SECOND DIVISION

management dismissed the individual complainants when they insisted on

their union membership.

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 OATE, ERNESTO
VILLANUEVA, ANTONIO BOCALING and GODOFREDO
CUETO, 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

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

LABOR LAW I |1

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).

LABOR LAW I |2

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@it
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:
LABOR LAW I |3

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 contractorcontractee 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
LABOR LAW I |4

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 interoffice 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.

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.

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.

LABOR LAW I |5

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, thirteenmonth 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
LABOR LAW I |6

its control ." 13 He assessed against the firm, nevertheless, separation pay and
attorney's fees.
We reverse.

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.

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.

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.

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

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

On the other hand, we have likewise held, based on Article 106 of the Labor
Code, hereinbelow reproduced:

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

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

LABOR LAW I |7

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
Communicationscase:
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

LABOR LAW I |8

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.
LABOR LAW I |9

SECOND DIVISION
G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO
S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil Code in
this appeal by certiorari. The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the
appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina
Noguera, party of the first part; the Tourist World Service, Inc., represented
by Mr. Eliseo Canilao as party of the second part, and hereinafter referred to
as appellants, the Tourist World Service, Inc. leased the premises belonging
to the party of the first part at Mabini St., Manila for the former-s use as a
branch office. In the said contract the party of the third part held herself
solidarily liable with the party of the part for the prompt payment of the
monthly rental agreed on. When the branch office was opened, the same
was run by the herein appellant Una 0. Sevilla payable to Tourist World
Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina
Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the
Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc.
appears to have been informed that Lina Sevilla was connected with a rival
firm, the Philippine Travel Bureau, and, since the branch office was anyhow
losing, the Tourist World Service considered closing down its office. This was
firmed up by two resolutions of the board of directors of Tourist World
Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the
office of the manager and vice-president of the Tourist World Service, Inc.,

Ermita Branch, and the second,authorizing the corporate secretary to receive

the properties of the Tourist World Service then located at the said branch
office. It further appears that on Jan. 3, 1962, the contract with the appellees
for the use of the Branch Office premises was terminated and while the
effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a
matter of fact appellants used it since Nov. 1961. Because of this, and to
comply with the mandate of the Tourist World Service, the corporate
secretary Gabino Canilao went over to the branch office, and, finding the
premises locked, and, being unable to contact Lina Sevilla, he padlocked the
premises on June 4, 1962 to protect the interests of the Tourist World
Service. When neither the appellant Lina Sevilla nor any of her employees
could enter the locked premises, a complaint wall filed by the herein
appellants against the appellees with a prayer for the issuance of mandatory
preliminary injunction. Both appellees answered with counterclaims. For
apparent lack of interest of the parties therein, the trial court ordered the
dismissal of the case without prejudice.
The appellee Segundina Noguera sought reconsideration of
the order dismissing her counterclaim which the court a quo, in
an order dated June 8, 1963, granted permitting her to present
evidence in support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the herein
appellees and after the issues were joined, the reinstated counterclaim of
Segundina Noguera and the new complaint of appellant Lina Sevilla were
jointly heard following which the court a quo ordered both cases dismiss for
lack of merit, on the basis of which was elevated the instant appeal on the
following assignment of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE
OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS.
LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD
SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE
RELATION AND IN FAILING TO HOLD THAT THE SAID ARRANGEMENT
WAS ONE OF JOINT BUSINESS VENTURE.

LABOR LAW I |10

III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFFAPPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING
THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE
TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES
HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM
THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL
APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O.
SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT
APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR
FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues to be
resolved are:
1. Whether the appellee Tourist World Service unilaterally disco the telephone
line at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World Service was
actionable or not; and
3. Whether or not the lessee to the office premises belonging to the appellee
Noguera was appellees TWS or TWS and the appellant.

clientele, coming mostly from her own social circle (pp. 3-6 tsn. February
16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19
October 1960 (Exh. 'A') covering the premises at A. Mabini St., she expressly
warranting and holding [sic] herself 'solidarily' liable with appellee Tourist
World Service, Inc. for the prompt payment of the monthly rentals thereof to
other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist
World Service, Inc., which had its own, separate office located at the Trade &
Commerce Building; nor was she an employee thereof, having no
participation in nor connection with said business at the Trade & Commerce
Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her own passengers, her
own bookings her own business (and not for any of the business of appellee
Tourist World Service, Inc.) obtained from the airline companies. She shared
the 7% commissions given by the airline companies giving appellee Tourist
World Service, Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the
A. Mabini St. office, paying for the salary of an office secretary, Miss Obieta,
and other sundry expenses, aside from desicion the office furniture and
supplying some of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee
Tourist World Service, Inc. shouldering the rental and other expenses in
consideration for the 3% split in the co procured by appellant Mrs. Sevilla (p.
35 tsn Feb. 16,1965).

In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was
entered into by and between her and appellee TWS with offices at the Ermita
branch office and that she was not an employee of the TWS to the end that her
relationship with TWS was one of a joint business venture appellant made
declarations showing:

6. It was the understanding between them that appellant Mrs. Sevilla would
be given the title of branch manager for appearance's sake only (p. 31 tsn.
Id.), appellee Eliseo Canilao admit that it was just a title for dignity (p. 36 tsn.
June 18, 1965- testimony of appellee Eliseo Canilao pp. 38-39 tsn April
61965-testimony of corporate secretary Gabino Canilao (pp- 2-5, Appellants'
Reply Brief)

1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent

eye, ear and nose specialist as well as a imediately columnist had been in
the travel business prior to the establishment of the joint business venture
with appellee Tourist World Service, Inc. and appellee Eliseo Canilao, her
compadre, she being the godmother of one of his children, with her own

Upon the other hand, appellee TWS contend that the appellant was an
employee of the appellee Tourist World Service, Inc. and as such was
designated manager. 1

LABOR LAW I |11

xxx xxx xxx

The trial court 2 held for the private respondent on the premise that the private
respondent, Tourist World Service, Inc., being the true lessee, it was within its
prerogative to terminate the lease and padlock the premises. 3 It likewise found
the petitioner, Lina Sevilla, to be a mere employee of said Tourist World
Service, Inc. and as such, she was bound by the acts of her employer. 4 The
respondent Court of Appeal 5 rendered an affirmance.
The petitioners now claim that the respondent Court, in sustaining the lower
court, erred. Specifically, they state:
I THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE
PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC.
WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINA
SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER
EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE
APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING
INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY
OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO
PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE
THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE
TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE
RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION
AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW.
II THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA
RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP
PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH
APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)
III THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING
AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED
ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.
IV THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT

SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN
JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS
AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE
TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD
SERVICE INC. 6
As a preliminary inquiry, the Court is asked to declare the true nature of the
relation between Lina Sevilla and Tourist World Service, Inc. The respondent
Court of see fit to rule on the question, the crucial issue, in its opinion being
"whether or not the padlocking of the premises by the Tourist World Service,
Inc. without the knowledge and consent of the appellant Lina Sevilla entitled
the latter to the relief of damages prayed for and whether or not the evidence
for the said appellant supports the contention that the appellee Tourist World
Service, Inc. unilaterally and without the consent of the appellant disconnected
the telephone lines of the Ermita branch office of the appellee Tourist World
Service, Inc. 7 Tourist World Service, Inc., insists, on the other hand, that Lina
SEVILLA was a mere employee, being "branch manager" of its Ermita "branch"
office and that inferentially, she had no say on the lease executed with the
private respondent, Segundina Noguera. The petitioners contend, however,
that relation between the between parties was one of joint venture, but
concede that "whatever might have been the true relationship between Sevilla
and Tourist World Service," the Rule of Law enjoined Tourist World Service and
Canilao from taking the law into their own hands, 8 in reference to the
padlocking now questioned.
The Court finds the resolution of the issue material, for if, as the private
respondent, Tourist World Service, Inc., maintains, that the relation between
the parties was in the character of employer and employee, the courts would
have been without jurisdiction to try the case, labor disputes being the
exclusive domain of the Court of Industrial Relations, later, the Bureau Of
Labor Relations, pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of
an employer-employee relation. In general, we 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." 10 Subsequently, however, we have
considered, in addition to the standard of right-of control, the existing economic
conditions prevailing between the parties, like the inclusion of the employee in

LABOR LAW I |12

the payrolls, in determining the existence of an employer-employee

relationship. 11
The records will show that the petitioner, Lina Sevilla, was not subject to control
by the private respondent Tourist World Service, Inc., either as to the result of
the enterprise or as to the means used in connection therewith. In the first
place, under the contract of lease covering the Tourist Worlds Ermita office, she
had bound herself insolidum as and for rental payments, an arrangement that
would be like claims of a master-servant relationship. True the respondent
Court would later minimize her participation in the lease as one of mere
guaranty, 12 that does not make her an employee of Tourist World, since in any
case, a true employee cannot be made to part with his own money in
pursuance of his employer's business, or otherwise, assume any liability
thereof. In that event, the parties must be bound by some other relation, but
certainly not employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch
office was opened, the same was run by the herein appellant Lina O. Sevilla
payable to Tourist World Service, Inc. by any airline for any fare brought in on
the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said
that Sevilla was under the control of Tourist World Service, Inc. "as to the
means used." Sevilla in pursuing the business, obviously relied on her own
gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her
efforts, she retained 4% in commissions from airline bookings, the remaining
3% going to Tourist World. Unlike an employee then, who earns a fixed salary
usually, she earned compensation in fluctuating amounts depending on her
booking successes.
The fact that Sevilla had been designated 'branch manager" does not make
her, ergo, Tourist World's employee. As we said, employment is determined by
the right-of-control test and certain economic parameters. But titles are weak
indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a
consequence, accepting Lina Sevilla's own, that is, that the parties had
embarked on a joint venture or otherwise, a partnership. And apparently,
Sevilla herself did not recognize the existence of such a relation. In her letter of
November 28, 1961, she expressly 'concedes your [Tourist World Service,

Inc.'s] right to stop the operation of your branch office 14 in effect, accepting
Tourist World Service, Inc.'s control over the manner in which the business was
run. A joint venture, including a partnership, presupposes generally a of
standing between the joint co-venturers or partners, in which each party has an
equal proprietary interest in the capital or property contributed 15 and where
each party exercises equal rights in the conduct of the business. 16 furthermore,
the parties did not hold themselves out as partners, and the building itself was
embellished with the electric sign "Tourist World Service, Inc. 17in lieu of a
distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla,
agreed to (wo)man the private respondent, Tourist World Service, Inc.'s Ermita
office, she must have done so pursuant to a contract of agency. It is the
essence of this contract that the agent renders services "in representation or
on behalf of another. 18 In the case at bar, Sevilla solicited airline fares, but she
did so for and on behalf of her principal, Tourist World Service, Inc. As
compensation, she received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself based on her letter of November
28, 1961, pre-assumed her principal's authority as owner of the business
undertaking. We are convinced, considering the circumstances and from the
respondent Court's recital of facts, that the ties had contemplated a principal
agent relationship, rather than a joint managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we hereby
declare to be compatible with the intent of the parties, cannot be revoked at
will. The reason is that it is one coupled with an interest, the agency having
been created for mutual interest, of the agent and the principal. 19 It appears
that Lina Sevilla is a bona fidetravel agent herself, and as such, she had
acquired an interest in the business entrusted to her. Moreover, she had
assumed a personal obligation for the operation thereof, holding herself
solidarily liable for the payment of rentals. She continued the business, using
her own name, after Tourist World had stopped further operations. Her interest,
obviously, is not to the commissions she earned as a result of her business
transactions, but one that extends to the very subject matter of the power of
management delegated to her. It is an agency that, as we said, cannot be
revoked at the pleasure of the principal. Accordingly, the revocation complained
of should entitle the petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, confining itself to
the telephone disconnection and padlocking incidents. Anent the disconnection
LABOR LAW I |13

issue, it is the holding of the Court of Appeals that there is 'no evidence
showing that the Tourist World Service, Inc. disconnected the telephone lines at
the branch office. 20Yet, what cannot be denied is the fact that Tourist World
Service, Inc. did not take pains to have them reconnected. Assuming,
therefore, that it had no hand in the disconnection now complained of, it had
clearly condoned it, and as owner of the telephone lines, it must shoulder
responsibility therefor.

near the premises. Capping these series of "offensives," it cut the office's
telephone lines, paralyzing completely its business operations, and in the
process, depriving Sevilla articipation therein.

The Court of Appeals must likewise be held to be in error with respect to the
padlocking incident. For the fact that Tourist World Service, Inc. was the lessee
named in the lease con-tract did not accord it any authority to terminate that
contract without notice to its actual occupant, and to padlock the premises in
such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired
a personal stake in the business itself, and necessarily, in the equipment
pertaining thereto. Furthermore, Sevilla was not a stranger to that contract
having been explicitly named therein as a third party in charge of rental
payments (solidarily with Tourist World, Inc.). She could not be ousted from
possession as summarily as one would eject an interloper.

We rule therefore, that for its unwarranted revocation of the contract of agency,
the private respondent, Tourist World Service, Inc., should be sentenced to pay
damages. Under the Civil Code, moral damages may be awarded for
"breaches of contract where the defendant acted ... in bad faith. 23

The Court is satisfied that from the chronicle of events, there was indeed some
malevolent design to put the petitioner, Lina Sevilla, in a bad light following
disclosures that she had worked for a rival firm. To be sure, the respondent
court speaks of alleged business losses to justify the closure '21 but there is no
clear showing that Tourist World Ermita Branch had in fact sustained such
reverses, let alone, the fact that Sevilla had moonlit for another company. What
the evidence discloses, on the other hand, is that following such an information
(that Sevilla was working for another company), Tourist World's board of
directors adopted two resolutions abolishing the office of 'manager" and
authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the
takeover of its branch office properties. On January 3, 1962, the private
respondents ended the lease over the branch office premises, incidentally,
without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the Ermita
office was padlocked, personally by the respondent Canilao, on the pretext that
it was necessary to Protect the interests of the Tourist World Service. " 22 It is
strange indeed that Tourist World Service, Inc. did not find such a need when it
cancelled the lease five months earlier. While Tourist World Service, Inc. would
not pretend that it sought to locate Sevilla to inform her of the closure, but
surely, it was aware that after office hours, she could not have been anywhere

This conduct on the part of Tourist World Service, Inc. betrays a sinister effort
to punish Sevillsa it had perceived to be disloyalty on her part. It is offensive, in
any event, to elementary norms of justice and fair play.

We likewise condemn Tourist World Service, Inc. to pay further damages for
the moral injury done to Lina Sevilla from its brazen conduct subsequent to the
cancellation of the power of attorney granted to her on the authority of Article
21 of the Civil Code, in relation to Article 2219 (10) thereof
ART. 21. Any person who wilfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate
the latter for the damage. 24
ART. 2219. Moral damages 25 may be recovered in the following and
analogous cases:
xxx xxx xxx
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and
35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered
to respond for the same damages in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is concerned,
no evidence has been shown that she had connived with Tourist World Service,
Inc. in the disconnection and padlocking incidents. She cannot therefore be
held liable as a cotortfeasor.

LABOR LAW I |14

The Court considers the sums of P25,000.00 as and for moral damages,24
P10,000.00 as exemplary damages,25 and P5,000.00 as nominal 26 and/or
temperate 27 damages, to be just, fair, and reasonable under the circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975 as well as the
Resolution issued on July 31, 1975, by the respondent Court of Appeals is
hereby REVERSED and SET ASIDE. The private respondent, Tourist World
Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to
indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral
damages, the sum of P10,000.00, as and for exemplary damages, and the sum
of P5,000.00, as and for nominal and/or temperate damages.
Costs against said private respondents.
SO ORDERED.

LABOR LAW I |15

SECOND DIVISION
G.R. No. L-43825 May 9, 1988
CONTINENTAL MARBLE CORP. and FELIPE DAVID, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC); ARBITRATOR
JOSE T. COLLADO and RODITO NASAYAO, respondents.
PADILLA, J.:
In this petition for mandamus, prohibition and certiorari with preliminary
injunction, petitioners seek to annul and set aside the decision rendered by the
respondent Arbitrator Jose T. Collado, dated 29 December 1975, in NLRC
Case No. LR-6151, entitled: "Rodito Nasayao, complainant, versus Continental
Marble Corp. and Felipe David, respondents," and the resolution issued by the
respondent Commission, dated 7 May 1976, which dismissed herein
petitioners' appeal from said decision.
In his complaint before the NLRC, herein private respondent Rodito Nasayao
claimed that sometime in May 1974, he was appointed plant manager of the
petitioner corporation, with an alleged compensation of P3,000.00, a month, or
25% of the monthly net income of the company, whichever is greater, and when
the company failed to pay his salary for the months of May, June, and July
1974, Rodito Nasayao filed a complaint with the National Labor Relations
Commission, Branch IV, for the recovery of said unpaid varies. The case was
docketed therein as NLRC Case No. LR-6151.
Answering, the herein petitioners denied that Rodito Nasayao was employed in
the company as plant manager with a fixed monthly salary of P3,000.00. They
claimed that the undertaking agreed upon by the parties was a joint venture, a
sort of partnership, wherein Rodito Nasayao was to keep the machinery in
good working condition and, in return, he would get the contracts from endusers for the installation of marble products, in which the company would not
interfere. In addition, private respondent Nasayao was to receive an amount
equivalent to 25% of the net profits that the petitioner corporation would realize,
should there be any. Petitioners alleged that since there had been no profits
during said period, private respondent was not entitled to any amount.

The case was submitted for voluntary arbitration and the parties selected the
herein respondent Jose T. Collado as voluntary arbitrator. In the course of the
proceedings, however, the herein petitioners challenged the arbitrator's
capacity to try and decide the case fairly and judiciously and asked him to
desist from further hearing the case. But, the respondent arbitrator refused. In
due time, or on 29 December 1975, he rendered judgment in favor of the
complainant, ordering the herein petitioners to pay Rodito Nasayao the amount
of P9,000.00, within 10 days from notice. 1
Upon receipt of the decision, the herein petitioners appealed to the National
Labor Relations Commission on grounds that the labor arbiter gravely abused
his discretion in persisting to hear and decide the case notwithstanding
petitioners' request for him to desist therefrom: and that the appealed decision
is not supported by evidence. 2
On 18 March 1976, Rodito Nasayao filed a motion to dismiss the appeal on the
ground that the decision of the voluntary arbitrator is final, unappealable, and
immediately executory; 3 and, on 23 March 1976, he filed a motion for the
issuance of a writ of execution. 4
Acting on the motions, the respondent Commission, in a resolution dated 7
May 1976, dismissed the appeal on the ground that the decision appealed from
is final, unappealable and immediately executory, and ordered the herein
petitioners to comply with the decision of the voluntary arbitrator within 10 days
from receipt of the resolution. 5
The petitioners are before the Court in the present recourse. As prayed for, the
Court issued a temporary restraining order, restraining herein respondents from
enforcing and/or carrying out the questioned decision and resolution. 6
The issue for resolution is whether or not the private respondent Rodito
Nasayao was employed as plant manager of petitioner Continental Marble
Corporation with a monthly salary of P3,000.00 or 25% of its monthly income,
whichever is greater, as claimed by said respondent, or entitled to receive only
an amount equivalent to 25% of net profits, if any, that the company would
realize, as contended by the petitioners.
The respondent arbitrator found that the agreement between the parties was
for the petitioner company to pay the private respondent, Rodito Nasayao, a
LABOR LAW I |16

monthly salary of P3,000.00, and, consequently, ordered the company to pay

Rodito Nasayao the amount of P9,000.00 covering a period of three (3)
months, that is, May, June and July 1974.
The respondent Rodito Nasayao now contends that the judgment or award of
the voluntary arbitrator is final, unappealable and immediately executory, and
may not be reviewed by the Court. His contention is based upon the provisions
of Art. 262 of the Labor Code, as amended.
The petitioners, upon the other hand, maintain that "where there is patent and
manifest abuse of discretion, the rule on unappealability of awards of a
voluntary arbitrator becomes flexible and it is the inherent power of the Courts
to maintain the people's faith in the administration of justice." The question of
the finality and unappealability of a decision and/or award of a voluntary
arbitrator had been laid to rest in Oceanic Bic Division (FFW) vs.
Romero, 7 and reiterated in Mantrade FMMC Division Employees and Workers
Union vs. Bacungan. 8 The Court therein ruled that it can review the decisions
of voluntary arbitrators, thusWe agree with the petitioner that the decisions of voluntary arbitrators must
be given the highest respect and as a general rule must be accorded a
certain measure of finality. This is especially true where the arbitrator
chosen by the parties enjoys the first rate credentials of Professor Flerida
Ruth Pineda Romero, Director of the U.P. Law Center and an academician
of unquestioned expertise in the field of Labor Law. It is not correct,
however, that this respect precludes the exercise of judicial review over
their decisions. Article 262 of the Labor Code making voluntary arbitration
awards final, inappealable, and executory except where the money claims
exceed P l 00,000.00 or 40% of paid-up capital of the employer or where
there is abuse of discretion or gross incompetence refers to appeals to the
National Labor Relations Commission and not to judicial review.
Inspite of statutory provisions making 'final' the decisions of certain
administrative agencies, we have taken cognizance of petitions questioning
these decisions where want of jurisdiction, grave abuse of discretion,
violation of due process, denial of substantial justice, or erroneous
interpretation of the law were brought to our attention. There is no provision
for appeal in the statute creating the Sandiganbayan but this has not
precluded us from examining decisions of this special court brought to us in
proper petitions. ...

The Court further said:

A voluntary arbitrator by the nature of her fucntions acts in quasi-judicial
capacity. There is no reason why herdecisions involving interpretation of
law should be beyond this Court's review. Administrative officials are
presumed to act in accordance with law and yet we do hesitate to pass
upon their work where a question of law is involved or where a showing of
abuse of authority or discretion in their official acts is properly raised in
petitions for certiorari.
The foregoing pronouncements find support in Section 29 of Republic Act No.
876, otherwise known as the Arbitration Law, which provides:
Sec. 29. Appeals An appeal may be taken from an order made in a
proceeding under this Act, or from a judgment entered upon an award
through certiorari proceedings, but such appeals shall be limited to
questions of law. The proceedings upon such an appeal, including the
judgment thereon shall be governed by the Rules of Court in so far as
they are applicable.
The private respondent, Rodito Nasayao, in his Answer to the petition, 9 also
claims that the case is premature for non-exhaustion of administrative
remedies. He contends that the decision of the respondent Commission should
have been first appealed by petitioners to the Secretary of Labor, and, if they
are not satisfied with his decision, to appeal to the President of the Philippines,
before resort is made to the Court.
The contention is without merit. The doctrine of exhaustion of administrative
remedies cannot be invoked in this case, as contended. In the recent case
of John Clement Consultants, Inc. versus National Labor Relations
Commission, 10 the Court said:
As is well known, no law provides for an appeal from decisions of the
National Labor Relations Commission; hence, there can be no review and
reversal on appeal by higher authority of its factual or legal conclusions.
When, however, it decides a case without or in excess of its jurisdiction, or
with grave abuse of discretion, the party thereby adversely affected may
obtain a review and nullification of that decision by this Court through the
extraordinary writ of certiorari. Since, in this case, it appears that the
Commission has indeed acted without jurisdiction and with grave abuse of
LABOR LAW I |17

discretion in taking cognizance of a belated appeal sought to be taken from

a decision of Labor Arbiter and thereafter reversing it, the writ of certiorari
will issue to undo those acts, and do justice to the aggrieved party.

element (Investment Planning Corp. of the Phils. vs. The Social Security
System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario
Brothers, Inc. v. Ople, 131 SCRA 72).<re||an1w>

We also find no merit in the contention of Rodito Nasayao that only questions
of law, and not findings of fact of a voluntary arbitrator may be reviewed by the
Court, since the findings of fact of the voluntary arbitrator are conclusive upon
the Court.

In the instant case, it appears that the petitioners had no control over the
conduct of Rodito Nasayao in the performance of his work. He decided for
himself on what was to be done and worked at his own pleasure. He was not
subject to definite hours or conditions of work and, in turn, was compensated
according to the results of his own effort. He had a free hand in running the
company and its business, so much so, that the petitioner Felipe David did not
know, until very much later, that Rodito Nasayao had collected old accounts
receivables, not covered by their agreement, which he converted to his own
personal use. It was only after Rodito Nasayao had abandoned the plant
following discovery of his wrong- doings, that Felipe David assumed
management of the plant.

While the Court has accorded great respect for, and finality to, findings of fact
of a voluntary arbitrator 11 and administrative agencies which have acquired
expertise in their respective fields, like the Labor Department and the National
Labor Relations Commission, 12 their findings of fact and the conclusions drawn
therefrom have to be supported by substantial evidence. ln that instant case,
the finding of the voluntary arbitrator that Rodito Nasayao was an employee of
the petitioner corporation is not supported by the evidence or by the law.
On the other hand, we find the version of the petitioners to be more plausible
and in accord with human nature and the ordinary course of things. As pointed
out by the petitioners, it was illogical for them to hire the private respondent
Rodito Nasayao as plant manager with a monthly salary of P3,000.00, an
amount which they could ill-afford to pay, considering that the business was
losing, at the time he was hired, and that they were about to close shop in a
few months' time.
Besides, there is nothing in the record which would support the claim of Rodito
Nasayao that he was an employee of the petitioner corporation. He was not
included in the company payroll, nor in the list of company employees
furnished the Social Security System.
Most of all, the element of control is lacking. In Brotherhood Labor Unity
Movement in the Philippines vs. Zamora,13 the Court enumerated the factors in
determining whether or not an employer-employee relationship exists, to wit:

Absent the power to control the employee with respect to the means and
methods by which his work was to be accomplished, there was no employeremployee relationship between the parties. Hence, there is no basis for an
award of unpaid salaries or wages to Rodito Nasayao.
WHEREFORE, the decision rendered by the respondent Jose T. Collado in
NLRC
Case
No.
LR-6151,
entitled:
"Rodito
Nasayao,
complainant, versus Continental Marble Corp. and Felipe David, respondents,"
on 29 December 1975, and the resolution issued by the respondent National
Labor Relations Commission in said case on 7 May 1976, are REVERSED and
SET ASIDE and another one entered DISMISSING private respondent's
complaints. The temporary restraning order heretofore isued by the Court is
made permanent. Without costs.
SO ORDERED.

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 so-called "control test" that is the most important
LABOR LAW I |18

SECOND DIVISION

G.R. No. 87098 November 4, 1996

ENCYCLOPAEDIA
BRITANNICA
(PHILIPPINES),
INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER
TEODORICO L. ROGELIO and BENJAMIN LIMJOCO, respondents.

TORRES, JR., J.:

Encyclopaedia Britannica (Philippines), Inc. filed this petition for certiorari to
annul and set aside the resolution of the National Labor Relations Commission,
Third Division, in NLRC Case No. RB IV-5158-76, dated December 28, 1988,
the dispositive portion of which reads:
WHEREFORE, in view of all the foregoing, the decision dated December 7,
1982 of then Labor Arbiter Teodorico L. Dogelio is hereby AFFIRMED, and
the instant appeal is hereby DISMISSED for lack of merit.
SO ORDERED. 1
Private respondent Benjamin Limjoco was a Sales Division Manager of
petitioner Encyclopaedia Britannica and was in charge of selling petitioner's
products through some sales representatives. As compensation, private
respondent received commissions from the products sold by his agents. He
was also allowed to use petitioner's name, goodwill and logo. It was, however,
agreed upon that office expenses would be deducted from private respondent's
commissions. Petitioner would also be informed about appointments,
promotions, and transfers of employees in private respondent's district.
On June 14, 1974, private respondent Limjoco resigned from office to pursue
his private business. Then on October 30, 1975, he filed a complaint against
petitioner Encyclopaedia Britannica with the Department of Labor and

Employment, claiming for non-payment of separation pay and other benefits,

and also illegal deduction from his sales commissions.
Petitioner Encyclopaedia Britannica alleged that complainant Benjamin Limjoco
(Limjoco, for brevity) was not its employee but an independent dealer
authorized to promote and sell its products and in return, received
commissions therefrom. Limjoco did not have any salary and his income from
the petitioner company was dependent on the volume of sales accomplished.
He also had his own separate office, financed the business expenses, and
maintained his own workforce. The salaries of his secretary, utility man, and
sales representatives were chargeable to his commissions. Thus, petitioner
argued that it had no control and supervision over the complainant as to the
manner and means he conducted his business operations. The latter did not
even report to the office of the petitioner and did not observe fixed office hours.
Consequently, there was no employer-employee relationship.
Limjoco maintained otherwise. He alleged that he was hired by the petitioner in
July 1970, was assigned in the sales department, and was earning an average
of P4,000.00 monthly as his sales commission. He was under the supervision
of the petitioner's officials who issued to him and his other personnel,
memoranda, guidelines on company policies, instructions and other orders. He
was, however, dismissed by the petitioner when the Laurel-Langley Agreement
expired. As a result thereof, Limjoco asserts that in accordance with the
established company practice and the provisions of the collective bargaining
agreement, he was entitled to termination pay equivalent to one month salary,
the unpaid benefits (Christmas bonus, midyear bonus, clothing allowance,
vacation leave, and sick leave), and the amounts illegally deducted from his
commissions which were then used for the payments of office supplies, office
space, and overhead expenses.
On December 7, 1982, Labor Arbiter Teodorico Dogelio, in a decision ruled that
Limjoco was an employee of the petitioner company. Petitioner had control
over Limjoco since the latter was required to make periodic reports of his sales
activities to the company. All transactions were subject to the final approval of
the petitioner, an evidence that petitioner company had active control on the
sales activities. There was therefore, an employer-employee relationship and
necessarily, Limjoco was entitled to his claims. The decision also ordered
petitioner company to pay the following:

LABOR LAW I |19

1. To pay complainant his separation pay in the total amount of P16,000.00;

2. To pay complainant his unpaid Christmas bonus for three years or the
amount of 12,000.00;
3. To pay complainant his unpaid mid-year bonus equivalent to one-half
month pay or the total amount of P6,000.00;
4. To pay complainant his accrued vacation leave equivalent to 15 days per
year of service, or the total amount of P6,000.00;
5. To pay complainant his unpaid clothing allowance in the total amount of
P600.00; and
6. To pay complainant his accrued sick leave equivalent to 15 days per
year of service or the total amount of P6,000.00. 2
On appeal, the Third Division of the National Labor Relations Commission
affirmed the assailed decision. The Commission opined that there was no
evidence supporting the allegation that Limjoco was an independent contractor
or dealer. The petitioner still exercised control over Limjoco through its
memoranda and guidelines and even prohibitions on the sale of products other
than those authorized by it. In short, the petitioner company dictated how and
where to sell its products. Aside from that fact, Limjoco passed the costs to the
petitioner chargeable against his future commissions. Such practice proved
that he was not an independent dealer or contractor for it is required by law
that an independent contractor should have substantial capital or investment.
Dissatisfied with the outcome of the case, petitioner Encyclopaedia Britannica
now comes to us in this petition forcertiorari and injunction with prayer for
preliminary injunction. On April 3, 1989, this Court issued a temporary
restraining order enjoining the enforcement of the decision dated December 7,
1982.
The following are the arguments raised by the petitioner:
I The respondent NLRC gravely abused its discretion in holding that
"appellant's contention that appellee was an independent contractor is not
supported by evidence on record".

II Respondent NLRC committed grave abuse of discretion in not passing

upon the validity of the pronouncement of the respondent Labor Arbiter
granting private respondent's claim for payment of Christmas bonus, Midyear bonus, clothing allowance and the money equivalent of accrued and
unused vacation and sick leave.
The NLRC ruled that there existed an employer-employee relationship and
petitioner failed to disprove this finding. We do not agree.
In determining the existence of an employer-employee relationship the
following elements must be present: 1) selection and engagement of the
employee; 2) payment of wages; 3) power of dismissal; and 4) the power to
control the employee's conduct. Of the above, control of employee's conduct is
commonly regarded as the most crucial and determinative indicator of the
presence or absence of an employer-employee relationship. 3 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 to be
achieved, but also the manner and means to used in reaching that end. 4
The fact that petitioner issued memoranda to private respondents and to other
division sales managers did not prove that petitioner had actual control over
them. The different memoranda were merely guidelines on company policies
which the sales managers follow and impose on their respective agents. It
should be noted that in petitioner's business of selling encyclopedias and
books, the marketing of these products was done through dealership
agreements. The sales operations were primarily conducted by independent
authorized agents who did not receive regular compensations but only
commissions based on the sales of the products. These independent agents
hired their own sales representatives, financed their own office expenses, and
maintained their own staff. Thus, there was a need for the petitioner to issue
memoranda to private respondent so that the latter would be apprised of the
company policies and procedures. Nevertheless, private respondent Limjoco
and the other agents were free to conduct and promote their sales operations.
The periodic reports to the petitioner by the agents were but necessary to
update the company of the latter's performance and business income.
Private respondent was not an employee of the petitioner company. While it
was true that the petitioner had fixed the prices of the products for reason of
uniformity and private respondent could not alter them, the latter, nevertheless,
had free rein in the means and methods for conducting the marketing
LABOR LAW I |20

operations. He selected his own personnel and the only reason why he had to
notify the petitioner about such appointments was for purpose of deducting the
employees' salaries from his commissions. This he admitted in his testimonies,
thus:

salary will be chargeable to the Katipunan and Bayanihan Districts", signed

by yourself. What is the Katipunan and Bayanihan District?

Q. Yes, in other words you were on what is known as P&L basis or profit
and loss basis?

Q. In effect you were telling Britannica that you have hired this person and
"you should charge her salary to me," is that right?

A. That is right.

A. Yes, sir. 5

Q. If for an instance, just example your sales representative in any period

did not produce any sales, you would not get any money from Britannica,
would you?
A. No, sir.
Q. In fact, Britannica by doing the accounting for you as division manager
was merely making it easy for you to concentrate all your effort in selling
and you don't worry about accounting, isn't that so?

A. Those were districts under my division.

Private respondent was merely an agent or an independent dealer of the

petitioner. He was free to conduct his work and he was free to engage in other
means of livelihood. At the time he was connected with the petitioner company,
private respondent was also a director and later the president of the Farmers'
Rural Bank. Had he been an employee of the company, he could not be
employed elsewhere and he would be required to devote full time for petitioner.
If private respondent was indeed an employee, it was rather unusual for him to
wait for more than a year from his separation from work before he decided to
file his claims. Significantly, when Limjoco tendered his resignation to petitioner
on June 14, 1974, he stated, thus:

A. Yes, sir.
Re: Resignation
Q. In fact whenever you hire a secretary or trainer you merely hire that
person and notify Britannica so that Encyclopaedia Britannica will give the
salaries and deduct it from your earnings, isn't that so?
A. In certain cases I just hired people previously employed by
Encyclopaedia Britannica.
xxx xxx xxx
Q. In this Exhibit "2" you were informing Encyclopaedia Britannica that you
have hired a certain person and you were telling Britannica how her salary
was going to be taken cared of, is it not?
A. Yes, sir.
Q. You said here, "please be informed that we have appointed Miss Luz
Villan as division trainer effective May 1, 1971 at P550.00 per month her

I am resigning as manager of the EB Capitol Division effective 16 June

1974.
This decision was brought about by conflict with other interests which lately
have increasingly required my personal attention. I feel that in fairness to
the company and to the people under my supervision I should relinquish
the position to someone who can devote full-time to the Division.
I wish to thank you for all the encouragement and assistance
you have extended to me and to my group during my long
association with Britannica.
Evidently, Limjoco was aware of "conflict with other interests which . . . have
increasingly required my personal attention" (p. 118, Records). At the very
least, it would indicate that petitioner has no effective control over the personal
activities of Limjoco, who as admitted by the latter had other "conflict of
interest" requiring his personal attention.
LABOR LAW I |21

In ascertaining whether the relationship is that of employer-employee or one of

independent contractor, each case must be determined by its own facts and all
features of the relationship are to be considered. 6 The records of the case at
bar showed that there was no such employer-employee relationship.
As stated earlier, "the element of control is absent; where a person who works
for another does so more or less at his own pleasure and is not subject to
definite hours or conditions of work, and in turn is compensated according to
the result of his efforts and not the amount thereof, we should not find that the
relationship of employer and employee exists. 7 In fine, there is nothing in the
records to show or would "indicate that complainant was under the control of
the petitioner" in respect of the means and methods 8 in the performance of
complainant's work.
Consequently, private respondent is not entitled to the benefits prayed for.
In view of the foregoing premises, the petition is hereby GRANTED, and the
decision of the NLRC is hereby REVERSED AND SET ASIDE.
SO ORDERED.

LABOR LAW I |22

FIRST DIVISION
G.R. No. L-32245 May 25, 1979
DY KEH BENG, petitioner,
vs.
INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET
AL., respondents.

IV RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF

UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE
COMPLAINT.
V RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE
RESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES FROM
THEIR RESPECTIVE DATES OF DISMISSALS UNTIL FINALLY REINSTATED
WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER
RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY LAW.
The facts as found by the Hearing Examiner are as follows:

DE CASTRO, J.:
Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court
of Industrial Relations dated March 23, 1970 in Case No. 3019-ULP and the
Court's Resolution en banc of June 10, 1970 affirming said decision. The Court
of Industrial Relations in that case found Dy Keh Beng guilty of the unfair labor
practice acts alleged and order him to
reinstate Carlos Solano and Ricardo Tudla to their former jobs with
backwages from their respective dates of dismissal until fully reinstated
without loss to their right of seniority and of such other rights already
acquired by them and/or allowed by law. 1
Now, Dy Keh Beng assigns the following errors 2 as having been committed by
the Court of Industrial Relations:
I RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS
SOLANO AND TUDLA WERE EMPLOYEES OF PETITIONERS.
II RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS
SOLANO AND TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY
PETITIONER.
III RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES
ADDUCED BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A
PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN.

A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a
basket factory, for discriminatory acts within the meaning of Section 4(a), subparagraph (1) and (4). Republic Act No. 875, 3 by dismissing on September 28
and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for their union
activities. After preliminary investigation was conducted, a case was filed in the
Court of Industrial Relations for in behalf of the International Labor and Marine
Union of the Philippines and two of its members, Solano and Tudla In his
answer, Dy Keh Beng contended that he did not know Tudla and that Solano
was not his employee because the latter came to the establishment only when
there was work which he did on pakiaw basis, each piece of work being done
under a separate contract. Moreover, Dy Keh Beng countered with a special
defense of simple extortion committed by the head of the labor union,
Bienvenido Onayan.
After trial, the Hearing Examiner prepared a report which was subsequently
adopted in toto by the Court of Industrial Relations. An employee-employer
relationship was found to have existed between Dy Keh Beng and
complainants Tudla and Solano, although Solano was admitted to have worked
on piece basis. 4 The issue therefore centered on whether there existed an
employee employer relation between petitioner Dy Keh Beng and the
respondents Solano and Tudla .
According to the Hearing Examiner, the evidence for the complainant Union
tended to show that Solano and Tudla became employees of Dy Keh Beng
from May 2, 1953 and July 15, 1955, 5 respectively, and that except in the
event of illness, their work with the establishment was continuous although
their services were compensated on piece basis. Evidence likewise showed
LABOR LAW I |23

that at times the establishment had eight (8) workers and never less than five
(5); including the complainants, and that complainants used to receive ?5.00 a
day. sometimes less. 6
According to Dy Keh Beng, however, Solano was not his employee for the
following reasons:
(1) Solano never stayed long enought at Dy's establishment;
(2) Solano had to leave as soon as he was through with the
(3) order given him by Dy;
(4) When there were no orders needing his services there was nothing for
him to do;
(5) When orders came to the shop that his regular workers could not fill it
was then that Dy went to his address in Caloocan and fetched him for
these orders; and
(6) Solano's work with Dy's establishment was not continuous. ,

According to petitioner, these facts show that respondents Solano and Tudla
are only piece workers, not employees under Republic Act 875, where an
employee 8 is referred to as
shall include any employee and shag not be limited to the employee of a
particular employer unless the Act explicitly states otherwise and shall
include any individual whose work has ceased as a consequence of, or in
connection with any current labor dispute or because of any unfair labor
practice and who has not obtained any other substantially equivalent and
regular employment.
while an employer 9
includes any person acting in the interest of an employer, directly or
indirectly but shall not include any labor organization (otherwise than when
acting as an employer) or anyone acting in the capacity of officer or agent
of such labor organization.

Petitioner really anchors his contention of the non-existence of employeeemployer relationship on the control test. He points to the case of Madrigal
Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-13130, October 31,
1959, where the Court ruled that:
The test ... of the existence of employee and employer relationship is
whether there is an understanding between the parties that one is to render
personal services to or for the benefit of the other and recognition by them
of the right of one to order and control the other in the performance of the
work and to direct the manner and method of its performance.
Petitioner contends that the private respondents "did not meet the control test
in the fight of the ... definition of the terms employer and employee, because
there was no evidence to show that petitioner had the right to direct the manner
and method of respondent's work. 10 Moreover, it is argued that petitioner's
evidence showed that "Solano worked on a pakiaw basis" and that he stayed in
the establishment only when there was work.
While this Court upholds the control test 11 under which an employer-employee
relationship exists "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, " it finds no merit with petitioner's arguments
as stated above. It should be borne in mind that the control test calls merely for
the existence of the right to control the manner of doing the work, not the actual
exercise of the right. 12 Considering the finding by the Hearing Examiner that
the establishment of Dy Keh Beng is "engaged in the manufacture of baskets
known as kaing, 13 it is natural to expect that those working under Dy would
have to observe, among others, Dy's requirements of size and quality of
the kaing. Some control would necessarily be exercised by Dy as the making of
the kaing would be subject to Dy's specifications. Parenthetically, since the
work on the baskets is done at Dy's establishments, it can be inferred that the
proprietor Dy could easily exercise control on the men he employed.
As to the contention that Solano was not an employee because he worked on
piece basis, this Court agrees with the Hearing Examiner that
circumstances 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
LABOR LAW I |24

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.

this award is entrusted to the National Labor Relations Commission. Costs

against petitioner.
SO ORDERED.

At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief
Justice Ricardo Paras who penned the decision in "Sunrise Coconut Products
Co. v. Court of Industrial Relations" (83 Phil..518, 523), opined that
judicial notice of the fact that the so-called "pakyaw" system mentioned in
this case as generally practiced in our country, is, in fact, a labor contract
-between employers and employees, between capitalists and laborers.
Insofar as the other assignments of errors are concerned, there is no showing
that the Court of Industrial Relations abused its discretion when it concluded
that the findings of fact made by the Hearing Examiner were supported by
evidence on the record. Section 6, Republic Act 875 provides that in unfair
labor practice cases, the factual findings of the Court of Industrial Relations are
conclusive on the Supreme Court, if supported by substantial evidence. This
provision has been put into effect in a long line of decisions where the Supreme
Court did not reverse the findings of fact of the Court of Industrial Relations
when they were supported by substantial evidence. 14
Nevertheless, considering that about eighteen (18) years have already elapsed
from the time the complainants were dismissed, 15 and that the decision being
appealed ordered the payment of backwages to the employees from their
respective dates of dismissal until finally reinstated, it is fitting to apply in this
connection the formula for backwages worked out by Justice Claudio
Teehankee in "cases not terminated sooner." 16 The formula cans for fixing the
award of backwages without qualification and deduction to three years,
"subject to deduction where there are mitigating circumstances in favor of the
employer but subject to increase by way of exemplary damages where there
are aggravating circumstances. 17Considering there are no such circumstances
in this case, there is no reason why the Court should not apply the
abovementioned formula in this instance.
WHEREFORE; the award of backwages granted by the Court of Industrial
Relations is herein modified to an award of backwages for three years without
qualification and deduction at the respective rates of compensation the
employees concerned were receiving at the time of dismissal. The execution of
LABOR LAW I |25

THIRD DIVISION

G.R. No. 100665 February 13, 1995

ZANOTTE SHOES/LEONARDO LORENZO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. BENIGNO C.
VILLARENTE, JR., JOSEPH LLUZ, LOLITO LLUZ, NOEL ADARAYAN,
ROGELIO SIRA, VIRGINIA HERESANO, GENELITO HERESANO and
CARMELITA DE DIOS, respondents.

