Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 84484 November 15, 1989
INSULAR LIFE ASSURANCE CO., LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.
Tirol & Tirol for petitioner.
Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.

NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T.
Basiao entered into a contract 1 by which:
1. Basiao was "authorized to solicit within the Philippines applications for insurance policies
and annuities in accordance with the existing rules and regulations" of the Company;
2. he would receive "compensation, in the form of commissions ... as provided in the Schedule
of Commissions" of the contract to "constitute a part of the consideration of ... (said)
agreement;" and
3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its
circulars ... and those which may from time to time be promulgated by it, ..." were made part of
said contract.
The contract also contained, among others, provisions governing the relations of the parties, the duties of the
Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to
time, place and means of soliciting insurance. Nothing herein contained shall therefore be
construed to create the relationship of employee and employer between the Agent and the
Company. However, the Agent shall observe and conform to all rules and regulations which
the Company may from time to time prescribe.
ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or
indirectly, rebates in any form, or from making any misrepresentation or over-selling, and, in
general, from doing or committing acts prohibited in the Agent's Manual and in circulars of the
Office of the Insurance Commissioner.

TERMINATION. The Company may terminate the contract at will, without any previous notice
to the Agent, for or on account of ... (explicitly specified causes). ...
Either party may terminate this contract by giving to the other notice in writing to that effect. It
shall become ipso facto cancelled if the Insurance Commissioner should revoke a Certificate
of Authority previously issued or should the Agent fail to renew his existing Certificate of
Authority upon its expiration. The Agent shall not have any right to any commission on
renewal of premiums that may be paid after the termination of this agreement for any cause
whatsoever, except when the termination is due to disability or death in line of service. As to
commission corresponding to any balance of the first year's premiums remaining unpaid at the
termination of this agreement, the Agent shall be entitled to it if the balance of the first year
premium is paid, less actual cost of collection, unless the termination is due to a violation of
this contract, involving criminal liability or breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other
compensations shall be valid without the prior consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into another contract an Agency Manager's Contract
and to implement his end of it Basiao organized an agency or office to which he gave the name M. Basiao
and Associates, while concurrently fulfilling his commitments under the first contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration,
Basiao sued the Company in a civil action and this, he was later to claim, prompted the latter to terminate also
his engagement under the first contract and to stop payment of his commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president.

Without contesting the termination of the first contract, the complaint sought to recover commissions
allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction
over Basiao's claim, asserting that he was not the Company's employee, but an independent contractor
and that the Company had no obligation to him for unpaid commissions under the terms and conditions of
his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement
had established an employer-employee relationship between him and the Company, and this conferred
jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision directed payment of his
unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid, at the time of
his termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus
10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence,

the present petition for certiorari and prohibition.

The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's
employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions within the
original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217 of the Labor
Code, 8 or, contrarily, as the Company would have it, that under said contract Basiao's status was that of

an independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but
by the regular courts in an ordinary civil action.

The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed
between it and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or
by necessary implication, made Basiao the master of his own time and selling methods, left to his judgment the
time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the
basis 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.
Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the
Company, the respondents contend that they do not constitute the decisive determinant of the nature of his
engagement, invoking precedents to the effect that the critical feature distinguishing the status of an employee
from that of an independent contractor is control, that is, whether or not the party who engages the services of
another has the power to control the latter's conduct in rendering such services. Pursuing the argument, the
respondents draw attention to the provisions of Basiao's contract obliging him to "... observe and conform to all
rules and regulations which the Company may from time to time prescribe ...," as well as to the fact that the
Company prescribed the qualifications of applicants for insurance, processed their applications and determined
the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in legal
contemplation, an employee of the Company. 9
It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana
vs. Alejo Al-Lagadan 10
... In determining the existence of employer-employee relationship, the following elements are
generally considered, namely: (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 employees'
conduct although the latter is the most important element (35 Am. Jur. 445). ...

Indeed, it is without question a valid test of

the character of a contract or agreement to render service. It should, however, be obvious that not every
form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the
services rendered may be accorded the effect of establishing an employer-employee relationship
between them in the legal or technical sense of the term. A line must be drawn somewhere, if the
recognized distinction between an employee and an individual contractor is not to vanish altogether.
Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his performance of the engagement.
has been followed and applied in later cases, some fairly recent.

11

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim
only to promote the result, create no employer-employee relationship unlike the second, which address both
the result and the means used to achieve it. The distinction acquires particular relevance in the case of an
enterprise affected with public interest, as is the business of insurance, and is on that account subject to
regulation by the State with respect, not only to the relations between insurer and insured but also to the
internal affairs of the insurance company. 12 Rules and regulations governing the conduct of the business

are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore,
usual and expected for an insurance company to promulgate a set of rules to guide its commission agents
in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a
character are the rules which prescribe the qualifications of persons who may be insured, subject
insurance applications to processing and approval by the Company, and also reserve to the Company the
determination of the premiums to be paid and the schedules of payment. None of these really invades the

agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and
convenience, hence cannot justifiably be said to establish an employer-employee relationship between
him and the company.
There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent
contractors, instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs.
Ople,13 the Court ruled that a person engaged to sell soft drinks for another, using a truck supplied by the

latter, but with the right to employ his own workers, sell according to his own methods subject only to
prearranged routes, observing no working hours fixed by the other party and obliged to secure his own
licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the
other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent
contractor.
a case almost on all fours
with the present one, this Court held that there was no employer-employee relationship between a
commission agent and an investment company, but that the former was an independent contractor where
said agent and others similarly placed were: (a) paid compensation in the form of commissions based on
percentages of their sales, any balance of commissions earned being payable to their legal
representatives in the event of death or registration; (b) required to put up performance bonds; (c) subject
to a set of rules and regulations governing the performance of their duties under the agreement with the
company and termination of their services for certain causes; (d) not required to report for work at any
time, nor to devote their time exclusively to working for the company nor to submit a record of their
activities, and who, finally, shouldered their own selling and transportation expenses.
In Investment Planning Corporation of the Philippines us. Social Security System

14

More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and

sell rice and palay without compensation except a certain percentage of what he was able to buy or sell,
did work at his own pleasure without any supervision or control on the part of his principal and relied on
his own resources in the performance of his work, was a plain commission agent, an independent
contractor and not an employee.
The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to
observe and conform to such rules and regulations as the latter might from time to time prescribe. No showing
has been made that any such rules or regulations were in fact promulgated, much less that any rules existed or
were issued which effectively controlled or restricted his choice of methods or the methods themselves of
selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were
imposed on the express provision of the contract leaving Basiao "... free to exercise his own judgment as to the
time, place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company
for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what is germane here is
Basiao's status under the contract of July 2, 1968, not the length of his relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the
petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should
have been litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance of, and adjudicating,
said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision.
This conclusion renders it unnecessary and premature to consider Basiao's claim for commissions on its
merits.

WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that
complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No
pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
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. 03-030994 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 employeremployee relationship between De los Reyes and petitioner INSULAR LIFE. 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. Petitioner's motion for reconsideration having been
denied, the NLRC remanded the case to the Labor Arbiter for hearing on the merits.
1

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 employer-employee 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 of Insular Life Assurance Co., Ltd. v. NLRC and Basiao 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 herein vis-a-vispetitioner should not be similarly determined.
3

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 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 employer-employee 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.
4

On 1 March 1993 petitioner and private respondent entered into another contract 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 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.
6

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..
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. In determining the status of the
management contract, the "four-fold test" on employment earlier mentioned has to be applied.
7

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. 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.
8

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 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 however contradict such claims:
11

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 Basiao to the instant
case under the doctrine of stare decisis, postulating that both cases involve parties similarly situated and facts
which are almost identical.
12

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 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 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.
13

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.

10

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 119268

February 23, 2000

ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS, LUIS DE LOS
ANGELES, JOEL ORDENIZA and AMADO CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN TAXI (PHILJAMA
INTERNATIONAL, INC.) respondents.
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the decision1 of public respondent promulgated on October
28, 1994, in NLRC NCR CA No. 003883-92, and its resolution 2 dated December 13, 1994 which denied
petitioners motion for reconsideration.
Petitioners were drivers of private respondent, Philjama International Inc., a domestic corporation engaged in
the operation of "Goodman Taxi." Petitioners used to drive private respondent's taxicabs every other day on a
24-hour work schedule under the boundary system. Under this arrangement, the petitioners earned an average
of P400.00 daily. Nevertheless, private respondent admittedly regularly deducts from petitioners, daily earnings
the amount of P30.00 supposedly for the washing of the taxi units. Believing that the deduction is illegal,
petitioners decided to form a labor union to protect their rights and interests.

11

Upon learning about the plan of petitioners, private respondent refused to let petitioners drive their taxicabs
when they reported for work on August 6, 1991, and on succeeding days. Petitioners suspected that they were
singled out because they were the leaders and active members of the proposed union. Aggrieved, petitioners
filed with the labor arbiter a complaint against private respondent for unfair labor practice, illegal dismissal and
illegal deduction of washing fees. In a decision 3 dated August 31, 1992, the labor arbiter dismissed said
complaint for lack of merit.
On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994, reversed and set aside the
judgment of the labor arbiter. The labor tribunal declared that petitioners are employees of private respondent,
and, as such, their dismissal must be for just cause and after due process. It disposed of the case as follows:
WHEREFORE, in view of all the foregoing considerations, the decision of the Labor Arbiter appealed
from is hereby SET ASIDE and another one entered:
1. Declaring the respondent company guilty of illegal dismissal and accordingly it is directed to
reinstate the complainants, namely, Alberto A. Gonzales, Joel T. Morato, Gavino Panahon, Demetrio L.
Calagos, Sonny M. Lustado, Romeo Q. Clariza, Luis de los Angeles, Amado Centino, Angel Jardin,
Rosendo Marcos, Urbano Marcos, Jr., and Joel Ordeniza, to their former positions without loss of
seniority and other privileges appertaining thereto; to pay the complainants full backwages and other
benefits, less earnings elsewhere, and to reimburse the drivers the amount paid as washing charges;
and
2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.
SO ORDERED.4
Private respondent's first motion for reconsideration was denied. Remaining hopeful, private respondent filed
another motion for reconsideration. This time, public respondent, in its decision 5 dated October 28, 1994,
granted aforesaid second motion for reconsideration. It ruled that it lacks jurisdiction over the case as
petitioners and private respondent have no employer-employee relationship. It held that the relationship of the
parties is leasehold which is covered by the Civil Code rather than the Labor Code, and disposed of the case
as follows:
VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under reconsideration is hereby given
due course.
Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994 are hereby SET
ASIDE. The Decision of the Labor Arbiter subject of the appeal is likewise SET ASIDE and a NEW
ONE ENTERED dismissing the complaint for lack of jurisdiction.
No costs.
SO ORDERED.6
Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision which was denied. Hence,
the instant petition.
In this recourse, petitioners allege that public respondent acted without or in excess of jurisdiction, or with grave
abuse of discretion in rendering the assailed decision, arguing that:

12

I
THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S SECOND MOTION FOR
RECONSIDERATION WHICH IS ADMITTEDLY A PLEADING PROHIBITED UNDER THE NLRC RULES, AND
TO GRANT THE SAME ON GROUNDS NOT EVEN INVOKED THEREIN.
II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES IS ALREADY
A SETTLED ISSUE CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS NO MORE JURISDICTION
TO REVERSE, ALTER OR MODIFY.
III
IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE VIEW THAT
PETITIONERS-TAXI DRIVERS ARE EMPLOYEES OF RESPONDENT TAXI COMPANY.7
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled meaning in the
jurisprudence of procedure. It means such capricious and whimsical exercise of judgment by the tribunal
exercising judicial or quasi-judicial power as to amount to lack of power.8 In labor cases, this Court has declared
in several instances that disregarding rules it is bound to observe constitutes grave abuse of discretion on the
part of labor tribunal.
In Garcia vs. NLRC,9 private respondent therein, after receiving a copy of the labor arbiter's decision, wrote the
labor arbiter who rendered the decision and expressed dismay over the judgment. Neither notice of appeal was
filed nor cash or surety bond was posted by private respondent. Nevertheless, the labor tribunal took
cognizance of the letter from private respondent and treated said letter as private respondent's appeal. In
a certiorari action before this Court, we ruled that the labor tribunal acted with grave abuse of discretion in
treating a mere letter from private respondent as private respondent's appeal in clear violation of the rules on
appeal prescribed under Section 3(a), Rule VI of the New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,10 we held that the labor arbiter committed grave abuse of discretion when
he failed to resolve immediately by written order a motion to dismiss on the ground of lack of jurisdiction and
the supplemental motion to dismiss as mandated by Section 15 of Rule V of the New Rules of Procedure of the
NLRC.
In Unicane Workers Union-CLUP vs. NLRC,11 we held that the NLRC gravely abused its discretion by allowing
and deciding an appeal without an appeal bond having been filed as required under Article 223 of the Labor
Code.
In Maebo vs. NLRC,12 we declared that the labor arbiter gravely abused its discretion in disregarding the rule
governing position papers. In this case, the parties have already filed their position papers and even agreed to
consider the case submitted for decision, yet the labor arbiter still admitted a supplemental position paper and
memorandum, and by taking into consideration, as basis for his decision, the alleged facts adduced therein and
the documents attached thereto.
In Gesulgon vs. NLRC,13 we held that public respondent gravely abused its discretion in treating the motion to
set aside judgment and writ of execution as a petition for relief of judgment. In doing so, public respondent had,

13

without sufficient basis, extended the reglementary period for filing petition for relief from judgment contrary to
prevailing rule and case law.
In this case before us, private respondent exhausted administrative remedy available to it by seeking
reconsideration of public respondent's decision dated April 28, 1994, which public respondent denied. With this
motion for reconsideration, the labor tribunal had ample opportunity to rectify errors or mistakes it may have
committed before resort to courts of justice can be had. 14 Thus, when private respondent filed a second motion
for reconsideration, public respondent should have forthwith denied it in accordance with Rule 7, Section 14 of
its New Rules of Procedure which allows only one motion for reconsideration from the same party, thus:
Sec. 14. Motions for Reconsideration. Motions for reconsideration of any order, resolution or
decision of the Commission shall not be entertained except when based on palpable or patent errors,
provided that the motion is under oath and filed within ten (10) calendar days from receipt of the order,
resolution or decision with proof of service that a copy of the same has been furnished within the
reglementary period the adverse party and provided further, that only one such motion from the same
party shall be entertained. [Emphasis supplied]
The rationale for allowing only one motion for reconsideration from the same party is to assist the parties in
obtaining an expeditious and inexpensive settlement of labor cases. For obvious reasons, delays cannot be
countenanced in the resolution of labor disputes. The dispute may involve no less than the livelihood of an
employee and that of his loved ones who are dependent upon him for food, shelter, clothing, medicine, and
education. It may as well involve the survival of a business or an industry.15
As correctly pointed out by petitioner, the second motion for reconsideration filed by private respondent is
indubitably a prohibited pleading16 which should have not been entertained at all. Public respondent cannot just
disregard its own rules on the pretext of "satisfying the ends of justice", 17 especially when its disposition of a
legal controversy ran afoul with a clear and long standing jurisprudence in this jurisdiction as elucidated in the
subsequent discussion. Clearly, disregarding a settled legal doctrine enunciated by this Court is not a way of
rectifying an error or mistake. In our view, public respondent gravely abused its discretion in taking cognizance
and granting private respondent's second motion for reconsideration as it wrecks the orderly procedure in
seeking reliefs in labor cases.
But, there is another compelling reason why we cannot leave untouched the flip-flopping decisions of the public
respondent. As mentioned earlier, its October 28, 1994 judgment is not in accord with the applicable decisions
of this Court. The labor tribunal reasoned out as follows:
On the issue of whether or not employer-employee relationship exists, admitted is the fact that
complainants are taxi drivers purely on the "boundary system". Under this system the driver takes out
his unit and pays the owner/operator a fee commonly called "boundary" for the use of the unit. Now, in
the determination the existence of employer-employee relationship, the Supreme Court in the case
of Sara, et al., vs. Agarrado, et al. (G.R. No. 73199, 26 October 1988) has applied the following fourfold test: "(1) the selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the power of control the employees conduct."
"Among the four (4) requisites", the Supreme Court stresses that "control is deemed the most
important that the other requisites may even be disregarded". Under the control test, an employeremployee relationship exists if the "employer" has reserved the right to control the "employee" not only
as to the result of the work done but also as to the means and methods by which the same is to be
accomplished. Otherwise, no such relationship exists. (Ibid.)

14

Applying the foregoing parameters to the case herein obtaining, it is clear that the respondent does not
pay the drivers, the complainants herein, their wages. Instead, the drivers pay a certain fee for the use
of the vehicle. On the matter of control, the drivers, once they are out plying their trade, are free to
choose whatever manner they conduct their trade and are beyond the physical control of the
owner/operator; they themselves determine the amount of revenue they would want to earn in a day's
driving; and, more significantly aside from the fact that they pay for the gasoline they consume, they
likewise shoulder the cost of repairs on damages sustained by the vehicles they are driving.
Verily, all the foregoing attributes signify that the relationship of the parties is more of a leasehold or
one that is covered by a charter agreement under the Civil Code rather than the Labor Code. 18
The foregoing ratiocination goes against prevailing jurisprudence.
In a number of cases decided by this Court,19 we ruled that the relationship between jeepney owners/operators
on one hand and jeepney drivers on the other under the boundary system is that of employer-employee and
not of lessor-lessee. We explained that in the lease of chattels, the lessor loses complete control over the
chattel leased although the lessee cannot be reckless in the use thereof, otherwise he would be responsible for
the damages to the lessor. In the case of jeepney owners/operators and jeepney drivers, the former exercise
supervision and control over the latter. The management of the business is in the owner's hands. The owner as
holder of the certificate of public convenience must see to it that the driver follows the route prescribed by the
franchising authority and the rules promulgated as regards its operation. Now, the fact that the drivers do not
receive fixed wages but get only that in excess of the so-called "boundary" they pay to the owner/operator is
not sufficient to withdraw the relationship between them from that of employer and employee. We have applied
by analogy the abovestated doctrine to the relationships between bus owner/operator and bus
conductor,20 auto-calesa owner/operator and driver,21 and recently between taxi owners/operators and taxi
drivers.22 Hence, petitioners are undoubtedly employees of private respondent because as taxi drivers they
perform activities which are usually necessary or desirable in the usual business or trade of their employer.
As consistently held by this Court, 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. The requirement of notice and hearing is set-out in Article 277 (b) of the said Code. Hence,
petitioners, being employees of private respondent, can be dismissed only for just and authorized cause, and
after affording them notice and hearing prior to termination. In the instant case, private respondent had no valid
cause to terminate the employment of petitioners. Neither were there two (2) written notices sent by private
respondent informing each of the petitioners that they had been dismissed from work. These lack of valid cause
and failure on the part of private respondent to comply with the twin-notice requirement underscored the
illegality surrounding petitioners' dismissal.
Under the law, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation was withheld from him up to
the time of his actual reinstatement.23 It must be emphasized, though, that recent judicial
pronouncements24 distinguish between employees illegally dismissed prior to the effectivity of Republic Act No.
6715 on March 21, 1989, and those whose illegal dismissals were effected after such date. Thus, employees
illegally dismissed prior to March 21, 1989, are entitled to backwages up to three (3) years without deduction or
qualification, while those illegally dismissed after that date are granted full backwages inclusive of allowances
and other benefits or their monetary equivalent from the time their actual compensation was withheld from them
up to the time of their actual reinstatement. The legislative policy behind Republic 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. Considering that petitioners were

15

terminated from work on August 1, 1991, they are entitled to full backwages on the basis of their last daily
earnings.
With regard to the amount deducted daily by private respondent from petitioners for washing of the taxi units,
we view the same as not illegal in the context of the law. We note that after a tour of duty, it is incumbent upon
the driver to restore the unit he has driven to the same clean condition when he took it out. Car washing after a
tour of duty is indeed a practice in the taxi industry and is in fact dictated by fair play.25 Hence, the drivers are
not entitled to reimbursement of washing charges.
1wphi1.nt

WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respondent dated October
28, 1994, is hereby SET ASIDE. The DECISION of public respondent dated April 28, 1994, and its
RESOLUTION dated December 13, 1994, are hereby REINSTATED subject to MODIFICATION. Private
respondent is directed to reinstate petitioners to their positions held at the time of the complained dismissal.
Private respondent is likewise ordered to pay petitioners their full backwages, to be computed from the date of
dismissal until their actual reinstatement. However, the order of public respondent that petitioners be
reimbursed the amount paid as washing charges is deleted. Costs against private respondents.
SO ORDERED.

16

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 64948 September 27, 1994

MANILA GOLF & COUNTRY CLUB, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.
Bito, Misa & Lozada for petitioner.
Remberto Z. Evio for private respondent.

