006.00

132. Antonio Basalan 2,816.00 8,190.00 11,006.00

133. Lyndon Basalan 2,816.00 8,190.00 11,006.00

134. Wilfredo Aliviano 2,816.00 8,190.00 11,006.00

135. Bienvenido Rosario 2,816.00 8,190.00 11,006.00

136. Jesus Capangpangan 2,816.00 8,190.00 11,006.00

137. Renato Mendoza 2,816.00 8,190.00 11,006.00

138. Alejandro Catandejan 2,816.00 8,190.00 11,006.00

139. Ruben Talaba 2,816.00 8,190.00 11,006.00

140. Filemon Echavez 2,816.00 8,190.00 11,006.00

141. Marcelino Caracena 2,816.00 8,190.00 11,006.00

142. Ignacio Misa 2,816.00 8,190.00 11,006.00

143. Feliciano Agbay 2,816.00 8,190.00 11,006.00

144. Victor Maglasang 2,816.00 8,190.00 11,006.00

145. Arturo Heyrosa 2,816.00 8,190.00 11,006.00

146. Alipio Tirol 2,816.00 8,190.00 11,006.00

147. Rosendo Mondares 2,816.00 8,190.00 11,006.00

148. Aniceto Ludia 2,816.00 8,190.00 11,006.00

149. Reynaldo Lavandero 2,816.00 8,190.00 11,006.00

150. Reuyan Herculano 2,816.00 8,190.00 11,006.00

151. Teodula Nique 2,816.00 8,190.00 11,006.00

TOTAL P59,136.00 P171,990.00 P231,126.00

Case No. 06-1145-91

152. Emerberto Orque P2,816.00 P8,190.00 P11,006.00

153. Zosimo Baobao 2,816.00 8,190.00 11,006.00

154. Medardo Singson 2,816.00 8,190.00 11,006.00

155. Antonio Patalinghug 2,816.00 8,190.00 11,006.00

156. Ernesto Singson 2,816.00 8,190.00 11,006.00

157. Roberto Torres 2,816.00 8,190.00 11,006.00

158. Cesar Escario 2,816.00 8,190.00 11,006.00

159. Leodegario Dollecin 2,816.00 8,190.00 11,006.00

160. Alberto Anoba 2,816.00 8,190.00 11,006.00

161. Rodrigo Bisnar 2,816.00 8,190.00 11,006.00

162. Zosimo Bingas 2,816.00 8,190.00 11,006.00

163. Rosalio Duran, Sr. 2,816.00 8,190.00 11,006.00

164. Rosalio Duran, Jr. 2,816.00 8,190.00 11,006.00

165. Romeo Duran 2,816.00 8,190.00 11,006.00

166. Antonio Abella 2,816.00 8,190.00 11,006.00

167. Mariano Repollo 2,816.00 8,190.00 11,006.00

168. Polegarpo Degamo 2,816.00 8,190.00 11,006.00

169. Mario Cereza 2,816.00 8,190.00 11,006.00

170. Antonio Laoronilla 2,816.00 8,190.00 11,006.00

171. Proctuso Magallanes 2,816.00 8,190.00 11,006.00

172. Eladio Torres 2,816.00 8,190.00 11,006.00

173. Warlito Demana 2,816.00 8,190.00 11,006.00

174. Henry Gedaro 2,816.00 8,190.00 11,006.00

175. Doisederio Gemperao 2,816.00 8,190.00 11,006.00

176. Aniceto Gemperao 2,816.00 8,190.00 11,006.00

177. Jerry Caparoso 2,816.00 8,190.00 11,006.00

178. Serlito Noynay 2,816.00 8,190.00 11,006.00

179. Luciano Recopelacion 2,816.00 8,190.00 11,006.00

180. Juanito Garces 2,816.00 8,190.00 11,006.00

181. Feliciano Torres 2,816.00 8,190.00 11,006.00

182. Ranilo Villareal 2,816.00 8,190.00 11,006.00

183. Fermin Aliviano 2,816.00 8,190.00 11,006.00

184. Junjie Laviste 2,816.00 8,190.00 11,006.00

185. Tomacito de Castro 2,816.00 8,190.00 11,006.00

186. Joselito Capilina 2,816.00 8,190.00 11,006.00

187. Samuel Casquejo 2,816.00 8,190.00 11,006.00

188. Leonardo Natad 2,816.00 8,190.00 11,006.00

189. Benjamin Sayson 2,816.00 8,190.00 11,006.00

190. Pedro Inoc 2,816.00 8,190.00 11,006.00

191. Edward Flores 2,816.00 8,190.00 11,006.00

192. Edwin Sasan 2,816.00 8,190.00 11,006.00

193. Jose Rey Inot 2,816.00 8,190.00 11,006.00

194. Edgar Cortes 2,816.00 8,190.00 11,006.00

195. Romeo Lombog 2,816.00 8,190.00 11,006.00

196. Nicolas Ribo 2,816.00 8,190.00 11,006.00

197. Jaime Rubin 2,816.00 8,190.00 11,006.00

198. Orlando Regis 2,816.00 8,190.00 11,006.00

199. Ricky Alconza 2,816.00 8,190.00 11,006.00

200. Rudy Tagalog 2,816.00 8,190.00 11,006.00

201. Victorino Tagalog 2,816.00 8,190.00 11,006.00

202. Edward Colina 2,816.00 8,190.00 11,006.00

203. Ronie Gonzaga 2,816.00 8,190.00 11,006.00

204. Paul Cabillada 2,816.00 8,190.00 11,006.00

205. Wilfredo Magalona 2,816.00 8,190.00 11,006.00

206. Joel Pepito 2,816.00 8,190.00 11,006.00

207. Prospero Maglasang 2,816.00 8,190.00 11,006.00

208. Allan Agustin 2,816.00 8,190.00 11,006.00

209. Fausto Bargayo 2,816.00 8,190.00 11,006.00

210. Nomer Sanchez 2,816.00 8,190.00 11,006.00

211. Jolito Alin 2,816.00 8,190.00 11,006.00

212. Birning Regidor 2,816.00 8,190.00 11,006.00

213. Garry Dignos 2,816.00 8,190.00 11,006.00

214. Edwin Dignos 2,816.00 8,190.00 11,006.00

215. Dario Dignos 2,816.00 8,190.00 11,006.00

216. Rogelio Dignos 2,816.00 8,190.00 11,006.00

217. Jimmy Cabigas 2,816.00 8,190.00 11,006.00

218. Fernando Anajao 2,816.00 8,190.00 11,006.00

219. Alex Flores 2,816.00 8,190.00 11,006.00

220. Fernando Remedio 2,816.00 8,190.00 11,006.00

221. Toto Mosquido 2,816.00 8,190.00 11,006.00

222. Alberto Yagonia 2,816.00 8,190.00 11,006.00

223. Victor Bariquit 2,816.00 8,190.00 11,006.00

224. Ignacio Misa 2,816.00 8,190.00 11,006.00

225. Eliseo Villareno 2,816.00 8,190.00 11,006.00

226. Manuel Lavandero 2,816.00 8,190.00 11,006.00

227. Vircede 2,816.00 8,190.00 11,006.00

228. Mario Ranis 2,816.00 8,190.00 11,006.00

229. Jaime Responso 2,816.00 8,190.00 11,006.00

230. Marianito Aguirre 2,816.00 8,190.00 11,006.00

231. Marcial Heruela 2,816.00 8,190.00 11,006.00

232. Godofredo Tuñacao 2,816.00 8,190.00 11,006.00

233. Perfecto Regis 2,816.00 8,190.00 11,006.00

234. Roel Demana 2,816.00 8,190.00 11,006.00

235. Elmer Castillo 2,816.00 8,190.00 11,006.00

236. Wilfredo Calamohoy 2,816.00 8,190.00 11,006.00

237. Rudy Lucernas 2,816.00 8,190.00 11,006.00

238. Antonio Cañete 2,816.00 8,190.00 11,006.00

239. Efraim Yubal 2,816.00 8,190.00 11,006.00

240. Jesus Capangpangan 2,816.00 8,190.00 11,006.00

241. Damian Capangpangan 2,816.00 8,190.00 11,006.00

242. Teofilo Capangpangan 2,816.00 8,190.00 11,006.00

243. Nilo Capangpangan 2,816.00 8,190.00 11,006.00

244. Cororeno Capangpangan 2,816.00 8,190.00 11,006.00

245. Emilio Mondares 2,816.00 8,190.00 11,006.00

246. Ponciano Agana 2,816.00 8,190.00 11,006.00

247. Vicente Devilleres 2,816.00 8,190.00 11,006.00

248. Mario Alipan 2,816.00 8,190.00 11,006.00

249. Romanito Alipan 2,816.00 8,190.00 11,006.00

250. Aldeon Robinson 2,816.00 8,190.00 11,006.00

251. Fortunato Soco 2,816.00 8,190.00 11,006.00

252. Celso Compuesto 2,816.00 8,190.00 11,006.00

253. William Itoralde 2,816.00 8,190.00 11,006.00

254. Antonio Pescador 2,816.00 8,190.00 11,006.00

255. Jeremias Rondero 2,816.00 8,190.00 11,006.00

256. Estropio Punay 2,816.00 8,190.00 11,006.00

257. Leovijildo Punay 2,816.00 8,190.00 11,006.00

258. Romeo Quilongquilong 2,816.00 8,190.00 11,006.00

259. Wilfredo Gestopa 2,816.00 8,190.00 11,006.00

260. Eliseo Santos 2,816.00 8,190.00 11,006.00

261. Henry Orio 2,816.00 8,190.00 11,006.00

262. Jose Yap 2,816.00 8,190.00 11,006.00

263. Nicanor Manayaga 2,816.00 8,190.00 11,006.00

264. Teodoro Salinas 2,816.00 8,190.00 11,006.00

265. Aniceto Montero 2,816.00 8,190.00 11,006.00

266. Rafaelito Versoza 2,816.00 8,190.00 11,006.00

267. Alejandro Ranido 2,816.00 8,190.00 11,006.00

268. Henry Talaba 2,816.00 8,190.00 11,006.00

269. Romulo Talaba 2,816.00 8,190.00 11,006.00

270. Diosdado Besabela 2,816.00 8,190.00 11,006.00

271. Sylvestre Toring 2,816.00 8,190.00 11,006.00

272. Edilberto Padilla 2,816.00 8,190.00 11,006.00

273. Allan Herosa 2,816.00 8,190.00 11,006.00

274. Ernesto Sumalinog 2,816.00 8,190.00 11,006.00

275. Ariston Velasco, Jr. 2,816.00 8,190.00 11,006.00

276. Fernando Lopez 2,816.00 8,190.00 11,006.00

277. Alfonso Echavez 2,816.00 8,190.00 11,006.00

278. Nicanor Cuizon 2,816.00 8,190.00 11,006.00

279. Dominador Caparida 2,816.00 8,190.00 11,006.00

280. Zosimo Cororation 2,816.00 8,190.00 11,006.00

281. Artemio Loveranes 2,816.00 8,190.00 11,006.00

282. Dionisio Yagonia 2,816.00 8,190.00 11,006.00

283. Victor Celocia 2,816.00 8,190.00 11,006.00

284. Hipolito Vidas 2,816.00 8,190.00 11,006.00

285. Teodoro Arcillas 2,816.00 8,190.00 11,006.00

286. Marcelino Habagat 2,816.00 8,190.00 11,006.00

287. Gaudioso Labasan 2,816.00 8,190.00 11,006.00

288. Leopoldo Regis 2,816.00 8,190.00 11,006.00

289. Aquillo Damole 2,816.00 8,190.00 11,006.00

290. Willy Roble 2,816.00 8,190.00 11,006.00

TOTAL P391,424.00 P1,138,410.00 P1,529,834.00

RECAP

CASE NO. SALARY SEPARATION TOTAL

DIFFERENTIAL PAY

06-1165-91 P330,621.00 P884,520.00 P1,215,141.00

07-1177-91 3,056.00 5,460.00 8,516.00

06-1176-91 3,056.00 8,190.00 11,246.00

07-1219-91 39,728.00 76,440.00 116,168.00

07-1283-91 11,984.00 32,760.00 44,744.00

10-1584-91 3,056.00 8,190.00 11,246.00

08-1321-91 3,056.00 8,190.00 11,246.00

09-1507-91 59,136.00 171,990.00 231,126.00

06-1145-91 391,424.00 1,138,410.00 1,529,834.00

GRAND TOTAL P845,117.00 P2,334,150.00 P3,179,267.00

However, certain matters have cropped up which require a review of the awards to some complainants and a recomputation by the Labor Arbiter of
the total amounts.

A scrutiny of the enumeration of all the complainants shows that some names 38 appear twice by virtue of their being included in two (2) of the nine
(9) consolidated cases. A check of the Labor Arbiter’s computation discloses that most of these names were awarded different amounts of separation
pay or wage differential in each separate case where they were impleaded as parties because the allegations of the length and period of their
employment for the separate cases, though overlapping, were also different. The records before us are incomplete and do not aid in verifying
whether these names belong to the same persons but at least three (3) of those names were found to have identical signatures in the complaint
forms they filed in the separate cases. It is likely therefore that the Labor Arbiter erroneously granted some complainants separation benefits and
wage differentials twice. Apart from this, we also discovered some names that are almost identical. 39 It is possible that the minor variance in the
spelling of some names may have been a typographical error and refer to the same persons although the records seem to be inconclusive.

Furthermore, one of the original complainants 40 was inadvertently omitted by the Labor Arbiter from his computations. 41 The counsel for the
complainants promptly filed a motion for inclusion/correction 42 which motion was treated as an appeal of the Decision as the Labor Arbiter was
prohibited by the rules of the NLRC from entertaining any motion at that stage of the proceedings. 43 The NLRC for its part acknowledged the
omission 44 but both the Commission and subsequently the Court of Appeals failed to rectify the oversight in their decisions.

Finally, the NLRC ordered both MAERC and SMC to pay P84,511.70 in attorneys fees which is ten percent (10%) of the salary differentials awarded to
the complainants in accordance with Art. 111 of the Labor Code. The Court of Appeals also affirmed the award. Consequently, with the recomputation
of the salary differentials, the award of attorney’s fees must also be modified.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated 28 April 2000 and the Resolution dated 26 July 2000 are
AFFIRMED with MODIFICATION. Respondent Maerc Integrated Services, Inc. is declared to be a labor-only contractor. Accordingly, both petitioner San
Miguel Corporation and respondent Maerc Integrated Services, Inc., are ordered to jointly and severally pay complainants (private respondents
herein) separation benefits and wage differentials as may be finally recomputed by the Labor Arbiter as herein directed, plus attorney’s fees to be
computed on the basis of ten percent (10%) of the amounts which complainants may recover pursuant to Art. 111 of the Labor Code, as well as an
indemnity fee of P2,000.00 to each complainant.chanrob1es virtua1 1aw 1ibrary

The Labor Arbiter is directed to review and recompute the award of separation pays and wage differentials due complainants whose names appear
twice or are notably similar, compute the monetary award due to complainant Niel Zanoria whose name was omitted in the Labor Arbiter’s Decision
and immediately execute the monetary awards as found in the Labor Arbiter’s computations insofar as those complainants whose entitlement to
separation pay and wage differentials and the amounts thereof are no longer in question. Costs against petitioner.

SO ORDERED.

Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.

Quisumbing, J., is on leave.

SECOND DIVISION
[G.R. NO. 149793. April 15, 2005]
WACK WACK GOLF & COUNTRY CLUB, Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION, MARTINA G. CAGASAN, CARMENCITA F.
DOMINGUEZ, and BUSINESS STAFFING AND MANAGEMENT, INC., Respondents.
DECISION
CALLEJO, SR., J.:

This is a Petition for Review of the Resolution1 of the Court of Appeals (CA) in CA-G.R. SP No. 63658, dismissing the petition for certiorari before it for
being insufficient in form and the subsequent resolution denying the motion for reconsideration thereof.
The undisputed antecedent facts are as follows:
On November 29, 1996, a fire destroyed a large portion of the main clubhouse of the Wack Wack Golf and Country Club (Wack Wack), including its
kitchen. In view of the reconstruction of the whole clubhouse complex, Wack Wack filed a notice with the Department of Labor and Employment
(DOLE) on April 14, 1997 that it was going to suspend the operations of the Food and Beverage (F & B) Department one (1) month thereafter. Notices
to 54 employees (out of a complement of 85 employees in the department) were also sent out, informing them that they need not report for work
anymore after April 14, 1997 but that they would still be paid their salaries up to May 14, 1997. They were further told that they would be informed
once full operations in Wack Wack resume.
The Wack Wack Golf Employees Union branded the suspension of operations of the F & B Department as arbitrary, discriminatory and constitutive of
union-busting, so they filed a notice of strike with the DOLE's National Conciliation and Mediation Board (NCMB). Several meetings between the
officers of Wack Wack and the Union, headed by its President, Crisanto Baluyot, Sr., and assisted by its counsel, Atty. Pedro T. De Quiroz, were held
until the parties entered into an amicable settlement. An Agreement2 was forged whereby a special separation benefit/retirement package for
interested Wack Wack employees, especially those in the F & B Department was offered. The terms and conditions thereof reads as follows:
1. The UNION and the affected employees of F & B who are members of the UNION hereby agree to accept the special separation benefit package
agreed upon between the CLUB management on the one hand, and the UNION officers and the UNION lawyer on the other, in the amount equivalent
to one-and-one-half months salary for every year of service, regardless of the number of years of service rendered. That, in addition, said employees
shall also receive the other benefits due them, namely, the cash equivalent of unused vacation and sick leave credits, proportionate 13th month pay;
and other benefits, if any, computed without premium;
2. That the affected F & B employees who have already signified intention to be separated from the service under the special separation benefit
package shall receive their separation pay as soon as possible;
3. That the same package shall, likewise, be made available to other employees who are members of the bargaining unit and who may or may not be
affected by future similar suspensions of operations. The UNION re-affirms and recognizes that it is the sole prerogative of the management of the
Club to suspend part or all of its operations as may be necessitated by the exigencies of the situation and the general welfare of its membership. The
closure of the West Course, which is scheduled for conversion to an All-Weather Championship golf course, is cited as an example. It is, however,
agreed that if a sufficient number of employees, other than F & B employees, would apply for availment of the package within the next two months,
the Club may no longer go through the process of formally notifying the Department of Labor. The processing and handling of benefits for these other
employees shall be done over a transition period within one year;
4. All qualified employees who may have been separated from the service under the above package shall be considered under a priority basis for
employment by concessionaires and/or contractors, and even by the Club upon full resumption of operations, upon the recommendation of the
UNION. The Club may even persuade an employee-applicant for availment under the package to remain on his/her job, or be assigned to another
position.3
Respondent Carmencita F. Dominguez, who was then working in the Administrative Department of Wack Wack, was the first to avail of the special
separation package.4 Computed at 1' months for every year of service pursuant to the Agreement, her separation pay amounted to P91,116.84, while
economic benefits amounted to P6,327.53.5 On September 18, 1997, Dominguez signed a Release and Quitclaim6 in favor of Wack Wack.
Respondent Martina B. Cagasan was Wack Wack's Personnel Officer who, likewise, volunteered to avail of the separation package.7 On September 30,
1997, she received from Wack Wack the amount of P469,495.66 as separation pay and other economic benefits amounting to P17,010.50.8 A Release
and Quitclaim9 was signed on September 30, 1997.
The last one to avail of the separation package was Crisanto Baluyot, Sr. who, in a Letter10 dated January 16, 1998 addressed to Mr. Bienvenido Juan,
Administrative Manager of Wack Wack, signified his willingness to avail of the said early retirement package. The total amount of P688,290.3011 was
received and the Release and Quitclaim12 signed on May 14, 1998.
On October 15, 1997, Wack Wack entered into a Management Contract13 with Business Staffing and Management, Inc. (BSMI), a corporation engaged
in the business as Management Service Consultant undertaking and managing for a fee projects which are specialized and technical in character like
marketing, promotions, merchandising, financial management, operation management and the like.14 BSMI was to provide management services for
Wack Wack in the following operational areas:
1. Golf operations management;
2. Management and maintenance of building facilities;
3 .Management of food and beverage operation;
4. Management of materials and procurement functions;
5. To provide and undertake administrative and support services for the [said] projects.15
Pursuant to the Agreement, the retired employees of Wack Wack by reason of their experience were given priority by BSMI in hiring. On October 21,
1997, respondents Cagasan and Dominguez filed their respective applications16 for employment with BSMI. They were eventually hired by BSMI to
their former positions in Wack Wack as project employees and were issued probationary contracts.17
Aside from BSMI, Wack Wack also engaged several contractors which were assigned in various operating functions of the club, to wit:
1. Skills and Talent Employment Promotion (STEP) whose 90 workers are designated as locker attendants, golf bag attendants, nurses, messengers,
technical support engineer, golf director, agriculturist, utilities and gardeners;
2. Marvel Manpower Agency - whose 19 employees are designated as sweepers, locker attendants, drive range attendant, telephone operator,
workers and secretaries;
3 City Service Corporation - contractor for janitorial services for the whole club;
4. Microstar Business and Management Services, Inc. whose 15 employees are designated in the Finance and Accounting departments.18
Due to these various management service contracts, BSMI undertook an organizational analysis and manpower evaluation to determine its efficacy,
and to streamline its operations. In the course of its assessment, BSMI saw that the positions of Cagasan and Dominguez were redundant. In the case
of respondent Cagasan, her tasks as personnel officer were likewise being taken cared of by the different management service contractors; on the
other hand, Dominguez's work as telephone operator was taken over by the personnel of the accounting department. Thus, in separate
Letters19 dated February 27, 1998, the services of Dominguez and Cagasan were terminated. With respect to Baluyot, he applied for the position of
Chief Porter on May 12, 1998. The position, however, was among those recommended to be abolished by the BSMI, so he was offered the position of
Caddie Master Aide with a starting salary of P5,500.00 a month. Baluyot declined the offer. Pending Wack Wack's approval of the proposed abolition
of the position of Chief Porter, Baluyot was temporarily accepted to the position with a monthly salary of P12,000.00. In July 1998, Baluyot decided
not to accept the position of Caddie Master Aide; thus, BSMI continued with its plan to abolish the said position of Chief Porter and Baluyot was
dismissed from the service.
Thereafter, the three (3) employees filed their respective complaints with the National Labor Relations Commission (NLRC) for illegal dismissal and
damages against Wack Wack and BSMI.
The complainants averred that they were dismissed without cause. They accepted the separation package upon the assurance that they would be
given their former work and assignments once the Food and Beverage Department of Wack Wack resumes its operations. On the other hand, the
respondents therein alleged that the dismissal of the complainants were made pursuant to a study and evaluation of the different jobs and positions
and found them to be redundant.
In a Decision20 dated January 25, 2000, the Labor Arbiter found that the dismissal of Dominguez and Cagasan was for a valid and authorized cause, and
dismissed their complaints.
The position of personnel manager occupied by Martina Cagasan was redundated as it is allegedly not necessary, because her functions will be taken
over [by] the field superintendent and the company's personnel and operations manager. The work of Carmencita Dominguez on the other hand as
telephone operator will be taken over by the accounting department personnel. Such move really are intended to streamline operations. While
admittedly, they are still necessary in the operations of Wack Wack, their jobs can be assigned to some other personnel, who will be performing dual
functions and does save Wack Wack money. This is feasible on account of the fact that they are functions pertaining to administrative work.21
As to Baluyot, however, the Labor Arbiter found that while the position of chief porter had been abolished, the caddie master aide had been created.
Their functions were one and the same. The porters, upon instructions from the chief porter, are the ones who bring down the golf bags of the
players from the vehicle. The caddie master receives them and counts the number of clubs inside the golf set. After the game, the same procedure is
repeated before the golf sets are loaded once more into the vehicle.22 The Labor Arbiter found that the dismissal of Baluyot as Chief Porter was
unjustified and can not be considered redundant in the case at bar. It was a means resorted to in order to unduly sever Baluyot's relationship with
BSMI without justifiable cause. The Labor Arbiter therefore found Baluyot's dismissal to be illegal. The dispositive portion of the decision reads as
follows:
CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered dismissing the complaints of Carmencita F. Dominguez and Martina Cagasan
for lack of merit. Finding Crisanto Baluyot's dismissal to be illegal. Consequently, he should immediately be reinstated to his former position as Chief
Porter or Caddie Master, and paid his backwages which, as of December 31, 1999, has accumulated in the sum of P180,000.00 by BSMI.
All other claims are dismissed for lack of merit.23
Since Baluyot no longer appealed the decision, complainants Dominguez and Cagasan filed a Partial Appeal on the ground of prima facie abuse of
discretion on the part of the Labor Arbiter and serious errors in his findings of facts and law. Their claims were anchored on the Agreement between
the Union and management, that they were promised to be rehired upon the full resumption of operations of Wack Wack. They asserted that Wack
Wack and BSMI should not avoid responsibility to their employment, by conniving with each other to render useless and meaningless the Agreement.
BSMI also appealed to the NLRC, alleging that the Labor Arbiter committed grave abuse of discretion in finding Baluyot's dismissal to be illegal, when
in fact his position as Chief Porter was abolished pursuant to a bona fide reorganization of Wack Wack. It was not motivated by factors other than the
promotion of the interest and welfare of the company.
On September 27, 2000, the NLRC rendered its Decision24 ordering Wack Wack to reinstate Carmencita F. Dominguez and Martina Cagasan to their
positions in respondent Wack Wack Golf & Country Club with full backwages and other benefits from the date of their dismissal until actually
reinstated. It anchored its ruling on the Agreement dated June 16, 1997 reached between the Union and Wack Wack, particularly Section 425 thereof.
The NLRC directed Wack Wack to reinstate the respondents and pay their backwages since "Business Staffing and Management, Inc. (BSMI) is a
contractor who [merely] supplies workers to respondent Wack Wack. It has nothing to do with the grievance of the complainants with their employer,
respondent Wack Wack."
Wack Wack and BSMI filed a motion for reconsideration which was denied in the Resolution26 dated December 15, 2000.
Wack Wack, now the petitioner, consequently filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 63658 alleging the
following:
A. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND DENIAL OF DUE PROCESS
IN HOLDING THAT RESPONDENTS CAGASAN AND DOMINGUEZ HAVE REGAINED THEIR JOBS OR EMPLOYMENT PURSUANT TO THE AGREEMENT
BETWEEN PETITIONER AND WACK WACK GOLF EMPLOYEES UNION.
B. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND DENIAL OF DUE PROCESS
IN RULING THAT RESPONDENT BSMI IS NOT AN INDEPENDENT CONTRACTOR BUT A MERE SUPPLIER OF WORKERS TO THE PETITIONER.
C. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND DENIAL OF DUE PROCESS
IN HOLDING PETITIONER LIABLE FOR THE REINSTATEMENT OF RESPONDENTS CAGASAN AND DOMINGUEZ AND FOR THE PAYMENT OF THEIR
SUPPOSED BACKWAGES DESPITE THE ABSENCE OF EMPLOYER-EMPLOYEE RELATION BETWEEN THEM.27
Likewise, BSMI also assailed the resolutions of the NLRC and filed its own petition for certiorari with the CA, docketed as CA-G.R. SP No. 63553.28 A
perusal of the petition which is attached to the records reveal that BSMI ascribes grave abuse of discretion on the part of the NLRC in ruling that: (a)
the private respondents have regained their employment pursuant to the Agreement between Wack Wack and the Wack Wack Golf Employees
Union; (b) the dismissal of private respondents was made pursuant to the petitioner's exercise of its management prerogatives; and (c) the petitioner
(BSMI) is liable for the reinstatement of private respondents and the payment of their backwages.29
On April 3, 2001, the CA (Twelfth Division) dismissed the petition on the ground that the petitioner therein failed to attach an Affidavit of Service as
required in Section 11, Rule 13 of the 1997 Rules of Civil Procedure. Moreover, the verification and certification against forum shopping was
insufficient for having been executed by the general manager who claimed to be the duly-authorized representative of the petitioner, but did not
show any proof of authority, i.e., a board resolution, to the effect.
A motion for reconsideration was, consequently, filed appending thereto the requisite documents of proof of authority. It asserted that in the interest
of substantial justice, the CA should decide the case on its merits.
BSMI filed a Comment30 to the Motion for Reconsideration of the petitioner, also urging the CA to set aside technicalities and to consider the legal
issues involved: (a) whether or not there is a guaranty of employment in favor of the complainants under the Agreement between the petitioner and
the Union; (b) whether or not the termination of the employment of the complainants, based on redundancy, is legal and valid; and (c) who are the
parties liable for the reinstatement of the complainants and the payment of backwages. It further added that it shares the view of the petitioner, that
the assailed resolutions of the NLRC are tainted with legal infirmities. For this reason, it was also constrained to file its own Petition for Certiorari with
the CA, docketed as CA-G.R. SP No. 63553 pending with the Special Fourth Division, just to stress that there is no guaranty of perpetual employment
in favor of the complainants.
On August 31, 2001, the CA denied petitioner's motion for reconsideration.
The petitioner is now before the Court, assailing the twin resolutions of the CA. It points out that BSMI has filed its petition for certiorari before the CA
one day late and yet, the Special Fourth Division admitted the petition in the interest of substantial justice, and directed the respondents to file a
comment thereon;31 whereas, in the instant case, the mere lack of proof of authority of Wack Wack's General Manager to sign the certificate of non-
forum shopping was considered fatal by the CA's Twelfth Division. It further asserts that its Petition for Certiorari is meritorious, considering that the
NLRC committed grave abuse of discretion in ordering Wack Wack to reinstate the respondents Cagasan and Dominguez, and to pay their backwages
when indubitable evidence shows that the said respondents were no longer employees of Wack Wack when they filed their complaints with the Labor
Arbiter.
There is merit in the petition.
In Novelty Philippines, Inc. v. Court of Appeals,32 the Court recognized the authority of the general manager to sue on behalf of the corporation and to
sign the requisite verification and certification of non-forum shopping. The general manager is also one person who is in the best position to know the
state of affairs of the corporation. It was also error for the CA not to admit the requisite proof of authority when in the Novelty case, the Court ruled
that the subsequent submission of the requisite documents constituted substantial compliance with procedural rules. There is ample jurisprudence
holding that the subsequent and substantial compliance of an appellant may call for the relaxation of the rules of procedure in the interest of
justice.33 While it is true that rules of procedure are intended to promote rather than frustrate the ends of justice, and while the swift unclogging of
court dockets is a laudable objective, it nevertheless must not be met at the expense of substantial justice.34 It was, therefore, reversible error for the
CA to have dismissed the petition for certiorari before it. The ordinary recourse for us to take is to remand the case to the CA for proper disposition on
the merits; however, considering that the records are now before us, we deem it necessary to resolve the instant case in order to ensure harmony in
the rulings and expediency.
Indeed, the merits of the case constitute special or compelling reasons for us to overlook the technical rules in this case. With the dismissal of its
petition for certiorari before the CA, the petitioner by virtue of the NLRC decision is compelled to reinstate respondents Cagasan and Dominguez and
pay their full backwages from the time of their dismissal until actual reinstatement when the attendant circumstances, however, show that the
respondents had no cause of action against the petitioner for illegal dismissal and damages.
It must be recalled that said respondents availed of the special separation package offered by the petitioner. This special separation package was
thought of and agreed by the two parties (Wack Wack and the Union) after a series of discussions and negotiations to avert any labor unrest due to
the closure of Wack Wack.35 Priority was given to the employees of the F & B Department, but was, likewise, offered to the other employees who may
wish to avail of the separation package due to the reconstruction of Wack Wack. Respondents do not belong to the F & B Department and yet, on
their own volition opted to avail of the special separation package. The applications which were similarly worded read as follows:
TO : WACK WACK GOLF & COUNTRY CLUB
BOARD OF DIRECTORS AND MANAGEMENT
Based on the information that the Club and the employees' Union have reached an agreement on a special separation benefit package equivalent to
one-and-one-half months salary for every year of service, regardless of the number of years of service, for employees who have been affected and
may be affected by ongoing as well as forthcoming Club renovation, construction and related activities and reportedly even for those who may not be
affected but wish to avail of an early retirement under the above package arrangement, I hereby register my desire to be separated from the Club and
receive the benefits under the above stated package. 36
Thereafter, the respondents signed their respective release and quitclaims after receiving their money benefits.
It cannot be said that the respondents in the case at bar did not fully comprehend and realize the consequences of their acts. Herein respondents are
not unlettered persons who need special protection. They held responsible positions in the petitioner-employer, so they presumably understood the
contents of the documents they signed. There is no showing that the execution thereof was tainted with deceit or coercion. Further, the respondents
were paid hefty amounts of separation pay indicating that their separation from the company was for a valuable consideration. Where the person
making the waiver has done so voluntarily, with a full understanding thereof, and the consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as being a valid and binding undertaking.37 As in contracts, these quitclaims amount to a valid and binding
compromise agreement between the parties which deserve to be respected.38
We reiterate what was stated in the case of Periquet v. NLRC 39 that:
Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable
settlement, it is binding on the parties and may not later be disowned simply because of a change of mind. It is only where there is clear proof that
the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to
annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he
was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking.
'40
When the respondents voluntarily signed their quitclaims and accepted the separation package offered by the petitioner, they, thenceforth, already
ceased to be employees of the petitioner. Nowhere does it appear in the Agreement that the petitioner assured the respondents of continuous
employment in Wack Wack. Qualified employees were given priority in being hired by its concessionaires and/or contractors such as BSMI when it
entered into a management contract with the petitioner.
This brings us to the threshold issue on whether or not BSMI is an independent contractor or a labor-only contractor. The NLRC posits that BSMI is
merely a supplier of workers or a labor-only contractor; hence, the petitioner remains to be the principal employer of the respondents and liable for
their reinstatement and payment of backwages.
The ruling of the NLRC is wrong. An independent contractor is one who undertakes "job contracting," i.e., a person who: (a) carries on an independent
business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (b)
has substantial capital or investment in the form of tools, equipments, machineries, work premises and other materials which are necessary in the
conduct of the business. Jurisprudential holdings are to the effect that in determining the existence of an independent contractor relationship, several
factors may be considered, such as, but not necessarily confined to, whether or not the contractor is carrying on an independent business; the nature
and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work;
the control and supervision of the work to another; the employer's power with respect to the hiring, firing, and payment of the contractor's workers;
the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.41
There is indubitable evidence showing that BSMI is an independent contractor, engaged in the management of projects, business operations,
functions, jobs and other kinds of business ventures, and has sufficient capital and resources to undertake its principal business. It had provided
management services to various industrial and commercial business establishments. Its Articles of Incorporation proves its sufficient capitalization. In
December 1993, Labor Secretary Bienvenido Laguesma, in the case of In re Petition for Certification Election Among the Regular Rank-and-File
Employees Workers of Byron-Jackson (BJ) Services International Incorporated, Federation of Free Workers (FFW)-Byron Jackson Services Employees
Chapter,42 recognized BSMI as an independent contractor. As a legitimate job contractor, there can be no doubt as to the existence of an employer-
employee relationship between the contractor and the workers.43
BSMI admitted that it employed the respondents, giving the said retired employees some degree of priority merely because of their work experience
with the petitioner, and in order to have a smooth transition of operations.44 In accordance with its own recruitment policies, the respondents were
made to sign applications for employment, accepting the condition that they were hired by BSMI as probationary employees only. Not being contrary
to law, morals, good custom, public policy and public order, these employment contracts, which the parties are bound are considered valid.
Unfortunately, after a study and evaluation of its personnel organization, BSMI was impelled to terminate the services of the respondents on the
ground of redundancy. This right to hire and fire is another element of the employer-employee relationship45 which actually existed between the
respondents and BSMI, and not with Wack Wack.
There being no employer-employee relationship between the petitioner and respondents Cagasan and Dominguez, the latter have no cause of action
for illegal dismissal and damages against the petitioner. Consequently, the petitioner cannot be validly ordered to reinstate the respondents and pay
them their claims for backwages.
WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals and the NLRC are SET ASIDE and REVERSED. The complaints of
respondents Cagasan and Dominguez are DISMISSED. No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

