Issues: (1) employer-employee relationship?
(2)
Tan vs. Lagrama
G.R. No. 151228, August 15, 2002
Facts
 Lagrama works for Tan as painter of billboards and murals for
the motion pictures shown at the theaters managed by Tan for
more than 10years
 Lagrama was dismissed for having urinated in his working area
 Lagrama filed a complaint for illegal dismissal and non payment
of benefits
 Tan asserted that Lagrama was an independent contractor as
he was paid in piece-work basis
Issue
W/N Lagrama is an independent contractor or an employee of
Tan?
Ruling
Lagrama is an employee not an independent contractor
Applying Four Fold Test
A. Power of Control - Evidence shows that the Lagrama
performed his work as painter and under the supervision and
control of Tan.
1. Lagrama worked in a designated work area inside the theater
of Tan for the use of which petitioner prescribed rules, which
rules included the observance of cleanliness and hygeine and
prohibition against urinating in the work area and any other
place other than rest rooms and
2. Tan's control over Lagrama's work extended not only the use of
work area but also the result of Lagrama;s work and the manner
and means by which the work was to be accomplished
3. Lagrama is not an independent contractor because he did not
enjoy independence and freedom from the control and
supervision of Tan and he was subjected to Tan's control over
the means and methods by which his work is to be performed
and accomplished
B. Payment of Wages
1. Lagrama worked for Tan on a fixed piece work basis is of no
moment. Payment by result is a method of compensation and
does not define the essence of the relation.
2. Tat Lagrama was not reported as an employee to the SSS is
not conclusive, on the question whether he was an employee,
otherwise Tan would be rewarded for his failure or even neglect
to perform his obligation.
C. Power of Dismissal – by Tan stating that he had the right
to fire Lagrama, Tan in effect acknowledged Lagrama to be his
employee
D. Power of Selection and Engagement of Employees –
Tan engaged the services of Lagrama without the intervention
of third party
G.R. Nos. 83380-81 November 15, 1989
Makati Haberda Shery Inc., Jorge Ledesma and Cecilio
Inocencio, petitioners
vs NLRC, etc., respondents.
Ponente: Fernan
Facts:
This is a petition assailing the decision of NLRC affirming the
decision of Labor Arbiter finding Haberda guilty of illegal
dismissal and ordering him to reinstate the dismissed workers
and in concluding that there is employer-employee relationship
between workers and Haberda.
The complainants were working for Haberda as tailors,
seamstress, sewers, basters and plantsadoras. Paid on a
piece-rate basis with allowance when they report for work
before 9:30am everyday.(MON-SAT)
July 1984, the labor organization where the complainants are
members filed a complaint for underpayment of basic wage,
living allowance, non-payment of overtime work, non-payment
entitled to monetary claims? (3) were respondent
dismissed?
Ruling:
(1) There is employer-employee relationship. The
indubitably reveal that the most important requisit
present. As gleaned from the operations of petitio
customer enters into a contract with the haberdas
proprietor, the latter directs an employee who ma
pattern maker, sewer or "plantsadora" to take the
measurements, and to sew the pants, coat or shir
by the customer. Supervision is actively manifeste
aspects — the manner and quality of cutting, sew
ironing.
(2) Because the workers were proven to be regula
employees, they shall be entitled to minimum wag
respondents didn't appealed when the Labor Arbi
the minimum wage award to the workers in the fir
workers are not entitled to incentive pay and othe
because piece-rate workers are paid at fixed amo
performing work irrespective of the time consume
(3) There was no illegal dismissal to the two work
of the copied Barong Tagalog design, because w
were asked to explain to their employer, the work
but instead go AWOL. Imposing disciplinary sanc
employee for just and valid cause is within the rig
employer.
G.R. No. 123938 May 21, 1998
Labor Congress of the Philippines vs. N
Ponente: J. Davide, Jr.
Doctrine:
Application of LC Article 286(n) in determination
piece workers as regular workers versus LC Article
Facts:
The 99 persons (Ana Marie Ocampo, Mary Intal, e
petitioners in the proceeding (represented b
Congress of the Phils.) were rank-and-file employ
respondent Empire Food Products (a food and fru
company), hired on various dates.
Ocampo et al filed against Empire an NLRC
payment of money claims and for violation of lab
laws. Alongside this they also filed a petitio
certification for the Labor Congress to be the
representative. On Oct. 23, 1990, petitioners re
LCP, and private respondents Gonzalo and Eve
(Kehyeng spouses) entered into a Memorandum o
recognizing the following:
 Status of LCP as sole and exclusive Bar
and Representative for all rank and file
the Empire Food Products regarding "wa
work, and other terms and conditions of
 With regard to the NLRC complaint, all
to resolve the issues during the Collectiv
Agreement;
 Proper adjustment of wages, withdrawa
the Calendar of NLRC, non-interferenc
act, etc.
On Oct. 24, 1990, the Mediator Arbiter a
memorandum and certified LCP as the sole a
bargaining agent for the rank-and-file employees
On November 1990, LCP President Navarro
Empire a proposal for collective bargaining.
January 1991, the private petitioners Ana Marie
complaint for:
  Absolved Empire for ULP, union busting, violation of
the memorandum of agreement, underpayment of
wages and denied petitioners' prayer for actual, moral
and exemplary damages.
 Denied prayer for actual, moral and exemplary
damages
 Directed reinstatement of complainants, due to the fact
that Empire did not keep its payroll records as per
requirement of the DOLE. Admonition to Empire given
as well re: further harassment and intimidation.
NLRC (Part 1):
 Remanded case to Labor Arbiter for further
proceedings due to overlooking “…the testimonies of
some of the individual complainants which are now on
record”.
Labor Arbiter (Part 2):
 Complainants failed to present with definiteness and
clarity the particular act or acts constitutive of unfair
labor practice.
 Declaration of ULP connotes a finding of prima facie
evidence of probability that a criminal offense may
have been committed so as to warrant the filing of a
criminal information before the regular court.
 As regards the issue of harassment, threats and
interference with the rights of employees to self-
organization which is actually an ingredient of unfair
labor practice, complainants failed to specify what type
of threats or intimidation was committed and who
committed the same.
NLRC (Part 2):
 Affirmed LA decision Part 2.
Petitioners:
 The fact that they are piece workers does not imply
that they are not regular employees entitled for
reinstatement.
 LA and NLRC decisions were not supported by
substantial evidence;
 Abandonment of work was not proved by substantial
evidence;
 Much credit given to the Kehyeng spouses’ self-
serving arguments.
Respondents:
 Ana Marie, et al were piece workers hence they are
exempt from labor standards benefits
Issues:
1. [RELEVANT] WON the petitioners are entitled to labor
standard benefits, considering their status as piece
rate workers.
2. WON the actions of Ana Marie, et al constituted
abandonment of work.
Held:
1. YES, petitioners are entitled to labor standards
benefits, namely, holiday pay, premium pay, 13th
month pay and service incentive leave.
2. NO, failure to appear to work did not constitute
abandonment,
Ratio:
Supreme Court decision cites that Ana Marie, et al, despite
being “pakyao” or piece workers does not imply that they are
not regular employees entitled to reinstatement. Applying the
