LABOR LAW 1
1.) SECOND DIVISION
ATTY. ANDREA UY and G.R. No. 159119
FELIX YUSAY,
Petitioners,
Present:
Puno, J., Chairman,
Sandoval-Gutierrez,
- versus - *Corona,
Azcuna, and
Garcia, JJ.
AMALIA A. BUENO, Promulgated:
Respondent. March 14, 2006
DECISION
PUNO, J.:
The finding of illegal dismissal against petitioner Atty. Andrea Uy made by
the Court of Appeals is challenged in this petition for review on certiorari
under Rule 45 of the Rules of Court.
The facts are as follows:
Countrywide Rural Bank of La Carlota, Inc. (Countrywide Rural Bank) in
Marbel, Koronadal City, South Cotabato, is a private banking corporation
duly licensed and organized to engage in rural banking operations that offers
a wide-range of deposit, financial and lending services through its network of
branches nationwide. In April 1998, Countrywide Rural Bank experienced
liquidity problems. A group of its depositors, alarmed at the imminent
prospect of not being able to recover their deposits and other investments,
organized themselves into a committee of depositors. The committee elected
petitioner Felix Yusay as Chairman, petitioner Andrea Uy as Secretary,
Manu Gidwani as Vice-Chairman and Pompeyo Querubin as Treasurer.[1]
On January 18, 1999, the depositors of Countrywide Rural Bank (not the
committee of depositors led by petitioner Yusay) met at the Marbel
Branch. Marlon V. Juesna, the Vice-Chairman of the Board of Countrywide
Rural Bank, presided over the meeting. In the course of the meeting,
respondent Amalia A. Bueno stood up and announced that her services as
Branch Manager of Marbel Branch were terminated by petitioner
Uy. Petitioner Uy, who was in the meeting, confirmed respondent Buenos
declaration. She did not elaborate on the basis of the termination explaining
that it involved internal problems that could not be discussed with the
depositors.[2]
The day after or on January 19, 1999, respondent Bueno filed a case for
illegal dismissal and prayed for reinstatement with payment of full back
wages, damages and attorneys fees against Countrywide Rural Bank, Miguel
Mendoza, Primo Esleyer, Marlon Juesna, and petitioners Uy and Felix Yusay
before the Labor Arbiter of the Sub-Regional Arbitration Branch No. XI of
the National Labor Relations Commission (NLRC)
in General Santos City. Petitioners Uy and Yusay were sued in their capacity
as Interim President and Corporate Secretary, and Interim Board Chairman,
respectively. Miguel Mendoza, Primo Esleyer and Marlon Juesna were sued
as Chairman, Vice-Chairman and Executive Vice-President, respectively, of
the Board of Countrywide Rural Bank.[3] Respondent Bueno alleged that she
was employed by Countrywide Rural Bank on November 12, 1996 until her
termination on January 18, 1999.[4]
An amicable settlement of the case failed. On September 28, 1999,
respondent Bueno filed a Manifestation for the early resolution of her
complaint alleging that Countrywide Rural Bank was already under
receivership with the Philippine Deposit Insurance Commission (PDIC) and
she wanted the favorable decision submitted to the PDIC for
consideration. On November 18, 1999, with only the position paper of
respondent Bueno and without awaiting the reply of the Postmaster of
Bacolod City as to whether Countrywide Rural Bank and its co-respondents
received the order to submit their respective position papers,[5] the Labor
Arbiter rendered a decision in favor of respondent Bueno. He found the
verbal and summary termination of the services of respondent Bueno to be
without valid cause and in violation of Article 277(b) of the Labor
Code. Also, the Labor Arbiter held that as a regular employee of
Countrywide Rural Bank, respondent Bueno was protected by the security of
tenure provision or Article 279 of the Labor Code. He awarded separation
pay in lieu of reinstatement and back wages. In addition, he granted moral
and exemplary damages for the bad faith and/or malice that attended the
manner of termination of respondent Bueno. Finally, for being forced to
litigate, the
Labor Arbiter awarded attorneys fees of 10% in accordance with Article 111
of the Labor Code. He disposed, viz:[6]
WHEREFORE, premises considered, respondent Countrywide Rural Bank of
La Carlota, Inc. and individual respondent Atty. Andrea Uy are solidarily
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liable [to] complainant Amalia Bueno to pay the sum of PESOS EIGHT
HUNDRED ELEVEN THOUSAND TWO HUNDRED (P811,200.00)
ONLY representing her monetary awards and attorneys fees.
All other claims are dismissed for lack of merit.
On May 24, 2000 petitioner Uy filed her Notice of Appeal and Memorandum
of Appeal with the Fifth Division of the NLRC in Cagayan de Oro City. She
assailed the decision of the Labor Arbiter on the grounds of denial of due
process and serious errors in the findings of fact. Finding that the appealed
decision was received on February 10, 2000 but only appealed on May 18,
2000, the NLRC in its resolution dated July 31, 2000, dismissed the appeal
for being filed out of time. It ruled that the decision had become final and
executory.[7]
On August 28, 2000, petitioners Uy and Yusay[8] filed a Motion for
Reconsideration alleging that they never held office where a copy of the
decision was served and that they only received their copy of the decision
on May 9, 2000. On December 21, 2001, the NLRC granted their motion and
absolved petitioner Uy from liability as it found petitioners Uy and Yusay to
be mere depositors of Countrywide Rural Bank on the basis of the evidence
submitted by respondent Bueno herself, i.e., the minutes of the meeting of
the depositors of Countrywide Rural Banks Marbel Branch held on January
18, 1999. [9] It disposed, viz:
WHEREFORE, the above resolution is Reversed and Set Aside. In lieu
thereof, a new judgment is rendered modifying the appealed decision of the
Labor Arbiter, dated November 18, 1999, in that the portion thereof directing
individual Atty. Andrea Uy to personally pay complainant Amalia Bueno her
monetary award is deleted for lack of factual and legal basis.
On February 8, 2002, respondent Bueno filed a Motion for Reconsideration
on grounds of serious errors in the findings of fact and in the application of
law. On March 22, 2002, the NLRC denied the motion for lack of merit as
the issues raised had been extensively treated and discussed in the resolution
sought to be reconsidered.[10] Thus, respondent Bueno appealed to the Court
of Appeals (CA) imputing on the part of the NLRC grave abuse of discretion
amounting to lack of or in excess of jurisdiction for (1) admitting the appeal
and exculpating petitioner Uy from monetary liability, and (2) declaring that
petitioner Uy was not an officer of Countrywide Rural Bank.
The CA resolved both issues in favor of respondent Bueno. Anent the first, it
held that petitioners Uy and Yusay filed their appeal out of time emphasizing
the rules on perfection of appeals, presumption of regularity in the
performance of official duties and substantiation by competent evidence on
allegation of non-receipt of pleadings. It observed that Countrywide Rural
Bank and its co-respondents received the initial processes relative to the
case. Anent the second, the CA found the individual respondents in the
complaint that included petitioners Uy and Yusay to be officers of
Countrywide Rural Bank. Its bases were (a) the categorical admission in their
appeal before the NLRC that they were officers of Countrywide Rural Bank,
(b) the October 10, 2000 resolution of the NLRC in another case,[11] which
already settled the issue of their being officers of Countrywide Rural Bank,
(c) the termination of respondent Bueno by petitioner Uy, which the latter did
not dispute, and (d) the issuance of a Memorandum of Termination in an
attempt to legitimize the verbal dismissal of respondent Bueno. Thus, the CA
disposed on January 24, 2003,[12] viz:
WHEREFORE, premises considered, the instant petition is hereby
GRANTED. The assailed resolutions of public respondent Commission dated
December 21, 2001 and March 22, 2002, are ordered SET ASIDE and
NULLIFIED. The resolution of public respondent Commission dated July
31, 2000[13] is AFFIRMED in its entirety.
Aggrieved, petitioners Uy and Yusay[14] filed their February 12, 2003 Motion
for Reconsideration, which the CA denied on May 26, 2003. Hence, this
petition for review before the Court, which presents the following issues:
WHETHER OR NOT THE RESPONDENT HONORABLE COURT OF
APPEALS ERRED IN ITS FINDINGS THAT THE NATIONAL LABOR
RELATIONS COMMISSION HAS GRAVELY ABUSED ITS
DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
JURISDICTION IN ISSUING THE RESOLUTIONS DATED 21
DECEMBER 2001 AND 22 MARCH 2002.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN ITS
FINDING THAT SUMMONS WAS PROPERLY SERVED ON THE
PETITIONERS.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
AFFIRMING THAT THE PETITIONERS ARE OFFICERS OF THE
BANK.
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WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED
IN FINDING THAT THE DISMISSAL OF PRIVATE RESPONDENT
WAS DONE IN BAD FAITH.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED
IN ITS FINDING THAT PETITIONERS ARE SOLIDARILY LIABLE
WITH THE COUNTRYWIDE RURAL BANK OF LA CARLOTA INC.
We immediately note that the Countrywide Rural Bank failed to appeal its
liability over the illegal dismissal of the respondent before the NLRC, the CA
and this Court. Such failure to perfect an appeal has the effect of rendering
the judgment final and executory as to it.[15]
We now come to the liability of petitioner Uy. The findings of the Labor
Arbiter, the NLRC and the CA as to the liability of petitioner Uy are
conflicting, thus, the application of the exception to the rule that only legal
issues may be raised in a petition for review on certiorari under Rule 45 of
the Rules of Court.[16]
First, the Labor Arbiter found her solidarily liable with Countrywide Rural
Bank, thus:
x x x Record reveals that she was verbally and summarily terminated on
January 18, 1999 in an unconventional manner by individual respondent
ATTY. ANDREA UY (Interim President and Corporate Secretary) by
announcing and confirming said termination during the depositors meeting
held at the Marbel Branch office, without valid cause and in violation of the
procedures outlined in Art. 277(b) of the Labor Code in terminating the
services of an employee.
xxx
Corporate directors and officers are solidarily liable with the corporation for
the termination of employment of employees only if the termination is done
with malice or in bad faith (Progress Homes vs. NLRC, 269 SCRA 274). The
dismissal of complainant was attended with malice or bad faith when she was
summarily terminated and announced during the depositors meeting by
individual respondent Atty. Andrea Uy (Interim President and Corporate
Secretary).[17]
Second, the NLRC, after reconsidering its earlier pronouncement that
petitioner Uy had lost her appeal for filing it beyond the mandatory
reglementary period, held her not liable with Countrywide Rural Bank, thus:
From her own evidence, the minutes of depositors meeting held on January
18, 1999 at the banks Marbel Branch (Annex C, complainants position
paper), it was shown clearly that individual respondents were mere
depositors of respondent bank. They were only elected as officers of the
Interi[m] Board of Directors created by the group or association of depositors
with the sole task to rehabilitate respondent bank. The excerpts from the
minutes of meeting are quoted hereunder, to wit:
xxx
Mr. Michael Viray asked Atty. Uy who are you by the way? What group do
you belong to? You did not introduce yourself to us.
Atty. Uy answered that she is also a depositor like them and they formed an
association of depositors in Bacolod and signified their intention to buy the
bank thru equity swap as required by BSP. They formed the Interim Board
and volunteered to rehabilitate the bank. The Interi[m] Board elected her as
the President.[18]
Finally, the CA reversed and found against petitioner Uy, where her liability
was viewed, thus:
x x x It is crystal clear based on the facts and records of the case that
individual private respondents were officers of co-private respondent
bank. In fact, they themselves have categorically admitted in their appeal
before the public respondent Commission that they were corporate officers of
the co-respondent bank.
Significantly, the resolution made by the public respondent Commission in
its decision in the case titled Arlene Villanueva vs. Countrywide Rural Bank
of La Carlota (Marbel Branch) and/or Atty. Andrea Uy (Corp. Sec.) and
Felix Yusay (Board Chairman) docketed as NLRC CA No. M-005740-2000
(RAB 11-01-50043-99) dated October 10, 2000, has already settled the issue
that private respondent Uy was indeed then the Corporate Secretary of
respondent bank, and that respondent Uy has indicated her executive office
address to the same address where the summons was served to her in the
illegal dismissal case filed against her by the petitioner.
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The abovementioned admission made by the private respondents was further
bolstered by the fact of private respondent Uy terminating the services of
petitioner as an employee of co-respondent bank which fact of termination
was not disputed by private respondent Uy.[19]
Whether petitioner Uy[20] should be held solidarily liable with Countrywide
Rural Bank in the illegal dismissal of respondent Bueno, depends on the
jurisdiction of the Labor Arbiter over the case at bar.
The records show that petitioner Uy was a mere depositor of the bank who
was elected Interim President and Corporate Secretary by a committee of
depositors to protect their interests given the bad state of Countrywide Rural
Banks affairs. In his findings, the Labor Arbiter mentioned the meeting of the
depositors on January 18, 1999 but he failed to account for the exact
personality of petitioner Uy whose statement relative to her role in the affairs
of Countrywide Rural Bank was related in the minutes of the same
meeting. It was only through the NLRC that petitioner Uys role was
established, i.e., that she was one of the depositors of Countrywide Rural
Bank who formed themselves into a group or association indicating their
intention to help rehabilitate Countrywide Rural Bank. This part of the
minutes of the meeting is revealing:
Secretary was recognized by the Bangko Sentral ng Pilipinas, and hence had
the legal authority to act for the bank.
Lacking this evidence, the act of petitioner Uy in dismissing respondent
cannot be deemed an act as an officer of the bank. Consequently, it cannot be
held that there existed an employer-employee relationship between
petitioner Uy and respondent Bueno when the former allegedly dismissed the
latter. This requirement of employer-employer relationship is jurisdictional
for the provisions of the Labor Code, specifically Book VI thereof, on Post-
Employment, to apply. Since the employer-employee relationship between
petitioner Uy and respondent Bueno was not established, the labor arbiter
never acquired jurisdiction over petitioner Uy. Consequently, whether
petitioner Uy was properly served with summons is immaterial. Likewise,
that she terminated the services of respondent Bueno in bad faith and with
malice is of no moment. Her liability, if any, should be determined in another
forum.
IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals
Decision dated January 24, 2003 and Resolution dated May 26, 2003 in CA-
G.R. SP No. 70672, which found petitioner Atty. Andrea Uy solidarily liable
with Countrywide Rural Bank of Carlota, Inc. in Marbel, Koronadal City,
South Cotabato, are REVERSED. No costs.