VITUG, J.:
This petition for certiorari assails the 24th April 1991 resolution of respondent
National Labor Relations Commission ("NLRC"), as well as its resolution of 30
May 1991 denying a motion for reconsideration, which has dismissed herein
petitioners' appeal of the 16th October 1989 decision of Labor Arbiter Benigno
C. Villarente, Jr.
Private respondents filed a complaint for illegal dismissal and for various
monetary claims, including the recovery of damages and attorney's fees,
against petitioners. In their supplemental position paper, the complainants
subsequently confined themselves to the illegal dismissal charge and
abandoned the monetary claims. One of the original eight complainants,
Virgilio Alcunaba, decided to resume his work with petitioners, thus leaving the
rest to pursue the case. Private respondents averred that they started to work
for petitioners on, respectively, the following dates:

that they worked for a minimum of twelve hours daily, including Sundays and
holidays when needed; that they were paid on piece-work basis; that it
"angered" petitioner Lorenzo when they requested to be made members of the
Social Security System ("SSS"); and that, when they demanded an increase in
their pay rates, they were prevented (starting 24 October 1988) from entering
the work premises.
Petitioners, in turn, claimed that their business operations were only seasonal,
normally twice a year, one in June (coinciding with the opening of school
classes) and another in December (during the Christmas holidays), when
heavy job orders would come in. Private respondents, according to petitioners,
were engaged on purely contractual basis and paid the rates conformably with
their respective agreements.
On 16 October 1989, Labor Arbiter Benigno C. Villarente, Jr., rendered
judgment in favor of the complainants, thus:
WHEREFORE, judgment is hereby rendered declaring that there was an
employer-employee relationship between complainants and respondents
and that the former were regular employees of the latter. Accordingly,
respondents are hereby directed to pay all complainants their respective
separation pay based on their one-half month's earnings per year of
service, a fraction of at least six months to be considered one whole year,
or the following amounts:
1

Joseph Lluz

P 7,488.00

(3 yrs. & 7 mos.)

Noel Adarayan

12,636.00

(8 yrs. & 8 mos.)

Rogelio Sira

8,828.00

(6 yrs. & 9 mos.)

8,828.00

(6 yrs. & 7 mos.)

NAME

DATE

Lolito Lluz

Joseph Lluz

March, 1985

Genelito Heresano 1,404.00

(1 year)

Noel Adarayan

Feb. 17, 1980

Virginia Heresano 665.00

(1 yr. & 5 mos.)

Rogelio Sira

January, 1982

Carmelita de Dios 19,656.00

(13 yrs. & 9 mos.)

Lolito Lluz

March, 1982

Virginia Heresano

May, 1987

Genelito Heresano

20-Oct-87

Carmelita de Dios

January, 1975 1

Total

P 59,515.002

Respondents are also hereby directed to pay complainants' counsel the

amount of P5,950.00 which is equivalent to 10% of the above total awards
as attorney's fees.

LABOR LAW I |26

SO ORDERED. 3
An appeal was interposed by petitioners. The NLRC, on 24 April 1991,
sustained the findings of the Labor Arbiter and dismissed the appeal. On 30
May 1991, the NLRC denied petitioners' motion for reconsideration.
Hence, the instant petition.
In his comment, dated 14 October 1991, the Solicitor General moved for the
modification of NLRC's resolution of 24 April 1991. While conceding that an
employer-employee relationship existed between petitioners and private
respondents, the Solicitor General, nevertheless, expressed strong
reservations on the award of separation pay in view of the findings by both the
Labor Arbiter and the NLRC that there was neither dismissal nor abandonment
in the case at bench. The NLRC submitted its own comment on 11 February
1992.
Well-settled is the rule that factual findings of the NLRC, particularly when they
coincide with that of the Labor Arbiter, are accorded respect, if not finality, and
will not be disturbed absent any showing that substantial evidence which might
otherwise affect the result of the case has been discarded. We see no reason,
in this case at bench, for disturbing the findings of the Labor Arbiter and the
NLRC on the existence of an employer-employee relationship between herein
private parties. The work of private respondents is clearly related to, and in the
pursuit of, the principal business activity of petitioners. The indicia used for
determining the existence of an employer-employee relationship, all extant in
the case at bench, include (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 result of the work to be done
and to the means and methods by which the work to be done and to the means
and methods by which the work is to be accomplished. The requirement, so
herein posed as an issue, refers to the existence of the right to control and not
necessarily to the actual exercise of the right. In Dy Keh Beng v. International
Labor and Marine Union of the Philippines, et al., 4 the Court has held:
While this Court up holds the control test under which an employeremployee relationship exists "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," it finds no merit with
petitioner's arguments as stated above. It should be borne in mind that the
control test calls merely for the existence of the right to control the manner
of doing the work, not the actual exercise of the right. Considering the
finding by the Hearing Examiner that the establishment of Dy Keh Beng is

"engaged in the manufacture of basket known as kaing," it is natural to

expect that those working under Dy would have to observe, among others,
Dy's requirements of size and quality of the kaing. Some control would
necessarily be exercised by Dy's specifications. Parenthetically, since the
work on the baskets is done at Dy's establishments, it can be inferred that
the proprietor Dy could easily exercise control on the men he employed.
We share the opinion of the Solicitor General that the award of separation pay
to private respondents appears, nonetheless, to be unwarranted.
The Labor Arbiter, sustained by the NLRC, concluded that there was neither
dismissal nor abandonment. The Labor Arbiter said
. . . At any rate, records show that even during the conciliation stage,
respondents had repeatedly indicated that they were willing to accept back
all complainants aside from denying complainants allegation. Hence, it is
clear that there was no dismissal to talk about in the first place which would
have to be determined whether legal or not. We also take particular note of
complainants' desire to be given separation pay instead of being ordered
back to work. Considering all these factors we hereby rule that there was
neither dismissal nor abandonment but complainants are simply out of job
for reasons not attributable to either party. (Rollo, pp. 30-31.)
The NLRC, in nonetheless agreeing with the Labor Arbiter on the latter's award
of separation pay, ventured to say:
. . . It is not difficult to see the rationale behind the Labor Arbiter's
disposition he saw in respondents' offer of reinstatement the
commanding advantage it had to later force (by whatever unlawful means
they may resort to) the complainants out of job, just as the Labor Arbiter
saw that fear on the part of complainants to enter into a trap being laid
before them for indeed, it is peculiar for an employer who wants to get rid
of its employees, to insist on reinstatement rather than a separation pay
scheme which the law allows them so they may be able to better manage
their business. (Rollo, p. 39.)
We find the above disquisition of the NLRC too peculative and conjectural to be
sustained. The fact of the matter is that petitioners have repeatedly indicated
their willingness to accept private respondents but the latter have steadfastly
refused the offer. For being without any clear legal basis, the award of
separation pay must thus be set aside. 5 There is nothing, however, that
prevents petitioners from voluntarily giving private respondents some amounts
on ex gratia basis.

LABOR LAW I |27

WHEREFORE, the questioned findings and resolutions of respondents Labor

Arbiter and NLRC are MODIFIED by deleting the award of separation pay and
the corresponding attorney's fees. No costs.
SO ORDERED.

LABOR LAW I |28

FIRST DIVISION

On January 9, 1990, the petitioner issued another order reminding Salas of the
approaching termination of his legal services under their contract. This
prompted Salas to lodge a complaint against AMWSLAI for separation pay,
vacation and sick leave benefits, cost of living allowances, refund of SSS
premiums, moral and exemplary damages, payment of notarial services
rendered from February 1, 1980 to March 2, 1990, and attorney's fees.

G.R. No. 111870 June 30, 1994

AIR
MATERIAL
WING
SAVINGS AND
LOAN
ASSOCIATION,
INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.
CRUZ, J.:
Private respondent Luis S. Salas was appointed "notarial and legal counsel" for
petitioner Air Material Wings Savings and Loan Association (AMWSLAI) in
1980. The appointment was renewed for three years in an implementing order
dated January 23, 1987, reading as follows:
SUBJECT: Implementing Order on the Reappointment of the Legal Officer
TO: ATTY. LUIS S. SALAS
Per approval of the Board en banc in a regular meeting held on January
21, 1987, you are hereby reappointed as Notarial and Legal Counsel of this
association for a term of three (3) years effective March 1, 1987, unless
sooner terminated from office for cause or as may be deemed necessary
by the Board for the interest and protection of the association.

Instead of filing an answer, AMWSLAI moved to dismiss for lack of jurisdiction.

It averred that there was no employer-employee relationship between it and
Salas and that his monetary claims properly fell within the jurisdiction of the
regular courts. Salas opposed the motion and presented documentary
evidence to show that he was indeed an employee of AMWSLAI.
The motion was denied and both parties were required to submit their position
papers. AMWSLAI filed a motion for reconsideration ad cautelam, which was
also denied. The parties were again ordered to submit their position papers but
AMWSLAI did not comply. Nevertheless, most of Salas' claims were dismissed
by the labor arbiter in his decision dated November 21, 1991. 1
It was there held that Salas was not illegally dismissed and so not entitled to
collect separation benefits. His claims for vacation leave, sick leave, medical
and dental allowances and refund of SSS premiums were rejected on the
ground that he was a managerial employee. He was also denied moral and
exemplary damages for lack of evidence of bad faith on the part of AMWSLAI.
Neither was he allowed to collect his notarial fees from 1980 up to 1986
because the claim therefor had already prescribed. However, the petitioner was
ordered to pay Salas his notarial fees from 1987 up to March 2, 1990, and
attorney's fee equivalent to 10% of the judgment award.

Aside from notarization of loan & other legal documents, your duties and
responsibilities are hereby enumerated in the attached sheet, per Articles
IX, Section 1-d of the by-laws and those approved by the Board en banc.

On appeal, the decision was affirmed in toto by the respondent Commission,

prompting the petitioner to seek relief in this Court. 2

Your monthly compensation/retainer's fee remains the same.

The threshold issue in this case is whether or not Salas can be considered an
employee of the petitioner company.

This shall form part of your 201 file.

BY
AUTHORITY
OF
THE
President & Chief of the Board

BOARD:

LUVIN

S.

MANAY

We have held in a long line of decisions that the elements of an employeremployee relationship are: (1) selection and engagement of the employee; (2)
payment of wages; (3) power of dismissal; and (4) employer's own power to
control employee's conduct. 3
LABOR LAW I |29

The existence of such a relationship is essentially a factual question. The

findings of the NLRC on this matter are accorded great respect and even
finality when the same are supported by substantial evidence. 4
The terms and conditions set out in the letter-contract entered into by the
parties on January 23, 1987, clearly show that Salas was an employee of the
petitioner. His selection as the company counsel was done by the board of
directors in one of its regular meetings. The petitioner paid him a monthly
compensation/retainer's fee for his services. Though his appointment was for a
fixed term of three years, the petitioner reserved its power of dismissal for
cause or as it might deem necessary for its interest and protection. No less
importantly, AMWSLAI also exercised its power of control over Salas by
defining his duties and functions as its legal counsel, to wit:
1. To act on all legal matters pertinent to his Office.
2. To seek remedies to effect collection of overdue accounts of members
without prejudice to initiating court action to protect the interest of the
association.
3. To defend by all means all suit against the interest of the Association.
In the earlier case of Hydro Resources
Pagalilauan, 6 this Court observed that:

Contractors

We must disagree with the NLRC, however, on Salas' claims for notarial fees.
The petitioner contends that the public respondents are not empowered to
adjudicate claims for notarial fees. On the other hand, the Solicitor General
believes that the NLRC acted correctly when it took cognizance of the claim
because it arose out of Salas' employment contract with the petitioner which
assigned him the duty to notarize loan agreements and other legal documents.
Moreover, Section 9 of Rule 141 of the Rules of Court does not restrict or
prevent the labor arbiter and the NLRC from determining claims for notarial
fees.
Labor arbiters have the original and exclusive jurisdiction over money claims of
workers when such claims have some reasonable connection with the
employer-employee relationship. The money claims of workers referred to in
paragraph 3 of Article 217 of the Labor Code are those arising out of or in
connection with the employer-employee relationship or some aspect or incident
of such relationship.
Salas' claim for notarial fees is based on his employment as a notarial officer of
the petitioner and thus comes under the jurisdiction of the labor arbiter.

Corp.

v.

A lawyer, like any other professional, may very well be an

employee of a private corporation or even of the government. It
is not unusual for a big corporation to hire a staff of lawyers as
its in-house counsel, pay them regular salaries, rank them in
its table of organization, and otherwise treat them like its other
officers and employees. At the same time, it may also contract
with a law firm to act as outside counsel on a retainer basis.
The two classes of lawyers often work closely together but one
group is made up of employees while the other is not. A similar
arrangement may exist as to doctors, nurses, dentists, public
relations practitioners and other professionals.

The public respondents agreed that Salas was entitled to collect notarial fees
from 1987 to 1990 by virtue of his having been assigned as notarial officer. We
feel, however, that there is no substantial evidence to support this finding.
The letter-contract of January 23, 1987, does not contain any stipulation for the
separate payment of notarial fees to Salas in addition to his basic salary. On
the contrary, it would appear that his notarial services were part of his regular
functions and were thus already covered by his monthly compensation. It is
true that the notarial fees were paid by members-borrowers of the petitioner for
its own account and not of Salas. However, this is not a sufficient basis for his
claim to such fees in the absence of any agreement to that effect.
ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED, with the
modification that the award of notarial fees and attorney's fees is disallowed. It
is so ordered.

We hold, therefore, that the public respondent committed no grave abuse of

discretion in ruling that an employer-employee relationship existed between the
petitioner and the private respondent.
LABOR LAW I |30

THIRD DIVISION

HYDRO
RESOURCES
CONTRACTORS
CORPORATION, petitioner,
vs.
LABOR ARBITER ADRIAN N. PAGALILAUAN and the NATIONAL LABOR
RELATIONS
COMMISSION, public
respondents, and
ROGELIO
A.
ABAN, private respondent,

the alleged absence of an employer-employee relationship. The petitioner

contends that its relationship with Aban is that of a client with his lawyer. It is its
position that "(a) lawyer as long as he is acting as such, as long as he is
performing acts constituting practice of law, can never be considered an
employee. His relationship with those to whom he renders services, as such
lawyer, can never be governed by the labor laws. For a lawyer to so argue is
not only demeaning to himself (sic), but also his profession and to his brothers
in the profession." Thus, the petitioner argues that the labor arbiter and NLRC
have no jurisdiction over the instant case.

GUTIERREZ, JR., J.:

The contention is without merit.

This is a petition to review on certiorari the resolution of the National Labor

Relations Commission (NLRC) which affirmed the labor arbiter's decision
ordering herein petitioner, Hydro Resources Contractors Corporation to
reinstate Rogelio A. Abanto his former position without loss of seniority rights,
to pay him 12 months backwages in the amount of P18,000.00 and to pay
attorney's fees in the amount of P1,800.00.

A lawyer, like any other professional, may very well be an employee of a

private corporation or even of the government. It is not unusual for a big
corporation to hire a staff of lawyers as its in-house counsel, pay them regular
salaries, rank them in its table of organization, and otherwise treat them like its
other officers and employees. At the same time, it may also contract with a law
firm to act as outside counsel on a retainer basis. The two classes of lawyers
often work closely together but one group is made up of employees while the
other is not. A similar arrangement may exist as to doctors, nurses, dentists,
public relations practitioners, and other professionals.

G.R. No. L-62909 April 18, 1989

On October 24, 1978, petitioner corporation hired the private respondent Aban
as its "Legal Assistant." He received a basic monthly salary of Pl,500.00 plus
an initial living allowance of P50.00 which gradually increased to P320.00.
On September 4, 1980, Aban received a letter from the corporation informing
him that he would be considered terminated effective October 4, 1980 because
of his alleged failure to perform his duties well.
On October 6, 1980, Aban filed a complaint against the petitioner for illegal
dismissal.
The labor arbiter ruled that Aban was illegally dismissed.
This ruling was affirmed by the NLRC on appeal.
Hence, this present petition.
The only issue raised by the petitioner is whether or not there was an
employer-employee relationship between the petitioner corporation and Aban.
The petitioner questions the jurisdiction of the public respondents considering

This Court is not without a guide in deciding whether or not an employeremployee relation exists between the contending parties or whether or not the
private respondent was hired on a retainer basis.
As stated in the case of Tabas v. California Manufacturing Co., (G.R. No.
80680, January 26, 1989):
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. Of the four, the right-of-control test has been
held to be the decisive factor.
Aban was employed by the petitioner to be its Legal Assistant as evidenced by
his appointment paper (Exhibit "A"). The petitioner paid him a basic salary plus
LABOR LAW I |31

living allowance. Thereafter, Aban was dismissed on his alleged failure to

perform his duties well. (Exhibit "B").
Aban worked solely for the petitioner and dealt only with legal matters involving
the said corporation and its employees. He also assisted the Personnel Officer
in processing appointment papers of employees. This latter duty is not an act of
a lawyer in the exercise of his profession but rather a duty for the benefit of the
corporation.
The above-mentioned facts show that the petitioner paid Aban's wages,
exercised its power to hire and fire the respondent employee and more
important, exercised control over Aban by defining the duties and functions of
his work.
Moreover, estoppel lies against the petitioner. It may no longer question the
jurisdiction of the labor arbiter and NLRC .

reinstatement. (City Trust Finance Corp. v. NLRC, 157 SCRA 87; Santos v.
NLRC, 154 SCRA 166; Metro Drug v. NLRC, et al., 143 SCRA 132; Luzon
Brokerage v. Luzon Labor Union, 7 SCRA 116). The amount of such separation
pay as may be provided by law or the collective bargaining agreement is to be
computed based on the period from 24 October 1978 (date of first
employment) to 4 October 1983 (three years after date of illegal dismissal).
[Manila Midtown Commercial Corporation v. Nuwhrain 159 SCRA 212 (1988)].
WHEREFORE, the petition is hereby DISMISSED for lack of merit. The
petitioner is ordered to reinstate the private respondent to his former or a
similar position without loss of seniority rights and to pay three (3) years
backwages without qualification or deduction and P5,000.00 in attorney's fees.
Should reinstatement not be feasible, the petitioner shall pay the private
respondent termination benefits in addition to the above stated three years
backpay and P5,000.00 attorney's fees.
SO ORDERED.

The petitioner presented documents (Exhibits "2" to "19") before the Labor
Arbiter to prove that Aban was a managerial employee. Now, it is disclaiming
that Aban was ever its employee. The proper procedure was for the petitioner
to prove its allegations that Aban drank heavily, violated company policies,
spent company funds and properties for personal ends, and otherwise led the
employer to lose trust and confidence in him. The real issue was due process,
not the specious argument raised in this petition.
The new theory presented before this Court is a last-ditch effort by the
petitioner to cover up for the unwarranted dismissal of its employee. This Court
frowns upon such delaying tactics.
The findings of fact of the Labor Arbiter being supported by substantial
evidence are binding on this Court. (See Industrial limber Corp. v. National
Labor Relations Commission, G.R. No. 83616, January 20, 1989).
Considering that the private respondent was illegally dismissed from his
employment in 1980, he is entitled to reinstatement to his former or similar
position without loss of seniority rights, if it is still feasible, to backwages
without qualification or deduction for three years, (D.M. Consunji, Inc. v. Pucan
159 SCRA 107 (1988); Flores v. Nuestro, G.R. No. 66890, April 15, 1988), and
to reasonable attorney's fees in the amount of P5,000.00. Should reinstatement
prove no longer feasible, the petitioner will pay him separation pay in lieu of
LABOR LAW I |32

FIRST DIVISION

G.R. No. 119930 March 12, 1998

INSULAR LIFE ASSURANCE CO., LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Fourth Division, Cebu
City), LABOR ARBITER NICASIO P. ANINON and PANTALEON DE LOS
REYES, respondents.

BELLOSILLO, J.:
On 17 June 1994 respondent Labor Arbiter dismissed for lack of jurisdiction
NLRC RAB-VII Case No. 03-0309-94 filed by private respondent Pantaleon de
los Reyes against petitioner Insular Life Assurance Co., Ltd. (INSULAR LIFE),
for illegal dismissal and nonpayment of salaries and back wages after finding
no employer-employee relationship between De los Reyes and petitioner
INSULAR LIFE. 1 On appeal by private respondent, the order of dismissal was
reversed by the National Labor Relations Commission (NLRC) which ruled that
respondent De los Reyes was an employee of petitioner. 2 Petitioner's motion
for reconsideration having been denied, the NLRC remanded the case to the
Labor Arbiter for hearing on the merits.
Seeking relief through this special civil action for certiorari with prayer for a
restraining order and/or preliminary injunction, petitioner now comes to us
praying for annulment of the decision of respondent NLRC dated 3 March 1995
and its Order dated 6 April 1995 denying the motion for reconsideration of the
decision. It faults NLRC for acting without jurisdiction and/or with grave abuse
of discretion when, contrary to established facts and pertinent law and
jurisprudence, it reversed the decision of the Labor Arbiter and held instead
that the complaint was properly filed as an employer-employee relationship
existed between petitioner and private respondent.
Petitioner reprises the stand it assumed below that it never had any employeremployee relationship with private respondent, this being an express
agreement between them in the agency contracts, particularly reinforced by the
stipulation therein that De los Reyes was allowed discretion to devise ways and
means to fulfill his obligations as agent and would be paid commission fees
based on his actual output. It further insists that the nature of this work status
as described in the contracts had already been squarely resolved by the Court
in the earlier case ofInsular Life Assurance Co., Ltd. v. NLRC and

Basiao 3 where the complainant therein, Melecio Basiao, was similarly situated
as respondent De los Reyes in that he was appointed first as an agent and
then promoted as agency manager, and the contracts under which he was
appointed contained terms and conditions identical to those of Delos Reyes.
Petitioner concludes that since Basiao was declared by the Court to be an
independent contractor and not an employee of petitioner, there should be no
reason why the status of De los Reyes hereinvis-a-vis petitioner should not be
similarly determined.
We reject the submissions of petitioner and hold that respondent NLRC acted
appropriately within the bounds of the law. The records of the case are replete
with telltale indicators of an existing employer-employee relationship between
the two parties despite written contractual disavowals.
These facts are undisputed: on 21 August 1992 petitioner entered into an
agency contract with respondent Pantaleon de los Reyes 4 authorizing the latter
to solicit within the Philippines applications for life insurance and annuities for
which he would be paid compensation in the form of commissions. The
contract was prepared by petitioner in its entirety and De los Reyes merely
signed his conformity thereto. It contained the stipulation that no employeremployee relationship shall be created between the parties and that the agent
shall be free to exercise his own judgment as to time, place and means of
soliciting insurance. De los Reyes however was prohibited by petitioner from
working for any other life insurance company, and violation of this stipulation
was sufficient ground for termination of the contract. Aside from soliciting
insurance for the petitioner, private respondent was required to submit to the
former all completed applications for insurance within ninety (90) consecutive
days, deliver policies, receive and collect initial premiums and balances of first
year premiums, renewal premiums, deposits on applications and payments on
policy loans. Private respondent was also bound to turn over to the company
immediately any and all sums of money collected by him. In a written
communication by petitioner to respondent De los Reyes, the latter was urged
to register with the Social Security System as a self-employed individual as
provided under PD No. 1636. 5
On 1 March 1993 petitioner and private respondent entered into another
contract 6 where the latter was appointed as Acting Unit Manager under its
office the Cebu DSO V (157). As such, the duties and responsibilities of De
los Reyes included the recruitment, training, organization and development
within his designated territory of a sufficient number of qualified, competent and
trustworthy underwriters, and to supervise and coordinate the sales efforts of
the underwriters in the active solicitation of new business and in the
LABOR LAW I |33

furtherance of the agency's assigned goals. It was similarly provided in the

management contract that the relation of the acting unit manager and/or the
agents of his unit to the company shall be that of independent contractor. If the
appointment was terminated for any reason other than for cause, the acting
unit manager would be reverted to agent status and assigned to any unit. As in
the previous agency contract, De los Reyes together with his unit force was
granted freedom to exercise judgment as to time, place and means of soliciting
insurance. Aside from being granted override commissions, the acting unit
manager was given production bonus, development allowance and a unit
development financing scheme euphemistically termed "financial assistance"
consisting of payment to him of a free portion of P300.00 per month and a
validate portion of P1,200.00. While the latter amount was deemed as an
advance against expected commissions, the former was not and would be
freely given to the unit manager by the company only upon fulfillment by him of
certain manpower and premium quota requirements. The agents and
underwriters recruited and trained by the acting unit manager would be
attached to the unit but petitioner reserved the right to determine if such
assignment would be made or, for any reason, to reassign them elsewhere.
Aside from soliciting insurance, De los Reyes was also expressly obliged to
participate in the company's conservation program, i.e., preservation and
maintenance of existing insurance policies, and to accept moneys duly
receipted on agent's receipts provided the same were turned over to the
company. As long as he was unit manager in an acting capacity, De los Reyes
was prohibited from working for other life insurance companies or with the
government. He could not also accept a managerial or supervisory position in
any firm doing business in the Philippines without the written consent of
petitioner.
Private respondent worked concurrently as agent and Acting Unit Manager until
he was notified by petitioner on 18 November 1993 that his services were
terminated effective 18 December 1993. On 7 March 1994 he filed a complaint
before the Labor Arbiter on the ground that he was illegally dismissed and that
he was not paid his salaries and separation pay.
Petitioner filed a motion to dismiss the complaint of De los Reyes for lack of
jurisdiction, citing the absence of employer-employee relationship. It reasoned
out that based on the criteria for determining the existence of such relationship
or the so-called "four-fold test," i.e., (a) selection and engagement of employee,
(b) payment of wages, (c) power of dismissal, and, (d) power of control, De los
Reyes was not an employee but an independent contractor.

On 17 June 1994 the motion of petitioner was granted by the Labor Arbiter and
the case was dismissed on the ground that the element of control was not
sufficiently established since the rules and guidelines set by petitioner in its
agency agreement with respondent Delos Reyes were formulated only to
achieve the desired result without dictating the means or methods of attaining
it.
Respondent NLRC however appreciated the evidence from a different
perspective. It determined that respondent De los Reyes was under the
effective control of petitioner in the critical and most important aspects of his
work as Unit Manager. This conclusion was derived from the provisions in the
contract which appointed private respondent as Acting Unit Manager, to wit: (a)
De los Reyes was to serve exclusively the company, therefore, he was not an
independent contractor; (b) he was required to meet certain manpower and
production quota; and, (c) petitioner controlled the assignment to and removal
of soliciting agents from his unit.
The NLRC also took into account other circumstances showing that petitioner
exercised employer's prerogatives over De los Reyes, e.g., (a) limiting the work
of respondent De los Reyes to selling a life insurance policy known as "Salary
Deduction Insurance" only to members of the Philippine National Police, public
and private school teachers and other employees of private companies; (b)
assigning private respondent to a particular place and table where he worked
whenever he was not in the field; (c) paying private respondent during the
period of twelve (12) months of his appointment as Acting Unit Manager the
amount of P1,500.00 as Unit Development Financing of which 20% formed his
salary and the rest, i.e., 80%, as advance of his expected commissions; and,
(d) promising that upon completion of certain requirements, he would be
promoted to Unit Manager with the right of petitioner to revert him to agent
status when warranted.
Parenthetically, both petitioner and respondent NLRC treated the agency
contract and the management contract entered into between petitioner and De
los Reyes as contracts of agency. We however hold otherwise. Unquestionably
there exist major distinctions between the two agreements. While the first has
the earmarks of an agency contract, the second is far removed from the
concept of agency in that provided therein are conditionalities that indicate an
employer-employee relationship. The NLRC therefore was correct in finding
that private respondent was an employee of petitioner, but this holds true only
insofar as the management contract is concerned. In view thereof, the Labor
Arbiter has jurisdiction over the case..

LABOR LAW I |34

It is axiomatic that the existence of an employer-employee relationship cannot

be negated by expressly repudiating it in the management contract and
providing therein that the "employee" is an independent contractor when the
terms of the agreement clearly show otherwise. For, the employment status of
a person is defined and prescribed by law and not by what the parties say it
should be. 7 In determining the status of the management contract, the "fourfold test" on employment earlier mentioned has to be applied.
Petitioner contends that De los Reyes was never required to go through the
pre-employment procedures and that the probationary employment status was
reserved only to employees of petitioner. On this score, it insists that the first
requirement of selection and engagement of the employee was not met.
A look at the provisions of the contract shows that private respondent was
appointed as Acting Unit Manager only upon recommendation of the District
Manager. 8 This indicates that private respondent was hired by petitioner
because of the favorable endorsement of its duly authorized officer. But, this
approbation could only have been based on the performance of De los Reyes
as agent under the agency contract so that there can be no other conclusion
arrived under this premise than the fact that the agency or underwriter phase of
the relationship of De los Reyes with petitioner was nothing more than a trial or
probationary period for his eventual appointment as Acting Unit Manager of
petitioner. Then, again, the very designation of the appointment of private
respondent as "acting" unit manager obviously implies a temporary
employment status which may be made permanent only upon compliance with
company standards such as those enumerated under Sec. 6 of the
management contract. 9
On the matter of payment of wages, petitioner points out that respondent was
compensated strictly on commission basis, the amount of which was totally
dependent on his total output. But, the manager's contract, speaks differently.
Thus
4. Performance Requirements. To maintain your appointment as Acting
Unit Manager you must meet the following manpower and production
requirements:
Quarter Active Calendar Year
Production Agents Cumulative FYP
Production
1st 2 P 125,000
2nd 3 250,000

3rd 4 375,000
4th 5 500,000
5.4. Unit Development Financing (UDF). As an Acting Unit Manager you
shall be given during the first 12 months of your appointment a financial
assistance which is composed of two parts:
5.4.1. Free Portion amounting to P300 per month, subject to your
meeting prescribed minimum performance requirement on manpower
and premium production. The free portion is not payable by you.
5.4.2. Validate Portion amounting to P1,200 per month, also subject to
meeting the same prescribed minimum performance requirements on
manpower and premium production. The validated portion is an advance
against expected compensation during the UDF period and thereafter as
may be necessary.
The above provisions unquestionably demonstrate that the performance
requirement imposed on De los Reyes was applicable quarterly while his
entitlement to the free portion (P300) and the validated portion (P1,200)
wasmonthly starting on the first month of the twelve (12) months of the
appointment. Thus, it has to be admitted that even before the end of the first
quarter and prior to the so-called quarterly performance evaluation, private
respondent was already entitled to be paid both the free and validated portions
of the UDF every month because his production performance could not be
determined until after the lapse of the quarter involved. This indicates quite
clearly that the unit manager's quarterly performance had no bearing at all on
his entitlement at least to the free portion of the UDF which for all intents and
purposes comprised the salary regularly paid to him by petitioner. Thus it
cannot be validly claimed that the financial assistance consisting of the free
portion of the UDF was purely dependent on the premium production of the
agent. Be that as it may, it is worth considering that the payment of
compensation by way of commission does not militate against the conclusion
that private respondent was an employee of petitioner. Under Art. 97 of the
Labor Code, "wage" shall mean "however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task,
price or commission basis . . . ."10
As to the matter involving the power of dismissal and control by the employer,
the latter of which is the most important of the test, petitioner asserts that its
termination of De los Reyes was but an exercise of its inherent right as
principal under the contracts and that the rules and guidelines it set forth in the
contract cannot, by any stretch of the imagination, be deemed as an exercise
LABOR LAW I |35

of control over the private respondent as these were merely directives that
fixed the desired result without dictating the means or method to be employed
in attaining it. The following factual findings of the NLRC 11 however contradict
such claims:
A perusal of the appointment of complainant as Acting Unit
Manager reveals that:
1. Complainant was to "exclusively" serve respondent company. Thus it is
provided:
.
.
.
7..7
Other
causes
of
Termination:
This appointment may likewise be terminated for any of the following
causes: . . . 7..7..2. Your entering the service of the government or another
life insurance company; 7..7..3. Your accepting a managerial or supervisory
position in any firm doing business in the Philippines without the written
consent of the Company; . . .
2. Complainant was required to meet certain manpower and production
quotas.
3. Respondent (herein petitioner) controlled the assignment and removal of
soliciting agents to and from complainant's unit, thus: . . . 7..2. Assignment
of Agents: Agents recruited and trained by you shall be attached to your
unit unless for reasons of Company policy, no such assignment should be
made. The Company retains the exclusive right to assign new soliciting
agents to the unit. It is agreed that the Company may remove or transfer
any soliciting agents appointed and assigned to the said unit. . . .
It would not be amiss to state that respondent's duty to collect the company's
premiums using company receipts under Sec. 7.4 of the management contract
is further evidence of petitioner's control over respondent, thus:
xxx

xxx

xxx

7.4. Acceptance and Remittance of Premiums. . . . . the Company

hereby authorizes you to accept and to receive sums of money in payment
of premiums, loans, deposits on applications, with or without interest, due
from policyholders and applicants for insurance, and the like, specially from
policyholders of business solicited and sold by the agents attached to your
unit provided however, that all such payments shall be duly receipted by
you on the corresponding Company's "Agents' Receipt" to be provided you
for this purpose and to be covered by such rules and accounting
regulations the Company may issue from time to time on the matter.
Payments received by you shall be turned over to the Company's

designated District or Service Office clerk or directly to the Home Office not
later than the next working day from receipt thereof . . . .
Petitioner would have us apply our ruling in Insular Life Assurance
Co., Ltd. v. NLRC and Basiao12 to the instant case under the doctrine of stare
decisis, postulating that both cases involve parties similarly situated and facts
which are almost identical.
But we are not convinced that the cited case is on all fours with the case at bar.
In Basiao, the agent was appointed Agency Manager under an Agency
Manager Contract. To implement his end of the agreement, Melecio Basiao
organized an agency office to which he gave the name M. Basiao and
Associates. The Agency Manager Contract practically contained the same
terms and conditions as the Agency Contract earlier entered into, and the Court
observed that, "drawn from the terms of the contract they had entered into,
(which) either expressly or by necessary implication, Basiao (was) made the
master of his own time and selling methods, left to his own judgment the time,
place and means of soliciting insurance, set no accomplishment quotas and
compensated him on the bases of results obtained. He was not bound to
observe any schedule of working hours or report to any regular station; he
could seek and work on his prospects anywhere and at anytime he chose to
and was free to adopt the selling methods he deemed most effective." Upon
these premises, Basiao was considered as agent an independent contractor
of petitioner INSULAR LIFE.
Unlike Basiao, herein respondent De los Reyes was appointed Acting Unit
Manager, not agency manager. There is no evidence that to implement his
obligations under the management contract, De los Reyes had organized an
office. Petitioner in fact has admitted that it provided De los Reyes a place and
a table at its office where he reported for and worked whenever he was not out
in the field. Placed under petitioner's Cebu District Service Office, the unit was
given a name by petitioner De los Reyes and Associates and assigned
Code No. 11753 and Recruitment No. 109398. Under the managership
contract, De los Reyes was obliged to work exclusively for petitioner in life
insurance solicitation and was imposed premium production quotas. Of course,
the acting unit manager could not underwrite other lines of insurance because
his Permanent Certificate of Authority was for life insurance only and for no
other. He was proscribed from accepting a managerial or supervisory position
in any other office including the government without the written consent of
petitioner. De los Reyes could only be promoted to permanent unit manager if
he met certain requirements and his promotion was recommended by the
petitioner's District Manager and Regional Manager and approved by its
LABOR LAW I |36

Division Manager. As Acting Unit Manager, De los Reyes performed functions

beyond mere solicitation of insurance business for petitioner. As found by the
NLRC, he exercised administrative functions which were necessary and
beneficial to the business of INSULAR LIFE.
In Great Pacific Life Insurance Company v. NLRC 13 which is closer in
application than Basiao to this present controversy, we found that "the
relationships of the Ruiz brothers and Grepalife were those of employeremployee. First, their work at the time of their dismissal as zone supervisor and
district manager was necessary and desirable to the usual business of the
insurance company. They were entrusted with supervisory, sales and other
functions to guard Grepalife's business interests and to bring in more clients to
the company, and even with administrative functions to ensure that all
collections, reports and data are faithfully brought to the company . . . . A
cursory reading of their respective functions as enumerated in their contracts
reveals that the company practically dictates the manner by which their jobs
are to be carried out . . . ." We need elaborate no further.
Exclusivity of service, control of assignments and removal of agents under
private respondent's unit, collection of premiums, furnishing of company
facilities and materials as well as capital described as Unit Development Fund
are but hallmarks of the management system in which herein private
respondent worked. This obtaining, there is no escaping the conclusion that
private respondent Pantaleon de los Reyes was an employee of herein
petitioner.
WHEREFORE, the petition of Insular Life Assurance Company, Ltd., is
DENIED and the Decision of the National Labor Relations Commission dated 3
March 1995 and its Order of 6 April 1996 sustaining it are AFFIRMED. Let this
case be REMANDED to the Labor Arbiter a quo who is directed to hear and
dispose of this case with deliberate dispatch in light of the views expressed
herein.
SO ORDERED.

LABOR LAW I |37

FIRST DIVISION
G.R. No. 170087 August 31, 2006
ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.
DECISION

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

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. 3010-0-489-01, 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 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
LABOR LAW I |38

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 companys employees. 12

b. Salary Differentials (01/2001 09/2001) 22,500.00

Petitioners 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.

g. Moral and exemplary damages 100,000.00

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
petitioners 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 complainants 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.)

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

h. 10% Attorneys 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% attorneys fees shall be based on salary differential award
only;
LABOR LAW I |39

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 petitioners 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 employers 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 employers 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
latters employment.
The control test initially found application in the case of Viaa 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
employers business; (2) the extent of the workers investment in equipment
and facilities; (3) the nature and degree of control exercised by the employer;
(4) the workers opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed independent
LABOR LAW I |40

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. 25By 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 corporations 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. Petitioners 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 latters 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 petitioners
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 formers employees. The
coverage of Social Security Law is predicated on the existence of an employeremployee 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 petitioners
job was as Kamuras 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
LABOR LAW I |41

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, isREINSTATED. The case is REMANDED to the Labor Arbiter
for the recomputation of petitioner Angelina Franciscos 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.
FIRST DIVISION
G.R. No. L-98368 December 15, 1993
OPULENCIA ICE PLANT AND STORAGE AND/OR DR. MELCHOR
OPULENCIA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION), LABOR
ARBITER NUMERIANO VILLENA AND MANUEL P. ESITA, respondents.
BELLOSILLO, J.:
MANUEL P. ESITA was for twenty (20) years a compressor operator of
Tiongson Ice Plant in San Pablo City. In 1980 he was hired as compressor
operator-mechanic for the ice plants of petitioner Dr. Melchor Opulencia
located in Tanauan, Batangas, and Calamba, Laguna. Initially assigned at the
ice plant in Tanauan, Esita would work from seven o'clock in the morning to five
o'clock in the afternoon receiving a daily wage of P35.00.
In 1986, Esita was transferred to the ice plant in Calamba, which was then
undergoing overhauling, taking the place of compressor operator Lorenzo
Eseta, who was relieved because he was already old and weak. For less than
a month, Esita helped in the construction-remodeling of Dr. Opulencia's house.
On 6 February 1989, for demanding the correct amount of wages due him,
Esita was dismissed from service. Consequently, he filed with Sub-Regional
Arbitration Branch IV, San Pablo City, a complaint for illegal dismissal,
underpayment, non-payment for overtime, legal holiday, premium for holiday
and rest day, 13th month, separation/retirement pay and allowances against
petitioners.
LABOR LAW I |42

Petitioners deny that Esita is an employee. They claim that Esita could not
have been employed in 1980 because the Tanauan ice plant was not in
operation due to low voltage of electricity and that Esita was merely a
helper/peon of one of the contractors they had engaged to do major repairs
and renovation of the Tanauan ice plant in 1986. Petitioners further allege that
when they had the Calamba ice plant repaired and expanded, Esita likewise
rendered services in a similar capacity, and thus admitting that he worked as a
helper/peon in the repair or remodeling of Dr. Opulencia's residence in
Tanauan.

ripened into a regular employment; that petitioners' benevolence in allowing

Esita to stay inside the company's premises free of charge for humanitarian
reason deserves commendation rather than imposition of undue penalty; that
Esita's name does not appear in the payrolls of the company which necessarily
means that he was not an employee; and, that Esita's statements are
inconsistent and deserving of disbelief. On 13 May 1991, petitioners' prayer for
a temporary restraining order to prevent respondents from enforcing the
assailed resolutions of NLRC was granted.
The instant petition lacks merit, hence, must be dismissed.

Opulencia likewise maintains that while he refused the insistent pleas of Esita
for employment in the ice plants due to lack of vacancy, he nonetheless
allowed him to stay in the premises of the ice plant for free and to collect fees
for crushing or loading ice of the customers and dealers of the ice plant.
Opulencia claims that in addition, Esita enjoyed free electricity and water, and
was allowed to cultivate crops within the premises of the ice plant to augment
his income. Petitioners however admit that "following the tradition of
'pakikisama' and as a token of gratitude of the part of the complainant (Esita),
he helps in the cleaning of the ice plant premises and engine room whenever
he is requested to do so, and this happens only (at) twice a month."
On 8 December 1989, Labor Arbiter Nemeriano D. Villena rendered a
decision 1 finding the existence of an employer-employee relationship between
petitioners and Esita and accordingly directed them to pay him P33,518.02
representing separation pay, underpayment of wages, allowances, 13th month,
holiday, premium for holiday, and rest day pays. The claim for overtime pay
was however dismissed for lack of basis, i.e., Esita failed to prove that overtime
services were actually rendered.
On 29 November 1990, the Third Division of the National Labor Relations
Commission, in Case No. RAB-IV-2-2206-89, affirmed the decision of Labor
Arbiter Villena but reduced the monetary award to P28,344.60 as it was not
proven that Esita worked every day including rest days and on the days before
the legal holidays. On 26 March 1991, petitioners' motion for reconsideration
was denied.
In this present recourse, petitioners seek reversal of the ruling of public
respondents Labor Arbiter and NLRC, raising the following arguments: that
public respondents have no jurisdiction over the instant case; that Esita's work
in the repair and construction of Dr. Opulencia's residence could not have

Petitioners allege that there is no employer-employee relationship between

them and Esita; consequently, public respondents have no jurisdiction over the
case. Petitioners even go to the extent of asserting that "in case like the one at
bar where employer-employee relationship has been questioned from the very
start, Labor Arbiters and the NLRC have no jurisdiction and should not assume
jurisdiction therein."
While the Labor Arbiter and the NLRC may subsequently be found without
jurisdiction over a case when it would later appear that no employer-employee
relationship existed between the contending parties, such is not the situation in
this case where the employer-employee relationship between the petitioners
and Esita was clearly established. If the argument of petitioners were to be
allowed, then unscrupulous employers could readily avoid the jurisdiction of the
Labor Arbiters and NLRC, and may even elude compliance with labor laws only
on the bare assertion that an employer-employee relationship does not exist.
Petitioners further argue that "complainant miserably failed to present any
documentary evidence to prove his employment. There was no time sheet, pay
slip and/or payroll/cash voucher to speak of. Absence of these material
documents are necessary fatal to complainant's cause."
We do not agree. No particular form of evidence is required to prove the
existence of an employer-employee relationship. Any competent and relevant
evidence to prove the relationship may be admitted. For, if only documentary
evidence would be required to show that relationship, no scheming employer
would ever be brought before the bar of justice, as no employer would wish to
come out with any trace of the illegality he has authored considering that it
should take much weightier proof to invalidate a written instrument. 2 Thus, as
in this case where the employer-employee relationship between petitioners and
LABOR LAW I |43

Esita was sufficiently proved by testimonial evidence, the absence of time

sheet, time record or payroll has become inconsequential.
The petitioners' reliance on Sevilla v. Court of Appeals 3 is misplaced. In that
case, we did not consider the inclusion of employer's name in the payroll as an
independently crucial evidence to prove an employer-employee relation.
Moreover, for a payroll to be utilized to disprove the employment of a person, it
must contain a true and complete list of the employees. But, in this case, the
testimonies of petitioners' witnesses admit that not all the names of the
employees were reflected in the payroll.
In their Consolidated Reply, petitioners assert that "employees who were
absent were naturally not included in the weekly payrolls." 4 But this simply
emphasizes the obvious. Petitioners' payrolls do not contain the complete list of
the employees, so that the payroll slips cannot be an accurate basis in
determining who are and are not their employees. In addition, as the Solicitor
General observes: ". . . . the payroll slips submitted by petitioners do not cover
the entire period of nine years during which private respondent claims to have
been employed by them, but only the periods from November 2 to November
29, 1986 and April 26 to May 30, 1987 . . . . It should be noted that petitioners
repeatedly failed or refused to submit all payroll slips covering the period during
which private respondent claims to have been employed by them despite
repeated directives from the Labor Arbiter . . . ." 5 In this regard, we can aptly
apply the disputable presumption that evidence willfully suppressed would be
adverse if produced. 6
Petitioners further contend that the claim of Esita that he worked from seven
o'clock in the morning to five o'clock in the afternoon, which is presumed to be
continuous, is hardly credible because otherwise he would not have had the
time to tend his crops. 7 As against this positive assertion of Esita, it behooves
petitioners to prove the contrary. It is not enough that they raise the issue of
probability, nay, improbability, of the conclusions of public respondents based
on the facts bared before them, for in case of doubt, the factual findings of the
tribunal which had the opportunity to peruse the conflicting pieces of evidence
should be sustained.
The petitioners point out that even granting arguendo that Esita was indeed a
mechanic, he could never be a regular employee because his presence would
be required only when there was a need for repair. We cannot sustain this
argument. This circumstance cannot affect the regular status of employment of

Esita. An employee who is required to remain on call in the employer's

premises or so close thereto that he cannot use the time effectively and
gainfully for his own purpose shall be considered as working while on call. 8 In
sum, the determination of regular and casual employment 9 is not affected by
the fact that the employee's regular presence in the place of work is not
required, the more significant consideration being that the work of the
employee is usually necessary or desirable in the business of the employer.
More importantly, Esita worked for 9 years and, under the Labor Code, "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
that activity in which he is employed . . . ." 10
The petitioners would give the impression that the repair of the ice plant and
the renovation of the residence of Dr. Opulencia were voluntarily extended by
Esita because "[r]espondent did it on their (sic) own." Unfortunately for
petitioners, we cannot permit these baseless assertions to prevail against the
factual findings of public respondents which went through the sanitizing
process of a public hearing. The same observation may be made of the alleged
inconsistencies in Esita's testimonies. Moreover, on the claim that Esita's
construction work could not ripen into a regular employment in the ice plant
because the construction work was only temporary and unrelated to the icemaking business, needless to say, the one month spent by Esita in construction
is insignificant compared to his nine-year service as compressor operator in
determining the status of his employment as such, and considering further that
it was Dr. Opulencia who requested Esita to work in the construction of his
house.
In allowing Esita to stay in the premises of the ice plant and permitting him to
cultivate crops to augment his income, there is no doubt that petitioners should
be commended; however, in view of the existence of an employer-employee
relationship as found by public respondents, we cannot treat humanitarian
reasons as justification for emasculating or taking away the rights and
privileges of employees granted by law. Benevolence, it is said, does not
operate as a license to circumvent labor laws. If petitioners were genuinely
altruistic in extending to their employees privileges that are not even required
by law, then there is no reason why they should not be required to give their
employees what they are entitled to receive. Moreover, as found by public
respondents, Esita was enjoying the same privileges granted to the other
employees of petitioners, so that in thus treating Esita, he cannot be
considered any less than a legitimate employee of petitioners.
LABOR LAW I |44

WHEREFORE, there being no grave abuse of discretion on the part of public

respondents, the instant petition is DISMISSED. Accordingly, the restraining
order we issued on 13 May 1991 is LIFTED.
SO ORDERED.