two-fold test from LC Article 286(n) [Art. 280 (old)], the SC found
that the supposedly piece workers had three factors in their
favor:
a) The nature of the tasks of Ana Marie, et al of repacking
b) Ana Marie et al worked throughout the y
employment being independent from a s
or season.
c) The length of time that petitioners
requirement of Article 286(n).
Therefore, the SC considered the employees
employees despite their status as piece worke
them benefits such as holiday pay, premium pa
pay and service incentive leave.
The Rules Implementing the Labor Code ex
employees from receiving benefits such as n
holiday pay, service incentive leave and 13th mo
alia, "field personnel and other employees who
performance is unsupervised by the employer, in
who are engaged on task or contract basis, purel
basis, or those who are paid a fixed amount for pe
irrespective of the time consumed in the performa
However, petitioners as piece-rate workers do not
group. Not only did the employees labor under
Empire, the employees also worked throughout th
their quota as “basis for compensation”.
Further, in Section 8 (b), Rule IV, Book III, piece
specifically mentioned as being entitled to holiday
Sec. 8. Holiday pay of certain employee
(b) Where a covered employee is p
or output, such as payment on piece wor
pay shall not be less than his average d
for the last seven (7) actual working da
the regular holiday: Provided, however, th
shall the holiday pay be less than th
statutory minimum wage rate.
In addition, the Revised Guidelines on the Imple
the 13th Month Pay Law, in view of the modifica
No. 851 19 by Memorandum Order No. 28, clearl
employer of piece rate workers from those ex
paying 13th month pay, to wit:
2. EXEMPTED EMPLOYERS - T
employers are still not covered by P.D. N
d. Employers of those wh
purely commission, boundary o
and those who are paid a fixe
performing specific work, irresp
time consumed in the perform
except where the workers are p
rate basis in which case the e
grant the required 13th month
workers.
However, the Revised Guidelines as well as th
Regulations identify those workers who fall under
category as those who are paid a standard amo
piece or unit of work produced that is more or
replicated, without regard to the time spent in p
same.
They should also be paid for overtime pay, even
2(e), Rule I, Book III of the Implementing Rules st
“…workers who are paid by results in
who are paid on piece-work, takay, pa
basis, if their output rates are in accord
standards prescribed under Sec. 8, Rule
of these regulations, or where such rate
fixed by the Secretary of Labor in accord
aforesaid section, are not entitled to rec
pay.”
In this case, Empire Foods did not allege that the
 testimony of Security Guard Rolando Cairo that on
January 21, 1991, petitioners refused to work. As a
result of their failure to work, the cheese curls ready
for repacking on said date were spoiled…
… The failure to work for one day, which resulted in
the spoilage of cheese curls does not amount to
abandonment of work. In fact two (2) days after the
reported abandonment of work or on January 23,
1991, petitioners filed a complaint for, among others,
unfair labor practice, illegal lockout and/or illegal
dismissal.
Furthermore, the SC stressed that the burden of proving the
existence of just cause for dismissing an employee, such as
abandonment, rests on the employer. According to the SC,
Empire Foods failed to discharge this burden as basis for
dismissing the employees.
Also, the SC considered that, in terminating the employees for
abandonment of work, Empire failed to serve to the employees
a written notice of termination (as required by the Two-Notice
rule and Section 2, Rule XIV, Book V of the Omnibus Rules),
violating the employees’ right to security of tenure and the
constitutional right to due process.
Jimenez, at al. vs. NLRC and Juanatas
G.R. No. 116960, 2 April 1996
By: Bam Medina
FACTS:
 Petition for certiorari assailing the decision of NLRC
which denied the petitioner’s motion for
reconsideration.
 The private respondents Juantas (father and son) filed
a claim for unpaid wages/commissions, separation
pay and damages against JJ’ s Trucking and/or Dr.
Bernardo Jimenez.
 The Juantas allege that they were hired by herein
petitioner Bernardo Jimenez as driver, mechanic and
helper, respectively, in his trucking firm, JJ Trucking.
They were assigned to a ten-wheeler truck to haul soft
drinks of Coca-Cola Bottling Company and paid on
commission basis, initially fixed at 17% but later
increased to 20%. They further allege that they only
receive partial commissions and that there was an
unpaid balance when they were unjustly terminated.
 Petitioners contend that that respondent Fredelito
Juanatas was not an employee of the firm but was
merely a helper of his father Pedro and that all
commissions were dully paid and that the truck driven
by respondent Pedro Juanatas was sold to one
Winston Flores in 1991 and, therefore, private
respondents were not illegally dismissed.
 LABOR ARBITER
o ordering respondents JJ’s Trucking and/or
Dr. Bernardo Jimenez to pay jointly and
severally complainant Pedro Juanatas
(father) a separation pay of FIFTEEN
THOUSAND FIFTY (P15,050.00) PESOS,
plus attorney’s fee equivalent to ten percent
(10%) of the award.
o The complaint of Fredelito Juanatas (son) is
hereby dismissed for lack of merit.
 NLRC – modified the decision of the Labor Arbiter
o Fredelito Juanatas is hereby declared
respondents’ employee and shares in (the)
commission and separation pay awarded to
complainant Pedro Juanatas, his father.
o Respondent JJ’s Trucking and Dr. Bernardo
Jimenez are jointly and severally liable to pay
complainants their unpaid commissions in
the total amount of Eighty Four Thousand
Three Hundred Eighty Seven Pesos and
3. Whether or not the private respondents
their commissions in full (IMPORTANT IS
HELD/RATIO:
1. No, Fredelito is not an employee beca
does not fall under the four fold test
2. NLRC erred in holding that the son, Fred
employee of petitioners.
3. YES, right of respondent Pedro Juanata
commission equivalent to 17%, later
20%, of the gross income is not
petitioners.
a. private respondents admit rec
payment but the petitioners
present proof of full payment, in
petitioners have the burden of
full payment but the petitioner
so.
b. The petitioners merely submitte
showing the alleged vales
respondents for the year 1990,1
inadmissible and cannot be giv
value considering that it is
accomplished, is undated and u
is thus uncertain as to its
authenticity
JUDGMENT:
Decision of NLRC affirmed with a modification
Juantas is NOT an employee of the petitioners.
VIRGINIA G. NERI and JOSE CABELIN, petitio
NATIONAL LABOR RELATIONS COMMISSION
BANK & TRUST COMPANY (FEBTC) and BUIL
CORPORATION, respondents. G.R. Nos. 97008
1993
Petitioners instituted complaints against FEBTC a
compel the bank to accept them as regular emplo
it to pay the differential between the wages being
BCC and those received by FEBTC employees w
length of service. They contended that BCC in en
labor-only contracting because it failed to adduce
purporting to show that it invested in the form of to
equipment, machineries, work premises and othe
which are necessary in the conduct of its busines
petitioners argue that they perform duties which a
related to the principal business or operation of F
It is well-settled that there is labor-only contracting
the person supplying workers to an employer doe
substantial capital or investment in the form of too
equipment, machineries, work premises, among o
(b) the workers recruited and placed by such pers
performing activities which are directly related to t
business of the employer.
The Supreme Court ruled that respondent BCC n
prove that it made investments in the form of tools