Mr. Viray commented that they were not informed of this Interim SO ORDERED.
Board. Atty. Uy glance[d] at ex-Manager Bueno to which Mrs. Bueno
announced that the Branch did not [receive] any written Memorandum as to
the composition/members of this Interim Board.

Mrs. Viray requested Atty. Uy and Mr. Juesna to name the members of this
Interim Board. Mr. Juesna enumerated the names of Mr. Felix Yusay as the
Chairman, Atty. Andrea Uy as the President and Corporate Secretary, etc.
[Mrs.] Bueno interrupted. Thats precisely why I questioned if the Interim
Board is sanctioned by BSP or SEC to avoid confusion on who to deal
with.[21]

Clearly, even respondent Bueno was uncertain as to the exact role of the
Interim Board that elected petitioner Uy as Interim President and Corporate
Secretary. She herself questioned the personality of the Interim Board in the
management of Countrywide Rural Bank even while she alleged that
petitioner Uy as its Interim President and Corporate Secretary caused her
dismissal. More significantly, there is no evidence that the committee of
depositors that elected petitioner Uy as Interim President and Corporate

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2,) SECOND DIVISION reversal of the Decision of the Court of Appeals directing them to reinstate
LIGHT RAIL TRANSIT AUTHORITY, G.R. No. 163782 private respondent workers to their former positions without loss of seniority
Petitioner, and other rights and privileges, and ordering them to jointly and severally
pay the latter their full back wages, benefits, and moral damages. The LRTA
- versus - and METRO were also ordered to jointly and severally pay attorneys fees
equivalent to ten percent (10%) of the total money judgment.
PERFECTO H. VENUS, JR., BIENVENIDO
P. SANTOS, JR., RAFAEL C. ROY, Petitioner LRTA is a government-owned and controlled corporation created
NANCY C. RAMOS, SALVADOR A. by Executive Order No. 603, Series of 1980, as amended, to construct and
ALFON, NOEL R. SANTOS, MANUEL A. maintain a light rail transit system and provide the commuting public with an
FERRER, SALVADOR G. ALINAS, efficient, economical, dependable and safe transportation. Petitioner
RAMON D. LOFRANCO, AMADOR H. METRO, formerly Meralco Transit Organization, Inc., was a qualified
POLICARPIO, REYNALDO B. GENER, transportation corporation duly organized in accordance with the provisions
and BIENVENIDO G. ARPILLEDA, of the Corporation Code, registered with the Securities and Exchange
Respondents. Commission, and existing under Philippine laws.

It appears that petitioner LRTA constructed a light rail transit system

METRO TRANSIT ORGANIZATION, INC., G.R. No. 163881 from Monumento in Kalookan City to Baclaran in Paraaque, Metro
Petitioner, Manila. To provide the commuting public with an efficient and dependable
Present: light rail transit system, petitioner LRTA, after a bidding process, entered
- versus - into a ten (10)-year Agreement for the Management and Operation of the
PUNO, J., Chairman, Metro Manila Light Rail Transit System from June 8, 1984 until June 8,
COURT OF APPEALS, PERFECTO H. SANDOVAL-GUTIERREZ, 1994 with petitioner METRO.[1] The Agreement provided, among others, that
VENUS, JR., BIENVENIDO P. SANTOS, CORONA, 1. Effective on the COMMENCEMENT DATE, METRO shall accept and
JR., RAFAEL C. ROY, NANCY C. AZCUNA, and take over from the AUTHORITY [LRTA] the management, maintenance and
RAMOS, SALVADOR A. ALFON, GARCIA, JJ. operation of the commissioned and tested portion of the [Light Rail Transit]
NOEL R. SANTOS, MANUEL A. FERRER, System x x x [par. 2.02];
SALVADOR G. ALINAS, RAMON D. Promulgated: 2. The AUTHORITY [LRTA] shall pay METRO the MANAGEMENT FEE
LOFRANCO, AMADOR H. POLICARPIO, as follows x x x [par. 5.01];
and REYNALDO B. GENER,
Respondents. March 24, 2006 3. In rendering these services, METRO shall apply its best skills and
judgment, in attaining the objectives of the [Light Rail Transit] System in
accordance with accepted professional standards. It shall exercise the
DECISION required care, diligence and efficiency in the discharge of its duties and
responsibilities and shall work for the best interest of the [Light Rail Transit]
System and the AUTHORITY [LRTA] [par. 2.03];

PUNO, J.: 4. METRO shall be free to employ such employees and

officers as it shall deem necessary in order to carry out the requirements of
Before us are the consolidated petitions of Light Rail Transit Authority [the] Agreement. Such employees and officers shall be the employees of
(LRTA) and Metro Transit Organization, Inc. (METRO), seeking the METRO and not of the AUTHORITY [LRTA]. METRO shall prepare a