SECOND DIVISION
G.R. No. 160506 : March 9, 2010
JOEB M. ALIVIADO, ARTHUR CORPUZ, ERIC ALIVIADO, MONCHITO AMPELOQUIO, ABRAHAM BASMAYOR, JONATHAN MATEO, LORENZO PLATON,
JOSE FERNANDO GUTIERREZ, ESTANISLAO BUENAVENTURA, LOPE SALONGA, FRANZ DAVID, NESTOR IGNACIO, JULIO REY, RUBEN MARQUEZ, JR.,
MAXIMINO PASCUAL, ERNESTO CALANAO, ROLANDO ROMASANTA, RHUEL AGOO, BONIFACIO ORTEGA, ARSENIO SORIANO, JR., ARNEL ENDAYA,
ROBERTO ENRIQUEZ, NESTOR BAQUILA, EDGARDO QUIAMBAO, SANTOS BACALSO, SAMSON BASCO, ALADINO GREGORO, JR., EDWIN GARCIA,
ARMANDO VILLAR, EMIL TAWAT, MARIO P. LIONGSON, CRESENTE J. GARCIA, FERNANDO MACABENTE, MELECIO CASAPAO, REYNALDO JACABAN,
FERDINAND SALVO, ALSTANDO MONTOS, RAINER N. SALVADOR, RAMIL REYES, PEDRO G. ROY, LEONARDO P. TALLEDO, ENRIQUE F. TALLEDO,
WILLIE ORTIZ, ERNESTO SOYOSA, ROMEO VASQUEZ, JOEL BILLONES, ALLAN BALTAZAR, NOLI GABUYO, EMMANUEL E. LABAN, RAMIR E. PIAT, RAUL
DULAY, TADEO DURAN, JOSEPH BANICO, ALBERT LEYNES, ANTONIO DACUNA, RENATO DELA CRUZ, ROMEO VIERNES, JR., ELAIS BASEO, WILFREDO
TORRES, MELCHOR CARDANO, MARIANO NARANIAN, JOHN SUMERGIDO, ROBERTO ROSALES, GERRY C. GATPO, GERMAN N. GUEVARRA, GILBERT
Y. MIRANDA, RODOLFO C. TOLEDO, ARNOLD D. LASTONA, PHILIP M. LOZA, MARIO N. CULDAYON, ORLANDO P. JIMENEZ, FRED P. JIMENEZ,
RESTITUTO C. PAMINTUAN, JR., ROLANDO J. DE ANDRES, ARTUZ BUSTENERA, ROBERTO B. CRUZ, ROSEDY O. YORDAN, DENNIS DACASIN,
ALEJANDRINO ABATON, and ORLANDO S. BALANGUE, Petitioners, v. PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC., Respondents.
DECISION
DEL CASTILLO, J.:
Labor laws expressly prohibit "labor-only" contracting. To prevent its circumvention, the Labor Code establishes an employer-employee relationship
between the employer and the employees of the labor-only contractor.chanroblesvirtua|awlibary
The instant petition for review assails the March 21, 2003 Decision1cЃa of the Court of Appeals (CA) in CA-G.R. SP No. 52082 and its October 20, 2003
Resolution2cЃa denying the motions for reconsideration separately filed by petitioners and respondent Procter & Gamble Phils. Inc. (P&G). The
appellate court affirmed the July 27, 1998 Decision of the National Labor Relations Commission (NLRC), which in turn affirmed the November 29, 1996
Decision3cЃa of the Labor Arbiter. All these decisions found Promm-Gem, Inc. (Promm-Gem) and Sales and Promotions Services (SAPS) to be
legitimate independent contractors and the employers of the petitioners.
Factual Antecedents
Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as 1982 or as late as June 1991, to either May 5, 1992 or
March 11, 1993, more specifically as follows:
Name Date Employed Date Dismissed

1. Joeb M. Aliviado November, 1985 May 5, 1992

2. Arthur Corpuz 1988 March 11, 1993

3. Eric Aliviado 1985 March 11, 1993

4. Monchito Ampeloquio September, 1988 March 11, 1993

5. Abraham Basmayor[, Jr.] 1987 March 11, 1993

6. Jonathan Mateo May, 1988 March 11, 1993

7. Lorenzo Platon 1985 March 11, 1993

8. Jose Fernando Gutierrez 1988 May 5, 1992

9. Estanislao Buenaventura June, 1988 March 11, 1993

10. Lope Salonga 1982 March 11, 1993

11. Franz David 1989 March 11, 1993

12. Nestor Ignacio 1982 March 11, 1993

13. Julio Rey 1989 May 5, 1992

14. Ruben [Vasquez], Jr. 1985 May 5, 1992

15. Maximino Pascual 1990 May 5, 1992

16. Ernesto Calanao[, Jr.] 1987 May 5, 1992

17. Rolando Romasanta 1983 March 11, 1993

18. [Roehl] Agoo 1988 March 11, 1993

19. Bonifacio Ortega 1988 March 11, 1993

20. Arsenio Soriano, Jr. 1985 March 11, 1993

21. Arnel Endaya 1983 March 11, 1993

22. Roberto Enriquez December, 1988 March 11, 1993

23. Nestor [Es]quila 1983 May 5, 1992

24. Ed[g]ardo Quiambao 1989 March 11, 1993

25. Santos Bacalso 1990 March 11, 1993

26. Samson Basco 1984 March 11, 1993

27. Aladino Gregor[e], Jr. 1980 May 5, 1992

28. Edwin Garcia 1987 May 5, 1992

29. Armando Villar 1990 May 5, 1992

30. Emil Tawat 1988 March 11, 1993

31. Mario P. Liongson 1991 May 5, 1992

32. Cresente J. Garcia 1984 March 11, 1993

33. Fernando Macabent[a] 1990 May 5, 1992

34. Melecio Casapao 1987 March 11, 1993

35. Reynaldo Jacaban 1990 May 5, 1992

36. Ferdinand Salvo 1985 May 5, 1992

37. Alstando Montos 1984 March 11, 1993

38. Rainer N. Salvador 1984 May 5, 1992

39. Ramil Reyes 1984 March 11, 1993

40. Pedro G. Roy 1987

 41. Leonardo [F]. Talledo 1985 March 11, 1993

42. Enrique [F]. Talledo 1988 March 11, 1993

43. Willie Ortiz 1987 May 5, 1992

44. Ernesto Soyosa 1988 May 5, 1992

45. Romeo Vasquez 1985 March 11, 1993

46. Joel Billones 1987 March 11, 1993

47. Allan Baltazar 1989 March 11, 1993

48. Noli Gabuyo 1991 March 11, 1993

49. Emmanuel E. Laban 1987 May 5, 1992

50. Ramir[o] E. [Pita] 1990 May 5, 1992

51. Raul Dulay 1988 May 5, 1992

52. Tadeo Duran[o] 1988 May 5, 1992

53. Joseph Banico 1988 March 11, 1993

54. Albert Leynes 1990 May 5, 1992

55. Antonio Dacu[m]a 1990 May 5, 1992

56. Renato dela Cruz 1982

57. Romeo Viernes, Jr. 1986

58. El[ia]s Bas[c]o 1989

59. Wilfredo Torres 1986 May 5, 1992

60. Melchor Carda[ñ]o 1991 May 5, 1992

61. [Marino] [Maranion] 1989 May 5, 1992

62. John Sumergido 1987 May 5, 1992

63. Roberto Rosales May, 1987 May 5, 1992

64. Gerry [G]. Gatpo November, 1990 March 11, 1993

65. German N. Guevara May, 1990 March 11, 1993

66. Gilbert Y. Miranda June, 1991 March 11, 1993

67. Rodolfo C. Toledo[, Jr.] May 14, 1991 March 11, 1993

68. Arnold D. [Laspoña] June 1991 March 11, 1993

69. Philip M. Loza March 5, 1992 March 11, 1993

70. Mario N. C[o]ldayon May 14, 1991 March 11, 1993

71. Orlando P. Jimenez November 6, 1992 March 11, 1993

72. Fred P. Jimenez September, 1991 March 11, 1993

73. Restituto C. Pamintuan, Jr. March 5, 1992 March 11, 1993

74. Rolando J. de Andres June, 1991 March 11, 1993

75. Artuz Bustenera[, Jr.] December, 1989 March 11, 1993

76. Roberto B. Cruz May 4, 1990 March 11, 1993

77. Rosedy O. Yordan June, 1991 May 5, 1992

78. Dennis Dacasin May. 1990 May 5, 1992

79. Alejandrino Abaton 1988 May 5, 1992

80. Orlando S. Balangue March, 1989 March 11, 19934cЃa

cralawThey all individually signed employment contracts with either Promm-Gem or SAPS for periods of more or less five months at a time.5cЃa They
were assigned at different outlets, supermarkets and stores where they handled all the products of P&G. They received their wages from Promm-Gem
or SAPS.6cЃa
SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as habitual absenteeism, dishonesty or changing day-
off without prior notice.7cЃa
P&G is principally engaged in the manufacture and production of different consumer and health products, which it sells on a wholesale basis to
various supermarkets and distributors. 8cЃa To enhance consumer awareness and acceptance of the products, P&G entered into contracts with
Promm-Gem and SAPS for the promotion and merchandising of its products.9cЃa
In December 1991, petitioners filed a complaint10cЃa against P&G for regularization, service incentive leave pay and other benefits with damages. The
complaint was later amended11cЃa to include the matter of their subsequent dismissal.
Ruling of the Labor Arbiter
On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no employer-employee relationship
between petitioners and P&G. He found that the selection and engagement of the petitioners, the payment of their wages, the power of dismissal and
control with respect to the means and methods by which their work was accomplished, were all done and exercised by Promm-Gem/SAPS. He further
found that Promm-Gem and SAPS were legitimate independent job contractors. The dispositive portion of his Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered Dismissing the above-entitled cases against respondent Procter & Gamble (Phils.),
Inc. for lack of merit.
SO ORDERED.12cЃa
Ruling of the NLRC
Appealing to the NLRC, petitioners disputed the Labor Arbiters findings. On July 27, 1998, the NLRC rendered a Decision13cЃa disposing as follows:
WHEREFORE, premises considered, the appeal of complainants is hereby DISMISSED and the decision appealed from AFFIRMED.
SO ORDERED.14cЃa
Petitioners filed a motion for reconsideration but the motion was denied in the November 19, 1998 Resolution.15cЃa
Ruling of the Court of Appeals
Petitioners then filed a petition for certiorari with the CA, alleging grave abuse of discretion amounting to lack or excess of jurisdiction on the part of
the Labor Arbiter and the NLRC. However, said petition was also denied by the CA which disposed as follows:
WHEREFORE, the decision of the National Labor Relations Commission dated July 27, 1998 is AFFIRMED with the MODIFICATION that respondent
Procter & Gamble Phils., Inc. is ordered to pay service incentive leave pay to petitioners.chanroblesvirtua|awlibary
SO ORDERED.16cЃa
Petitioners filed a motion for reconsideration but the motion was also denied. Hence, this petition.
Issues
Petitioners now come before us raising the following issues:
I.chanroblesvirtua|awlibary
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR WHEN IT DID NOT FIND THE PUBLIC RESPONDENTS TO
HAVE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN RENDERING THE QUESTIONED
JUDGMENT WHEN, OBVIOUSLY, THE PETITIONERS WERE ABLE TO PROVE AND ESTABLISH THAT RESPONDENT PROCTER & GAMBLE PHILS., INC. IS
THEIR EMPLOYER AND THAT THEY WERE ILLEGALLY DISMISSED BY THE FORMER.
II.chanroblesvirtua|awlibary
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR WHEN IT DID NOT DECLARE THAT THE PUBLIC
RESPONDENTS HAD ACTED WITH GRAVE ABUSE OF DISCRETION WHEN THE LATTER DID NOT FIND THE PRIVATE RESPONDENTS LIABLE TO THE
PETITIONERS FOR PAYMENT OF ACTUAL, MORAL AND EXEMPLARY DAMAGES AS WELL AS LITIGATION COSTS AND ATTORNEYS FEES.17cЃa
Simply stated, the issues are: (1) whether P&G is the employer of petitioners; (2) whether petitioners were illegally dismissed; and (3) whether
petitioners are entitled for payment of actual, moral and exemplary damages as well as litigation costs and attorneys fees.
Petitioners Arguments
Petitioners insist that they are employees of P&G. They claim that they were recruited by the salesmen of P&G and were engaged to undertake
merchandising chores for P&G long before the existence of Promm-Gem and/or SAPS. They further claim that when the latter had its so-called re-
alignment program, petitioners were instructed to fill up application forms and report to the agencies which P&G created.18cЃa
Petitioners further claim that P&G instigated their dismissal from work as can be gleaned from its letter19cЃa to SAPS dated February 24, 1993,
informing the latter that their Merchandising Services Contract will no longer be renewed.chanroblesvirtua|awlibary
Petitioners further assert that Promm-Gem and SAPS are labor-only contractors providing services of manpower to their client. They claim that the
contractors have neither substantial capital nor tools and equipment to undertake independent labor contracting. Petitioners insist that since they
had been engaged to perform activities which are necessary or desirable in the usual business or trade of P&G, then they are its regular
employees.20cЃa
Respondents Arguments
On the other hand, P&G points out that the instant petition raises only questions of fact and should thus be thrown out as the Court is not a trier of
facts. It argues that findings of facts of the NLRC, particularly where the NLRC and the Labor Arbiter are in agreement, are deemed binding and
conclusive on the Supreme Court.chanroblesvirtua|awlibary
P&G further argues that there is no employment relationship between it and petitioners. It was Promm-Gem or SAPS that (1) selected petitioners and
engaged their services; (2) paid their salaries; (3) wielded the power of dismissal; and (4) had the power of control over their conduct of
work.chanroblesvirtua|awlibary
P&G also contends that the Labor Code neither defines nor limits which services or activities may be validly outsourced. Thus, an employer can farm
out any of its activities to an independent contractor, regardless of whether such activity is peripheral or core in nature. It insists that the
determination of whether to engage the services of a job contractor or to engage in direct hiring is within the ambit of management
prerogative.chanroblesvirtua|awlibary
At this juncture, it is worth mentioning that on January 29, 2007, we deemed as waived the filing of the Comment of Promm-Gem on the
petition.21cЃa Also, although SAPS was impleaded as a party in the proceedings before the Labor Arbiter and the NLRC, it was no longer impleaded as a
party in the proceedings before the CA.22cЃa Hence, our pronouncements with regard to SAPS are only for the purpose of determining the obligations
of P&G, if any.
Our Ruling
The petition has merit.chanroblesvirtua|awlibary
As a rule, the Court refrains from reviewing factual assessments of lower courts and agencies exercising adjudicative functions, such as the NLRC.
Occasionally, however, the Court is constrained to wade into factual matters when there is insufficient or insubstantial evidence on record to support
those factual findings; or when too much is concluded, inferred or deduced from the bare or incomplete facts appearing on record.23cЃa In the
present case, we find the need to review the records to ascertain the facts.
Labor-only contracting and job contracting
In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to first determine whether Promm-Gem and SAPS are
labor-only contractors or legitimate job contractors.
The pertinent Labor Code provision on the matter states:
ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the formers work,
the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the provisions of this Code.chanroblesvirtua|
awlibary
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this
Code, to prevent any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which
are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. (Emphasis and
underscoring supplied.)
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18-02,24cЃa distinguishes between
legitimate and labor-only contracting:
xxxx
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a
contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the
contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a
job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance
of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job[,] work or
service.chanroblesvirtua|awlibary
xxxx
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting
shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for
a principal, and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business
of the principal; or
ii) [T]he contractor does not exercise the right to control over the performance of the work of the contractual employee.chanroblesvirtua|awlibary
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended.chanroblesvirtua|awlibary
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements,
machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or
service contracted out.chanroblesvirtua|awlibary
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine
not only the end to be achieved, but also the manner and means to be used in reaching that end.
x x x x (Underscoring supplied.)
Clearly, the law and its implementing rules allow contracting arrangements for the performance of specific jobs, works or services. Indeed, it is
management prerogative to farm out any of its activities, regardless of whether such activity is peripheral or core in nature. However, in order for
such outsourcing to be valid, it must be made to an independent contractor because the current labor rules expressly prohibit labor-only
contracting.chanroblesvirtua|awlibary
To emphasize, there is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places workers to perform a job,
work or service for a principal25cЃa and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business
of the principal; or
ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee. (Underscoring supplied)
In the instant case, the financial statements26cЃa of Promm-Gem show that it
has authorized capital stock of P1 million and a paid-in capital, or capital available for operations, of P500,000.00 as of 1990.27cЃa It also has long term
assets worth P432,895.28 and current assets of P719,042.32. Promm-Gem has also proven that it maintained its own warehouse and office space with
a floor area of 870 square meters.28cЃa It also had under its name three registered vehicles which were used for its promotional/merchandising
business.29cЃa Promm-Gem also has other clients30cЃa aside from P&G.31cЃa Under the circumstances, we find that Promm-Gem has substantial
investment which relates to the work to be performed. These factors negate the existence of the element specified in Section 5(i) of DOLE
Department Order No. 18-02.chanroblesvirtua|awlibary
The records also show that Promm-Gem supplied its complainant-workers with the relevant materials, such as markers, tapes, liners and cutters,
necessary for them to perform their work. Promm-Gem also issued uniforms to them. It is also relevant to mention that Promm-Gem already
considered the complainants working under it as its regular, not merely contractual or project, employees.32cЃa This circumstance negates the
existence of element (ii) as stated in Section 5 of DOLE Department Order No. 18-02, which speaks of contractual employees. This, furthermore,
negates on the part of Promm-Gem bad faith and intent to circumvent labor laws which factors have often been tipping points that lead the Court to
strike down the employment practice or agreement concerned as contrary to public policy, morals, good customs or public order.33cЃa
Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that it is a legitimate independent
contractor.chanroblesvirtua|awlibary
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31,250.00. There is no other evidence presented
to show how much its working capital and assets are. Furthermore, there is no showing of substantial investment in tools, equipment or other
assets.chanroblesvirtua|awlibary
In Vinoya v. National Labor Relations Commission,34cЃa the Court held that "[w]ith the current economic atmosphere in the country, the paid-in
capitalization of PMCI amounting to P75,000.00 cannot be considered as substantial capital and, as such, PMCI cannot qualify as an independent
contractor."35cЃa Applying the same rationale to the present case, it is clear that SAPS having a paid-in capital of only P31,250 - has no substantial
capital. SAPS lack of substantial capital is underlined by the records36cЃa which show that its payroll for its merchandisers alone for one month would
already total P44,561.00. It had 6-month contracts with P&G.37cЃa Yet SAPS failed to show that it could complete the 6-month contracts using its own
capital and investment. Its capital is not even sufficient for one months payroll. SAPS failed to show that its paid-in capital of P31,250.00 is sufficient
for the period required for it to generate its needed revenue to sustain its operations independently. Substantial capital refers to capitalization used in
the performance or completion of the job, work or service contracted out. In the present case, SAPS has failed to show substantial
capital.chanroblesvirtua|awlibary
Furthermore, the petitioners have been charged with the merchandising and promotion of the products of P&G, an activity that has already been
considered by the Court as doubtlessly directly related to the manufacturing business,38cЃa which is the principal business of P&G. Considering that
SAPS has no substantial capital or investment and the workers it recruited are performing activities which are directly related to the principal business
of P&G, we find that the former is engaged in "labor-only contracting".chanroblesvirtua|awlibary
"Where labor-only contracting exists, the Labor Code itself establishes an employer-employee relationship between the employer and the employees
of the labor-only contractor."39cЃa The statute establishes this relationship for a comprehensive purpose: to prevent a circumvention of labor laws.
The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as
if such employees had been directly employed by the principal employer.40cЃa
Consequently, the following petitioners, having been recruited and supplied by SAPS41cЃa -- which engaged in labor-only contracting -- are considered
as the employees of P&G: Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao
Buenaventura, Lope Salonga, Franz David, Nestor Ignacio, Jr., Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya,
Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo,
Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert V. Miranda, Rodolfo C. Toledo, Jr., Arnold D.
Laspoña, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera,
Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz,
Romeo Viernes, Jr., Elias Basco and Dennis Dacasin.chanroblesvirtua|awlibary
The following petitioners, having worked under, and been dismissed by Promm-Gem, are considered the employees of Promm-Gem, not of P&G:
Wilfredo Torres, John Sumergido, Edwin Garcia, Mario P. Liongson, Jr., Ferdinand Salvo, Alejandrino Abaton, Emmanuel A. Laban, Ernesto Soyosa,
Aladino Gregore, Jr., Ramil Reyes, Ruben Vasquez, Jr., Maximino Pascual, Willie Ortiz, Armando Villar, Jose Fernando Gutierrez, Ramiro Pita, Fernando
Macabenta, Nestor Esquila, Julio Rey, Albert Leynes, Ernesto Calanao, Roberto Rosales, Antonio Dacuma, Tadeo Durano, Raul Dulay, Marino
Maranion, Joseph Banico, Melchor Cardano, Reynaldo Jacaban, and Joeb Aliviado.42cЃa
Termination of services
We now discuss the issue of whether petitioners were illegally dismissed. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just43cЃa or authorized44cЃa cause.chanroblesvirtua|awlibary
In the instant case, the termination letters given by Promm-Gem to its employees uniformly specified the cause of dismissal as grave misconduct and
breach of trust, as follows:
xxxx
This informs you that effective May 5, 1992, your employment with our company, Promm-Gem, Inc. has been terminated. We find your expressed
admission, that you considered yourself as an employee of Procter & Gamble Phils., Inc. and assailing the integrity of the Company as legitimate and
independent promotion firm, is deemed as an act of disloyalty prejudicial to the interests of our Company: serious misconduct and breach of trust
reposed upon you as employee of our Company which [co]nstitute just cause for the termination of your employment.chanroblesvirtua|awlibary
x x x x45cЃa
Misconduct has been defined as improper or wrong conduct; the transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, unlawful in character implying wrongful intent and not mere error of judgment. The misconduct to be serious must be of such
grave and aggravated character and not merely trivial and unimportant.46cЃa To be a just cause for dismissal, such misconduct (a) must be serious; (b)
must relate to the performance of the employees duties; and (c) must show that the employee has become unfit to continue working for the
employer.47cЃa
In other words, in order to constitute serious misconduct which will warrant the dismissal of an employee under paragraph (a) of Article 282 of the
Labor Code, it is not sufficient that the act or conduct complained of has violated some established rules or policies. It is equally important and
required that the act or conduct must have been performed with wrongful intent.48cЃa In the instant case, petitioners-employees of Promm-Gem may
have committed an error of judgment in claiming to be employees of P&G, but it cannot be said that they were motivated by any wrongful intent in
doing so. As such, we find them guilty of only simple misconduct for assailing the integrity of Promm-Gem as a legitimate and independent promotion
firm. A misconduct which is not serious or grave, as that existing in the instant case, cannot be a valid basis for dismissing an
employee.chanroblesvirtua|awlibary
Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful breach of the trust reposed in the employee by his
employer. Ordinary breach will not suffice. A breach of trust is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as
distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.49cЃa
Loss of trust and confidence, as a cause for termination of employment, is premised on the fact that the employee concerned holds a position of
responsibility or of trust and confidence. As such, he must be invested with confidence on delicate matters, such as custody, handling or care and
protection of the property and assets of the employer. And, in order to constitute a just cause for dismissal, the act complained of must be work-
related and must show that the employee is unfit to continue to work for the employer.50cЃa In the instant case, the petitioners-employees of Promm-
Gem have not been shown to be occupying positions of responsibility or of trust and confidence. Neither is there any evidence to show that they are
unfit to continue to work as merchandisers for Promm-Gem.chanroblesvirtua|awlibary
All told, we find no valid cause for the dismissal of petitioners-employees of Promm-Gem.chanroblesvirtua|awlibary
While Promm-Gem had complied with the procedural aspect of due process in terminating the employment of petitioners-employees, i.e., giving two
notices and in between such notices, an opportunity for the employees to answer and rebut the charges against them, it failed to comply with the
substantive aspect of due process as the acts complained of neither constitute serious misconduct nor breach of trust. Hence, the dismissal is
illegal.chanroblesvirtua|awlibary
With regard to the petitioners placed with P&G by SAPS, they were given no written notice of dismissal. The records show that upon receipt by SAPS
of P&Gs letter terminating their "Merchandising Services Contact" effective March 11, 1993, they in turn verbally informed the concerned petitioners
not to report for work anymore. The concerned petitioners related their dismissal as follows:
xxxx
5. On March 11, 1993, we were called to a meeting at SAPS office. We were told by Mr. Saturnino A. Ponce that we should already stop working
immediately because that was the order of Procter and Gamble. According to him he could not do otherwise because Procter and Gamble was the
one paying us. To prove that Procter and Gamble was the one responsible in our dismissal, he showed to us the letter51cЃa dated February 24, 1993, x
xx
February 24, 1993
Sales and Promotions Services
Armons Bldg., 142 Kamias Road,
Quezon City
Attention: Mr. Saturnino A. Ponce
President & General Manager
Gentlemen:
Based on our discussions last 5 and 19 February 1993, this formally informs you that we will not be renewing our Merchandising Services Contract
with your agency.chanroblesvirtua|awlibary
Please immediately undertake efforts to ensure that your services to the Company will terminate effective close of business hours of 11 March 1993.
This is without prejudice to whatever obligations you may have to the company under the abovementioned contract.
Very truly yours,
(Sgd.)
EMMANUEL M. NON
Sales Merchandising III
cralaw6. On March 12, 1993, we reported to our respective outlet assignments. But, we were no longer allowed to work and we were refused
entrance by the security guards posted. According to the security guards, all merchandisers of Procter and Gamble under S[APS] who filed a case in
the Dept. of Labor are already dismissed as per letter of Procter and Gamble dated February 25, 1993. x x x52cЃa
Neither SAPS nor P&G dispute the existence of these circumstances. Parenthetically, unlike Promm-Gem which dismissed its employees for grave
misconduct and breach of trust due to disloyalty, SAPS dismissed its employees upon the initiation of P&G. It is evident that SAPS does not carry on its
own business because the termination of its contract with P&G automatically meant for it also the termination of its employees services. It is obvious
from its act that SAPS had no other clients and had no intention of seeking other clients in order to further its merchandising business. From all
indications SAPS, existed to cater solely to the need of P&G for the supply of employees in the latters merchandising concerns only. Under the
circumstances prevailing in the instant case, we cannot consider SAPS as an independent contractor.chanroblesvirtua|awlibary
Going back to the matter of dismissal, it must be emphasized that the onus probandi to prove the lawfulness of the dismissal rests with the
employer.53cЃa In termination cases, the burden of proof rests upon the employer to show that the dismissal is for just and valid cause.54cЃa In the
instant case, P&G failed to discharge the burden of proving the legality and validity of the dismissals of those petitioners who are considered its
employees. Hence, the dismissals necessarily were not justified and are therefore illegal.
Damages
We now go to the issue of whether petitioners are entitled to damages. Moral
and exemplary damages are recoverable where the dismissal of an employee was attended by bad faith or fraud or constituted an act oppressive to
labor or was done in a manner contrary to morals, good customs or public policy.55cЃa
With regard to the employees of Promm-Gem, there being no evidence of bad faith, fraud or any oppressive act on the part of the latter, we find no
support for the award of damages.chanroblesvirtua|awlibary
As for P&G, the records show that it dismissed its employees through SAPS in a manner oppressive to labor. The sudden and peremptory barring of
the concerned petitioners from work, and from admission to the work place, after just a one-day verbal notice, and for no valid cause bellows
oppression and utter disregard of the right to due process of the concerned petitioners. Hence, an award of moral damages is called
for.chanroblesvirtua|awlibary
Attorneys fees may likewise be awarded to the concerned petitioners who were illegally dismissed in bad faith and were compelled to litigate or incur
expenses to protect their rights by reason of the oppressive acts56cЃa of P&G.chanroblesvirtua|awlibary
Lastly, under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges, inclusive of allowances, and other benefits or their monetary equivalent from the time the compensation was
withheld up to the time of actual reinstatement.57cЃa Hence, all the petitioners, having been illegally dismissed are entitled to reinstatement without
loss of seniority rights and with full back wages and other benefits from the time of their illegal dismissal up to the time of their actual reinstatement.
WHEREFORE, the petition is GRANTED. The Decision dated March 21, 2003 of the Court of Appeals in CA-G.R. SP No. 52082 and the Resolution dated
October 20, 2003 are REVERSED and SET ASIDE. Procter & Gamble Phils., Inc. and Promm-Gem, Inc. are ORDERED to reinstate their respective
employees immediately without loss of seniority rights and with full backwages and other benefits from the time of their illegal dismissal up to the
time of their actual reinstatement. Procter & Gamble Phils., Inc. is further ORDERED to pay each of those petitioners considered as its employees,
namely Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope
Salonga, Franz David, Nestor Ignacio, Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez,
Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel
Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert Y. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoña, Philip M. Loza,
Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz,
Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz, Romeo Viernes, Jr.,
Elias Basco and Dennis Dacasin, P25,000.00 as moral damages plus ten percent of the total sum as and for attorneys fees.chanroblesvirtua|awlibary
Let this case be REMANDED to the Labor Arbiter for the computation, within 30 days from receipt of this Decision, of petitioners backwages and other
benefits; and ten percent of the total sum as and for attorneys fees as stated above; and for immediate execution.
SO ORDERED.