NARVASA, C.J.:
The question before the Court here is whether or not persons rendering caddying services for members of golf
clubs and their guests in said clubs' courses or premises are the employees of such clubs and therefore within
the compulsory coverage of the Social Security System (SSS).
That question appears to have been involved, either directly or peripherally, in three separate proceedings, all
initiated by or on behalf of herein private respondent and his fellow caddies. That which gave rise to the present
petition for review was originally filed with the Social Security Commission (SSC) via petition of seventeen (17)
persons who styled themselves "Caddies of Manila Golf and Country Club-PTCCEA" for coverage and
availment of benefits under the Social Security Act as amended, "PTCCEA" being
the acronym of a labor organization, the "Philippine Technical, Clerical, Commercial Employees Association,"
with which the petitioners claimed to be affiliated. The petition, docketed as SSC Case No. 5443, alleged in
essence that although the petitioners were employees of the Manila Golf and Country Club, a domestic
corporation, the latter had not registered them as such with the SSS.
At about the same time, two other proceedings bearing on the same question were filed or were pending; these
were:
(1) a certification election case filed with the Labor Relations Division of the Ministry of Labor
by the PTCCEA on behalf of the same caddies of the Manila Golf and Country Club, the case
being titled "Philippine Technical, Clerical, Commercial Association vs. Manila Golf and
Country Club" and docketed as Case No. R4-LRDX-M-10-504-78; it appears to have been
resolved in favor of the petitioners therein by Med-Arbiter Orlando S. Rojo who was thereafter
upheld by Director Carmelo S. Noriel, denying the Club's motion for reconsideration; 1

(2) a compulsory arbitration case initiated before the Arbitration Branch of the Ministry of
Labor by the same labor organization, titled "Philippine Technical, Clerical, Commercial
Employees Association (PTCCEA), Fermin Lamar and Raymundo Jomok vs. Manila Golf
and Country Club, Inc., Miguel Celdran, Henry Lim and Geronimo Alejo;" it was dismissed

17

for lack of merit by Labor Arbiter Cornelio T. Linsangan, a decision later affirmed on
appeal by the National Labor Relations Commission on the ground that there was no
employer-employee relationship between the petitioning caddies and the respondent
Club. 2
In the case before the SSC, the respondent Club filed answer praying for the dismissal of the petition, alleging
in substance that the petitioners, caddies by occupation, were allowed into the Club premises to render
services as such to the individual members and guests playing the Club's golf course and who themselves paid
for such services; that as such caddies, the petitioners were not subject to the direction and control of the Club
as regards the manner in which they performed their work; and hence, they were not the Club's employees.
Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for social
security coverage, avowedly coming to realize that indeed there was no employment relationship between
them and the Club. The case continued, and was eventually adjudicated by the SSC after protracted
proceedings only as regards the two holdouts, Fermin Llamar and Raymundo Jomok. The Commission
dismissed the petition for lack of merit, 3 ruling:
. . . that the caddy's fees were paid by the golf players themselves and not by respondent
club. For instance, petitioner Raymundo Jomok averred that for their services as caddies a
caddy's Claim Stub (Exh. "1-A") is issued by a player who will in turn hand over to
management the other portion of the stub known as Caddy Ticket (Exh. "1") so that by this
arrangement management will know how much a caddy will be paid (TSN, p. 80, July 23,
1980). Likewise, petitioner Fermin Llamar admitted that caddy works on his own in
accordance with the rules and regulations (TSN, p. 24, February 26, 1980) but petitioner
Jomok could not state any policy of respondent that directs the manner of caddying (TSN, pp.
76-77, July 23, 1980). While respondent club promulgates rules and regulations on the
assignment, deportment and conduct of caddies (Exh. "C") the same are designed to impose
personal discipline among the caddies but not to direct or conduct their actual work. In fact, a
golf player is at liberty to choose a caddy of his preference regardless of the respondent club's
group rotation system and has the discretion on whether or not to pay a caddy. As testified to
by petitioner Llamar that their income depends on the number of players engaging their
services and liberality of the latter (TSN, pp. 10-11, Feb. 26, 1980). This lends credence to
respondent's assertion that the caddies are never their employees in the absence of two
elements, namely, (1) payment of wages and (2) control or supervision over them. In this
connection, our Supreme Court ruled that in the determination of the existence of an
employer-employee relationship, the "control test" shall be considered decisive (Philippine
Manufacturing Co. vs. Geronimo and Garcia, 96 Phil. 276; Mansal vs. P.P. Coheco Lumber
Co., 96 Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila Hotel Co., 101 Phil. 358,
LVN Pictures Inc. vs. Phil. Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being made also to Investment
Planning Corporation Phil. vs. SSS 21 SCRA 925).
Records show the respondent club had reported for SS coverage Graciano Awit and Daniel
Quijano, as bat unloader and helper, respectively, including their ground men, house and
administrative personnel, a situation indicative of the latter's concern with the rights and
welfare of its employees under the SS law, as amended. The unrebutted testimony of Col.
Generoso A. Alejo (Ret.) that the ID cards issued to the caddies merely intended to identify
the holders as accredited caddies of the club and privilege(d) to ply their trade or occupation
within its premises which could be withdrawn anytime for loss of confidence. This gives us a

18

reasonable ground to state that the defense posture of respondent that petitioners were never
its employees is well taken. 4
From this Resolution appeal was taken to the Intermediate appellate Court by the union representing Llamar
and Jomok. After the appeal was docketed 5 and some months before decision thereon was reached and

promulgated, Raymundo Jomok's appeal was dismissed at his instance, leaving Fermin Llamar the lone
appellant. 6
The appeal ascribed two errors to the SSC:
(1) refusing to suspend the proceedings to await judgment by the Labor Relations Division of
National Capital Regional Office in the certification election case (R-4-LRD-M-10-50478) supra, on the precise issue of the existence of employer-employee relationship between
the respondent club and the appellants, it being contended that said issue was "a function of
the proper labor office"; and
(2) adjudicating that self same issue a manner contrary to the ruling of the Director of the
Bureau of Labor Relations, which "has not only become final but (has been) executed or
(become) res adjudicata." 7
The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of the least
importance. Nor, it would appear, did it find any greater merit in the second alleged error. Although said Court
reserved the appealed SSC decision and declared Fermin Llamar an employee of the Manila Gold and Country
Club, ordering that he be reported as such for social security coverage and paid any corresponding benefits, 8 it

conspicuously ignored the issue of res adjudicata raised in said second assignment. Instead, it drew basis
for the reversal from this Court's ruling in Investment Planning Corporation of the Philippines vs. Social
Security System, supra 9 and declared that upon the evidence, the questioned employer-employee
relationship between the Club and Fermin Llamar passed the so-called "control test," establishment in the
case i.e., "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," the Club's control over the caddies encompassing:
(a) the promulgation of no less than twenty-four (24) rules and regulations just about every
aspect of the conduct that the caddy must observe, or avoid, when serving as such, any
violation of any which could subject him to disciplinary action, which may include suspending
or cutting off his access to the club premises;
(b) the devising and enforcement of a group rotation system whereby a caddy is assigned a
number which designates his turn to serve a player;
(c) the club's "suggesting" the rate of fees payable to the caddies.
Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid by the players,
not by the Club, that they observed no definite working hours and earned no fixed income. It quoted with
approval from an American decision 10 to the effect that: "whether the club paid the caddies and afterward

collected in the first instance, the caddies were still employees of the club." This, no matter that the case
which produced this ruling had a slightly different factual cast, apparently having involved a claim for
workmen's compensation made by a caddy who, about to leave the premises of the club where he
worked, was hit and injured by an automobile then negotiating the club's private driveway.

19

That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as already pointed out, is
now among the mainways of the private respondent's defenses to the petition for review. Considered in the
perspective of the incidents just recounted, it illustrates as well as anything can, why the practice of forumshopping justly merits censure and punitive sanction. Because the same question of employer-employee
relationship has been dragged into three different fora, willy-nilly and in quick succession, it has birthed
controversy as to which of the resulting adjudications must now be recognized as decisive. On the one hand,
there is the certification case [R4-LRDX-M-10-504-78), where the decision of the Med-Arbiter found for the
existence of employer-employee relationship between the parties, was affirmed by Director Carmelo S. Noriel,
who ordered a certification election held, a disposition never thereafter appealed according to the private
respondent; on the other, the compulsory arbitration case (NCR Case No. AB-4-1771-79), instituted by or for
the same respondent at about the same time, which was dismissed for lack of merit by the Labor Arbiter, which
was afterwards affirmed by the NLRC itself on the ground that there existed no such relationship between the
Club and the private respondent. And, as if matters were not already complicated enough, the same
respondent, with the support and assistance of the PTCCEA, saw fit, also contemporaneously, to initiate still a
third proceeding for compulsory social security coverage with the Social Security Commission (SSC Case No.
5443), with the result already mentioned.
Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the certification case
had never become final, being in fact the subject of three pending and unresolved motions for reconsideration,
as well as of a later motion for early resolution. 11 Unfortunately, none of these motions is incorporated or

reproduced in the record before the Court. And, for his part, the private respondent contends, not only that
said decision had been appealed to and been affirmed by the Director of the BLR, but that a certification
election had in fact been held, which resulted in the PTCCEA being recognized as the sole bargaining
agent of the caddies of the Manila Golf and Country Club with respect to wages, hours of work, terms of
employment, etc. 12 Whatever the truth about these opposing contentions, which the record before the
Court does not adequately disclose, the more controlling consideration would seem to be that, however,
final it may become, the decision in a certification case, by the
very nature of that proceedings, is not such as to foreclose all further dispute between the parties as to
the existence, or non-existence, of employer-employee relationship between them.
It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the following essential
requisites must concur: (1) there must be a final judgment or order; (2) said judgment or order must be on the
merits; (3) the court rendering the same must have jurisdiction over the subject matter and the parties; and (4)
there must be between the two cases identity of parties, identity of subject matter and identity of cause of
action.13
Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior Judgment" that
would operate in bar of a subsequent action between the same parties for the same cause, be adversarial, or
contentious, "one having opposing parties; (is) contested, as distinguished from an ex parte hearing or
proceeding. . . . of which the party seeking relief has given legal notice to the other party and afforded the latter
an opportunity to contest it" 14 and a certification case is not such a proceeding, as this Court already ruled:
A certification proceedings is not a "litigation" in the sense in which the term is commonly
understood, but mere investigation of a non-adversary, fact-finding character, in which the
investigating agency plays the part of a disinterested investigator seeking merely to ascertain
the desires of the employees as to the matter of their representation. The court enjoys a wide
discretion in determining the procedure necessary to insure the fair and free choice of
bargaining representatives by the employees. 15

20

Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested issue of employeremployee relationship between present petitioner and the private respondent, it would logically be that
rendered in the compulsory arbitration case (NCR Case No. AB-4-771-79, supra), petitioner having asserted,
without dispute from the private respondent, that said issue was there squarely raised and litigated, resulting in
a ruling of the Arbitration Branch (of the same Ministry of Labor) that such relationship did not exist, and which
ruling was thereafter affirmed by the National Labor Relations Commission in an appeal taken by said
respondent. 16
In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to which of the
conflicting ruling just adverted to should be accorded primacy, given the fact that it was he who actively sought
them simultaneously, as it were, from separate fora, and even if the graver sanctions more lately imposed by
the Court for forum-shopping may not be applied to him retroactively.
Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res adjudicata; on
contrary, it acted correctly in doing so.
Said Courts holding that upon the facts, there exists (or existed) a relationship of employer and employee
between petitioner and private respondent is, however, another matter. The Court does not agree that said
facts necessarily or logically point to such a relationship, and to the exclusion of any form of arrangements,
other than of employment, that would make the respondent's services available to the members and guest of
the petitioner.
As long as it is, the list made in the appealed decision detailing the various matters of conduct, dress,
language, etc. covered by the petitioner's regulations, does not, in the mind of the Court, so circumscribe the
actions or judgment of the caddies concerned as to leave them little or no freedom of choice whatsoever in the
manner of carrying out their services. In the very nature of things, caddies must submit to some supervision of
their conduct while enjoying the privilege of pursuing their occupation within the premises and grounds of
whatever club they do their work in. For all that is made to appear, they work for the club to which they attach
themselves on sufference but, on the other hand, also without having to observe any working hours, free to
leave anytime they please, to stay away for as long they like. It is not pretended that if found remiss in the
observance of said rules, any discipline may be meted them beyond barring them from the premises which, it
may be supposed, the Club may do in any case even absent any breach of the rules, and without violating any
right to work on their part. All these considerations clash frontally with the concept of employment.
The IAC would point to the fact that the Club suggests the rate of fees payable by the players to the caddies as
still another indication of the latter's status as employees. It seems to the Court, however, that the intendment
of such fact is to the contrary, showing that the Club has not the measure of control over the incidents of the
caddies' work and compensation that an employer would possess.
The Court agrees with petitioner that the group rotation system so-called, is less a measure of employer control
than an assurance that the work is fairly distributed, a caddy who is absent when his turn number is called
simply losing his turn to serve and being assigned instead the last number for the day. 17
By and large, there appears nothing in the record to refute the petitioner's claim that:
(Petitioner) has no means of compelling the presence of a caddy. A caddy is not required to
exercise his occupation in the premises of petitioner. He may work with any other golf club or
he may seek employment a caddy or otherwise with any entity or individual without restriction
by petitioner. . . .

21

. . . In the final analysis, petitioner has no was of compelling the presence of the caddies as
they are not required to render a definite number of hours of work on a single day. Even the
group rotation of caddies is not absolute because a player is at liberty to choose a caddy of
his preference regardless of the caddy's order in the rotation.
It can happen that a caddy who has rendered services to a player on one day may still find
sufficient time to work elsewhere. Under such circumstances, he may then leave the premises
of petitioner and go to such other place of work that he wishes (sic). Or a caddy who is on call
for a particular day may deliberately absent himself if he has more profitable caddying, or
another, engagement in some other place. These are things beyond petitioner's control and
for which it imposes no direct sanctions on the caddies. . . . 18
WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is reversed and set
aside, it being hereby declared that the private respondent, Fermin Llamar, is not an employee of petitioner
Manila Golf and Country Club and that petitioner is under no obligation to report him for compulsory coverage
to the Social Security System. No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 102199 January 28, 1997

AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and EUTIQUIO BUSTAMANTE, respondents.

PANGANIBAN, J.:
The determination of the proper forum is crucial because the filing of the petition or complaint in the wrong
court or tribunal is fatal, even for a patently meritorious claim. More specifically, labor arbiters and the National

22

Labor Relations Commission have no jurisdiction to entertain and rule on money claims where no employeremployee relations is involved. Thus, any such award rendered without jurisdiction is a nullity.
This petition for certiorari under Rule 65, Rules of Court seeks to annul the Resolution 1 of the National Labor

Relations Commission, promulgated September 27, 1991, in NLRC-NCR Case No. 00-02-01196-90,
entitled "Eutiquio Bustamante vs. AFP Mutual Benefit Association, Inc.," affirming the decision of the labor
arbiter which ordered payment of the amount of P319,796.00 as insurance commissions to private
respondent.
The Antecedent Facts
The facts are simple. Private respondent Eutiquio Bustamante had been an insurance underwriter of petitioner
AFP Mutual Benefit Association, Inc. since 1975. The Sales Agent's Agreement between them provided: 2
B. Duties and Obligations:
1. During the lifetime of this Agreement, the SALES AGENT (private respondent) shall solicit
exclusively for AFPMBAI (petitioner), and shall be bound by the latter's policies, memo
circulars, rules and regulations which it may from time to time, revise, modify or cancel to
serve its business interests.
2. The SALES AGENT shall confine his business activities for AFPMBAI while inside any
military camp, installation or residence of military personnel. He is free to solicit in the area for
which he/she is licensed and as authoriied, provided however, that AFPMBAI may from time
to time, assign him a specific area of responsibility and a production quota on a case to case
basis.
xxx xxx xxx
C. Commission
1. The SALES AGENT shall be entitled to the commission due for all premiums actually due
and received by AFPMBAI out of life insurance policies solicited and obtained by the SALES
AGENT at the rates set forth in the applicant's commission schedules hereto attached.
xxx xxx xxx
D. General Provisions
1. There shall be no employer-employee relationship between the parties, the SALES AGENT
being hereby deemed an independent contractor.
As compensation, he received commissions based on the following percentages of the premiums paid:
"30% of premium paid within the first year;
10% of premium paid with the second year;
5% of the premium paid during the third year;
3% of the premium paid during the fourth year; and

23

1% of the premium paid during the fifth year up to

the tenth year.
On July 5, 1989, petitioner dismissed private respondent for misrepresentation and for simultaneously selling
insurance for another life insurance company in violation of said agreement.
At the time of his dismissal, private respondent was entitled to accrued commissions equivalent to twenty four
(24) months per the Sales Agent Agreement and as stated in the account summary dated July 5, 1989,
approved by Retired Brig. Gen. Rosalino Alquiza, president of petitioner-company. Said summary showed that
private respondent had a total commission receivable of P438,835.00, of which only P78,039.89 had been paid
to him.
Private respondent wrote petitioner seeking the release of his commissions for said 24 months. Petitioner,
through Marketing Manager Juan Concepcion, replied that he was entitled to only P75,000.00 to P100,000.00.
Hence, believing Concepcion's computations, private respondent signed a quitclaim in favor of petitioner.
Sometime in October 1989, private respondent was informed that his check was ready for release. In collecting
his check, he discovered from a document (account summary) attached to said check that his total
commissions for the 24 months actually amounted to P354,796.09. Said document stated: 4
6. The total receivable for Mr. Bustamante out of the renewals and old business generated
since 1983 grosses P438,835.00 less his outstanding obligation in the amount of P78,039.89
as of June 30, 1989, total expected commission would amount to P354,796.09. From that
figure at a 15% compromise settlement this would mean P53,219.41 due him to settle his
claim.
Private respondent, however, was paid only the amount of P35,000.00.
On November 23, 1989, private respondent filed a complaint with the Office of the Insurance Commissioner
praying for the payment of the correct amount of his commission. Atty. German C. Alejandria, Chief of the
Public Assistance and Information Division, Office of the Insurance Commissioner, advised private respondent
that it was the Department of Labor and Employment that had jurisdiction over his complaint.
On February 26, 1990, private respondent filed his complaint with the Department of Labor claiming: (1)
commission for 2 years from termination of employment equivalent to 30% of premiums remitted during
employment; (2) P354,796.00 as commission earned from renewals and old business generated since 1983;
(3) P100,000.00 as moral damages; and (4) P100,000.00 as exemplary damages.
After submission of position papers, Labor Arbiter Jose G. de Vera rendered his decision, dated August 24,
1990, the dispositive portion of which reads: 5
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered
declaring the dismissal of the complainant as just and valid, and consequently, his claim for
separation pay is denied. On his money claim, the respondent company is hereby ordered to
pay complainant the sum of P319,796.00 plus attorney's fees in the amount of P31,976.60.
All other claims of the complainant are dismissed for want of merit.

24

The labor arbiter relied on the Sales Agent's Agreement proviso that petitioner could assign private respondent
a specific area of responsibility and a production quota, and read it as signalling the existence of employeremployee relationship between petitioner and private respondent.
On appeal, the Second Division 6 of the respondent Commission affirmed the decision of the Labor Arbiter.

In the assailed Resolution, respondent Commission found no reason to disturb said ruling of the labor
arbiter and
ruled: 7
WHEREFORE, in view of the foregoing considerations, the subject appeal should be as it is
hereby, denied and the decision appealed from affirmed
SO ORDERED.
Hence, this petition.
The Issue
Petitioner contends that respondent Commission committed grave abuse of discretion in ruling that the labor
arbiter had jurisdiction over this case. At the heart of the controversy is the issue of whether there existed an
employer-employee relationship between petitioner and private respondent.
Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's Agreement, there is no employeremployee relationship between private respondent and itself. Hence, respondent commission gravely abused
its discretion when it held that the labor arbiter had jurisdiction over the case.
The Court's Ruling
The petition is meritorious.
First Issue: Not All That Glitters Is Control
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 arbiter and the National Labor Relations Commission shall be
accorded not only respect but even finality when supported by substantial evidence. 8 The determinative factor

in such finality is the presence of substantial evidence to support said finding, otherwise, such factual
findings cannot bind this Court.
Respondent Commission concurred with the labor arbiter's findings that:

x x x The complainant's job as sales insurance agent is usually necessary and desirable in the
usual business of the respondent company. Under the Sales Agents Agreement, the
complainant was required to solicit exclusively for the respondent company, and he was
bound by the company policies, memo circulars, rules and regulations which were issued from
time to time. By such requirement to follow strictly management policies, orders, circulars,
rules and regulations, it only shows that the respondent had control or reserved the right to
control the complainant's work as solicitor. Complainant was not an independent contractor as
he did not carry on an independent business other than that of the company's . . .

25

To this, respondent Commission added that the Sales Agent's Agreement specifically provided that petitioner
may assign private respondent a specific area of responsibility and a production quota. From there, it
concluded that apparently there is that exercise of control by the employer which is the most important element
in determining employer- employee relationship. 10
We hold, however, that respondent Commission misappreciated the facts of the case. Time and again, the
Court has applied the "four-fold" test in determining the existence of employer-employee relationship. This test
considers 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. 11
The difficulty lies in correctly assessing if certain factors or elements properly indicate the presence of control.
Anent the issue of exclusivity in the case at bar, the fact that private respondent was required to solicit business
exclusively for petitioner could hardly be considered as control in labor jurisprudence. Under Memo Circulars
No. 2-81 12 and 2-85, dated December 17, 1981 and August 7, 1985, respectively, issued by the Insurance

Commissioner, insurance agents are barred from serving more than one insurance company, in order to
protect the public and to enable insurance companies to exercise exclusive supervision over their agents
in their solicitation work. Thus, the exclusivity restriction clearly springs from a regulation issued by the
Insurance Commission, and not from an intention by petitioner to establish control over the method and
manner by which private respondent shall accomplish his work. This feature is not meant to change the
nature of the relationship between the parties, nor does it necessarily imbue such relationship with the
quality of control envisioned by the law.
So too, the fact that private respondent was bound by company policies, memo/circulars, rules and regulations
issued from time to time is also not indicative of control. In its Reply to Complainant's Position
Paper, 13 petitioner alleges that the policies, memo/circulars, and rules and regulations referred to in

provision B(1) of the Sales Agent's Agreement are only those pertaining to payment of agents'
accountabilities, availment by sales agents of cash advances for sorties, circulars on incentives and
awards to be given based on production, and other matters concerning the selling of insurance, in
accordance with the rules promulgated by the Insurance Commission. According to the petitioner,
insurance solicitors are never affected or covered by the rules and regulations
concerning employee conduct and penalties for violations thereof, work standards, performance
appraisals, merit increases, promotions, absenteeism/attendance, leaves of absence, management-union
matters, employee benefits and the like. Since private respondent failed to rebut these allegations, the
same are deemed admitted, or at least proven, thereby leaving nothing to support the respondent
Commission's conclusion that the foregoing elements signified an employment relationship between the
parties.
In regard to the territorial assignments given to sales agents, this too cannot be held as indicative of the
exercise of control over an employee. First of all, the place of work in the business of soliciting insurance does
not figure prominently in the equation. And more significantly, private respondent failed to rebut petitioner's
allegation that it had never issued him any territorial assignment at all. Obviously, this Court cannot draw the
same inference from this feature as did the respondent Commission.
To restate, the significant factor in determining the relationship of the parties is the presence or absence of
supervisory authority to control the method and the details of performance of the service being rendered, and
the degree to which the principal may intervene to exercise such control. The presence of such power of
control is indicative of an employment relationship, while absence thereof is indicative of independent
contractorship. In other words, the test to determine the existence of independent contractorship is whether one
claiming to be an independent contractor has contracted to do the work according to his own methods and

26

without being subject to the control of the employer except only as to the result of the work.

14

Such is exactly

the nature of the relationship between petitioner and private respondent.