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LABOR LAW 1
compensation schedule and the corresponding salaries and fringe benefits of
[its] personnel in consultation with the AUTHORITY [LRTA] [par. 3.05];
5. METRO shall likewise hold the AUTHORITY [LRTA]
free and harmless from any and all fines, penalties, losses and liabilities and
litigation expenses incurred or suffered on account of and by reason of death,
injury, loss or damage to passengers and third persons, including the
employees and representatives of the AUTHORITY [LRTA], except where
such death, injury, loss or damage is attributable to a defect or deficiency in
the design of the system or its equipment [par. 3.06].
Pursuant to the above Agreement, petitioner METRO hired its own
employees, including herein private respondents. Petitioner METRO
thereafter entered into a collective bargaining agreement with Pinag-
isang Lakas ng Manggagawa sa METRO, Inc. National Federation of Labor,
otherwise known as PIGLAS-METRO, INC. NFL KMU (Union), the
certified exclusive collective bargaining representative of the rank-and-file
employees of petitioner METRO.
Meanwhile, on June 9, 1989, petitioners LRTA and METRO executed a
Deed of Sale where petitioner LRTA purchased the shares of stocks in
petitioner METRO.[2] However, petitioners LRTA and METRO continued
with their distinct and separate juridical personalities. Hence, when the above
ten (10)-year Agreement expired on June 8, 1994, they renewed the same,
initially on a yearly basis, and subsequently on a monthly basis.
On July 25, 2000, the Union filed a Notice of Strike with the National
Conciliation and Mediation Board National Capital Region against petitioner
METRO on account of a deadlock in the collective bargaining
negotiation. On the same day, the Union struck. The power supply switches
in the different light rail transit substations were turned off. The members of
the Union picketed the various substations. They completely paralyzed the
operations of the entire light rail transit system. As the strike adversely
affected the mobility of the commuting public, then Secretary of
Labor Bienvenido E. Laguesma issued on that same day an assumption of
jurisdiction order[3] directing all the striking employees to return to work
immediately upon receipt of this Order and for the Company to accept them
back under the same terms and conditions of employment prevailing prior to
the strike.[4]
In their memorandum,[5] Department of Labor and Employment Sheriffs
Feliciano R. Orihuela, Jr., and Romeo P. Lemi reported to
Sec. Laguesma that they tried to personally serve the Order of assumption of
jurisdiction to the Union through its officials and members on July 26, 2000,
but the latter refused to receive the same. The sheriffs thus posted the Order
in the different stations/terminals of the light rail transit system. Further, the
Order of assumption of jurisdiction was published on the July 27, 2000 issues
of the Philippine Daily Inquirer[6] and the Philippine Star.[7]
Despite the issuance, posting, and publication of the assumption of
jurisdiction and return to work order, the Union officers and members,
including herein private respondent workers, failed to return to work. Thus,
effective July 27, 2000, private respondents, Perfecto Venus,
Jr., Bienvenido P. Santos, Jr., Rafael C. Roy, Nancy C. Ramos, Salvador
A. Alfon, Noel R. Santos, Manuel A. Ferrer, Salvador G. Alinas, Ramon
D. Lofranco, Amador H. Policarpio, Reynaldo B. Gener,
and Bienvenido G. Arpilleda, were considered dismissed from employment.
In the meantime, on July 31, 2000, the Agreement for the Management and
Operation of the Metro Manila Light Rail Transit System between petitioners
LRTA and METRO expired. The Board of Directors of petitioner LRTA
decided not to renew the contract with petitioner METRO and directed the
LRTA management instead to immediately take over the management and
operation of the light rail transit system to avert the mass transportation
crisis.
On October 10, 2000, private respondents Venus, Jr., Santos, Jr., and Roy
filed a complaint for illegal dismissal before the National Labor Relations
Commission (NLRC) and impleaded both petitioners LRTA and
METRO. Private respondents
Ramos, Alfon, Santos, Ferrer, Alinas, Lofranco, Policarpio, Gener,
and Arpilleda follwed suit on December 1, 2000.
On October 1, 2001, Labor Arbiter Luis D. Flores rendered a consolidated
judgment in favor of the private respondent workers[8]
WHEREFORE, judgment is hereby rendered in favor of the complainants
and against the respondents, as follows:
1. Declaring that the complainants were illegally dismissed from
employment and ordering their reinstatement to their former positions
without loss of seniority and other rights and privileges.
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LABOR LAW 1

2. Ordering respondents Metro Transit Organization, Inc. and On December 3, 2002, the NLRC denied the workers Motion for
Light Rail Transit Authority to jointly and severally pay the complainants Reconsideration [t]here being no showing that the Commission committed,
their other benefits and full backwages, which as of June 30, 2001 are as (and that) the Motion for Reconsideration was based on, palpable or patent
follows: errors, and the fact that (the) said motion is not under oath.
1. Perfecto H. Venus, Jr. P247,724.36
2. Bienvenido P. Santos, Jr. 247,724.36 On a petition for certiorari however, the Court of Appeals reversed the
3. Rafael C. Roy 247,724.36 NLRC and reinstated the Decision rendered by the Labor Arbiter. Public
4. Nancy [C.] Ramos 254,282.62 respondent appellate court declared the workers dismissal as illegal, pierced
5. Salvador A. Alfon 257,764.62 the veil of separate corporate personality and held the LRTA and METRO as
6. Noel R. Santos 221,897.58 jointly liable for back wages.
7. Manuel A. Ferrer 250,534.78
8. Salvador G. [Alinas] 253,454.88 Hence, these twin petitions for review on certiorari of the decision of public
9. Ramon D. Lofranco 253,642.18 respondent appellate court filed by LRTA and METRO which this Court
10. Amador H. Policarpio 256,609.22 eventually consolidated.
11. Reynaldo B. Gener 255,094.56
TOTAL P2,746,453.52 In the main, petitioner LRTA argues that it has no employer-employee
relationship with private respondent workers as they were hired by petitioner
3. Ordering respondents Metro Transit Organization, Inc. and METRO alone pursuant to its ten (10)-year Agreement for the Management
Light Rail Transit Authority to jointly and severally pay each of the and Operation of the Metro Manila Light Rail Transit System with petitioner
complainants the amount of P50,000.00 as moral damages. METRO. Private respondent workers recognized that their employer was not
petitioner LRTA when their certified exclusive collective bargaining
4. Ordering respondents Metro Transit Organization, Inc. and representative, the Pinag-isang Lakas ng Manggagawa sa METRO, Inc.
Light Rail Transit Authority to jointly and severally pay the complainants National Federation of Labor, otherwise known as PIGLAS-METRO, INC.
attorneys fees equivalent to ten percent (10%) of the total money judgment. NFL KMU, entered into a collective bargaining agreement with petitioner
METRO. Piercing the corporate veil of METRO was unwarranted, as there
SO ORDERED. was no competent and convincing evidence of any wrongful, fraudulent or
unlawful act on the part of METRO, and, more so, on the part of LRTA.

The complaint filed by Bienvenido G. Arpilleda, although initially
consolidated with the main case, was eventually dropped for his failure to
appear and submit any document and position paper.[9]
On May 29, 2002, on appeal, the NLRC found that the striking workers
failed to heed the return to work order and reversed and set aside the decision
of the labor arbiter. The suit against LRTA was dismissed since LRTA is a
government-owned and controlled corporation created by virtue of Executive
Order No. 603 with an original charter[10] and it ha[d] no participation
whatsoever with the termination of complainants employment.[11] In fine, the
cases against the LRTA and METRO were dismissed, respectively, for lack
of jurisdiction and for lack of merit.
Petitioner LRTA further contends that it is a government-owned and
controlled corporation with an original charter, Executive Order No. 603,
Series of 1980, as amended, and thus under the exclusive jurisdiction only of
the Civil Service Commission, not the NLRC.
Private respondent workers, however, submit that petitioner METRO was not
only fully-owned by petitioner LRTA, but all aspects of its operations and
administration were also strictly controlled, conducted and directed by
petitioner LRTA. And since petitioner METRO is a mere adjunct, business
conduit, and alter ego of petitioner LRTA, their respective corporate veils
must be pierced to satisfy the money claims of the illegally dismissed private
respondent employees.