THIRD DIVISION
[G.R. No. 174084 : August 25, 2010]
SPIC N' SPAN SERVICES CORPORATION, PETITIONER, VS. GLORIA PAJE, LOLITA GOMEZ, MIRIAM CATACUTAN, ESTRELLA ZAPATA, GLORIA SUMANG,
JULIET DINGAL, MYRA AMANTE, AND FE S. BERNANDO, RESPONDENTS.

DECISION
BRION, J.:

Before the Court is the petition for review on certiorari[1]  filed by Spic N' Span Services Corporation (SNS) to seek the reversal of the October 25, 2004
Decision[2] and the August 2, 2006 Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP No. 83215, entitled "Gloria Paje, Lolita Gomez, Miriam
Catacutan, Estrella Zapata, Gloria Sumang, Juliet Dingal, Myra Amante and Fe S. Bernardo v. National Labor Relations Commission, Spic N Span
Service Corporation and Swift Foods, Inc."
Background Facts

Swift Foods, Inc. (Swift) is a subsidiary of RFM Corporation that manufactures and processes meat products and other food products.  SNS's business is
to supply manpower services to its clients for a fee. Swift and SNS have a contract to promote Swift products.

Inocencio Fernandez, Edelisa F. David, Thelma Guardian, Juliet C. Dingal, Fe S. Bernardo, Lolita Gomez, Myra Amante, Miriam S. Catacutan, Gloria O.
Sumang, Gloria O. Paje, and Estrella Zapata (complainants) worked as Deli/Promo Girls of Swift products in various supermarkets in Tarlac and
Pampanga. They were all dismissed from their employment on February 28, 1998.  They filed two complaints for illegal dismissal against SNS and Swift
before the National Labor Relations Commission (NLRC) Regional Arbitration Branch III, San Fernando, Pampanga, docketed as Case Nos. 03-9131-98
and 07-9295-98.  These cases were subsequently consolidated.

After two unsuccessful conciliation hearings, the Labor Arbiter ordered the parties to submit their position papers.  Swift filed its position paper; SNS
did not.[4]  The complainants' position papers were signed by Florencio P. Peralta who was not a lawyer and who claimed to be the complainants'
representative, although he never showed any proof of his authority to represent them.

In their position papers, the complainants alleged that they were employees of Swift and SNS, and their services were terminated without cause and
without due process.  The termination came on the day they received their notices; thus, they were denied the procedural due process requirements
of notice and hearing prior to their termination of employment.[5]  Swift, in its position paper, moved to dismiss the complaints on the ground that it
entered into an independent labor contract with SNS for the promotion of its products; it alleged that the complainants were the employees of SNS,
not of Swift.[6]

The Labor Arbiter[7] found SNS to be the agent of Swift, and ordered SNS and Swift to jointly and severally pay Edelisa David P115,637.50 and
Inocencio Fernandez P192,197.50, representing their retirement pay and service incentive leave pay.  He dismissed, without prejudice, the claims of
the other complainants because they failed to verify their position paper.  He also denied all other claims for lack of factual basis.[8]

Both Swift and the complainants appealed to the NLRC. Swift filed a memorandum of appeal, while the complainants filed a partial memorandum of
appeal.[9]

The NLRC denied the complainants' appeal for lack of merit.[10]  It dismissed the complaint against Swift, and ordered SNS to pay Edelisa David a total
of P256,620.13, and Inocencio Fernandez a total of P280,912.63, representing backwages, separation pay, and service incentive leave pay.  It
dismissed all other claims for lack of merit.  Thereafter, Edelisa David and Inocencio Fernandez agreed to a settlement, and their cases were thus
closed.[11]

The complainants whose claims were dismissed, namely, Gloria Paje, Lolita Gomez, Miriam Catacutan, Estrella Zapata, Gloria Sumang, Juliet Dingal,
Myra Amante, and Fe S. Bernardo (respondents), moved for the reconsideration of the NLRC's ruling. This time, they were represented by the Public
Attorney's Office.  The NLRC denied their motion.[12]

The respondents then sought relief with the CA through a petition for certiorari, based on the alleged grave abuse of discretion committed by the
NLRC.  The CA found the petition meritorious, in its assailed decision of October 25, 2004, and ruled that the respondents' failure to sign the
verification in their position paper was a formal defect that was not fatal to their case. It concluded that SNS was merely an agent of Swift; thus, the
latter should not be exempt from liability. It ordered the remand of the case to the Labor Arbiter for the computation of the respondents' backwages,
separation pay, and service incentive leave pay. SNS and Swift filed their motions for reconsideration which the CA denied.

SNS is now before us on a petition for review on certiorari, and submits the following -
I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT RULED THAT THE NLRC COMMITTED GRAVE ABUSE
OF DISCRETION IN DISMISSING THE CLAIMS OF HEREIN RESPONDENTS "ON THE GROUND OF NON-SIGNING OF THE POSITION PAPER."

II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT ALTHOUGH THE RESPONDENTS WERE
NOT REPRESENTED BY A LAWYER BUT BY ONE WHO IS NOT A MEMBER OF THE BAR, SAID FACT IS "SUFFICIENT JUSTIFICATION FOR THE PETITIONERS'
FAILURE TO COMPLY WITH THE REQUIREMENTS OF LAW."

III.  WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN "REMANDING THE CASE TO THE LABOR ARBITER FOR
THE COMPUTATION OF THE MONEY CLAIMS OF THE RESPONDENTS, TO WIT: 1) BACKWAGES, 2) SEPARATION PAY, AND 3) SERVICE INCENTIVE
LEAVE," DESPITE THE FACT THAT NOWHERE IN THE DECISIONS OF THE LABOR ARBITER, THE NATIONAL LABOR RELATIONS COMMISSION, AND COURT
OF APPEALS IS IT STATED THAT HEREIN RESPONDENTS WERE ILLEGALLY DISMISSED."[13]

THE COURT'S RULING

We find the petition unmeritorious.

SNS submits that since respondents did not sign the verification in their position paper, the CA erred when it ruled that the NLRC committed grave
abuse of discretion in dismissing the respondents' complaints. SNS stressed the importance of a signature in a pleading, and harped on the
respondents' failure to sign their position paper. [14]  This, to SNS, is fatal to the respondents' case.

We do not agree with SNS.

As we previously explained in Torres v. Specialized Packaging Development Corporation,[15] where only two of the 25 real parties-in-interest signed the
verification, the verification by the two could be sufficient assurance that the allegations in the petition were made in good faith, are true and correct,
and are not speculative. The lack of a verification in a pleading is only a formal defect, not a jurisdictional defect, and is not necessarily fatal to a case.
[16]
  The primary reason for requiring a verification is simply to ensure that the allegations in the pleading are done in good faith, are true and correct,
and are not mere speculations.[17]

The CA, in its assailed decision, cited Philippine Telegraph and Telephone Corporation v. NLRC [18] to emphasize that in labor cases, the deciding
authority should use every reasonable means to speedily and objectively ascertain the facts, without regard to technicalities of law and procedure.
Technical rules of evidence are not strictly binding in labor cases.[19]

In the hierarchy observed in the dispensation of justice, rules of procedure can be disregarded in order to serve the ends of justice.  This was
explained by Justice Bernando P. Pardo, in Aguam v. Court of Appeals,[20] when he said -
Litigations must be decided on their merits and not on technicality. Every party litigant must be afforded the amplest opportunity for the proper and
just determination of his cause, free from the unacceptable plea of technicalities. Thus, dismissal of appeals purely on technical grounds is frowned
upon where the policy of the court is to encourage hearings of appeals on their merits and the rules of procedure ought not to be applied in a very
rigid, technical sense; rules of procedure are used only to help secure, not override substantial justice. It is a far better and more prudent course of
action for the court to excuse a technical lapse and afford the parties a review of the case on appeal to attain the ends of justice rather than dispose
of the case on technicality and cause a grave injustice to the parties, giving a false impression of speedy disposal of cases while actually resulting in
more delay, if not a miscarriage of justice.[21]

We should remember, too, that certain labor rights assume preferred positions in our legal hierarchy.  Under the Constitution and the Labor Code, the
State is bound to protect labor and assure the rights of workers to security of tenure.[22] Article 4 of the Labor Code provides that all doubts in the
implementation and interpretation of its provisions (including its implementing rules and regulations) shall be resolved in favor of labor.  The
Constitution, on the other hand, characterizes labor as a primary social economic force.  The State is bound to "protect the rights of workers and
promote their welfare,"[23]  and the workers are "entitled to security of tenure, humane conditions of work, and a living wage."[24] Under these
fundamental guidelines, respondents' right to security of tenure is a preferred constitutional right that technical infirmities in labor pleadings cannot
defeat.

1. SNS submits that the CA committed a serious error in ruling that the respondents' representative's non-membership in the bar is sufficient
justification for their failure to comply with the requirements of the law.  SNS argues that this ruling excuses the employment of a non-lawyer and
places the acts of the latter on the same level as those of a member of the Bar. [25]   Our Labor Code allows a non-lawyer to represent a party before the
Labor Arbiter and the Commission,[26] but provides limitations: Non-lawyers may appear before the Commission or any Labor Arbiter only: (1) If they
represent themselves; or (2) If they represent their organization or members thereof. [27]  Thus, SNS concludes that the respondents' representative had
no personality to appear before the Labor Arbiter or the NLRC, and his representation for the respondents should produce no legal effect.

Our approach to these arguments is simple as the problem boils down to a balance between a technical rule and protected constitutional interests.
The cited technical infirmity cannot defeat the respondents' preferred right to security of tenure which has primacy over technical requirements.
Thus, we affirm the CA's ruling on this point, without prejudice to whatever action may be taken against the representative, if he had indeed been
engaged in the unauthorized practice of law.

2. SNS also claims serious error on the part of the CA in remanding the case to the Labor Arbiter, for computation of the respondents' backwages,
separation pay and service incentive leave pay despite the fact that nowhere in the decisions of the Labor Arbiter, the NLRC, and CA was there any
finding that respondents had been illegally dismissed.

We find this to be the first argument of its kind from SNS, and, in fact, is the first ever submission from SNS before it filed a motion for reconsideration
with the CA. To recall, SNS did not file its position paper before the labor arbiter, nor did it file its appeal before the NLRC; only Swift and the
complainants did.[28]  It was only Swift, too, that filed its comment to the herein respondents' petition for certiorari.[29]

The records do not show if SNS filed its memorandum before the CA, although SNS filed a motion for reconsideration of the CA decision.  It then
claimed that the CA erred in ruling that the NLRC committed grave abuse of discretion when it dismissed respondents' claim; that a petition
for certiorari under Rule 65 of the Rules of Court is not the proper remedy to correct the NLRC's alleged grave abuse of discretion; and that the
respondents were bound by the mistakes of their non-lawyer representative.[30]  Significantly, SNS did not raise the question of the CA's failure to state
that the respondents had been illegally dismissed.  At this point, it is too late for SNS to raise the issue.

Nothing on record indicates the reason for the respondents' termination from employment, although the fact of termination was never disputed. 
Swift denied liability on the basis of its contract with SNS.  The contract was not presented before the Labor Arbiter, although Swift averred that under
the contract, SNS would supply promo girls, merchandisers and other promotional personnel to handle all promotional aspects and merchandising
strategy of Swift.[31]  We can assume, for lack of proof to the contrary, that the respondents' termination from employment was illegal since neither
SNS nor Swift, as employers, presented any proof that their termination from employment was legal.  Upon proof of termination of employment, the
employer has the burden of proof that the dismissal was valid; absent this proof, the termination from employment is deemed illegal, as alleged by
the dismissed employees.

3. In order that a labor relationship can be categorized as legitimate/permissible job contracting or as prohibited labor-only contracting, the totality of
the facts and the surrounding circumstances of the relationship ought to be considered.[32]  Every case is unique and has to be assessed on the basis of
its facts and of the features of the relationship in question.  In permissible job contracting, the principal agrees to put out or farm out with a
contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of
whether such job, work or service is to be performed or completed within or outside the premises of the principal.  The test is whether the
independent contractor has contracted to do the work according to his own methods and without being subject to the principal's control except only
as to the results, he has substantial capital, and he has assured the contractual employees entitlement to all labor and occupational safety and health
standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits.[33]
The CA found SNS to be Swift's agent, and explained its ruling as follows[34] -

To be legitimate, contracting or subcontracting must satisfy the following requirements: 1)  The contractor or subcontractor carries on a distinct and
independent business and undertakes to perform the job, work or service on its own account and under its own responsibility, according to its own
manners and methods, and free from the control and direction of the principal in all matters connected with the performance of the work except as
to the results thereof; 2)  the contractor or subcontractor has substantial capital or investment; and 3)  the agreement between the principal and
contractor or subcontractor assures the contractual employees' entitlement to all labor and occupational safety and health standards, free exercise of
right to self-organization, security of tenure, and social and welfare benefit (Vinoya v. NLRC, 324 SCRA 469).

The parties failed to attach a copy of the agreement entered into between SNS and Swift. Neither did they attach a copy of the financial statement of
SNS.  Thus, we are constrained to rule on the issue involved on the basis of the findings of both the Labor Arbiter and the NLRC.

The Labor Arbiter, in finding that SNS was merely a labor-only contractor, cited the following reasons:  First, the agreement between SNS and Swift
shows that the latter exercised control over the promo girls and/or merchandisers through the services of coordinators.  Second, it cannot be said
that SNS has substantial capital.  Third, the duties of the petitioners were directly related, necessary and vital to the day-to-day operations of Swift. 
Lastly, the uniform and identification cards used by the petitioners were subject to the approval of Swift.

The NLRC, on the other hand, in finding that SNS is an independent contractor gave the following reasons:  First, there is no evidence that Swift
exercised the power of control over the petitioners.  Rather, it is SNS who exercised direct control and supervision over the nature and performance
of the works of herein petitioners.  Second, by law, Swift and SNS have distinct and separate juridical personality from each other.

The decision of the NLRC is bereft of explanation as to the existence of circumstances that would make SNS an independent contractor as would
exempt the "principal" from liabilities to the employees.

Nowhere in the decision of both the Labor Arbiter and the NLRC shows that SNS had full control of the means and methods of the performance of
their work.  Moreover, as found by the Labor Arbiter, there was no evidence that SNS has substantial capital or investment.  Lastly, there was no
finding by the Labor Arbiter nor the NLRC that the agreement between the principal (Swift) and contractor (SNS) assures the contractual employees'
entitlement to all labor and occupational safety and health standards, free exercise of right to self-organization, security of tenure, and social and
welfare benefit.

In view of the foregoing, we conclude that the requisites above-mentioned are not obtaining in the present case.  Hence, SNS is considered merely an
agent of Swift which does not exempt the latter from liability.

We note that the present decision does not affect the settlement entered into between Edeliza David and Inocencio Fernandez, on the one hand and
SNS, on the other.  As held by the NLRC, their complaints are considered closed and terminated.

WHEREFORE, premises considered, the instant petition is hereby GRANTED.  The Resolutions of the NLRC dated January 11, 2002 and December 23,
2003 are SET ASIDE in so far as the dismissal of the petitioners' case is concerned and in so far as Swift is found not liable for the payment of the
petitioners' money claims.

The present case is hereby REMANDED to the Labor Arbiter for the computation of the money claims of the petitioners, to wit: 1) Backwages; 2)
Separation Pay; and 3) Service Incentive Leave Pay.

The settlement of the claims of David and Fernandez is not affected by this decision.

We fully agree with this ruling.  What we have before us, therefore, is a case of illegal dismissal perpetrated by a principal and its illegal contractor-
agent.  Thus, we affirm the ruling of the CA with the modification that the respondents are also entitled to nominal damages, for violation of their due
process rights to notice and hearing, pursuant to our ruling in Agabon v. NLRC.[35]  We peg this amount at P30,000.00 for each of the respondents.

WHEREFORE, premises considered, we hereby AFFIRM the Court of Appeals' October 25, 2004 Decision and August 2, 2006 Resolution in CA-G.R. SP
No. 83215, with the modification that nominal damages in the amount of P30,000.00 should additionally be paid to each of the respondents, for
violation of their procedural due process rights.  Costs against the petitioner.

SO ORDERED.

Carpio Morales, (Chairperson), Bersamin, Villarama, Jr., and  Sereno, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 146408             February 29, 2008
PHILIPPINE AIRLINES, INC., petitioner,
vs.
ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE
SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY
LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES, BENEDICTO
AUXTERO, EDUARDO MAGDADARAUG, NELSON M. DULCE, and ALLAN BENTUZAL, respondents.
DECISION
CARPIO MORALES, J.:
Petitioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as Contractor, entered into an Agreement1 on July 15, 1991
whereby Synergy undertook to "provide loading, unloading, delivery of baggage and cargo and other related services to and from [petitioner]'s
aircraft at the Mactan Station."2
The Agreement specified the following "Scope of Services" of Contractor Synergy:
1.2 CONTRACTOR shall furnish all the necessary capital, workers, loading, unloading and delivery materials, facilities, supplies, equipment
and tools for the satisfactory performance and execution of the following services (the Work):
a. Loading and unloading of baggage and cargo to and from the aircraft;
b. Delivering of baggage from the ramp to the baggage claim area;
c. Picking up of baggage from the baggage sorting area to the designated parked aircraft;
d. Delivering of cargo unloaded from the flight to cargo terminal;
e. Other related jobs (but not janitorial functions) as may be required and necessary;
CONTRACTOR shall perform and execute the aforementioned Work at the following areas located at Mactan Station, to wit:
a. Ramp Area
b. Baggage Claim Area
c. Cargo Terminal Area, and
d. Baggage Sorting Area3 (Underscoring supplied)
And it expressly provided that Synergy was "an independent contractor and . . . that there w[ould] be no employer-employee relationship between
CONTRACTOR and/or its employees on the one hand, and OWNER, on the other."4
On the duration of the Agreement, Section 10 thereof provided:
 10. 1 Should at any time OWNER find the services herein undertaken by CONTRACTOR to be unsatisfactory, it shall notify CONTRACTOR who
shall have fifteen (15) days from such notice within which to improve the services. If CONTRACTOR fails to improve the services under this
Agreement according to OWNER'S specifications and standards, OWNER shall have the right to terminate this Agreement immediately and
without advance notice.
10.2 Should CONTRACTOR fail to improve the services within the period stated above or should CONTRACTOR breach the terms of this
Agreement and fail or refuse to perform the Work in such a manner as will be consistent with the achievement of the result therein
contracted for or in any other way fail to comply strictly with any terms of this Agreement, OWNER at its option, shall have the right to
terminate this Agreement and to make other arrangements for having said Work performed and pursuant thereto shall retain so much of
the money held on the Agreement as is necessary to cover the OWNER's costs and damages, without prejudice to the right of OWNER to
seek resort to the bond furnished by CONTRACTOR should the money in OWNER's possession be insufficient.
x x x x (Underscoring supplied)
Except for respondent Benedicto Auxtero (Auxtero), the rest of the respondents, who appear to have been assigned by Synergy to petitioner following
the execution of the July 15, 1991 Agreement, filed on March 3, 1992 complaints before the NLRC Regional Office VII at Cebu City against petitioner,
Synergy and their respective officials for underpayment, non-payment of premium pay for holidays, premium pay for rest days, service incentive leave
pay, 13th month pay and allowances, and for regularization of employment status with petitioner, they claiming to be "performing duties for the
benefit of [petitioner] since their job is directly connected with [its] business x x x."5
Respondent Auxtero had initially filed a complaint against petitioner and Synergy and their respective officials for regularization of his employment
status. Later alleging that he was, without valid ground, verbally dismissed, he filed a complaint against petitioner and Synergy and their respective
officials for illegal dismissal and reinstatement with full backwages.6
The complaints of respondents were consolidated.
By Decision7 of August 29, 1994, Labor Arbiter Dominador Almirante found Synergy an independent contractor and dismissed respondents' complaint
for regularization against petitioner, but granted their money claims. The fallo of the decision reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered as follows:
(1) Ordering respondents PAL and Synergy jointly and severally to pay all the complainants herein their 13th month pay and service incentive
leave benefits;
xxxx
(3) Ordering respondent Synergy to pay complainant Benedicto Auxtero a financial assistance in the amount of P5,000.00.
The awards hereinabove enumerated in the aggregate total amount of THREE HUNDRED TWENTY-TWO THOUSAND THREE HUNDRED FIFTY
NINE PESOS AND EIGHTY SEVEN CENTAVOS (P322,359.87) are computed in detail by our Fiscal Examiner which computation is hereto
attached to form part of this decision.
The rest of the claims are hereby ordered dismissed for lack of merit.8 (Underscoring supplied)
On appeal by respondents, the NLRC, Fourth Division, Cebu City, vacated and set aside the decision of the Labor Arbiter by Decision9 of January 5,
1996, the fallo of which reads:
WHEREFORE, the Decision of the Labor Arbiter Dominador A. Almirante, dated August 29, 1994, is hereby VACATED and SET ASIDE and
judgment is hereby rendered:
1. Declaring respondent Synergy Services Corporation to be a 'labor-only' contractor;
2. Ordering respondent Philippine Airlines to accept, as its regular employees, all the complainants, . . . and to give each of them the
salaries, allowances and other employment benefits and privileges of a regular employee under the Collective Bargaining Agreement
subsisting during the period of their employment;
xxxx
4. Declaring the dismissal of complainant Benedicto Auxtero to be illegal and ordering his reinstatement as helper or utility man with
respondent Philippine Airlines, with full backwages, allowances and other benefits and privileges from the time of his dismissal up to his
actual reinstatement; and
5. Dismissing the appeal of respondent Synergy Services Corporation, for lack of merit.10 (Emphasis and underscoring supplied)
Only petitioner assailed the NLRC decision via petition for certiorari before this Court.
By Resolution11 of January 25, 1999, this Court referred the case to the Court of Appeals for appropriate action and disposition, conformably with St.
Martin Funeral Homes v. National Labor Relations Commission which was promulgated on September 16, 1998.
The appellate court, by Decision of September 29, 2000, affirmed the Decision of the NLRC.12 Petitioner's motion for reconsideration having been
denied by Resolution of December 21, 2000,13 the present petition was filed, faulting the appellate court
I.
. . . IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION DECISION WHICH IMPOSED THE RELATIONSHIP OF EMPLOYER-
EMPLOYEE BETWEEN PETITIONER AND THE RESPONDENTS HEREIN.
II.
. . . IN AFFIRMING THE RULING OF THE NATIONAL LABOR RELATIONS COMMISSION ORDERING THE REINSTATEMENT OF RESPONDENT
AUXTERO DESPITE THE ABSENCE [OF] ANY FACTUAL FINDING IN THE DECISION THAT PETITIONER ILLEGALLY TERMINATED HIS
EMPLOYMENT.
III.
. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND GRAVE ERROR IN UPHOLDING THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION WHICH COMPELLED THE PETITIONER TO EMPLOY THE RESPONDENTS AS REGULAR EMPLOYEES DESPITE THE FACT THAT THEIR
SERVICES ARE IN EXCESS OF PETITIONER COMPANY'S OPERATIONAL REQUIREMENTS.14 (Underscoring supplied)
Petitioner argues that the law does not prohibit an employer from engaging an independent contractor, like Synergy, which has substantial capital in
carrying on an independent business of contracting, to perform specific jobs.
Petitioner further argues that its contracting out to Synergy various services like janitorial, aircraft cleaning, baggage-handling, etc., which are directly
related to its business, does not make respondents its employees.
Petitioner furthermore argues that none of the four (4) elements of an employer-employee relationship between petitioner and respondents, viz:
selection and engagement of an employee, payment of wages, power of dismissal, and the power to control employee's conduct, is present in the
case.15
Finally, petitioner avers that reinstatement of respondents had been rendered impossible because it had reduced its personnel due to heavy losses as
it had in fact terminated its service agreement with Synergy effective June 30, 199816 as a cost-saving measure.
The decision of the case hinges on a determination of whether Synergy is a mere job-only contractor or a legitimate contractor. If Synergy is found to
be a mere job-only contractor, respondents could be considered as regular employees of petitioner as Synergy would then be a mere agent of
petitioner in which case respondents would be entitled to all the benefits granted to petitioner's regular employees; otherwise, if Synergy is found to
be a legitimate contractor, respondents' claims against petitioner must fail as they would then be considered employees of Synergy.
The statutory basis of legitimate contracting or subcontracting is provided in Article 106 of the Labor Code which reads:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. - Whenever an employer enters into a contract with another person for the performance of
the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions
of this Code.
 In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall
be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the
contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers
established under the Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered
the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in
the form of tools, equipment, machineries, work premises, among others, AND the workers recruited and placed by such person
are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him. (Emphasis, capitalization and underscoring supplied)
Legitimate contracting and labor-only contracting are defined in Department Order (D.O.) No. 18-02, Series of 2002 (Rules Implementing Articles 106
to 109 of the Labor Code, as amended) as follows:
Section 3. Trilateral relationship in contracting arrangements. In legitimate contracting, there exists a trilateral relationship under which
there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of
employment between the contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity
to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or
subcontractor to accomplish the job, work or service. (Emphasis and underscoring supplied)
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a
job, work or service for a principal, and any of the following elements are [sic] present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be
performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly
related to the main business of the principal; OR
(ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee. (Emphasis,
underscoring and capitalization supplied)
"Substantial capital or investment" and the "right to control" are defined in the same Section 5 of the Department Order as follows:
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor
in the performance or completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed,
to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. (Emphasis and underscoring
supplied)
From the records of the case, it is gathered that the work performed by almost all of the respondents - loading and unloading of baggage and cargo of
passengers - is directly related to the main business of petitioner. And the equipment used by respondents as station loaders, such as trailers and
conveyors, are owned by petitioner.17
Petitioner asserts, however, that mere compliance with substantial capital requirement suffices for Synergy to be considered a legitimate contractor,
citing Neri v. National Labor Relations Commission.18 Petitioner's reliance on said case is misplaced.
In Neri, the Labor Arbiter and the NLRC both determined that Building Care Corporation had a capital stock of P1 million fully subscribed and paid
for.19 The corporation's status as independent contractor had in fact been previously confirmed in an earlier case20 by this Court which found it to be
serving, among others, a university, an international bank, a big local bank, a hospital center, government agencies, etc."
In stark contrast to the case at bar, while petitioner steadfastly asserted before the Labor Arbiter and the NLRC that Synergy has a substantial capital
to engage in legitimate contracting, it failed to present evidence thereon. As the NLRC held:
The decision of the Labor Arbiter merely mentioned on page 5 of his decision that respondent SYNERGY has substantial capital, but there
is no showing in the records as to how much is that capital. Neither had respondents shown that SYNERGY has such substantial capital. x x
x21 (Underscoring supplied)
It was only after the appellate court rendered its challenged Decision of September 29, 2002 when petitioner, in its Motion for Reconsideration of the
decision, sought to prove, for the first time, Synergy's substantial capitalization by attaching photocopies of Synergy's financial statements, e.g.,
balance sheets, statements of income and retained earnings, marked as "Annexes 'A' - 'A-4.'"22
More significantly, however, is that respondents worked alongside petitioner's regular employees who were performing identical work.23 As San
Miguel Corporation v. Aballa24 and Dole Philippines, Inc. v. Esteva, et al.25 teach, such is an indicium of labor-only contracting.
For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two elements to be present is, for convenience, re-quoted:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be
performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly
related to the main business of the principal, OR
(ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee. (Emphasis and
CAPITALIZATION supplied)
Even if only one of the two elements is present then, there is labor-only contracting.
The control test element under the immediately-quoted paragraph (ii), which was not present in the old Implementing Rules (Department Order No.
10, Series of 1997),26 echoes the prevailing jurisprudential trend27 elevating such element as a primary determinant of employer-employee
relationship in job contracting agreements.
One who claims to be an independent contractor has to prove that he contracted to do the work according to his own methods and without being
subject to the employer's control except only as to the results.28
While petitioner claimed that it was Synergy's supervisors who actually supervised respondents, it failed to present evidence thereon. It did not even
identify who were the Synergy supervisors assigned at the workplace.
Even the parties' Agreement does not lend support to petitioner's claim, thus:
Section 6. Qualified and Experienced Worker: Owner's Right to Dismiss Workers.
CONTRACTOR shall employ capable and experienced workers and foremen to carry out the loading, unloading and delivery Work as well
as provide all equipment, loading, unloading and delivery equipment, materials, supplies and tools necessary for the performance of the
Work. CONTRACTOR shall upon OWNER'S request furnish the latter with information regarding the qualifications of the former's workers, to
prove their capability and experience. Contractor shall require all its workers, employees, suppliers and visitors to comply with OWNER'S
rules, regulations, procedures and directives relative to the safety and security of OWNER'S premises, properties and operations. For this
purpose, CONTRACTOR shall furnish its employees and workers identification cards to be countersigned by OWNER and uniforms to be
approved by OWNER. OWNER may require CONTRACTOR to dismiss immediately and prohibit entry into OWNER'S premises of any
person employed therein by CONTRACTOR who in OWNER'S opinion is incompetent or misconducts himself or does not comply with
OWNER'S reasonable instructions and requests regarding security, safety and other matters and such person shall not again be employed
 to perform the services hereunder without OWNER'S permission.29 (Underscoring partly in the original and partly supplied; emphasis
supplied)
Petitioner in fact admitted that it fixes the work schedule of respondents as their work was dependent on the frequency of plane arrivals.30 And as the
NLRC found, petitioner's managers and supervisors approved respondents' weekly work assignments and respondents and other regular PAL
employees were all referred to as "station attendants" of the cargo operation and airfreight services of petitioner.31
Respondents having performed tasks which are usually necessary and desirable in the air transportation business of petitioner, they should be
deemed its regular employees and Synergy as a labor-only contractor.32
The express provision in the Agreement that Synergy was an independent contractor and there would be "no employer-employee relationship
between [Synergy] and/or its employees on one hand, and [petitioner] on the other hand" is not legally binding and conclusive as contractual
provisions are not valid determinants of the existence of such relationship. For it is the totality of the facts and surrounding circumstances of the
case33 which is determinative of the parties' relationship.
Respecting the dismissal on November 15, 199234 of Auxtero, a regular employee of petitioner who had been working as utility man/helper since
November 1988, it is not legally justified for want of just or authorized cause therefor and for non-compliance with procedural due process.
Petitioner's claim that he abandoned his work does not persuade.35 The elements of abandonment being (1) the failure to report for work or absence
without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship manifested by some overt acts,36 the onus
probandi lies with petitioner which, however, failed to discharge the same.
Auxtero, having been declared to be a regular employee of petitioner, and found to be illegally dismissed from employment, should be entitled to
salary differential37 from the time he rendered one year of service until his dismissal, reinstatement plus backwages until the finality of this
decision.38 In view, however, of the long period of time39 that had elapsed since his dismissal on November 15, 1992, it would be appropriate to award
separation pay of one (1) month salary for each year of service, in lieu of reinstatement.40
As regards the remaining respondents, the Court affirms the ruling of both the NLRC and the appellate court, ordering petitioner to accept them as its
regular employees and to give each of them the salaries, allowances and other employment benefits and privileges of a regular employee under the
pertinent Collective Bargaining Agreement.
Petitioner claims, however, that it has become impossible for it to comply with the orders of the NLRC and the Court of Appeals, for during the
pendency of this case, it was forced to reduce its personnel due to heavy losses caused by economic crisis and the pilots' strike of June 5,
1998.41 Hence, there are no available positions where respondents could be placed.
And petitioner informs that "the employment contracts of all if not most of the respondents . . . were terminated by Synergy effective 30 June
1998 when petitioner terminated its contract with Synergy."42
Other than its bare allegations, petitioner presented nothing to substantiate its impossibility of compliance. In fact, petitioner waived this defense by
failing to raise it in its Memorandum filed on June 14, 1999 before the Court of Appeals.43 Further, the notice of termination in 1998 was in disregard
of a subsisting temporary restraining order44 to preserve the status quo, issued by this Court in 1996 before it referred the case to the Court of
Appeals in January 1999. So as to thwart the attempt to subvert the implementation of the assailed decision, respondents are deemed to be
continuously employed by petitioner, for purposes of computing the wages and benefits due respondents.
Finally, it must be stressed that respondents, having been declared to be regular employees of petitioner, Synergy being a mere agent of the latter,
had acquired security of tenure. As such, they could only be dismissed by petitioner, the real employer, on the basis of just or authorized cause, and
with observance of procedural due process.
WHEREFORE, the Court of Appeals Decision of September 29, 2000 is AFFIRMED with MODIFICATION.
Petitioner PHILIPPINE AIRLINES, INC. is ordered to:
(a) accept respondents ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ,
BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA,
JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES,
EDUARDO MAGDADARAUG, NELSON M. DULCE and ALLAN BENTUZAL as its regular employees in their same or substantially equivalent positions, and
pay the wages and benefits due them as regular employees plus salary differential corresponding to the difference between the wages and benefits
given them and those granted to petitioner's other regular employees of the same rank; and
(b) pay respondent BENEDICTO AUXTERO salary differential; backwages from the time of his dismissal until the finality of this decision;
and separation pay, in lieu of reinstatement, equivalent to one (1) month pay for every year of service until the finality of this decision.
There being no data from which this Court may determine the monetary liabilities of petitioner, the case is REMANDED to the Labor Arbiter solely for
that purpose.
SO ORDERED.
THIRD DIVISION
[G.R. NO. 149011 : June 28, 2005]
SAN MIGUEL CORPORATION, Petitioner v. PROSPERO A. ABALLA, BONNY J. ABARING, EDWIN M. ADLA-ON, ALVIN C. ALCALDE, CELANIO D.
ARROLLADO, EDDIE A. ARROLLADO, REYNALDO T. ASONG, RENE A. ASPERA, JOEL D. BALATERIA, JOSEPH D. BALATERIA, JOSE JOLLEN BALLADOS,
WILFREDO B. BASAS, EDWIN E. BEATINGO, SONNY V. BERONDO, CHRISTOPHER D. BRIONES, MARLON D. BRIONES, JOEL C. BOOC, ENRIQUE
CABALIDA, DIOSCORO R. CAHINOD, ERNESTO P. CAHINOD, RENANTE S. CAHINOD, RUDERICK R. CALIXTON, RONILO C. CALVEZ, PANCHO CAÑETE,
JUNNY CASTEL, JUDY S. CELESTE, ROMEO CHUA, DANILO COBRA, ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ, JOHN D. DELFIN, RENELITO P. DEON,
ARNEL C. DE PEDRO, ORLANDO DERDER, CLIFFORD A. DESPI, RAMIE A. DESPI, SR., VICTOR A. DESPI, ROLANDO L. DINGLE, ANTONIO D. DOLORFINO,
LARRY DUMA-OP, NOEL DUMOL, CHITO L. DUNGOG, RODERICK C. DUQUEZA, ROMMEL ESTREBOR, RIC E. GALPO, MANSUETO GILLE, MAXIMO L.
HILA-US, GERARDO J. JIMENEZ, ROBERTLY Y. HOFILEÑA, ROBERTO HOFILEÑA, VICENTE INDENCIO, JONATHAN T. INVENTOR, PETER PAUL T.
INVENTOR, JOEBERT G. LAGARTO, RENATO LAMINA, ALVIN LAS POBRES, ALBERT LAS POBRES, LEONARD LEMONCHITO, JERRY LIM, JOSE COLLY S.
LUCERO, ROBERTO E. MARTIL, HERNANDO MATILLANO, VICENTE M. MATILLANO, TANNY C. MENDOZA, WILLIAM P. NAVARRO, WILSON P.
NAVARRO, LEO A. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C. PAROCHILIN, REYNALDO C. PAROCHILIN, RICKY PALANOG, BERNIE O. PILLO,
ALBERTO O. PILLO, JOE-MARIE S. PUGNA, EDWIN G. RIBON, RAUL A. RUBIO, HENRY S. SAMILLANO, EDGAR SANTIAGO, ROLAND B. SANTILLANA,
ROLDAN V. SAYAM, JOSEPH S. SAYSON, RENE SUARNABA, ELMAR TABLIGAN, JERRY D. TALITE, OSCAR TALITE, WINIFREDO TALITE, CAMILO N.
TEMPOROSA, JOSE TEMPOROSA, RANDY TINGALA, TRISTAN A. TINGSON, ROGELIO TOMESA, DIONISE A. TORMIS, ADELINO C. UNTAL, FELIX T.
UNTAL, RONILO E. VISTA, JOAN C. VIYO and JOSE JOFER C. VIYO and the COURT OF APPEALS, Respondents.
DECISION
CARPIO-MORALES, J.:

Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice President and Visayas Area Manager for Aquaculture Operations Leopoldo
S. Titular, and Sunflower Multi-Purpose Cooperative (Sunflower), represented by the Chairman of its Board of Directors Roy G. Asong, entered into a
one-year Contract of Services1 commencing on January 1, 1993, to be renewed on a month to month basis until terminated by either party. The
pertinent provisions of the contract read:
1. The cooperative agrees and undertakes to perform and/or provide for the company, on a non-exclusive basis for a period of one year the following
services for the Bacolod Shrimp Processing Plant:
A. Messengerial/Janitorial
B. Shrimp Harvesting/Receiving
C. Sanitation/Washing/Cold Storage2
2. To carry out the undertaking specified in the immediately preceding paragraph, the cooperative shall employ the necessary personnel and provide
adequate equipment, materials, tools and apparatus, to efficiently, fully and speedily accomplish the work and services undertaken by the
cooperative. xxx
3. In consideration of the above undertaking the company expressly agrees to pay the cooperative the following rates per activity:
A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand Five Hundred Pesos Only (P19,500.00)
B. Harvesting/Shrimp Receiving. 'Piece rate of P0.34/kg. Or P100.00 minimum per person/activity whichever is higher, with provisions as follows:
P25.00 Fixed Fee per person
Additional meal allowance P15.00 every meal time in case harvest duration exceeds one meal.
This will be pre-set every harvest based on harvest plan approved by the Senior Buyer.
C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts.
One-half of the payment for all services rendered shall be payable on the fifteenth and the other half, on the end of each month. The cooperative
shall pay taxes, fees, dues and other impositions that shall become due as a result of this contract.
The cooperative shall have the entire charge, control and supervision of the work and services herein agreed upon. xxx
4. There is no employer-employee relationship between the company and the cooperative, or the cooperative and any of its members, or the
company and any members of the cooperative. The cooperative is an association of self-employed members, an independent contractor, and an
entrepreneur. It is subject to the control and direction of the company only as to the result to be accomplished by the work or services herein
specified, and not as to the work herein contracted. The cooperative and its members recognize that it is taking a business risk in accepting a fixed
service fee to provide the services contracted for and its realization of profit or loss from its undertaking, in relation to all its other undertakings, will
depend on how efficiently it deploys and fields its members and how they perform the work and manage its operations.
5. The cooperative shall, whenever possible, maintain and keep under its control the premises where the work under this contract shall be performed.
6. The cooperative shall have exclusive discretion in the selection, engagement and discharge of its member-workers or otherwise in the direction and
control thereof. The determination of the wages, salaries and compensation of the member-workers of the cooperative shall be within its full control.
It is further understood that the cooperative is an independent contractor, and as such, the cooperative agrees to comply with all the requirements of
all pertinent laws and ordinances, rules and regulations. Although it is understood and agreed between the parties hereto that the cooperative, in the
performance of its obligations, is subject to the control or direction of the company merely as a (sic) result to be accomplished by the work or services
herein specified, and not as to the means and methods of accomplishing such result, the cooperative hereby warrants that it will perform such work
or services in such manner as will be consistent with the achievement of the result herein contracted for.
xxx
8. The cooperative undertakes to pay the wages or salaries of its member-workers, as well as all benefits, premiums and protection in accordance
with the provisions of the labor code, cooperative code and other applicable laws and decrees and the rules and regulations promulgated by
competent authorities, assuming all responsibility therefor.
The cooperative further undertakes to submit to the company within the first ten (10) days of every month, a statement made, signed and sworn to
by its duly authorized representative before a notary public or other officer authorized by law to administer oaths, to the effect that the cooperative
has paid all wages or salaries due to its employees or personnel for services rendered by them during the month immediately preceding, including
overtime, if any, and that such payments were all in accordance with the requirements of law.
xxx
12. Unless sooner terminated for the reasons stated in paragraph 9 this contract shall be for a period of one (1) year commencing on January 1, 1993.
Thereafter, this Contract will be deemed renewed on a month-to-month basis until terminated by either party by sending a written notice to the other
at least thirty (30) days prior to the intended date of termination.
xxx3 (Underscoring supplied)Ï‚rαlαωlιbrαrÿ
Pursuant to the contract, Sunflower engaged private respondents to, as they did, render services at SMC's Bacolod Shrimp Processing Plant at Sta. Fe,
Bacolod City. The contract was deemed renewed by the parties every month after its expiration on January 1, 1994 and private respondents
continued to perform their tasks until September 11, 1995.
In July 1995, private respondents filed a complaint before the NLRC, Regional Arbitration Branch No. VI, Bacolod City, praying to be declared as
regular employees of SMC, with claims for recovery of all benefits and privileges enjoyed by SMC rank and file employees.
Private respondents subsequently filed on September 25, 1995 an Amended Complaint4 to include illegal dismissal as additional cause of action
following SMC's closure of its Bacolod Shrimp Processing Plant on September 15, 19955 which resulted in the termination of their services.
SMC filed a Motion for Leave to File Attached Third Party Complaint6 dated November 27, 1995 to implead Sunflower as Third Party Defendant which
was, by Order7 of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon.
In the meantime, on September 30, 1996, SMC filed before the Regional Office at Iloilo City of the Department of Labor and Employment (DOLE) a
Notice of Closure8 of its aquaculture operations effective on even date, citing serious business losses.
By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private respondents' complaint for lack of merit, ratiocinating as follows:
We sustain the stand of the respondent SMC that it could properly exercise its management prerogative to contract out the preparation and
processing aspects of its aquaculture operations. Judicial notice has already been taken regarding the general practice adopted in government and
private institutions and industries of hiring independent contractors to perform special services. xxx
xxx
Indeed, the law allows job contracting. Job contracting is permissible under the Labor Code under specific conditions and we do not see how this
activity could not be legally undertaken by an independent service cooperative like the third-party respondent herein.
There is no basis to the demand for regularization simply on the theory that complainants performed activities which are necessary and desirable in
the business of respondent. It has been held that the definition of regular employees as those who perform activities which are necessary and
desirable for the business of the employer is not always determinative because any agreement may provide for one (1) party to render services for
and in behalf of another for a consideration even without being hired as an employee.
The charge of the complainants that third-party respondent is a mere labor-only contractor is a sweeping generalization and completely
unsubstantiated. xxx In the absence of clear and convincing evidence showing that third-party respondent acted merely as a labor only contractor, we
are firmly convinced of the legitimacy and the integrity of its service contract with respondent SMC.
In the same vein, the closure of the Bacolod Shrimp Processing Plant was a management decision purely dictated by economic factors which was (sic)
mainly serious business losses. The law recognizes the right of the employer to close his business or cease his operations for bonafide reasons, as
much as it recognizes the right of the employer to terminate the employment of any employee due to closure or cessation of business operations,
unless the closing is for the purpose of circumventing the provisions of the law on security of tenure. The decision of respondent SMC to close its
Bacolod Shrimp Processing Plant, due to serious business losses which has (sic) clearly been established, is a management prerogative which could
hardly be interfered with.
xxx The closure did affect the regular employees and workers of the Bacolod Processing Plant, who were accordingly terminated following the legal
requisites prescribed by law. The closure, however, in so far as the complainants are concerned, resulted in the termination of SMC's service contract
with their cooperative xxx9 (Underscoring supplied)Ï‚rαlαωlιbrαrÿ
Private respondents appealed to the NLRC.
By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of merit, it finding that third party respondent Sunflower was an
independent contractor in light of its observation that "[i]n all the activities of private respondents, they were under the actual direction, control and
supervision of third party respondent Sunflower, as well as the payment of wages, and power of dismissal."10
Private respondents' Motion for Reconsideration11 having been denied by the NLRC for lack of merit by Resolution of September 10, 1999, they filed a
petition for certiorari 12 before the Court of Appeals (CA).
Before the CA, SMC filed a Motion to Dismiss13 private respondents' petition for non-compliance with the Rules on Civil Procedure and failure to show
grave abuse of discretion on the part of the NLRC.
SMC subsequently filed its Comment14 to the petition on March 30, 2000.
By Decision of February 7, 2001, the appellate court reversed the NLRC decision and accordingly found for private respondents, disposing as follows:
WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby RENDERED: (1) REVERSING and SETTING ASIDE both the 29 December 1998
decision and 10 September 1999 resolution of the National Labor Relations Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-0361-
97 as well as the 23 September 1997 decision of the labor arbiter in RAB Case No. 06-07-10316-95; (2) ORDERING the respondent, San Miguel
Corporation, to GRANT petitioners: (a) separation pay in accordance with the computation given to the regular SMC employees working at its Bacolod
Shrimp Processing Plant with full backwages, inclusive of allowances and other benefits or their monetary equivalent, from 11 September 1995, the
time their actual compensation was withheld from them, up to the time of the finality of this decision; (b) differentials pays (sic) effective as of and
from the time petitioners acquired regular employment status pursuant to the disquisition mentioned above, and all such other and further benefits
as provided by applicable collective bargaining agreement(s) or other relations, or by law, beginning such time up to their termination from
employment on 11 September 1995; and ORDERING private respondent SMC to PAY unto the petitioners attorney's fees equivalent to ten (10%)
percent of the total award.
No pronouncement as to costs.
SO ORDERED.15 (Underscoring supplied)Ï‚rαlαωlιbrαrÿ
Justifying its reversal of the findings of the labor arbiter and the NLRC, the appellate court reasoned:
Although the terms of the non-exclusive contract of service between SMC and [Sunflower] showed a clear intent to abstain from establishing an
employer-employee relationship between SMC and [Sunflower] or the latter's members, the extent to which the parties successfully realized this
intent in the light of the applicable law is the controlling factor in determining the real and actual relationship between or among the parties.
xxx
With respect to the power to control petitioners' conduct, it appears that petitioners were under the direct control and supervision of SMC
supervisors both as to the manner they performed their functions and as to the end results thereof. It was only after petitioners lodged a complaint to
have their status declared as regular employees of SMC that certain members of [Sunflower] began to countersign petitioners' daily time records to
make it appear that they (petitioners) were under the control and supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx
Even without these instances indicative of control by SMC over the petitioners, it is safe to assume that SMC would never have allowed the
petitioners to work within its premises, using its own facilities, equipment and tools, alongside SMC employees discharging similar or identical
activities unless it exercised a substantial degree of control and supervision over the petitioners not only as to the manner they performed their
functions but also as to the end results of such functions.
xxx
xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as independent contractors. [Sunflower] and the petitioners did not have
substantial capital or investment in the form of tools, equipment, implements, work premises, et cetera necessary to actually perform the service
under their own account, responsibility, and method. The only "work premises" maintained by [Sunflower] was a small office within the confines of a
small "carinderia" or refreshment parlor owned by the mother of its chair, Roy Asong; the only equipment it owned was a typewriter (rollo, pp. 525-
525) and, the only assets it provided SMC were the bare bodies of its members, the petitioners herein (rollo, p. 523).
In addition, as shown earlier, petitioners, who worked inside the premises of SMC, were under the control and supervision of SMC both as to
the manner and method in discharging their functions and as to the results thereof.
Besides, it should be taken into account that the activities undertaken by the petitioners as cleaners, janitors, messengers and shrimp harvesters,
packers and handlers were directly related to the aquaculture business of SMC (See Guarin v. NLRC, 198 SCRA 267, 273). This is confirmed by
the renewal of the service contract from January 1993 to September 1995, a period of close to three (3) years.
Moreover, the petitioners here numbering ninety seven (97), by itself, is a considerable workforce and raises the suspicion that the non-exclusive
service contract between SMC and [Sunflower] was "designed to evade the obligations inherent in an employer-employee relationship" (See Rhone-
Poulenc Agrochemicals Philippines, Inc. v. NLRC, 217 SCRA 249, 259).
Equally suspicious is the fact that the notary public who signed the by-laws of [Sunflower] and its [Sunflower] retained counsel are both partners
of the local counsel of SMC (rollo, p. 9).
xxx
With these observations, no other logical conclusion can be reached except that [Sunflower] acted as an agent of SMC, facilitating the manpower
requirements of the latter, the real employer of the petitioners. We simply cannot allow these two entities through the convenience of a non-
exclusive service contract to stipulate on the existence of employer-employee relation. Such existence is a question of law which cannot be made the
subject of agreement to the detriment of the petitioners (Tabas v. California Manufacturing, Inc., 169 SCRA 497, 500).
xxx
There being a finding of "labor-only" contracting, liability must be shouldered either by SMC or [Sunflower] or shared by both (See Tabas v. California
Manufacturing, Inc., supra, p. 502). SMC however should be held solely liable for [Sunflower] became non-existent with the closure of the
aquaculture business of SMC.
Furthermore, since the closure of the aquaculture operations of SMC appears to be valid, reinstatement is no longer feasible. Consistent with the
pronouncement in Bustamante, et al., v. NLRC, G.R. No. 111651, 28 November 1996, petitioners are thus entitled to separation pay (in the
computation similar to those given to regular SMC employees at its Bacolod Shrimp Processing Plant) "with full backwages, inclusive of allowances
and other benefits or their monetary equivalent, from the time their actual compensation was withheld from them" up to the time of the finality of
this decision. This is without prejudice to differentials pays (sic) effective as of and from the time petitioners acquired regular employment status
pursuant to the discussion mentioned above, and all such other and further benefits as provided by applicable collective bargaining agreement(s) or
other relations, or by law, beginning such time up to their termination from employment on 11 September 1995.16 (Emphasis and underscoring
supplied)ςrαlαωlιbrαrÿ
SMC's Motion for Reconsideration17 having been denied for lack of merit by Resolution of July 11, 2001, it comes before this Court via the present
Petition for Review on Certiorari assigning to the CA the following errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND GRANTING RESPONDENTS' PATENTLY DEFECTIVE PETITION FOR CERTIORARI. IN
DOING SO, THE COURT OF APPEALS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS.
II
THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE RESPONDENTS AS COMPLAINANTS IN THE CASE BEFORE THE LABOR ARBITER. IN
DOING SO, THE COURT OF APPEALS DECIDED THIS CASE IN A MANNER NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT.
III
THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE EMPLOYEES OF SMC.
IV
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT RESPONDENTS ARE NOT ENTITLED TO ANY RELIEF. THE CLOSURE OF THE
BACOLOD SHRIMP PROCESSING PLANT WAS DUE TO SERIOUS BUSINESS LOSSES.18 (Underscoring supplied)Ï‚rαlαωlιbrαrÿ
SMC bewails the failure of the appellate court to outrightly dismiss the petition for certiorari as only three out of the ninety seven named petitioners
signed the verification and certification against forum-shopping.
While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in a case and the signature of
only one of them is insufficient,19 this Court has stressed that the rules on forum shopping, which were designed to promote and facilitate the orderly
administration of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective.20 Strict
compliance with the provisions regarding the certificate of non-forum shopping merely underscores its mandatory nature in that the certification
cannot be altogether dispensed with or its requirements completely disregarded.21 It does not, however, thereby interdict substantial compliance
with its provisions under justifiable circumstances.22
Thus in the recent case of HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners Association,23 this Court held:
Respondents (who were plaintiffs in the trial court) filed the complaint against petitioners as a group, represented by their homeowners' association
president who was likewise one of the plaintiffs, Mr. Samaon M. Buat. Respondents raised one cause of action which was the breach of contractual
obligations and payment of damages. They shared a common interest in the subject matter of the case, being the aggrieved residents of the poorly
constructed and developed Emily Homes Subdivision. Due to the collective nature of the case, there was no doubt that Mr. Samaon M. Buat could
validly sign the certificate of non-forum shopping in behalf of all his co-plaintiffs. In cases therefore where it is highly impractical to require all the
plaintiffs to sign the certificate of non-forum shopping, it is sufficient, in order not to defeat the ends of justice, for one of the plaintiffs, acting as
representative, to sign the certificate provided that xxx the plaintiffs share a common interest in the subject matter of the case or filed the case as a
"collective," raising only one common cause of action or defense.24 (Emphasis and underscoring supplied)Ï‚rαlαωlιbrαrÿ
Given the collective nature of the petition filed before the appellate court by herein private respondents, raising one common cause of action against
SMC, the execution by private respondents Winifredo Talite, Renelito Deon and Jose Temporosa in behalf of all the other private respondents of the
certificate of non-forum shopping constitutes substantial compliance with the Rules.25 That the three indeed represented their co-petitioners before
the appellate court is, as it correctly found, "subsequently proven to be true as shown by the signatures of the majority of the petitioners appearing in
their memorandum filed before Us."26
Additionally, the merits of the substantive aspects of the case may also be deemed as "special circumstance" or "compelling reason" to take
cognizance of a petition although the certification against forum shopping was not executed and signed by all of the petitioners.27
SMC goes on to argue that the petition filed before the CA is fatally defective as it was not accompanied by "copies of all pleadings and documents
relevant and pertinent thereto" in contravention of Section 1, Rule 65 of the Rules of Court.28
This Court is not persuaded. The records show that private respondents appended the following documents to their petition before the appellate
court: the September 23, 1997 Decision of the Labor Arbiter,29 their Notice of Appeal with Appeal Memorandum dated October 16, 1997 filed before
the NLRC,30 the December 29, 1998 NLRC D E C I S I O N,31 their Motion for Reconsideration dated March 26, 1999 filed with the NLRC32 and the
September 10, 1999 NLRC Resolution.33
It bears stressing at any rate that it is the appellate court which ultimately determines if the supporting documents are sufficient to make out a prima
facie case.34 It discerns whether on the basis of what have been submitted it could already judiciously determine the merits of the petition.35 In the
case at bar, the CA found that the petition was adequately supported by relevant and pertinent documents.
At all events, this Court has allowed a liberal construction of the rule on the accomplishment of a certificate of non-forum shopping in the following
cases: (1) where a rigid application will result in manifest failure or miscarriage of justice; (2) where the interest of substantial justice will be served;
(3) where the resolution of the motion is addressed solely to the sound and judicious discretion of the court; and (4) where the injustice to the
adverse party is not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed.36
Rules of procedure should indeed be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which
would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed.37
SMC further argues that the appellate court exceeded its jurisdiction in reversing the decisions of the labor arbiter and the NLRC as "findings of facts
of quasi-judicial bodies like the NLRC are accorded great respect and finality," and that this principle acquires greater weight and application in the
case at bar as the labor arbiter and the NLRC have the same factual findings.
The general rule, no doubt, is that findings of facts of an administrative agency which has acquired expertise in the particular field of its endeavor are
accorded great weight on appeal.38 The rule is not absolute and admits of certain well-recognized exceptions, however. Thus, when the findings of fact
of the labor arbiter and the NLRC are not supported by substantial evidence or their judgment was based on a misapprehension of facts, the appellate
court may make an independent evaluation of the facts of the case.39
SMC further faults the appellate court in giving due course to private respondents' petition despite the fact that the complaint filed before the labor
arbiter was signed and verified only by private respondent Winifredo Talite; that private respondents' position paper40 was verified by only six41 out of
the ninety seven complainants; and that their Joint-Affidavit42 was executed only by twelve43 of the complainants.
Specifically with respect to the Joint-Affidavit of private respondents, SMC asserts that it should not have been considered by the appellate court in
establishing the claims of those who did not sign the same, citing this Court's ruling in Southern Cotabato Development and Construction, Inc. v.
NLRC.44
SMC's position does not lie.
A perusal of the complaint shows that the ninety seven complainants were being represented by their counsel of choice. Thus the first sentence of
their complaint alleges: "xxx complainants, by counsel and unto this Honorable Office respectfully state xxx." And the complaint was signed by Atty.
Jose Max S. Ortiz as "counsel for the complainants." Following Section 6, Rule III of the 1990 Rules of Procedure of the NLRC, now Section 7, Rule III of
the 1999 NLRC Rules, Atty. Ortiz is presumed to be properly authorized by private respondents in filing the complaint.
That the verification wherein it is manifested that private respondent Talite was one of the complainants and was causing the preparation of the
complaint "with the authority of my co-complainants" indubitably shows that Talite was representing the rest of his co-complainants in signing the
verification in accordance with Section 7, Rule III of the 1990 NLRC Rules, now Section 8, Rule 3 of the 1999 NLRC Rules, which states:
Section 7. Authority to bind party. 'Attorneys and other representatives of parties shall have authority to bind their clients in all matters of procedure;
but they cannot, without a special power of attorney or express consent, enter into a compromise agreement with the opposing party in full or partial
discharge of a client's claim. (Underscoring supplied)ςrαlαωlιbrαrÿ
As regards private respondents' position paper which bore the signatures of only six of them, appended to it was an Authority/Confirmation of
Authority45 signed by the ninety one others conferring authority to their counsel "to file RAB Case No. 06-07-10316-95, entitled Winifredo Talite et
al. v. San Miguel Corporation presently pending before the sala of Labor Arbiter Ray Alan Drilon at the NLRC Regional Arbitration Branch No. VI in
Bacolod City" and appointing him as their retained counsel to represent them in the said case.
That there has been substantial compliance with the requirement on verification of position papers under Section 3, Rule V of the 1990 NLRC Rules of
Procedure46 is not difficult to appreciate in light of the provision of Section 7, Rule V of the 1990 NLRC Rules, now Section 9, Rule V of the 1999 NLRC
Rules which reads:
Section 7. Nature of Proceedings. - The proceedings before a Labor Arbiter shall be non-litigious in nature. Subject to the requirements of due
process, the technicalities of law and procedure and the rules obtaining in the courts of law shall not strictly apply thereto. The Labor Arbiter may
avail himself of all reasonable means to ascertain the facts of the controversy speedily, including ocular inspection and examination of well-informed
persons. (underscoring supplied)
As regards private respondents' Joint-Affidavit which is being assailed in view of the failure of some complainants to affix their signatures thereon, this
Court quotes with approval the appellate court's ratiocinations:
A perusal of the Southern Cotabato Development Case would reveal that movant did not quote the whole text of paragraph 5 on page 865 of 280
SCRA. The whole paragraph reads:
"Clearly then, as to those who opted to move for the dismissal of their complaints, or did not submit their affidavits nor appear during trial and in
whose favor no other independent evidence was adduced, no award for back wages could have been validly and properly made for want of factual
basis. There is no showing at all that any of the affidavits of the thirty-four (34) complainants were offered as evidence for those who did not submit
their affidavits, or that such affidavits had any bearing at all on the rights and interest of the latter. In the same vein, private respondent's position
paper was not of any help to these delinquent complainants.
The implication is that as long as the affidavits of the complainants were offered as evidence for those who did not submit theirs, or the affidavits
were material and relevant to the rights and interest of the latter, such affidavits may be sufficient to establish the claims of those who did not
give their affidavits.
Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97) complainants (petitioners herein) would readily reveal that the
affidavit was offered as evidence not only for the signatories therein but for all of the complainants. (These ninety-seven (97) individuals were
previously identified during the mandatory conference as the only complainants in the proceedings before the labor arbiter) Moreover, the affidavit
touched on the common interest of all of the complainants as it supported their claim of the existence of an employer-employee relationship
between them and respondent SMC. Thus, the said affidavit was enough to prove the claims of the rest of the complainants.47 (Emphasis supplied,
underscoring in the original)
In any event, SMC is reminded that the rules of evidence prevailing in courts of law or equity do not control proceedings before the Labor Arbiter. So
Article 221 of the Labor Code enjoins:
ART. 221. Technical rules not binding and prior resort to amicable settlement. - In any proceeding before the Commission or any of the Labor
Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in the interest of due process. xxx
As such, their application may be relaxed to serve the demands of substantial justice.48
On the merits, the petition just the same fails.
SMC insists that private respondents are the employees of Sunflower, an independent contractor. On the other hand, private respondents assert that
Sunflower is a labor-only contractor.
Article 106 of the Labor Code provides:
ART. 106. Contractor or subcontracting. - Whenever an employer enters into a contract with another person for the performance of the former's
work, the employees of the contractor and of the latter's subcontractor, if any shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established
under the Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which
are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18, distinguishes between legitimate
and labor-only contracting:
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a
contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the
contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a
job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance
of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service.
Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis hereby declared prohibited. For this purpose, labor-only contracting
shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for
a principal, and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business
of the principal, or
ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements,
machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or
service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine
not only the end to be achieved, but also the manner and means to be used in reaching that end.
The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do
the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work.49
In legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid
their wages. The principal employer becomes jointly and severally liable with the job contractor, only for the payment of the employees' wages
whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees.50
In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor
laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the principal employer.51
The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an employer-employee relationship
between SMC and private respondents. The language of a contract is not, however, determinative of the parties' relationship; rather it is the totality
of the facts and surrounding circumstances of the case.52 A party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the
character of its business, i.e., whether as labor-only contractor or job contractor, it being crucial that its character be measured in terms of and
determined by the criteria set by statute.53
SMC argues that Sunflower could not have been issued a certificate of registration as a cooperative if it had no substantial capital.54
While indeed Sunflower was issued Certificate of Registration No. IL0-87555 on February 10, 1992 by the Cooperative Development Authority, this
merely shows that it had at least P2,000.00 in paid-up share capital as mandated by Section 5 of Article 1456 of Republic Act No. 6938, otherwise
known as the Cooperative Code, which amount cannot be considered substantial capitalization.
What appears is that Sunflower does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises
and other materials to qualify it as an independent contractor.
On the other hand, it is gathered that the lot, building, machineries and all other working tools utilized by private respondents in carrying out their
tasks were owned and provided by SMC. Consider the following uncontroverted allegations of private respondents in the Joint Affidavit:
[Sunflower], during the existence of its service contract with respondent SMC, did not own a single machinery, equipment, or working tool used in the
processing plant. Everything was owned and provided by respondent SMC. The lot, the building, and working facilities are owned by respondent SMC.
The machineries and equipments (sic) like washer machine, oven or cooking machine, sizer machine, freezer, storage, and chilling tanks, push carts,
hydrolic (sic) jack, tables, and chairs were all owned by respondent SMC. All the boxes, trays, molding pan used in the processing are also owned by
respondent SMC. The gloves and boots used by the complainants were also owned by respondent SMC. Even the mops, electric floor cleaners, brush,
hoose (sic), soaps, floor waxes, chlorine, liquid stain removers, lysol and the like used by the complainants assigned as cleaners were all owned and
provided by respondent SMC.
Simply stated, third-party respondent did not own even a small capital in the form of tools, machineries, or facilities used in said prawn processing
xxx
The alleged office of [Sunflower] is found within the confines of a small "carinderia" or "refreshment" (sic) owned by the mother of the Cooperative
Chairman Roy Asong.
xxx In said . . . office, the only equipment used and owned by [Sunflower] was a typewriter.57
And from the job description provided by SMC itself, the work assigned to private respondents was directly related to the aquaculture operations of
SMC. Undoubtedly, the nature of the work performed by private respondents in shrimp harvesting, receiving and packing formed an integral part of
the shrimp processing operations of SMC. As for janitorial and messengerial services, that they are considered directly related to the principal
business of the employer58 has been jurisprudentially recognized.
Furthermore, Sunflower did not carry on an independent business or undertake the performance of its service contract according to its own manner
and method, free from the control and supervision of its principal, SMC, its apparent role having been merely to recruit persons to work for SMC.
Thus, it is gathered from the evidence adduced by private respondents before the labor arbiter that their daily time records were signed by SMC
supervisors Ike Puentebella, Joemel Haro, Joemari Raca, Erwin Tumonong, Edison Arguello, and Stephen Palabrica, which fact shows that SMC
exercised the power of control and supervision over its employees.59 And control of the premises in which private respondents worked was by SMC.
These tend to disprove the independence of the contractor.60
More. Private respondents had been working in the aqua processing plant inside the SMC compound alongside regular SMC shrimp processing
workers performing identical jobs under the same SMC supervisors.61 This circumstance is another indicium of the existence of a labor-only
contractorship.62
And as private respondents alleged in their Joint Affidavit which did not escape the observation of the CA, no showing to the contrary having been
proffered by SMC, Sunflower did not cater to clients other than SMC,63 and with the closure of SMC's Bacolod Shrimp Processing Plant, Sunflower
likewise ceased to exist. This Court's ruling in San Miguel Corporation v. MAERC Integrated Services, Inc.64 is thus instructive.
xxx Nor do we believe MAERC to have an independent business. Not only was it set up to specifically meet the pressing needs of SMC which was then
having labor problems in its segregation division, none of its workers was also ever assigned to any other establishment, thus convincing us that it was
created solely to service the needs of SMC. Naturally, with the severance of relationship between MAERC and SMC followed MAERC's cessation of
operations, the loss of jobs for the whole MAERC workforce and the resulting actions instituted by the workers.65 (Underscoring supplied)Ï‚rαlαÏ
‰lιbrαrÿ
All the foregoing considerations affirm by more than substantial evidence the existence of an employer-employee relationship between SMC and
private respondents.
Since private respondents who were engaged in shrimp processing performed tasks usually necessary or desirable in the aquaculture business of SMC,
they should be deemed regular employees of the latter66 and as such are entitled to all the benefits and rights appurtenant to regular
employment.67 They should thus be awarded differential pay corresponding to the difference between the wages and benefits given them and those
accorded SMC's other regular employees.ςηαñrοblεš  Î½Î¹r†υαl  lαω  lιbrαrÿ
Respecting the private respondents who were tasked with janitorial and messengerial duties, this Court quotes with approval the appellate court's
ruling thereon:
Those performing janitorial and messengerial services however acquired regular status only after rendering one-year service pursuant to Article 280
of the Labor Code. Although janitorial and messengerial services are considered directly related to the aquaculture business of SMC, they are deemed
unnecessary in the conduct of its principal business; hence, the distinction (See Coca Cola Bottlers Phils., Inc. v. NLRC, 307 SCRA 131, 136-137
and Philippine Bank of Communications v. NLRC, supra, p. 359).68
The law of course provides for two kinds of regular employees, namely: (1) those who are engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether continuous or
broken, with respect to the activity in which they are employed.69
As for those of private respondents who were engaged in janitorial and messengerial tasks, they fall under the second category and are thus entitled