LABOR LAW I |45

FIRST DIVISION
G.R. No. 118101 September 16, 1996
EDDIE DOMASIG, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), CATA
GARMENTS CORPORATION and/or OTTO ONG and CATALINA CO.,
respondents.
PADILLA, J.:
This petition for certiorari under Rule 65 of the Rules of Court seeks to nullify
and set aside the Resolution 1 of respondent National Labor Relations
Commission (NLRC) rendered on 20 September 1994 remanding the records
of the case to the arbitration branch of origin for further proceedings.
The antecedent facts as narrated by public respondent in the assailed
resolution are as follows:
The complaint was instituted by Eddie Domasig against respondent Cata
Garments Corporation, a company engaged in garments business and its
owner/manager Otto Ong and Catalina Co for illegal dismissal, unpaid
commission and other monetary claim[s]. Complainant alleged that he
started working with the respondent on July 6, 1986 as Salesman when the
company was still named Cato Garments Corporation; that three (3) years
ago, because of a complaint against respondent by its workers, its
changed its name to Cata Garments Corporation; and that on August 29,
1992, he was dismissed when respondent learned that he was being
pirated by a rival corporation which offer he refused. Prior to his dismissal,
complainant alleged that he was receiving a salary of P1,500.00 a month
plus commission. On September 3, 1992 he filed the instant complaint.
Respondent denied complainant's claim that he is a regular employee
contending that he is a mere commission agent who receives a
commission of P5.00 per piece of article sold at regular price and P2.50
per piece sold in [sic] bargain price; that in addition to commission,
complainant received a fixed allowance of P1,500.00 a month; that he had
no regular time schedule; and that the company come [sic] into existence

only on September 17, 1991. In support of its claim that complainant is a

commission agent, respondent submitted as Annexes "B" and "B-1" the
List of Sales Collections, Computation of Commission due, expenses
incurred, cash advances received for the month of January and March
1992 (Rollo,p. 22-27). Respondent further contends that complainant failed
to turn over to the respondent his collection from two (2) buyers as per
affidavit executed by these buyers (Rollo p. 28-29) and for which,
according to respondent it initiated criminal proceedings against the
complainant.
The Labor Arbiter held that complainant was illegally dismissed and entitled
to reinstatement and backwages as well as underpayment of salary; 13th
month pay; service incentive leave and legal holiday. The Arbiter also
awarded complainant his claim for unpaid commission in the amount of
P143,955.00. 2
Private respondents appealed the decision of the labor arbiter to public
respondent. As aforesaid, the NLRC resolved to remand the case to the labor
arbiter for further proceeding. It declared as follows:
We find the decision of the Labor Arbiter not supported by evidence on
record. The issue of whether or not complainant was a commission agent
was not fully resolved in the assailed decision. It appears that the Labor
Arbiter failed to appreciate the evidences submitted by respondent as
Annexes "B" and "B-1" (Rollo p. 22-27) in support of its allegation as
regard[s] the nature of complainant's employment. Neither is there a
showing that the parties were required to adduce further to support their
respective claim. The resolution of the nature of complainant's employment
is vital to the case at bar considering that it would be determinative to his
entitlement of monetary benefits. The same is similarly true as regard the
claim [sic] for unpaid commission. The amount being claim [sic] for unpaid
commission as big as it is requires substantial proof to establish the
entitlement of the complainant proof to establish the entitlement of the
complainant to the same. We take not of the respondent's claim that "while
they admit that complainant has an unpaid commission due him, the same
is only for his additional sale of 4,027 pieces at regular price and 1,047
pieces at bargain price for a total sum of (P20,135.00 + 2,655.00) or
P22,820.00 as appearing in the list of Sales and unpaid commission"
(Annex "C" and "C-1" Appeal, Rollo p. 100-102). Said amount according to
LABOR LAW I |46

respondent is being withheld by them pending the accounting of money

collected by complainant from his two (2) buyers which was not remitted to
them. Considering the conflicting version of the parties regarding the
issues on hand, it was incumbent on the Labor Arbiter to conduct further
proceedings thereon. The ends of justice would better be served if both
partied are given the opportunity to ventilate further their positions. 3

Substantial evidence has been defined to be such relevant evidence as a

reasonable mind might accept as adequate to support a conclusion, and its
absence is not shown by stressing that there is contrary evidence on record,
direct or circumstantial, for the appellate court cannot substitute its own
judgment or criterion for that of the trial court in determining wherein lies the
weight of evidence or what evidence is entitled to belief. 5

In their comment on the petition at bar, private respondents agree with the
finding of the NLRC that the nature of petitioner's employment with private
respondents is vital to the case as it will determine the monetary benefits to
which he is entitled. They further aver that the evidence presented upon which
the labor arbiter based her decision is insufficient, so that the NLRC did not
commit grave abuse of discretion in remanding the case to the arbitration
branch of origin for further proceedings.

In a business establishment, an identification card is usually 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, we agree with the
labor arbiter that these matters constitute substantial evidence adequate to
support a conclusion that petitioner was indeed an employee of private
respondent.

The comment of the Solicitor General is substantially the same as that of

private respondents, i.e., there is no sufficient evidence to prove employeremployee relationship between the parties. Furthermore, he avers that the
order of the NLRC to the labor arbiter for further proceedings does not
automatically translate to a protracted trial on the merits for such can be
faithfully complied with through the submission of additional documents or
pleadings only.

Section 4, Rule V of the Rules of Procedure of the National Labor Relations

Commission provides thus:

The only issue to be resolved in this petition is whether or not the NLRC
gravely abused its discretion in vacating and setting aside the decision of the
labor arbiter and remanding the case to the arbitration branch of origin for
further proceedings.
In essence, respondent NLRC was not convinced that the evidence presented
by the petitioner, consisting of the identification card issued to him by private
respondent corporation and the cash vouchers reflecting his monthly salaries
covering the months stated therein, settled the issue of employer-employee
relationship between private respondents and petitioner.
It has long been established that in administrative and quasi-judicial
proceedings, substantial evidence is sufficient as a basis for judgment on the
existence of employer-employee relationship. No particular form of evidence is
required is required to prove the existence of such employer-employee
relationship. Any competent and relevant evidence to prove the relationship
may be admitted. 4

Sec. 4. Determination of Necessity of Hearing. Immediately after the

submission of the parties of their position papers/memoranda, the Labor
Arbiter shall motu propio determine whether there is need for a formal trial
or hearing. At this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to further elicit facts
or information, including but not limited to the subpoena of relevant
documentary evidence, if any, from any party or witness.
It is clear from the law that it is the arbiters who are authorized to
determine whether or not there is a necessity for conducting formal
hearings in cases brought before them for adjudication. Such determination
is entitled to great respect in the absence of arbitrariness. 6
In the case at bar, we do not believe that the labor arbiter acted arbitrarily.
Contrary to the finding of the NLRC, her decision at least on the existence of
an employer-employee relationship between private respondents and
petitioner, is supported by substantial evidence on record.
The list of sales collection including computation of commissions due,
expenses incurred and cash advances received (Exhibits "B" and "B-1") which,
according to public respondent, the labor arbiter failed to appreciate in support
of private respondents" allegation as regards the nature of petitioner's
LABOR LAW I |47

employment as a commission agent, cannot overcome the evidence of the ID

card and salary vouchers presented petitioner which private respondents have
not denied. The list presented by private respondents would even support
petitioner's allegations that, aside from a monthly salary of P1,500.00, he also
received commissions for his work as a salesman of private respondents.
Having been in the employ of private respondents continuously for more than
one year, under the law, petitioner is considered a regular employee. Proof
beyond reasonable doubt is not required as a basis for judgment on the legality
of an employer's dismissal of an employee, nor even preponderance of
evidence for that matter, substantial evidence being sufficient. 7 Petitioner's
contention that private respondents terminated his employment due to their
suspicion that he was being enticed by another firm to work for it was not
refuted by private respondents. The labor arbiter's conclusion that petitioner's
dismissal is therefore illegal, is not necessarily arbitrary or erroneous. It is
entitled to great weight and respect.

entitled, within thirty (30) days from the submission by the partied of all
necessary documents.
WHEREFORE, the resolutions of the public respondent dated 20 September
1994 and 9 November 1994 are SET ASIDE. The decision of the labor arbiter
dated 19 may 1993 us REINSTATED and AFFIRMED subject to the
modification above-stated as regards a re-computation by the labor arbiter of
the commissions to which petitioner maybe actually entitled.
SO ORDERED.

It was error and grave abuse of discretion for the NLRC to remand the case for
further proceedings to determine whether or not petitioner was private
respondents' employee. This would only prolong the final disposition of the
complaint. It is stressed that, in labor cases, simplification of procedures,
without regard to technicalities and without sacrificing the fundamental
requisites of due process, is mandated to ensure the speedy administration of
justice. 8
After all, Article 218 of the Labor Code grants the Commission and the labor
arbiter broad powers, including issuance of subpoena, requiring the attendance
and testimony of witnesses or the production of such documentary evidence as
may be material to a just determination of the matter under investigation.
Additionally, the National Labor Relations Commission and the labor arbiter
have authority under the Labor Code to decide a case based on the position
papers and documents submitted without resorting to the technical rules of
evidence. 9
However, in view of the need for further and correct computation of the
petitioner's commissions in the light of the exhibits presented and the dismissal
of the criminal cases filed against petitioner, the labor arbiter is required to
undertake a new computation of the commissions to which petitioner may be

LABOR LAW I |48

FIRST DIVISION

Duties & Responsibilities

G.R. No. 102467 June 13, 1997

Provides legal advice to the Board of Directors and Management of the

Bank.

EQUITABLE BANKING CORPORATION, Chairman MANUEL L. MORALES,

President & Director GEORGE L. GO, Vice-Chairman & Director RICARDO
J. ROMULO, Vice-Chairman & Director JOHN C.B. GO, Director HERMINIO
B. BANICO, Director FRANCISCO C. CHUA, Director PETER GO PAILIAN,
Director RICARDO C. LEONG, Director JULIUS T. LIMPE and Director
PEDRO A. ORTIZ, petitioners,
vs.
HON. NATIONAL LABOR RELATIONS COMMISSION, First Division, and
RICARDO L. SADAC, respondents.
VITUG, J.:
In the special civil action of certiorari, the petitioners, in order to have a
reasonable chance of success, must be able to come up with proof that the
tribunal, board or officer against whom the petition is brought has, in the
exercise of judicial or quasi-judicial function, acted without or in excess of
jurisdiction or with grave abuse of discretion amounting to lack or excess of
jurisdiction. In the instant petition, the Court is asked to rule against the
National Labor Relations Commission ("NLRC") in holding private respondent
Ricardo L. Sadac, Vice-President for the Legal Department and General
Counsel of petitioner Equitable Banking Corporation, to have been a regular
employee of the bank whose services could only be terminated in accordance
with the Labor Code. Petitioner bank submits that the services of private
respondent, its legal counsel, could be dispensed with at anytime pursuant to
the provision on the cessation of lawyer-client relationship under Rule 138 of
the Rules of Court.
The facts, essentially, do not appear to be in dispute.
Private respondent Sadac was appointed, effective 01 August 1981, VicePresident for the Legal Department of petitioner bank by its then President,
Manuel L. Morales, with a monthly salary of P8,000.00, plus an allowance of
P4,500.00 and a Christmas bonus equivalent to a two-month salary. 1 On 08
December 1981, private respondent was also designated as the bank's
General Counsel. Private respondent had these functions:

Takes charge of all Bank cases arising from bank transactions and rendering
opinions on legal questions in connection therewith.
Insures effective conduct of litigation, collection of past due accounts, and
investigation of irregularities and other legal matters affecting the interest of the
Bank.
Participates in action of major character, financing, amendments to the
Articles of Incorporation and By-laws of the Bank, changes in corporate
structures acquisition and disposal of important segments of enterprises or real
estate, determination of action to comply with statutory and other government
requirements.
Directs, plans, coordinates and maintains supervision and control over the
staff of the Legal Department.
Provides for and insures proper documentation and notarization of all Bank
transactions.
Assumes primary responsibility in the account of continuing research and
studies on questions of law affecting the Bank and its subsidiary corporations
and the formulation and development of legal opinions.
Recommends appointments, promotions, transfers and disciplinary actions
involving Legal Department personnel.
Establishes and maintains effective discipline, work performances, high level
of morale and cooperation among the staff.
Performs such other duties as may be assigned from time to time by the
President and the Board of Directors. 2
The turning point in the relationship among the parties surfaced, when, on 26
June 1989, nine lawyers 3 of the bank's Legal Department, who were all under
LABOR LAW I |49

private respondent, addressed a "letter-petition" to the Chairman of the Board

of Directors, accusing private respondent of abusive conduct, inefficiency,
mismanagement, ineffectiveness and indecisiveness. 4 The individual written
complaints of each of the nine lawyers were attached to the "letter-petition."
Private respondent was furnished with a copy of the letter.

b. MISMANAGEMENT
In my study and investigation, I found abundant evidence to support a
finding of mismanagement of the Legal Department by Atty. Sadac.
c. INEFFICIENCY, INEFFECTIVENESS, AND INDECISIVENESS

Private respondent promptly responded and manifested an intention to file

criminal, civil and administrative charges against the nine lawyers. Petitioner
Morales, by now Chairman of the Board of Directors, called the contending
lawyers to a conference in his office in an attempt to resolve their differences.
The meeting held on 29 June 1989, in the presence of Vice-President for
Personnel and Human Relations Dean Alejandro C. Reyes, apparently did not
amount to much and only resulted, it would seem, in a broad commitment of
the parties to implement the "existing procedures and practices in the Legal
Department." 5 The dialogue was marked, in fact, by "rancorous and very
heated altercation" between private respondent and his subordinates. Mr.
Morales considered the problem serious enough to merit the Board's attention.
In its meeting on 11 July 1989, the Board of Directors, apprised of the situation,
adopted a resolution directing one of its directors, petitioner Herminio B.
Banico, to look further into the matter and to "determine a course of action for
the best interest of the bank."
Petitioner Banico met with the complaining nine lawyers on 17 July 1989. He
was warned that if private respondent were to be retained in his position, the
lawyers would resign en masse. The following day, Mr. Banico saw private
respondent. The latter denied the charges leveled against him. Although the
two would appear to have explored various alternatives and avenues to solve
the crisis, nothing positive, however, came out of their meeting. Convinced that
reconciliation was out of the question, Mr. Banico, on 08 August 1989,
submitted a report to the Board of Directors with these findings:
a. ABUSIVE CONDUCT
There is no doubt at all, in my mind that the charge of "abusive conduct"
against Atty. Sadac, in his treatment in varying degrees, of the complaining
lawyers, is true, as this is supported by overwhelming evidence. Atty.
Sadac himself, in effect, admitted this when he proferred his apologies in
the presence of the Chairman in the "confrontation" held in the latter's
office.

The above specific charges are each proven and/or established by the
same nature of evidence. 6
Two days later, or on 10 August 1989, Mr. Morales issued a memorandum to
private respondent which, among other things, pertinently stated:
. . . The Board, however, feels that because during all its existence of
almost forty (40) years, the Bank never had in its employ any senior officer
who had compelled it to resort to the unfortunate, sorry and nasty
spectacle of conducting a formal hearing (which of course is distasteful to
all parties concerned) of whatever charge such as the one lodged against
you just to terminate your services, consonant with the due process
requirements of the Constitution, the Labor Code, the Implementing
Regulations thereof and other pertinent laws, it has chosen the more
compassionate option of waiting for your voluntary resignation from your
employ with the Bank.
In the meantime, since all the lawyers under you, by petitioning for a
change in leadership of the department despite the fact that all these
lawyers have all been hired and promoted to their positions upon your
recommendation, have thus shown lack of confidence in you, the Board
feels it has no reason to continue reposing confidence in you and therefore
elected to exercise its prerogative as your client, under the rules of client
and lawyer relationship to direct Atty. William R. Veto, Legal Counsel of the
Bank these many years to appear in substitution of you in all the cases in
which you are presently appearing as counsel of record for the Bank. For
this purpose, the Bank as your client, therefore, instructs you to deliver the
folders of pleadings and documents of all cases you are now personally
handling and submit a list of all the cases where you appear as the counsel
of record for the bank and the corresponding titles thereof not later than the
close of office hours on Tuesday, August 15, 1989 so that the Legal
Counsel of the Bank, Atty. William R. Veto, could file his substitution of
appearance in all said cases where you are counsel of record. Atty. Veto
LABOR LAW I |50

has already been instructed and authorized by the Board to take over from
you the functions that you are now performing in the Legal Department. 7
Reacting to the above memorandum, private respondent, on 14 August 1989
addressed a letter to Board Chairman Morales, furnishing the other members
of the Board, to the effect that the report of Mr. Banico contained libelous
statements and that the implementation of the chairman's memorandum would
lead to an illegal dismissal. Pointing out that he could not now in conscience
resign in the face of Mr. Banico's "baseless and libelous findings," private
respondent requested for a full hearing by the Board of Directors so that he
could clear his name. 8
On 17 August 1989, petitioner Ricardo J. Romulo, Board Vice-Chairman,
answered private respondent. Mr. Romulo stressed that private respondent's
services were not terminated by the Board which, instead, was merely
exercising its managerial prerogative "to control, conduct (its) business in the
manner (it) deems fit and to regulate the same." In reply to private respondent's
request for a formal hearing, Mr. Romulo reiterated the Board's decision that it
would be to the best interest of all concerned if the "distasteful spectacle" of a
hearing would not be resorted to "in order to adhere to (the bank's) long
standing compassionate policy." 9 Mr. Romulo also said:
We would like to emphasize that our decision as a Board did not dismiss
you from the service of the Bank. All that the Board is saying to you is that
it has lost its confidence in you and therefore it is patiently awaiting your
resignation of course with your right of retirement pay in accordance with
the policy adopted by the Bank under these situations. Trust or confidence
like love are feelings which emanate from the heart and, as the song goes,
"once a heart is torn apart it is never the same again." So also confidence
like a tooth once pulled can never be restored. 10
In his memorandum of 28 August 1989 to the members of the Board, private
respondent again made a request for a full hearing and cautioned that, under
Section 31 of the Corporation Code, individual members of the Board could be
held accountable for voting or assenting to patently unlawful acts of the
corporation.
On 31 August 1989, Mr. Romulo wrote back expressing, in part, as follows:

7. The charge that you have been constructively dismissed is likewise

without basis because as we said before, you are free to remain in the
employ of the bank if you so wish, even if the bank were to incur the
tremendous expense of continuing to pay your high salary just so it can
continue to adhere to its compassionate policy of avoiding ruining the
future of any of its officers by a possible dismissal for cause which is
certainly bound to leak to the public. It is believed, however, that there is no
law which can compel an employer to give any of his employees any
particular work at all. 11
Mr. Romulo stated that the bank's confidence on private respondent had
been lost "most especially in the light of (his) threats" and that the latter
could "bring the matter up in the appropriate forum." 12
Undaunted, private respondent, in his memorandum of 07 September 1989 to
the individual members of the Board of Directors, persisted in his request for a
formal investigation. 13 Having been unheeded, private respondent, on 09
November 1989, filed with the Manila arbitration branch of the NLRC, a
complaint, docketed NLRC Case No. 00-11-05252-89, against herein
petitioners for illegal dismissal and damages. 14
After learning of the filing of the complaint, the Board of Directors, on 21
November 1989, adopted Resolution No. 5803 terminating the services of
private respondent "in view of his belligerence" and the Board's "honest belief
that the relationship" between private respondent and petitioner bank was one
of "client and lawyer." Private respondent was removed from his office
occupancy in the bank and ordered disentitled, starting 10 August 1989, to any
compensation and other benefits. The Board instructed management to take
the necessary steps to "defend itself and all the members of the Board of
Directors" from private respondent's complaint. 15
Pursuing their stand that the association between the bank and private
respondent was one of a client-lawyer relationship, herein petitioners filed a
motion to dismiss the complaint with the NLRC on the ground of lack of
jurisdiction. 16 Private respondent, opposing the motion, insisted on the
existence of an employer-employee relationship between them. 17 In their reply,
petitioners added another ground for seeking a dismissal of the complaint, i.e.,
that under the ruling in Besa vs. PNB, 18 the rule governing the duration of
private respondent's term was provided for by the Rules of Court and not by
the Labor Code. 19
LABOR LAW I |51

Following an exchange of position papers and other pleadings, Labor Arbiter

Jovencio Ll. Mayor, Jr., on 02 October 1990, rendered a decision dismissing
the complaint for lack of merit. 20 The Labor Arbiter was convinced that the
relationship between petitioner bank and private respondent was one of
lawyer-client based on the functions of the latter which "only a lawyer with
highly trained legal mind, can effectively discharge." 21 He distinguished the
instant controversy from the situation in Hydro Resources Contractors
Corporation vs. Pagalilauan 22 in that herein private respondent, he said, only
performed functions encompassed by the practice of law while in Hydro
Resources, the involved lawyer was a "mere legal assistant" tasked with
certain duties not all that related to the practice of law. The Labor Arbiter
concluded that the complaint stated no cause of action because a lawyer-client
relationship should instead be governed by Section 26, Rule 138, of the Rules
of Court. On whether or not there were valid grounds to terminate the services
of private respondent, the Labor Arbiter, noting the "letter-petition" of the nine
subordinate lawyers of private respondent, said:
. . . The truth and veracity of these complaints were respectively affirmed
under oath by each and every one of these nine subordinate lawyers in
their individual affidavits (Annexes "1-J" to "1-R", inclusive), (Ibid). From
these individual statements, it can be culled that complainant has been
charged, among others, with committing such acts as shouting and
insulting lawyers even in the presence of clients, having frequent outbursts
of temper, being indecisive even on simple and fundamental questions, of
devoting time to private and personal matters such that he is always out of
the office, of being closed and narrow minded to the ideas of subordinates,
and other similar acts. These charges were never refuted by herein
complainant and instead narrated a general refutation . . . 23
The Labor Arbiter brushed aside private respondent's claim that he
was denied due process, holding that private respondent was "heard
exhaustively on the matter of the charge lodged against him" and that,
"for valid practical reasons," petitioners "were not in a position to
accede" to the demand for a formal hearing.24

Resources that
distinguished
between
an in-house counsel
and
an outside counsel hired on a retainer basis. Certain other circumstances that
likewise did not escape NLRC's attention were that petitioner George L. Go,
the bank's president, had enjoined private respondent to attend a banksponsored symposium on Japanese investment on 08 September 1989 at the
Hotel Intercontinental; that in petitioners' letter of 31 August 1989, private
respondent was referred to as an employee; that in another letter, dated 24
November
1989,
petitioner
admitted
having
terminated
private
respondent'semployment and requested the return of the 1988 Mitsubishi
Galant 1800 which he had acquired through the bank's car plan; and that,
through a communication of 02 January 1990 of the Personnel and HRD
Department, the bank announced that private respondent's employment had
been terminated effective 21 November 1989.
Turning to the issue of whether or not the employment of private respondent
was terminated for cause, the NLRC held that because he had not been
afforded a hearing in accordance with law, there was no factual basis to
support the allegation of loss of confidence made by petitioners who, instead,
had relied on the doctrine of res ipsa loquitor.
The NLRC ruled that private respondent was denied the right to due process
with the bank's failure to observe the twin requirements of notice and hearing.
The 10th August 1989 memorandum could not have been a substitute for
notice because it did not manifest petitioners' intention to dismiss him from
employment, and neither the meeting between private respondent and the
complaining lawyers nor those held between private respondent and petitioner
Banico could be considered the "investigations" which private respondent had
consistently sought.
For having been made to undergo unnecessary embarrassment by being
stripped of his functions and made "to undergo the sad and painful experience
of reporting to office every day doing nothing," the NLRC, citing Sibal vs.Notre
Dame of Greater Manila, 27 awarded damages.
The NLRC, thereby concluded:

On appeal, the NLRC concluded differently. On 24 September 1991, the First

Division of the NLRC rendered a resolution 25 reversing the decision of the
Labor Arbiter. It held that private respondent was an employee of petitioner
bank which "never stated that complainant was an outside counsel for he was
never so" 26 as against the pronouncement of the Court in Hydro

WHEREFORE, in view of all the foregoing considerations, let the Decision

of October 2, 1990 be, as it is hereby, SET ASIDE and a new one
ENTERED declaring the dismissal of the complainant as illegal, and
consequently ordering the respondents jointly and severally to reinstate
LABOR LAW I |52

him to his former position as bank Vice-President and General Counsel

without loss of seniority rights and other privileges, and to pay him full
backwages and other benefits from the time his compensation was
withheld to his actual reinstatement, as well as moral damages of
P100,000.00, exemplary damages of P50,000.00, and attorney's fees
equivalent to Ten Percent (10%) of the monetary award. Should
reinstatement be no longer possible due to strained relations, the
respondents are ordered likewise jointly and severally to grant separation
pay at one (1) month per year of service in the total sum of P293,650.00
with backwages and other benefits from November 16, 1989 to September
15, 1991 (cut-off date subject to adjustment) computed at P1,055,740.48,
plus damages of P100,000.00 (moral damages), P50,000.00 (exemplary
damages) and attorney's fees equal to Ten Percent (10%) of all the
monetary award, or a grand total of P1,649,329.53.
SO ORDERED.

28

Petitioners filed a motion, 29 opposed

reconsideration of the resolution.

by

private

respondent,

30

for

The motion for reconsideration was still pending when private respondent,
following an exchange of yet additional pleadings, filed an urgent exparte motion for immediate reinstatement grounded on Article 223 of the Labor
Code. 31 On 07 November 1991, NLRC Executive Clerk Pascual Y. Reyes
addressed a communication, with the letterhead of the First Division of the
NLRC, to Attys. Vicente Abad Santos and William R. Veto, counsel for
petitioners, which read:
G R E E T I N G S:
Consistent with the NLRC New Rules and Procedure on Appeal under
Republic Act 6715, amending Article 223 of the Labor Code,
RESPONDENT(s) is/are hereby directed within ten (10) calendar days
from receipt of this Order:
To immediately reinstate complainant under the same terms and
conditions prevailing prior to his dismissal or separation or, at
RESPONDENT(s) option to reinstate him in the payroll, and to submit
proof of compliance thereof, otherwise, a Writ of Execution shall issue. 32

Petitioners filed a motion to quash the "untitled document" which was

claimed to be "highly irregular." Private respondent countered, on the
strength of the ruling in Aris (Phil.) Inc. vs. NLRC, 33 that even before its
amendment by Section 12 of R.A. 6715, Article 223 of the Labor Code
already allowed execution of decisions of the NLRC pending their appeal to
the Secretary of Labor and Employment, and that, under Section 2, Rule
XII, of the New Rules of Procedure of the NLRC, Executive Clerk Reyes
could be said to be performing a function similar or equivalent to that
discharged by the Clerk of Court of the Court of Appeals.
Petitioners, on their part filed an urgent motion for immediate resolution of their
motion for reconsideration, 34 on account of what was felt to be the "dubious
legality" of the directive for reinstatement.
Pending the above incidents, particularly the motion for reconsideration of
NLRC's resolution that has reversed the Labor Arbiter's decision, petitioners
have filed the instant petition for certiorari, with prayer for the issuance of a writ
of preliminary injunction, before this Court. The petition questions the resolution
of the NLRC finding that an employer-employee relationship existed between
petitioner bank and private respondent invoking the rulings inBesa
vs. PNB 35 and Asis vs. Minister of Labor and Employment, 36 against that
of Hydro Resources Contractors vs.Pagalilauan; 37 that the facts on record do
support valid grounds for terminating the employment of private respondent;
and that due process has been duly observed. The petition likewise assails the
NLRC for its monetary awards and in omitting to resolve the allegation of
forum-shopping committed by private respondent.
This Court required petitioners to post a cash bond in the amount of
P500,000.00 for the issuance of a temporary restraining orders. 38
Prefatorily, the Court must state that the filing of a motion for reconsideration of
a decision of the NLRC is prerequisite to the elevation of the case to this Court
on a petition for certiorari. The rule is aimed at enabling the commission to look
into and correct its error or mistake, if any has been committed, without the
precipitate intervention of this Court. 39 The failure to allow that opportunity for
whatever reason is ordinarily a fatal procedural defect that could warrant the
dismissal of the petition. 40
In this case, petitioners, instead of waiting for the resolution by the NLRC of
their motion for reconsideration, posthaste filed the instant petition. Its
LABOR LAW I |53

prematurity notwithstanding, the instant petition for certiorari was given due
course in order not to unduly delay the final disposition of the case considering
that the issues involved 41 have heretofore been ventilated practically to the
limit by the parties.
While the Court agrees with private respondent that execution pending appeal
may be ordered by the NLRC, 42 it is equally true, however, that where the
dismissed employee's reinstatement would lead to a strained relation between
the employer and the employee or to an atmosphere of antipathy and
antagonism, the exception to the twin remedies of reinstatement and payment
of backwages can be invoked and reinstatement, which might become
anathema to industrial peace, could be held back pending
appeal. 43 Nevertheless, the Court is not prepared to preempt the NLRC and
conclude that the directive for reinstatement is of "dubious" character. 44 It can
be assumed that had petitioners waited for NLRC's resolution on the motion for
reconsideration, the question on the regularity in the issuance of the directive
for reinstatement could have perhaps properly been delved into.
The existence of an employer-employee relationship is, itself, a factual
question 45 well within the province of the NLRC. Considering, nevertheless,
that its findings are at odds with the Labor Arbiter, the Court sees it fit to dwell a
bit into the issue. 46
In determining the existence of an employer-employee relationship, the
following elements are considered: (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, with the control test generally
assuming primacy in the overall consideration. The power of control refers to
the existence of the power and not necessarily to the actual exercise thereof. It
is not essential, in other words, for the employer to actually supervise the
performance of duties of the employee; it is enough that the former has the
right to wield the power. 47
The NLRC, in the instant case, based its finding that there existed an
employer-employee relationship between petitioner bank and private
respondent on these factual settings:
It was complainant's understanding with respondent Morales that he would
be appointed and assigned to the Legal Department as vice President with
the same salary, privileges and benefits granted by the respondent bank to

its ranking senior officers. He was not hired as lawyer on a retainership

basis but as an officer of the bank.
Thus, the complainant was given an appointment as Vice President, Legal
Department, effective August 1, 1981, with a monthly salary of P8,000.00,
monthly allowance of P4,500.00, and the usual two months Christmas
bonus based on basic salary likewise enjoyed by the other officers of the
bank.
Then, as part of the ongoing organization of the Legal Department, the
position of General Counsel of the bank was created and extended to the
complainant. In addition to his duties as Vice President of the bank, the
complainant's duties and responsibilities were so defined as to prove that
he was a bank officer working under the supervision of the President and
the Board of Directors of the respondent bank.
In his more than eight years employment with the respondent bank, the
complainant was given the usual payslips to evidence his monthly gross
compensation. The respondent bank, as employer, withheld taxes due to
the Bureau of Internal Revenue from the complainant's salary as
employee. Moreover, the bank enrolled the complainant as its employee
under the Social Security System and Medicare programs. The
complainant contributed to the bank Employees' Provident Fund.
When the respondent bank changed its payroll accounting system in
September 1988 by appointing SGV & Co. to handle it and Far East Bank
& Trust Company to pay the salaries and other benefits of Equitable
Banking Corporation officers, the complainant was included as one of
corporate officers. Specifically, that there were eleven Far East Bank and
Trust Company credit memos starting October 13, 1988 up to September
13, 1989 received by the complainant from FBTC crediting his salary and
Christmas bonus to his account with FBTC per instruction of the
respondent bank.
Inasmuch as the complainant and the lawyers in the Legal Department
were receiving salaries and other benefits as other bank officers and
employees, the attorney's fees, documentary and notarial fees earned in
the exercise of their profession as in-house lawyers were not given to or
even shared with them, instead all were credited to the income of the bank.
In 1987 and 1988, the complainant and his subordinate lawyers were able
LABOR LAW I |54

to generate by way of attorney's fees, documentary and notarial fees a

total income of P973,028.00 for the bank('s) benefit. In turn, the respondent
bank shouldered the professional tax and Integrated Bar of the Philippines
dues of the complainant and his subordinate lawyers. Further proofs that
there existed employer-employee relationship between the respondent
bank and the complainant are the following, to wit:
(1) Complainant's monthly attendance, like those of other bank officers,
was recorded by the Chief Security Officer and reported to the Office of the
President with copy of the report furnished to the bank Personnel and HRD
Department.
(2) Complainant was authorized by the President to sign for and in behalf
of the bank contracts covering legal services of lawyers to be retained by
the respondent bank for its branches on periodical retainership basis.
(3) Complainant participated as part of management in annual
Management Planning Conferences which started in 1986 on objectivesetting and long-range planning in response to the requirement of the
rapidly changing environment.
(4) Respondent bank extended to complainant the benefit (of) a car plan
like any other qualified senior officer of the bank.
(5) Respondent bank since 1982 continuously reported and included the
complainant as one of its senior officers in its statements of financial
condition holding the position of Vice President. These bank statements
have been distributed and circularized to the public, including bank clients
and government entities.
(6) Complainant, like other bank officers, prepared his biographical data for
submission to the Central Bank after his assumption of duties in 1981.
Thereafter, and pursuant to the regulations of the Central Bank, he has
been required to update annually his biographical data. 48
It would virtually be foolhardy to so challenge the NLRC as having committed
grave abuse of discretion in coming up with its above findings. Just to the
contrary, NLRC appears to have been rather exhaustive in its examination of
this particular question (existence or absence of an employer-employee
relationship between the parties). Substantial evidence, which is the quantum

of evidence required to establish a fact in cases before administrative and

quasi-judicial bodies, connotes merely that amount of relevant evidence which
a reasonable mind might accept to be adequate in justifying a conclusion. 49
The rulings in Besa and Asis, cited by petitioners, could not be all that
controlling in this instance. In both cases, the question of whether or not the
parties had an employer-employee relationship was not the focal point of
controversy. In Besa, the Court said:
Petitioner's reliance on the constitutional provision against removal without
cause is misplaced. It is appropriate to invoke it when an officer or
employee in the civil service enjoying a fixed term is made to lose his
position without warrant or justification. It certainly finds no application
when the duration of one's term depends on the will of the appointing
power. That is so where the position held is highly confidential in character.
Such is the case of the Chief Legal Counsel of respondent Philippine
National Bank. That is our answer to the specific question before us. Our
decision is limited to the validity of the action taken by respondent Bank.
We do not by any means intimate an opinion as to the legal consequences
attaching to an action similar in character taken by any other office or
agency of the government concerning a lawyer in its staff, especially one
who was not employed precisely because of the marked degree of
confidence reposed in him, but rather because of his technical
competence.
As far as the petitioner is concerned, however, it is our conclusion that he
could not plausibly contend that there was a removal in the constitutional
sense as what did take place was a termination of official relation.
Accepting as he did the position of chief legal adviser, the essence of
which is the utmost degree of confidence involving such "close intimacy
which insures freedom of intercourse without embarrassment or freedom
from misgivings of betrayals" whether of personal trust or official matters,
he could not have been unaware that his term could be cut short any time
without giving rise to any alleged infringement of the above constitutional
safeguard. There was no removal which according to such a mandate is
only allowable for cause. Hence the lack of persuasive character of
petitioner's plea. 50
And in Asis, the Court held:

LABOR LAW I |55

The Deputy Minister found that the evidence satisfactorily established that
the Central's suspension of the petitioner's and others' monthly ration of
gasoline and LPG, had been caused by unavoidable financial constraints;
that such a suspension, in line with its conservation and cost-saving policy,
did not in truth effect any significant diminution of said benefits, since the
petitioner was nevertheless entitled to reimbursement of the actual amount
of gas consumed; that petitioner had encouraged his co-employees to file
complaints against the Central over the rations issue, and this, as well as
his institution of his own actions, had created an atmosphere of enmity in
the Central, and caused the loss by the Central of that trust and confidence
in him so essential in a lawyer-client relationship as that theretofore
existing between them; and that under the circumstances, petitioner's
discharge as the Central's Legal Counsel and Head of the Manpower &
Services Department was justified. The Deputy Minister's order of
dismissal was however subsequently modified, at the petitioner's instance,
by decreeing the payment to the latter of separation pay equivalent to one
month's salary for every year of service rendered. 51
It was, in fact, Hydro Resources which directly confronted the issue; there, the
Court ruled:
A lawyer, like any other professional, may very well be an employee of a
private corporation or even of the government. It is not unusual for a big
corporation to hire a staff of lawyers as its in-house counsel, pay them
regular salaries, rank them in its table of organization, and otherwise treat
them like its other officers and employees At the same time, it may also
contract with a law firm to act as outside counsel on a retainer basis. The
two classes of lawyers often work closely together but one group is made
up of employees while the other is not. A similar arrangement may exist as
to doctors, nurses, dentists, public relations practitioners, and other
professionals. 52
The existence of an employer-employee relationship, between the bank and
private respondent brings the case within the coverage of the Labor Code.
Under the Code, an employee may be validly dismissed if these requisites are
attendant: (1) the dismissal is grounded on any of the causes stated in Article
282 of Labor Code, and (2) the employee has been notified in writing and given
the opportunity to be heard and to defend himself as so required by Section 2
and Section 5, Rule XIV, Book V, of the Implementing Rules of the Labor
Code. 53

Article 282(c) of the Labor Code provides that "willful breach by the employee
of the trust reposed in him by his employer" is a cause for the termination of
employment by an employer. Ordinary breach of trust will not suffice, it must be
willful and without justifiable excuse. 54 This ground must be founded on facts
established by the employer who must clearly and convincingly prove by
substantial evidence 55 the facts and incidents upon which loss of confidence in
the employee may fairly be made to rest; otherwise, the dismissal will be
rendered illegal. 56
Petitioners' stated loss of trust and confidence on private respondent was
spawned by the complaints leveled against him by the lawyers in his
department. The letter-complaint signed by the nine lawyers read: June 26,
1989
Mr. Manuel L. Morales
Chairman, Board of Directors
Equitable Banking Corporation
S i r:
With utmost respect, we have taken the liberty of seeking your intercession on
the problems besetting the Legal Department.
For a long time, we have kept silent, containing within us the abusive conduct
and inefficiency of our department head, Atty. Ricardo L. Sadac, if only to
preserve cohesion among us. But we have reached the breaking point where
we could endure no more except to speak out. We realize the gravity of our
action and its possible repercussions but we only have ourselves to blame if
we remained silent.
Atty. Sadac's insults to the lawyers which are totally uncalled for and made
even in the presence of clients are simply too much for a fellow lawyer. His
outburst of temper on inconsequential matters have now become
commonplace in the department. His mismanagement, ineffectiveness as a
head and indecisiveness on basic legal questions have adversely affected the
smooth operation of the department and the output of the lawyers. He berates
rather than inspires, delays rather than facilitates. Each lawyer's complaint are
(sic) attached hereto attached (sic) as Annexes "A", "A-1" to "A-8".

LABOR LAW I |56

At present, we are disgruntled on how he runs the department and our morale
is at its ebb. While our only desire is to work under an auspicious environment
and under an effective head, we could not do so because of the General
Counsel.
We, therefore, respectfully pray for an immediate change in the department
leadership in order to pave the way for a more effective system, a new image
for the department, and restore professionalism and the dignity of the lawyers.
Please accept our assurances that the interest of the bank is primordial to us
as we pledge our total commitment and unflinching loyalty to this institution.
Thank you. 57
Concededly, a wide latitude of discretion is given an employer in terminating
the employment of managerial employees on the ground of breach of trust and
confidence. 58 In order to constitute a "just cause" for dismissal, however, the
act complained of must be related to the performance of the duties of the
employee such as would show him to be thereby unfit to continue working for
the employer. 59 Here, the grievances of the lawyers, in main, refer to what are
perceived to be certain objectionable character traits of private respondent.
Although petitioners have charged private respondent with allegedly
mishandling two cases in his long service with the bank, it is quite apparent
that private respondent would not have been asked to resign had it not been
for the letter-complaint of his associates in the Legal Department.
Confident that no employer-employee existed between the bank and private
respondent, petitioners have put aside the procedural requirements for
terminating one's employment, i.e., (a) a notice apprising the employee of the
particular acts or omissions for which his dismissal is sought, and (b) another
notice informing the employee of the employer's decision to dismiss
him. 60 Failure to comply with these requirements taints the dismissal with
illegality. This procedure is mandatory, any judgment reached by management
without that compliance can be considered void and inexistent. 61 While it is
true that the essence of due process is simply an opportunity to be heard or, as
applied in administrative proceedings, an opportunity to explain one's
side, 62 meetings in the nature of consultation and conferences such as the
case here, however, may not be valid substitutes for the proper observance of
notice and hearing. 63

Moral damages are recoverable when the dismissal of an employee 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.
Exemplary damages may be awarded if the dismissal is effected in a wanton,
oppressive or malevolent manner. 64
The Court has deliberated closely on this case and, after reviewing all the facts
and circumstances heretofore described, it is its considered view that
petitioners have not been motivated by malice or bad faith nor have they acted
in wanton, oppressive or malevolent manner such as to warrant a judgment
against them for moral and exemplary damages. Malice or bad faith, the lesser
evil of the two, the Court has once said, "implies a conscious and intentional
design to do a wrongful act for a dishonest purpose or moral obliquity; it is
different from the negative idea of negligence in that malice or bad faith
contemplates a state of mind affirmatively operating with furtive design or ill
will." 65
It, too, then follows that the individual petitioners may not be held solidarily
liable with the bank. In Santos vs.NLRC, 66 the Court has explained the rule
quite elaborately; thus:
A corporation is a juridical entity with legal personality separate and distinct
from those acting for and in its behalf and, in general, from the people
comprising it. The rule is that obligations incurred by the corporation, acting
through its directors, officers and employees, are its sole liabilities.
Nevertheless, being a mere fiction of law, peculiar situations or valid grounds
can exist to warrant, albeit done sparingly, the disregard of its independent
being and the lifting of the corporate veil. As a rule, this situation might arise
when a corporation is used to evade a just and due obligation or to justify a
wrong, to shield or perpetrate fraud, to carry out similar other unjustifiable
aims or intentions, or as a subterfuge to commit injustice and so circumvent
the law. In Tramat Mercantile, Inc., vs. Court of Appeals [238 SCRA 14, 19],
the Court has collated the settled instances when, without necessarily
piercing the veil of corporate fiction, personal civil liability can also be said to
lawfully attach to a corporate director, trustee or officer; to wit: When
(1) He assents (a) to a patently unlawful act of the corporation, or (b) for
bad faith or gross negligence in directing its affairs, or (c) for conflict of
interest, resulting in damages to the corporation, its stockholders or other
persons;
LABOR LAW I |57

(2) He consents to the issuance of watered stocks or who, having

knowledge thereof, does not forthwith file with the corporate secretary his
written objection thereto;
(3) He agrees to hold himself personally and solidarily liable with the
corporation; or
(4) He is made, by a specific provision of law, to personally answer for his
corporate action.
The case of petitioner is way off these exceptional instances. It is not even
shown that petitioner has had a direct hand in the dismissal of private
respondent enough to attribute to him (petitioner) a patently unlawful act
while acting for the corporation. Neither can Article 289 of the Labor Code be
applied since this law specifically refers only to the imposition
of penalties under the Code. . . . .

the conflict was between two brothers occupying the highest ranking
positions in the company. There were incontrovertible facts which pointed to
extreme personal animosity that resulted, evidently in bad faith, in the easing
out from the company of one of the brothers by the other.
The basic rule is still that which can be deduced from the Court's
pronouncement in Sunio vs.National Labor Relations Commission [127
SCRA 390]; thus:
We come now to the personal liability of petitioner, Sunio, who was made
jointly and severally responsible with petitioner company and CIPI for the
payment of the backwages of private respondents. This is reversible error.
The Assistant Regional Director's Decision failed to disclose the reason
why he was made personally liable. Respondents, however, alleged as
grounds thereof, his the being owner of one-half (1/2) interest of said
corporation, and his alleged arbitrary dismissal of private respondents.