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LABOR LAW 1
We agree with petitioner LRTA. Section 2 (1), Article IX B, 1987
Constitution, expressly provides that [t]he civil service embraces all
branches, subdivisions, instrumentalities, and agencies of the Government,
including government-owned or controlled corporations with original
charters. Corporations with original charters are those which have been
created by special law and not through the general corporation law. Thus,
in Philippine National Oil Company Energy Development Corporation
v. Hon. Leogrado, we held that under the present state of the law, the test in
determining whether a government-owned or controlled corporation is
subject to the Civil Service Law is the manner of its creation such that
government corporations created by special charter are subject to its
provisions while those incorporated under the general Corporation Law are
not within its coverage.[12] There should be no dispute then that employment
in petitioner LRTA should be governed only by civil service rules, and not
the Labor Code and beyond the reach of the Department of Labor and
Employment, since petitioner LRTA is a government-owned and controlled
corporation with an original charter, Executive Order No. 603, Series of
1980, as amended.
In contrast, petitioner METRO is covered by the Labor Code despite its later
acquisition by petitioner LRTA. In Lumanta v. National Labor Relations
Commission,[13] this Court ruled that labor law claims against government-
owned and controlled corporations without original charter fall within the
jurisdiction of the Department of Labor and Employment and not the Civil
Service Commission. Petitioner METRO was originally organized under the
Corporation Code, and only became a government-owned and controlled
corporation after it was acquired by petitioner LRTA.Even then, petitioner
METRO has no original charter, hence, it is the Department of Labor and
Employment, and not the Civil Service Commission, which has jurisdiction
over disputes arising from the employment of its workers. Consequently, the
terms and conditions of such employment are governed by the Labor Code
and not by the Civil Service Rules and Regulations.
We therefore hold that the employees of petitioner METRO cannot be
considered as employees of petitioner LRTA. The employees hired by
METRO are covered by the Labor Code and are under the jurisdiction of the
Department of Labor and Employment, whereas the employees of petitioner
LRTA, a government-owned and controlled corporation with original
charter, are covered by civil service rules. Herein private respondent workers
cannot have the best of two worlds, e.g., be considered government
employees of petitioner LRTA, yet allowed to strike as private employees
under our labor laws. Department of Justice Opinion No. 108, Series of 1999,
issued by then Secretary of Justice Serafin R. Cuevas on whether or not
employees of petitioner METRO could go on strike is persuasive
We believe that METRO employees are not covered by the prohibition
against strikes applicable to employees embraced in the Civil Service. It is
not disputed, but in fact conceded, that METRO employees are not covered
by the Civil Service. This being so, METRO employees are not covered by
the Civil Service law, rules and regulations but are covered by the Labor
Code and, therefore, the rights and prerogatives granted to private
employees thereunder, including the right to strike, are available to them.
Moreover, as noted by Secretary Benjamin E. Diokno, of the Department of
Budget and Management, in his letter dated February 22, 1999, the
employees of METRO are not entitled to the government amelioration
assistance authorized by the President pursuant to Administrative Order No.
37 for government employees, because the employees of METRO are not
government employees since Metro, Inc. could not be considered as GOCC
as defined under Section 3 (b) of E.O. 518 x x x x[14]
Indeed, there was never an intention to consider the employees of petitioner
METRO as government employees of petitioner LRTA as well neither from
the beginning, nor until the end.Otherwise, they could have been easily
converted from being employees in the private sector and absorbed as
government employees covered by the civil service when petitioner LRTA
acquired petitioner METRO in 1989. The stubborn fact is that they remained
private employees with rights and prerogatives granted to them under the
Labor Code, including the right to strike, which they exercised and from
which the instant dispute arose.
We likewise hold that it is inappropriate to pierce the corporate veil of
petitioner METRO. In Del Rosario v. National Labor Relations
Commission, we ruled that [u]nder the law a corporation is bestowed
juridical personality, separate and distinct from its stockholders. But when
the juridical personality of the corporation is used to defeat public
convenience, justify wrong, protect fraud or defend crime, the corporation
shall be considered as a mere association of persons, and its responsible
officers and/or stockholders shall be held individually liable. For the same
reasons, a corporation shall be liable for the obligations of a stockholder, or a
corporation and its successor-in-interest shall be considered as one and the
liability of the former shall attach to the latter. But for the separate juridical
8
LABOR LAW 1
personality of a corporation to be disregarded, the wrongdoing must be
clearly and convincingly established. It cannot be presumed.[15] In Del
Rosario, we also held that the substantial identity of the incorporators of the
two corporations does not necessarily imply fraud.[16]
In the instant case, petitioner METRO, formerly Meralco Transit
Organization, Inc., was originally owned by the Manila Electric Company
and registered with the Securities and Exchange Commission more than a
decade before the labor dispute. It then entered into a ten-year agreement
with petitioner LRTA in 1984. And, even if petitioner LRTA eventually
purchased METRO in 1989, both parties maintained their separate and
distinct juridical personality and allowed the agreement to proceed. In 1990,
this Court, in Light Rail Transit Authority v. Commission on Audit, even
upheld the validity of the said agreement.[17] Consequently, the agreement
was extended beyond its ten-year period. In 1995, METROs separate
juridical identity was again recognized when it entered into a collective
bargaining agreement with the workers union. All these
years, METROs distinct corporate personality continued quiescently,
separate and apart from the juridical personality of petitioner LRTA.
The labor dispute only arose in 2000, after a deadlock occurred during the
collective bargaining between petitioner METRO and the workers
union. This alone is not a justification to pierce the corporate veil of
petitioner METRO and make petitioner LRTA liable to private respondent
workers. There are no badges of fraud or any wrongdoing to pierce the
corporate veil of petitioner METRO.
On this point, the Department of Justice Opinion No. 108, Series of 1999,
issued by then Secretary of Justice Serafin R. Cuevas is once again apropos:
Anent the issue of piercing the corporate veil, it was held in Concept
Builders, Inc. v. NLRC (G.R. No. 108734, May 29, 1996, 257 SCRA 149,
159) that the test in determining the applicability of the doctrine of piercing
the veil of corporate fiction is as follows:
1. Control, not mere majority or complete stock control, but complete
domination, not only of finances but of policy and business practice in
respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own;
2. Such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal duty,
or dishonest and unjust act in contravention of plaintiffs legal rights; and
3. The aforesaid control and breach of duty must proximately cause the
injury or unjust loss complained of.
The absence of any one of these elements prevents piercing the corporate
veil. In applying the instrumentality or alter ego doctrine, the courts are
concerned with reality and not form, with how the corporation operated and
the individual defendants relationship to that operation.
Here, the records do not show that control was used to commit a fraud or
wrong. In fact, it appears that piercing the corporate veil for the purpose of
delivery of public service, would lead to a confusing situation since the
outcome would be that Metro will be treated as a mere alter ego of LRTA,
not having a separate corporate personality from LRTA, when dealing with
the issue of strike, and a separate juridical entity not covered by the Civil
Service when it comes to other matters. Under the Constitution, a
government corporation is either one with original charter or one without
original charter, but never both.[18]
In sum, petitioner LRTA cannot be held liable to the employees of petitioner
METRO.
With regard the issue of illegal dismissal, petitioner METRO maintains that
private respondent workers were not illegally dismissed but should be
deemed to have abandoned their jobs after defying the assumption of
jurisdiction and return-to-work order issued by the Labor Secretary. Private
respondent workers, on the other hand, submit that they could not
immediately return to work as the light rail transit system had ceased its
operations.
We find for the private respondent
workers. In Batangas Laguna Tayabas Bus Co. v. National Labor
Relations Commission,[19] we said that the five-day period for the strikers to
obey the Order of the Secretary of Justice and return to work was not
sufficient as some of them may have left Metro Manila and did not have
enough time to return during the period given by petitioner, which was only
five days.[20] In Batangas Laguna Tayabas Bus Co.,[21] we further held
9
LABOR LAW 1

The contention of the petitioner that the private respondents abandoned their
position is also not acceptable. An employee who forthwith takes steps to
protest his lay-off cannot by any logic be said to have abandoned his work.

For abandonment to constitute a valid cause for termination of employment,

there must be a deliberate, unjustified refusal of the employee to resume his
employment. This refusal must be clearly established. As we stressed in a
recent case, mere absence is not sufficient; it must be accompanied by overt
acts unerringly pointing to the fact that the employee simply does not want to
work anymore.
In the instant case, private respondent workers could not have defied the
return-to-work order of the Secretary of Labor simply because they were
dismissed immediately, even before they could obey the said order. The
records show that the assumption of jurisdiction and return-to-work order
was issued by Secretary of Labor Bienvenido E. Laguesma on July 25,
2000. The said order was served and posted by the sheriffs of the Department
of Labor and Employment the following day, on July 26, 2000. Further, the
said order of assumption of jurisdiction was duly published on July 27, 2000,
in the Philippine Daily Inquirer and the Philippine Star. On the same day
also, on July 27, 2000, private respondent workers were dismissed. Neither
could they be considered as having abandoned their work. If petitioner
METRO did not dismiss the strikers right away, and instead accepted them
back to work, the management agreement between petitioners LRTA and
METRO could still have been extended and the workers would still have had
work to return to.

IN VIEW WHEREOF, the Decision of public respondent Court of Appeals

is AFFIRMED insofar as it holds Metro Transit Organization, Inc. liable for
the illegal dismissal of private respondents and orders it to pay them their
benefits and full back wages and moral damages. Further, Metro Transit
Organization, Inc. is ordered to pay attorneys fees equivalent to ten percent
(10%) of the total money judgment. The petition of the Light Rail Transit
Authority is GRANTED, and the complaint filed against it for illegal
dismissal is DISMISSED for lack of merit.

SO ORDERED.