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation
to the services being rendered may be accorded the effect of establishing an employer-employee relationship.
The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we
held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the
means used to achieve it. The distinction acquires particular relevance in the case of an
enterprise affected with public interest, as is the business of insurance, and is on that account
subject to regulation by the State with respect, not only to the relations between insurer and
insured but also to the internal affairs of the insurance company. Rules and regulations
governing the conduct of the business are provided for in the Insurance Code and enforced by
the Insurance Commissioner. It is, therefore, usual and expected for an insurande company to
promulgate a set of rules to guide its commission agents in selling its policies that they may
not run afoul of the law and what it requires or prohibits. . . . None of these really invades the
agent's contractual prerogative to adopt his own selling methods or to sell insurance at his
own time and convenience, hence cannot justifiably be said to establish an employeremployee relationship between him and the company. 15
Private respondent's contention that he was petitioner's employee is belied by the fact that he was free to sell
insurance at any time as he was not subject to definite hours or conditions of work and in turn was
compensated according to the result of his efforts. By the nature of the business of soliciting insurance, agents
are normally left free to devise ways and means of persuading people to take out insurance. There is no
prohibition, as contended by petitioner, for private respondent to work for as long as he does not violate the
Insurance Code. As petitioner explains:
(Private respondent) was free to solicit life insurance anywhere he wanted and he had free
and unfettered time to pursue his business. He did not have to punch in and punch out the
bundy clock as he was not required to report to the (petitioner's) office regularly. He was not
covered by any employee policies or regulations and not subject to the disciplinary action of
management on the basis of the Employee Code of Conduct. He could go out and sell
insurance at his own chosen time. He was entirely left to his own choices of areas or
territories, with no definite, much less supervised, time schedule.
(Private respondent) had complete control over his occupation and (petitioner) did not
exercise any right of Control and Supervision over his performance except as to the payment
of commission the amount of which entirely depends on the sole efforts of (private
respondent). He was free to engage in other occupation or practice other profession for as
long as he did not commit any violation of the ethical standards prescribed in the Sales
Agent's Agreement. 16
Although petitioner could have, theoretically, disapproved any of private respondent's transactions, what could
be disapproved was only the result of the work, and not the means by which it was accomplished.

27

The "control" which the above factors indicate did not sum up to the power to control private respondent's
conduct in and mode of soliciting insurance. On the contrary, they clearly indicate that the juridical element of
control had been absent in this situation. Thus, the Court is constrained to rule that no employment relationship
had ever existed between the parties.
Second Issue: Jurisdiction of Respondent
Commission & Labor Arbiter
Under the contract invoked, private respondent had never been petitioner's employee, but only its commission
agent. As an independent contractor, his claim for unpaid commission should have been litigated in an ordinary
civil action. 17
The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217 of the Labor
Code. 18 The unifying element running through paragraphs (1) (6) of said provision is the consistent

reference to cases or disputesarising out of or in connection with an employer-employee relationship.

Prior to its amendment by Batas Pambansa Blg. 227 on June 1, 1982, this point was clear as the article
included "all other cases arising from employer-employee relation unless expressly excluded by this
Code." 19 Without this critical element of employment relationship, the labor arbiter and respondent
Commission can never acquire jurisdiction over a dispute. As in the case at bar. It was serious error on
the part of the labor arbiter to have assumed jurisdiction and adjudicated the claim. Likewise, the
respondent Commission's affirmance thereof.
Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings, even on appeal.
The doctrine of estoppel cannot be properly invoked by respondent Commission to cure this fatal defect as it
cannot confer jurisdiction upon a tribunal that to begin with, was bereft of jurisdiction over a cause of
action. 20 Moreover, in the proceedings below, petitioner consistently challenged the jurisdiction of the

labor arbiter 21 and respondent Commission. 22

It remains a basic fact in law that the choice of the proper forum is crucial as the decision of a court or tribunal
without jurisdiction is a total nullity. 23 A void judgment for want of jurisdiction is no judgment at all. It cannot

be the source of any right nor the creator of any obligation. All acts performed pursuant to it and all claims
emanating from it have no legal effect. Hence, it can never become final. ". . . (I)t may be said to be a
lawless thing which can be treated as an outlaw and slain at sight, or ignored wherever and whenever it
exhibits its head." 24
The way things stand, it becomes unnecessary to consider the merits of private respondent's claim for unpaid
commission. Be that as it may, this ruling is without prejudice to private respondent's right to file a suit for
collection of unpaid commissions against petitioner with the proper forum and within the proper period.
WHEREFORE, the petition is hereby GRANTED, and the assailed Resolution is hereby SET ASIDE.
SO ORDERED.

28

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 138051

June 10, 2004

JOSE Y. SONZA, petitioner,

vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of
Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of
Appeals affirmed the findings of the National Labor Relations Commission ("NLRC"), which affirmed the Labor
Arbiters dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement
("Agreement") with the Mel and Jay Management and Development Corporation ("MJMDC"). ABS-CBN was
represented by its corporate officers while MJMDC was represented by SONZA, as President and General
Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as
"AGENT," MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio and
television. The Agreement listed the services SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays. 3

29

ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and P317,000
for the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days
of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on
behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his
programs and career. We consider these acts of the station violative of the Agreement and the station
as in breach thereof. In this connection, we hereby serve notice of rescission of said Agreement at our
instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated
in paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under
said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and
Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his
salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel allowance and
amounts due under the Employees Stock Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship
existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank,
Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank
where ABS-CBN deposited SONZAs talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter 5 denied the motion to dismiss and directed the parties to
file their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent
company until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to
confer jurisdiction over the instant case in this Office. And as to whether or not such claim would entitle
complainant to recover upon the causes of action asserted is a matter to be resolved only after and as
a result of a hearing. Thus, the respondents plea of lack of employer-employee relationship may be
pleaded only as a matter of defense. It behooves upon it the duty to prove that there really is no
employer-employee relationship between it and the complainant.

30

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position
papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge Respondents
Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro
Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in the
television and broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction. 6 The
pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of
a talent," it stands to reason that a "talent" as above-described cannot be considered as an employee
by reason of the peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills
and talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to
perform the services he undertook to render in accordance with his own style. The benefits
conferred to complainant under the May 1994 Agreement are certainly very much higher than those
generally given to employees. For one, complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was covered by a specific contract.
Likewise, he was not bound to render eight (8) hours of work per day as he worked only for such
number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to
an employee is inconsequential. Whatever benefits complainant enjoyed arose from specific
agreement by the parties and not by reason of employer-employee relationship. As correctly put
by the respondent, "All these benefits are merely talent fees and other contractual benefits and should
not be deemed as salaries, wages and/or other remuneration accorded to an employee,
notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule that the term
or nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to the
Agreement conferring such benefit."
The fact that complainant was made subject to respondents Rules and Regulations, likewise,
does not detract from the absence of employer-employee relationship. As held by the Supreme
Court, "The line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use
of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means to achieve it." (Insular Life
Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor
Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3
July 1998.

31

On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the
decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing
the case.8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between
SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted the following findings of the
NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an
agent of complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent
is the act of the principal itself. This fact is made particularly true in this case, as admittedly MJMDC is
a management company devoted exclusively to managing the careers of Mr. Sonza and his broadcast
partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC,
and not between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement
which specifically referred to MJMDC as the AGENT. As a matter of fact, when complainant herein
unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission
in behalf of Mr. Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the
parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994
Agreement, which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC
figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that
there exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary, We
find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as
expressly admitted by the latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular
courts, the same being in the nature of an action for alleged breach of contractual obligation on the
part of respondent-appellee. As squarely apparent from complainant-appellants Position Paper, his
claims for compensation for services, 13th month pay, signing bonus and travel allowance against
respondent-appellee are not based on the Labor Code but rather on the provisions of the May 1994
Agreement, while his claims for proceeds under Stock Purchase Agreement are based on the latter. A
portion of the Position Paper of complainant-appellant bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound
itself to pay complainant a signing bonus consisting of shares of stockswith FIVE
HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not
lower than the amount he was receiving prior to effectivity of (the) Agreement.

32

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable

travel benefit amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per
year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual
relations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead
of merely resigning from ABS-CBN, complainant-appellant served upon the latter a notice of
rescission of Agreement with the station, per his letter dated April 1, 1996, which asserted that instead
of referring to unpaid employee benefits, he is waiving and renouncing recovery of the remaining
amount stipulated in paragraph 7 of the Agreement but reserves the right to such recovery of the other
benefits under said Agreement. (Annex 3 of the respondent ABS-CBNs Motion to Dismiss dated July
10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock
Purchase Agreement by respondent-appellee that complainant-appellant filed his complaint.
Complainant-appellants claims being anchored on the alleged breach of contract on the part of
respondent-appellee, the same can be resolved by reference to civil law and not to labor law.
Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the
case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an
action for breach of contractual obligation is intrinsically a civil dispute.9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABSCBN is a factual question that is within the jurisdiction of the NLRC to resolve. 10 A special civil action for
certiorari extends only to issues of want or excess of jurisdiction of the NLRC. 11 Such action cannot cover an
inquiry into the correctness of the evaluation of the evidence which served as basis of the NLRCs
conclusion.12 The Court of Appeals added that it could not re-examine the parties evidence and substitute the
factual findings of the NLRC with its own.13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND
REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN
SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND
EVIDENCE TO SUPPORT SUCH A FINDING.14
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC
ruling which upheld the Labor Arbiters dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define
clearly the elements of an employer-employee relationship, this is the first time that the Court will resolve the
nature of the relationship between a television and radio station and one of its "talents." There is no case law
stating that a radio and television program host is an employee of the broadcast station.

33

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

34

employee contract.21 Whatever benefits SONZA enjoyed arose from contract and not because of an employeremployee relationship.22
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the
ordinary that they indicate more an independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZAs unique
skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone
possessed enough bargaining power to demand and receive such huge talent fees for his services. The power
to bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement,
MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the
Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to
show that ABS-CBN could terminate his services on grounds other than breach of contract, such as
retrenchment to prevent losses as provided under labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as "AGENT and Jay
Sonza shall faithfully and completely perform each condition of this Agreement." 24 Even if it suffered severe
business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZAs
talent fees during the life of the Agreement. This circumstance indicates an independent contractual
relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent
fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZAs talent fees
during the remaining life of the Agreement even if ABS-CBN cancelled SONZAs programs through no fault of
SONZA.25
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that he is
not an employee of ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was really an
employee, he would merely resign, instead." SONZA did actually resign from ABS-CBN but he also, as
president of MJMDC, rescinded the Agreement. SONZAs letter clearly bears this out. 26 However, the manner
by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the
Agreement or resigned from work does not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an
independent contractor, we refer to foreign case law in analyzing the present case. The United States Court of
Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin
Pblica ("WIPR")27 that a television program host is an independent contractor. We quote the following findings
of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a
skilled position requiring talent and training not available on-the-job. x x x In this regard, Alberty

35

possesses a masters degree in public communications and journalism; is trained in dance, singing,
and modeling; taught with the drama department at the University of Puerto Rico; and acted in several
theater and television productions prior to her affiliation with "Desde Mi Pueblo." Second, Alberty
provided the "tools and instrumentalities" necessary for her to perform. Specifically, she
provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies
and services necessary for her appearance. Alberty disputes that this factor favors independent
contractor status because WIPR provided the "equipment necessary to tape the show." Albertys
argument is misplaced. The equipment necessary for Alberty to conduct her job as host of "Desde Mi
Pueblo" related to her appearance on the show. Others provided equipment for filming and producing
the show, but these were not the primary tools that Alberty used to perform her particular function. If
we accepted this argument, independent contractors could never work on collaborative projects
because other individuals often provide the equipment required for different aspects of the
collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Albertys
contracts with WIPR specifically provided that WIPR hired her "professional services as Hostess for
the Program Desde Mi Pueblo." There is no evidence that WIPR assigned Alberty tasks in addition to
work related to these tapings. x x x28 (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an independent
contractor. The control test is the most important test our courts apply in distinguishing an employee from an
independent contractor.29 This test is based on the extent of control the hirer exercises over a worker. The
greater the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The
converse holds true as well the less control the hirer exercises, the more likely the worker is considered an
independent contractor.30
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the "Mel & Jay"
programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his
skills and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside
ABS-CBNs control. SONZA did not have to render eight hours of work per day. The Agreement required
SONZA to attend only rehearsals and tapings of the shows, as well as pre- and post-production staff
meetings.31 ABS-CBN could not dictate the contents of SONZAs script. However, the Agreement prohibited
SONZA from criticizing in his shows ABS-CBN or its interests. 32 The clear implication is that SONZA had a free
hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of
SONZAs work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right
to modify the program format and airtime schedule "for more effective programming." 34 ABS-CBNs sole
concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise
control over the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means
and methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs
show, ABS-CBN was still obligated to pay SONZAs talent fees... Thus, even if ABS-CBN was completely
dissatisfied with the means and methods of SONZAs performance of his work, or even with the quality or
product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to
broadcast SONZAs show but ABS-CBN must still pay his talent fees in full. 35

36

Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue
paying in full SONZAs talent fees, did not amount to control over the means and methods of the performance
of SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of
performance of his work - how he delivered his lines and appeared on television - did not meet ABS-CBNs
approval. This proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to
broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the
expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville
performers were independent contractors although the management reserved the right to delete objectionable
features in their shows. Since the management did not have control over the manner of performance of the
skills of the artists, it could only control the result of the work by deleting objectionable features. 37
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew.
No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs.
However, the equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform
his job. What SONZA principally needed were his talent or skills and the costumes necessary for his
appearance.38Even though ABS-CBN provided SONZA with the place of work and the necessary equipment,
SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs
sole concern was for SONZA to display his talent during the airing of the programs. 39
A radio broadcast specialist who works under minimal supervision is an independent contractor.40 SONZAs
work as television and radio program host required special skills and talent, which SONZA admittedly
possesses. The records do not show that ABS-CBN exercised any supervision and control over how SONZA
utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its
rules and standards of performance. SONZA claims that this indicates ABS-CBNs control "not only [over] his
manner of work but also the quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering
talents"41 of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under the
Agreement refers to the "Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP),
which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics." 42 The KBP code applies to
broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of
radio and television stations. Clearly, the rules and standards of performance referred to in the Agreement are
those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee
of the former.43 In this case, SONZA failed to show that these rules controlled his performance. We find that
these general rules are merely guidelines towards the achievement of the mutually desired result, which are
top-rating television and radio programs that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation
to the services being rendered may be accorded the effect of establishing an employer-employee relationship.
The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we
held that:

37

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use
of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. 44
The Vaughan case also held that one could still be an independent contractor although the hirer reserved
certain supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one
hired from performing his services according to his own initiative. 45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which
ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABSCBN. Even an independent contractor can validly provide his services exclusively to the hiring party. In the
broadcast industry, exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46 This
practice is not designed to control the means and methods of work of the talent, but simply to protect the
investment of the broadcast station. The broadcast station normally spends substantial amounts of money, time
and effort "in building up its talents as well as the programs they appear in and thus expects that said talents
remain exclusive with the station for a commensurate period of time." 47 Normally, a much higher fee is paid to
talents who agree to work exclusively for a particular radio or television station. In short, the huge talent fees
partially compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services to
ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN.
SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is
ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real
employer. Under this scheme, the "labor-only" contractor is the agent of the principal. The law makes the
principal responsible to the employees of the "labor-only contractor" as if the principal itself directly hired or
employed the employees.48 These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC
merely acted as SONZAs agent. The Agreement expressly states that MJMDC acted as the "AGENT" of
SONZA. The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and
Jay Management and Development Corporation, is a corporation organized and owned by SONZA and
TIANGCO. The President and General Manager of MJMDC is SONZA himself. It is absurd to hold that
MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering
into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent
of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of
SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job
contracting. MJMDC does not have any other function apart from acting as agent of SONZA or TIANGCO to
promote their careers in the broadcast and television industry.49

38

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979
finally settled the status of workers in the broadcast industry. Under this policy, the types of employees in the
broadcast industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is
no legal presumption that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance
cannot exclude independent contractors from the class of service providers to the broadcast industry. The
classification of workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not
binding on this Court, especially when the classification has no basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without
giving his counsel the
opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the
prevailing practice in the radio and television industry. SONZA views the affidavits of these witnesses as
misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or refuting
the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type)
hearing after the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the
complaint excluding those that may have been amicably settled, and shall be accompanied by all
supporting documents including the affidavits of their respective witnesses which shall take the place
of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of
their position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is
need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making
such determination, ask clarificatory questions to further elicit facts or information, including but not
limited to the subpoena of relevant documentary evidence, if any from any party or witness. 50
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without
a formal trial.51 The holding of a formal hearing or trial is something that the parties cannot demand as a matter
of right.52 If the Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for
not conducting a formal trial, unless under the particular circumstances of the case, the documents alone are
insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of
due process, the technicalities of law and the rules obtaining in the courts of law do not strictly apply in
proceedings before a Labor Arbiter.
Talents as Independent Contractors

39

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat
talents like SONZA as independent contractors. SONZA argues that if such practice exists, it is void for
violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution 53 arises only if there is an employeremployee relationship under labor laws. Not every performance of services for a fee creates an employeremployee relationship. To hold that every person who renders services to another for a fee is an employee - to
give meaning to the security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent
contractors. The right to life and livelihood guarantees this freedom to contract as independent contractors. The
right of labor to security of tenure cannot operate to deprive an individual, possessed with special skills,
expertise and talent, of his right to contract as an independent contractor. An individual like an artist or talent
has a right to render his services without any one controlling the means and methods by which he performs his
art or craft. This Court will not interpret the right of labor to security of tenure to compel artists and talents to
render their services only as employees. If radio and television program hosts can render their services only as
employees, the station owners and managers can dictate to the radio and television hosts what they say in
their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended by Republic
Act No. 8241,56 treats talents, television and radio broadcasters differently. Under the NIRC, these professionals
are subject to the 10% value-added tax ("VAT") on services they render. Exempted from the VAT are those
under an employer-employee relationship. 57 This different tax treatment accorded to talents and broadcasters
bolters our conclusion that they are independent contractors, provided all the basic elements of a contractual
relationship are present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive
leave, signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree
with the findings of the Labor Arbiter and the Court of Appeals that SONZAs claims are all based on the May
1994 Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does not call
for an application of the Labor Code provisions but an interpretation and implementation of the May 1994
Agreement. In effect, SONZAs cause of action is for breach of contract which is intrinsically a civil dispute
cognizable by the regular courts.58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in
CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.

40

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 72409 December 29, 1986
MAMERTO S. BESA, doing business under the name and style of BESA'S CUSTOMBUILT
SHOES,petitioner,
vs.
THE HONORABLE CRESENCIANO B. TRAJANO, DIRECTOR OF THE BUREAU OF LABOR RELATIONS,
MINISTRY OF LABOR AND EMPLOYMENT, AND KAISAHAN NG MANGGAGAWANG PILIPINO (KAMPILKATIPUNAN), respondents.
De Asis and Hernando Law Office for petitioner.
Estebal M. Mendoza for private respondent.

PARAS, J.:
This petition questions the decision of the Director of the Bureau of Labor Relations in BLR Case No. A-8-16585, which affirmed the appealed order of the Med-Arbiter, Labor Relations Division, NCR in NCR-LRD-M-1044-85, a certification election case. More specifically, petitioner seeks the resolution of the question as to
whether or not an employer-employee relationship exists between herein petitioner and the seventeen (17)
shoeshiners-members of the respondent union, who, if the relationship does exist, should be entitled to the
rights, privileges and benefits of an employee as provided in the Labor Code.
Sometime in January, 1985, private respondent Kaisahan ng Mangagawang Pilipino KAMPIL for short) a
legitimate labor union duly registered with the Ministry of Labor and Employment (MOLE, for short), filed a

41

Petition for Certification Election, docketed as NCR-LRD-M-1-044-85 in the National Labor Relations Division of
the National Capital Region. Petitioner opposed it alleging that
1. There is no employer-employee relationship between Besa's and the petitioners-signatories to the
petition;
2. The subject of the present petition had previously been decided by the defunct Court of Industrial
Relations, and is therefore barred under the principle of res judicata;
3. The petition fails to comply with the mandatory formal requirements under Sec. 2, Book V, of the
Omnibus Rules Implementing the Labor Code; and
4. This Hon. Commission has no jurisdiction over the subject matter and parties to the petition.
Acting on the Petition, the Opposition thereto, and the Reply to the Opposition, the Med-Arbiter on June 27,
1985, issued an order declaring that there was an employer-employee relationship between the parties and
directed that an election be conducted.
Petitioner appealed the order to the Director of BLR citing among others the following reasons
1. That the subject of the present petition has previously been decided by the defunct Court of
Industrial Relations, and is therefore barred under the principle of res judicata (CIR Case Nos. 2783,
2751 and 2949 ULP December 21, 1965);
2. That on May 28, 1985, Director Severo Pucan of the Ministry of Labor and Employment, in
dismissing the case for underpayment of commissions and non-payment of ECOLA, filed by the
shoeshiners against Besas Custombuilt Shoes, for lack of jurisdiction petition, declared that there was
no employer-employee relationship between the shoeshiners and petitioner Besas (Order in NCRLSED1-020-85);
Director Pucan's findings were based on a letter-opinion of the Director of the Bureau of Working
Conditions of the MOLE (Annex "B-2", Petition for Certiorari). The legal ground therein cited was res
judicata.
xxx xxx xxx
Appeal was dismissed by the Director of BLR as contained in his decision dated Sept. 27, 1985 upholding the
finding of the Med-Arbiter that supervisors were appointed to oversee the bootblacks' performance. It declared
that such is a finding of fact that is entitled to respect and that res judicata does not he as the parties and the
causes of action in the certification election case are different from the parties and causes of action in CIR
Cases Nos. 2783-ULP 2751-ULP and 2949 ULP
Thus the Petition of the Union (KAMPIL) before the Med-Arbiter for the holding of the certification election was
granted. While the pre-election conference was in progress, petitioner herein BESAS filed with Us with petition
for certiorari with Prohibition and simultaneously filed with the Med-Arbiter a motion to suspend the pre-election
conference. The petition filed before Us was dismissed for lack of merit but was reconsidered upon Motion of
petitioner. In its Motion for Reconsideration, petitioner raised the following grounds:
I

42

THE INSTANT PETITION PRESENTS QUESTIONS OF LAW AND SUBSTANCE TO MERIT THE
CONSIDERATION OF THIS HONORABLE COURT.
II
THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR WAS NOT SUPPORTED BY
SUBSTANTIAL EVIDENCE AND THE SAME IS PURELY BASED ON SPECULATIONS, SURMISES
AND CONJECTURES.
III
THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR IS CONTRARY TO LAW AND
APPLICABLE DECI SIONS OF THE SUPREME COURT ON THE MATTER.
IV
THE PETITION FOR CERTIFICATION ELECTION FILED BY RESPONDENT UNION WITH THE
MINISTRY OF LABOR AND EMPLOYMENT FAILED TO COMPLY WITH THE MANDATORY
REQUIREMENTS UNDER ARTICLE 258 OF THE LABOR CODE, AS AMENDED, AND ITS
IMPLEMENTING RULES.
V
THE RESPONDENT DIRECTOR ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION IN DECIDING THAT THERE EXISTS AN EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE PETITIONER AND THE SHOESHINER-MEMBERS OF THE
RESPONDENT UNION,
VI
THE RESPONDENT DIRECTOR ACTED WITHOUT JURISDICTION IN TAKING COGNIZANCE OF
THE BASIC PETITION CONSIDERING THAT THE SUBJECT MATTER AND THE PARTIES
THEREOF HAVE BEEN DECIDED BY THE DEFUNCT COURT OF INDUSTRIAL RELATIONS AND IS
THEREFORE BABRED BY THE PRINCIPLE OF RES ADJUDICATA.
The main thrust of the instant petition is the question of employer-employee relationship between petitioner
BESAS and 17 of the members of the herein respondent Union who are designated as shoeshiners. During the
certification election held on Nov. 26, 1985 at BESAS of the 53 eligible voters, 49 cast their votes. 33 voted for
the union while 16 voted for no union. Among the 33 voters who opted for a union 17 persons are shoeshiners
while 16 persons are non-shoeshiners.
The question of employer-employee relationship became a primodial consideration in resolving whether or not
the subject shoeshiners have the juridical personality and standing to present a petition for certification election
as well as to vote i therein. It is the position of petitioner that if the shoeshiners are not considered as
employees of Besa's the basic petition for certification election must necessarily be dismissed for failure to
comply with the mandatory requirements of the Labor Code, as amended, that at least thirty (30%) percent of
the employees must support the petition for certification election and that in order to be certified as the sole and
exclusive bargaining agent, the union must be obtained a majority of the valid votes cast by eligible voters. In
the instant case, if the 17 shoeshiners are declared ineligible and their votes are consequently nullified the
result of the certification election would be 16 "Yes" votes (33 minus 17) and 16 "No" votes, which is a tie. Since

