FIRST DIVISION

[G.R. No. 138051. June 10, 2004.]

JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J : p

The Case
Before this Court is a petition for review on certiorari 1 assailing the 26 March 1999 Decision 2 of the Court of Appeals in
CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed the
findings of the National Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiter's dismissal of the case
for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("Agreement") with the
Mel and Jay Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its corporate officers
while MJMDC was represented by SONZA, as President and General Manager, and Carmela Tiangco ("TIANGCO"), as
EVP and Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZA's services exclusively
to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as
follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays. 3

ABS-CBN agreed to pay for SONZA's services a monthly talent fee of 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-CBN's 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. Manager 4

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment, National
Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay, service
incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the Employees Stock
Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed
between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZA's monthly talent fees through his account at PCIBank, Quezon Avenue
Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited
SONZA's talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor 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 respondent's
 plea of lack of employer-employee relationship may be pleaded only as a matter of defense. It behooves upon it
the duty to prove that there really is no employer-employee relationship between it and the complainant.

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24
February 1997.
On 11 March 1997, SONZA filed a Reply to Respondent's Position Paper with Motion to Expunge Respondent's Annex 4
and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN's witnesses Soccoro Vidanes and Rolando V.
Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and broadcast industry is to
treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction. 6 The pertinent
parts of the decision read as follows:
xxx xxx xxx

While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a talent," it
stands to reason that a "talent" as above-described cannot be considered as an employee by reason of the
peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV
host and a radio broadcaster.Unlike an ordinary employee, he was free to perform the services he undertook to
render in accordance with his own style. The benefits conferred to complainant under the May 1994 Agreement are
certainly very much higher than those generally given to employees. For one, complainant Sonza's monthly talent
fees amount to a staggering 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 respondent's Rules and Regulations, likewise, does not detract from
the absence of employer-employee relationship. As held by the Supreme Court, "The line should be drawn
between rules that merely serve as guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and
bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the means to achieve it."
(Insular Life Assurance Co., Ltd. vs.NLRC, et al., G.R. No. 84484, November 15, 1989).

xxx xxx xxx (Emphasis supplied) 7

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiter's
decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and
resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case. 8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRC's finding that no employer-employee relationship existed between SONZA and
ABS-CBN. Adopting the NLRC's decision, the appellate court quoted the following findings of the NLRC:
. . . the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of
complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the
principal itself. This fact is made particularly true in this case, as admittedly MJMDC 'is a management company
devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.'
(Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not
between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically
referred to MJMDC as the 'AGENT'. As a matter of fact, when complainant herein unilaterally rescinded said May
1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed
the same in his capacity as President.
 Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the
said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest
Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent
of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere 'labor-only' contractor of ABS-CBN such that there exist[s]
employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that
MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter
and MJMDC in the May 1994 Agreement.

It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the
same being in the nature of an action for alleged breach of contractual obligation on the part of respondent-
appellee. As squarely apparent from complainant-appellant's Position Paper, his claims for compensation for
services, '13th month pay', signing bonus and travel allowance against respondent-appellee are not based on the
Labor Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds under Stock
Purchase Agreement are based on the latter. A portion of the Position Paper of complainant-appellant bears
perusal:

'Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay
complainant a signing bonus consisting of shares of stocks . . . with FIVE HUNDRED THOUSAND
PESOS (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'.

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-appellant's own recognition of the fact that his contractual relations
with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning
from ABS-CBN, complainant-appellant served upon the latter a 'notice of rescission' of Agreement with the station,
per his letter dated April 1, 1996, which asserted that instead of referring to unpaid employee benefits, 'he is
waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves
the right to such recovery of the other benefits under said Agreement.' (Annex 3 of the respondent ABS-CBN's
Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase
Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-appellant's claims
being anchored on the alleged breach of contract on the part of respondent-appellee, the same can be resolved by
reference to civil law and not to labor law. Consequently, they are within the realm of civil law and, thus, lie with the
regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual obligation is intrinsically a civil dispute. 9 (Emphasis supplied)

The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a
factual question that is within the jurisdiction of the NLRC to resolve. 10 A special civil action for certiorari extends only to
issues of want or excess of jurisdiction of the NLRC. 11 Such action cannot cover an inquiry into the correctness of the
evaluation of the evidence which served as basis of the NLRC's conclusion. 12 The Court of Appeals added that it could
not re-examine the parties' evidence and substitute the factual findings of the NLRC with its own. 13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC'S DECISION AND REFUSING TO
FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN,
DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A
FINDING. 14

The Court's 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 Arbiter's dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the
elements of an employer-employee relationship, this is the first time that the Court will resolve the nature of the
relationship between a television and radio station and one of its "talents." There is no case law stating that a radio and
television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and radio
personality, and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the
other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor.
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. 15Substantial
evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. 16 A
party cannot prove the absence of substantial evidence by simply pointing out that there is contrary evidence on record,
direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in determining where the
weight of evidence lies or what evidence is credible. 17
SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has
consistently held that the elements of an employer-employee relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee on
the means and methods by which the work is accomplished. 18 The last element, the so-called "control test", is the most
important element. 19
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA's services to co-host its television and radio programs because of SONZA's peculiar skills,
talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring
complainant over other broadcasters of possibly similar experience and qualification as complainant belies respondent's
claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status
not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual
relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered
into the Agreement with SONZA but would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider
all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this
mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him
benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."
CHcTIA

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were
ABS-CBN's employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, . . . and
13th month pay" 20 which the law automatically incorporates into every employer-employee contract. 21 Whatever benefits
SONZA enjoyed arose from contract and not because of an employer-employee relationship. 22
SONZA's talent fees, amounting to 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 SONZA's unique skills, talent and celebrity status not
possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and
receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the
AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show that
ABS-CBN could terminate his services on grounds other than breach of contract, such as retrenchment to prevent losses
as provided under labor laws. 23
During the life of the Agreement, ABS-CBN agreed to pay SONZA's talent fees as long as "AGENT and Jay Sonza shall
faithfully and completely perform each condition of this Agreement." 24 Even if it suffered severe business losses, ABS-
CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZA's talent fees during the life of the
Agreement. This circumstance indicates an independent contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees.
Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZA's talent fees during the
remaining life of the Agreement even if ABS-CBN cancelled SONZA's programs through no fault of SONZA. 25
SONZA assails the Labor Arbiter's interpretation of his rescission of the Agreement as an admission that he is not an
employee of ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was really an employee, he would
merely resign, instead." SONZA did actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the
Agreement. SONZA's letter clearly bears this out. 26 However, the manner by which SONZA terminated his relationship
with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not determine his
status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an independent
contractor, we refer to foreign case law in analyzing the present case. The United States Court of Appeals, First 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. . . . In this regard, Alberty possesses a master's degree in
public communications and journalism; is trained in dance, singing, and modeling; taught with the drama
department at the University of Puerto Rico; and acted in several theater and television productions prior to her
affiliation with "Desde Mi Pueblo." Second, Alberty provided the "tools and instrumentalities" necessary for her to
perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry, and other image-
related supplies and services necessary for her appearance. Alberty disputes that this factor favors independent
contractor status because WIPR provided the "equipment necessary to tape the show." Alberty's argument is
misplaced. The equipment necessary for Alberty to conduct her job as host of "Desde Mi Pueblo" related to her
appearance on the show. Others provided equipment for filming and producing the show, but these were not the
primary tools that Alberty used to perform her particular function. If we accepted this argument, independent
contractors could never work on collaborative projects because other individuals often provide the equipment
required for different aspects of the collaboration. . . .
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Alberty's contracts with WIPR
specifically provided that WIPR hired her "professional services as Hostess for the Program Desde Mi Pueblo."
There is no evidence that WIPR assigned Alberty tasks in addition to work related to these tapings. . .
. 28 (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 importanttest our courts apply in distinguishing an employee from an independent
contractor. 29 This test is based on the extent of control the hirer exercises over a worker. The greater the supervision and
control the hirer exercises, the more likely the worker is deemed an employee. The converse holds true as well the less
control the hirer exercises, the more likely the worker is considered an independent contractor. 30
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZA's argument is misplaced. ABS-CBN engaged SONZA's services specifically to co-host the "Mel & Jay" programs.
ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How
SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN's control. SONZA did
not have to render eight hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of
the shows, as well as pre- and post-production staff meetings. 31 ABS-CBN could not dictate the contents of SONZA's
script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests. 32 The clear
implication is that SONZA had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or
its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA's
work. 33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the
program format and airtime schedule "for more effective programming." 34 ABS-CBN's sole concern was the quality of the
shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of
performance of SONZA's work.
SONZA claims that ABS-CBN's power not to broadcast his shows proves ABS-CBN's power over the means and methods
of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZA's show, ABS-CBN was
still obligated to pay SONZA's talent fees. Thus, even if ABS-CBN was completely dissatisfied with the means and
methods of SONZA's performance of his work, or even with the quality or product of his work, ABS-CBN could not dismiss
or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA's show but ABS-CBN must still pay his
talent fees in full. 35
Clearly, ABS-CBN's right not to broadcast SONZA's show, burdened as it was by the obligation to continue paying in full
SONZA's talent fees, did not amount to control over the means and methods of the performance of SONZA's work. ABS-
CBN could not terminate or discipline SONZA even if the means and methods of performance of his work how he
delivered his lines and appeared on television did not meet ABS-CBN's approval. This proves that ABS-CBN's control
was limited only to the result of SONZA's work, whether to broadcast the final product or not. In either case, ABS-CBN
must still pay SONZA's talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al., 36 the United States Circuit Court of Appeals ruled that vaudeville performers were
independent contractors although the management reserved the right to delete objectionable features in their shows.
Since the management did not have control over the manner of performance of the skills of the artists, it could only control
the result of the work by deleting objectionable features. 37
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt,
ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs. However, the
equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform his job. What SONZA
principally needed were his talent or skills and the costumes necessary for his appearance. 38 Even though ABS-CBN
provided SONZA with the place of work and the necessary equipment, SONZA was still an independent contractor since
ABS-CBN did not supervise and control his work. ABS-CBN's sole concern was for SONZA to display his talent during the
airing of the programs. 39
A radio broadcast specialist who works under minimal supervision is an independent contractor. 40 SONZA's work as
television and radio program host required special skills and talent, which SONZA admittedly possesses. The records do
not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBN's employee because ABS-CBN subjected him to its rules and
standards of performance. SONZA claims that this indicates ABS-CBN's control "not only [over] his manner of work but
also the quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering talents" 41 of
ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on SONZA under the Agreement refers to the "Television and
Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-
CBN) as its Code of Ethics." 42 The KBP code applies to broadcasters, not to employees of radio and television stations.
Broadcasters are not necessarily employees of radio and television stations. Clearly, the rules and standards of
performance referred to in the Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the
former. 43 In this case, SONZA failed to show that these rules controlled his performance. We find that these general rules
are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio
programs that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to
the services being rendered may be accorded the effect of establishing an employer-employee relationship. The
facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held
that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve it. 44

The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired from
performing his services according to his own initiative. 45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-CBN
exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even
an independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry,
exclusivity is not necessarily the same as control.

The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. 46 This practice is not
designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial amounts of money, time and effort "in building up its talents as
well as the programs they appear in and thus expects that said talents remain exclusive with the station for a
commensurate period of time." 47 Normally, a much higher fee is paid to talents who agree to work exclusively for a
particular radio or television station. In short, the huge talent fees partially compensates for exclusivity, as in the present
case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiter's finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN.
The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC
is a "labor-only" contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is ostensibly
under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer. Under this
scheme, the "labor-only" contractor is the agent of the principal. The law makes the principal responsible to the
employees of the "labor-only contractor" as if the principal itself directly hired or employed the employees. 48 These
circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely
acted as SONZA's agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The records do
not show that MJMDC acted as ABS-CBN's agent. MJMDC, which stands for Mel and Jay Management and Development
Corporation, is a corporation organized and owned by SONZA and TIANGCO. The President and General Manager of
MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by
SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is represented by MJMDC.
That would make MJMDC the agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his
broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting. MJMDC does not
have any other function apart from acting as agent of SONZA or TIANGCO to promote their careers in the broadcast and
television industry. 49
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 SONZA's status. A mere executive issuance cannot exclude
independent contractors from the class of service providers to the broadcast industry. The classification of workers in the
broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the
classification has no basis either in law or in fact.
Affidavits of ABS-CBN's 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-CBN's witnesses, he was never prevented from denying or refuting the
allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the
submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx xxx xxx

These verified position papers shall cover only those claims and causes of action raised in the complaint excluding
those that may have been amicably settled, and shall be accompanied by all supporting documents including the
affidavits of their respective witnesses which shall take the place of the latter's direct testimony. . . .
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
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 employer-employee
relationship under labor laws. Not every performance of services for a fee creates an employer-employee relationship. To
hold that every person who renders services to another for a fee is an employee to give meaning to the security of
tenure clause will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent contractors. The
right to life and livelihood guarantees this freedom to contract as independent contractors. The right of labor to security of
tenure cannot operate to deprive an individual, possessed with special skills, expertise and talent, of his right to contract
as an independent contractor. An individual like an artist or talent has a right to render his services without any one
controlling the means and methods by which he performs his art or craft. This Court will not interpret the right of labor to
security of tenure to compel artists and talents to render their services only as employees. If radio and television program
hosts can render their services only as employees, the station owners and managers can dictate to the radio and
television hosts what they say in their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC") 54 in relation to Republic Act No. 7716, 55 as amended by Republic Act No.
8241, 56 treats talents, television and radio broadcasters differently. Under the NIRC,these professionals are subject to the
10% value-added tax ("VAT") on services they render. Exempted from the VAT are those under an employer-employee
relationship. 57 This different tax treatment accorded to talents and broadcasters bolters our conclusion that they are
independent contractors, provided all the basic elements of a contractual relationship are present as in this case.
Nature of SONZA's Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave,
signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the findings of
the Labor Arbiter and the Court of Appeals that SONZA's claims are all based on the May 1994 Agreement and stock
option plan, and not on the Labor Code. Clearly, the present case does not call for an application of the Labor Code
provisions but an interpretation and implementation of the May 1994 Agreement. In effect, SONZA's cause of action is for
breach of contract which is intrinsically a civil dispute cognizable by the regular courts. 58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP
No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
Davide, Jr., C .J ., Panganiban, Ynares-Santiago and Azcuna, JJ ., concur.
||| (Sonza v. ABS-CBN Broadcasting Corp., G.R. No. 138051, [June 10, 2004])
 SECOND DIVISION
[G.R. No. 138254. July 30, 2004.]
ANGELITO L. LAZARO, Proprietor of Royal Star
Marketing,petitioner, vs. SOCIAL SECURITY COMMISSION, ROSALINA
LAUDATO, SOCIAL SECURITY SYSTEM and THE HONORABLE COURT OF
APPEALS, respondents.
DECISION
TINGA, J :p

Before us is a Petition for Review under Rule 45, assailing the Decision 1 of the Court of Appeals Fifteenth Division 2 in
CA-G.R. Sp. No. 40956, promulgated on 20 November 1998, which affirmed two rulings of
the Social Security Commission("SSC") dated 8 November 1995 and 24 April 1996.
Private respondent Rosalina M. Laudato ("Laudato") filed a petition before the SSC for social security coverage and
remittance of unpaid monthly social securitycontributions against her three (3) employers. Among the respondents was
herein petitioner Angelito L. Lazaro ("Lazaro"), proprietor of Royal Star Marketing ("Royal Star"), which is engaged in the
business of selling home appliances. 3 Laudato alleged that despite her employment as sales supervisor of the sales
agents for Royal Star from April of 1979 to March of 1986, Lazaro had failed during the said period, to report her to the
SSC for compulsory coverage or remit Laudato's socialsecurity contributions. 4
Lazaro denied that Laudato was a sales supervisor of Royal Star, averring instead that she was a mere sales agent whom
he paid purely on commission basis.Lazaro also maintained that Laudato was not subjected to definite hours and
conditions of work. As such, Laudato could not be deemed an employee of Royal Star. 5
After the parties submitted their respective position papers, the SSC promulgated a Resolution 6 dated 8 November 1995
ruling in favor of Laudato. 7 Applying the "control test," it held that Laudato was an employee of Royal Star, and ordered
Royal Star to pay the unremitted social security contributions of Laudato in the amount of Five Thousand Seven Pesos
and Thirty Five Centavos (P5,007.35), together with the penalties totaling Twenty Two Thousand Two Hundred Eighteen
Pesos and Fifty Four Centavos (P22,218.54). In addition, Royal Star was made liable to pay damages to the SSC in the
amount of Fifteen Thousand Six Hundred Eighty Pesos and Seven Centavos (P15,680.07) for not reporting Laudato
for socialsecurity coverage, pursuant to Section 24 of the Social Security Law. 8
After Lazaro's Motion for Reconsideration before the SSC was denied, 9 Lazarofiled a Petition for Review with the Court of
Appeals. Lazaro reiterated that Laudato was merely a sales agent who was paid purely on commission basis, not included
in the company payroll, and who neither observed regular working hours nor accomplished time cards.
In its assailed Decision, the Court of Appeals noted that Lazaro's arguments were a reprise of those already presented
before the SSC. 10 Moreover, Lazaro had not come forward with particulars and specifics in his petition to show that
theCommission's ruling is not supported by substantial evidence. 11 Thus, the appellate court affirmed the finding that
Laudato was an employee of Royal Star, and hence entitled to coverage under the Social Security Law.
Before this Court, Lazaro again insists that Laudato was not qualified for socialsecurity coverage, as she was not an
employee of Royal Star, her income dependent on a generation of sales and based on commissions. 12 It is argued that
Royal Star had no control over Laudato's activities, and that under the so-called "control test," Laudato could not be
deemed an employee. 13
It is an accepted doctrine that for the purposes of coverage under the SocialSecurity Act, the determination of employer-
employee relationship warrants the application of the "control test," that is, whether the employer controls or 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 accomplished.14 The SSC, as sustained by the Court of Appeals, applying the control test found that
Laudato was an employee of Royal Star. We find no reversible error.
Lazaro's arguments are nothing more but a mere reiteration of arguments unsuccessfully posed before two bodies: the
SSC and the Court of Appeals. They likewise put to issue factual questions already passed upon twice below, rather than
questions of law appropriate for review under a Rule 45 petition. The determination of an employer-employee relationship
depends heavily on the particular factual circumstances attending the professional interaction of the parties. The Court is
not a trier of facts 15 and accords great weight to the factual findings of lower courts or agencies whose function is to
resolve factual matters.16
Lazaro's arguments may be dispensed with by applying precedents. Suffice it to say, the fact that Laudato was paid by
way of commission does not preclude the establishment of an employer-employee relationship.
In Grepalife v. Judico, 17 the Court upheld the existence of an employer-employee relationship between the insurance
company and its agents, despite the fact that the compensation that the agents on commission received was not paid by
the company but by the investor or the person insured. 18 The relevant factor remains, as stated earlier, 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. 19
Neither does it follow that a person who does not observe normal hours of work cannot be deemed an employee.
In Cosmopolitan Funeral Homes, Inc. v. Maalat,20 the employer similarly denied the existence of an employer-employee
relationship, as the claimant according to it, was a "supervisor on commissionbasis" who did not observe normal hours of
work. This Court declared that there was an employer-employee relationship, noting that "[the] supervisor, although
compensated on commission basis, [is] exempt from the observance of normal hours of work for his compensation is
measured by the number of sales he makes." 21
It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato was a sales
supervisor and not a mere agent. 22 As such, Laudato oversaw and supervised the sales agents of the company, and thus
was subject to the control of management as to how she implements its policies and its end results. We are disinclined to
reverse this finding, in the absence of countervailing evidence from Lazaro and also in light of the fact that Laudato's
calling cards from Royal Star indicate that she is indeed a sales supervisor.
The finding of the SSC that Laudato was an employee of Royal Star is supported by substantial evidence. The SSC
examined the cash vouchers issued by Royal Star to Laudato, 23 calling cards of Royal Star denominating Laudato as a
"Sales Supervisor" of the company, 24 and Certificates of Appreciation issued by Royal Star to Laudato in recognition of
her unselfish and loyal efforts in promoting the company. 25 On the other hand, Lazaro has failed to present any
convincing contrary evidence, relying instead on his bare assertions. The Court of Appeals correctly ruled that petitioner
has not sufficiently shown that the SSC's ruling was not supported by substantial evidence.
A piece of documentary evidence appreciated by the SSC is Memorandum dated 3 May 1980 of Teresita Lazaro, General
Manager of Royal Star, directing that no commissions were to be given on all "main office" sales from walk-in customers
and enjoining salesmen and sales supervisors to observe this new policy. 26 The Memorandum evinces the fact that,
contrary to Lazaro's claim, Royal Star exercised control over its sales supervisors or agents such as Laudato as to the
means and methods through which these personnel performed their work.
Finally, Lazaro invokes our ruling in the 1987 case of Social Security System v.Court of Appeals 27 that a person who
works for another at his own pleasure, subject to definite hours or conditions of work, and is compensated according to
the result of his effort is not an employee. 28 The citation is odd for Lazaro to rely upon, considering that in the cited case,
the Court affirmed the employee-employer relationship between a sales agent and the cigarette firm whose products he
sold. 29 Perhaps Lazaro meant instead to cite our 1969 ruling in the similarly-titled case of Social Security System v. Court
of Appeals, 30 also cited in the later eponymous ruling, whose disposition is more in accord with Lazaro's argument.
Yet, the circumstances in the 1969 case are very different from those at bar. Ruling on the question whether jockeys were
considered employees of the Manila Jockey Club, the Court noted that the jockeys were actually subjected to the control
of the racing steward, whose authority in turn was defined by the Games and Amusements Board. 31 Moreover, the
jockey's choice as to which horse to mount was subject to mutual agreement between the horse owner and the jockey,
and beyond the control of the race club. 32 In the case at bar, there is no showing that Royal Star was similarly precluded
from exerting control or interference over the manner by which Laudato performed her duties. On the contrary, substantial
evidence as found by the SSC and the Court of Appeals have established the element of control determinative of an
employer-employee relationship. We affirm without hesitation.
WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals dated 20 November 1998 is
AFFIRMED. Costs against petitioner.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ ., concur.
||| (Lazaro v. Social Security Commission, G.R. No. 138254, [July 30, 2004], 479 PHIL 384-392)
 THIRD DIVISION
[G.R. No. 157214. June 7, 2005]
PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner, vs. RICARDO DE VERA, respondent.
DECISION
GARCIA, J.:

Before us is this appeal by way of a petition for review on certiorari from the 12 September 2002 Decision and the 13 February
[1]

2003 Resolution of the Court of Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal dismissal by the National Labor
[2]

Relations Commission against petitioner.

As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation engaged in the business of communication services
and allied activities, while respondent Ricardo De Vera is a physician by profession whom petitioner enlisted to attend to the medical
needs of its employees. At the crux of the controversy is Dr. De Veras status vis a vispetitioner when the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May 1981, offered his services to the petitioner, therein proposing
[3]

his plan of works required of a practitioner in industrial medicine, to include the following:

1. Application of preventive medicine including periodic check-up of employees;

2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation services to employees;

3. Management and treatment of employees that may necessitate hospitalization including emergency cases and accidents;

4. Conduct pre-employment physical check-up of prospective employees with no additional medical fee;

5. Conduct home visits whenever necessary;

6. Attend to certain medical administrative function such as accomplishing medical forms, evaluating conditions of employees applying for
sick leave of absence and subsequently issuing proper certification, and all matters referred which are medical in nature.

The parties agreed and formalized respondents proposal in a document denominated as RETAINERSHIP CONTRACT which will [4]

be for a period of one year subject to renewal, it being made clear therein that respondent will cover the retainership the Company
previously had with Dr. K. Eulau and that respondents retainer fee will be at P4,000.00 a month. Said contract was renewed yearly. The [5]

retainership arrangement went on from 1981 to 1994 with changes in the retainers fee. However, for the years 1995 and 1996, renewal
of the contract was only made verbally.
The turning point in the parties relationship surfaced in December 1996 when Philcom, thru a letter bearing on the subject boldly
[6]

written as TERMINATION RETAINERSHIP CONTRACT, informed De Vera of its decision to discontinue the latters retainers contract
with the Company effective at the close of business hours of December 31, 1996 because management has decided that it would be
more practical to provide medical services to its employees through accredited hospitals near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal dismissal before the National Labor Relations Commission (NLRC),
alleging that that he had been actually employed by Philcom as its company physician since 1981 and was dismissed without due process.
He averred that he was designated as a company physician on retainer basis for reasons allegedly known only to Philcom. He likewise
professed that since he was not conversant with labor laws, he did not give much attention to the designation as anyway he worked on a
full-time basis and was paid a basic monthly salary plus fringe benefits, like any other regular employees of Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a decision dismissing De Veras complaint for lack
[7]

of merit, on the rationale that as a retained physician under a valid contract mutually agreed upon by the parties, De Vera was an
independent contractor and that he was not dismissed but rather his contract with [PHILCOM] ended when said contract was not renewed
after December 31, 1996.
On De Veras appeal to the NLRC, the latter, in a decision dated 23 October 2000, reversed (the word used is modified) that of the
[8]

Labor Arbiter, on a finding that De Vera is Philcoms regular employee and accordingly directed the company to reinstate him to his former
position without loss of seniority rights and privileges and with full backwages from the date of his dismissal until actual reinstatement.
We quote the dispositive portion of the decision:

WHEREFORE, the assailed decision is modified in that respondent is ordered to reinstate complainant to his former position without loss of seniority
rights and privileges with full backwages from the date of his dismissal until his actual reinstatement computed as follows:

Backwages:

a) Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.
 P44,400.00 x 39.33 mos. P1,750,185.00
b) 13th Month Pay:
1/12 of P1,750,185.00 145,848.75
c) Travelling allowance:
P1,000.00 x 39.33 mos. 39,330.00

GRAND TOTAL P1,935,363.75

The decision stands in other aspects.

SO ORDERED.

With its motion for reconsideration having been denied by the NLRC in its order of 27 February 2001, Philcom then went to the
[9]

Court of Appeals on a petition for certiorari, thereat docketed as CA-G.R. SP No. 65178, imputing grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of the NLRC when it reversed the findings of the labor arbiter and awarded thirteenth month
pay and traveling allowance to De Vera even as such award had no basis in fact and in law.
On 12 September 2002, the Court of Appeals rendered a decision, modifying that of the NLRC by deleting the award of traveling
[10]

allowance, and ordering payment of separation pay to De Vera in lieu of reinstatement, thus:

WHEREFORE, premises considered, the assailed judgment of public respondent, dated 23 October 2000, is MODIFIED. The award of traveling
allowance is deleted as the same is hereby DELETED. Instead of reinstatement, private respondent shall be paid separation pay computed at one (1)
month salary for every year of service computed from the time private respondent commenced his employment in 1981 up to the actual payment of
the backwages and separation pay. The awards of backwages and 13th month pay STAND.

SO ORDERED.

In time, Philcom filed a motion for reconsideration but was denied by the appellate court in its resolution of 13 February 2003. [11]

Hence, Philcoms present recourse on its main submission that -

THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION AND
RENDERING THE QUESTIONED DECISION AND RESOLUTION IN A WAY THAT IS NOT IN ACCORD WITH THE FACTS AND
APPLICABLE LAWS AND JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB CONTRACTING AGREEMENTS FROM THE
EMPLOYER-EMPLOYEE RELATIONSHIP.

We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this Court in decisions rendered by the Court of
Appeals. There are instances, however, where the Court departs from this rule and reviews findings of fact so that substantial justice may
be served. The exceptional instances are where:

xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the inference made is manifestly mistaken;
(3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court of
Appeals went beyond the issues of the case and its findings are contrary to the admissions of both appellant and appellees; (7) the findings of fact of
the Court of Appeals are contrary to those of the trial court; (8) said findings of facts are conclusions without citation of specific evidence on which
they are based; (9) the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondents; and (10)
the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record. [12]

As we see it, the parties respective submissions revolve on the primordial issue of whether an employer-employee relationship
exists between petitioner and respondent, the existence of which is, in itself, a question of fact well within the province of the NLRC.
[13]

Nonetheless, given the reality that the NLRCs findings are at odds with those of the labor arbiter, the Court, consistent with its ruling
in Jimenez vs. National Labor Relations Commission, is constrained to look deeper into the attendant circumstances obtaining in this
[14]

case, as appearing on record.

In a long line of decisions, the Court, in determining the existence of an employer-employee relationship, has invariably adhered
[15]

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, considered to be the most important element.
Applying the four-fold test to this case, we initially find that it was respondent himself who sets the parameters of what his duties
would be in offering his services to petitioner. This is borne by no less than his 15 May 1981 letter which, in full, reads:
[16]

May 15, 1981

Mrs. Adela L. Vicente

Vice President, Industrial Relations
 PhilCom, Paseo de Roxas
Makati, Metro Manila

Madam:

I shall have the time and effort for the position of Company physician with your corporation if you deemed it necessary. I have the necessary
qualifications, training and experience required by such position and I am confident that I can serve the best interests of your employees, medically.

My plan of works and targets shall cover the duties and responsibilities required of a practitioner in industrial medicine which includes the following:

1. Application of preventive medicine including periodic check-up of employees;

2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation services to employees;

3. Management and treatment of employees that may necessitate hospitalization including emergency cases and accidents;

4. Conduct pre-employment physical check-up of prospective employees with no additional medical fee;

5. Conduct home visits whenever necessary;

6. Attend to certain medical administrative functions such as accomplishing medical forms, evaluating conditions of employees applying
for sick leave of absence and subsequently issuing proper certification, and all matters referred which are medical in nature.

On the subject of compensation for the services that I propose to render to the corporation, you may state an offer based on your belief that I can very
well qualify for the job having worked with your organization for sometime now.

I shall be very grateful for whatever kind attention you may extend on this matter and hoping that it will merit acceptance, I remain

Very truly yours,

(signed)
RICARDO V. DE VERA, M.D.

Significantly, the foregoing letter was substantially the basis of the labor arbiters finding that there existed no employer-employee
relationship between petitioner and respondent, in addition to the following factual settings:

The fact that the complainant was not considered an employee was recognized by the complainant himself in a signed letter to the respondent dated
April 21, 1982 attached as Annex G to the respondents Reply and Rejoinder. Quoting the pertinent portion of said letter:

To carry out your memo effectively and to provide a systematic and workable time schedule which will serve the best interests of both the present
and absent employee, may I propose an extended two-hour service (1:00-3:00 P.M.) during which period I can devote ample time to both groups
depending upon the urgency of the situation. I shall readjust my private schedule to be available for the herein proposed extended hours, should you
consider this proposal.

As regards compensation for the additional time and services that I shall render to the employees, it is dependent on your evaluation of the merit of
my proposal and your confidence on my ability to carry out efficiently said proposal.

The tenor of this letter indicates that the complainant was proposing to extend his time with the respondent and seeking additional compensation for
said extension. This shows that the respondent PHILCOM did not have control over the schedule of the complainant as it [is] the complainant who is
proposing his own schedule and asking to be paid for the same. This is proof that the complainant understood that his relationship with the
respondent PHILCOM was a retained physician and not as an employee. If he were an employee he could not negotiate as to his hours of work.

The complainant is a Doctor of Medicine, and presumably, a well-educated person. Yet, the complainant, in his position paper, is claiming that he is
not conversant with the law and did not give much attention to his job title- on a retainer basis. But the same complainant admits in his affidavit that
his service for the respondent was covered by a retainership contract [which] was renewed every year from 1982 to 1994. Upon reading the contract
dated September 6, 1982, signed by the complainant himself (Annex C of Respondents Position Paper), it clearly states that is a retainership contract.
The retainer fee is indicated thereon and the duration of the contract for one year is also clearly indicated in paragraph 5 of the Retainership Contract.
The complainant cannot claim that he was unaware that the contract was good only for one year, as he signed the same without any objections. The
complainant also accepted its renewal every year thereafter until 1994. As a literate person and educated person, the complainant cannot claim that he
does not know what contract he signed and that it was renewed on a year to year basis. [17]

The labor arbiter added the indicia, not disputed by respondent, that from the time he started to work with petitioner, he never was
included in its payroll; was never deducted any contribution for remittance to the Social Security System (SSS); and was in fact subjected
by petitioner to the ten (10%) percent withholding tax for his professional fee, in accordance with the National Internal Revenue Code,
matters which are simply inconsistent with an employer-employee relationship. In the precise words of the labor arbiter:

xxx xxx xxx After more than ten years of services to PHILCOM, the complainant would have noticed that no SSS deductions were made on his
remuneration or that the respondent was deducting the 10% tax for his fees and he surely would have complained about them if he had considered
himself an employee of PHILCOM. But he never raised those issues. An ordinary employee would consider the SSS payments important and thus
make sure they would be paid. The complainant never bothered to ask the respondent to remit his SSS contributions. This clearly shows that the
complainant never considered himself an employee of PHILCOM and thus, respondent need not remit anything to the SSS in favor of the
complainant. [18]

Clearly, the elements of an employer-employee relationship are wanting in this case. We may add that the records are replete with
evidence showing that respondent had to bill petitioner for his monthly professional fees. It simply runs against the grain of common
[19]

experience to imagine that an ordinary employee has yet to bill his employer to receive his salary.
We note, too, that the power to terminate the parties relationship was mutually vested on both. Either may terminate the arrangement
at will, with or without cause. [20]

Finally, remarkably absent from the parties arrangement is the element of control, whereby the employer has reserved the right to
control the employee not only as to the result of the work done but also as to the means and methods by which the same is to be
accomplished. [21]

Here, petitioner had no control over the means and methods by which respondent went about performing his work at the company
premises. He could even embark in the private practice of his profession, not to mention the fact that respondents work hours and the
additional compensation therefor were negotiated upon by the parties. In fine, the parties themselves practically agreed on every terms
[22]

and conditions of respondents engagement, which thereby negates the element of control in their relationship. For sure, respondent has
never cited even a single instance when petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the NLRC and the Court of Appeals ruled that respondent is
petitioners regular employee at the time of his separation.
Partly says the appellate court in its assailed decision:

Be that as it may, it is admitted that private respondents written retainer contract was renewed annually from 1981 to 1994 and the alleged renewal
for 1995 and 1996, when it was allegedly terminated, was verbal.

Article 280 of the Labor code (sic) provides:

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

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has
rendered at least one (1) year of service, whether such is continuous or broken, shall be considered a regular with respect to the activity in
which he is employed and his employment shall continue while such activity exists.

Parenthetically, the position of company physician, in the case of petitioner, is usually necessary and desirable because the need for medical attention
of employees cannot be foreseen, hence, it is necessary to have a physician at hand. In fact, the importance and desirability of a physician in a
company premises is recognized by Art. 157 of the Labor Code, which requires the presence of a physician depending on the number of employees
and in the case at bench, in petitioners case, as found by public respondent, petitioner employs more than 500 employees.

Going back to Art. 280 of the Labor Code, it was made therein clear that the provisions of a written agreement to the contrary notwithstanding or the
existence of a mere oral agreement, if the employee is engaged in the usual business or trade of the employer, more so, that he rendered service for at
least one year, such employee shall be considered as a regular employee. Private respondent herein has been with petitioner since 1981 and his
employment was not for a specific project or undertaking, the period of which was pre-determined and neither the work or service of private
respondent seasonal. (Emphasis by the CA itself).

We disagree to the foregoing ratiocination.

The appellate courts premise that regular employees are those who perform activities which are desirable and necessary for the
business of the employer is not determinative in this case. For, we take it that any agreement may provide that one party shall render
services for and in behalf of another, no matter how necessary for the latters business, even without being hired as an employee. This
set-up is precisely true in the case of an independent contractorship as well as in an agency agreement. Indeed, Article 280 of the Labor
Code, quoted by the appellate court, is not the yardstick for determining the existence of an employment relationship. As it is, the provision
merely distinguishes between two (2) kinds of employees, i.e., regular and casual. It does not apply where, as here, the very existence
of an employment relationship is in dispute. [23]
 Buttressing his contention that he is a regular employee of petitioner, respondent invokes Article 157 of the Labor Code, and argues
that he satisfies all the requirements thereunder. The provision relied upon reads:

ART. 157. Emergency medical and dental services. It shall be the duty of every employer to furnish his employees in any locality with free medical
and dental attendance and facilities consisting of:

(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more than two hundred (200)
except when the employer does not maintain hazardous workplaces, in which case the services of a graduate first-aider shall be
provided for the protection of the workers, where no registered nurse is available. The Secretary of Labor shall provide by
appropriate regulations the services that shall be required where the number of employees does not exceed fifty (50) and shall
determine by appropriate order hazardous workplaces for purposes of this Article;

(b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when the number of
employees exceeds two hundred (200) but not more than three hundred (300); and

(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic, and an infirmary or emergency
hospital with one bed capacity for every one hundred (100) employees when the number of employees exceeds three hundred
(300).

In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot stay in the premises of the
establishment for at least two (2) hours, in the case of those engaged on part-time basis, and not less than eight (8) hours in the case of those
employed on full-time basis. Where the undertaking is nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject to
such regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and dental treatment and attendance in case of
emergency.

Had only respondent read carefully the very statutory provision invoked by him, he would have noticed that in non-hazardous
workplaces, the employer may engage the services of a physician on retained basis. As correctly observed by the petitioner, while it is
true that the provision requires employers to engage the services of medical practitioners in certain establishments depending on the
number of their employees, nothing is there in the law which says that medical practitioners so engaged be actually hired as
employees, adding that the law, as written, only requires the employer to retain, not employ, a part-time physician who needed to stay
[24]

in the premises of the non-hazardous workplace for two (2) hours. [25]

Respondent takes no issue on the fact that petitioners business of telecommunications is not hazardous in nature. As such, what
applies here is the last paragraph of Article 157 which, to stress, provides that the employer may engage the services of a physician and
dentist on retained basis, subject to such regulations as the Secretary of Labor may prescribe. The successive retainership agreements
of the parties definitely hue to the very statutory provision relied upon by respondent.
Deeply embedded in our jurisprudence is the rule that courts may not construe a statute that is free from doubt. Where the law is
clear and unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to it that the mandate is
obeyed. As it is, Article 157 of the Labor Code clearly and unequivocally allows employers in non-hazardous establishments to engage
[26]

on retained basis the service of a dentist or physician. Nowhere does the law provide that the physician or dentist so engaged thereby
becomes a regular employee. The very phrase that they may be engaged on retained basis, revolts against the idea that this engagement
gives rise to an employer-employee relationship.
With the recognition of the fact that petitioner consistently engaged the services of respondent on a retainer basis, as shown by
their various retainership contracts, so can petitioner put an end, with or without cause, to their retainership agreement as therein
provided. [27]

We note, however, that even as the contracts entered into by the parties invariably provide for a 60-day notice requirement prior to
termination, the same was not complied with by petitioner when it terminated on 17 December 1996 the verbally-renewed retainership
agreement, effective at the close of business hours of 31 December 1996.
Be that as it may, the record shows, and this is admitted by both parties, that execution of the NLRC decision had already been
[28]

made at the NLRC despite the pendency of the present recourse. For sure, accounts of petitioner had already been garnished and
released to respondent despite the previous Status Quo Order issued by this Court. To all intents and purposes, therefore, the 60-day
[29]

notice requirement has become moot and academic if not waived by the respondent himself.
WHEREFORE, the petition is GRANTED and the challenged decision of the Court of Appeals REVERSED and SET ASIDE. The
21 December 1998 decision of the labor arbiter is REINSTATED.
No pronouncement as to costs.
SO ORDERED.
 FIRST DIVISION
[G.R. No. 170087. August 31, 2006.]
ANGELINA FRANCISCO, petitioner, vs. NATIONAL LABORRELATIONS COMMISSION
DECISION
YNARES-SANTIAGO, J : p

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 theNational Labor Relations Commission (NLRC) dated April 15,
2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the LaborArbiter dated July 31,
2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and
Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as
Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial
operation of the company. 5
Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did
she attend any board meeting nor required to do so. She never prepared any legal document and never represented the
company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for the
company. 6
In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of
petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management
administration functions; represent the company in all dealings with government agencies, especially with the Bureau of
Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other
matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00
plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign
a prepared resolution for her replacement but she was assured that she would still be connected with Kasei Corporation.
Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced
that nothing had changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji
Kamura and in charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a
total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the
company was not earning well. On October 2001, petitioner did not receive her salary from the company. She made
repeated follow-ups with the company cashier but she was advised that the company was not earning well. 10
On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she
is no longer connected with the company. 11
Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal
before the labor arbiter.
EHASaD

Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was
hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As
technical consultant, petitioner performed her work at her own discretion without control and supervision of Kasei
Corporation. Petitioner had no daily time record and she came to the office any time she wanted. The company never
interfered with her work except that from time to time, the management would ask her opinion on matters relating to her
profession. Petitioner did not go through the usual procedure of selection of employees, but her services were engaged
through a Board Resolution designating her as technical consultant. The money received by petitioner from the
corporation was her professional fee subject to the 10% expanded withholding tax on professionals, and that she was not
one of those reported to the BIR or SSS as one of the company's employees. 12
Petitioner's designation as technical consultant depended solely upon the will of management. As such, her consultancy
may be terminated any time considering that her services were only temporary in nature and dependent on the needs of
the corporation.
To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the
years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR,
as well as a list of payees subject to expanded withholding tax which included petitioner. SSS records were also
submitted showing that petitioner's latest employer was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainant's dismissal as illegal;

3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly
and severally pay complainant her money claims in accordance with the following computation:

a. Backwages 10/2001 07/2002 275,000.00

(27,500 x 10 mos.)
b. Salary Differentials (01/2001 09/2001) 22,500.00
c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei

Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorney's fees 87,076.50
P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional
backwages that would accrue up to actual payment of separation pay.
SO ORDERED. 14

On April 15, 2003, the NLRC affirmed with modification the Decision of the LaborArbiter, the dispositive portion of which
reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay computed at one month per year of service in
addition to full backwages from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of
P100,000.00 and P361,175.00 are deleted;
3) The award of 10% attorney's fees shall be based on salary differential award only;

4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are
AFFIRMED.
SO ORDERED. 15

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of theNational Labor Relations Commissions
dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the
complaint filed by private respondent against Kasei Corporation, et al. for constructive dismissal.
SO ORDERED. 16

The appellate court denied petitioner's motion for reconsideration, hence, the present recourse.
The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between
petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.
Considering the conflicting findings by the Labor Arbiter and the National LaborRelations Commission on one hand, and
the Court of Appeals on the other, there is a need to reexamine the records to determine which of the propositions
espoused by the contending parties is supported by substantial evidence. 17
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the existence
of an employer-employee relation. Generally, courts have relied on the so-called right of control test where the person for
whom the services are performed reserves a right to control not only the end to be achieved but also the means to be
used in reaching such end. In addition to the standard of right-of-control, the existing economic conditions prevailing
between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an
employer-employee relationship.
However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the
parties, owing to the complexity of such a relationship where several positions have been held by the worker. There are
instances when, aside from the employer's power to control the employee with respect to the means and methods by
which the work is to be accomplished, economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or
some other capacity. caIEAD

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer's power to control
the employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying
economic realities of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this
case where there is no written agreement or terms of reference to base the relationship on; and due to the complexity of
the relationship based on the various positions and responsibilities given to the worker over the period of the latter's
employment.
The control test initially found application in the case of 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 employer's
business; (2) the extent of the worker's investment in equipment and facilities; (3) the nature and degree of control
exercised by the employer; (4) the worker's opportunity for profit and loss; (5) the amount of initiative, skill, judgment or
foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of the
relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer for
his continued employment in that line of business. 23
The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his
continued employment in that line of business. 24 In the United States, the touchstone of economic reality in analyzing
possible employment relationships for purposes of the Federal Labor Standards Act is dependency. 25 By analogy, the
benchmark of economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to
be the economic dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under
the direct control and supervision of Seiji Kamura, the corporation's Technical Consultant. She reported for work regularly
and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate
Secretary, with substantially the same job functions, that is, rendering accounting and tax services to the company and
performing functions necessary and desirable for the proper operation of the corporation such as securing business
permits and other licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation
because she had served the company for six years before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18, 2000. 26 When petitioner was designated General Manager,
respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioner's membership in the SSS as
manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei Corporation and
the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an employer-employee
relationship between petitioner and respondent corporation.27
It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment
in the latter's line of business.
In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification card is
provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that
issues it. Together with the cash vouchers covering petitioner's salaries for the months stated therein, these matters
constitute substantial evidence adequate to support a conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the latter
were the former's employees. The coverage of Social Security Law is predicated on the existence of an employer-
employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as
Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioner's job was
as Kamura's direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction
permits, license to operate and other requirements imposed by government agencies. Petitioner was never entrusted with
corporate documents of the company, nor required to attend the meeting of the corporation. She was never privy to the
preparation of any document for the corporation, although once in a while she was required to sign prepared
documentation for the company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly
withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced that the
allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any
retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would
make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. 32 A
recantation does not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test
of credibility and should be received with caution. 33
Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation.
She was selected and engaged by the company for compensation, and is economically dependent upon respondent for
her continued employment in that line of business. Her main job function involved accounting and tax services rendered to
respondent corporation on a regular basis over an indefinite period of engagement. Respondent corporation hired and
engaged petitioner for compensation, with the power to dismiss her for cause. More importantly, respondent corporation
had the power to control petitioner with the means and methods by which the work is to be accomplished. aHTEIA

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 nationaldevelopment.
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 LaborRelations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The
case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Francisco's full backwages from the
time she was illegally terminated until the date of finality of this decision, and separation pay representing one-half month
pay for every year of service, where a fraction of at least six months shall be considered as one whole year.
SO ORDERED.
 THIRD DIVISION
[G.R. No. 142625. December 19, 2006.]
ROGELIO P. NOGALES, for himself and on behalf of the minors, ROGER ANTHONY, ANGELICA,
NANCY, and MICHAEL CHRISTOPHER, all surnamed NOGALES, petitioners, vs. CAPITOL MEDICAL
CENTER, DR. OSCAR ESTRADA, DR. ELY VILLAFLOR, DR. ROSA UY, DR. JOEL ENRIQUEZ, DR.
PERPETUA LACSON, DR. NOE ESPINOLA, and NURSE J. DUMLAO, respondents.
DECISION
CARPIO, J : p

The Case
This petition for review 1 assails the 6 February 1998 Decision 2 and 21 March 2000 Resolution 3 of the Court of Appeals
in CA-G.R. CV No. 45641. The Court of Appeals affirmed in toto the 22 November 1993 Decision 4 of the Regional Trial
Court of Manila, Branch 33, finding Dr. Oscar Estrada solely liable for damages for the death of his patient, Corazon
Nogales, while absolving the remaining respondents of any liability. The Court of Appeals denied petitioners' motion for
reconsideration.
The Facts
Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was then 37 years old, was under the exclusive
prenatal care of Dr. Oscar Estrada ("Dr. Estrada") beginning on her fourth month of pregnancy or as early as December
1975. While Corazon was on her last trimester of pregnancy, Dr. Estrada noted an increase in her blood pressure and
development of leg edema 5 indicating preeclampsia, 6 which is a dangerous complication of pregnancy. 7
Around midnight of 25 May 1976, Corazon started to experience mild labor pains prompting Corazon and Rogelio
Nogales ("Spouses Nogales") to see Dr. Estrada at his home. After examining Corazon, Dr. Estrada advised her
immediate admission to the Capitol Medical Center ("CMC").
On 26 May 1976, Corazon was admitted at 2:30 a.m. at the CMC after the staff nurse noted the written admission
request 8 of Dr. Estrada. Upon Corazon's admission at the CMC, Rogelio Nogales ("Rogelio") executed and signed the
"Consent on Admission and Agreement" 9 and "Admission Agreement." 10 Corazon was then brought to the labor room of
the CMC.
Dr. Rosa Uy ("Dr. Uy"), who was then a resident physician of CMC, conducted an internal examination of Corazon. Dr. Uy
then called up Dr. Estrada to notify him of her findings.
Based on the Doctor's Order Sheet, 11 around 3:00 a.m., Dr. Estrada ordered for 10 mg. of valium to be administered
immediately by intramuscular injection. Dr. Estrada later ordered the start of intravenous administration of syntocinon
admixed with dextrose, 5%, in lactated Ringers' solution, at the rate of eight to ten micro-drops per minute. cCSDTI

According to the Nurse's Observation Notes, 12 Dr. Joel Enriquez ("Dr. Enriquez"), an anesthesiologist at CMC, was
notified at 4:15 a.m. of Corazon's admission. Subsequently, when asked if he needed the services of an anesthesiologist,
Dr. Estrada refused. Despite Dr. Estrada's refusal, Dr. Enriquez stayed to observe Corazon's condition.
At 6:00 a.m., Corazon was transferred to Delivery Room No. 1 of the CMC. At 6:10 a.m., Corazon's bag of water ruptured
spontaneously. At 6:12 a.m., Corazon's cervix was fully dilated. At 6:13 a.m., Corazon started to experience convulsions.
At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of magnesium sulfate. However, Dr. Ely Villaflor ("Dr.
Villaflor"), who was assisting Dr. Estrada, administered only 2.5 grams of magnesium sulfate.
At 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to extract Corazon's baby. In the process, a 1.0 x
2.5 cm. piece of cervical tissue was allegedly torn. The baby came out in an apnic, cyanotic, weak and injured condition.
Consequently, the baby had to be intubated and resuscitated by Dr. Enriquez and Dr. Payumo.
At 6:27 a.m., Corazon began to manifest moderate vaginal bleeding which rapidly became profuse. Corazon's blood
pressure dropped from 130/80 to 60/40 within five minutes. There was continuous profuse vaginal bleeding. The assisting
nurse administered hemacel through a gauge 19 needle as a side drip to the ongoing intravenous injection of dextrose.
At 7:45 a.m., Dr. Estrada ordered blood typing and cross matching with bottled blood. It took approximately 30 minutes for
the CMC laboratory, headed by Dr. Perpetua Lacson ("Dr. Lacson"), to comply with Dr. Estrada's order and deliver the
blood.
At 8:00 a.m., Dr. Noe Espinola ("Dr. Espinola"), head of the Obstetrics-Gynecology Department of the CMC, was apprised
of Corazon's condition by telephone. Upon being informed that Corazon was bleeding profusely, Dr. Espinola ordered
immediate hysterectomy. Rogelio was made to sign a "Consent to Operation." 13
Due to the inclement weather then, Dr. Espinola, who was fetched from his residence by an ambulance, arrived at the
CMC about an hour later or at 9:00 a.m. He examined the patient and ordered some resuscitative measures to be
administered. Despite Dr. Espinola's efforts, Corazon died at 9:15 a.m. The cause of death was "hemorrhage, post
partum." 14
On 14 May 1980, petitioners filed a complaint for damages 15 with the Regional Trial Court 16 of Manila against CMC, Dr.
Estrada, Dr. Villaflor, Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr. Espinola, and a certain Nurse J. Dumlao for the death of
Corazon. Petitioners mainly contended that defendant physicians and CMC personnel were negligent in the treatment and
management of Corazon's condition. Petitioners charged CMC with negligence in the selection and supervision of
defendant physicians and hospital staff.
For failing to file their answer to the complaint despite service of summons, the trial court declared Dr. Estrada, Dr.
Enriquez, and Nurse Dumlao in default. 17CMC, Dr. Villaflor, Dr. Uy, Dr. Espinola, and Dr. Lacson filed their respective
answers denying and opposing the allegations in the complaint. Subsequently, trial ensued.
After more than 11 years of trial, the trial court rendered judgment on 22 November 1993 finding Dr. Estrada solely liable
for damages. The trial court ruled as follows:
The victim was under his pre-natal care, apparently, his fault began from his incorrect and inadequate management
and lack of treatment of the pre-eclamptic condition of his patient. It is not disputed that he misapplied the forceps
in causing the delivery because it resulted in a large cervical tear which had caused the profuse bleeding which he
also failed to control with the application of inadequate injection of magnesium sulfate by his assistant Dra. Ely
Villaflor. Dr. Estrada even failed to notice the erroneous administration by nurse Dumlao of hemacel by way of side
drip, instead of direct intravenous injection, and his failure to consult a senior obstetrician at an early stage of the
problem. TaDSCA

On the part however of Dra. Ely Villaflor, Dra. Rosa Uy, Dr. Joel Enriquez, Dr. Lacson, Dr. Espinola, nurse J.
Dumlao and CMC, the Court finds no legal justification to find them civilly liable.

On the part of Dra. Ely Villaflor, she was only taking orders from Dr. Estrada, the principal physician of Corazon
Nogales. She can only make suggestions in the manner the patient maybe treated but she cannot impose her will
as to do so would be to substitute her good judgment to that of Dr. Estrada. If she failed to correctly diagnose the
true cause of the bleeding which in this case appears to be a cervical laceration, it cannot be safely concluded by
the Court that Dra. Villaflor had the correct diagnosis and she failed to inform Dr. Estrada. No evidence was
introduced to show that indeed Dra. Villaflor had discovered that there was laceration at the cervical area of the
patient's internal organ.
On the part of nurse Dumlao, there is no showing that when she administered the hemacel as a side drip, she did it
on her own. If the correct procedure was directly thru the veins, it could only be because this was what was
probably the orders of Dr. Estrada.

While the evidence of the plaintiffs shows that Dr. Noe Espinola, who was the Chief of the Department of Obstetrics
and Gynecology who attended to the patient Mrs. Nogales, it was only at 9:00 a.m. That he was able to reach the
hospital because of typhoon Didang (Exhibit 2). While he was able to give prescription in the manner Corazon
Nogales may be treated, the prescription was based on the information given to him by phone and he acted on the
basis of facts as presented to him, believing in good faith that such is the correct remedy. He was not with Dr.
Estrada when the patient was brought to the hospital at 2:30 o'clock a.m. So, whatever errors that Dr. Estrada
committed on the patient before 9:00 o'clock a.m. are certainly the errors of Dr. Estrada and cannot be the mistake
of Dr. Noe Espinola. His failure to come to the hospital on time was due to fortuitous event.

On the part of Dr. Joel Enriquez, while he was present in the delivery room, it is not incumbent upon him to call the
attention of Dr. Estrada, Dra. Villaflor and also of Nurse Dumlao on the alleged errors committed by them. Besides,
as anesthesiologist, he has no authority to control the actuations of Dr. Estrada and Dra. Villaflor. For the Court to
assume that there were errors being committed in the presence of Dr. Enriquez would be to dwell on conjectures
and speculations.

On the civil liability of Dr. Perpetua Lacson, [s]he is a hematologist and in-charge of the blood bank of the CMC.
The Court cannot accept the theory of the plaintiffs that there was delay in delivering the blood needed by the
patient. It was testified, that in order that this blood will be made available, a laboratory test has to be conducted to
determine the type of blood, cross matching and other matters consistent with medical science so, the lapse of 30
minutes maybe considered a reasonable time to do all of these things, and not a delay as the plaintiffs would want
the Court to believe.

Admittedly, Dra. Rosa Uy is a resident physician of the Capitol Medical Center. She was sued because of her
alleged failure to notice the incompetence and negligence of Dr. Estrada. However, there is no evidence to support
such theory. No evidence was adduced to show that Dra. Rosa Uy as a resident physician of Capitol Medical
Center, had knowledge of the mismanagement of the patient Corazon Nogales, and that notwithstanding such
knowledge, she tolerated the same to happen.

In the pre-trial order, plaintiffs and CMC agreed that defendant CMC did not have any hand or participation in the
selection or hiring of Dr. Estrada or his assistant Dra. Ely Villaflor as attending physician[s] of the deceased. In
 other words, the two (2) doctors were not employees of the hospital and therefore the hospital did not have control
over their professional conduct. When Mrs. Nogales was brought to the hospital, it was an emergency case and
defendant CMC had no choice but to admit her. Such being the case, there is therefore no legal ground to apply
the provisions of Article 2176 and 2180 of the New Civil Code referring to the vicarious liability of an employer for
the negligence of its employees. If ever in this case there is fault or negligence in the treatment of the deceased on
the part of the attending physicians who were employed by the family of the deceased, such civil liability should be
borne by the attending physicians under the principle of "respondeat superior". aSTECA

WHEREFORE, premises considered, judgment is hereby rendered finding defendant Dr. Estrada of Number 13
Pitimini St. San Francisco del Monte, Quezon City civilly liable to pay plaintiffs: 1) By way of actual damages in the
amount of P105,000.00; 2) By way of moral damages in the amount of P700,000.00; 3) Attorney's fees in the
amount of P100,000.00 and to pay the costs of suit.