10
LABOR LAW 1
3.) Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 110187 September 4, 1996
JOSE G. EBRO III, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION,
INTERNATIONAL CATHOLIC MIGRATION COMMISSION, JON
DARRAH, ALEX DY-REYES, CARRIE WILSON, and MARIVIC
SOLIVEN, respondents.
MENDOZA, J.:
This is a petition for certiorari to set aside the order dated October 13, 1992
and the resolution dated March 3, 1993 of the National Labor Relations
Commission (NLRC). 1
The antecedent facts are as follows:
Private respondent International Catholic Migration Commission (ICMC) is
a non-profit agency engaged in international humanitarian and voluntary
work. It is duly registered with the United National Economic and Social
Council (ECOSOC) and enjoys Consultative Status, Category II. It was one
of the agencies accredited by the Philippine Government to operate the
refugee processing center at Sabang, Morong, Bataan.
On June 24, 1985, private respondent ICMC employed petitioner Jose G.
Ebro III to teach "English as a Second Language and Cultural Orientation
Training Program" at the refugee processing center. The employment
contract provided in pertinent part:
Salary: Your monthly salary for the first 6 months probationary period is
P3,155.00 inclusive of cost of living allowance. Upon being made regular
after successful completion of the six (6) months probationary period your
monthly salary will be adjusted to P3,445.00 inclusive of cost of living
allowance
xxx xxx xxx
Termination of Employment: Employment may be terminated by ICMC in
any of the following situations:
a A cessation or reduction in program operations, by Department of State
order,
b. Unsuccessful completion of probationary period, at any time during that
period,
c For due cause, in cases of violation of provisions detailed in ICMC
Personnel Policies and administrative regulations,
d. For just and authorized causes expressly provided for or authorized by
law,
e. For reasons of inadequate or deficient professional performance based on
relevant guidelines and procedures relating to the position,
f. In cases where, as a member of the PRPC community, ICMC is directed to
take action.
If either party wishes to terminate employment, a notice of two (2) weeks
should be given in writing to the party.
After six months, ICMC notified petitioner that effective December 21, 1985,
the latter's services were terminated for his failure to meet the requirements
of "1. classroom performance . . . up to the standards set in the Guide for
Instruction; 2. regular attendance in the mandated teacher training, and in the
schedule team meetings, one-on-one conferences with the supervisor, etc.;
and 3. compliance with ICMC and PRPC policies and procedures."
On February 4, 1986, petitioner filed a complaint for illegal dismissal, unfair
labor practice, underpayment of wages, accrued leave pay, 14th month pay,
damages, attorney's fees., and expenses of litigation. The complaint was filed
against private respondents ICMC and its Project Director Jon Darrah,
Personnel Officer Alex Dy-Reyes, Program Officer of the Cultural
Orientation Program Carrie Wilson, and Supervisor of the Cultural
Orientation Program Marivic Soliven. Petitioner alleged that there was no
objective evaluation of his performance to warrant his dismissal and that he
should have been considered a regular employee from the start because
ICMC failed to acquaint him with the standards under which he must qualify
as such. He prayed for reinstatement with backwages; P3,155.00 for
probationary and P3,445.00 for regular salary adjustments; value of lodging
or dormitory privileges; cost of insurance coverage for group life, medical,
death, dismemberment and disability benefits; moral, and exemplary, and
nominal damages plus interest on the above claims with attorney's fees.
11
LABOR LAW 1
Answering the complaint, ICMC claimed that petitioner failed to quality for
regular employment because he showed no interest in improving his
professional performance both in and out of the classroom after he had been
periodically evaluated (observation summary from August 20 to October 2,
1985 and evaluation summary of December 14, 1985); that petitioner was
paid his salary up to December 31, 1985, two weeks pay in lieu of notice,
and 14th month pay pro-rata; and that his accrued leave balance already been
converted to cash.
After the parties had formally offered their evidence, private respondents
submitted their memorandum on July 31, 1989 in which, among other things,
they invoked ICMC's diplomatic immunity on the basis of the Memorandum
of Agreement signed on July 15, 1988 between the Philippines government
and ICMC.
The Labor Arbiter held that petitioner's legal immunity under the
Memorandum could not be given retroactive effect since "[that would]
deprive complainant's property right without due process and impair the
obligation of contract of employment." In addition, he expressed doubt about
petitioner's legal immunity on the ground that it was provided for by
agreement and not through an act of Congress. Accordingly, the Labor
Arbiter ordered ICMC to reinstate petitioner as regular teacher without loss
of seniority rights and to pay him one year backwages, other benefits, and ten
percent attorney's fees for a total sum of P70,944.85.
Both parties appealed to the NLRC. On August 13, 1990, petitioner moved to
dismiss private respondent's appeal because of the latter's failure to post a
cash/surety bond. In its order of October 13, 1992, however, the NLRC
ordered the case dismissed on the ground that, under the Memorandum of
Agreement between the Philippine government and ICMC, the latter was
immune from suit.
Petitioner moved for reconsideration, arguing among other things, that the
Memorandum of Agreement could not be given retroactive effect and that in
any case ICMC had waived its immunity by consenting to be sued.
However, petitioner's motion was denied by the NLRC in its resolution dated
March 4, 1993. 2 Hence this petitioner presenting the following issues:
a) Whether private respondents have perfected their appeal and whether
public respondent may, on appeal, entertain or review private respondents'
claim of immunity;
b) Whether a mere Memorandum of Agreement entered into by the Secretary
of Foreign Affairs with respondent International Catholic Migration
Commission, which is not a law, can divest the Labor Arbiter and the
National Labor Relations Commission of their jurisdiction over the subject
matter and over the persons of respondents in the pending case;
c) Whether the Memorandum of Agreement may be given retroactive effect;
d) Whether the dismissal of the based on the claim of immunity will deprive
petitioner of his property without due process of law;
e) Whether the dismissal of the case based on the claim of immunity will
result in the impairment of the obligations assumed by respondent
International Catholic Migration Commission under its contract of
employment with petitioner;
f) Assuming for the sake of argument that the Memorandum of Agreement
has validly conferred immunity on private respondent's whether they may be
considered as having waived such immunity;
g) Upon the same consideration, whether private respondents may be
considered estopped from claiming immunity.
The basic issue in this case is whether the Memorandum of Agreement
executed on July 15, 1988 ICMC immunity from suit. The Court holds it did.
Consequently, both the Labor Arbiter and the NLRC had no jurisdiction over
the case.
First. Petitioner's contention that the Memorandum of Agreement is not an
act of Congress which is needed to "repeal or supersede" the provision of the
Labor Code on the jurisdiction of the NLRC and of the Labor Arbiter is
untenable. The grant of immunity to ICMC is in virtue of the Convention on
the Privileges and Immunities of Specialized Agencies of the United Nations,
adopted by the UN General Assembly on November 21, 1947, and concurred
in by the Philippine Senate on May 17, 1949. This Convention has the force
and effect of law, considering that under the Constitution, the Philippines
adopts the generally accepted principles of international law as part of the
law of the land. 3 The Memorandum of Agreement in question merely carries
out the Philippine government's obligation under the Convention.
In International Catholic Migration Commission v. Calleja, 4 this Court
explained the grant of immunity to ICMC in this wise:
12
LABOR LAW 1
The grant of immunity from local jurisdiction to ICMC . . . is clearly
necessitated by their international character and respective purposes. The
objective is to avoid the danger of partiality and interference by the host
country in their internal workings. The exercise of jurisdiction by the
Department of Labor in these instances would defeat the very purpose of
immunity, which is to shield the affairs of international organizations, in
accordance with international practice, from political pressure or control by
the host country to the prejudice of member State of the organization, and to
ensure the unhampered performance of their functions.
Second. Petitioner argues that in any case ICMC's immunity can not apply
because this case was filed below before the signing of the Memorandum on
July 15, 1988. Petitioner cites in support the statement of this Court in the
aforesaid case of International Catholic Migration Commission
v. Calleja, 5 distinguishing that case from an earlier case 6 also involving
ICMC, wherein the NLRC, as well as the Court, took cognizance of a
complaint against ICMC for payment of salary for the unexpired portion of a
six-month probationary. The Court held: 7
[N]ot only did the facts of said controversy [ICMC v. NLRC, 169 SCRA 606
(1989)] occur between 1983-1985, or before the grant to ICMC on 15 July
1988 of the status of a specialized agency with corresponding immunities,
but also because ICMC in that case did not invoke its immunity and,
therefore, may be deemed to have waived it, assuming that during that period
(1983-1985) it was tacitly recognized as enjoying such immunity.
Here, according to petitioner, his employment and subsequent dismissal by
ICMC took place in 1985, prior to the execution of the Memorandum of
Agreement on July 15, 1988 and, therefore, like in the 1989 ICMC case, the
Memorandum should not be made to apply to him.
This Court did not really reject ICMC's invocation of immunity for causes of
action accruing prior to the execution of the Memorandum. It left open the
possibility that ICMC may have been tacitly enjoying diplomatic immunity
beforehand. It is important to note that in the 1989 case ICMC did not invoke
its immunity notwithstanding the fact that the Memorandum took effect
while the case was pending before the Court. 8
Moreover, in the 1990 ICMC case, ICMC's immunity was in fact upheld
despite the fact that at the case arose, the Memorandum recognizing ICMC's
status as a specialized agency had not yet been signed. In that case, the
petition for certification election among its rank and file employees was filed
on July 14, 1986 and the order directing a certification election was made
when ICMC's request for recognition as a specialized agency was still
pending in the Department of Foreign Affairs. Yet this Court held that the
subsequent execution of the Memorandum was a bar to the granting of the
petition for certification election.
The scope of immunity of the ICMC contained in the Convention on the
Privileges and Immunities of the Specialized Agencies of the United Nations
is instructive. Art. III, §4 of the Convention provides for immunity from
"every form of legal process." Thus, even if private respondents had been
served summons and subpoenas prior to the execution of the Memorandum,
they, as officers of ICMC, can claim immunity under the same in order to
prevent enforcement of an adverse judgment, since a writ of execution is "a
legal process" within the meaning of Article III, §4. 9
Third. Another question is whether ICMC can invoke its immunity because it
only did so in its memorandum before the Labor Arbiter. It is contended that
ICMC waived its immunity in any event. Art III §4 of the Convention on the
Privileges and Immunities of the Specialized Agencies of the United Nations
requires, however, that the waiver of the privilege must be express. There
was no such waiver of immunity in this case. Nor can ICMC be estopped
from claiming diplomatic immunity since estoppel does not operate to confer
jurisdiction to a tribunal that has none over a cause of action. 10
Fourth. Finally, neither can it be said that recognition of ICMC's immunity
from suit deprives petitioner of due process. As pointed out in International
Catholic Commission v. Calleja, 11 petitioner is not exactly without remedy
for whatever violation of rights it may have suffered for the following
reason:
Section 31 of the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations provides that "each specialized
agency shall make provision for appropriate modes of settlement of: (a)
disputes arising out of contracts or other disputes of private character to
which the specialized agency is a party." Moreover, pursuant to Article IV of
the Memorandum of Agreement between ICMC and the Philippine
Government, whenever there is any abuse of privilege by ICMC, the
Government is free to withdraw the privileges and immunities accorded.
Thus:
Article IV. Cooperation with Government Authorities. —1. The Commission
shall cooperate at all times with the appropriate authorities of the
13
LABOR LAW 1

Government to ensure the observance of Philippine laws, rules and

regulations, facilitate the proper administration of justice and prevent the
occurrences of any abuse of the privileges and immunities granted is officials
and alien employees in Article III of this Agreement of the Commission.