to differential pay and benefits extended to other SMC regular employees from the day immediately following their first year of service.70
Regarding the closure of SMC's aquaculture operations and the consequent termination of private respondents, Article 283 of the Labor Code
provides:
ART. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the
Department of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation
of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one
(1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (Underscoring supplied)ςrαlαωlιbrαrÿ
In the case at bar, a particular department under the SMC group of companies was closed allegedly due to serious business reverses. This constitutes
retrenchment by, and not closure of, the enterprise or the company itself as SMC has not totally ceased operations but is still very much an on-going
and highly viable business concern.71
Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is, however, subject to faithful compliance with the
substantive and procedural requirements laid down by law and jurisprudence.72
For retrenchment to be considered valid the following substantial requirements must be met: (a) the losses expected should be substantial and not
merely de minimis in extent; (b) the substantial losses apprehended must be reasonably imminent such as can be perceived objectively and in good
faith by the employer; (c) the retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and (d) the alleged
losses, if already incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence.73
In the discharge of these requirements, it is the employer who has the onus, being in the nature of an affirmative defense.74
Normally, the condition of business losses is shown by audited financial documents like yearly balance sheets, profit and loss statements and annual
income tax returns. The financial statements must be prepared and signed by independent auditors failing which they can be assailed as self-serving
documents.75
In the case at bar, company losses were duly established by financial documents audited by Joaquin Cunanan & Co. showing that the aquaculture
operations of SMC's Agribusiness Division accumulated losses amounting to P145,848,172.00 in 1992 resulting in the closure of its Calatrava
Aquaculture Center in Negros Occidental, P11,393,071.00 in 1993 and P80,325,608.00 in 1994 which led to the closure of its San Fernando Shrimp
Processing Plant in Pampanga and the Bacolod Shrimp Processing Plant in 1995.
SMC has thus proven substantial business reverses justifying retrenchment of its employees.
For termination due to retrenchment to be valid, however, the law requires that written notices of the intended retrenchment be served by the
employer on the worker and on the DOLE at least one (1) month before the actual date of the retrenchment,76 in order to give employees some time
to prepare for the eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain the verity of the alleged cause of termination.77
Private respondents, however, were merely verbally informed on September 10, 1995 by SMC Prawn Manager Ponciano Capay that effective the
following day or on September 11, 1995, they were no longer to report for work as SMC would be closing its operations.78
Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to comply with the notice
requirement, the sanction should be stiff as the dismissal process was initiated by the employer's exercise of his management prerogative, as opposed
to a dismissal based on a just cause under Article 282 with the same procedural infirmity where the sanction to be imposed upon the employer should
be tempered as the dismissal process was, in effect, initiated by an act imputable to the employee.79
In light of the factual circumstances of the case at bar, this Court awards P50,000.00 to each private respondent as nominal damages.
The grant of separation pay as an incidence of termination of employment due to retrenchment to prevent losses is a statutory obligation on the part
of the employer and a demandable right on the part of the employee. Private respondents should thus be awarded separation pay equivalent to at
least one (1) month pay or to at least one-half month pay for every year of service, whichever is higher, as mandated by Article 283 of the Labor Code
or the separation pay awarded by SMC to other regular SMC employees that were terminated as a result of the retrenchment, depending on which is
most beneficial to private respondents.
Considering that private respondents were not illegally dismissed, however, no backwages need be awarded. It is well settled that backwages may be
granted only when there is a finding of illegal dismissal.80 The appellate court thus erred in awarding backwages to private respondents upon the
authority of Bustamante v. NLRC,81 what was involved in that case being one of illegal dismissal.
With respect to attorney's fees, in actions for recovery of wages or where an employee was forced to litigate and thus incurred expenses to protect
his rights and interests,82 a maximum of ten percent (10%) of the total monetary award83 by way of attorney's fees is justifiable under Article 111 of
the Labor Code,84 Section 8, Rule VIII, Book III of its Implementing Rules,85 and paragraph 7, Article 2208 of the Civil Code.86 Although an express
finding of facts and law is still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously or in bad
faith when it withheld the wages. There need only be a showing that the lawful wages were not paid accordingly, as in this case.87
Absent any evidence showing that Sunflower has been dissolved in accordance with law, pursuant to Rule VIII-A, Section 1988 of the Omnibus Rules
Implementing the Labor Code, Sunflower is held solidarily liable with SMC for all the rightful claims of private respondents.
WHEREFORE, the petition is DENIED. The assailed Decision dated February 7, 2001 and Resolution dated July 11, 2001 of the Court of Appeals are
AFFIRMED with MODIFICATION.
Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative are hereby ORDERED to jointly and severally pay each private
respondent differential pay from the time they became regular employees up to the date of their termination; separation pay equivalent to at least
one (1) month pay or to at least one-half month pay for every year of service, whichever is higher, as mandated by Article 283 of the Labor Code or
the separation pay awarded by SMC to other regular SMC employees that were terminated as a result of the retrenchment, depending on which is
most beneficial to private respondents; and ten percent (10%) attorney's fees based on the herein modified award.
Petitioner San Miguel Corporation is further ORDERED to pay each private respondent the amount of P50,000.00, representing nominal damages for
non-compliance with statutory due process.
The award of backwages is DELETED.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 145402               March 14, 2008
MERALCO INDUSTRIAL ENGINEERING SERVICES CORPORATION, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, OFELIA P. LANDRITO GENERAL SERVICES and/or OFELIA P. LANDRITO, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to reverse and set aside (1)
the Decision1 of the Court of Appeals in CA-G.R. SP No. 50806, dated 24 April 2000, which modified the Decision2 of the National Labor Relations
Commission (NLRC), dated 30 January 1996 in NLRC NCR CA No. 001737-91 (NLRC NCR Case No. 00-09-04432-89), and thereby held the petitioner
solidarily liable with the private respondents for the satisfaction of the separation pay of the latter’s employees; and (2) the Resolution3 of the
appellate court, dated 27 September 2000, in the same case which denied the petitioner’s Motion for Reconsideration.
Petitioner Meralco Industrial Engineering Services Corporation (MIESCOR) is a corporation duly organized and existing under the laws of the Republic
of the Philippines and a client of private respondents. Private respondent Ofelia P. Landrito General Services (OPLGS) is a business firm engaged in
providing and rendering general services, such as janitorial and maintenance work to its clients, while private respondent Ofelia P. Landrito is the
Proprietor and General Manager of OPLGS.
The factual milieu of the present case is as follows:
On 7 November 1984, petitioner and private respondents executed Contract Order No. 166-84,4 whereby the latter would supply the petitioner
janitorial services, which include labor, materials, tools and equipment, as well as supervision of its assigned employees, at petitioner’s Rockwell
Thermal Plant in Makati City. Pursuant thereto, private respondents assigned their 49 employees as janitors to petitioner’s Rockwell Thermal Plant
with a daily wage of ₱51.50 per employee.
On 20 September 1989, however, the aforesaid 49 employees (complainants) lodged a Complaint for illegal deduction, underpayment, non-payment
of overtime pay, legal holiday pay, premium pay for holiday and rest day and night differentials5 against the private respondents before the Labor
Arbiter. The case was docketed as NLRC NCR Case No. 00-09-04432-89.
In view of the enactment of Republic Act No. 6727,6 the contract between the petitioner and the private respondents was amended7 for the 10th time
on 3 November 1989 to increase the minimum daily wage per employee from ₱63.55 to ₱89.00 or ₱2,670.00 per month. Two months thereafter, or
on 2 January 1990,8 petitioner sent a letter to private respondents informing them that effective at the close of business hours on 31 January 1990,
petitioner was terminating Contract Order No. 166-84. Accordingly, at the end of the business hours on 31 January 1990, the complainants were
pulled out from their work at the petitioner’s Rockwell Thermal Plant. Thus, on 27 February 1990, complainants amended their Complaint to include
the charge of illegal dismissal and to implead the petitioner as a party respondent therein.
Since the parties failed to settle amicably before the Labor Arbiter, they submitted their respective position papers and other pleadings together with
their documentary evidence. Thereafter, a Decision was rendered by the Labor Arbiter on 26 March 1991, dismissing the Complaint against the
petitioner for lack of merit, but ordering the private respondents to pay the complainants the total amount of ₱487,287.07 representing unpaid
wages, separation pay and overtime pay; as well as attorney’s fees in an amount equivalent to 10% of the award or ₱48,728.70. All other claims of the
complainants against the private respondents were dismissed. 9
Feeling aggrieved, private respondents appealed the aforesaid Decision to the NLRC. Private respondents alleged, among other things, that: (1) 48 of
the 49 complainants had executed affidavits of desistance and they had never attended any hearing nor given any authority to anyone to file a case
on their behalf; (2) the Labor Arbiter erred in not conducting a full-blown hearing on the case; (3) there is only one complainant in that case who
submitted a position paper on his own; (4) the complainants were not constructively dismissed when they were not given assignments within a period
of six months, but had abandoned their jobs when they failed to report to another place of assignment; and (5) the petitioner, being the principal, was
solidarily liable with the private respondents for failure to make an adjustment on the wages of the complainants.10 On 28 May 1993, the NLRC issued
a Resolution11 affirming the Decision of the Labor Arbiter dated 26 March 1991 with the modification that the petitioner was solidarily liable with the
private respondents, ratiocinating thus:
We, however, disagree with the dismissal of the case against [herein petitioner]. Under Art. 10712 of the Labor Code of the Philippines, [herein
petitioner] is considered an indirect employer and can be held solidarily liable with [private respondents] as an independent contractor. Under Art.
109,13 for purposes of determining the extent of its liability, [herein petitioner] is considered a direct employer, hence, it is solidarily liable for
complainant’s (sic) wage differentials and unpaid overtime. We find this situation obtaining in this case in view of the failure of [private respondents]
to pay in full the labor standard benefits of complainants, in which case liability is limited thereto and does not extend to the establishment of
employer-employee relations.14 [Emphasis supplied].
Both private respondents and petitioner separately moved for reconsideration of the aforesaid Resolution of the NLRC. In their Motion for
Reconsideration, private respondents reiterated that the complainants abandoned their work, so that private respondents should not be liable for
separation pay; and that petitioner, not private respondents, should be liable for complainants’ other monetary claims, i.e., for wage differentials and
unpaid overtime. The petitioner, in its own Motion for Reconsideration, asked that it be excluded from liability. It averred that private respondents
should be solely responsible for their acts as it sufficiently paid private respondents all the benefits due the complainants.
On 30 July 1993, the NLRC issued an Order15 noting that based on the records of the case, the judgment award in the amount of ₱487,287.07 was
secured by a surety bond posted by the private respondents;16 hence, there was no longer any impediment to the satisfaction of the complainants’
claims. Resultantly, the NLRC denied the private respondents’ Motion for Reconsideration. The NLRC likewise directed the Labor Arbiter to enforce
the monetary award against the private respondents’ surety bond and to determine who should finally shoulder the liability therefor.17
Alleging grave abuse of discretion of the NLRC in its issuance of the Resolution and Order dated 28 May 1993 and 30 July 1993, respectively, private
respondents filed before this Court a Petition for Certiorari with prayer for the issuance of a writ of preliminary injunction. The same was docketed as
G.R. No. 111506 entitled Ofelia Landrito General Services v. National Labor Relations Commission. The said Petition suspended the proceedings before
the Labor Arbiter.
On 23 May 1994, however, this Court issued a Resolution18 dismissing G.R. No. 111506 for failure of private respondents to sufficiently show that the
NLRC had committed grave abuse of discretion in rendering its questioned judgment. This Court’s Resolution in G.R. No. 111506 became final and
executory on 25 July 1994.19
As a consequence thereof, the proceedings before the Labor Arbiter resumed with respect to the determination of who should finally shoulder the
liability for the monetary awards granted to the complainants, in accordance with the NLRC Order dated 30 July 1993.
On 5 October 1994, the Labor Arbiter issued an Order,20 which reads:
As can be gleaned from the Resolution dated [28 May 1993], there is that necessity of clarifying the respective liabilities of [herein petitioner] and
[herein private respondents] insofar as the judgment award in the total sum of ₱487,287.07 is concerned.
The judgment award in the total sum of ₱487,287.07 as contained in the Decision dated [26 March 1991] consists of three (3) parts, as follows: First,
the judgment award on the underpayment; Second, the judgment award on separation pay; and Third, the judgment award on the overtime pay.
The question now is: Which of these awards is [petitioner] solidarily liable with [private respondents]?
An examination of the record elicits the finding that [petitioner] is solidarily liable with [private respondents] on the judgment awards on the
underpayment and on the non-payment of the overtime pay. xxx. This joint and several liability of the contractor [private respondents] and the
principal [petitioner] is mandated by the Labor Code to assure compliance of the provisions therein, including the statutory minimum wage (Art.
99,21 Labor Code). The contractor-agency is made liable by virtue of his status as direct employer. The principal, on the other hand, is made the
indirect employer of the contractor-agency’s employees for purposes of paying the employees their wages should the contractor-agency be unable to
pay them. This joint and several liability facilitates, if not guarantees, payment of the workers performance of any work, task, job or project, thus
giving the workers ample protection as mandated by the 1987 Constitution.
In sum, the complainants may enforce the judgment award on underpayment and the non-payment of overtime pay against either [private
respondents] and/or [petitioner].
However, in view of the finding in the Decision that [petitioner] had adjusted its contract price for the janitorial services it contracted with [private
respondents] conforming to the provisions of Republic Act No. 6727, should the complainants enforce the judgment on the underpayment and on the
non-payment of the overtime pay aginst (sic) [petitioner], the latter can seek reimbursement from the former [meaning (private respondents)], but
should the judgment award on the underpayment and on the non-payment of the overtime pay be enforced against [private respondents], the latter
cannot seek reimbursement against [petitioner].
The judgment award on separation pay is the sole liability of [private respondents].
WHEREFORE, [petitioner] is jointly and severally liable with [private respondents] in the judgment award on underpayment and on the non-payment
of overtime pay. Should the complainants enforce the above judgment award against [petitioner], the latter can seek reimbursement against [private
respondents], but should the aforementioned judgment award be enforced against [private respondents], the latter cannot seek reimbursement from
the [petitioner].
The judgment award on the payment of separation pay is the sole liability of [private respondents].
Let an alias writ of execution be issued. [Emphasis supplied].
Again, both the private respondents and the petitioner appealed the afore-quoted Order of the Labor Arbiter to the NLRC. On 25 April 1995, the NLRC
issued a Resolution22 affirming the Order dated 5 October 1994 of the Labor Arbiter and dismissing both appeals for non-posting of the appeal or
surety bond and/or for utter lack of merit.23 When the private respondents and the petitioner moved for reconsideration, however, it was granted by
the NLRC in its Order24 dated 27 July 1995. The NLRC thus set aside its Resolution dated 25 April 1995, and directed the private respondents and the
petitioner to each post an appeal bond in the amount of ₱487,287.62 to perfect their respective appeals.25 Both parties complied.26
On 30 January 1996, the NLRC rendered a Decision modifying the Order of the Labor Arbiter dated 5 October 1994, the dispositive portion of which
reads:
WHEREFORE, the [21 November 1994] appeal of [herein petitioner] is hereby granted. The [5 October 1994] Order of Labor Arbiter Donato G. Quinto,
Jr., is modified to the extent that it still held [petitioner] as "jointly and severally liable with [herein private respondents] in the judgment award on
underpayment and on the non-payment of overtime pay," our directive being that the Arbiter should now satisfy said labor-standards award, as well
as that of the separation pay, exclusively through the surety bond posted by [private respondents].27 [Emphasis supplied].
Dissatisfied, private respondents moved for the reconsideration of the foregoing Decision, but it was denied by the NLRC in an Order28 dated 30
October 1996. This NLRC Order dated 30 October 1996 became final and executory on 29 November 1996.
On 4 December 1996, private respondents filed a Petition for Certiorari29 before this Court assailing the Decision and the Order of the NLRC dated 30
January 1996 and 30 October 1996, respectively. On 9 December 1998, this Court issued a Resolution30 referring the case to the Court of Appeals
conformably with its ruling in St. Martin Funeral Home v. National Labor Relations Commission.31 The case was docketed before the appellate court as
CA-G.R. SP No. 50806.
The Petition made a sole assignment of error, to wit:
THE HONORABLE COMMISSION GRAVELY ERRED AND GRAVELY ABUSED ITS DISCRETION IN FINDING THAT THE ULTIMATE LIABILITY SHOULD FALL ON
THE [HEREIN PRIVATE RESPONDENTS] ALONE, WITHOUT REIMBURSEMENT FROM THE [HEREIN PETITIONER], IN ORDER TO SATISFY THE MONETARY
AWARDS OF THE [THEREIN COMPLAINANTS].32
After due proceedings, the Court of Appeals rendered the assailed Decision on 24 April 2000, modifying the Decision of the NLRC dated 30 January
1996 and holding the petitioner solidarily liable with the private respondents for the satisfaction of the laborers’ separation pay. According to the
Court of Appeals:
The [NLRC] adjudged the payment of separation pay to be the sole responsibility of [herein private respondents] because (1) there is no employer-
employee relationship between [herein petitioner] and the forty-nine (49) [therein complainants]; (2) the payment of separation pay is not a labor
standard benefit. We disagree.
Again, We quote Article 109 of the Labor Code, as amended, viz:
"The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or
subcontractor for any violation of any provision of this Code…"
The abovementioned statute speaks of "any violation of any provision of this Code." Thus, the existence or non-existence of employer-employee
relationship and whether or not the violation is one of labor standards is immaterial because said provision of law does not make any distinction at all
and, therefore, this Court should also refrain from making any distinction. Concomitantly, [herein petitioner] should be jointly and severally liable with
[private respondents] for the payment of wage differentials, overtime pay and separation pay of the [therein complainants]. The joint and several
liability imposed to [petitioner] is, again, without prejudice to a claim for reimbursement by [petitioner] against [private respondents] for reasons
already discusses (sic).
WHEREFORE, premises studiedly considered, the assailed 30 January 1996 decision of [the NLRC] is hereby modified insofar as [petitioner] should be
held solidarily liable with [the private respondents] for the satisfaction of the laborers’ separation pay. No pronouncement as to costs.33 [Emphasis
supplied].
The petitioner filed a Motion for Reconsideration of the aforesaid Decision but it was denied by the Court of Appeals in a Resolution dated 27
September 2000.
Petitioner now comes before this Court via a Petition for Review on Certiorari, docketed as G.R. No. 145402, raising the sole issue of "whether or not
the Honorable Court of Appeals palpably erred when it went beyond the issues of the case as it modified the factual findings of the Labor Arbiter
which attained finality after it was affirmed by Public Respondent NLRC and by the Supreme Court which can no longer be disturbed as it became the
law of the case."34
Petitioner argues that in the assailed Decision dated 24 April 2000, the Court of Appeals found that the sole issue for its resolution was whether the
ultimate liability to pay the monetary awards in favor of the 49 employees falls on the private respondents without reimbursement from the
petitioner. Hence, the appellate court should have limited itself to determining the right of private respondents to still seek reimbursement from
petitioner for the monetary awards on the unpaid wages and overtime pay of the complainants.
According to petitioner, the NLRC, in its Resolution dated 28 May 1993, already found that petitioner had fully complied with its salary obligations to
the complainants. Petitioner invokes the same NLRC Resolution to support its claim that it was not liable to share with the private respondents in the
payment of separation pay to complainants. When private respondents questioned the said NLRC Resolution in a Petition for Certiorari with this
Court, docketed as G.R. No. 111506, this Court found that the NLRC did not commit grave abuse of discretion in the issuance thereof and accordingly
dismissed private respondents’ Petition. Said NLRC Resolution, therefore, has since become final and executory and can no longer be disturbed for it
now constitutes the law of the case.
Assuming for the sake of argument that the Court of Appeals can still take cognizance of the issue of petitioner’s liability for complainants’ separation
pay, petitioner asserts that the appellate court seriously erred in concluding that it is jointly and solidarily liable with private respondents for the
payment thereof. The payment of separation pay should be the sole responsibility of the private respondents because there was no employer-
employee relationship between the petitioner and the complainants, and the payment of separation pay is not a labor standards benefit.
Law of the case has been defined as the opinion delivered on a former appeal. It is a term applied to an established rule that when an appellate court
passes on a question and remands the case to the lower court for further proceedings, the question there settled becomes the law of the case upon
subsequent appeal. It means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the
same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was
predicated continue to be the facts of the case before the court.35 Indeed, courts must adhere thereto, whether the legal principles laid down were
"correct on general principles or not" or "whether the question is right or wrong" because public policy, judicial orderliness and economy require such
stability in the final judgments of courts or tribunals of competent jurisdiction.36
Petitioner’s application of the law of the case principle to the case at bar as regards its liability for payment of separation pay is misplaced.
The only matters settled in the 23 May 1994 Resolution of this Court in G.R. No. 111506, which can be regarded as the law of the case, were (1) both
the petitioner and the private respondents were jointly and solidarily liable for the judgment awards due the complainants; and (2) the said judgment
awards shall be enforced against the surety bond posted by the private respondents. However, the issue as regards the liability of the petitioner for
payment of separation pay was yet to be resolved because precisely, the NLRC, in its Order dated 30 July 1993, still directed the Labor Arbiter to make
a determination on who should finally shoulder the monetary awards granted to the complainants. And it was only after G.R. No. 111506 was
dismissed by this Court that the Labor Arbiter promulgated his Decision dated 5 October 1994, wherein he clarified the respective liabilities of the
petitioner and the private respondents for the judgment awards. In his 5 October 1994 Decision, the Labor Arbiter explained that the solidary liability
of the petitioner was limited to the monetary awards for wage underpayment and non-payment of overtime pay due the complainants, and it did not,
in any way, extend to the payment of separation pay as the same was the sole liability of the private respondents.
Nonetheless, this Court finds the present Petition meritorious.
The Court of Appeals indeed erred when it ruled that the petitioner was jointly and solidarily liable with the private respondents as regards the
payment of separation pay.
The appellate court used as basis Article 109 of the Labor Code, as amended, in holding the petitioner solidarily liable with the private respondents for
the payment of separation pay:
ART. 109. Solidary Liability. - The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held
responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil
liability under this Chapter, they shall be considered as direct employers. [Emphasis supplied].1avvphi1
However, the afore-quoted provision must be read in conjunction with Articles 106 and 107 of the Labor Code, as amended.
Article 107 of the Labor Code, as amended, defines an indirect employer as "any person, partnership, association or corporation which, not being an
employer, contracts with an independent contractor for the performance of any work, task, job or project." To ensure that the contractor’s
employees are paid their appropriate wages, Article 106 of the Labor Code, as amended, provides:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. – x x x.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him. [Emphasis supplied].
Taken together, an indirect employer (as defined by Article 107) can only be held solidarily liable with the independent contractor or subcontractor
(as provided under Article 109) in the event that the latter fails to pay the wages of its employees (as described in Article 106).
Hence, while it is true that the petitioner was the indirect employer of the complainants, it cannot be held liable in the same way as the employer in
every respect. The petitioner may be considered an indirect employer only for purposes of unpaid wages. As this Court succinctly explained in
Philippine Airlines, Inc. v. National Labor Relations Commission37:
While USSI is an independent contractor under the security service agreement and PAL may be considered an indirect employer, that status did not
make PAL the employer of the security guards in every respect. As correctly posited by the Office of the Solicitor General, PAL may be considered an
indirect employer only for purposes of unpaid wages since Article 106, which is applicable to the situation contemplated in Section 107, speaks of
wages. The concept of indirect employer only relates or refers to the liability for unpaid wages. Read together, Articles 106 and 109 simply mean that
the party with whom an independent contractor deals is solidarily liable with the latter for unpaid wages, and only to that extent and for that purpose
that the latter is considered a direct employer. The term "wage" is defined in Article 97(f) of the Labor Code as "the remuneration of earnings,
however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the
fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the
employee."
Further, there is no question that private respondents are operating as an independent contractor and that the complainants were their employees.
There was no employer-employee relationship that existed between the petitioner and the complainants and, thus, the former could not have
dismissed the latter from employment. Only private respondents, as the complainants’ employer, can terminate their services, and should it be done
illegally, be held liable therefor. The only instance when the principal can also be held liable with the independent contractor or subcontractor for the
backwages and separation pay of the latter’s employees is when there is proof that the principal conspired with the independent contractor or
subcontractor in the illegal dismissal of the employees, thus:
The liability arising from an illegal dismissal is unlike an order to pay the statutory minimum wage, because the workers’ right to such wage is derived
from law. The proposition that payment of back wages and separation pay should be covered by Article 109, which holds an indirect employer
solidarily responsible with his contractor or subcontractor for "any violation of any provision of this Code," would have been tenable if there were
proof - there was none in this case - that the principal/employer had conspired with the contractor in the acts giving rise to the illegal dismissal. 38
It is the established fact of conspiracy that will tie the principal or indirect employer to the illegal dismissal of the contractor or subcontractor’s
employees. In the present case, there is no allegation, much less proof presented, that the petitioner conspired with private respondents in the illegal
dismissal of the latter’s employees; hence, it cannot be held liable for the same.
Neither can the liability for the separation pay of the complainants be extended to the petitioner based on contract. Contract Order No. 166-84
executed between the petitioner and the private respondents contains no provision for separation pay in the event that the petitioner terminates the
same. It is basic that a contract is the law between the parties and the stipulations therein, provided that they are not contrary to law, morals, good
customs, public order or public policy, shall be binding as between the parties.39 Hence, if the contract does not provide for such a liability, this Court
cannot just read the same into the contract without possibly violating the intention of the parties.
It is also worth noting that although the issue in CA-G.R. SP No. 50806 pertains to private respondents’ right to reimbursement from petitioner for the
"monetary awards" in favor of the complainants, they limited their arguments to the monetary awards for underpayment of wages and non-payment
of overtime pay, and were conspicuously silent on the monetary award for separation pay. Thus, private respondents’ sole liability for the separation
pay of their employees should have been deemed settled and already beyond the power of the Court of Appeals to resolve, since it was an issue never
raised before it.40
Although petitioner is not liable for complainants’ separation pay, the Court conforms to the consistent findings in the proceedings below that the
petitioner is solidarily liable with the private respondents for the judgment awards for underpayment of wages and non-payment of overtime pay.
In this case, however, private respondents had already posted a surety bond in an amount sufficient to cover all the judgment awards due the
complainants, including those for underpayment of wages and non-payment of overtime pay. The joint and several liability of the principal with the
contractor and subcontractor were enacted to ensure compliance with the provisions of the Labor Code, principally those on statutory minimum
wage. This liability facilitates, if not guarantees, payment of the workers’ compensation, thus, giving the workers ample protection as mandated by
the 1987 Constitution.41 With private respondents’ surety bond, it can therefore be said that the purpose of the Labor Code provision on the solidary
liability of the indirect employer is already accomplished since the interest of the complainants are already adequately protected. Consequently, it will
be futile to continuously hold the petitioner jointly and solidarily liable with the private respondents for the judgment awards for underpayment of
wages and non-payment of overtime pay.
But while this Court had previously ruled that the indirect employer can recover whatever amount it had paid to the employees in accordance with
the terms of the service contract between itself and the contractor,42 the said ruling cannot be applied in reverse to this case as to allow the private
respondents (the independent contractor), who paid for the judgment awards in full, to recover from the petitioner (the indirect employer).
Private respondents have nothing more to recover from petitioner.
Petitioner had already handed over to private respondent the wages and other benefits of the complainants. Records reveal that it had complied with
complainants’ salary increases in accordance with the minimum wage set by Republic Act No. 6727 by faithfully adjusting the contract price for the
janitorial services it contracted with private respondents. 43 This is a finding of fact made by the Labor Arbiter,44 untouched by the NLRC45 and explicitly
affirmed by the Court of Appeals,46 and which should already bind this Court.
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the
Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are completely devoid of
support from the evidence on record, or the assailed judgment is based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial
agencies like the NLRC, when affirmed by the Court of Appeals, are conclusive upon the parties and binding on this Court.47
Having already received from petitioner the correct amount of wages and benefits, but having failed to turn them over to the complainants, private
respondents should now solely bear the liability for the underpayment of wages and non-payment of the overtime pay.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and Resolution of the Court of Appeals dated 24 April 2000
and 27 September 2000, respectively, in CA-G.R. SP No. 50806, are hereby REVERSED AND SET ASIDE. The Decision dated 30 January 1996 of the
National Labor Relations Commission in NLRC NCR CA No. 001737-91 (NLRC NCR Case No. 00-09-04432-89) is hereby REINSTATED. No costs.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice
 SECOND DIVISION
[G.R. NO. 145271 July 14, 2005]
MANILA ELECTRIC COMPANY, Petitioner, v. ROGELIO BENAMIRA, ERNIE DE SAGUN1, DIOSDADO YOGARE, FRANCISCO MORO2, OSCAR LAGONOY3,
Rolando Beni, Alex Beni, Raul4 Guia, Armed Security & Detective Agency, Inc., (ASDAI) and Advance FORCES Security & INVESTIGATION Services,
Inc., (AFSISI), Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision,5 dated September 27, 2000, of the Court of
Appeals (CA) in CA-G.R. SP No. 50520 which declared petitioner Manila Electric Company (MERALCO) as the direct employer of individual respondents
Rogelio Benamira, Ernie De Sagun, Diosdado Yogare, Francisco Moro, Oscar Lagonoy, Rolando Beni, Alex Beni and Raul De Guia (individual
respondents for brevity).
The factual background of the case is as follows:
The individual respondents are licensed security guards formerly employed by People's Security, Inc. (PSI) and deployed as such at MERALCO's head
office in Ortigas Avenue, Pasig, Metro Manila.
On November 30, 1990, the security service agreement between PSI and MERALCO was terminated.
Immediately thereafter, fifty-six of PSI's security guards, including herein eight individual respondents, filed a complaint for unpaid monetary benefits
against PSI and MERALCO, docketed as NLRC-NCR Case No. 05-02746-90.
Meanwhile, the security service agreement between respondent Armed Security & Detective Agency, Inc., (ASDAI) and MERALCO took effect on
December 1, 1990. In the agreement, ASDAI was designated as the AGENCY while MERALCO was designated as the COMPANY. The pertinent terms
and conditions of the agreement are as follows:
1. The AGENCY shall initially provide the COMPANY with TWO HUNDRED TWENTY (220) licensed, uniformed, bonded and armed security guards to be
assigned at the COMPANY's "MERALCO CENTER," complete with nightsticks, flashlights, raincoats, and other paraphernalias to work on eight (8) hours
duty. The COMPANY shall determine the number of security guards in accordance with its needs and the areas of responsibility assigned to each, and
shall have the option to increase or decrease the number of guards at any time provided the AGENCY is notified within twenty four (24) hours of the
contemplated reduction or increase of the guards in which case the cost or consideration shall be adjusted accordingly.
2. The COMPANY shall furnish the AGENCY copies of written specific instruction to be followed or implemented by the latter's personnel in the
discharge of their duties and responsibilities and the AGENCY shall be responsible for the faithful compliance therewith by its personnel together with
such general and specific orders which shall be issued from time to time.