machineries, work premises, among others, beca
established that it has sufficient capitalization. Thi
both determined by the Labor Arbiter and the NLR
had a capital stock of P1 million fully subscribed a
BCC is therefore a highly capitalized venture and
deemed engaged in labor-only contracting.
While there may be no evidence that it has invest
form of tools, equipment, machineries, work prem
others, it is enough that it has substantial capital,
established before the Labor Arbiter as well as th
law does not require both substantial capital and i
the form of tools, equipment, machineries, etc. Th
from the use of the conjunction "or" instead of “an
established that it has substantial capital, it was n
necessary for BCC to further adduce evidence to
does not fall within the purview of "labor-only" con
There is even no need for it to refute petitioners' c
that the activities they perform are directly related
they are not necessary in the conduct of the principal business
of the employer.
Petition dismissed.
MANILA WATER COMPANY, INC., petitioner, vs.
HERMINIO D. PENA, et. al., respondents. [G.R. No. 158255.
July 8, 2004]
Petitioner Manila Water Company, Inc. is one of the two
private concessionaires contracted by the Metropolitan
Waterworks and Sewerage System (MWSS) to manage the
water distribution system in the East Zone of Metro Manila.
Under the Concession Agreement, petitioner undertook to
absorb former employees of the MWSS whose names and
positions were in the list furnished by the latter, while the
employment of those not in the list was terminated on the day
petitioner took over the operation of the East Zone, which was
on August 1, 1997. Private respondents, being contractual
collectors of the MWSS, were among the 121 employees not
included in the list; nevertheless, petitioner engaged their
services without written contract from August 1, 1997 to
August 31, 1997. Thereafter, on September 1, 1997, they
signed a three-month contract to perform collection services
for eight branches of petitioner in the East Zone.
Before the end of the three-month contract, the 121 collectors
incorporated the Association Collectors Group, Inc. (ACGI),
which was contracted by petitioner to collect charges for the
Balara Branch. Subsequently, most of the 121 collectors were
asked by the petitioner to transfer to the First Classic Courier
Services, a newly registered corporation. Only private
respondents remained with ACGI. Petitioner continued to
transact with ACGI to do its collection needs until February 8,
1999, when petitioner terminated its contract with ACGI.
Private respondents filed a complaint for illegal dismissal and
money claims against petitioner, contending that they were
petitioner’s employees as all the methods and procedures of
their collections were controlled by the latter.
ACGI is considered merely an agent of the petitioner. In labor-
only contracting, the statute creates an employer-employee
relationship for a comprehensive purpose: to prevent a
circumvention of labor laws. The contractor is considered
merely an agent of the principal employer and the latter is
responsible to the employees of the labor-only contractor as if
such employees had been directly employed by the principal
employer. Since ACGI is only a labor-only contractor, the
workers it supplied should be considered as employees of the
petitioner.
DOLE Phils. vs. Esteva, G.R. No. 161115, November 30,
2006
FACTS:
Petitioner is a corporation duly recognized and existing in
accordance with Philippine laws, engaged principally in the
production and processing of pineapple for the export market.
Its plantation is located in Polomolok, South Cotabato .
Respondents are members of the Cannery Multi-Purpose
Cooperative (CAMPCO). CAMPCO was organized in
accordance with R.A. No. 6938, otherwise known as the
Cooperative Code of the Philippines , and duly –registered
with the Cooperative Development Authority (CDA) on 6
January 1993. Members of CAMPCO live in communities
surrounding petitioner’s plantation and are relatives of
petitioner’s employees.
On 17 August 1993, petitioner and CAMPCO entered into a
Service Contract. The Service Contract referred to petitioner
as “the Company,” while CAMPCO was “the Contractor.” The
said contract was good for six months.
Pursuant to the contract, CAMPCO members rendered
services to petitioner. The parties apparently extended or
renewed the same for the succeeding years without executing
another written contract.
However, due to investigations and reliable information, the
agent of the principal while the latter will latter is c
the indirect employer for purposes of enforcemen
rights.)
Before the NLRC, respondents contended that the
working more than one year too petitioner. While
respondents were still working for petitioner, othe
on “stay home status” on varying dates in the yea
1995, and 1996 and were no longer furnished wit
thereafter. They, then, filed a case before the NLR
dismissal, regularization, wage differentials, dama
attorney’s fees.
Respondents argued that they should be conside
employees of petitioner given that: 1. they were p
jobs that were usually necessary and desirable in
business of petitioner; 2. petitioner exercised con
respondents, not only as to the results, but also a
manner by which they performed their assigned ta
CAMPCO, a labor-only contractor, was merely a c
petitioner. As regular employees of petitioner, res
asserted that they were entitled to security of tenu
placed on “stay home status” for more than six mo
been constructively and illegally dismissed. Resp
further claimed entitlement to wage differential, m
damages, and attorney’s fees.
NLRC affirmed the Labor Arbiter’s decision. CA a
ISSUES: Whether the lower courts were correct in
Petitioner is the employer of respondents and tha
be considered merely as agent of the company
HELD:
In summary, this Court finds that CAMPCO was a
contractor and, thus, petitioner is the real employe
respondents, with CAMPCO acting only as the ag
intermediary of petitioner. Due to the nature of the
length of their service, respondents should be con
regular employees of petitioner. Petitioner constru
dismissed a number of the respondents by placin
"stay home status" for over six months, and was t
guilty of illegal dismissal. Petitioner must accord r
the status of regular employees, and reinstate the
who it constructively and illegally dismissed, to the
positions, without loss of seniority rights and othe
and pay these respondents’ backwages from the
of the Complaint with the NLRC on 19 December
actual reinstatement.
CRITERIA TO ESTABLISH THE EXISTENCE OF
INDEPENDENT AND PERMISSIBLE CONTRAC
RELATIONSHIP
generally established by the following criteria: whe
the contractor is carrying on an independent busin
nature and extent of the work; the skill required; th
duration of the relationship; the right to assign the
performance of a specified piece of work; the con
supervision of the work to another; the employer's
respect to the hiring, firing and payment of the con
workers; the control of the premises; the duty to s
premises tools, appliances, materials and labor; a
mode, manner and terms of payment
SEVERAL FACTORS ARE PRESENT IN THE CA
ESTABLISH A LABOR- ONLY CONTRACTING
ARRANGEMENT BY BETWEEN THE MANAGEM
CAMPCO
While there is present in the relationship of petitio
CAMPCO some factors suggestive of an indepen
contractor relationship (i.e., CAMPCO chose who
members should be sent to work for petitioner; pe
CAMPCO the wages of the members, plus a perc
thereof as administrative charge; CAMPCO paid t
the members who rendered service to petitioner),
factors are present which would indicate a labor-o
contracting arrangement between petitioner and C
First, although petitioner touts the multi-million pe