It is true, there were various cases when corporate officers were themselves
held by the Court to be personally accountable for the payment of wages and
money claims to its employees. In A.C.Ransom Labor Union-CCLU
vs. NLRC [142 SCRA 269] for instance, the Court ruled that under the
Minimum Wage Law, the responsible officer of an employer corporation could
be held personally liable for nonpayment of backwages for "(i)f the policy of
the law were otherwise, the corporation employer (would) have devious ways
for evading payment of back wages." In the absence of a clear identification
of the officer directly responsible for failure to pay the backwages, the Court
considered the President of the corporation as such officer. The case was
cited in Chua vs. NLRC [182 SCRA 353] in holding personally liable the vicepresident of the company, being the highest and most ranking official of the
corporation next to the President who was dismissed, for the latter's claim for
unpaid wages.

Petitioner Sunio was impleaded in the Complaint in his capacity as General

Manager of petitioner corporation There appears to be no evidence on
record that he acted maliciously or in bad faith in terminating the services
of private respondents. His act, therefore, was within the scope of his
authority and was a corporate act.

A review of the above exceptional cases would readily disclose the

attendance of facts and circumstances that could rightly sanction personal
liability on the part of the company officer. In A.C.Ransom, the corporate
entity was a family corporation and execution against it could not be
implemented because of the disposition posthaste of its leviable assets
evidently in order to evade its just and due obligations. The doctrine of
"piercing
the
veil
of
corporate
fiction"
was
thus
clearly
appropriate. Chua likewise involved another family corporation, and this time

The Court, to be sure, did appear to have deviated somewhat in Gudez

vs. NLRC [183 SCRA 644]; however, it should be clear from our recent
pronouncement in Mam Realty Development Corporation and Manuel
Centeno vs. NLRC [244 SCRA 797] that theSunio doctrine still prevails. 67

It is basic that a corporation is invested by law with a personality separate

and distinct from those of the persons composing it as well as from that of
any other legal entity to which it may be related. Mere ownership by a
single stockholder or by another corporation of all or nearly all of the capital
stock of a corporation is not of itself sufficient ground for disregarding the
separate corporate personality. Petitioner Sunio, therefore, should not have
been made personally answerable for the payment of private respondents'
back salaries.

For having violated private respondent's right to due process private

respondent shall, considering the attendant circumstances particularly his

LABOR LAW I |58

repeated, but unheeded, request for a hearing, be entitled to an amount of

P5,000.00.
The allegation that private respondent was guilty of forum-shopping deserves
scant consideration. Suffice it said that, for forum-shopping to exist, both
actions should involve a common transaction with essentially the same facts
and circumstances and raise identical causes of action, subject matter and
issues. 68 Certainly, the filing by private respondent of a criminal action for libel
during the pendency of this illegal dismissal case could not constitute forumshopping.
The controversy spawning this case has generated not too little personal
animosities. 69 Reinstatement, which is the consequence of illegal dismissal,
has markedly been rendered undesirable. Private respondent shall, instead, be
entitled to backwages from the time of his dismissal until reaching sixty (60)
years of age (1995) 70 and, thereupon, to retirement benefits in accordance
with Article 287 of the Labor Code and Section 14, 71 Rule 1, Book VI, of the
Implementing Rules of the Labor Code. 72
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED
with the following MODIFICATIONS: That private respondent shall be entitled
to backwages from termination of employment until turning sixty (60) years of
age (in 1995) and, thereupon, to retirement benefits in accordance with law;
that private respondent shall be paid an additional amount of P5,000.00; that
the award of moral and exemplary damages are deleted; and that the liability
herein pronounced shall be due from petitioner bank alone, the other
petitioners being absolvedfrom solidary liability. No costs.
SO ORDERED.

LABOR LAW I |59

FIRST DIVISION
G.R. No. 147816

On 15 August 1992, barely two months after the renewal of his contract,
petitioner received the following notice from respondent firm May 9, 2003
"Dear Mr. Paguio,

EFREN P. PAGUIO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, METROMEDIA TIMES
CORPORATION, ROBINA Y. GOKONGWEI, LIBERATO GOMEZ, JR.,
YOLANDA E. ARAGON, FREDERICK D. GO and ALDA
IGLESIA,respondents.
VITUG, J.:
On 22 June 1992, respondent Metromedia Times Corporation entered, for the
fifth time, into an agreement with petitioner Efren P. Paguio, appointing the
latter to be an account executive of the firm. 1 Again, petitioner was to solicit
advertisements for "The Manila Times," a newspaper of general circulation,
published by respondent company. Petitioner, for his efforts, was to receive
compensation consisting of a 15% commission on direct advertisements less
withholding tax and a 10% commission on agency advertisements based on
gross revenues less agency commission and the corresponding withholding
tax. The commissions, released every fifteen days of each month, were to be
given to petitioner only after the clients would have paid for the advertisements.
Apart from commissions, petitioner was also entitled to a monthly allowance of
P2,000.00 as long as he met the P30,000.00-monthly quota. Basically, the
contentious points raised by the parties had something to do with the following
stipulations of the agreement; viz:
"12. You are not an employee of the Metromedia Times Corporation nor
does the company have any obligations towards anyone you may employ,
nor any responsibility for your operating expenses or for any liability you
may incur. The only rights and obligations between us are those set forth in
this agreement. This agreement cannot be amended or modified in any
way except with the duly authorized consent in writing of both parties.
"13. Either party may terminate this agreement at any time by giving written
notice to the other, thirty (30) days prior to effectivity of termination." 2

"Please be advised of our decision to terminate your services as Account

Executive of Manila Times effective September 30, 1992.
"This is in accordance with our contract signed last July 1, 1992." 3
Apart from vague allegations of misconduct on which he was not given the
opportunity to defend himself, i.e., pirating clients from his co-executives and
failing to produce results, no definite cause for petitioner's termination was
given. Aggrieved, petitioner filed a case before the labor arbiter, asking that his
dismissal be declared unlawful and that his reinstatement, with entitlement to
backwages without loss of seniority rights, be ordered. Petitioner also prayed
that respondent company officials be held accountable for acts of unfair labor
practice, for P500,000.00 moral damages and for P200,000.00 exemplary
damages.
In their defense, respondent Metromedia Times Corporation asserted that it did
not enter into any agreement with petitioner outside of the contract of services
under Articles 1642 and 1644 of the Civil Code of the Philippines. 4Asserting
their right to terminate the contract with petitioner, respondents pointed to the
last provision thereof stating that both parties could opt to end the contract
provided that either party would serve, thirty days prior to the intended date of
termination, the corresponding notice to the other.
The labor arbiter found for petitioner and declared his dismissal illegal. The
arbiter ordered respondent Metromedia Times Corporation and its officers to
reinstate petitioner to his former position, without loss of seniority rights, and to
pay him his commissions and other remuneration accruing from the date of
dismissal on 15 August 1992 up until his reinstatement. He likewise adjudged
that Liberato I. Gomez, general manager of respondent corporation, be held
liable to petitioner for moral damages in the amount of P20,000.00.
On appeal, the National Labor Relations Commission (NLRC) reversed the
ruling of the labor arbiter and declared the contractual relationship between the
parties as being for a fixed-term employment. The NLRC declared a fixed-term
LABOR LAW I |60

employment to be lawful as long as "it was agreed upon knowingly and

voluntarily by the parties, without any force, duress or improper pressure being
brought to bear upon the worker and absent any other circumstances vitiating
his consent."5 The finding of the NLRC was primarily hinged on the assumption
that petitioner, on account of his educated stature, having indeed personally
prepared his pleadings without the aid of counsel, was an unlikely victim of a
lopsided contract. Rejecting the assertion of petitioner that he was a regular
employee, the NLRC held: "The decisive determinant would not be the
activities that the employee (was) called upon to perform but rather, the day
certain agreed upon by the parties for the commencement and termination of
their employment relationship, a day certain being understood to be that which
(would) necessarily come, although it (might) not be known when." 6
Petitioner appealed the ruling of the NLRC before the Court of Appeals which
upheld in toto the findings of the commission. In his petition for review
on certiorari, petitioner raised the following issues for resolution:
"WHETHER OR NOT PETITIONER'S CONTRACT WITH PRIVATE
RESPONDENT'S COMPANY IS FOR A FIXED PERIOD.
"WHETHER OR NOT PETITIONER'S DISMISSAL IS LEGAL.
"WHETHER OR NOT PETITIONER IS ENTITLED TO BACKWAGES
AND MORAL DAMAGES."7
The crux of the matter would entail the determination of the nature of
contractual relationship between petitioner and respondent company - was it or
was it not one of regular employment?
A "regular employment," whether it is one or not, is aptly gauged from the
concurrence, or the non-concurrence, of the following factors - a) the manner
of selection and engagement of the putative employee, b) the mode of
payment of wages, c) the presence or absence of the power of dismissal; and
d) the presence or absence of the power to control the conduct of the putative
employee or the power to control the employee with respect to the means or
methods by which his work is to be accomplished. 8 The "control test" assumes
primacy in the overall consideration. Under this test, an employment relation
obtains where work is performed or services are rendered under the control
and supervision of the party contracting for the service, not only as to the result
of the work but also as to the manner and details of the performance desired. 9

An indicum of regular employment, rightly taken into account by the labor

arbiter, was the reservation by respondent Metromedia Times Corporation not
only of the right to control the results to be achieved but likewise the manner
and the means used in reaching that end. 10 Metromedia Times Corporation
exercised such control by requiring petitioner, among other things, to submit a
daily sales activity report and also a monthly sales report as well. Various
solicitation letters would indeed show that Robina Gokongwei, company
president, Alda Iglesia, the advertising manager, and Frederick Go, the
advertising director, directed and monitored the sales activities of petitioner.
The Labor Code, in Article 280 thereof, 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 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 proceeding 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."
Thus defined, a regular employee is one who is engaged to perform activities
which are necessary and desirable in the usual business or trade of the
employer as against those which are undertaken for a specific project or are
seasonal. Even in these latter cases, where such person has rendered at least
one year of service, regardless of the nature of the activity performed or of
whether it is continuous or intermittent, the employment is considered regular
as long as the activity exists, it not being indispensable that he be first issued a
regular appointment or be formally declared as such before acquiring a regular
status.11

LABOR LAW I |61

That petitioner performed activities which were necessary and desirable to the
business of the employer, and that the same went on for more than a year,
could hardly be denied. Petitioner was an account executive in soliciting
advertisements, clearly necessary and desirable, for the survival and continued
operation of the business of respondent corporation. Robina Gokongwei, its
President, herself admitted that the income generated from paid
advertisements was the lifeblood of the newspaper's existence. Implicitly,
respondent corporation recognized petitioner's invaluable contribution to the
business when it renewed, not just once but five times, its contract with
petitioner.

REINSTATED except with respect to the P20,000.00 moral damages adjudged

against respondent Liberato I. Gomez which award is deleted.
SO ORDERED.

Respondent company cannot seek refuge under the terms of the agreement it
has entered into with petitioner. The law, in defining their contractual
relationship, does so, not necessarily or exclusively upon the terms of their
written or oral contract, but also on the basis of the nature of the work petitioner
has been called upon to perform. 12 The law affords protection to an employee,
and it will not countenance any attempt to subvert its spirit and intent. A
stipulation in an agreement can be ignored as and when it is utilized to deprive
the employee of his security of tenure. 13 The sheer inequality that characterizes
employer-employee relations, where the scales generally tip against the
employee, often scarcely provides him real and better options.
The real question that should thus be posed is whether or not petitioner has
been justly dismissed from service. A lawful dismissal must meet both
substantive and procedural requirements; in fine, the dismissal must be for a
just or authorized cause and must comply with the rudimentary due process of
notice and hearing. It is not shown that respondent company has fully bothered
itself with either of these requirements in terminating the services of petitioner.
The notice of termination recites no valid or just cause for the dismissal of
petitioner nor does it appear that he has been given an opportunity to be heard
in his defense.
The evidence, however, found by the appellate court is wanting that would
indicate bad faith or malice on the part of respondents, particularly by
respondent Liberato I. Gomez, and the award of moral damages must thus be
deleted.
WHEREFORE, the instant petition is GRANTED. The decision of the Court of
Appeals in C.A. G.R. SP No. 527773 and that of the National Labor Relations
Commission are hereby SET ASIDE and that of the Labor Arbiter is
LABOR LAW I |62

SECOND DIVISION

Petitioner company moved to reconsider, which was denied, hence this petition
for review raising four legal issues to wit:

G.R. No. 73887 December 21, 1989

GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,
vs.
HONORATO JUDICO and NATIONAL LABOR RELATIONS
COMMISSION, respondents.
PARAS J.:
Before us is a Petition for certiorari to review the decision of the National Labor
Relations Commission (NLRC, for brevity) dated September 9, 1985 reversing
the decision of Labor Arbiter Vito J. Minoria, dated June 9, 1983, by 1) ordering
petitioner insurance company, Great Pacific Life Assurance Corporation
(Grepalife, for brevity) to recognize private respondent Honorato Judico, as its
regular employee as defined under Art. 281 of the Labor Code and 2)
remanding the case to its origin for the determination of private respondent
Judico's money claims.
The records of the case show that Honorato Judico filed a complaint for illegal
dismissal against Grepalife, a duly organized insurance firm, before the NLRC
Regional Arbitration Branch No. VII, Cebu City on August 27, 1982. Said
complaint prayed for award of money claims consisting of separation pay,
unpaid salary and 13th month pay, refund of cash bond, moral and exemplary
damages and attorney's fees.
Both parties appealed to the NLRC when a decision was rendered by the
Labor Arbiter dismissing the complaint on the ground that the employeremployee relations did not exist between the parties but ordered Grepalife to
pay complainant the sum of Pl,000.00 by reason of Christian Charity.
On appeal, said decision was reversed by the NLRC ruling that complainant is
a regular employee as defined under Art. 281 of the Labor Code and declaring
the appeal of Grepalife questioning the legality of the payment of Pl,000.00 to
complainant moot and academic. Nevertheless, for the purpose of revoking the
supersedeas bond of said company it ruled that the Labor Arbiter erred in
awarding Pl,000.00 to complainant in the absence of any legal or factual basis
to support its payment.

I. Whether the relationship between insurance agents and their principal,

the insurance company, is that of agent and principal to be governed by the
Insurance Code and the Civil Code provisions on agency, or one of
employer-employee, to be governed by the Labor Code.
II. Whether insurance agents are entitled to the employee benefits
prescribed by the Labor Code.
III. Whether the public respondent NLRC has jurisdiction to take
cognizance of a controversy between insurance agent and the insurance
company, arising from their agency relations.
IV. Whether the public respondent acted correctly in setting aside the
decision of Labor Arbiter Vito J. Minoria and in ordering the case remanded
to said Labor Arbiter for further proceedings.(p. 159, Rollo)
The crux of these issues boil down to the question of whether or not employeremployee relationship existed between petitioner and private respondent.
Petitioner admits that on June 9, 1976, private respondent Judico entered into
an agreement of agency with petitioner Grepalife to become a debit agent
attached to the industrial life agency in Cebu City. Petitioner defines a debit
agent as "an insurance agent selling/servicing industrial life plans and policy
holders. Industrial life plans are those whose premiums are payable either
daily, weekly or monthly and which are collectible by the debit agents at the
home or any place designated by the policy holder" (p. 156, Rollo). Such
admission is in line with the findings of public respondent that as such debit
agent, private respondent Judico had definite work assignments including but
not limited to collection of premiums from policy holders and selling insurance
to prospective clients. Public respondent NLRC also found out that complainant
was initially paid P 200. 00 as allowance for thirteen (13) weeks regardless of
production and later a certain percentage denominated as sales reserve of his
total collections but not lesser than P 200.00. Sometime in September 1981,
complainant was promoted to the position of Zone Supervisor and was given
additional (supervisor's) allowance fixed at P110.00 per week. During the third
week of November 1981, he was reverted to his former position as debit agent
LABOR LAW I |63

but, for unknown reasons, not paid so-called weekly sales reserve of at least P
200.00. Finally on June 28, 1982, complainant was dismissed by way of
termination of his agency contract.
Petitioner assails the findings of the NLRC that private respondent is an
employee of the former. Petitioner argues that Judico's compensation was not
based on any fixed number of hours he was required to devote to the service of
petitioner company but rather it was the production or result of his efforts or his
work that was being compensated and that the so-called allowance for the first
thirteen weeks that Judico worked as debit agent, cannot be construed as
salary but as a subsidy or a way of assistance for transportation and meal
expenses of a new debit agent during the initial period of his training which was
fixed for thirteen (13) weeks. Stated otherwise, petitioner contends that
Judico's compensation, in the form of commissions and bonuses, was based
on actual production, (insurance plans sold and premium collections).
Said contentions of petitioner are strongly rejected by private respondent. He
maintains that he received a definite amount as his Wage known as "sales
reserve" the failure to maintain the same would bring him back to a beginner's
employment with a fixed weekly wage of P 200.00 regardless of production. He
was assigned a definite place in the office to work on when he is not in the
field; and in addition to canvassing and making regular reports, he was
burdened with the job of collection and to make regular weekly report thereto
for which an anemic performance would mean dismissal. He earned out of his
faithful and productive service, a promotion to Zone Supervisor with additional
supervisor's allowance, (a definite or fixed amount of P110.00) that he was
dismissed primarily because of anemic performance and not because of the
termination of the contract of agency substantiate the fact that he was indeed
an employee of the petitioner and not an insurance agent in the ordinary
meaning of the term.
That private respondent Judico was an agent of the petitioner is
unquestionable. But, as We have held in Investment Planning Corp. vs. SSS,
21 SCRA 294, an insurance company may have two classes of agents who sell
its insurance policies: (1) salaried employees who keep definite hours and work
under the control and supervision of the company; and (2) registered
representatives who work on commission basis. The agents who belong to the
second category are not required to report for work at anytime, they do not
have to devote their time exclusively to or work solely for the company since
the time and the effort they spend in their work depend entirely upon their own

will and initiative; they are not required to account for their time nor submit a
report of their activities; they shoulder their own selling expenses as well as
transportation; and they are paid their commission based on a certain
percentage of their sales. One salient point in the determination of employeremployee relationship which cannot be easily ignored is the fact that the
compensation that these agents on commission received is not paid by the
insurance company but by the investor (or the person insured). After
determining the commission earned by an agent on his sales the agent directly
deducts it from the amount he received from the investor or the person insured
and turns over to the insurance company the amount invested after such
deduction is made. The test therefore is whether the "employer" controls or has
reserved the right to control the "employee" not only as to the result of the work
to be done but also as to the means and methods by which the same is to be
accomplished.
Applying the aforementioned test to the case at bar, We can readily see that
the element of control by the petitioner on Judico was very much present. The
record shows that petitioner Judico received a definite minimum amount per
week as his wage known as "sales reserve" wherein the failure to maintain the
same would bring him back to a beginner's employment with a fixed weekly
wage of P 200.00 for thirteen weeks regardless of production. He was assigned
a definite place in the office to work on when he is not in the field; and in
addition to his canvassing work he was burdened with the job of collection. In
both cases he was required to make regular report to the company regarding
these duties, and for which an anemic performance would mean a dismissal.
Conversely faithful and productive service earned him a promotion to Zone
Supervisor with additional supervisor's allowance, a definite amount of P110.00
aside from the regular P 200.00 weekly "allowance". Furthermore, his contract
of services with petitioner is not for a piece of work nor for a definite period.
On the other hand, an ordinary commission insurance agent works at his own
volition or at his own leisure without fear of dismissal from the company and
short of committing acts detrimental to the business interest of the company or
against the latter, whether he produces or not is of no moment as his salary is
based on his production, his anemic performance or even dead result does not
become a ground for dismissal. Whereas, in private respondent's case, the
undisputed facts show that he was controlled by petitioner insurance company
not only as to the kind of work; the amount of results, the kind of performance
but also the power of dismissal. Undoubtedly, private respondent, by nature of
his position and work, had been a regular employee of petitioner and is
LABOR LAW I |64

therefore entitled to the protection of the law and could not just be terminated
without valid and justifiable cause.
Premises considered, the appealed decision is hereby AFFIRMED in toto.
SO ORDERED.

LABOR LAW I |65

EN BANC
G.R. No. L-21278

December 27, 1966

FEATI UNIVERSITY, petitioner,

vs.
HON. JOSE S. BAUTISTA, Presiding Judge of the Court of Industrial
Relations and FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondents.
---------------------------------------G.R. No. L-21462

December 27, 1966

FEATI UNIVERSITY, petitioner-appellant,

vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
---------------------------------------G.R. No. L-21500

December 27, 1966

FEATI UNIVERSITY, petitioner-appellant,

vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
ZALDIVAR, J.:
This Court, by resolution, ordered that these three cases be considered
together, and the parties were allowed to file only one brief for the three cases.
On January 14, 1963, the President of the respondent Feati University Faculty
Club-PAFLU hereinafter referred to as Faculty Club wrote a letter to Mrs.
Victoria L. Araneta, President of petitioner Feati University hereinafter
referred to as University informing her of the organization of the Faculty
Club into a registered labor union. The Faculty Club is composed of members
who are professors and/or instructors of the University. On January 22, 1963,
the President of the Faculty Club sent another letter containing twenty-six
demands that have connection with the employment of the members of the
Faculty Club by the University, and requesting an answer within ten days from

receipt thereof. The President of the University answered the two letters,
requesting that she be given at least thirty days to study thoroughly the
different phases of the demands. Meanwhile counsel for the University, to
whom the demands were referred, wrote a letter to the President of the Faculty
Club demanding proof of its majority status and designation as a bargaining
representative. On February 1, 1963, the President of the Faculty Club again
wrote the President of the University rejecting the latter's request for extension
of time, and on the same day he filed a notice of strike with the Bureau of
Labor alleging as reason therefor the refusal of the University to bargain
collectively. The parties were called to conferences at the Conciliation Division
of the Bureau of Labor but efforts to conciliate them failed. On February 18,
1963, the members of the Faculty Club declared a strike and established picket
lines in the premises of the University, resulting in the disruption of classes in
the University. Despite further efforts of the officials from the Department of
Labor to effect a settlement of the differences between the management of the
University and the striking faculty members no satisfactory agreement was
arrived at. On March 21, 1963, the President of the Philippines certified to the
Court of Industrial Relations the dispute between the management of the
University and the Faculty Club pursuant to the provisions of Section 10 of
Republic Act No. 875.
In connection with the dispute between the University and the Faculty Club and
certain incidents related to said dispute, various cases were filed with the Court
of Industrial Relations hereinafter referred to as CIR. The three cases now
before this Court stemmed from those cases that were filed with the CIR.
CASE NO. G.R. NO. L-21278
On May 10, 1963, the University filed before this Court a "petition
for certiorari and prohibition with writ of preliminary injunction", docketed as
G.R. No. L-21278, praying: (1) for the issuance of the writ of preliminary
injunction enjoining respondent Judge Jose S. Bautista of the CIR to desist
from proceeding in CIR Cases Nos. 41-IPA, 1183-MC, and V-30; (2) that the
proceedings in Cases Nos. 41-IPA and 1183-MC be annulled; (3) that the
orders dated March 30, 1963 and April 6, 1963 in Case No. 41-IPA, the order
dated April 6, 1963 in Case No. 1183-MC, and the order dated April 29, 1963 in
Case No. V-30, all be annulled; and (4) that the respondent Judge be ordered
to dismiss said cases Nos. 41-IPA, 1183-MC and V-30 of the CIR.

LABOR LAW I |66

On May 10, 1963, this Court issued a writ of preliminary injunction, upon the
University's filing a bond of P1,000.00, ordering respondent Judge Jose S.
Bautista as Presiding Judge of the CIR, until further order from this Court, "to
desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA,
1183-MC and V-30 of the Court of Industrial Relations)." 1 On December 4,
1963, this Court ordered the injunction bond increased to P100,000.00; but on
January 23, 1964, upon a motion for reconsideration by the University, this
Court reduced the bond to P50,000.00.
A brief statement of the three cases CIR Cases 41-IPA, 1183-MC and V-30
involved in the Case G.R. No. L-21278, is here necessary.
CIR Case No. 41-IPA, relates to the case in connection with the strike staged
by the members of the Faculty Club. As we have stated, the dispute between
the University and the Faculty Club was certified on March 21, 1963 by the
President of the Philippines to the CIR. On the strength of the presidential
certification, respondent Judge Bautista set the case for hearing on March 23,
1963. During the hearing, the Judge endeavored to reconcile the part and it
was agreed upon that the striking faculty members would return to work and
the University would readmit them under a status quo arrangement. On that
very same day, however, the University, thru counsel filed a motion to dismiss
the case upon the ground that the CIR has no jurisdiction over the case,
because (1) the Industrial Peace Act is not applicable to the University, it being
an educational institution, nor to the members of the Faculty Club, they being
independent contractors; and (2) the presidential certification is violative of
Section 10 of the Industrial Peace Act, as the University is not an industrial
establishment and there was no industrial dispute which could be certified to
the CIR. On March 30, 1963 the respondent Judge issued an order denying the
motion to dismiss and declaring that the Industrial Peace Act is applicable to
both parties in the case and that the CIR had acquired jurisdiction over the
case by virtue of the presidential certification. In the same order, the
respondent Judge, believing that the dispute could not be decided promptly,
ordered the strikers to return immediately to work and the University to take
them back under the last terms and conditions existing before the dispute
arose, as per agreement had during the hearing on March 23, 1963; and
likewise enjoined the University, pending adjudication of the case, from
dismissing any employee or laborer without previous authorization from the
CIR. The University filed on April 1, 1963 a motion for reconsideration of the
order of March 30, 1963 by the CIR en banc, and at the same time asking that
the motion for reconsideration be first heard by the CIR en banc. Without the

motion for reconsideration having been acted upon by the CIR en banc,
respondent Judge set the case for hearing on the merits for May 8, 1963. The
University moved for the cancellation of said hearing upon the ground that the
court en banc should first hear the motion for reconsideration and resolve the
issues raised therein before the case is heard on the merits. This motion for
cancellation of the hearing was denied. The respondent Judge, however,
cancelled the scheduled hearing when counsel for the University manifested
that he would take up before the Supreme Court, by a petition for certiorari, the
matter regarding the actuations of the respondent Judge and the issues raised
in the motion for reconsideration, specially the issue relating to the jurisdiction
of the CIR. The order of March 30, 1963 in Case 41-IPA is one of the orders
sought to be annulled in the case, G.R. No. L-21278.
Before the above-mentioned order of March 30, 1963 was issued by
respondent Judge, the University had employed professors and/or instructors
to take the places of those professors and/or instructors who had struck. On
April 1, 1963, the Faculty Club filed with the CIR in Case 41-IPA a petition to
declare in contempt of court certain parties, alleging that the University refused
to accept back to work the returning strikers, in violation of the return-to-work
order of March 30, 1963. The University filed, on April 5,1963, its opposition to
the petition for contempt, denying the allegations of the Faculty Club and
alleging by way of special defense that there was still the motion for
reconsideration of the order of March 30, 1963 which had not yet been acted
upon by the CIR en banc. On April 6, 1963, the respondent Judge issued an
order stating that "said replacements are hereby warned and cautioned, for the
time being, not to disturb nor in any manner commit any act tending to disrupt
the effectivity of the order of March 30,1963, pending the final resolution of the
same."2 On April 8, 1963, there placing professors and/or instructors concerned
filed, thru counsel, a motion for reconsideration by the CIR en banc of the order
of respondent Judge of April 6, 1963. This order of April 6, 1963 is one of the
orders that are sought to be annulled in case G.R. No. L-21278.
CIR Case No. 1183-MC relates to a petition for certification election filed by the
Faculty Club on March 8, 1963 before the CIR, praying that it be certified as
the sole and exclusive bargaining representative of all the employees of the
University. The University filed an opposition to the petition for certification
election and at the same time a motion to dismiss said petition, raising the very
same issues raised in Case No. 41-IPA, claiming that the petition did not
comply with the rules promulgated by the CIR; that the Faculty Club is not a
legitimate labor union; that the members of the Faculty Club cannot unionize
LABOR LAW I |67

for collective bargaining purposes; that the terms of the individual contracts of
the professors, instructors, and teachers, who are members of the Faculty
Club, would expire on March 25 or 31, 1963; and that the CIR has no
jurisdiction to take cognizance of the petition because the Industrial Peace Act
is not applicable to the members of the Faculty Club nor to the University. This
case was assigned to Judge Baltazar Villanueva of the CIR. Before Judge
Villanueva could act on the motion to dismiss, however, the Faculty Club filed
on April 3, 1963 a motion to withdraw the petition on the ground that the labor
dispute (Case No. 41-IPA) had already been certified by the President to the
CIR and the issues raised in Case No. 1183-MC were absorbed by Case No.
41-IPA. The University opposed the withdrawal, alleging that the issues raised
in Case No. 1183-MC were separate and distinct from the issues raised in
Case No. 41-IPA; that the questions of recognition and majority status in Case
No. 1183-MC were not absorbed by Case No. 41-IPA; and that the CIR could
not exercise its power of compulsory arbitration unless the legal issue
regarding the existence of employer-employee relationship was first resolved.
The University prayed that the motion of the Faculty Club to withdraw the
petition for certification election be denied, and that its motion to dismiss the
petition be heard. Judge Baltazar Villanueva, finding that the reasons stated by
the Faculty Club in the motion to withdraw were well taken, on April 6, 1963,
issued an order granting the withdrawal. The University filed, on April 24, 1963,
a motion for reconsideration of that order of April 6, 1963 by the CIR en banc.
This order of April 6, 1963 in Case No. 1183-MC is one of the orders sought to
be annulled in the case, G.R. No. L-21278, now before Us.
CIR Case No. V-30 relates to a complaint for indirect contempt of court filed
against the administrative officials of the University. The Faculty Club, through
the Acting Chief Prosecutor of the CIR, filed with the CIR a complaint docketed
as Case No. V-30, charging President Victoria L. Araneta, Dean Daniel
Salcedo, Executive Vice-President Rodolfo Maslog, and Assistant to the
President Jose Segovia, as officials of the University, with indirect contempt of
court, reiterating the same charges filed in Case No. 41-IPA for alleged
violation of the order dated March 30, 1963. Based on the complaint thus filed
by the Acting Chief Prosecutor of the CIR, respondent Judge Bautista issued
on April 29, 1963 an order commanding any officer of the law to arrest the
above named officials of the University so that they may be dealt with in
accordance with law, and the same time fixed the bond for their release at
P500.00 each. This order of April 29, 1963 is also one of the orders sought to
be annulled in the case, G.R. No. L-2l278.

The principal allegation of the University in its petition for certiorari and
prohibition with preliminary injunction in Case G.R. No. L-21278, now before
Us, is that respondent Judge Jose S. Bautista acted without, or in excess of,
jurisdiction, or with grave abuse of discretion, in taking cognizance of, and in
issuing the questioned orders in, CIR Cases Nos. 41-IPA 1183-MC and V-30.
Let it be noted that when the petition for certiorari and prohibition with
preliminary injunction was filed on May 10, 1963 in this case, the questioned
order in CIR Cases Nos. 41-IPA, 1183-MC and V-30 were still pending action
by the CIR en banc upon motions for reconsideration filed by the University.
On June 10, 1963, the Faculty Club filed its answer to the petition
for certiorari and prohibition with preliminary injunction, admitting some
allegations contained in the petition and denying others, and alleging special
defenses which boil down to the contentions that (1) the CIR had acquired
jurisdiction to take cognizance of Case No. 41-IPA by virtue of the presidential
certification, so that it had jurisdiction to issue the questioned orders in said
Case No. 41-IPA; (2) that the Industrial Peace Act (Republic Act 875) is
applicable to the University as an employer and to the members of the Faculty
Club as employees who are affiliated with a duly registered labor union, so that
the Court of Industrial Relations had jurisdiction to take cognizance of Cases
Nos. 1183-MC and V-30 and to issue the questioned orders in those two cases;
and (3) that the petition for certiorari and prohibition with preliminary injunction
was prematurely filed because the orders of the CIR sought to be annulled
were still the subjects of pending motions for reconsideration before the CIR en
banc when said petition for certiorari and prohibition with preliminary injunction
was filed before this Court.
CASE G.R. NO. L-21462
This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As already
stated Case No. 1183-MC relates to a petition for certification election filed by
the Faculty Club as a labor union, praying that it be certified as the sole and
exclusive bargaining representative of all employees of the University. This
petition was opposed by the University, and at the same time it filed a motion to
dismiss said petition. But before Judge Baltazar Villanueva could act on the
petition for certification election and the motion to dismiss the same, Faculty
Club filed a motion to withdraw said petition upon the ground that the issue
raised in Case No. 1183-MC were absorbed by Case No. 41-IPA which was
certified by the President of the Philippines. Judge Baltazar Villanueva, by
order April 6, 1963, granted the motion to withdraw. The University filed a
LABOR LAW I |68

motion for reconsideration of that order of April 6, 1963 by the CIR en banc.
That motion for reconsideration was pending action by the CIR en banc when
the petition forcertiorari and prohibition with preliminary injunction in Case G.R.
no. L-21278 was filed on May 10, 1963. As earlier stated this Court, in Case
G.R. No. L-21278, issued a writ of preliminary injunction on May 10, 1963,
ordering respondent Judge Bautista, until further order from this Court, to
desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA,
1183-MC and V-30 of the Court of Industrial Relations).
On June 5, 1963, that is, after this Court has issued the writ of preliminary
injunction in Case G.R. No. L-21278, the CIR en banc issued a resolution
denying the motion for reconsideration of the order of April 6, 1963 in Case No.
1183-MC.
On July 8, 1963, the University filed before this Court a petition for certiorari, by
way of an appeal from the resolution of the CIR en banc, dated June 5, 1963,
denying the motion for reconsideration of the order of April 6, 1963 in Case No.
1183-MC. This petition was docketed as G.R. No. L-21462. In its petition
for certiorari, the University alleges (1) that the resolution of the Court of
Industrial Relations of June 5, 1963 was null and void because it was issued in
violation of the writ of preliminary injunction issued in Case G.R. No. L-21278;
(2) that the issues of employer-employee relationship, the alleged status as a
labor union, majority representation and designation as bargaining
representative in an appropriate unit of the Faculty Club should have been
resolved first in Case No. 1183-MC prior to the determination of the issues in
Case No. 41-IPA and therefore the motion to withdraw the petition for
certification election should not have been granted upon the ground that the
issues in the first case have been absorbed in the second case; and (3) the
lower court acted without or in excess of jurisdiction in taking cognizance of the
petition for certification election and that the same should have been dismissed
instead of having been ordered withdrawn. The University prayed that the
proceedings in Case No. 1183-MC and the order of April 6, 1963 and the
resolution of June 5, 1963 issued therein be annulled, and that the CIR be
ordered to dismiss Case No. 1183-MC on the ground of lack of jurisdiction.
The Faculty Club filed its answer, admitting some, and denying other,
allegations in the petition for certiorari; and specially alleging that the lower
court's order granting the withdrawal of the petition for certification election was
in accordance with law, and that the resolution of the court en banc on June 5,
1963 was not a violation of the writ of preliminary injunction issued in Case

G.R. No. L-21278 because said writ of injunction was issued against Judge
Jose S. Bautista and not against the Court of Industrial Relations, much less
against Judge Baltazar Villanueva who was the trial judge of Case No. 1183MC.
CASE G.R. NO. L-21500
This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier
stated, Case No. 41-IPA relates to the strike staged by the members of the
Faculty Club and the dispute was certified by the President of the Philippines to
the CIR. The University filed a motion to dismiss that case upon the ground that
the CIR has no jurisdiction over the case, and on March 30, 1963 Judge Jose
S. Bautista issued an order denying the motion to dismiss and declaring that
the Industrial Peace Act is applicable to both parties in the case and that the
CIR had acquired jurisdiction over the case by virtue of the presidential
certification; and in that same order Judge Bautista ordered the strikers to
return to work and the University to take them back under the last terms and
conditions existing before the dispute arose; and enjoined the University from
dismissing any employee or laborer without previous authority from the court.
On April 1, 1963, the University filed a motion for reconsideration of the order of
March 30, 1963 by the CIR en banc. That motion for reconsideration was
pending action by the CIR en banc when the petition for certiorari and
prohibition with preliminary injunction in Case G.R. No. L-21278 was filed on
May 10, 1963. As we have already stated, this Court in said case G.R. No. L21278, issued a writ of preliminary injunction on May 10, 1963 ordering
respondent Judge Jose S. Bautista, until further order from this Court, to desist
and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183MC and V-30 of the Court of Industrial Relations).
On July 2, 1963, the University received a copy of the resolution of the CIR en
banc, dated May 7, 1963 but actually received and stamped at the Office of the
Clerk of the CIR on June 28, 1963, denying the motion for reconsideration of
the order dated March 30, 1963 in Case No. 41-IPA.
On July 23, 1963, the University filed before this Court a petition for certiorari,
by way of an appeal from the resolution of the Court of Industrial Relations en
banc dated May 7, 1963 (but actually received by said petitioner on July 2,
1963) denying the motion for reconsideration of the order of March 30, 1963 in
Case No. 41-IPA. This petition was docketed as G.R. No. L-21500. In its
petition for certiorari the University alleges (1) that the resolution of the CIR en
LABOR LAW I |69

banc, dated May 7, 1963 but filed with the Clerk of the CIR on June 28, 1963,
in Case No. 41-IPA, is null and void because it was issued in violation of the
writ of preliminary injunction issued by this Court in G.R. No. L-21278; (2) that
the CIR, through its Presiding Judge, had no jurisdiction to take cognizance of
Case No. 41-IPA and the order of March 30, 1963 and the resolution dated May
7, 1963 issued therein are null and void; (3) that the certification made by the
President of the Philippines is not authorized by Section 10 of Republic Act
875, but is violative thereof; (4) that the Faculty Club has no right to unionize or
organize as a labor union for collective bargaining purposes and to be certified
as a collective bargaining agent within the purview of the Industrial Peace Act,
and consequently it has no right to strike and picket on the ground of
petitioner's alleged refusal to bargain collectively where such duty does not
exist in law and is not enforceable against an educational institution; and (5)
that the return-to-work order of March 30, 1963 is improper and illegal. The
petition prayed that the proceedings in Case No. 41-IPA be annulled, that the
order dated March 30, 1963 and the resolution dated May 7, 1963 be revoked,
and that the lower court be ordered to dismiss Case 41-IPA on the ground of
lack of jurisdiction.
On September 10, 1963, the Faculty Club, through counsel, filed a motion to
dismiss the petition for certiorari on the ground that the petition being filed by
way of an appeal from the orders of the Court of Industrial Relations denying
the motion to dismiss in Case No. 41-IPA, the petition for certiorari is not proper
because the orders appealed from are interlocutory in nature.
This Court, by resolution of September 26, 1963, ordered that these three
cases (G.R. Nos. L-21278, L-21462 and L-21500) be considered together and
the motion to dismiss in Case G.R. No. L-21500 be taken up when the cases
are decided on the merits after the hearing.
Brushing aside certain technical questions raised by the parties in their
pleadings, We proceed to decide these three cases on the merits of the issues
raised.
The University has raised several issues in the present cases, the pivotal one
being its claim that the Court of Industrial Relations has no jurisdiction over the
parties and the subject matter in CIR Cases 41-IPA, 1183-MC and V-30,
brought before it, upon the ground that Republic Act No. 875 is not applicable
to the University because it is an educational institution and not an industrial
establishment and hence not an "employer" in contemplation of said Act; and

neither is Republic Act No. 875 applicable to the members of the Faculty Club
because the latter are independent contractors and, therefore, not employees
within the purview of the said Act.
In support of the contention that being an educational institution it is beyond the
scope of Republic Act No. 875, the University cites cases decided by this
Court: Boy Scouts of the Philippines vs. Juliana Araos, L-10091, Jan. 29,
1958; University of San Agustin vs. CIR, et al., L-12222, May 28, 1958; Cebu
Chinese High School vs. Philippine Land-Air-Sea Labor Union, PLASLU, L12015, April 22, 1959; La Consolacion College, et al. vs. CIR, et al., L-13282,
April 22, 1960; University of the Philippines, et al. vs. CIR, et al., L-15416, April
8, 1960; Far Eastern University vs. CIR, L-17620, August 31, 1962. We have
reviewed these cases, and also related cases subsequent thereto, and We find
that they do not sustain the contention of the University. It is true that this Court
has ruled that certain educational institutions, like the University of Santo
Tomas, University of San Agustin, La Consolacion College, and other juridical
entities, like the Boy Scouts of the Philippines and Manila Sanitarium, are
beyond the purview of Republic Act No. 875 in the sense that the Court of
Industrial Relations has no jurisdiction to take cognizance of charges of unfair
labor practice filed against them, but it is nonetheless true that the principal
reason of this Court in ruling in those cases that those institutions are excluded
from the operation of Republic Act 875 is that those entities are not organized,
maintained and operated for profit and do not declare dividends to
stockholders. The decision in the case of University of San Agustin vs. Court of
Industrial Relations, G.R. No. L-12222, May 28, 1958, is very pertinent. We
quote a portion of the decision:
It appears that the University of San Agustin, petitioner herein, is an
educational institution conducted and managed by a "religious nonstock corporation duly organized and existing under the laws of the
Philippines." It was organized not for profit or gain or division of the
dividends among its stockholders, but solely for religious and
educational purposes. It likewise appears that the Philippine
Association of College and University Professors, respondent herein, is
a non-stock association composed of professors and teachers in
different colleges and universities and that since its organization two
years ago, the university has adopted a hostile attitude to its formation
and has tried to discriminate, harass and intimidate its members for
which reason the association and the members affected filed the unfair
labor practice complaint which initiated this proceeding. To the
LABOR LAW I |70

complaint of unfair labor practice, petitioner filed an answer wherein it

disputed the jurisdiction of the Court of Industrial Relations over the
controversy on the following grounds:

January 29, 1958, this Court, speaking thru Mr. Justice Montemayor,
answered the query in the negative in the following wise:
"The main issue involved in the present case is whether or not
a charitable institution or one organized not for profit but for
more elevated purposes, charitable, humanitarian, etc., like the
Boy Scouts of the Philippines, is included in the definition of
"employer" contained in Republic Act 875, and whether the
employees of said institution fall under the definition of
"employee" also contained in the same Republic Act. If they
are included, then any act which may be considered unfair
labor practice, within the meaning of said Republic Act, would
come under the jurisdiction of the Court of Industrial Relations;
but if they do not fall within the scope of said Republic Act,
particularly, its definitions of employer and employee, then the
Industrial Court would have no jurisdiction at all.