43

the respondent union did not obtain a clear majority for the "Yes" votes as required under Rule IV Sec. 8(f) of
the Omnibus Rules of the Labor Code, it necessarily follows that the respondent union cannot be certified as
the sole and exclusive bargaining agent of the workers of Besa's.
The present petition merits Our consideration. The records of the case reveal that an employer-employee
relationship does not exist between the 17 shoeshiners and petitioner.
Be it noted that the defunct CIR in dismissing the cases for unfair labor practice filed by the shoeshiners
against herein petitioner BESA declared in its Decision dated December 21, 1965 that:
The shoe shiner is distinct from a piece worker because while the latter is paid for work accomplished,
he does not, however, contribute anything to the capital of the employer other than his service. It is the
employer of the piece worker who pays his wages, while the shoe shiner in this instance is paid
directly by his customer. The piece worker is paid for work accomplished without regard or concern to
the profit as derived by his employer, but in the case of the shoe shiners, the proceeds derived from
the trade are always divided share and share alike with respondent BESA. The shoe shiner can take
his share of the proceeds everyday if he wanted to or weekly as is the practice of qqqBesas The
employer of the piece worker supervises and controls his work, but in the case of the shoe shiner,
respondent BESA does not exercise any degree of control or supervision over their person and their
work. All these are not obtaining in the case of a piece worker as he is in fact an employee in
contemplation of law, distinct from the shoe shiner in this instance who, in relation to respondent
MAMERTO B. BESA, is a partner in the trade. Consequently, employer-employee relationship
between members of the Petitioning union and respondent MAMERTO B. BESA being absent the
latter could not be held guilty of the unfair tabor practice acts imputed against him. (p. 6, Annex "B1 " of
said Decision).
<re||an1w>

Then too on Dec. 27, 1983, then Director Augusto Sanchez of the Bureau of Working Conditions, MOLE, in
response to a letter of petitioner relative to the implementation of wage Order No. 2 which provided for an
increase both in minimum wage and cost of living allowance, opined as follows:
Entitlement of the minimum requirements of the law particularly on wages and allowances
presupposes the existence of employer-employee relationship which is determined by the concurrence
of the following conditions:
1. right to hire
2. payment of wages
3. right to fire; and
4. control and supervision
The most important condition to be considered is the exercise of control and supervision over the
employees, per our conversation, the persons concerned under your query are the shoe shiners and
based on the decision rendered by Associate Judge Emiliano Tabigne of the defunct Court of Industrial
Relations, these shoe shiners are not employees of the company, but are partners instead. This is due
to the fact that the owner/manager does not exercise control and supervision over the shoe shiners.
That the shiners have their own customers from whom they charge the fee and divide the proceeds
equally with the owner, which make the owner categorized them as on purely commission basis. The
attendant circumstances clearly show that there is no employer-employee relationship existing, and

44

such the owner/manager is not by law, under obligation to extend to those on purely commission basis
the benefit of Wage Order No. 2. However, the law does not preclude the employer in giving such
benefit to all its employees including those which may not be covered by the mandate of the law.
(Letter dated December 27, 1985 addressed to petitioner Annex B-2, Petition)
The Office of the Solicitor General as counsel for public respondent agrees that in the present case, no
employer-employee relationship exists.
The Supreme Court in the Rosario Brothers case ruled that;
A basic factor underlying the exercise of rights under the Labor Code is the status of employment. It is
important in the determination of who shall be included in a proposed bargaining unit because it
is sine qua non. The fundamental and essential condition that a bargaining unit be composed of
employees. Failure to establish this juridical relationship between the union members and the
employer affects the legality of the union itself. It means the ineligibility of the union members to
present a petition for certification election as well as to vote therein.
Existence of employer-employee relationship is determined by the following elements, namely, a]
selection and engagement of the employee; b] payment of wages; c] powers of dismissal; and d]
power to control the employee's conduct although the latter is the most important element (Rosario
Brothers Inc, vs. Ople, 131 SCRA 72, 1984)
WHEREFORE, judgment is hereby rendered giving due course to the Petition and declaring VOID the decision
of the Director of the Bureau of Labor Relations dated September 27, 1985. The Petition in BLR Case No. A-8165-85 (NCR-LRD-M1-044-85) is therefore hereby DISMISSED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
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

45

YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the
Decision and Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively,
in CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal filed by herein petitioner Angelina
Francisco. The appellate court reversed and set aside the Decision of the National Labor Relations
Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification
the decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that
private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as
Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company.
She was also designated as Liaison Officer to the City of Makati to secure business permits, construction
permits and other licenses for the initial operation of the company. 5
Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents;
neither did she attend any board meeting nor required to do so. She never prepared any legal document and
never represented the company as its Corporate Secretary. However, on some occasions, she was prevailed
upon to sign documentation for the company. 6
In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu
of petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings with government agencies,
especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government
of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned
and operated by Kasei Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was
P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was
required to sign a prepared resolution for her replacement but she was assured that she would still be
connected with Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all
employees of Kasei Corporation and announced that nothing had changed and that petitioner was still
connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters.

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

46

Corporate Secretary. As technical consultant, petitioner performed her work at her own discretion without
control and supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office
any time she wanted. The company never interfered with her work except that from time to time, the
management would ask her opinion on matters relating to her profession. Petitioner did not go through the
usual procedure of selection of employees, but her services were engaged through a Board Resolution
designating her as technical consultant. The money received by petitioner from the corporation was her
professional fee subject to the 10% expanded withholding tax on professionals, and that she was not one of
those reported to the BIR or SSS as one of the companys employees. 12
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.
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.)
b. Salary Differentials (01/2001 09/2001) 22,500.00
c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50

47

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;
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.

48

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 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.

49

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 employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never
acted as Corporate Secretary and that her designation as such was only for convenience. The actual nature of
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 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.

50

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.
SO ORDERED.

51

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 96520 June 28, 1996

RESTITUTO C. PALOMADO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MARLING RICE MILL and/or MARIO TAN TENG KUAN
and ROLANDO TAN, respondents.

PANGANIBAN, J.:p
In this Decision, this Court reiterates some well-entrenched doctrines in labor cases, like (1) the appropriate
remedy to challenge rulings of the NLRC is a petition for certiorari under Rule 65, not a petition for review under
Rule 45 or 43; (2) a motion for reconsideration is an essential prerequisite to certiorari; (3) only questions
relating to jurisdiction or grave abuse of discretion -- not ordinary errors of law -- are reviewable on certiorari;
(4) hence, findings of facts of the NLRC are generally accorded great respect, even finality; (5) the law grants
the labor arbiter wide latitude to determine the need for a formal hearing after the submission by the parties of
their position papers; (6) labor tribunals need only substantial evidence -- not beyond reasonable doubt -- as
basis for their decisions; and (7) before a case for illegal dismissal can prosper, an employer-employee
relationship must first be established.
Petitioner questions the correctness of the Resolution 1 dated November 29, 1990 of respondent National

Labor Relations Commission 2 in Case No. RAB-IV-4-2385-90, which affirmed in toto the decision dated
June 27, 1990 rendered by Labor Arbiter Numeriano D. Villena dismissing herein petitioner's complaint for
alleged illegal dismissal, underpayment of wages and various benefits.
Antecedent Facts
The labor arbiter made the following factual findings:

52

As viewed from the complaint filed on April 17, 1990, complainant Restituto Palomado
charges respondents Marling Rice Mill and/or Mario Tan Teng (sic) Kuan and Rolando S. (sic)
Tan for alleged illegal dismissal, underpayment of wages, overtime pay, legal holiday pay,
premium pay for holiday and rest day and separation pay/retirement/resignation benefit.
After a careful appraisal of the verified position papers together with their supporting proofs,
documents and affidavits submitted by the parties, the undersigned finds that the case could
be decided judiciously without the necessity of going through formal hearings, hence this
Decision.
In support of his claims, complainant, in his verified position paper submitted on June 7, 1990
gave the following averments: that on January 2, 1970, he was hired by respondent Marline
Rice Mill as a truck driver paid on a "per trip basis" amounting to a monthly average of
P3,000.00; that he allegedly worked thereat continuously up to August 1987 when he was
illegally dismissed by respondent Rolando O. Tan, in his capacity as manager/operator of
respondent Marling Rice Mill. Complainant likewise averred that sometime in 1973,
respondent Mario Tan Ten (sic) Kuan suffered from stroke and in view thereof, his son,
respondent Rolando O. Tan, managed and operated Marling Rice Mill. It was further argued
that sometime in August 1987, respondent Rolando Tan talked to him (complainant) and told
him that he (R. Tan) would sell the Isuzu cargo truck which complainant used to drive in order
to buy a new truck with the assurance that he would be retained as the driver of the new unit,
however, when the Isuzu cargo truck was bought, respondent Tan dismissed him without
cause and hired a new driver by the name of Antonio Pustrado. Complainant contended that
because of his unjustified dismissal from Marling Rice Mill, he suffered and continues to suffer
loss of income in the average amount of P3,000.00 a month starting September 1987.
With regards to his money claims, complainant argued that he had to take trips which took 2-3
days to complete for which he was paid minimal amounts depending on the load of his truck
and that for said minimal amounts, he had to work continuously for days and even nights; that
there were occasions when he had to drive even during holidays and his rest days as per
order of the respondents (,) hence, for these, he is entitled to overtime pay, legal holiday pay
and premium pay for holiday and rest day.
Complainant submitted as part of its (sic) documentary evidence a "Certification of Premium
Payments" issued by the Employee Accounts Department of the Social Security System dated
October 26, 1988 showing the premium payments made by Marling Trading and Ricemill in
his favor from April 1972 to July 1979. As likewise indicated by the letters "NI" in the columns
corresponding to the months after July 1979, complainant's name was no longer included in
the quarterly collection list submitted by the respondents on file with the Social Security
System.
On the other hand, respondent Rolando S. (sic) Tan, in his verified position paper submitted
on May 28, 1990 alleged among others that he is the proprietor of R.S. Ricemill located in Bo.
Hibanga, Sariaya, Quezon, which business he started in 1987 while respondent Mario Tan
Ten (sic) Kuan was the proprietor of "Marling Rice Mill", which ceased operations in 1987
following the infirmity and poor health of Mr. Mario Tan Teng Kuan who died of cardiac arrest
on March 15, 1989.
Respondent Rolando S. (sic) Tan strongly argued that he is not the owner neither the
manager of Marling Rice Mill although he was a former employee of Mr. Mario Tan Teng Kuan

53

and that complainant had never been an employee of R.S. Ricemill which he owned and
operated.
The labor arbiter found that there was no dispute as to the fact that respondent Mario Tan Teng Kuan (as owner
of Marling Rice Mill) employed petitioner herein as truck driver, the real controversy being when the latter's
services actually ended, particularly in view of the untimely death of respondent Mario Tan Teng Kuan in 1989
and the Marling Rice Mill's cessation of operation in 1987. Absent other concrete evidence of petitioner's length
of service, the labor arbiter relied upon the "certification of premium payments" prepared and issued by the
SSS Employee Accounts Department, Premium Verification Division II at the instance of petitioner himself,
which certification showed that after June 1979, petitioner was no longer included among the employees listed
in the quarterly collection list filed with the Social Security System -- in other words, he ceased to be employed
with respondent Marling Rice Mill after June 1979. This was buttressed by the payrolls of Marling Rice Mill
submitted to the SSS for various periods after June 1979, as well as by the unrebutted sworn statement of one
Dionisio Belda, petitioner's co-worker and pahinante, who alleged that petitioner asked to go on vacation leave
in June 1979 and did not report back to work after that. The arbiter thus concluded that petitioner ceased to be
an employee of respondent Marling Rice Mill since July 1979, and therefore, inasmuch as the complaint
against his former employer Marling Rice Mill and/or Mario Tan Teng Kuan was filed only on April 17, 1990, or
beyond the reglementary period prescribed by law, 3 the complaint was already barred by prescription.
As to petitioner's claims against respondent Rolando O. Tan, the labor arbiter found that the documentary
evidence presented by said respondent overwhelmingly negated petitioner's allegations that he had been
employed by Tan, who it turned out was himself but an employee of Marling Rice Mill, and who subsequently
became proprietor of his own business (R.S. Ricemill), which started operations in 1986, and which was never
impleaded by petitioner as party-respondent in the case below. Thus, the arbiter ruled that there existed no
employer-employee relationship between the herein petitioner and respondent Rolando O. Tan, and dismissed
the petitioner's claims for lack of merit.
Dissatisfied, petitioner appealed the decision to public respondent NLRC, claiming grave abuse of discretion by
the arbiter and serious errors in his findings of fact. But the public respondent agreed with the findings made by
the arbiter and then concluded:
We have gone over the entire records of this case, and We find no evidentiary support for
complainant's (petitioner's) allegations against respondent Rolando Tan. Thus, it is Our
opinion that the Labor Arbiter neither abused his discretion nor committed serious errors in his
findings of facts. Hence, We affirm. 4
Aggrieved, petitioner now pleads NLRC's abuse of discretion before this Court.
Issues Raised
Petitioner framed the "principal issue" this-wise:
Whether or not public respondent NLRC erred in finding that the Labor Arbiter did not act with
grave abuse of discretion amounting to lack of jurisdiction nor commit serious errors in his
findings both in questions of fact and of law.
and then proceeded to attack the labor arbiter's rulling by alleging the following specific "grounds" for
the petition:

54

I. The labor arbiter acted with grave abuse of discretion amounting to lack of jurisdiction in the
conduct of the proceedings in this case.
II. The labor arbiter committed serious errors in his findings in questions of fact.
III. The labor arbiter committed serious errors in his findings in questions of law.
The Court's Ruling
We find for the respondents, the instant petition being obviously and indubitably bereft of merit.
At the outset, it must be noted that this petition suffers from serious procedural defects which would have
warranted its outright dismissal. First of all, it was incorrectly brought "under the provisions of Rule 43 of the
Rules of Court" (rollo, p. 6). We have time and again ruled that the appropriate remedy to challenge a
resolution of the NLRC is a special civil action for certiorari under Rule 65 of the Rules of Court, and not a
petition for review under Rule 45, 5 much less Rule 43. However, in order to afford the parties substantial

justice, the Court decided to treat the instant petition as a special civil action for certiorari.
Additionally, the allegations in the petition clearly show that petitioner failed to file a motion for reconsideration
of the assailed Resolution before filing the instant petition. As correctly argued by private respondent Rolando
Tan, such failure constitutes a fatal infirmity even if the petition be treated as a special civil action for certiorari.
The unquestioned rule in this jurisdiction is that certiorari will lie only if there is no appeal or any other plain,
speedy and adequate remedy in the ordinary course of law against the acts of public respondent. In the instant
case, the plain and adequate remedy expressly provided by law 6 was a motion for reconsideration of the

assailed decision, based on palpable or patent errors, to be made under oath and filed within ten (10)
calendar days from receipt of the questioned decision. And for failure to avail of the correct remedy
expressly provided by law, petitioner has permitted the subject Resolution to become final and executory
after the lapse of the ten day period within which to file such motion for reconsideration. We have held
in Pure Foods Corporation vs. NLRC 7 that:
(T)he filing of such a motion is intended to afford public respondent an opportunity to correct
any actual or fancied error attributed to it by way of a re-examination of the legal and factual
aspects of the case. Petitioner's inaction or negligence under the circumstances is tantamount
to a deprivation of the right and opportunity of the respondent commission to cleanse itself of
an error unwittingly committed or to vindicate itself of an act unfairly imputed. An improvident
resort to certiorari cannot be used as a tool to circumvent the right of public respondent to
review and purge its decision of an oversight, if any. Neither should this special civil action be
resorted to as a shield from the adverse consequences of petitioner's own negligence or error
in the choice of remedies. Having allowed the decision to become final and executory,
petitioner cannot by an overdue strategy question the correctness of the decision of the
respondent commission when a timely motion for reconsideration was the legal remedy
indicated.
Likewise, in the case of Zapata vs. NLRC, 8 this Court held:
Furthermore, fatal to this action is petitioner's failure to move for the reconsideration of the
assailed decision on the dubious pretext that it will be a mere rehash of the arguments and
issues previously raised in his position paper, but which stratagem conveniently skirts as a
consequence the reglementary period therefor, especially if the same has already expired.
The implementing rules of respondent NLRC are unequivocal in requiring that a motion for

55

reconsideration of the order, resolution, or decision of respondent commission should be

seasonably filed as a precondition for pursuing any further or subsequent remedy, otherwise
the said order resolution, or decision shall become final and executory after ten calendar days
from receipt thereof . Obviously, the rationale therefor is that the law intends to afford the
NLRC an opportunity to rectify such errors or mistakes it may have lapsed into before resort to
the courts of justice can be had. This merely adopts the rule that the function of a motion for
reconsideration is to point out to the court (or commission) the error that it may have
committed and to give it a chance to correct itself. (footnote omitted; emphasis supplied.)
But even if the aforementioned procedural flaws were to be disregarded, the herein petition nevertheless
suffers from even more grievous substantive defects. A petition for certiorari under Rule 65 of the Rules of
Court will lie only where a grave abuse of discretion or an act without or in excess of jurisdiction on the part of
the respondent commission is clearly shown. In Loadstar Shipping Co., Inc. vs. Gallo, 9 we reiterated the basic

policy that the original and exclusive jurisdiction of this Court to review a decision or resolution of
respondent NLRC does not include a correction of its evaluation of the evidence but is confined to issues
of jurisdiction or grave abuse of discretion. But the instant petition is a mere rehash of petitioner's
Memorandum of Appeal 10 dated July 13, 1990 filed with respondent NLRC. Nowhere in the petition is it
shown that the respondent commission committed such patent, gross and prejudicial errors of law or fact,
or a capricious disregard of settled law and jurisprudence, as to amount to a grave abuse of discretion or
lack of jurisdiction on its part. Absent such showing, this Court ordinarily will not engage in a review of the
facts found nor even of the law as interpreted or applied by respondent, for the writ of certiorari is an
extraordinary remedy, and certiorari jurisdiction is not to be equated with appellate
jurisdiction. 11 Moreover, it is a fundamental rule that factual findings of quasi-judicial agencies like the
public respondent NLRC if supported by substantial evidence are generally accorded not only great
respect but even finality, and are binding upon this Court, unless petitioner is able to show that
respondent Commission had arbitrarily disregarded evidence before it or had misapprehended evidence
to such an extent as to compel a contrary conclusion if such evidence had been properly
appreciated. 12 This is rooted in the fact that this Court is not a trier of facts, as well as in the respect to be
accorded the determinations made by administrative bodies in general on matters falling within their
respective fields of specialization or expertise. 13
In any event, a careful perusal of the records of this case leads to the inescapable conclusion that respondent
NLRC acted correctly in affirming in toto the decision of the labor arbiter dismissing the claims of petitioner.
Clearly, the arbiter's decision is based on substantial evidence, and no infirmity or circumstance can be found in
its factual findings as would detract from the conclusiveness thereof. Thus, there being nothing irregular,
arbitrary, capricious or oppressive, amounting to lack of jurisdiction, nor erroneous exercise of discretion, much
less any grave abuse thereof, on the part of public respondent, we therefore may not amend or revoke its
factual findings. Any error which may be attributed to respondent NLRC would at most be a mere error of
judgment which cannot be a proper subject of the special civil action for certiorari. 14
But if only to demonstrate the utter lack of basis for the instant petition and obliterate all doubts as to the
correctness of the respondent Commission's ruling, we shall delve into the alleged errors assigned by the
petitioner.
Firstly, petitioner complains that the labor arbiter "acted with grave abuse of discretion . . ." when on May 17,
1990 he terminated the preliminary conference and directed the parties to file their respective position papers
without even requiring the private respondents to answer the claims of petitioner and in spite of the fact that
petitioner's counsel had moved for ten days to file a reply/comment to respondent Tan's Letter-Answer
(Petitioner's Memorandum, pp. 7-8; rollo, pp. 185-186). Petitioner also insists that inasmuch as the parties held
totally conflicting positions, the arbiter ought to have held formal hearings.