3. For and in consideration of the services to be rendered by the AGENCY to the COMPANY, the COMPANY during the term of this contract shall pay
the AGENCY the amount of THREE THOUSAND EIGHT HUNDRED PESOS (P3,800.00) a month per guard, FOUR THOUSAND PESOS (P4,000.00) for the
Shift Leader and FOUR THOUSAND TWO HUNDRED PESOS (P4,200.00) for the Detachment Commander for eight (8) hours work/day, Saturdays,
Sundays and Holidays included, payable semi-monthly.
 xxx
5. The AGENCY shall assume the responsibility for the proper and efficient performance of duties by the security guards employed by it and it shall be
solely responsible for any act of said security guards during their watch hours, the COMPANY being specifically released from any and all liability to
third parties arising from the acts or omission of the security guards of the AGENCY.
6. The AGENCY also agrees to hold the COMPANY entirely free from any liability, cause or causes of action or claims which may be filed by said
security guards by reason of their employment with the AGENCY pursuant to this Agreement or under the provisions of the Labor Code, the Social
Security Act, and other laws, decrees or social legislations now enacted or which hereafter may be enacted.
7. Discipline and Administration of the security guards shall conform with the rules and regulations of the AGENCY, and the COMPANY reserves the
right to require without explanation the replacement of any guard whose behavior, conduct or appearance is not satisfactory to the COMPANY and
that the AGENCY cannot pull-out any security guard from the COMPANY without the consent of the latter.
8. The AGENCY shall conduct inspections through its duly authorized inspector at least two (2) times a week of guards assigned to all COMPANY
installations secured by the AGENCY located in the Metropolitan Manila area and at least once a week of the COMPANY's installations located outside
of the Metropolitan Manila area and to further submit its inspection reports to the COMPANY. Likewise, the COMPANY shall have the right at all times
to inspect the guards of the AGENCY assigned to the COMPANY.
9. The said security guards shall be hired by the AGENCY and this contract shall not be deemed in any way to constitute a contract of employment
between the COMPANY and any of the security guards hired by the AGENCY but merely as a contract specifying the conditions and manner under
which the AGENCY shall render services to the COMPANY.
10. Nothing herein contained shall be understood to make the security guards under this Agreement, employees of the COMPANY, it being clearly
understood that such security guards shall be considered as they are, employees of the AGENCY alone, so that the AGENCY shall be responsible for
compliance with all pertinent labor laws and regulations included but not limited to the Labor Code, Social Security Act, and all other applicable laws
and regulations including that providing for a withholding tax on income.
xxx
13. This contract shall take effect on the 1st day of December, 1990 and shall continue from year to year unless sooner terminated by the COMPANY
for cause or otherwise terminated by either party without cause upon thirty (30) days written notice by one party to the other.6
Subsequently, the individual respondents were absorbed by ASDAI and retained at MERALCO's head office.
On June 29, 1992, Labor Arbiter Manuel P. Asuncion rendered a decision in NLRC-NCR Case No. 05-02746-90 in favor of the former PSI security
guards, including the individual respondents.
Less than a month later, or on July 21, 1992, the individual respondents filed another complaint for unpaid monetary benefits, this time against ASDAI
and MERALCO, docketed as NLRC-NCR Case No. 00-07-03953-92.
On July 25, 1992, the security service agreement between respondent Advance Forces Security & Investigation Services, Inc. (AFSISI) and MERALCO
took effect, terminating the previous security service agreement with ASDAI.7 Except as to the number of security guards,8 the amount to be paid the
agency,9 and the effectivity of the agreement,10 the terms and conditions were substantially identical with the security service agreement with ASDAI.
On July 29, 1992, the individual respondents amended their complaint to implead AFSISI as party respondent. On August 11, 1992 they again
amended their complaint to allege that AFSISI terminated their services on August 6, 1992 without notice and just cause and therefore guilty of illegal
dismissal.
The individual respondents alleged that: MERALCO and ASDAI never paid their overtime pay, service incentive leave pay, premium pay for Sundays
and Holidays, P50.00 monthly uniform allowance and underpaid their 13th month pay; on July 24, 1992, when the security service agreement of
ASDAI was terminated and AFSISI took over the security functions of the former on July 25, 1992, respondent security guard Benamira was no longer
given any work assignment when AFSISI learned that the former has a pending case against PSI, in effect, dismissing him from the service without just
cause; and, the rest of the individual respondents were absorbed by AFSISI but were not given any assignments, thereby dismissing them from the
service without just cause.
ASDAI denied in general terms any liability for the claims of the individual respondents, claiming that there is nothing due them in connection with
their services.
On the other hand, MERALCO denied liability on the ground of lack of employer-employee relationship with individual respondents. It averred that
the individual respondents are the employees of the security agencies it contracted for security services; and that it has no existing liability for the
individual respondents' claims since said security agencies have been fully paid for their services per their respective security service agreement.
For its part, AFSISI asserted that: it is not liable for illegal dismissal since it did not absorb or hire the individual respondents, the latter were merely
hold-over guards from ASDAI; it is not obliged to employ or absorb the security guards of the agency it replaced since there is no provision in its
security service agreement with MERALCO or in law requiring it to absorb and hire the guards of ASDAI as it has its own guards duly trained to service
its various clients.
On January 3, 1994, after the submission of their respective evidence and position papers, Labor Arbiter Pablo C. Espiritu, Jr. rendered a Decision
holding ASDAI and MERALCO jointly and solidarily liable to the monetary claims of individual respondents and dismissing the complaint against AFSISI.
The dispositive portion of the decision reads as follows:
WHEREFORE, conformably with the above premises, judgment is hereby rendered:
1. Declaring ASDAI as the employer of the complainants and as such complainants should be reinstated as regular security guards of ASDAI without
loss of seniority rights, privileges and benefits and for ASDAI to immediately post the complainants as security guards with their clients. The complaint
against AFSISI is Dismissed for lack of merit.
2. Ordering both respondents, ASDAI and MERALCO to jointly and solidarily pay complainants monetary claims (underpayment of actual regular hours
and overtime hours rendered, and premium pay for holiday and rest day) in the following amounts:
NAME OVERTIME DIFFERENTIALS AND PREMIUM PAY FOR HOLIDAY & REST DAY
1. Rogelio Benamira P14,615.75
2. Ernie De Sagun 21,164.31
3. Diosdado Yogare 7,108.77
4. Francisco Maro 26,567.11
5. Oscar Lagonay 18,863.36
6. Rolando Beni 21,834.12
7. Alex Beni 21,648.80
8. Ruel De Guia 14,200.33
3. Ordering Respondents ASDAI and MERALCO to jointly and solidarily pay complainants 10% attorney's fees in the amount of P14,600.25 based on
the total monetary award due to the complainants in the amount of P146,002.55.
All other claims of the complainants are hereby DISMISSED for lack of merit.
The counter-claim of respondent AFSISI for damages is hereby dismissed for want of substantial evidence to justify the grant of damages.
SO ORDERED.11
All the parties, except AFSISI, appealed to the National Labor Relations Commission (NLRC).
Individual respondents' partial appeal assailed solely the Labor Arbiter's declaration that ASDAI is their employer. They insisted that AFSISI is the party
liable for their illegal dismissal and should be the party directed to reinstate them.
For its part, MERALCO attributed grave abuse of discretion on the part of the Labor Arbiter in failing to consider the absence of employer-employee
relationship between MERALCO and individual respondents.
On the other hand, ASDAI took exception from the Labor Arbiter's finding that it is the employer of the individual respondents and therefore liable for
the latter's unpaid monetary benefits.
On April 10, 1995, the NLRC affirmed in toto the decision of the Labor Arbiter.12 On April 19, 1995, the individual respondents filed a motion for partial
reconsideration but it was denied by the NLRC in a Resolution dated May 23, 1995.13
On August 11, 1995, the individual respondents filed a Petition for Certiorari before us, docketed as G.R. No. 121232.14 They insisted that they were
absorbed by AFSISI and the latter effected their termination without notice and just cause.
After the submission of the responsive pleadings and memoranda, we referred the petition, in accordance with St. Martin Funeral Homes v. NLRC,15 to
the CA which, on September 27, 2000, modified the decision of the NLRC by declaring MERALCO as the direct employer of the individual respondents.
The CA held that: MERALCO changed the security agency manning its premises three times while engaging the services of the same people, the
individual respondents; MERALCO employed a scheme of hiring guards through an agency and periodically entering into service contract with one
agency after another in order to evade the security of tenure of individual respondents; individual respondents are regular employees of MERALCO
since their services as security guards are usually necessary or desirable in the usual business or trade of MERALCO and they have been in the service
of MERALCO for no less than six years; an employer-employee relationship exists between MERALCO and the individual respondents because: (a)
MERALCO had the final say in the selection and hiring of the guards, as when its advice was proved to have carried weight in AFSISI's decision not to
absorb the individual respondents into its workforce; (b) MERALCO paid the wages of individual respondents through ASDAI and AFSISI; (c)
MERALCO's discretion on matters of dismissal of guards was given great weight and even finality since the record shows that the individual
respondents were replaced upon the advice of MERALCO; and, (d) MERALCO has the right, at any time, to inspect the guards, to require without
explanation the replacement of any guard whose behavior, conduct or appearance is not satisfactory and ASDAI and AFSISI cannot pull out any
security guard from MERALCO without the latter's consent; and, a labor-only contract existed between ASDAI and AFSISI and MERALCO, such that
MERALCO is guilty of illegal dismissal without just cause and liable for reinstatement of individual respondents to its workforce.
The dispositive portion of the CA's Decision reads as follows:
WHEREFORE, in view of the foregoing premises, the Resolution subject of this petition is hereby AFFIRMED with MODIFICATION in the sense that
MERALCO is declared the employer of the petitioners. Accordingly, private respondent MERALCO is hereby ordered as follows:
1. To reinstate petitioners into MERALCO's work force as regular security guards without loss of seniority rights and other privileges; andcralawlibrary
2. To pay the petitioners' full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time their
compensation was withheld from them up to the time of their actual reinstatement, for which the Labor Arbiter Pablo C. Espiritu, Jr. is hereby
directed to undertake the necessary computation and enforcement thereof.
With respect to the rest of the dispositive portion of the assailed Resolution which affirmed the decision of the Labor Arbiter Pablo C. Espiritu, Jr.,
particularly the joint and solidary liabilities of both ASDAI and MERALCO to the petitioners, the same are hereby AFFIRMED.
SO ORDERED.16
Hence, the present Petition for Review on certiorari, filed by MERALCO, anchored on the following grounds:
A. THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR AND GRAVE ABUSE OF DISCRETION IN HOLDING THAT AN EMPLOYER-
EMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER MERALCO AND INDIVIDUAL RESPONDENTS.
B. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT INDIVIDUAL RESPONDENTS ARE REGULAR EMPLOYEES OF
PETITIONER MERALCO.
C. THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN ALLOWING INDIVIDUAL RESPONDENTS TO RAISE FOR THE FIRST TIME ON
APPEAL, THE ISSUE THAT PETITIONER WAS THEIR DIRECT EMPLOYER.
D. THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN FINDING THAT PETITIONER MERALCO IS GUILTY OF ILLEGAL DISMISSAL.
E. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT INDIVIDUAL RESPONDENTS ARE ENTITLED TO REINSTATEMENT INTO PETITIONER'S
WORKFORCE.
F. THE COURT OF APPEALS SERIOUSLY ERRED IN NOT FINDING THAT PETITIONER MERALCO IS ENTITLED TO REIMBURSEMENT FROM RESPONDENT
ASDAI FOR THE MONETARY CLAIMS PETITIONER PAID TO INDIVIDUAL RESPONDENTS PURSUANT TO THE SECURITY SERVICE AGREEMENT.17
Anent the first ground, MERALCO submits that the elements of "four-fold" test to determine the existence of an employer-employee relation, namely:
(1) the power to hire, (2) the payment of wages, (3) the power to dismiss, and (4) the power to control, are not present in the instant case.
Regarding the power to hire, MERALCO contends that the records are bereft of any evidence that shows that it participated in or influenced the
decision of PSI and ASDAI to hire or absorb the individual respondents.
As to the payment of wages, MERALCO maintains that the individual respondents received their wages from their agency.
With regard to the power to dismiss, MERALCO argues that the security service agreement clearly provided that the discipline and administration of
the security guards shall conform to the rules and regulations of the agency.
Concerning the power of control, MERALCO asserts that there is no evidence that individual respondents were subjected to its control as to the
manner or method by which they conduct or perform their work of guarding of MERALCO's premises.
Furthermore, MERALCO insists that ASDAI and AFSISI are not labor-only contractors since they have their own equipment, machineries and work
premises which are necessary in the conduct of their business and the duties performed by the security guards are not necessary in the conduct of
MERALCO's principal business.
With respect to the second ground, MERALCO argues that the individual respondents cannot be considered as regular employees as the duties
performed by them as security guards are not necessary in the conduct of MERALCO's principal business which is the distribution of electricity.
As regards the third ground, MERALCO argues that it was denied due process when the individual respondents raised for the first time in the CA the
issue that MERALCO is their direct employer since the individual respondents have always considered themselves as employees of AFSISI and
nowhere in the Labor Arbiter or the NLRC did they raise the argument that MERALCO is their direct employer.
Regarding the fourth ground, MERALCO asserts that it is not guilty of illegal dismissal because it had no direct hand or participation in the termination
of the employment of individual respondents, who even insisted in their Petition for Certiorari in the CA that it was AFSISI which terminated their
employment.
As to the fifth ground, MERALCO maintains that the individual respondents are not entitled to reinstatement into its workforce because no employer-
employee relationship exists between it and the individual respondents.
With regard to the sixth ground, MERALCO asserts that since it is not the direct employer of the individual respondents, it has a right of
reimbursement from ASDAI for the full amount it may pay to the individual respondents under Articles 106 and 107 of the Labor Code.
In contrast, the individual respondents maintain that the CA aptly found that all the elements in employer-employee relationship exist between them
and MERALCO and there is no cogent reason to deviate from such factual findings.
For its part, ASDAI contends that the instant petition raises factual matters beyond the jurisdiction of this Court to resolve since only questions of law
may be raised in a Petition for Review on certiorari. It submits that while the rule admits of exceptions, MERALCO failed to establish that the present
case falls under any of the exceptions.
On the other hand, AFSISI avers that there is no employer-employee relationship between MERALCO and the security guards of any of the security
agencies under contract with MERALCO.
It is a settled rule that in the exercise of the Supreme Court's power of review, the Court is not a trier of facts and does not normally undertake the re-
examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the CA are
conclusive and binding on the Court. However, jurisprudence has recognized several exceptions in which factual issues may be resolved by this Court,
to wit:
(1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts
are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions
of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not
disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on
record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered,
would justify a different conclusion.18
In the present case, the existence of an employer-employee relationship is a question of fact which is well within the province of the CA. Nonetheless,
given the reality that the CA's findings are at odds to those of the NLRC, the Court is constrained to look deeper into the attendant circumstances
obtaining in the present case, as appearing on record.
At the outset, we note that the individual respondents never alleged in their complaint in the Labor Arbiter, in their appeal in the NLRC and even in
their Petition for Certiorari in the CA that MERALCO was their employer. They have always advanced the theory that AFSISI is their employer. A
perusal of the records shows it was only in their Memorandum in the CA that this thesis was presented and discussed for the first time. We cannot
ignore the fact that this position of individual respondents runs contrary to their earlier submission in their pleadings filed in the Labor Arbiter, NLRC
and even in the Petition for Certiorari in the CA that AFSISI is their employer and liable for their termination. As the object of the pleadings is to draw
the lines of battle, so to speak, between the litigants and to indicate fairly the nature of the claims or defenses of both parties, a party cannot
subsequently take a position contrary to, or inconsistent, with his pleadings.19
Moreover, it is a fundamental rule of procedure that higher courts are precluded from entertaining matters neither alleged in the pleadings nor raised
during the proceedings below, but ventilated for the first time only in a motion for reconsideration or on appeal.20 The individual respondents are
bound by their submissions that AFSISI is their employer and they should not be permitted to change their theory. Such a change of theory cannot be
tolerated on appeal, not due to the strict application of procedural rules but as a matter of fairness. A change of theory on appeal is objectionable
because it is contrary to the rules of fair play, justice and due process.21
Thus, the CA should not have considered the new theory offered by the individual respondents in their memorandum.
The present Petition for Review on Certiorari is far from novel and, in fact, not without precedence. We have ruled in Social Security System v. Court
of Appeals22 that:
...The guards or watchmen render their services to private respondent by allowing themselves to be assigned by said respondent, which furnishes
them arms and ammunition, to guard and protect the properties and interests of private respondent's clients, thus enabling that respondent to fulfill
its contractual obligations. Who the clients will be, and under what terms and conditions the services will be rendered, are matters determined not by
the guards or watchmen, but by private respondent. On the other hand, the client companies have no hand in selecting who among the guards or
watchmen shall be assigned to them. It is private respondent that issues assignment orders and instructions and exercises control and supervision
over the guards or watchmen, so much so that if, for one reason or another, the client is dissatisfied with the services of a particular guard, the client
cannot himself terminate the services of such guard, but has to notify private respondent, which either substitutes him with another or metes out to
him disciplinary measures. That in the course of a watchman's assignment the client conceivably issues instructions to him, does not in the least
detract from the fact that private respondent is the employer of said watchman, for in legal contemplation such instructions carry no more weight
than mere requests, the privity of contract being between the client and private respondent, not between the client and the guard or watchman.
Corollarily, such giving out of instructions inevitably spring from the client's right predicated on the contract for services entered into by it with private
respondent.
In the matter of compensation, there can be no question at all that the guards or watchmen receive compensation from private respondent and not
from the companies or establishments whose premises they are guarding. The fee contracted for to be paid by the client is admittedly not equal to
the salary of a guard or watchman; such fee is arrived at independently of the salary to which the guard or watchman is entitled under his
arrangements with private respondent.23
and reiterated in American President Lines v. Clave,24 thus:
In the light of the foregoing standards, We fail to see how the complaining watchmen of the Marine Security Agency can be considered as employees
of the petitioner. It is the agency that recruits, hires, and assigns the work of its watchmen. Hence, a watchman can not perform any security service
for the petitioner's vessels unless the agency first accepts him as its watchman. With respect to his wages, the amount to be paid to a security guard is
beyond the power of the petitioner to determine. Certainly, the lump sum amount paid by the petitioner to the agency in consideration of the latter's
service is much more than the wages of any one watchman. In point of fact, it is the agency that quantifies and pays the wages to which a watchman
is entitled.
Neither does the petitioner have any power to dismiss the security guards. In fact, We fail to see any evidence in the record that it wielded such a
power. It is true that it may request the agency to change a particular guard. But this, precisely, is proof that the power lies in the hands of the
agency.
Since the petitioner has to deal with the agency, and not the individual watchmen, on matters pertaining to the contracted task, it stands to reason
that the petitioner does not exercise any power over the watchmen's conduct. Always, the agency stands between the petitioner and the watchmen;
and it is the agency that is answerable to the petitioner for the conduct of its guards.25
In this case, the terms and conditions embodied in the security service agreement between MERALCO and ASDAI expressly recognized ASDAI as the
employer of individual respondents.
Under the security service agreement, it was ASDAI which (a) selected, engaged or hired and discharged the security guards; (b) assigned them to
MERALCO according to the number agreed upon; (c) provided the uniform, firearms and ammunition, nightsticks, flashlights, raincoats and other
paraphernalia of the security guards; (d) paid them salaries or wages; and, (e) disciplined and supervised them or principally controlled their conduct.
The agreement even explicitly provided that "[n]othing herein contained shall be understood to make the security guards under this Agreement,
employees of the COMPANY, it being clearly understood that such security guards shall be considered as they are, employees of the AGENCY alone."
Clearly, the individual respondents are the employees of ASDAI.
As to the provision in the agreement that MERALCO reserved the right to seek replacement of any guard whose behavior, conduct or appearance is
not satisfactory, such merely confirms that the power to discipline lies with the agency. It is a standard stipulation in security service agreements that
the client may request the replacement of the guards to it. Service-oriented enterprises, such as the business of providing security services, generally
adhere to the business adage that "the customer or client is always right" and, thus, must satisfy the interests, conform to the needs, and cater to the
reasonable impositions of its clients.
Neither is the stipulation that the agency cannot pull out any security guard from MERALCO without its consent an indication of control. It is simply a
security clause designed to prevent the agency from unilaterally removing its security guards from their assigned posts at MERALCO's premises to the
latter's detriment.
The clause that MERALCO has the right at all times to inspect the guards of the agency detailed in its premises is likewise not indicative of control as it
is not a unilateral right. The agreement provides that the agency is principally mandated to conduct inspections, without prejudice to MERALCO's right
to conduct its own inspections.
Needless to stress, for the power of control to be present, the person for whom the services are rendered must reserve the right to direct not only the
end to be achieved but also the means for reaching such end.26 Not all rules imposed by the hiring party on the hired party indicate that the latter is
an employee of the former.27 Rules which serve as general guidelinestowards the achievement of the mutually desired result are not indicative of the
power of control.28
Verily, the security service agreements in the present case provided that all specific instructions by MERALCO relating to the discharge by the security
guards of their duties shall be directed to the agency and not directly to the individual respondents. The individual respondents failed to show that
the rules of MERALCO controlled their performance.
Moreover, ASDAI and AFSISI are not "labor-only" contractors. There is "labor only" contract when the person acting as contractor is considered
merely as an agent or intermediary of the principal who is responsible to the workers in the same manner and to the same extent as if they had been
directly employed by him. On the other hand, "job (independent) contracting" is present if the following conditions are met: (a) the contractor carries
on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except to the
result thereof; and (b) the contractor has substantial capital or investments in the form of tools, equipment, machineries, work premises and other
materials which are necessary in the conduct of his business.29 Given the above distinction and the provisions of the security service agreements
entered into by petitioner with ASDAI and AFSISI, we are convinced that ASDAI and AFSISI were engaged in job contracting.
The individual respondents can not be considered as regular employees of the MERALCO for, although security services are necessary and desirable to
the business of MERALCO, it is not directly related to its principal business and may even be considered unnecessary in the conduct of MERALCO's
principal business, which is the distribution of electricity.
Furthermore, the fact that the individual respondents filed their claim for unpaid monetary benefits against ASDAI is a clear indication that the
individual respondents acknowledge that ASDAI is their employer.
We cannot give credence to individual respondents' insistence that they were absorbed by AFSISI when MERALCO's security service agreement with
ASDAI was terminated. The individual respondents failed to present any evidence to confirm that AFSISI absorbed them into its workforce. Thus,
respondent Benamira was not retained in his post at MERALCO since July 25, 1992 due to the termination of the security service agreement of
MERALCO with ASDAI. As for the rest of the individual respondents, they retained their post only as "hold-over" guards until the security guards of
AFSISI took over their post on August 6, 1992.30
In the present case, respondent Benamira has been "off-detail" for seventeen days while the rest of the individual respondents have only been "off -
detail" for five days when they amended their complaint on August 11, 1992 to include the charge of illegal dismissal. The inclusion of the charge of
illegal dismissal then was premature. Nonetheless, bearing in mind that ASDAI simply stopped giving the individual respondents any assignment and
their inactivity clearly persisted beyond the six-month period allowed by Article 28631 of the Labor Code, the individual respondents were, in effect,
constructively dismissed by ASDAI from employment, hence, they should be reinstated.
The fact that there is no actual and direct employer-employee relationship between MERALCO and the individual respondents does not exonerate
MERALCO from liability as to the monetary claims of the individual respondents. When MERALCO contracted for security services with ASDAI as the
security agency that hired individual respondents to work as guards for it, MERALCO became an indirect employer of individual respondents pursuant
to Article 107 of the Labor Code, which reads:
ART. 107. Indirect employer -  The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or
corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project.
When ASDAI as contractor failed to pay the individual respondents, MERALCO as principal becomes jointly and severally liable for the individual
respondents' wages, under Articles 106 and 109 of the Labor Code, which provide:
ART. 106. Contractor or subcontractor. -  Whenever an employer enters into a contract with another person for the performance of the former['s]
work, the employees of the contractor and of the latter['s] subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him. xxx
ART. 109. Solidary liability - The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held
responsible with his contractor or subcontractor for any violation of any provision of this Code. For purpose of determining the extent of their civil
liability under this Chapter, they shall be considered as direct employers.
ASDAI is held liable by virtue of its status as direct employer, while MERALCO is deemed the indirect employer of the individual respondents for the
purpose of paying their wages in the event of failure of ASDAI to pay them. This statutory scheme gives the workers the ample protection
consonant with labor and social justice provisions of the 1987 Constitution.32
However, as held in Mariveles Shipyard Corp. v. Court of Appeals,33 the solidary liability of MERALCO with that of ASDAI does not preclude the
application of Article 1217 of the Civil Code on the right of reimbursement from his co-debtor by the one who paid,34 which provides:
ART. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may
choose which offer to accept.
He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made.
If the payment is made before the debt is due, no interest for the intervening period may be demanded.
When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be
borne by all his co-debtors, in proportion to the debt of each.
ASDAI may not seek exculpation by claiming that MERALCO's payments to it were inadequate for the individual respondents' lawful compensation. As
an employer, ASDAI is charged with knowledge of labor laws and the adequacy of the compensation that it demands for contractual services is its
principal concern and not any other's.35
WHEREFORE, the present petition is GRANTED. The assailed Decision, dated September 27, 2000, of the CA is REVERSED and SET ASIDE. The Decision
of the Labor Arbiter dated January 3, 1994 and the Resolution of the NLRC dated April 10, 1995 are AFFIRMED with the MODIFICATION that the joint
and solidary liability of ASDAI and MERALCO to pay individual respondents' monetary claims for underpayment of actual regular hours and overtime
hours rendered, and premium pay for holiday and rest day, as well as attorney's fees, shall be without prejudice to MERALCO's right of
reimbursement from ASDAI.
SO ORDERED.
Puno, Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.
 FIRST DIVISION
[G.R. NO. 161115 : November 30, 2006]
DOLE PHILIPPINES, INC., Petitioner, v. MEDEL ESTEVA, HENRY SILVA, GILBERT CABILAO, LORENZO GAQUIT, DANIEL PABLO, EDWIN CAMILO,
BENJAMIN SAKILAN, RICHARD PENUELA, ARMANDO PORRAS, EDUARDO FALDAS, NILO DONDOYANO, MIGUEL DIAZ, ROMEL BAJO, ARTEMIO
TENERIFE, EDDIE LINAO, JERRY LIGTAS, SAMUEL RAVAL, WILFREDO BLANDO, LORENZO MONTERO, JR., JAIME TESIPAO, GEORGE DERAL, ERNESTO
ISRAEL, JR., AGAPITO ESTOLOGA, JOVITO DAGUIO, ARSENIO LEONCIO, MARLON BLANDO, JOSE OTELO CASPILLO, ARNOLD LIZADA, JERRY
DEYPALUBOS, STEVEN MADULA, ROGELIO CABULAO, JR., ALVIN COMPOC, EUGENIO BRITANA, RONNIE GUELOS, EMMANUEL JIMENA, GERMAN
JAVA, JESUS MEJICA, JOEL INVENTADO, DOMINGO JABULGO, RAMIL ENAD, RAYMUNDO YAMON, RITCHIE MELENDRES, JACQUEL ORGE, RAMON
BARCELONA, ERWIN ESPIA, NESTOR DELIDELI, JR., ALLAN GANE, ROMEO PORRAS, RITCHIE BOCOG, JOSELITO ACEBES, DANNY TORRES, JIMMY
NAVARRO, RALPH PEREZ, SONNY SESE, RONALD RODRIQUES, ROBERTO ALLANEC, ERNIE GIGANTANA, NELSON SAMSON, REDANTE DAVILA, EDDIE
BUSLIG, ALLAN PINEDA, JESUS BELGERA, VICENTE LABISTE, CARMENCITA FELISILDA, GEORGE DERLA, RUBEN TORMON, NEIL TAJALE, ORLANDO
ESPENILLA, RITCHEL MANEJAR, JOEL QUINTANA, ERWIN ALDE, JOEL CATALAN, ELMER TIZON, ALLAN ESPADA, EUGENE BRETANA, RAMIL ENAD,
RENE INGALLA, STEVEN MADULLA, RANDY REBUTAZO, NEIL BAGATILLA, ARSENIO LEONCIO, ROLANDO VILLEGAS and JUSLIUS TESIPAO, herein
represented by MEDEL ESTEVA, Authorized Representative, Respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the revised Rules of Civil Procedure seeking the reversal of the
Decision,1 dated 20 May 2002, and the Amended Decision,2 dated 27 November 2003, both rendered by the Court of Appeals in CA-G.R. SP No. 63405,
which declared herein petitioner Dole Philippines, Inc. as the employer of herein respondents, Medel Esteva and 86 others; found petitioner guilty of
illegal dismissal; and ordered petitioner to reinstate respondents to their former positions and to pay the latter backwages.
The antecedent facts of the case are recounted as follows:
Petitioner is a corporation duly organized and existing in accordance with Philippine laws, engaged principally in the production and processing of
pineapple for the export market.3 Its plantation is located in Polomolok, South Cotabato.4
Respondents are members of the Cannery Multi-Purpose Cooperative (CAMPCO). CAMPCO was organized in accordance with Republic Act No. 6938,
otherwise known as the Cooperative Code of the Philippines, and duly-registered with the Cooperative Development Authority (CDA) on 6 January
1993.5 Members of CAMPCO live in communities surrounding petitioner's plantation and are relatives of petitioner's employees.
On 17 August 1993, petitioner and CAMPCO entered into a Service Contract.6 The Service Contract referred to petitioner as "the Company," while
CAMPCO was "the Contractor." Relevant portions thereof read as follows '
1. That the amount of this contract shall be or shall not exceed TWO HUNDRED TWENTY THOUSAND ONLY (P220,000.00) PESOS, terms and conditions
of payment shall be on a per job basis as specified in the attached schedule of rates; the CONTRACTOR shall perform the following services for the
COMPANY;
1.1 Assist the COMPANY in its daily operations;
1.2 Perform odd jobs as may be assigned.
2. That both parties shall observe the following terms and conditions as stipulated, to wit:
2.1 CONTRACTOR must carry on an independent legitimate business, and must comply with all the pertinent laws of the government both local and
national;
2.2 CONTRACTOR must provide all hand tools and equipment necessary in the performance of their work.
However, the COMPANY may allow the use of its fixed equipment as a casual facility in the performance of the contract;
2.3 CONTRACTOR must comply with the attached scope of work, specifications, and GMP and safety practices of the company;
2.4 CONTRACTOR must undertake the contract work under the following manner:
A. on his own account;
b. under his own responsibility;
c. according to his manner and method, free from the control and direction of the company in all matters connected with the performance of the
work except as to the result thereof;
3. CONTRACTOR must pay the prescribed minimum wage, remit SSS/MEDICARE premiums to proper government agencies, and submit copies of
payroll and proof of SSS/MEDICARE remittances to the COMPANY;
4. This contract shall be for a specific period of Six (6) months from July 1 to December 31, 1993; x x x.
Pursuant to the foregoing Service Contract, CAMPCO members rendered services to petitioner. The number of CAMPCO members that report for
work and the type of service they performed depended on the needs of petitioner at any given time. Although the Service Contract specifically stated
that it shall only be for a period of six months, i.e., from 1 July to 31 December 1993, the parties had apparently extended or renewed the same for
the succeeding years without executing another written contract. It was under these circumstances that respondents came to work for petitioner.
Investigation by DOLE
Concomitantly, the Sangguniang Bayan of Polomolok, South Cotabato, passed Resolution No. 64, on 5 May 1993, addressed to then Secretary Ma.
Nieves R. Confessor of the Department of Labor and Employment (DOLE), calling her attention to the worsening working conditions of the petitioner's
workers and the organization of contractual workers into several cooperatives to replace the individual labor-only contractors that used to supply
workers to the petitioner. Acting on the said Resolution, the DOLE Regional Office No. XI in Davao City organized a Task Force that conducted an
investigation into the alleged labor-only contracting activities of the cooperatives in Polomolok.7
On 24 May 1993, the Senior Legal Officer of petitioner wrote a letter addressed to Director Henry M. Parel of DOLE Regional Office No. XI, supposedly
to correct the misinformation that petitioner was involved in labor-only contracting, whether with a cooperative or any private contractor. He further
stated in the letter that petitioner was not hiring cooperative members to replace the regular workers who were separated from service due to
redundancy; that the cooperatives were formed by the immediate dependents and relatives of the permanent workers of petitioner; that these