For failure of the plaintiffs to adduce evidence to support its [sic] allegations against the other defendants, the
complaint is hereby ordered dismissed. While the Court looks with disfavor the filing of the present complaint
against the other defendants by the herein plaintiffs, as in a way it has caused them personal inconvenience and
slight damage on their name and reputation, the Court cannot accepts [sic] however, the theory of the remaining
defendants that plaintiffs were motivated in bad faith in the filing of this complaint. For this reason defendants'
counterclaims are hereby ordered dismissed.
SO ORDERED. 18

Petitioners appealed the trial court's decision. Petitioners claimed that aside from Dr. Estrada, the remaining respondents
should be held equally liable for negligence. Petitioners pointed out the extent of each respondent's alleged liability.
On 6 February 1998, the Court of Appeals affirmed the decision of the trial court. 19 Petitioners filed a motion for
reconsideration which the Court of Appeals denied in its Resolution of 21 March 2000. 20
Hence, this petition.
Meanwhile, petitioners filed a Manifestation dated 12 April 2002 21 stating that respondents Dr. Estrada, Dr. Enriquez, Dr.
Villaflor, and Nurse Dumlao "need no longer be notified of the petition because they are absolutely not involved in the
issue raised before the [Court], regarding the liability of [CMC]." 22 Petitioners stressed that the subject matter of this
petition is the liability of CMC for the negligence of Dr. Estrada. 23
The Court issued a Resolution dated 9 September 2002 24 dispensing with the requirement to submit the correct and
present addresses of respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao. The Court stated that with
the filing of petitioners' Manifestation, it should be understood that they are claiming only against respondents CMC, Dr.
Espinola, Dr. Lacson, and Dr. Uy who have filed their respective comments. Petitioners are foregoing further claims
against respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao.
The Court noted that Dr. Estrada did not appeal the decision of the Court of Appeals affirming the decision of the Regional
Trial Court. Accordingly, the decision of the Court of Appeals, affirming the trial court's judgment, is already final as
against Dr. Oscar Estrada.
Petitioners filed a motion for reconsideration 25 of the Court's 9 September 2002 Resolution claiming that Dr. Enriquez, Dr.
Villaflor and Nurse Dumlao were notified of the petition at their counsels' last known addresses. Petitioners reiterated their
imputation of negligence on these respondents. The Court denied petitioners' Motion for Reconsideration in its 18
February 2004 Resolution. 26
The Court of Appeals' Ruling
In its Decision of 6 February 1998, the Court of Appeals upheld the trial court's ruling. The Court of Appeals rejected
petitioners' view that the doctrine in Darling v. Charleston Community Memorial Hospital 27 applies to this case. According
to the Court of Appeals, the present case differs from the Darling case since Dr. Estrada is an independent contractor-
physician whereas the Darling case involved a physician and a nurse who were employees of the hospital.
Citing other American cases, the Court of Appeals further held that the mere fact that a hospital permitted a physician to
practice medicine and use its facilities is not sufficient to render the hospital liable for the physician's negligence. 28 A
hospital is not responsible for the negligence of a physician who is an independent contractor. 29
The Court of Appeals found the cases of Davidson v. Conole 30 and Campbell v. Emma Laing Stevens
Hospital 31 applicable to this case. Quoting Campbell, the Court of Appeals stated that where there is no proof that
defendant physician was an employee of defendant hospital or that defendant hospital had reason to know that any acts
of malpractice would take place, defendant hospital could not be held liable for its failure to intervene in the relationship of
physician-patient between defendant physician and plaintiff. EDATSC

On the liability of the other respondents, the Court of Appeals applied the "borrowed servant" doctrine considering that Dr.
Estrada was an independent contractor who was merely exercising hospital privileges. This doctrine provides that once
the surgeon enters the operating room and takes charge of the proceedings, the acts or omissions of operating room
personnel, and any negligence associated with such acts or omissions, are imputable to the surgeon. 32 While the assisting
physicians and nurses may be employed by the hospital, or engaged by the patient, they normally become the temporary
servants or agents of the surgeon in charge while the operation is in progress, and liability may be imposed upon the
surgeon for their negligent acts under the doctrine ofrespondeat superior. 33
The Court of Appeals concluded that since Rogelio engaged Dr. Estrada as the attending physician of his wife, any
liability for malpractice must be Dr. Estrada's sole responsibility.
While it found the amount of damages fair and reasonable, the Court of Appeals held that no interest could be imposed on
unliquidated claims or damages.
The Issue
Basically, the issue in this case is whether CMC is vicariously liable for the negligence of Dr. Estrada. The resolution of
this issue rests, on the other hand, on the ascertainment of the relationship between Dr. Estrada and CMC. The Court
also believes that a determination of the extent of liability of the other respondents is inevitable to finally and completely
dispose of the present controversy.
The Ruling of the Court
The petition is partly meritorious.
On the Liability of CMC
Dr. Estrada's negligence in handling the treatment and management of Corazon's condition which ultimately resulted in
Corazon's death is no longer in issue. Dr. Estrada did not appeal the decision of the Court of Appeals which affirmed the
ruling of the trial court finding Dr. Estrada solely liable for damages. Accordingly, the finding of the trial court on Dr.
Estrada's negligence is already final.
Petitioners maintain that CMC is vicariously liable for Dr. Estrada's negligence based on Article 2180 in relation to Article
2176 of the Civil Code. These provisions pertinently state:
Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also
for those of persons for whom one is responsible.
xxx xxx xxx

Employers shall be liable for the damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any business or industry.
xxx xxx xxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed
all the diligence of a good father of a family to prevent damage.

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.

Similarly, in the United States, a hospital which is the employer, master, or principal of a physician employee, servant, or
agent, may be held liable for the physician's negligence under the doctrine of respondeat superior. 34
In the present case, petitioners maintain that CMC, in allowing Dr. Estrada to practice and admit patients at CMC, should
be liable for Dr. Estrada's malpractice. Rogelio claims that he knew Dr. Estrada as an accredited physician of CMC,
though he discovered later that Dr. Estrada was not a salaried employee of the CMC. 35 Rogelio further claims that he was
dealing with CMC, whose primary concern was the treatment and management of his wife's condition. Dr. Estrada just
happened to be the specific person he talked to representing CMC. 36Moreover, the fact that CMC made Rogelio sign a
Consent on Admission and Admission Agreement 37 and a Consent to Operation printed on the letterhead of CMC
indicates that CMC considered Dr. Estrada as a member of its medical staff.
On the other hand, CMC disclaims liability by asserting that Dr. Estrada was a mere visiting physician and that it admitted
Corazon because her physical condition then was classified an emergency obstetrics case. 38 CMC alleges that Dr.
Estrada is an independent contractor "for whose actuations CMC would be a total stranger." CMC maintains that it had no
control or supervision over Dr. Estrada in the exercise of his medical profession.
The Court had the occasion to determine the relationship between a hospital and a consultant or visiting physician and
the liability of such hospital for that physician's negligence in Ramos v. Court of Appeals, 39 to wit:
In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the conduct of
their work within the hospital premises. Doctors who apply for "consultant" slots, visiting or attending, are required
 to submit proof of completion of residency, their educational qualifications; generally, evidence of accreditation by
the appropriate board (diplomate), evidence of fellowship in most cases, and references. These requirements are
carefully scrutinized by members of the hospital administration or by a review committee set up by the hospital who
either accept or reject the application. This is particularly true with respondent hospital.
After a physician is accepted, either as a visiting or attending consultant, he is normally required to attend clinico-
pathological conferences, conduct bedside rounds for clerks, interns and residents, moderate grand rounds and
patient audits and perform other tasks and responsibilities, for the privilege of being able to maintain a clinic in the
hospital, and/or for the privilege of admitting patients into the hospital. In addition to these, the physician's
performance as a specialist is generally evaluated by a peer review committee on the basis of mortality and
morbidity statistics, and feedback from patients, nurses, interns and residents. A consultant remiss in his duties, or
a consultant who regularly falls short of the minimum standards acceptable to the hospital or its peer review
committee, is normally politely terminated.

In other words, private hospitals, hire, fire and exercise real control over their attending and visiting "consultant"
staff. While "consultants" are not, technically employees, a point which respondent hospital asserts in
denying all responsibility for the patient's condition, the control exercised, the hiring, and the right to
terminate consultants all fulfill the important hallmarks of an employer-employee relationship, with the
exception of the payment of wages. In assessing whether such a relationship in fact exists, the control test
is determining. Accordingly, on the basis of the foregoing, we rule that for the purpose of allocating
responsibility in medical negligence cases, an employer-employee relationship in effect exists between
hospitals and their attending and visiting physicians. This being the case, the question now arises as to
whether or not respondent hospital is solidarily liable with respondent doctors for petitioner's condition. IaDTES

The basis for holding an employer solidarily responsible for the negligence of its employee is found in Article 2180
of the Civil Code which considers a person accountable not only for his own acts but also for those of others based
on the former's responsibility under a relationship of patria potestas. . . . 40 (Emphasis supplied)

While the Court in Ramos did not expound on the control test, such test essentially determines whether an
employment relationship exists between a physician and a hospital based on the exercise of control over the
physician as to details. Specifically, the employer (or the hospital) must have the right to control both the means and
the details of the process by which the employee (or the physician) is to accomplish his task. 41
After a thorough examination of the voluminous records of this case, the Court finds no single evidence pointing to CMC's
exercise of control over Dr. Estrada's treatment and management of Corazon's condition. It is undisputed that throughout
Corazon's pregnancy, she was under the exclusive prenatal care of Dr. Estrada. At the time of Corazon's admission at
CMC and during her delivery, it was Dr. Estrada, assisted by Dr. Villaflor, who attended to Corazon. There was no
showing that CMC had a part in diagnosing Corazon's condition. While Dr. Estrada enjoyed staff privileges at CMC, such
fact alone did not make him an employee of CMC. 42 CMC merely allowed Dr. Estrada to use its facilities 43 when Corazon
was about to give birth, which CMC considered an emergency. Considering these circumstances, Dr. Estrada is not an
employee of CMC, but an independent contractor.
The question now is whether CMC is automatically exempt from liability considering that Dr. Estrada is an independent
contractor-physician.
In general, a hospital is not liable for the negligence of an independent contractor-physician. There is, however, an
exception to this principle. The hospital may be liable if the physician is the "ostensible" agent of the hospital. 44 This
exception is also known as the "doctrine of apparent authority." 45 In Gilbert v. Sycamore Municipal Hospital, 46 the Illinois
Supreme Court explained the doctrine of apparent authority in this wise:
[U]nder the doctrine of apparent authority a hospital can be held vicariously liable for the negligent acts of a
physician providing care at the hospital, regardless of whether the physician is an independent contractor, unless
the patient knows, or should have known, that the physician is an independent contractor. The elements of the
action have been set out as follows:

"For a hospital to be liable under the doctrine of apparent authority, a plaintiff must show that: (1) the hospital, or its
agent, acted in a manner that would lead a reasonable person to conclude that the individual who was alleged to
be negligent was an employee or agent of the hospital; (2) where the acts of the agent create the appearance of
authority, the plaintiff must also prove that the hospital had knowledge of and acquiesced in them; and (3) the
plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence."

The element of "holding out" on the part of the hospital does not require an express representation by the hospital
that the person alleged to be negligent is an employee. Rather, the element is satisfied if the hospital holds itself
out as a provider of emergency room care without informing the patient that the care is provided by independent
contractors.

The element of justifiable reliance on the part of the plaintiff is satisfied if the plaintiff relies upon the hospital to
provide complete emergency room care, rather than upon a specific physician. ECSaAc
The doctrine of apparent authority essentially involves two factors to determine the liability of an independent-contractor
physician.
The first factor focuses on the hospital's manifestations and is sometimes described as an inquiry whether the hospital
acted in a manner which would lead a reasonable person to conclude that the individual who was alleged to be negligent
was an employee or agent of the hospital. 47 In this regard, the hospital need not make express representations to
the patient that the treating physician is an employee of the hospital; rather a representation may be general and
implied. 48
The doctrine of apparent authority is a species of the doctrine of estoppel. Article 1431 of the Civil Code provides that
"[t]hrough estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon." Estoppel rests on this rule: "Whenever a party has, by his own
declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon
such belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it." 49
In the instant case, CMC impliedly held out Dr. Estrada as a member of its medical staff. Through CMC's acts, CMC
clothed Dr. Estrada with apparent authority thereby leading the Spouses Nogales to believe that Dr. Estrada was an
employee or agent of CMC. CMC cannot now repudiate such authority.
First, CMC granted staff privileges to Dr. Estrada. CMC extended its medical staff and facilities to Dr. Estrada. Upon Dr.
Estrada's request for Corazon's admission, CMC, through its personnel, readily accommodated Corazon and updated Dr.
Estrada of her condition.
Second, CMC made Rogelio sign consent forms printed on CMC letterhead. Prior to Corazon's admission and supposed
hysterectomy, CMC asked Rogelio to sign release forms, the contents of which reinforced Rogelio's belief that Dr. Estrada
was a member of CMC's medical staff. 50 The Consent on Admission and Agreement explicitly provides:
KNOW ALL MEN BY THESE PRESENTS:

I, Rogelio Nogales, of legal age, a resident of 1974 M. H. Del Pilar St., Malate Mla., being the
father/mother/brother/sister/spouse/relative/guardian/or person in custody of Ma. Corazon, and representing his/her
family, of my own volition and free will, do consent and submit said Ma. Corazon to Dr. Oscar Estrada (hereinafter
referred to as Physician) for cure, treatment, retreatment, or emergency measures, that the Physician, personally
or by and through the Capitol Medical Center and/or its staff, may use, adapt, or employ such means,
forms or methods of cure, treatment, retreatment, or emergency measures as he may see best and most
expedient; that Ma. Corazon and I will comply with any and all rules, regulations, directions, and
instructions of the Physician, the Capitol Medical Center and/or its staff; and, that I will not hold liable or
responsible and hereby waive and forever discharge and hold free the Physician, the Capitol Medical Center and/or
its staff, from any and all claims of whatever kind of nature, arising from directly or indirectly, or by reason of said
cure, treatment, or retreatment, or emergency measures or intervention of said physician, the Capitol Medical
Center and/or its staff.

xxx xxx xxx 51 (Emphasis supplied)

While the Consent to Operation pertinently reads, thus:

I, ROGELIO NOGALES, . . ., of my own volition and free will, do consent and submit said CORAZON NOGALES to
Hysterectomy, by the Surgical Staff and Anesthesiologists of Capitol Medical Center and/or whatever
succeeding operations, treatment, or emergency measures as may be necessary and most expedient; and, that I
will not hold liable or responsible and hereby waive and forever discharge and hold free the Surgeon, his
assistants, anesthesiologists, the Capitol Medical Center and/or its staff, from any and all claims of whatever kind
of nature, arising from directly or indirectly, or by reason of said operation or operations, treatment, or emergency
measures, or intervention of the Surgeon, his assistants, anesthesiologists, the Capitol Medical Center and/or its
staff. 52(Emphasis supplied)

Without any indication in these consent forms that Dr. Estrada was an independent contractor-physician, the Spouses
Nogales could not have known that Dr. Estrada was an independent contractor. Significantly, no one from CMC
informed the Spouses Nogales that Dr. Estrada was an independent contractor. On the contrary, Dr. Atencio, who
was then a member of CMC Board of Directors, testified that Dr. Estrada was part of CMC's surgical staff. 53
Third, Dr. Estrada's referral of Corazon's profuse vaginal bleeding to Dr. Espinola, who was then the Head of the
Obstetrics and Gynecology Department of CMC, gave the impression that Dr. Estrada as a member of CMC's medical
staff was collaborating with other CMC-employed specialists in treating Corazon. caHASI

The second factor focuses on the patient's reliance. It is sometimes characterized as an inquiry on whether the plaintiff
acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence. 54
The records show that the Spouses Nogales relied upon a perceived employment relationship with CMC in accepting Dr.
Estrada's services. Rogelio testified that he and his wife specifically chose Dr. Estrada to handle Corazon's delivery not
only because of their friend's recommendation, but more importantly because of Dr. Estrada's "connection with a
reputable hospital, the [CMC]." 55 In other words, Dr. Estrada's relationship with CMC played a significant role in the
Spouses Nogales' decision in accepting Dr. Estrada's services as the obstetrician-gynecologist for Corazon's delivery.
Moreover, as earlier stated, there is no showing that before and during Corazon's confinement at CMC, the Spouses
Nogales knew or should have known that Dr. Estrada was not an employee of CMC.
Further, the Spouses Nogales looked to CMC to provide the best medical care and support services for Corazon's
delivery. The Court notes that prior to Corazon's fourth pregnancy, she used to give birth inside a clinic. Considering
Corazon's age then, the Spouses Nogales decided to have their fourth child delivered at CMC, which Rogelio regarded
one of the best hospitals at the time. 56 This is precisely because the Spouses Nogales feared that Corazon might
experience complications during her delivery which would be better addressed and treated in a modern and big hospital
such as CMC. Moreover, Rogelio's consent in Corazon's hysterectomy to be performed by a different physician, namely
Dr. Espinola, is a clear indication of Rogelio's confidence in CMC's surgical staff.
CMC's defense that all it did was "to extend to [Corazon] its facilities" is untenable. The Court cannot close its eyes to the
reality that hospitals, such as CMC, are in the business of treatment. In this regard, the Court agrees with the observation
made by the Court of Appeals of North Carolina in Diggs v. Novant Health, Inc., 57to wit:
"The conception that the hospital does not undertake to treat the patient, does not undertake to act through its
doctors and nurses, but undertakes instead simply to procure them to act upon their own responsibility, no longer
reflects the fact. Present day hospitals, as their manner of operation plainly demonstrates, do far more than
furnish facilities for treatment. They regularly employ on a salary basis a large staff of physicians, nurses
and internes [sic], as well as administrative and manual workers, and they charge patients for medical care
and treatment, collecting for such services, if necessary, by legal action. Certainly, the person who avails
himself of 'hospital facilities' expects that the hospital will attempt to cure him, not that its nurses or other
employees will act on their own responsibility." . . . (Emphasis supplied)

Likewise unconvincing is CMC's argument that petitioners are estopped from claiming damages based on the
Consent on Admission and Consent to Operation. Both release forms consist of two parts. The first part gave CMC
permission to administer to Corazon any form of recognized medical treatment which the CMC medical staff deemed
advisable. The second part of the documents, which may properly be described as the releasing part, releases CMC
and its employees "from any and all claims" arising from or by reason of the treatment and operation.
The documents do not expressly release CMC from liability for injury to Corazondue to negligence during her treatment or
operation. Neither do the consent forms expressly exempt CMC from liability for Corazon's death due to negligenceduring
such treatment or operation. Such release forms, being in the nature of contracts of adhesion, are construed strictly
against hospitals. Besides, a blanket release in favor of hospitals "from any and all claims," which includes claims due to
bad faith or gross negligence, would be contrary to public policy and thus void.
Even simple negligence is not subject to blanket release in favor of establishments like hospitals but may only mitigate
liability depending on the circumstances. 58When a person needing urgent medical attention rushes to a hospital, he
cannot bargain on equal footing with the hospital on the terms of admission and operation. Such a person is literally at the
mercy of the hospital. There can be no clearer example of a contract of adhesion than one arising from such a dire
situation. Thus, the release forms of CMC cannot relieve CMC from liability for the negligent medical treatment of
Corazon.
On the Liability of the Other Respondents
Despite this Court's pronouncement in its 9 September 2002 59 Resolution that the filing of petitioners' Manifestation
confined petitioners' claim only against CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy, who have filed their comments, the
Court deems it proper to resolve the individual liability of the remaining respondents to put an end finally to this more than
two-decade old controversy. IDTcHa

a) Dr. Ely Villaflor

Petitioners blame Dr. Ely Villaflor for failing to diagnose the cause of Corazon's bleeding and to suggest the correct
remedy to Dr. Estrada. 60 Petitioners assert that it was Dr. Villaflor's duty to correct the error of Nurse Dumlao in the
administration of hemacel.
The Court is not persuaded. Dr. Villaflor admitted administering a lower dosage of magnesium sulfate. However, this was
after informing Dr. Estrada that Corazon was no longer in convulsion and that her blood pressure went down to a
dangerous level. 61 At that moment, Dr. Estrada instructed Dr. Villaflor to reduce the dosage of magnesium sulfate from 10
to 2.5 grams. Since petitioners did not dispute Dr. Villaflor's allegation, Dr. Villaflor's defense remains uncontroverted. Dr.
Villaflor's act of administering a lower dosage of magnesium sulfate was not out of her own volition or was in
contravention of Dr. Estrada's order.
b) Dr. Rosa Uy
Dr. Rosa Uy's alleged negligence consisted of her failure (1) to call the attention of Dr. Estrada on the incorrect dosage of
magnesium sulfate administered by Dr. Villaflor; (2) to take corrective measures; and (3) to correct Nurse Dumlao's wrong
method of hemacel administration.
The Court believes Dr. Uy's claim that as a second year resident physician then at CMC, she was merely authorized to
take the clinical history and physical examination of Corazon. 62 However, that routine internal examination did notipso
facto make Dr. Uy liable for the errors committed by Dr. Estrada. Further, petitioners' imputation of negligence rests on
their baseless assumption that Dr. Uy was present at the delivery room. Nothing shows that Dr. Uy participated in
delivering Corazon's baby. Further, it is unexpected from Dr. Uy, a mere resident physician at that time, to call the
attention of a more experienced specialist, if ever she was present at the delivery room. HAaDTI

c) Dr. Joel Enriquez

Petitioners fault Dr. Joel Enriquez also for not calling the attention of Dr. Estrada, Dr. Villaflor, and Nurse Dumlao about
their errors. 63 Petitioners insist that Dr. Enriquez should have taken, or at least suggested, corrective measures to rectify
such errors.
The Court is not convinced. Dr. Enriquez is an anesthesiologist whose field of expertise is definitely not obstetrics and
gynecology. As such, Dr. Enriquez was not expected to correct Dr. Estrada's errors. Besides, there was no evidence of
Dr. Enriquez's knowledge of any error committed by Dr. Estrada and his failure to act upon such observation.
d) Dr. Perpetua Lacson
Petitioners fault Dr. Perpetua Lacson for her purported delay in the delivery of blood Corazon needed. 64 Petitioners claim
that Dr. Lacson was remiss in her duty of supervising the blood bank staff.
As found by the trial court, there was no unreasonable delay in the delivery of blood from the time of the request until the
transfusion to Corazon. Dr. Lacson competently explained the procedure before blood could be given to the
patient.65 Taking into account the bleeding time, clotting time and cross-matching, Dr. Lacson stated that it would take
approximately 45-60 minutes before blood could be ready for transfusion. 66 Further, no evidence exists that Dr. Lacson
neglected her duties as head of the blood bank.
e) Dr. Noe Espinola
Petitioners argue that Dr. Espinola should not have ordered immediate hysterectomy without determining the underlying
cause of Corazon's bleeding. Dr. Espinola should have first considered the possibility of cervical injury, and advised a
thorough examination of the cervix, instead of believing outright Dr. Estrada's diagnosis that the cause of bleeding was
uterine atony.
Dr. Espinola's order to do hysterectomy which was based on the information he received by phone is not negligence. The
Court agrees with the trial court's observation that Dr. Espinola, upon hearing such information about Corazon's condition,
believed in good faith that hysterectomy was the correct remedy. At any rate, the hysterectomy did not push through
because upon Dr. Espinola's arrival, it was already too late. At the time, Corazon was practically dead.
f) Nurse J. Dumlao
In Moore v. Guthrie Hospital Inc., 67 the US Court of Appeals, Fourth Circuit, held that to recover, a patient complaining of
injuries allegedly resulting when the nurse negligently injected medicine to him intravenously instead of intramuscularly
had to show that (1) an intravenous injection constituted a lack of reasonable and ordinary care; (2) the nurse injected
medicine intravenously; and (3) such injection was the proximate cause of his injury.
In the present case, there is no evidence of Nurse Dumlao's alleged failure to follow Dr. Estrada's specific instructions.
Even assuming Nurse Dumlao defied Dr. Estrada's order, there is no showing that side-drip administration of hemacel
proximately caused Corazon's death. No evidence linking Corazon's death and the alleged wrongful hemacel
administration was introduced. Therefore, there is no basis to hold Nurse Dumlao liable for negligence.
On the Award of Interest on Damages
The award of interest on damages is proper and allowed under Article 2211 of the Civil Code, which states that in crimes
and quasi-delicts, interest as a part of the damages may, in a proper case, be adjudicated in the discretion of the court. 68
WHEREFORE, the Court PARTLY GRANTS the petition. The Court finds respondent Capitol Medical Center vicariously
liable for the negligence of Dr. Oscar Estrada. The amounts of P105,000 as actual damages and P700,000 as moral
damages should each earn legal interest at the rate of six percent (6%) per annum computed from the date of the
judgment of the trial court. The Court affirms the rest of the Decision dated 6 February 1998 and Resolution dated 21
March 2000 of the Court of Appeals in CA-G.R. CV No. 45641. SETAcC

SO ORDERED.
 FIRST DIVISION
[G.R. No. 146881. February 5, 2007.]
COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager,petitioners, vs. DR. DEAN N.
CLIMACO, respondent.
DECISION
AZCUNA, J : p

This is a petition for review on certiorari of the Decision of the Court of Appeals 1promulgated on July 7, 2000, and its
Resolution promulgated on January 30, 2001, denying petitioner's motion for reconsideration. The Court of Appeals ruled
that an employer-employee relationship exists between respondent Dr. Dean N. Climaco and petitioner Coca-Cola
Bottlers Phils., Inc. (Coca-Cola), and that respondent was illegally dismissed.
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola Bottlers Phils., Inc. by virtue
of a Retainer Agreement that stated:
WHEREAS, the COMPANY desires to engage on a retainer basis the services of a physician and the said
DOCTOR is accepting such engagement upon terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter contained, the parties
agree as follows:
1. This Agreement shall only be for a period of one (1) year beginningJanuary 1, 1988 up to December 31, 1988.
The said term notwithstanding, either party may terminate the contract upon giving a thirty (30)-day written
notice to the other. HIACac

2. The compensation to be paid by the company for the services of the DOCTOR is hereby fixed at PESOS: Three
Thousand Eight Hundred (P3,800.00) per month. The DOCTOR may charge professional fee for hospital
services rendered in line with his specialization. All payments in connection with the Retainer Agreement
shall be subject to a withholding tax of ten percent (10%) to be withheld by the COMPANY under the
Expanded Withholding Tax System. In the event the withholding tax rate shall be increased or decreased
by appropriate laws, then the rate herein stipulated shall accordingly be increased or decreased pursuant
to such laws.

3. That in consideration of the above mentioned retainer's fee, the DOCTOR agrees to perform the duties and
obligations enumerated in the COMPREHENSIVE MEDICAL PLAN, hereto attached as Annex "A" and
made an integral part of this Retainer Agreement.

4. That the applicable provisions in the Occupational Safety and Health Standards, Ministry of Labor and
Employment shall be followed.

5. That the DOCTOR shall be directly responsible to the employee concerned and their dependents for any injury
inflicted on, harm done against or damage caused upon the employee of the COMPANY or their
dependents during the course of his examination, treatment or consultation, if such injury, harm or
damage was committed through professional negligence or incompetence or due to the other valid causes
for action.

6. That the DOCTOR shall observe clinic hours at the COMPANY'S premises from Monday to Saturday of a
minimum of two (2) hours each day or a maximum of TWO (2) hours each day or treatment from 7:30 a.m.
to 8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless such schedule is otherwise changed by the
COMPANY as [the] situation so warrants, subject to the Labor Code provisions on Occupational Safety
and Health Standards as the COMPANY may determine. It is understood that the DOCTOR shall stay at
least two (2) hours a day in the COMPANY clinic and that such two (2) hours be devoted to the workshifts
with the most number of employees. It is further understood that the DOCTOR shall be on call at all times
during the other workshifts to attend to emergency case[s];
7. That no employee-employer relationship shall exist between the COMPANY and the DOCTOR whilst this
contract is in effect, and in case of its termination, the DOCTOR shall be entitled only to such retainer fee
as may be due him at the time of termination. 2

The Comprehensive Medical Plan, 3 which contains the duties and responsibilities of respondent, adverted to in the
Retainer Agreement, provided:
A. OBJECTIVE
These objectives have been set to give full consideration to [the] employees' and dependents' health:
1. Prompt and adequate treatment of occupational and non-occupational injuries and diseases.

2. To protect employees from any occupational health hazard by evaluating health factors related to
working conditions.
 3. To encourage employees [to] maintain good personal health by setting up employee orientation and
education on health, hygiene and sanitation, nutrition, physical fitness, first aid training, accident
prevention and personnel safety.
4. To evaluate other matters relating to health such as absenteeism, leaves and termination.
5. To give family planning motivations.
B. COVERAGE
1. All employees and their dependents are embraced by this program.

2. The health program shall cover pre-employment and annual p.e., hygiene and sanitation,
immunizations, family planning, physical fitness and athletic programs and other activities such
as group health education program, safety and first aid classes, organization of health and safety
committees.
3. Periodically, this program will be reviewed and adjusted based on employees' needs. ECHSDc
C. ACTIVITIES
1. Annual Physical Examination.
2. Consultations, diagnosis and treatment of occupational and non-occupational illnesses and injuries.
3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest rooms.
5. Conduct health education programs and present education materials.

6. Coordinate with Safety Committee in developing specific studies and program to minimize
environmental health hazards.
7. Give family planning motivations.
8. Coordinate with Personnel Department regarding physical fitness and athletic programs.
9. Visiting and follow-up treatment of Company employees and their dependents confined in the hospital.

The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one expired on December 31,
1993. Despite the non-renewal of the Retainer Agreement, respondent continued to perform his functions as company
doctor to Coca-Cola until he received a letter 4 dated March 9, 1995 from petitioner company concluding their retainership
agreement effective 30 days from receipt thereof.
It is noted that as early as September 1992, petitioner was already making inquiries regarding his status with petitioner
company. First, he wrote a letter addressed to Dr. Willie Sy, the Acting President and Chairperson of the Committee on
Membership, Philippine College of Occupational Medicine. In response, Dr. Sy wrote a letter 5 to the Personnel Officer of
Coca-Cola Bottlers Phils., Bacolod City, stating that respondent should be considered as a regular part-time physician,
having served the company continuously for four (4) years. He likewise stated that respondent must receive all the
benefits and privileges of an employee under Article 157 (b) 6 of the Labor Code.
Petitioner company, however, did not take any action. Hence, respondent made another inquiry directed to the Assistant
Regional Director, Bacolod City District Office of the Department of Labor and Employment (DOLE), who referred the
inquiry to the Legal Service of the DOLE, Manila. In his letter 7 dated May 18, 1993, Director Dennis P. Ancheta, Legal
Service, DOLE, stated that he believed that an employer-employee relationship existed between petitioner and
respondent based on the Retainer Agreement and the Comprehensive Medical Plan, and the application of the "four-fold"
test. However, Director Ancheta emphasized that the existence of employer-employee relationship is a question of fact.
Hence, termination disputes or money claims arising from employer-employee relations exceeding P5,000 may be filed
with the National Labor Relations Commission (NLRC). He stated that their opinion is strictly advisory.
An inquiry was likewise addressed to the Social Security System (SSS). Thereafter, Mr. Romeo R. Tupas, OIC-FID of
SSS-Bacolod City, wrote a letter 8 to the Personnel Officer of Coca-Cola Bottlers Phils., Inc. informing the latter that the
legal staff of his office was of the opinion that the services of respondent partake of the nature of work of a regular
company doctor and that he was, therefore, subject to social security coverage.
Respondent inquired from the management of petitioner company whether it was agreeable to recognizing him as a
regular employee. The management refused to do so.
On February 24, 1994, respondent filed a Complaint 9 before the NLRC, Bacolod City, seeking recognition as a regular
employee of petitioner company and prayed for the payment of all benefits of a regular employee, including 13th Month
Pay, Cost of Living Allowance, Holiday Pay, Service Incentive Leave Pay, and Christmas Bonus. The case was docketed
as RAB Case No. 06-02-10138-94. DSHcTC

While the complaint was pending before the Labor Arbiter, respondent received a letter dated March 9, 1995 from
petitioner company concluding their retainership agreement effective thirty (30) days from receipt thereof. This prompted
respondent to file a complaint for illegal dismissal against petitioner company with the NLRC, Bacolod City. The case was
docketed as RAB Case No. 06-04-10177-95.
In a Decision 10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr. found that petitioner company lacked the
power of control over respondent's performance of his duties, and recognized as valid the Retainer Agreement between
the parties. Thus, the Labor Arbiter dismissed respondent's complaint in the first case, RAB Case No. 06-02-10138-94.
The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint seeking
recognition as a regular employee.
SO ORDERED. 11

In a Decision 12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed the case for illegal dismissal (RAB
Case No. 06-04-10177-95) in view of the previous finding of Labor Arbiter Jesus N. Rodriguez, Jr. in RAB Case No. 06-
02-10138-94 that complainant therein, Dr. Dean Climaco, is not an employee of Coca-Cola Bottlers Phils., Inc.

Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City.
In a Decision 13 promulgated on November 28, 1997, the NLRC dismissed the appeal in both cases for lack of merit. It
declared that no employer-employee relationship existed between petitioner company and respondent based on the
provisions of the Retainer Agreement which contract governed respondent's employment.
Respondent's motion for reconsideration was denied by the NLRC in a Resolution 14 promulgated on August 7, 1998.
Respondent filed a petition for review with the Court of Appeals.
In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an employer-employee relationship existed
between petitioner company and respondent after applying the four-fold test: (1) the power to hire the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the employer's power to control the employee with respect to the
means and methods by which the work is to be accomplished.
The Court of Appeals held:
The Retainer Agreement executed by and between the parties, when read together with the Comprehensive
Medical Plan which was made an integral part of the retainer agreements, coupled with the actual services
rendered by the petitioner, would show that all the elements of the above test are present.

First, the agreements provide that "the COMPANY desires to engage on a retainer basis the services of a
physician and the said DOCTOR is accepting such engagement . . ." (Rollo, page 25). This clearly shows that
Coca-Cola exercised its power to hire the services of petitioner.
Secondly, paragraph (2) of the agreements showed that petitioner would be entitled to a final compensation of
Three Thousand Eight Hundred Pesos per month, which amount was later raised to Seven Thousand Five
Hundred on the latest contract. This would represent the element of payment of wages. SEACTH

Thirdly, it was provided in paragraph (1) of the agreements that the same shall be valid for a period of one year.
"The said term notwithstanding, either party may terminate the contract upon giving a thirty (30) day written notice
to the other." (Rollo, page 25). This would show that Coca-Cola had the power of dismissing the petitioner, as it
later on did, and this could be done for no particular reason, the sole requirement being the former's compliance
with the 30-day notice requirement.
Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised the most important element of
all, that is, control, over the conduct of petitioner in the latter's performance of his duties as a doctor for the
company.
It was stated in paragraph (3) that the doctor agrees to perform the duties and obligations enumerated in the
Comprehensive Medical Plan referred to above. In paragraph (6), the fixed and definite hours during which the
petitioner must render service to the company is laid down.

We say that there exists Coca-Cola's power to control petitioner because the particular objectives and activities to
be observed and accomplished by the latter are fixed and set under the Comprehensive Medical Plan which was
made an integral part of the retainer agreement. Moreover, the times for accomplishing these objectives and
activities are likewise controlled and determined by the company. Petitioner is subject to definite hours of work, and
 due to this, he performs his duties to Coca-Cola not at his own pleasure but according to the schedule dictated by
the company.

In addition, petitioner was designated by Coca-Cola to be a member of its Bacolod Plant's Safety Committee. The
minutes of the meeting of the said committee dated February 16, 1994 included the name of petitioner, as plant
physician, as among those comprising the committee.

It was averred by Coca-Cola in its comment that they exercised no control over petitioner for the reason that the
latter was not directed as to the procedure and manner of performing his assigned tasks. It went as far as saying
that "petitioner was not told how to immunize, inject, treat or diagnose the employees of the respondent (Rollo,
page 228). We believe that if the "control test" would be interpreted this strictly, it would result in an absurd and
ridiculous situation wherein we could declare that an entity exercises control over another's activities only in
instances where the latter is directed by the former on each and every stage of performance of the particular
activity. Anything less than that would be tantamount to no control at all.
To our minds, it is sufficient if the task or activity, as well as the means of accomplishing it, is dictated, as in this
case where the objectives and activities were laid out, and the specific time for performing them was fixed by the
controlling party. 15

Moreover, the Court of Appeals declared that respondent should be classified as a regular employee having rendered six
years of service as plant physician by virtue of several renewed retainer agreements. It underscored the provision in
Article 280 16 of the Labor Code stating that "any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is
employed, and his employment shall continue while such activity exists." Further, it held that the termination of
respondent's services without any just or authorized cause constituted illegal dismissal.
In addition, the Court of Appeals found that respondent's dismissal was an act oppressive to labor and was effected in a
wanton, oppressive or malevolent manner which entitled respondent to moral and exemplary damages. AEITDH

The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations Commission dated November
28, 1997 and its Resolution dated August 7, 1998 are found to have been issued with grave abuse of discretion in
applying the law to the established facts, and are herebyREVERSED and SET ASIDE, and private respondent
Coca-Cola Bottlers, Phils., Inc. is hereby ordered to:

1. Reinstate the petitioner with full backwages without loss of seniority rights from the time his compensation was
withheld up to the time he is actually reinstated; however, if reinstatement is no longer possible, to pay the
petitioner separation pay equivalent to one (1) month's salary for every year of service rendered,
computed at the rate of his salary at the time he was dismissed, plus backwages.
2. Pay petitioner moral damages in the amount of P50,000.00.
3. Pay petitioner exemplary damages in the amount of P50,000.00.

4. Give to petitioner all other benefits to which a regular employee of Coca-Cola is entitled from the time petitioner
became a regular employee (one year from effectivity date of employment) until the time of actual
payment.
SO ORDERED. 17

Petitioner company filed a motion for reconsideration of the Decision of the Court of Appeals.
In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that petitioner company noted that its
Decision failed to mention whether respondent was a full-time or part-time regular employee. It also questioned how the
benefits under their Collective Bargaining Agreement which the Court awarded to respondent could be given to him
considering that such benefits were given only to regular employees who render a full day's work of not less than eight
hours. It was admitted that respondent is only required to work for two hours per day.
The Court of Appeals clarified that respondent was a "regular part-time employee and should be accorded all the
proportionate benefits due to this category of employees of [petitioner] Corporation under the CBA." It sustained its
decision on all other matters sought to be reconsidered.
Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The issues are:
1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND
THE NATIONAL LABOR RELATIONS COMMISSION, CONTRARY TO THE DECISIONS OF THE
HONORABLE SUPREME COURT ON THE MATTER.
 2. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND
THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE WORK OF
A PHYSICIAN IS NECESSARY AND DESIRABLE TO THE BUSINESS OF SOFTDRINKS
MANUFACTURING, CONTRARY TO THE RULINGS OF THE SUPREME COURT IN ANALOGOUS
CASES. IHCacT

3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND
THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE
PETITIONERS EXERCISED CONTROL OVER THE WORK OF THE RESPONDENT.
4. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND
THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE IS EMPLOYER-
EMPLOYEE RELATIONSHIP PURSUANT TO ARTICLE 280 OF THE LABOR CODE.

5. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND
THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE EXISTED ILLEGAL
DISMISSAL WHEN THE EMPLOYMENT OF THE RESPONDENT WAS TERMINATED WITHOUT JUST
CAUSE.

6. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND
THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS A
REGULAR PART TIME EMPLOYEE WHO IS ENTITLED TO PROPORTIONATE BENEFITS AS A
REGULAR PART TIME EMPLOYEE ACCORDING TO THE PETITIONERS' CBA.
7. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND
THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS
ENTITLED TO MORAL AND EXEMPLARY DAMAGES.

The main issue in this case is whether or not there exists an employer-employee relationship between the parties. The
resolution of the main issue will determine whether the termination of respondent's employment is illegal.
The Court, in determining the existence of an employer-employee relationship, has invariably adhered to the four-fold test:
(1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
power to control the employee's conduct, or the so-called "control test," considered to be the most important element. 18
The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of this case show that no
employer-employee relationship exists between the parties. The Labor Arbiter and the NLRC correctly found that
petitioner company lacked the power of control over the performance by respondent of his duties. The Labor Arbiter
reasoned that the Comprehensive Medical Plan, which contains the respondent's objectives, duties and obligations, does
not tell respondent "how to conduct his physical examination, how to immunize, or how to diagnose and treat his patients,
employees of [petitioner] company, in each case." He likened this case to that of Neri v. National Labor Relations
Commission, 19 which held:
In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a
radio/telex operator. However, a cursory reading of the job description shows that what was sought to be controlled
by FEBTC was actually the end result of the task, e.g., that the daily incoming and outgoing telegraphic transfer of
funds received and relayed by her, respectively, tallies with that of the register. The guidelines were laid down
merely to ensure that the desired end result was achieved. It did not, however, tell Neri how the radio/telex
machine should be operated. STADIH

In effect, the Labor Arbiter held that petitioner company, through the Comprehensive Medical Plan, provided guidelines
merely to ensure that the end result was achieved, but did not control the means and methods by which respondent
performed his assigned tasks.
The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely because the company lacks the power
of control that the contract provides that respondent shall be directly responsible to the employee concerned and their
dependents for any injury, harm or damage caused through professional negligence, incompetence or other valid causes
of action.
The Labor Arbiter also correctly found that the provision in the Retainer Agreement that respondent was on call during
emergency cases did not make him a regular employee. He explained, thus:
 Likewise, the allegation of complainant that since he is on call at anytime of the day and night makes him a regular
employee is off-tangent. Complainant does not dispute the fact that outside of the two (2) hours that he is required
to be at respondent company's premises, he is not at all further required to just sit around in the premises and wait
for an emergency to occur so as to enable him from using such hours for his own benefit and advantage. In fact,
complainant maintains his own private clinic attending to his private practice in the city, where he services his
patients, bills them accordingly and if it is an employee of respondent company who is attended to by him for
special treatment that needs hospitalization or operation, this is subject to a special billing. More often than not, an
employee is required to stay in the employer's workplace or proximately close thereto that he cannot utilize his time
effectively and gainfully for his own purpose. Such is not the prevailing situation here.

In addition, the Court finds that the schedule of work and the requirement to be on call for emergency cases do not
amount to such control, but are necessary incidents to the Retainership Agreement.
The Court also notes that the Retainership Agreement granted to both parties the power to terminate their relationship
upon giving a 30-day notice. Hence, petitioner company did not wield the sole power of dismissal or termination.
The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the employment of respondent as
a retained physician of petitioner company and upholds the validity of the Retainership Agreement which clearly stated
that no employer-employee relationship existed between the parties. The Agreement also stated that it was only for a
period of 1 year beginning January 1, 1988 to December 31, 1998, but it was renewed on a yearly basis.
Considering that there is no employer-employee relationship between the parties, the termination of the Retainership
Agreement, which is in accordance with the provisions of the Agreement, does not constitute illegal dismissal of
respondent. Consequently, there is no basis for the moral and exemplary damages granted by the Court of Appeals to
respondent due to his alleged illegal dismissal.
WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court of Appeals are REVERSED and
SET ASIDE. The Decision and Resolution dated November 28, 1997 and August 7, 1998, respectively, of the National
Labor Relations Commission are REINSTATED. ICcDaA

No costs.
SO ORDERED.
Puno, C.J., Sandoval-Gutierrez, Corona and Garcia, JJ., concur.
||| (Coca Cola Bottlers (Phils.), Inc. v. Climaco, G.R. No. 146881, [February 5, 2007], 543 PHIL 151-167)
 SECOND DIVISION
[G.R. No. 176484. November 25, 2008.]
CALAMBA MEDICAL CENTER, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
RONALDO LANZANAS AND MERCEDITHA * LANZANAS, respondents.
DECISION
CARPIO-MORALES, J : p

The Calamba Medical Center (petitioner), a privately-owned hospital, engaged the services of medical doctors-
spouses Ronaldo Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas (Dr. Merceditha) in March 1992 and August
1995, respectively, as part of its team of resident physicians. Reporting at the hospital twice-a-week on twenty-four-
hour shifts, respondents were paid a monthly "retainer" of P4,800.00 each. 1 It appears that resident physicians were
also given a percentage share out of fees charged for out-patient treatments, operating room assistance and discharge
billings, in addition to their fixed monthly retainer. 2ScTCIE

The work schedules of the members of the team of resident physicians were fixed by petitioner's medical
director Dr. Raul Desipeda (Dr. Desipeda). And they were issued identification cards 3 by petitioner and were enrolled
in the Social Security System (SSS). 4 Income taxes were withheld from them. 5
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician at the hospital, inadvertently
overheard a telephone conversation of respondent Dr. Lanzanas with a fellow employee, Diosdado Miscala, through
an extension telephone line. Apparently, Dr. Lanzanas and Miscala were discussing the low "census" or admission of
patients to the hospital. 6
Dr. Desipeda whose attention was called to the above-said telephone conversation issued to Dr. Lanzanas a
Memorandum of March 7, 1998 reading: ECSHID

As a Licensed Resident Physician employed in Calamba Medical Center since several years ago,
the hospital management has committed upon you utmost confidence in the performance of duties pursuant
thereto. This is the reason why you were awarded the privilege to practice in the hospital and were entrusted
hospital functions to serve the interest of both the hospital and our patients using your capability for independent
judgment.
Very recently though and unfortunately, you have committed acts inimical to the interest of the hospital,
the details of which are contained in the hereto attached affidavit of witness. EAHDac
You are therefore given 24 hours to explain why no disciplinary action should be taken against
you.
Pending investigation of your case, you are hereby placed under 30-days [sic] preventive
suspension effective upon receipt hereof. 7 (Emphasis, italics and underscoring supplied) HEISca
Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not involved in the said incident, any
work schedule after sending her husband Dr. Lanzanas the memorandum, 8 nor inform her the reason therefor, albeit
she was later informed by the Human Resource Department (HRD) officer that that was part of petitioner's cost-cutting
measures. 9
Responding to the memorandum, Dr. Lanzanas, by letter of March 9, 1998, 10 admitted that he spoke with
Miscala over the phone but that their conversation was taken out of context by Dr. Trinidad. HcTSDa

On March 14, 1998, 11 the rank-and-file employees union of petitioner went on strike due to unresolved
grievances over terms and conditions of employment. 12
On March 20, 1998, Dr. Lanzanas filed a complaint for illegal suspension13 before the National Labor Relations
Commission (NLRC)-Regional Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a complaint for illegal
dismissal. 14
In the meantime, then Sec. Cresenciano Trajano of the Department of Labor and Employment (DOLE) certified
the labor dispute to the NLRC for compulsory arbitration and issued on April 21, 1998 return-to-work Order to the striking
union officers and employees of petitioner pending resolution of the labor dispute. 15
In a memorandum 16 of April 22, 1998, Dr. Desipeda echoed the April 22, 1998 order of the Secretary of Labor
directing all union officers and members to return-to-work "on or April 23, 1998, except those employees that were
already terminated or are serving disciplinary actions". Dr. Desipeda thus ordered the officers and members of the union
to "report for work as soon as possible" to the hospital's personnel officer and administrator for "work scheduling,
assignments and/or re-assignments". aIETCA

Petitioner later sent Dr. Lanzanas a notice of termination which he received on April 25, 1998, indicating as
grounds therefor his failure to report back to work despite the DOLE order and his supposed role in the striking union,
thus:
 On April 23, 1998, you still did not report for work despite memorandum issued by the CMC Medical
Director implementing the Labor Secretary's ORDER. The same is true on April 24, 1998 and April 25, 1998,
you still did not report for work [sic].
You are likewise aware that you were observed (re: signatories[sic] to the Saligang Batas of BMCMC-
UWP) to be unlawfully participating as member in the rank-and-file union's concerted activities despite knowledge
that your position in the hospital is managerial in nature(Nurses, Orderlies, and staff of the Emergency Room carry
out your orders using your independent judgment) which participation is expressly prohibited by the New Labor
Code and which prohibition was sustained by the Med-Arbiter's ORDER dated February 24, 1998. (Emphasis and
italics in the original; underscoring partly in the original and partly supplied) HCDAcE
For these reasons as grounds for termination, you are hereby terminated for cause from
employment effective today, April 25, 1998, without prejudice to further action for revocation of your license
before the Philippine [sic] Regulations [sic] Commission. 17 (Emphasis and underscoring supplied)
Dr. Lanzanas thus amended his original complaint to include illegal dismissal. 18 His and Dr. Merceditha's
complaints were consolidated and docketed as NLRC CASE NO. RAB-IV-3-9879-98-L. TCaEAD

By Decision 19 of March 23, 1999, Labor Arbiter Antonio R. Macam dismissed the spouses' complaints for want
of jurisdiction upon a finding that there was no employer-employee relationship between the parties, the fourth requisite
or the "control test" in the determination of an employment bond being absent.
On appeal, the NLRC, by Decision 20 of May 3, 2002, reversed the Labor Arbiter's findings, disposing as follows:
WHEREFORE, the assailed decision is set aside. The respondents are ordered to pay the complainants
their full backwages; separation pay of one month salary for every year of service in lieu of reinstatement; moral
damages of P500,000.00 each; exemplary damages of P250,000.00 each plus ten percent (10%) of the total award
as attorney's fees. cTESIa
SO ORDERED. 21
Petitioner's motion for reconsideration having been denied, it brought the case to the Court of Appeals
on certiorari.
The appellate court, by June 30, 2004 Decision, 22 initially granted petitioner's petition and set aside the NLRC
ruling. However, upon a subsequent motion for reconsideration filed by respondents, it reinstated the NLRC decision in
an Amended Decision 23 dated September 26, 2006 but tempered the award to each of the spouses of moral and
exemplary damages to P100,000.00 and P50,000.00, respectively and omitted the award of attorney's fees. THcaDA

In finding the existence of an employer-employee relationship between the parties, the appellate court held:
. . . . While it may be true that the respondents are given the discretion to decide on how to treat the
petitioner's patients, thepetitioner has not denied nor explained why its Medical Director still hasthe direct
supervision and control over the respondents. The fact is the petitioner's Medical Director still has to approve
the schedule of duties of the respondents. The respondents stressed that the petitioner's Medical Director also
issues instructions or orders to the respondents relating to the means and methods of performing their
duties, i.e. admission of patients, manner of characterizing cases, treatment of cases, etc., and may even
overrule, review or revise the decisions of the resident physicians. This was not controverted by the petitioner.
The foregoing factors taken together are sufficient to constitute the fourth element, i.e. control test, hence, the
existence of the employer-employee relationship. In denying that it had control over the respondents, the petitioner
alleged that the respondents were free to put up their own clinics or to accept other retainership agreement with
the other hospitals. But, the petitioner failed to substantiate the allegation with substantial evidence. (Emphasis
and underscoring supplied) 24
The appellate court thus declared that respondents were illegally dismissed.
. . . . The petitioner's ground for dismissing respondent Ronaldo Lanzanas was based on his alleged
participation in union activities, specifically in joining the strike and failing to observe the return-to-work order issued
by the Secretary of Labor. Yet, the petitioner did not adduce any piece of evidence to show that respondent
Ronaldo indeed participated in the strike. . . . .
In the case of respondent Merceditha Lanzanas, the petitioner's explanation that "her marriage to
complainant Ronaldo has given rise to the presumption that her sympat[hies] are likewise with her husband" as a
ground for her dismissal is unacceptable. Such is not one of the grounds to justify the termination of her
employment. 25 (Underscoring supplied)
The fallo of the appellate court's decision reads:
WHEREFORE, the instant Motion for Reconsideration is GRANTED, and the Court's decision dated June
30, 2004, is SET ASIDE. In lieu thereof, a new judgment is entered, as follows:
WHEREFORE, the petition is DISMISSED. The assailed decision dated May 3, 2002 and order dated
September 24, 2002 of the NLRC in NLRC NCR CA No. 019823-99 are AFFIRMED with the
 MODIFICATION that the moral and exemplary damages are reduced to P100,000.00 each and P50,000.00
each, respectively. aSTAIH

SO ORDERED. 26 (Emphasis and italics in the original; underscoring supplied)

Preliminarily, the present petition calls for a determination of whether there exists an employer-employee
relationship 27 between petitioner and the spouses-respondents. cSaADC

Denying the existence of such relationship, petitioner argues that the appellate court, as well as the NLRC,
overlooked its twice-a-week reporting arrangement with respondents who are free to practice their profession elsewhere
the rest of the week. And it invites attention to the uncontroverted allegation that respondents, aside from their monthly
retainers, were entitled to one-half of all suturing, admitting, consultation, medico-legal and operating room assistance
fees. 28 These circumstances, it stresses, are clear badges of the absence of any employment relationship between
them.
This Court is unimpressed.
Under the "control test", an employment relationship exists between a physician and a hospital if the hospital
controls both the means and the details of the process by which the physician is to accomplish his task. 29
Where a person who works for another does so more or less at his own pleasure and is not subject to definite
hours or conditions of work, and is compensated according to the result of his efforts and not the amount thereof, the
element of control is absent. 30
As priorly stated, private respondents maintained specific work-schedules, as determined by petitioner through
its medical director, which consisted of 24-hour shifts totaling forty-eight hours each week and which were strictly to be
observed under pain of administrative sanctions. CDaTAI

That petitioner exercised control over respondents gains light from the undisputed fact that in the emergency
room, the operating room, or any department or ward for that matter, respondents' work is monitored through its nursing
supervisors, charge nurses and orderlies. Without the approval or consent of petitioner or its medical director, no
operations can be undertaken in those areas. For control test to apply, it is not essential for the employer to actually
supervise the performance of duties of the employee, it being enough that it has the right to wield the power. 31
With respect to respondents' sharing in some hospital fees, this scheme does not sever the employment tie
between them and petitioner as this merely mirrors additional form or another form of compensation or incentive similar
to what commission-based employees receive as contemplated in Article 97 (f) of the Labor Code, thus:
"Wage" paid to any employee shall mean the remuneration or earning, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis,
or other method of calculating the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and
includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. . . . (Emphasis and underscoring supplied),
Respondents were in fact made subject to petitioner-hospital's Code of Ethics, 32 the provisions of which cover
administrative and disciplinary measures on negligence of duties, personnel conduct and behavior, and offenses against
persons, property and the hospital's interest. cADSCT

More importantly, petitioner itself provided incontrovertible proof of the employment status of respondents,
namely, the identification cards it issued them, the payslips 33 and BIR W-2 (now 2316) Forms which reflect their status
as employees, and the classification as "salary" of their remuneration. Moreover, it enrolled respondents in the SSS
and Medicare (Philhealth) program. It bears noting at this juncture that mandatory coverage under theSSS Law 34 is
premised on the existence of an employer-employee relationship,35 except in cases of compulsory coverage of the self-
employed. It would be preposterous for an employer to report certain persons as employees and pay their SSS
premiums as well as their wages if they are not its employees. 36
And if respondents were not petitioner's employees, how does it account for its issuance of the earlier-quoted
March 7, 1998 memorandum explicitly stating that respondent is "employed" in it and of the subsequent termination
letter indicating respondent Lanzanas' employment status. EaIcAS

Finally, under Section 15, Rule X of Book III of the Implementing Rules of the Labor Code, an employer-
employee relationship exists between the resident physicians and the training hospitals, unless there is a training
agreement between them, and the training program is duly accredited or approved by the appropriate government
agency. In respondents' case, they were not undergoing any specialization training. They were considered non-
training general practitioners, 37 assigned at the emergency rooms and ward sections.
Turning now to the issue of dismissal, the Court upholds the appellate court's conclusion that private
respondents were illegally dismissed. aSIATD
 Dr. Lanzanas was neither a managerial nor supervisory employee but part of the rank-and-file. This is the import
of the Secretary of Labor's Resolution of May 22, 1998 in OS A-05-15-98 which reads:
xxx xxx xxx
In the motion to dismiss it filed before the Med-Arbiter, the employer (CMC) alleged that 24 members of
petitioner are supervisors, namely . . . Rolando Lanzonas [sic] . . . .
A close scrutiny of the job descriptions of the alleged supervisors narrated by the employer only proves
that except for the contention that these employees allegedly supervise, they do not however recommend any
managerial action. At most, their job is merely routinary in nature and consequently, they cannot be considered
supervisory employees.
They are not therefore barred from membership in the union of rank[-]and[-]file, which the petitioner
[the union] is seeking to represent in the instant case. 38 (Emphasis and underscoring supplied)DaTISc
xxx xxx xxx