56

These arguments are simply untenable. Petitioner should know that the basic purpose of the initial
conference/hearing is to explore the possibility of amicably settling the case upon a fair compromise (Sec. 1,
Rule VII, Revised Rules of the NLRC). Therefore, when the possibility of an amicable settlement appears
remote, either in whole or in part, it becomes imperative for the labor arbiter to terminate the conference and
require the parties to submit their respective verified position papers pursuant to Sec. 2 of Rule VII. In the case
below, the arbiter's exercise of his discretion, which carries with it the presumption of regularity, was based only
on the belief that it was futile to continue exploring the possibility of a settlement. The arbiter ordered
submission of position papers also because of the "failure of complainant's representative to appear" (rollo, p.
41). This, however, did not preclude the petitioner's filing of a reply/comment to respondent Tan's Letter-Answer
if he had so desired. In any event, we do not see how the failure of the arbiter to conduct a formal hearing could
constitute "grave abuse of discretion". Sec. 3, Rule VII grants an arbiter wide latitude to "determine whether
there is a need for a formal hearing or investigation . . . after the submission by the parties of their position
papers and supporting proofs." Additionally, the records show that petitioner signed the minutes of the hearing
of May 17, 1990, signifying his agreement to the arbiter's colatilla that "in case a formal hearing is no longer
necessary, this case shall be deemed submitted for decision." (Rollo, p. 41.)
Secondly, petitioner believes that had there been a formal hearing, the arbiter's allegedly mistaken reliance on
certain of the documentary evidence submitted by parties "would have been cured and remedied by the
parties", presumably through the presentation of controverting evidence. This postulate is not in consonance
with the need for speedy disposition of labor cases, for the parties may then willfully withhold their evidence
and disclose the same only during the formal hearing, thus creating surprises which would merely complicate
the issues and prolong the trial. There is a dire need to lessen technicalities in the process of settling labor
disputes; hence, Sec. 2 of Rule VII provides:
Sec. 2. Submission of position papers. -- During the initial conference/hearing, or immediately
thereafter, the Labor Arbiter shall require the parties to simultaneously submit to him their
respective verified position papers, which shall cover only the issues raised in the complaint,
accompanied by all supporting documents then available to them and the affidavits of their
witnesses which shall take the place of their direct testimony. The parties shall thereafter not
be allowed to allege, or present evidence to prove, facts not referred to and any cause or
causes of action not included in their complaint or position papers, affidavits and other
documents. The parties shall furnish each other with copies of the position papers, together
with the supporting affidavits and documents submitted by them.
Petitioner further alleges that the arbiter ignored all his documentary exhibits save one, which was even used
against him, "while laboriously enumerating one by one all the documentary exhibits of respondent Rolando
Tan without qualification whatsoever on the admissibility and credibility of the same." The one piece of
documentary evidence being referred to was the SSS's certification of premium payments which, as earlier
mentioned, indicated on its face that by July 1979 petitioner was no longer an employee of Marling Rice Mill.
Other documentary evidence presented by petitioner consisted of various receipts for purchases of gasoline,
which cannot be regarded as relevant to nor in any way supportive of his allegation of having been employed
from 1979 onwards, and so were correctly disregarded.
Petitioner also questions respondent Commission's condonation of the labor arbiter's "serious errors" in
determining the non-existence of employer-employee relationship based on (i) the SSS certification of premium
payments, (ii) the payrolls of Marling Rice Mill submitted to the SSS, and (iii) the sworn statement executed by
Dionisio Belda.
The petitioner's proposition is tenuous if not flimsy. He himself procured and submitted to the arbiter the SSS
certification of premium payments to prove his employment from 1979 to his alleged date of termination. Thus,
he must have foreseen the consequences of such evidence, for the certification "clearly showed that after June

57

1979, his name as an employee of respondent Marling Rice Mill was no longer included in the submitted
quarterly collection list on file with the Social Security System, or in short, he ceased to be employed with the
respondent Marling Rice Mill after June 1979." 15 As for the payrolls of Marline Rice Mill pertaining to various

parts of 1979, 1984, 1985 and 1986, we agree with respondent Tan 16 that petitioner's accusation that Tan
deliberately and unlawfully withheld the payrolls for the intervening periods is unfounded, reckless and
irresponsible. In the first place, he did not prove the existence of such unpresented payrolls (said rice mill
having ceased operation in 1987) and secondly, he failed to prove that respondent Tan (who insists he
was not the manager thereof) was in possession or custody of such payrolls. If he indeed believe that by
such withheld payrolls he could have proven the existence of an employer-employee relationship in his
favor, then he should have exerted diligent efforts to secure the same through subpoena duces tecum.
But he did not. In any event, quasi-judicial agencies need only substantial evidence as basis for their
decisions. Petitioner submitted a "Sinumpaang Salaysay" dated July 26, 1990 of Mr. Dionisio Belda
(which, incidentally, was presented for the first time only before this Court) in order to counteract and
offset the effects of the sworn statement dated October 28, 1979 executed by the same Mr. Belda in
which he categorically stated that petitioner did not return to work after going on vacation leave in June
1979, Nevertheless, it is obvious that the new sworn statement does not in the least detract from the
weight of the evidence showing that petitioner was not an employee of private respondent Rolando Tan
and that Rolando Tan was not the manager of Marling Rice Mill but merely an employee thereof. The
petitioner also failed to explain why, in the payrolls of Marling Rice Mill, a certain Guillermo Tan signed as
the manager thereof, if indeed it is true that Rolando Tan was the manager of said rice mill. The "Bilihang
Lampasan" between respondent Tan and Antonio Lindog for the sale of an Isuzu cargo truck does not,
contrary to petitioner's contention, prove that respondent Tan was in "absolute control" of Marling Rice
Mill. To begin with, the mentioned truck was not even shown to have been owned by the rice mill, thus no
presumption of absolute control by respondent Tan over the rice mill could have arisen from that contract
of sale.
Disregarding the peripheral matters, the key issue in this case is whether there exists an employer-employee
relationship between petitioner and private respondent Rolando Tan, who, petitioner claims, exercised the
power to select and engage the services of the Marling Rice Mill's employees; to dismiss employees (in the
same way petitioner was allegedly dismissed), and paid the wages and controlled all work of the mill's
employees. Petitioner likewise avers that he was terminated without "cause, just or authorized, thereby making
the same illegal". As discussed earlier, and as found by the labor arbiter and affirmed by the public respondent
NLRC, there never existed an employer-employee relationship between petitioner and private respondent
Rolando Tan. Thus the labor arbiter held (and public respondent NLRC concurred):
With regards to complainant's claims against respondent. Rolando O. Tan, the overwhelming
documentary evidences presented by said respondent strongly negated complainant's
charges that he had been under the employ of Rolando O. Tan who appeared to be the
registered proprietor/owner of R.S. Rice Mill, (an) entity which started to operate in 1986 as
per Certificate of Registration issued by the Bureau of Domestic Trade dated April 11, 1986
and which was never interpleaded (sic) by herein complainant as party-respondent in this
case. Respondent Rolando Tan, whom complainant alluded to as the manager/operator of
Marling Rice Mill after respondent. Mario Tan Ten (sic) Kuan suffered (a) stroke some time in
1973 was nothing more than a mere employee of Marling Rice Mill as shown by the payrolls
submitted to the Social Security System by respondent Marling Rice Mill. Complainant's
allegation that Rolando Tan managed, operated and transacted business for Marling Rice Mill
is of no moment and wanting in evidence since it is even clear from the said payrolls that it
was one Guillermo Tan who was the manager of Marling Rice Mill. Complainant's
documentary exhibits (Annexes "I", "I-1" to "I-16", inclusive, and Annex "J") failed to serve
their purpose as they are in themselves mere scraps of paper, irrelevant and immaterial.

58

In view of all the foregoing, the undersigned finds that there existed no employee-employer
relationship between complainant and respondent Rolando O. Tan. (Rollo, pp. 49-50.)
An indispensable precondition of illegal dismissal is the prior existence of an employer-employee relationship;
in this case, since it was established that there was no such relationship between petitioner and private
respondent Tan, therefore the allegation of illegal dismissal does not have any leg to stand on. The claims for
backwages, separation pay and other benefits must likewise fail.
WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED for lack of merit and the Resolution
of the public respondent NLRC dated November 29, 1990 is AFFIRMED in toto. No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

59

G.R. No. 146408

February 29, 2008

PHILIPPINE AIRLINES, INC., petitioner,

vs.
ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON
PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR.,
ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY
LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS,
ROLANDO TUNACAO, CHERRIE ALEGRES, BENEDICTO AUXTERO, EDUARDO MAGDADARAUG,
NELSON M. DULCE, and ALLAN BENTUZAL, respondents.
DECISION
CARPIO MORALES, J.:
Petitioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as Contractor, entered
into an Agreement1 on July 15, 1991 whereby Synergy undertook to "provide loading, unloading, delivery of
baggage and cargo and other related services to and from [petitioner]'s aircraft at the Mactan Station." 2
The Agreement specified the following "Scope of Services" of Contractor Synergy:
1.2 CONTRACTOR shall furnish all the necessary capital, workers, loading, unloading and
deliverymaterials, facilities, supplies, equipment and tools for the satisfactory performance and
execution of the following services (the Work):
a. Loading and unloading of baggage and cargo to and from the aircraft;
b. Delivering of baggage from the ramp to the baggage claim area;
c. Picking up of baggage from the baggage sorting area to the designated parked aircraft;
d. Delivering of cargo unloaded from the flight to cargo terminal;
e. Other related jobs (but not janitorial functions) as may be required and necessary;
CONTRACTOR shall perform and execute the aforementioned Work at the following areas
located at Mactan Station, to wit:
a. Ramp Area
b. Baggage Claim Area
c. Cargo Terminal Area, and
d. Baggage Sorting Area3 (Underscoring supplied)
And it expressly provided that Synergy was "an independent contractor and . . . that there w[ould] be no
employer-employee relationship between CONTRACTOR and/or its employees on the one hand, and OWNER,
on the other."4

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On the duration of the Agreement, Section 10 thereof provided:

10. 1 Should at any time OWNER find the services herein undertaken by CONTRACTOR to be
unsatisfactory, it shall notify CONTRACTOR who shall have fifteen (15) days from such notice within
which to improve the services. If CONTRACTOR fails to improve the services under this Agreement
according to OWNER'S specifications and standards, OWNER shall have the right to terminate this
Agreement immediately and without advance notice.
10.2 Should CONTRACTOR fail to improve the services within the period stated above or should
CONTRACTOR breach the terms of this Agreement and fail or refuse to perform the Work in such a
manner as will be consistent with the achievement of the result therein contracted for or in any other
way fail to comply strictly with any terms of this Agreement, OWNER at its option, shall have the right
to terminate this Agreement and to make other arrangements for having said Work performed and
pursuant thereto shall retain so much of the money held on the Agreement as is necessary to cover
the OWNER's costs and damages, without prejudice to the right of OWNER to seek resort to the bond
furnished by CONTRACTOR should the money in OWNER's possession be insufficient.
x x x x (Underscoring supplied)
Except for respondent Benedicto Auxtero (Auxtero), the rest of the respondents, who appear to have been
assigned by Synergy to petitioner following the execution of the July 15, 1991 Agreement, filed on March 3,
1992 complaints before the NLRC Regional Office VII at Cebu City against petitioner, Synergy and their
respective officials for underpayment, non-payment of premium pay for holidays, premium pay for rest
days, service incentiveleave pay, 13th month pay and allowances, and for regularization of employment
status with petitioner, they claiming to be "performing duties for the benefit of [petitioner] since their job is
directly connected with [its] business x x x."5
Respondent Auxtero had initially filed a complaint against petitioner and Synergy and their respective officials
for regularization of his employment status. Later alleging that he was, without valid ground, verbally dismissed,
he filed a complaint against petitioner and Synergy and their respective officials for illegal dismissal and
reinstatement with full backwages.6
The complaints of respondents were consolidated.
By Decision7 of August 29, 1994, Labor Arbiter Dominador Almirante found Synergy an independent contractor
and dismissed respondents' complaint for regularization against petitioner, but granted their money claims. The
fallo of the decision reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered as follows:
(1) Ordering respondents PAL and Synergy jointly and severally to pay all the complainants herein
their 13th month pay and service incentive leave benefits;
xxxx
(3) Ordering respondent Synergy to pay complainant Benedicto Auxtero a financial assistance in the
amount of P5,000.00.
The awards hereinabove enumerated in the aggregate total amount of THREE HUNDRED TWENTYTWO THOUSAND THREE HUNDRED FIFTY NINE PESOS AND EIGHTY SEVEN CENTAVOS

61

(P322,359.87) are computed in detail by our Fiscal Examiner which computation is hereto attached to
form part of this decision.
The rest of the claims are hereby ordered dismissed for lack of merit.8 (Underscoring supplied)
On appeal by respondents, the NLRC, Fourth Division, Cebu City, vacated and set aside the decision of the
Labor Arbiter by Decision9 of January 5, 1996, the fallo of which reads:
WHEREFORE, the Decision of the Labor Arbiter Dominador A. Almirante, dated August 29, 1994, is
hereby VACATED and SET ASIDE and judgment is hereby rendered:
1. Declaring respondent Synergy Services Corporation to be a 'labor-only' contractor;
2. Ordering respondent Philippine Airlines to accept, as its regular employees, all the complainants, .
. . and to give each of them the salaries, allowances and other employment benefits and privileges of
a regular employee under the Collective Bargaining Agreement subsisting during the period of their
employment;
xxxx
4. Declaring the dismissal of complainant Benedicto Auxtero to be illegal and ordering his
reinstatementas helper or utility man with respondent Philippine Airlines, with full backwages,
allowances and other benefits and privileges from the time of his dismissal up to his actual
reinstatement; and
5. Dismissing the appeal of respondent Synergy Services Corporation, for lack of merit. 10 (Emphasis
and underscoring supplied)
Only petitioner assailed the NLRC decision via petition for certiorari before this Court.
By Resolution11 of January 25, 1999, this Court referred the case to the Court of Appeals for appropriate action
and disposition, conformably with St. Martin Funeral Homes v. National Labor Relations Commission which
was promulgated on September 16, 1998.
The appellate court, by Decision of September 29, 2000, affirmed the Decision of the NLRC. 12 Petitioner's
motion for reconsideration having been denied by Resolution of December 21, 2000, 13 the present petition was
filed, faulting the appellate court
I.
. . . IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION DECISION
WHICH IMPOSED THE RELATIONSHIP OF EMPLOYER-EMPLOYEE BETWEEN PETITIONER AND
THE RESPONDENTS HEREIN.
II.
. . . IN AFFIRMING THE RULING OF THE NATIONAL LABOR RELATIONS
COMMISSION ORDERING THE REINSTATEMENT OF RESPONDENT AUXTERO DESPITE THE
ABSENCE [OF] ANY FACTUAL FINDING IN THE DECISION THAT PETITIONER ILLEGALLY
TERMINATED HIS EMPLOYMENT.

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III.
. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND GRAVE ERROR IN UPHOLDING THE
DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION WHICH
COMPELLED THE PETITIONER TO EMPLOY THE RESPONDENTS AS REGULAR EMPLOYEES
DESPITE THE FACT THAT THEIR SERVICES ARE IN EXCESS OF PETITIONER COMPANY'S
OPERATIONAL REQUIREMENTS.14 (Underscoring supplied)
Petitioner argues that the law does not prohibit an employer from engaging an independent contractor, like
Synergy, which has substantial capital in carrying on an independent business of contracting, to perform
specific jobs.
Petitioner further argues that its contracting out to Synergy various services like janitorial, aircraft cleaning,
baggage-handling, etc., which are directly related to its business, does not make respondents its employees.
Petitioner furthermore argues that none of the four (4) elements of an employer-employee relationship between
petitioner and respondents, viz: selection and engagement of an employee, payment of wages, power of
dismissal, and the power to control employee's conduct, is present in the case. 15
Finally, petitioner avers that reinstatement of respondents had been rendered impossible because it had
reduced its personnel due to heavy losses as it had in fact terminated its service agreement with Synergy
effective June 30, 199816 as a cost-saving measure.
The decision of the case hinges on a determination of whether Synergy is a mere job-only contractor or a
legitimate contractor. If Synergy is found to be a mere job-only contractor, respondents could be considered as
regular employees of petitioner as Synergy would then be a mere agent of petitioner in which case respondents
would be entitled to all the benefits granted to petitioner's regular employees; otherwise, if Synergy is found to
be a legitimate contractor, respondents' claims against petitioner must fail as they would then be considered
employees of Synergy.
The statutory basis of legitimate contracting or subcontracting is provided in Article 106 of the Labor Code
which reads:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. - Whenever an employer enters into a contract
with another person for the performance of the former's work, the employees of the contractor and of
the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and
extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor
to protect the rights of workers established under the Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall
be considered the employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.

63

There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises,
among others, AND the workers recruited and placed by such person are performing activities
which are directly related to the principal business of such employer. In such cases, the person
or intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly
employed by him. (Emphasis, capitalization and underscoring supplied)
Legitimate contracting and labor-only contracting are defined in Department Order (D.O.) No. 18-02, Series of
2002 (Rules Implementing Articles 106 to 109 of the Labor Code, as amended) as follows:
Section 3. Trilateral relationship in contracting arrangements. In legitimate contracting, there exists a
trilateral relationship under which there is a contract for a specific job, work or service between the
principal and the contractor or subcontractor, and a contract of employment between the contractor or
subcontractor and its workers. Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake the performance of the job, work or
service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job,
work or service. (Emphasis and underscoring supplied)
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal,and any of the following elements are [sic] present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to
the job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main business
of the principal; OR
(ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee. (Emphasis, underscoring and capitalization supplied)
"Substantial capital or investment" and the "right to control" are defined in the same Section 5 of the
Department Order as follows:
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case
of corporations, tools, equipment, implements, machineries and work premises, actually and directly
used by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end. (Emphasis and underscoring supplied)
From the records of the case, it is gathered that the work performed by almost all of the respondents - loading
and unloading of baggage and cargo of passengers - is directly related to the main business of petitioner. And
the equipment used by respondents as station loaders, such as trailers and conveyors, are owned by
petitioner.17

64

Petitioner asserts, however, that mere compliance with substantial capital requirement suffices for Synergy to
be considered a legitimate contractor, citing Neri v. National Labor Relations Commission.18 Petitioner's reliance
on said case is misplaced.
In Neri, the Labor Arbiter and the NLRC both determined that Building Care Corporation had a capital stock of
P1 million fully subscribed and paid for.19 The corporation's status as independent contractor had in fact been
previously confirmed in an earlier case20 by this Court which found it to be serving, among others, a university,
an international bank, a big local bank, a hospital center, government agencies, etc."
In stark contrast to the case at bar, while petitioner steadfastly asserted before the Labor Arbiter and the NLRC
that Synergy has a substantial capital to engage in legitimate contracting, it failed to present evidence thereon.
As the NLRC held:
The decision of the Labor Arbiter merely mentioned on page 5 of his decision that respondent
SYNERGY has substantial capital, but there is no showing in the records as to how much is that
capital. Neither had respondents shown that SYNERGY has such substantial capital. x x
x21 (Underscoring supplied)
It was only after the appellate court rendered its challenged Decision of September 29, 2002 when petitioner, in
its Motion for Reconsideration of the decision, sought to prove, for the first time, Synergy's substantial
capitalization by attaching photocopies of Synergy's financial statements, e.g., balance sheets, statements of
income and retained earnings, marked as "Annexes 'A' - 'A-4.'" 22
More significantly, however, is that respondents worked alongside petitioner's regular employees who were
performing identical work.23 As San Miguel Corporation v. Aballa24 and Dole Philippines, Inc. v. Esteva, et
al.25teach, such is an indicium of labor-only contracting.
For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two elements to be
present is, for convenience, re-quoted:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to
the job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main business
of the principal, OR
(ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee. (Emphasis and CAPITALIZATION supplied)
Even if only one of the two elements is present then, there is labor-only contracting.
The control test element under the immediately-quoted paragraph (ii), which was not present in the old
Implementing Rules (Department Order No. 10, Series of 1997), 26 echoes the prevailing jurisprudential
trend27elevating such element as a primary determinant of employer-employee relationship in job contracting
agreements.
One who claims to be an independent contractor has to prove that he contracted to do the work according to
his own methods and without being subject to the employer's control except only as to the results. 28
While petitioner claimed that it was Synergy's supervisors who actually supervised respondents, it failed to
present evidence thereon. It did not even identify who were the Synergy supervisors assigned at the workplace.

65

Even the parties' Agreement does not lend support to petitioner's claim, thus:
Section 6. Qualified and Experienced Worker: Owner's Right to Dismiss Workers.
CONTRACTOR shall employ capable and experienced workers and foremen to carry out the loading,
unloading and delivery Work as well as provide all equipment, loading, unloading and delivery
equipment, materials, supplies and tools necessary for the performance of the Work. CONTRACTOR
shall upon OWNER'S request furnish the latter with information regarding the qualifications of the
former's workers, to prove their capability and experience. Contractor shall require all its workers,
employees, suppliers and visitors to comply with OWNER'S rules, regulations, procedures and
directives relative to the safety and security of OWNER'S premises, properties and
operations. For this purpose, CONTRACTOR shall furnish its employees and
workers identification cards to be countersigned by OWNER and uniforms to be approved by
OWNER. OWNER may require CONTRACTOR to dismiss immediately and prohibit entry into
OWNER'S premises of any person employed therein by CONTRACTOR who in OWNER'S
opinion is incompetent or misconducts himself or does not comply with OWNER'S reasonable
instructions and requests regarding security, safety and other matters and such person shall not
again be employed to perform the services hereunder without OWNER'S permission. 29 (Underscoring
partly in the original and partly supplied; emphasis supplied)
Petitioner in fact admitted that it fixes the work schedule of respondents as their work was dependent on the
frequency of plane arrivals.30 And as the NLRC found, petitioner's managers and supervisors approved
respondents' weekly work assignments and respondents and other regular PAL employees were all referred to
as "station attendants" of the cargo operation and airfreight services of petitioner.31
Respondents having performed tasks which are usually necessary and desirable in the air transportation
business of petitioner, they should be deemed its regular employees and Synergy as a labor-only contractor.32
The express provision in the Agreement that Synergy was an independent contractor and there would be "no
employer-employee relationship between [Synergy] and/or its employees on one hand, and [petitioner] on the
other hand" is not legally binding and conclusive as contractual provisions are not valid determinants of the
existence of such relationship. For it is the totality of the facts and surrounding circumstances of the
case33 which is determinative of the parties' relationship.
Respecting the dismissal on November 15, 199234 of Auxtero, a regular employee of petitioner who had been
working as utility man/helper since November 1988, it is not legally justified for want of just or authorized cause
therefor and for non-compliance with procedural due process. Petitioner's claim that he abandoned his work
does not persuade.35 The elements of abandonment being (1) the failure to report for work or absence without
valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship manifested by
some overt acts,36 the onus probandi lies with petitioner which, however, failed to discharge the same.
Auxtero, having been declared to be a regular employee of petitioner, and found to be illegally dismissed from
employment, should be entitled to salary differential 37 from the time he rendered one year of service until his
dismissal, reinstatement plus backwages until the finality of this decision. 38 In view, however, of the long period
of time39 that had elapsed since his dismissal on November 15, 1992, it would be appropriate to award
separation pay of one (1) month salary for each year of service, in lieu of reinstatement. 40
As regards the remaining respondents, the Court affirms the ruling of both the NLRC and the appellate court,
ordering petitioner to accept them as its regular employees and to give each of them the salaries, allowances

66

and other employment benefits and privileges of a regular employee under the pertinent Collective Bargaining
Agreement.
Petitioner claims, however, that it has become impossible for it to comply with the orders of the NLRC and the
Court of Appeals, for during the pendency of this case, it was forced to reduce its personnel due to heavy
losses caused by economic crisis and the pilots' strike of June 5, 1998. 41 Hence, there are no available
positions where respondents could be placed.
And petitioner informs that "the employment contracts of all if not most of the respondents . . . were terminated
by Synergy effective 30 June 1998 when petitioner terminated its contract with Synergy." 42
Other than its bare allegations, petitioner presented nothing to substantiate its impossibility of compliance. In
fact, petitioner waived this defense by failing to raise it in its Memorandum filed on June 14, 1999 before the
Court of Appeals.43 Further, the notice of termination in 1998 was in disregard of a subsisting temporary
restraining order44 to preserve the status quo, issued by this Court in 1996 before it referred the case to the
Court of Appeals in January 1999. So as to thwart the attempt to subvert the implementation of the assailed
decision, respondents are deemed to be continuously employed by petitioner, for purposes of computing the
wages and benefits due respondents.
Finally, it must be stressed that respondents, having been declared to be regular employees of petitioner,
Synergy being a mere agent of the latter, had acquired security of tenure. As such, they could only be
dismissed by petitioner, the real employer, on the basis of just or authorized cause, and with observance of
procedural due process.
WHEREFORE, the Court of Appeals Decision of September 29, 2000 is AFFIRMED with MODIFICATION.
Petitioner PHILIPPINE AIRLINES, INC. is ordered to:
(a) accept respondents ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD
GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P.
CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA,
JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS,
ROLANDO TUNACAO, CHERRIE ALEGRES, EDUARDO MAGDADARAUG, NELSON M. DULCE and ALLAN
BENTUZAL as its regular employees in their same or substantially equivalent positions, and pay the wages
and benefits due them as regular employees plus salary differential corresponding to the difference between
the wages and benefits given them and those granted to petitioner's other regular employees of the same rank;
and
(b) pay respondent BENEDICTO AUXTERO salary differential; backwages from the time of his dismissal
until the finality of this decision; and separation pay, in lieu of reinstatement, equivalent to one (1) month pay
for every year of service until the finality of this decision.
There being no data from which this Court may determine the monetary liabilities of petitioner, the case is
REMANDED to the Labor Arbiter solely for that purpose.
SO ORDERED.