cooperatives were registered with the CDA; and that these cooperatives were authorized by their respective constitutions and by-laws to engage in
the job contracting business.8
The Task Force submitted a report on 3 June 1993 identifying six cooperatives that were engaged in labor-only contracting, one of which was
CAMPCO. The DOLE Regional Office No. XI held a conference on 18 August 1993 wherein the representatives of the cooperatives named by the Task
Force were given the opportunity to explain the nature of their activities in relation to petitioner. Subsequently, the cooperatives were required to
submit their position papers and other supporting documents, which they did on 30 August 1993. Petitioner likewise submitted its position paper on
15 September 1993.9
On 19 October 1993, Director Parel of DOLE Regional Office No. XI issued an Order10 in which he made the following findings'
Records submitted to this Office show that the six (6) aforementioned cooperatives are all duly registered with the Cooperative Development
Authority (CDA). These cooperatives were also found engaging in different activities with DOLE PHILIPPINES, INC. a company engaged in the
production of pineapple and export of pineapple products. Incidentally, some of these cooperatives were also found engaging in activities which are
directly related to the principal business or operations of the company. This is true in the case of the THREE (3) Cooperatives, namely; Adventurer's
Multi Purpose Cooperative, Human Resource Multi Purpose Cooperative and Cannery Multi Purpose Cooperative.
From the foregoing findings and evaluation of the activities of Adventurer's Multi Purpose Cooperative, Human Resource Multi Purpose Cooperative
and Cannery Multi Purpose Cooperative, this Office finds and so holds that they are engaging in Labor Only Contracting Activities as defined under
Section 9, Rule VIII, Book III of the rules implementing the Labor Code of the Philippines, as amended which we quote:
"Section 9 Labor Only Contracting - a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only
contracting where such person:
1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; andcralawlibrary
2) The workers recruited and placed by such person are performing activities which are directly related to the principal business or operation of the
employer to which workers are habitually employed.
b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or
intermediary of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him."
WHEREFORE, premises considered, ADVENTURER'S MULTI PURPOSE COOPERATIVE, HUMAN RESOURCE MULTI PURPOSE COOPERATIVE and CANNERY
MULTI PURPOSE COOPERATIVE are hereby declared to be engaged in labor only contracting which is a prohibited activity. The same cooperatives are
therefore ordered to cease and desist from further engaging in such activities.
The three (3) other cooperatives, namely Polomolok Skilled Workers Multi Purpose Cooperative, Unified Engineering and Manpower Service Multi
Purpose Cooperative and Tibud sa Katibawasan Multi Purpose Cooperative whose activities may not be directly related to the principal business of
DOLE Philippines, Inc. are also advised not to engage in labor only contracting with the company.
All the six cooperatives involved appealed the afore-quoted Order to the Office of the DOLE Secretary, raising the sole issue that DOLE Regional
Director Director Parel committed serious error of law in directing the cooperatives to cease and desist from engaging in labor-only contracting. On 15
September 1994, DOLE Undersecretary Cresencio B. Trajano, by the authority of the DOLE Secretary, issued an Order11 dismissing the appeal on the
basis of the following ratiocination'
The appeal is devoid of merit.
The Regional Director has jurisdiction to issue a cease and desist order as provided by Art. 106 of the Labor Code, as amended, to wit:
"Art. 106. Contractor or subcontractor. x x x
xxx
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any provision of this Code (Emphasis supplied)cralawlibrary
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the forms of
tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which
are directly related to the principal business of the employer. In such cases, the person or the intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him."
in relation to Article 128(b) of the Labor Code, as amended by Republic Act No. 7730, which reads:
"Art. 128. Visitorial and Enforcement Power.
b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still
exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to
the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. The Secretary or his duly authorized representatives shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor employment and
enforcement officer and raises issues supported by documentary proof which were not considered in the course of inspection.
An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter. In
case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash bond issued by a reputable
bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order appealed
from."
The records reveal that in the course of the inspection of the premises of Dolefil, it was found out that the activities of the members of the
[cooperatives] are necessary and desirable in the principal business of the former; and that they do not have the necessary investment in the form of
tools and equipments. It is worthy to note that the cooperatives did not deny that they do not have enough capital in the form of tools and
equipment. Under the circumstances, it could not be denied that the [cooperatives] are considered as labor-only contractors in relation to the
business operation of DOLEFIL, INC.
Thus, Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code, provides that:
"Sec. 9. Labor-only contracting. - (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only
contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; andcralawlibrary
(2) The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the
employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as a contractor shall be considered merely as an agent or
intermediary of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
x x x x"
Violation of the afore-quoted provision is considered a labor standards violation and thus, within the visitorial and enforcement powers of the
Secretary of Labor and Employment (Art. 128).
The Regional Director's authority to issue a cease and desist order emanates from Rule I, Section 3 of the Rules on Disposition of Labor Standard Cases
in the Regional Offices, to wit:
"Section 3. Authorized representative of the Secretary of Labor and Employment. - The Regional Directors shall be the duly authorized representatives
of the Secretary of Labor and Employment in the administration and enforcement of the labor standards within their respective territorial
jurisdiction."
The power granted under Article 106 of the Labor Code to the Secretary of Labor and Employment to restrict or prohibit the contracting out of labor
to protect the rights of workers established under the Code is delegated to the Regional Directors by virtue of the above-quoted provision.
The reason why "labor-only" contracting is prohibited under the Labor Code is that it encourages circumvention of the provisions of the Labor Code
on the workers' right to security of tenure and to self-organization.
WHEREFORE, the respondents' Appeal is hereby DISMISSED for lack of merit. The Order of the Regional Director, Regional Office No. XI, Davao City, is
AFFIRMED.
After the motion for reconsideration of the foregoing Order was denied, no further motion was filed by the parties, and the Order, dated 15
September 1994, of DOLE Undersecretary Trajano became final and executory. A Writ of Execution12 was issued by DOLE Regional Office No. XI only
on 27 July 1999, years after the issuance of the order subject of the writ. The DOLE Regional Office No. XI was informed that CAMPCO and two other
cooperatives "continued to operate at DOLE Philippines, Inc. despite the cease and desist Order" it had issued. It therefore commanded the Sheriff to
proceed to the premises of CAMPCO and the two other cooperatives and implement its Order dated 19 October 1993.
Respondent's Complaint before the NLRC
Respondents started working for petitioner at various times in the years 1993 and 1994, by virtue of the Service Contract executed between CAMPCO
and petitioner. All of the respondents had already rendered more than one year of service to petitioner. While some of the respondents were still
working for petitioner, others were put on "stay home status" on varying dates in the years 1994, 1995, and 1996 and were no longer furnished with
work thereafter. Together, respondents filed a Complaint,13 on 19 December 1996, with the National Labor Relations Commission (NLRC), for illegal
dismissal, regularization, wage differentials, damages and attorney's fees.
In their Position Paper,14 respondents reiterated and expounded on the allegations they previously made in their Complaint'
Sometime in 1993 and 1994, [herein petitioner] Dolefil engaged the services of the [herein respondents] through Cannery Multi-purpose Cooperative.
A cooperative which was organized through the initiative of Dolefil in order to fill in the vacuum created as a result of the dismissal of the regular
employees of Dolefil sometime in 1990 to 1993.
The [respondents] were assigned at the Industrial Department of respondent Dolefil. All tools, implements and machineries used in performing their
task such as: can processing attendant, feeder of canned pineapple at pineapple processing, nata de coco processing attendant, fruit cocktail
processing attendant, and etc. were provided by Dolefil. The cooperative does not have substantial capital and does not provide the [respondents]
with the necessary tools to effectively perform their assigned task as the same are being provided by Dolefil.
The training and instructions received by the [respondents] were provided by Dolefil. Before any of the [respondents] will be allowed to work, he has
to undergo and pass the training prescribed by Dolefil. As a matter of fact, the trainers are employees of Dolefil.
The [respondents] perform their assigned task inside the premises of Dolefil. At the job site, they were given specific task and assignment by Dolefil's
supervisors assigned to supervise the works and efficiency of the complainants. Just like the regular employees of Dolefil, [respondents] were
subjected to the same rules and regulations observe [sic] inside company premises and to some extent the rules applied to the [respondents] by the
company through its officers are even stricter.
The functions performed by the [respondents] are the same functions discharged by the regular employees of Dolefil. In fact, at the job site, the
[respondents] were mixed with the regular workers of Dolefil. There is no difference in so far as the job performed by the regular workers of Dolefil
and that of the [respondents].
Some of the [respondents] were deprived of their employment under the scheme of "stay home status" where they were advised to literally stay
home and wait for further instruction to report anew for work. However, they remained in this condition for more than six months. Hence, they were
constructively or illegally dismissed.
Respondents thus argued that they should be considered regular employees of petitioner given that: (1) they were performing jobs that were usually
necessary and desirable in the usual business of petitioner; (2) petitioner exercised control over respondents, not only as to the results, but also as to
the manner by which they performed their assigned tasks; and (3) CAMPCO, a labor-only contractor, was merely a conduit of petitioner. As regular
employees of petitioner, respondents asserted that they were entitled to security of tenure and those placed on "stay home status" for more than six
months had been constructively and illegally dismissed. Respondents further claimed entitlement to wage differential, moral damages, and attorney's
fees.
In their Supplemental Position Paper,15 respondents presented, in support of their Complaint, the Orders of DOLE Regional Director Parel, dated 19
October 1993, and DOLE Undersecretary Trajano, dated 15 September 1994, finding that CAMPCO was a labor-only contractor and directing CAMPCO
to cease and desist from any further labor-only contracting activities.
Petitioner, in its Position Paper16 filed before the NLRC, denied that respondents were its employees.
Petitioner explained that it found the need to engage external services to augment its regular workforce, which was affected by peaks in operation,
work backlogs, absenteeism, and excessive leaves. It used to engage the services of individual workers for definite periods specified in their
employment contracts and never exceeding one year. However, such an arrangement became the subject of a labor case,17 in which petitioner was
accused of preventing the regularization of such workers. The Labor Arbiter who heard the case, rendered his Decision18 on 24 June 1994 declaring
that these workers fell squarely within the concept of seasonal workers as envisaged by Article 280 of the Labor Code, as amended, who were hired
by petitioner in good faith and in consonance with sound business practice; and consequently, dismissing the complaint against petitioner. The NLRC,
in its Resolution,19 dated 14 March 1995, affirmed in toto the Labor Arbiter's Decision and further found that the workers were validly and legally
engaged by petitioner for "term employment," wherein the parties agreed to a fixed period of employment, knowingly and voluntarily, without any
force, duress or improper pressure being brought to bear upon the employees and absent any other circumstance vitiating their consent. The said
NLRC Resolution became final and executory on 18 June 1996. Despite the favorable ruling of both the Labor Arbiter and the NLRC, petitioner decided
to discontinue such employment arrangement. Yet, the problem of petitioner as to shortage of workforce due to the peaks in operation, work
backlogs, absenteeism, and excessive leaves, persisted. Petitioner then found a solution in the engagement of cooperatives such as CAMPCO to
provide the necessary additional services.
Petitioner contended that respondents were owners-members of CAMPCO; that CAMPCO was a duly-organized and registered cooperative which had
already grown into a multi-million enterprise; that CAMPCO was engaged in legitimate job-contracting with its own owners-members rendering the
contract work; that under the express terms and conditions of the Service Contract executed between petitioner (the principal) and CAMPCO (the
contractor), the latter shall undertake the contract work on its own account, under its own responsibility, and according to its own manner and
method free from the control and direction of the petitioner in all matters connected with the performance of the work, except as to the result
thereof; and since CAMPCO held itself out to petitioner as a legitimate job contractor, respondents, as owners-members of CAMPCO, were estopped
from denying or refuting the same.
Petitioner further averred that Department Order No. 10, amending the rules implementing Books III and VI of the Labor Code, as amended,
promulgated by the DOLE on 30 May 1997, explicitly recognized the arrangement between petitioner and CAMPCO as permissible contracting and
subcontracting, to wit'
Section 6. Permissible contracting and subcontracting. - Subject to the conditions set forth in Section 3(d) and (e) and Section 5 hereof, the principal
may engage the services of a contractor or subcontractor for the performance of any of the following;
(a) Works or services temporarily or occasionally needed to meet abnormal increase in the demand of products or services, provided that the normal
production capacity or regular workforce of the principal cannot reasonably cope with such demands;
(b) Works or services temporarily or occasionally needed by the principal for undertakings requiring expert or highly technical personnel to improve
the management or operations of an enterprise;
(c) Services temporarily needed for the introduction or promotion of new products, only for the duration of the introductory or promotional period;
(d) Works or services not directly related or not integral to the main business or operation of the principal, including casual work, janitorial, security,
landscaping, and messengerial services, and work not related to manufacturing processes in manufacturing establishments;
(e) Services involving the public display of manufacturer's products which does not involve the act of selling or issuance of receipts or invoices;
(f) Specialized works involving the use of some particular, unusual, or peculiar skills, expertise, tools or equipment the performance of which is
beyond the competence of the regular workforce or production capacity of the principal; andcralawlibrary
(g) Unless a reliever system is in place among the regular workforce, substitute services for absent regular employees, provided that the period of
service shall be coextensive with the period of absence and the same is made clear to the substitute employee at the time of engagement. The phrase
"absent regular employees" includes those who are serving suspensions or other disciplinary measures not amounting to termination of employment
meted out by the principal, but excludes those on strike where all the formal requisites for the legality of the strike have been prima facie complied
with based on the records filed with the National Conciliation and Mediation Board.
According to petitioner, the services rendered by CAMPCO constituted permissible job contracting under the afore-quoted paragraphs (a), (c), and (g),
Section 6 of DOLE Department Order No. 10, series of 1997.
After the parties had submitted their respective Position Papers, the Labor Arbiter promulgated its Decision20 on 11 June 1999, ruling entirely in favor
of petitioner, ratiocinating thus'
After judicious review of the facts, narrated and supporting documents adduced by both parties, the undersigned finds [and] holds that CAMPCO is
not engaged in labor-only contracting.
Had it not been for the issuance of Department Order No. 10 that took effect on June 22, 1997 which in the contemplation of Law is much later
compared to the Order promulgated by the Undersecretary Cresencio Trajano of Department of [L]abor and Employment, the undersigned could
safely declared [sic] otherwise. However, owing to the principle observed and followed in legal practice that the later law or jurisprudence controls,
the reliance to Secretary Trajano's order is overturned.
Labor-only contracting as amended by Department [O]rder No. 10 is defined in this wise:
"Labor-only contracting is prohibited under this Rule is an arrangement where the contractor or subcontractor merely recruits, supplied [sic] or places
workers to perform a job, work or service for a principal, and the following elements are present:
i) The contractor or sub-contractor does not have substantial capital or investment to actually perform the job, work, or service under its own account
& responsibility, and
ii) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main
business of the principal."
Verification of the records reveals that per Annexes "J" and "K" of [herein petitioner DolePhil's] position paper, which are the yearly audited Financial
Statement and Balance Sheet of CAMPCO shows [sic] that it has more than substantial capital or investment in order to qualify as a legitimate job
contractor.
We likewise recognize the validity of the contract entered into and between CAMPCO and [petitioner] for the former to assists [sic] the latter in its
operations and in the performance of odd jobs - such as the augmentation of regular manning particularly during peaks in operation, work back logs,
absenteeism and excessive leave availment of respondent's regular employees. The rule is well-settled that labor laws discourage interference with an
employer's judgment in the conduct of his business. Even as the law is solicitors [sic] of the welfare of the employees, it must also protect the right of
an employer to exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs to achieve its
purpose cannot be denied (Yuco Chemical Industries v. Ministry of [L]abor, GR No. 75656, May 28, 1990).
CAMPCO being engaged in legitimate contracting, cannot therefore declared [sic] as guilty of labor-only contracting which [herein respondents] want
us to believe.
The second issue is likewise answered in the negative. The reason is plain and simple[,] section 12 of Department [O]rder No. 10 states:
"Section 12. Employee-employer relationship. Except in cases provided for in Section 13, 14, 15 & 17, the contractor or subcontractor shall be
considered the employer of the contractual employee for purposes of enforcing the provisions of the Code."
The Resolution of NLRC 5th division, promulgated on March 14, 1 1995 [sic] categorically declares:
"Judging from the very nature of the terms and conditions of their hiring, the Commission finds the complainants to have been engaged to perform
work, although necessary or desirable to the business of respondent company, for a definite period or what is community called TERM
EMPLOYMENT. It is clear from the evidence and record that the nature of the business and operation of respondent company has its peaks and
valleys and therefore, it is not difficult to discern, inclement weather, or high availment by regular workers of earned leave credits, additional workers
categorized as casuals, or temporary, are needed to meet the exigencies." (Underlining in the original)
The validity of fixed-period employment has been consistently upheld by the Supreme [C]ourt in a long line of cases, the leading case of which is Brent
School, Inc. v. Zamora & Alegre, GR No. 48494, February 5, 1990. Thus at the end of the contract the employer-employee relationship is terminated. It
behooves upon us to rule that herein complainants cannot be declared regular rank and file employees of the [petitioner] company.
Anent the third issue, [respondents] dismally failed to provide us the exact figures needed for the computation of their wage differentials. To simply
alleged [sic] that one is underpaid of his wages is not enough. No bill of particulars was submitted. Moreover, the Order of RTWPB Region XI, Davao
City dated February 21, 1996 exempts [petitioner] company from complying Wage Order No. 04 [sic] in so far as such exemption applies only to
workers who are not covered by the Collective Bargaining Agreement, for the period January 1 to December 31, 1995,. [sic] In so far as [respondents]
were not privies to the CBA, they were the workers referred to by RTWPB's Order. [H]ence, [respondents'] claims for wage differentials are hereby
dismissed for lack of factual basis.
We find no further necessity in delving into the issues raised by [respondents] regarding moral damages and attorney's fees for being moot and
academic because of the findings that CAMPCO does not engaged [sic] in labor-only contracting and that [respondents] cannot be declared as regular
employees of [petitioner].
WHEREFORE, premises considered, judgment is hereby rendered in the above-entitled case, dismissing the complaint for lack of merit.
Respondents appealed the Labor Arbiter's Decision to the NLRC, reiterating their position that they should be recognized as regular employees of the
petitioner since CAMPCO was a mere labor-only contractor, as already declared in the previous Orders of DOLE Regional Director Parel, dated 19
October 1993, and DOLE Undersecretary Trajano, dated 15 September 1994, which already became final and executory. The NLRC, in its
Resolution,21 dated 29 February 2000, dismissed the appeal and affirmed the Labor Arbiter's Decision, reasoning as follows'
We find no merit in the appeal.
The concept of conclusiveness of judgment under the principle of "res judicata" means that where between the first case wherein judgment is
rendered and the second case wherein such judgment is invoked, there is identity of parties, but there is no identity of cause of action, the judgment
is conclusive in the second case, only as to those matters actually and directly controverted and determined and not as to matters merely involved
therein (Viray, etc. v. Marinas, et al., 49 SCRA 44). There is no denying that the order of the Department of Labor and Employment, Regional Office
No. XI in case No. RI100-9310-RI-355, which the complainants perceive to have sealed the status of CAMPCO as labor-only contractor, proceeded
from the visitorial and enforcement power of the Department Secretary under Article 128 of the Labor Code. Acting on reports that the cooperatives,
including CAMPCO, that operated and offered services at [herein petitioner] company were engaging in labor-only contracting activities, that Office
conducted a routinary inspection over the records of said cooperatives and consequently, found the latter to be engaging in labor-only contracting
activities. This being so, [petitioner] company was not a real party-in-interest in said case, but the cooperatives concerned. Therefore, there is no
identity of parties between said case and the present case which means that the afore-said ruling of the DOLE is not binding and conclusive upon
[petitioner] company.
It is not correct, however, to say, as the Labor Arbiter did, that the afore-said ruling of the Department of Labor and Employment has been overturned
by Department Order No. 10. It is a basic principle that "once a judgment becomes final it cannot be disturbed, except for clerical errors or when
supervening events render its execution impossible or unjust" (Sampaguita Garmens [sic]  Corp. v. NLRC, G. R. No. 102406, June 7, 1994). Verily, the
subsequent issuance of Department Order No. 10 cannot be construed as supervening event that would render the execution of said judgment
impossible or unjust. Department Order No. 10 refers to the ramification of some provisions of the Rules Implementing Articles 106 and 109 of the
Labor Code, without substantially changing the definition of "labor-only" or "job' contracting.
Well-settled is the rule that to qualify as an independent job contractor, one has either substantial capital "or" investment in the form of tools,
equipment and machineries necessary to carry out his business (see Virginia Neri, et al. v. NLRC, et al., G.R. NOS. 97008-89, July 23, 1993). CAMPCO
has admittedly a paid-up capital of P4,562,470.25 and this is more than enough to qualify it as an independent job contractor, as aptly held by the
Labor Arbiter.
WHEREFORE, the appeal is DISMISSED for lack of merit and the appealed decision is AFFIRMED.
Petition for  Certiorari  with the Court of Appeals
Refusing to concede defeat, respondents filed with the Court of Appeals a Petition for Certiorari  under Rule 65 of the revised Rules of Civil Procedure,
asserting that the NLRC acted without or in excess of its jurisdiction and with grave abuse of discretion amounting to lack of jurisdiction when, in its
Resolution, dated 29 February 2000, it (1) ruled that CAMPCO was a bona fide independent job contractor with substantial capital, notwithstanding
the fact that at the time of its organization and registration with CDA, it only had a paid-up capital of P6,600.00; and (2) refused to apply the doctrine
of res judicata against petitioner. The Court of Appeals, in its Decision,22 dated 20 May 2002, granted due course to respondents' Petition, and set
aside the assailed NLRC Decision. Pertinent portions of the Court of Appeals Decision are reproduced below'
In the case at bench, it was established during the proceedings before the [NLRC] that CAMPCO has a substantial capital. However, having a
substantial capital does not per se qualify CAMPCO as a job contractor. In order to be considered an independent contractor it is not enough to show
substantial capitalization or investment in the form of tools, equipment, machinery and work premises. The conjunction "and," in defining what a job
contractor is, means that aside from having a substantial capital or investment in the form of tools, equipment, machineries, work premise, and other
materials which are necessary in the conduct of his business, the contractor must be able to prove that it also carries on an independent business and
undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof. [Herein petitioner
DolePhil] has failed to prove, except for the substantial capital requirement, that CAMPCO has met the other requirements. It was not established
that CAMPCO is engaged or carries on an independent business. In the performance of the respective tasks of workers deployed by CAMPCO with
[petitioner], it was not established that CAMPCO undertook the contract of work it entered with [petitioner] under its own account and its own
responsibility. It is [petitioner] who provides the procedures to be followed by the workers in the performance of their assigned work. The workers
deployed by CAMPCO to [petitioner] performed activities which are directly related to the principal business or operations of the employer in which
workers are habitually employed since [petitioner] admitted that these workers were engaged to perform the job of other regular employees who
cannot report for work.
Moreover, [NLRC] likewise gravely erred in not giving weight to the Order dated 19 October 1993 issued by the Office of the Secretary of the
Department of Labor and Employment, through Undersecretary Cresencio Trajano, which affirmed the findings of the Department of Labor and
Employment Regional Office, Region XI, Davao City that Cannery Multi-Purpose Cooperative is one of the cooperatives engaged in labor-only
contracting activities.
In the exercise of the visitorial and enforcement power of the Department of Labor and Employment, an investigation was conducted among the
cooperatives organized and existing in Polomolok, South Cotabato, relative to labor-only contracting activities. One of the cooperatives investigated
was Cannery Multi-Purpose Cooperative. After the investigation, the Department of Labor and Employment, Regional Office No. XI, Davao City,
through its Regional Director, issued the Order dated 19 October 1993, stating:
"WHEREFORE, premises considered, ADVENTURER'S MULTI PURPOSE COOPERATIVE, HUMAN RESOURCE MULTI PURPOSE SKILLED COOPERATIVE and
CANNERY MULTI PURPOSE COOPERATIVE are hereby declared to be engaged in labor only contracting which is a prohibited activity. The same
cooperatives are therefore ordered to cease and desist from further engaging in such activities.
xxxx
SO ORDERED."
Cannery Multi Purpose Cooperative, together with the other cooperatives declared as engaged in labor-only contracting activity, appeal the above-
findings to the Secretary of the Department of Labor and Employment. Their appeal was dismissed for lack of merit as follows:: [sic]
xxx
[NLRC] held that CAMPCO, being not a real party-in interest in the above-case, the said ruling is not binding and conclusive upon [petitioner]. This
Court, however, finds the contrary.
CAMPCO was one of the cooperatives investigated by the Department of Labor and Employment, Regional Office No. XI, Davao City, pursuant to
Article 128 of the Labor Code. It was one of the appellants before the Secretary of the Department of Labor questioning the decision of the Regional
Director of DOLE, Regional Office No. XI, Davao City. This Court noted that in the proceedings therein, and as mentioned in the decision rendered by
Undersecretary Cresencio B. Trajano of the Department of Labor and Employment, Manila, regarding the cooperatives' appeal thereto, the parties
therein, including Cannery Multi-Purpose Cooperative, submitted to the said office their position papers and Articles of Cooperatives and Certification
of Registrations [sic] on 30 August 1993. This is a clear indicia that CAMPCO participated in the proceedings therein. [NLRC], therefore, committed
grave abuse of discretion amounting to lack or excess of jurisdiction when it held that CAMPCO was never a party to the said case.
[Petitioner] invokes Section 6 of Department Order No. 10, series of 1997, issued by the Department of Labor and Employment which took effect on
22 June 1997. The said section identified the circumstances which are permissible job contracting, to wit:
xxx
[Petitioner's] main contention is based on the decisions rendered by the labor arbiter and [NLRC] which are both anchored on Department Order No.
10 issued by the Department of Labor and Employment. The said department order provided for several flexible working relations between a
principal, a contractor or subcontractor and the workers recruited by the latter and deployed to the former. In the case at bench, [petitioner] posits
that the engagement of [petitioner] of the workers deployed by CAMPCO was pursuant to D.O. No. 10, Series of 1997.
However, on 8 May 2001, the Department of Labor and Employment issued Department Order No. 3, series of 2001, revoking Department Order No.
10, series of 1997. The said department order took effect on 29 May 2001.
xxx
Under Department Order No. 3, series of 2001, some contracting and outsourcing arrangements are no longer legitimate modes of employment
relation. Having revoked Department Order No. 10, series of 1997, [petitioner] can no longer support its argument by relying on the revoked
department order.
Considering that [CAMPCO] is not a job contractor, but one engaged in labor-only contracting, CAMPCO serves only as an agent of [petitioner]
pursuant to par. (b) of Sec. 9, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor Code, stating,
xxx
However, the Court cannot declare that [herein respondents] are regular employees of [petitioner]. x x x
xxx
In the case at bench, although [respondents] were engaged to perform activities which are usually necessary or desirable in the usual business or
trade of private respondent, it is apparent, however, that their services were engaged by [petitioner] only for a definite period. [Petitioner's] nature of
business and operation has its peaks. In order to meet the demands during peak seasons they necessarily have to engage the services of workers to
work only for a particular season. In the case of [respondents], when they were deployed by CAMPCO with [petitioner] and were assigned by the
latter at its cannery department, they were aware that they will be working only for a certain duration, and this was made known to them at the time
they were employed, and they agreed to the same.
xxx
The non-rehiring of some of the petitioners who were allegedly put on a "floating status' is an indication that their services were no longer needed.
They attained their "floating status" only after they have finished their contract of employment, or after the duration of the season that they were
employed. The decision of [petitioner] in not rehiring them means that their services were no longer needed due to the end of the season for which
they were hired. And this Court reiterates that at the time they were deployed to [petitioner's] cannery division, they knew that the services they
have to render or the work they will perform are seasonal in nature and consequently their employment is only for the duration of the season.
ACCORDINGLY, in view of the foregoing, the instant petition for certiorari is hereby GRANTED DUE COURSE. The decision dated 29 February 2000 and
Resolution dated 19 December 2000 rendered by [NLRC] are hereby SET ASIDE. In place thereof, it is hereby rendered that:
1. Cannery Multi-Purpose Cooperative is a labor-only contractor as defined under the Labor Code of the Philippines and its implementing rules and
regulations; and that
2. DOLE Philippines Incorporated is merely an agent or intermediary of Cannery Multi-Purpose Cooperative.
All other claims of [respondents] are hereby DENIED for lack of basis.
Both petitioner and respondents filed their respective Motions for Reconsideration of the foregoing Decision, dated 20 May 2002, prompting the
Court of Appeals to promulgate an Amended Decision on 27 November 2003, in which it ruled in this wise:
This court examined again the documentary evidence submitted by the [herein petitioner] and we rule not to disturb our findings in our Decision
dated May 20, 2002. It is our opinion that there was no competent evidence submitted that would show that CAMPCO is engaged to perform a
specific and special job or service which is one of the strong indicators that an entity is an independent contractor. The articles of cooperation and by-
laws of CAMPCO do not show that it is engaged in performing a specific and special job or service. What is clear is that it is a multi-purpose
cooperative organized under RA No. 6938, nothing more, nothing less.
As can be gleaned from the contract that CAMPCO entered into with the [petitioner], the undertaking of CAMPCO is to provide [petitioner] with
workforce by assisting the company in its daily operations and perform odd jobs as may be assigned. It is our opinion that CAMPCO merely acted as
recruitment agency for [petitioner]. CAMPCO by supplying manpower only, clearly conducted itself as 'labor-only" contractor. As can be gleaned from
the service contract, the work performed by the [herein respondents] are directly related to the main business of the [petitioner]. Clearly, the
requisites of "labor-only" contracting are present in the case at bench.
In view of the above ruling, we find it unnecessary to discuss whether the Order of Undersecretary Trajano finding that CAMPCO is a "labor-only"
contractor is a determining factor or constitutes res judicata in the case at bench. Our findings that CAMPCO is a "labor-only" contractor is based on
the evidence presented vis - à-vis  the rulings of the Supreme Court on the matter.
Since, the argument that the [petitioner] is the real employer of the [respondents], the next question that must be answered is - what is the nature of
the employment of the petitioners?
xxx
The afore-quoted [Article 280 of the Labor Code, as amended] provides for two kinds of employment, namely: (1) regular (2) casual. In our Decision,
we ruled that the [respondents] while performing work necessary and desirable to the business of the [petitioner] are seasonal employees as their
services were engaged by the [petitioner] for a definite period or only during peak season.
In the most recent case of Hacienda Fatima v. National Federation of Sugarcane Workers Food and General Trade, the Supreme Court ruled that for
employees to be excluded from those classified as regular employees, it is not enough that they perform work or services that are seasonal in nature.
They must have also been employed only for the duration of one season. It is undisputed that the [respondents'] services were engaged by the
[petitioner] since 1993 and 1994. The instant complaint was filed in 1996 when the [respondents] were placed on floating status. Evidently,
[petitioner] employed the [respondents] for more than one season. Therefore, the general rule on regular employment is applicable. The herein