Admittedly, Dr. Lanzanas was a union member in the hospital, which is considered indispensable to the national
interest. In labor disputes adversely affecting the continued operation of a hospital, Article 263 (g) of the Labor Code
provides:
ART. 263. Strikes, Picketing, and Lockouts.
xxx xxx xxx

(g) . . .
. . . . In labor disputes adversely affecting the continued operation of such hospitals, clinics or
medical institutions, it shall be the duty of the striking union or locking-out employer to provide and maintain an
effective skeletal workforce of medical and other health personnel, whose movement and services shall be
unhampered and unrestricted, as are necessary to insure the proper and adequate protection of the life and health
of its patients, most especially emergency cases, for the duration of the strike or lockout. In such cases, the
Secretary of Labor and Employment is mandated to immediately assume, within twenty-four hours from knowledge
of the occurrence of such strike or lockout, jurisdiction over the same or certify to the Commission for compulsory
arbitration. For this purpose, the contending parties are strictly enjoined to comply with such orders,
prohibitions and/or injunctions as are issued by the Secretary of Labor and Employment or the
Commission, under pain of immediate disciplinary action, including dismissal or loss of employment
status or payment by the locking-out employer of backwages, damages and other affirmative relief, even
criminal prosecution against either or both of them.
xxx xxx xxx (Emphasis and underscoring supplied)
An assumption or certification order of the DOLE Secretary automatically results in a return-to-work of
all striking workers, whether a corresponding return-to-work order had been issued. 39 The DOLE Secretary in fact
issued a return-to-work Order, failing to comply with which is punishable by dismissal or loss of employment status. 40
Participation in a strike and intransigence to a return-to-work ordermust, however, be duly proved in order to
justify immediate dismissal in a "national interest" case. As the appellate court as well as the NLRC observed, however,
there is nothing in the records that would bear out Dr. Lanzanas' actual participation in the strike. And the medical
director's Memorandum 41 of April 22, 1998 contains nothing more than a general directive to all union officers and
members to return-to-work. Mere membership in a labor union does not ipso facto mean participation in a strike. IECcaA

Dr. Lanzanas' claim that, after his 30-day preventive suspension ended on or before April 9, 1998, he was never
given any work schedule 42 was not refuted by petitioner. Petitioner in fact never released any findings of its supposed
investigation into Dr. Lanzanas' alleged "inimical acts".
Petitioner thus failed to observe the two requirements,before dismissal can be effected notice and hearing
which constitute essential elements of the statutory process; the first to apprise the employee of the particular acts
or omissions for which his dismissal is sought, and the second to inform the employee of the employer's decision to
dismiss him. 43 Non-observance of these requirements runs afoul of the procedural mandate. 44
The termination notice sent to and received by Dr. Lanzanas on April 25, 1998 was the first and only time that
he was apprised of the reason for his dismissal. He was not afforded, however, even the slightest opportunity to explain
his side. His was a "termination upon receipt" situation. While he was priorly made to explain on his telephone
conversation with Miscala, 45 he was not with respect to his supposed participation in the strike and failure to heed the
return-to-work order. HCEcAa

As for the case of Dr. Merceditha, her dismissal was worse, it having been effected without any just or authorized
cause and without observance of due process. In fact, petitioner never proffered any valid cause for her dismissal except
its view that "her marriage to [Dr. Lanzanas] has given rise to the presumption that her sympath[y] [is] with her husband;
 [and that when [Dr. Lanzanas] declared that he was going to boycott the scheduling of their workload by the medical
doctor, he was presumed to be speaking for himself [and] for his wife Merceditha." 46
Petitioner's contention that Dr. Merceditha was a member of the union or was a participant in the strike remained
just that. Its termination of her employment on the basis of her conjugal relationship is not analogous to any of the
causes enumerated in Article 282 47 of the Labor Code. Mere suspicion or belief, no matter how strong, cannot substitute
for factual findings carefully established through orderly procedure. 48
The Court even notes that after the proceedings at the NLRC, petitioner never even mentioned Dr. Merceditha's
case. There is thus no gainsaying that her dismissal was both substantively and procedurally infirm. TacSAE

Adding insult to injury was the circulation by petitioner of a "watchlist" or "watch out list" 49 including therein the
names of respondents. Consider the following portions of Dr. Merceditha's Memorandum of Appeal:
3. Moreover, to top it all, respondents have circulated a so called "Watch List" to other hospitals, one of
which [was] procured from Foothills Hospital in Sto. Tomas, Batangas [that] contains her name. The object of the
said list is precisely to harass Complainant and malign her good name and reputation. This is not only
unprofessional, but runs smack of oppression as CMC is trying permanently deprived [sic]Complainant of her
livelihood by ensuring that she is barred from practicing in other hospitals. aEDCSI
4. Other co-professionals and brothers in the profession are fully aware of these "watch out" lists and as
such, her reputation was not only besmirched, but was damaged, and she suffered social humiliation as it is of
public knowledge that she was dismissed from work. Complainant came from a reputable and respected family,
her father being a retired full Colonel in the Army, Col. Romeo A. Vente, and her brothers and sisters are all
professionals, her brothers, Arnold and Romeo Jr., being engineers. The Complainant has a family
protection [sic]to protect. She likewise has a professional reputation to protect, being a licensed physician. Both
her personal and professional reputation were damaged as a result of the unlawful acts of the respondents. 50
While petitioner does not deny the existence of such list, it pointed to the lack of any board action on its part to
initiate such listing and to circulate the same, viz.:
20. . . . . The alleged watchlist or "watch out list", as termed by complainants, were merely lists obtained
by one Dr. Ernesto Naval of PAMANA Hospital. Said list was given by a stockholder of respondent who was
at the same time a stockholder of PAMAN[A] Hospital. The giving of the list was not a Board
action. 51 (Emphasis and underscoring supplied) ETDHaC
The circulation of such list containing names of alleged union members intended to prevent employment of
workers for union activities similarly constitutes unfair labor practice, thereby giving a right of action for damages by the
employees prejudiced. 52
A word on the appellate court's deletion of the award of attorney's fees. There being no basis advanced in
deleting it, as exemplary damages were correctly awarded, 53 the award of attorney's fees should be reinstated. cHAaEC

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871 is AFFIRMED with
MODIFICATION in that the award by the National Labor Relations Commission of 10% of the total judgment award as
attorney's fees is reinstated. In all other aspects, the decision of the appellate court is affirmed.
SO ORDERED.
Quisumbing, Tinga, Velasco, Jr. and Brion, JJ., concur.
(Calamba Medical Center, Inc. v. National Labor Relations Commission, G.R. No. 176484, [November 25, 2008], 592
|||

PHIL 318-334)
 SECOND DIVISION
[G.R. No. 178827. March 4, 2009.]
JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, petitioners, vs. SHANGRI-LA'S MACTAN
ISLAND RESORT and DR. JESSICA J.R. PEPITO, respondents.
DECISION
CARPIO-MORALES, J : p

Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were engaged in 1999 and 1996,
respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at respondent Shangri-la's Mactan
Island Resort (Shangri-la) in Cebu of which she was a retained physician. EHSADc

In late 2002, petitioners filed with the National Labor Relations Commission (NLRC) Regional Arbitration Branch No. VII
(NLRC-RAB No. VII) a complaint 1 for regularization, underpayment of wages, non-payment of holiday pay, night shift
differential and 13th month pay differential against respondents, claiming that they are regular employees of Shangri-la.
The case was docketed as RAB Case No. 07-11-2089-02.
Shangri-la claimed, however, that petitioners were not its employees but of respondent doctor whom it retained via
Memorandum of Agreement (MOA) 2pursuant to Article 157 of the Labor Code, as amended.
Respondent doctor for her part claimed that petitioners were already working for the previous retained physicians of
Shangri-la before she was retained by Shangri-la; and that she maintained petitioners' services upon their request.
By Decision 3 of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared petitioners to be regular employees of Shangri-
la. The Arbiter thus ordered Shangri-la to grant them the wages and benefits due them as regular employees from the
time their services were engaged.
In finding petitioners to be regular employees of Shangri-la, the Arbiter noted that they usually perform work which is
necessary and desirable to Shangri-la's business; that they observe clinic hours and render services only to Shangri-la's
guests and employees; that payment for their salaries were recommended to Shangri-la's Human Resource Department
(HRD); that respondent doctor was Shangri-la's "in-house" physician, hence, also an employee; and that the MOA
between Shangri-la and respondent doctor was an "insidious mechanism in order to circumvent [the doctor's] tenurial
security and that of the employees under her".
Shangri-la and respondent doctor appealed to the NLRC. Petitioners appealed too, but only with respect to the non-award
to them of some of the benefits they were claiming.
By Decision 4 dated March 31, 2005, the NLRC granted Shangri-la's and respondent doctor's appeal and dismissed
petitioners' complaint for lack of merit, it finding that no employer-employee relationship exists between petitioner and
Shangri-la. In so deciding, the NLRC held that the Arbiter erred in interpreting Article 157 in relation to Article 280 of the
Labor Code, as what is required under Article 157 is that the employer should provide the services of medical personnel
to its employees, but nowhere in said article is a provision that nurses are required to be employed; that contrary to the
finding of the Arbiter, even if Article 280 states that if a worker performs work usually necessary or desirable in the
business of the employer, he cannot be automatically deemed a regular employee; and that the MOA amply shows that
respondent doctor was in fact engaged by Shangri-la on a retainer basis, under which she could hire her own nurses and
other clinic personnel.
Brushing aside petitioners' contention that since their application for employment was addressed to Shangri-la, it was
really Shangri-la which hired them and not respondent doctor, the NLRC noted that the applications for employment were
made by persons who are not parties to the case and were not shown to have been actually hired by Shangri-la.
On the issue of payment of wages, the NLRC held that the fact that, for some months, payment of petitioners' wages were
recommended by Shangri-la's HRD did not prove that it was Shangri-la which pays their wages. It thus credited
respondent doctor's explanation that the recommendations for payment were based on the billings she prepared for
salaries of additional nurses during Shangri-la's peak months of operation, in accordance with the retainership agreement,
the guests' payments for medical services having been paid directly to Shangri-la.
Petitioners thereupon brought the case to the Court of Appeals which, by Decision 5 of May 22, 2007, affirmed the NLRC
Decision that no employer-employee relationship exists between Shangri-la and petitioners. The appellate court
concluded that all aspects of the employment of petitioners being under the supervision and control of respondent doctor
and since Shangri-la is not principally engaged in the business of providing medical or healthcare services, petitioners
could not be regarded as regular employees of Shangri-la.
Petitioners' motion for reconsideration having been denied by Resolution 6 of July 10, 2007, they interposed the present
recourse.
Petitioners insist that under Article 157 of the Labor Code, Shangri-la is required to hire a full-time registered nurse, apart
from a physician, hence, their engagement should be deemed as regular employment, the provisions of the MOA
notwithstanding; and that the MOA is contrary to public policy as it circumvents tenurial security and, therefore, should be
struck down as being voidab initio. At most, they argue, the MOA is a mere job contract.
And petitioners maintain that respondent doctor is a labor-only contractor for she has no license or business permit and
no business name registration, which is contrary to the requirements under Sec. 19 and 20 of the Implementing Rules and
Regulations of the Labor Code on sub-contracting.
Petitioners add that respondent doctor cannot be a legitimate independent contractor, lacking as she does in substantial
capital, the clinic having been set-up and already operational when she took over as retained physician; that respondent
doctor has no control over how the clinic is being run, as shown by the different orders issued by officers of Shangri-la
forbidding her from receiving cash payments and several purchase orders for medicines and supplies which were coursed
thru Shangri-la's Purchasing Manager, circumstances indubitably showing that she is not an independent contractor but a
mere agent of Shangri-la. acEHSI

In its Comment, 7 Shangri-la questions the Special Powers of Attorneys (SPAs) appended to the petition for being
inadequate. On the merits, it prays for the disallowance of the petition, contending that it raises factual issues, such as the
validity of the MOA, which were never raised during the proceedings before the Arbiter, albeit passed upon by him in his
Decision; that Article 157 of the Labor Code does not make it mandatory for a covered establishment to employ health
personnel; that the services of nurses is not germane nor indispensable to its operations; and that respondent doctor is a
legitimate individual independent contractor who has the power to hire, fire and supervise the work of the nurses under
her.
The resolution of the case hinges, in the main, on the correct interpretation of Art. 157 vis a vis Art. 280 and the provisions
on permissible job contracting of the Labor Code, as amended.
The Court holds that, contrary to petitioners' postulation, Art. 157 does not require the engagement of full-time nurses
as regular employees of a company employing not less than 50 workers. Thus, the Article provides:
ART. 157. Emergency medical and dental services. It shall be the duty of every employer to furnish his
employees in any locality with free medical and dental attendance and facilities consisting of:

(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50)
but not more than two hundred (200) except when the employer does not maintain
hazardous workplaces, in which case the services of a graduate first-aider shall be provided for
the protection of the workers, where no registered nurse is available. The Secretary of Labor
shall provide by appropriate regulations the services that shall be required where the number of
employees does not exceed fifty (50) and shall determine by appropriate order hazardous
workplaces for purposes of this Article;
(b) The services of a full-time registered nurse, a part-time physician and dentist, and an
emergency clinic, when the number of employees exceeds two hundred (200) but not
more than three hundred (300); and

(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic,
and an infirmary or emergency hospital with one bed capacity for every one hundred (100)
employees when the number of employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot stay
in the premises of the establishment for at least two (2) hours, in the case of those engaged on part-time basis, and
not less than eight (8) hours in the case of those employed on full-time basis. Where the undertaking is
nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject to such
regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and dental
treatment and attendance in case of emergency. (Emphasis and underscoring supplied)

Under the foregoing provision, Shangri-la, which employs more than 200 workers, is mandated to "furnish" its employees
with the services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic which means
that it should provide or make available such medical and allied services to its employees, not necessarily to hire
or employ a service provider. As held inPhilippine Global Communications vs. De Vera: 8
. . . while it is true that the provision requires employers to engage the services of medical practitioners in
certain establishments depending on the number of their employees, nothing is there in the law which
says that medical practitioners so engaged be actually hired as employees, adding that the law, as written,
only requires the employer "to retain", not employ, a part-time physician who needed to stay in the premises of the
non-hazardous workplace for two (2) hours. (Emphasis and underscoring supplied)
The term "full-time" in Art. 157 cannot be construed as referring to the type of employment of the person engaged to
provide the services, for Article 157 mustnot be read alongside Art. 280 9 in order to vest employer-employee relationship
on the employer and the person so engaged. So De Vera teaches:
. . . For, we take it that any agreement may provide that one party shall render services for and in behalf of another,
no matter how necessary for the latter's business, even without being hired as an employee. This set-up is
precisely true in the case of an independent contractorship as well as in an agency agreement. Indeed, Article 280
of the Labor Code, quoted by the appellate court, is not the yardstick for determining the existence of an
employment relationship. As it is, the provision merely distinguishes between two (2) kinds of
employees, i.e., regular and casual. . . . 10 (Emphasis and underscoring supplied) cHAaCE

The phrase "services of a full-time registered nurse" should thus be taken to refer to the kind of services that the
nurse will render in the company's premises and to its employees, not the manner of his engagement.
As to whether respondent doctor can be considered a legitimate independent contractor, the pertinent sections of DOLE
Department Order No. 10, series of 1997, illuminate:
Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are met:

(1) The contractor carries on an independent business and undertakes the contract work on his own account under
his own responsibility according to his own manner and method, free from the control and direction of his employer
or principal in all matters connected with the performance of the work except as to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business.
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and

(2) The workers recruited and placed by such persons are performing activities which are directly related
to the principal business or operations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders
whether or not the contracting out of labor is permissible in the light of the circumstances of each case and after
considering the operating needs of the employer and the rights of the workers involved. In such case, he may
prescribe conditions and restrictions to insure the protection and welfare of the workers. (Emphasis supplied)

The existence of an independent and permissible contractor relationship is generally established by considering the
following determinants: whether the contractor is carrying on an independent business; the nature and extent of the work;
the skill required; the term and duration of the relationship; the right to assign the performance of a specified piece of
work; the control and supervision of the work to another; the employer's power with respect to the hiring, firing and
payment of the contractor's workers; the control of the premises; the duty to supply the premises, tools, appliances,
materials and labor; and the mode, manner and terms of payment. 11
On the other hand, existence of an employer- employee relationship is established by the presence of the following
determinants: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by
whatever means; and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall
consideration. 12
Against the above-listed determinants, the Court holds that respondent doctor is a legitimate independent contractor. That
Shangri-la provides the clinic premises and medical supplies for use of its employees and guests does not necessarily
prove that respondent doctor lacks substantial capital and investment. Besides, the maintenance of a clinic and provision
of medical services to its employees is required under Art. 157, which are not directly related to Shangri-la's principal
business operation of hotels and restaurants.
As to payment of wages, respondent doctor is the one who underwrites the following: salaries, SSS contributions and
other benefits of the staff; 13 group life, group personal accident insurance and life/death insurance 14 for the staff with
minimum benefit payable at 12 times the employee's last drawn salary, as well as value added taxes and withholding
taxes, sourced from her P60,000.00 monthly retainer fee and 70% share of the service charges from Shangri-la's guests
who avail of the clinic services. It is unlikely that respondent doctor would report petitioners as workers, pay their SSS
premium as well as their wages if they were not indeed her employees. 15
With respect to the supervision and control of the nurses and clinic staff, it is not disputed that a document, "Clinic Policies
and Employee Manual" 16 claimed to have been prepared by respondent doctor exists, to which petitioners gave their
conformity 17 and in which they acknowledged their co-terminus employment status. It is thus presumed that said
document, and not the employee manual being followed by Shangri-la's regular workers, governs how they perform their
respective tasks and responsibilities.
Contrary to petitioners' contention, the various office directives issued by Shangri-la's officers do not imply that it is
Shangri-la's management and not respondent doctor who exercises control over them or that Shangri-la has control over
how the doctor and the nurses perform their work. The letter 18 addressed to respondent doctor dated February 7, 2003
from a certain Tata L. Reyes giving instructions regarding the replenishment of emergency kits is, at most, administrative
in nature, related as it is to safety matters; while the letter 19 dated May 17, 2004 from Shangri-la's Assistant Financial
Controller, Lotlot Dagat, forbidding the clinic from receiving cash payments from the resort's guests is a matter of financial
policy in order to ensure proper sharing of the proceeds, considering that Shangri-la and respondent doctor share in the
guests' payments for medical services rendered. In fine, as Shangri-la does not control how the work should be performed
by petitioners, it is not petitioners' employer.
IcDESA

WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals dated May 22, 2007 and the
Resolution dated July 10, 2007 are AFFIRMED.
SO ORDERED.
Quisumbing, Nachura, * Brion and Peralta, ** JJ., concur.
||| (Escasinas v. Shangri-la's Mactan Island Resort, G.R. No. 178827, [March 4, 2009], 599 PHIL 746-758)
 EN BANC
[G.R. No. 167622. June 29, 2010.]
GREGORIO V. TONGKO, petitioner, vs. THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.),
INC. and RENATO A. VERGEL DE DIOS, respondents.
RESOLUTION
BRION, J :
p

This resolves the Motion for Reconsideration 1 dated December 3, 2008 filed by respondent The Manufacturers
Life Insurance Co. (Phils.), Inc. (Manulife) to set aside our Decision of November 7, 2008. In the assailed decision, we
found that an employer-employee relationship existed between Manulife and petitioner Gregorio Tongko and ordered
Manulife to pay Tongko backwages and separation pay for illegal dismissal. TAcCDI

The following facts have been stated in our Decision of November 7, 2008, now under reconsideration, but are
repeated, simply for purposes of clarity.
The contractual relationship between Tongko and Manulife had two basic phases. The first or initial
phase began on July 1, 1977, under a Career Agent's Agreement (Agreement) that provided:
It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be
construed or interpreted as creating an employer-employee relationship between the Company and the Agent.
xxx xxx xxx

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered
by the Company, and collect, in exchange for provisional receipts issued by the Agent, money due to or become due
to the Company in respect of applications or policies obtained by or through the Agent or from policyholders allotted
by the Company to the Agent for servicing, subject to subsequent confirmation of receipt of payment by the Company
as evidenced by an Official Receipt issued by the Company directly to the policyholder.
xxx xxx xxx
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent
by giving written notice to the Agent within fifteen (15) days from the time of the discovery of the breach. No waiver,
extinguishment, abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company
shall be construed for any previous failure to exercise its right under any provision of this Agreement.

Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other
party fifteen (15) days notice in writing. 2

Tongko additionally agreed (1) to comply with all regulations and requirements of Manulife, and (2) to maintain a
standard of knowledge and competency in the sale of Manulife's products, satisfactory to Manulife and sufficient to meet
the volume of the new business, required by his Production Club membership. 3
The second phase started in 1983 when Tongko was named Unit Manager in Manulife's Sales Agency
Organization. In 1990, he became a Branch Manager. Six years later (or in 1996), Tongko became a Regional Sales
Manager. 4 CAHTIS

Tongko's gross earnings consisted of commissions, persistency income, and management overrides. Since
the beginning, Tongko consistently declared himself self-employed in his income tax returns. Thus, under oath,
he declared his gross business income and deducted his business expenses to arrive at his taxable business
income. Manulife withheld the corresponding 10% tax on Tongko's earnings. 5
In 2001, Manulife instituted manpower development programs at the regional sales management level.
Respondent Renato Vergel de Dios wrote Tongko a letter dated November 6, 2001 on concerns that were brought up
during the October 18, 2001 Metro North Sales Managers Meeting. De Dios wrote:
The first step to transforming Manulife into a big league player has been very clear to increase the number of
agents to at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when
you first joined the organization. Since then, however, substantial changes have taken place in the organization, as
these have been influenced by developments both from within and without the company.
xxx xxx xxx

The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers'
meeting earlier last month when Kevin O'Connor, SVP-Agency, took to the floor to determine from our senior agency
leaders what more could be done to bolster manpower development. At earlier meetings, Kevin had presented
information where evidently, your Region was the lowest performer (on a per Manager basis) in terms of recruiting
in 2000 and, as of today, continues to remain one of the laggards in this area.
While discussions, in general, were positive other than for certain comments from your end which were perceived to
be uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and
management, were on the same plane. As gleaned from some of your previous comments in prior meetings (both in
group and one-on-one), it was not clear that we were proceeding in the same direction.

Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent
meetings you reiterated certain views, the validity of which we challenged and subsequently found as having no
basis. STIHaE

With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit
confused as to the directions the company was taking. For this reason, I sought a meeting with everyone in your
management team, including you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North Region's Sales Managers
meeting held at the 7/F Conference room last 18 October.
xxx xxx xxx
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."

This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the
table before the rest of your Region's Sales Managers to verify its validity. As you must have noted, no Sales Manager
came forward on their own to confirm your statement and it took you to name Malou Samson as a source of the
same, an allegation that Malou herself denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought all
along, that these allegations were simply meant to muddle the issues surrounding the inability of your Region to meet
its agency development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less."
xxx xxx xxx

All the above notwithstanding, we had your own records checked and we found that you made a lot more money in
the Year 2000 versus 1999. In addition, you also volunteered the information to Kevin when you said that you
probably will make more money in the Year 2001 compared to Year 2000. Obviously, your above statement about
making "less money" did not refer to you but the way you argued this point had us almost believing that you were
spouting the gospel of truth when you were not. . . .
xxx xxx xxx

All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new
direction that we have been discussing these past few weeks, i.e., Manulife's goal to become a major agency-led
distribution company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have
never heard you proactively push for greater agency recruiting. You have not been proactive all these years when it
comes to agency growth. DSATCI
xxx xxx xxx

I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the
following changes in the interim:

1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks
which can be easily delegated. This assistant should be so chosen as to complement your skills and help
you in the areas where you feel "may not be your cup of tea."

You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your
health. The above could solve this problem.
xxx xxx xxx

2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch
(NSB) in autonomous fashion. . . .

I have decided to make this change so as to reduce your span of control and allow you to concentrate more
fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales
Managers in Metro North. I will hold you solely responsible for meeting the objectives of these remaining
groups.
xxx xxx xxx
The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon
you. But you have to understand that meeting corporate objectives by everyone is primary and will not be
compromised. We are meeting tough challenges next year, and I would want everybody on board. Any resistance or
holding back by anyone will be dealt with accordingly. 6

Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminating Tongko's services:
 It would appear, however, that despite the series of meetings and communications, both one-on-one meetings
between yourself and SVP Kevin O'Connor, some of them with me, as well as group meetings with your Sales
Managers, all these efforts have failed in helping you align your directions with Management's avowed agency growth
policy. CaHcET
xxx xxx xxx

On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are
now issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of
this letter. 7

Tongko responded by filing an illegal dismissal complaint with the National Labor Relations
Commission (NLRC) Arbitration Branch. He essentially alleged despite the clear terms of the letter terminating his
Agency Agreement that he was Manulife's employee before he was illegally dismissed. 8
Thus, the threshold issue is the existence of an employment relationship. A finding that none exists renders
the question of illegal dismissal moot; a finding that an employment relationship exists, on the other hand, necessarily
leads to the need to determine the validity of the termination of the relationship.
A. Tongko's Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding P50,000.00, regardless
of production levels attained and exclusive of commissions and bonuses. He also claimed that as Regional Sales
Manager, he was given a travel and entertainment allowance of P36,000.00 per year in addition to his overriding
commissions; he was tasked with numerous administrative functions and supervisory authority over Manulife's
employees, aside from merely selling policies and recruiting agents for Manulife; and he recommended and recruited
insurance agents subject to vetting and approval by Manulife. He further alleges that he was assigned a definite place
in the Manulife offices when he was not in the field at the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo
Sts., Salcedo Village, Makati City for which he never paid any rental. Manulife provided the office equipment he used,
including tables, chairs, computers and printers (and even office stationery), and paid for the electricity, water and
telephone bills. As Regional Sales Manager, Tongko additionally asserts that he was required to follow at least three
codes of conduct. 9 DETACa

B. Manulife's Case Agency Relationship with Tongko

Manulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko was paid commissions
of varying amounts, computed based on the premium paid in full and actually received by Manulife on policies obtained
through an agent. As sales manager, Tongko was paid overriding sales commission derived from sales made by agents
under his unit/structure/branch/region. Manulife also points out that it deducted and withheld a 10% tax from all
commissions Tongko received; Tongko even declared himself to be self-employed and consistently paid taxes as
such i.e., he availed of tax deductions such as ordinary and necessary trade, business and professional expenses
to which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over Tongko's claim as he was not its employee
as characterized in the four-fold test and our ruling in Carungcong v. National Labor Relations Commission. 10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship existed between the parties. However, the
NLRC reversed the labor arbiter's decision on appeal; it found the existence of an employer-employee relationship and
concluded that Tongko had been illegally dismissed. In the petition for certiorari with the Court of Appeals (CA), the
appellate court found that the NLRC gravely abused its discretion in its ruling and reverted to the labor arbiter's decision
that no employer-employee relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and found that an employment relationship
existed between Tongko and Manulife. We concluded that Tongko is Manulife's employee for the following reasons:
1. Our ruling in the first Insular 11 case did not foreclose the possibility of an insurance agent becoming an
employee of an insurance company; if evidence exists showing that the company promulgated rules or regulations that
effectively controlled or restricted an insurance agent's choice of methods or the methods themselves in selling
insurance, an employer-employee relationship would be present. The determination of the existence of an employer-
employee relationship is thus on a case-to-case basis depending on the evidence on record. IHCSTE

2. Manulife had the power of control over Tongko, sufficient to characterize him as an employee, as shown by
the following indicators:
 2.1 Tongko undertook to comply with Manulife's rules, regulations and other requirements, i.e., the different codes of
conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the Financial Code of
Conduct Agreement;

2.2 The various affidavits of Manulife's insurance agents and managers, who occupied similar positions as Tongko,
showed that they performed administrative duties that established employment with Manulife; 12 and

2.3 Tongko was tasked to recruit some agents in addition to his other administrative functions. De Dios' letter harped
on the direction Manulife intended to take,viz., greater agency recruitment as the primary means to sell more policies;
Tongko's alleged failure to follow this directive led to the termination of his employment with Manulife.

The Motion for Reconsideration

Manulife disagreed with our Decision and filed the present motion for reconsideration on the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulife's right to due process by: (a) confining the review only to the
issue of "control" and utterly disregarding all the other issues that had been joined in this case; (b) mischaracterizing
the divergence of conclusions between the CA and the NLRC decisions as confined only to that on "control"; (c)
grossly failing to consider the findings and conclusions of the CA on the majority of the material evidence, especially
[Tongko's] declaration in his income tax returns that he was a "business person" or "self-employed"; and (d) allowing
[Tongko] to repudiate his sworn statement in a public document.

2. The November 7[, 2008] Decision contravenes settled rules in contract law and agency, distorts not only the legal
relationships of agencies to sell but also distributorship and franchising, and ignores the constitutional and policy
context of contract law vis- -vis labor law.
3. The November 7[, 2008] Decision ignores the findings of the CA on the three elements of the four-fold test other
than the "control" test, reverses well-settled doctrines of law on employer-employee relationships, and grossly
misapplies the "control test," by selecting, without basis, a few items of evidence to the exclusion of more material
evidence to support its conclusion that there is "control." TSHIDa

4. The November 7[, 2008] Decision is judicial legislation, beyond the scope authorized by Articles 8 and 9 of the
Civil Code, beyond the powers granted to this Court under Article VIII, Section 1 of the Constitution and contravenes
through judicial legislation, the constitutional prohibition against impairment of contracts under Article III, Section 10
of the Constitution.
5. For all the above reasons, the November 7[, 2008] Decision made unsustainable and reversible errors, which
should be corrected, in concluding that Respondent Manulife and Petitioner had an employer-employee relationship,
that Respondent Manulife illegally dismissed Petitioner, and for consequently ordering Respondent Manulife to pay
Petitioner backwages, separation pay, nominal damages and attorney's fees. 13

THE COURT'S RULING

A. The Insurance and the Civil Codes;
the Parties' Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law perspective, oblivious that the factual antecedents
were set in the insurance industry so that the Insurance Code primarily governs. Chapter IV, Title 1 of this Code is
wholly devoted to "Insurance Agents and Brokers" and specifically defines the agents and brokers relationship with the
insurance company and how they are governed by the Code and regulated by the Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency" that it speaks of, as agency is a civil law
matter governed by the Civil Code. Thus, at the very least, three sets of laws namely, the Insurance Code, the Labor
Code and the Civil Code have to be considered in looking at the present case. Not to be forgotten, too, is the
Agreement (partly reproduced on page 2 of this Dissent and which no one disputes) that the parties adopted to govern
their relationship for purposes of selling the insurance the company offers. To forget these other laws is to take a myopic
view of the present case and to add to the uncertainties that now exist in considering the legal relationship between the
insurance company and its "agents."
The main issue of whether an agency or an employment relationship exists depends on the incidents of the
relationship. The Labor Code concept of "control" has to be compared and distinguished with the "control" that must
necessarily exist in a principal-agent relationship. The principal cannot but also have his or her say in directing the
course of the principal-agent relationship, especially in cases where the company-representative relationship in the
insurance industry is an agency. ASTIED

a. The laws on insurance and agency

The business of insurance is a highly regulated commercial activity in the country, in terms particularly of who
can be in the insurance business, who can act for and in behalf of an insurer, and how these parties shall conduct
themselves in the insurance business. Section 186 of the Insurance Code provides that "No person, partnership, or
association of persons shall transact any insurance business in the Philippines except as agent of a person or
corporation authorized to do the business of insurance in the Philippines." Sections 299 and 300 of the Insurance Code
on Insurance Agents and Brokers, among other provisions, provide:
Section 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay any
commission or other compensation to any person for services in obtaining insurance, unless such person
shall have first procured from the Commissioner a license to act as an insurance agent of such company or as an
insurance broker as hereinafter provided.

No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications
for insurance, or receive for services in obtaining insurance, any commission or other compensation from any
insurance company doing business in the Philippines or any agent thereof, without first procuring a license so to act
from the Commissioner . . . The Commissioner shall satisfy himself as to the competence and trustworthiness of the
applicant and shall have the right to refuse to issue or renew and to suspend or revoke any such license in his
discretion.

Section 300. Any person who for compensation solicits or obtains insurance on behalf of any insurance company or
transmits for a person other than himself an application for a policy or contract of insurance to or from such company
or offers or assumes to act in the negotiating of such insurance shall be an insurance agent within the intent of this
section and shall thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance
agent is subject.

The application for an insurance agent's license requires a written examination, and the applicant must be of good moral
character and must not have been convicted of a crime involving moral turpitude. 14 The insurance agent who collects
premiums from an insured person for remittance to the insurance company does so in a fiduciary capacity, and an
insurance company which delivers an insurance policy or contract to an authorized agent is deemed to have authorized
the agent to receive payment on the company's behalf. 15 Section 361 further prohibits the offer, negotiation, or collection
of any amount other than that specified in the policy and this covers any rebate from the premium or any special favor
or advantage in the dividends or benefit accruing from the policy. cAaETS

Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed and must also act
within the parameters of the authority granted under the license and under the contract with the principal. Other than
the need for a license, the agent is limited in the way he offers and negotiates for the sale of the company's insurance
products, in his collection activities, and in the delivery of the insurance contract or policy. Rules regarding the desired
results (e.g., the required volume to continue to qualify as a company agent, rules to check on the parameters on the
authority given to the agent, and rules to ensure that industry, legal and ethical rules are followed) are built-in elements
of control specific to an insurance agency and should not and cannot be read as elements of control that attend an
employment relationship governed by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person [who] binds himself to render some service or
to do something in representation or on behalf of another, with the consent or authority of the latter." 16 While this is a
very broad definition that on its face may even encompass an employment relationship, the distinctions between agency
and employment are sufficiently established by law and jurisprudence.
Generally, the determinative element is the control exercised over the one rendering service. The employer
controls the employee both in the results and in the means and manner of achieving this result. The principal in an
agency relationship, on the other hand, also has the prerogative to exercise control over the agent in undertaking the
assigned task based on the parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an agency must be express in light of the need for a
license and for the designation by the insurance company. In the present case, the Agreement fully serves as grant of
authority to Tongko as Manulife's insurance agent. 17 This agreement is supplemented by the company's agency
practices and usages, duly accepted by the agent in carrying out the agency. 18 By authority of the Insurance Code, an
insurance agency is for compensation, 19 a matter the Civil Code Rules on Agency presumes in the absence of proof to
the contrary. 20 Other than the compensation, the principal is bound to advance to, or to reimburse, the agent the agreed
sums necessary for the execution of the agency. 21 By implication at least under Article 1994 of the Civil Code, the
principal can appoint two or more agents to carry out the same assigned tasks, 22 based necessarily on the specific
instructions and directives given to them. HCEISc

With particular relevance to the present case is the provision that "In the execution of the agency, the agent
shall act in accordance with the instructions of the principal." 23 This provision is pertinent for purposes of the necessary
control that the principal exercises over the agent in undertaking the assigned task, and is an area where the instructions
can intrude into the labor law concept of control so that minute consideration of the facts is necessary. A related article
is Article 1891 ofthe Civil Code which binds the agent to render an account of his transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to establish that the company
rules and regulations that an agent has to comply with are indicative of an employer-employee relationship. 24 The
Dissenting Opinions of Justice Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also cite Insular Life
Assurance Co. v. National Labor Relations Commission (second Insular case) 25 to support the view that Tongko is
Manulife's employee. On the other hand, Manulife cites the Carungcong case and AFP Mutual Benefit Association, Inc.
v. National Labor Relations Commission (AFPMBAI case) 26 to support its allegation that Tongko was not its employee.
A caveat has been given above with respect to the use of the rulings in the cited cases because none of them
is on all fours with the present case; the uniqueness of the factual situation of the present case prevents it from being
directly and readily cast in the mold of the cited cases. These cited cases are themselves different from one another;
this difference underscores the need to read and quote them in the context of their own factual situations.
The present case at first glance appears aligned with the facts in the Carungcong, the Grepalife, and the second
Insular Life cases. A critical difference, however, exists as these cited cases dealt with the proper legal
characterization of a subsequentmanagement contract that superseded the original agency contract between
the insurance company and its agent. Carungcong dealt with a subsequent Agreement making Carungcong a New
Business Manager that clearly superseded the Agreement designating Carungcong as an agent empowered to solicit
applications for insurance. The Grepalife case, on the other hand, dealt with the proper legal characterization of the
appointment of the Ruiz brothers to positions higher than their original position as insurance agents. Thus, after
analyzing the duties and functions of the Ruiz brothers, as these were enumerated in their contracts, we concluded
that the company practically dictated the manner by which the Ruiz brothers were to carry out their jobs. Finally,
the second Insular Life case dealt with the implications of de los Reyes' appointment as acting unit manager which, like
the subsequent contracts in the Carungcong and the Grepalife cases, was clearly defined under a subsequent
contract. In all these cited cases, a determination of the presence of the Labor Code element of control was
made on the basis of the stipulations of the subsequent contracts. TaDAHE

In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases, the only contract or
document extant and submitted as evidence in the present case is the Agreement a pure agency agreement in the
Civil Code context similar to the original contract in the first Insular Life case and the contract in the AFPMBAI case.
And while Tongko was later on designated unit manager in 1983, Branch Manager in 1990, and Regional Sales Manager
in 1996, no formal contract regarding these undertakings appears in the records of the case. Any such contract or
agreement, had there been any, could have at the very least provided the bases for properly ascertaining the juridical
relationship established between the parties.
These critical differences, particularly between the present case and the Grepalife and the second Insular Life
cases, should therefore immediately drive us to be more prudent and cautious in applying the rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977 Agreement that governed and defined the parties'
relations until the Agreement's termination in 2001. This Agreement stood for more than two decades and, based on
the records of the case, was never modified or novated. It assumes primacy because it directly dealt with the nature
of the parties' relationship up to the very end; moreover, both parties never disputed its authenticity or the accuracy of
its terms.
By the Agreement's express terms, Tongko served as an "insurance agent" for Manulife, not as an employee.
To be sure, the Agreement's legal characterization of the nature of the relationship cannot be conclusive and binding
on the courts; as the dissent clearly stated, the characterization of the juridical relationship the Agreement embodied is
a matter of law that is for the courts to determine. At the same time, though, the characterization the parties gave to
their relationship in the Agreement cannot simply be brushed aside because it embodies their intent at the time they
entered the Agreement, and they were governed by this understanding throughout their relationship. At the very least,
the provision on the absence of employer-employee relationship between the parties can be an aid in considering the
Agreement and its implementation, and in appreciating the other evidence on record. STIcEA

The parties' legal characterization of their intent, although not conclusive, is critical in this case because this
intent is not illegal or outside the contemplation of law, particularly of the Insurance and the Civil Codes. From this
perspective, the provisions of the Insurance Code cannot be disregarded as this Code (as heretofore already noted)
expressly envisions a principal-agent relationship between the insurance company and the insurance agent in the sale
of insurance to the public. For this reason, we can take judicial notice that as a matter of Insurance Code-based
business practice, an agency relationship prevails in the insurance industry for the purpose of selling
insurance. The Agreement, by its express terms, is in accordance with the Insurance Code model when it provided for
a principal-agent relationship, and thus cannot lightly be set aside nor simply be considered as an agreement that does
not reflect the parties' true intent. This intent, incidentally, is reinforced by the system of compensation the Agreement
provides, which likewise is in accordance with the production-based sales commissions the Insurance Code provides.
Significantly, evidence shows that Tongko's role as an insurance agent never changed during his relationship
with Manulife. If changes occurred at all, the changes did not appear to be in the nature of their core relationship. Tongko
essentially remained an agent, but moved up in this role through Manulife's recognition that he could use other agents
approved by Manulife, but operating under his guidance and in whose commissions he had a share. For want of a better
term, Tongko perhaps could be labeled as a "lead agent" who guided under his wing other Manulife agents similarly
tasked with the selling of Manulife insurance.
Like Tongko, the evidence suggests that these other agents operated under their own agency agreements.
Thus, if Tongko's compensation scheme changed at all during his relationship with Manulife, the change was solely for
purposes of crediting him with his share in the commissions the agents under his wing generated. As an agent who was
recruiting and guiding other insurance agents, Tongko likewise moved up in terms of the reimbursement of expenses
he incurred in the course of his lead agency, a prerogative he enjoyed pursuant to Article 1912 of the Civil Code.Thus,
Tongko received greater reimbursements for his expenses and was even allowed to use Manulife facilities in his
interactions with the agents, all of whom were, in the strict sense, Manulife agents approved and certified as such by
Manulife with the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly remained an agent is the inevitable conclusion
that results from the reading of the Agreement (the only agreement on record in this case) and his continuing role
thereunder as sales agent, from the perspective of the Insurance and the Civil Codes and in light of what Tongko himself
attested to as his role as Regional Sales Manager. To be sure, this interpretation could have been contradicted if other
agreements had been submitted as evidence of the relationship between Manulife and Tongko on the latter's expanded
undertakings. In the absence of any such evidence, however, this reading based on the available evidence and the
applicable insurance and civil law provisions must stand, subject only to objective and evidentiary Labor Code tests
on the existence of an employer-employee relationship. CAETcH

In applying such Labor Code tests, however, the enforcement of the Agreement during the course of the parties'
relationship should be noted. From 1977 until the termination of the Agreement, Tongko's occupation was to sell
Manulife's insurance policies and products. Both parties acquiesced with the terms and conditions of the Agreement.
Tongko, for his part, accepted all the benefits flowing from the Agreement, particularly the generous commissions.
Evidence indicates that Tongko consistently clung to the view that he was an independent agent selling Manulife
insurance products since he invariably declared himself a business or self-employed person in his income tax
returns. This consistency with, and action made pursuant to the Agreement were pieces of evidence that were
never mentioned nor considered in our Decision of November 7, 2008. Had they been considered, they could, at
the very least, serve as Tongko's admissions against his interest. Strictly speaking, Tongko's tax returns cannot but be
legally significant because he certified under oath the amount he earned as gross business income, claimed business
deductions, leading to his net taxable income. This should be evidence of the first order that cannot be brushed aside
by a mere denial. Even on a layman's view that is devoid of legal considerations, the extent of his annual income alone
renders his claimed employment status doubtful. 27
Hand in hand with the concept of admission against interest in considering the tax returns, the concept of
estoppel a legal and equitable concept 28 necessarily must come into play. Tongko's previous admissions in
several years of tax returns as an independent agent, as against his belated claim that he was all along an employee,
are too diametrically opposed to be simply dismissed or ignored. Interestingly, Justice Velasco's dissenting opinion
states that Tongko was forced to declare himself a business or self-employed person by Manulife's persistent refusal
to recognize him as its employee. 29 Regrettably, the dissent has shown no basis for this conclusion, an
understandable omission since no evidence in fact exists on this point in the records of the case. In fact, what
the evidence shows is Tongko's full conformity with, and action as, an independent agent until his relationship with
Manulife took a bad turn.
Another interesting point the dissent raised with respect to the Agreement is its conclusion that the Agreement
negated any employment relationship between Tongko and Manulife so that the commissions he earned as a sales
agent should not be considered in the determination of the backwages and separation pay that should be given to him.
This part of the dissent is correct although it went on to twist this conclusion by asserting that Tongko had dual roles in
his relationship with Manulife; he was an agent, not an employee, in so far as he sold insurance for Manulife, but was
an employee in his capacity as a manager. Thus, the dissent concluded that Tongko's backwages should only be with
respect to his role as Manulife's manager. ITESAc

The conclusion with respect to Tongko's employment as a manager is, of course, unacceptable for the legal,
factual and practical reasons discussed in this Resolution. In brief, the factual reason is grounded on the lack of
evidentiary support of the conclusion that Manulife exercised control over Tongko in the sense understood in the Labor
Code. The legal reason, partly based on the lack of factual basis, is the erroneous legal conclusion that Manulife
controlled Tongko and was thus its employee. The practical reason, on the other hand, is the havoc that the dissent's
unwarranted conclusion would cause the insurance industry that, by the law's own design, operated along the lines of
principal-agent relationship in the sale of insurance.
c.2. Other Evidence of Alleged Control
 A glaring evidentiary gap for Tongko in this case is the lack of evidence on record showing that Manulife ever
exercised means-and-manner control, even to a limited extent, over Tongko during his ascent in Manulife's sales ladder.
In 1983, Tongko was appointed unit manager. Inexplicably, Tongko never bothered to present any evidence at all on
what this designation meant. This also holds true for Tongko's appointment as branch manager in 1990, and as Regional
Sales Manager in 1996. The best evidence of control the agreement or directive relating to Tongko's duties and
responsibilities was never introduced as part of the records of the case. The reality is, prior to de Dios' letter, Manulife
had practically left Tongko alone not only in doing the business of selling insurance, but also in guiding the agents under
his wing. As discussed below, the alleged directives covered by de Dios' letter, heretofore quoted in full, were policy
directions and targeted results that the company wanted Tongko and the other sales groups to realign with in their own
selling activities. This is the reality that the parties' presented evidence consistently tells us.
What, to Tongko, serve as evidence of labor law control are the codes of conduct that Manulife imposes on its
agents in the sale of insurance. The mere presentation of codes or of rules and regulations, however, is not per
se indicative of labor law control as the law and jurisprudence teach us.
As already recited above, the Insurance Code imposes obligations on both the insurance company and its
agents in the performance of their respective obligations under the Code, particularly on licenses and their renewals,
on the representations to be made to potential customers, the collection of premiums, on the delivery of insurance
policies, on the matter of compensation, and on measures to ensure ethical business practice in the industry.
The general law on agency, on the other hand, expressly allows the principal an element of control over the
agent in a manner consistent with an agency relationship. In this sense, these control measures cannot be read as
indicative of labor law control. Foremost among these are the directives that the principal may impose on the agent to
achieve the assigned tasks, to the extent that they do not involve the means and manner of undertaking these tasks.
The law likewise obligates the agent to render an account; in this sense, the principal may impose on the agent specific
instructions on how an account shall be made, particularly on the matter of expenses and reimbursements. To these
extents, control can be imposed through rules and regulations without intruding into the labor law concept of control for
purposes of employment. ScaATD

From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment to abide
by the rules and regulations of an insurance company does not ipso facto make the insurance agent an employee.
Neither do guidelines somehow restrictive of the insurance agent's conduct necessarily indicate "control" as this term
is defined in jurisprudence. Guidelines indicative of labor law "control," as the first Insular Life case tells us,
should not merely relate to the mutually desirable result intended by the contractual relationship; they must
have the nature of dictating the means or methods to be employed in attaining the result, or of fixing the
methodology and of binding or restricting the party hired to the use of these means. In fact, results-wise, the
principal can impose production quotas and can determine how many agents, with specific territories, ought to be
employed to achieve the company's objectives. These are management policy decisions that the labor law element of
control cannot reach. Our ruling in these respects in the first Insular Life case was practically reiterated in Carungcong.
Thus, as will be shown more fully below, Manulife's codes of conduct, 30 all of which do not intrude into the insurance
agents' means and manner of conducting their sales and only control them as to the desired results and Insurance
Code norms, cannot be used as basis for a finding that the labor law concept of control existed between Manulife and
Tongko.
The dissent considers the imposition of administrative and managerial functions on Tongko as indicative of
labor law control; thus, Tongko as manager, but not as insurance agent, became Manulife's employee. It drew this
conclusion from what the other Manulife managers disclosed in their affidavits (i.e., their enumerated administrative and
managerial functions) and after comparing these statements with the managers in Grepalife. The dissent compared the
control exercised by Manulife over its managers in the present case with the control the managers in the Grepalife case
exercised over their employees by presenting the following matrix: 31
Duties of Manulife's Manager Duties of Grepalife's
Managers/Supervisors
- to render or recommend prospective - train understudies for the position
agents to be licensed, trained and of district manager
contracted to sell Manulife products
and who will be part of my Unit
- to coordinate activities of the agents - properly account, record and document
under [the managers'] Unit in [the the company's funds, spot-check and audit
agents'] daily, weekly and monthly the work of the zone supervisors, . . .
selling activities, making sure that follow up the submission of weekly
their respective sales targets are met; remittance reports of the debit agents and
zone supervisors
- to conduct periodic training sessions - direct and supervise the sales activities
for [the] agents to further enhance of the debit agents under him, . . .
their sales skill; and undertake and discharge the functions of
absentee debit agents, spot-check the
 - to assist [the] agents with their sales record of debit agents, and insure proper
activities by way of joint fieldwork, documentation of sales and collections of
consultations and one-on-one evaluation debit agents.
and analysis of particular accounts cDTCIA
Aside from these affidavits however, no other evidence exists regarding the effects of Tongko's additional roles in
Manulife's sales operations on the contractual relationship between them.
To the dissent, Tongko's administrative functions as recruiter, trainer, or supervisor of other sales agents
constituted a substantive alteration of Manulife's authority over Tongko and the performance of his end of the
relationship with Manulife. We could not deny though that Tongko remained, first and foremost, an insurance agent,
and that his additional role as Branch Manager did not lessen his main and dominant role as insurance agent; this role
continued to dominate the relations between Tongko and Manulife even after Tongko assumed his leadership role
among agents. This conclusion cannot be denied because it proceeds from the undisputed fact that Tongko and
Manulife never altered their July 1, 1977 Agreement, a distinction the present case has with the contractual changes
made in the second Insular Life case. Tongko's results-based commissions, too, attest to the primacy he gave to his
role as insurance sales agent.
The dissent apparently did not also properly analyze and appreciate the great qualitative difference that exists
between:
the Manulife managers' role is to coordinate activities of the agents under the managers' Unit in the agents'
daily, weekly, and monthly selling activities, making sure that their respective sales targets are met.
the District Manager's duty in Grepalife is to properly account, record, and document the company's funds,
spot-check and audit the work of the zone supervisors, conserve the company's business in the district through
"reinstatements," follow up the submission of weekly remittance reports of the debit agents and zone supervisors,
preserve company property in good condition, train understudies for the position of district managers, and maintain his
quota of sales (the failure of which is a ground for termination).
the Zone Supervisor's (also in Grepalife) has the duty to direct and supervise the sales activities of the debit
agents under him, conserve company property through "reinstatements," undertake and discharge the functions of
absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and collections
by the debit agents. AHECcT

These job contents are worlds apart in terms of "control." In Grepalife, the details of how to do the job are specified and
pre-determined; in the present case, the operative words are the "sales target," the methodology being left undefined
except to the extent of being "coordinative." To be sure, a "coordinative" standard for a manager cannot be indicative
of control; the standard only essentially describes what a Branch Manager is the person in the lead who orchestrates
activities within the group. To "coordinate," and thereby to lead and to orchestrate, is not so much a matter of control
by Manulife; it is simply a statement of a branch manager's role in relation with his agents from the point of view of
Manulife whose business Tongko's sales group carries.
A disturbing note, with respect to the presented affidavits and Tongko's alleged administrative functions, is the
selective citation of the portions supportive of an employment relationship and the consequent omission of portions
leading to the contrary conclusion. For example, the following portions of the affidavit of Regional Sales Manager John
Chua, with counterparts in the other affidavits, were not brought out in the Decision of November 7, 2008, while the
other portions suggesting labor law control were highlighted. Specifically, the following portions of the affidavits were
not brought out: 32
1.a. I have no fixed wages or salary since my services are compensated by way of commissions based on the
computed premiums paid in full on the policies obtained thereat;
1.b. I have no fixed working hours and employ my own method in soliciting insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my daily work load;
1.d. I use my own facilities, tools, materials and supplies in carrying out my business of selling insurance;
xxx xxx xxx
6. I have my own staff that handles the day to day operations of my office;
7. My staff are my own employees and received salaries from me;
xxx xxx xxx
9. My commission and incentives are all reported to the Bureau of Internal Revenue (BIR) as income by a self-
employed individual or professional with a ten (10) percent creditable withholding tax. I also remit monthly for
professionals. ISHaCD
These statements, read with the above comparative analysis of the Manulife and the Grepalife cases, would have
readily yielded the conclusion that no employer-employee relationship existed between Manulife and Tongko.
Even de Dios' letter is not determinative of control as it indicates the least amount of intrusion into Tongko's
exercise of his role as manager in guiding the sales agents. Strictly viewed, de Dios' directives are merely operational
guidelines on how Tongko could align his operations with Manulife's re-directed goal of being a "big league player." The
method is to expand coverage through the use of more agents. This requirement for the recruitment of more agents is
not a means-and-method control as it relates, more than anything else, and is directly relevant, to Manulife's objective
of expanded business operations through the use of a bigger sales force whose members are all on a principal-agent
relationship. An important point to note here is that Tongko was not supervising regular full-time employees of
Manulife engaged in the running of the insurance business; Tongko was effectively guiding his corps of sales
agents, who are bound to Manulife through the same Agreement that he had with Manulife, all the while sharing
in these agents' commissions through his overrides. This is the lead agent concept mentioned above for want of a
more appropriate term, since the title of Branch Manager used by the parties is really a misnomer given that what is
involved is not a specific regular branch of the company but a corps of non-employed agents, defined in terms of covered
territory, through which the company sells insurance. Still another point to consider is that Tongko was not even setting
policies in the way a regular company manager does; company aims and objectives were simply relayed to him with
suggestions on how these objectives can be reached through the expansion of a non-employee sales force.
Interestingly, a large part of de Dios' letter focused on income, which Manulife demonstrated, in Tongko's case,
to be unaffected by the new goal and direction the company had set. Income in insurance agency, of course, is
dependent on results, not on the means and manner of selling a matter for Tongko and his agents to determine and
an area into which Manulife had not waded. Undeniably, de Dios' letter contained a directive to secure a competent
assistant at Tongko's own expense. While couched in terms of a directive, it cannot strictly be understood as an intrusion
into Tongko's method of operating and supervising the group of agents within his delineated territory. More than anything
else, the "directive" was a signal to Tongko that his results were unsatisfactory, and was a suggestion on how Tongko's
perceived weakness in delivering results could be remedied. It was a solution, with an eye on results, for a consistently
underperforming group; its obvious intent was to save Tongko from the result that he then failed to grasp that he
could lose even his own status as an agent, as he in fact eventually did.
The present case must be distinguished from the second Insular Life case that showed the hallmarks of an
employer-employee relationship in the management system established. These were: exclusivity of service, control of
assignments and removal of agents under the private respondent's unit, and furnishing of company facilities and
materials as well as capital described as Unit Development Fund. All these are obviously absent in the present case. If
there is a commonality in these cases, it is in the collection of premiums which is a basic authority that can be delegated
to agents under the Insurance Code. STaHIC

As previously discussed, what simply happened in Tongko's case was the grant of an expanded sales agency
role that recognized him as leader amongst agents in an area that Manulife defined. Whether this consequently
resulted in the establishment of an employment relationship can be answered by concrete evidence that
corresponds to the following questions:
as lead agent, what were Tongko's specific functions and the terms of his additional engagement;
was he paid additional compensation as a so-called Area Sales Manager, apart from the commissions
he received from the insurance sales he generated;
what can be Manulife's basis to terminate his status as lead agent;
can Manulife terminate his role as lead agent separately from his agency contract; and
to what extent does Manulife control the means and methods of Tongko's role as lead agent?
The answers to these questions may, to some extent, be deduced from the evidence at hand, as partly discussed
above. But strictly speaking, the questions cannot definitively and concretely be answered through the evidence on
record. The concrete evidence required to settle these questions is simply not there, since only the Agreement
and the anecdotal affidavits have been marked and submitted as evidence.
Given this anemic state of the evidence, particularly on the requisite confluence of the factors determinative of
the existence of employer-employee relationship, the Court cannot conclusively find that the relationship exists in the
present case, even if such relationship only refers to Tongko's additional functions. While a rough deduction can be
made, the answer will not be fully supported by the substantial evidence needed.
Under this legal situation, the only conclusion that can be made is that the absence of evidence showing
Manulife's control over Tongko's contractual duties points to the absence of any employer-employee relationship
between Tongko and Manulife. In the context of the established evidence, Tongko remained an agent all along; although
 his subsequent duties made him a lead agent with leadership role, he was nevertheless only an agent whose basic
contract yields no evidence of means-and-manner control. DEacIT