67

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 177785

September 3, 2008

RANDY ALMEDA, EDWIN M. AUDENCIAL, NOLIE D. RAMIREZ, ERNESTO

M. CALICAGAN and REYNALDO M. CALICAGAN, petitioners,
vs.
ASAHI GLASS PHILIPPINES, INC., respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the
Revised Rules of Court, filed by petitioners Randy Almeda, Edwin Audencial,
Nolie Ramirez, Ernesto Calicagan and Reynaldo Calicagan, seeking to
reverse and set aside the Decision1 dated 10 November 2006 and the
68

Resolution2 dated 27 April 2007 of the Court of Appeals in CA-G.R. SP No.

93291. The appellate court reversed and set aside the Decision dated 29
June 2005 and Resolution dated 24 November 2005 of the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 039768-04 finding
respondent Asahi Glass Philippines, Inc. jointly and severally liable with San
Sebastian Allied Services, Inc. (SSASI) for illegal dismissal, and ordering both
respondent and SSASI to reinstate petitioners to their former positions and to
pay their backwages from 2 December 2002 up to the date of their actual
reinstatement. Instead, the Court of Appeals reinstated the Decision dated 18
February 2004 of the Labor Arbiter dismissing petitioners complaint for illegal
dismissal against respondent and SSASI, but ordering the payment of
separation benefits to petitioners.
The present Petition arose from a complaint for illegal dismissal with claims
for moral and exemplary damages and attorneys fees filed by petitioners
against respondent and SSASI.
In their Complaint3 filed before the Labor Arbiter, petitioners alleged that
respondent (a domestic corporation engaged in the business of glass
manufacturing) and SSASI (a labor-only contractor) entered into a service
contract on 5 March 2002 whereby the latter undertook to provide the former
with the necessary manpower for its operations. Pursuant to such a contract,
SSASI employed petitioners Randy Almeda, Edwin Audencial, Nolie Ramirez
and Ernesto Calicagan as glass cutters, and petitioner Reynaldo Calicagan as
Quality Controller,4 all assigned to work for respondent. Petitioners worked for
respondent for periods ranging from three to 11 years.5 On 1 December 2002,
respondent terminated its service contract with SSASI, which in turn,
terminated the employment of petitioners on the same date. Believing that
SSASI was a labor-only contractor, and having continuously worked as glass
cutters and quality controllers for the respondent - functions which are directly
related to its main line of business as glass manufacturer - for three to 11
years, petitioners asserted that they should be considered regular employees
of the respondent; and that their dismissal from employment without the
benefit of due process of law was unlawful. In support of their complaint,
petitioners submitted a copy of their work schedule to show that they were
under the direct control of the respondent which dictated the time and manner
of performing their jobs.
Respondent, on the other hand, refuted petitioners allegations that they were
its regular employees. Instead, respondent claimed that petitioners were
employees of SSASI and were merely assigned by SSASI to work for
69

respondent to perform intermittent services pursuant to an Accreditation

Agreement, dated 5 March 2002, the validity of which was never assailed by
the petitioners. Respondent contested petitioners contention that they were
performing functions that were directly related to respondents main business
since petitioners were simply tasked to do mirror cutting, an activity
occasionally performed upon a customers order. Respondent likewise denied
exercising control over petitioners and asserted that such was wielded by
SSASI. Finally, respondent maintained that SSASI was engaged in legitimate
job contracting and was licensed by the Department of Labor and
Employment (DOLE) to engage in such activity as shown in its Certificate of
Registration.6 Respondent presented before the Labor Arbiter copies of the
Opinion dated 18 February 2003 of DOLE Secretary Patricia Sto. Tomas
authorizing respondent to contract out certain activities not necessary or
desirable to the business of the company; and the Opinion dated 10 July 2003
of DOLE Bureau of Labor Relations (DOLE-BLR) Director Hans Leo Cacdac
allowing respondent to contract out even services that were not directly
related to its main line of business.
SSASI, for its part, claimed that it was a duly registered independent
contractor as evidenced by the Certificate of Registration issued by the DOLE
on 3 January 2003. SSASI averred that it was the one who hired petitioners
and assigned them to work for respondent on occasions that the latters work
force could not meet the demands of its customers. Eventually, however,
respondent ceased to give job orders to SSASI, constraining the latter to
terminate petitioners employment.
On 18 February 2004, the Labor Arbiter promulgated his Decision7 finding that
respondent submitted overwhelming documentary evidence to refute the bare
allegations of the petitioners and accordingly dismissing the complaint for lack
of merit. However, he also ordered the payment of separation benefits to
petitioners. The Labor Arbiter thus decreed:
WHEREFORE, premises considered, judgment is hereby rendered
declaring that the instant case should be, as it is hereby DISMISSED for
lack of merit. However, the respondent San Sebastian Allied Services,
Inc. is hereby ordered to pay the [herein petitioners] Edwin M.
Audencial, Reynaldo Calicagan, Randy Almeda, Nolie D. Ramirez and
Ernesto Calicagan their respective separation benefits in the following
specified amounts:

70

(1) Edwin Audencial

P 41,327.00

(2) Reynaldo M. Calicagan

15, 860.00

(3) Randy V. Almeda

45,084.00

(4) Nolie Ramirez

15,028.00

(5) Ernesto Calicagan

22,542.00

All other claims are dismissed.

On appeal, the NLRC reversed the afore-quoted Decision of the Labor Arbiter,
giving more evidentiary weight to petitioners testimonies. It appeared to the
NLRC that SSASI was engaged in labor-only contracting since it did not have
substantial capital and investment in the form of tools, equipment and
machineries. The petitioners were recruited and assigned by SSASI to
respondent as glass cutters, positions which were directly related to
respondents principal business of glass manufacturing. In light of the factual
circumstances of the case, the NLRC declared that petitioners were
employees of respondent and not of SSASI. Hence, the NLRC ruled in its
Decision8 dated 29 June 2005:
WHEREFORE, the decision appealed from is hereby VACATED and
SET ASIDE. [Herein respondent] and [SSASI] are hereby ordered to: (1)
reinstate the [herein petitioners] to their former position as glass cutters;
and (2) pay [petitioners] full backwages from December 2, 2002 up to
the date of their actual reinstatement. The liability of [respondent] and
[SSASI] for [petitioners] backwages is further declared to be joint and
several.
Only respondent moved for the reconsideration of the foregoing NLRC
Decision. Respondent prayed that the NLRC vacate its previous finding that
71

SSASI was a labor-only contractor and that it was guilty of the illegal dismissal
of petitioners. In a Resolution9 dated 24 November 2005, the NLRC denied
the Motion for Reconsideration of respondent for lack of compelling
justification to modify, alter or reverse its earlier Decision.
This prompted respondent to elevate its case to the Court of Appeals by the
filing of a Petition forCertiorari with Application for the Issuance of Temporary
Restraining Order (TRO),10 alleging that the NLRC abused its discretion in
ignoring the established facts and legal principles fully substantiated by the
documentary evidence on record and legal opinions of labor officials, and in
giving more credence to the empty allegations advanced by petitioners.
To prevent the execution of the Decision dated 25 June 2005 and Resolution
dated 24 November 2005 of the NLRC, respondent included in its Petition a
prayer for the issuance of a TRO, which it reiterated in a motion filed on 29
August 2006. Acting on respondents motion, the Court of Appeals issued a
TRO on 11 September 2006 enjoining the NLRC from enforcing its 25 June
2005 Decision and 24 November 2005 Resolution.11
On 10 November 2006, the Court of Appeals rendered a Decision granting
respondents Petition forCertiorari and reversingthe NLRC Decision dated 25
June 2005. The appellate court found merit in respondents argument that the
NLRC gravely abused its discretion in not finding that there was a legitimate
job contracting between respondent and SSASI. SSASI is a legitimate job
contractor as proven by its Certificate of Registration issued by the DOLE.
Respondent entered into a valid service contract with SSASI, by virtue of
which petitioners were assigned by SSASI to work for respondent. The service
contract itself, which was duly approved by the DOLE, defined the relationship
between SSASI and petitioners as one of employer-employees. It was SSASI
which exercised the power of control over petitioners. Petitioners were merely
allowed to work at respondents premises for reasons of efficiency. Moreover,
it was SSASI, not respondent, who terminated petitioners services.
The fallo of the Decision of the Court of Appeals state:
WHEREFORE, premises considered, the petition is GRANTED and
[NLRCs] assailed 29 June 2005 Decision is, accordingly, REVERSED
and SET ASIDE. In lieu thereof, the 18 February 2004 Decision
rendered in the case by Labor Arbiter Francisco A. Robles is
REINSTATED.12
The Court of Appeals denied petitioners Motion for Reconsideration in a
Resolution dated 27 April 2007.
72

Hence, petitioners come before this Court via the instant Petition for Review
on Certiorari assailing the 10 November 2006 Decision and 27 April 2007
Resolution of the Court of Appeals based on the following assignment of
errors:
I.
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN
REVERSING THE FINDING OF THE NLRC THAT RESPONDENT
COMPANY IS ENGAGED IN LABOR-ONLY CONTRACTING.
II.
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN
REVERSING THE RULING OF THE NLRC THAT SAN SEBASTIAN
ALLIED SERVICES, INC. IS MERELY RESPONDENTS AGENT AND
RESPONDENT IS PETITIONERS REAL EMPLOYER.
III.
THE COURT OF APPEALS COMMITTED AN ERROR IN DISMISSING
PETITIONERS COMPLAINT FOR ILLEGAL DISMISSAL.
It is apparent to this Court that the judicious resolution of the Petition at bar
hinges on two elemental issues: (1) whether petitioners were employees of
respondent; and (2) if they were, whether they were illegally dismissed.
Respondent adamantly insists that petitioners were not its employees but
those of SSASI, a legitimate job contractor duly licensed by the DOLE to
undertake job contracting activities. The job performed by petitioners were not
directly related to respondents primary venture as flat glass manufacturer, for
they were assigned to the mirroring line to perform glass cutting on occasions
when the employees of respondent could not comply with the markets
intermittent increased demand. And even if petitioners were working at
respondents premises, it was SSASI which effectively supervised the manner
and method petitioners performed their jobs, except as to the result thereof.
The Court would only be able to deem petitioners as employees of respondent
if it is established that SSASI was a labor-only contractor, and not a legitimate
job contractor or subcontractor.

73

Permissible job contracting or subcontracting refers to an arrangement

whereby a principal agrees to put out or farm out to a contractor or
subcontractor the performance or completion of a specific job, work or service
within a definite or predetermined period, regardless of whether such job,
work or service is to be performed or completed within or outside the premises
of the principal.13 A person is considered engaged in legitimate job contracting
or subcontracting if the following conditions concur:
(a) The contractor or subcontractor carries on a distinct and
independent business and undertakes to perform the job, work or
service on its own account and under its own responsibility according to
its own manner and method, and free from the control and direction of
the principal in all matters connected with the performance of the work
except as to the results thereof;
(b) The contractor or subcontractor has substantial capital or
investment; and
(c) The agreement between the principal and contractor or
subcontractor assures the contractual employees entitlement to all labor
and occupational safety and health standards, free exercise of the right
to self-organization, security of tenure, and social and welfare benefits.14
On the other hand, labor-only contracting, a prohibited act, is an arrangement
in which the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal.15 In labor-only
contracting, the following elements are present:
(a) The contractor or subcontractor does not have substantial capital or
investment to actually perform the job, work or service under its own
account and responsibility;
(b) The employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal.16
In labor-only contracting, the statutes create an employer-employee
relationship for a comprehensive purpose: to prevent circumvention of labor
laws. The contractor is considered as merely the agent of the principal
employer and the latter is responsible to the employees of the labor-only
contractor as if such employees are directly employed by the principal
employer.17 Therefore, if SSASI was a labor-only contractor, then respondent
74

shall be considered as the employer of petitioners who must bear the liability
for the dismissal of the latter, if any.
An important element of legitimate job contracting is that the contractor has
substantial capital or investment, which respondent failed to prove. There is a
dearth of evidence to prove that SSASI possessed substantial capital or
investment when respondent began contractual relations with it more than a
decade before 2003. Respondents bare allegations, without supporting proof
that SSASI had substantial capital or investment, do not sway this Court. The
Court did not find a single financial statement or record to attest to the
economic status and financial capacity of SSASI to venture into and sustain
its own business independent from petitioner.
Furthermore, the Court is unconvinced by respondents argument that
petitioners were performing jobs that were not directly related to respondents
main line of business. Respondent is engaged in glass manufacturing. One of
the petitioners served as a quality controller, while the rest were glass cutters.
The only excuse offered by respondent - that petitioners services were
required only when there was an increase in the markets demand with which
respondent could not cope - only prove even more that the services rendered
by petitioners were indeed part of the main business of respondent. It would
mean that petitioners supplemented the regular workforce when the latter
could not comply with the markets demand; necessarily, therefore, petitioners
performed the same functions as the regular workforce. Even respondents
claim that petitioners services were required only intermittently, depending on
the market, deserves scant credit. The indispensability of petitioners services
was fortified by the length and continuity of their performance, lasting for
periods ranging from three to 11 years.
More importantly, the Court finds that the crucial element of control over
petitioners rested in respondent. The power of control refers to the authority of
the employer to control the employee not only with regard to the result of work
to be done, but also to the means and methods by which the work is to be
accomplished. It should be borne in mind that the power of control refers
merely to the existence of the power and not to the actual exercise thereof. It
is not essential for the employer to actually supervise the performance of
duties of the employee; it is enough that the former has a right to wield the
power.18
In the instant case, petitioners worked at the respondents premises, and
nowhere else. Petitioners followed the work schedule prepared by
respondent. They were required to observe all rules and regulations of the
75

respondent pertaining to, among other things, the quality of job performance,
regularity of job output, and the manner and method of accomplishing the
jobs. Obscurity hounds respondents argument that even if petitioners were
working under its roof, it was still SSASI which exercised control over the
manner in which they accomplished their work. There was no showing that it
was SSASI who established petitioners working procedure and methods, or
who supervised petitioners in their work, or who evaluated the same. Other
than being the one who hired petitioners, there was absolute lack of evidence
that SSASI exercised control over them or their work.
The fact that it was SSASI which dismissed petitioners from employment is
irrelevant. It is hardly proof of control, since it was demonstrated only at the
end of petitioners employment. What is more, the dismissal of petitioners by
SSASI was a mere result of the termination by respondent of its contractual
relations with SSASI.
Despite respondents disavowal of the existence of an employer-employee
relationship between it and petitioners and its unyielding insistence that
petitioners were employees of SSASI, the totality of the facts and the
surrounding circumstances of the case convey otherwise. SSASI is a laboronly contractor; hence, it is considered as the agent of respondent.
Respondent is deemed by law as the employer of petitioners. Surely,
respondent cannot expect this Court to sustain its stance and accord full
evidentiary weight to the documentary evidence belatedly procured in its vain
attempt to evade liability as petitioners employer.
The Certificate of Registration presented by respondent to buttress its position
that SSASI is a duly registered job contractor is of little significance,
considering that it were issued only on 3 January 2003. There is no further
proof that prior to said date, SSASI had already registered with and had been
recognized by the DOLE as a job contractor.
Verily, the Certificate of Registration of SSASI, instead of supporting
respondents case, only served to raise more doubts. The timing of the
registration of SSASI is highly suspicious. It is important to note that SSASI
was already providing respondent with workers, including petitioners, long
before SSASI was registered with the DOLE as a job contractor. Some of the
petitioners were hired by SSASI and made to work for respondent for 11
years. Petitioners were also dismissed from service only a month prior to the
issuance of the Certificate of Registration of SSASI. Neither respondent nor
SSASI exerted any effort to explain the reason for the belated registration with
the DOLE by SSASI as a purported job contractor. It may be safely discerned
76

from the surrounding circumstances that the Certificate of Registration of

SSASI was merely secured in order to blanket the previous relations between
SSASI and respondent with legality.
Moreover, the Certificate of Registration issued by the DOLE recognized that
SSASI was a legitimate job contractor only as of the date of its issuance, 3
January 2003. There is no basis whatsoever to give the said Certificate any
retroactive effect. The Certificate can only be used as reference by persons
who would consider the services offered by SSASI subsequent to its
issuance. Respondent, who entered into contractual relations with SSASI way
before the said Certificate, cannot claim that it relied thereon.
Hence, the status of SSASI as a job contractor previous to its registration with
the DOLE on 3 January 2003 is still refutable. It can only be determined upon
an evaluation of its activities as contractor prior to the issuance of its
Certificate of Registration.
For the same reasons, this Court cannot give much weight to the Opinions
dated 18 February 2003 and 10 July 2003 of DOLE Secretary Sto. Tomas and
DOLE-BLR Director Cacdac, respectively, allowing respondent to contract out
certain services. The said Opinions were noticeably issued only after the
hiring and termination of petitioners. And, although the Opinions allow
respondent to contract out certain services, they do not necessarily prove that
the services respondent contracted to SSASI were actually among those it
was allowed to contract out; or that SSASI was a legitimate job contractor,
thus, relieving respondent of any liability for the dismissal of petitioners by
SSASI.
Equally unavailing is respondents stance that its relationship with petitioners
should be governed by the Accreditation Agreement stipulating that petitioners
were to remain employees of SSASI and shall not become regular employees
of the respondent. To permit respondent to disguise the true nature of its
transactions with SSASI by the terms of its contract, for the purpose of
evading its liabilities under the law, would seriously impair the administration
of justice. A party cannot dictate, by the mere expedient of a unilateral
declaration in a contract, the character of its business, i.e., whether as laboronly contractor or as job contractor, it being crucial that its character be
measured in terms of and determined by the criteria set by statute. 19
Having established that respondent was petitioners employer, the Court now
proceeds to determining whether petitioners were dismissed in accordance
with law.
77

Article 280 of the Labor Code, as amended, reads ART. 280. Regular and Casual Employment. - The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary 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 its is not covered by the
preceding paragraph:Provided, That, any employee who has rendered
at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue
while such activity exists.
This Court expounded on the afore-quoted provision, thus The primary standard, therefore, of determining a regular employment is
the reasonable connection between the particular activity performed by
the employee in relation to the usual business or trade of the employer.
x x x The connection can be determined by considering the nature of the
work performed and its relation to the scheme of the particular business
or trade in its entirety. Also, if the employee has been performing the job
for at least one year, even if the performance is not continuous or
merely intermittent, the law deems the repeated and continuing need for
its performance as sufficient evidence of the necessity if not
indispensability of that activity to the business. Hence, the employment
is also considered regular, but only with respect to such activity and
while such activity exists.20
In the instant Petition, the Court has already declared that petitioners
employment as quality controllers and glass cutters are directly related to the
usual business or trade of respondent as a glass manufacturer. Respondent
would have wanted this Court to believe that petitioners employment was
dependent on the increased market demand. However, bearing in mind that
petitioners have worked for respondent for not less than three years and as
much as 11 years, which respondent did not refute, then petitioners continued
78

employment clearly demonstrates its continuing necessity and indispensability

to the business of respondent, raising their employment to regular status.
Thus, having gained regular status, petitioners were entitled to security of
tenure and could only be dismissed on just or authorized causes and after
they had been accorded due process.21
As petitioners employer, respondent has the burden of proving that the
dismissal was for a cause allowed under the law, and that they were afforded
procedural due process.22 However, respondent failed to discharge this
burden with substantial evidence as it noticeably narrowed its defense to the
denial of any employer-employee relationship between it and petitioners.
The sole reason given for the dismissal of petitioners by SSASI was the
termination of its service contract with respondent. But since SSASI was a
labor-only contractor, and petitioners were to be deemed the employees of
respondent, then the said reason would not constitute a just or authorized
cause23 for petitioners dismissal. It would then appear that petitioners were
summarily dismissed based on the afore-cited reason, without compliance
with the procedural due process for notice and hearing.
Herein petitioners, having been unjustly dismissed from work, are entitled to
reinstatement without loss of seniority rights and other privileges and to full
back wages, inclusive of allowances, and to other benefits or their monetary
equivalents computed from the time compensation was withheld up to the
time of actual reinstatement.24 Their earnings elsewhere during the periods of
their illegal dismissal shall not be deducted therefrom.25
WHEREFORE, premises considered, the instant Petition is GRANTED. The
Decision dated 10 November 2006 and Resolution dated 27 April 2007 of the
Court of Appeals in CA-G.R. SP No. 93291 are REVERSED and SET ASIDE.
The Decision dated 29 June 2005 of the National Labor Relations
Commission in NLRC-NCR CA No. 039768-04 is thereby REINSTATED. Let
the records of this case be remanded to the Computation and Examination
Unit of the NLRC for the proper computation of subject money claims as
above-discussed. No costs.
SO ORDERED.