"(a) That complainants therein being college and/or university

professors were not "industrial" laborers or employees, and the
Philippine Association of College and University Professors
being composed of persons engaged in the teaching
profession, is not and cannot be a legitimate labor organization
within the meaning of the laws creating the Court of Industrial
Relations and defining its powers and functions;
"(b) That the University of San Agustin, respondent therein,
is not an institution established for the purpose of gain or
division of profits, and consequently, it is not an "industrial"
enterprise and the members of its teaching staff are not
engaged in "industrial" employment (U.S.T. Hospital
Employees Association vs. Sto. Tomas University Hospital,
G.R. No. L-6988, 24 May 1954; and San Beda College vs.
Court of Industrial Relations and National Labor Union, G.R.
No. L-7649, 29 October 1955; 51 O.G. (Nov. 1955) 56365640);
"(c) That, as a necessary consequence, alleged controversy
between therein complainants and respondent is not an
"industrial" dispute, and the Court of Industrial Relations has
no jurisdiction, notonly on the parties but also over the subject
matter of the complaint."
The issue now before us is: Since the University of San Agustin is not
an institution established for profit or gain, nor an industrial enterprise,
but one established exclusively for educational purposes, can it be said
that its relation with its professors is one of employer and employee
that comes under the jurisdiction of the Court of Industrial Relations? In
other words, do the provisions of the Magna Carta on unfair labor
practice apply to the relation between petitioner and members of
respondent association?
The issue is not new. Thus, in the case of Boy Scouts of the
Philippines v. Juliana V. Araos, G.R. No. L-10091, promulgated on

xxx

xxx

xxx

"On the basis of the foregoing considerations, there is every

reason to believe that our labor legislation from
Commonwealth Act No. 103, creating the Court of Industrial
Relations, down through the Eight-Hour Labor Law, to the
Industrial Peace Act, was intended by the Legislature to apply
only to industrial employment and to govern the relations
between employers engaged in industry and occupations for
purposes of profit and gain, and their industrial employees, but
not to organizations and entities which are organized, operated
and maintained not for profit or gain, but for elevated and lofty
purposes, such as, charity, social service, education and
instruction, hospital and medical service, the encouragement
and promotion of character, patriotism and kindred virtues in
youth of the nation, etc.
"In conclusion, we find and hold that Republic Act No. 875,
particularly, that portion thereof regarding labor disputes and
unfair labor practice, does not apply to the Boy Scouts of the
Philippines, and consequently, the Court of Industrial Relations
had no jurisdiction to entertain and decide the action or petition
filed by respondent Araos. Wherefore, the appealed decision
LABOR LAW I |71

and resolution of the CIR are hereby set aside, with costs
against respondent."
There being a close analogy between the relation and facts involved in
the two cases, we cannot but conclude that the Court of Industrial
Relations has no jurisdiction to entertain the complaint for unfair labor
practice lodged by respondent association against petitioner and,
therefore, we hereby set aside the order and resolution subject to the
present petition, with costs against respondent association.
The same doctrine was confirmed in the case of University of Santo Tomas v.
Hon. Baltazar Villanueva, et al.,G.R. No. L-13748, October 30, 1959, where
this Court ruled that:
In the present case, the record reveals that the petitioner University of
Santo Tomas is not an industry organized for profit but an institution of
learning devoted exclusively to the education of the youth. The Court of
First Instance of Manila in its decision in Civil Case No. 28870, which
has long become final and consequently the settled law in the case,
found as established by the evidence adduced by the parties therein
(herein petitioner and respondent labor union) that while the University
collects fees from its students, all its income is used for the
improvement and enlargement of the institution. The University
declares no dividend, and the members of the corporation who
founded it, as ordained in its articles of incorporation, receive no
material compensation for the time and sacrifice they render to the
University and its students. The respondent union itself in a case
before the Industrial Court (Case No. 314-MC) has averred that "the
University of Santo Tomas, like the San Beda College, is an
educational institution operated not for profit but for the sole purpose of
educating young men." (See Annex "B" to petitioner's motion to
dismiss.). It is apparent, therefore, that on the face of the record the
University of Santo Tomas is not a corporation created for profit but an
educational institution and therefore not an industrial or business
organization.
In the case of La Consolacion College, et al. vs. CIR, et al., G.R. No. L-13282,
April 22, 1960, this Court repeated the same ruling when it said:

The main issue in this appeal by petitioner is that the industry trial court
committed an error in holding that it has jurisdiction to act in this case
even if it involves unfair labor practice considering that the La
Consolacion College is not a business enterprise but an educational
institution not organized for profit.
If the claim that petitioner is an educational institution not operated for
profit is true, which apparently is the case, because the very court a
quo found that it has no stockholder, nor capital . . . then we are of the
opinion that the same does not come under the jurisdiction of the Court
of Industrial Relations in view of the ruling in the case of Boy Scouts of
the Philippines v. Juliana V. Araos, G.R. No. L-10091, decided on
January 29, 1958.
It is noteworthy that the cases of the University of San Agustin, the University
of Santo Tomas, and La Consolacion College, cited above, all involve charges
of unfair labor practice under Republic Act No. 875, and the uniform rulings of
this Court are that the Court of Industrial Relations has no jurisdiction over the
charges because said Act does not apply to educational institutions that are not
operated or maintained for profit and do not declare dividends. On the other
hand, in the cases of Far Eastern University v. CIR, et al., G.R. No. L-17620,
August 31, 1962, this Court upheld the decision of the Court of Industrial
Relations finding the Far Eastern University, also an educational institution,
guilty of unfair labor practice. Among the findings of fact in said case was that
the Far Eastern University made profits from the school year 1952-1953 to
1958-1959. In affirming the decision of the lower court, this Court had thereby
ratified the ruling of the Court of Industrial Relations which applied the
Industrial Peace Act to educational institutions that are organized, operated
and maintained for profit.
It is also noteworthy that in the decisions in the cases of the Boy Scouts of the
Philippines, the University of San Agustin, the University of Sto. Tomas, and La
Consolacion College, this Court was not unanimous in the view that the
Industrial Peace Act (Republic Act No. 875) is not applicable to charitable,
eleemosynary or non-profit organizations which include educational
institutions not operated for profit. There are members of this Court who hold
the view that the Industrial Peace Act would apply also to non-profit
organizations or entities the only exception being the Government, including
any political subdivision or instrumentality thereof, in so far as governmental
functions are concerned. However, in the Far Eastern University case this
LABOR LAW I |72

Court is unanimous in supporting the view that an educational institution that is

operated for profit comes within the scope of the Industrial Peace Act. We
consider it a settled doctrine of this Court, therefore, that the Industrial Peace
Act is applicable to any organization or entity whatever may be its purpose
when it was created that is operated for profit or gain.
Does the University operate as an educational institution for profit? Does it
declare dividends for its stockholders? If it does not, it must be declared
beyond the purview of Republic Act No. 875; but if it does, Republic Act No.
875 must apply to it. The University itself admits that it has declared
dividends.3 The CIR in its order dated March 30, 1963 in CIR Case No. 41-IPA
which order was issued after evidence was heard also found that the
University is not for strictly educational purposes and that "It realizes profits
and parts of such earning is distributed as dividends to private stockholders or
individuals (Exh. A and also 1 to 1-F, 2-x 3-x and 4-x)" 4 Under this
circumstance, and in consonance with the rulings in the decisions of this Court,
above cited, it is obvious that Republic Act No. 875 is applicable to herein
petitioner Feati University.
But the University claims that it is not an employer within the contemplation of
Republic Act No. 875, because it is not an industrial establishment. At most, it
says, it is only a lessee of the services of its professors and/or instructors
pursuant to a contract of services entered into between them. We find no merit
in this claim. Let us clarify who is an "employer" under the Act. Section 2(c) of
said Act provides:
Sec. 2. Definitions.As used in this Act
(c) The term employer include any person acting in the interest of an
employer, directly or indirectly, but shall not include any labor
organization (otherwise than when acting as an employer) or any one
acting in the capacity or agent of such labor organization.
It will be noted that in defining the term "employer" the Act uses the word
"includes", which it also used in defining "employee". [Sec. 2 (d)], and
"representative" [Sec. 2(h)]; and not the word "means" which the Act uses in
defining the terms "court" [Sec. 2(a)], "labor organization" [Sec. 2(e)],
"legitimate labor organization [Sec. 2(f)], "company union" [Sec. 2(g)], "unfair
labor practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)], "strike" [Sec. 2(l)] and "lockout" [Sec. 2(m)]. A methodical variation in terminology is manifest. This

variation and distinction in terminology and phraseology cannot be presumed

to have been the inconsequential product of an oversight; rather, it must have
been the result of a deliberate and purposeful act, more so when we consider
that as legislative records show, Republic Act No. 875 had been meticulously
and painstakingly drafted and deliberated upon. In using the word "includes"
and not "means", Congress did not intend to give a complete definition of
"employer", but rather that such definition should be complementary to what is
commonly understood as employer. Congress intended the term to be
understood in a broad meaning because, firstly, the statutory definition includes
not only "a principal employer but also a person acting in the interest of the
employer"; and, secondly, the Act itself specifically enumerated those who are
not included in the term "employer", namely: (1) a labor organization (otherwise
than when acting as an employer), (2) anyone acting in the capacity of officer
or agent of such labor organization [Sec. 2(c)], and (3) the Government and
any political subdivision or instrumentality thereof insofar as the right to strike
for the purpose of securing changes or modifications in the terms and
conditions of employment is concerned (Section 11). Among these statutory
exemptions, educational institutions are not included; hence, they can be
included in the term "employer". This Court, however, has ruled that those
educational institutions that are not operated for profit are not within the
purview of Republic Act No. 875.5
As stated above, Republic Act No. 875 does not give a comprehensive but only
a complementary definition of the term "employer". The term encompasses
those that are in ordinary parlance "employers." What is commonly meant by
"employer"? The term "employer" has been given several acceptations. The
lexical definition is "one who employs; one who uses; one who engages or
keeps in service;" and "to employ" is "to provide work and pay for; to engage
one's service; to hire." (Webster's New Twentieth Century Dictionary, 2nd ed.,
1960, p. 595). The Workmen's Compensation Act defines employer as
including "every person or association of persons, incorporated or not, public or
private, and the legal representative of the deceased employer" and "includes
the owner or lessee of a factory or establishment or place of work or any other
person who is virtually the owner or manager of the business carried on in the
establishment or place of work but who, for reason that there is an independent
contractor in the same, or for any other reason, is not the direct employer of
laborers employed there." [Sec. 39(a) of Act No. 3428.] The Minimum Wage
Law states that "employer includes any person acting directly or indirectly in
the interest of the employer in relation to an employee and shall include the
Government and the government corporations". [Rep. Act No. 602, Sec. 2(b)].
LABOR LAW I |73

The Social Security Act defines employer as "any person, natural or juridical,
domestic or foreign, who carries in the Philippines any trade, business,
industry, undertaking, or activity of any kind and uses the services of another
person who is under his orders as regards the employment, except the
Government and any of its political subdivisions, branches or instrumentalities,
including corporations owned or controlled by the Government." (Rep. Act No.
1161, Sec. 8[c]).
This Court, in the cases of the The Angat River Irrigation System, et al. vs.
Angat River Workers' Union (PLUM), et al., G.R. Nos. L-10934 and L-10944,
December 28, 1957, which cases involve unfair labor practices and hence
within the purview of Republic Act No. 875, defined the term employer as
follows:
An employer is one who employs the services of others; one for whom
employees work and who pays their wages or salaries (Black Law
Dictionary, 4th ed., p. 618).
An employer includes any person acting in the interest of an employer,
directly or indirectly (Sec. 2-c, Rep. Act 875).
Under none of the above definitions may the University be excluded, especially
so if it is considered that every professor, instructor or teacher in the teaching
staff of the University, as per allegation of the University itself, has a contract
with the latter for teaching services, albeit for one semester only. The University
engaged the services of the professors, provided them work, and paid them
compensation or salary for their services. Even if the University may be
considered as a lessee of services under a contract between it and the
members of its Faculty, still it is included in the term "employer". "Running
through the word `employ' is the thought that there has been an agreement on
the part of one person to perform a certain service in return for compensation
to be paid by an employer. When you ask how a man is employed, or what is
his employment, the thought that he is under agreement to perform some
service or services for another is predominant and paramount." (Ballentine Law
Dictionary, Philippine ed., p. 430, citing Pinkerton National Detective Agency v.
Walker, 157 Ga. 548, 35 A. L. R. 557, 560, 122 S.E. Rep. 202).
To bolster its claim of exception from the application of Republic Act No. 875,
the University contends that it is not state that the employers included in the
definition of 2 (c) of the Act. This contention can not be sustained. In the first

place, Sec. 2 (c) of Republic Act No. 875 does not state that the employers
included in the definition of the term "employer" are only and exclusively
"industrial establishments"; on the contrary, as stated above, the term
"employer" encompasses all employers except those specifically excluded by
the Act. In the second place, even the Act itself does not refer exclusively to
industrial establishments and does not confine its application thereto. This is
patent inasmuch as several provisions of the Act are applicable to nonindustrial workers, such as Sec. 3, which deals with "employees' right to selforganization"; Sections 4 and 5 which enumerate unfair labor practices;
Section 8 which nullifies private contracts contravening employee's rights;
Section 9 which relates to injunctions in any case involving a labor dispute;
Section 11 which prohibits strikes in the government; Section 12 which
provides for the exclusive collective bargaining representation for labor
organizations; Section 14 which deals with the procedure for collective
bargaining; Section 17 which treats of the rights and conditions of membership
in labor organizations; Sections 18, 19, 20 and 21 which provide respectively
for the establishment of conciliation service, compilation of collective
bargaining contracts, advisory labor-management relations; Section 22 which
empowers the Secretary of Labor to make a study of labor relations; and
Section 24 which enumerates the rights of labor organizations. (See Dissenting
Opinion of Justice Concepcion in Boy Scouts of the Philippines v. Juliana
Araos, G.R. No. L-10091, January 29, 1958.)
This Court, in the case of Boy Scouts of the Philippines v. Araos, supra, had
occasion to state that the Industrial Peace Act "refers only to organizations and
entities created and operated for profits, engaged in a profitable trade,
occupation or industry". It cannot be denied that running a university engages
time and attention; that it is an occupation or a business from which the one
engaged in it may derive profit or gain. The University is not an industrial
establishment in the sense that an industrial establishment is one that is
engaged in manufacture or trade where raw materials are changed or
fashioned into finished products for use. But for the purposes of the Industrial
Peace Act the University is an industrial establishment because it is operated
for profit and it employs persons who work to earn a living. The term "industry",
for the purposes of the application of our labor laws should be given a broad
meaning so as to cover all enterprises which are operated for profit and which
engage the services of persons who work to earn a living.
The word "industry" within State Labor Relations Act controlling labor
relations in industry, cover labor conditions in any field of employment
LABOR LAW I |74

where the objective is earning a livelihood on the one side and gaining
of a profit on the other. Labor Law Sec. 700 et seq. State Labor
Relations Board vs. McChesney, 27 N.Y.S. 2d 866, 868." (Words and
Phrases, Permanent Edition, Vol. 21, 1960 edition p. 510).

While the term "workers" as used in a particular statute, has been

regarded as limited to those performing physical labor, it has been held
to embrace stenographers and bookkeepers. Teachers are not
included, however.

The University urges that even if it were an employer, still there would be no
employer-employee relationship between it and the striking members of the
Faculty Club because the latter are not employees within the purview of Sec.
2(d) of Republic Act No. 875 but are independent contractors. This claim is
untenable.

It is evident from the above-quoted authority that "teachers" are not to be

included among those who perform "physical labor", but it does not mean that
they are not employees. We have checked the source of the authority, which is
31 Am. Jur., Sec. 3, p. 835, and the latter cites Huntworth v. Tanner, 87 Wash
670, 152 P. 523, Ann Cas 1917 D 676. A reading of the last case confirms Our
view.

Section 2 (d) of Republic Act No. 875 provides:

(d) The term "employee" shall include any employee and shall not be
limited to the employee of a particular employer unless the act
explicitly states otherwise and shall include any individual whose work
has ceased as a consequence of, or in connection with, any current
labor dispute or because of any unfair labor practice and who has not
obtained any other substantially equivalent and regular employment.
This definition is again, like the definition of the term "employer" [Sec. 2(c)], by
the use of the term "include", complementary. It embraces not only those who
are usually and ordinarily considered employees, but also those who have
ceased as employees as a consequence of a labor dispute. The term
"employee", furthermore, is not limited to those of a particular employer. As
already stated, this Court in the cases of The Angat River Irrigation System, et
al. v. Angat River Workers' Union (PLUM), et al., supra, has defined the term
"employer" as "one who employs the services of others; one for whom
employees work and who pays their wages or salaries. "Correlatively, an
employee must be one who is engaged in the service of another; who performs
services for another; who works for salary or wages. It is admitted by the
University that the striking professors and/or instructors are under contract to
teach particular courses and that they are paid for their services. They are,
therefore, employees of the University.
In support of its claim that the members of the Faculty Club are not employees
of the University, the latter cites as authority Francisco's Labor Laws, 2nd ed.,
p. 3, which states:

That teachers are "employees' has been held in a number of cases (Aebli v.
Board of Education of City and County of San Francisco, 145 P. 2d 601, 62
Col. App 2.d 706; Lowe & Campbell Sporting Goods Co. v. Tangipahoa Parish
School Board, La. App., 15 So. 2d 98, 100; Sister Odelia v. Church of St.
Andrew, 263 N. W. 111, 112, 195 Minn. 357, cited in Words and Phrases,
Permanent ed., Vol. 14, pp. 806-807). This Court in the Far Eastern University
case, supra, considered university instructors as employees and declared
Republic Act No. 875 applicable to them in their employment relations with their
school. The professors and/or instructors of the University neither ceased to be
employees when they struck, for Section 2 of Rep. Act 875 includes among
employees any individual whose work has ceased as consequence of, or in
connection with a current labor dispute. Striking employees maintain their
status as employees of the employer. (Western Cartridge Co. v. NLRB, C.C.A.
7, 139 F2d 855, 858).
The contention of the University that the professors and/or instructors are
independent contractors, because the University does not exercise control over
their work, is likewise untenable. This Court takes judicial notice that a
university controls the work of the members of its faculty; that a university
prescribes the courses or subjects that professors teach, and when and where
to teach; that the professors' work is characterized by regularity and continuity
for a fixed duration; that professors are compensated for their services by
wages and salaries, rather than by profits; that the professors and/or
instructors cannot substitute others to do their work without the consent of the
university; and that the professors can be laid off if their work is found not
satisfactory. All these indicate that the university has control over their work;
and professors are, therefore, employees and not independent contractors.
There are authorities in support of this view.
LABOR LAW I |75

The principal consideration in determining whether a workman is an

employee or an independent contractor is the right to control the
manner of doing the work, and it is not the actual exercise of the right
by interfering with the work, but the right to control, which constitutes
the test. (Amalgamated Roofing Co. v. Travelers' Ins. Co., 133 N.E.
259, 261, 300 Ill. 487, quoted in Words and Phrases, Permanent ed.,
Vol. 14, p. 576).

individuals in domestic service of the home, supervisors, and others were

excluded. (See Rothenberg on Labor Relations, 1949, pp. 330-331).

Where, under Employers' Liability Act, A was instructed when and

where to work . . . he is an employee, and not a contractor, though paid
specified sum per square. (Heine v. Hill, Harris & Co., 2 La. App. 384,
390, in Words and Phrases, loc, cit.) .

Sec. 3. Employees' right to self-organization.Employees shall have

the right to self-organization and to form, join or assist labor
organizations of their own choosing for the purpose of collective
bargaining through representatives of their own choosing and to
engage in concerted activities for the purpose of collective bargaining
and other mutual aid or protection. . . .

Employees are those who are compensated for their labor or services
by wages rather than by profits. (People vs. Distributors Division,
Smoked Fish Workers Union Local No. 20377, Sup. 7 N. Y. S. 2d 185,
187 in Words and Phrases, loc, cit.)
Services of employee or servant, as distinguished from those of a
contractor, are usually characterized by regularity and continuity of
work for a fixed period or one of indefinite duration, as contrasted with
employment to do a single act or a series of isolated acts; by
compensation on a fixed salary rather than one regulated by value or
amount of work; . . . (Underwood v. Commissioner of Internal Revenue,
C.C.A., 56 F. 2d 67, 71 in Words and Phrases, op. cit., p. 579.)
Independent contractors can employ others to work and accomplish
contemplated result without consent of contractee, while "employee"
cannot substitute another in his place without consent of his employer.
(Luker Sand & Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82
Utah, 188, in Words and Phrases, Vol. 14, p. 576).
Moreover, even if university professors are considered independent
contractors, still they would be covered by Rep. Act No. 875. In the case of the
Boy Scouts of the Philippines v. Juliana Araos, supra, this Court observed that
Republic Act No. 875 was modelled after the Wagner Act, or the National Labor
Relations Act, of the United States, and this Act did not exclude "independent
contractors" from the orbit of "employees". It was in the subsequent legislation

the
Labor
Management
Relation
Act
(Taft-Harley
Act) that "independent contractors" together with agricultural laborers,

It having been shown that the members of the Faculty Club are employees, it
follows that they have a right to unionize in accordance with the provisions of
Section 3 of the Magna Carta of Labor (Republic Act No. 875) which provides
as follows:

We agree with the statement of the lower court, in its order of March 30, 1963
which is sought to be set aside in the instant case, that the right of employees
to self-organization is guaranteed by the Constitution, that said right would
exist even if Republic Act No. 875 is repealed, and that regardless of whether
their employers are engaged in commerce or not. Indeed, it is Our considered
view that the members of the faculty or teaching staff of private universities,
colleges, and schools in the Philippines, regardless of whether the university,
college or school is run for profit or not, are included in the term "employees"
as contemplated in Republic Act No. 875 and as such they may organize
themselves pursuant to the above-quoted provision of Section 3 of said Act.
Certainly, professors, instructors or teachers of private educational institutions
who teach to earn a living are entitled to the protection of our labor laws and
one such law is Republic Act No. 875.
The contention of the University in the instant case that the members of the
Faculty Club can not unionize and the Faculty Club can not exist as a valid
labor organization is, therefore, without merit. The record shows that the
Faculty Club is a duly registered labor organization and this fact is admitted by
counsel for the University.5a
The other issue raised by the University is the validity of the Presidential
certification. The University contends that under Section 10 of Republic Act No.
875 the power of the President of the Philippines to certify is subject to the
following conditions, namely: (1) that here is a labor dispute, and (2) that said
labor dispute exists in an industry that is vital to the national interest. The
LABOR LAW I |76

University maintains that those conditions do not obtain in the instant case.
This contention has also no merit.
We have previously stated that the University is an establishment or enterprise
that is included in the term "industry" and is covered by the provisions of
Republic Act No. 875. Now, was there a labor dispute between the University
and the Faculty Club?
Republic Act No. 875 defines a labor dispute as follows:
The term "labor dispute" includes any controversy concerning terms,
tenure or conditions of employment, or concerning the association or
representation of persons in negotiating, fixing, maintaining, changing,
or seeking to arrange terms or conditions of employment regardless of
whether the disputants stand in proximate relation of employer and
employees.
The test of whether a controversy comes within the definition of "labor dispute"
depends on whether the controversy involves or concerns "terms, tenure or
condition of employment" or "representation." It is admitted by the University, in
the instant case, that on January 14, 1963 the President of the Faculty Club
wrote to the President of the University a letter informing the latter of the
organization of the Faculty Club as a labor union, duly registered with the
Bureau of Labor Relations; that again on January 22, 1963 another letter was
sent, to which was attached a list of demands consisting of 26 items, and
asking the President of the University to answer within ten days from date of
receipt thereof; that the University questioned the right of the Faculty Club to
be the exclusive representative of the majority of the employees and asked
proof that the Faculty Club had been designated or selected as exclusive
representative by the vote of the majority of said employees; that on February
1, 1963 the Faculty Club filed with the Bureau of Labor Relations a notice of
strike alleging as reason therefor the refusal of the University to bargain
collectively with the representative of the faculty members; that on February
18, 1963 the members of the Faculty Club went on strike and established
picket lines in the premises of the University, thereby disrupting the schedule of
classes; that on March 1, 1963 the Faculty Club filed Case No. 3666-ULP for
unfair labor practice against the University, but which was later dismissed (on
April 2, 1963 after Case 41-IPA was certified to the CIR); and that on March 7,
1963 a petition for certification election, Case No. 1183-MC, was filed by the
Faculty Club in the CIR.6 All these admitted facts show that the controversy

between the University and the Faculty Club involved terms and conditions of
employment, and the question of representation. Hence, there was a labor
dispute between the University and the Faculty Club, as contemplated by
Republic Act No. 875. It having been shown that the University is an institution
operated for profit, that is an employer, and that there is an employer-employee
relationship, between the University and the members of the Faculty Club, and
it having been shown that a labor dispute existed between the University and
the Faculty Club, the contention of the University, that the certification made by
the President is not only not authorized by Section 10 of Republic Act 875 but
is violative thereof, is groundless.
Section 10 of Republic Act No. 875 provides:
When in the opinion of the President of the Philippines there exists a
labor dispute in an industry indispensable to the national interest and
when such labor dispute is certified by the President to the Court of
Industrial Relations, said Court may cause to be issued a restraining
order forbidding the employees to strike or the employer to lockout the
employees, and if no other solution to the dispute is found, the Court
may issue an order fixing the terms and conditions of employment.
This Court had occasion to rule on the application of the above-quoted
provision of Section 10 of Republic Act No. 875. In the case of Pampanga
Sugar Development Co. v. CIR, et al., G.R. No. L-13178, March 24, 1961, it
was held:
It thus appears that when in the opinion of the President a labor
dispute exists in an industry indispensable to national interest and he
certifies it to the Court of Industrial Relations the latter acquires
jurisdiction to act thereon in the manner provided by law. Thus the
court may take either of the following courses: it may issue an order
forbidding the employees to strike or the employer to lockout its
employees, or, failing in this, it may issue an order fixing the terms and
conditions of employment. It has no other alternative. It can not throw
the case out in the assumption that the certification was erroneous.
xxx

xxx

xxx

. . . The fact, however, is that because of the strike declared by the

members of the minority union which threatens a major industry the
LABOR LAW I |77

President deemed it wise to certify the controversy to the Court of

Industrial Relations for adjudication. This is the power that the law
gives to the President the propriety of its exercise being a matter that
only devolves upon him. The same is not the concern of the industrial
court. What matters is that by virtue of the certification made by the
President the case was placed under the jurisdiction of said
court. (Emphasis supplied)
To certify a labor dispute to the CIR is the prerogative of the President under
the law, and this Court will not interfere in, much less curtail, the exercise of
that prerogative. The jurisdiction of the CIR in a certified case is exclusive
(Rizal Cement Co., Inc. v. Rizal Cement Workers Union (FFW), et al., G.R. No.
L-12747, July 30, 1960). Once the jurisdiction is acquired pursuant to the
presidential certification, the CIR may exercise its broad powers as provided in
Commonwealth Act 103. All phases of the labor dispute and the employeremployee relationship may be threshed out before the CIR, and the CIR may
issue such order or orders as may be necessary to make effective the exercise
of its jurisdiction. The parties involved in the case may appeal to the Supreme
Court from the order or orders thus issued by the CIR.
And so, in the instant case, when the President took into consideration that the
University "has some 18,000 students and employed approximately 500 faculty
members", that `the continued disruption in the operation of the University will
necessarily prejudice the thousand of students", and that "the dispute affects
the national interest",7and certified the dispute to the CIR, it is not for the CIR
nor this Court to pass upon the correctness of the reasons of the President in
certifying the labor dispute to the CIR.

The third issue raised by the University refers to the question of the legality of
the return-to-work order (of March 30, 1963 in Case 41-IPA) and the order
implementing the same (of April 6, 1963). It alleges that the orders are illegal
upon the grounds: (1) that Republic Act No. 875, supplementing
Commonwealth Act No. 103, has withdrawn from the CIR the power to issue a
return-to-work order; (2) that the only power granted by Section 10 of Republic
Act No. 875 to the CIR is to issue an order forbidding the employees to strike
or forbidding the employer to lockout the employees, as the case may be,
before either contingency had become a fait accompli; (3) that the taking in by
the University of replacement professors was valid, and the return-to-work
order of March 30, 1963 constituted impairment of the obligation of contracts;
and (4) the CIR could not issue said order without having previously
determined the legality or illegality of the strike.
The contention of the University that Republic Act No. 875 has withdrawn the
power of the Court of Industrial Relations to issue a return-to-work order
exercised by it under Commonwealth Act No. 103 can not be sustained. When
a case is certified by the President to the Court of Industrial Relations, the case
thereby comes under the operation of Commonwealth Act No. 103, and the
Court may exercise the broad powers and jurisdiction granted to it by said Act.
Section 10 of Republic Act No. 875 empowers the Court of Industrial Relations
to issue an order "fixing the terms of employment." This clause is broad enough
to authorize the Court to order the strikers to return to work and the employer
to readmit them. This Court, in the cases of the Philippine Marine Officers
Association vs. The Court of Industrial Relations, Compania Maritima, et al.;
and Compaia Martima, et al. vs. Philippine Marine Radio Officers Association
and CIR, et al., G.R. Nos. L-10095 and L-10115, October 31, 1957, declared:
We cannot subscribe to the above contention. We agree with counsel
for the Philippine Radio Officers' Association that upon certification by
the President under Section 10 of Republic Act 875, the case comes
under the operation of Commonwealth Act 103, which enforces
compulsory arbitration in cases of labor disputes in industries
indispensable to the national interest when the President certifies the
case to the Court of Industrial Relations. The evident intention of the
law is to empower the Court of Industrial Relations to act in such
cases, not only in the manner prescribed under Commonwealth Act
103, but with the same broad powers and jurisdiction granted by that
act. If the Court of Industrial Relations is granted authority to find a
solution to an industrial dispute and such solution consists in the
LABOR LAW I |78

ordering of employees to return back to work, it cannot be contended

that the Court of Industrial Relations does not have the power or
jurisdiction to carry that solution into effect. And of what use is its
power of conciliation and arbitration if it does not have the power and
jurisdiction to carry into effect the solution it has adopted? Lastly, if the
said court has the power to fix the terms and conditions of
employment, it certainly can order the return of the workers with or
without backpay as a term or condition of employment.
The foregoing ruling was reiterated by this Court in the case of Hind Sugar Co.
v. CIR, et al., G.R. No. L-13364, July 26, 1960.
When a case is certified to the CIR by the President of the Philippines pursuant
to Section 10 of Republic Act No. 875, the CIR is granted authority to find a
solution to the industrial dispute; and the solution which the CIR has found
under the authority of the presidential certification and conformable thereto
cannot be questioned (Radio Operators Association of the Philippines vs.
Philippine Marine Radio Officers Association, et al., L-10112, Nov. 29, 1957, 54
O.G. 3218).
Untenable also is the claim of the University that the CIR cannot issue a returnto-work order after strike has been declared, it being contended that under
Section 10 of Republic Act No. 875 the CIR can only prevent a strike or a
lockout when either of this situation had not yet occurred. But in the case of
Bisaya Land Transportation Co., Inc. vs. Court of Industrial Relations, et al.,
No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this Court declared:
There is no reason or ground for the contention that Presidential
certification of labor dispute to the CIR is limited to the prevention of
strikes and lockouts. Even after a strike has been declared where the
President believes that public interest demands arbitration and
conciliation, the President may certify the ease for that purpose. The
practice has been for the Court of Industrial Relations to order the
strikers to work, pending the determination of the union demands that
impelled the strike. There is nothing in the law to indicate that this
practice is abolished." (Emphasis supplied)
Likewise untenable is the contention of the University that the taking in by it of
replacements was valid and the return-to-work order would be an impairment
of its contract with the replacements. As stated by the CIR in its order of March

30, 1963, it was agreed before the hearing of Case 41-IPA on March 23, 1963
that the strikers would return to work under the status quo arrangement and the
University would readmit them, and the return-to-work order was a confirmation
of that agreement. This is a declaration of fact by the CIR which we cannot
disregard. The faculty members, by striking, have not abandoned their
employment but, rather, they have only ceased from their labor (Keith Theatre
v. Vachon et al., 187 A. 692). The striking faculty members have not lost their
right to go back to their positions, because the declaration of a strike is not a
renunciation of their employment and their employee relationship with the
University (Rex Taxicab Co. vs. CIR, et al., 40 O.G., No. 13, 138). The
employment of replacements was not authorized by the CIR. At most, that was
a temporary expedient resorted to by the University, which was subject to the
power of the CIR to allow to continue or not. The employment of replacements
by the University prior to the issuance of the order of March 30, 1963 did not
vest in the replacements a permanent right to the positions they held. Neither
could such temporary employment bind the University to retain permanently
the replacements.
Striking employees maintained their status as employees of the
employer (Western Castridge Co. v. National Labor Relations Board,
C.C.A. 139 F. 2d 855, 858) ; that employees who took the place of
strikers do not displace them as `employees." ' (National Labor
Relations Board v. A. Sartorius & Co., C.C.A. 2, 140 F. 2d 203, 206,
207.)
It is clear from what has been said that the return-to-work order cannot be
considered as an impairment of the contract entered into by petitioner with the
replacements. Besides, labor contracts must yield to the common good and
such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and similar subjects (Article 1700, Civil Code).
Likewise unsustainable is the contention of the University that the Court of
Industrial Relations could not issue the return-to-work order without having
resolved previously the issue of the legality or illegality of the strike, citing as
authority therefor the case of Philippine Can Company v. Court of Industrial
Relations, G.R. No. L-3021, July 13, 1950. The ruling in said case is not
applicable to the case at bar, the facts and circumstances being very different.
The Philippine Can Company case, unlike the instant case, did not involve the
national interest and it was not certified by the President. In that case the
company no longer needed the services of the strikers, nor did it need
LABOR LAW I |79

substitutes for the strikers, because the company was losing, and it was
imperative that it lay off such laborers as were not necessary for its operation in
order to save the company from bankruptcy. This was the reason of this Court
in ruling, in that case, that the legality or illegality of the strike should have been
decided first before the issuance of the return-to-work order. The University, in
the case before Us, does not claim that it no longer needs the services of
professors and/or instructors; neither does it claim that it was imperative for it
to lay off the striking professors and instructors because of impending
bankruptcy. On the contrary, it was imperative for the University to hire
replacements for the strikers. Therefore, the ruling in the Philippine Can case
that the legality of the strike should be decided first before the issuance of the
return-to-work order does not apply to the case at bar. Besides, as We have
adverted to, the return-to-work order of March 30, 1963, now in question, was a
confirmation of an agreement between the University and the Faculty Club
during a prehearing conference on March 23, 1963.

on a strike because of the unfair labor practice of the company, their

status as employees for the purpose of any controversy growing out of
that unfair labor practice was fixed. Sec. 2 (3) of the Act. Phelps Dodge
Corp. v. National Labor Relations Board, 313 U.S. 177, 61 S. Ct. 845,
85. L. ed. 1271, 133 A.L.R. 1217.

The University also maintains that there was no more basis for the claim of the
members of the Faculty Club to return to their work, as their individual
contracts for teaching had expired on March 25 or 31, 1963, as the case may
be, and consequently, there was also no basis for the return-to-work order of
the CIR because the contractual relationships having ceased there were no
positions to which the members of the Faculty Club could return to. This
contention is not well taken. This argument loses sight of the fact that when the
professors and instructors struck on February 18, 1963, they continued to be
employees of the University for the purposes of the labor controversy
notwithstanding the subsequent termination of their teaching contracts, for
Section 2(d) of the Industrial Peace Act includes among employees "any
individual whose work has ceased a consequence of, or in connection with,
any current labor dispute or of any unfair labor practice and who has not
obtained any other substantially equivalent and regular employment."

The University, furthermore, claims that the information for indirect contempt
filed against the officers of the University (Case No. V-30) as well as the order
of April 29, 1963 for their arrest were improper, irregular and illegal because (1)
the officers of the University had complied in good faith with the return-to-work
order and in those cases that they did not, it was due to circumstance beyond
their control; (2) the return-to-work order and the order implementing the same
were illegal; and (3) even assuming that the order was legal, the same was not
Yet final because there was a motion to reconsider it.

The question raised by the University was resolved in a similar case in the
United States. In the case of Rapid Roller Co. v. NLRB 126 F. 2d 452, we read:

Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial

Relations of any Judge thereof to punish direct and indirect contempts as
provided in Rule 64 (now Rule 71) of the Rules of Court, under the same
procedure and penalties provided therein. Section 3 of Rule 71 enumerates the
acts which would constitute indirect contempt, among which is "disobedience
or resistance to lawful writ, process, order, judgment, or command of a court,"
and the person guilty thereof can be punished after a written charge has been
filed and the accused has been given an opportunity to be heard. The last
paragraph of said section provides:

On May 9, 1939 the striking employees, eighty-four in number, offered

to the company to return to their employment. The company believing it
had not committed any unfair labor practice, refused the employees'
offer and claimed the right to employ others to take the place of the
strikers, as it might see fit. This constituted discrimination in the hiring
and tenure of the striking employees. When the employees went out

For the purpose of such controversy they remained employees of the

company. The company contended that they could not be their
employees in any event since the "contract of their employment
expired by its own terms on April 23, 1939."
In this we think the company is mistaken for the reason we have just
pointed out, that the status of the employees on strike became fixed
under Sec. 2 (3) of the Act because of the unfair labor practice of the
company which caused the strike.

Again We find no merit in this claim of Petitioner. We have already ruled that
the CIR had jurisdiction to issue the order of March 30, 1963 in CIR Case 41IPA, and the return-to-work provision of that order is valid and legal.
Necessarily the order of April 6, 1963 implementing that order of March 30,
1963 was also valid and legal.

LABOR LAW I |80

But nothing in this section shall be so construed as to prevent the court

from issuing process to bring the accused party into court, or from
holding him in custody pending such proceedings.
The provision authorizes the judge to order the arrest of an alleged contemner
(Francisco, et al. v. Enriquez, L-7058, March 20, 1954, 94 Phil., 603) and this,
apparently, is the provision upon which respondent Judge Bautista relied when
he issued the questioned order of arrest.
The contention of petitioner that the order of arrest is illegal is unwarranted.
The return-to-work order allegedly violated was within the court's jurisdiction to
issue.
Section 14 of Commonwealth Act No. 103 provides that in cases brought
before the Court of Industrial Relations under Section 4 of the Act (referring to
strikes and lockouts) the appeal to the Supreme Court from any award, order
or decision shall not stay the execution of said award, order or decision sought
to be reviewed unless for special reason the court shall order that execution be
stayed. Any award, order or decision that is appealed is necessarily not final.
Yet under Section 14 of Commonwealth Act No. 103 that award, order or
decision, even if not yet final, is executory, and the stay of execution is
discretionary with the Court of Industrial Relations. In other words, the Court of
Industrial Relations, in cases involving strikes and lockouts, may compel
compliance or obedience of its award, order or decision even if the award,
order or decision is not yet final because it is appealed, and it follows that any
disobedience or non-compliance of the award, order or decision would
constitute contempt against the Court of Industrial Relations which the court
may punish as provided in the Rules of Court. This power of the Court of
Industrial Relations to punish for contempt an act of non-compliance or
disobedience of an award, order or decision, even if not yet final, is a special
one and is exercised only in cases involving strikes and lockouts. And there is
reason for this special power of the industrial court because in the exercise of
its jurisdiction over cases involving strikes and lockouts the court has to issue
orders or make decisions that are necessary to effect a prompt solution of the
labor dispute that caused the strike or the lockout, or to effect the prompt
creation of a situation that would be most beneficial to the management and
the employees, and also to the public even if the solution may be temporary,
pending the final determination of the case. Otherwise, if the effectiveness of
any order, award, or decision of the industrial court in cases involving strikes
and lockouts would be suspended pending appeal then it can happen that the

coercive powers of the industrial court in the settlement of the labor disputes in
those cases would be rendered useless and nugatory.
The University points to Section 6 of Commonwealth Act No. 103 which
provides that "Any violation of any order, award, or decision of the Court of
Industrial Relations shall after such order, award or decision has become final,
conclusive and executory constitute contempt of court," and contends that only
the disobedience of orders that are final (meaning one that is not appealed)
may be the subject of contempt proceedings. We believe that there is no
inconsistency between the above-quoted provision of Section 6 and the
provision of Section 14 of Commonwealth Act No. 103. It will be noted that
Section 6 speaks of order, award or decision that is executory. By the provision
of Section 14 an order, award or decision of the Court of Industrial Relations in
cases involving strikes and lockouts are immediately executory, so that a
violation of that order would constitute an indirect contempt of court.
We believe that the action of the CIR in issuing the order of arrest of April 29,
1963 is also authorized under Section 19 of Commonwealth Act No. 103 which
provides as follows:
SEC. 19. Implied condition in every contract of employment.In every
contract of employment whether verbal or written, it is an implied
condition that when any dispute between the employer and the
employee or laborer has been submitted to the Court of Industrial
Relations for settlement or arbitration pursuant to the provisions of this
Act . . . and pending award, or decision by the Court of such
dispute . . . the employee or laborer shall not strike or walk out of his
employment when so enjoined by the Court after hearing and when
public interest so requires, and if he has already done so, that he shall
forthwith return to it, upon order of the Court, which shall be issued
only after hearing when public interest so requires or when the dispute
cannot, in its opinion, be promptly decided or settled; and if the
employees or laborers fail to return to work, the Court may authorize
the employer to accept other employees or laborers. A condition shall
further be implied that while such dispute . . . is pending, the employer
shall refrain from accepting other employees or laborers, unless with
the express authority of the Court, and shall permit the continuation in
the service of his employees or laborers under the last terms and
conditions existing before the dispute arose. . . . A violation by the
employer or by the employee or laborer of such an order or the implied
LABOR LAW I |81

contractual condition set forth in this section shall constitute contempt

of the Court of Industrial Relations and shall be punished by the Court
itself in the same manner with the same penalties as in the case of
contempt of a Court of First Instance. . . .
We hold that the CIR acted within its jurisdiction when it ordered the arrest of
the officers of the University upon a complaint for indirect contempt filed by the
Acting Special Prosecutor of the CIR in CIR Case V-30, and that order was
valid. Besides those ordered arrested were not yet being punished for
contempt; but, having been charged, they were simply ordered arrested to be
brought before the Judge to be dealt with according to law. Whether they are
guilty of the charge or not is yet to be determined in a proper hearing.
Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-30 is
being questioned in Case G.R. No. L-21278 before this Court in a special civil
action for certiorari. The University did not appeal from that order. In other
words, the only question to be resolved in connection with that order in CIR
Case V-30 is whether the CIR had jurisdiction, or had abused its discretion, in
issuing that order. We hold that the CIR had jurisdiction to issue that order, and
neither did it abuse its discretion when it issued that order.
In Case G.R. No. L-21462 the University appealed from the order of Judge
Villanueva of the CIR in Case No. 1183-MC, dated April 6, 1963, granting the
motion of the Faculty Club to withdraw its petition for certification election, and
from the resolution of the CIR en banc, dated June 5, 1963, denying the motion
to reconsider said order of April 6, 1963. The ground of the Faculty Club in
asking for the withdrawal of that petition for certification election was because
the issues involved in that petition were absorbed by the issues in Case 41IPA. The University opposed the petition for withdrawal, but at the same time it
moved for the dismissal of the petition for certification election.