Second, CAMPCO did not carry out an independent business
from petitioner. It was precisely established to render services
to petitioner to augment its workforce during peak seasons.
Petitioner was its only client. Even as CAMPCO had its own
office and office equipment, these were mainly used for
administrative purposes; the tools, machineries, and
equipment actually used by CAMPCO members when
rendering services to the petitioner belonged to the latter.
Third, petitioner exercised control over the CAMPCO members,
including respondents. Petitioner attempts to refute control by
alleging the presence of a CAMPCO supervisor in the work
premises. Yet, the mere presence within the premises of a
supervisor from the cooperative did not necessarily mean that
CAMPCO had control over its members. Section 8(1), Rule VIII,
Book III of the implementing rules of the Labor Code, as
amended, required for permissible job contracting that the
contractor undertakes the contract work on his account, under
his own responsibility, according to his own manner and
method, free from the control and direction of his employer or
principal in all matters connected with the performance of the
work except as to the results thereof. As alleged by the
respondents, and unrebutted by petitioner, CAMPCO members,
before working for the petitioner, had to undergo instructions
and pass the training provided by petitioner’s personnel. It was
petitioner who determined and prepared the work assignments
of the CAMPCO members. CAMPCO members worked within
petitioner’s plantation and processing plants alongside regular
employees performing identical jobs, a circumstance
recognized as an indicium of a labor-only contractorship.
Fourth, CAMPCO was not engaged to perform a specific and
special job or service. In the Service Contract of 1993,
CAMPCO agreed to assist petitioner in its daily operations, and
perform odd jobs as may be assigned. CAMPCO complied with
this venture by assigning members to petitioner. Apart from that,
no other particular job, work or service was required from
CAMPCO, and it is apparent, with such an arrangement, that
CAMPCO merely acted as a recruitment agency for petitioner.
Since the undertaking of CAMPCO did not involve the
performance of a specific job, but rather the supply of
manpower only, CAMPCO clearly conducted itself as a labor-
only contractor.
Lastly, CAMPCO members, including respondents, performed
activities directly related to the principal business of petitioner.
They worked as can processing attendant, feeder of canned
pineapple and pineapple processing, nata de coco processing
attendant, fruit cocktail processing attendant, and etc., functions
which were, not only directly related, but were very vital to
petitioner’s business of production and processing of pineapple
products for export.
The findings enumerated in the preceding paragraphs only
support what DOLE Regional Director Parel and DOLE
Undersecretary Trajano had long before conclusively
established, that CAMPCO was a mere labor-only contractor
EMPLOYER- EMPLOYEE RELATIONSHIP EXIST BETWEEN
THE PETITIONER AND THE RESPONDENT WITH THE
DECLARATION THAT CAMPCO WAS ENGAGED IN THE
PROHIBITED ACTS OF LABOR-ONLY CONTRACTING
The declaration that CAMPCO is indeed engaged in the
prohibited activities of labor-only contracting, then
consequently, an employer-employee relationship is deemed to
exist between petitioner and respondents, since CAMPCO shall
be considered as a mere agent or intermediary of petitioner
RESPONDENTS ARE CONSIDERED REGULAR
EMPLOYEES FOR THEY PERFORMED ACTIVITIES THAT
ARE NECESSARY OR DESIRABLE TO THE USUAL
BUSINESS OF THE PETITIONER
pineapple and pineapple processing, nata de coc
attendant, fruit cocktail processing attendant, and
functions they performed alongside regular emplo
petitioner. There is no doubt that the activities per
respondents are necessary or desirable to the us
of petitioner.
Petitioner likewise want this Court to believe that
employment was dependent on the peaks in op
backlogs, absenteeism, and excessive leave
bearing in mind that respondents all claimed to ha
petitioner for over a year, a claim which petitioner f
then respondent’s continued employment clearly
the continuing necessity and indispensability of
employment to the business of petitioner.
THE COMPANY’S ACT OF PLACING SOM
RESPONDENTS ON "STAY HOME STATUS
GIVING THEM WORK ASSIGNMENTS FOR MOR
MONTHS WERE ALREADY TANTAM
CONSTRUCTIVE AND ILLEGAL DISMISSAL
Respondents, as regular employees of petitioner,
to security of tenure. They could only be removed
just and authorized causes as provided for in the
as amended, and after they are accorded procedu
process. Therefore, petitioner’s acts of placing so
respondents on "stay home status" and not giving
assignments for more than six months were alrea
tantamount to constructive and illegal dismissal
Insular Life v. NLRC (Nov. 15, 1989)
FACTS:
Insular Life (company) and Basiao entered into
which Basiao was authorized to solicit for
accordance with the rules of the company. He
receive compensation, in the form of commissions
also contained the relations of the parties, d
agent and the acts prohibited to him including
termination. After 4 years, the parties entered
contract – an Agency Manager’s Contact – and
his end of it, Basiao organized an agency while
fulfilling his commitment under the first contract.
terminated the Agency Manager’s Contract. Bas
company in a civil action. Thus ,the compan
Basiao’s engagement under the first contract
payment of his commissions.
ISSUE:
W/N Basiao had become the company’s employe
the contract, thereby placing his claim for unpaid
HELD:
No. Rules and regulations governing the
the business are provided for in the Insurance
rules merely serve as guidelines towards the ac
the mutually desired result without dictating th
methods to be employed in attaining it. Its aim is on
the result, thereby creating no employer-employee
It is usual and expected for an insurance
promulgate a set of rules toguide its commissi
selling its policies which prescribe the qualificatio
who may be insured. None of these really invade
contractual prerogative to adopt
selling methods or to sell insurance at his o
convenience, hence cannot justifiable be said to
employer-employee relationship between Bas
company. The respondents limit themselves to po
Basiao’s contract with the company
toobserve and conform to such rules. No showing