79

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 186621

March 12, 2014

SOUTH EAST INTERNATIONAL RATTAN, INC. and/or ESTANISLAO AGBAY, Petitioners,

vs.
JESUS J. COMING, Respondent.
1

DECISION
VILLARAMA, JR., J.:

80

Before the Court is a petition for review on certiorari under Rule 45 to reverse and set aside the Decision dated
February 21, 2008 and Resolution dated February 9, 2009 of the Court of Appeals (CA) in CA-GR. CEB-SP
No. 02113.
2

Petitioner South East International Rattan, Inc. (SEIRI) is a domestic corporation engaged in the business of
manufacturing and exporting furniture to various countries with principal place of business at Paknaan,
Mandaue City, while petitioner Estanislao Agbay, as per records, is the President and General Manager of
SEIRI.
4

On November 3, 2003, respondent Jesus J. Coming filed a complaint for illegal dismissal, underpayment of
wages, non-payment of holiday pay, 13th month pay and service incentive leave pay, with prayer for
reinstatement, back wages, damages and attorneys fees.
5

Respondent alleged that he was hired by petitioners as Sizing Machine Operator on March 17, 1984. His work
schedule is from 8:00 a.m. to 5:00 p.m. Initially, his compensation was on "pakiao" basis but sometime in June
1984, it was fixed at P150.00 per day which was paid weekly. In 1990, without any apparent reason, his
employment was interrupted as he was told by petitioners to resume work in two months time. Being an
uneducated person, respondent was persuaded by the management as well as his brother not to complain, as
otherwise petitioners might decide not to call him back for work. Fearing such consequence, respondent
accepted his fate. Nonetheless, after two months he reported back to work upon order of management.
6

Despite being an employee for many years with his work performance never questioned by petitioners,
respondent was dismissed on January 1, 2002 without lawful cause. He was told that he will be terminated
because the company is not doing well financially and that he would be called back to work only if they need
his services again. Respondent waited for almost a year but petitioners did not call him back to work. When he
finally filed the complaint before the regional arbitration branch, his brother Vicente was used by management
to persuade him to withdraw the case.
7

On their part, petitioners denied having hired respondent asserting that SEIRI was incorporated only in 1986,
and that respondent actually worked for SEIRIs furniture suppliers because when the company started in 1987
it was engaged purely in buying and exporting furniture and its business operations were suspended from the
last quarter of 1989 to August 1992. They stressed that respondent was not included in the list of employees
submitted to the Social Security System (SSS). Moreover, respondents brother, Vicente Coming, executed an
affidavit in support of petitioners position while Allan Mayol and Faustino Apondar issued notarized
certifications that respondent worked for them instead.
8

10

With the denial of petitioners that respondent was their employee, the latter submitted an affidavit signed by
five former co-workers stating that respondent was one of the pioneer employees who worked in SEIRI for
almost twenty years.
11

In his Decision dated April 30, 2004, Labor Arbiter Ernesto F. Carreon ruled that respondent is a regular
employee of SEIRI and that the termination of his employment was illegal. The dispositive portion of the
decision reads:
12

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent South East (Intl.)
Rattan, Inc. to pay complainant Jesus J. Coming the following:
1. Separation pay

P114,400.00

2. Backwages

P 30,400.00

3. Wage differential

P 15,015.00

4. 13th month pay

P 5,958.00

5. Holiday pay

P 4,000.00

81

6. Service incentive leave pay

P 2,000.00

Total award

P171,773.00

The other claims and the case against respondent Estanislao Agbay are dismissed for lack of merit.
SO ORDERED.

13

Petitioners appealed to the National Labor Relations Commission (NLRC)-Cebu City where they submitted the
following additional evidence: (1) copies of SEIRIs payrolls and individual pay records of employees; (2)
affidavit of SEIRIs Treasurer, Angelina Agbay; and (3) second affidavit of Vicente Coming.
14

15

16

On July 28, 2005, the NLRCs Fourth Division rendered its Decision, the dispositive portion of which states:
17

WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET ASIDE and VACATED
and a new one entered DISMISSING the complaint.
SO ORDERED.

18

The NLRC likewise denied respondents motion for reconsideration.

19

Respondent elevated the case to the CA via a petition for certiorari under Rule 65.
By Decision dated February 21, 2008, the CA reversed the NLRC and ruled that there existed an employeremployee relationship between petitioners and respondent who was dismissed without just and valid cause.
The CA thus decreed:
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The assailed Decision dated July 28,
2005 issued by the National Labor Relations Commission (NLRC), Fourth Division, Cebu City in NLRC Case
No. V-000625-2004 is REVERSED and SET ASIDE. The Decision of the Labor Arbiter dated April 30, 2004 is
REINSTATED with MODIFICATION on the computation of backwages which should be computed from the time
of illegal termination until the finality of this decision.
Further, the Labor Arbiter is directed to make the proper adjustment in the computation of the award of
separation pay as well as the monetary awards of wage differential, 13th month pay, holiday pay and service
incentive leave pay.
SO ORDERED.

20

Petitioners filed a motion for reconsideration but the CA denied it under Resolution dated February 9, 2009.
Hence, this petition raising the following issues:
6.1
WHETHER UNDER THE FACTS AND EVIDENCE ON RECORD, THE FINDING OF THE HONORABLE
COURT OF APPEALS THAT THERE EXISTS EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
PETITIONERS AND RESPONDENT IS IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THIS
HONORABLE COURT.

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6.2
WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY APPRECIATED IN ACCORDANCE WITH
APPLICABLE LAW AND JURISPRUDENCE THE EVIDENCE PRESENTED BY BOTH PARTIES.
6.3
WHETHER UNDER THE FACTS AND EVIDENCE PRESENTED, THE FINDING OF THE HONORABLE
COURT OF APPEALS THAT PETITIONERS ARE LIABLE FOR ILLEGAL DISMISSAL OF RESPONDENT IS IN
ACCORD WITH APPLICABLE LAW AND JURISPRUDENCE.
6.4
WHETHER UNDER THE FACTS PRESENTED, THE RULING OF THE HONORABLE COURT OF APPEALS
THAT THE BACKWAGES DUE THE RESPONDENT SHOULD BE COMPUTED FROM THE TIME OF
ILLEGAL TERMINATION UNTIL THE FINALITY OF THE DECISION IS SUPPORTED BY PREVAILING
JURISPRUDENCE.
21

Resolution of the first issue is paramount in view of petitioners denial of the existence of employer-employee
relationship.
The issue of whether or not an employer-employee relationship exists in a given case is essentially a question
of fact. As a rule, this Court is not a trier of facts and this applies with greater force in labor cases. Only errors
of law are generally reviewed by this Court. This rule is not absolute, however, and admits of exceptions. For
one, the Court may look into factual issues in labor cases when the factual findings of the Labor Arbiter, the
NLRC, and the CA are conflicting. Here, the findings of the NLRC differed from those of the Labor Arbiter and
the CA, which compels the Courts exercise of its authority to review and pass upon the evidence presented
and to draw its own conclusions therefrom.
22

23

24

25

To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the
four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct, or the so-called "control test." In
resolving the issue of whether such relationship exists in a given case, substantial evidence that amount of
relevant evidence which a reasonable mind might accept as adequate to justify a conclusion is sufficient.
Although no particular form of evidence is required to prove the existence of the relationship, and any
competent and relevant evidence to prove the relationship may be admitted, a finding that the relationship
exists must nonetheless rest on substantial evidence.
26

27

In support of their claim that respondent was not their employee, petitioners presented Employment Reports to
the SSS from 1987 to 2002, the Certifications issued by Mayol and Apondar, two affidavits of Vicente Coming,
payroll sheets (1999-2000), individual pay envelopes and employee earnings records (1999-2000) and affidavit
of Angelina Agbay (Treasurer and Human Resources Officer). The payroll and pay records did not include the
name of respondent. The affidavit of Ms. Agbay stated that after SEIRI started its business in 1986 purely on
export trading, it ceased operations in 1989 as evidenced by Certification dated January 18, 1994 from the
Securities and Exchange Commission (SEC); that when business resumed in 1992, SEIRI undertook only a
little of manufacturing; that the company never hired any workers for varnishing and pole sizing because it
bought the same from various suppliers, including Faustino Apondar; respondent was never hired by SEIRI;
and while it is true that Mr. Estanislao Agbay is the company President, he never dispensed the salaries of
workers.
28

In his first affidavit, Vicente Coming averred that:

6. [Jesus Coming] is a furniture factory worker. In 1982 to 1986, he was working with Ben Mayol as
round core maker/splitter.

83

7. Thereafter, we joined Okay Okay Yard owned by Amelito Montececillo. This is a rattan trader with
business address near Cebu Rattan Factory on a "Pakiao" basis.
8. However, Jesus and I did not stay long at Okay Okay Yard and instead we joined Eleuterio Agbay in
Labogon, Cebu in 1989. In 1991, we went back to Okay Okay located near the residence of Atty.
Vicente de la Serna in Mandaue City. We were on a "pakiao" basis. We stayed put until 1993 when we
resigned and joined Dodoy Luna in Labogon, Mandaue City as classifier until 1995. In 1996[,] Jesus
rested. It was only in 1997 that he worked back. He replaced me, as a classifier in Rattan Traders
owned by Allan Mayol. But then, towards the end of the year, he left the factory and relaxed in our
place of birth, in Sogod, Cebu.
9. It was only towards the end of 1999 that Jesus was taken back by Allan Mayol as sizing machine
operator. However, the work was off and on basis. Not regular in nature, he was harping a side line job
with me knowing that I am now working with Faustino Apondar that supplies rattan furnitures [sic] to
South East (Intl) Rattan, Inc. As a brother, I allowed Jesus to work with me and collect the proceeds of
his services as part of my collectibles from Faustino Apondar since I was on a "pakiao" basis. He was
working at his pleasure. Which means, he works if he likes to? That will be until 10:00 oclock in the
evening.
xxxx

29

The Certification dated January 20, 2004 of Allan Mayol reads:

This is to certify that I personally know Jesus Coming, the brother of Vicente Coming. Jesus is a rattan factory
worker and he was working with me as rattan pole sizing/classifier of my business from 1997 up to part of 1998
when he left my factory at will. I took him back towards the end of 1999, this time as a sizing machine operator.
In all these years, his services are not regular. He works only if he likes to.
30

Faustino Apondar likewise issued a Certification which states:

This is to certify that I am a maker/supplier of finished Rattan Furniture. As such, I have several rattan furniture
workers under me, one of whom is Vicente Coming, the brother of Jesus Coming.
That sometime in 1999, Vicente pleaded to me for a side line job of his brother, Jesus who was already
connected with Allan Mayol. Having vouched for the integrity of his brother and knowing that the job is
temporary in character, I allowed Jesus to work with his brother Vicente. However, the proceeds will be
collected together with his brother Vicente since it was the latter who was working with me. He renders services
to his brother work only after the regular working hours but off and on basis.
31

On the other hand, respondent submitted the affidavit executed by Eleoterio Brigoli, Pedro Brigoli, Napoleon
Coming, Efren Coming and Gil Coming who all attested that respondent was their co-worker at SEIRI.
Their affidavit reads:
We, the undersigned, all of legal ages, Filipino, and resident[s] of Cebu, after having been duly sworn to in
accordance with law, depose and say:
That we are former employees of SOUTH EAST RATTAN which is owned by Estan Eslao Agbay;
That we personally know JESUS COMING considering that we worked together in one company SOUTH EAST
RATTANT [sic];
That we together with JESUS COMING are all under the employ of ESTAN ESLAO AGBAY considering that
the latter is the one directly paying us and holds the absolute control of all aspects of our employment;

84

That it is not true that JESUS COMING is under the employ of one person other than ESTAN ESLAO AGBAY
OF SOUTH EAST RATTAN;
That Jesus Coming is one of the pioneer employees of SOUTH EAST RATTAN and had been employed
therein for almost twenty years;
That we executed this affidavit to attest to the truth of the foregoing facts and to deny any contrary allegation
made by the company against his employment with SOUTH EAST RATTAN.
32

In his decision, Labor Arbiter Carreon found that respondents work as sizing machine operator is usually
necessary and desirable to the rattan furniture business of petitioners and their failure to include respondent in
the employment report to SSS is not conclusive proof that respondent is not their employee. As to the affidavit
of Vicente Coming, Labor Arbiter Carreon did not give weight to his statement that respondent is not petitioners
employee but that of one Faustino Apondar. Labor Arbiter Carreon was not convinced that Faustino Apondar is
an independent contractor who has a contractual relationship with petitioners.
In reversing the Labor Arbiter, the NLRC reasoned as follows:
First complainant alleged that he worked continuously from March 17, 1984 up to January 21, 2002. Records
reveal however that South East (Intl.) Rattan, Inc. was incorporated only last July 18, 1986 (p. 55 records)[.]
Moreover, when they started to actually operate in 1987, the company was engaged purely on "buying and
exporting rattan furniture" hence no manufacturing employees were hired. Furthermore, from the last quarter of
1989 up to August of 1992, the company suspended operations due to economic reverses as per Certification
issued by the Securities and Exchange Commission (p. 56 records)[.]
1wphi1

Second, for all his insistence that he was a regular employee, complainant failed to present a single payslip,
voucher or a copy of a company payroll showing that he rendered service during the period indicated therein. x
xx
From the above established facts we are inclined to give weight and credence to the Certifications of Allan
Mayol and Faustino Apondar, both suppliers of finished Rattan Furniture (pp. 442-43, records). It appears that
complainant first worked with Allan Mayol and later with Faustino Apondar upon the proddings of his brother
Vicente. Vicentes affidavit as to complainants employment history was more detailed and forthright. x x x
xxxx
In the case at bar, there is likewise substantial evidence to support our findings that complainant was not an
employee of respondents. Thus:
1. Complainants name does not appear in the list of employees reported to the SSS.
2. His name does not also appear in the sample payrolls of respondents employees.
3. The certification of Allan Mayol and Fasutino Apondar[,] supplier of finished rattan products[,] that
complainant had at one time or another worked with them.
4. The Affidavit of Vicente Coming, complainants full brother[,] attesting that complainant had never
been an employee of respondent. The only connection was that their employer Faustino Apondar
supplies finished rattan products to respondents.
33

On the other hand, the CA gave more credence to the declarations of the five former employees of petitioners
that respondent was their co-worker in SEIRI. One of said affiants is Vicente Comings own son, Gil Coming.
Vicente averred in his second affidavit that when he confronted his son, the latter explained that he was merely
told by their Pastor to sign the affidavit as it will put an end to the controversy. Vicente insisted that his son did
not know the contents and implications of the document he signed. As to the absence of respondents name in

85

the payroll and SSS employment report, the CA observed that the payrolls submitted were only from January 1,
1999 to December 29, 2000 and not the entire period of eighteen years when respondent claimed he worked
for SEIRI. It further noted that the names of the five affiants, whom petitioners admitted to be their former
employees, likewise do not appear in the aforesaid documents. According to the CA, it is apparent that
petitioners maintained a separate payroll for certain employees or willfully retained a portion of the payroll.
x x x As to the "control test", the following facts indubitably reveal that respondents wielded control over the
work performance of petitioner, to wit: (1) they required him to work within the company premises; (2) they
obliged petitioner to report every day of the week and tasked him to usually perform the same job; (3) they
enforced the observance of definite hours of work from 8 oclock in the morning to 5 oclock in the afternoon; (4)
the mode of payment of petitioners salary was under their discretion, at first paying him on pakiao basis and
thereafter, on daily basis; (5) they implemented company rules and regulations; (6) [Estanislao] Agbay directly
paid petitioners salaries and controlled all aspects of his employment and (7) petitioner rendered work
necessary and desirable in the business of the respondent company.
34

We affirm the CA.

In Tan v. Lagrama, the Court held that the fact that a worker was not reported as an employee to the SSS is
not conclusive proof of the absence of employer-employee relationship. Otherwise, an employer would be
rewarded for his failure or even neglect to perform his obligation.
35

36

Nor does the fact that respondents name does not appear in the payrolls and pay envelope records submitted
by petitioners negate the existence of employer-employee relationship. For a payroll to be utilized to disprove
the employment of a person, it must contain a true and complete list of the employee. In this case, the exhibits
offered by petitioners before the NLRC consisting of copies of payrolls and pay earnings records are only for
the years 1999 and 2000; they do not cover the entire 18-year period during which respondent supposedly
worked for SEIRI.
37

In their comment to the petition filed by respondent in the CA, petitioners emphasized that in the certifications
issued by Mayol and Apondar, it was shown that respondent was employed and working for them in those
years he claimed to be working for SEIRI. However, a reading of the certification by Mayol would show that
while the latter claims to have respondent under his employ in 1997, 1998 and 1999, respondents services
were not regular and that he works only if he wants to. Apondars certification likewise stated that respondent
worked for him since 1999 through his brother Vicente as "sideline" but only after regular working hours and
"off and on" basis. Even assuming the truth of the foregoing statements, these do not foreclose respondents
regular or full-time employment with SEIRI. In effect, petitioners suggest that respondent was employed by
SEIRIs suppliers, Mayol and Apondar but no competent proof was presented as to the latters status as
independent contractors.
In the same comment, petitioners further admitted that the five affiants who attested to respondents
employment with SEIRI are its former workers whom they describe as "disgruntled workers of SEIRI" with an
axe to grind against petitioners, and that their execution of affidavit in support of respondents claim is "their
very way of hitting back the management of SEIRI after disciplinary measures were meted against them." This
allegation though was not substantiated by petitioners. Instead, after the CA rendered its decision reversing the
NLRCs ruling, petitioners subsequently changed their theory by denying the employment relationship with the
five affiants in their motion for reconsideration, thus:
38

x x x Since the five workers were occupying and working on a leased premises of the private respondent, they
were called workers of SEIRI (private respondent). Such admission however, does not connote employment.
For the truth of the matter, all of the five employees of the supplier assigned at the leased premises of the
private respondent. Because of the recommendation of the private respondent with regards to the disciplinary
measures meted on the five workers, they wanted to hit back against the private respondent. Their motive to
implicate private respondent was to vindicate. Definitely, they have an axe to grind against the private
respondent. Mention has to be made that despite the dismissal of these five (5) witnesses from their service,
none of them ever went to the National Labor [Relations] Commission and invoked their rights, if any, against
their employer or at the very least against the respondent. The reason is obvious, since they knew pretty well

86

that they were not employees of SEIRI but rather under the employ of Allan Mayol and Faustino Apondar,
working on a leased premise of respondent. x x x
39

Petitioners admission that the five affiants were their former employees is binding upon them. While they claim
that respondent was the employee of their suppliers Mayol and Apondar, they did not submit proof that the
latter were indeed independent contractors; clearly, petitioners failed to discharge their burden of proving their
own affirmative allegation. There is thus no showing that the five former employees of SEIRI were motivated
by malice, bad faith or any ill-motive in executing their affidavit supporting the claims of respondent.
40

In any controversy between a laborer and his master, doubts reasonably arising from the evidence are resolved
in favor of the laborer.
41

As a regular employee, respondent enjoys the right to security of tenure under Article 279 of the Labor Code
and may only be dismissed for a just or authorized cause, otherwise the dismissal becomes illegal.
42

43

44

Respondent, whose employment was terminated without valid cause by petitioners, is entitled to reinstatement
without loss of seniority rights and other privileges and to his full back wages, inclusive of allowances and other
benefits or their monetary equivalent, computed from the time his compensation was withheld from him up to
the time of his actual reinstatement. Where reinstatement is no longer viable as an option, back wages shall be
computed from the time of the illegal termination up to the finality of the decision. Separation pay equivalent to
one month salary for every year of service should likewise be awarded as an alternative in case reinstatement
in not possible.
45

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated February 21, 2008 and
Resolution dated February 9, 2009 of the Court of Appeals in CA-G.R. No. CEB-SP No. 02113 are hereby
AFFIRMED and UPHELD.
Petitioners to pay the costs of suit.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 154830

June 8, 2007

PIONEER CONCRETE PHILIPPINES, INC., PIONEER PHILIPPINES HOLDINGS, and PHILIP J.

KLEPZIG,petitioners,
vs.
ANTONIO D. TODARO, respondent.
DECISION

87

AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari seeking to annul and set aside the Decision1 of the Court
of Appeals (CA) dated October 31, 2000 in CA-G.R. SP No. 54155 and its Resolution 2 of August 21, 2002
denying petitioners Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:
On January 16, 1998, herein respondent Antonio D. Todaro (Todaro) filed with the Regional Trial Court (RTC) of
Makati City, a complaint for Sum of Money and Damages with Preliminary Attachment against Pioneer
International Limited (PIL), Pioneer Concrete Philippines, Inc. (PCPI), Pioneer Philippines Holdings, Inc.
(PPHI), John G. McDonald (McDonald) and Philip J. Klepzig (Klepzig). 3
In his complaint, Todaro alleged that PIL is a corporation duly organized and existing under the laws of Australia
and is principally engaged in the ready-mix concrete and concrete aggregates business; PPHI is the company
established by PIL to own and hold the stocks of its operating company in the Philippines; PCPI is the company
established by PIL to undertake its business of ready-mix concrete, concrete aggregates and quarrying
operations in the Philippines; McDonald is the Chief Executive of the Hongkong office of PIL; and, Klepzig is
the President and Managing Director of PPHI and PCPI; Todaro has been the managing director of Betonval
Readyconcrete, Inc. (Betonval), a company engaged in pre-mixed concrete and concrete aggregate
production; he resigned from Betonval in February 1996; in May 1996, PIL contacted Todaro and asked him if
he was available to join them in connection with their intention to establish a ready-mix concrete plant and other
related operations in the Philippines; Todaro informed PIL of his availability and interest to join them;
subsequently, PIL and Todaro came to an agreement wherein the former consented to engage the services of
the latter as a consultant for two to three months, after which, he would be employed as the manager of PIL's
ready-mix concrete operations should the company decide to invest in the Philippines; subsequently, PIL
started its operations in the Philippines; however, it refused to comply with its undertaking to employ Todaro on
a permanent basis.4
Instead of filing an Answer, PPHI, PCPI and Klepzig separately moved to dismiss the complaint on the grounds
that the complaint states no cause of action, that the RTC has no jurisdiction over the subject matter of the
complaint, as the same is within the jurisdiction of the NLRC, and that the complaint should be dismissed on
the basis of the doctrine of forum non conveniens.5
In its Order dated January 4, 1999, the RTC of Makati, Branch 147, denied herein petitioners' respective
motions to dismiss.6 Herein petitioners, as defendants, filed an Urgent Omnibus Motion 7 for the reconsideration
of the trial court's Order of January 4, 1999 but the trial court denied it via its Order 8 dated June 3, 1999.
On August 3, 1999, herein petitioners filed a Petition for Certiorari with the CA.9 On October 31, 2000, the CA
rendered its presently assailed Decision denying herein petitioners' Petition for Certiorari. Petitioners filed a
Motion for Reconsideration but the CA denied it in its Resolution dated August 21, 2002.
Hence, herein Petition for Review on Certiorari based on the following assignment of errors:
A.
THE COURT OF APPEALS' CONCLUSION THAT THE COMPLAINT STATES A CAUSE OF ACTION
AGAINST PETITIONERS IS WITHOUT ANY LEGAL BASIS. THE ANNEXES TO THE COMPLAINT
CLEARLY BELIE THE ALLEGATION OF EXISTENCE OF AN EMPLOYMENT CONTRACT BETWEEN
PRIVATE RESPONDENT AND PETITIONERS.