We believe that these contentions of the University in Case G.R. No. L-21462
have been sufficiently covered by the discussion in this decision of the main
issues raised in the principal case, which is Case G.R. No. L-21278. After all,
the University wanted CIR Case 1183-MC dismissed, and the withdrawal of the
petition for certification election had in a way produced the situation desired by
the University. After considering the arguments adduced by the University in
support of its petition for certiorari by way of appeal in Case G.R. No. L-21278,
We hold that the CIR did not commit any error when it granted the withdrawal
of the petition for certification election in Case No. 1183-MC. The principal case
before the CIR is Case No. 41-IPA and all the questions relating to the labor
disputes between the University and the Faculty Club may be threshed out,
and decided, in that case.
In Case G.R. No. L-21500 the University appealed from the order of the CIR of
March 30, 1963, issued by Judge Bautista, and from the resolution of the
CIR en banc promulgated on June 28, 1963, denying the motion for the
reconsideration of that order of March 30, 1963, in CIR Case No. 41-IPA. We
have already ruled that the CIR has jurisdiction to issue that order of March 30,
1963, and that order is valid, and We, therefore, hold that the CIR did not err in
issuing that order of March 30, 1963 and in issuing the resolution promulgated
on June 28, 1963 (although dated May 7, 1963) denying the motion to
reconsider that order of March 30, 1963.
IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition with
preliminary injunction in Case G.R. No. L-21278 is dismissed and the writs
prayed for therein are denied. The writ of preliminary injunction issued in Case
G.R. No. L-21278 is dissolved. The orders and resolutions appealed from, in
Cases Nos. L-21462 and L-21500, are affirmed, with costs in these three cases
against the petitioner-appellant Feati University. It is so ordered.

It is contended by the University before this Court, in G.R. L-21462, that the
issues of employer-employee relationship between the University and the
Faculty Club, the alleged status of the Faculty Club as a labor union, its
majority representation and designation as bargaining representative in an
appropriate unit of the Faculty Club should have been resolved first in Case
No. 1183-MC prior to the determination of the issues in Case No. 41-IPA, and,
therefore, the motion to withdraw the petition for certification election should
not have been granted upon the ground that the issues in the first case were
absorbed in the second case.
LABOR LAW I |82

EN BANC
G.R. No. L-21212

September 23, 1966

CITIZENS' LEAGUE OF FREEWORKERS AND/OR BALBINO EPIS,

NICOLAS ROJO, ET AL., petitioners,
vs.
HON. MACAPANTON ABBAS, Judge of the Court of First Instance of
Davao and TEOFILO GERONIMO and EMERITA MENDEZ, respondents.
DIZON, J.:
Petition for certiorari with a prayer for the issuance of a writ of preliminary
injunction filed by the Citizens' League of Freeworkers, a legitimate labor
organization, hereinafter referred to as the Union and its members
against the spouses Teofilo Geronimo and Emerita Mendez, and the Hon.
Macapanton Abbas, as judge of the Court of First Instance of Davao. Its
purpose is to set aside the writ of preliminary injunction issued by the latter in
Civil Case No. 3966 and restrain him from proceeding with the case, on the
ground that the controversy involves a labor dispute and is, therefore, within
the exclusive jurisdiction of the Court of Industrial Relations.
It appears that on March 11, 1963, respondents-spouses owners and operators
of auto-calesas in Davao City, filed a complaint with the Court of First Instance
of Davao (Civil Case No. 3966) to restrain the Union and its members, who
were drivers of the spouses in said business, from interfering with its operation,
from committing certain acts complained of in connection therewith, and to
recover damages. The complaint alleged that the defendants named therein
used to lease the auto-calesas of the spouses on a daily rental basis; that,
unable to get the spouses to recognize said defendants as employees instead
of lessees and to bargain with it on that basis, the Union declared a strike on
February 20, 1963 and since then had paralyzed plaintiffs' business operations
through threats, intimidation and violence. The complaint also prayed for the
issuance of a writ of preliminary injunction ex-parte restraining defendants
therein from committing said acts of violence and intimidation during the
pendency of the case.

On March 11, 1963 the respondent judge granted the writ prayed for, while
deferring action on petitioners' motion to dissolve said writ to March 20 of the
same year.
Meanwhile, on March 12, 1963, petitioners filed a complaint for unfair labor
practice against the respondents-spouses with the Court of Industrial Relations
on the ground, among others, of the latter's refusal to bargain with
them. 1awphl.nt
On March 18, 1963, petitioners filed a motion to declare the writ of preliminary
injunction void on the ground that the same had expired by virtue of Section 9
(d) of Republic Act 875. In his order of March 21, 1963, however, the
respondent judge denied said motion on the ground that there was no
employer-employee relationship between respondents-spouses and the
individual petitioners herein and that, consequently, the Rules of Court and not
Republic Act No. 875 applied to the matter of injunction. Thereupon the petition
under consideration was filed.
In the case of Isabelo Doce vs. Workmen's Compensation Commission, et
al. (G.R. No. L-9417, December 22, 1958), upon a similar if not an altogether
identical set of facts, We held:
This case falls squarely within our ruling in National Labor Union v.
Dinglasan, 52 O.G., No. 4, 1933, wherein this Court held that a driver
of a jeep who operates the same under the boundary system is
considered an employee within the meaning of the law and as such the
case comes under the jurisdiction of the Court of Industrial Relations.
In that case, Benedicto Dinglasan was the owner and operator of TPU
jeepneys which were driven by petitioner under verbal contracts that
they will pay P7.50 for 10 hours use under the so called "boundary
system." The drivers did not receive salaries or wages from the owner.
Their day's earnings were the excess over the P7.50 they paid for the
use of the jeepneys. In the event that they did not earn more, the
owner did not have to pay them anything. In holding that the employeremployee relationship existed between the owner of the jeepneys and
the drivers even if the latter worked under the boundary system, this
Court said:

LABOR LAW I |83

"The only features that would make the relationship of lessor

and lessee between the respondent, owner of the jeeps, and
the drivers, members of the petitioner union, are the fact that
he does not pay them any fixed wage but their compensation
is the excess of the total amount of fares earned or collected
by them over and above the amount of P7.50 which they
agreed to pay to the respondent, and the fact that the gasoline
burned by the jeeps is for the account of the drivers. These two
features are not, however, sufficient to withdraw the
relationship, between them from that of employer-employee,
because the estimated earnings for fares must be over and
above the amount they agreed to pay to the respondent for a
ten-hour shift or ten-hour a day operation of the jeeps. Not
having any interest in the business because they did not invest
anything in the acquisition of the jeeps and did not participate
in the management thereof, their service as drivers of the
jeeps being their only contribution to the business, the
relationship of lessor and lessee cannot be sustained."
Even assuming, arguendo, that the respondent court had jurisdiction to issue
the abovementioned writ of preliminary injunction in Civil Case No. 3966 at the
time it was issued, We are of the opinion, and so hold, that it erred in denying
petitioners' motion to set aside said writ upon expiration of the period of thirty
days from its issuance, upon the wrong ground that there was no labor dispute
between the parties and that, therefore, the provisions of Republic Act No. 875
did not apply to the case. As stated heretofore, there was a labor dispute
between the parties from the beginning.
Moreover, upon the filing of the unfair labor practice case on March 12, 1963,
the Court of Industrial Relations acquired complete jurisdiction over the labor
dispute and the least that could be done in Civil Case No. 3966 is either to
dismiss it or suspend proceedings therein until the final resolution of the former.
Wherefore, judgment is hereby rendered setting aside the writ of preliminary
injunction issued by the respondent judge in Civil Case No. 3966 of the Court
of First Instance of Davao, with costs.

LABOR LAW I |84

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 Decision 1 and Resolution2 of the Court of Appeals
(CA) in CA-G.R. SP No. 78720 which set aside the Resolution 3of the National
Labor Relations Commission (NLRC) in NCR-30-08-03247-00, which in turn
affirmed the Decision4of 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 Villamarias
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 vehicles
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.

LABOR LAW I |85

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 Complaint 7 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 drivers 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. Attorneys 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 vehicles 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, Paraaque 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. NLRC 11 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. Abbas 16 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
LABOR LAW I |86

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 judgment 17 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] complaints (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
Villamarias 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 PETITIONERS APPEAL "FOR REASON NOT STATED IN
THE LABOR ARBITERS 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-buyers
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
LABOR LAW I |87

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. Drilon 24 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.

method of the employees work. In this case, Villamarias 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 Villamarias
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 weeks default in paying the
boundary-hulog constituted an additional cause for terminating Bustamantes
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.

The appellate court ruled that the Labor Arbiter had jurisdiction over
Bustamantes complaint. Under the Kasunduan, the relationship between him
and Villamaria was dual: that of vendor-vendee and employer-employee. The
CA ratiocinated that Villamarias exercise of control over Bustamantes conduct
in operating the jeepney is inconsistent with the formers 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.

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 vendorvendee 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.

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

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

Without Costs.
SO ORDERED.26

LABOR LAW I |88

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 respondents 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
LABOR LAW I |89

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

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.

Article 217 of the Labor Code, as amended, vests on the Labor Arbiter
exclusive original jurisdiction only over the following:

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 employeremployee 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

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

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 vendorvendee. 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. Dinglasan 40 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. Bernardo 41 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
44
conductor, 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 latters daily earnings are remitted to the
owner/operator less the excess of the boundary which represents the drivers
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
LABOR LAW I |90

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
respondents 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 petitioners
boundary and respondents 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.

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.

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

7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o

piyesa na papalitan ng nasira o nawala ito dahil sa kanyang kapabayaan.

Under the Kasunduan, petitioner retained supervision and control over the
conduct of the respondent as driver of the jeepney, thus:

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.

Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary

hulog ay ang mga sumusunod:

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.

LABOR LAW I |91

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.

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.

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.

20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipagunahan sa kaninumang sasakyan upang maiwasan ang aksidente.

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.

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

LABOR LAW I |92

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 respondents conduct as driver of
the vehicle. As correctly ruled by the CA:
The exercise of control by private respondent over petitioners conduct in
operating the jeepney he was driving is inconsistent with private respondents
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 petitioners claim that the terms
and conditions in the Kasunduan relative to respondents behavior and
deportment as driver was for his and respondents 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 respondents employer, it was the burden of petitioner to prove that
respondents 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

LABOR LAW I |93

employer to discharge this burden means that the dismissal is not justified and
that the employee is entitled to reinstatement and back wages.

"(The Signatures appearing herein

include (sic) that of petitioners) (Sgd.)

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 (petitioners) 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
respondents 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

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
Petitioners claim that he opted not to terminate the employment of respondent
because of magnanimity is negated by his (petitioners) own evidence that he
took the jeepney from the respondent only on July 24, 2000.

"Sa pamamagitan ng BOUNDARY HULOG

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.

"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.

SO ORDERED.

"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong

ipatutupad ang nasabing Kasunduan kayat 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
LABOR LAW I |94

SECOND DIVISION
G.R. No. 142293

February 27, 2003

VICENTE SY, TRINIDAD PAULINO, 6BS TRUCKING CORPORATION, and

SBT1 TRUCKING
CORPORATION,petitioners,
vs.
HON. COURT OF APPEALS and JAIME SAHOT, respondents.
DECISION
QUISUMBING, J.:
This petition for review seeks the reversal of the decision 2 of the Court of
Appeals dated February 29, 2000, in CA-G.R. SP No. 52671, affirming with
modification the decision3 of the National Labor Relations Commission
promulgated on June 20, 1996 in NLRC NCR CA No. 010526-96. Petitioners
also pray for the reinstatement of the decision 4 of the Labor Arbiter in NLRC
NCR Case No. 00-09-06717-94.
Culled from the records are the following facts of this case:
5

Sometime in 1958, private respondent Jaime Sahot started working as a truck

helper for petitioners family-owned trucking business named Vicente Sy
Trucking. In 1965, he became a truck driver of the same family business,
renamed T. Paulino Trucking Service, later 6Bs Trucking Corporation in 1985,
and thereafter known as SBT Trucking Corporation since 1994. Throughout all
these changes in names and for 36 years, private respondent continuously
served the trucking business of petitioners.

retinopathy G II (Annexes "G-5" and "G-3", pp. 48, 104, respectively), 6 HPM,
UTI, Osteoarthritis (Annex "G-4", p. 105),7 and heart enlargement (Annex G, p.
107).8 On said grounds, Belen Paulino of the SBT Trucking Service
management told him to file a formal request for extension of his leave. At the
end of his week-long absence, Sahot applied for extension of his leave for the
whole month of June, 1994. It was at this time when petitioners allegedly
threatened to terminate his employment should he refuse to go back to work.
At this point, Sahot found himself in a dilemma. He was facing dismissal if he
refused to work, But he could not retire on pension because petitioners never
paid his correct SSS premiums. The fact remained he could no longer work as
his left thigh hurt abominably. Petitioners ended his dilemma. They carried out
their threat and dismissed him from work, effective June 30, 1994. He ended
up sick, jobless and penniless.
On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a
complaint for illegal dismissal, docketed as NLRC NCR Case No. 00-09-0671794. He prayed for the recovery of separation pay and attorneys fees against
Vicente Sy and Trinidad Paulino-Sy, Belen Paulino, Vicente Sy Trucking, T.
Paulino Trucking Service, 6Bs Trucking and SBT Trucking, herein petitioners.
For their part, petitioners admitted they had a trucking business in the 1950s
but denied employing helpers and drivers. They contend that private
respondent was not illegally dismissed as a driver because he was in fact
petitioners industrial partner. They add that it was not until the year 1994,
when SBT Trucking Corporation was established, and only then did respondent
Sahot become an employee of the company, with a monthly salary that
reached P4,160.00 at the time of his separation.

In April 1994, Sahot was already 59 years old. He had been incurring absences
as he was suffering from various ailments. Particularly causing him pain was
his left thigh, which greatly affected the performance of his task as a driver. He
inquired about his medical and retirement benefits with the Social Security
System (SSS) on April 25, 1994, but discovered that his premium payments
had not been remitted by his employer.

Petitioners further claimed that sometime prior to June 1, 1994, Sahot went on
leave and was not able to report for work for almost seven days. On June 1,
1994, Sahot asked permission to extend his leave of absence until June 30,
1994. It appeared that from the expiration of his leave, private respondent
never reported back to work nor did he file an extension of his leave. Instead,
he filed the complaint for illegal dismissal against the trucking company and its
owners.

Sahot had filed a week-long leave sometime in May 1994. On May 27th, he
was medically examined and treated for EOR, presleyopia, hypertensive

Petitioners add that due to Sahots refusal to work after the expiration of his
authorized leave of absence, he should be deemed to have voluntarily
LABOR LAW I |95

resigned from his work. They contended that Sahot had all the time to extend
his leave or at least inform petitioners of his health condition. Lastly, they cited
NLRC Case No. RE-4997-76, entitled "Manuelito Jimenez et al. vs. T. Paulino
Trucking Service," as a defense in view of the alleged similarity in the factual
milieu and issues of said case to that of Sahots, hence they are in pari
material and Sahots complaint ought also to be dismissed.
The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente
Santos, ruled that there was no illegal dismissal in Sahots case. Private
respondent had failed to report to work. Moreover, said the Labor Arbiter,
petitioners and private respondent were industrial partners before January
1994. The Labor Arbiter concluded by ordering petitioners to pay "financial
assistance" of P15,000 to Sahot for having served the company as a regular
employee since January 1994 only.
On appeal, the National Labor Relations Commission modified the judgment of
the Labor Arbiter. It declared that private respondent was an employee, not an
industrial partner, since the start. Private respondent Sahot did not abandon his
job but his employment was terminated on account of his illness, pursuant to
Article 2849 of the Labor Code. Accordingly, the NLRC ordered petitioners to
pay private respondent separation pay in the amount of P60,320.00, at the rate
of P2,080.00 per year for 29 years of service.
Petitioners assailed the decision of the NLRC before the Court of Appeals. In
its decision dated February 29, 2000, the appellate court affirmed with
modification the judgment of the NLRC. It held that private respondent was
indeed an employee of petitioners since 1958. It also increased the amount of
separation pay awarded to private respondent to P74,880, computed at the
rate of P2,080 per year for 36 years of service from 1958 to 1994. It decreed:
WHEREFORE, the assailed decision is hereby AFFIRMED with
MODIFICATION. SB Trucking Corporation is hereby directed to pay
complainant Jaime Sahot the sum of SEVENTY-FOUR THOUSAND EIGHT
HUNDRED EIGHTY (P74,880.00) PESOS as and for his separation pay.10
Hence, the instant petition anchored on the following contentions:
I RESPONDENT COURT OF APPEALS IN PROMULGATING THE
QUESTION[ED] DECISION AFFIRMING WITH MODIFICATION THE
DECISION OF NATIONAL LABOR RELATIONS COMMISSION DECIDED

NOT IN ACCORD WITH LAW AND PUT AT NAUGHT ARTICLE 402 OF THE
CIVIL CODE.11
II RESPONDENT COURT OF APPEALS VIOLATED SUPREME COURT
RULING THAT THE NATIONAL LABOR RELATIONS COMMISSION IS
BOUND BY THE FACTUAL FINDINGS OF THE LABOR ARBITER AS THE
LATTER WAS IN A BETTER POSITION TO OBSERVE THE DEMEANOR AND
DEPORTMENT OF THE WITNESSES IN THE CASE OF ASSOCIATION OF
INDEPENDENT UNIONS IN THE PHILIPPINES VERSUS NATIONAL
CAPITAL REGION (305 SCRA 233).12
III
PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY RESPONDENT SBT
TRUCKING CORPORATION.13
Three issues are to be resolved: (1) Whether or not an employer-employee
relationship existed between petitioners and respondent Sahot; (2) Whether or
not there was valid dismissal; and (3) Whether or not respondent Sahot is
entitled to separation pay.
Crucial to the resolution of this case is the determination of the first issue.
Before a case for illegal dismissal can prosper, an employer-employee
relationship must first be established.14
Petitioners invoke the decision of the Labor Arbiter Ariel Cadiente Santos which
found that respondent Sahot was not an employee but was in fact, petitioners
industrial partner.15 It is contended that it was the Labor Arbiter who heard the
case and had the opportunity to observe the demeanor and deportment of the
parties. The same conclusion, aver petitioners, is supported by substantial
evidence.16 Moreover, it is argued that the findings of fact of the Labor Arbiter
was wrongly overturned by the NLRC when the latter made the following
pronouncement:
We agree with complainant that there was error committed by the Labor Arbiter
when he concluded that complainant was an industrial partner prior to 1994. A
computation of the age of complainant shows that he was only twenty-three
(23) years when he started working with respondent as truck helper. How can
we entertain in our mind that a twenty-three (23) year old man, working as a
truck helper, be considered an industrial partner. Hence we rule that
LABOR LAW I |96

complainant was only an employee, not a partner of respondents from the time
complainant started working for respondent.17

Thus, the NLRC and the CA did not err in reversing the finding of the Labor
Arbiter that private respondent was an industrial partner from 1958 to 1994.

Because the Court of Appeals also found that an employer-employee

relationship existed, petitioners aver that the appellate courts decision gives an
"imprimatur" to the "illegal" finding and conclusion of the NLRC.

On this point, we affirm the findings of the appellate court and the NLRC.
Private respondent Jaime Sahot was not an industrial partner but an employee
of petitioners from 1958 to 1994. The existence of an employer-employee
relationship is ultimately a question of fact 23 and the findings thereon by the
NLRC, as affirmed by the Court of Appeals, deserve not only respect but finality
when supported by substantial evidence. Substantial evidence is such amount
of relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion.24

Private respondent, for his part, denies that he was ever an industrial partner of
petitioners. There was no written agreement, no proof that he received a share
in petitioners profits, nor was there anything to show he had any participation
with respect to the running of the business.18
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 employers power to control the
employees conduct. The most important element is the employers control of
the employees conduct, not only as to the result of the work to be done, but
also as to the means and methods to accomplish it.19
As found by the appellate court, petitioners owned and operated a trucking
business since the 1950s and by their own allegations, they determined private
respondents wages and rest day.20 Records of the case show that private
respondent actually engaged in work as an employee. During the entire course
of his employment he did not have the freedom to determine where he would
go, what he would do, and how he would do it. He merely followed instructions
of petitioners and was content to do so, as long as he was paid his wages.
Indeed, said the CA, private respondent had worked as a truck helper and
driver of petitioners not for his own pleasure but under the latters control.
Article 176721 of the Civil Code states that in a contract of partnership two or
more persons bind themselves to contribute money, property or industry to a
common fund, with the intention of dividing the profits among themselves. 22 Not
one of these circumstances is present in this case. No written agreement exists
to prove the partnership between the parties. Private respondent did not
contribute money, property or industry for the purpose of engaging in the
supposed business. There is no proof that he was receiving a share in the
profits as a matter of course, during the period when the trucking business was
under operation. Neither is there any proof that he had actively participated in
the management, administration and adoption of policies of the business.

Time and again this Court has said that "if doubt exists between the evidence
presented by the employer and the employee, the scales of justice must be
tilted in favor of the latter."25 Here, we entertain no doubt. Private respondent
since the beginning was an employee of, not an industrial partner in, the
trucking business.
Coming now to the second issue, was private respondent validly dismissed by
petitioners?
Petitioners contend that it was private respondent who refused to go back to
work. The decision of the Labor Arbiter pointed out that during the conciliation
proceedings, petitioners requested respondent Sahot to report back for work.
However, in the same proceedings, Sahot stated that he was no longer fit to
continue working, and instead he demanded separation pay. Petitioners then
retorted that if Sahot did not like to work as a driver anymore, then he could be
given a job that was less strenuous, such as working as a checker. However,
Sahot declined that suggestion. Based on the foregoing recitals, petitioners
assert that it is clear that Sahot was not dismissed but it was of his own volition
that he did not report for work anymore.
In his decision, the Labor Arbiter concluded that:
While it may be true that respondents insisted that complainant continue
working with respondents despite his alleged illness, there is no direct
evidence that will prove that complainants illness prevents or incapacitates him
from performing the function of a driver. The fact remains that complainant
suddenly stopped working due to boredom or otherwise when he refused to
work as a checker which certainly is a much less strenuous job than a driver.26
LABOR LAW I |97

But dealing the Labor Arbiter a reversal on this score the NLRC, concurred in
by the Court of Appeals, held that:
While it was very obvious that complainant did not have any intention to report
back to work due to his illness which incapacitated him to perform his job, such
intention cannot be construed to be an abandonment. Instead, the same
should have been considered as one of those falling under the just causes of
terminating an employment. The insistence of respondent in making
complainant work did not change the scenario.
It is worthy to note that respondent is engaged in the trucking business where
physical strength is of utmost requirement (sic). Complainant started working
with respondent as truck helper at age twenty-three (23), then as truck driver
since 1965. Complainant was already fifty-nine (59) when the complaint was
filed and suffering from various illness triggered by his work and age.
x x x27
In termination cases, the burden is upon the employer to show by substantial
evidence that the termination was for lawful cause and validly made. 28 Article
277(b) of the Labor Code puts the burden of proving that the dismissal of an
employee was for a valid or authorized cause on the employer, without
distinction whether the employer admits or does not admit the dismissal. 29 For
an employees dismissal to be valid, (a) the dismissal must be for a valid cause
and (b) the employee must be afforded due process.30
Article 284 of the Labor Code authorizes an employer to terminate an
employee on the ground of disease, viz:
Art. 284. Disease as a 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 prejudicial to his
health as well as the health of his co-employees: xxx
However, in order to validly terminate employment on this ground, Book VI,
Rule I, Section 8 of the Omnibus Implementing Rules of the Labor Code
requires:
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

health or to the health of his co-employees, the employer shall not terminate
his employment unless there is a certification by 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. (Italics supplied).
As this Court stated in Triple Eight integrated Services, Inc. vs. NLRC, 31 the
requirement for a medical certificate under Article 284 of the Labor Code
cannot be dispensed with; otherwise, it would sanction the unilateral and
arbitrary determination by the employer of the gravity or extent of the
employees illness and thus defeat the public policy in the protection of labor.
In the case at bar, the employer clearly did not comply with the medical
certificate requirement before Sahots dismissal was effected. In the same case
of Sevillana vs. I.T. (International) Corp., we ruled:
Since the burden of proving the validity of the dismissal of the employee rests
on the employer, the latter should likewise bear the burden of showing that the
requisites for a valid dismissal due to a disease have been complied with. In
the absence of the required certification by a competent public health authority,
this Court has ruled against the validity of the employees dismissal. It is
therefore incumbent upon the private respondents to prove by the quantum of
evidence required by law that petitioner was not dismissed, or if dismissed, that
the dismissal was not illegal; otherwise, the dismissal would be unjustified. This
Court will not sanction a dismissal premised on mere conjectures and
suspicions, the evidence must be substantial and not arbitrary and must be
founded on clearly established facts sufficient to warrant his separation from
work.32
In addition, we must likewise determine if the procedural aspect of due process
had been complied with by the employer.
From the records, it clearly appears that procedural due process was not
observed in the separation of private respondent by the management of the
trucking company. The employer is required to furnish an employee with two
written notices before the latter is dismissed: (1) the notice to apprise the
employee of the particular acts or omissions for which his dismissal is sought,
LABOR LAW I |98

which is the equivalent of a charge; and (2) the notice informing the employee
of his dismissal, to be issued after the employee has been given reasonable
opportunity to answer and to be heard on his defense. 33 These, the petitioners
failed to do, even only for record purposes. What management did was to
threaten the employee with dismissal, then actually implement the threat when
the occasion presented itself because of private respondents painful left thigh.
All told, both the substantive and procedural aspects of due process were
violated. Clearly, therefore, Sahots dismissal is tainted with invalidity.
On the last issue, as held by the Court of Appeals, respondent Jaime Sahot is
entitled to separation pay. The law is clear on the matter. An employee who is
terminated because of disease is entitled to "separation pay equivalent to at
least one month salary or to one-half month salary for every year of service,
whichever is greater xxx."34Following the formula set in Art. 284 of the Labor
Code, his separation pay was computed by the appellate court at P2,080 times
36 years (1958 to 1994) or P74,880. We agree with the computation, after
noting that his last monthly salary was P4,160.00 so that one-half thereof is
P2,080.00. Finding no reversible error nor grave abuse of discretion on the part
of appellate court, we are constrained to sustain its decision. To avoid further
delay in the payment due the separated worker, whose claim was filed way
back in 1994, this decision is immediately executory. Otherwise, six percent
(6%) interest per annum should be charged thereon, for any delay, pursuant to
provisions of the Civil Code.
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals
dated February 29, 2000 is AFFIRMED. Petitioners must pay private
respondent Jaime Sahot his separation pay for 36 years of service at the rate
of one-half monthly pay for every year of service, amounting to P74,880.00,
with interest of six per centum (6%) per annum from finality of this decision until
fully paid.
Costs against petitioners. SO ORDERED.
THIRD DIVISION

vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA
(Labor Arbiter, Department of Labor and Employment, National Capital
Region), SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP
and its members, JACINTO GARCIANO, ALFREDO C. BASCO, VICTORIO
Y. LAURETO, ESTER NARVAEZ, EUGENIO L. ROBLES, BELEN N. VISTA,
ALEJANDRO A. ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA,
GLORIA ESTRABO, LEONORA MENDOZA, MACARIA G. DIMPAS,
MERILYN A. VIRAY, LILY OPINA, JANET SANGDANG, JOSEFINA
ALCOCEBA and MARIA ANGELES, respondents.
FERNAN, C.J.:
This petition for certiorari involving two separate cases filed by private
respondents against herein petitioners assails the decision of respondent
National Labor Relations Commission in NLRC CASE No. 7-2603-84 entitled
"Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Makati
Haberdashery and/or Toppers Makati, et al." and NLRC CASE No. 2-428-85
entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al.
v. Toppers Makati, et al.", affirming the decision of the Labor Arbiter who jointly
heard and decided aforesaid cases, finding: (a) petitioners guilty of illegal
dismissal and ordering them to reinstate the dismissed workers and (b) the
existence of employer-employee relationship and granting respondent workers
by reason thereof their various monetary claims.
The undisputed facts are as follows:
Individual complainants, private respondents herein, have been working for
petitioner Makati Haberdashery, Inc. as tailors, seamstress, sewers, basters
(manlililip) and "plantsadoras". They are paid on a piece-rate basis except
Maria Angeles and Leonila Serafina who are paid on a monthly basis. In
addition to their piece-rate, they are given a daily allowance of three (P 3.00)
pesos provided they report for work before 9:30 a.m. everyday.

G.R. Nos. 83380-81 November 15, 1989

Private respondents are required to work from or before 9:30 a.m. up to 6:00 or
7:00 p.m. from Monday to Saturday and during peak periods even on Sundays
and holidays.

MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G.

INOCENCIO, petitioners,

On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor

organization of the respondent workers, filed a complaint docketed as NLRC
LABOR LAW I |99

NCR Case No. 7-2603-84 for (a) underpayment of the basic wage; (b)
underpayment of living allowance; (c) non-payment of overtime work; (d) nonpayment of holiday pay; (e) non-payment of service incentive pay; (f) 13th
month pay; and (g) benefits provided for under Wage Orders Nos. 1, 2, 3, 4
and 5. 1
During the pendency of NLRC NCR Case No. 7-2603-84, private respondent
Dioscoro Pelobello left with Salvador Rivera, a salesman of petitioner
Haberdashery, an open package which was discovered to contain a "jusi"
barong tagalog. When confronted, Pelobello replied that the same was ordered
by respondent Casimiro Zapata for his customer. Zapata allegedly admitted
that he copied the design of petitioner Haberdashery. But in the afternoon,
when again questioned about said barong, Pelobello and Zapata denied
ownership of the same. Consequently a memorandum was issued to each of
them to explain on or before February 4, 1985 why no action should be taken
against them for accepting a job order which is prejudicial and in direct
competition with the business of the company. 2 Both respondents allegedly did
not submit their explanation and did not report for work. 3 Hence, they were
dismissed by petitioners on February 4, 1985. They countered by filing a
complaint for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 on
February 5, 1985. 4
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2428-85 finding respondents guilty of illegal dismissal and ordering them to
reinstate Dioscoro Pelobello and Casimiro Zapata to their respective or
similar positions without loss of seniority rights, with full backwages from
July 4, 1985 up to actual reinstatement. The charge of unfair labor practice
is dismissed for lack of merit.
In NLRC NCR Case No. 7-26030-84, the complainants' claims for
underpayment re violation of the minimum wage law is hereby ordered
dismissed for lack of merit.
Respondents are hereby found to have violated the decrees on the cost of
living allowance, service incentive leave pay and the 13th Month Pay. In
view thereof, the economic analyst of the Commission is directed to
compute the monetary awards due each complainant based on the

available records of the respondents retroactive as of three years prior to

the filing of the instant case.
SO ORDERED. 5
From the foregoing decision, petitioners appealed to the NLRC. The latter on
March 30, 1988 affirmed said decision but limited the backwages awarded the
Dioscoro Pelobello and Casimiro Zapata to only one (1) year. 6
After their motion for reconsideration was denied, petitioners filed the instant
petition raising the following issues:
I THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER
HABERDASHERY AND RESPONDENTS WORKERS.
II THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
RESPONDENTS WORKERS ARE ENTITLED TO MONETARY CLAIMS
DESPITE THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUM
WAGE.
III THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
RESPONDENTS
PELOBELLO
AND
ZAPATA WERE
ILLEGALLY
DISMISSED. 7
The first issue which is the pivotal issue in this case is resolved in favor of
private respondents. We have repeatedly held in countless decisions that the
test of employer-employee relationship is four-fold: (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. It is the so
called "control test" that is the most important element. 8 This simply means the
determination of whether the employer controls or has reserved the right to
control the employee not only as to the result of the work but also as to the
means and method by which the same is to be accomplished. 9
The facts at bar indubitably reveal that the most important requisite of control is
present. As gleaned from the operations of petitioner, when a customer enters
into a contract with the haberdashery or its proprietor, the latter directs an
employee who may be a tailor, pattern maker, sewer or "plantsadora" to take
the customer's measurements, and to sew the pants, coat or shirt as specified
LABOR LAW I |100

by the customer. Supervision is actively manifested in all these aspects the

manner and quality of cutting, sewing and ironing.
Furthermore, the presence of control is immediately evident in this
memorandum issued by Assistant Manager Cecilio B. Inocencio, Jr. dated May
30, 1981 addressed to Topper's Makati Tailors which reads in part:
4. Effective immediately, new procedures shall be followed:
A. To follow instruction and orders from the undersigned Roger Valderama,
Ruben Delos Reyes and Ofel Bautista. Other than this person (sic) must
ask permission to the above mentioned before giving orders or instructions
to the tailors.
B. Before accepting the job orders tailors must check the materials, job
orders, due dates and other things to maximize the efficiency of our
production. The materials should be checked (sic) if it is matched (sic) with
the sample, together with the number of the job order.
C. Effective immediately all job orders must be finished one day before the
due date. This can be done by proper scheduling of job order and if you will
cooperate with your supervisors. If you have many due dates for certain
day, advise Ruben or Ofel at once so that they can make necessary
adjustment on due dates.
D. Alteration-Before accepting alteration person attending on customs (sic)
must ask first or must advise the tailors regarding the due dates so that we
can eliminate what we call 'Bitin'.
E. If there is any problem regarding supervisors or co-tailor inside our
shop, consult with me at once settle the problem. Fighting inside the shop
is strictly prohibited. Any tailor violating this memorandum will be subject to
disciplinary action.
For strict compliance. 10
From this memorandum alone, it is evident that petitioner has reserved the
right to control its employees not only as to the result but also the means and
methods by which the same are to be accomplished. That private respondents
are regular employees is further proven by the fact that they have to report for

work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional
allowance of P 3.00 daily if they report for work before 9:30 a.m. and which is
forfeited when they arrive at or after 9:30 a.m. 11
Since private respondents are regular employees, necessarily the argument
that they are independent contractors must fail. As established in the preceding
paragraphs, private respondents did not exercise independence in their own
methods, but on the contrary were subject to the control of petitioners from the
beginning of their tasks to their completion. Unlike independent contractors
who generally rely on their own resources, the equipment, tools, accessories,
and paraphernalia used by private respondents are supplied and owned by
petitioners. Private respondents are totally dependent on petitioners in all these
aspects.
Coming now to the second issue, there is no dispute that private respondents
are entitled to the Minimum Wage as mandated by Section 2(g) of Letter of
Instruction No. 829, Rules Implementing Presidential Decree No. 1614 and
reiterated in Section 3(f), Rules Implementing Presidential Decree 1713 which
explicitly states that, "All employees paid by the result shall receive not less
than the applicable new minimum wage rates for eight (8) hours work a day,
except where a payment by result rate has been established by the Secretary
of Labor. ..." 12No such rate has been established in this case.
But all these notwithstanding, the question as to whether or not there is in fact
an underpayment of minimum wages to private respondents has already been
resolved in the decision of the Labor Arbiter where he stated: "Hence, for lack
of sufficient evidence to support the claims of the complainants for alleged
violation of the minimum wage, their claims for underpayment re violation of the
Minimum Wage Law under Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce
fall." 13
The records show that private respondents did not appeal the above ruling of
the Labor Arbiter to the NLRC; neither did they file any petition raising that
issue in the Supreme Court. Accordingly, insofar as this case is concerned, that
issue has been laid to rest. As to private respondents, the judgment may be
said to have attained finality. For it is a well-settled rule in this jurisdiction that
"an appellee who has not himself appealed cannot obtain from the appellate
court-, any affirmative relief other than the ones granted in the decision of the
court below. " 14

LABOR LAW I |101

As a consequence of their status as regular employees of the petitioners, they

can claim cost of living allowance. This is apparent from the provision defining
the employees entitled to said allowance, thus: "... All workers in the private
sector, regardless of their position, designation or status, and irrespective of
the method by which their wages are paid. " 15
Private respondents are also entitled to claim their 13th Month Pay under
Section 3(e) of the Rules and Regulations Implementing P.D. No. 851 which
provides:
Section 3. Employers covered. The Decree shall apply to all employers
except to:
xxx xxx xxx
(e) Employers of those who are paid on purely commission, boundary, or
task basis, and those who are paid a fixed amount for performing a specific
work, irrespective of the time consumed in the performance thereof, except
where the workers are paid on piece-rate basis in which case the employer
shall be covered by this issuance insofar as such workers are
concerned. (Emphasis supplied.)
On the other hand, while private respondents are entitled to Minimum Wage,
COLA and 13th Month Pay, they are not entitled to service incentive leave pay
because as piece-rate workers being paid at a fixed amount for performing
work irrespective of time consumed in the performance thereof, they fall under
one of the exceptions stated in Section 1(d), Rule V, Implementing Regulations,
Book III, Labor Code. For the same reason private respondents cannot also
claim holiday pay (Section 1(e), Rule IV, Implementing Regulations, Book III,
Labor Code).
With respect to the last issue, it is apparent that public respondents have
misread the evidence, for it does show that a violation of the employer's rules
has been committed and the evidence of such transgression, the copied
barong tagalog, was in the possession of Pelobello who pointed to Zapata as
the owner. When required by their employer to explain in a memorandum
issued to each of them, they not only failed to do so but instead went on AWOL
(absence without official leave), waited for the period to explain to expire and
for petitioner to dismiss them. They thereafter filed an action for illegal
dismissal on the far-fetched ground that they were dismissed because of union

activities. Assuming that such acts do not constitute abandonment of their jobs
as insisted by private respondents, their blatant disregard of their employer's
memorandum is undoubtedly an open defiance to the lawful orders of the latter,
a justifiable ground for termination of employment by the employer expressly
provided for in Article 283(a) of the Labor Code as well as a clear indication of
guilt for the commission of acts inimical to the interests of the employer,
another justifiable ground for dismissal under the same Article of the Labor
Code, paragraph (c). Well established in our jurisprudence is the right of an
employer to dismiss an employee whose continuance in the service is inimical
to the employer's interest. 16
In fact the Labor Arbiter himself to whom the explanation of private
respondents was submitted gave no credence to their version and found their
excuses that said barong tagalog was the one they got from the embroiderer
for the Assistant Manager who was investigating them, unbelievable.
Under the circumstances, it is evident that there is no illegal dismissal of said
employees. Thus, We have ruled that:
No employer may rationally be expected to continue in employment a
person whose lack of morals, respect and loyalty to his employer, regard
for his employer's rules, and appreciation of the dignity and responsibility of
his office, has so plainly and completely been bared.
That there should be concern, sympathy, and solicitude for the rights and
welfare of the working class, is meet and proper. That in controversies
between a laborer and his master, doubts reasonably arising from the
evidence, or in the interpretation of agreements and writings should be
resolved in the former's favor, is not an unreasonable or unfair rule. But
that disregard of the employer's own rights and interests can be justified by
that concern and solicitude is unjust and unacceptable. (Stanford
Microsystems, Inc. v. NLRC, 157 SCRA 414-415 [1988] ).
The law is protecting the rights of the laborer authorizes neither oppression nor
self-destruction of the employer.17 More importantly, 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 automatically be decided
in favor of labor. 18

LABOR LAW I |102

Finally, it has been established that the right to dismiss or otherwise impose
discriplinary sanctions upon an employee for just and valid cause, pertains in
the first place to the employer, as well as the authority to determine the
existence of said cause in accordance with the norms of due process. 19
There is no evidence that the employer violated said norms. On the contrary,
private respondents who vigorously insist on the existence of employeremployee relationship, because of the supervision and control of their
employer over them, were the very ones who exhibited their lack of respect
and regard for their employer's rules.
Under the foregoing facts, it is evident that petitioner Haberdashery had valid
grounds to terminate the services of private respondents.
WHEREFORE, the decision of the National Labor Relations Commission dated
March 30, 1988 and that of the Labor Arbiter dated June 10, 1986 are hereby
modified. The complaint filed by Pelobello and Zapata for illegal dismissal
docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack of factual and
legal bases. Award of service incentive leave pay to private respondents is
deleted.
SO ORDERED.