es were in fact promulgated which effectively
restricted his choice of methods of selling insuranc
Petitioner SMC entered into a one-year contract with the
Sunflower Multi-Purpose Cooperative. Sunflower engaged
private respondents to render services at SMC’s Bacolod
Shrimp Processing Plant at Sta. Fe, Bacolod City. A complaint
was filed by private respondents before the NLRC, Regional
Arbitration Branch No. VI, Bacolod City, praying to be declared
as regular employees of SMC, with claims for recovery of all
benefits and privileges enjoyed by SMC rank and file
employees. SMC alleged that Sunflower is engaged in a
legitimate labor contracting and hence the private respondents
cannot be considered their employees.
Supreme Court ruled otherwise. Sunflower is a labor-only
contractor for the following reasons: 1. although Sunflower was
issued a Certificate of Registration by the Cooperative
Development Authority, it merely shows it had P2,000 in paid-
up share capital which amount cannot be considered
substantial capitalization; 2. its lot, building, machineries and all
other working tools utilized by private respondents in carrying
out their tasks were owned and provided by SMC and the
alleged office is found within the confines of a small “carinderia”
or “refreshment” (sic) owned by the mother of the Cooperative
Chairman Roy Asong and the only equipment used and owned
by Sunflower was a typewriter; 3. from the job description
provided by SMC itself, the work- shrimp harvesting, receiving
and packing- assigned to private respondents, formed an
integral part of the shrimp processing operations of SMC; 4. it
did not carry on an independent business or undertake the
performance of its service contract according to its own manner
and method, free from the control and supervision of SMC, as
it is apparent that its role was merely to recruit persons to work
for SMC- their daily time records were signed by SMC
supervisors, the control of the premises in which private
respondents worked was by SMC and private respondents had
been working in the aqua processing plant inside the SMC
compound alongside regular SMC shrimp processing workers
performing identical jobs under the same SMC supervisors; 5.
Sunflower did not cater to clients other than SMC, and with the
closure of SMC’s Bacolod Shrimp Processing Plant, Sunflower
likewise ceased to exist.
Since private respondents who were engaged in shrimp
processing performed tasks usually necessary or desirable in
the aquaculture business of SMC, they should be deemed
regular employees of the latter and as such are entitled to all
the benefits and rights appurtenant to regular employment.
Absent any evidence showing that Sunflower has been
dissolved in accordance with law, it is held solidarily liable with
SMC for all the rightful claims of private respondents.
Republic of the Philippines/SSc/SSS vs. Asiapro
Cooperative
Facts:
Respondent Asiapro, as a cooperative, is composed of owners-
members. Under its by-laws, owners-members are of two
categories, to wit: (1) regular member, who is entitled to all the
rights and privileges of membership; and (2) associate member,
who has no right to vote and be voted upon and shall be entitled
only to such rights and privileges provided in its by-laws. Its
primary objectives are to provide savings and credit facilities
and to develop other livelihood services for its owners-
members. In the discharge of the aforesaid primary objectives,
respondent cooperative entered into several Service Contracts
with Stanfilco - a division of DOLE Philippines, Inc. and a
company based in Bukidnon. The owners-members do not
receive compensation or wages from the respondent
cooperative. Instead, they receive a share in the service
surplus which the respondent cooperative earns from different
areas of trade it engages in, such as the income derived from
the said Service Contracts with Stanfilco. The owners-
members get their income from the service surplus generated
by the quality and amount of services they rendered, which is
No. 8282, the SSS contributions of the said own
were equal to the share of both the employer and t
On 26 September 2002, however, petitioner SS
Vice-President for Mindanao Division, Atty. Eddie
a letter to the respondent cooperative, addresse
Executive Officer (CEO) and General Manager L
informing the latter that based on the Service
executed with Stanfilco, respondent cooperative
manpower contractor supplying employees to Sta
that reason, it is an employer of its owners-mem
with Stanfilco. Thus, respondent cooperative sh
itself with petitioner SSS as an employer an
corresponding report and remittance of premium
in accordance with the Social Security Law of
October 2002, respondent cooperative, through
sent a reply to petitioner SSS’s letter asserting th
employer because its owners-members are the
itself; hence, it cannot be its own employer.
October 2002, petitioner SSS sent a letter to
cooperative ordering the latter to register as an e
report its owners-members as employees for
coverage with the petitioner SSS. Responden
continuously ignored the demand of petitioner SS
Accordingly, petitioner SSS, on 12 June 2003, fi
before petitioner SSC against the respondent coo
Stanfilco praying that the respondent cooperati
alternative, Stanfilco be directed to register as an
to report respondent cooperative’s owners-m
covered employees under the compulsory coverag
to remit the necessary contributions in accorda
Social Security Law of 1997. The same was dock
Case No. 6-15507-03. Respondent cooperative fil
with Motion to Dismiss alleging that no emplo
relationship exists between it and its owners-me
petitioner SSC has no jurisdiction over the
cooperative. Stanfilco, on the other hand, filed an
Cross-claim against the respondent cooperative.
Issues:
Whether the petitioner SSC has jurisdiction ove
complaint filed before it by petitioner SSS
respondent cooperative.
There is an employer-employee relationsh
[respondent cooperative] and its [owners-member
Held:
Petitioner SSC’s jurisdiction is clearly stated in
Republic Act No. 8282 as well as in Section 1, R
1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. – (a) Any dispute
this Act with respect to coverage, benefits, cont
penalties thereon or any other matter related the
cognizable by the Commission, x x x.
Similarly, Section 1, Rule III of the 1997 SSS Rev
Procedure states:
Section 1. Jurisdiction. – Any dispute aris