This conclusion renders unnecessary any further discussion of the question of whether an agent may
simultaneously assume conflicting dual personalities. But to set the record straight, the concept of a single person
having the dual role of agent and employee while doing the same task is a novel one in our jurisprudence, which must
be viewed with caution especially when it is devoid of any jurisprudential support or precedent. The quoted portions
in Justice Carpio-Morales' dissent, 33 borrowed from both the Grepalife and the second Insular Life cases, to support
the duality approach of the Decision of November 7, 2008, are regrettably far removed from their context i.e., the
cases' factual situations, the issues they decided and the totality of the rulings in these cases and cannot yield the
conclusions that the dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz brothers' appointment as zone supervisor and
district manager made them employees ofGrepalife. Indeed, because of the presence of the element of control in their
contract of engagements, they were considered Grepalife's employees. This did not mean, however, that they were
simultaneously considered agents as well as employees of Grepalife; the Court's ruling never implied that this situation
existed insofar as the Ruiz brothers were concerned. The Court's statement the Insurance Code may govern the
licensing requirements and other particular duties of insurance agents, but it does not bar the application of the Labor
Code with regard to labor standards and labor relations simply means that when an insurance company has
exercised control over its agents so as to make them their employees, the relationship between the parties, which was
otherwise one for agency governed by the Civil Code and the Insurance Code, will now be governed by the Labor Code.
The reason for this is simple the contract of agency has been transformed into an employer-employee relationship.
The second Insular Life case, on the other hand, involved the issue of whether the labor bodies have jurisdiction
over an illegal termination dispute involving parties who had two contracts first, an original contract (agency contract),
which was undoubtedly one for agency, and another subsequent contract that in turn designated the agent acting unit
manager (a management contract). Both the Insular Life and the labor arbiter were one in the position that both were
agency contracts. The Court disagreed with this conclusion and held that insofar as the management contract is
concerned, the labor arbiter has jurisdiction. It is in this light that we remanded the case to the labor arbiter for further
proceedings. We never said in this case though that the insurance agent had effectively assumed dual personalities for
the simple reason that the agency contract has been effectively superseded by the management contract. The
management contract provided that 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.
The dissent pointed out, as an argument to support its employment relationship conclusion, that any doubt in
the existence of an employer-employee relationship should be resolved in favor of the existence of the
relationship. 34 This observation, apparently drawn from Article 4 of the Labor Code, is misplaced, as Article 4 applies
only when a doubt exists in the "implementation and application" of the Labor Code and its implementing rules; it does
not apply where no doubt exists as in a situation where the claimant clearly failed to substantiate his claim of employment
relationship by the quantum of evidence the Labor Code requires. STcDIE

On the dissent's last point regarding the lack of jurisprudential value of our November 7, 2008 Decision, suffice
it to state that, as discussed above, the Decision was not supported by the evidence adduced and was not in accordance
with controlling jurisprudence. It should, therefore, be reconsidered and abandoned, but not in the manner the dissent
suggests as the dissenting opinions are as factually and as legally erroneous as the Decision under reconsideration.
In light of these conclusions, the sufficiency of Tongko's failure to comply with the guidelines of de Dios' letter,
as a ground for termination of Tongko's agency, is a matter that the labor tribunals cannot rule upon in the absence of
an employer-employee relationship. Jurisdiction over the matter belongs to the courts applying the laws of insurance,
agency and contracts.
WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7,
2008, GRANT Manulife's motion for reconsideration and, accordingly, DISMISS Tongko's petition. No costs.
SO ORDERED.
(Tongko v. Manufacturers Lfe Insurance Co. (Phils.), Inc., G.R. No. 167622 (Resolution), [June 29, 2010], 636 PHIL 57-
|||

127)
 THIRD DIVISION [G.R. No. 196426. August 15, 2011.]
MARTICIO SEMBLANTE and DUBRICK PILAR, petitioners, vs. COURT OF APPEALS, ALLERA DE
MANDAUE/SPOUSES VICENTE and MARIA LUISA LOOT, respondents.
DECISION
VELASCO, JR., J : p

Before Us is a Petition for Review on Certiorari under Rule 45, assailing and seeking to set aside the
Decision 1 and Resolution 2 dated May 29, 2009 and February 23, 2010, respectively, of the Court of Appeals (CA) in CA-
G.R. SP No. 03328. The CA affirmed the October 18, 2006 Resolution 3 of the National Labor Relations Commission
(NLRC), Fourth Division (now Seventh Division), in NLRC Case No. V-000673-2004. AaSCTD

Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that they were hired by
respondents-spouses Vicente and Maria Luisa Loot, the owners of Gallera de Mandaue (the cockpit), as the
official masiador and sentenciador, respectively, of the cockpit sometime in 1993.
As the masiador, Semblante calls and takes the bets from the gamecock owners and other bettors and orders
the start of the cockfight. He also distributes the winnings after deducting the arriba, or the commission for the cockpit.
Meanwhile, as the sentenciador, Pilar oversees the proper gaffing of fighting cocks, determines the fighting cocks'
physical condition and capabilities to continue the cockfight, and eventually declares the result of the cockfight. 4
For their services as masiador and sentenciador, Semblante receives PhP2,000 per week or a total of
PhP8,000 per month, while Pilar gets PhP3,500 a week or PhP14,000 per month. They work every Tuesday,
Wednesday, Saturday, and Sunday every week, excluding monthly derbies and cockfights held on special holidays.
Their working days start at 1:00 p.m. and last until 12:00 midnight, or until the early hours of the morning depending on
the needs of the cockpit. Petitioners had both been issued employees' identification cards 5 that they wear every time
they report for duty. They alleged never having incurred any infraction and/or violation of the cockpit rules and
regulations.
On November 14, 2003, however, petitioners were denied entry into the cockpit upon the instructions of
respondents, and were informed of the termination of their services effective that date. This prompted petitioners to file
a complaint for illegal dismissal against respondents.
In answer, respondents denied that petitioners were their employees and alleged that they were associates of
respondents' independent contractor, Tomas Vega. Respondents claimed that petitioners have no regular working time
or day and they are free to decide for themselves whether to report for work or not on any cockfighting day. In times
when there are few cockfights in Gallera de Mandaue, petitioners go to other cockpits in the vicinity. Lastly, petitioners,
so respondents assert, were only issued identification cards to indicate that they were free from the normal entrance
fee and to differentiate them from the general public. 6
In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found petitioners to be regular employees
of respondents as they performed work that was necessary and indispensable to the usual trade or business of
respondents for a number of years. The Labor Arbiter also ruled that petitioners were illegally dismissed, and so ordered
respondents to pay petitioners their backwages and separation pay. 7
Respondents' counsel received the Labor Arbiter's Decision on September 14, 2004. And within the 10-day
appeal period, he filed the respondents' appeal with the NLRC on September 24, 2004, but without posting a cash or
surety bond equivalent to the monetary award granted by the Labor Arbiter. 8
It was only on October 11, 2004 that respondents filed an appeal bond dated October 6, 2004. Hence, in a
Resolution 9 dated August 25, 2005, the NLRC denied the appeal for its non-perfection.
Subsequently, however, the NLRC, acting on respondents' Motion for Reconsideration, reversed its Resolution
on the postulate that their appeal was meritorious and the filing of an appeal bond, albeit belated, is a substantial
compliance with the rules. The NLRC held in its Resolution of October 18, 2006 that there was no employer-employee
relationship between petitioners and respondents, respondents having no part in the selection and engagement of
petitioners, and that no separate individual contract with respondents was ever executed by petitioners. 10
Following the denial by the NLRC of their Motion for Reconsideration, per Resolution dated January 12, 2007,
petitioners went to the CA on a petition forcertiorari. In support of their petition, petitioners argued that the NLRC gravely
abused its discretion in entertaining an appeal that was not perfected in the first place. On the other hand, respondents
argued that the NLRC did not commit grave abuse of discretion, since they eventually posted their appeal bond and
that their appeal was so meritorious warranting the relaxation of the rules in the interest of justice. 11
In its Decision dated May 29, 2009, the appellate court found for respondents, noting that referees and bet-
takers in a cockfight need to have the kind of expertise that is characteristic of the game to interpret messages conveyed
by mere gestures. Hence, petitioners are akin to independent contractors who possess unique skills, expertise, and
talent to distinguish them from ordinary employees. Further, respondents did not supply petitioners with the tools and
instrumentalities they needed to perform work. Petitioners only needed their unique skills and talents to perform their
job as masiador and sentenciador. 12 The CA held: ESDcIA

In some circumstances, the NLRC is allowed to be liberal in the interpretation of the rules in deciding labor cases. In
this case, the appeal bond was filed, although late. Moreover, an exceptional circumstance obtains in the case
at bench which warrants a relaxation of the bond requirement as a condition for perfecting the appeal. This
case is highly meritorious that propels this Court not to strictly apply the rules and thus prevent a grave injustice from
being done.
As elucidated by the NLRC, the circumstances obtaining in this case wherein no actual employer-employee
exists between the petitioners and the private respondents [constrain] the relaxation of the rules. In this
regard, we find no grave abuse attributable to the administrative body.
xxx xxx xxx Petitioners are duly licensed "masiador" and "sentenciador" in the cockpit owned by Lucia Loot.
Cockfighting, which is a part of our cultural heritage, has a peculiar set of rules. It is a game based on the fighting
ability of the game cocks in the cockpit. The referees and bet-takers need to have that kind of expertise that is
characteristic of the cockfight gambling who can interpret the message conveyed even by mere
gestures. They ought to have the talent and skill to get the bets from numerous cockfighting aficionados and decide
which cockerel to put in the arena. They are placed in that elite spot where they can control the game and the
crowd. They are not given salaries by cockpit owners as their compensation is based on the "arriba". In fact,
they can offer their services everywhere because they are duly licensed by the GAB. They are free to choose which
cockpit arena to enter and offer their expertise. Private respondents cannot even control over the means and
methods of the manner by which they perform their work. In this light, they are akin to independent contractors
who possess unique skills, expertise and talent to distinguish them from ordinary employees.

Furthermore, private respondents did not supply petitioners with the tools and instrumentalities they needed to
perform their work. Petitioners only needed their talent and skills to be a "masiador" and "sentenciador". As such,
they had all the tools they needed to perform their work. (Emphasis supplied.)

The CA refused to reconsider its Decision. Hence, petitioners came to this Court, arguing in the main that the
CA committed a reversible error in entertaining an appeal, which was not perfected in the first place.
Indeed, the posting of a bond is indispensable to the perfection of an appeal in cases involving monetary awards
from the Decision of the Labor Arbiter. 13Article 223 of the Labor Code provides:
Article 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission
by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such appeal may be
entertained only on any of the following grounds: xxx xxx xxx

In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a
cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the
monetary award in the judgment appealed from. (Emphasis supplied.)

Time and again, however, this Court, considering the substantial merits of the case, has relaxed this rule on,
and excused the late posting of, the appeal bond when there are strong and compelling reasons for the liberality, 14 such
as the prevention of miscarriage of justice extant in the case 15 or the special circumstances in the case combined with
its legal merits or the amount and the issue involved. 16 After all, technical rules cannot prevent courts from exercising
their duties to determine and settle, equitably and completely, the rights and obligations of the parties. 17 This is one
case where the exception to the general rule lies.
While respondents had failed to post their bond within the 10-day period provided above, it is evident, on the
other hand, that petitioners are NOT employees of respondents, since their relationship fails to pass muster the four-
fold test of employment We have repeatedly mentioned in countless decisions: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct,
which is the most important element. 18 ScAIaT

As found by both the NLRC and the CA, respondents had no part in petitioners' selection and
management; 19 petitioners' compensation was paid out of thearriba (which is a percentage deducted from the total
bets), not by petitioners; 20 and petitioners performed their functions as masiador and sentenciador free from the
direction and control of respondents. 21 In the conduct of their work, petitioners relied mainly on their "expertise that
is characteristic of the cockfight gambling," 22 and were never given by respondents any tool needed for the performance
of their work. 23
Respondents, not being petitioners' employers, could never have dismissed, legally or illegally, petitioners,
since respondents were without power or prerogative to do so in the first place. The rule on the posting of an appeal
bond cannot defeat the substantive rights of respondents to be free from an unwarranted burden of answering for an
illegal dismissal for which they were never responsible.
Strict implementation of the rules on appeals must give way to the factual and legal reality that is evident from
the records of this case. 24 After all, the primary objective of our laws is to dispense justice and equity, not the contrary.
 WHEREFORE, We DENY this petition and AFFIRM the May 29, 2009 Decision and February 23, 2010 Resolution of the
CA, and the October 18, 2006 Resolution of the NLRC. SO ORDERED.

SECOND DIVISION
[G.R. No. 192084. September 14, 2011.]
JOSE MEL BERNARTE, petitioner, vs. PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE
EMMANUEL M. EALA, and PERRY MARTINEZ,respondents.
DECISION
CARPIO, J :
p

The Case
This is a petition for review 1 of the 17 December 2009 Decision 2 and 5 April 2010 Resolution 3 of the Court of
Appeals in CA-G.R. SP No. 105406. The Court of Appeals set aside the decision of the National Labor Relations
Commission (NLRC), which affirmed the decision of the Labor Arbiter, and held that petitioner Jose Mel Bernarte is an
independent contractor, and not an employee of respondents Philippine Basketball Association (PBA), Jose Emmanuel
M. Eala, and Perry Martinez. The Court of Appeals denied the motion for reconsideration.
The Facts
The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows:
Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as referees.
During the leadership of Commissioner Emilio Bernardino, they were made to sign contracts on a year-to-year basis.
During the term of Commissioner Eala, however, changes were made on the terms of their employment.

Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the All-Filipino
Cup which was from February 23, 2003 to June 2003. It was only during the second conference when he was made
to sign a one and a half month contract for the period July 1 to August 5, 2003. ITESAc

On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him that his contract
would not be renewed citing his unsatisfactory performance on and off the court. It was a total shock for Bernarte
who was awarded Referee of the year in 2003. He felt that the dismissal was caused by his refusal to fix a game
upon order of Ernie De Leon.

On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of referees in February
2001. On March 1, 2001, he signed a contract as trainee. Beginning 2002, he signed a yearly contract as Regular
Class C referee. On May 6, 2003, respondent Martinez issued a memorandum to Guevarra expressing dissatisfaction
over his questioning on the assignment of referees officiating out-of-town games. Beginning February 2004, he was
no longer made to sign a contract.
Respondents aver, on the other hand, that complainants entered into two contracts of retainer with the PBA in the
year 2003. The first contract was for the period January 1, 2003 to July 15, 2003; and the second was for September
1 to December 2003. After the lapse of the latter period, PBA decided not to renew their contracts.
Complainants were not illegally dismissed because they were not employees of the PBA. Their respective contracts
of retainer were simply not renewed. PBA had the prerogative of whether or not to renew their contracts, which they
knew were fixed. 4

In her 31 March 2005 Decision, 5 the Labor Arbiter 6 declared petitioner an employee whose dismissal by
respondents was illegal. Accordingly, the Labor Arbiter ordered the reinstatement of petitioner and the payment of
backwages, moral and exemplary damages and attorney's fees, to wit:
WHEREFORE, premises considered all respondents who are here found to have illegally dismissed complainants
are hereby ordered to (a) reinstate complainants within thirty (30) days from the date of receipt of this decision and
to solidarily pay complainants: AEDHST

JOSE MEL RENATO

BERNARTE GUEVARRA
1. backwages from January 1,
2004 up to the finality of this
Decision, which to date is P536,250.00 P211,250.00
2. moral damages 100,000.00 100,000.00
3. exemplary damages 50,000.00 50,000.00
4. 10% attorney's fees 68,625.00 36,125.00

TOTAL P754,875.00 P397,375.00
 ======== ========

or a total of P1,152,250.00
The rest of the claims are hereby dismissed for lack of merit or basis.
SO ORDERED. 7

In its 28 January 2008 Decision, 8 the NLRC affirmed the Labor Arbiter's judgment. The dispositive portion of
the NLRC's decision reads:
WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated
March 31, 2005 is AFFIRMED.
SO ORDERED. 9

Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions of the NLRC
and Labor Arbiter. The dispositive portion of the Court of Appeals' decision reads:
WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008
and Resolution dated August 26, 2008 of the National Labor Relations Commission are ANNULLED and SET
ASIDE. Private respondents' complaint before the Labor Arbiter is DISMISSED. TDAHCS
SO ORDERED. 10

The Court of Appeals' Ruling

The Court of Appeals found petitioner an independent contractor since respondents did not exercise any form
of control over the means and methods by which petitioner performed his work as a basketball referee. The Court of
Appeals held:
While the NLRC agreed that the PBA has no control over the referees' acts of blowing the whistle and making calls
during basketball games, it, nevertheless, theorized that the said acts refer to the means and methods employed by
the referees in officiating basketball games for the illogical reason that said acts refer only to the referees' skills. How
could a skilled referee perform his job without blowing a whistle and making calls? Worse, how can the PBA control
the performance of work of a referee without controlling his acts of blowing the whistle and making calls?

Moreover, this Court disagrees with the Labor Arbiter's finding (as affirmed by the NLRC) that the Contracts of
Retainer show that petitioners have control over private respondents.
xxx xxx xxx

Neither do We agree with the NLRC's affirmance of the Labor Arbiter's conclusion that private respondents' repeated
hiring made them regular employees by operation of law. 11 STDEcA

The Issues
The main issue in this case is whether petitioner is an employee of respondents, which in turn determines
whether petitioner was illegally dismissed.
Petitioner raises the procedural issue of whether the Labor Arbiter's decision has become final and executory
for failure of respondents to appeal with the NLRC within the reglementary period.
The Ruling of the Court
The petition is bereft of merit.
The Court shall first resolve the procedural issue posed by petitioner.
Petitioner contends that the Labor Arbiter's Decision of 31 March 2005 became final and executory for failure
of respondents to appeal with the NLRC within the prescribed period. Petitioner claims that the Labor Arbiter's decision
was constructively served on respondents as early as August 2005 while respondents appealed the Arbiter's decision
only on 31 March 2006, way beyond the reglementary period to appeal. Petitioner points out that service of an unclaimed
registered mail is deemed complete five days from the date of first notice of the post master. In this case three notices
were issued by the post office, the last being on 1 August 2005. The unclaimed registered mail was consequently
returned to sender. Petitioner presents the Postmaster's Certification to prove constructive service of the Labor Arbiter's
decision on respondents. The Postmaster certified:
xxx xxx xxx

That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr., immediately issued the first
registry notice to claim on July 12, 2005 by the addressee. The second and third notices were issued on July 21 and
August 1, 2005, respectively. DSATCI
 That the subject registered letter was returned to the sender (RTS) because the addressee failed to claim it after our
one month retention period elapsed. Said registered letter was dispatched from this office to Manila CPO (RTS)
under bill #6, line 7, page 1, column 1, on September 8, 2005. 12

Section 10, Rule 13 of the Rules of Court provides:

SEC. 10. Completeness of service. Personal service is complete upon actual delivery. Service by ordinary mail is
complete upon the expiration of ten (10) days after mailing, unless the court otherwise provides. Service by registered
mail is complete upon actual receipt by the addressee, or after five (5) days from the date he received the first notice
of the postmaster, whichever date is earlier.

The rule on service by registered mail contemplates two situations: (1) actual service the completeness of which
is determined upon receipt by the addressee of the registered mail; and (2) constructive service the completeness of
which is determined upon expiration of five days from the date the addressee received the first notice of the
postmaster. 13
Insofar as constructive service is concerned, there must be conclusive proof that a first notice was duly sent by
the postmaster to the addressee. 14 Not only is it required that notice of the registered mail be issued but that it should
also be delivered to and received by the addressee. 15 Notably, the presumption that official duty has been regularly
performed is not applicable in this situation. It is incumbent upon a party who relies on constructive service to prove that
the notice was sent to, and received by, the addressee. 16
The best evidence to prove that notice was sent would be a certification from the postmaster, who should certify
not only that the notice was issued or sent but also as to how, when and to whom the delivery and receipt was made.
The mailman may also testify that the notice was actually delivered. 17
In this case, petitioner failed to present any concrete proof as to how, when and to whom the delivery and
receipt of the three notices issued by the post office was made. There is no conclusive evidence showing that the post
office notices were actually received by respondents, negating petitioner's claim of constructive service of the Labor
Arbiter's decision on respondents. The Postmaster's Certification does not sufficiently prove that the three notices were
delivered to and received by respondents; it only indicates that the post office issued the three notices. Simply put, the
issuance of the notices by the post office is not equivalent to delivery to and receipt by the addressee of the registered
mail. Thus, there is no proof of completed constructive service of the Labor Arbiter's decision on respondents. CSIcTa

At any rate, the NLRC declared the issue on the finality of the Labor Arbiter's decision moot as respondents'
appeal was considered in the interest of substantial justice. We agree with the NLRC. The ends of justice will be better
served if we resolve the instant case on the merits rather than allowing the substantial issue of whether petitioner is an
independent contractor or an employee linger and remain unsettled due to procedural technicalities.
The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual
issues are beyond the province of this Court. However, this rule admits of exceptions, one of which is where there are
conflicting findings of fact between the Court of Appeals, on one hand, and the NLRC and Labor Arbiter, on the other,
such as in the present case. 18
To determine the existence of an employer-employee relationship, case law has consistently applied the four-
fold test, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employer's power to control the employee on the means and methods by which the work is accomplished.
The so-called "control test" is the most important indicator of the presence or absence of an employer-employee
relationship. 19
In this case, PBA admits repeatedly engaging petitioner's services, as shown in the retainer contracts. PBA
pays petitioner a retainer fee, exclusive of per diem or allowances, as stipulated in the retainer contract. PBA can
terminate the retainer contract for petitioner's violation of its terms and conditions.
However, respondents argue that the all-important element of control is lacking in this case, making petitioner
an independent contractor and not an employee of respondents.
Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents since the latter exercise
control over the performance of his work. Petitioner cites the following stipulations in the retainer contract which
evidence control: (1) respondents classify or rate a referee; (2) respondents require referees to attend all basketball
games organized or authorized by the PBA, at least one hour before the start of the first game of each day; (3)
respondents assign petitioner to officiate ballgames, or to act as alternate referee or substitute; (4) referee agrees to
observe and comply with all the requirements of the PBA governing the conduct of the referees whether on or off the
court; (5) referee agrees (a) to keep himself in good physical, mental, and emotional condition during the life of the
contract; (b) to give always his best effort and service, and loyalty to the PBA, and not to officiate as referee in any
basketball game outside of the PBA, without written prior consent of the Commissioner; (c) always to conduct himself
on and off the court according to the highest standards of honesty or morality; and (6) imposition of various sanctions
for violation of the terms and conditions of the contract.
 The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner
performs his work as a referee officiating a PBA basketball game. The contractual stipulations do not pertain to, much
less dictate, how and when petitioner will blow the whistle and make calls. On the contrary, they merely serve as rules
of conduct or guidelines in order to maintain the integrity of the professional basketball league. As correctly observed
by the Court of Appeals, "how could a skilled referee perform his job without blowing a whistle and making calls? . . .
[H]ow can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and
making calls?" 20 CHaDIT

In Sonza v. ABS-CBN Broadcasting Corporation, 21 which determined the relationship between a television and
radio station and one of its talents, the Court held that not all rules imposed by the hiring party on the hired party indicate
that the latter is an employee of the former. The Court held:
We find that these general rules are merely guidelines towards the achievement of the mutually desired result, which
are top-rating television and radio programs that comply with standards of the industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party in
relation to the services being rendered may be accorded the effect of establishing an employer-employee
relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. v. NLRC.
In said case, we held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed
in attaining it, and those that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result, create no employer-
employee relationship unlike the second, which address both the result and the means used to
achieve it. 22

We agree with respondents that once in the playing court, the referees exercise their own independent
judgment, based on the rules of the game, as to when and how a call or decision is to be made. The referees decide
whether an infraction was committed, and the PBA cannot overrule them once the decision is made on the playing
court. The referees are the only, absolute, and final authority on the playing court. Respondents or any of the PBA
officers cannot and do not determine which calls to make or not to make and cannot control the referee when he blows
the whistle because such authority exclusively belongs to the referees. The very nature of petitioner's job of officiating
a professional basketball game undoubtedly calls for freedom of control by respondents.
Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the referees are
required to report for work only when PBA games are scheduled, which is three times a week spread over an average
of only 105 playing days a year, and they officiate games at an average of two hours per game; and (2) the only
deductions from the fees received by the referees are withholding taxes. IaAEHD

In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a week,
petitioner is required to report for work only when PBA games are scheduled or three times a week at two hours per
game. In addition, there are no deductions for contributions to the Social Security System, Philhealth or Pag-Ibig, which
are the usual deductions from employees' salaries. These undisputed circumstances buttress the fact that petitioner is
an independent contractor, and not an employee of respondents.
Furthermore, the applicable foreign case law declares that a referee is an independent contractor, whose
special skills and independent judgment are required specifically for such position and cannot possibly be controlled by
the hiring party.
In Yonan v. United States Soccer Federation, Inc., 23 the United States District Court of Illinois held that plaintiff,
a soccer referee, is an independent contractor, and not an employee of defendant which is the statutory body that
governs soccer in the United States. As such, plaintiff was not entitled to protection by the Age Discrimination in
Employment Act. The U.S. District Court ruled:
Generally, "if an employer has the right to control and direct the work of an individual, not only as to the result to be
achieved, but also as to details by which the result is achieved, an employer/employee relationship is likely to exist."
The Court must be careful to distinguish between "control[ling] the conduct of another party contracting party by
setting out in detail his obligations" consistent with the freedom of contract, on the one hand, and "the discretionary
control an employer daily exercises over its employee's conduct" on the other.
Yonan asserts that the Federation "closely supervised" his performance at each soccer game he officiated by giving
him an assessor, discussing his performance, and controlling what clothes he wore while on the field and traveling.
Putting aside that the Federation did not, for the most part, control what clothes he wore, the Federation did not
supervise Yonan, but rather evaluated his performance after matches. That the Federation evaluated Yonan as a
referee does not mean that he was an employee. There is no question that parties retaining independent contractors
may judge the performance of those contractors to determine if the contractual relationship should continue. . . .
It is undisputed that the Federation did not control the way Yonan refereed his games. He had full discretion and
authority, under the Laws of the Game, to call the game as he saw fit. . . . In a similar vein, subjecting Yonan to
 qualification standards and procedures like the Federation's registration and training requirements does not create
an employer/employee relationship. . . .

A position that requires special skills and independent judgment weights in favor of independent contractor status. .
. . Unskilled work, on the other hand, suggests an employment relationship. . . . Here, it is undisputed that soccer
refereeing, especially at the professional and international level, requires "a great deal of skill and natural ability."
Yonan asserts that it was the Federation's training that made him a top referee, and that suggests he was an
employee. Though substantial training supports an employment inference, that inference is dulled significantly or
negated when the putative employer's activity is the result of a statutory requirement, not the employer's choice. . .
. ECDAcS

In McInturff v. Battle Ground Academy of Franklin, 24 it was held that the umpire was not an agent of the
Tennessee Secondary School Athletic Association (TSSAA), so the player's vicarious liability claim against the
association should be dismissed. In finding that the umpire is an independent contractor, the Court of Appeals of
Tennesse ruled:
The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played between TSSAA
member schools. The TSSAA does not supervise regular season games. It does not tell an official how to conduct
the game beyond the framework established by the rules. The TSSAA does not, in the vernacular of the case law,
control the means and method by which the umpires work.

In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an employee
of the former. For a hired party to be considered an employee, the hiring party must have control over the means and
methods by which the hired party is to perform his work, which is absent in this case. The continuous rehiring by PBA
of petitioner simply signifies the renewal of the contract between PBA and petitioner, and highlights the satisfactory
services rendered by petitioner warranting such contract renewal. Conversely, if PBA decides to discontinue petitioner's
services at the end of the term fixed in the contract, whether for unsatisfactory services, or violation of the terms and
conditions of the contract, or for whatever other reason, the same merely results in the non-renewal of the contract, as
in the present case. The non-renewal of the contract between the parties does not constitute illegal dismissal of
petitioner by respondents.
WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals. THaAEC

SO ORDERED.
Brion, Del Castillo, * Perez and Sereno, JJ., concur.
||| (Bernarte v. Philippine Basketball Association, G.R. No. 192084, [September 14, 2011], 673 PHIL 384-399)
 THIRD DIVISION
[G.R. No. 169757. November 23, 2011.]
CESAR C. LIRIO, doing business under the name and style of CELKOR AD
SONICMIX, petitioner, vs. WILMER D. GENOVIA, respondent.
DECISION
PERALTA, J : p

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. SP No. 88899 dated
August 4, 2005 and its Resolution dated September 21, 2005, denying petitioner's motion for reconsideration.
The Court of Appeals reversed and set aside the resolution of the NLRC, and reinstated the decision of the
Labor Arbiter with modification, finding that respondent is an employee of petitioner, and that respondent was illegally
dismissed and entitled to the payment of backwages and separation pay in lieu of reinstatement.
The facts are as follows:
On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner Cesar Lirio and/or Celkor
Ad Sonicmix Recording Studio for illegal dismissal, non-payment of commission and award of moral and exemplary
damages.
In his Position Paper, 1 respondent Genovia alleged, among others, that on August 15, 2001, he was hired as
studio manager by petitioner Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor). He was employed to
manage and operate Celkor and to promote and sell the recording studio's services to music enthusiasts and other
prospective clients. He received a monthly salary of P7,000.00. They also agreed that he was entitled to an additional
commission of P100.00 per hour as recording technician whenever a client uses the studio for recording, editing or any
related work. He was made to report for work from Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he was
required to work half-day only, but most of the time, he still rendered eight hours of work or more. All the employees of
petitioner, including respondent, rendered overtime work almost everyday, but petitioner never kept a daily time record
to avoid paying the employees overtime pay.
Respondent stated that a few days after he started working as a studio manager, petitioner approached him
and told him about his project to produce an album for his 15-year-old daughter, Celine Mei Lirio, a former talent of
ABS-CBN Star Records. Petitioner asked respondent to compose and arrange songs for Celine and promised that he
(Lirio) would draft a contract to assure respondent of his compensation for such services. As agreed upon, the additional
services that respondent would render included composing and arranging musical scores only, while the technical
aspect in producing the album, such as digital editing, mixing and sound engineering would be performed by respondent
in his capacity as studio manager for which he was paid on a monthly basis. Petitioner instructed respondent that his
work on the album as composer and arranger would only be done during his spare time, since his other work as studio
manager was the priority. Respondent then started working on the album. IDEHCa

Respondent alleged that before the end of September 2001, he reminded petitioner about his compensation as
composer and arranger of the album. Petitioner verbally assured him that he would be duly compensated. By mid-
November 2001, respondent finally finished the compositions and musical arrangements of the songs to be included in
the album. Before the month ended, the lead and back-up vocals in the ten (10) songs were finally recorded and
completed. From December 2001 to January 2002, respondent, in his capacity as studio manager, worked on digital
editing, mixing and sound engineering of the vocal and instrumental audio files.
Thereafter, respondent was tasked by petitioner to prepare official correspondence, establish contacts and
negotiate with various radio stations, malls, publishers, record companies and manufacturers, record bars and other
outlets in preparation for the promotion of the said album. By early February 2002, the album was in its manufacturing
stage. ELECTROMAT, manufacturer of CDs and cassette tapes, was tapped to do the job. The carrier single of the
album, which respondent composed and arranged, was finally aired over the radio on February 22, 2002.
On February 26, 2002, respondent again reminded petitioner about the contract on his compensation as
composer and arranger of the album. Petitioner told respondent that since he was practically a nobody and had proven
nothing yet in the music industry, respondent did not deserve a high compensation, and he should be thankful that he
was given a job to feed his family. Petitioner informed respondent that he was entitled only to 20% of the net profit, and
not of the gross sales of the album, and that the salaries he received and would continue to receive as studio manager
of Celkor would be deducted from the said 20% net profit share. Respondent objected and insisted that he be properly
compensated. On March 14, 2002, petitioner verbally terminated respondent's services, and he was instructed not to
report for work.
Respondent asserts that he was illegally dismissed as he was terminated without any valid grounds, and no
hearing was conducted before he was terminated, in violation of his constitutional right to due process. Having worked
for more than six months, he was already a regular employee. Although he was a so called "studio manager," he had
no managerial powers, but was merely an ordinary employee.
 Respondent prayed for his reinstatement without loss of seniority rights, or, in the alternative, that he be paid
separation pay, backwages and overtime pay; and that he be awarded unpaid commission in the amount of P2,000.00
for services rendered as a studio technician as well as moral and exemplary damages.
Respondent's evidence consisted of the Payroll dated July 31, 2001 to March 15, 2002, which was certified
correct by petitioner, 2 and Petty Cash Vouchers 3evidencing receipt of payroll payments by respondent from Celkor.
In defense, petitioner stated in his Position Paper 4 that respondent was not hired as studio manager, composer,
technician or as an employee in any other capacity of Celkor. Respondent could not have been hired as a studio
manager, since the recording studio has no personnel except petitioner. Petitioner further claimed that his daughter
Celine Mei Lirio, a former contract artist of ABS-CBN Star Records, failed to come up with an album as the latter aborted
its project to produce one. Thus, he decided to produce an album for his daughter and established a recording studio,
which he named Celkor Ad Sonicmix Recording Studio. He looked for a composer/arranger who would compose the
songs for the said album. In July 2001, Bob Santiago, his son-in-law, introduced him to respondent, who claimed to be
an amateur composer, an arranger with limited experience and musician without any formal musical training. According
to petitioner, respondent had no track record as a composer, and he was not known in the field of music. Nevertheless,
after some discussion, respondent verbally agreed with petitioner to co-produce the album based on the following terms
and conditions: (1) petitioner shall provide all the financing, equipment and recording studio; (2) Celine Mei Lirio shall
sing all the songs; (3) respondent shall act as composer and arranger of all the lyrics and the music of the five songs
he already composed and the revival songs; (4) petitioner shall have exclusive right to market the album; (5) petitioner
was entitled to 60% of the net profit, while respondent and Celine Mei Lirio were each entitled to 20% of the net profit;
and (6) respondent shall be entitled to draw advances of P7,000.00 a month, which shall be deductible from his share
of the net profits and only until such time that the album has been produced.
According to petitioner, they arrived at the foregoing sharing of profits based on the mutual understanding that
respondent was just an amateur composer with no track record whatsoever in the music industry, had no definite source
of income, had limited experience as an arranger, had no knowledge of the use of sound mixers or digital arranger and
that petitioner would help and teach him how to use the studio equipment; that petitioner would shoulder all the expenses
of production and provide the studio and equipment as well as his knowledge in the use thereof; and Celine Mei Lirio
would sing the songs. They embarked on the production of the album on or about the third week of August 2002. HTAEIS

Petitioner asserted that from the aforesaid terms and conditions, his relationship with respondent is one of an
informal partnership under Article 1767 5 of theNew Civil Code, since they agreed to contribute money, property or
industry to a common fund with the intention of dividing the profits among themselves. Petitioner had no control over
the time and manner by which respondent composed or arranged the songs, except on the result thereof. Respondent
reported to the recording studio between 10:00 a.m. and 12:00 noon. Hence, petitioner contended that no employer-
employee relationship existed between him and the respondent, and there was no illegal dismissal to speak of.
On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a decision, 6 finding that an employer-
employee relationship existed between petitioner and respondent, and that respondent was illegally dismissed. The
dispositive portion of the decision reads:
WHEREFORE, premises considered, we find that respondents CELKOR AD SONICMIX RECORDING STUDIO
and/or CESAR C. LIRIO (Owner), have illegally dismissed complainant in his status as regular employee and,
consequently, ORDERING said respondents:

1) To pay him full backwages from date of illegal dismissal on March 14, 2002 until finality of this decision
and, in lieu of reinstatement, to pay his separation pay of one (1) month pay per year of service
reckoned from [the] date of hire on August 15, 2001 until finality of this decision, which as of date
amounts tofull backwages total of 145,778.6 (basic P7,000.00 x 19.6 mos. = P133,000.00 +
1/12 thereof as 13th month pay of P11,083.33 + SILP P7,000/32.62 days = P214.59/day x 5 =
P1,072.96 x 1.58 yrs. = P1,695.27); separation pay of P22,750.00 (P7,000.00 x 3.25 yrs.);

2) To pay complainant's unpaid commission of P2,000.00;

3) To pay him moral and exemplary damages in the combined amount of P75,000.00.
Other monetary claims of complainant are dismissed for lack of merit. 7

The Labor Arbiter stated that petitioner's denial of the employment relationship cannot overcome respondent's
positive assertion and documentary evidence proving that petitioner hired respondent as his employee. 8
Petitioner appealed the decision of the Labor Arbiter to the National Labor Relations Commission (NLRC).
In a Resolution 7 dated October 14, 2004, the NLRC reversed and set aside the decision of the Labor Arbiter.
The dispositive portion of the Resolution reads:
WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, the Decision appealed from is
REVERSED and, hence, SET ASIDE and a new one ENTERED dismissing the instant case for lack of merit. 9
 The NLRC stated that respondent failed to prove his employment tale with substantial evidence. Although the
NLRC agreed that respondent was able to prove that he received gross pay less deduction and net pay, with the
corresponding Certification of Correctness by petitioner, covering the period from July 31, 2001 to March 15, 2002, the
NLRC held that respondent failed to proved with substantial evidence that he was selected and engaged by petitioner,
that petitioner had the power to dismiss him, and that they had the power to control him not only as to the result of his
work, but also as to the means and methods of accomplishing his work.
Respondent's motion for reconsideration was denied by the NLRC in a Resolution 9 dated December 14, 2004.
Respondent filed a petition for certiorari before the Court of Appeals.
On August 4, 2005, the Court of Appeals rendered a decision 10 reversing and setting aside the resolution of
the NLRC, and reinstating the decision of the Labor Arbiter, with modification in regard to the award of commission and
damages. The Court of Appeals deleted the award of commission, and moral and exemplary damages as the same
were not substantiated. The dispositive portion of the Court of Appeals' decision reads: DTSIEc

WHEREFORE, the petition is GRANTED and the assailed resolutions dated October 14, 2004 and December 14,
2004 are hereby REVERSED and SET ASIDE.Accordingly, the decision dated October 31, 2003 of the Labor
Arbiter is REINSTATED, with the modification that the awards of commission and damages
aredeleted. 11 (Emphasis supplied.)

Petitioner's motion for reconsideration was denied for lack of merit by the Court of Appeals in its
Resolution 12 dated September 21, 2005.
Hence, petitioner Lirio filed this petition.
Petitioner states that respondent appealed to the Court of Appeals via a petition for certiorari under Rule 65,
which will prosper only if there is a showing of grave abuse of discretion or an act without or in excess of jurisdiction on
the part of the NLRC. 13 However, petitioner contends that the Court of Appeals decided the case not in accordance
with law and applicable rulings of this Court as petitioner could not find any portion in the Decision of the Court of
Appeals ruling that the NLRC acted without or in excess of jurisdiction or with grave abuse of discretion amounting to
lack or excess of jurisdiction. Petitioner submits that the Court of Appeals could not review an error of judgment by the
NLRC raised before it on a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Moreover, petitioner
contends that it was error on the part of the Court of Appeals to review the finding of facts of the NLRC on whether there
exists an employer-employee relationship between the parties.
Petitioner's argument lacks merit.
It is noted that respondent correctly sought judicial review of the decision of the NLRC via a petition
for certiorari under Rule 65 of the Rules of Court filed before the Court of Appeals in accordance with the decision of
the Court in St. Martin Funeral Home v. NLRC, 14 which held:
Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRC to the
Supreme Court are interpreted and hereby declared to mean and refer to petitions for certiorari under Rule 65.
Consequently, all such petitions should henceforth be initially filed in the Court of Appealsin strict observance
of the doctrine on the hierarchy of courts as the appropriate forum for the relief desired. 15

The Court of Appeals stated in its decision that the issue it had to resolve was "whether or not the public
respondent NLRC committed grave abuse of discretion when it declared that no employer-employee relationship
exists between the petitioner and the private respondents, since the petitioner failed to prove such fact by substantial
evidence." 16
Errors of judgment, as distinguished from errors of jurisdiction, are not within the province of a special civil
action for certiorari, which is merely confined to issues of jurisdiction or grave abuse of discretion. 17 By grave abuse of
discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, and it
must be shown that the discretion was exercised arbitrarily or despotically. 18
The Court of Appeals, therefore, could grant the petition for certiorari if it finds that the NLRC, in its assailed
decision or resolution, committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding
evidence that is material to or decisive of the controversy; and it cannot make this determination without looking into
the evidence of the parties. 19 Necessarily, the appellate court can only evaluate the materiality or significance of the
evidence, which is alleged to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation to
all other evidence on record. 20 Thus, contrary to the contention of petitioner, the Court of Appeals can review the finding
of facts of the NLRC and the evidence of the parties to determine whether the NLRC gravely abused its discretion in
finding that no employer-employee relationship existed between petitioner and respondent. 21
Respondent raised before the Court of Appeals the following issues: acHDTA

I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION

IN SHIFTING THE BURDEN OF PROVING THAT EMPLOYMENT RELATIONS EXISTED BETWEEN THE
 PETITIONER AND THE PRIVATE RESPONDENTS TO THE FORMER, IN VIOLATION OF ESTABLISHED
PROVISION OF LAWS AND JURISPRUDENCE.

II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF

DISCRETION IN HOLDING THAT NO EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE
PETITIONER AND THE PRIVATE RESPONDENTS.

III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF

DISCRETION IN DISREGARDING THE PETITIONER'S PAYROLL AND THE PETTY CASH VOUCHERS AS AN
INDICIA OF EMPLOYMENT RELATIONS BETWEEN PETITIONER AND THE PRIVATE RESPONDENTS. 22

Between the documentary evidence presented by respondent and the mere allegation of petitioner without any
proof by way of any document evincing their alleged partnership agreement, the Court of Appeals agreed with the Labor
Arbiter that petitioner failed to substantiate his claim that he had a partnership with respondent, citing the Labor Arbiter's
finding, thus:
In this case, complainant's evidence is substantial enough to prove the employment relationship that on August 14,
2001, he was hired as 'Studio manager' by respondent Lirio to manage and operate the recording studio and to
promote and sell its services to music enthusiasts and clients, proven by his receipt for this purpose from said
respondent a fixed monthly compensation of P7,000.00, with commission of P100.00 per hour when serving as
recording technician, shown by the payroll from July 31, 2001-March 15, 2002. The said evidence points to
complainant's hiring as employee so that the case comes within the purview of our jurisdiction on labor disputes
between an employer and an employee. . . . .
Respondent Lirio's so-called existence of a partnership agreement was not substantiated and his assertion
thereto, in the face of complainant's evidence, constitute but a self-serving assertion, without probative
value, a mere invention to justify the illegal dismissal.

xxx xxx xxx

Indeed, we find credible that what caused complainant's dismissal on March 14, 2002 was due to his refusal to
respondent's Lirio's insistences on merely giving him 20% based on net profit on sale of the album which he
composed and arranged during his free time and, moreover, that salaries which he received would be deducted
therefrom, which obviously, soured the relations from the point of view of respondent Lirio. 23

Hence, based on the finding above and the doctrine that "if doubt exists between the evidence presented by
the employer and the employee, the scales of justice must be tilted in favor of the latter," 24 the Court of Appeals reversed
the resolution of the NLRC and reinstated the decision of the Labor Arbiter with modification. Even if the Court of Appeals
was remiss in not stating it in definite terms, it is implied that the Court of Appeals found that the NLRC gravely abused
its discretion in finding that no employer-employee relationship existed between petitioner and respondent based on
the evidence on record.
We now proceed to the main issue raised before this Court: Whether or not the decision of the Court of Appeals
is in accordance with law, or whether or not the Court of Appeals erred in reversing and setting aside the decision of
the NLRC, and reinstating the decision of the Labor Arbiter with modification.
In petitions for review, only errors of law are generally reviewed by this Court. This rule, however, is not
ironclad. 25 Where the issue is shrouded by a conflict of factual perceptions by the lower court or the lower administrative
body, in this case, the NLRC, this Court is constrained to review the factual findings of the Court of Appeals. 26
Before a case for illegal dismissal can prosper, it must first be established that an employer-employee
relationship existed between petitioner and respondent.27 IEcDCa

The elements to determine the existence of an employment relationship are: (a) the selection and engagement
of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the
employee's conduct. The most important element is the employer's control of the employee's conduct, not only as to
the result of the work to be done, but also as to the means and methods to accomplish it. 28
It is settled that no particular form of evidence is required to prove the existence of an employer-employee
relationship. 29 Any competent and relevant evidence to prove the relationship may be admitted. 30
In this case, the documentary evidence presented by respondent to prove that he was an employee of petitioner
are as follows: (a) a document denominated as "payroll" (dated July 31, 2001 to March 15, 2002) certified correct by
petitioner, 31 which showed that respondent received a monthly salary of P7,000.00 (P3,500.00 every 15th of the month
and another P3,500.00 every 30th of the month) with the corresponding deductions due to absences incurred by
respondent; and (2) copies of petty cash vouchers, 32 showing the amounts he received and signed for in the payrolls.
The said documents showed that petitioner hired respondent as an employee and he was paid monthly wages
of P7,000.00. Petitioner wielded the power to dismiss as respondent stated that he was verbally dismissed by petitioner,
and respondent, thereafter, filed an action for illegal dismissal against petitioner. The power of control refers merely to
the existence of the power. 33 It is not essential for the employer to actually supervise the performance of duties of the
 employee, as it is sufficient that the former has a right to wield the power. 34 Nevertheless, petitioner stated in his Position
Paper that it was agreed that he would help and teach respondent how to use the studio equipment. In such case,
petitioner certainly had the power to check on the progress and work of respondent.
On the other hand, petitioner failed to prove that his relationship with respondent was one of partnership. Such
claim was not supported by any written agreement. The Court notes that in the payroll dated July 31, 2001 to March 15,
2002, 35 there were deductions from the wages of respondent for his absence from work, which negates petitioner's
claim that the wages paid were advances for respondent's work in the partnership. In Nicario v. National Labor
Relations Commission, 36 the Court held:
It is a well-settled doctrine, that if doubts exist between the evidence presented by the employer and the employee,
the scales of justice must be tilted in favor of the latter. It is a time-honored rule that in controversies between a
laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of agreements and
writing should be resolved in the former's favor. The policy is to extend the doctrine to a greater number of employees
who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give
maximum aid and protection of labor. This rule should be applied in the case at bar, especially since the evidence
presented by the private respondent company is not convincing. . . . 37

Based on the foregoing, the Court agrees with the Court of Appeals that the evidence presented by the parties
showed that an employer-employee relationship existed between petitioner and respondent.
In termination cases, the burden is upon the employer to show by substantial evidence that the termination was
for lawful cause and validly made. 38 Article 277 (b) of the Labor Code 39 puts the burden of proving that the dismissal
of an employee was for a valid or authorized cause on the employer, without distinction whether the employer admits
or does not admit the dismissal. 40 For an employee's dismissal to be valid, (a) the dismissal must be for a valid cause,
and (b) the employee must be afforded due process. 41 Procedural due process requires the employer to furnish an
employee with two written notices before the latter is dismissed: (1) the notice to apprise the employee of the particular
acts or omissions for which his dismissal is sought, which is the equivalent of a charge; and (2) the notice informing the
employee of his dismissal, to be issued after the employee has been given reasonable opportunity to answer and to be
heard on his defense. 42Petitioner failed to comply with these legal requirements; hence, the Court of Appeals correctly
affirmed the Labor Arbiter's finding that respondent was illegally dismissed, and entitled to the payment of backwages,
and separation pay in lieu of reinstatement.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 88899, dated
August 4, 2005, and its Resolution dated September 21, 2005, are AFFIRMED.
No costs.
SO ORDERED. DCASIT

||| (Lirio v. Genovia, G.R. No. 169757, [November 23, 2011], 677 PHIL 134-151)
 FIRST DIVISION
[G.R. No. 163700. April 18, 2012.]
CHARLIE JAO, petitioner, vs. BCC PRODUCTS SALES, INC., and TERRANCE TY, respondents.
DECISION
BERSAMIN, J : p

The issue is whether petitioner was respondents' employee or not. Respondents denied an employer-employee relationship
with petitioner, who insisted the contrary.
Through his petition for review on certiorari, petitioner appeals the decision promulgated by the Court of Appeals (CA) on
February 27, 2004, 1 finding no employee-employer relationship between him and respondents, thereby reversing the ruling
by the National Labor Relations Commission (NLRC) to the effect that he was the employee of respondents.
Antecedents
Petitioner maintained that respondent BCC Product Sales, Inc. (BCC) and its President, respondent Terrance Ty (Ty),
employed him as comptroller starting from September 1995 with a monthly salary of P20,000.00 to handle the financial
aspect of BCC's business; 2 that on October 19, 1995, the security guards of BCC, acting upon the instruction of Ty, barred
him from entering the premises of BCC where he then worked; that his attempts to report to work in November and
December 12, 1995 were frustrated because he continued to be barred from entering the premises of BCC; 3 and that he
filed a complaint dated December 28, 1995 for illegal dismissal, reinstatement with full backwages, non-payment of wages,
damages and attorney's fees. 4
Respondents countered that petitioner was not their employee but the employee of Sobien Food Corporation (SFC), the
major creditor and supplier of BCC; and that SFC had posted him as its comptroller in BCC to oversee BCC's finances and
business operations and to look after SFC's interests or investments in BCC. 5 ATHCac

Although Labor Arbiter Felipe Pati ruled in favor of petitioner on June 24, 1996, 6 the NLRC vacated the ruling and remanded
the case for further proceedings. 7Thereafter, Labor Arbiter Jovencio Ll. Mayor rendered a new decision on September 20,
2001, dismissing petitioner's complaint for want of an employer-employee relationship between the parties. 8 Petitioner
appealed the September 20, 2001 decision of Labor Arbiter Mayor.
On July 31, 2002, the NLRC rendered a decision reversing Labor Arbiter Mayor's decision, and declaring that petitioner had
been illegally dismissed. It ordered the payment of unpaid salaries, backwages and 13th month pay, separation pay and
attorney's fees. 9 Respondents moved for the reconsideration of the NLRC decision, but their motion for reconsideration
was denied on September 30, 2002. 10 Thence, respondents assailed the NLRC decision on certiorari in the CA.
Ruling of the CA
On February 27, 2004, the CA promulgated its assailed decision, 11 holding:
After a judicious review of the records vis--vis the respective posturing of the contending parties, we agree with the
finding that no employer-employee relationship existed between petitioner BCC and the private respondent. On this
note, the conclusion of the public respondent must be reversed for being issued with grave abuse of discretion.

"Etched in an unending stream of cases are the four (4) standards in determining the existence of an employer-
employee relationship, namely, (a) the manner of selection and engagement of the putative employee; (b) the mode
of payment of wages; (c) the presence or absence of power of dismissal; and, (d) the presence or absence of control
of the putative employee's conduct." Of these powers the power of control over the employee's conduct is generally
regarded as determinative of the existence of the relationship. DSacAE

Apparently, in the case before us, all these four elements are absent. First, there is no proof that the services of the
private respondent were engaged to perform the duties of a comptroller in the petitioner company. There is no proof
that the private respondent has undergone a selection procedure as a standard requisite for employment, especially
with such a delicate position in the company. Neither is there any proof of his appointment nor is there any showing
that the parties entered into an employment contract, stipulating thereof that he will receive P20,000.00/month salary
as comptroller, before the private respondent commenced with his work as such. Second, as clearly established on
record, the private respondent was not included in the petitioner company's payroll during the time of his alleged
employment with the former. True, the name of the private respondent Charlie Jao appears in the payroll however it
does not prove that he has received his remuneration for his services. Notably, his name was not among the
employees who will receive their salaries as represented by the payrolls. Instead, it appears therein as a comptroller
who is authorized to approve the same. Suffice it to state that it is rather obscure for a certified public accountant
doing the functions of a comptroller from September 1995 up to December 1995 not to receive his salary during the
said period. Verily, such scenario does not conform with the usual and ordinary experience of man. Coming now to
the most controlling factor, the records indubitably reveal the undisputed fact that the petitioner company did not
have nor did not exercise the power of control over the private respondent. It did not prescribe the manner by which
the work is to be carried out, or the time by which the private respondent has to report for and leave from work. As
already stated, the power of control is such an important factor that other requisites may even be disregarded.
In Sevilla v. Court of Appeals, the Supreme Court emphatically held, thus:
 "The "control test," under which the person for whom the services are rendered reserves the right
to direct not only the end to be achieved but also the means for reaching such end, is generally
relied on by the courts."

We have carefully examined the evidence submitted by the private respondent in the formal offer of evidence and
unfortunately, other than the bare assertions of the private respondent which he miserably failed to substantiate, we
find nothing therein that would decisively indicate that the petitioner BCC exercised the fundamental power of control
over the private respondent in relation to his employment not even the ID issued to the private respondent and
the affidavits executed by Bertito Jemilla and Rogelio Santias. At best, these pieces of documents merely suggest
the existence of employer-employee relationship as intimated by the NLRC. On the contrary, it would appear that the
said sworn statement provided a substantial basis to support the contention that the private respondent worked at
the petitioner BCC as SFC's representative, being its major creditor and supplier of goods and merchandise.
Moreover, as clearly pointed out by the petitioner in his Reply to the private respondent's Comment, it is unnatural
for SFC to still employ the private respondent "to oversee and supervise collections of account receivables due SFC
from its customers or clients" like the herein petitioner BCC on a date later than December, 1995 considering that a
criminal complaint has already been instituted against him.

Sadly, the private respondent failed to sufficiently discharge the burden of showing with legal certainty that employee-
employer relationship existed between the parties. On the other hand, it was clearly shown by the petitioner that it
neither exercised control nor supervision over the conduct of the private respondent's employment. Hence, the
allegation that there is employer-employee relationship must necessarily fail.
Consequently, a discussion on the issue of illegal dismissal therefore becomes unnecessary. DEcTCa

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision of the public respondent
NLRC dated July 31, 2002 and the Resolution dated September 30, 2002 are REVERSED and SET ASIDE.
Accordingly, the decision of the Labor Arbiter dated September 20, 2001 is hereby REINSTATED.
SO ORDERED.