LABOR LAW I |103

FIRST DIVISION
[G.R. No. 113542. February 24, 1998]
CAURDANETAAN PIECE WORKERS UNION, represented by JUANITO P.
COSTALES, JR. in his capacity as union president, petitioner,
vs.UNDERSECRETARY BIENVENIDO E. LAGUESMA and
CORFARM GRAINS, INC., respondents.
[G.R. No. 114911. February 24, 1998]
CAURDANETAAN PIECE WORKERS ASSOCIATION as represented by
JUANITO P. COSTALES, JR., president, petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION, CORFARM GRAINS, INC.
and/or
TEODY
C.
RAPISORA
and
HERMINIO
RABANG, respondents.
DECISION
PANGANIBAN, J.:
The Court reiterates some fundamental labor doctrines: (1) this Court may
review factual determinations where the findings of the med-arbiter conflict with
those
of
the
undersecretary
of
labor;
(2)
an
employeremployee relationship may be established by substantial evidence; (3)
procedural due process is satisfied by the grant of an opportunity to be heard
and an actual adversarial-type trial is not required; (4) the NLRC commits
grave abuse of discretion when it remands a case to the labor arbiter in spite of
ample pieces of evidence on record which are sufficient to decide the case
directly; and (5) where illegal dismissal is proven, the workers are entitled to
back wages and other similar benefits without deductions or conditions.
Statement of the Case
These doctrines are used by the Court in resolving these consolidated
petitions for certiorari under Rule 65, challenging the resolutions of
Undersecretary Bienvenido Laguesma and the National Labor Relations
Commission.
First Case
In G.R. No. 113542, hereafter referred to as the First Case, Petitioner
Caurdanetaan Piece Workers Union/Association (CPWU) prays for the
nullification and reversal of Undersecretary Laguesmas Order dated January 4,
1994 in OS-MA-A-8-119-93 (RO100-9207-RU-001), which granted Respondent
Corfarms motion for reconsideration and dismissed petitioners prayer for

certification election. The dispositive portion of the assailed Order reads as

follows:[1]
WHEREFORE, the questioned Order is hereby set aside and a new
one issued dismissing the petition for certification election for lack of
merit.
In his earlier Order dated September 7, 1993, Laguesma affirmed MedArbiter Sinamar E. Limos order of March 18, 1993 which disposed as follows: [2]
IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, the aboveentitled petition is hereby granted. Consequently, the motion to
dismiss filed by Corfarm Grains, Inc. is denied.
Let a certification election be conducted among the rank-and-file
employees of Corfarm Grains, Inc., within ten (10) days from receipt
hereof, with the following choices:
1. Caurdanetaan Piece Workers Union;
2. No Union
A pre-election conference is hereby set on March 29, 1993 at 2:00 o
clock in the afternoon at the DOLE, Dagupan District Office,
Mayombo District, Dagupan City to thresh out the mechanics of the
Certification Election. Employer Corfarm Grains, Inc. is hereby
directed to present its employment records for the period covering
January to June 1992 evidencing payment of salaries of its
employees.
Let the parties be notified accordingly.
Aggrieved by Respondent Laguesmas subsequent Order dated January
27, 1994[3] denying its motion for reconsideration, petitioner filed this recourse
before this Court.
Second Case
In G.R. No. 114911, hereafter referred to as the Second Case, petitioner
assails the Resolution promulgated on February 16, 1994 in NLRC CA No. L001109[4] by the National Labor Relations Commission (Respondent NLRC),
[5]
the dispositive portion of which reads:[6]
WHEREFORE, the Decision of the Labor Arbiter dated 14 September
1993 is hereby SET ASIDE. Let the records of the case be
REMANDED to the Arbitration Branch of origin for immediate
appropriate proceedings.
LABOR LAW I |104

The labor arbiters decision that was reversed by Respondent NLRC

disposed as follows:[7]
WHEREFORE, judgment is hereby rendered as follows:
1. Declaring individual complainants dismissal illegal;
2. Declaring respondent guilty of unfair labor practice;
3. Ordering respondent to pay the 92 [8] complainants the
following:
a) 13th month pay limited to three years in the amount of
P4,788.00 each;
b) service incentive leave pay in the amount of P855.00 each for
three years;
c) underpaid wages covering the period June 1989 to June 1992
which amount to P47,040.00 each;
d) backwages reckoned from June 1992, the date of dismissal[,]
to September 1993, the date of promulgation of the decision
or a period of 14 months, in the amount of P22,344.00 each;
e) refund of P12.00/day deduction limited to three years which
amounts to P12,096 each; and
f) to pay the complainants P1,000.00 each as damages.
4. To reinstate the complainants to their former position[s] immediately.
All other claims are hereby dismissed for lack of merit.
In a Resolution promulgated on March 28, 1994, Respondent NLRC
denied petitioners motion for reconsideration.[9]
The Facts
In his Consolidated Memorandum, the solicitor general recited the
following pertinent facts, which we find amply supported by the records: [10]
Petitioner union has ninety-two (92) members who worked as
cargador at the warehouse and ricemills of private respondent
[referring to Respondent Corfarm] at Umingan, Pangasinan since
1982. As cargadores, they loaded, unloaded and piled sacks of palay
from the warehouse to the cargo trucks and those brought by cargo
trucks for delivery to different places. They were paid by private
respondent on a piece rate basis. When private respondent denied

some benefits to these cargadores, the latter organized petitioner

union. Upon learning of its formation, private respondent barred its
members from working with them and replaced [them] with nonmembers of the union sometime in the middle of 1992.
On July 9, 1992, petitioner filed [a petition] for certification election
before the Regional Office No. I of the Department of Labor and
Employment, San Fernando, La Union docketed as RO100-9207-RU001.
While this petition for certification election was pending, petitioner
also filed on November 16, 1992, a complaint for illegal dismissal,
unfair labor practice, refund of illegal deductions, payment of wage
differentials, various pecuniary benefits provided by laws, damages,
legal interest, reinstatement and attorneys fees, against private
respondent before the Regional Arbitration Branch No. 1 of Dagupan
City, docketed as NLRC RAB Case No. 01-117-0184-92.
On November 24, 1992, Labor Arbiter Ricardo Olairez in NLRC Case
No. Sub-Rab 01-117-0184-92, directed the parties to submit position
paper on or before December 14, 1992, and to appear for hearing on
the said date. Only the complainant petitioner submitted its position
paper on December 3, 1992.
Likewise in the scheduled hearing on December 14, 1992, private
respondent did not appear[;] thus Labor Arbiter Olairez allowed the
president of petitioner union Juanito Costales to testify and present
its evidence ex-parte.
On December 16 1992, another notice was sent to the parties to
appear on [the] January 7, 1993 hearing by Labor Arbiter Emiliano de
Asis.
Before the scheduled hearing on January 7, 1993, complainant
petitioner filed a motion to amend complaint and to admit amended
complaint. It also filed the following:
1. Affidavit of Juanito Costales, Jr., dated November 24,
1992;
2. Joint affidavit of Ricardo Aban, Armando Casing,
Benjamin Corpuz, Danny Margadejas, Fidel
Fortunato, Henry de los Reyes, Anthony de Luna,
Warlito Arguilles, Dominador Aguda, Marcelino

LABOR LAW I |105

Cayuda, Jr., Jaime Costales and Juanito Mendenilla

dated December 30, 1992;
3. Joint affidavit of Juanito Costales and Armando Casing
dated January 7, 1993;
4. Affidavit signed by individual union members.
On March 18, 1993, Med-Arbiter Sinamar E. Limos issued an Order
granting the petition for certification election earlier filed.
Meanwhile, Labor Arbiter Rolando D. Gambito in the illegal dismissal
case issued the May 20, 1993 Order, the dispositive portion [of] which
reads:
WHEREFORE, respondents are hereby ordered to
submit their position paper, together with their documentary
evidence, if any, within TEN (10) days from receipt of the
order, otherwise we will be constrained to resolve this case
based on available evidence on record.
On September 7, 1993, public respondent Laguesma issued a
Resolution denying the appeal filed by private respondent against the
order of Med-Arbiter Limos granting the petition for certification
election.
Acting on said denial, private respondent filed a motion for
reconsideration which was granted in an Order dated January 4,
1994 by public respondent Laguesma dismissing the petition for
certification election for lack of employer-employee relationship.
Petitioner in turn filed a motion for reconsideration of the January 4,
1994, Order but it was denied by public respondent Laguesma in his
January 27, 1994 Order which reaffirmed the dismissal of petition for
certification election.
Thus, the union filed its first petition for certiorari assailing the Orders
of January 4 and 27, 1994 of public respondent Laguesma dismissing
the petition for certification election. The said petition is captioned as
Caurdanetaan Piece Workers Union, petitioner, vs. Hon. Bienvenido
Laguesma, et al., respondents, docketed as G.R. No. 113542 and
raffled to the Second Division of this Honorable Court.
On September 14, 1993, Labor Arbiter Rolando D. Gambito issued his
decision finding the dismissal of petitioners members illegal. On appeal by both
parties, Respondent NLRC -- as earlier stated -- set aside the appealed

decision and remanded the case to the labor arbiter for

proceedings. Petitioners motion for reconsideration was later denied.

further

The solicitor general, who was supposed to represent both public

respondents, joined petitioner and filed a Manifestation and Motion (In Lieu of
Comment) dated July 25, 1994, praying that the petition in the First Case be
granted and that judgment be rendered annulling [11] the assailed Orders of
Respondent Laguesma. The Republics counsel likewise filed another
Manifestation and Motion (In Lieu of Comment) dated October 4, 1994 in the
Second Case, praying that judgment be rendered annulling the resolution of
Public Respondent NLRC dated February 16, 1994 and March 28, 1994 and
order[ing] public respondent to proceed with the case instead of remanding the
same to the labor arbiter of origin.[12]
In a Resolution dated March 29, 1995, [13] this Court ordered the
consolidation of the two cases.[14]
Public Respondents Rulings
In the First Case
Public Respondent Laguesma premised the dismissal of the petition for
certification election on the absence of an employer-employee relationship
between petitioners members and private respondent. Professing reliance on
the control test in determining employer-employee relationship, his Order dated
January 4, 1994[15] explained:
It is settled in this jurisdiction that the most important factor in
determining the existence of employer-employee relationship is the
control test or the question of whether or not the supposed employer
exercises control over the means and methods by which the work is
to be done. In the instant case, it is not disputed that movant does not
exercise any degree of control over how the loading or unloading of
cavans of palays to or from the trucks, to or from the rice
mills. Movants only concern is that said cavans of palay are
loaded/unloaded. Absent therefore, the power to control not only the
end to be achieved but also the means to be used in reaching such
end, no employer-employee relationship could be said to have been
established. We also noted that some of petitioners members
including its president, Juanito Costales, Jr., admitted in separate
sworn statements that they offer and actually perform loading and
unloading work for various rice mills in Pangasinan and that the
performance of said work depends on the availability of work in said
mills. They also categorically stated that there is no employerLABOR LAW I |106

employee relationship between petitioner and movant. To our mind,

said declarations being made against interest deserve much
evidentiary weight. Considering therefore, the foregoing, we have no
alternative but to dismiss the petition for lack of employer-employee
relationship.
In the Second Case
On the other hand, Respondent NLRC ordered the remand of the case to
the arbitration branch for further proceedings because the issues at hand need
further threshing out. Stressing the principle that allegations must be proved by
competent and credible evidence, it held:[16]
There is no question that under the Rules of the Commission,
complaints may be resolved on the basis of the Position Papers
submitted by the parties and that the parties may be deemed to have
waived their right to present evidence after they have been given an
opportunity to do so. These procedural rules, however should be read
in conjunction with the time[-]honored principle that allegations must
be proved and established by competent and credible evidence. In
other words, mere allegations would not suffice despite the absence
of evidence to the contrary.
In subject case, complainants-appellants allegations that they are
laborers of respondents-appellants receiving P45.00 per days work of
eight hours (p. 2, Amended Position Paper dated December 14,
1992, p. 31 Records; p. 2 Amended Complaint dated 16 December
1992, p. 70, Records) appears to be in conflict with their earlier
assertions that they are paid on the basis of the number of cavans of
palay moved, piled, hauled and unloaded from trucks or haulers
multiplied by P0.12 [per] sack or cavan. And for the days earning
respondents used to be obliged to pay P57.00 per days earning -- (p.
2, Position Paper dated 24 November 1992; p. 17, Records).
Similarly attached to the records is a narrative report of [the] DOLE
inspector where it was mentioned that Juanito Costales, Jr., is the
owner of Carcado Contracting Services and is not an employee of
Corefarm [sic] Grains (Narrative Report dated August 4, 1992, p. 10
Records).
Another reason why subject case should be remanded to the Labor
Arbiter below is the fact that the personality of complainant union has
been raised in issue before the proper forum and adverse decision on
the matter will definitely affect the whole proceedings.

Furthermore, records show that an Amended Complaint was filed on

December 23, 1992. This amended complaint made no mention of
the affidavits of Juanito Costales, Jr. and the 92 other workers which
documents were filed in January 1993. Likewise, the amended
complaint contains but a general statement that the 92 workers of
Corefarm [sic] Grains have been employed since 1982 which was
adopted by the Labor Arbiter below in his decision notwithstanding
the fact that a number of these workers started working with
respondent after 1982. Some of whom worked with the company in
1990 (Joint Affidavit dated 7 January 1993, pp. 96-98,
Records). Notwithstanding this fact, the Labor Arbiter in the decision
under consideration allowed refund of alleged deduction for a period
of three years. In the same manner, payment of salary differential
was also granted.
Indeed the issues at hand need further threshing out. Under the
Rules, the Labor Arbiter is authorized to thresh out issues (sec. 4,
Rule V). As it is, we are not convinced by the conclusions of the
Labor Arbiter.
The ends of justice would better be served if all parties are granted
further opportunity to ventilate their respective positions.
The Issues
In its Consolidated Memorandum dated September 19, 1995 filed before
us, petitioner raises the following grounds in support of its petition: [17]
1. Grave abuse of discretion or acting in excess of jurisdiction,
which is equivalent to lack of jurisdiction on the part of
public respondent in setting aside the labor arbiters
decision and in remanding this case to the office of origin
for further proceedings is not necessary when in fact the
mandatory requirements of due process have been
observed by the labor arbiter in rendering decision on the
case;
2. Remand of the case to office of origin for further proceedings
on matters already passed upon properly by the labor
arbiter is contrary to the rule of speedy labor justice and
the [sic] social justice and to afford protection to labor
policy of the Philippine Constitution, which is a command
that should not be disregarded by the courts in resolving
labor cases;
LABOR LAW I |107

3. Remand of the case to the labor arbiter would only prolong

social unrest and the suffering of injurious effects of illegal
dismissal by the 92 illegally dismissed workers[;] hence,
said remand of the case without justification constitutes an
oppressive act committed by public respondent.
Simply put, the issues are as follows:
1. Whether Respondent Laguesma acted with grave abuse of
discretion in ordering the dismissal of the petition for certification
election
2 Whether Respondent NLRC acted with grave abuse of discretion in
remanding the illegal dismissal case to the labor arbiter for further
proceedings.
The present controversy hinges on whether an employer-employee
relationship between the CPWU members and Respondent Corfarm has been
established by substantial evidence.
The Courts Ruling
The two petitions are meritorious.
Main Issue: Employer-Employee Relationship
First Case: Certification Election
Petitioner contends that Respondent Laguesma committed grave abuse of
discretion in dismissing the petition for certification election by relying on
private respondents bare allegation, in its motion for reconsideration, of lack of
employer-employee relationship.[18] According to petitioner, Respondent
Laguesma cannot reverse his Decision in the absence of a concomitant
change in his factual findings. [19] Petitioner insists that all its members were
employees of private respondent, viz.:[20]
The 92 workers, who are all union members of petitioner herein, have
been rendering actual manual services as cargadores in the
warehouse and rice mills of private respondent, performing activities
usually related to or desirable by [sic] the business or trade of private
respondent who is engaged in the buy and sell of palay as well as
warehousing of said commodity and milling the same for sale to
customers in the form of milled rice. The 92 workers have performed
their activities for the last ten (10) years prior to their having been
illegally dismissed from employment on June 18, 1992 or
thereabouts.

Petitioner adds that many of its members received Christmas bonuses

from private respondent.[21]
On the other hand, Respondent Corfarm describes the contentions of
petitioner as
off-tangent, if not irrelevant. -First, the authority of the DOLE Secretary to decide appeals in
representation cases is undeniable (see e.g., Sections 9 and 10 of
Rule V, Book V, of the Implementing Rules and Regulations of the
Labor Code; also Art. 259, appeal from certification election orders,
labor code). Second, petitioner completely misses the point that
the granting and denial of a motion for reconsideration involves the
exercise of discretion. As submitted by the Public Respondent in its
Comment, among the ends to which a Motion for Reconsideration is
addressed, one is precisely to convince the court that its ruling is
erroneous and improper, contrary to law or the evidence, x x x
(Emphasis found in the original.)
Corfarm insists that the challenged Order of Respondent Laguesma dated
January 4, 1994 rests on solid findings of fact which should be accorded
respect and finality.[22] It attacks the petitioners allegation -- that it has 92
workers who worked as cargador at its warehouses -- as gratuitous and not
supported by any evidence x x x [because] as late as this time of day in the
litigation of this case, who exactly are those 92 workers cannot be known from
the records.[23] (Emphasis in original.)
Private respondent further argues that RJL Martinez Fishing Corp. vs.
NLRC,[24] cited by the solicitor general, has a factual situation different from the
case at bar. Waiting time, unlike that in RJL Martinez Fishing Corp., does not
obtain here.[25] Likewise allegedly inapplicable are the rulings in Villavilla vs.
Court of Appeals[26] and in Brotherhood Labor Unity Movement vs. Zamora.[27]
Respondent Corfarm denies that it had the power of control, rationalizing
that petitioners members were street-hired workers engaged from time to time
to do loading and unloading work x x x[;] [t]here [was] no superintendent-incharge x x x to give orders x x x[;] [and] there [were] no gate passes issued,
nor tools, equipment and paraphernalia issued by Corfarm for
loading/unloading x x x.[28] It attributes error to the solicitor generals reliance on
Article 280[29] of the Labor Code. Citing Brent School, Inc. vs. Zamora,[30] private
respondent asserts that a literal application of such article will result in
absurdity, where petitioners members will be regular employees not only of
respondents but also of several other rice mills, where they were allegedly also
LABOR LAW I |108

under service. Finally, Corfarm submits that the OSGs position is negated by
the fact that petitioners members contracted for loading and unloading services
with respondent company when such work was available and when they felt
like it x x x.[31]
We rule for petitioners. Section 5, Rule 133 of the Rules of Court
mandates that in cases filed before administrative or quasi-judicial bodies, like
the Department of Labor, a fact may be established by substantial
evidence, i.e. that amount of evidence which a reasonable mind might accept
as adequate to justify a conclusion.[32] Also fundamental is the rule granting not
only respect but even finality to factual findings of the Department of Labor, if
supported by substantial evidence. Such findings are binding upon this Court,
unless petitioner is able to show that the secretary of labor (or the
undersecretary acting in his place) has arbitrarily disregarded or
misapprehended evidence before him to such an extent as to compel a
contrary conclusion if such evidence were properly appreciated. This is rooted
in the principle that this Court is not a trier of facts, and that the determinations
made by administrative bodies on matters falling within their respective fields of
specialization or expertise are accorded respect. [33] Also well-settled is the
doctrine that the existence of an employer-employee relationship is ultimately a
question of fact and that the findings thereon by the labor authorities shall be
accorded not only respect but even finality when supported by substantial
evidence.[34] Finally, in certiorariproceedings under Rule 65, this Court does not,
as a rule, evaluate the sufficiency of evidence upon which the labor officials
based their determinations. The inquiry is essentially limited to whether they
acted without or in excess of jurisdiction or with grave abuse of discretion.
[35]
However, this doctrine is not absolute. Where the labor officers findings are
contrary to those of the med-arbiter, the Court -- in the exercise of its equity
jurisdiction -- may wade into and reevaluate such findings, [36] which we now
embark on in this case.[37]
To determine the existence of an employer-employee relation, this Court
has consistently applied the four-fold test which has the following elements: (1)
the power to hire, (2) the payment of wages, (3) the power to dismiss, and (4)
the power to control -- the last being the most important element. [38]
Our examination of the case records indubitably shows the presence of an
employer-employee relationship. Relying on the evidence adduced by the
petitioners, Respondent Laguesma himself affirmed the presence of such
connection. Thus, in his Order dated September 7, 1993, he astutely held: [39]
Anent the first issue, we find the annexes submitted by the
respondent company not enough to prove that herein petitioner is

indeed an independent contractor. The existence of an independent

contractor relationship is generally established by the following
criteria. 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 over the workers;
payment of the contractors workers; the control and the supervision
over the workers; the control of the premises; the duty to supply the
premises, tools, appliances, materials and laborers, and the mode,
manner and terms of payment. [Brotherhood Labor Unity Movement
of the Philippines vs. Zamora, 147 SCRA 49 (198) [sic] ].
None of the above criteria exists in the case at bar. The absence of a
written contract which specifies the performance of a specified piece
of work, the nature and extent of the work and the term and duration
of the relationship between herein petitioner and respondent
company belies the latters [sic] allegation that the former is indeed
and [sic] independent contractor.
Also, respondent failed to show by clear and convincing proof that
herein respondent has the substantial capital or investment to qualify
as an independent contractor under the law.The premises, tools,
equipments [sic] and paraphernalia are all supplied by respondent
company. It is only the manpower or labor force which the alleged
contractor supplies, suggesting the existence of a labor only
contracting scheme which is prohibited by law. Further, if herein
petitioner is indeed an independent contractor, it should have offered
its services to other companies and not to work [sic] exclusively for
the respondent company. It is therefore, clear that the alleged J.P.
Costales, Jr. Cargador Services cannot be considered as an
independent contractor as defined by law.
In his subsequent order, Respondent Laguesma inexplicably reversed his
above ruling and held that there was no employer-employee relationship on the
ground that Respondent Corfarm exercised no power of control over the
alleged employees.
It may be asked, why the sudden change of mind on the part of
Respondent Laguesma? No additional pieces of evidence were adduced and
no existing ones were identified by Laguesma to support such strange
reversal. The unblemished fact is that private respondent was the recruiter and
employer of petitioners members.

LABOR LAW I |109

Shoppers Gain Supermart vs. NLRC[40] provides the standard to determine

whether a worker is an independent contractor:
The applicable law is not Article 280 of the Labor Code which is cited
by petitioners, but Art. 106, which provides:
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.
xxxxxxxxx
xxxxxxxxx
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. (emphasis supplied)
In accordance with the above provision, petitioner corporation is deemed the
direct employer of the private respondents and thus liable for all benefits to
which such workers are entitled, like wages, separation benefits and so
forth. There is no denying the fact that private respondents work as
merchandisers, cashiers, baggers, check-out personnel, sales ladies,
warehousemen and so forth were directly related, necessary and vital to the
day-to-day operations of the supermarket; their jobs involved normal and
regular functions in the ordinary business of the petitioner corporation. Given
the nature of their functions and responsibilities, it is improbable that petitioner
did not exercise direct control over their work. Moreover, there is no evidence-as in fact, petitioners do not even allege--that aside from supplying the
manpower, the labor agencies have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others.
It is undeniable that petitioners members worked as cargadores for private
respondent. They loaded, unloaded and piled sacks of palay from the

warehouses to the cargo trucks and from the cargo trucks to the buyers. This
work is directly related, necessary and vital to the operations of
Corfarm. Moreover, Corfarm did not even allege, much less prove, that
petitioners members have substantial capital or investment in the form of tools,
equipment, machineries, [and] work premises, among others. Furthermore,
said respondent did not contradict petitioners allegation that it paid wages
directly to these workers without the intervention of any third-party independent
contractor. It also wielded the power of dismissal over petitioners; in fact, its
exercise of this power was the progenitor of the Second Case. Clearly, the
workers are not independent contractors.
Applying Article 280[41] of the Labor Code, we hold that the CPWU
members were regular employees of private respondent. Their tasks were
essential in the usual business of private respondent.
As we have ruled in an earlier case, the question of whether an employeremployee relationship exists in a certain situation has bedevilled the
courts. Businessmen, with the aid of lawyers, have tried to avoid or sidestep
such relationship, because that juridical vinculum engenders obligations
connected with workmens compensation, social security, medicare, minimum
wage, termination pay and unionism. [42] All too familiarly, Respondent Corfarm
sought refuge from these obligations. However, the records of this case clearly
support the existence of the juridical vinculum.
RJL Martinez Fishing Corporation,[43] cited by the solicitor general, is
relevant because petitioners members were also made to wait for loading and
unloading of cavans of palay to and from the storage areas and to and from the
milling areas.[44] This waiting time does not denigrate the regular employment of
petitioners members. As ruled in that case:[45]
x x x Besides, the continuity of employment is not the determining
factor, but rather whether the work of the laborer is part of the regular
business or occupation of the employer.(fn: Article 281, Labor Code,
as amended; Philippine Fishing Boat Officers and Engineer[s]
Union vs. Court of Industrial Relations, 112 SCRA 159 (1982). We are
thus in accord with the findings of respondent NLRC in this regard.
Although it may be that private respondents alternated their
employment on different vessels when they were not assigned to
petitioners boats, that did not affect their employee status. The
evidence also establishes that petitioners had a fleet of fishing
vessels with about 65 ship captains, and as private respondents

LABOR LAW I |110

contended, when they finished with one vessel they were instructed
to wait for the next. As respondent NLRC had found:
We further find that the employer-employee relationship
between the parties herein is not co-terminous 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 seasonal activity. (fn: NLRC Decision, p.
94, Rollo.)

required to prove the existence of an employer-employee relationship. Any

competent and relevant evidence may show the relationship. If only
documentary evidence would be required to demonstrate that relationship, no
scheming employer would ever be brought before the bar of justice. [51] Fourth,
and in any event, the alleged admissions of the three workers that they worked
with other rice mills do not work against them. Assuming arguendo that they
did work with other rice mills, this was required by the imperative of meeting
their basic needs.[52]
The employer-employee relationship having been duly established, the
holding of a certification election necessarily follows. It bears stressing that
there should be no unnecessary obstacle to the holding of such election, [53] for
it is a statutory policy that should not be circumvented. [54] We have held that, in
the absence of a legal impediment, the holding of a certification election is the
most democratic method of determining the employees choice of their
bargaining representative. It is the best means to settle controversies and
disputes involving union representation. Indeed, it is the keystone of industrial
democracy.[55]

Alleged Admission of Lack of

Second Case: Illegal Dismissal

Employer-Employee Relationship

Petitioner assails the NLRC for setting aside the labor arbiters decision
and remanding the case for further proceedings. Petitioner argues that the
order of remand will only prolong the agony of the 92 union members and their
families for living or existing without jobs and earnings to give them
support. Further, petitioner contends:[56]

Respondent Corfarm argues that some of petitioners members including

its president, Juanito P. Costales, Jr.[,] admitted that they work for various rice
mills in Pangasinan and that there is no employer-employee relations between
them and private respondents. It adds that the solicitor general, by arguing that
there was an employer-employee relationship, attempts to substitute [his]
judgment [with] that of public respondent undersecretary x x x who found such
admissions against self-interest on the part of petitioners members x x x. [46]
These arguments are negligible. The alleged admissions cannot be taken
against petitioners cause. First, the contents of the admissions are highly
suspect. The records reveal that the admissions of Juanito Costales, Jr.,
[47]
Carlito Costales[48] and Juanito Medenilla[49] were in the form of affidavits[50] of
adhesion which were identical in content, differentiated only by the typewritten
names and the signatures of the workers. Second, only three of the workers
executed such affidavits. Clearly, the admissions in such affidavits cannot work
against petitioner unions cause. Such pro forma and identical affidavits do not
prove lack of employer-employee relationship against all members of
petitioner. Third, the employer-employee relationship is clearly proven by
substantial evidence. Corfarm sorely failed to show that petitioners members
were independent contractors. We rule that no particular form of proof is

The Labor Arbiter had rendered a decision (Annex D, Petition) on

September 14, 1993 in favor of petitioner based on the available
records of the case after giving more than ample opportunities to
private respondents herein to submit their position paper and other
pleadings alleging their evidences [sic] against the causes of action
of petitioner alleged in the complaint for illegal dismissal, unfair labor
practice, non-payment of various benefits granted by existing laws
during their employment, illegal deductions or diminution of their
underpaid daily wages, non-payment of wage increases and other
causes of action pleaded by the complainant or herein petitioner.
In short, Labor Arbiter Rolando Gambito rendered his decision based
on the records of the case including evidence available on record and
after observing due process of law.
To support his opposition against the remand of the case, petitioner
recites the chronological events of the case, viz::[57]
LABOR LAW I |111

In the case at bar, private respondents were notified earlier in the

latter part of 1992 regarding the pendency of the complaint for illegal
dismissal, unfair labor practice, damages, etc., but said respondents
did not appear during the initial hearing of the case [before] Labor
Arbiter Ricardo Olairez, then the Arbiter handling the case. The case
was re-set for hearing at some other dates. On April 22, 1993, Atty.
Alfonso C. Bince, Jr. appeared as counsel for respondents at
Dagupan City. Atty. Bince committed to the Labor Arbiter that the
former will file the position paper for his clients (Corfarm Grains,
Inc., et al.) within ten (10) days from April 22, 1993, but still private
respondents Position Paper was not filed.
On May 20, 1993, Labor Arbiter Rolando Gambito, who took over the
case for illegal dismissal, etc. filed by petitioner, issued an order to
private respondents directing the latter (respondents) to submit their
Position Paper together with THEIR DOCUMENTARY EXHIBITS, if
any, within 10 days from receipt of the order. Still, private
respondents counsel failed to submit private respondents Position
Paper relative to the petitioners complaint for illegal dismissal, unfair
labor practice, etc. which is involved in G.R. No. 114911 pending
action by this Honorable Court.
Thus, the Labor Arbiter rendered his decision on the case in favor of
petitioner and/or the 92 illegally dismissed workers based on the
position paper filed by the latter and available records of the
case. (Emphasis in original.)
On the other hand, Respondent Corfarm submits that the labor arbiters
decision should be set aside not only for lack of competent and credible
evidence but also for lack of procedural due process. Corfarm further contends
that in spite of the pendency of its motions to cross-examine petitioners
witnesses and to suspend proceedings, the labor arbiter ordered the
submission of its position paper and documentary evidence within ten (10)
days.[58] Respondent Corfarm insists:[59]
Indeed, although proceedings before a Labor Arbiter are supposed to
be non-litigious and the technicalities in the courts of law need not be
strictly applied, the proceedings should nevertheless be subject to the
requirements of due process as provided in Section 7, Rule 7 of the
NLRC Rules of Procedure. (See also Phil. Telegraph and Telephone
Corp. vs. NLRC, 183 SCRA 451).

We agree with petitioner. Private respondent was not denied procedural

due process, and the labor arbiters decision was based on competent, credible
and substantial evidence.
Procedural Due Process Observed
Private respondent had been duly informed of the pendency of the illegal
dismissal case, but it chose not to participate therein without any known
justifiable cause. The labor arbiter sent notices of hearing or arbitration to the
parties, requiring them to submit position papers at 1:30 p.m. on November 14,
1992.[60] Respondent Corfarm did not attend the hearing.According to
Respondent NLRC, there was no proof that Respondent Corfarm received
such notice. In any case, petitioner filed a Motion to Admit Amended Complaint
on December 23, 1992. Again, another notice for hearing or arbitration on
January 7, 1993 was sent to the parties. [61] This was received by petitioners
counsel as evidenced by the registry return receipt duly signed by private
respondents counsel, Atty. Alfonso Bince, Jr. It was only on January 28, 1993,
however, that Atty. Bince entered his appearance as counsel for Respondent
Corfarm.[62] On May 10, 1993, Corfarm was again given a new period of ten
(10) days within which to submit its position paper and documentary evidence;
otherwise, [the labor arbiter] will be constrained to resolve this case based on
available evidence on record.[63] As evidenced by a registry return receipt, a
copy of said directive was received by respondents counsel on May 25,
1993. Still and all, Corfarm failed to file its position paper. Clearly, private
respondent was given an opportunity to present its evidence, but it failed or
refused to avail itself of this opportunity without any legal reason. Due process
is not violated where a person is given the opportunity to be heard, but
chooses not to give his side of the case.[64]
Labor Arbiters Decision Based
on Credible, Competent and Substantial Evidence
Contrary to the conclusions of the NLRC and the arguments of private
respondent, the findings of the labor arbiter on the question of illegal dismissal
were based on credible, competent and substantial evidence.
It is to be borne in mind that proceedings before labor agencies merely
require the parties to submit their respective affidavits and position
papers. Adversarial trial is addressed to the sound discretion of the labor
arbiter. To establish a cause of action, only substantial evidence is
necessary, i.e., such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds equally reasonable

LABOR LAW I |112

might conceivably opine otherwise.[65] As ruled in Manalo vs. Roldan-Confesor:

[66]

Clear and convincing proof is x x x more than mere preponderance,

but not to extent of such certainty as is required beyond reasonable
doubt as in criminal cases x x x (fn: Blacks Law Dictionary, 5th Ed., p.
227, citing Fred C. Walker Agency, Inc. v. Lucas, 215 Va. 535, 211
S.E. 2d 88, 92) while substantial evidence x x x consists of more than
a mere scintilla of evidence but may be somewhat less than a
preponderance x x x x (fn: Ibid., p. 1281, citing Marker v. Finch, D.C.
Del., 322 F. Supp. 905, 910) Consequently, in the hierarchy of
evidentiary values, We find proof beyond reasonable doubt at the
highest level, followed by clear and convincing evidence,
preponderance of evidence, and substantial evidence, in that order.
Evidence to determine the validity of petitioners claims, which the labor
arbiter relied upon, was available to Respondent NLRC. These pieces of
evidence are in the case records, as aptly pointed out by the solicitor general:
[67]

[Regarding] the quoted second sentence of public respondent NLRCs

Resolution that allegations must be proved and established by
competent evidence, and that mere allegations would not suffice
despite the absence of evidence to the contrary, suffice it to say that
there is ample evidence on record to support the Labor Arbiters
decision, to wit: 1) Narrative report of DOLE inspector Crisanto Rey
Dingle noting some violation of underpayment of minimum wage and
underpayment of 13th month pay (page 10, record); 2) affidavit of
union officers and individual union members, stating their various
claims (page 80-195, Record). Despite such evidence and an
opportunity afforded to private respondent to present its evidence and
position paper as borne out by the notice of hearing issued by Labor
Arbiter Olairez dated November 14, 1992, with advice to the parties
to submit their position paper (p. 14 Record) and the Order issued by
Labor Arbiter Gambito dated May 20, 1993; requiring private
respondents to submit their position paper, together with their
documentary evidence (p. 247, record), private respondent failed to
submit its position paper and countervailing evidence which should
have met squarely the allegations and evidence adduced by the
petitioner. Thus, in the absence of private respondents position paper
and countervailing evidence, the Labor Arbiter cannot be faulted in
deciding the case based on the available evidence on record.

It must be stressed that labor laws mandate the speedy administration of

justice, with least attention to technicalities but without sacrificing the
fundamental requisites of due process. In this light, the NLRC, like the labor
arbiter, is authorized to decide cases based on the position papers and other
documents submitted, without resorting to the technical rules of evidence.
[68]
Verily, Respondent NLRC noted several documentary evidence sufficient to
arrive at a just decision. Indeed, the evidence on record clearly supports the
conclusion of the labor arbiter that the petitioners were employees of
respondent, and that they were illegally dismissed.[69]
The NLRC points to conflicts and inconsistencies in the evidence on
record. We are not convinced. These alleged inconsistencies are too flimsy
and too tenuous to preclude a just decision. The finding that Juanito Costales,
Jr. was an employee of respondent was allegedly inconsistent with his
admission that he was the owner of Carcado Contracting Services. As earlier
observed, the inconsistency is irrelevant. Juan Costales, Jr. was an employee
of Corfarm. Owning this alleged outfit is not inconsistent with such
employment. The NLRC also questioned the amount of the employees
compensation. In one instance, the workers stated that they were
receiving P45.00 per days work of eight hours. In another, they claimed that
they were paid P0.12 per sack or cavan. These allegedly differ from their
allegation that Corfarm used to be obliged to pay P57.00 per days earning. The
alleged inconsistencies are more apparent than real. Records reveal that
the P57 was the promised compensation; however, there was an unauthorized
deduction of P12; thus, the amount of P45 per day.[70] The claim ofP0.12 per
sack or cavan is the basic computation of how workers or haulers earn their
wage for the day.[71] In any event, the alleged inconsistencies do not affect or
diminish the established fact that petitioners members were regular employees
who were illegally dismissed.
Why Respondent NLRC refused to rule directly on the appeal escapes us.
The remand of a case or an issue to the labor arbiter for further proceedings is
unnecessary, considering that the NLRC was in a position to resolve the
dispute based on the records before it and particularly where the ends of
justice would be served thereby.[72] Remanding the case would needlessly
delay the resolution of the case which has been pending since 1992. [73] As
already observed, the evidence on record clearly supports the findings of the
labor arbiter.
Pursuant to the doctrine that this Court has a duty to settle, whenever
possible, the entire controversy in a single proceeding, leaving no root or
branch to bear the seeds of future litigation, we now resolve all issues. [74]
LABOR LAW I |113

It is axiomatic that in illegal dismissal cases, the employer always has the
burden of proof,[75] and his failure to discharge this duty results in a finding that
the dismissal was unjustified.[76] Having defaulted from filing its position paper,
Respondent Corfarm is deemed to have waived its right to present evidence
and counter the allegations of petitioners members.
In the same light, we sustain the labor arbiters holding in respect of unfair
labor practice.[77] As ruled by Labor Arbiter Rolando D. Gambito:[78]
The last issue: Instead of sitting down with the individual
complainants or the union officers to discuss their demands,
respondents resorted to mass lay-off of all the members of the union
and replaced them with outsiders. This is clearly a case of union
busting which Art. 248 of the Labor Code prohibits. Art. 248 provides
that It shall be unlawful for an employer to commit any of the
following unfair labor practice (a) To interfere with, restrain or coerce
employees in the exercise of their right to self-organization; (b) x x x
(c) To contract out service or functions being performed by union
members when such will interfere with, restrain or coerce employees
in the exercise of their rights to self-organization.
In view of recent jurisprudence, [79] we are correcting some items in the
labor arbiters decision. The thirteenth month pay awarded should be computed
for each year of service from the time each employee was hired up to the date
of his actual reinstatement. The same computation applies to the award of the
service incentive leave[80] and underpaid wages. Each employee is to be paid
the remaining underpaid wages from the date of his or her hiring in accordance
with the then prevailing wage legislations. Likewise, a refund of P12 shall be
computed for each day of service of each employee, to be reckoned from the
date such employee was hired. The damages awarded should be sustained
because the employer acted in bad faith. [81] Back wages are to be computed
from the date of dismissal up to the date of actual reinstatement without any
deductions or conditions. This is in consonance with Fernandez, et al. vs.
National Labor Relations Commission:[82]

The clear legislative intent of the amendment in Rep. Act

No. 6715 is to give more benefits to workers than was
previously given them under the Mercury Drug rule or the
deduction of earnings elsewhere rule. Thus, a closer
adherence to the legislative policy behind Rep. Act No. 6715
points to full backwages as meaning exactly that, i.e.,
without deducting from backwages the earnings derived
elsewhere by the concerned employee during the period of
his illegal dismissal.
WHEREFORE, both petitions are GRANTED. In G.R. No. 113542,
Respondent Laguesmas Orders dated January 4, 1994 and January 27, 1994
are REVERSED and SET ASIDE; whereas his Order dated September 7, 1993
is REINSTATED. In G.R. No. 114911, Respondent NLRCs Resolutions
promulgated on February 16, 1994 and March 28, 1994 are
likewiseREVERSED AND SET ASIDE. The Labor Arbiters decision dated
September 14, 1993 is reinstated with MODIFICATIONS as set out in this
Decision. Respondent NLRC is ORDERED toCOMPUTE the monetary benefits
awarded in accordance with this Decision and to submit its compliance thereon
within thirty days from notice of this Decision.
SO ORDERED.

x x x Accordingly, the award to petitioners of backwages for three

years should be modified in accordance with Article 279 of the Labor
Code, as amended by R.A. 6715, by giving them full backwages
without conditions and limitations, the dismissals having occurred
after the effectivity of the amendatory law on March 21, 1989. Thus,
the Court held inBustamante:

LABOR LAW I |114

THIRD DIVISION

G.R. No. L-72654-61 January 22, 1990

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE
BAUTU, JAIME BARBIN, NICANOR FRANCISCO, PHILIP CERVANTES and
ELEUTERIO
BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING
ENTERPRISES and/or ARSENIO DE GUZMAN, respondents.
FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not the fishermencrew members of the trawl fishing vessel 7/B Sandyman II are employees of its
owner-operator, De Guzman Fishing Enterprises, and if so, whether or not they
were illegally dismissed from their employment.
Records show that the petitioners were the fishermen-crew members of 7/B
Sandyman II, one of several fishing vessels owned and operated by private
respondent De Guzman Fishing Enterprises which is primarily engaged in the
fishing business with port and office at Camaligan, Camarines Sur. Petitioners
rendered service aboard said fishing vessel in various capacities, as follows:
Alipio Ruga and Jose Parma patron/pilot; Eladio Calderon, chief engineer;
Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor
Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin,
fishermen.
For services rendered in the conduct of private respondent's regular business
of "trawl" fishing, petitioners were paid on percentage commission basis in
cash by one Mrs. Pilar de Guzman, cashier of private respondent. As agreed
upon, they received thirteen percent (13%) of the proceeds of the sale of the
fish-catch if the total proceeds exceeded the cost of crude oil consumed during
the fishing trip, otherwise, they received ten percent (10%) of the total
proceeds of the sale. The patron/pilot, chief engineer and master fisherman
received a minimum income of P350.00 per week while the assistant engineer,

second fisherman, and fisherman-winchman received a minimum income of

P260.00 per week. 1
On September 11, 1983 upon arrival at the fishing port, petitioners were told by
Jorge de Guzman, president of private respondent, to proceed to the police
station at Camaligan, Camarines Sur, for investigation on the report that they
sold some of their fish-catch at midsea to the prejudice of private respondent.
Petitioners denied the charge claiming that the same was a countermove to
their having formed a labor union and becoming members of Defender of
Industrial Agricultural Labor Organizations and General Workers Union
(DIALOGWU) on September 3, 1983.
During the investigation, no witnesses were presented to prove the charge
against petitioners, and no criminal charges were formally filed against them.
Notwithstanding, private respondent refused to allow petitioners to return to the
fishing vessel to resume their work on the same day, September 11, 1983.
On September 22, 1983, petitioners individually filed their complaints for illegal
dismissal and non-payment of 13th month pay, emergency cost of living
allowance and service incentive pay, with the then Ministry (now Department)
of Labor and Employment, Regional Arbitration Branch No. V, Legaspi City,
Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They uniformly
contended that they were arbitrarily dismissed without being given ample time
to look for a new job.
On October 24, 1983, private respondent, thru its operations manager,
Conrado S. de Guzman, submitted its position paper denying the employeremployee relationship between private respondent and petitioners on the
theory that private respondent and petitioners were engaged in a joint
venture. 3
After the parties failed to reach an amicable settlement, the Labor Arbiter
scheduled the case for joint hearing furnishing the parties with notice and
summons. On December 27, 1983, after two (2) previously scheduled joint
hearings were postponed due to the absence of private respondent, one of the
petitioners herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman II,
testified, among others, on the manner the fishing operations were conducted,
mode of payment of compensation for services rendered by the fishermencrew members, and the circumstances leading to their dismissal. 4
LABOR LAW I |115

On March 31, 1984, after the case was submitted for resolution, Labor Arbiter
Asisclo S. Coralde rendered a joint decision 5 dismissing all the complaints of
petitioners on a finding that a "joint fishing venture" and not one of employeremployee relationship existed between private respondent and petitioners.

evidence of petitioners that private respondent controlled the fishing

operations; that public respondent did not take into account established
jurisprudence that the relationship between the fishing boat operators and their
crew is one of direct employer and employee.

From the adverse decision against them, petitioners appealed to the National
Labor Relations Commission.

Aside from seeking the dismissal of the petition on the ground that the decision
of the labor arbiter is now final and executory for failure of petitioners to file
their appeal with the NLRC within 10 calendar days from receipt of said
decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine
Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor General claims
that the ruling of public respondent that a "joint fishing venture" exists between
private respondent and petitioners rests on the resolution of the Social Security
System (SSS) in a 1968 case, Case No. 708 (De Guzman Fishing Enterprises
vs. SSS), exempting De Guzman Fishing Enterprises, private respondent
herein, from compulsory coverage of the SSS on the ground that there is no
employer-employee relations between the boat-owner and the fishermen-crew
members following the doctrine laid down inPajarillo vs. SSS, 17 SCRA 1014
(1966). In applying to the case at bar the doctrine in Pajarillo vs. SSS, supra,
that there is no employer-employee relationship between the boat-owner and
the pilot and crew members when the boat-owner supplies the boat and
equipment while the pilot and crew members contribute the corresponding
labor and the parties get specific shares in the catch for their respective
contribution to the venture, the Solicitor General pointed out that the boatowners in the Pajarillo case, as in the case at bar, did not control the conduct of
the fishing operations and the pilot and crew members shared in the catch.

On May 30, 1985, the National Labor Relations Commission promulgated its
resolution 6 affirming the decision of the labor arbiter that a "joint fishing
venture" relationship existed between private respondent and petitioners.
Hence, the instant petition.
Petitioners assail the ruling of the public respondent NLRC that what exists
between private respondent and petitioners is a joint venture arrangement and
not an employer-employee relationship. To stress that there is an employeremployee relationship between them and private respondent, petitioners invite
attention to the following: that they were directly hired by private respondent
through its general manager, Arsenio de Guzman, and its operations manager,
Conrado de Guzman; that, except for Laurente Bautu, they had been employed
by private respondent from 8 to 15 years in various capacities; that private
respondent, through its operations manager, supervised and controlled the
conduct of their fishing operations as to the fixing of the schedule of the fishing
trips, the direction of the fishing vessel, the volume or number of tubes of the
fish-catch the time to return to the fishing port, which were communicated to
the patron/pilot by radio (single side band); that they were not allowed to join
other outfits even the other vessels owned by private respondent without the
permission of the operations manager; that they were compensated on
percentage commission basis of the gross sales of the fish-catch which were
delivered to them in cash by private respondent's cashier, Mrs. Pilar de
Guzman; and that they have to follow company policies, rules and regulations
imposed on them by private respondent.
Disputing the finding of public respondent that a "joint fishing venture" exists
between private respondent and petitioners, petitioners claim that public
respondent exceeded its jurisdiction and/or abused its discretion when it added
facts not contained in the records when it stated that the pilot-crew members
do not receive compensation from the boat-owners except their share in the
catch produced by their own efforts; that public respondent ignored the

We rule in favor of petitioners.