Social Security Act with respect to coverage, e
benefits, collection and settlement of contr
penalties thereon, or any other matter related the
cognizable by the Commission after the SSS
President, Manager or Officer-in-charge
Department/Branch/Representative Office conce
taken action thereon in writing.
It is clear then from the aforesaid provisions th
and Stanfilco alleges that the owners-members of the
respondent cooperative are subject to the compulsory coverage
of the SSS because they are employees of the respondent
cooperative. Consequently, the respondent cooperative being
the employer of its owners-members must register as employer
and report its owners-members as covered members of the
SSS and remit the necessary premium contributions in
accordance with the Social Security Law of 1997. Accordingly,
based on the aforesaid allegations in the petition-complaint filed
before the petitioner SSC, the case clearly falls within its
jurisdiction. As previously pointed out by this Court, an
employee-employer relationship actually exists between the
respondent cooperative and its owners-members. The four
elements in the four-fold test for the existence of an employment
relationship have been complied with. The respondent
cooperative must not be allowed to deny its employment
relationship with its owners-members by invoking the
questionable Service Contracts provision, when in actuality, it
does exist. The existence of an employer-employee
relationship cannot be negated by expressly repudiating it in a
contract, when the terms and surrounding circumstances show
otherwise. The employment status of a person is defined and
prescribed by law and not by what the parties say it should be.
The question involved here is whether an employer-employee
relationship can exist between the cooperative and an owner-
member. In fact, a closer look at Cooperative Rural Bank of
Davao City, Inc. will show that it actually recognized that an
owner-member of a cooperative can be its own employee.
It is settled that the contracting parties may establish such
stipulations, clauses, terms and conditions as they want, and
their agreement would have the force of law between them.
However, the agreed terms and conditions must not be contrary
to law, morals, customs, public policy or public order. The
Service Contract provision in question must be struck down for
being contrary to law and public policy since it is apparently
being used by the respondent cooperative merely to circumvent
the compulsory coverage of its employees, who are also its
owners-members, by the Social Security Law.
It bears stressing, too, that a cooperative acquires juridical
personality upon its registration with the Cooperative
Development Authority. It has its Board of Directors, which
directs and supervises its business; meaning, its Board of
Directors is the one in charge in the conduct and management
of its affairs. With that, a cooperative can be likened to a
corporation with a personality separate and distinct from its
owners-members. Consequently, an owner-member of a
cooperative can be an employee of the latter and an employer-
employee relationship can exist between them.
In the present case, it is not disputed that the respondent
cooperative had registered itself with the Cooperative
Development Authority, as evidenced by its Certificate of
Registration No. 0-623-2460. In its by-laws, its Board of
Directors directs, controls, and supervises the business and
manages the property of the respondent cooperative. Clearly
then, the management of the affairs of the respondent
cooperative is vested in its Board of Directors and not in its
owners-members as a whole. Therefore, it is completely logical
that the respondent cooperative, as a juridical person
represented by its Board of Directors, can enter into an
employment with its owners-members.
In sum, having declared that there is an employer-employee
relationship between the respondent cooperative and its
owners-member, we conclude that the petitioner SSC has
jurisdiction over the petition-complaint filed before it by the
petitioner SSS.
Philippine Bank of Communications vs. National Labor
Relations Commission
as “from January 1976 – although it appeared tha
had been assigned to the bank since June 1975.
He rendered messengerial services to the ba
promises, together with other the others doing a
or about October 1976, the bank requested CES
Orpiada’s assignment because Orpiada’s servic
longer needed.”
Orpiada filed a complaint against the bank for illeg
and failure to pay the 13th- month pay. The bank
CESI as an additional respondent. The Labor Arb
favor of Orpiada. Hence, this petition for certiorari
bank.
Issue: Whether or not an employer-employee re
existed between the bank and private respondent
Ruling:
Yes. There is an employer-employee relationship
between the bank and Orpiada. The fact that Orp
or rendered services to the bank for a period of ab
(16) months made him an employee of the bank.
Labor Code, any employee who has rendered at l
year of service, whether such service is continuou
shall be considered a regular employee. Thus, Or
services may not be terminated by the bank exce
cause or when authorized under the Labor Code.
engaged in labor-only contracting. Therefore, the
bank is liable to Orpiada as if Orpiada had been d
employed, not only by CESI but also by the bank.
Tabas vs. California Manufacturing Co., Inc. [1
497, GR 80680]
Facts: Petitioners filed a petition in the NLRC for
and payment of various benefits agains
Manufacturing Company. The respondent co
denied the existence of an employer-employee
between the company and the petitioners.
Pursuant to a manpower supply agreement, it app
petitioners prior their involvement with California M
Company were employees of Livi Manpower
independent contractor, which assigned them
“promotional merchandisers.” The agreement pro
California “has no control or supervisions wha
[Livi’s] workers with respect to how they accompl
or perform [Californias] obligation” It was furth
stipulated that the assignment of workers to Calif
on a “seasonal and contractual basis”; that “[c
allowance and the 10 legal holidays will be charg
[California] at cost “; and that “[p]ayroll for the p
week [shall] be delivered by [Livi] at [California’s]
Issue: WON principal employer is liable.
Held: Yes. The existence of an employer-employe
cannot be made the subject of an agreement.