2. In the event that the Government determines that there has been an abuse
of the privileges and immunities granted under this Agreement, consultations
shall be held between the Government and the Commission to determine
whether any such abuse has occurred and, if so, the Government shall
withdraw the privileges and immunities granted the Commission and its
officials.

WHEREFORE, the petitioner is DISMISSED for lack of merit.

SO ORDERED.

14
LABOR LAW 1
4.) FIRST DIVISION
[G.R. No. 125039. November 20, 1998]
NATIONAL MINES AND ALLIED WORKERS UNION (NAMAWU),
JULIETA ARROYO, AGNES DE GUZMAN, CARMELITA
RAYMUNDO, SAMMY ISRAEL, GUILLERMO DELA CRUZ,
NESTOR VALLESTEROS, NOEL ARANDA, DANIEL RESTORIA,
TEODORO CATUIRA, MARCELITA SIERVO, CECILIA OLDAN,
LEO RIO, MELINDA ODISTE, EMERITA DELA CRUZ, ARMINA
DAGAR, CORAZON GALVEZ, BELEN BUAN, REMEDIOS
VASQUEZ, MORENA VELGADO, MA. LUISA AMICAN, MARILOU
CANELAS, ANALYN JESUSA, and DIVINA BERNARDO, petitioners,
vs. SAN ILDEFONSO COLLEGE-RVM
SISTERS ADMINISTRATION; SISTER MARIAAURORA LLOREN,
(RVM Directress); and THE NATIONAL LABOR RELATIONS
COMMISSION (NLRC), respondent.
DECISION
DAVIDE, JR., J.:
In this petition for certiorari under Rule 65 of the Rules of Court, petitioners
seek to set aside the decision[1] of the National Labor Relations Commission
(NLRC) in NLRC Case No. RAB-IV-4-3710-91-RI and its
resolution[2] denying the motion for reconsideration.
Petitioner National Mines and Allied Workers Union (NAMAWU) is the
certified bargaining agent of the rank and file employees of private
respondent San Ildefonso College (hereafter COLLEGE). Petitioner Juliet
Arroyo (hereafter ARROYO) was the president of the San Ildefonso College
Association of Faculty and Personnel (SICAFP), an affiliate of
NAMAWU. The remaining petitioners were teachers and employees of the
COLLEGE. Private respondent Sister Maria Aurora Lloren is the directress
of the COLLEGE.
In February 1991, ARROYO, a tenured teacher who later became a part-time
teacher, asked that she be allowed to teach on a full-time basis.[3] The
COLLEGE, however, denied her request for her failure to make use of the
privilege of her study leave in the two years she was allowed to do so.[4] The
following month, the other individual petitioners, who were issued yearly
appointments, were informed of the non-renewal of their respective
contracts.
In April 1991, the SICAFP was formalized into a labor union and affiliated
with NAMAWU.
On 11 April 1991, the individual petitioners and NAMAWU filed a
complaint[5] for illegal dismissal, unfair labor practice, forced resignation,
harassment, underpayment of wages, non-payment of service incentive leave
pay, and violation of Wage Order No. IV-1. They demanded reinstatement
and payment of back wages and other monetary claims. The complaint was
subsequently amended to include tenure pay as an additional claim.[6]
On 15 April 1991, NAMAWU filed a petition for certification
election.[7] The COLLEGE did not oppose the petition. A certification
election was held, and NAMAWU was chosen as the bargaining agent of the
rank and file employees.
Later, or on 27 May 1991, the individual petitioners wrote private
respondents indicating their desire to return to work, but private respondents
refused to take them back.
No amicable settlement having been reached by the parties, they filed the
required position papers, and the labor arbiter conducted trial on the merits.
Three of the complainants testified on their behalf: ARROYO, Teodoro
Catuira, and Agnes de Guzman. Private respondents presented their sole
witness, Dolores Matienzo.
The individual petitioners asserted that they were regular employees for
having rendered service for more than a year. They were thus entitled to
security of tenure notwithstanding the annual renewal of their contract with
the COLLEGE.
15
LABOR LAW 1
The COLLEGE maintained otherwise, claiming that the individual
petitioners, with the exception of ARROYO, were either part-time or
probationary employees who had each rendered less than three years of
service. Their contracts of employment were for a fixed period, the renewal
of which were always subject to their respective performance. Their last
employment contract indicated the expiration in March 1991. For the school
year 1991-1992, the COLLEGE chose not to renew their contract, and
petitioners were individually notified thereof. In the case of ARROYO, the
COLLEGE maintained that while she had served for more than three years
and was thus a permanent employee, she lost that status when she requested
to teach on a part-time basis to enable her to complete her masters
degree. The COLLEGE acted within its rights when it refused to renew the
fixed year-to-year contracts of the individual petitioners; it cannot, therefore,
be held guilty of illegal dismissal or unfair labor practice.
The COLLEGE further asserted that all money claims due the individual
petitioners had been paid even beyond the amount prescribed by law. The
minimum daily wage was then P89.00 or an aggregate of P1,943.16 a
month.Petitioners were receiving a monthly pay of at least P1,994.00 for a
regular five-day-work week, with the exclusion of Saturdays and
Sundays. Upon the effectivity of Wage Order No. IV-01, they were entitled
to an increase of P327.50, which the COLLEGE could not then afford.
Nonetheless, each individual petitioner was eventually paid P2,229.25, an
amount higher than what was due them, through the Government Assistance
to Private Education. Anent the tenure pay, the COLLEGE contended that
the individual petitioners were not entitled to such pay because they were not
tenured teachers. It refused payment for the service incentive leave pay, since
all the individual petitioners had availed of their service incentive leave.
In his decision of 12 April 1994,[8] Labor Arbiter Pedro Ramos made the
following findings of fact:
Complainants used to be the part-time or probationary employees teaching in
the different departments of the respondent school, whose names, date hired,
date terminated and salary received are, as follows:
1. AGNES DE GUZMAN
- Appointed as college teacher on a part-time basis effective June 1988 to
October 1988 with monthly basic salary and LA integrated - P520.65;
- appointed as college teacher on part-time basis effective November 1988 to
March 1989 with a monthly basic salary of P1,041.24;
- appointed as college teacher on part-time basis effective June 1989 to
October 1989 with a monthly basic pay of P1,205.04;
- appointed as college teacher on a part-time basis effective November 1989
to March 1990 with a monthly basic pay of P1,506.40;
- appointed as college teacher on part-time basis effective June 1990 to
October 1990 with a monthly basic pay of P1,542.10;
appointed as college teacher on a part-time basis effective Nov. 5, 1990 to
March 31, 1991, with a monthly basic pay of P1,233.68;
2. JULIETA ARROYO
- from June 1, 1965 worked on permanent status up to March 1988;
- appointed as college teacher on a part-time basis effective June 1988 up to
March 27, 1991.
3. TEODORO CATUIRA
- appointed as High School Teacher on a probationary status effective June
1989 to March 1990 with a monthly basic pay of P1,944.00;
- appointed as classroom teacher on a probationary status effective June 1990
to March 1991 with a monthly basic pay of P1,9[9]4.00 with additional load
or part of SAC paid in the amount of P315.10 or a total of P2,309.10;
4. SAMMY ISRAEL
- appointed as a college teacher on a part-time basis effective June 1989 to
October 1989 with a basic pay of P308.00 per subject;
- appointed as a college teacher on a part-time status effective Nov. 1989 to
March 1990 with a basic pay of P895.71;
- appointed as a college [teacher] on a part-time basis effective November 5,
1990 to March 31, 1991 with a basic pay of P1,222.84 with additional load
paid in the amount of P611.42 or a total of P1,834.26;
5. CARMELITA RAYMUNDO
- appointed as a college teacher on a part-time basis effective June 1988 to
October 1988 with a basic pay and LA integrated [of] P776.60;
16
LABOR LAW 1
- appointed as a college teacher on a part-time status effective Nov. 1989 to
March 1990 with a basic pay of P1,434.25;
- appointed as a college teacher on a part-time basis effective November 5,
1990 to March 31, 1991 with a basic pay of P1,542.86 with additional load;
6. [MARCELITA] SIERVO
- appointed as H.E. teacher on a part-time basis effective June 1990 to March
1991 with a basic pay of P864.84;
7. NESTOR VALLESTERO
- appointed as H.E. teacher on a part-time basis effective June 1990 to March
1991 with a basic pay of P875.13;
8. REMEDIOS VASQUEZ
- appointed as a Grade School Teacher on a probationary status effective
March 1989 to June 1990 with a basic pay of P1,974.00;
- appointed as classroom teacher on a probationary status effective June 1990
to March 1991 with a basic pay of P1,994.00 plus P30.00 for advisory;
9. CORAZON GALVEZ
- appointed as grade school teacher on a probationary status effective June
1989 to March 1990 with a basic pay of P1,944.00 plus P30.00 as advisory;
- appointed as classroom teacher on a probationary status effective June 1990
to March 1991 with a basic pay of P1,9[9]4.00 plus P30.00 as advisory;
10. LUISA AMICAN
- appointed as classroom teacher on a probationary status effective June 1990
to March 1991 with a basic pay of P1,994.00 plus P30.00 as advisory;
11. MARILOU CANELAS
- appointed as Grade School Teacher on a probationary status effective June
1989 to March 1990 with basic pay of P1,944.00 plus P30.00 for advisory;
- appointed as classroom teacher on a probationary status effective June 1990
to March 1991 with a basic pay of P1,994.00 plus P30.00 for advisory;
12. MORENA VELGADO
- appointed as classroom teacher on a probationary status effective June 1990
to March 1991 with a basic pay of P1,994.00 plus P30.00 for advisory;
13. EMERITA DE LA CRUZ
- appointed as classroom teacher on a probationary status effective June 1990
to March 1991 with a basic pay of P1,994.00 plus P115.00 for advisory,
and P284.70 for additional load;
14. LEO RIO
- appointed as classroom teacher on a probationary status effective June 1990
to March 1991 with a basic pay of P1,994.00 plus P115.00 as advisory
and P284.70 as additional load;
15. CECILIA OLDAN
- appointed as classroom teacher on a probationary status effective June 1990
to March 1991 with a basic pay of P1,994.00 plus P115.00 as advisory;
16. MELINDA ODISTE
- appointed as a classroom teacher on a full-time basis effective June 1988 to
March 1989 with a basic pay with LA integrated [of] P1,398.00 plus P30.00
as advisory pay and P222.72 for additional load or a total of P1,650.72;
- appointed as High School Teacher on a probationary status effective June
1989 to March 1990 with a basic pay of P1,958.00 plus P30.00 as advisory
pay and P70.00 as catechral in-charge or a total of P2,058.00;
- appointed as High School Teacher on a probationary status effective June
1990 to March 1991 with a basic pay of P2,008.00 plus P115.00 for
advisory, P47.71 for additional load and P200.00 [for] other assignments;
17. GUILLERMO DE LA CRUZ
- appointed as college teacher on a part-time basis effective June 1990 to
March 1991 with a basic pay of P308.00 per subject;
18. BELEN BUAN
- appointed as classroom teacher on a probationary status from June 1, 1988
up to March 11, 1991, with the last basic pay of P2,006.00/mo.;
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LABOR LAW 1