After the CA denied petitioner's motion for reconsideration on May 14, 2004, 12 he filed a motion for extension to file petition
for review, which the Court denied through the resolution dated July 7, 2004 for failure to render an explanation on why the
service of copies of the motion for extension on respondents was not personally made. 13 The denial notwithstanding, he
filed his petition for review on certiorari. The Court denied the petition on August 18, 2004 in view of the denial of the motion
for extension of time and the continuing failure of petitioner to render the explanation as to the non-personal service of the
petition on respondents. 14However, upon a motion for reconsideration, the Court reinstated the petition for review
on certiorari and required respondents to comment. 15
Issue
The sole issue is whether or not an employer-employee relationship existed between petitioner and BCC. A finding on the
existence of an employer-employee relationship will automatically warrant a finding of illegal dismissal, considering that
respondents did not state any valid grounds to dismiss petitioner. ISEHTa

Ruling
The petition lacks merit.
The existence of an employer-employee relationship is a question of fact. Generally, a re-examination of factual findings
cannot be done by the Court acting on a petition for review on certiorari because the Court is not a trier of facts but reviews
only questions of law. Nor may the Court be bound to analyze and weigh again the evidence adduced and considered in
the proceedings below. 16 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. 17
Here, the findings of the NLRC differed from those of the Labor Arbiter and the CA. This conflict among such adjudicating
offices compels the Court's exercise of its authority to review and pass upon the evidence presented and to draw its own
conclusions therefrom.
To prove his employment with BCC, petitioner offered the following: (a) BCC Identification Card (ID) issued to him stating
his name and his position as "comptroller," and bearing his picture, his signature, and the signature of Ty; (b) a payroll of
BCC for the period of October 1-15, 1996 that petitioner approved as comptroller; (c) various bills and receipts related to
expenditures of BCC bearing the signature of petitioner; (d) various checks carrying the signatures of petitioner and Ty,
and, in some checks, the signature of petitioner alone; (e) a court order showing that the issuing court considered petitioner's
ID as proof of his employment with BCC; (f) a letter of petitioner dated March 1, 1997 to the Department of Justice on his
filing of a criminal case for estafa against Ty for non-payment of wages; (g) affidavits of some employees of BCC attesting
that petitioner was their co-employee in BCC; and (h) a notice of raffle dated December 5, 1995 showing that petitioner,
being an employee of BCC, received the notice of raffle in behalf of BCC. 18 ISCHET

Respondents denied that petitioner was BCC's employee. They affirmed that SFC had installed petitioner as its comptroller
in BCC to oversee and supervise SFC's collections and the account of BCC to protect SFC's interest; that their issuance of
the ID to petitioner was only for the purpose of facilitating his entry into the BCC premises in relation to his work of overseeing
the financial operations of BCC for SFC; that the ID should not be considered as evidence of petitioner's employment in
BCC; 19 that petitioner executed an affidavit in March 1996, 20 stating, among others, as follows:
1. I am a CPA (Certified Public Accountant) by profession but presently associated with, or employed by, Sobien
Food Corporation with the same business address as abovestated;

2. In the course of my association with, or employment by, Sobien Food Corporation (SFC, for short), I have
been entrusted by my employer to oversee and supervise collections on account of receivables due
SFC from its customers or clients; for instance, certain checks due and turned over by one of SFC's
customers is BCC Product Sales, Inc., operated or run by one Terrance L. Ty, (President and General
manager), pursuant to, or in accordance with, arrangements or agreement thereon; such
arrangement or agreement is duly confirmed by said Terrance Ty, as shown or admitted by him in a
public instrument executed therefor, particularly par. 2 of that certain Counter-Affidavit executed and
subscribed on December 11, 1995, xerox copy of which is hereto attached, duly marked as Annex "A" and
made integral part hereof.
3. Despite such admission of an arrangement, or agreement insofar as BCC-checks were delivered to, or
turned over in favor of SFC, Mr. Terrance Ty, in a desire to blemish my reputation or to cause me dishonor
as well as to impute unto myself the commission of a crime, state in another public instrument executed
therefor in that:

"3. That all the said 158 checks were unlawfully appropriated by a certain Charlie Jao absolutely
without any authority from BCC and the same were reportedly turned over by said Mr. Jao to a
person who is not an agent or is not authorized representative of BCC."
xerox copy of which document (Affidavit) is hereto attached, duly marked as Annex "B" and made integral part
hereof. (emphasis supplied)

and that the affidavit constituted petitioner's admission of the arrangement or agreement between BCC and SFC for the
latter to appoint a comptroller to oversee the former's operations.
Petitioner counters, however, that the affidavit did not establish the absence of an employer-employee relationship between
him and respondents because it had been executed in March 1996, or after his employment with respondents had been
terminated on December 12, 1995; and that the affidavit referred to his subsequent employment by SFC following the
termination of his employment by BCC. 21 IaESCH

We cannot side with petitioner.

Our perusal of the affidavit of petitioner compels a conclusion similar to that reached by the CA and the Labor Arbiter to the
effect that the affidavit actually supported the contention that petitioner had really worked in BCC as SFC's representative.
It does seem more natural and more believable that petitioner's affidavit was referring to his employment by SFC even while
he was reporting to BCC as a comptroller in behalf of SFC. As respondents pointed out, it was implausible for SFC to still
post him to oversee and supervise the collections of accounts receivables due from BCC beyond December 1995 if, as he
insisted, BCC had already illegally dismissed him and had even prevented him from entering the premises of BCC. Given
the patent animosity and strained relations between him and respondents in such circumstances, indeed, how could he still
efficiently perform in behalf of SFC the essential responsibility to "oversee and supervise collections" at BCC? Surely,
respondents would have vigorously objected to any arrangement with SFC involving him.
We note that petitioner executed the affidavit in March 1996 to refute a statement Ty himself made in his own affidavit dated
December 11, 1995 to the effect that petitioner had illegally appropriated some checks without authority from
BCC. 22 Petitioner thereby sought to show that he had the authority to receive the checks pursuant to the arrangements
between SFC and BCC. This showing would aid in fending off the criminal charge respondents filed against him arising
from his mishandling of the checks. Naturally, the circumstances petitioner adverted to in his March 1996 affidavit concerned
those occurring before December 11, 1995, the same period when he actually worked as comptroller in BCC.
Further, an affidavit dated September 5, 2000 by Alfredo So, the President of SFC, whom petitioner offered as a rebuttal
witness, lent credence to respondents' denial of petitioner's employment. So declared in that affidavit, among others, that
he had known petitioner for being "earlier his retained accountant having his own office but did not hold office" in SFC's
premises; that Ty had approached him (So) "looking for an accountant or comptroller to be employed by him (Ty) in [BCC's]
distribution business" of SFC's general merchandise, and had later asked him on his opinion about petitioner; and that he
(So) had subsequently learned that "Ty had already employed [petitioner] as his comptroller as of September 1995." 23
The statements of So really supported respondents' position in that petitioner's association with SFC prior to his supposed
employment by BCC went beyond mere acquaintance with So. That So, who had earlier merely "retained" petitioner as his
accountant, thereafter employed petitioner as a "retained" accountant after his supposed illegal dismissal by BCC raised a
doubt as to his employment by BCC, and rather confirmed respondents' assertion of petitioner being an employee of SFC
while he worked at BCC.
Moreover, in determining the presence or absence of an employer-employee relationship, the Court has consistently looked
for the following incidents, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee on the means and methods by which the work is
accomplished. The last element, the so-called control test, is the most important element. 24
Hereunder are some of the circumstances and incidents occurring while petitioner was supposedly employed by BCC that
debunked his claim against respondents.
It can be deduced from the March 1996 affidavit of petitioner that respondents challenged his authority to deliver some 158
checks to SFC. Considering that he contested respondents' challenge by pointing to the existing arrangements between
BCC and SFC, it should be clear that respondents did not exercise the power of control over him, because he thereby acted
for the benefit and in the interest of SFC more than of BCC. IcTCHD

In addition, petitioner presented no document setting forth the terms of his employment by BCC. The failure to present such
agreement on terms of employment may be understandable and expected if he was a common or ordinary laborer who
would not jeopardize his employment by demanding such document from the employer, but may not square well with his
actual status as a highly educated professional.
Petitioner's admission that he did not receive his salary for the three months of his employment by BCC, as his complaint
for illegal dismissal and non-payment of wages 25 and the criminal case for estafa he later filed against the respondents for
non-payment of wages 26 indicated, further raised grave doubts about his assertion of employment by BCC. If the assertion
was true, we are puzzled how he could have remained in BCC's employ in that period of time despite not being paid the
first salary of P20,000.00/month. Moreover, his name did not appear in the payroll of BCC despite him having approved the
payroll as comptroller.
Lastly, the confusion about the date of his alleged illegal dismissal provides another indicium of the insincerity of petitioner's
assertion of employment by BCC. In the petition for review on certiorari, he averred that he had been barred from entering
the premises of BCC on October 19, 1995, 27 and thus was illegally dismissed. Yet, his complaint for illegal dismissal stated
that he had been illegally dismissed on December 12, 1995 when respondents' security guards barred him from entering
the premises of BCC, 28 causing him to bring his complaint only on December 29, 1995, and after BCC had already filed the
criminal complaint against him. The wide gap between October 19, 1995 and December 12, 1995 cannot be dismissed as
a trivial inconsistency considering that the several incidents affecting the veracity of his assertion of employment by BCC
earlier noted herein transpired in that interval.
With all the grave doubts thus raised against petitioner's claim, we need not dwell at length on the other proofs he presented,
like the affidavits of some of the employees of BCC, the ID, and the signed checks, bills and receipts. Suffice it to be stated
that such other proofs were easily explainable by respondents and by the aforestated circumstances showing him to be the
employee of SFC, not of BCC.
WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals; and ORDERS petitioner to pay the costs of suit.
SO ORDERED.
Corona, C.J., Leonardo-de Castro, Del Castillo and Villarama, Jr., JJ., concur.
||| (Jao v. BCC Products Sales, Inc., G.R. No. 163700, [April 18, 2012], 686 PHIL 36-47)
 FIRST DIVISION
[G.R. No. 153511. July 18, 2012.]
LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or, NELSON NAPUD, in his
capacity as the President of Petitioner Corporation, petitioner, vs. HERNANI S. REALUYO, also
known as JOEY ROA, respondent.
DECISION
BERSAMIN, J : p

This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a hotel.
On August 9, 1999, respondent, whose stage name was Joey R. Roa, filed a complaint for alleged unfair labor practice,
constructive illegal dismissal, and the underpayment/nonpayment of his premium pay for holidays, separation pay, service
incentive leave pay, and 13th month pay. He prayed for attorney's fees, moral damages of P100,000.00 and exemplary
damages for P100,000.00. 1
Respondent averred that he had worked as a pianist at the Legend Hotel's Tanglaw Restaurant from September 1992 with
an initial rate of P400.00/night that was given to him after each night's performance; that his rate had increased to
P750.00/night; and that during his employment, he could not choose the time of performance, which had been fixed from
7:00 pm to 10:00 pm for three to six times/week. He added that the Legend Hotel's restaurant manager had required him
to conform with the venue's motif; that he had been subjected to the rules on employees' representation checks and chits,
a privilege granted to other employees; that on July 9, 1999, the management had notified him that as a cost-cutting measure
his services as a pianist would no longer be required effective July 30, 1999; that he disputed the excuse, insisting that
Legend Hotel had been lucratively operating as of the filing of his complaint; and that the loss of his employment made him
bring his complaint. 2
In its defense, petitioner denied the existence of an employer-employee relationship with respondent, insisting that he had
been only a talent engaged to provide live music at Legend Hotel's Madison Coffee Shop for three hours/day on two days
each week; and stated that the economic crisis that had hit the country constrained management to dispense with his
services.EHSITc

On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding that the parties had
no employer-employee relationship. 3 The LA explained thusly:
xxx xxx xxx

On the pivotal issue of whether or not there existed an employer-employee relationship between the parties, our
finding is in the negative. The finding finds support in the service contract dated September 1, 1992 . . . .
xxx xxx xxx

Even if we grant the initial non-existence of the service contract, as complainant suggests in his reply (third paragraph,
page 4), the picture would not change because of the admission by complainant in his letter dated October 8, 1996
(Annex "C") that what he was receiving was talent fee and not salary.

This is reinforced by the undisputed fact that complainant received his talent fee nightly, unlike the regular employees
of the hotel who are paid by monthly . . . .
xxx xxx xxx

And thus, absent the power to control with respect to the means and methods by which his work was to be
accomplished, there is no employer-employee relationship between the parties . . . .
xxx xxx xxx
WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.
SO ORDERED. 4

Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA on May 31, 2001. 5 IATSHE

Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.
On February 11, 2002, the CA set aside the decision of the NLRC, 6 holding:
xxx xxx xxx

Applying the above-enumerated elements of the employee-employer relationship in this case, the question to be
asked is, are those elements present in this case?
The answer to this question is in the affirmative.
 xxx xxx xxx

Well settled is the rule that of the four (4) elements of employer-employee relationship, it is the power of control that
is more decisive.

In this regard, public respondent failed to take into consideration that in petitioner's line of work, he was supervised
and controlled by respondent's restaurant manager who at certain times would require him to perform only tagalog
songs or music, or wear barong tagalog to conform with Filipiniana motif of the place and the time of his performance
is fixed by the respondents from 7:00 pm to 10:00 pm, three to six times a week. Petitioner could not choose the time
of his performance. . . . .
As to the status of petitioner, he is considered a regular employee of private respondents since the job of the petitioner
was in furtherance of the restaurant business of respondent hotel. Granting that petitioner was initially a contractual
employee, by the sheer length of service he had rendered for private respondents, he had been converted into a
regular employee . . . .
xxx xxx xxx

. . . In other words, the dismissal was due to retrenchment in order to avoid or minimize business losses, which is
recognized by law under Article 283 of the Labor Code,. . . .
xxx xxx xxx
WHEREFORE, foregoing premises considered, this petition is GRANTED. . . . . 7

Issues
In this appeal, petitioner contends that the CA erred:
I. . . . WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN THE PETITIONER HOTEL AND RESPONDENT ROA.
II. . . . IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE TERMINATION OF HIS SERVICES
WAS ILLEGAL. THE CA LIKEWISE ERRED WHEN IT DECLARED THE REINSTATEMENT OF ROA TO
HIS FORMER POSITION OR BE GIVEN A SEPARATION PAY EQUIVALENT TO ONE MONTH FOR
EVERY YEAR OF SERVICE FROM SEPTEMBER 1999 UNTIL JULY 30, 1999 CONSIDERING THE
ABSENCE OF AN EMPLOYMENT RELATIONSHIP BETWEEN THE PARTIES. TSacID
III. . . . WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES, SERVICE INCENTIVE LEAVE AND
OTHER BENEFITS CONSIDERING THAT THERE IS NO EMPLOYER EMPLOYEE RELATIONSHIP
BETWEEN THE PARTIES.
IV. . . . WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC NCR CA NO. 023404-2000 OF THE
NLRC AS WELL AS ITS RESOLUTION DATED JUNE 29, 2001 IN FAVOR OF HEREIN PETITIONER
HOTEL WHEN HEREIN RESPONDENT ROA FAILED TO SHOW PROOF THAT THE NLRC AND THE
LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF DISCRETION OR LACK OF JURISDICTION
IN THEIR RESPECTIVE DECISIONS.
VI. . . . WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA WHEN IT IS CLEARLY IMPROPER
AND SHOULD HAVE BEEN DISMISSED OUTRIGHT CONSIDERING THAT A PETITION
FOR CERTIORARI UNDER RULE 65 IS LIMITED ONLY TO QUESTIONS OR ISSUES OF GRAVE
ABUSE OF DISCRETION OR LACK OF JURISDICTION COMMITTED BY THE NLRC OR THE LABOR
ARBITER, WHICH ISSUES ARE NOT PRESENT IN THE CASE AT BAR.
The assigned errors are divided into the procedural issue of whether or not the petition for certiorari filed in the CA was the
proper recourse; and into two substantive issues, namely: (a) whether or not respondent was an employee of petitioner;
and (b) if respondent was petitioner's employee, whether he was validly terminated.
Ruling
The appeal fails.
Procedural Issue:
Certiorari was a proper recourse
Petitioner contends that respondent's petition for certiorari was improper as a remedy against the NLRC due to its raising
mainly questions of fact and because it did not demonstrate that the NLRC was guilty of grave abuse of discretion. cDSaEH

The contention is unwarranted. There is no longer any doubt that a petition for certiorari brought to assail the decision of
the NLRC may raise factual issues, and the CA may then review the decision of the NLRC and pass upon such factual
issues in the process. 8 The power of the CA to review factual issues in the exercise of its original jurisdiction to issue writs
of certiorari is based on Section 9 of Batas Pambansa Blg. 129, which pertinently provides that the CA "shall have the power
to try cases and conduct hearings, receive evidence and perform any and all acts necessary to resolve factual issues raised
in cases falling within its original and appellate jurisdiction, including the power to grant and conduct new trials or further
proceedings."
Substantive Issue No. 1:
Employer-employee relationship
existed between the parties
We next ascertain if the CA correctly found that an employer-employee relationship existed between the parties.
The issue of whether or not an employer-employee relationship existed between petitioner and respondent is essentially a
question of fact. 9 The factors that determine the issue include who has the power to select the employee, who pays the
employee's wages, who has the power to dismiss the employee, and who exercises control of the methods and results by
which the work of the employee is accomplished. 10 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, 11 a
finding that the relationship exists must nonetheless rest on substantial evidence, which is that amount of relevant evidence
that a reasonable mind might accept as adequate to justify a conclusion. 12
Generally, the Court does not review factual questions, primarily because the Court is not a trier of facts. However, where,
like here, there is a conflict between the factual findings of the Labor Arbiter and the NLRC, on the one hand, and those of
the CA, on the other hand, it becomes proper for the factual issues and to look into the records of the case and re-examine
the questioned findings. 13
A review of the circumstances reveals that respondent was, indeed, petitioner's employee. He was undeniably employed
as a pianist in petitioner's Madison Coffee Shop/Tanglaw Restaurant from September 1992 until his services were
terminated on July 9, 1999. EAISDH

First of all, petitioner actually wielded the power of selection at the time it entered into the service contract dated September
1, 1992 with respondent. This is true, notwithstanding petitioner's insistence that respondent had only offered his services
to provide live music at petitioner's Tanglaw Restaurant, and despite petitioner's position that what had really transpired
was a negotiation of his rate and time of availability. The power of selection was firmly evidenced by, among others, the
express written recommendation dated January 12, 1998 by Christine Velazco, petitioner's restaurant manager, for the
increase of his remuneration. 14
Petitioner could not seek refuge behind the service contract entered into with respondent. It is the law that defines and
governs an employment relationship, whose terms are not restricted to those fixed in the written contract, for other factors,
like the nature of the work the employee has been called upon to perform, are also considered. The law affords protection
to an employee, and does not countenance any attempt to subvert its spirit and intent. Any stipulation in writing can be
ignored when the employer utilizes the stipulation to deprive the employee of his security of tenure. The inequality that
characterizes employer-employee relations generally tips the scales in favor of the employer, such that the employee is
often scarcely provided real and better options. 15
Secondly, petitioner argues that whatever remuneration was given to respondent were only his talent fees that were not
included in the definition of wage under theLabor Code; and that such talent fees were but the consideration for the service
contract entered into between them.
The argument is baseless.
Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three to six nights a week. Such
rate of remuneration was later increased to P750.00 upon restaurant manager Velazco's recommendation. There is no
denying that the remuneration denominated as talent fees was fixed on the basis of his talent and skill and the quality of the
music he played during the hours of performance each night, taking into account the prevailing rate for similar talents in the
entertainment industry. 16
Respondent's remuneration, albeit denominated as talent fees, was still considered as included in the term wage in the
sense and context of the Labor Code, regardless of how petitioner chose to designate the remuneration. Anent this, Article
97 (f) of the Labor Code clearly states:
. . . wage paid to any employee shall mean the remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services rendered or to be rendered, and includes
the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee.

Clearly, respondent received compensation for the services he rendered as a pianist in petitioner's hotel. Petitioner cannot
use the service contract to rid itself of the consequences of its employment of respondent. There is no denying that whatever
amounts he received for his performance, howsoever designated by petitioner, were his wages. STECDc
It is notable that under the Rules Implementing the Labor Code and as held in Tan v. Lagrama, 17 every employer is required
to pay his employees by means of a payroll, which should show in each case, among others, the employee's rate of pay,
deductions made from such pay, and the amounts actually paid to the employee. Yet, petitioner did not present the payroll
of its employees to bolster its insistence of respondent not being its employee.
That respondent worked for less than eight hours/day was of no consequence and did not detract from the CA's finding on
the existence of the employer-employee relationship. In providing that the "normal hours of work of any employee shall not
exceed eight (8) hours a day," Article 83 of the Labor Code only set a maximum of number of hours as "normal hours of
work" but did not prohibit work of less than eight hours.
Thirdly, the power of the employer to control the work of the employee is considered the most significant determinant of the
existence of an employer-employee relationship. 18 This is the so-called control test, and is premised on whether the person
for whom the services are performed reserves the right to control both the end achieved and the manner and means used
to achieve that end. 19
Petitioner submits that it did not exercise the power of control over respondent and cites the following to buttress its
submission, namely: (a) respondent could beg off from his nightly performances in the restaurant for other
engagements; (b) he had the sole prerogative to play and perform any musical arrangements that he wished;(c) although
petitioner, through its manager, required him to play at certain times a particular music or song, the music, songs, or
arrangements, including the beat or tempo, were under his discretion, control and direction; (d) the requirement for him to
wear barong Tagalog to conform with the Filipiniana motif of the venue whenever he performed was by no means evidence
of control; (e) petitioner could not require him to do any other work in the restaurant or to play the piano in any other places,
areas, or establishments, whether or not owned or operated by petitioner, during the three hour period from 7:00 pm to
10:00 pm, three to six times a week; and (f) respondent could not be required to sing, dance or play another musical
instrument.
A review of the records shows, however, that respondent performed his work as a pianist under petitioner's supervision and
control. Specifically, petitioner's control of both the end achieved and the manner and means used to achieve that end was
demonstrated by the following, to wit:
a. He could not choose the time of his performance, which petitioners had fixed from 7:00 pm to 10:00
pm, three to six times a week; IDEScC

b. He could not choose the place of his performance;

c. The restaurant's manager required him at certain times to perform only Tagalog songs or music, or to
wear barong Tagalog to conform to the Filipiniana motif; and
d. He was subjected to the rules on employees' representation check and chits, a privilege granted to
other employees.
Relevantly, it is worth remembering that the employer need not actually supervise the performance of duties by the
employee, for it sufficed that the employer has the right to wield that power.
Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject to its Code of Discipline,
and that the power to terminate the working relationship was mutually vested in the parties, in that either party might
terminate at will, with or without cause.
The claim is contrary to the records. Indeed, the memorandum informing respondent of the discontinuance of his service
because of the present business or financial condition of petitioner 20 showed that the latter had the power to dismiss him
from employment. 21
Substantive Issue No. 2:
Validity of the Termination
Having established that respondent was an employee whom petitioner terminated to prevent losses, the conclusion that his
termination was by reason of retrenchment due to an authorized cause under the Labor Code is inevitable.
Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor Code. It is a
management prerogative resorted to by employers to avoid or to minimize business losses. On this matter, Article 283 of
the Labor Code states:
Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry
of Labor and Employment at least one (1) month before the intended date thereof. . . . . In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due
 to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay
or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six
(6) months shall be considered one (1) whole year.

The Court has laid down the following standards that an employer should meet to justify retrenchment and to foil abuse,
namely:
(a) The expected losses should be substantial and not merely de minimis in extent;
(b) The substantial losses apprehended must be reasonably imminent;
(c) The retrenchment must be reasonably necessary and likely to effectively prevent the expected losses;
and
(d) The alleged losses, if already incurred, and the expected imminent losses sought to be forestalled
must be proved by sufficient and convincing evidence. 22 TcSCEa

Anent the last standard of sufficient and convincing evidence, it ought to be pointed out that a less exacting standard of
proof would render too easy the abuse of retrenchment as a ground for termination of services of employees. 23
Was the retrenchment of respondent valid?
In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests upon the employer.
Here, petitioner did not submit evidence of the losses to its business operations and the economic havoc it would thereby
imminently sustain. It only claimed that respondent's termination was due to its "present business/financial condition." This
bare statement fell short of the norm to show a valid retrenchment. Hence, we hold that there was no valid cause for the
retrenchment of respondent.
Indeed, not every loss incurred or expected to be incurred by an employer can justify retrenchment. The employer must
prove, among others, that the losses are substantial and that the retrenchment is reasonably necessary to avert such losses.
Thus, by its failure to present sufficient and convincing evidence to prove that retrenchment was necessary, respondent's
termination due to retrenchment is not allowed.
The Court realizes that the lapse of time since the retrenchment might have rendered respondent's reinstatement to his
former job no longer feasible. If that should be true, then petitioner should instead pay to him separation pay at the rate of
one month pay for every year of service computed from September 1992 (when he commenced to work for the petitioners)
until the finality of this decision, and full backwages from the time his compensation was withheld until the finality of this
decision.
WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the Court of Appeals
promulgated on February 11, 2002, subject to the modification that should reinstatement be no longer feasible, petitioner
shall pay to respondent separation pay of one month for every year of service computed from September 1992 until the
finality of this decision, and full backwages from the time his compensation was withheld until the finality of this decision.
Costs of suit to be paid by the petitioners.
SO ORDERED.
Del Castillo, Abad, * Villarama, Jr. and Perlas-Bernabe, JJ., concur.
||| (Legend Hotel v. Realuyo, G.R. No. 153511, [July 18, 2012], 691 PHIL 226-244)
 SECOND DIVISION
[G.R. No. 199547. September 24, 2012.]
THE NEW PHILIPPINE SKYLANDERS, INC. and/or JENNIFER M. EANO-BOTE, petitioners, vs.
FRANCISCO N. DAKILA, respondent.
RESOLUTION
PERLAS-BERNABE, J : p

The Petition for Review on Certiorari 1 assails the August 31, 2011 2 and November 23, 2011 3 Resolutions of the Court of
Appeals (CA) in CA-G.R. SP No. 113015 which affirmed the September 10, 2009 Decision 4 and December 15, 2009
Resolution 5 of the National Labor Relations Commission (NLRC) finding respondent Francisco N. Dakila (respondent
Dakila) to have been illegally dismissed.
The Factual Antecedents
Respondent Dakila was employed by petitioner corporation as early as 1987 and terminated for cause in April 1997 when
the corporation was sold. In May 1997, he was rehired as consultant by the petitioners under a Contract for Consultancy
Services 6 dated April 30, 1997.
Thereafter, in a letter 7 dated April 19, 2007, respondent Dakila informed petitioners of his compulsory retirement effective
May 2, 2007 and sought for the payment of his retirement benefits pursuant to the Collective Bargaining Agreement. His
request, however, was not acted upon. Instead, he was terminated from service effective May 1, 2007.
Consequently, respondent Dakila filed a complaint for constructive illegal dismissal, non-payment of retirement benefits,
under/non-payment of wages and other benefits of a regular employee, and damages against petitioners, The New
Philippine Skylanders, Inc. and its President and General Manager, Jennifer M. Eano-Bote, before the NLRC. He averred,
among others, that the consultancy contract was a scheme to deprive him of the benefits of regularization, claiming to have
assumed tasks necessary and desirable in the trade or business of petitioners and under their direct control and supervision.
In support of his claim, he submitted, among others, copies of his time cards, Official Business Itinerary Slips, Daily
Attendance Sheets and other documents prescribing the manner in which his tasks were to be accomplished under the
control of the petitioners and acknowledging his status as a regular employee of the corporation. aTcESI

On the other hand, petitioners, in their position paper, 8 asserted that respondent Dakila was a consultant and not their
regular employee. The latter was not included in petitioners' payroll and paid a fixed amount under the consultancy contract.
He was not required to observe regular working hours and was free to adopt means and methods to accomplish his task
except as to the results of the work required of him. Hence, no employer-employee relationship existed between them.
Moreover, respondent Dakila terminated his contract in a letter dated April 19, 2007, thus, negating his dismissal.
Ruling of the Labor Arbiter
On May 28, 2008, Labor Arbiter Thomas T. Que, Jr. rendered a decision 9 finding respondent Dakila to have been illegally
dismissed and ordered his reinstatement with full backwages computed from the time of his dismissal on May 1, 2007 until
his actual reinstatement as well as the payment of his unpaid benefits under the Collective Bargaining Agreement (CBA).
He declared respondent Dakila to be a regular employee on the basis of the unrebutted documentary evidence showing
that he was under the petitioners' direct control and supervision and performed tasks that were either incidental or usually
desirable and necessary in the trade or business of petitioner corporation for a period of ten years. Having been dismissed
without cause and notice, respondent Dakila was awarded moral and exemplary damages in the amount of P50,000.00
each. He is also entitled to avail of the corporation's retirement benefits upon his reinstatement.
Ruling of the NLRC
On appeal, the NLRC sustained the Labor Arbiter's (LA) finding that respondent Dakila was a regular employee and that
his dismissal was illegal. However, it noted that since he was already beyond the retirement age, his reinstatement was no
longer feasible. As such, it ordered the payment of his retirement pay to be computed from 1997 until the date of the
decision. Moreover, it found respondent Dakila entitled to reinstatement wages from the time petitioners received a copy of
the LA's Decision on July 7, 2008 up to the date of the NLRC's decision. Thus, it ordered the petitioners to pay respondent
Dakila the additional amount of P278,508.33 representing reinstatement wages and retirement pay. 10
The petitioners' motion for reconsideration having been denied in the Resolution 11 dated December 15, 2009, they filed a
petition for certiorari 12 before the CA raising the following errors:
SEHDIC

(1) the complaint should have been dismissed against petitioner Jennifer M. Eano-Bote absent any
showing of bad faith;
(2) respondent Dakila is not a regular employee;
(3) respondent was not illegally dismissed as it was the respondent who resigned; and
 (4) the LA's monetary award has no basis.
Ruling of the CA
In the Resolution 13 dated August 31, 2011, the CA dismissed the petition for failure to show that the NLRC committed grave
abuse of discretion in affirming the LA's Decision. It found the factual findings of the LA and the NLRC to be supported by
substantial evidence and thus, should be accorded respect and finality. Petitioners' motion for reconsideration therefrom
was likewise denied in the Resolution 14 dated November 23, 2011.
Hence, the instant petition reiterating the arguments raised before the CA.
Ruling of the Court
The issue of illegal dismissal is premised on the existence of an employer-employee relationship between the parties herein.
It is essentially a question of fact, beyond the ambit of a petition for review on certiorari under Rule 45 of the Rules of
Court unless there is a clear showing of palpable error or arbitrary disregard of evidence which does not obtain in this case.
Records reveal that both the LA and the NLRC, as affirmed by the CA, have found substantial evidence to show that
respondent Dakila was a regular employee who was dismissed without cause.
Following Article 279 of the Labor Code, an employee who is unjustly dismissed from work is entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages computed from the time he was illegally
dismissed. However, considering that respondent Dakila was terminated on May 1, 2007, or one (1) day prior to his
compulsory retirement on May 2, 2007, his reinstatement is no longer feasible. Accordingly, the NLRC correctly held him
entitled to the payment of his retirement benefits pursuant to the CBA. On the other hand, his backwages should be
computed only for days prior to his compulsory retirement which in this case is only a day. Consequently, the award of
reinstatement wages pending appeal must be deleted for lack of basis. cDECIA

Similarly, the Court finds no basis to hold petitioner Jennifer M. Eano-Bote, President and General Manager of The New
Philippine Skylanders, Inc., jointly and severally liable with the corporation for the payment of the monetary awards. The
mere lack of authorized or just cause to terminate one's employment and the failure to observe due process do not ipso
facto mean that the corporate officer acted with malice or bad faith. 15 There must be independent proof of malice or bad
faith which was not established in this case. Perforce, petitioner Jennifer M. Eano-Bote cannot be made personally liable
for the liabilities of the corporation which, by legal fiction, has a personality separate and distinct from its officers,
stockholders and members. Moreover, for lack of factual and legal bases, the awards of moral and exemplary damages
cannot also be sustained. 16
WHEREFORE, premises considered, the petition is PARTLY GRANTED. The assailed August 31, 2011 and November 23,
2011 Resolutions of the Court of Appeals in CA-G.R. SP No. 113015 are MODIFIED as follows:
(1) petitioner Jennifer M. Eano-Bote is ABSOLVED from liability for payment of respondent Francisco
N. Dakila's monetary awards;
(2) the awards of reinstatement wages pending appeal as well as the moral and exemplary damages are
ordered DELETED; and
(3) the computation of backwages should be limited only for a day prior to his compulsory retirement.
The rest of the decision stands.
SO ORDERED.
Carpio, Leonardo-De Castro, * Brion and Perez, JJ., concur.
||| (New Philippine Skylanders, Inc. v. Dakila, G.R. No. 199547 (Resolution), [September 24, 2012], 695 PHIL 762-768)
 THIRD DIVISION
[G.R. No. 171482. March 12, 2014.]
ASHMOR M. TESORO, PEDRO ANG and GREGORIO SHARP, petitioners, vs. METRO MANILA
RETREADERS, INC. (BANDAG) and/or NORTHERN LUZON RETREADERS, INC. (BANDAG)
and/or POWER TIRE AND RUBBER CORP. (BANDAG), respondents.
DECISION
ABAD, J :p

This case concerns the effect on the status of employment of employees who entered into a Service Franchise
Agreement with their employer.
The Facts and the Case
On various dates between 1991 and 1998, petitioners Ashmor M. Tesoro, Pedro Ang, and Gregorio Sharp used to work as
salesmen for respondents Metro Manila Retreaders, Inc., Northern Luzon Retreaders, Inc., or Power Tire and Rubber
Corporation, apparently sister companies, collectively called "Bandag." Bandag offered repair and retread services for used
tires. In 1998, however, Bandag developed a franchising scheme that would enable others to operate tire and retreading
businesses using its trade name and service system. ECTIcS

Petitioners quit their jobs as salesmen and entered into separate Service Franchise Agreements (SFAs) with Bandag for
the operation of their respective franchises. Under the SFAs, Bandag would provide funding support to the petitioners
subject to a regular or periodic liquidation of their revolving funds. The expenses out of these funds would be deducted from
petitioners' sales to determine their incomes.
At first, petitioners managed and operated their respective franchises without any problem. After a length of time, however,
they began to default on their obligations to submit periodic liquidations of their operational expenses in relation to the
revolving funds Bandag provided them. Consequently, Bandag terminated their respective SFA.
Aggrieved, petitioners filed a complaint for constructive dismissal, non-payment of wages, incentive pay, 13th month pay
and damages against Bandag with the National Labor Relations Commission (NLRC). Petitioners contend that,
notwithstanding the execution of the SFAs, they remained to be Bandag's employees, the SFAs being but a circumvention
of their status as regular employees.
For its part, Bandag pointed out that petitioners freely resigned from their employment and decided to avail themselves of
the opportunity to be independent entrepreneurs under the franchise scheme that Bandag had. Thus, no employer-
employee relationship existed between petitioners and Bandag.
On March 14, 2003 the Labor Arbiter rendered a Decision, dismissing the complaint on the ground that no employer-
employee relationship existed between Bandag and petitioners. Upon petitioners' appeal to the NLRC the latter affirmed on
June 30, 2003 the Labor Arbiter's Decision. It also denied petitioners' motion for reconsideration. Undaunted, petitioners
filed a petition for certiorari under Rule 65 with the Court of Appeals (CA) ascribing grave abuse of discretion. On July 29,
2005 the CA rendered a Decision, 1 dismissing the petition for lack of merit. It also denied their motion for reconsideration
on February 7, 2006.
Issue of the Case
The only issue presented in this case is whether or not petitioners remained to be Bandag's salesmen under the franchise
scheme it entered into with them. CEcaTH

Ruling of the Court

Franchising is a business method of expansion that allows an individual or group of individuals to market a product or a
service and to use of the patent, trademark, trade name and the systems prescribed by the owner. 2 In this case, Bandag's
SFAs created on their faces an arrangement that gave petitioners the privilege to operate and maintain Bandag branches
in the way of franchises, providing tire repair and retreading services, with petitioners earning profits based on the
performance of their branches.
The question is: did petitioners remain to be Bandag's employees after they began operating those branches? The tests for
determining employer-employee relationship are: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to the means and
methods by which the work is to be accomplished. The last is called the "control test," the most important element. 3
When petitioners agreed to operate Bandag's franchise branches in different parts of the country, they knew that this
substantially changed their former relationships. They were to cease working as Bandag's salesmen, the positions they
occupied before they ventured into running separate Bandag branches. They were to cease receiving salaries or
commissions. Their incomes were to depend on the profits they made. Yet, petitioners did not then complain of constructive
dismissal. They took their chances, ran their branches, Gregorio Sharp in La Union for several months and Ashmor Tesoro
in Baguio and Pedro Ang in Pangasinan for over a year. Clearly, their belated claim of constructive dismissal is quite hollow.
It is pointed out that Bandag continued, like an employer, to exercise control over petitioners' work. It points out that Bandag:
(a) retained the right to adjust the price rates of products and services; (b) imposed minimum processed tire requirement
(MPR); (c) reviewed and regulated credit applications; and (d) retained the power to suspend petitioners' services for failure
to meet service standards.
But uniformity in prices, quality of services, and good business practices are the essence of all franchises. A franchisee will
damage the franchisor's business if he sells at different prices, renders different or inferior services, or engages in bad
business practices. These business constraints are needed to maintain collective responsibility for faultless and reliable
service to the same class of customers for the same prices.
This is not the "control" contemplated in employer-employee relationships. Control in such relationships addresses the
details of day to day work like assigning the particular task that has to be done, monitoring the way tasks are done and their
results, and determining the time during which the employee must report for work or accomplish his assigned task.
Franchising involves the use of an established business expertise, trademark, knowledge, and training. As such, the
franchisee is required to follow a certain established system. Accordingly, the franchisors may impose guidelines that
somehow restrict the petitioners' conduct which do not necessarily indicate "control." The important factor to consider is still
the element of control over how the work itself is done, not just its end result. 4
The Court held, in Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc., 5 that, results-wise, the insurance
company, as principal, can impose production quotas upon its independent agents and determine how many individual
agents, with specific territories, such independent agents ought to employ to achieve the company's objectives. These are
management policy decisions that the labor law element of control cannot reach. Petitioners' commitment to abide by
Bandag's policy decisions and implementing rules, as franchisees does not make them its employees.
Petitioners cannot use the revolving funds feature of the SFAs as evidence of their employer-employee relationship with
Bandag. These funds do not represent wages. They are more in the nature of capital advances for operations that Bandag
conceptualized to attract prospective franchisees. Petitioners' incomes depended on the profits they make, controlled by
their individual abilities to increase sales and reduce operating costs.
The Labor Arbiter, the NLRC, and the CA, are unanimous that petitioners were no longer "route salesmen, bringing
previously ordered supplies and goods to dealers, taking back returned items, collecting payments, remitting them, etc.
They were themselves then the dealers, getting their own supply and bringing these to their own customers and sub-dealers,
if any."
The rule in labor cases is that the findings of fact of quasi-judicial bodies, like the NLRC, are to be accorded with respect,
even finality, if supported by substantial evidence. This is particularly true when passed upon and upheld by the CA. 6
WHEREFORE, the instant petition is DENIED. The Decision dated July 29, 2005 and Resolution dated February 7, 2006 of
the Court of Appeals in CA-G.R. SP 82447 areAFFIRMED.
SO ORDERED.
Velasco, Jr., Peralta and Perez, JJ., concur.
||| (Tesoro v. Metro Manila Retreaders, Inc., G.R. No. 171482, [March 12, 2014])
 SECOND DIVISION
[G.R. No. 195190. July 28, 2014.]
ROYALE HOMES MARKETING CORPORATION, petitioner, vs. FIDEL P. ALCANTARA [deceased],
substituted by his heirs, respondent.
DECISION
DEL CASTILLO, J : p

Not every form of control that a hiring party imposes on the hired party is indicative of employee-employer relationship.
Rules and regulations that merely serve as guidelines towards the achievement of a mutually desired result without dictating
the means and methods of accomplishing it do not establish employer-employee relationship. 1
This Petition for Review on Certiorari 2 assails the June 23, 2010 Decision 3 of the Court of Appeals (CA) in CA-G.R. SP
No. 109998 which (i) reversed and set aside the February 23, 2009 Decision 4 of the National Labor Relations Commission
(NLRC), (ii) ordered petitioner Royale Homes Marketing Corporation (Royale Homes) to pay respondent Fidel P. Alcantara
(Alcantara) backwages and separation pay, and (iii) remanded the case to the Labor Arbiter for the proper determination
and computation of said monetary awards.
Also assailed in this Petition is the January 18, 2011 Resolution 5 of the CA denying Royale Homes' Motion for
Reconsideration, 6 as well as its Supplemental 7 thereto.
Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara as its Marketing Director for
a fixed period of one year. His work consisted mainly of marketing Royale Homes' real estate inventories on an exclusive
basis. Royale Homes reappointed him for several consecutive years, the last of which covered the period January 1 to
December 31, 2003 where he held the position of Division 5 Vice-President-Sales. 8
Proceedings before the Labor Arbiter
On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal 9 against Royale Homes and its President Matilde
Robles, Executive Vice-President for Administration and Finance Ma. Melinda Bernardino, and Executive Vice-President
for Sales Carmina Sotto. Alcantara alleged that he is a regular employee of Royale Homes since he is performing tasks that
are necessary and desirable to its business; that in 2003 the company gave him P1.2 million for the services he rendered
to it; that in the first week of November 2003, however, the executive officers of Royale Homes told him that they were
wondering why he still had the gall to come to office and sit at his table; 10 and that the acts of the executive officers of
Royale Homes amounted to his dismissal from work without any valid or just cause and in gross disregard of the proper
procedure for dismissing employees. Thus, he also impleaded the corporate officers who, he averred, effected his dismissal
in bad faith and in an oppressive manner. cACHSE

Alcantara prayed to be reinstated to his former position without loss of seniority rights and other privileges, as well as to be
paid backwages, moral and exemplary damages, and attorney's fees. He further sought that the ownership of the Mitsubishi
Adventure with Plate No. WHD-945 be transferred to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that the appointment paper
of Alcantara is clear that it engaged his services as an independent sales contractor for a fixed term of one year only. He
never received any salary, 13th month pay, overtime pay or holiday pay from Royale Homes as he was paid purely on
commission basis. In addition, Royale Homes had no control on how Alcantara would accomplish his tasks and
responsibilities as he was free to solicit sales at any time and by any manner which he may deem appropriate and necessary.
He is even free to recruit his own sales personnel to assist him in pursuance of his sales target.
According to Royale Homes, Alcantara decided to leave the company after his wife, who was once connected with it as a
sales agent, had formed a brokerage company that directly competed with its business, and even recruited some of its sales
agents. Although this was against the exclusivity clause of the contract, Royale Homes still offered to accept Alcantara's
wife back so she could continue to engage in real estate brokerage, albeit exclusively for Royale Homes. In a special
management committee meeting on October 8, 2003, however, Alcantara announced publicly and openly that he would
leave the company by the end of October 2003 and that he would no longer finish the unexpired term of his contract. He
has decided to join his wife and pursue their own brokerage business. Royale Homes accepted Alcantara's decision. It then
threw a despedida party in his honor and, subsequently, appointed a new independent contractor.
Two months after he relinquished his post, however, Alcantara appeared in Royale Homes and submitted a letter claiming
that he was illegally dismissed.
Ruling of the Labor Arbiter
On September 7, 2005, the Labor Arbiter rendered a Decision 11 holding that Alcantara is an employee of Royale Homes
with a fixed-term employment period from January 1 to December 31, 2003 and that the pre-termination of his contract
was against the law. Hence, Alcantara is entitled to an amount which he may have earned on the average for the
unexpired portion of the contract. With regard to the impleaded corporate officers, the Labor Arbiter absolved them from
any liability.
The dispositive portion of the Labor Arbiter's Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Royale Homes
Marketing Corp. to pay the complainant the total amount of TWO HUNDRED SEVENTY SEVEN THOUSAND
PESOS (P277,000.00) representing his compensation/commission for the unexpired term of his contract.
All other claims are dismissed for lack of merit.
SO ORDERED. 12

Both parties appealed the Labor Arbiter's Decision to the NLRC. Royale Homes claimed that the Labor Arbiter grievously
erred in ruling that there exists an employer-employee relationship between the parties. It insisted that the contract
between them expressly states that Alcantara is an independent contractor and not an ordinary employee. It had no
control over the means and methods by which he performed his work. Royale Homes likewise assailed the award of
P277,000.00 for lack of basis as it did not pre-terminate the contract. It was Alcantara who chose not to finish the contract.
Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term and that he is
not entitled to backwages, reinstatement, unpaid commissions, and damages. EcICDT

Ruling of the National Labor Relations Commission

On February 23, 2009, the NLRC rendered its Decision, 13 ruling that Alcantara is not an employee but a mere
independent contractor of Royale Homes. It based its ruling mainly on the contract which does not require Alcantara to
observe regular working hours. He was also free to adopt the selling methods he deemed most effective and can even
recruit sales agents to assist him in marketing the inventories of Royale Homes. The NLRC also considered the fact that
Alcantara was not receiving monthly salary, but was being paid on commission basis as stipulated in the contract. Being
an independent contractor, the NLRC concluded that Alcantara's Complaint is cognizable by the regular courts.
The fallo of the NLRC Decision reads:
WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-Beley dated September 5,
2005 is REVERSED and SET ASIDE and a NEW ONE rendered dismissing the complaint for lack of jurisdiction.
SO ORDERED. 14

Alcantara moved for reconsideration. 15 In a Resolution 16 dated May 29, 2009, however, the NLRC denied his motion.
Alcantara thus filed a Petition for Certiorari 17 with the CA imputing grave abuse of discretion on the part of the NLRC in
ruling that he is not an employee of Royale Homes and that it is the regular courts which have jurisdiction over the issue
of whether the pre-termination of the contract is valid.
Ruling of the Court of Appeals
On June 23, 2010, the CA promulgated its Decision 18 granting Alcantara's Petition and reversing the NLRC's Decision.
Applying the four-fold and economic reality tests, it held that Alcantara is an employee of Royale Homes. Royale Homes
exercised some degree of control over Alcantara since his job, as observed by the CA, is subject to company rules,
regulations, and periodic evaluations. He was also bound by the company code of ethics. Moreover, the exclusivity clause
of the contract has made Alcantara economically dependent on Royale Homes, supporting the theory that he is an employee
of said company.
The CA further held that Alcantara's termination from employment was without any valid or just cause, and it was carried
out in violation of his right to procedural due process. Thus, the CA ruled that he is entitled to backwages and separation
pay, in lieu of reinstatement. Considering, however, that the CA was not satisfied with the proof adduced to establish the
amount of Alcantara's annual salary, it remanded the case to the Labor Arbiter to determine the same and the monetary
award he is entitled to. With regard to the corporate officers, the CA absolved them from any liability for want of clear proof
that they assented to the patently unlawful acts or that they are guilty of bad faith or gross negligence. Thus:
WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed decision of the National
Labor Relations Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA NO. 046104-05 dated February
23, 2009 as well as the Resolution dated May 29, 2009 are hereby SET ASIDE and a new one is entered ordering
the respondent company to pay petitioner backwages which shall be computed from the time of his illegal termination
in October 2003 up to the finality of this decision, plus separation pay equivalent to one month salary for every year
of service. This case is REMANDED to the Labor Arbiter for the proper determination and computation of back wages,
separation pay and other monetary benefits that petitioner is entitled to.
SO ORDERED. 19
Royale Homes filed a Motion for Reconsideration 20 and a Supplemental Motion for Reconsideration. 21 In a
Resolution 22 dated January 18, 2011, however, the CA denied said motions.
Issues
Hence, this Petition where Royale Homes submits before this Court the following issues for resolution: CHIEDS

A.

WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN ACCORD WITH LAW
AND APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT REVERSED THE RULING OF THE
NLRC DISMISSING THE COMPLAINT OF RESPONDENT FOR LACK OF JURISDICTION AND
CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED[.]
B.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DISREGARDING THE
EN BANC RULING OF THIS HONORABLE COURT IN THE CASE OFTONGKO VS. MANULIFE, AND IN
BRUSHING ASIDE THE APPLICABLE RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]

C.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DENYING THE MOTION
FOR RECONSIDERATION OF PETITIONER AND IN REFUSING TO CORRECT ITSELF[.] 23

Royale Homes contends that its contract with Alcantara is clear and unambiguous it engaged his services as an
independent contractor. This can be readily seen from the contract stating that no employer-employee relationship exists
between the parties; that Alcantara was free to solicit sales at any time and by any manner he may deem appropriate; that
he may recruit sales personnel to assist him in marketing Royale Homes' inventories; and, that his remunerations are
dependent on his sales performance.
Royale Homes likewise argues that the CA grievously erred in ruling that it exercised control over Alcantara based on a
shallow ground that his performance is subject to company rules and regulations, code of ethics, periodic evaluation, and
exclusivity clause of contract. Royale Homes maintains that it is expected to exercise some degree of control over its
independent contractors, but that does not automatically result in the existence of employer-employee relationship. For
control to be considered as a proof tending to establish employer-employee relationship, the same must pertain to the
means and method of performing the work; not on the relationship of the independent contractors among themselves or
their persons or their source of living.
Royale Homes further asserts that it neither hired nor wielded the power to dismiss Alcantara. It was Alcantara who openly
and publicly declared that he was pre-terminating his fixed-term contract.
The pivotal issue to be resolved in this case is whether Alcantara was an independent contractor or an employee of Royale
Homes.
Our Ruling
The Petition is impressed with merit.
The determination of whether a party who renders services to another is an employee or an independent contractor involves
an evaluation of factual matters which, ordinarily, is not within the province of this Court. In view of the conflicting findings
of the tribunals below, however, this Court is constrained to go over the factual matters involved in this case. 24
The juridical relationship of the parties
based on their written contract
The primary evidence of the nature of the parties' relationship in this case is the written contract that they signed and
executed in pursuance of their mutual agreement. While the existence of employer-employee relationship is a matter of law,
the characterization made by the parties in their contract as to the nature of their juridical relationship cannot be simply
ignored, particularly in this case where the parties' written contract unequivocally states their intention at the time they
entered into it. In Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc., 25 it was held that:
To be sure, the Agreement's legal characterization of the nature of the relationship cannot be conclusive and
binding on the courts; . . . the characterization of the juridical relationship the Agreement embodied is a matter of
law that is for the courts to determine. At the same time, though, the characterization the parties gave to their
relationship in the Agreement cannot simply be brushed aside because it embodies their intent at the time they
entered the Agreement, and they were governed by this understanding throughout their relationship. At the very
least, the provision on the absence of employer-employee relationship between the parties can be an aid in
considering the Agreement and its implementation, and in appreciating the other evidence on record. 26 DISHEA
In this case, the contract, 27 duly signed and not disputed by the parties, conspicuously provides that "no employer-employee
relationship exists between" Royale Homes and Alcantara, as well as his sales agents. It is clear that they did not want to
be bound by employer-employee relationship at the time of the signing of the contract. Thus:
January 24, 2003

MR. FIDEL P. ALCANTARA

13 Rancho I
Marikina City
Dear Mr. Alcantara,

This will confirm your appointment as Division 5 VICE[-]PRESIDENT-SALES of ROYALE HOMES MARKETING
CORPORATION effective January 1, 2003 to December 31, 2003.

Your appointment entails marketing our real estate inventories on an EXCLUSIVE BASIS under such price, terms
and condition to be provided to you from time to time.

As such, you can solicit sales at any time and by any manner which you deem appropriate and necessary to market
our real estate inventories subject to rules, regulations and code of ethics promulgated by the company. Further, you
are free to recruit sales personnel/agents to assist you in marketing of our inventories provided that your
personnel/agents shall first attend the required seminars and briefing to be conducted by us from time to time for the
purpose of familiarizing them of terms and conditions of sale, the nature of property sold, etc., attendance of which
shall be a condition precedent for their accreditation by us.
That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:
1. Commission override of 0.5% for all option sales beginning January 1, 2003 booked by your sales agents.
2. Budget allocation depending on your division's sale performance as per our budget guidelines.
3. Sales incentive and other forms of company support which may be granted from time to time.
It is understood, however, that no employer-employee relationship exists between us, that of your sales
personnel/agents, and that you shall hold our company . . ., its officers and directors, free and harmless from any
and all claims of liability and damages arising from and/or incident to the marketing of our real estate inventories.

We reserve, however, our right to terminate this agreement in case of violation of any company rules and regulations,
policies and code of ethics upon notice for justifiable reason.

Your performance shall be subject to periodic evaluation based on factors which shall be determined by the
management.