petitioners who performed their jobs in the workplace of the [petitioner] every season for several years, are considered the latter's regular employees
for having performed works necessary and desirable to the business of the [petitioner]. The [petitioner's] eventual refusal to use their services'even if
they were ready, able and willing to perform their usual duties whenever these were available and hiring other workers to perform the tasks originally
assigned to [respondents] amounted to illegal dismissal of the latter. We thus, correct our earlier ruling that the herein petitioners are seasonal
workers. They are regular employees within the contemplation of Article 280 of the Labor Code and thus cannot be dismissed except for just or
authorized cause. The Labor Code provides that when there is a finding of illegal dismissal, the effect is that the employee dismissed shall be
reinstated to his former position without loss of seniority rights with backwages from the date of his dismissal up to his actual reinstatement.
This court however, finds no basis for the award of damages and attorney's fees in favor of the petitioners.
WHEREFORE, the Decision dated May 20, 2002 rendered by this Court is hereby AMENDED as follows:
1) [Petitioner] DOLE PHILIPPINES is hereby declared the employer of the [respondents].
2) [Petitioner] DOLE PHILIPPINES is hereby declared guilty of illegal dismissal and ordered to immediately reinstate the [respondents] to their former
position without loss of seniority rights and other benefits, and to pay each of the [respondents] backwages from the date of the filing of illegal
dismissal on December 19, 1996 up to actual reinstatement, the same to be computed by the labor arbiter.
3) The claims for damages and attorney's fees are hereby denied for lack of merit.
No costs.23
 The Petition at Bar
Aggrieved by the Decision, dated 20 May 2002, and the Amended Decision, dated 27 November 2003, of the Court of Appeals, petitioner filed the
instant Petition for Review on Certiorari under Rule 45 of the revised Rules of Civil Procedure, in which it made the following assignment of errors '
I.
THE COURT OF APPEALS HAS DEPARTED FROM THE USUAL COURSE OF JUDCIAL PROCEEDINGS WHEN IT MADE ITS OWN FACTUAL FINDINGS AND
DISREGARDED THE UNIFORM AND CONSISTENT FACTUAL FINDINGS OF THE LABOR ARBITER AND THE NLRC, WHICH MUST BE ACCORDED GREAT
WEIGHT, RESPECT AND EVEN FINALITY. IN SO DOING, THE COURT OF APPEALS EXCEEDED ITS AUTHORITY ON CERTIORARI UNDER RULE 65 OF THE
RULES OF COURT.
II.
THE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH THE CONSTITUTION, LAW, APPLICABLE RULES
AND REGULATIONS AND DECISIONS OF THE SUPREME COURT IN NOT HOLDING THAT DEPARTMENT ORDER NO. 10, SERIES OF 1997  IS THE
APPLICABLE REGULATION IN THIS CASE. IN GIVING RETROACTIVE APPLICATION TO DEPARTMENT ORDER NO. 3, SERIES OF 2001,  THE COURT OF
APPEALS VIOLATED THE CONSTITUTIONAL PROVISION AGAINST IMPAIRMENT OF CONTRACTS AND DEPRIVED PETITIONER OF THE DUE PROCESS OF
THE LAW.
III.
THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN GIVING WEIGHT TO THE
ORDER DATED 19 OCTOBER 1993 ISSUED BY THE OFFICE OF SECRETARY OF LABOR, WHICH AFFIRMED THE FINDINGS OF THE DOLE REGIONAL OFFICE
(REGION XI, DAVAO CITY) THAT CAMPCO IS ONE OF THE COOPERATIVES ENGAGED IN LABOR-ONLY CONTRACTING ACTIVITIES.
IV.
THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN NOT RULING THAT
RESPONDENTS, BY ACTIVELY REPRESENTING THEMSELVES AND WARRANTING THAT THEY ARE ENGAGED IN LEGITIMATE JOB CONTRACTING, ARE
BARRED BY THE EQUITABLE PRINCIPLE OF ESTOPPEL FROM ASSERTING THAT THEY ARE REGULAR EMPLOYEES OF PETITIONER.
V.
THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN RULING THAT CAMPCO
IS ENGAGED IN THE PROHIBITED ACT OF "LABOR-ONLY CONTRACTING" DESPITE THERE BEING SUBSTANTIAL EVIDENCE TO THE CONTRARY.
VI.
THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN RULING THAT
PETITIONER IS THE EMPLOYER OF RESPONDENTS AND THAT PETITIONER IS GUILTY OF ILLEGAL DISMISSAL.24
This Court's Ruling
I
Anent the first assignment of error, petitioner argues that judicial review under Rule 65 of the revised Rules of Civil Procedure is limited only to issues
concerning want or excess or jurisdiction or grave abuse of discretion. The special civil action for certiorari is a remedy designed to correct errors of
jurisdiction and not mere errors of judgment. It is the contention of petitioner that the NLRC properly assumed jurisdiction over the parties and
subject matter of the instant case. The errors assigned by the respondents in their Petition for Certiorari before the Court of Appeals do not pertain to
the jurisdiction of the NLRC; they are rather errors of judgment supposedly committed by the the NLRC, in its Resolution, dated 29 February 2000, and
are thus not the proper subject of a Petition for Certiorari. Petitioner also posits that the Petition for Certiorari filed by respondents with the Court of
Appeals raised questions of fact that would necessitate a review by the appellate court of the evidence presented by the parties before the Labor
Arbiter and the NLRC, and that questions of fact are not a fit subject for a special civil action for certiorari.
It has long been settled in the landmark case of St. Martin Funeral Home v. NLRC,25 that the mode for judicial review over decisions of the NLRC is by a
Petition for Certiorari under Rule 65 of the revised Rules of Civil Procedure. The different modes of appeal, namely, writ of error (Rule 41), Petition for
Review (Rules 42 and 43), and Petition for Review on Certiorari (Rule 45), cannot be availed of because there is no provision on appellate review of
NLRC decisions in the Labor Code, as amended.26 Although the same case recognizes that both the Court of Appeals and the Supreme Court have
original jurisdiction over such petitions, it has chosen to impose the strict observance of the hierarchy of courts. Hence, a Petition for Certiorari of a
decision or resolution of the NLRC should first be filed with the Court of Appeals; direct resort to the Supreme Court shall not be allowed unless the
redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify an availment of a remedy
within and calling for the exercise by the Supreme Court of its primary jurisdiction.
The extent of judicial review by certiorari of decisions or resolutions of the NLRC, as exercised previously by the Supreme Court and, now, by the Court
of Appeals, is described in Zarate v. Olegario,27 thus'
The rule is settled that the original and exclusive jurisdiction of this Court to review a decision of respondent NLRC (or Executive Labor Arbiter as in
this case) in a Petition for Certiorari under Rule 65 does not normally include an inquiry into the correctness of its evaluation of the evidence. Errors of
judgment, as distinguished from errors of jurisdiction, are not within the province of a special civil action for certiorari, which is merely confined to
issues of jurisdiction or grave abuse of discretion. It is thus incumbent upon petitioner to satisfactorily establish that respondent Commission or
executive labor arbiter acted capriciously and whimsically in total disregard of evidence material to or even decisive of the controversy, in order that
the extraordinary writ of certiorari will lie. By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent
to lack of jurisdiction, and it must be shown that the discretion was exercised arbitrarily or despotically. For certiorari to lie, there must be capricious,
arbitrary and whimsical exercise of power, the very antithesis of the judicial prerogative in accordance with centuries of both civil law and common
law traditions.
The Court of Appeals, therefore, can grant the Petition for Certiorari if it finds that the NLRC, in its assailed decision or resolution, committed grave
abuse of discretion by capriciously, whimsically, or arbitrarily disregarding evidence which is material or decisive of the controversy; and the Court of
Appeals can not make this determination without looking into the evidence presented by the parties. Necessarily, the appellate court can only
evaluate the materiality or significance of the evidence, which is alleged to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC,
in relation to all other evidence on record.
As this Court elucidated in Garcia v. National Labor Relations Commission28 - -
[I]n Ong v. People, we ruled that certiorari can be properly resorted to where the factual findings complained of are not supported by the evidence on
record. Earlier, in Gutib v. Court of Appeals, we emphasized thus:
[I]t has been said that a wide breadth of discretion is granted a court of justice in certiorari proceedings. The cases in which certiorari will issue cannot
be defined, because to do so would be to destroy its comprehensiveness and usefulness. So wide is the discretion of the court that authority is not
wanting to show that certiorari is more discretionary than either prohibition or mandamus . In the exercise of our superintending control over inferior
courts, we are to be guided by all the circumstances of each particular case "as the ends of justice may require." So it is that the writ will be granted
where necessary to prevent a substantial wrong or to do substantial justice.
And in another case of recent vintage, we further held:
In the review of an NLRC decision through a special civil action for certiorari, resolution is confined only to issues of jurisdiction and grave abuse of
discretion on the part of the labor tribunal. Hence, the Court refrains from reviewing factual assessments of lower courts and agencies exercising
adjudicative functions, such as the NLRC. Occasionally, however, the Court is constrained to delve into factual matters where, as in the instant case,
the findings of the NLRC contradict those of the Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look into the records of the case and re-examine the questioned findings. As a
corollary, this Court is clothed with ample authority to review matters, even if they are not assigned as errors in their appeal, if it finds that their
consideration is necessary to arrive at a just decision of the case. The same principles are now necessarily adhered to and are applied by the Court of
Appeals in its expanded jurisdiction over labor cases elevated through a petition for certiorari; thus, we see no error on its part when it made anew a
factual determination of the matters and on that basis reversed the ruling of the NLRC.
II
The second assignment of error delves into the significance and application to the case at bar of the two department orders issued by DOLE.
Department Order No. 10, series of 1997, amended the implementing rules of Books III and VI of the Labor Code, as amended. Under this particular
DOLE department order, the arrangement between petitioner and CAMPCO would qualify as permissible contracting. Department Order No. 3, series
of 2001, revoked Department Order No. 10, series of 1997, and reiterated the prohibition on labor-only contracting.
Attention is called to the fact that the acts complained of by the respondents occurred well before the issuance of the two DOLE department orders in
1997 and 2001. The Service Contract between DOLE and CAMPCO was executed on 17 August 1993. Respondents started working for petitioner
sometime in 1993 and 1994. While some of them continued to work for petitioner, at least until the filing of the Complaint, others were put on "stay
home status" at various times in 1994, 1995, and 1996. Respondents filed their Complaint with the NLRC on 19 December 1996.
A basic rule observed in this jurisdiction is that no statute, decree, ordinance, rule or regulation shall be given retrospective effect unless explicitly
stated.29 Since there is no provision at all in the DOLE department orders that expressly allowed their retroactive application, then the general rule
should be followed, and the said orders should be applied only prospectively.
Which now brings this Court to the question as to what was the prevailing rule on labor-only contracting from 1993 to 1996, the period when the
occurrences subject of the Complaint before the NLRC took place.
Article 106 of the Labor Code, as amended, permits legitimate job contracting, but prohibits labor-only contracting. The said provision reads'
ART. 106. Contractor or subcontractor. - Whenever an employer enters into a contract with another person for the performance of the former's work,
the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which
are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
To implement the foregoing provision of the Labor Code, as amended, Sections 8 and 9, Rule VIII, Book III of the implementing rules, in force since
1976 and prior to their amendment by DOLE Department Order No. 10, series of 1997, provided as follows'
Sec. 8. Job contracting. - There is job contracting permissible under the Code if the following conditions are met;
(1) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to
his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the
work except as to the results thereof; andcralawlibrary
(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business.
Sec. 9. Labor-only contracting. - (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only
contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; andcralawlibrary
(2) The workers recruited and placed by such persons are performing activities which are directly related to the principal business or operations of the
employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or
intermediary of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether or not the contracting out of
labor is permissible in the light of the circumstances of each case and after considering the operating needs of the employer and the rights of the
workers involved. In such case, he may prescribe conditions and restrictions to insure the protection and welfare of the workers.
Since these statutory and regulatory provisions were the ones in force during the years in question, then it was in consideration of the same that
DOLE Regional Director Parel and DOLE Undesrsecretary Trajano issued their Orders on 19 September 1993 and 15 September 1994, respectively,
both finding that CAMPCO was engaged in labor-only contracting. Petitioner, in its third assignment of error, questions the weight that the Court of
Appeals gave these orders in its Decision, dated 20 May 2002, and Amended Decision, dated 27 November 2003.
III
The Orders of DOLE Regional Director Parel, dated 19 September 1993, and of DOLE Undersecretary Trajano, dated 15 September 1994, were issued
pursuant to the visitorial and enforcement power conferred by the Labor Code, as amended, on the DOLE Secretary and his duly authorized
representatives, to wit'
ART. 128. Visitorial and enforcement power. - (a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers,
shall have access to employer's records and premises at any time of the day or night whenever work is being undertaken therein, and the right to
copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to determine violations or which
may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still
exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to
the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. The Secretary or his duly authorized representatives shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor employment and
enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection.
An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter. In
case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order
appealed from. (Emphasis supplied.)
Before Regional Director Parel issued his Order, dated 19 September 1993, a Task Force investigated the operations of cooperatives in Polomolok,
South Cotabato, and submitted a report identifying six cooperatives that were engaged in labor-only contracting, one of which was CAMPCO. In a
conference before the DOLE Regional Office, the cooperatives named by the Task Force were given the opportunity to explain the nature of their
activities in relation to petitioner; and, the cooperatives, as well as petitioner, submitted to the DOLE Regional Office their position papers and other
supporting documents to refute the findings of the Task Force. It was only after these procedural steps did Regional Director Parel issued his Order
finding that three cooperatives, including CAMPCO, were indeed engaged in labor-only contracting and were directed to cease and desist from further
engaging in such activities. On appeal, DOLE Undersecretary Trajano, by authority of the DOLE Secretary, affirmed Regional Director Parel's Order.
Upon denial of the Motion for Reconsideration filed by the cooperatives, and no further appeal taken therefrom, the Order of DOLE Undersecretary
Trajano, dated 15 September 1994, became final and executory.
Petitioner avers that the foregoing Orders of the authorized representatives of the DOLE Secretary do not constitute res judicata in the case filed
before the NLRC. This Court, however, believes otherwise and finds that the final and executory Orders of the DOLE Secretary or his authorized
representatives should bind the NLRC.
It is obvious that the visitorial and enforcement power granted to the DOLE Secretary is in the nature of a quasi-judicial power. Quasi-judicial power
has been described by this Court in the following manner'
Quasi-judicial or administrative adjudicatory power on the other hand is the power of the administrative agency to adjudicate the rights of persons
before it. It is the power to hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the
standards laid down by the law itself in enforcing and administering the same law. The administrative body exercises its quasi-judicial power when
it performs in a judicial manner an act which is essentially of an executive or administrative nature, where the power to act in such manner is
incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it. In carrying out their quasi-judicial
functions the administrative officers or bodies are required to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence,
and draw conclusions from them as basis for their official action and exercise of discretion in a judicial nature. Since rights of specific persons are
affected it is elementary that in the proper exercise of quasi-judicial power due process must be observed in the conduct of the
proceedings.30 (Emphasis supplied.)
The DOLE Secretary, under Article 106 of the Labor Code, as amended, exercise quasi-judicial power, at least, to the extent necessary to determine
violations of labor standards provisions of the Code and other labor legislation. He can issue compliance orders and writs of execution for the
enforcement of his orders. As evidence of the importance and binding effect of the compliance orders of the DOLE Secretary, Article 128 of the Labor
Code, as amended, further provides'
ART. 128. Visitorial and enforcement power.'
xxx
(d) It shall be unlawful for any person or entity to obstruct, impede, delay or otherwise render ineffective the orders of the Secretary of Labor or his
duly authorized representatives issued pursuant to the authority granted under this article, and no inferior court or entity shall issue temporary or
permanent injunction or restraining order or otherwise assume jurisdiction over any case involving the enforcement orders issued in accordance with
this article.
The Orders of DOLE Regional Director Parel, dated 19 September 1993, and of DOLE Undersecretary Trajano, dated 15 September 1994, consistently
found that CAMPCO was engaging in labor-only contracting. Such finding constitutes res judicata in the case filed by the respondents with the NLRC.
It is well-established in this jurisdiction that the decisions and orders of administrative agencies, rendered pursuant to their quasi-judicial authority,
have upon their finality, the force and binding effect of a final judgment within the purview of the doctrine of res judicata. The rule of res judicata,
which forbids the reopening of a matter once judicially determined by competent authority, applies as well to the judicial and quasi-judicial acts of
public, executive or administrative officers and boards acting within their jurisdiction as to the judgments of courts having general judicial powers. The
orderly administration of justice requires that the judgments or resolutions of a court or quasi-judicial body must reach a point of finality set by the
law, rules and regulations, so as to write finis to disputes once and for all. This is a fundamental principle in the Philippine justice system, without
which there would be no end to litigations.31
Res judicata has dual aspects, "bar by prior judgment" and "conclusiveness of judgment." This Court has previously clarified the difference between
the two'
Section 49, Rule 39 of the Revised Rules of Court lays down the dual aspects of res judicata in actions in personam. to wit:
"Effect of judgment. - The effect of a judgment or final order rendered by a court or judge of the Philippines, having jurisdiction to pronounce the
judgment or order, may be as follows:
xxx
(b) In other cases the judgment or order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same title and in the same capacity;
(c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment
which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto."
Section 49(b) enunciates the first concept of res judicata known as "bar by prior judgment," whereas, Section 49(c) is referred to as "conclusiveness of
judgment."
There is "bar by former judgment" when, between the first case where the judgment was rendered, and the second case where such judgment is
invoked, there is identity of parties, subject matter and cause of action. When the three identities are present, the judgment on the merits rendered
in the first constitutes an absolute bar to the subsequent action. But where between the first case wherein Judgment is rendered and the second case
wherein such judgment is invoked, there is only identity of parties but there is no identity of cause of action, the judgment is conclusive in the second
case, only as to those matters actually and directly controverted and determined, and not as to matters merely involved therein. This is what is
termed "conclusiveness of judgment."
The second concept of res judicata, conclusiveness of judgment, is the one applicable to the case at bar.
The same parties who participated in the proceedings before the DOLE Regional Office are the same parties involved in the case filed before the NLRC.
CAMPCO, on behalf of its members, attended the conference before the DOLE Regional Office; submitted its position paper; filed an appeal with the
DOLE Secretary of the Order of DOLE Regional Director Parel; and moved for reconsideration of the subsequent Order of DOLE Undersecretary
Trajano. Petitioner, although not expressly named as a respondent in the DOLE investigation, was a necessary party thereto, considering that
CAMPCO was rendering services to petitioner solely. Moreover, petitioner participated in the proceedings before the DOLE Regional Office,
intervening in the matter through a letter sent by its Senior Legal Officer, dated 24 May 1993, and submitting its own position paper.
While the causes of action in the proceedings before the DOLE and the NLRC differ, they are, in fact, very closely related. The DOLE Regional Office
conducted an investigation to determine whether CAMPCO was violating labor laws, particularly, those on labor-only contracting. Subsequently, it
ruled that CAMPCO was indeed engaging in labor-only contracting activities, and thereafter ordered to cease and desist from doing so. Respondents
came before the NLRC alleging illegal dismissal by the petitioner of those respondents who were put on "stay home status," and seeking
regularization of respondents who were still working for petitioner. The basis of their claims against petitioner rests on the argument that CAMPCO
was a labor-only contractor and, thus, merely an agent or intermediary of petitioner, who should be considered as respondents' real employer. The
matter of whether CAMPCO was a labor-only contractor was already settled and determined in the DOLE proceedings, which should be conclusive and
binding upon the NLRC. What were left for the determination of the NLRC were the issues on whether there was illegal dismissal and whether
respondents should be regularized.
This Court also notes that CAMPCO and DOLE still continued with their Service Contract despite the explicit cease and desist orders rendered by
authorized DOLE officials. There is no other way to look at it except that CAMPCO and DOLE acted in complete defiance and disregard of the visitorial
and enforcement power of the DOLE Secretary and his authorized representatives under Article 128 of the Labor Code, as amended. For the NLRC to
ignore the findings of DOLE Regional Director Parel and DOLE Undersecretary Trajano is an unmistakable and serious undermining of the DOLE
officials' authority.
IV
In petitioner's fourth assignment of error, it points out that the Court of Appeals erred in not holding respondents estopped from asserting that they
were regular employees of petitioner since respondents, as owners-members of CAMPCO, actively represented themselves and warranted that they
were engaged in legitimate job contracting.
This Court cannot sustain petitioner's argument.
It is true that CAMPCO is a cooperative composed of its members, including respondents. Nonetheless, it cannot be denied that a cooperative, as
soon as it is registered with the CDA, attains a juridical personality of its own,32 separate and distinct from its members; much in the same way that a
corporation has a juridical personality separate and distinct from its stockholders, known as the doctrine of corporate fiction. The protection afforded
by this doctrine is not absolute, but the exception thereto which necessitates the piercing of the corporate veil can only be made under specified
circumstances. In Traders Royal Bank v. Court of Appeals,33 this Court ruled that -
Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this is merely an equitable remedy, and maybe awarded only in cases
when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime or where a corporation is a mere alter
ego or business conduit of a person.
Piercing the veil of corporate entity requires the court to see through the protective shroud which exempts its stockholders from liabilities that
ordinarily, they could be subject to, or distinguishes one corporation from a seemingly separate one, were it not for the existing corporate fiction. But
to do this, the court must be sure that the corporate fiction was misused, to such an extent that injustice, fraud, or crime was committed upon
another, disregarding, thus, his, her, or its rights. It is the corporate entity which the law aims to protect by this doctrine.
Using the above-mentioned guidelines, is petitioner entitled to a piercing of the "cooperative identity" of CAMPCO? This Court thinks not.
It bears to emphasize that the piercing of the corporate veil is an equitable remedy, and among the maxims of equity are: (1) he who seeks equity
must do equity, and (2) he who comes into equity must come with clean hands. Hence, a litigant may be denied relief by a court of equity on the
ground that his conduct has been inequitable, unfair, dishonest, fraudulent, or deceitful as to the controversy in issue.34
Petitioner does not come before this Court with clean hands. It is not an innocent party in this controversy.
Petitioner itself admitted that it encouraged and even helped the establishment of CAMPCO and the other cooperatives in Polomolok, South
Cotabato. These cooperatives were established precisely to render services to petitioner. It is highly implausible that the petitioner was lured into
entering into the Service Contract with CAMPCO in 1993 on the latter's misrepresentation and false warranty that it was an independent job
contractor. Even if it is conceded that petitioner was indeed defrauded into believing that CAMPCO was an independent contractor, then the DOLE
proceedings should have placed it on guard. Remember that petitioner participated in the proceedings before the DOLE Regional Office, it cannot now
claim ignorance thereof. Furthermore, even after the issuance of the cease and desist order on CAMPCO, petitioner still continued with its prohibited
service arrangement with the said cooperative. If petitioner was truly defrauded by CAMPCO and its members into believing that the cooperative was
an independent job contractor, the more logical recourse of petitioner was to have the Service Contract voided in the light of the explicit findings of
the DOLE officials that CAMPCO was engaging in labor-only contracting. Instead, petitioner still carried on its Service Contract with CAMPCO for
several more years thereafter.
V
As previously discussed, the finding of the duly authorized representatives of the DOLE Secretary that CAMPCO was a labor-only contractor is already
conclusive. This Court cannot deviate from said finding.
This Court, though, still notes that even an independent review of the evidence on record, in consideration of the proper labor statutes and
regulations, would result in the same conclusion: that CAMPCO was engaged in prohibited activities of labor-only contracting.
The existence of an independent and permissible contractor relationship is generally established by the following criteria: whether or not the
contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the
right to assign the performance of a specified piece of work; the control and supervision of the work to another; the employer's power with respect to
the hiring, firing and payment of the contractor's workers; the control of the premises; the duty to supply the premises tools, appliances, materials
and labor; and the mode, manner and terms of payment.35
While there is present in the relationship of petitioner and CAMPCO some factors suggestive of an independent contractor relationship (i.e., CAMPCO
chose who among its members should be sent to work for petitioner; petitioner paid CAMPCO the wages of the members, plus a percentage thereof
as administrative charge; CAMPCO paid the wages of the members who rendered service to petitioner), many other factors are present which would
indicate a labor-only contracting arrangement between petitioner and CAMPCO.36
First, although petitioner touts the multi-million pesos assets of CAMPCO, it does well to remember that such were amassed in the years following its
establishment. In 1993, when CAMPCO was established and the Service Contract between petitioner and CAMPCO was entered into, CAMPCO only
had P6,600.00 paid-up capital, which could hardly be considered substantial.37 It only managed to increase its capitalization and assets in the
succeeding years by continually and defiantly engaging in what had been declared by authorized DOLE officials as labor-only contracting.
Second, CAMPCO did not carry out an independent business from petitioner. It was precisely established to render services to petitioner to augment
its workforce during peak seasons. Petitioner was its only client. Even as CAMPCO had its own office and office equipment, these were mainly used for
administrative purposes; the tools, machineries, and equipment actually used by CAMPCO members when rendering services to the petitioner
belonged to the latter.
Third, petitioner exercised control over the CAMPCO members, including respondents. Petitioner attempts to refute control by alleging the presence
of a CAMPCO supervisor in the work premises. Yet, the mere presence within the premises of a supervisor from the cooperative did not necessarily
mean that CAMPCO had control over its members. Section 8(1), Rule VIII, Book III of the implementing rules of the Labor Code, as amended, required
for permissible job contracting that the contractor undertakes the contract work on his account, under his own responsibility, according to his own
manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work
except as to the results thereof. As alleged by the respondents, and unrebutted by petitioner, CAMPCO members, before working for the petitioner,
had to undergo instructions and pass the training provided by petitioner's personnel. It was petitioner who determined and prepared the work
assignments of the CAMPCO members. CAMPCO members worked within petitioner's plantation and processing plants alongside regular employees
performing identical jobs, a circumstance recognized as an indicium of a labor-only contractorship.38
Fourth, CAMPCO was not engaged to perform a specific and special job or service. In the Service Contract of 1993, CAMPCO agreed to assist petitioner
in its daily operations, and perform odd jobs as may be assigned. CAMPCO complied with this venture by assigning members to petitioner. Apart from
that, no other particular job, work or service was required from CAMPCO, and it is apparent, with such an arrangement, that CAMPCO merely acted as
a recruitment agency for petitioner. Since the undertaking of CAMPCO did not involve the performance of a specific job, but rather the supply of
manpower only, CAMPCO clearly conducted itself as a labor-only contractor.39
Lastly, CAMPCO members, including respondents, performed activities directly related to the principal business of petitioner. They worked as can
processing attendant, feeder of canned pineapple and pineapple processing, nata de coco processing attendant, fruit cocktail processing attendant,
and etc., functions which were, not only directly related, but were very vital to petitioner's business of production and processing of pineapple
products for export.
The findings enumerated in the preceding paragraphs only support what DOLE Regional Director Parel and DOLE Undersecretary Trajano had long
before conclusively established, that CAMPCO was a mere labor-only contractor.
VI
The declaration that CAMPCO is indeed engaged in the prohibited activities of labor-only contracting, then consequently, an employer-employee
relationship is deemed to exist between petitioner and respondents, since CAMPCO shall be considered as a mere agent or intermediary of petitioner.
Since respondents are now recognized as employees of petitioner, this Court is tasked to determine the nature of their employment. In consideration
of all the attendant circumstances in this case, this Court concludes that respondents are regular employees of petitioner.
Article 280 of the Labor Code, as amended, reads'
ART. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are
usually necessary and desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of engagement of the employee or where the work or services
to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if its is not covered by the preceding paragraph: Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such activity exists.
This Court expounded on the afore-quoted provision, thus'
The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. The test is whether the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme
of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if her performance is
not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if
not indispensability of the activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while
such activity exists.40
In the instant Petition, petitioner is engaged in the manufacture and production of pineapple products for export.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Respondents rendered services as processing attendant, feeder of canned pineapple and pineapple processing, nata de coco processing attendant,
fruit cocktail processing attendant, and etc., functions they performed alongside regular employees of the petitioner. There is no doubt that the
activities performed by respondents are necessary or desirable to the usual business of petitioner.
Petitioner likewise want this Court to believe that respondents' employment was dependent on the peaks in operation, work backlogs, absenteeism,
and excessive leaves. However, bearing in mind that respondents all claimed to have worked for petitioner for over a year, a claim which petitioner
failed to rebut, then respondent's continued employment clearly demonstrates the continuing necessity and indispensability of respondents'
employment to the business of petitioner.
Neither can this Court apply herein the ruling of the NLRC in the previous case involving petitioner and the individual workers they used to hire before
the advent of the cooperatives, to the effect that the employment of these individual workers were not regular, but rather, were valid "term
employments," wherein the employer and employee knowingly and voluntarily agreed to employment for only a limited or specified period of time.
The difference between that case and the one presently before this Court is that the members of CAMPCO, including respondents, were not
informed, at the time of their engagement, that their employment shall only be for a limited or specified period of time. There is absence of proof
that the respondents were aware and had knowingly and voluntarily agreed to such term employment. Petitioner did not enter into individual
contracts with the CAMPCO members, but executed a Service Contract with CAMPCO alone. Although the Service Contract of 1993 stated that it shall
be for a specific period, from 1 July to 31 December 1993, petitioner and CAMPCO continued the service arrangement beyond 1993. Since there was
no written renewal of the Service Contract,41 there was no further indication that the engagement by petitioner of the services of CAMPCO members
was for another definite or specified period only.
Respondents, as regular employees of petitioner, are entitled to security of tenure. They could only be removed based on just and authorized causes
as provided for in the Labor Code, as amended, and after they are accorded procedural due process. Therefore, petitioner's acts of placing some of
the respondents on "stay home status" and not giving them work assignments for more than six months were already tantamount to constructive and
illegal dismissal.42
In summary, this Court finds that CAMPCO was a labor-only contractor and, thus, petitioner is the real employer of the respondents, with CAMPCO
acting only as the agent or intermediary of petitioner. Due to the nature of their work and length of their service, respondents should be considered
as regular employees of petitioner. Petitioner constructively dismissed a number of the respondents by placing them on "stay home status" for over
six months, and was therefore guilty of illegal dismissal. Petitioner must accord respondents the status of regular employees, and reinstate the
respondents who it constructively and illegally dismissed, to their previous positions, without loss of seniority rights and other benefits, and pay these
respondents' backwages from the date of filing of the Complaint with the NLRC on 19 December 1996 up to actual reinstatement.
WHEREFORE, in view of the foregoing, the instant Petition is DENIED and the Amended Decision, dated 27 November 2003, rendered by the Court of
Appeals in CA-G.R. SP No. 63405 is AFFIRMED.
Costs against the petitioner.