Fundamental considerations of substantial justice persuade Us to decide the
instant case on the merits rather than to dismiss it on a mere technicality. In so
doing, we exercise the prerogative accorded to this Court enunciated
in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and
Rubber Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the well-settled
doctrine is that in labor cases before this Tribunal, no undue sympathy is to be
accorded to any claim of a procedural misstep, the idea being that its power be
exercised according to justice and equity and substantial merits of the
controversy."
Circumstances peculiar to some extent to fishermen-crew members of a fishing
vessel regularly engaged in trawl fishing, as in the case of petitioners herein,
LABOR LAW I |116

who spend one (1) whole week or more 7 in the open sea performing their job
to earn a living to support their families, convince Us to adopt a more liberal
attitude in applying to petitioners the 10-calendar day rule in the filing of
appeals with the NLRC from the decision of the labor arbiter.
Records reveal that petitioners were informed of the labor arbiter's decision of
March 31, 1984 only on July 3,1984 by their non-lawyer representative during
the arbitration proceedings, Jose Dialogo who received the decision eight (8)
days earlier, or on June 25, 1984. As adverted to earlier, the circumstances
peculiar to petitioners' occupation as fishermen-crew members, who during the
pendency of the case understandably have to earn a living by seeking
employment elsewhere, impress upon Us that in the ordinary course of events,
the information as to the adverse decision against them would not reach them
within such time frame as would allow them to faithfully abide by the 10calendar day appeal period. This peculiar circumstance and the fact that their
representative is a non-lawyer provide equitable justification to conclude that
there is substantial compliance with the ten-calendar day rule of filing of
appeals with the NLRC when petitioners filed on July 10, 1984, or seven (7)
days after receipt of the decision, their appeal with the NLRC through
registered mail.
We have consistently ruled that in determining the existence of an employeremployee 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. 8 The employment relation arises from contract of hire,
express or implied. 9 In the absence of hiring, no actual employer-employee
relation could exist.
From the four (4) elements mentioned, We have generally relied on the socalled right-of-control test 10 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. The test calls merely for the
existence of the right to control the manner of doing the work, not the actual
exercise of the right. 11
The case of Pajarillo vs. SSS, supra, invoked by the public respondent as
authority for the ruling that a "joint fishing venture" existed between private
respondent and petitioners is not applicable in the instant case. There is neither

light of control nor actual exercise of such right on the part of the boat-owners
in the Pajarillo case, where the Court found that the pilots therein are not under
the order of the boat-owners as regards their employment; that they go out to
sea not upon directions of the boat-owners, but upon their own volition as to
when, how long and where to go fishing; that the boat-owners do not in any
way control the crew-members with whom the former have no relationship
whatsoever; that they simply join every trip for which the pilots allow them,
without any reference to the owners of the vessel; and that they only share in
their own catch produced by their own efforts.
The aforementioned circumstances obtaining in Pajarillo case do not exist in
the instant case. The conduct of the fishing operations was undisputably shown
by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II, to be
under the control and supervision of private respondent's operations manager.
Matters dealing on the fixing of the schedule of the fishing trip and the time to
return to the fishing port were shown to be the prerogative of private
respondent. 12 While performing the fishing operations, petitioners received
instructions via a single-side band radio from private respondent's operations
manager who called the patron/pilot in the morning. They are told to report their
activities, their position, and the number of tubes of fish-catch in one
day. 13 Clearly thus, the conduct of the fishing operations was monitored by
private respondent thru the patron/pilot of 7/B Sandyman II who is responsible
for disseminating the instructions to the crew members.
The conclusion of public respondent that there had been no change in the
situation of the parties since 1968 when De Guzman Fishing Enterprises,
private respondent herein, obtained a favorable judgment in Case No. 708
exempting it from compulsory coverage of the SSS law is not supported by
evidence on record. It was erroneous for public respondent to apply the factual
situation of the parties in the 1968 case to the instant case in the light of the
changes in the conditions of employment agreed upon by the private
respondent and petitioners as discussed earlier.
Records show that in the instant case, as distinguished from the Pajarillo case
where the crew members are under no obligation to remain in the outfit for any
definite period as one can be the crew member of an outfit for one day and be
the member of the crew of another vessel the next day, the herein petitioners,
on the other hand, were directly hired by private respondent, through its
general manager, Arsenio de Guzman, and its operations manager, Conrado
de Guzman and have been under the employ of private respondent for a period
LABOR LAW I |117

of 8-15 years in various capacities, except for Laurente Bautu who was hired
on August 3, 1983 as assistant engineer. Petitioner Alipio Ruga was hired on
September 29, 1974 as patron/captain of the fishing vessel; Eladio Calderon
started as a mechanic on April 16, 1968 until he was promoted as chief
engineer of the fishing vessel; Jose Parma was employed on September 29,
1974 as assistant engineer; Jaime Barbin started as a pilot of the motor boat
until he was transferred as a master fisherman to the fishing vessel 7/B
Sandyman II; Philip Cervantes was hired as winchman on August 1, 1972 while
Eleuterio Barbin was hired as winchman on April 15, 1976.
While tenure or length of employment is not considered as the test of
employment, nevertheless the hiring of petitioners to perform work which is
necessary or desirable in the usual business or trade of private respondent for
a period of 8-15 years since 1968 qualify them as regular employees within the
meaning of Article 281 of the Labor Code as they were indeed engaged to
perform activities usually necessary or desirable in the usual fishing business
or occupation of private respondent. 14
Aside from performing activities usually necessary and desirable in the
business of private respondent, it must be noted that petitioners received
compensation on a percentage commission based on the gross sale of the
fish-catch i.e. 13% of the proceeds of the sale if the total proceeds exceeded
the cost of the crude oil consumed during the fishing trip, otherwise only 10%
of the proceeds of the sale. Such compensation falls within the scope and
meaning of the term "wage" as defined under Article 97(f) of the Labor Code,
thus:
(f) "Wage" paid to any employee shall mean the 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 services rendered or to be rendered, and
included 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. . . .
The claim of private respondent, which was given credence by public
respondent, that petitioners get paid in the form of share in the fish-catch which
the patron/pilot as head of the team distributes to his crew members in

accordance with their own understanding 15 is not supported by recorded

evidence. Except that such claim appears as an allegation in private
respondent's position paper, there is nothing in the records showing such a
sharing scheme as preferred by private respondent.
Furthermore, the fact that on mere suspicion based on the reports that
petitioners allegedly sold their fish-catch at midsea without the knowledge and
consent of private respondent, petitioners were unjustifiably not allowed to
board the fishing vessel on September 11, 1983 to resume their activities
without giving them the opportunity to air their side on the accusation against
them unmistakably reveals the disciplinary power exercised by private
respondent over them and the corresponding sanction imposed in case of
violation of any of its rules and regulations. The virtual dismissal of petitioners
from their employment was characterized by undue haste when less extreme
measures consistent with the requirements of due process should have been
first exhausted. In that sense, the dismissal of petitioners was tainted with
illegality.
Even on the assumption that petitioners indeed sold the fish-catch at midsea
the act of private respondent virtually resulting in their dismissal evidently
contradicts private respondent's theory of "joint fishing venture" between the
parties herein. A joint venture, including partnership, presupposes generally
a parity of standingbetween the joint co-venturers or partners, in which each
party has an equal proprietary interest in the capital or property
contributed 16 and where each party exercises equal lights in the conduct of the
business. 17 It would be inconsistent with the principle of parity of standing
between the joint co-venturers as regards the conduct of business, if private
respondent would outrightly exclude petitioners from the conduct of the
business without first resorting to other measures consistent with the nature of
a joint venture undertaking, Instead of arbitrary unilateral action, private
respondent should have discussed with an open mind the advantages and
disadvantages of petitioners' action with its joint co-venturers if indeed there is
a "joint fishing venture" between the parties. But this was not done in the
instant case. Petitioners were arbitrarily dismissed notwithstanding that no
criminal complaints were filed against them. The lame excuse of private
respondent that the non-filing of the criminal complaints against petitioners was
for humanitarian reasons will not help its cause either.
We have examined the jurisprudence on the matter and find the same to be
supportive of petitioners' stand. InNegre vs. WCC 135 SCRA 653 (1985), we
LABOR LAW I |118

held that fishermen crew members who were recruited by one master
fisherman locally known as "maestro" in charge of recruiting others to complete
the crew members are considered employees, not industrial partners, of the
boat-owners. In an earlier case of Abong vs. WCC, 54 SCRA 379 (1973) where
petitioner therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he
was not the employer of the fishermen crew members because of an alleged
partnership agreement between him, as financier, and Simplicio Panganiban,
as his team leader in charge of recruiting said fishermen to work for him, we
affirmed the finding of the WCC that there existed an employer-employee
relationship between the boat-owner and the fishermen crew members not only
because they worked for and in the interest of the business of the boat-owner
but also because they were subject to the control, supervision and dismissal of
the boat-owner, thru its agent, Simplicio Panganiban, the alleged "partner" of
Dr. Abong; that while these fishermen crew members were paid in kind, or by
"pakiao basis" still that fact did not alter the character of their relationship with
Dr. Abong as employees of the latter.
In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial
Relations, 112 SCRA 159 (1982), we held that the employer-employee
relationship between the crew members and the owners of the fishing vessels
engaged in deep sea fishing is merely suspended during the time the vessels
are drydocked or undergoing repairs or being loaded with the necessary
provisions for the next fishing trip. The said ruling is premised on the principle
that all these activities i.e., drydock, repairs, loading of necessary provisions,
form part of the regular operation of the company fishing business.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The
questioned resolution of the National Labor Relations Commission dated May
30,1985 is hereby REVERSED and SET ASIDE. Private respondent is ordered
to reinstate petitioners to their former positions or any equivalent positions with
3-year backwages and other monetary benefits under the law. No
pronouncement as to costs.
SO ORDERED.

LABOR LAW I |119

FIRST DIVISION

G.R. No. 120969 January 22, 1998

ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION)
composed of Presiding Commissioner RAUL T. AQUINO, Commissioner
ROGELIO I. RAYALA and Commissioner VICTORIANO R. CALAYCAY
(Ponente), VIC DEL ROSARIO and VIVA FIMS, respondents.

DAVIDE, JR., J.:

By way of this special civil action for certiorari under Rule 65 of the Rules of
Court, petitioners seek to annul the 10 February 1995 Decision 1 of the
National Labor Relations Commission (hereafter NLRC), and its 6 April 1995
Resolution 2 denying the motion to reconsider the former in NLRC-NCR-CA No.
006195-94. The decision reversed that of the Labor Arbiter in NLRC-NCR-Case
No. 00-07-03994-92.
The parties present conflicting sets of facts.
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private
respondents on 18 July 1989 as part of the filming crew with a salary of
P375.00 per week. About four months later, he was designated Assistant
Electrician with a weekly salary of P400.00, which was increased to P450.00 in
May 1990. In June 1991, he was promoted to the rank of Electrician with a
weekly salary of P475.00, which was increased to P539.00 in September 1991.
Petitioner Paulino Enero, on his part, claims that private respondents employed
him in June 1990 as a member of the shooting crew with a weekly salary of
P375.00, which was increased to P425.00 in May 1991, then to P475.00 on 21
December 1991. 3
Petitioners' tasks consisted of loading, unloading and arranging movie
equipment in the shooting area as instructed by the cameraman, returning the
equipment to Viva Films' warehouse, assisting in the "fixing" of the lighting
system, and performing other tasks that the cameraman and/or director may
assign. 4
Sometime in May 1992, petitioners sought the assistance of their supervisors,
Mrs. Alejandria Cesario, to facilitate their request that private respondents
adjust their salary in accordance with the minimum wage law. In June 1992,

Mrs. Cesario informed petitioners that Mr. Vic del Rosario would agree to
increase their salary only if they signed a blank employment contract. As
petitioners refused to sign, private respondents forced Enero to go on leave in
June 1992, then refused to take him back when he reported for work on 20 July
1992. Meanwhile, Maraguinot was dropped from the company payroll from 8 to
21 June 1992, but was returned on 22 June 1992. He was again asked to sign
a blank employment contract, and when he still refused, private respondents
terminated his services on 20 July 1992. 5 Petitioners thus sued for illegal
dismissal 6 before the Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter VIVA)
is the trade name of Viva Productions, Inc., and that it is primarily engaged in
the distribution and exhibition of movies but not in the business of making
movies; in the same vein, private respondent Vic del Rosario is merely an
executive producer,i.e., the financier who invests a certain sum of money for
the production of movies distributed and exhibited by VIVA. 7
Private respondents assert that they contract persons called "producers"
also referred to as "associate producers" 8 to "produce" or make movies for
private respondents; and contend that petitioners are project employees of the
association producers who, in turn, act as independent contractors. As such,
there is no employer-employee relationship between petitioners and private
respondents.
Private respondents further contend that it was the associate producer of the
film "Mahirap Maging Pogi," who hired petitioner Maraguinot. The movie shot
from 2 July up to 22 July 1992, and it was only then that Maraguinot was
released upon payment of his last salary, as his services were no longer
needed. Anent petitioner Enero, he was hired for the movie entitled "Sigaw ng
Puso," later re-tired "Narito and Puso." He went on vacation on 8 June 1992,
and by the time he reported for work on 20 July 1992, shooting for the movie
had already been completed.9
After considering both versions of the facts, the Labor Arbiter found as follows:
On the first issue, this Office rules that complainants are the employees of
the respondents. The producer cannot be considered as an independent
contractor but should be considered only as a labor-only contractor and as
such, acts as a mere agent of the real employer, the herein respondent.
Respondents even failed to name and specify who are the producers. Also,
it is an admitted fact that the complainants received their salaries from the
respondents. The case cited by the respondents,Rosario Brothers,
Inc. vs. Ople, 131 SCRA 72 does not apply in this case.
LABOR LAW I |120

It is very clear also that complainants are doing activities which are
necessary and essential to the business of the respondents, that of moviemaking. Complainant Maraguinot worked as an electrician while
complainant Enero worked as a crew [member]. 10
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as
follows:
WHEREFORE, judgment is hereby rendered declaring that complainants
were illegally dismissed.
Respondents are hereby ordered to reinstate complainant to their former
positions without loss [of] seniority rights and pay their backwages
starting July 21, 1992 to December 31, 1993 temporarily computed in the
amount of P38,000.00 for complainant Paulino Enero and P46,000.00 for
complainant Alejandro Maraguinot, Jr. and thereafter until actually
reinstated.
Respondents are ordered to pay also attorney's fees equivalent to ten
(10%) and/or P8,400.00 on top of the award. 11
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No.
006195-94). In its decision 12 of 10 February 1995, the NLRC found the
following circumstances of petitioners' work "clearly established:"
1. Complainants [petitioners herein] were hired for specific movie projects
and their employment wasco-terminus with each movie project the
completion/termination of which are pre-determined, such fact being made
known to complainants at the time of their engagement.
xxx xxx xxx
2 Each shooting unit works on one movie project at a time. And the work of
the shooting units, which work independently from each other, are not
continuous in nature but depends on the availability of movie projects.
3. As a consequence of the non-continuous work of the shooting units, the
total working hours logged by complainants in a month show extreme
variations. . . For instance, complainant Maraguinot worked for
only 1.45 hours in June 1991 but logged a total of 183.25 hours in January
1992. Complainant Enero logged a total of only 31.57 hours in September
1991 but worked for 183.35hours the next month, October 1991.
4. Further shown by respondents is the irregular work schedule of
complainants on a daily basis. Complainant Maraguinot was supposed to
report on 05 August 1991 but reported only on 30 August 1991, or a gap of

25 days. Complainant Enero worked on 10 September 1991 and his next

scheduled working day was 28 September 1991, a gap of 18 days.
5. The extremely irregular working days and hours of complainants' work
explain the lump sum payment for complainants' services for each movie
project. Hence, complainants were paid a standard weekly salary regardless
of the number of working days and hours they logged in. Otherwise, if the
principle of "no work no pay" was strictly applied, complainants' earnings for
certain weeks would be very negligible.
6. Respondents also alleged that complainants were not prohibited from
working with such movie companies like Regal, Seiko and FPJ Productions
whenever they are not working for the independent movie producers
engaged by respondents . . . This allegation was never rebutted by
complainants and should be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that these
circumstances, taken together, indicated that complainants (herein
petitioners) were "project employees."
After their motion for reconsideration was denied by the NLRC in its
Resolution 13 of 6 April 1995, petitioners filed the instant petition, claiming that
the NLRC committed grave abuse of discretion amounting to lack or excess of
jurisdiction in: (1) finding that petitioners were project employees; (2) ruling that
petitioners were not illegally dismissed; and (3) reversing the decision of the
Labor Arbiter.
To support their claim that they were regular (and not project) employees of
private respondents, petitioners cited their performance of activities that were
necessary or desirable in the usual trade or business of private respondents
and added that their work was continuous, i.e., after one project was completed
they were assigned to another project. Petitioners thus considered themselves
part of a work pool from which private respondents drew workers for
assignment to different projects. Petitioners lamented that there was no basis
for the NLRC's conclusion that they were project employees, while the
associate producers were independent contractors; and thus reasoned that as
regular employees, their dismissal was illegal since the same was premised on
a "false cause," namely, the completion of a project, which was not among the
causes for dismissal allowed by the Labor Code.
Private respondents reiterate their version of the facts and stress that their
evidence supports the view that petitioners are project employees; point to
petitioners' irregular work load and work schedule; emphasize the NLRC's
finding that petitioners never controverted the allegation that they were not
LABOR LAW I |121

prohibited from working with other movie companies; and ask that the facts be
viewed in the context of the peculiar characteristics of the movie industry.
The Office of the Solicitor General (OSG) is convinced that this petition is
improper since petitioners raise questions of fact, particularly, the NLRC's
finding that petitioners were project employees, a finding supported by
substantial evidence; and submits that petitioners' reliance on Article 280 of the
Labor Code to support their contention that they should be deemed regular
employees is misplaced, as said section "merely distinguishes between two
types of employees, i.e., regular employees and casual employees, for
purposes of determining the right of an employee to certain benefits."
The OSG likewise rejects petitioners' contention that since they were hired not
for one project, but for a series of projects, they should be deemed regular
employees. Citing Mamansag v. NLRC, 14 the OSG asserts that what matters is
that there was a time-frame for each movie project made known to petitioners
at the time of their hiring. In closing, the OSG disagrees with petitioners' claim
that the NLRC's classification of the movie producers as independent
contractors had no basis in fact and in law, since, on the contrary, the NLRC
"took pains in explaining its basis" for its decision.
As regards the propriety of this action, which the Office of the Solicitor General
takes issue with, we rule that a special civil action for certiorari under Rule 65
of the Rules of Court is the proper remedy for one who complains that the
NLRC acted in total disregard of evidence material to or decisive of the
controversy. 15 In the instant case, petitioners allege that the NLRC's
conclusions have no basis in fact and in law, hence the petition may not be
dismissed on procedural or jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the determination of
whether an employer-employee relationship existed between petitioners and
private respondents or any one of private respondents. If there was none, then
this petition has no merit; conversely, if the relationship existed, then petitioners
could have been unjustly dismissed.
A related question is whether private respondents are engaged in the business
of making motion pictures. Del Rosario is necessarily engaged in such
business as he finances the production of movies. VIVA, on the other hand,
alleges that it does not "make" movies, but merely distributes and exhibits
motion pictures. There being no further proof to this effect, we cannot rely on
this self-serving denial. At any rate, and as will be discussed below, private
respondents' evidence even supports the view that VIVA is engaged in the
business of making movies.

We now turn to the critical issues. Private respondents insist that petitioners
are project employees of associate producers who, in turn, act as independent
contractors. It is settled that the contracting out of labor is allowed only in case
of job contracting. Section 8, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code describes permissible job contracting in this
wise:
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; 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.
Assuming that the associate producers are job contractors, they must then be
engaged in the business of making motion pictures. As such, and to be a job
contractor under the preceding description, associate producers must have
tools, equipment, machinery, work premises, and other materials necessary to
make motion pictures. However, the associate producers here have none of
these. Private respondents' evidence reveals that the movie-making equipment
are supplied to the producers and owned by VIVA. These include
generators, 16 cables and wooden platforms, 17 cameras and "shooting
equipment;" 18 in fact, VIVA likewise owns the trucks used to transport the
equipment. 19 It is thus clear that the associate producer merely leases the
equipment from VIVA. 20 Indeed, private respondents' Formal Offer of
Documentary Evidence stated one of the purposes of Exhibit "148" as:
To prove further that the independent Producers rented Shooting Unit No. 2
from Viva to finish their films. 21
While the purpose of Exhibits "149," "149-A" and "149-B" was:
[T]o prove that the movies of Viva Films were contracted out to the different
independent Producers who rented Shooting Unit No. 3 with a fixed budget
and time-frame of at least 30 shooting days or 45 days whichever comes
first. 22
Private respondent further narrated that VIVA's generators broke down during
petitioners' last movie project, which forced the associate producer concerned
LABOR LAW I |122

to rent generators, equipment and crew from another company.23 This only
shows that the associate producer did not have substantial capital nor
investment in the form of tools, equipment and other materials necessary for
making a movie. Private respondents in effect admit that their producers,
especially petitioners' last producer, are not engaged in permissible job
contracting.
If private respondents insist that the associate producers are labor contractors,
then these producers can only be "labor-only" contractors, defined by the Labor
Code as follows:
Art. 106. Contractor or subcontractor. . . .
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.
A more detailed description is provided by Section 9, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code:
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; and
(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 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.
As labor-only contracting is prohibited, the law considers the person or entity
engaged in the same a mere agent or intermediary of the direct employer. But
even by the preceding standards, the associate producers of VIVA cannot be
considered labor-only contractors as they did not supply, recruit nor hire the
workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor
and an employee of VIVA, who recruited crew members from an "available
group of free-lance workers which includes the complainants Maraguinot and
Enero." 24 And in their Memorandum, private respondents declared that the
associate producer "hires the services of . . . 6) camera crew which includes (a)
cameraman; (b) the utility crew; (c) the technical staff; (d) generator man and
electrician; (e) clapper; etc. . . . ." 25 This clearly showed that the associate
producers did not supply the workers required by the movie project.
The relationship between VIVA and its producers or associate producers
seems to be that of agency, 26 as the latter make movies on behalf of VIVA,
whose business is to "make" movies. As such, the employment relationship
between petitioners and producers is actually one between petitioners and
VIVA, with the latter being the direct employer.
The employer-employee relationship between petitioners and VIVA can further
be established by the "control test." While four elements are usually considered
in determining the existence of an employment relationship, namely: (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 of the employee's
conduct, 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 the same. 27 These four elements are
present here. In their position paper submitted to the Labor Arbiter, private
respondents narrated the following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by
the company, for as long as the ultimate finish[ed] product is acceptable to
the company . . .
The ensure that qualify films are produced by the PRODUCER who is an
independent contractor, the company likewise employs a Supervising
PRODUCER, a Project accountant and a Shooting unit supervisor. The
Company's Supervising PRODUCER is Mr. Eric Cuatico, the Project
accountant varies from time to time, and the Shooting Unit Supervisor is
Ms. Alejandria Cesario.
LABOR LAW I |123

The Supervising PRODUCER acts as the eyes and ears of the company and
of the Executive Producer to monitor the progress of the PRODUCER's work
accomplishment. He is there usually in the field doing the rounds of
inspection to see if there is any problem that the PRODUCER is
encountering and to assist in threshing out the same so that the film project
will be finished on schedule. He supervises about 3 to 7 movie projects
simultaneously [at] any given time by coordinating with each film
"PRODUCER". The Project Accountant on the other hand assists the
PRODUCER in monitoring the actual expenses incurred because the
company wants to insure that any additional budget requested by the
PRODUCER is really justified and warranted especially when there is a
change of original plans to suit the tast[e] of the company on how a certain
scene must be presented to make the film more interesting and more
commercially viable. (emphasis supplied).
VIVA's control is evident in its mandate that the end result must be a "quality
film acceptable to the company." The means and methods to accomplish the
result are likewise controlled by VIVA, viz., the movie project must be finished
within schedule without exceeding the budget, and additional expenses must
be justified; certain scenes are subject to change to suit the taste of the
company; and the Supervising Producer, the "eyes and ears" of VIVA and del
Rosario, intervenes in the movie-making process by assisting the associate
producer in solving problems encountered in making the film.
It may not be validly argued then that petitioners are actually subject to the
movie director's control, and not VIVA's direction. The director merely instructs
petitioners on how to better comply with VIVA's requirements to ensure that a
quality film is completed within schedule and without exceeding the budget. At
bottom, the director is akin to a supervisor who merely oversees the activities
of rank-and-file employees with control ultimately resting on the employer.
Moreover, appointment slips 28 issued to all crew members state:
During the term of this appointment you shall comply with the
duties and responsibilities of your position as well as observe
the rules and regulations promulgated by your superiors and
by Top Management.
The words "supervisors" and "Top Management" can only refer to the
"supervisors" and "Top Management" of VIVA. By commanding crew members
to observe the rules and regulations promulgated by VIVA, the appointment
slips only emphasize VIVA's control over petitioners.

Aside from control, the element of selection and engagement is likewise

present in the instant case and exercised by VIVA. A sample appointment slip
offered by private respondents "to prove that members of the shooting crew
except the driver are project employees of the Independent Producers" 29 reads
as follows:
VIVA PRODUCTIONS, INC.
16 Sct. Albano St.
Diliman, Quezon City
PEDRO NICOLAS Date: June 15, 1992

APPOINTMENT SLIP
You are hereby appointed as SOUNDMAN for the film project entitled
"MANAMBIT". This appointment shall be effective upon the
commencement of the said project and shall continue to be effective until
the completion of the same.
For your services you shall receive the daily/weekly/monthly compensation
of P812.50.
During the term of this appointment you shall comply with the duties and
responsibilities of your position as well as observe the rules and
regulations promulgated by your superiors and by Top Management. Very
truly yours, (an illegible signature)
CONFORME:
_________________
Name of appointee
Signed in the presence of:
___________________
Notably, nowhere in the appointment slip does it appear that it was the
producer or associate producer who hired the crew members; moreover, it is
VIVA's corporate name which appears on the heading of the appointment slip.
What likewise tells against VIVA is that it paid petitioners' salaries as evidenced
by vouchers, containing VIVA's letterhead, for that purpose. 30
All the circumstances indicate an employment relationship between petitioners
and VIVA alone, thus the inevitable conclusion is that petitioners are employees
only of VIVA.
LABOR LAW I |124

The next issue is whether petitioners were illegally dismissed. Private

NARDONG TOOTHPICK
respondents contend that petitioners were project employees whose
employment was automatically terminated with the completion of their
BAKIT
KAY
TAGAL
respective projects. Petitioners assert that they were regular employees who
SANDALI
were illegally dismissed.
It may not be ignored, however, that private respondents expressly admitted BAKIT
KAY
TAGAL
that petitioners were part of a work pool; 31 and, while petitioners were initiallycontract)
hired possibly as project employees, they had attained the status of regular
employees in view if VIVA's conduct.
HINUKAY
KO
NA
LIBINGAN
MO
A project employee or a member of a work pool may acquire the status of a

4/4/90

5/18/90

JUN CHING

NG

6/26/90

10/20/90

E. MANUEL

(2nd

8/10/90

9/23/90

E. MANUEL

ANG

9/6/90

10/20/90

JUN CHING

10/25/90

12/8/90

SANDY STA. MARIA

12/9/90

1/22/91

SANDY S

1/29/91

3/14/90

JUN CHING

3/15/91

4/6/91

JUN CHING

5/7/91

6/20/91

M. ONG

6/23/91

8/6/91

JUN CHING

8/18/91

10/2/91

SANDY S.

regular employee when the following concur:

1) There is a continuous rehiring of project employees even after cessation of a
project; 32 and

MAGING SINO KA MAN

M. SINO KA MAN (2nd contract)

2) The tasks performed by the alleged "project employee" are vital, necessary
and indispensable to the usual business or trade of the employer. 33
NOEL JUICO
However, the length of time during which the employee was
continuously re-hired is not controlling, but merely serves as a badge NOEL JUICO (2nd contract)
of regular employment. 34
In the instant case, the evidence on record shows that petitioner Enero was ROBIN GOOD
employed for a total of two (2) years and engaged in at least eighteen (18)
projects, while petitioner Maraguinot was employed for some three (3) years UTOL KONG HOODLUM # 1
and worked on at least twenty-three (23) projects. 35 Moreover, as petitioners'
KAPUTOL NG ISANG AWIT
tasks involved, among other chores, the loading, unloading and

ILM

DATE
STARTED

DATE
COMPLETED

ASSOCIATE DARNA
PRODUCER

10/4/91

11/18/91

E. MANUEL

12/12/91

E. MANUEL

1/3/90

2/16/90

DARNA (addl. 1/2)

MARIVIC ONG

11/20/91

OVE AT FIRST SIGHT

1/27/92

BOBBY GRIMALT

1/26/90

3/11/90

MAGNONG REHAS
EDITH MANUEL

12/13/91

AIKOT-IKOT

1/28/92

3/12/92

B. GRIMALT

ROCKY & ROLLY

2/13/90

3/29/90

M. ONG
4/29/92

M. ONG

3/12/90

4/3/90

HIRAM NA MUKHA
E. MANUEL

3/15/92

PAIKOT-IKOT (addl. 1/2)

HIRAM (2nd contract)

5/1/92

6/14/92

M. ONG

ROCKY & ROLLY (2nd contract)

4/6/90

5/20/90

M. ONG
KAHIT AKO'Y BUSABOS

5/28/92

7/7/92

JERRY OHARA

M. REHAS (2nd contract)

LABOR LAW I |125

ALABANG GIRLS (1/2 contract)

3/4/92

3/26/92

M. ONG

BATANG RILES

3/9/92

3/30/92

BOBBY GRIMALT

UTOL KONG HOODLUM (part 2)

3/22/92

5/6/92

B. GRIMALT

5/7/92

5/29/92

B. GRIMALT

IGAW NG PUSO

7/1/92

8/4/92

M. ONG

IGAW (addl. 1/2)

8/15/92

9/5/92

M. ONG UTOL (addl. 1/2 contract)

MANDURUGAS (2nd contract)

5/25/92
7/8/92
JERRY OHARA
SANDY STA. MARIA
MAHIRAP MAGING POGI
7/2/92
8/15/92
M. ONG
While Maraguinot was a member of Shooting Unit III, which made the following
arranging of movie equipment in the shooting area as instructed by the
movies (Annex "4-A" of Respondents' Position Paper; OR, 29):
cameramen, returning the equipment to the Viva Films' warehouse, and
LM
DATE
DATE
ASSOCIATE PRODUCER
assisting in the "fixing" of the lighting system, it may not be gainsaid that
STARTED
COMPLETED
these tasks were vital, necessary and indispensable to the usual business or
trade of the employer. As regards the underscored phrase, it has been held
UMAPANG KA SA LUSAK
1/27/90
3/12/90
JUN CHING
that this is ascertained by considering the nature of the work performed and
ETRANG KABAYO
2/19/90
4/4/90
RUTH GRUTA
its relation to the scheme of the particular business or trade in its entirety.36

NGAYON AT KAILANMAN

USAK (2nd contract)

9/6/92

10/20/92

3/14/90

4/27/90

JUN CHING

4/21/90

5/13/90

RUTH GRUTA

ADBOY

6/15/90

7/29/90

EDITH MANUEL

ADBOY (2nd contract)

7/30/90

8/21/90

E. MANUEL

NAK NI BABY AMA

9/2/90

10/16/90

RUTH GRUTA

B. AMA (addl 1/2)

10/17/90

11/8/90

RUTH GRUTA

B. AMA (addl 2nd 1/2)

11/9/90

12/1/90

R. GRUTA

OYONG MANALAC

11/30/90

1/14/91

MARIVIC ONG

UMANAP KA NG PANGET

1/20/91

3/5/91

EDITH MANUEL

. PANGET(2nd contract)

3/10/91

4/23/91

E. MANUEL

MANALAC (2nd contract)

5/22/91

7/5/91

M. ONG

OBIN GOOD (2nd contract)

7/7/91

8/20/91

M. ONG

TONG GAMOL

8/30/91

10/13/91

M. ONG

GAMOL (2nd contract)

10/14/91

11/27/91

M. ONG

12/28/91

2/10/92

E. MANUEL

KABAYO (Addl 1/2 contract)

REASE GUN GANG

A recent pronouncement of this Court anent project or work pool employees

who had attained the status of regular employees proves most instructive:
The denial by petitioners of the existence of a work pool in the company
because their projects were not continuous is amply belied by petitioners
themselves who admit that: . . .
A work pool may exist although the workers in the pool do not receive
salaries and are free to seek other employment during temporary breaks in
the business, provided that the worker shall be available when called to
report of a project. Although primarily applicable to regular seasonal workers,
this set-up can likewise be applied to project workers insofar as the effect of
temporary cessation of work is concerned. This is beneficial to both the
employer and employee for it prevents the unjust situation of "coddling labor
at the expense of capital" and at the same time enables the workers to attain
the status of regular employees. Clearly, the continuous rehiring of the same
set of employees within the framework of the Lao Group of Companies is
strongly indicative that private respondents were an integral part of a work
pool from which petitioners drew its workers for its various projects.
In a final attempt to convince the Court that private respondents were
indeed project employees, petitioners point out that the workers were not
regularly maintained in the payroll and were free to offer their services to
other companies when there were no on-going projects. This argument
however cannot defeat the workers' status of regularity. We apply by
LABOR LAW I |126

analogy
the
vase
of Industrial-Commercial-Agricultural
Workers
Organization v. CIR [16 SCRA 526, 567-568 (1966)] which deals with
regular seasonal employees. There we held: . . .
Truly, the cessation of construction activities at the end of every project is a
foreseeable suspension of work. Of course, no compensation can be
demanded from the employer because the stoppage of operations at the
end of a project and before the start of a new one is regular and expected
by both parties to the labor relations. Similar to the case of regular
seasonal employees, the employment relation is not severed by merely
being suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)] The
employees are, strictly speaking, not separated from services but merely
on leave of absence without pay until they are reemployed. Thus we
cannot affirm the argument that non-payment of salary or non-inclusion in
the payroll and the opportunity to seek other employment denote project
employment. 37 (emphasis supplied)
While Lao admittedly involved the construction industry, to which Policy
Instruction No. 20/Department Order No. 19 38 regarding work pools specifically
applies, there seems to be no impediment to applying the underlying principles
to industries other than the construction industry. 39 Neither may it be argued
that a substantial distinction exists between the projects undertaken in the
construction industry and the motion picture industry. On the contrary,
the raison d' etre of both industries concern projects with a foreseeable
suspension of work.
At this time, we wish to allay any fears that this decision unduly burdens an
employer by imposing a duty to re-hire a project employee even after
completion of the project for which he was hired. The import of this decision is
not to impose a positive and sweeping obligation upon the employer to re-hire
project employees. What this decision merely accomplishes is a judicial
recognition of the employment status of a project or work pool employee in
accordance with what is fait accompli, i.e., the continuous re-hiring by the
employer of project or work pool employees who perform tasks necessary or
desirable to the employer's usual business or trade. Let it not be said that this
decision "coddles" labor, for as Lao has ruled, project or work pool employees
who have gained the status of regular employees are subject to the "no workno pay" principle, to repeat:
A work pool may exist although the workers in the pool do not receive salaries
and are free to seek other employment during temporary breaks in the
business, provided that the worker shall be available when called to report for a
project. Although primarily applicable to regular seasonal workers, this set-up

can likewise be applied to project workers insofar as the effect of temporary

cessation of work is concerned. This is beneficial to both the employer and
employee for it prevents the unjust situation of "coddling labor at the expense
of capital" and at the same time enables the workers to attain the status of
regular employees.
The Court's ruling here is meant precisely to give life to the constitutional policy
of strengthening the labor sector,40 but, we stress, not at the expense of
management. Lest it be misunderstood, this ruling does not mean that simply
because an employee is a project or work pool employee even outside the
construction industry, he is deemed, ipso jure, a regular employee. All that we
hold today is that once a project or work pool employee has been: (1)
continuously, as opposed to intermittently, re-hired by the same employer for
the same tasks or nature of tasks; and (2) these tasks are vital, necessary and
indispensable to the usual business or trade of the employer, then the
employee must be deemed a regular employee, pursuant to Article 280 of the
Labor Code and jurisprudence. To rule otherwise would allow circumvention of
labor laws in industries not falling within the ambit of Policy Instruction No.
20/Department Order No. 19, hence allowing the prevention of acquisition of
tenurial security by project or work pool employees who have already gained
the status of regular employees by the employer's conduct.
In closing then, as petitioners had already gained the status of regular
employees, their dismissal was unwarranted, for the cause invoked by private
respondents for petitioners' dismissal, viz.: completion of project, was not, as to
them, a valid cause for dismissal under Article 282 of the Labor Code. As such,
petitioners are now entitled to back wages and reinstatement, without loss of
seniority rights and other benefits that may have accrued. 41 Nevertheless,
following the principles of "suspension of work" and "no pay" between the end
of one project and the start of a new one, in computing petitioners' back wages,
the amounts corresponding to what could have been earned during the periods
from the date petitioners were dismissed until their reinstatement when
petitioners' respective Shooting Units were not undertaking any movie projects,
should be deducted.
Petitioners were dismissed on 20 July 1992, at a time when Republic Act No.
6715 was already in effect. Pursuant to Section 34 thereof which amended
Section 279 of the Labor Code of the Philippines and Bustamante
v. NLRC,42 petitioners are entitled to receive full back wages from the date of
their dismissal up to the time of their reinstatement, without deducting whatever
earnings derived elsewhere during the period of illegal dismissal, subject
however, to the above observations.
LABOR LAW I |127

WHEREFORE, the instant petition is GRANTED. The assailed decision of the

National Labor Relations Commission in NLRC NCR CA No. 006195-94 dated
01 February 1995, as well as its Resolution dated 6 April 1995, are hereby
ANNULLED and SET ASIDE for having been rendered with grave abuse of
discretion, and the decision of the Labor Arbiter in NLRC NCR Case No. 00-0703994-92 is REINSTATED, subject, however, to the modification above
mentioned in the computation of back wages.
No pronouncement as to costs.
SO ORDERED.

LABOR LAW I |128

THIRD DIVISION
[G.R. No. 129076. November 25, 1998]
ORLANDO FARM GROWERS ASSOCIATION/GLICERIO AOVER, petitioner,
vs. THE
HONORABLE
NATIONAL
LABOR
RELATIONS
COMMISSION (FIFTH DIVISION), ANTONIO PAQUIT, ESTHER
BONGGOT, FRANCISCO BAUG, LEOCADIO ORDONO, REBECCA
MOREN, MARCELINA HONTIVEROS, MARTIN ORDONO, TITO
ORDONO, FE ORDONO, ERNIE COLON, EUSTIQUIO GELDO,
DANNY SAM, JOEL PIAMONTE, FEDERICO PASTOLERO,
VIRGINIA BUSANO, EDILMIRO ALDION, EUGENIO BETICAN, JR.
and BERNARDO OPERIO, respondents.

After respondents were dismissed on various dates from January 8, 1993 to July
30, 1994, several complaints were filed against petitioner for illegal dismissal and
monetary benefits. Based on similar grounds, the same were consolidated in the office
of Labor Arbiter Newton R. Sancho who, in a decision dated September 6, 1995,
ordered their reinstatement, viz:
"WHEREFORE, judgment is hereby rendered declaring the dismissal of the 20 abovenamed complainants ILLEGAL, and ordering respondents Orlando Farms Growers
Association/Glicerio Anover to REINSTATE them immediately to their former or
equivalent positions, and to PAY individual complainants their respective backwages
and other benefits (wage differentials, 13th month pay and holiday pay) appearing
opposite their names above set forth, including moral damages and attorney's fees, in
the total amount of P1,047,720.92 only.

DECISION

All other claims are dismissed for lack of merit.

ROMERO, J.:

As becoming a collective association, respondents liabilities to complainants are joint

and solidary, with its responsible officers.

It is a settled doctrine that an employer-employee relationship can be deduced

from the existence of the following elements: (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.
The principal issue to be resolved in the instant petition is whether or not an
unregistered association may be an employer independent of the respective members it
represents.
The evidence reveals the ensuing facts:
Petitioner Orlando Farms Growers Association, with co-petitioner Glicerio Aover
as its President, is an association of landowners engaged in the production of export
quality bananas located in Kinamayan, Sto. Tomas, Davao del Norte, established for
the sole purpose of dealing collectively with Stanfilco on matters concerning technical
services, canal maintenance, irrigation and pest control, among others. Respondents, on
the other hand, were hired as farm workers by several member-landowners but,
nonetheless, were made to perform functions as packers and harvesters in the
plantation of petitioner association.

The case of Loran Paquit and Lovilla Dorlones [1] is dropped for having been amicably
settled.
In case of appeal, backwages and other benefits shall accrue but in no case exceeding 3
years, without any qualification or deduction.
SO ORDERED."[2]
On appeal, the National Labor Relations Commission (NLRC) affirmed the
same in toto in a decision dated December 26, 1996. Its motion for reconsideration
having been denied on February 25, 1997, petitioner filed the instant petition
for cetiorari.
Petitioner alleged that the NLRC erred in finding that respondents were its
employees and not of the individual landownners which fact can easily be deduced
from the payments made by the latter of respondent's Social Security System (SSS)
contributions. Moreover, it could have never exercised the power of control over them
with regard to the manner and method by which the work was to be accomplished,
which authority remain vested with the landowners despite becoming members thereof.

LABOR LAW I |129

The arguments adduced before us do not warrant the nullification of the findings
made by the Labor Arbiter and the NLRC as the determination of the existence of an
employer-employee relationship between the party-litigants, being a question of fact, is
amply supported by substantial evidence, as can be gathered from a perfunctory
reading, not only of the pleadings submitted, but from the assailed decision, as
well. Thus, the authority of this Court to review the findings of the NLRC is limited to
allegations of lack of jurisdiction or grave abuse of discretion.
The contention that petitioner, being an unregistered association and having been
formed solely to serve as an effective medium for dealing collectively with Stanfilco,
does not exist in law and, therefore, cannot be considered an employer, is
misleading. This assertion can easily be dismissed by reference to Article 212(e) of the
Labor Code, as amended, which defines an employer as any person acting in the
interest of an employer, directly or indirectly. Following a careful scrutiny of the said
provision, the Court concludes that the law does not require an employer to be
registered before he may come within the purview of the Labor Code, consistent with
the established rule in statutory construction that when the law does not distinguish, we
should not distinguish. To do otherwise would bring about a situation whereby
employees are denied, not only redress of their grievances, but, more importantly, the
protection and benefits accorded to them by law if their employer happens to be an
unregistered association.
To reiterate, as held in the case of Filipinas Broacasting Network, Inc. v. NLRC,
the following are generally considered in the determination of the existence of an
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; of these four, the last one being the most
important.
[3]

In the instant case, the following circumstances which support the existence of
employer-employee relations cannot be denied. During the subsistence of the
association, several circulars and memoranda were issued concerning, among other
things, absences without formal request, loitering in the work area and disciplinary
measures with which every worker is enjoined to comply. Furthermore, the employees
were issued identification cards which the Court, in the case of Domasig v. NLRC,
[4]
construed, not only as a security measure but mainly to identify the holder as a
bonafide employee of the firm. However, what makes the relationship explicit is the
power of the petitioner to enter into compromise agreements involving money claims
filed by three employees, namely: Lorna Paquit, Lovella Dorlones and Jasmine
Espanola. If petitioner's disclaimer were to believed, what benefit would accrue to it in
settling an employer-employee dispute to which it allegedly lay no claim?
In spite of the overwhelming evidence sufficient to justify a conclusion that
respondents were indeed employees of petitioner, the latter, nevertheless, maintain the
preposterous claim that the ID card, circulars and memoranda were issued merely to
facilitate the efficient use of common resources, as well as to promote uniform rules in
the work establishment. On this score, we defer to the observations made by the NLRC
when it ruled that, while the original purpose of the formation of the association was
merely to provide the landowners a unified voice in dealing with Stanfilco, petitioner
however exceeded its avowed intentions when its subsequent actions reenforced only
too clearly its admitted role of employer. As reiterated all too often, factual findings of
the NLRC, particularly when they coincide with those of the Labor Arbiter, are
accorded respect, even finality, and will not be disturbed for as long as such findings
are supported by substantial evidence.[5]
Prescinding from the foregoing, we now address the issue of whether or not
petitioner had a valid ground to dismiss respondents from their respective employment.
It is settled that in termination disputes, the employer bears the burden of proving
that the dismissal is for just cause, failing which it would mean that the dismissal is not
justified and the employer is entitled to reinstatement. [6] The dismissal of employees
must be made within the parameters of the law and pursuant to the basic tenets of
equity, justice and fair play.[7] In Brahm Industries, Inc. v. NLRC,[8]the Court explained
that there are two (2) facets of valid termination of employment: (a) the legality of the
act of dismissal, i.e., the dismissal must be under any of the just causes provided under
Art. 282[9] of the Labor Code; and (b) the legality of the manner of dismissal, which
means that there must be observance of the requirements of due process, otherwise
known as the two-notice rule. Thus, "the employer is required to furnish the employee
with a written notice containing a statement of the cause for termination and to afford
LABOR LAW I |130

said employee ample opportunity to be heard and to defend himself with the assistance
of his representative, if he so desires. The employer is also required to notify the
worker in writing of the decision to dismiss him, stating clearly the reasons
therefore."[10]
In the instant case, petitioner severed employment relations when it whimsically
dismissed the respondents in utter disregard of the safeguards underscored in the
Constitution, as well as in the Labor Code. Petitioner failed to controvert the allegation
that it was responsible for the dismissal of the employees. Instead of denying the same
or otherwise imputing liability on its member-landowner by naming the employees
allegedly in his employ, petitioner was silent on the issue and harped on the nonexistence of employer-employee relationship between the parties, which contention we
find to be tangential.However related the issue might seem, it would have been more
relevant for the petitioner to have presented ample evidence before the NLRC and this
Court to justify its exoneration from liability. Having failed in this respect, we deem it
fatal to its defense.

For having been dismissed without a valid cause and for non-observance of the
due process requirement, respondents, consistent with recent jurisprudence laid down
in the case of Bustamante v. NLRC,[11] are entitled to receive full backwages from the
date of their dismissal up to the time of their reinstatement. The order, therefore, of the
labor arbiter limiting backwages to a period of three (3) years in the event of an appeal,
is erroneous.
WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED and
the decision of the National Labor Relations Commission dated September 6, 1995 is
AFFIRMED subject to the deletion of the award of moral damages and attorney's
fees. The Court, however, is remanding this case to Labor Arbiter Newton R. Sancho to
specify in the dispositive portion of his decision the names of the respondents and the
amount that each is entitled to.
SO ORDERED.

LABOR LAW I |131