88

B.
THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD
WITH LAW AND WITH APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT UPHELD
THE JURISDICTION OF THE TRIAL COURT DESPITE THE FACT THAT THE COMPLAINT
INDUBITABLY SHOWS THAT IT IS AN ACTION FOR AN ALLEGED BREACH OF EMPLOYMENT
CONTRACT, AND HENCE, FALLS WITHIN THE EXLCUSIVE JURISDICTION OF THE NATIONAL
LABOR RELATIONS COMMISSION.
C
THE COURT OF APPEALS DISREGARDED AND FAILED TO CONSIDER THE PRINCIPLE OF
"FORUM NON CONVENIENS" AS A VALID GROUND FOR DISMISSING A COMPLAINT.10
In their first assigned error, petitioners contend that there was no perfected employment contract between PIL
and herein respondent. Petitioners assert that the annexes to respondent's complaint show that PIL's offer was
for respondent to be employed as the manager only of its pre-mixed concrete operations and not as the
company's managing director or CEO. Petitioners argue that when respondent reiterated his intention to
become the manager of PIL's overall business venture in the Philippines, he, in effect did not accept PIL's offer
of employment and instead made a counter-offer, which, however, was not accepted by PIL. Petitioners also
contend that under Article 1318 of the Civil Code, one of the requisites for a contract to be perfected is the
consent of the contracting parties; that under Article 1319 of the same Code, consent is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract; that
the offer must be certain and the acceptance absolute; that a qualified acceptance constitutes a counter-offer.
Petitioners assert that since PIL did not accept respondent's counter-offer, there never was any employment
contract that was perfected between them.
Petitioners further argue that respondent's claim for damages based on the provisions of Articles 19 and 21 of
the Civil Code is baseless because it was shown that there was no perfected employment contract.
Assuming, for the sake of argument, that PIL may be held liable for breach of employment contract, petitioners
contend that PCPI and PPHI, may not also be held liable because they are juridical entities with personalities
which are separate and distinct from PIL, even if they are subsidiary corporations of the latter. Petitioners also
aver that the annexes to respondent's complaint show that the negotiations on the alleged employment
contract took place between respondent and PIL through its office in Hongkong. In other words, PCPI and PPHI
were not privy to the negotiations between PIL and respondent for the possible employment of the latter; and
under Article 1311 of the Civil Code, a contract is not binding upon and cannot be enforced against one who
was not a party to it even if he be aware of such contract and has acted with knowledge thereof.
Petitioners further assert that petitioner Klepzig may not be held liable because he is simply acting in his
capacity as president of PCPI and PPHI and settled is the rule that an officer of a corporation is not personally
liable for acts done in the performance of his duties and within the bounds of the authority conferred on him.
Furthermore, petitioners argue that even if PCPI and PPHI are held liable, respondent still has no cause of
action against Klepzig because PCPI and PPHI have personalities which are separate and distinct from those
acting in their behalf, such as Klepzig.
As to their second assigned error, petitioners contend that since herein respondent's claims for actual, moral
and exemplary damages are solely premised on the alleged breach of employment contract, the present case
should be considered as falling within the exclusive jurisdiction of the NLRC.

89

With respect to the third assigned error, petitioners assert that the principle of forum non conveniens dictates
that even where exercise of jurisidiction is authorized by law, courts may refuse to entertain a case involving a
foreign element where the matter can be better tried and decided elsewhere, either because the main aspects
of the case transpired in a foreign jurisdiction or the material witnesses have their residence there and the
plaintiff sought the forum merely to secure procedural advantage or to annoy or harass the defendant.
Petitioners also argue that one of the factors in determining the most convenient forum for conflicts problem is
the power of the court to enforce its decision. Petitioners contend that since the majority of the defendants in
the present case are not residents of the Philippines, they are not subject to compulsory processes of the
Philippine court handling the case for purposes of requiring their attendance during trial. Even assuming that
they can be summoned, their appearance would entail excessive costs. Petitioners further assert that there is
no allegation in the complaint from which one can conclude that the evidence to be presented during the trial
can be better obtained in the Philippines. Moreover, the events which led to the present controversy occurred
outside the Philippines. Petitioners conclude that based on the foregoing factual circumstances, the case
should be dismissed under the principle of forum non conveniens.
In his Comment, respondent extensively quoted the assailed CA Decision maintaining that the factual
allegations in the complaint determine whether or not the complaint states a cause of action.
As to the question of jurisdiction, respondent contends that the complaint he filed was not based on a contract
of employment. Rather, it was based on petitioners' unwarranted breach of their contractual obligation to
employ respondent. This breach, respondent argues, gave rise to an action for damages which is cognizable
by the regular courts.
Even assuming that there was an employment contract, respondent asserts that for the NLRC to acquire
jurisdiction, the claim for damages must have a reasonable causal connection with the employer-employee
relationship of petitioners and respondent.
Respondent further argues that there is a perfected contract between him and petitioners as they both agreed
that the latter shall employ him to manage and operate their ready-mix concrete operations in the Philippines.
Even assuming that there was no perfected contract, respondent contends that his complaint alleges an
alternative cause of action which is based on the provisions of Articles 19 and 21 of the Civil Code.
As to the applicability of the doctrine of forum non conveniens, respondent avers that the question of whether a
suit should be entertained or dismissed on the basis of the principle of forum non conveniens depends largely
upon the facts of the particular case and is addressed to the sound discretion of the trial judge, who is in the
best position to determine whether special circumstances require that the court desist from assuming
jurisdiction over the suit.
The petition lacks merit.
Section 2, Rule 2 of the Rules of Court, as amended, defines a cause of action as the act or omission by which
a party violates a right of another. A cause of action exists if the following elements are present: (1) a right in
favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the
part of the named defendant to respect or not to violate such right; and, (3) an act or omission on the part of
such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to
the plaintiff for which the latter may maintain an action for recovery of damages. 11
In Hongkong and Shanghai Banking Corporation Limited v. Catalan,12 this Court held:

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The elementary test for failure to state a cause of action is whether the complaint alleges facts which if
true would justify the relief demanded. Stated otherwise, may the court render a valid judgment upon
the facts alleged therein? The inquiry is into the sufficiency, not the veracity of the material allegations.
If the allegations in the complaint furnish sufficient basis on which it can be maintained, it should not be
dismissed regardless of the defense that may be presented by the defendants. 13
Moreover, the complaint does not have to establish or allege facts proving the existence of a cause of action at
the outset; this will have to be done at the trial on the merits of the case. 14 To sustain a motion to dismiss for
lack of cause of action, the complaint must show that the claim for relief does not exist, rather than that a claim
has been defectively stated, or is ambiguous, indefinite or uncertain. 15
Hence, in resolving whether or not the Complaint in the present case states a cause of action, the trial court
correctly limited itself to examining the sufficiency of the allegations in the Complaint as well as the annexes
thereto. It is proscribed from inquiring into the truth of the allegations in the Complaint or the authenticity of any
of the documents referred or attached to the Complaint, since these are deemed hypothetically admitted by the
respondent.
This Court has reviewed respondents allegations in its Complaint. In a nutshell, respondent alleged that herein
petitioners reneged on their contractual obligation to employ him on a permanent basis. This allegation is
sufficient to constitute a cause of action for damages.
The issue as to whether or not there was a perfected contract between petitioners and respondent is a matter
which is not ripe for determination in the present case; rather, this issue must be taken up during trial,
considering that its resolution would necessarily entail an examination of the veracity of the allegations not only
of herein respondent as plaintiff but also of petitioners as defendants.
The Court does not agree with petitioners' contention that they were not privy to the negotiations for
respondent's possible employment. It is evident from paragraphs 24 to 28 of the Complaint 16 that, on various
occasions, Klepzig conducted negotiations with respondent regarding the latter's possible employment. In fact,
Annex "H"17 of the complaint shows that it was Klepzig who informed respondent that his company was no
longer interested in employing respondent. Hence, based on the allegations in the Complaint and the annexes
attached thereto, respondent has a cause of action against herein petitioners.
As to the question of jurisdiction, this Court has consistently held that where no employer-employee
relationship exists between the parties and no issue is involved which may be resolved by reference to the
Labor Code, other labor statutes or any collective bargaining agreement, it is the Regional Trial Court that has
jurisdiction.18 In the present case, no employer-employee relationship exists between petitioners and
respondent. In fact, in his complaint, private respondent is not seeking any relief under the Labor Code, but
seeks payment of damages on account of petitioners' alleged breach of their obligation under their agreement
to employ him. It is settled that an action for breach of contractual obligation is intrinsically a civil dispute.19 In
the alternative, respondent seeks redress on the basis of the provisions of Articles 19 and 21 of the Civil Code.
Hence, it is clear that the present action is within the realm of civil law, and jurisdiction over it belongs to the
regular courts.20
With respect to the applicability of the principle of forum non conveniens in the present case, this Court's ruling
inBank of America NT & SA v. Court of Appeals21 is instructive, to wit:
The doctrine of forum non conveniens, literally meaning the forum is inconvenient, emerged in private
international law to deter the practice of global forum shopping, that is to prevent non-resident litigants
from choosing the forum or place wherein to bring their suit for malicious reasons, such as to secure

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procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select
a more friendly venue. Under this doctrine, a court, in conflicts of law cases, may refuse impositions on
its jurisdiction where it is not the most "convenient" or available forum and the parties are not
precluded from seeking remedies elsewhere.
Whether a suit should be entertained or dismissed on the basis of said doctrine depends largely upon
the facts of the particular case and is addressed to the sound discretion of the trial court. In the case
ofCommunication Materials and Design, Inc. vs. Court of Appeals, this Court held that "xxx [a]
Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that the
following requisites are met: (1) that the Philippine Court is one to which the parties may conveniently
resort to; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and
the facts; and, (3) that the Philippine Court has or is likely to have power to enforce its decision."
Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of Appeals, that the
doctrine of forum non conveniens should not be used as a ground for a motion to dismiss
because Sec. 1, Rule 16 of the Rules of Court does not include said doctrine as a ground. This
Court further ruled that while it is within the discretion of the trial court to abstain from
assuming jurisdiction on this ground, it should do so only after vital facts are established, to
determine whether special circumstances require the courts desistance; and that the propriety
of dismissing a case based on this principle of forum non conveniens requires a factual
determination, hence it is more properly considered a matter of defense. 22 (emphasis supplied)
In the present case, the factual circumstances cited by petitioners which would allegedly justify the application
of the doctrine of forum non conveniens are matters of defense, the merits of which should properly be
threshed out during trial.
WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the Court of
Appeals are AFFIRMED.
Costs against petitioners.
SO ORDERED.

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Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 70705 August 21, 1989
MOISES DE LEON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and LA TONDE;A INC., respondents.
Amorito V. Canete for petitioner.
Pablo R. Cruz for private respondent.

FERNAN, C.J.:
This petition for certiorari seeks to annul and set aside: (1) the majority decision dated January 28, 1985 of the
National Labor Relations Commission First Division in Case No. NCR- 83566-83, which reversed the Order
dated April 6,1984 of Labor Arbiter Bienvenido S. Hernandez directing the reinstatement of petitioner Moises de
Leon by private respondent La Tonde;a Inc. with payment of backwages and other benefits due a regular
employee; and, (2) the Resolution dated March 21, 1985 denying petitioner's motion for reconsideration.
It appears that petitioner was employed by private respondent La Tonde;a Inc. on December 11, 1981, at the
Maintenance Section of its Engineering Department in Tondo, Manila. 1 His work consisted mainly of painting

company building and equipment, and other odd jobs relating to maintenance. He was paid on a daily
basis through petty cash vouchers.
In the early part of January, 1983, after a service of more than one (1) year, petitioner requested from
respondent company that lie be included in the payroll of regular workers, instead of being paid through petty
cash vouchers. Private respondent's response to this request was to dismiss petitioner from his employment on
January 16, 1983. Having been refused reinstatement despite repeated demands, petitioner filed a complaint
for illegal dismissal, reinstatement and payment of backwages before the Office of the Labor Arbiter of the then
Ministry now Department of Labor and Employment.
Petitioner alleged that he was dismissed following his request to be treated as a regular employee; that his
work consisted of painting company buildings and maintenance chores like cleaning and operating company
equipment, assisting Emiliano Tanque Jr., a regular maintenance man; and that weeks after his dismissal, he
was re-hired by the respondent company indirectly through the Vitas-Magsaysay Village Livelihood Council, a

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labor agency of respondent company, and was made to perform the tasks which he used to do. Emiliano
Tanque Jr. corroborated these averments of petitioner in his affidavit. 2
On the other hand, private respondent claimed that petitioner was not a regular employee but only a casual
worker hired allegedly only to paint a certain building in the company premises, and that his work as a painter
terminated upon the completion of the painting job.
On April 6, 1984, Labor Arbiter Bienvenido S. Hernandez rendered a decision 3 finding the complaint

meritorious and the dismissal illegal; and ordering the respondent company to reinstate petitioner with full
backwages and other benefits. Labor Arbiter Hernandez ruled that petitioner was not a mere casual
employee as asserted by private respondent but a regular employee. He concluded that the dismissal of
petitioner from the service was prompted by his request to be included in the list of regular employees
and to be paid through the payroll and is, therefore, an attempt to circumvent the legal obligations of an
employer towards a regular employee.
Labor Arbiter Hernandez found as follows:
After a thorough examination of the records of the case and evaluation of the evidence and
versions of the parties, this Office finds and so holds that the dismissal of complainant is
illegal. Despite the impressive attempt of respondents to show that the complainant was hired
as casual and for the work on particular project, that is the repainting of Mama Rosa Building,
which particular work of painting and repainting is not pursuant to the regular business of the
company, according to its theory, we find differently. Complainant's being hired on casual
basis did not dissuade from the cold fact that such painting of the building and the painting
and repainting of the equipment and tools and other things belonging to the company and the
odd jobs assigned to him to be performed when he had no painting and repainting works
related to maintenance as a maintenance man are necessary and desirable to the better
operation of the business company. Respondent did not even attempt to deny and refute the
corroborating statements of Emiliano Tanque Jr., who was regularly employed by it as a
maintenance man doing same jobs not only of painting and repainting of building, equipment
and tools and machineries or machines if the company but also other odd jobs in the
Engineering and Maintenance Department that complainant Moises de Leon did perform the
same odd jobs and assignments as were assigned to him during the period de Leon was
employed for more than one year continuously by Id respondent company. We find no reason
not to give credit and weight to the affidavit and statement made therein by Emiliano Tanque
Jr. This strongly confirms that complainant did the work pertaining to the regular business in
which the company had been organized. Respondent cannot be permitted to circumvent the
law on security of tenure by considering complainant as a casual worker on daily rate basis
and after working for a period that has entitled him to be regularized that he would be
automatically terminated. ... . 4
On appeal, however, the above decision of the Labor Arbiter was reversed by the First Division of the National
Labor Relations Commission by virtue of the votes of two members 5 which constituted a majority.

Commissioner Geronimo Q. Quadra dissented, voting "for the affirmation of the well-reasoned decision of
the Labor Arbiter below." 6 The motion for reconsideration was denied. Hence, this recourse.
Petitioner asserts that the respondent Commission erred and gravely abuse its discretion in reversing the Order
of the Labor Arbiter in view of the uncontroverted fact that the tasks he performed included not only painting but
also other maintenance work which are usually necessary or desirable in the usual business of private
respondent: hence, the reversal violates the Constitutional and statutory provisions for the protection of labor.

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The private respondent, as expected, maintains the opposite view and argues that petitioner was hired only as
a painter to repaint specifically the Mama Rosa building at its Tondo compound, which painting work is not part
of their main business; that at the time of his engagement, it was made clear to him that he would be so
engaged on a casual basis, so much so that he was not required to accomplish an application form or to
comply with the usual requisites for employment; and that, in fact, petitioner was never paid his salary through
the regular payroll but always through petty cash vouchers. 7
The Solicitor General, in his Comment, recommends that the petition be given due course in view of the
evidence on record supporting petitioner's contention that his work was regular in nature. In his view, the
dismissal of petitioner after he demanded to be regularized was a subterfuge to circumvent the law on regular
employment. He further recommends that the questioned decision and resolution of respondent Commission
be annulled and the Order of the Labor Arbiter directing the reinstatement of petitioner with payment of
backwages and other benefits be upheld. 8
After a careful review of the records of this case, the Court finds merit in the petition as We sustain the position
of the Solicitor General that the reversal of the decision of the Labor Arbiter by the respondent Commission was
erroneous.
The law on the matter is Article 281 of the Labor Code which defines regular and casual employment as
follows:
Art. 281. Regular and casual employment. The provisions of a written agreement to the
contrary notwithstanding and regardless of the oral agreements of the parties, an employment
shall be deemed to be regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer,
except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the
employee or where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph:
Provided, That any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while such actually exists.
This provision reinforces the Constitutional mandate to protect the interest of labor. Its language evidently
manifests the intent to safeguard the tenurial interest of the worker who may be denied the rights and benefits
due a regular employee by virtue of lopsided agreements with the economically powerful employer who can
maneuver to keep an employee on a casual status for as long as convenient. Thus, contrary agreements
notwithstanding, an employment is deemed regular when the activities performed by the employee are usually
necessary or desirable in the usual business or trade of the employer. Not considered regular are the so-called
"project employment" the completion or termination of which is more or less determinable at the time of
employment, such as those employed in connection with a particular construction project 9 and seasonal

employment which by its nature is only desirable for a limited period of time. However, any employee who
has rendered at least one year of service, whether continuous or intermittent, is deemed regular with
respect to the activity he performed and while such activity actually exists.
The primary standard, therefore, of determining a regular employment is the reasonable connection between
the particular activity performed by the employee in relation to the usual business or trade of the employer. The
test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The

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connection can be determined by considering the nature of the work performed and its relation to the scheme
of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least
one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and
continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity
to the business. Hence, the employment is also considered regular, but only with respect to such activity and
while such activity exists.
In the case at bar, the respondent company, which is engaged in the business of manufacture and distillery of
wines and liquors, claims that petitioner was contracted on a casual basis specifically to paint a certain
company building and that its completion rendered petitioner's employment terminated. This may have been
true at the beginning, and had it been shown that petitioner's activity was exclusively limited to painting that
certain building, respondent company's theory of casual employment would have been worthy of consideration.
However, during petitioner's period of employment, the records reveal that the tasks assigned to him included
not only painting of company buildings, equipment and tools but also cleaning and oiling machines, even
operating a drilling machine, and other odd jobs assigned to him when he had no painting job. A regular
employee of respondent company, Emiliano Tanque Jr., attested in his affidavit that petitioner worked with him
as a maintenance man when there was no painting job.
It is noteworthy that, as wisely observed by the Labor Arbiter, the respondent company did not even attempt to
negate the above averments of petitioner and his co- employee. Indeed, the respondent company did not only
fail to dispute this vital point, it even went further and confirmed its veracity when it expressly admitted in its
comment that, "The main bulk of work and/or activities assigned to petitioner was painting and other related
activities. Occasionally, he was instructed to do other odd things in connection with maintenance while he was
waiting for materials he would need in his job or when he had finished early one assigned to him. 10
The respondent Commission, in reversing the findings of the Labor Arbiter reasoned that petitioner's job cannot
be considered as necessary or desirable in the usual business or trade of the employer because, "Painting the
business or factory building is not a part of the respondent's manufacturing or distilling process of wines and
liquors. 11
The fallacy of the reasoning is readily apparent in view of the admitted fact that petitioner's activities included
not only painting but other maintenance work as well, a fact which even the respondent Commission, like the
private respondent, also expressly recognized when it stated in its decision that, 'Although complainant's
(petitioner) work was mainly painting, he was occasionally asked to do other odd jobs in connection with
maintenance work. 12 It misleadingly assumed that all the petitioner did during his more than one year of

employment was to paint a certain building of the respondent company, whereas it is admitted that he
was given other assignments relating to maintenance work besides painting company building and
equipment.
It is self-serving, to say the least, to isolate petitioner's painting job to justify the proposition of casual
employment and conveniently disregard the other maintenance activities of petitioner which were assigned by
the respondent company when he was not painting. The law demands that the nature and entirety of the
activities performed by the employee be considered. In the case of petitioner, the painting and maintenance
work given him manifest a treatment consistent with a maintenance man and not just a painter, for if his job was
truly only to paint a building there would have been no basis for giving him other work assignments In between
painting activities.
It is not tenable to argue that the painting and maintenance work of petitioner are not necessary in respondent's
business of manufacturing liquors and wines, just as it cannot be said that only those who are directly involved

96

in the process of producing wines and liquors may be considered as necessary employees. Otherwise, there
would have been no need for the regular Maintenance Section of respondent company's Engineering
Department, manned by regular employees like Emiliano Tanque Jr., whom petitioner often worked with.
Furthermore, the petitioner performed his work of painting and maintenance activities during his employment in
respondent's business which lasted for more than one year, until early January, 1983 when he demanded to be
regularized and was subsequently dismissed. Certainly, by this fact alone he is entitled by law to be considered
a regular employee. And considering further that weeks after his dismissal, petitioner was rehired by the
company through a labor agency and was returned to his post in the Maintenance Section and made to
perform the same activities that he used to do, it cannot be denied that as activities as a regular painter and
maintenance man still exist.
It is of no moment that petitioner was told when he was hired that his employment would only be casual, that he
was paid through cash vouchers, and that he did not comply with regular employment procedure. Precisely, the
law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining position
needs the support of the State. That determines whether a certain employment is regular or casual is not the
will and word of the employer, to which the desperate worker often accedes, much less the procedure of hiring
the employee or the manner of paying his salary. It is the nature of the activities performed in relation to the
particular business or trade considering all circumstances, and in some cases the length of time of its
performance and its continued existence.
Finally, considering its task to give life and spirit to the Constitutional mandate for the protection of labor, to
enforce and uphold our labor laws which must be interpreted liberally in favor of the worker in case of doubt,
the Court cannot understand the failure of the respondent Commission to perceive the obvious attempt on the
part of the respondent company to evade its obligations to petitioner by dismissing the latter days after he
asked to be treated as a regular worker on the flimsy pretext that his painting work was suddenly finished only
to rehire him indirectly weeks after his dismissal and assign him to perform the same tasks he used to perform.
The devious dismissal is too obvious to escape notice. The inexplicable disregard of established and decisive
facts which the Commission itself admitted to be so, in justifying a conclusion adverse to the aggrieved laborer
clearly spells a grave abuse of discretion amounting to lack of jurisdiction.
WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the National Labor
Relations Commission are hereby annulled and set aside. The Order of Labor arbiter Bienvenido S. Hernandez
dated April 6, 1984 is reinstated. Private respondent is ordered to reinstate petitioner as a regular maintenance
man and to pay petitioner 1) backwages equivalent to three years from January 16,1983, in accordance with
the Aluminum Wage Orders in effect for the period covered, 2) ECOLA 3) 13th Month Pay, 4) and other benefits
under pertinent Collective Bargaining Agreements, if any.
SO ORDERED.

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