19. ANALYN JESUSA
- appointed as classroom teacher on a probationary status from June 1, 1988
up to March 11, 1991, with latest basic pay of P1,994.00/mo.
The other five [sic] individual complainants, namely: Nel Aranda, Daniel
Retoria, Armina Dagar and Divina Bernando did not sign the complaint and
[are] therefore not included as complainants.
1. Declaring the respondents guilty of unfair labor practice and/or illegal
dismissal, as charged;
2. Ordering the criminal prosecution of respondent Directress S. Ma. Aurora
Lloren for having committed unfair labor practice;
3. Ordering the respondents to cease and desist from further committing the
unfair labor practice complained of;

The Labor Arbiter held that private respondents were guilty of illegal
dismissal, as well as unfair labor practice in interfering with the organization
of the individual petitioners labor union. The contracts of employment in
question were not bilateral agreements, but rather letters of appointment.
When the COLLEGE opted not to renew the appointments it merely invoked
the expiration of the period fixed in the appointments without giving any
other reason or granting the teachers concerned an opportunity to explain
their side. The probationary employees were not even informed of their
performance rating when they were denied renewal of their
appointments. The non-renewal of the appointments was timely made while
the individual petitioners were in the process of organizing themselves into a
union, affiliating with NAMAWU, and preparing a petition for certification
election. These acts of the COLLEGE amounted to union busting.
4. Ordering the respondents to reinstate all the complainants to their former
positions without loss of seniority rights and other privileges, under the same
terms and conditions obtaining at the time of their separation from the
service, either physically or in the payroll, at the option of the respondents,
immediately upon receipt of this decision;
5. Ordering the respondents to pay the full back wages of all the
complainants from date of illegal separation from the service and up to actual
reinstatement, computed partially from School Year 1991-1992 up to School
Year 1993-1994, in the amounts indicated below;
6. Ordering the respondents to pay the complainants their salary differentials
under R.A. 6727 and Wage Order No. IV-01 in the amount computed below:

As to the underpayment of the minimum wage and the corresponding salary COMPUTATION OF AWARDS
adjustments under Wage Order No. IV-01, the Labor Arbiter found the A. PART-TIME TEACHERS: BACK WAGES R.A. 6727 & W.O.
computation of the COLLEGE erroneous, since it was based on the
compensation of an employee paid on a daily basis. The individual IV -01 SALARY
petitioners were all paid monthly, which required a different computation.
With the proper computation, i.e., by considering the number of days in a DIFFERENTIALS
month and not the actual number of working days, they were entitled to a
differential pay.

But, as to the incentive leave pay, the Labor Arbiter agreed with the
COLLEGE that the individual petitioners were no longer entitled to such
pay, it being a common practice in educational institutions that teachers were
given a Christmas vacation beyond five days with pay. This was sufficient
compliance with the law.

The labor arbiter then decreed as follows:

WHEREFORE, in view of all the foregoing considerations, judgment is

hereby rendered, as follows:

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LABOR LAW 1

1. Agnes de Guzman P37,010.40 - PROBATIONARY BACK WAGES R.A. 6727 5. Belen [Buan] 103,344.00 15,094.00
& W.0.
2. Julieta Arroyo 9,630.00 - 6. Analyn Jesusa 103,344.00 15,094.00
TEACHERS: IV-01 SALARY
3. Sammy Israel 36,685.20 - 7. Luisa Amican 103,344.00 8,560.00
DIFFERENTIALS
4. Carmelita Raymundo 46,285.80 - 8. Morena Velgado 103,344.00 8,560.00
1. Teodoro Catuira P103,344.00 P15,094.00
5. M[a]rcelita Siervo 25,945.20 - 9. Emerita de la Cruz 103,344.00 8,560.00
2. Remedios Vasquez 103,344.00 15,094.00
6. Nestor Vallesteros 26,253.90 - 10. Leo Rio 103,344.00 8,560.00
3. Corazon Galvez 103,344.00 15,094.00
7. Guillermo de la Cruz 9,240.00 - 11. [Cecilia] Oldan 103,344.00 8,560.00
4. Marilou Canelas 103,344.00 15,094.00
T O T A L P191,050.50 12. [Melinda] Odiste 103,344.00 21,135.00
T O T A L P1,240,128.00 P154,499.00 proper party, since she was not hired as a teacher but as a secretary;
moreover, she had already received her separation pay.[10]
or a Grand Total of ONE MILLION FOUR HUNDRED THIRTY-ONE
THOUSAND ONE HUNDRED SEVENTY EIGHT & 50/100 PESOS As to ARROYO, while the NLRC clarified that she did not abandon her
(P1,431,178.50). permanent status when she requested to teach on a part-time basis, she was
terminated from work for cause. Her failure to prove that she actually
NOTE: Computation of salary differentials under R.A. 6727 and W.O. No. pursued a masters degree during her two-year study leave was a breach of the
IV-01 refers only to Probationary Teachers who were paid on monthly basis. trust and confidence reposed upon her by the COLLEGE. Under the rules
and regulations of the Manila Archdiocese and Parochial School Association,
Part-Time Teachers paid per subject are not included in the computation for of which the COLLEGE was a member, her lack of a masters degree was a
lack of sufficient datas [sic], like rate per subject and hours of work, etc. valid ground for dismissal.
7. Dismissing the claim for incentive leave pay for lack of merit. The NLRC upheld the COLLEGEs computation of the basic salary which
On appeal, the NLRC reversed the decision of the Labor Arbiter and was based on the actual number of working days. It cited the case of
dismissed the complaint. It declared that the individual petitioners, with the Philippine Air Lines Employees Association (PALEA) v. Philippine Air
exception of ARROYO, were not regular employees and, therefore, not Lines, Inc. (PAL),[11] where we ruled that the number of off days are not to
protected by the law on security of tenure. It cited our decision in University be counted because the employees are not required to work on said days.
of Sto. Tomas v. NLRC,[9] where we referred to the Manual of Regulations Finally, the NLRC absolved the COLLEGE and Sister Lloren of unfair labor
for Private Schools in determining when a private school teacher could be practice, for it was not clearly established that the individual petitioners were
deemed a permanent employee and therefore be entitled to security of dismissed because of their union activities. On the contrary, the COLLEGE
tenure. We ruled that a permanent status can only be acquired by a full-time did not even oppose the petition for certification election.
teacher who has rendered three consecutive years of satisfactory service. In
the instant case, the individual petitioners, except ARROYO, were hired Their motion for reconsideration having been denied,[12] petitioners filed the
either on a part-time or probationary basis. Their contract was for a fixed instant petition. They claim that the NLRC committed grave abuse of
period. Besides, they were not able to render service for three consecutive discretion in finding that the COLLEGE and Sister Lloren were not guilty of
years. As to petitioner Analyn Jesusa, the NLRC held that she was not a illegal dismissal and unfair labor practice, and in not awarding them salary
differentials.