If you are amenable to the foregoing terms and conditions, please indicate your conformity by signing on the space
provided below and return [to] us a duplicate copy of this letter, duly accomplished, to constitute as our agreement
on the matter. (Emphasis ours)

Since "the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning
of its stipulations should control." 28 No construction is even needed as they already expressly state their intention. Also, this
Court adopts the observation of the NLRC that it is rather strange on the part of Alcantara, an educated man and a veteran
sales broker who claimed to be receiving P1.2 million as his annual salary, not to have contested the portion of the contract
expressly indicating that he is not an employee of Royale Homes if their true intention were otherwise. ICDSca

The juridical relationship of the parties

based on Control Test
In determining the existence of an employer-employee relationship, this Court has generally relied on the four-fold test, to
wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employer's power to control the employee with respect to the means and methods by which the work is to be
accomplished. 29 Among the four, the most determinative factor in ascertaining the existence of employer- employee
relationship is the "right of control test". 30 "It is deemed to be such an important factor that the other requisites may even
be disregarded." 31 This holds true where the issues to be resolved is whether a person who performs work for another is
the latter's employee or is an independent contractor, 32 as in this case. For where the person for whom the services are
performed reserves the right to control not only the end to be achieved, but also the means by which such end is reached,
employer-employee relationship is deemed to exist. 33
In concluding that Alcantara is an employee of Royale Homes, the CA ratiocinated that since the performance of his tasks
is subject to company rules, regulations, code of ethics, and periodic evaluation, the element of control is present.
The Court disagrees.
Not every form of control is indicative of employer-employee relationship. A person who performs work for another and is
subjected to its rules, regulations, and code of ethics does not necessarily become an employee. 34 As long as the level of
control does not interfere with the means and methods of accomplishing the assigned tasks, the rules imposed by the hiring
party on the hired party do not amount to the labor law concept of control that is indicative of employer-employee
relationship. InInsular Life Assurance Co., Ltd. v. National Labor Relations Commission 35 it was pronounced that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which address both the result and
the means used to achieve it. . . . 36

In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and periodic evaluation alluded
to by Alcantara do not involve control over the means and methods by which he was to perform his job. Understandably,
Royale Homes has to fix the price, impose requirements on prospective buyers, and lay down the terms and conditions of
the sale, including the mode of payment, which the independent contractors must follow. It is also necessary for Royale
Homes to allocate its inventories among its independent contractors, determine who has priority in selling the same, grant
commission or allowance based on predetermined criteria, and regularly monitor the result of their marketing and sales
efforts. But to the mind of this Court, these do not pertain to the means and methods of how Alcantara was to perform and
accomplish his task of soliciting sales. They do not dictate upon him the details of how he would solicit sales or the manner
as to how he would transact business with prospective clients. In Tongko, this Court held that guidelines or rules and
regulations that do not pertain to the means or methods to be employed in attaining the result are not indicative of control
as understood in labor law Thus:
From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment to abide by
the rules and regulations of an insurance company does not ipso facto make the insurance agent an employee.
Neither do guidelines somehow restrictive of the insurance agent's conduct necessarily indicate "control" as this term
is defined in jurisprudence. Guidelines indicative of labor law "control," as the first Insular Life case tells us,
should not merely relate to the mutually desirable result intended by the contractual relationship; they must
have the nature of dictating the means or methods to be employed in attaining the result, or of fixing the
methodology and of binding or restricting the party hired to the use of these means. In fact, results-wise, the
principal can impose production quotas and can determine how many agents, with specific territories, ought to be
employed to achieve the company's objectives. These are management policy decisions that the labor law element
of control cannot reach. Our ruling in these respects in the first Insular Life case was practically reiterated
inCarungcong. Thus, as will be shown more fully below, Manulife's codes of conduct, all of which do not intrude into
the insurance agents' means and manner of conducting their sales and only control them as to the desired results
and Insurance Code norms, cannot be used as basis for a finding that the labor law concept of control existed
between Manulife and Tongko. 37 (Emphases in the original) IDCHTE

As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to prove the elements
thereof, particularly Royale Homes' power of control over the means and methods of accomplishing the work. 38 He,
however, failed to cite specific rules, regulations or codes of ethics that supposedly imposed control on his means and
methods of soliciting sales and dealing with prospective clients. On the other hand, this case is replete with instances
that negate the element of control and the existence of employer-employee relationship. Notably, Alcantara was not
required to observe definite working hours. 39 Except for soliciting sales, Royale Homes did not assign other tasks to
him. He had full control over the means and methods of accomplishing his tasks as he can "solicit sales at any time and
by any manner which [he may] deem appropriate and necessary." He performed his tasks on his own account free from
the control and direction of Royale Homes in all matters connected therewith, except as to the results thereof. 40
Neither does the repeated hiring of Alcantara prove the existence of employer-employee relationship. 41 As discussed
above, the absence of control over the means and methods disproves employer-employee relationship. The continuous
rehiring of Alcantara simply signifies the renewal of his contract with Royale Homes, and highlights his satisfactory services
warranting the renewal of such contract. Nor does the exclusivity clause of contract establish the existence of the labor law
concept of control. In Consulta v. Court of Appeals, 42 it was held that exclusivity of contract does not necessarily result in
employer-employee relationship, viz.:
. . . However, the fact that the appointment required Consulta to solicit business exclusively for Pamana did not
mean that Pamana exercised control over the means and methods of Consulta's work as the term control is
understood in labor jurisprudence. Neither did it make Consulta an employee of Pamana. Pamana did not prohibit
Consulta from engaging in any other business, or from being connected with any other company, for as long as
the business [of the] company did not compete with Pamana's business. 43

The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other business as long as he
does not sell projects of Royale Homes' competitors. He can engage in selling various other products or engage in unrelated
businesses.
Payment of Wages
The element of payment of wages is also absent in this case. As provided in the contract, Alcantara's remunerations consist
only of commission override of 0.5%, budget allocation, sales incentive and other forms of company support. There is no
proof that he received fixed monthly salary. No payslip or payroll was ever presented and there is no proof that Royale
Homes deducted from his supposed salary withholding tax or that it registered him with the Social Security System,
Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint merely states a ballpark figure of his
alleged salary of P100,000.00, more or less. All of these indicate an independent contractual relationship. 44 Besides, if
Alcantara indeed considered himself an employee of Royale Homes, then he, an experienced and professional broker,
would have complained that he was being denied statutorily mandated benefits. But for nine consecutive years, he kept
mum about it, signifying that he has agreed, consented, and accepted the fact that he is not entitled to those employee
benefits because he is an independent contractor.
This Court is, therefore, convinced that Alcantara is not an employee of Royale Homes, but a mere independent contractor.
The NLRC is, therefore, correct in concluding that the Labor Arbiter has no jurisdiction over the case and that the same is
cognizable by the regular courts.
WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of Appeals in CA-G.R.
SP No. 109998 is REVERSED and SET ASIDE. The February 23, 2009 Decision of the National Labor Relations
Commission is REINSTATED and AFFIRMED.
SO ORDERED. IHCSTE

||| (Royale Homes Marketing Corp. v. Alcantara, G.R. No. 195190, [July 28, 2014])
 SECOND DIVISION
[G.R. Nos. 204944-45. December 3, 2014.]
FUJI TELEVISION NETWORK, INC., petitioner, vs. ARLENE S. ESPIRITU, respondent.
DECISION
LEONEN, J : p

It is the burden of the employer to prove that a person whose services it pays for is an independent contractor rather than
a regular employee with or without a fixed term. That a person has a disease does not per se entitle the employer to
terminate his or her services. Termination is the last resort. At the very least, a competent public health authority must certify
that the disease cannot be cured within six (6) months, even with appropriate treatment.
We decide this petition for review 1 on certiorari filed by Fuji Television Network, Inc., seeking the reversal of the Court of
Appeals' decision 2 dated June 25, 2012, affirming with modification the decision 3 of the National Labor Relations
Commission.
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc. ("Fuji") as a news
correspondent/producer 4 "tasked to report Philippine news to Fuji through its Manila Bureau field office." 5 Arlene's
employment contract initially provided for a term of one (1) year but was successively renewed on a yearly basis with salary
adjustment upon every renewal. 6
Sometime in January 2009, Arlene was diagnosed with lung cancer. 7 She informed Fuji about her condition. In turn, the
Chief of News Agency of Fuji, Yoshiki Aoki, informed Arlene "that the company will have a problem renewing her
contract" 8 since it would be difficult for her to perform her job. 9 She "insisted that she was still fit to work as certified by her
attending physician." 10
After several verbal and written communications, 11 Arlene and Fuji signed a non-renewal contract on May 5, 2009 where it
was stipulated that her contract would no longer be renewed after its expiration on May 31, 2009. The contract also provided
that the parties release each other from liabilities and responsibilities under the employment contract. 12 SDTIaE

In consideration of the non-renewal contract, Arlene "acknowledged receipt of the total amount of US$18,050.00
representing her monthly salary from March 2009 to May 2009, year-end bonus, mid-year bonus, and separation
pay." 13 However, Arlene affixed her signature on the non-renewal contract with the initials "U.P." for "under protest." 14
On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a complaint for illegal dismissal and
attorney's fees with the National Capital Region Arbitration Branch of the National Labor Relations Commission. She alleged
that she was forced to sign the non-renewal contract when Fuji came to know of her illness and that Fuji withheld her salaries
and other benefits for March and April 2009 when she refused to sign. 15
Arlene claimed that she was left with no other recourse but to sign the non-renewal contract, and it was only upon signing
that she was given her salaries and bonuses, in addition to separation pay equivalent to four (4) years. 16
In the decision 17 dated September 10, 2009, Labor Arbiter Corazon C. Borbolla dismissed Arlene's
complaint. 18 Citing Sonza v. ABS-CBN 19 and applying the four-fold test, the Labor Arbiter held that Arlene was not Fuji's
employee but an independent contractor. 20
Arlene appealed before the National Labor Relations Commission. In its decision dated March 5, 2010, the National Labor
Relations Commission reversed the Labor Arbiter's decision. 21 It held that Arlene was a regular employee with respect to
the activities for which she was employed since she continuously rendered services that were deemed necessary and
desirable to Fuji's business. 22 The National Labor Relations Commission ordered Fuji to pay Arlene backwages, computed
from the date of her illegal dismissal. 23 The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered GRANTING the instant appeal. The Decision of
the Labor Arbiter dated 19 September 2009 is hereby REVERSED and SET ASIDE, and a new one is issued ordering
respondents-appellees to pay complainant-appellant backwages computed from the date of her illegal dismissal until
finality of this Decision.
SO ORDERED. 24

Arlene and Fuji filed separate motions for reconsideration. 25 Both motions were denied by the National Labor Relations
Commission for lack of merit in the resolution dated April 26, 2010. 26
From the decision of the National Labor Relations Commission, both parties filed separate petitions for certiorari 27 before
the Court of Appeals. The Court of Appeals consolidated the petitions and considered the following issues for resolution:
1) Whether or not Espiritu is a regular employee or a fixed-term contractual employee;
2) Whether or not Espiritu was illegally dismissed; and
 3) Whether or not Espiritu is entitled to damages and attorney's fees. 28
In the assailed decision, the Court of Appeals affirmed the National Labor Relations Commission with the modification that
Fuji immediately reinstate Arlene to her position as News Producer without loss of seniority rights, and pay her backwages,
13th-month pay, mid-year and year-end bonuses, sick leave and vacation leave with pay until reinstated, moral damages,
exemplary damages, attorney's fees, and legal interest of 12% per annum of the total monetary awards. 29
The Court of Appeals ruled that:
WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki Aoki is DENIED and the
petition of Arlene S. Espiritu is GRANTED. Accordingly, the Decision dated March 5, 2010 of the National Labor
Relations Commission, 6th Division in NLRC NCR Case No. 05-06811-09 and its subsequent Resolution dated April
26, 2010 are hereby AFFIRMED with MODIFICATIONS, as follows:

Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu to her position as News
Producer without loss of seniority rights and privileges and to pay her the following:

1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009 (the date of dismissal), until
reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal, until reinstated;

3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per year from the date of dismissal,
until reinstated;

4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per year from the date of dismissal,
until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from date of dismissal, until
reinstated.
7. The amount of P100,000.00 as moral damages;
8. The amount of P50,000.00 as exemplary damages;
9. Attorney's fees equivalent to 10% of the total monetary awards herein stated; and

10. Legal interest of twelve percent (12%) per annum of the total monetary awards computed from May 5,
2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another re-computation of the above monetary awards consistent
with the above directives.
SO ORDERED. 30

In arriving at the decision, the Court of Appeals held that Arlene was a regular employee because she was engaged to
perform work that was necessary or desirable in the business of Fuji, 31 and the successive renewals of her fixed-term
contract resulted in regular employment. 32
According to the Court of Appeals, Sonza does not apply in order to establish that Arlene was an independent contractor
because she was not contracted on account of any peculiar ability, special talent, or skill. 33 The fact that everything used
by Arlene in her work was owned by Fuji negated the idea of job contracting. 34
The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed to comply with the requirements of
substantive and procedural due process necessary for her dismissal since she was a regular employee. 35
The Court of Appeals found that Arlene did not sign the non-renewal contract voluntarily and that the contract was a mere
subterfuge by Fuji to secure its position that it was her choice not to renew her contract. She was left with no choice since
Fuji was decided on severing her employment. 36
Fuji filed a motion for reconsideration that was denied in the resolution 37 dated December 7, 2012 for failure to raise new
matters. 38EASIHa

Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals erred in affirming with modification the
National Labor Relations Commission's decision, holding that Arlene was a regular employee and that she was illegally
dismissed. Fuji also questioned the award of monetary claims, benefits, and damages. 39
Fuji points out that Arlene was hired as a stringer, and it informed her that she would remain one. 40 She was hired as an
independent contractor as defined in Sonza. 41Fuji had no control over her work. 42 The employment contracts were
executed and renewed annually upon Arlene's insistence to which Fuji relented because she had skills that distinguished
her from ordinary employees. 43 Arlene and Fuji dealt on equal terms when they negotiated and entered into the employment
contracts. 44There was no illegal dismissal because she freely agreed not to renew her fixed-term contract as evidenced by
her e-mail correspondences with Yoshiki Aoki. 45 In fact, the signing of the non-renewal contract was not necessary to
terminate her employment since "such employment terminated upon expiration of her contract." 46Finally, Fuji had dealt with
Arlene in good faith, thus, she should not have been awarded damages. 47
Fuji alleges that it did not need a permanent reporter since the news reported by Arlene could easily be secured from other
entities or from the internet. 48 Fuji "never controlled the manner by which she performed her functions." 49 It was Arlene
who insisted that Fuji execute yearly fixed-term contracts so that she could negotiate for annual increases in her pay. 50
Fuji points out that Arlene reported for work for only five (5) days in February 2009, three (3) days in March 2009, and one
(1) day in April 2009. 51 Despite the provision in her employment contract that sick leaves in excess of 30 days shall not be
paid, Fuji paid Arlene her entire salary for the months of March, April, and May; four (4) months of separation pay; and a
bonus for two and a half months for a total of US$18,050.00. 52 Despite having received the amount of US$18,050.00,
Arlene still filed a case for illegal dismissal. 53
Fuji further argues that the circumstances would show that Arlene was not illegally dismissed. The decision to not renew
her contract was mutually agreed upon by the parties as indicated in Arlene's e-mail 54 dated March 11, 2009 where she
consented to the non-renewal of her contract but refused to sign anything. 55 Aoki informed Arlene in an e-mail 56 dated
March 12, 2009 that she did not need to sign a resignation letter and that Fuji would pay Arlene's salary and bonus until
May 2009 as well as separation pay. 57
Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal agreement that she agreed to sign this
time. 58 This attached version contained a provision that Fuji shall re-hire her if she was still interested to work for Fuji. 59 For
Fuji, Arlene's e-mail showed that she had the power to bargain. 60
Fuji then posits that the Court of Appeals erred when it held that the elements of an employer-employee relationship are
present, particularly that of control; 61 that Arlene's separation from employment upon the expiration of her contract
constitutes illegal dismissal; 62 that Arlene is entitled to reinstatement; 63 and that Fuji is liable to Arlene for damages and
attorney's fees. 64
This petition for review on certiorari under Rule 45 was filed on February 8, 2013. 65 On February 27, 2013, Arlene filed a
manifestation 66 stating that this court may not take jurisdiction over the case since Fuji failed to authorize Corazon E.
Acerden to sign the verification. 67 Fuji filed a comment on the manifestation 68 on March 9, 2013.
Based on the arguments of the parties, there are procedural and substantive issues for resolution:
I. Whether the petition for review should be dismissed as Corazon E. Acerden, the signatory of the
verification and certification of non-forum shopping of the petition, had no authority to sign the
verification and certification on behalf of Fuji;
II. Whether the Court of Appeals correctly determined that no grave abuse of discretion was committed
by the National Labor Relations Commission when it ruled that Arlene was a regular employee,
not an independent contractor, and that she was illegally dismissed; and
III. Whether the Court of Appeals properly modified the National Labor Relations Commission's decision
by awarding reinstatement, damages, and attorney's fees.
The petition should be dismissed. HSTAcI

I
Validity of the verification and certification against forum shopping
In its comment on Arlene's manifestation, Fuji alleges that Corazon was authorized to sign the verification and certification
of non-forum shopping because Mr. Shuji Yano was empowered under the secretary's certificate to delegate his authority
to sign the necessary pleadings, including the verification and certification against forum shopping. 69
On the other hand, Arlene points out that the authority given to Mr. Shuji Yano and Mr. Jin Eto in the secretary's certificate
is only for the petition for certiorari before the Court of Appeals. 70 Fuji did not attach any board resolution authorizing
Corazon or any other person to file a petition for review on certiorari with this court. 71 Shuji Yano and Jin Eto could not re-
delegate the power that was delegated to them. 72 In addition, the special power of attorney executed by Shuji Yano in favor
of Corazon indicated that she was empowered to sign on behalf of Shuji Yano, and not on behalf of Fuji. 73
The Rules of Court requires the
submission of verification and
certification against forum shopping
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of verification, while Section 5 of the same
rule provides the requirement of certification against forum shopping. These sections state:
 SEC. 4. Verification. Except when otherwise specifically required by law or rule, pleadings need not be under
oath, verified or accompanied by affidavit.

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

A pleading required to be verified which contains a verification based on "information and belief," or upon "knowledge,
information and belief," or lacks a proper verification, shall be treated as an unsigned pleading.
SEC. 5. Certification against forum shopping. The plaintiff or principal party shall certify under oath in the
complaint or other initiatory pleading asserting a claim for relief or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the
same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or
claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status
thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he
shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading
has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other
initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon
motion and after hearing. The submission of a false certification or non-compliance with any of the undertakings
therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal
actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall
be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for
administrative sanctions.

Section 4 (e) of Rule 45 74 requires that petitions for review should "contain a sworn certification against forum shopping as
provided in the last paragraph of section 2, Rule 42." Section 5 of the same rule provides that failure to comply with any
requirement in Section 4 is sufficient ground to dismiss the petition.
Effects of non-compliance
Uy v. Landbank 75 discussed the effect of non-compliance with regard to verification and stated that:
[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such requirement is simply a
condition affecting the form of pleading, the non-compliance of which does not necessarily render the pleading fatally
defective. Verification is simply intended to secure an assurance that the allegations in the pleading are true and
correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith.
The court may order the correction of the pleading if the verification is lacking or act on the pleading although it is not
verified, if the attending circumstances are such that strict compliance with the rules may be dispensed with in order
that the ends of justice may thereby be served. 76 (Citations omitted)

Shipside Incorporated v. Court of Appeals 77 cited the discussion in Uy and differentiated its effect from non-compliance with
the requirement of certification against forum shopping:
On the other hand, the lack of certification against forum shopping is generally not curable by the submission thereof
after the filing of the petition. Section 5, Rule 45of the 1997 Rules of Civil Procedure provides that the failure of the
petitioner to submit the required documents that should accompany the petition, including the certification against
forum shopping, shall be sufficient ground for the dismissal thereof. The same rule applies to certifications against
forum shopping signed by a person on behalf of a corporation which are unaccompanied by proof that said signatory
is authorized to file a petition on behalf of the corporation. 78 (Emphasis supplied)

Effects of substantial compliance

with the requirement of verification
and certification against forum shopping
Although the general rule is that failure to attach a verification and certification against forum shopping is a ground for
dismissal, there are cases where this court allowed substantial compliance.
In Loyola v. Court of Appeals, 79 petitioner Alan Loyola submitted the required certification one day after filing his electoral
protest. 80 This court considered the subsequent filing as substantial compliance since the purpose of filing the certification
is to curtail forum shopping. 81
In LDP Marketing, Inc. v. Monter, 82 Ma. Lourdes Dela Pea signed the verification and certification against forum shopping
but failed to attach the board resolution indicating her authority to sign. 83 In a motion for reconsideration, LDP Marketing
attached the secretary's certificate quoting the board resolution that authorized Dela Pea. 84 Citing Shipside, this court
deemed the belated submission as substantial compliance since LDP Marketing complied with the requirement; what it
failed to do was to attach proof of Dela Pea's authority to sign. 85
Havtor Management Phils., Inc. v. National Labor Relations Commission 86 and General Milling Corporation v. National
Labor Relations Commission 87 involved petitions that were dismissed for failure to attach any document showing that the
signatory on the verification and certification against forum-shopping was authorized. 88 In both cases, the secretary's
certificate was attached to the motion for reconsideration. 89 This court considered the subsequent submission of proof
indicating authority to sign as substantial compliance. 90
Altres v. Empleo 91 summarized the rules on verification and certification against forum shopping in this manner:
For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential pronouncements . . .
respecting non-compliance with the requirement on, or submission of defective, verification and certification against
forum shopping:

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

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

3) Verification is deemed substantially complied with when one who has ample knowledge to swear to the truth of
the allegations in the complaint or petition signs the verification, and when matters alleged in the petition
have been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in verification, is
generally not curable by its subsequent submission or correction thereof, unless there is a need to relax the
Rule on the ground of "substantial compliance" or presence of "special circumstances or compelling
reasons." HSDIaC

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

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

There was substantial compliance

by Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be sued through its board of directors or duly authorized officers
and agents. Thus, the physical act of signing the verification and certification against forum shopping can only be done by
natural persons duly authorized either by the corporate by-laws or a board resolution. 93
In its petition for review on certiorari, Fuji attached Hideaki Ota's secretary's certificate, 94 authorizing Shuji Yano and Jin
Eto to represent and sign for and on behalf of Fuji. 95 The secretary's certificate was duly authenticated 96 by Sulpicio
Confiado, Consul-General of the Philippines in Japan. Likewise attached to the petition is the special power of attorney
executed by Shuji Yano, authorizing Corazon to sign on his behalf. 97 The verification and certification against forum
shopping was signed by Corazon. 98
Arlene filed the manifestation dated February 27, 2013, arguing that the petition for review should be dismissed because
Corazon was not duly authorized to sign the verification and certification against forum shopping.
Fuji filed a comment on Arlene's manifestation, stating that Corazon was properly authorized to sign. On the basis of the
secretary's certificate, Shuji Yano was empowered to delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals, against Philippines' National Labor
Relations Commission ("NLRC") and Arlene S. Espiritu, pertaining to NLRC-NCR Case No. LAC 00-002697-09,
RAB No. 05-06811-00 and entitled "Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki", and
participate in any other subsequent proceeding that may necessarily arise therefrom, including but not limited to the
filing of appeals in the appropriate venue;
(b) Mr. Shuji Yano and Mr. Jin Eto be authorized, as they are hereby authorized, to verify and execute the
certification against non-forum shopping which may be necessary or required to be attached to any pleading
to [sic] submitted to the Court of Appeals; and the authority to so verify and certify for the Corporation in favor of the
said persons shall subsist and remain effective until the termination of the said case;
xxx xxx xxx
 (d) Mr. Shuji Yano and Mr. Jin Eto be authorized, as they are hereby authorized, to represent and appear on behalf
the [sic] Corporation in all stages of the [sic]this case and in any other proceeding that may necessarily arise
thereform [sic], and to act in the Corporation's name, place and stead to determine, propose, agree, decide, do, and
perform any and all of the following:
1. The possibility of amicable settlement or of submission to alternative mode of dispute resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and documents; and
5. Such other matters as may aid in the prompt disposition of the action. 99 (Emphasis in the original; Italics
omitted)

Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rollera as his
attorneys-in-fact. 100 The special power of attorney states:
That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba, Minato-Ku, Tokyo, 137-
8088 Japan, and being the representative of Fuji TV, INc.,[sic] (evidenced by the attached Secretary's Certificate)
one of the respondents in NLRC-NCR Case No. 05-06811-00 entitled "Arlene S. Espiritu v. Fuji Television
Network, Inc./Yoshiki Aoki", and subsequently docketed before the Court of Appeals as C.A. G.R. S.P. No.
114867 (Consolidated with SP No. 114889) do hereby make, constitute and appoint Ms. Ma. Corazon E. Acerden
and Mr. Moises A. Rollera as my true and lawful attorneys-in-fact for me and my name, place and stead to act and
represent me in the above-mentioned case, with special power to make admission/s and stipulations and/or to make
and submit as well as to accept and approve compromise proposals upon such terms and conditions and under such
covenants as my attorney-in-fact may deem fit, and to engage the services of Villa Judan and Cruz Law Offices as
the legal counsel to represent the Company in the Supreme Court; IcHEaA

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

In its comment 102 on Arlene's manifestation, Fuji argues that Shuji Yano could further delegate his authority because the
board resolution empowered him to "act in the Corporation's name, place and stead to determine, propose, agree, decided
[sic], do and perform any and all of the following: . . . such other matters as may aid in the prompt disposition of the action." 103
To clarify, Fuji attached a verification and certification against forum shopping, but Arlene questions Corazon's authority to
sign. Arlene argues that the secretary's certificate empowered Shuji Yano to file a petition for certiorari before the Court of
Appeals, and not a petition for review before this court, and that since Shuji Yano's authority was delegated to him, he could
not further delegate such power. Moreover, Corazon was representing Shuji Yano in his personal capacity, and not in his
capacity as representative of Fuji.
A review of the board resolution quoted in the secretary's certificate shows that Fuji shall "file a Petition for Certiorari with
the Court of Appeals" 104 and "participate in any other subsequent proceeding that may necessarily arise therefrom,
including but not limited to the filing of appeals in the appropriate venue," 105 and that Shuji Yano and Jin Eto are authorized
to represent Fuji "in any other proceeding that may necessarily arise thereform [sic]." 106 As pointed out by Fuji, Shuji Yano
and Jin Eto were also authorized to "act in the Corporation's name, place and stead to determine, propose, agree, decide,
do, and perform any and all of the following: . . . 5. Such other matters as may aid in the prompt disposition of the action." 107
Considering that the subsequent proceeding that may arise from the petition for certiorari with the Court of Appeals is the
filing of a petition for review with this court, Fuji substantially complied with the procedural requirement.
On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article 1892 of the Civil Code of the
Philippines states:
ART. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be
responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;

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

The secretary's certificate does not state that Shuji Yano is prohibited from appointing a substitute. In fact, he is empowered
to do acts that will aid in the resolution of this case.
This court has recognized that there are instances when officials or employees of a corporation can sign the verification and
certification against forum shopping without a board resolution. In Cagayan Valley Drug Corporation v. CIR, 108 it was held
that:
In sum, we have held that the following officials or employees of the company can sign the verification and certification
without need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President of a corporation,
(3) the General Manager or Acting General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a
labor case.
While the above cases 109 do not provide a complete listing of authorized signatories to the verification and
certification required by the rules, the determination of the sufficiency of the authority was done on a case to case
basis. The rationale applied in the foregoing cases is to justify the authority of corporate officers or representatives
of the corporation to sign the verification or certificate against forum shopping, being 'in a position to verify the
truthfulness and correctness of the allegations in the petition.' 110

Corazon's affidavit 111 states that she is the "office manager and resident interpreter of the Manila Bureau of Fuji Television
Network, Inc." 112 and that she has "held the position for the last twenty-three years." 113
As the office manager for 23 years, Corazon can be considered as having knowledge of all matters in Fuji's Manila Bureau
Office and is in a position to verify "the truthfulness and the correctness of the allegations in the Petition." 114
Thus, Fuji substantially complied with the requirements of verification and certification against forum shopping.
Before resolving the substantive issues in this case, this court will discuss the procedural parameters of a Rule 45 petition
for review in labor cases.
II
Procedural parameters of petitions for review in labor cases
Article 223 of the Labor Code 115 does not provide any mode of appeal for decisions of the National Labor Relations
Commission. It merely states that "[t]he decision of the Commission shall be final and executory after ten (10) calendar days
from receipt thereof by the parties." Being final, it is no longer appealable. However, the finality of the National Labor
Relations Commission's decisions does not mean that there is no more recourse for the parties.
In St. Martin Funeral Home v. National Labor Relations Commission, 116 this court cited several cases 117 and rejected the
notion that this court had no jurisdiction to review decisions of the National Labor Relations Commission. It stated that this
court had the power to review the acts of the National Labor Relations Commission to see if it kept within its jurisdiction in
deciding cases and also as a form of check and balance. 118 This court then clarified that judicial review of National Labor
Relations Commission decisions shall be by way of a petition for certiorari under Rule 65. Citing the doctrine of hierarchy of
courts, it further ruled that such petitions shall be filed before the Court of Appeals. From the Court of Appeals, an aggrieved
party may file a petition for review on certiorari under Rule 45.
A petition for certiorari under Rule 65 is an original action where the issue is limited to grave abuse of discretion. As an
original action, it cannot be considered as a continuation of the proceedings of the labor tribunals.
On the other hand, a petition for review on certiorari under Rule 45 is a mode of appeal where the issue is limited to
questions of law. In labor cases, a Rule 45 petition is limited to reviewing whether the Court of Appeals correctly determined
the presence or absence of grave abuse of discretion and deciding other jurisdictional errors of the National Labor Relations
Commission. 119
In Odango v. National Labor Relations Commission, 120 this court explained that a petition for certiorari is an extraordinary
remedy that is "available only and restrictively in truly exceptional cases" 121 and that its sole office "is the correction of errors
of jurisdiction including commission of grave abuse of discretion amounting to lack or excess of jurisdiction." 122 A petition
for certiorari does not include a review of findings of fact since the findings of the National Labor Relations Commission are
accorded finality. 123 In cases where the aggrieved party assails the National Labor Relations Commission's findings, he or
she must be able to show that the Commission "acted capriciously and whimsically or in total disregard of evidence material
to the controversy." 124
When a decision of the Court of Appeals under a Rule 65 petition is brought to this court by way of a petition for review
under Rule 45, only questions of law may be decided upon. As held in Meralco Industrial v. National Labor Relations
Commission: 125
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court in a petition for review
on certiorari under Rule 45 of the Revised Rules of Courtis limited to reviewing only errors of law, not of fact, unless
the factual findings complained of are completely devoid of support from the evidence on record, or the assailed
judgment is based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial agencies like the
NLRC, when affirmed by the Court of Appeals, are conclusive upon the parties and binding on this Court. 126
Career Philippines v. Serna, 127 citing Montoya v. Transmed, 128 is instructive on the parameters of judicial review under
Rule 45:
As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we discussed the particular
parameters of a Rule 45 appeal from the CA's Rule 65 decision on a labor case, as follows:

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

Justice Brion's dissenting opinion in Abbott Laboratories, Philippines v. Alcaraz 130 discussed that in petitions for review
under Rule 45, "the Court simply determines whether the legal correctness of the CA's finding that the NLRC ruling . . . had
basis in fact and in law." 131 In this kind of petition, the proper question to be raised is,"Did the CA correctly determine
whether the NLRC committed grave abuse of discretion in ruling on the case?" 132
Justice Brion's dissenting opinion also laid down the following guidelines: aATEDS

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

These parameters shall be used in resolving the substantive issues in this petition.
III
Determination of employment status; burden of proof
In this case, there is no question that Arlene rendered services to Fuji. However, Fuji alleges that Arlene was an independent
contractor, while Arlene alleges that she was a regular employee. To resolve this issue, we ascertain whether an employer-
employee relationship existed between Fuji and Arlene.
This court has often used the four-fold test to determine the existence of an employer-employee relationship. Under the
four-fold test, the "control test" is the most important. 134 As to how the elements in the four-fold test are proven, this court
has discussed that:
[t]here is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant evidence
to prove the relationship may be admitted. Identification cards, cash vouchers, social security registration,
appointment letters or employment contracts, payrolls, organization charts, and personnel lists, serve as evidence of
employee status. 135

If the facts of this case vis--vis the four-fold test show that an employer-employee relationship existed, we then determine
the status of Arlene's employment, i.e., whether she was a regular employee. Relative to this, we shall analyze Arlene's
fixed-term contract and determine whether it supports her argument that she was a regular employee, or the argument of
Fuji that she was an independent contractor. We shall scrutinize whether the nature of Arlene's work was necessary and
desirable to Fuji's business or whether Fuji only needed the output of her work. If the circumstances show that Arlene's work
was necessary and desirable to Fuji, then she is presumed to be a regular employee. The burden of proving that she was
an independent contractor lies with Fuji.
In labor cases, the quantum of proof required is substantial evidence. 136 "Substantial evidence" has been defined as "such
amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion." 137
If Arlene was a regular employee, we then determine whether she was illegally dismissed. In complaints for illegal dismissal,
the burden of proof is on the employee to prove the fact of dismissal. 138 Once the employee establishes the fact of dismissal,
supported by substantial evidence, the burden of proof shifts to the employer to show that there was a just or authorized
cause for the dismissal and that due process was observed. 139
IV
Whether the Court of Appeals correctly affirmed the National Labor
Relations Commission's finding that Arlene was a regular employee
Fuji alleges that Arlene was an independent contractor, citing Sonza v. ABS-CBN and relying on the following facts: (1) she
was hired because of her skills; (2) her salary was US$1,900.00, which is higher than the normal rate; (3) she had the power
to bargain with her employer; and (4) her contract was for a fixed term. According to Fuji, the Court of Appeals erred when
it ruled that Arlene was forced to sign the non-renewal agreement, considering that she sent an email with another version
of the non-renewal agreement. 140 Further, she is not entitled to moral damages and attorney's fees because she acted in
bad faith when she filed a labor complaint against Fuji after receiving US$18,050.00 representing her salary and other
benefits. 141
Arlene argues that she was a regular employee because Fuji had control and supervision over her work. The news events
that she covered were all based on the instructions of Fuji. 142 She maintains that the successive renewal of her employment
contracts for four (4) years indicates that her work was necessary and desirable. 143In addition, Fuji's payment of separation
pay equivalent to one (1) month's pay per year of service indicates that she was a regular employee. 144 To further support
her argument that she was not an independent contractor, she states that Fuji owns the laptop computer and mini-camera
that she used for work. 145
Arlene also argues that Sonza is not applicable because she was a plain reporter for Fuji, unlike Jay Sonza who was a
news anchor, talk show host, and who enjoyed a celebrity status. 146
On her illness, Arlene points out that it was not a ground for her dismissal because her attending physician certified that she
was fit to work. 147
Arlene admits that she signed the non-renewal agreement with quitclaim, not because she agreed to its terms, but because
she was not in a position to reject the non-renewal agreement. Further, she badly needed the salary withheld for her
sustenance and medication. 148 She posits that her acceptance of separation pay does not bar filing of a complaint for illegal
dismissal. 149
Article 280 of the Labor Code provides that:
Art. 280. Regular and casual employment. The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where
the work or services to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph; Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exist.

This provision classifies employees into regular, project, seasonal, and casual. It further classifies regular employees into
two kinds: (1) those "engaged to perform activities which are usually necessary or desirable in the usual business or trade
of the employer"; and (2) casual employees who have "rendered at least one year of service, whether such service is
continuous or broken."
Another classification of employees, i.e., employees with fixed-term contracts, was recognized in Brent School, Inc. v.
Zamora 150 where this court discussed that:
Logically, the decisive determinant in the term employment should not be the activities that the employee is called
upon to perform, but the day certain agreed upon by the parties for the commencement and termination of their
employment relationship, a day certain being understood to be "that which must necessarily come, although it may
not be known when." 151 (Emphasis in the original)

This court further discussed that there are employment contracts where "a fixed term is an essential and natural
appurtenance" 152 such as overseas employment contracts and officers in educational institutions. 153
Distinctions among fixed-term
employees, independent contractors,
and regular employees
GMA Network, Inc. v. Pabriga 154 expounded the doctrine on fixed-term contracts laid down in Brent in the following
manner: TSDHCc

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

1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without any
force, duress, or improper pressure being brought to bear upon the employee and absent any other
circumstances vitiating his consent; or
 2) It satisfactorily appears that the employer and the employee dealt with each other on more or less equal
terms with no moral dominance exercised by the former or the latter.
These indications, which must be read together, make the Brent doctrine applicable only in a few special cases
wherein the employer and employee are on more or less in equal footing in entering into the contract. The reason for
this is evident: when a prospective employee, on account of special skills or market forces, is in a position to make
demands upon the prospective employer, such prospective employee needs less protection than the ordinary worker.
Lesser limitations on the parties' freedom of contract are thus required for the protection of the
employee. 155 (Citations omitted)

For as long as the guidelines laid down in Brent are satisfied, this court will recognize the validity of the fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc., 156 this court upheld the fixed-term employment of petitioners because from the time
they were hired, they were informed that their engagement was for a specific period. This court stated that:
[s]imply put, petitioners were not regular employees. While their employment as mixers, packers and machine
operators was necessary and desirable in the usual business of respondent company, they were employed
temporarily only, during periods when there was heightened demand for production. Consequently, there could have
been no illegal dismissal when their services were terminated on expiration of their contracts. There was even no
need for notice of termination because they knew exactly when their contracts would end. Contracts of employment
for a fixed period terminate on their own at the end of such period.
Contracts of employment for a fixed period are not unlawful. What is objectionable is the practice of some scrupulous
employers who try to circumvent the law protecting workers from the capricious termination of
employment. 157 (Citation omitted)

Caparoso v. Court of Appeals 158 upheld the validity of the fixed-term contract of employment. Caparoso and Quindipan
were hired as delivery men for three (3) months. At the end of the third month, they were hired on a monthly basis. In total,
they were hired for five (5) months. They filed a complaint for illegal dismissal. 159This court ruled that there was no evidence
indicating that they were pressured into signing the fixed-term contracts. There was likewise no proof that their employer
was engaged in hiring workers for five (5) months only to prevent regularization. In the absence of these facts, the fixed-
term contracts were upheld as valid. 160
On the other hand, an independent contractor is defined as:
. . . one who carries on a distinct and independent business and undertakes to perform the job, work, or service on
its own account and under one's own responsibility according to one's own manner and method, free from the control
and direction of the principal in all matters connected with the performance of the work except as to the results
thereof. 161

In view of the "distinct and independent business" of independent contractors, no employer-employee relationship exists
between independent contractors and their principals.
Independent contractors are recognized under Article 106 of the Labor Code:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
xxx xxx xxx
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these
types of contracting and determine who among the parties involved shall be considered the employer for purposes
of this Code, to prevent any violation or circumvention of any provision of this Code.

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

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

xxx xxx xxx

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

This department order also states that there is a trilateral relationship in legitimate job contracting and subcontracting
arrangements among the principal, contractor, and employees of the contractor. There is no employer-employee
relationship between the contractor and principal who engages the contractor's services, but there is an employer-employee
relationship between the contractor and workers hired to accomplish the work for the principal. 162
Jurisprudence has recognized another kind of independent contractor: individuals with unique skills and talents that set
them apart from ordinary employees. There is no trilateral relationship in this case because the independent contractor
himself or herself performs the work for the principal. In other words, the relationship is bilateral.
In Orozco v. Court of Appeals, 163 Wilhelmina Orozco was a columnist for the Philippine Daily Inquirer. This court ruled that
she was an independent contractor because of her "talent, skill, experience, and her unique viewpoint as a feminist
advocate." 164 In addition, the Philippine Daily Inquirer did not have the power of control over Orozco, and she worked at her
own pleasure. 165
Semblante v. Court of Appeals 166 involved a masiador 167 and a sentenciador. 168 This court ruled that "petitioners
performed their functions as masiador andsentenciador free from the direction and control of respondents" 169 and that
the masiador and sentenciador "relied mainly on their 'expertise that is characteristic of the cockfight gambling.'" 170 Hence,
no employer-employee relationship existed.
Bernarte v. Philippine Basketball Association 171 involved a basketball referee. This court ruled that "a referee is an
independent contractor, whose special skills and independent judgment are required specifically for such position and
cannot possibly be controlled by the hiring party." 172
In these cases, the workers were found to be independent contractors because of their unique skills and talents and the
lack of control over the means and methods in the performance of their work.
In other words, there are different kinds of independent contractors: those engaged in legitimate job contracting and those
who have unique skills and talents that set them apart from ordinary employees.
Since no employer-employee relationship exists between independent contractors and their principals, their contracts are
governed by the Civil Code provisions on contracts and other applicable laws. 173
A contract is defined as "a meeting of minds between two persons whereby one binds himself, with respect to the other, to
give something or to render some service."174 Parties are free to stipulate on terms and conditions in contracts as long as
these "are not contrary to law, morals, good customs, public order, or public policy." 175This presupposes that the parties to
a contract are on equal footing. They can bargain on terms and conditions until they are able to reach an agreement.
On the other hand, contracts of employment are different and have a higher level of regulation because they are impressed
with public interest. Article XIII, Section 3 of the 1987 Constitution provides full protection to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS.

xxx xxx xxx

LABOR

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

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

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

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

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

In contracts of employment, the employer and the employee are not on equal footing. Thus, it is subject to regulatory review
by the labor tribunals and courts of law. The law serves to equalize the unequal. The labor force is a special class that is
constitutionally protected because of the inequality between capital and labor. 176 This presupposes that the labor force is
weak.
However, the level of protection to labor should vary from case to case; otherwise, the state might appear to be too
paternalistic in affording protection to labor. As stated in GMA Network, Inc. v. Pabriga, the ruling in Brent applies in cases
where it appears that the employer and employee are on equal footing. 177 This recognizes the fact that not all workers are
weak. To reiterate the discussion in GMA Network v. Pabriga:
The reason for this is evident: when a prospective employee, on account of special skills or market forces, is in a
position to make demands upon the prospective employer, such prospective employee needs less protection than
the ordinary worker. Lesser limitations on the parties' freedom of contract are thus required for the protection of the
employee. 178

The level of protection to labor must be determined on the basis of the nature of the work, qualifications of the employee,
and other relevant circumstances.
For example, a prospective employee with a bachelor's degree cannot be said to be on equal footing with a grocery bagger
with a high school diploma. Employees who qualify for jobs requiring special qualifications such as "[having] a Master's
degree" or "[having] passed the licensure exam" are different from employees who qualify for jobs that require "[being a]
high school graduate; with pleasing personality." In these situations, it is clear that those with special qualifications can
bargain with the employer on equal footing. Thus, the level of protection afforded to these employees should be different.
Fuji's argument that Arlene was an independent contractor under a fixed-term contract is contradictory. Employees under
fixed-term contracts cannot be independent contractors because in fixed-term contracts, an employer-employee relationship
exists. The test in this kind of contract is not the necessity grid desirability of the employee's activities, "but the day certain
agreed upon by the parties for the commencement and termination of the employment relationship." 179 For regular
employees, the necessity and desirability of their work in the usual course of the employer's business are the determining
factors. On the other hand, independent contractors do not have employer-employee relationships with their principals.
Hence, before the status of employment can be determined, the existence of an employer-employee relationship must be
established.
The four-fold test 180 can be used in determining whether an employer-employee relationship exists. The elements of the
four-fold test are the following: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the power of control, which is the most important element. 181
The "power of control" was explained by this court in Corporal, Sr. v. National Labor Relations Commission: 182 ETIDaH

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

Orozco v. Court of Appeals further elucidated the meaning of "power of control" and stated the following:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which address both the result and
the means used to achieve it. . . . 184(Citation omitted)

In Locsin, et al. v. Philippine Long Distance Telephone Company, 185 the "power of control" was defined as "[the] right to
control not only the end to be achieved but also the means to be used in reaching such end." 186
Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit-Murillo v. Court of Appeals 187 in determining whether
Arlene was an independent contractor or a regular employee.
In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases involved newscasters and anchors.
However, Sonza was held to be an independent contractor, while Dumpit-Murillo was held to be a regular employee.
Comparison of the Sonza and
Dumpit-Murillo cases using
the four-fold test
Sonza was engaged by ABS-CBN in view of his "unique skills, talent and celebrity status not possessed by ordinary
employees." 188 His work was for radio and television programs. 189 On the other hand, Dumpit-Murillo was hired by ABC as
a newscaster and co-anchor. 190
Sonza's talent fee amounted to P317,000.00 per month, which this court found to be a substantial amount that indicated he
was an independent contractor rather than a regular employee. 191 Meanwhile, Dumpit-Murillo's monthly salary was
P28,000.00, a very low amount compared to what Sonza received. 192
Sonza was unable to prove that ABS-CBN could terminate his services apart from breach of contract. There was no
indication that he could be terminated based on just or authorized causes under the Labor Code. In addition, ABS-CBN
continued to pay his talent fee under their agreement, even though his programs were no longer broadcasted. 193 Dumpit-
Murillo was found to have been illegally dismissed by her employer when they did not renew her contract on her fourth year
with ABC. 194
In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines, how he appeared on television, or
how he sounded on radio. 195 All that Sonza needed was his talent. 196 Further, "ABS-CBN could not terminate or discipline
SONZA even if the means and methods of performance of his work . . . did not meet ABS-CBN's approval." 197 In Dumpit-
Murillo, the duties and responsibilities enumerated in her contract was a clear indication that ABC had control over her
work. 198
Application of the four-fold test
The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and affirmed the ruling of the National Labor
Relations Commission finding that Arlene was a regular employee. Arlene was hired by Fuji as a news producer, but there
was no showing that she was hired because of unique skills that would distinguish her from ordinary employees. Neither
was there any showing that she had a celebrity status. Her monthly salary amounting to US$1,900.00 appears to be a
substantial sum, especially if compared to her salary when she was still connected with GMA. 199 Indeed, wages may
indicate whether one is an independent contractor. Wages may also indicate that an employee is able to bargain with the
employer for better pay. However, wages should not be the conclusive factor in determining whether one is an employee
or an independent contractor.
Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her professional employment contract. 200 Her
contract also indicated that Fuji had control over her work because she was required to work for eight (8) hours from Monday
to Friday, although on flexible time. 201 Sonza was not required to work for eight (8) hours, while Dumpit-Murillo had to be in
ABC to do both on-air and off-air tasks.
On the power to control, Arlene alleged that Fuji gave her instructions on what to report. 202 Even the mode of transportation
in carrying out her functions was controlled by Fuji. Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is change of place or change of place of work, the train, bus, or public
transport shall be used for the trip. If the Employee uses the private car during the work and there is an
accident the Employer shall not be responsible for the damage, which may be caused to the Employee. 203

Thus, the Court of Appeals did not err when it upheld the findings of the National Labor Relations Commission that Arlene
was not an independent contractor.
Having established that an employer-employee relationship existed between Fuji and Arlene, the next questions for
resolution are the following: Did the Court of Appeals correctly affirm the National Labor Relations Commission that Arlene
had become a regular employee? Was the nature of Arlene's work necessary and desirable for Fuji's usual course of
business?
Arlene was a regular employee
with a fixed-term contract
The test for determining regular employment is whether there is a reasonable connection between the employee's activities
and the usual business of the employer. Article 280 provides that the nature of work must be "necessary or desirable in the
usual business or trade of the employer" as the test for determining regular employment. As stated in ABS-CBN
Broadcasting Corporation v. Nazareno: 204
In determining whether an employment should be considered regular or non-regular, the applicable test is the
reasonable connection between the particular activity performed by the employee in relation to the usual business
or trade of the employer. The standard, supplied by the law itself, is whether the work undertaken is necessary or
desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the nature of the
services rendered and its relation to the general scheme under which the business or trade is pursued in the usual
course. It is distinguished from a specific undertaking that is divorced from the normal activities required in carrying
on the particular business or trade. 205
However, there may be a situation where an employee's work is necessary but is not always desirable in the usual course
of business of the employer. In this situation, there is no regular employment.
In San Miguel Corporation v. National Labor Relations Commission, 206 Francisco de Guzman was hired to repair furnaces
at San Miguel Corporation's Manila glass plant. He had a separate contract for every furnace that he repaired. He filed a
complaint for illegal dismissal three (3) years after the end of his last contract. 207 In ruling that de Guzman did not attain the
status of a regular employee, this court explained: DaIACS

Note that the plant where private respondent was employed for only seven months is engaged in the manufacture of
glass, an integral component of the packaging and manufacturing business of petitioner. The process of
manufacturing glass requires a furnace, which has a limited operating life. Petitioner resorted to hiring project or fixed
term employees in having said furnaces repaired since said activity is not regularly performed. Said furnaces are to
be repaired or overhauled only in case of need and after being used continuously for a varying period of five (5) to
ten (10) years.

In 1990, one of the furnaces of petitioner required repair and upgrading. This was an undertaking distinct and
separate from petitioner's business of manufacturing glass. For this purpose, petitioner must hire workers to
undertake the said repair and upgrading. . . .
xxx xxx xxx

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

Fuji is engaged in the business of broadcasting, 209 including news programming. 210 It is based in Japan 211 and has
overseas offices to cover international news. 212
Based on the record, Fuji's Manila Bureau Office is a small unit 213 and has a few employees. 214 As such, Arlene had to do
all activities related to news gathering. Although Fuji insists that Arlene was a stringer, it alleges that her designation was
"News Talent/Reporter/Producer." 215
A news producer "plans and supervises newscast . . . [and] work[s] with reporters in the field planning and gathering
information. . . ." 216 Arlene's tasks included "[m]onitoring and [g]etting [n]ews [s]tories, [r]eporting interviewing subjects in
front of a video camera," 217 "the timely submission of news and current events reports pertaining to the Philippines[,] and
traveling [sic] to [Fuji's] regional office in Thailand." 218 She also had to report for work in Fuji's office in Manila from Mondays
to Fridays, eight (8) hours per day. 219 She had no equipment and had to use the facilities of Fuji to accomplish her tasks.
The Court of Appeals affirmed the finding of the National Labor Relations Commission that the successive renewals of
Arlene's contract indicated the necessity and desirability of her work in the usual course of Fuji's business. Because of this,
Arlene had become a regular employee with the right to security of tenure. 220 The Court of Appeals ruled that:
Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila Bureau. She was hired for the
primary purpose of news gathering and reporting to the television network's headquarters. Espiritu was not contracted
on account of any peculiar ability or special talent and skill that she may possess which the network desires to make
use of. Parenthetically, if it were true that Espiritu is an independent contractor, as claimed by Fuji, the fact that
everything that she uses to perform her job is owned by the company including the laptop computer and mini camera
discounts the idea of job contracting. 221

Moreover, the Court of Appeals explained that Fuji's argument that no employer-employee relationship existed in view of
the fixed-term contract does not persuade because fixed-term contracts of employment are strictly construed. 222 Further,
the pieces of equipment Arlene used were all owned by Fuji, showing that she was a regular employee and not an
independent contractor. 223
The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts that were successively renewed for
four (4) years. 224 This court held that "[t]his repeated engagement under contract of hire is indicative of the necessity and
desirability of the petitioner's work in private respondent ABC's business." 225
With regard to Fuji's argument that Arlene's contract was for a fixed term, the Court of Appeals cited Philips Semiconductors,
Inc. v. Fadriquela 226 and held that where an employee's contract "had been continuously extended or renewed to the same
position, with the same duties and remained in the employ without any interruption,"227 then such employee is a regular
employee. The continuous renewal is a scheme to prevent regularization. On this basis, the Court of Appeals ruled in favor
of Arlene.
As stated in Price, et al. v. Innodata Corp., et al.: 228
The employment status of a person is defined and prescribed by law and not by what the parties say it should be.
Equally important to consider is that a contract of employment is impressed with public interest such that labor
contracts must yield to the common good. Thus, provisions of applicable statutes are deemed written into the
contract, and the parties are not at liberty to insulate themselves and their relationships from the impact of labor laws
and regulations by simply contracting with each other. 229 (Citations omitted)

Arlene's contract indicating a fixed term did not automatically mean that she could never be a regular employee. This is
precisely what Article 280 seeks to avoid. The ruling in Brent remains as the exception rather than the general rule.
Further, an employee can be a regular employee with a fixed-term contract. The law does not preclude the possibility that
a regular employee may opt to have a fixed-term contract for valid reasons. This was recognized in Brent: For as long as it
was the employee who requested, or bargained, that the contract have a "definite date of termination," or that the fixed-term
contract be freely entered into by the employer and the employee, then the validity of the fixed-term contract will be
upheld. 230
V
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commission's finding of illegal dismissal
Fuji argues that the Court of Appeals erred when it held that Arlene was illegally dismissed, in view of the non-renewal
contract voluntarily executed by the parties. Fuji also argues that Arlene's contract merely expired; hence, she was not
illegally dismissed. 231
Arlene alleges that she had no choice but to sign the non-renewal contract because Fuji withheld her salary and benefits.
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fuji's assertion that Espiritu's contract merely expired and that she voluntarily agreed not to
renew the same. Even a cursory perusal of the subject Non-Renewal Contract readily shows that the same was
signed by Espiritu under protest. What is apparent is that the Non-Renewal Contract was crafted merely as a
subterfuge to secure Fuji's position that it was Espiritu's choice not to renew her contract. 232

As a regular employee, Arlene was entitled to security of tenure and could be dismissed only for just or authorized causes
and after the observance of due process.
The right to security of tenure is guaranteed under Article XIII, Section 3 of the 1987 Constitution:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS.

xxx xxx xxx

LABOR

xxx xxx xxx

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

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

Thus, on the right to security of tenure, no employee shall be dismissed, unless there are just or authorized causes and
only after compliance with procedural and substantive due process is conducted.
Even probationary employees are entitled to the right to security of tenure. This was explained in Philippine Daily Inquirer,
Inc. v. Magtibay, Jr. 233
Within the limited legal six-month probationary period, probationary employees are still entitled to security of tenure.
It is expressly provided in the afore-quoted Article 281 that a probationary employee may be terminated only on two
 grounds: (a) for just cause, or (b) when he fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his engagement. 234 (Citation omitted) aSCHcA

The expiration of Arlene's contract does not negate the finding of illegal dismissal by Fuji. The manner by which Fuji informed
Arlene that her contract would no longer be renewed is tantamount to constructive dismissal. To make matters worse, Arlene
was asked to sign a letter of resignation prepared by Fuji. 235 The existence of a fixed-term contract should not mean that
there can be no illegal dismissal. Due process must still be observed in the pre-termination of fixed-term contracts of
employment.
In addition, the Court of Appeals and the National Labor Relations Commission found that Arlene was dismissed because
of her health condition. In the non-renewal agreement executed by Fuji and Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from continuing to effectively
perform her functions under the said Contract such as the timely submission of news and current events reports
pertaining to the Philippines and travelling [sic] to the FIRST PARTY's regional office in Thailand. 236 (Emphasis
supplied)

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

Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides:
Sec. 8. Disease as a ground for dismissal. Where the employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall
not terminate his employment unless there is a certification by a competent public health authority that the disease
is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical
treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee
but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health.

For dismissal under Article 284 to be valid, two requirements must be complied with: (1) the employee's disease cannot be
cured within six (6) months and his "continued employment is prohibited by law or prejudicial to his health as well as to the
health of his co-employees"; and (2) certification issued by a competent public health authority that even with proper medical
treatment, the disease cannot be cured within six (6) months. 237 The burden of proving compliance with these requisites is
on the employer. 238 Non-compliance leads to the conclusion that the dismissal was illegal. 239
There is no evidence showing that Arlene was accorded due process. After informing her employer of her lung cancer, she
was not given the chance to present medical certificates. Fuji immediately concluded that Arlene could no longer perform
her duties because of chemotherapy. It did not ask her how her condition would affect her work. Neither did it suggest for
her to take a leave, even though she was entitled to sick leaves. Worse, it did not present any certificate from a competent
public health authority. What Fuji did was to inform her that her contract would no longer be renewed, and when she did not
agree, her salary was withheld. Thus, the Court of Appeals correctly upheld the finding of the National Labor Relations
Commission that for failure of Fuji to comply with due process, Arlene was illegally dismissed. 240
VI
Whether the Court of Appeals properly modified
the National Labor Relations Commission's decision
when it awarded reinstatement, damages, and attorney's fees
The National Labor Relations Commission awarded separation pay in lieu of reinstatement, on the ground that the filing of
the complaint for illegal dismissal may have seriously strained relations between the parties. Backwages were also awarded,
to be computed from date of dismissal until the finality of the National Labor Relations Commission's decision. However,
only backwages were included in the dispositive portion because the National Labor Relations Commission recognized that
Arlene had received separation pay in the amount of US$7,600.00.
The Court of Appeals affirmed the National Labor Relations Commission's decision but modified it by awarding moral and
exemplary damages and attorney's fees, and all other benefits Arlene was entitled to under her contract with Fuji. The Court
of Appeals also ordered reinstatement, reasoning that the grounds when separation pay was awarded in lieu of
reinstatement were not proven. 241
Article 279 of the Labor Code provides:
Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work
 shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement. (Emphasis supplied)

The Court of Appeals' modification of the National Labor Relations Commission's decision was proper because the law itself
provides that illegally dismissed employees are entitled to reinstatement, backwages including allowances, and all other
benefits.
On reinstatement, the National Labor Relations Commission ordered payment of separation pay in lieu of reinstatement,
reasoning "that the filing of the instant suit may have seriously abraded the relationship of the parties so as to render
reinstatement impractical." 242 The Court of Appeals reversed this and ordered reinstatement on the ground that separation
pay in lieu of reinstatement is allowed only in several instances such as (1) when the employer has ceased operations; (2)
when the employee's position is no longer available; (3) strained relations; and (4) a substantial period has lapsed from date
of filing to date of finality. 243
On this matter, Quijano v. Mercury Drug Corp. 244 is instructive:
Well-entrenched is the rule that an illegally dismissed employee is entitled to reinstatement as a matter of right. . . .