Based on Article 106, “labor-only” contractor i
merely as an agent of the employer, and the lia
shouldered by either one or shared by both.
There is no doubt that in the case at bar,
“manpower services”, meaning to say, it contract
favor of clients. We hold that it is one notwit
vehement claims to the contrary, and notwith
provision of the contract that it is “an
contractor.” The nature of one’s business is not d
self-serving appellations one attaches thereto bu
provided by statute and prevailing case law. The
Livi maintains a separate line of business does n
(California’s) merchandising activities, using its (California’s)
premises and equipment.
ROLANDO E. ESCARIO, et. Al; petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION, CALIFORNIA
MANUFACTURING CO. INC. AND DONNA LOUISE
ADVERTISING AND MARKETING ASSOCIATES
INCORPORATED, respondents. G.R. No. 124055. June 8,
2000
Private respondents California Marketing Co., Inc. is a domestic
corporation principally engaged in the manufacturing of food
products and distribution of such products to wholesalers and
retailers. Private respondent Donna Louis Advertising and
Marketing Associates, Inc. is a duly registered promotional firm.
Petitioners alleged that they were employed by CMC as
merchandisers. They alleged that the hiring, control and
supervision of workers and the payment of the salaries were all
covered by CMC through its agent D.L Admark in order CMC to
avoid its liability under the law. Petitioners filed a case against
CMC before the labor arbiter for regularization of their
employment status.
During the pendency of the case, D.L Admark terminated the
services of the petitioners. The complaint was amended to
include alleged dismissal. CMC filed a motion to implead as
party-defendant D.L Admark, the latter filed a motion to
intervene. Both motions were granted. CMC denied being
petitioners employer while D.L Admark asserted it is the
employer of the petitioners.
The labor arbiter found petitioners as employees of CMC as
they were engaged in activities that are necessary and
desirable in the usual business/trade of CMC. On appeal, the
NLRC set aside the labor arbiters decision. But ordered the
reinstatement of the petitioners in D.L Admark petitioners filed
a motion for consideration before the NLRC which was denied
for lack of merit. Hence the petition.
Issue:
Whether or not D.L Admark is a labor-only contractor
or as independent contractor.
Decision:
The Supreme Court denied the petition.
There is labor-only contracting when the contractor or
subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principa. In labor only
contracting, the following elements are present:
The person supplying workers to an employer does not have
substantial capital or investment in the form of tools,
equipments, machineries, wok premise, among other tools.
The workers recruited and placed by such person performing
activities which are directly related to the principal business of
the employer.
In contract, there is permissible job contracting when a principal
agrees to put out or farm out with a contractor or a subcontractor
the performance/completion of a specific job, work or services
within a definite or predetermined period, regardless of whether
such job/services is to be performed or completed within or
outside the premises of the principal. In this arrangement, the
following conditions must concur.
The contractor carries on a distinct and independent business
and undertakes the contract work on his account under the
responsibility according to his own manual and methods, free
from the control and direction of his employer or principal in all
The court reiterated that it is not enough to sho
capitalization on investment. In addition the foll
need be considered
whether the contractor is carrying on an independ
the nature and extent of the work
the skill required
the term and duration of the relationship
the right to assign the performance of specified pi
the control and supervision of the workers
the power of the employer with respect to the hiri
payment of workers of the contractor
the control of the premises
the duty to supply premises, tools, appliances, m
labor
mode, manner and terms of payment
Based on the foregoing criteria, the court found tha
is a legitimate independent contractor. Applying
test, D.L Admark was found to be the emp
petitioners. The Supreme Court affirmed the NLR
Jaguar Security and Investigation Agency vs.
Facts:
Petitioner Jaguar Security and Investigation Agen
is a private corporation engaged in the business
security services to its clients, one of whom is
Industries, Inc. ("Delta").
Private respondents Rodolfo Sales, Melvin Tam
Caranyagan, Jesus Silva, Jr., Jaime Moron
Fetalvero were hired as security guards by Jagua
assigned at the premises of Delta in Libis, Q
Caranyagan and Tamayo were terminated by Ja
26, 1998 and August 21, 1998, respectively. A
dismissals were arbitrary and illegal. Sales, Mor
and Silva remained with Jaguar. All the guard-emp
for monetary benefits such as underpayment, over
day and holiday premium pay, underpaid 13th mo
shift differential, five days service and incentive
addition to these money claims, Caranyagan
argue that they were entitled to separation pay and
for the time they were illegally dismissed until
decision. Furthermore, all respondents claim fo
exemplary damages.
On September 18, 1998, respondent security gua
the instant labor case before the labor arbiter.
On May 25, 1999, the labor arbiter rendered a de
of private respondents Sales, et al., the disposit
which provides:
"WHEREFORE, judgment is hereby rendered d
charges of illegal dismissal on the part of the
MELVIN R. TAMAYO and DIONISIO C. CARANYA
of merit but ordering respondents JAGUAR SEC
INVESTIGATION AGENCY and DELTA
INDUSTRIES, INC., to jointly and severally pa
complainants, namely: RODOLFO A. SALES,
TAMAYO, JAIME MORON and DANETH FET
following money claims for their services render
24, 1995 to April 24, 1998:
a) wage differentials
b) overtime pay differentials (4 hours a day
c) rest day pay
d) holiday pay
e) holiday premium pay
f) 13th month pay differentials
g) five days service incentive leave pay pe
to the exception earlier cited.
On July 1, 1999, petitioner Jaguar filed a partial appeal
questioning the failure of public respondent NLRC to resolve its
cross-claim against Delta as the party ultimately liable for
payment of the monetary award to the security guards.