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

The Court of Appeals reasoned that strained relations are a question of fact that must be supported by evidence. 246 No
evidence was presented by Fuji to prove that reinstatement was no longer feasible. Fuji did not allege that it ceased
operations or that Arlene's position, was no longer available. Nothing in the records shows that Arlene's reinstatement would
cause an atmosphere of antagonism in the workplace. Arlene filed her complaint in 2009. Five (5) years are not yet a
substantial period 247to bar reinstatement.
On the award of damages, Fuji argues that Arlene is not entitled to the award of damages and attorney's fees because the
non-renewal agreement contained a quitclaim, which Arlene signed.
Quitclaims in labor cases do not bar illegally dismissed employees from filing labor complaints and money claim. As
explained by Arlene, she signed the non-renewal agreement out of necessity. In Land and Housing Development
Corporation v. Esquillo, 248 this court explained: TADaES

We have heretofore explained that the reason why quitclaims are commonly frowned upon as contrary to public
policy, and why they are held to be ineffective to bar claims for the full measure of the workers' legal rights, is the
fact that the employer and the employee obviously do not stand on the same footing. The employer drove the
employee to the wall. The latter must have to get hold of money. Because, out of a job, he had to face the harsh
necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence,
not of choice. 249

With regard to the Court of Appeals' award of moral and exemplary damages and attorney's fees, this court has recognized
in several cases that moral damages are awarded "when the dismissal is attended by bad faith or fraud or constitutes an
act oppressive to labor, or is done in a manner contrary to good morals, good customs or public policy." 250 On the other
hand, exemplary damages may be awarded when the dismissal was effected "in a wanton, oppressive or malevolent
manner." 251
The Court of Appeals and National Labor Relations Commission found that after Arlene had informed Fuji of her cancer,
she was informed that there would be problems in renewing her contract on account of her condition. This information
caused Arlene mental anguish, serious anxiety, and wounded feelings that can be gleaned from the tenor of her email dated
March 11, 2009. A portion of her email reads:
I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very weak, you suddenly came to
deliver to me the NEWS that you will no longer renew my contract. I knew this will come but I never thought that you
will be so 'heartless' and insensitive to deliver that news just a month after I informed you that I am sick. I was asking
for patience and understanding and your response was not to RENEW my contract. 252

Apart from Arlene's illegal dismissal, the manner of her dismissal was effected in an oppressive approach with her salary
and other benefits being withheld until May 5, 2009, when she had no other choice but to sign the non-renewal contract.
Thus, there was legal basis for the Court of Appeals to modify the National Labor Relations Commission's decision.
However, Arlene received her salary for May 2009. 253 Considering that the date of her illegal dismissal was May 5,
2009, 254 this amount may be subtracted from the total monetary award.
With regard to the award of attorney's fees, Article 111 of the Labor Code states that "[i]n cases of unlawful withholding of
wages, the culpable party may be assessed attorney's fees equivalent to ten percent of the amount of wages recovered."
Likewise, this court has recognized that "in actions for recovery of wages or where an employee was forced to litigate and,
thus, incur expenses to protect his rights and interest, the award of attorney's fees is legally and morally justifiable." 255 Due
to her illegal dismissal, Arlene was forced to litigate.
In the dispositive portion of its decision, the Court of Appeals awarded legal interest at the rate of 12% per annum. 256 In
view of this court's ruling in Nacar v. Gallery Frames, 257 the legal interest shall be reduced to a rate of 6% per annum.
WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated June 25, 2012 is AFFIRMED with the
modification that backwages shall be computed from June 2009. Legal interest shall be computed at the rate of 6% per
annum of the total monetary award from date of finality of this decision until full satisfaction.
SO ORDERED.
Carpio, Del Castillo, Villarama, Jr. * and Mendoza, JJ., concur.
||| (Fuji Television Network, Inc. v. Espiritu, G.R. Nos. 204944-45, [December 3, 2014])
 THIRD DIVISION
[G.R. No. 176908. March 25, 2015.]
PURISIMO M. CABAOBAS, EXUPERIO C. MOLINA, GILBERTO V. OPINION, VICENTE R. LAURON,
RAMON M. DE PAZ, JR., ZACARIAS E. CARBO, JULITO G. ABARRACOSO, DOMINGO B. GLORIA,
and FRANCISCO P. CUMPIO, petitioners, vs. PEPSI-COLA PRODUCTS, PHILIPPINES,
INC., respondent.
DECISION
PERALTA, J : p

This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of
Appeals (CA) Decision 1 dated July 31, 2006, and its Resolution 2 dated February 21, 2007 in CA-G.R. S.P. No. 81712. The
assailed decision denied the petition for certiorari filed by petitioners Purisimo M. Cabaobas, Exuperio C. Molina, Gilberto
V. Opinion, Vicente R. Lauron, Ramon M. De Paz, Jr., Zacarias E. Carbo, Julito G. Abarracoso, Domingo B. Gloria and
Francisco P. Cumpio, seeking a partial nullification of the Decision 3 dated September 11, 2002 of the National Labor
Relations Commission (NLRC) in NLRC Certified Case No. V-000001-2000. 4 The NLRC dismissed petitioners' complaints
for illegal dismissal and declared the retrenchment program of respondent Pepsi-Cola Products Philippines, Inc. as a valid
exercise of management prerogative.
The facts follow.
Respondent Pepsi-Cola Products Philippines, Inc. (PCPPI) is a domestic corporation engaged in the manufacturing, bottling
and distribution of soft drink products, which operates plants all over the country, one of which is the Tanauan Plant in
Tanauan, Leyte.
In 1999, PCPPI's Tanauan Plant allegedly incurred business losses in the total amount of Twenty-Nine Million One Hundred
Sixty-Seven Thousand and Three Hundred Ninety (P29,167,390.00) Pesos. To avert further losses, PCPPI implemented a
company-wide retrenchment program denominated as Corporate-wide Rightsizing Program (CRP) from 1999 to 2000, and
retrenched forty-seven (47) employees of its Tanauan Plant on July 31, 1999.
On September 24, 1999, twenty-seven (27) of said employees, 5 led by Anecito Molon (Molon, et al.), filed complaints for
illegal dismissal before the NLRC which were docketed as NLRC RAB Cases Nos. VIII-9-0432-99 to 9-0458-99,
entitled "Molon, et al. v. Pepsi-Cola Products, Philippines, Inc."
On January 15, 2000, petitioners, who are permanent and regular employees of the Tanauan Plant, received their respective
letters, informing them of the cessation of their employment on February 15, 2000, pursuant to PCPPI's CRP. Petitioners
then filed their respective complaints for illegal dismissal before the National Labor Relations Commission Regional
Arbitration Branch No. VIII in Tacloban City. Said complaints were docketed as NLRC RAB VIII-03-0246-00 to 03-0259-00,
entitled"Kempis, et al. v. Pepsi-Cola Products, Philippines, Inc." TADaCH

In their Consolidated Position Paper, 6 petitioners alleged that PCPPI was not facing serious financial losses because after
their termination, it regularized four (4) employees and hired replacements for the forty-seven (47) previously dismissed
employees. They also alleged that PCPPI's CRP was just designed to prevent their union, Leyte Pepsi-Cola Employees
Union-Associated Labor Union (LEPCEU-ALU), from becoming the certified bargaining agent of PCPPI's rank-and-file
employees.
In its Position Paper, 7 PCPPI countered that petitioners were dismissed pursuant to its CRP to save the company from total
bankruptcy and collapse; thus, it sent notices of termination to them and to the Department of Labor and Employment. In
support of its argument that its CRP is a valid exercise of management prerogative, PCPPI submitted audited financial
statements showing that it suffered financial reverses in 1998 in the total amount of SEVEN HUNDRED MILLION
(P700,000,000.00) PESOS, TWENTY-SEVEN MILLION (P27,000,000.00) PESOS of which was allegedly incurred in the
Tanauan Plant in 1999.
On December 15, 2000, Labor Arbiter Vito C. Bose rendered a Decision 8 finding the dismissal of petitioners as illegal, the
dispositive portion of which reads:
WHEREFORE, premises duly considered, judgment is hereby rendered finding the dismissal of the ten (10)
complainants herein illegal. Consequently, respondent Pepsi-Cola Products Phils., Inc. (PCPPI) is ordered to
reinstate them to their former positions without loss of seniority rights and to pay them full backwages and other
benefits reckoned from February 16, 2000 until they are actually reinstated, which as of date amounted to NINE
HUNDRED FORTY SEVEN THOUSAND FIVE HUNDRED FIFTY-EIGHT PESOS AND THIRTY TWO CENTAVOS
(P947,558.32) inclusive of the 10% attorney's fees.
Other claims are dismissed for lack of merit.
SO ORDERED. 9
PCPPI appealed from the Decision of the Labor Arbiter to the Fourth Division of the NLRC of Tacloban City. Meanwhile,
the NLRC consolidated all other cases involving PCPPI and its dismissed employees.
On September 11, 2002, the NLRC rendered a Consolidated Decision, 10 the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered:

(1) DECLARING, in NLRC Certified Case No. V-000001-2000 (NLRC NCR CC No. 000171-99), Pepsi-Cola
Products Philippines, Incorporated, not guilty of union busting/unfair labor practice, and dismissing LEPCEU-ALU's
Notice of Strike dated July 19, 1999;
(2) DECLARING, in the subsumed NLRC Case No. 7-0301-99, LEPCEU-ALU's strike on July 23, 1999 ILLEGAL
for having been conducted without legal authority and without observing the 7-day strike vote notice requirement
as provided in Section 2 and Section 7 of Rule XXII, Book V of the Omnibus Rules Implementing Art. 263 (c) and
(f) of the Labor Code,but DENYING PEPSI-COLA's supplemental prayer to declare loss of employment status of
union leaders and some of its members as identification of officers and members, and the knowing participation of
union officers in the illegal strike, or that of the officers and members in illegal acts during the strike, have not been
established;

(3) DISMISSING in the subsumed NLRC Injunction Case No. V-000013-99, LEPCEU-ALU's Petition for a Writ of
Preliminary Injunction with Prayer for the Issuance of Temporary Restraining Order, because Pepsi Cola had
already implemented its Corporate-wide CRP in the exercise of management prerogative. Moreover, LEPCEU-
ALU had adequate remedy in law; cDHAaT
(4) DISMISSING, in subsumed case NLRC RAB VIII Cases Nos. 9-0432-99 to 9-0459-99 (Molon, et al. vs.
PCPPI) all the complaints for Illegal Dismissal except that of Saunder Santiago T. Remandaban III, for having been
validly and finally settled by the parties, and ORDERING PEPSI COLA Products Phils., Inc. to reinstate Saunder
Santiago T. Remandaban III to his former position without loss of seniority rights but without backwages;
(5) Nullifying, in NLRC Consolidated Case No. V-000071-01 (RAB VIII cases nos. 3-0246-2000 to 3-0258-
2000; Kempis, et al. vs. PCPPI), the Executive Labor Arbiter's Decisions dated December 15, 2000, and
DISMISSING the complaints for illegal dismissal, and in its stead DECLARING the retrenchment program
of Pepsi Cola Products Phils., Inc. pursuant to its CRP, a valid exercise of management prerogatives;
Further, ORDERING Pepsi Cola Products Philippines, Inc. to pay the following complainants their package
separation benefits of 1 & 1/2 months salary for every year of service, plus commutation of all vacation
and sick leave credits in the respective amounts hereunder indicated opposite their names:

1. ARTEMIO S. KEMPIS P167,486.80

2. EXUPERIO C. MOLINA 168,196.38
3. GILBERTO V. OPINION 31,799.74
4. PURISIMO M. CABAOBAS 165,466.09
5. VICENTE P. LAURON 167,325.86
6. RAMON M. DE PAZ, JR. 109,652.98
7. ZACARIAS E. CARBO 160,376.47
8. JULITO C. ABARRACOSO 161,366.44
9. DOMINGO B. GLORIA 26,119.26
10. FRANCISCO P. CUMPIO 165,204.41

(6) DECLARING, in NLRC Injunction Case No. V-000003-2001, Pepsi-Cola's Petition for Injunction and Application
for immediate issuance of Temporary Restraining Order, moot and academic, and DISMISSING the same; Further,
DECLARING moot and academic all incidents to the case of Kempis, et al. vs. PCPPI (NLRC Case No. V-000071-
2000 relating to the execution or implementation of the nullified Decision dated December 15, 2000, and likewise,
nullifying them.
All other claims and petitions are dismissed for want of merit.
SO ORDERED. 11

Petitioners and PCPPI filed their respective motions for reconsideration of the consolidated decision, which the NLRC
denied in a Resolution 12 dated September 15, 2003. Dissatisfied, petitioners filed a petition for certiorari with the CA
[docketed as CA-G.R. SP No. 81712 and raffled to the Eighteenth (18th) Division]. On July 31, 2006, the CA rendered a
Decision, denying their petition and affirming the NLRC Decision dated September 11, 2002, the dispositive portion of which
reads:cdll
 WHEREFORE, premises considered, the petition filed in this case is hereby DENIED and the decision dated
September 11, 2002, and the resolution dated September 15, 2003, promulgated by the National Labor Relations
Commission, Fourth Division in NLRC Certified Case No. V-000001-2000 (NCR CC. No. 000171-99) are
herebyAFFIRMED.
SO ORDERED. 13

On February 21, 2007, the CA 18th Division issued a Resolution 14 denying petitioners' motion for reconsideration.
In contrast, when Molon, et al. earlier questioned the consolidated decision of the NLRC via a petition
for certiorari [docketed as CA-G.R. SP No. 82354 and raffled to its Twentieth (20th) Division], the CA rendered on March
31, 2006 a Decision 15 granting their petition and reversing the same NLRC Decision dated September 11, 2002, the
dispositive portion of which states:
IN LIGHT OF ALL THE FOREGOING, the instant petition is GRANTED. The decision of the NLRC dated September
11, 2002 is hereby REVERSED and SET ASIDE and judgment is rendered as follows:

Declaring the strike conducted on July 23, 1999 as legal, it falling under the exception of Article 263, Labor
Code;
Declaring the manner by which the corporate rightsizing program or retrenchment was effected by PEPSI-
COLA to be contrary to the prescribed rules and procedure;
Declaring that petitioners were illegally terminated. Their reinstatement to their former positions or its
equivalent is hereby ordered, without loss of seniority rights and privileges and PEPSI-COLA is also ordered
the payment of their backwages from the time of their illegal dismissal up to the date of their actual
reinstatement. If reinstatement is not feasible because of strained relations or abolition of their respective
positions, the payment of separation pay equivalent to 1 month salary for every year of service, a fraction
of at least 6 months shall be considered a whole year. The monetary considerations received by some of
the employees shall be deducted from the total amount they ought to receive from the company.
Attorney's fees equivalent to 10% of the amount which petitioners may recover pursuant to Article 111 of the Labor
Code is also awarded.
No pronouncement as to costs.
SO ORDERED. 16

Aggrieved, petitioners come before the Court in this petition for review on certiorari assailing the CA 18th Division Decision
dated July 31, 2006, and its Resolution dated February 21, 2007 on these grounds:
A.

THE HONORABLE COURT OF APPEALS, SPECIAL FORMER EIGHTEENTH DIVISION, COMMITTED AN

ERROR OF LAW WHEN IT IGNORED THE EARLIER DECISION OF THE TWENTIETH DIVISION ON THE SAME
FACTUAL AND LEGAL ISSUES. DcICEa
B.

THE HONORABLE COURT OF APPEALS, SPECIAL FORMER EIGHTEENTH DIVISION, COMMITTED AN

ERROR OF LAW WHEN IT REFUSED TO REVERSE THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION, FOURTH DIVISION, DESPITE PRIVATE RESPONDENT'S FAILURE TO COMPLY WITH THE
REQUISITES OF A VALID RETRENCHMENT.
C.

THE HONORABLE COURT OF APPEALS, SPECIAL FORMER EIGHTEENTH DIVISION, COMMITTED AN

ERROR OF LAW WHEN IT AFFIRMED THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION, FOURTH DIVISION, DECLARING AS LEGAL THE ILLEGAL DISMISSAL OF PETITIONERS AND
DISMISSING THEIR COMPLAINTS FOR ILLEGAL DISMISSAL. 17

The three issues raised by petitioners boil down to the legality of their dismissal pursuant to PCPPI's retrenchment program.
The petition has no merit.
During the pendency of the petition, the Court rendered a Decision dated February 18, 2013 in the related case of Pepsi-
Cola Products Philippines, Inc. v. Molon, 18 the dispositive portion of which reads:
WHEREFORE, the petition is GRANTED. The assailed March 31, 2006 Decision and September 18, 2006 Resolution
of the Court of Appeals in CA-G.R. SP No. 82354 are hereby REVERSED and SET ASIDE. Accordingly, the
September 11, 2002 Decision of the National Labor Relations Commission is hereby REINSTATED insofar as (1) it
dismissed subsumed cases NLRC-RAB VIII Case Nos. 9-0432-99 to 9-0458-99 and; (2) ordered the reinstatement
of respondent Saunder Santiago Remandaban III without loss of seniority rights but without backwages in NLRC-
RAB VIII Case No. 9-0459-99.
 SO ORDERED.

Subsumed cases NLRC-RAB VIII Case Nos. 9-0432-99 to 9-0458-99 pertain to the dismissal of the complaints for illegal
dismissal filed by Molon, et al., the 27 former co-employees of petitioners in PCPPI. On the issue of whether the
retrenchment of the petitioners' former co-employees was in accord with law, the Court ruled that PCPPI had validly
implemented its retrenchment program, viz.:
Essentially, the prerogative of an employer to retrench its employees must be exercised only as a last resort,
considering that it will lead to the loss of the employees' livelihood. It is justified only when all other less drastic means
have been tried and found insufficient or inadequate. Corollary thereto, the employer must prove the requirements
for a valid retrenchment by clear and convincing evidence; otherwise, said ground for termination would be
susceptible to abuse by scheming employers who might be merely feigning losses or reverses in their business
ventures in order to ease out employees. These requirements are:
(1) That retrenchment is reasonably necessary and likely to prevent business losses which, if
already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only
expected, are reasonably imminent as perceived objectively and in good faith by the employer;

(2) That the employer served written notice both to the employees and to the Department of
Labor and Employment at least one month prior to the intended date of retrenchment; DIAcTE

(3) That the employer pays the retrenched employees separation pay equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is higher;

(4) That the employer exercises its prerogative to retrench employees in good faith for the
advancement of its interest and not to defeat or circumvent the employees' right to security of
tenure; and

(5) That the employer used fair and reasonable criteria in ascertaining who would be dismissed
and who would be retained among the employees, such as status, efficiency, seniority, physical
fitness, age, and financial hardship for certain workers.
In due regard of these requisites, the Court observes that Pepsi had validly implemented its retrenchment program:

(1) Records disclose that both the CA and the NLRC had already determined that Pepsi complied with the
requirements of substantial loss and due notice to both the DOLE and the workers to be retrenched. The
pertinent portion of the CA's March 31, 2006 Decision reads:
In the present action, the NLRC held that PEPSI-COLA's financial statements are substantial evidence
which carry great credibility and reliability viewed in light of the financial crisis that hit the country which saw
multinational corporations closing shops and walking away, or adapting [sic] their own corporate rightsizing
program. Since these findings are supported by evidence submitted before the NLRC, we resolve to respect
the same. . . . . The notice requirement was also complied with by PEPSI-COLA when it served notice of
the corporate rightsizing program to the DOLE and to the fourteen (14) employees who will be affected
thereby at least one (1) month prior to the date of retrenchment. (Citations omitted)
It is axiomatic that absent any clear showing of abuse, arbitrariness or capriciousness, the findings of fact
by the NLRC, especially when affirmed by the CA as in this case are binding and conclusive upon the
Court. Thus, given that there lies no discretionary abuse with respect to the foregoing findings, the Court
sees no reason to deviate from the same.

(2) Records also show that the respondents had already been paid the requisite separation pay as
evidenced by the September 1999 quitclaims signed by them. Effectively, the said quitclaims serve inter
alia the purpose of acknowledging receipt of their respective separation pays. Appositely, respondents
never questioned that separation pay arising from their retrenchment was indeed paid by Pepsi to them. As
such, the foregoing fact is now deemed conclusive.

(3) Contrary to the CA's observation that Pepsi had singled out members of the LEPCEU-ALU in
implementing its retrenchment program, records reveal that the members of the company union (i.e.,
LEPCEU-UOEF#49) were likewise among those retrenched.

Also, as aptly pointed out by the NLRC, Pepsi's Corporate Rightsizing Program was a company-wide program which
had already been implemented in its other plants in Bacolod, Iloilo, Davao, General Santos and Zamboanga.
Consequently, given the general applicability of its retrenchment program, Pepsi could not have intended to decimate
LEPCEU-ALU's membership, much less impinge upon its right to self-organization, when it employed the same. DcaECT

In fact, it is apropos to mention that Pepsi and its employees entered into a collective bargaining agreement on
October 17, 1995 which contained a union shop clause requiring membership in LEPCEU-UOEF#49, the incumbent
bargaining union, as a condition for continued employment. In this regard, Pepsi had all the reasons to assume that
all employees in the bargaining unit were all members of LEPCEU-UOEF#49; otherwise, the latter would have
already lost their employment. In other words, Pepsi need not implement a retrenchment program just to get rid of
LEPCEU-ALU members considering that the union shop clause already gave it ample justification to terminate them.
 It is then hardly believable that union affiliations were even considered by Pepsi in the selection of the employees to
be retrenched.

Moreover, it must be underscored that Pepsi's management exerted conscious efforts to incorporate employee
participation during the implementation of its retrenchment program. Records indicate that Pepsi had initiated sit-
downs with its employees to review the criteria on which the selection of who to be retrenched would be based. This
is evidenced by the report of NCMB Region VIII Director Juanito Geonzon which states that "Pepsi's] [m]anagement
conceded on the proposal to review the criteria and to sit down for more positive steps to resolve the issue."

Lastly, the allegation that the retrenchment program was a mere subterfuge to dismiss the respondents considering
Pepsi's subsequent hiring of replacement workers cannot be given credence for lack of sufficient evidence to support
the same.
Verily, the foregoing incidents clearly negate the claim that the retrenchment was undertaken by Pepsi in bad faith.

(5) On the final requirement of fair and reasonable criteria for determining who would or would not be dismissed,
records indicate that Pepsi did proceed to implement its rightsizing program based on fair and reasonable criteria
recommended by the company supervisors.

Therefore, as all the requisites for a valid retrenchment are extant, the Court finds Pepsi's rightsizing program and
the consequent dismissal of respondents in accord with law. 19

In view of the Court's ruling in Pepsi-Cola Products Philippines, Inc. v. Molon, 20 PCPPI contends that the petition for review
on certiorari should be denied and the CA decision should be affirmed under the principle of stare decisis.
The Court sustains PCPPI's contention.
The principle of stare decisis et non quieta movere (to adhere to precedents and not to unsettle things which are established)
is well entrenched in Article 8 of the New Civil Code which states that judicial decisions applying or interpreting the laws or
the Constitution shall form part of the legal system of the Philippines.
In Pepsi-Cola Products Philippines, Incorporated v. Pagdanganan, 21 the Court explained such principle in this wise:
The doctrine of stare decisis embodies the legal maxim that a principle or rule of law which has been established by
the decision of a court of controlling jurisdiction will be followed in other cases involving a similar situation. It is
founded on the necessity for securing certainty and stability in the law and does not require identity of or privity of
parties. This is unmistakable from the wordings of Article 8 of the Civil Code.It is even said that such decisions
"assume the same authority as the statute itself and, until authoritatively abandoned, necessarily become, to the
extent that they are applicable, the criteria which must control the actuations not only of those called upon to decide
thereby but also of those in duty bound to enforce obedience thereto." Abandonment thereof must be based only on
strong and compelling reasons, otherwise, the becoming virtue of predictability which is expected from this Court
would be immeasurably affected and the public's confidence in the stability of the solemn pronouncements
diminished. 22 DEacIT

In Philippine Carpet Manufacturing Corporation v. Tagyamon, 23 the Court further held:

Under the doctrine of stare decisis, when a court has laid down a principle of law as applicable to a certain state of
facts, it will adhere to that principle and apply it to all future cases in which the facts are substantially the same, even
though the parties may be different. Where the facts are essentially different, however, stare decisisdoes not apply,
for a perfectly sound principle as applied to one set of facts might be entirely inappropriate when a factual variant is
introduced. 24

Guided by the jurisprudence on stare decisis, the remaining question is whether the factual circumstances of this present
case are substantially the same as the Pepsi-Cola Products Philippines, Inc. v. Molon case. 25
The Court rules in the affirmative.
There is no dispute that the issues, subject matters and causes of action between the parties in Pepsi-Cola Products
Philippines, Inc. v. Molon 26 and the present case are identical, namely, the validity of PCPPI's retrenchment program, and
the legality of its employees' termination. There is also substantial identity of parties because there is a community of interest
between the parties in the first case and the parties in the second case, even if the latter was not impleaded in the first
case. 27 The respondents in Pepsi-Cola Products Philippines, Inc. v. Molon 28 are petitioners' former co-employees and co-
union members of LEPCEU-ALU who were also terminated pursuant to the PCPPI's retrenchment program. The only
difference between the two cases is the date of the employees' termination, i.e., Molon, et al. belong to the first batch of
employees retrenched on July 31, 1999, while petitioners belong to the second batch retrenched on February 15, 2000.
That the validity of the same PCPPI retrenchment program had already been passed upon and, thereafter, sustained in the
related case of Pepsi-Cola Products Philippines, Inc. v. Molon, 29 albeit involving different parties, impels the Court to accord
a similar disposition and uphold the legality of same program. To be sure, the Court is well aware of the pronouncement
inPhilippine Carpet Manufacturing Corporation v. Tagyamon, 30 that:
 The doctrine though is not cast in stone for upon a showing that circumstances attendant in a particular case override
the great benefits derived by our judicial system from the doctrine of stare decisis, the Court is justified in setting it
aside. For the Court, as the highest court of the land, may be guided but is not controlled by precedent. Thus, the
Court, especially with a new membership, is not obliged to follow blindly a particular decision that it determines, after
re-examination, to call for a rectification.

However, abandonment of the ruling in Pepsi-Cola Products Philippines, Inc. v. Molon 31 on the same issue of the validity
of PCPPI's retrenchment program must be based only on strong and compelling reasons. After a careful review of the
records, the Court finds no such reasons were shown to obtain in this case.
Even upon evaluation of petitioners' arguments on its supposed merits, the Court still finds no reason to disturb the CA
ruling that affirmed the NLRC. In their petition for review on certiorari, petitioners argue that PCPPI failed to prove that it
was suffering from financial losses, and that its financial statements were perplexing. In support of their argument, they cite
the observation of the Labor Arbiter that the alleged losses amounting to P1.2 billion in PCPPI's audited financial statements
included those of two subsidiaries that were not yet in commercial operation, interest payments on short-term and long-term
debts, and the adverse effect of the peso devaluation. 32 They also cite the Dissenting Opinion of Commissioner Edgardo
M. Enerlan that the Majority decision ignored the previous financial statement and relied on the new document presented
by PCPPI during the appeal stage, and that the accountant admitted that the financial statement as of and for the year
ended June 30, 2000 and 1999 are still incomplete. 33 They also insist that PCPPI failed to explain its acts of regularizing
four (4) employees and hiring sixty-three (63) replacements and additional workers. aHIEcS

Petitioners' arguments are untenable.

At the outset, the issues petitioners raised would entail an inquiry into the factual veracity of the evidence presented by the
parties, the determination of which is not the Court's statutory function. Indeed, petitioners are asking the Court to sift
through the evidence on record and pass upon whether PCPPI had, in fact, suffered from serious business losses. That
task, however, would be contrary to the well-settled principle that the Court is not a trier of facts, and cannot re-examine
and re-evaluate the probative value of the evidence presented to the Labor Arbiter, and the NLRC, which formed the basis
of the questioned CA decision. 34
At any rate, the Court finds that the September 11, 2002 NLRC Decision has exhaustively discussed PCPPI's compliance
with the requirement that for a retrenchment to be valid, such must be reasonably necessary and likely to prevent business
losses which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, to wit:
More pertinent would have been SGV & Co.'s report to the stockholder. It says:

The accompanying statement of assets, liabilities and home office account of Tanauan Operations of Pepsi-
Cola Products Philippines, Inc. ('company') as of June 30, 1999 and the related statement of income for the
year then ended, are integral parts of the financial statements of the company taken as a whole. In 1999,
the Company's Tanauan Operations incurred a net loss of P29,167,390 as reported in such plant's financial
statement (ANNEX I) which forms part of the audited consolidated financial statements as of and for the
year ended June 30, 1999, to which we have rendered our opinion dated October 28, 1999, attached hereto
as ANNEX II.

On the other hand, the accompanying financial statements as of and for the year ended June 30, 2000 of
the company's Tanauan Plant operations, which reported a net loss P22,327,175 (ANNEX III) are included
in the financial statements of the company taken as a whole as also hereto attached (as ANNEX IV). The
financial statements were accordingly derived from the Company's accounting records, with certain
adjustments and are subject to any additional adjustments as may be disclosed upon the completion of an
audit of the financial statements of the company taken as a whole, which is currently in progress. Since the
audit of the company's financial statements as of and for the year ended June 2000 has not yet been
completed, we are unable to express and we do not express our opinion on the statement of assets, liabilities
and home office account of Tanauan operations of the company as of June 30, 2000 and the related
statement if income for the year then ended.

The statements of assets, liabilities and home office account and the related statements of income of the
company's Tanauan Operations are not intended to be a complete presentation of the company's financial
statement as of end for the year ended June 30, 2000 and 1999.
The letter of SGV & Co. was accompanied by a consolidat[ed] statement of Income and Deficit (supplementary
schedule) showing a net loss of P29,167,000, in the company's Tanauan Operations as of June 30, 1999, and
P22,328,000 as of June 2000. This illustrates that the income statements and the balance sheets pertaining to the
Tanauan Plant Operations as prepared by Rodante F. Ramos were audited by SGV & Co. This situation would have
been avoided had the persistent requests for ample opportunity to present evidence made by the respondent were
not persistently denied by the Executive Labor Arbiter. prcd
At least the Income Statements and the Balance Sheets regularly prepared and submitted by AVR-Asst. Controller
Rodante Ramos to SGV & Co. for audit are substantial evidence which carry great credibility and responsibility
viewed in the light of the financial crisis that hit the country which saw multinational corporations closing shops and
walking away, or adapting their own corporate rightsizing programs. 35
The aforequoted NLRC ruling also explains why there is no merit in Commissioner Enerlan's contention that the incomplete
financial statements as of and for the year ended June 30, 2000 and 1999 are inconclusive to establish that PCPPI incurred
serious business losses. Given that the financial statements are incomplete, the independent auditing firm, SGV & Co.,
aptly explained nonetheless that they were derived from the PCPPI's accounting records, and were subject to further
adjustments upon the completion of the audit of financial statements of the company taken as a whole, which was then in
progress. The Court thus agrees with the CA and the NLRC that the letter of SGV & Co., accompanied by a consolidated
Statement of Income and Deficit showing a net loss of P29,167,000. in the company's Tanauan Operations as of June 30,
1999, and P22,328,000 as of June 2000, 36 is sufficient and convincing proof of serious business losses which justified
PCPPI's retrenchment program. After all, the settled rule in quasi-judicial proceedings is that proof beyond reasonable doubt
is not required in determining the legality of an employer's dismissal of an employee, and not even a preponderance of
evidence is necessary, as substantial evidence is considered sufficient. 37 Substantial evidence is more than a mere scintilla
of evidence or relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if other
minds, equally reasonable, might conceivably opine otherwise. 38
There is likewise no merit in Commissioner Enerlan's dissenting opinion that the majority decision ignored the previous
financial statement and relied on the new document presented by PCPPI during the appeal stage. Such act of the majority
is sanctioned by no less than Article 221 of the Labor Code,as amended, and Section 10, Rule VII of the 2011 NLRC Rules
of Procedure which provide that in any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence
prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of the Code that the Commission
and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case
speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process.
On PCPPI's alleged failure to explain its acts of regularizing four (4) employees and hiring sixty-three (63) replacements
and additional workers, the Court upholds the NLRC's correct ruling thereon, viz.:
Let Us squarely tackle this issue of replacements in the cases of the complainants in this case. We bear in mind that
replacements refer to the regular workers subjected to retrenchment, occupying regular positions in the company
structure. Artemio Kempis, a filer mechanic with a salary of P9,366.00 was replaced by Rogelio Castil. Rogelio Castil
was hired through an agency named Helpmate Janitorial Services. Castil's employer is Helpmate Janitorial Services.
How can a janitorial service employee perform function of a filer mechanic? How much does Pepsi Cola pay Helpmate
Janitorial Services for the contract of service? These questions immediately come to mind. Being not a regular
employee of Pepsi Cola, he is not a replacement of Kempis. The idea of rightsizing is to reduce the number of workers
and related functions and trim down, streamline, or simplify the structure of the organization to the level of utmost
efficiency and productivity in order to realize profit and survive. After the CRP shall have been implemented, the
desired size of the corporation is attained. Engaging the services of service contractors does not expand the size of
the corporate structure. In this sense, the retrenched workers were not replaced. cSTCDA

The same is true in the case of Exuperio C. Molina who was allegedly replaced by Eddie Piamonte, an employee of,
again, Helpmate Janitorial Services; of Gilberto V. Opinion who was allegedly replaced by Norlito Ulahay, an
employee of Nestor Ortiga General Services; of Purisimo M. Cabasbas who was allegedly replaced by Christopher
Albadrigo, an employee of Helpmate Janitorial Services; of Vicente R. Lauron who was allegedly replaced by
Wendylen Bron, an employee of Doublt "N" General Services; of Ramon M. de Paz, who was disabled, and replaced
by Alex Dieta, an employee of Nestor Ortiga General Services; and of Zacarias E. Carbo who was allegedly replaced
by an employee of Double "N" General Services. . . . 39

On petitioners' contention that the true motive of the retrenchment program was to prevent their union, LEPCEU-ALU, from
becoming the certified bargaining agent of all the rank-and-file employees of PCPPI, such issue of union-busting was duly
resolved in the September 11, 2002 NLRC Decision, as follows:
The issue of union busting has been debunked by Us in the Certified Notice of Strike Case No. V-000001-2000. We
said in that case that Pepsi Cola, in the selection of workers to be retrenched, did not take into consideration union
affiliation because the unit was supposed to be composed of all members of good standing of LEPCEU-UOEF#49
there being a "UNION SHOP" provision in the existing CBA. In the conciliation conference, PEPSI COLA expressed
its willingness to sit down with unions and review the criteria. When this was suggested by the conciliator, the idea
was then and there rejected by the unions, giving the impression that the real conflict was inter-union. There being
no cooperation from the unions, PEPSI COLA went on with the first batch of retrenchment involving 47 workers. It
bears stressing that all 47 workers signed individual release and quitclaims and settled their complaints with
respondent Pepsi Cola, apparently with the assistance of LEPCEU-ALU. It is awkward for LEPCEU-ALU to argue
that a serious corporate-wide rightsizing program cannot be implemented in PEPSI-COLA Tanauan Plant because
a nascent unrecognized union would probably be busted. Even the Executive Labor Arbiter did not take this issue up
in his Decision. The issue does not merit consideration. 40

Significantly, the foregoing NLRC ruling was validated in Pepsi-Cola Products Philippines, Inc. v. Molon, 41 thus:
Mindful of their nature, the Court finds it difficult to attribute any act of union busting or ULP on the part of Pepsi
considering that it retrenched its employees in good faith. As earlier discussed, Pepsi tried to sit-down with its
employees to arrive at mutually beneficial criteria which would have been adopted for their intended retrenchment.
In the same vein, Pepsi's cooperation during the NCMB-supervised conciliation conferences can also be gleaned
 from the records. Furthermore, the fact that Pepsi's rightsizing program was implemented on a company-wide basis
dilutes respondents' claim that Pepsi's retrenchment scheme was calculated to stymie its union activities, much less
diminish its constituency. Therefore, absent any perceived threat to LEPCEU-ALU's existence or a violation of
respondents' right to self-organization as demonstrated by the foregoing actuations Pepsi cannot be said to
have committed union busting or ULP in this case.

Finally, this case does not fall within any of the recognized exceptions 42 to the rule that only questions of law are proper in
a petition for review on certiorari under Rule 45 of the Rules of Court. Settled is the rule that factual findings of labor officials,
who are deemed to have acquired expertise in matters within their respective jurisdiction, are generally accorded not only
respect but even finality, and bind us when supported by substantial evidence. 43 Certainly, it is not the Court's function to
assess and evaluate the evidence all over again, particularly where the findings of both the CA and the NLRC coincide. 44
WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated July 31, 2006, and its Resolution dated
February 21, 2007 in CA-G.R. SP No. 81712, areAFFIRMED. HCTAEc

SO ORDERED.
||| (Cabaobas v. Pepsi-Cola Products Phils., Inc., G.R. No. 176908, [March 25, 2015])
 FIRST DIVISION
[G.R. No. 199166. April 20, 2015.]
NELSON V. BEGINO, GENER DEL VALLE, MONINA AVILA-LLORIN AND MA. CRISTINA
SUMAYAO, petitioners, vs. ABS-CBN CORPORATION (FORMERLY, ABS-CBN BROADCASTING
CORPORATION) AND AMALIA VILLAFUERTE, respondents.
DECISION
PEREZ, J : p

The existence of an employer-employee relationship is at the heart of this Petition for Review on Certiorari filed
pursuant to Rule 45 of the Rules of Court, primarily assailing the 29 June 2011 Decision 1 rendered by the Fourth
Division of the Court of Appeals (CA) in CA-G.R. SP No. 116928 which ruled out said relationship between the parties.
The Facts
Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting Corporation) is a television and radio
broadcasting corporation which, for its Regional Network Group in Naga City, employed respondent Amalia Villafuerte
(Villafuerte) as Manager. There is no dispute regarding the fact that, thru Villafuerte, ABS-CBN engaged the services
of petitioners Nelson Begino (Begino) and Gener Del Valle (Del Valle) sometime in 1996 as Cameramen/Editors for TV
Broadcasting. Petitioners Ma. Cristina Sumayao (Sumayao) and Monina Avila-Llorin (Llorin) were likewise similarly
engaged as reporters sometime in 1996 and 2002, respectively. With their services engaged by respondents thru Talent
Contracts which, though regularly renewed over the years, provided terms ranging from three (3) months to one (1)
year, petitioners were given Project Assignment Forms which detailed, among other matters, the duration of a particular
project as well as the budget and the daily technical requirements thereof. In the aforesaid capacities, petitioners were
tasked with coverage of news items for subsequent daily airings in respondents' TV Patrol Bicol Program. 2
While specifically providing that nothing therein shall be deemed or construed to establish an employer-
employee relationship between the parties, the aforesaid Talent Contracts included, among other matters, provisions
on the following matters: (a) the Talent's creation and performance of work in accordance with the ABS-CBN's
professional standards and compliance with its policies and guidelines covering intellectual property creators, industry
codes as well as the rules and regulations of the Kapisanan ng mga Broadcasters sa Pilipinas (KBP) and other
regulatory agencies; (b) the Talent's non-engagement in similar work for a person or entity directly or indirectly in
competition with or adverse to the interests of ABS-CBN and non-promotion of any product or service without prior
written consent; and (c) the results-oriented nature of the talent's work which did not require them to observe normal or
fixed working hours. 3 Subjected to contractor's tax, petitioners' remunerations were denominated as Talent Fees which,
as of last renewal, were admitted to be pegged per airing day at P273.35 for Begino, P302.92 for Del Valle, P323.08
for Sumayao and P315.39 for Llorin. 4
Claiming that they were regular employees of ABS-CBN, petitioners filed against respondents the
complaint 5 docketed as Sub-RAB 05-04-00041-07 before the National Labor Relations Commission's (NLRC) Sub-
Regional Arbitration Branch No. 5, Naga City. In support of their claims for regularization, underpayment of overtime
pay, holiday pay, 13th month pay, service incentive leave pay, damages and attorney's fees, petitioners alleged that
they performed functions necessary and desirable in ABS-CBN's business. Mandated to wear company IDs and
provided all the equipment they needed, petitioners averred that they worked under the direct control and supervision
of Villafuerte and, at the end of each day, were informed about the news to be covered the following day, the routes
they were to take and, whenever the subject of their news coverage is quite distant, even the start of their workday. Due
to the importance of the news items they covered and the necessity of their completion for the success of the program,
petitioners claimed that, under pain of immediate termination, they were bound by the company's policy on, among
others, attendance and punctuality. 6
Aside from the constant evaluation of their actions, petitioners were reportedly subjected to an annual
competency assessment alongside other ABS-CBN employees, as condition for their continued employment. Although
their work involved dealing with emergency situations at any time of the day or night, petitioners claimed that they were
not paid the labor standard benefits the law extends to regular employees. To avoid paying what is due them, however,
respondents purportedly resorted to the simple expedient of using said Talent Contracts and/or Project Assignment
Forms which denominated petitioners as talents, despite the fact that they are not actors or TV hosts of special skills.
As a result of this iniquitous situation, petitioners asseverated that they merely earned an average of P7,000.00 to
P8,000.00 per month, or decidedly lower than the P21,773.00 monthly salary ABS-CBN paid its regular rank-and-file
employees. Considering their repeated re-hiring by respondents for ostensible fixed periods, this situation had gone on
for years since TV Patrol Bicol has continuously aired from 1996 onwards. 7
In refutation of the foregoing assertions, on the other hand, respondents argued that, although it occasionally
engages in production and generates programs thru various means, ABS-CBN is primarily engaged in the business of
broadcasting television and radio content. Not having the full manpower complement to produce its own program, the
company had allegedly resorted to engaging independent contractors like actors, directors, artists, anchormen,
reporters, scriptwriters and various production and technical staff, who offered their services in relation to a particular
program. Known in the industry as talents, such independent contractors inform ABS-CBN of their availability and were
required to accomplish Talent Information Forms to facilitate their engagement for and appearance on designated
project days. Given the unpredictability of viewer preferences, respondents argued that the company cannot afford to
provide regular work for talents with whom it negotiates specific or determinable professional fees on a per project,
weekly or daily basis, usually depending on the budget allocation for a project. 8
Respondents insisted that, pursuant to their Talent Contracts and/or Project Assignment Forms, petitioners
were hired as talents, to act as reporters and/or cameramen for TV Patrol Bicol for designated periods and rates. Fully
aware that they were not considered or to consider themselves as employees of a particular production or film outfit,
petitioners were supposedly engaged on the basis of the skills, knowledge or expertise they already possessed and,
for said reason, required no further training from ABS-CBN. Although petitioners were inevitably subjected to some
degree of control, the same was allegedly limited to the imposition of general guidelines on conduct and performance,
simply for the purpose of upholding the standards of the company and the strictures of the industry. Never subjected to
any control or restrictions over the means and methods by which they performed or discharged the tasks for which their
services were engaged, petitioners were, at most, briefed whenever necessary regarding the general requirements of
the project to be executed. 9
Having been terminated during the pendency of the case, Petitioners filed on 10 July 2007 a second complaint
against respondents, for regularization, payment of labor standard benefits, illegal dismissal and unfair labor practice,
which was docketed as Sub-RAB 05-08-00107-07. Upon respondents' motion, this complaint was dismissed for violation
of the rules against forum shopping in view of the fact that the determination of the issues in the second case hinged
on the resolution of those raised in the first. 10 On 19 December 2007, however, Labor Arbiter Jesus Orlando Quiones
(Labor Arbiter Quiones) resolved Sub-RAB 05-04-00041-07 in favor of petitioners who, having rendered services
necessary and related to ABS-CBN's business for more than a year, were determined to be its regular employees. With
said conclusion found to be buttressed by, among others, the exclusivity clause and prohibitions under petitioners'
Talent Contracts and/or Project Assignment Forms which evinced respondents' control over them, 11 Labor Arbiter
Quiones disposed of the case in the following wise:
WHEREFORE, finding merit in the causes of action set forth by the complainants, judgment is hereby
rendered declaring complainants MONINA AVILA-LLORIN, GENER L. DEL VALLE, NELSON V. BEGINO and
MA. CRISTINA V. SUMAYAO, as regular employees of respondent company, ABS-CBN BROADCASTING
CORPORATION.
Accordingly, respondent ABS-CBN Broadcasting Corporation is hereby ORDERED to pay complainants,
subject to the prescriptive period provided under Article 291 of the Labor Code, however applicable, the total
amount of Php2,440,908.36, representing salaries/wage differentials, holiday pay, service incentive leave pay and
13th month pay, to include 10% of the judgment award as attorney's fees of the judgment award (computation of
the monetary awards are attached hereto as integral part of this decision).
Moreover, respondents are directed to admit back complainants to work under the same terms and
conditions prevailing prior to their separation or, at respondents' option, merely reinstated in the payroll.
Other than the above, all other claims and charges are ordered DISMISSED for lack of merit. 12

Aggrieved by the foregoing decision, respondents elevated the case on appeal before the NLRC, during the
pendency of which petitioners filed a third complaint against the former, for illegal dismissal, regularization, non-payment
of salaries and 13th month pay, unfair labor practice, damages and attorney's fees. In turn docketed as NLRC Case
No. Sub-RAB-V-05-03-00039-08, the complaint was raffled to Labor Arbiter Quiones who issued an Order dated 30
April 2008, inhibiting himself from the case and denying respondents' motion to dismiss on the grounds of res
judicata and forum shopping. 13 Finding that respondents' control over petitioners was indeed manifest from the
exclusivity clause and prohibitions in the Talent Contracts and/or Project Assignment Forms, on the other hand, the
NLRC rendered a Decision dated 31 March 2010, affirming said Labor Arbiter's appealed decision. 14 Undeterred by the
NLRC's 31 August 2010 denial of their motion for reconsideration, 15 respondents filed the Rule 65 petition
for certiorari docketed before the CA as CA-G.R. SP No. 116928 which, in addition to taking exceptions to the findings
of the assailed decision, faulted petitioners for violating the rule against forum shopping. 16
On 29 June 2011, the CA rendered the herein assailed decision, reversing the findings of the Labor Arbiter and
the NLRC. Ruling out the existence of forum shopping on the ground that petitioners' second and third complaints were
primarily anchored on their termination from employment after the filing of their first complaint, the CA nevertheless
discounted the existence of an employer-employee relation between the parties upon the following findings and
conclusions: (a) petitioners, were engaged by respondents as talents for periods, work and the program specified in the
Talent Contracts and/or Project Assignment Forms concluded between them; (b) instead of fixed salaries, petitioners
were paid talent fees depending on the budget allocated for the program to which they were assigned; (c) being mainly
concerned with the result, respondents did not exercise control over the manner and method by which petitioner
accomplished their work and, at most, ensured that they complied with the standards of the company, the KBP and the
industry; and, (d) the existence of an employer-employee relationship is not necessarily established by the exclusivity
clause and prohibitions which are but terms and conditions on which the parties are allowed to freely stipulate. 17
 Petitioners' motion for reconsideration of the foregoing decision was denied in the CA's 3 October 2011
Resolution, 18 hence, this petition.
The Issues
Petitioners seek the reversal of the CA's assailed Decision and Resolution on the affirmative of the following
issues:
1. Whether or not the CA seriously and reversibly erred in not dismissing respondents' petition for certiorari in
view of the fact that they did file a Notice of Appeal at the NLRC level and did not, by themselves or through their duly
authorized representative, verify and certify the Memorandum of Appeal they filed thereat, in accordance with the NLRC
Rules of Procedure; and
2. Whether or not the CA seriously and reversibly erred in brushing aside the determination made by both the
Labor Arbiter and the NLRC of the existence of an employer-employee relationship between the parties, despite
established jurisprudence supporting the same.
The Court's Ruling
The Court finds the petition impressed with merit.
Petitioners preliminarily fault the CA for not dismissing respondents' Rule 65 petition for certiorari in view of the
fact that the latter failed to file a Notice of Appeal from the Labor Arbiter's decision and to verify and certify the
Memorandum of Appeal they filed before the NLRC. While concededly required under the NLRC Rules of Procedure,
however, these matters should have been properly raised during and addressed at the appellate stage before the NLRC.
Instead, the record shows that the NLRC took cognizance of respondents' appeal and proceeded to resolve the same
in favor of petitioners by affirming the Labor Arbiter's decision. Not having filed their own petition for certiorari to take
exception to the liberal attitude the NLRC appears to have adopted towards its own rules of procedure, petitioners were
hardly in the proper position to raise the same before the CA or, for that matter, before this Court at this late stage.
Aside from the settled rule that a party who has not appealed is not entitled to affirmative relief other than the ones
granted in the decision 19 rendered, liberal interpretation of procedural rules on appeal had, on occasion, been favored
in the interest of substantive justice. 20
Although the existence of an employer-employee relationship is, on the other hand, a question of fact 21 which
is ordinarily not the proper subject of a Rule 45 petition for review on certiorari like the one at bar, the conflicting findings
between the labor tribunals and the CA justify a further consideration of the matter. 22 To determine the existence of
said relation, case law has consistently applied the four-fold test, to wit: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee
on the means and methods by which the work is accomplished. 23 Of these criteria, the so-called "control test" is
generally regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee
relationship. Under this test, an employer-employee relationship is said to exist where the person for whom the services
are performed reserves the right to control not only the end result but also the manner and means utilized to achieve
the same. 24
In discounting the existence of said relationship between the parties, the CA ruled that Petitioners' services
were, first and foremost, engaged thru their Talent Contracts and/or Project Assignment Forms which specified the work
to be performed by them, the project to which they were assigned, the duration thereof and their rates of pay according
to the budget therefor allocated. Because they are imbued with public interest, it cannot be gainsaid, however, that labor
contracts are subject to the police power of the state and are placed on a higher plane than ordinary contracts. The
recognized supremacy of the law over the nomenclature of the contract and the stipulations contained therein is aimed
at bringing life to the policy enshrined in the Constitution to afford protection to labor. 25 Insofar as the nature of one's
employment is concerned, Article 280 of the Labor Code of the Philippines also provides as follows:
ART. 280. Regular and Casual Employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the engagement of the
employee or where the work or service to be performed is seasonal in nature and the employment is for the duration
of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in which he is employed and his employment
shall continue while such actually exists.
It has been ruled that the foregoing provision contemplates four kinds of employees, namely: (a) regular
employees or those who have been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer; (b) project employees or those whose 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; (c) seasonal employees or those who work or perform services which are seasonal in nature, and the
employment is for the duration of the season; and (d) casual employees or those who are not regular, project, or
seasonal employees. 26 To the foregoing classification of employee, jurisprudence has added that of contractual or fixed
term employee which, if not for the fixed term, would fall under the category of regular employment in view of the nature
of the employee's engagement, which is to perform activity usually necessary or desirable in the employer's business. 27
The Court finds that, notwithstanding the nomenclature of their Talent Contracts and/or Project Assignment
Forms and the terms and condition embodied therein, petitioners are regular employees of ABS-CBN. Time and again,
it has been ruled that the test to determine whether employment is regular or not is the reasonable connection between
the activity performed by the employee in relation to the business or trade of the employer. 28 As cameramen/editors
and reporters, petitioners were undoubtedly performing functions necessary and essential to ABS-CBN's business of
broadcasting television and radio content. It matters little that petitioners' services were engaged for specified periods
for TV Patrol Bicol and that they were paid according to the budget allocated therefor. Aside from the fact that said
program is a regular weekday fare of the ABS-CBN's Regional Network Group in Naga City, the record shows that,
from their initial engagement in the aforesaid capacities, petitioners were continuously re-hired by respondents over the
years. To the mind of the Court, respondents' repeated hiring of petitioners for its long-running news program positively
indicates that the latter were ABS-CBN's regular employees.
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 or continuing performance as sufficient evidence of the necessity, if
not indispensability of that activity in the business. 29 Indeed, an employment stops being co-terminous with specific
projects where the employee is continuously re-hired due to the demands of the employer's business. 30 When
circumstances show, moreover, that contractually stipulated periods of employment have been imposed to preclude the
acquisition of tenurial security by the employee, this Court has not hesitated in striking down such arrangements as
contrary to public policy, morals, good customs or public order. 31 The nature of the employment depends, after all, on
the nature of the activities to be performed by the employee, considering the nature of the employer's business, the
duration and scope to be done, and, in some cases, even the length of time of the performance and its continued
existence. 32 In the same manner that the practice of having fixed-term contracts in the industry does not automatically
make all talent contracts valid and compliant with labor law, it has, consequently, been ruled that the assertion that a
talent contract exists does not necessarily prevent a regular employment status. 33
As cameramen/editors and reporters, it also appears that petitioners were subject to the control and supervision
of respondents which, first and foremost, provided them with the equipments essential for the discharge of their
functions. Prepared at the instance of respondents, petitioners' Talent Contracts tellingly provided that ABS-CBN
retained "all creative, administrative, financial and legal control" of the program to which they were assigned. Aside from
having the right to require petitioners "to attend and participate in all promotional or merchandising campaigns, activities
or events for the Program," ABS-CBN required the former to perform their functions "at such locations and
Performance/Exhibition Schedules" it provided or, subject to prior notice, as it chose determine, modify or change. Even
if they were unable to comply with said schedule, petitioners were required to give advance notice, subject to
respondents' approval. 34 However obliquely worded, the Court finds the foregoing terms and conditions demonstrative
of the control respondents exercised not only over the results of petitioners' work but also the means employed to
achieve the same.
In finding that petitioners were regular employees, the NLRC further ruled that the exclusivity clause and
prohibitions in their Talent Contracts and/or Project Assignment Forms were likewise indicative of respondents' control
over them. Brushing aside said finding, however, the CA applied the ruling in Sonza v. ABS-CBN Broadcasting
Corporation 35 where similar restrictions were considered not necessarily determinative of the existence of an employer-
employee relationship. Recognizing that independent contractors can validly provide his exclusive services to the hiring
party, said case enunciated that guidelines for the achievement of mutually desired results are not tantamount to control.
As correctly pointed out by petitioners, however, parallels cannot be expediently drawn between this case and that
of Sonza case which involved a well-known television and radio personality who was legitimately considered a talent
and amply compensated as such. While possessed of skills for which they were modestly recompensed by respondents,
petitioners lay no claim to fame and/or unique talents for which talents like actors and personalities are hired and
generally compensated in the broadcast industry.
Later echoed in Dumpit-Murillo v. Court of Appeals, 36 this Court has rejected the application of the ruling in
the Sonza case to employees similarly situated as petitioners in ABS-CBN Broadcasting Corporation v.
Nazareno. 37 The following distinctions were significantly observed between employees like petitioners and television
or radio personalities like Sonza, to wit:
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status
was required from them because they were merely hired through petitioner's personnel department just like any
ordinary employee.
 Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-
employee relationship. Respondents did not have the power to bargain for huge talent fees, a circumstance
negating independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and
respondents are highly dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through its
supervisors negates the allegation that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the employer
and when the worker, relative to the employer, does not furnish an independent business or professional service,
such work is a regular employment of such employee and not an independent contractor. The Court will peruse
beyond any such agreement to examine the facts that typify the parties' actual relationship. 38 (Emphasis omitted)
Rather than the project and/or independent contractors respondents claim them to be, it is evident from the
foregoing disquisition that petitioners are regular employees of ABS-CBN. This conclusion is borne out by the ineluctable
showing that petitioners perform functions necessary and essential to the business of ABS-CBN which repeatedly
employed them for a long-running news program of its Regional Network Group in Naga City. In the course of said
employment, petitioners were provided the equipments they needed, were required to comply with the Company's
policies which entailed prior approval and evaluation of their performance. Viewed from the prism of these
considerations, we find and so hold that the CA reversibly erred when it overturned the NLRC's affirmance of the Labor
Arbiter's finding that an employer-employee relationship existed between the parties. Given the fact, however, that Sub-
RAB-V-05-03-00039-08 had not been consolidated with this case and appears, for all intents and purposes, to be
pending still, the Court finds that the reinstatement of petitioners ordered by said labor officer and tribunal should, as a
relief provided in case of illegal dismissal, be left for determination in said case.
WHEREFORE, the Court of Appeals' assailed Decision dated 29 June 2011 and Resolution dated 3 October
2011 in CA-G.R. SP No. 116928 are REVERSED andSET ASIDE. Except for the reinstatement of Nelson V. Begino,
Gener Del Valle, Monina Avila-Llorin and Ma. Cristina Sumayao, the National Labor and Relations Commission's 31
March 2010 Decision is, accordingly, REINSTATED.
SO ORDERED.
||| (Begino v. ABS-CBN Corp., G.R. No. 199166, [April 20, 2015])
 SECOND DIVISION
[G.R. No. 200114. August 24, 2015.]
SOCIAL SECURITY SYSTEM, petitioner, vs. DEBBIE UBAA, respondent.
DECISION
DEL CASTILLO, J : p