In its Resolution dated September 19, 2000, the NLRC

dismissed the appeal, holding that it was not the proper forum
to raise the issue. It went on to say that Jaguar, being the direct
employer of the security guards, is the one principally liable to
the employees. Thus, it directed petitioner to file a separate civil
action for recovery of the amount before the regular court
having jurisdiction over the subject matter, for the purpose of
proving the liability of Delta.

Jaguar sought reconsideration of the dismissal, but the

Commission denied the same in its Resolution dated November
9, 2001.
Petitioner filed a petition for certiorari with the CA, which, in the
herein assailed Decision dated October 21, 2002 and
Resolution dated February 13, 2004, dismissed the petition for
lack of merit.

Issue: Whether or not petitioner may claim reimbursement

from Delta Milling through a cross-claim filed with the labor
court?

Held:

The Court ruled in the negative.

The jurisdiction of labor courts extends only to cases where an

employer-employee relationship exists.

In the present case, there exists no employer-employee

relationship between petitioner and Delta Milling. In its cross-
claim, petitioner is not seeking any relief under the Labor Code
but merely reimbursement of the monetary benefits claims
awarded and to be paid to the guard employees. There is no
labor dispute involved in the cross-claim against Delta Milling.
Rather, the cross-claim involves a civil dispute between
petitioner and Delta Milling. Petitioner's cross-claim is within the
realm of civil law, and jurisdiction over it belongs to the regular
courts.

Moreover, the liability of Delta Milling to reimburse petitioner will

only arise if and when petitioner actually pays its employees the
adjudged liabilities. Payment, which means not only the delivery
of money but also the performance, in any other manner, of the
obligation, is the operative fact which will entitle either of the
solidary debtors to seek reimbursement for the share which
corresponds to each of the debtors. In this case, it appears that
petitioner has yet to pay the guard employees.

The petition is DENIED.