This Petition for Review on Certiorari 1 assails: 1) the July 29, 2011 Decision 2 of the Court of Appeals (CA)
denying the Petition for Certiorari in CA-G.R. SP No. 110006 and affirming the March 6, 2007 Order 3 of the Regional
Trial Court (RTC) of Daet, Camarines Norte, Branch 39 in Civil Case No. 7304; and 2) the CA's January 10, 2012
Resolution 4 denying petitioner's Motion for Reconsideration of the herein assailed Decision.
Factual Antecedents
On December 26, 2002, respondent Debbie Ubaa filed a civil case for damages against the DBP Service
Corporation, petitioner Social Security System (SSS), and the SSS Retirees Association 5 before the RTC of Daet,
Camarines Norte. The case was docketed as Civil Case No. 7304 and assigned to RTC Branch 39.
In her Complaint, 6 respondent alleged that in July 1995, she applied for employment with the petitioner.
However, after passing the examinations and accomplishing all the requirements for employment, she was instead
referred to DBP Service Corporation for "transitory employment." She took the pre-employment examination given by
DBP Service Corporation and passed the same. On May 20, 1996, she was told to report for training to SSS, Naga City
branch, for immediate deployment to SSS Daet branch. On May 28, 1996, she was made to sign a six-month Service
Contract Agreement 7 by DBP Service Corporation, appointing her as clerk for assignment with SSS Daet branch
effective May 27, 1996, with a daily wage of only P171.00. She was assigned as "Frontliner" of the SSS Members
Assistance Section until December 15, 1999. From December 16, 1999 to May 15, 2001, she was assigned to the
Membership Section as Data Encoder. On December 16, 2001, she was transferred to the SSS Retirees Association
as Processor at the Membership Section until her resignation on August 26, 2002. As Processor, she was paid only
P229.00 daily or P5,038.00 monthly, while a regular SSS Processor receives a monthly salary of P18,622.00 or P846.45
daily wage. Her May 28, 1996 Service Contract Agreement with DBP Service Corporation was never renewed, but she
was required to work for SSS continuously under different assignments with a maximum daily salary of only P229.00;
at the same time, she was constantly assured of being absorbed into the SSS plantilla. Respondent claimed she was
qualified for her position as Processor, having completed required training and passed the SSS qualifying examination
for Computer Operations Course given by the National Computer Institute, U.P. Diliman from May 16 to June 10, 2001,
yet she was not given the proper salary. Because of the oppressive and prejudicial treatment by SSS, she was forced
to resign on August 26, 2002 as she could no longer stand being exploited, the agony of dissatisfaction, anxiety,
demoralization, and injustice. She asserted that she dedicated six years of her precious time faithfully serving SSS,
foregoing more satisfying employment elsewhere, yet she was merely exploited and given empty and false promises;
that defendants conspired to exploit her and violate civil service laws and regulations and Civil Code provisions on
Human Relations, particularly Articles 19, 20, and 21. 8 As a result, she suffered actual losses by way of unrealized
income, moral and exemplary damages, attorney's fees and litigation expenses.
Respondent prayed for an award of P572,682.67 actual damages representing the difference between the legal
and proper salary she should have received and the actual salary she received during her six-year stint with petitioner;
P300,000.00 moral damages; exemplary damages at the discretion of the court; P20,000.00 attorney's fees and
P1,000.00 appearance fees; and other just and equitable relief.
Petitioner and its co-defendants SSS Retirees Association and DBP Service Corporation filed their respective
motions to dismiss, arguing that the subject matter of the case and respondent's claims arose out of employer-employee
relations, which are beyond the RTC's jurisdiction and properly cognizable by the National Labor Relations Commission
(NLRC).
Respondent opposed the motions to dismiss, arguing that pursuant to civil service rules and regulations, service
contracts such as her Service Contract Agreement with DBP Service Corporation should cover only a) lump sum work
or services such as janitorial, security or consultancy services, and b) piece work or intermittent jobs of short duration
not exceeding six months on a daily basis. 9 She posited that her service contract involved the performance of sensitive
work, and not merely janitorial, security, consultancy services, or work of intermittent or short duration. In fact, she was
made to work continuously even after the lapse of her 6-month service contract. Citing Civil Service Commission
Memorandum Circular No. 40, respondent contended that the performance of functions outside of the nature provided
in the appointment and receiving salary way below that received by regular SSS employees amount to an abuse of
rights; and that her cause of action is anchored on the provisions of the Civil Code on Human Relations.
Ruling of the Regional Trial Court
On October 1, 2003, the RTC issued an Order 10 dismissing respondent's complaint for lack of jurisdiction,
stating that her claim for damages "has a reasonable causal connection with her employer-employee relations with the
defendants" 11 and "is grounded on the alleged fraudulent and malevolent manner by which the defendants conspired
with each other in exploiting [her], which is a clear case of unfair labor practice," 12 falling under the jurisdiction of the
Labor Arbiter of the NLRC. Thus, it decreed:
WHEREFORE, premises considered, the aforementioned Motion to Dismiss the complaint of the herein
plaintiff for lack of jurisdiction is hereby GRANTED. The above-entitled complaint is hereby DISMISSED.
SO ORDERED. 13
Respondent moved for reconsideration. On March 6, 2007, the RTC issued another Order 14 granting
respondent's motion for reconsideration. The trial court held:
Section 2(1), Art. IX-B, 1987 Constitution, expressly provides that "the civil service embraces all branches,
subdivisions, instrumentalities, and agencies of the government, including government-owned or controlled
corporation[s] with original charters." Corporations with original charters are those which have been created by
special law[s] and not through the general corporation law. In contrast, labor law claims against government-owned
and controlled corporations without original charters fall within the jurisdiction of the Department of Labor and
Employment and not the Civil Service Commission. (Light Rail Transit Authority vs. Perfecto Venus, March 24,
2006.)
Having been created under an original charter, RA No. 1161 as amended by R.A. 8282, otherwise known
as the Social Security Act of 1997, the SSS is governed by the provision[s] of the Civil Service Commission.
However, since the SSS denied the existence of an employer-employee relationship, and the case is one for
Damages, it is not the Civil Service Commission that has jurisdiction to try the case, but the regular courts.
A perusal of the Complaint filed by the plaintiff against the defendant SSS clearly shows that the case is
one for Damages.
Paragraph 15 of her complaint states, thus:
. . . . Likewise, they are contrary to the Civil Code provisions on human relations which [state], among
others, that "Every person, must in the exercise of his rights and in the performance of his duties, act with justice,
give everyone his due and observe honesty and good faith (Article 19) and that "Every person who, contrary to
law, willfully or negligently [causes] damages to another, shall indemnify the latter for the same. (Art. 20)
"Article 19 provides a rule of conduct that is consistent with an orderly and harmonious relationship
between and among men and women. It codifies the concept of what is justice and fair play so that abuse of right
by a person will be prevented. Art. 20 speaks of general sanction for all other provisions of law which do not
especially provide their own sanction. Thus, anyone, who, whether willfully or negligently, in the exercise of his
legal right or duty, causes damage to another, shall indemnify his or her victim for injuries suffered thereby."
(Persons and Family Relations, Sta. Maria, Melencio, Jr. (2004) pp. 31-32.)
Wherefore, all premises considered, the Motion for Reconsideration is hereby GRANTED. The case
against defendant Social Security System represented by its President is hereby reinstated in the docket of active
civil cases of this court.
SO ORDERED. 15 [Italics in the original]
Petitioner moved for reconsideration, but the RTC stood its ground in its June 24, 2009 Order. 16

Ruling of the Court of Appeals

In a Petition for Certiorari 17 filed with the CA and docketed as CA-G.R. SP No. 110006, petitioner sought a
reversal of the RTC's June 24, 2009 and March 6, 2007 Orders and the reinstatement of its original October 1, 2003
Order dismissing Civil Case No. 7304, insisting that the trial court did not have jurisdiction over respondent's claims for
"unrealized salary income" and other damages, which constitute a labor dispute cognizable only by the labor tribunals.
Moreover, it claimed that the assailed Orders of the trial court were issued with grave abuse of discretion. It argued that
the trial court gravely erred in dismissing the case only as against its co-defendants DBP Service Corporation and SSS
Retirees Association and maintaining the charge against it, considering that its grounds for seeking dismissal are similar
to those raised by the two. It maintained that DBP Service Corporation and SSS Retirees Association are legitimate
independent job contractors engaged by it to provide manpower services since 2001, which thus makes respondent an
employee of these two entities and not of SSS; and that since it is not the respondent's employer, then there is no cause
of action against it.
On July 29, 2011, the CA issued the assailed Decision containing the following pronouncement:
Hence, petitioner seeks recourse before this Court via this Petition for Certiorari challenging the RTC
Orders. For the resolution of this Court is the sole issue of:
WHETHER OR NOT THE RTC HAS JURISDICTION TO HEAR AND DECIDE CIVIL CASE NO.
7304.
The petition is devoid of merits.
The rule is that, the nature of an action and the subject matter thereof, as well as, which court or agency
of the government has jurisdiction over the same, are determined by the material allegations of the complaint in
 relation to the law involved and the character of the reliefs prayed for, whether or not the complainant/plaintiff is
entitled to any or all of such reliefs. A prayer or demand for relief is not part of the petition of the cause of action;
nor does it enlarge thecause of action stated or change the legal effect of what is alleged. In determining
which body has jurisdiction over a case, the better policy is to consider not only the status or relationship
of the parties but also the nature of the action that is the subject of their controversy.
A careful perusal of Ubaa's Complaint in Civil Case No. 7304 unveils that Ubaa's claim is rooted on the
principle of abuse of right laid in the New Civil Code. She was claiming damages based on the alleged exploitation
[perpetrated] by the defendants depriving her of her rightful income. In asserting that she is entitled to the damages
claimed, [she] invoked not the provisions of the Labor Code or any other labor laws but the provisions on human
relations under the New Civil Code. Evidently, the determination of the respective rights of the parties herein, and
the ascertainment whether there were abuses of such rights, do not call for the application of the labor laws but of
the New Civil Code. Apropos thereto, the resolution of the issues raised in the instant complaint does not require
the expertise acquired by labor officials. It is the courts of general jurisdiction, which is the RTC in this case, which
has the authority to hear and decide Civil Case No. 7304.
Not every dispute between an employer and employee involves matters that only labor arbiters and the
NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. Where the claim to the principal
relief sought is to be resolved not by reference to the Labor Code or other labor relations statute or a collective
bargaining agreement but by the general civil law, the jurisdiction over the dispute belongs to the regular courts of
justice and not to the Labor Arbiter and the NLRC. In such situations, [resolution] of the dispute requires expertise,
not in labor management relations nor in wage structures and other terms and conditions of employment, but rather
in the application of the general civil law. Clearly, such claims fall outside the area of competence or expertise
ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for granting jurisdiction over such claims to
these agencies disappears.
It is the character of the principal relief sought that appears essential in this connection. Where such
principal relief is to be granted under labor legislation or a collective bargaining agreement, the case should fall
within the jurisdiction of the Labor Arbiter and the NLRC, even though a claim for damages might be asserted as
an incident to such claim.
The pivotal question is whether the Labor Code has any relevance to the principal relief sought in the
complaint. As pointed out earlier, Ubaa did not seek refuge from the Labor Code in asking for the award of
damages. It was the transgression of Article[s] 19 and 20 of the New Civil Code that she was insisting in wagering
this case. The primary relief sought herein is for moral and exemplary damages for the abuse of rights. The claims
for actual damages for unrealized income are the natural consequence for abuse of such rights.
While it is true that labor arbiters and the NLRC have jurisdiction to award not only reliefs provided by
labor laws, but also damages governed by the Civil Code,these reliefs must still be based on an action that has a
reasonable causal connection with the Labor Code,other labor statutes, or collective bargaining agreements.
Claims for damages under paragraph 4 of Article 217 must have a reasonable causal connection with any of the
claims provided for in the article in order to be cognizable by the labor arbiter. Only if there is such a connection
with the other claims can the claim for damages be considered as arising from employer-employee relations. In
the present case, Ubaa's claim for damages is not related to any other claim under Article 217, other labor
statutes, or collective bargaining agreements.
All told, it is ineluctable that it is the regular courts that has [sic] jurisdiction to hear and decide Civil Case
No. 7304. In Tolosa v. NLRC, 18 the Supreme Court held that, "[i]t is not the NLRC but the regular courts that have
jurisdiction over action for damages, in which the employer-employee relations is merely incidental, and in which
the cause of action proceeds from a different source of obligation such as tort. Since petitioner's claim for damages
is predicated on a quasi-delict or tort that has no reasonable causal connection with any of the claims provided for
in Article 217, other labor statutes or collective bargaining agreements, jurisdiction over the action lies with the
regular courts not with the NLRC or the labor arbiters." The same rule applies in this case.
WHEREFORE, premises considered, the instant petition is DENIED and the Order dated March 6, 2007
of the Regional Trial Court, Branch 39 of Daet, Camarines Norte in Civil Case No. 7304 is hereby AFFIRMED.
SO ORDERED. 19
Petitioner filed a Motion for Reconsideration, 20 but the CA denied the same in its January 10, 2012
Resolution. 21 Hence, the present Petition.
Issue
Petitioner simply submits that the assailed CA dispositions are contrary to law and jurisprudence.
Petitioner's Arguments
Praying that the assailed CA dispositions be set aside and that the RTC's October 1, 2003 Order dismissing
Civil Case No. 7304 be reinstated, petitioner essentially maintains in its Petition and Reply 22 that respondent's claims
arose from and are in fact centered on her previous employment. It maintains that there is a direct causal connection
between respondent's claims and her employment, which brings the subject matter within the jurisdiction of the NLRC.
Petitioner contends that respondent's other claims are intimately intertwined with her claim of actual damages which
are cognizable by the NLRC. Moreover, petitioner alleges that its existing manpower services agreements with DBP
Service Corporation and SSS Retirees Association are legitimate; and that some of respondent's claims may not be
entertained since these pertain to benefits enjoyed by government employees, not by employees
contracted via legitimate manpower service providers. Finally, petitioner avers that the nature and character of the
reliefs prayed for by the respondent are directly within the jurisdiction not of the courts, but of the labor tribunals.
Respondent's Arguments
In her Comment, 23 respondent maintains that her case is predicated not on labor laws but on Articles 19 and
20 of the Civil Code for petitioner's act of exploiting her and enriching itself at her expense by not paying her the correct
salary commensurate to the position she held within SSS. Also, since there is no employer-employee relationship
between her and petitioner, as the latter itself admits, then her case is not cognizable by the Civil Service Commission
(CSC) either; that since the NLRC and the CSC have no jurisdiction over her case, then it is only the regular courts
which can have jurisdiction over her claims. She argues that the CA is correct in ruling that her case is rooted in the
principle of abuse of rights under the Civil Code; and that the Petition did not properly raise issues of law.
Our Ruling
The Court denies the Petition.
In Home Development Mutual Fund v. Commission on Audit, 24 it was held that while they performed the work
of regular government employees, DBP Service Corporation personnel are not government personnel, but employees
of DBP Service Corporation acting as an independent contractor. Applying the foregoing pronouncement to the present
case, it can be said that during respondent's stint with petitioner, she never became an SSS employee, as she remained
an employee of DBP Service Corporation and SSS Retirees Association the two being independent contractors with
legitimate service contracts with SSS.
Indeed, "[i]n legitimate job contracting, no employer-employee relation exists between the principal and the job
contractor's employees. The principal is responsible to the job contractor's employees only for the proper payment of
wages." 25
In her Complaint, respondent acknowledges that she is not petitioner's employee, but that precisely she was
promised that she would be absorbed into the SSS plantilla after all her years of service with SSS; and that as SSS
Processor, she was paid only P229.00 daily or P5,038.00 monthly, while a regular SSS Processor receives a monthly
salary of P18,622.00, or P846.45 daily wage. In its pleadings, petitioner denied the existence of an employer-employee
relationship between it and respondent; in fact, it insists on the validity of its service agreements with DBP Service
Corporation and SSS Retirees Association meaning that the latter, and not SSS, are respondent's true employers.
Since both parties admit that there is no employment relation between them, then there is no dispute cognizable by the
NLRC. Thus, respondent's case is premised on the claim that in paying her only P229.00 daily or P5,038.00 monthly
as against a monthly salary of P18,622.00, or P846.45 daily wage, paid to a regular SSS Processor at the time,
petitioner exploited her, treated her unfairly, and unjustly enriched itself at her expense.
For Article 217 of the Labor Code to apply, and in order for the Labor Arbiter to acquire jurisdiction over a
dispute, there must be an employer-employee relation between the parties thereto.
. . . It is well settled in law and jurisprudence 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. . . . The action is within the
realm of civil law hence jurisdiction over the case belongs to the regular courts. While the resolution of the issue
involves the application of labor laws, reference to the labor code was only for the determination of the solidary
liability of the petitioner to the respondent where no employer-employee relation exists. Article 217 of the Labor
Code as amended vests upon the labor arbiters exclusive original jurisdiction only over the following:
1. Unfair labor practices;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates
of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from employer-employee
relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving legality of
strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other
claims, arising from employer-employee relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim
for reinstatement.
In all these cases, an employer-employee relationship is an indispensable jurisdictional requisite . . . . 26
 Since there is no employer-employee relationship between the parties herein, then there is no labor dispute cognizable
by the Labor Arbiters or the NLRC.
There being no employer-employee relation or any other definite or direct contract between respondent and
petitioner, the latter being responsible to the former only for the proper payment of wages, respondent is thus justified
in filing a case against petitioner, based on Articles 19 and 20 of the Civil Code,to recover the proper salary due her as
SSS Processor. At first glance, it is indeed unfair and unjust that as Processor who has worked with petitioner for six
long years, she was paid only P5,038.00 monthly, or P229.00 daily, while a regular SSS employee with the same
designation and who performs identical functions is paid a monthly salary of P18,622.00, or P846.45 daily wage.
Petitioner may not hide under its service contracts to deprive respondent of what is justly due her. As a vital government
entity charged with ensuring social security, it should lead in setting the example by treating everyone with justice and
fairness. If it cannot guarantee the security of those who work for it, it is doubtful that it can even discharge its directive
to promote the social security of its members in line with the fundamental mandate to promote social justice and to
insure the well-being and economic security of the Filipino people.
In this jurisdiction, the "long honored legal truism of 'equal pay for equal work'" has been "impregnably
institutionalized;" "[p]ersons who work with substantially equal qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries." 27 "That public policy abhors inequality and discrimination is beyond
contention. Our Constitution and laws reflect the policy against these evils. The Constitution in the Article on Social
Justice and Human Rights exhorts Congress to 'give highest priority to the enactment of measures that protect and
enhance the right of all people to human dignity, reduce social, economic, and political inequalities.' The very broad
Article 19 of the Civil Code requires every person, 'in the exercise of his rights and in the performance of his duties, [to]
act with justice, give everyone his due, and observe honesty and good faith'." 28
WHEREFORE, the Petition is DENIED. The assailed July 29, 2011 Decision and January 10, 2012 Resolution
of the Court of Appeals in CA-G.R. SP No. 110006 areAFFIRMED. The case is ordered remanded with dispatch to the
Regional Trial Court of Daet, Camarines Norte, Branch 39, for continuation of proceedings.
SO ORDERED.
||| (Social Security System v. Ubaa, G.R. No. 200114 , [August 24, 2015])
 FIRST DIVISION
[G.R. No. 220978. July 5, 2016.]
CENTURY PROPERTIES, INC., petitioner, vs. EDWIN J. BABIANO and EMMA B.
CONCEPCION, respondents.
DECISION
PERLAS-BERNABE, J : p

Assailed in this petition for review on certiorari 1 are the Decision 2 dated April 8, 2015 and the
Resolution 3 dated October 12, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132953, which affirmed with
modification the Decision 4 dated June 25, 2013 and the Resolution 5 dated October 16, 2013 of the National Labor
Relations Commission (NLRC) in NLRC LAC No. 05-001615-12, and ordered petitioner Century Properties, Inc. (CPI)
to pay respondents Edwin J. Babiano (Babiano) and Emma B. Concepcion (Concepcion; collectively, respondents)
unpaid commissions in the amounts of P889,932.42 and P591,953,05, respectively.
The Facts
On October 2, 2002, Babiano was hired by CPI as Director of Sales, and was eventually 6 appointed as Vice
President for Sales effective September 1, 2007. As CPI's Vice President for Sales, Babiano was remunerated
with, inter alia, the following benefits: (a) monthly salary of P70,000.00; (b) allowance of P50,000.00; and (c)0.5%
override commission for completed sales. His employment contract 7 also contained a "Confidentiality of Documents
and Non-Compete Clause" 8 which, among others, barred him from disclosing confidential information, and from working
in any business enterprise that is in direct competition with CPI "while [he is] employed and for a period of one year
from date of resignation or termination from [CPI]." Should Babiano breach any of the terms thereof, his "forms of
compensation, including commissions and incentives will be forfeited." 9
During the same period, Concepcion was initially hired as Sales Agent by CPI and was eventually 10 promoted
as Project Director on September 1, 2007. 11 As such, she signed an employment agreement, denominated as "Contract
of Agency for Project Director" 12 which provided, among others, that she would directly report to Babiano, and receive
a monthly subsidy of P60,000.00, 0.5% commission, and cash incentives. 13 On March 31, 2008, Concepcion executed
a similar contract14 anew with CPI in which she would receive a monthly subsidy of P50,000.00, 0.5% commission, and
cash incentives as per company policy. Notably, it was stipulated in both contracts that no employer-employee
relationship exists between Concepcion and CPI. 15
After receiving reports that Babiano provided a competitor with information regarding CPI's marketing
strategies, spread false information regarding CPI and its projects, recruited CPI's personnel to join the competitor, and
for being absent without official leave (AWOL) for five (5) days, CPI, through its Executive Vice President for Marketing
and Development, Jose Marco R. Antonio (Antonio), sent Babiano a Notice to Explain 16 on February 23, 2009 directing
him to explain why he should not be charged with disloyalty, conflict of interest, and breach of trust and confidence for
his actuations. 17
On February 25, 2009, Babiano tendered 18 his resignation and revealed that he had been accepted as Vice
President of First Global BYO Development Corporation (First Global), a competitor of CPI. 19 On March 3, 2009,
Babiano was served a Notice of Termination 20 for: (a) incurring AWOL; (b) violating the "Confidentiality of Documents
and Non-Compete Clause" when he joined a competitor enterprise while still working for CPI and provided such
competitor enterprise information regarding CPI's marketing strategies; and (c) recruiting CPI personnel to join a
competitor. 21
On the other hand, Concepcion resigned as CPI's Project Director through a letter 22 dated February 23, 2009,
effective immediately. CAIHTE

On August 8, 2011, respondents filed a complaint 23 for non-payment of commissions and damages against
CPI and Antonio before the NLRC, docketed as NLRC Case No. NCR-08-12029-11, claiming that their repeated
demands for the payment and release of their commissions remained unheeded. 24
For its part, CPI maintained 25 that Babiano is merely its agent tasked with selling its projects. Nonetheless, he
was afforded due process in the termination of his employment which was based on just causes. 26 It also claimed to
have validly withheld Babiano's commissions, considering that they were deemed forfeited for violating the
"Confidentiality of Documents and Non-Compete Clause." 27 On Concepcion's money claims, CPI asserted that the
NLRC had no jurisdiction to hear the same because there was no employer-employee relations between them, and
thus, she should have litigated the same in an ordinary civil action. 28
The LA Ruling
In a Decision 29 dated March 19, 2012, the Labor Arbiter (LA) ruled in CPI's favor and, accordingly, dismissed
the complaint for lack of merit. 30 The LA found that: (a) Babiano's acts of providing information on CPI's marketing
strategies to the competitor and spreading false information about CPI and its projects are blatant violations of the
"Confidentiality of Documents and Non-Compete Clause" of his employment contract, thus, resulting in the forfeiture of
his unpaid commissions in accordance with the same clause; 31 and (b) it had no jurisdiction over Concepcion's money
claim as she was not an employee but a mere agent of CPI, as clearly stipulated in her engagement contract with the
latter. 32
Aggrieved, respondents appealed 33 to the NLRC.
The NLRC Ruling
In a Decision 34 dated June 25, 2013, the NLRC reversed and set aside the LA ruling, and entered a new one
ordering CPI to pay Babiano and Concepcion the amounts of P685,211.76 and P470,754.62, respectively, representing
their commissions from August 9, 2008 to August 8, 2011, as well as 10% attorney's fees of the total monetary awards. 35
While the NLRC initially concurred with the LA that Babiano's acts constituted just cause which would warrant
the termination of his employment from CPI, it, however, ruled that the forfeiture of all earned commissions of Babiano
under the "Confidentiality of Documents and Non-Compete Clause" is confiscatory and unreasonable and hence,
contrary to law and public policy. 36 In this light, the NLRC held that CPI could not invoke such clause to avoid the
payment of Babiano's commissions since he had already earned those monetary benefits and, thus, should have been
released to him. However, the NLRC limited the grant of the money claims in light of Article 291 (now Article 306) 37 of
the Labor Code which provides for a prescriptive period of three (3) years. Consequently, the NLRC awarded unpaid
commissions only from August 9, 2008 to August 8, 2011 i.e., which was the date when the complaint was
filed. 38 Meanwhile, contrary to the LA's finding, the NLRC ruled that Concepcion was CPI's employee, considering that
CPI: (a) repeatedly hired and promoted her since 2002; (b) paid her wages despite referring to it as "subsidy";
and (c) exercised the power of dismissal and control over her. 39 Lastly, the NLRC granted respondents' claim for
attorney's fees since they were forced to litigate and incurred expenses for the protection of their rights and interests. 40
Respondents did not assail the NLRC findings. In contrast, only CPI moved for reconsideration, 41 which the
NLRC denied in a Resolution 42 dated October 16, 2013. Aggrieved, CPI filed a petition for certiorari 43 before the CA.
The CA Ruling
In a Decision 44 dated April 8, 2015, the CA affirmed the NLRC ruling with modification increasing the award of
unpaid commissions to Babiano and Concepcion in the amounts of P889,932.42 and P591,953.05, respectively, and
imposing interest of six percent (6%) per annum on all monetary awards from the finality of its decision until fully
paid. 45DETACa

The CA held that Babiano properly instituted his claim for unpaid commissions before the labor tribunals as it
is a money claim arising from an employer-employee relationship with CPI. In this relation, the CA opined that CPI
cannot withhold such unpaid commissions on the ground of Babiano's alleged breach of the "Confidentiality of
Documents and Non-Compete Clause" integrated in the latter's employment contract, considering that such clause
referred to acts done after the cessation of the employer-employee relationship or to the "post-employment" relations
of the parties. Thus, any such supposed breach thereof is a civil law dispute that is best resolved by the regular courts
and not by labor tribunals. 46
Similarly, the CA echoed the NLRC's finding that there exists an employer-employee relationship between
Concepcion and CPI, because the latter exercised control over the performance of her duties as Project Director which
is indicative of an employer-employee relationship. Necessarily therefore, CPI also exercised control over Concepcion's
duties in recruiting, training, and developing directors of sales because she was supervised by Babiano in the
performance of her functions. The CA likewise observed the presence of critical factors which were indicative of an
employer-employee relationship with CPI, such as: (a) Concepcion's receipt of a monthly salary from CPI; and (b) that
she performed tasks besides selling CPI properties. To add, the title of her contract which was referred to as "Contract
of Agency for Project Director" was not binding and conclusive, considering that the characterization of the juridical
relationship is essentially a matter of law that is for the courts to determine, and not the parties thereof. Moreover, the
totality of evidence sustains a finding of employer-employee relationship between CPI and Concepcion. 47
Further, the CA held that despite the NLRC's proper application of the three (3)-year prescriptive period under
Article 291 of the Labor Code, it nonetheless failed to include all of respondents' earned commissions during that time
i.e., August 9, 2008 to August 8, 2011 thus, necessitating the increase in award of unpaid commissions in
respondents' favor. 48
Undaunted, CPI sought for reconsideration, 49 which was, however, denied in a Resolution 50 dated October 12,
2015; hence, this petition.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the CA erred in denying CPI's petition for certiorari,
thereby holding it liable for the unpaid commissions of respondents.
The Court's Ruling
 The petition is partly meritorious.
I.
Article 1370 of the Civil Code provides that "[i]f the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall control." 51 In Norton Resources and
Development Corporation v. All Asia Bank Corporation, 52 the Court had the opportunity to thoroughly discuss the said
rule as follows:
The rule is that where the language of a contract is plain and unambiguous, its meaning should
be determined without reference to extrinsic facts or aids. The intention of the parties must be gathered from
that language, and from that language alone. Stated differently, where the language of a written contract is
clear and unambiguous, the contract must be taken to mean that which, on its face, it purports to mean,
unless some good reason can be assigned to show that the words should be understood in a different
sense. Courts cannot make for the parties better or more equitable agreements than they themselves have been
satisfied to make, or rewrite contracts because they operate harshly or inequitably as to one of the parties, or alter
them for the benefit of one party and to the detriment of the other, or by construction, relieve one of the parties
from the terms which he voluntarily consented to, or impose on him those which he did not. 53 (Emphases and
underscoring supplied) aDSIHc
Thus, in the interpretation of contracts, the Court must first determine whether a provision or stipulation therein
is ambiguous. Absent any ambiguity, the provision on its face will be read as it is written and treated as the binding law
of the parties to the contract. 54
In the case at bar, CPI primarily invoked the "Confidentiality of Documents and Non-Compete Clause" found in
Babiano's employment contract 55 to justify the forfeiture of his commissions, viz.:
Confidentiality of Documents and Non-Compete Clause
All records and documents of the company and all information pertaining to its business or affairs or that of its
affiliated companies are confidential and no unauthorized disclosure or reproduction or the same will be made by
you any time during or after your employment.
And in order to ensure strict compliance herewith, you shall not work for whatsoever capacity, either as
an employee, agent or consultant with any person whose business is in direct competition with the
company while you are employed and for a period of one year from date of resignation or termination from
the company.
In the event the undersigned breaches any term of this contract, the undersigned agrees and acknowledges that
damages may not be an adequate remedy and that in addition to any other remedies available to the Company at
law or in equity, the Company is entitled to enforce its rights hereunder by way of injunction, restraining order or
other relief to enjoin any breach or default of this contract.
The undersigned agrees to pay all costs, expenses and attorney's fees incurred by the Company in connection
with the enforcement of the obligations of the undersigned. The undersigned also agrees to pay the Company all
profits, revenues and income or benefits derived by or accruing to the undersigned resulting from the undersigned's
breach of the obligations hereunder. This Agreement shall be binding upon the undersigned, all employees, agents,
officers, directors, shareholders, partners and representatives of the undersigned and all heirs, successors and
assigns of the foregoing.
Finally, if undersigned breaches any terms of this contract, forms of compensation including commissions
and incentives will be forfeited. 56 (Emphases and underscoring supplied)
Verily, the foregoing clause is not only clear and unambiguous in stating that Babiano is barred to "work for
whatsoever capacity . . . with any person whose business is in direct competition with [CPI] while [he is] employed and
for a period of one year from date of [his] resignation or termination from the company," it also expressly provided in no
uncertain terms that should Babiano "[breach] any term of [the employment contract], forms of compensation including
commissions and incentives will be forfeited." Here, the contracting parties namely Babiano on one side, and CPI as
represented by its COO-Vertical, John Victor R. Antonio, and Director for Planning and Controls, Jose Carlo R. Antonio,
on the other indisputably wanted the said clause to be effective even during the existence of the employer-employee
relationship between Babiano and CPI, thereby indicating their intention to be bound by such clause by affixing their
respective signatures to the employment contract. More significantly, as CPI's Vice President for Sales, Babiano held
a highly sensitive and confidential managerial position as he "was tasked, among others, to guarantee the achievement
of agreed sales targets for a project and to ensure that his team has a qualified and competent manpower resources
by conducting recruitment activities, training sessions, sales rallies, motivational activities, and evaluation
programs." 57 Hence, to allow Babiano to freely move to direct competitors during and soon after his employment with
CPI would make the latter's trade secrets vulnerable to exposure, especially in a highly competitive marketing
environment. As such, it is only reasonable that CPI and Babiano agree on such stipulation in the latter's employment
contract in order to afford a fair and reasonable protection to CPI. 58 Indubitably, obligations arising from contracts,
including employment contracts, have the force of law between the contracting parties and should be complied with in
good faith. 59 Corollary thereto, parties are bound by the stipulations, clauses, terms, and conditions they have agreed
to, provided that these stipulations, clauses, terms, and conditions are not contrary to law, morals, public order or public
policy, 60 as in this case.
Therefore, the CA erred in limiting the "Confidentiality of Documents and Non-Compete Clause" only to acts
done after the cessation of the employer-employee relationship or to the "post-employment" relations of the parties. As
clearly stipulated, the parties wanted to apply said clause during the pendency of Babiano's employment, and CPI
correctly invoked the same before the labor tribunals to resist the former's claim for unpaid commissions on account of
his breach of the said clause while the employer-employee relationship between them still subsisted. Hence, there is
now a need to determine whether or not Babiano breached said clause while employed by CPI, which would then
resolve the issue of his entitlement to his unpaid commissions.
A judicious review of the records reveals that in his resignation letter 61 dated February 25, 2009, Babiano
categorically admitted to CPI Chairman Jose Antonio that on February 12, 2009, he sought employment from First
Global, and five (5) days later, was admitted thereto as vice president. From the foregoing, it is evidently clear that when
he sought and eventually accepted the said position with First Global, he was still employed by CPI as he has not
formally resigned at that time. Irrefragably, this is a glaring violation of the "Confidentiality of Documents and Non-
Compete Clause" in his employment contract with CPI, thus, justifying the forfeiture of his unpaid commissions.
II.
Anent the nature of Concepcion's engagement, based on case law, the presence of the following elements
evince the existence of an employer-employee relationship: (a) the power to hire, i.e., the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the
employee's conduct, or the so called "control test." The control test is commonly regarded as the most important
indicator of the presence or absence of an employer-employee relationship. 62 Under this test, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to control not only the end
achieved, but also the manner and means to be used in reaching that end. 63 TIADCc

Guided by these parameters, the Court finds that Concepcion was an employee of CPI considering that: (a) CPI
continuously hired and promoted Concepcion from October 2002 until her resignation on February 23, 2009, 64 thus,
showing that CPI exercised the power of selection and engagement over her person and that she performed functions
that were necessary and desirable to the business of CPI; (b) the monthly "subsidy" and cash incentives that
Concepcion was receiving from CPI are actually remuneration in the concept of wages as it was regularly given to her
on a monthly basis without any qualification, save for the "complete submission of documents on what is a sale
policy"; 65 (c) CPI had the power to discipline or even dismiss Concepcion as her engagement contract with CPI
expressly conferred upon the latter "the right to discontinue [her] service anytime during the period of engagement
should [she] fail to meet the performance standards," 66among others, and that CPI actually exercised such power to
dismiss when it accepted and approved Concepcion's resignation letter; and most importantly, (d) as aptly pointed out
by the CA, CPI possessed the power of control over Concepcion because in the performance of her duties as Project
Director particularly in the conduct of recruitment activities, training sessions, and skills development of Sales
Directors she did not exercise independent discretion thereon, but was still subject to the direct supervision of CPI,
acting through Babiano. 67
Besides, while the employment agreement of Concepcion was denominated as a "Contract of Agency for
Project Director," it should be stressed that the existence of employer-employee relations could not be negated by the
mere expedient of repudiating it in a contract. In the case of Insular Life Assurance Co., Ltd. v. NLRC, 68 it was ruled
that one's employment status is defined and prescribed by law, and not by what the parties say it should be, viz.:
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. 69 (Emphasis and
underscoring supplied)
Therefore, the CA correctly ruled that since there exists an employer-employee relationship between
Concepcion and CPI, the labor tribunals correctly assumed jurisdiction over her money claims.
III.
Finally, CPI contends that Concepcion's failure to assail the NLRC ruling awarding her the amount of
P470,754.62 representing unpaid commissions rendered the same final and binding upon her. As such, the CA erred
in increasing her monetary award to P591,953.05. 70
The contention lacks merit.
As a general rule, a party who has not appealed cannot obtain any affirmative relief other than the one granted
in the appealed decision. However, jurisprudence admits an exception to the said rule, such as when strict adherence
 thereto shall result in the impairment of the substantive rights of the parties concerned. In Global Resource for
Outsourced Workers, Inc. v. Velasco: 71
Indeed, a party who has failed to appeal from a judgment is deemed to have acquiesced to it and can no
longer obtain from the appellate court any affirmative relief other than what was already granted under said
judgment. However, when strict adherence to such technical rule will impair a substantive right, such as
that of an illegally dismissed employee to monetary compensation as provided by law, then equity dictates
that the Court set aside the rule to pave the way for a full and just adjudication of the case. 72 (Emphasis
and underscoring supplied) AIDSTE
In the present case, the CA aptly pointed out that the NLRC failed to account for all the unpaid commissions
due to Concepcion for the period of August 9, 2008 to August 8, 2011. 73 Indeed, Conception's right to her earned
commissions is a substantive right which cannot be impaired by an erroneous computation of what she really is entitled
to. Hence, following the dictates of equity and in order to arrive at a complete and just resolution of the case, and avoid
a piecemeal dispensation of justice over the same, the CA correctly recomputed Concepcion's unpaid commissions,
notwithstanding her failure to seek a review of the NLRC's computation of the same.
In sum, the Court thus holds that the commissions of Babiano were properly forfeited for violating the
"Confidentiality of Documents and Non-Compete Clause." On the other hand, CPI remains liable for the unpaid
commissions of Concepcion in the sum of P591,953.05.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2015 and the Resolution dated
October 12, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132953 are hereby MODIFIED in that the
commissions of respondent Edwin J. Babiano are deemed FORFEITED. The rest of the CA Decision stands.
SO ORDERED.
||| (Century Properties, Inc. v. Babiano, G.R. No. 220978, [July 5, 2016])
 SECOND DIVISION
[G.R. No. 197899. March 6, 2017.]
JOAQUIN LU, petitioner, vs. TIRSO ENOPIA, ROBERTO ABANES, ALEJANDRE BAGAS,
SALVADOR BERNAL, SAMUEL CAHAYAG, ALEJANDRO CAMPUGAN, RUPERTO CERNA, JR.,
REYNALDO CERNA, PETER CERVANTES, LEONARDO CONDESTABLE, ROLANDO ESLOPOR,
ROLLY FERNANDEZ, EDDIE FLORES, ROLANDO FLORES, JUDITO FUDOLIN, LEO GRAPANI,
FELIX HUBAHIB, JERRY JUAGPAO, MARCIANO LANUTAN, JOVENTINO MATOBATO, ALFREDO
MONIVA, VICTORIANO ORTIZ, JR., RENALDO PIALAN, ALFREDO PRUCIA, PONCIANO REANDO,
HERMENIO REMEGIO, DEMETRIO RUAYA, EDGARDO RUSIANA, NESTOR SALILI, VICENTE
SASTRELLAS, ROMEO SUMAYANG, and DESIDERIO TABAY, respondents.
DECISION
PERALTA, J : p

Before us is a petition for review on certiorari filed by Joaquin Lu which seeks to reverse and set aside the
Decision 1 dated October 22, 2010 and the Resolution2 dated May 12, 2011, respectively, of the Court of Appeals issued
in CA-G.R. SP No. 55486-MIN.
The facts of the case, as stated by the Court of Appeals, are as follows:
Petitioners (now herein respondents) were hired from January 20, 1994 to March 20, 1996 as crew
members of the fishing mother boat F/B MG-28 owned by respondent Joaquin "Jake" Lu (herein petitioner Lu) who
is the sole proprietor of Mommy Gina Tuna Resources [MGTR] based in General Santos City. Petitioners and Lu
had an income-sharing arrangement wherein 55% goes to Lu, 45% to the crew members, with an additional 4%
as "backing incentive." They also equally share the expenses for the maintenance and repair of the mother boat,
and for the purchase of nets, ropes and payaos.
Sometime in August 1997, Lu proposed the signing of a Joint Venture Fishing Agreement between them,
but petitioners refused to sign the same as they opposed the one-year term provided in the agreement. According
to petitioners, during their dialogue on August 18, 1997, Lu terminated their services right there and then because
of their refusal to sign the agreement. On the other hand, Lu alleged that the master fisherman (piado) Ruben Salili
informed him that petitioners still refused to sign the agreement and have decided to return the vessel F/B MG-28.
On August 25, 1997, petitioners filed their complaint for illegal dismissal, monetary claims and damages.
Despite serious efforts made by Labor Arbiter (LA) Arturo P. Aponesto, the case was not amicably settled, except
for the following matters: (1) Balansi 8 and 9; (2) 10% piado share; (3) sud-anon refund; and (4) refund of payment
of motorcycle in the amount of P15,000.00. LA Aponesto further inhibited himself from the case out of "delicadeza,"
and the case was raffled to LA Amado M. Solamo.
In their Position Paper, petitioners alleged that their refusal to sign the Joint Venture Fishing Agreement
is not a just cause for their termination. Petitioners also asked for a refund of the amount of P8,700,407.70 that
was taken out of their 50% income share for the repair and maintenance of boat as well as the purchase of fishing
materials, as Lu should not benefit from such deduction.
On the other hand, Lu denied having dismissed petitioners, claiming that their relationship was one of
joint venture where he provided the vessel and other fishing paraphernalia, while petitioners, as industrial partners,
provided labor by fishing in the high seas. Lu alleged that there was no employer-employee relationship as its
elements were not present, viz.: it was the piado who hired petitioners; they were not paid wages but shares in the
catch, which they themselves determine; they were not subject to his discipline; and respondent had no control
over the day-to-day fishing operations, although they stayed in contact through respondent's radio operator or
checker. Lu also claimed that petitioners should not be reimbursed for their share in the expenses since it was
their joint venture that shouldered these expenses. 3
On June 30, 1998, the LA rendered a Decision 4 dismissing the case for lack of merit finding that there was no
employer-employee relationship existing between petitioner and the respondents but a joint venture. CAIHTE

In so ruling, the LA found that: (1) respondents were not hired by petitioner as the hiring was done by
the piado or master fisherman; (2) the earnings of the fishermen from the labor were in the form of wages they earned
based on their respective shares; (3) they were never disciplined nor sanctioned by the petitioner; and, (4) the income-
sharing and expense-splitting was no doubt a working set up in the nature of an industrial partnership. While petitioner
issued memos, orders and directions, however, those who were related more on the aspect of management and
supervision of activities after the actual work was already done for purposes of order in hauling and sorting of fishes,
and thus, not in the nature of control as to the means and method by which the actual fishing operations were conducted
as the same was left to the hands of the master fisherman.
The LA also ruled that the checker and the use of radio were for the purpose of monitoring and supplying the
logistics requirements of the fishermen while in the sea; and that the checkers were also tasked to monitor the recording
of catches and ensure that the proper sharing system was implemented; thus, all these did not mean supervision on
how, when and where to fish.
 Respondents appealed to the National Labor Relations Commission (NLRC), which affirmed the LA Decision
in its Resolution 5 dated March 12, 1999. Respondents' motion for reconsideration was denied in a Resolution 6 dated
July 9, 1999.
Respondents filed a petition for certiorari with the CA which dismissed 7 the same for having been filed beyond
the 60-day reglementary period as provided under Rule 65 of the Rules of Court, and that the sworn certification of non-
forum shopping was signed only by two (2) of the respondents who had not shown any authority to sign in behalf of the
other respondents. As their motion for reconsideration was denied, they went to Us via a petition for certiorari assailing
the dismissal which We granted in a Resolution 8 dated July 31, 2006 and remanded the case to the CA for further
proceedings.
Petitioner filed its Comment to the petition. The parties submitted their respective memoranda as required by
the CA.
On October 22, 2010, the CA rendered its assailed Decision reversing the NLRC, the decretal portion of which
reads as follows:
WHEREFORE, premises considered, the assailed March 12, 1999 Resolution of public respondent
National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City, is hereby REVERSED and
SET ASIDE, and a new one is entered.
Thus, private respondent Mommy Gina Tuna Resources (MGTR) thru its sole proprietor/general
manager, Joaquin T. Lu (Lu), is hereby ORDERED to pay each of the petitioners, namely, TIRSO ENOPIA,
ROBERTO ABANES, ALEJANDRE BAGAS, SALVADOR BERNAL, SAMUEL CAHAYAG, ALEJANDRO
CAMPUNGAN, RUPERTO CERNA, JR., REYNALDO CERNA, PETER CERVANTES, LEONARDO
CONDESTABLE, ROLANDO ESLOPOR, ROLLY FERNANDEZ, EDDIE FLORES, ROLANDO FLORES, JUDITO
FUDOLIN, LEO GRAPANI, FELIX HUBAHIB, JERRY JUAGPAO, MARCIANO LANUTAN, JOVENTINO
MATOBATO, ALFREDO MONIVA, VICTORIANO ORTIZ, JR., RENALDO PIALAN, SEVERO PIALAN, ALFREDO
PRUCIA, POCIANO REANDO, HERMENIO REMEGIO, DEMETRIO RUAYA, EDGARDO RUSIANA, NESTOR
SALILI, RICHARD SALILI, SAMUEL SALILI, VICENTE SASTRELLAS, ROMEO SUMAYANG and DESIDERIO
TABAY the following:
(1) SEPARATION PAY (in lieu of the supposed reinstatement) equivalent to one (1) month pay
for every year of service reckoned from the very moment each petitioner was hired as fishermen-
crew member of F/B MG-28 by MGTR until the finality of this judgment. A fraction of at least six
(6) months shall be considered one (1) whole year. Any fraction below six months shall be
paid pro rata;
(2) FULL BACKWAGES (inclusive of all allowances and other benefits required by law or their
monetary equivalent) computed from the time they were dismissed from employment on August
18, 1997 until finality of this Judgment;
(3) EXEMPLARY DAMAGES in the sum of Fifty Thousand Pesos (P50,000.00);
(4) ATTORNEY'S FEES equivalent to 10% of the total monetary award.
Considering that a person's income or earning is his "lifeblood," so to speak, i.e., equivalent to life itself,
this Decision is deemed immediately executory pending appeal should MGTR decide to elevate this case to the
Supreme Court.
Let this case be referred back to the Office of the Labor Arbiter for proper computation of the awards. 9

The CA found that petitioner exercised control over respondents based on the following: (1) respondents were
the fishermen crew members of petitioner's fishing vessel, thus, their services to the latter were so indispensable and
necessary that without them, petitioner's deep-sea fishing industry would not have come to existence much less fruition;
(2) he had control over the entire fishing operations undertaken by the respondents through the master fisherman
(piado) and the assistant master fisherman (assistant piado) employed by him; (3) respondents were paid based on a
percentage share of the fish catch did not in any way affect their regular employment status; and (4) petitioner had
already invested millions of pesos in its deep-sea fishing industry, hence, it is highly improbable that he had no control
over respondents' fishing operations. DETACa

Petitioner's motion for reconsideration was denied by the CA in its Resolution dated May 12, 2011.
Aggrieved, petitioner filed the instant petition for review on certiorari citing the following as reasons for granting
the same, to wit:
I
THE HONORABLE COURT OF APPEALS RENDERED THE ASSAILED DECISION CONTRARY TO LAW AND
LOGIC BY CITING THE ABSENCE OF PROOF OF REQUISITES OF A VALID DISMISSAL AS BASIS FOR
CONCLUDING THAT THE NLRC GRAVELY ABUSED ITS DISCRETION.
II
 THE HONORABLE COURT OF APPEALS EXCEEDED ITS JURISDICTION BY TREATING RESPONDENTS'
PETITION FOR CERTIORARI UNDER RULE 65 AS AN ORDINARY APPEAL, AND BY INSISTING ON ITS OWN
EVALUATION OF THE EVIDENCE.
III
THE HONORABLE COURT OF APPEALS RENDERED THE DECISION DATED 22 OCTOBER 2010
CONTRARY TO LAW AND THE EVIDENCE ON RECORD.
IV

THE HONORABLE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS BY MAKING ITS ASSAILED DECISION IMMEDIATELY EXECUTORY PENDING
APPEAL IN SPITE OF THE FACT THAT RESPONDENTS DID NOT ASK FOR IMMEDIATE PAYMENT OF
SEPARATION PAY AND OTHER CLAIMS, AND DESPITE THE CLAIM OF RESPONDENTS THAT MOST OF
THEM ARE CURRENTLY EMPLOYED IN OTHER DEEP-SEA FISHING COMPANIES. 10
Petitioner contends that no grave abuse of discretion can be attributed to the NLRC's finding affirming that of
the LA that the arrangement between petitioner and respondents was a joint venture partnership; and that the CA, in
assuming the role of an appellate body, had re-examined the facts and re-evaluated the evidence thereby treating the
case as an appeal instead of an original action for certiorari under Rule 65.
We are not persuaded.
In Prince Transport, Inc. v. Garcia, 11 We held:
The power of the CA to review NLRC decisions via a petition for certiorari under Rule 65 of the Rules of
Court has been settled as early as this Court's decision inSt. Martin Funeral Homes v. NLRC. In said case, the
Court held that the proper vehicle for such review is a special civil action for certiorari under Rule 65 of the said
Rules, and that the case should be filed with the CA in strict observance of the doctrine of hierarchy of courts.
Moreover, it is already settled that under Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No.
7902, the CA, pursuant to the exercise of its original jurisdiction over petitions for certiorari, is specifically given the
power to pass upon the evidence, if and when necessary, to resolve factual issues. Section 9 clearly states:
xxx xxx xxx
The Court of Appeals shall have the power to try cases and conduct hearings, receive
evidence and perform any and all acts necessary to resolve factual issues raised in cases falling
within its original and appellate jurisdiction, including the power to grant and conduct new trials
or further proceedings. x x x.
However, equally settled is the rule that factual findings of labor officials, who are deemed to have
acquired expertise in matters within their jurisdiction, are generally accorded not only respect but even finality by
the courts when supported by substantial evidence, i.e., the amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. But these findings are not infallible. When there is a showing that
they were arrived at arbitrarily or in disregard of the evidence on record, they may be examined by the courts. The
CA can grant the petition for certiorari if it finds that the NLRC, in its assailed decision or resolution, made a factual
finding not supported by substantial evidence. It is within the jurisdiction of the CA, whose jurisdiction over labor
cases has been expanded to review the findings of the NLRC. 12
Here, the LA's factual findings was affirmed by the NLRC, however, the CA found that the latter's resolution did
not critically examine the facts and rationally assess the evidence on hand, and thus found that the NLRC gravely
abused its discretion when it sustained the LA's decision dismissing respondents' complaint for illegal dismissal on the
ground of lack of merit. The judicial function of the CA in the exercise of its certiorari jurisdiction over the NLRC extends
to the careful review of the NLRC's evaluation of the evidence because the factual findings of the NLRC are accorded
great respect and finality only when they rest on substantial evidence. 13 Accordingly, the CA is not to be restrained from
revising or correcting such factual findings whenever warranted by the circumstances simply because the NLRC is not
infallible. Indeed, to deny to the CA this power is to diminish its corrective jurisdiction through the writ of certiorari. 14 aDSIHc

The main issue for resolution is whether or not an employer-employee relationship existed between petitioner
and respondents.
At the outset, We reiterate the doctrine that the existence of an employer-employee relationship is ultimately a
question of fact. Generally, We do not review errors that raise factual questions. However, when there is a conflict
among the factual findings of the antecedent deciding bodies like the LA, the NLRC and the CA, it is proper, in the
exercise of Our equity jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case
and re-examine the questioned findings. In dealing with factual issues in labor cases, substantial evidence or that
amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion is sufficient. 15
In determining the existence of an employer-employee relationship, the following elements are considered: (1)
the selection and engagement of the workers; (2) the power to control the worker's conduct; (3) the payment of wages
by whatever means; and (4) the power of dismissal. 16 We find all these elements present in this case.
 It is settled that no particular form of evidence is required to prove the existence of an employer-employee
relationship. Any competent and relevant evidence to prove the relationship may be admitted. 17
In this case, petitioner contends that it was the piado who hired respondents, however, it was shown by the
latter's evidence that the employer stated in their Social Security System (SSS) online inquiry system printouts was
MGTR, which is owned by petitioner. We have gone over these printouts and found that the date of the SSS remitted
contributions coincided with the date of respondents' employment with petitioner. Petitioner failed to rebut such
evidence. Thus, the fact that petitioner had registered the respondents with SSS is proof that they were indeed his
employees. The coverage of the Social Security Law is predicated on the existence of an employer-employee
relationship. 18
Moreover, the records show that the 4% backing incentive fee which was divided among the fishermen engaged
in the fishing operations approved by petitioner was paid to respondents after deducting the latter's respective vale or
cash advance. 19 Notably, even the piado's name was written in the backing incentive fee sheet with the
corresponding vale which was deducted from his incentive fee. If indeed a joint venture was agreed upon between
petitioner and respondents, why would these fishermen obtain vale or cash advance from petitioner and not from
the piado who allegedly hired and had control over them.
It was established that petitioner exercised control over respondents. It should be remembered that the control
test merely calls for the existence of the right to control, and not necessarily the exercise thereof. It is not essential that
the employer actually supervises the performance of duties by the employee. It is enough that the former has a right to
wield the power. 20
Petitioner admitted in his pleadings that he had contact with respondents at sea via the former's radio operator
and their checker. He claimed that the use of the radio was only for the purpose of receiving requisitions for the needs
of the fishermen in the high seas and to receive reports of fish catch so that they can then send service boats to haul
the same. However, such communication would establish that he was constantly monitoring or checking the progress
of respondents' fishing operations throughout the duration thereof, which showed their control and supervision over
respondents' activities. Consequently, We give more credence to respondents' allegations in their petition filed with the
CA on how such control was exercised, to wit:
The private respondent (petitioner) controls the entire fishing operations. For each mother fishing boat,
private respondent assigned a master fisherman (piado) and assistant master fisherman (assistant piado), who
every now and then supervise the fishing operations. Private respondent also assigned a checker and assistant
checker based on the office to monitor and contact every now and then the crew at sea through radio. The checker
and assistant checker advised then the private respondent of the condition. Based on the report of the checker,
the private respondent, through radio, will then instruct the "piado" how to conduct the fishing operations. 21
Such allegations are more in consonance with the fact that, as the CA found, MGTR had already invested millions of
pesos in its deep-sea fishing industry.
The payment of respondents' wages based on the percentage share of the fish catch would not be sufficient to
negate the employer-employee relationship existing between them. As held in Ruga v. NLRC: 22
x x x [I]t must be noted that petitioners received compensation on a percentage commission based on the gross
sale of the fish-catch, i.e., 13% of the proceeds of the sale if the total proceeds exceeded the cost of the crude oil
consumed during the fishing trip, otherwise, only 10% of the proceeds of the sale. Such compensation falls within
the scope and meaning of the term "wage" as defined under Article 97(f) of the Labor Code, thus: ETHIDa
(f) "Wage" paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained on a
time, task, piece or commission basis, or other method of calculating the same, which is payable
by an employer to an employee under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered, and included the fair and
reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. x x x 23
Petitioner wielded the power of dismissal over respondents when he dismissed them after they refused to sign
the joint fishing venture agreement.
The primary standard for determining regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual trade or business of the employer. 24 Respondents' jobs as
fishermen-crew members of F/B MG 28 were directly related and necessary to petitioner's deep-sea fishing business
and they had been performing their job for more than one year. We quote with approval what the CA said, to wit:
Indeed, it is not difficult to see the direct linkage or causal connection between the nature of petitioners'
(now respondents) work vis--vis MGTR's line of business. In fact, MGTR's line of business could not possibly
exist, let alone flourish without people like the fishermen crew members of its fishing vessels who actually
undertook the fishing activities in the high seas. Petitioners' services to MGTR are so indispensable and necessary
that without them MGTR's deep-sea fishing industry would not have come to existence, much less fruition. Thus,
 We do not see any reason why the ruling of the Supreme Court in Ruga v. National Labor Relations
Commission should not apply squarely to the instant case, viz.:
x x x The hiring of petitioners to perform work which is necessary or desirable in the
usual business or trade of private respondent x x x [qualifies] them as regular employees within
the meaning of Article 280 25 of the Labor Code as they were indeed engaged to perform
activities usually necessary or desirable in the usual fishing business or occupation of private
respondent. 26
As respondents were petitioner's regular employees, they are entitled to security of tenure under Section
3, 27 Article XIII of the 1987 Constitution. It is also provided under Article 279 of the Labor Code, that the right to security
of tenure guarantees the right of employees to continue in their employment absent a just or authorized cause for
termination. Considering that respondents were petitioner's regular employees, the latter's act of asking them to sign
the joint fishing venture agreement which provides that the venture shall be for a period of one year from the date of the
agreement, subject to renewal upon mutual agreement of the parties, and may be pre-terminated by any of the parties
before the expiration of the one-year period, is violative of the former's security of tenure. And respondents' termination
based on their refusal to sign the same, not being shown to be one of those just causes for termination under Article
282, 28 is, therefore, illegal.
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. 29
Respondents who were unjustly dismissed from work are entitled to reinstatement and backwages, among
others. However, We agree with the CA that since most (if not all) of the respondents are already employed in different
deep-sea fishing companies, and considering the strained relations between MGTR and the respondents, reinstatement
is no longer viable. Thus, the CA correctly ordered the payment to each respondent his separation pay equivalent to
one month for every year of service reckoned from the time he was hired as fishermen-crew member of F/B MG-28 by
MGTR until the finality of this judgment.
The CA correctly found that respondents are entitled to the payment of backwages from the time they were
dismissed until the finality of this decision.
The CA's award of exemplary damages to each respondent is likewise affirmed. Exemplary damages are
granted by way of example or correction for the public good if the employer acted in a wanton, fraudulent, reckless,
oppressive or malevolent manners. 30
We also agree with the CA that respondents are entitled to attorney's fees in the amount of 10% of the total
monetary award. It is settled that where an employee was forced to litigate and, thus, incur expenses to protect his
rights and interest, the award of attorney's fees is legally and morally justifiable. 31
The legal interest shall be imposed on the monetary awards herein granted at the rate of six percent (6%) per
annum from the finality of this judgment until fully paid. 32
Petitioner's contention that there is no justification to incorporate in the CA decision the immediate execution
pending appeal of its decision is not persuasive. The petition for certiorari filed with the CA contained a general prayer
for such other relief and remedies just and equitable under the premises. And this general prayer is broad enough to
justify extension of a remedy different from or together with the specific remedy sought. 33 Indeed, a court may grant
relief to a party, even if the party awarded did not pray for it in his pleadings. 34
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated October 22, 2010 and the
Resolution dated May 12, 2011 of the Court of Appeals in CA-G.R. SP No. 55486-MIN are hereby AFFIRMED. The
monetary awards which are herein granted shall earn legal interest at the rate of six percent (6%)per annum from the
date of the finality of this Decision until fully paid.
cSEDTC

SO ORDERED.
||| (Lu v. Enopia, G.R. No. 197899, [March 6, 2017])