19
LABOR LAW 1
The private respondents fully agree with the NLRC. They also clarify that
petitioners Noel Aranda, Daniel Restoria, Armina Dagar, Divina Bernardo,
and Analyn Jesusa are no longer proper parties. In the Labor Arbiters
decision, the first four petitioners were dropped as complainants for their
failure to sign the complaint. Petitioners never questioned this ruling, which
therefore became final. As to Jesusa, the NLRC excluded her as a
complainant after a finding that she was hired as a secretary, and not as a
teacher of the COLLEGE, and that she had already received her separation
pay.
The Office of the Solicitor General (OSG) moves for the dismissal of the
petition except as to ARROYO. It maintains that all the individual
petitioners, except ARROYO, were legally dismissed. As to ARROYO, it
submits that the reason why she failed to complete her masters degree could
not be solely attributed to her. She initially requested a leave of absence, but
the COLLEGE suggested that she teach on a part-time basis because it was in
need of teachers at that time. The evidence also indicate that her dismissal
was without due process. With regard to the individual petitioners claim for
salary differential, the same is not warranted, as the computation adopted by
the COLLEGE which excluded Saturdays and Sundays was correct.
In its own comment, the NLRC moves for the dismissal of the petition and
asserts that its challenged decision is supported by the applicable laws and
jurisprudence. Anent the contrary position taken by the OSG with respect to
ARROYO, it alleges that ARROYO was afforded an opportunity to prove
that she actually completed her masters degree; she, however, chose not to. It
underscores the fact that a masters degree was a prerequisite before she could
be considered a regular teacher.
It must be noted at the outset that, as pointed out by the private respondents,
five of the named petitioners - Noel Arandia, Daniel Restoria, Armina Dagar,
Divina Bernardo, and Analyn Jesusa - are no longer proper parties in this
petition because their exclusion as complainants below had never been
questioned and had therefore become final.
We agree with the OSG that the individual petitioners, with the exception of
ARROYO, were legally dismissed.
The charge of unfair labor practice was not substantiated by sufficient
evidence. Other than the allegations that the non-renewal of petitioners
appointment coincided with the period they were campaigning for the
transformation of their association into a union and that among those
dismissed were the president, vice president, and secretary of the union, no
substantial evidence was offered to clearly show that the COLLEGE
committed acts to prevent the exercise of the employees right to self-
organization.
It is not disputed that the individual petitioners appointments were not
renewed after the expiration thereof in March 1991. It was only in the
following month that the union was formally formed and affiliated with
NAMAWU, and the petition for certification election was filed. The record
shows that the notices of non-renewal were received on March 27 and April
3, 1991.[13] Besides, petitioners failed to controvert the COLLEGEs claim
that the appointments of other teachers who were union members were
renewed. Likewise, the COLLEGE did not oppose the petition for
certification election.
On the issue of whether the individual petitioners were permanent
employees, it is the Manual of Regulations for Private Schools, and not the
Labor Code, which is applicable. This was settled in University of Sto.
Tomas v. NLRC,[14] where we explicitly ruled that for a private school
teacher to acquire permanent status in employment and, therefore, be entitled
to security of tenure, the following requisites must concur: (1) the teacher is a
full-time teacher; (2) the teacher must have rendered three (3) consecutive
years of service; and (3) such service must have been satisfactory.[15]
Eleven of the individual petitioners were full-time teachers during the school
year 1990-1991,[16] but only two, namely, Odiste and Buan had rendered
three consecutive years of service. There is no showing, however, that the
two were on a full-time basis during those three years and that their services
were satisfactory. Evidently, not one of the said teachers can be considered to
have acquired a permanent status.
As to ARROYO, it is undisputed that she had been teaching in the
COLLEGE since 1965 and had obtained a permanent status; she became a
part-time teacher, however, from June 1988 to March 1991.
We are not persuaded by private respondents argument that ARROYO lost
her permanent status when she requested to teach on a part-time basis. The
reason for the request was that she wanted to pursue a masters degree. The
COLLEGE approved the request, and the study leave was extended for
another year. It would have been unjust and unreasonable to allow ARROYO
to pursue her masters degree, from which the COLLEGE would have also
benefited in terms of her higher learning and experience, and at the same
20
LABOR LAW 1
time penalize her with the loss of permanent status. It would as well be
absurd and illogical to maintain that by teaching on a part-time basis after
obtaining the permission to take up a masters degree, ARROYO relinquished
her permanent status.
When ARROYO subsequently requested that she continue teaching on a full-
time basis, private respondents in its letter of 27 March 1991 refused, citing
as reason her failure to make use of the privilege granted [her] by the
administration regarding [her] study leave in the past four semesters. This
letter served as notice of ARROYOs termination from employment. No
further notice was served. It must be emphasized that the letter did not
indicate that a masters degree was necessary for ARROYO to continue her
service, as now claimed by the COLLEGE. In fact, apart from its mere
allegation, the COLLEGE failed to prove that a masters degree was a
prerequisite for ARROYOs teaching position. ARROYO, a permanent
teacher, could only be dismissed for just cause and only after being afforded
due process,[17] in light of paragraph (b), Article 277 of the Labor Code.[18]
It is well-settled that the due process contemplated by the law requires twin
notices. The first notice apprises the employee of the particular acts or
omissions for which his dismissal is sought, which may be loosely
considered as the proper charge; while the second informs the employee of
the employer's decision to dismiss him. The latter must come only after the
employee is given a reasonable period from receipt of the first notice within
which to answer the charge, and ample opportunity to be heard and defend
himself with the assistance of his representative, if he so desires.[19]
ARROYOs dismissal was substantively and procedurally flawed. It was
effected without just cause and due process. Consequently, her termination
from employment was void. She is, therefore, entitled to reinstatement to her
former position without loss of seniority rights and other privileges, full back
wages inclusive of allowances, and other benefits or their monetary
equivalent computed from the date of her actual dismissal to the date of
actual reinstatement.[20]
As to the issue of minimum wage under R.A. No. 6727 and Wage Order No.
IV-01, we see no reason to depart from the ruling of the NLRC. This case is
analogous to that of PALEA v. PAL.[21] One of the issues involved therein
was the computation of the basic daily wage of the airlines monthly-salaried
employees. In resolving this issue, we ruled that off-days are rest days for the
worker. Since he is not required to work on such days, he cannot demand
corresponding pay. Should he work on an off-day, our labor laws reward him
with a premium higher than what he receives when he works on his regular
working day. It follows that the divisor in computing his basic daily wage
should be the actual working days in a year. The number of off-days is not to
be counted precisely because he is not required to work on said days.[22]
Section 6 of the Rules Implementing R.A. No. 6727 prescribes the formula in
computing the monthly minimum wage. The individual petitioners belong to
the category of paragraph (d) thereof, which states:
For those who do not work and are not considered paid on Saturdays and
Sundays or rest days:
EMR [Equivalent Monthly Rate] = ADR [Average Daily Wage Rate] x 262
days
12
Where 262 days =
250 days - ordinary working days
10 days - Regular holidays
2 days - Special days (If considered paid; If actually worked, this is
equivalent to 2.6 days)
________
262 days - Total equivalent number of days
Applied to the individual petitioners who were on a full-time basis and were
receiving a monthly salary of P1,994 as against the then applicable minimum
wage of P1,943.16, we see no violation of R.A. No. 6727.
Neither was there a violation of Wage Order No. IV-01, which increased the
daily minimum wage by P15.00. The delayed adjustment given by the
COLLEGE to comply with that Wage Order was sufficient compliance with
the law. Applying the formula prescribed in paragraph (d), Section 6 of the
Implementing Rules of R.A. No. 6727, the individual petitioners who were
full-time teachers were entitled to a salary increase of P327.50, starting 7
November 1990 when Wage Order No. IV-01 took effect until March 1991
when their respective contracts of employment expired. When computed, the
salary differential due each of them amounts to P1,637.50. The record shows
21
LABOR LAW 1

that each full-time teacher was belatedly paid a lump sum

of P2,011.14,[23] higher than what was due them.

The record further shows that the petitioners who were part-time teachers
were paid certain amounts. However, as held by the Labor Arbiter, they
cannot be awarded salary differentials for lack of sufficient data, like rate per
subject and hours of work.

WHEREFORE, the decision of the National Labor Relations Commission

in NLRC Case No. RAB-IV-4-3710-91-RI is AFFIRMED, subject to the
modification that private respondent San Ildefonso College is DIRECTED to
(1) reinstate petitioner JULIETA ARROYO to her former position at the time
of her dismissal, or to any equivalent position if reinstatement to such
position is no longer feasible, without loss of seniority rights and benefits
that may be due her; and (2) pay her back wages from the date of her actual
dismissal to the date of her actual reinstatement.

No pronouncement as to costs.

SO ORDERED

22
LABOR LAW 1
5.) FIRST DIVISION
[G.R. No. 119930. March 12, 1998]
INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION (Fourth Division, Cebu City),
LABOR ARBITER NICASIO P. ANINON and PANTALEON DE LOS
REYES, respondents.
DECISION
BELLOSILLO, J.:
On 17 June 1994 respondent Labor Arbiter dismissed for lack of jurisdiction
NLRC RAB-VII Case No. 03-0309-94 filed by private respondent Pantaleon
de los Reyes against petitioner Insular Life Assurance Co., Ltd. (INSULAR
LIFE), for illegal dismissal and nonpayment of salaries and back wages after
findings no employer-employee relationship between De los Reyes and
petitioner INSULAR LIFE.[1] On appeal by private respondent, the order of
dismissal was reversed by the National Labor Relations Commission
(NLRC) which ruled that respondent De los Reyes was an employee of
petitioner.[2] Petitioners motion for reconsideration having been denied, the
NLRC remanded the case to the Labor Arbiter for hearing on the merits.
Seeking relief through this special civil action for certiorari with prayer for a
restraining order and/or preliminary injunction, petitioner now comes to us
praying for annulment of the decision of respondent NLRC dated 3 March
1995 and its Order dated 6 April 1995 denying the motion for
reconsideration of the decision. It faults NLRC for acting without jurisdiction
and/or with grave abuse of discretion when, contrary to established facts and
pertinent law and jurisprudence, it reversed the decision of the Labor Arbiter
and held instead that the complaint was properly filed as an employer-
employee relationship existed between petitioner and private respondent.
Petitioner reprises the stand it assumed below that it never had any employer-
employee relationship with private respondent, this being an express
agreement between them in the agency contracts, particularly reinforced by
the stipulation therein de los Reyes was allowed discretion to devise ways
and means to fulfill his obligations as agent and would be paid commission
fees based on his actual output. It further insists that the nature of this work
status as described in the contracts had already been squarely resolved by the
Court in the earlier case of Insular Life Assurance Co., Ltd. v. NLRC and
Basiao [3]where the complainant therein, Melecio Basiao, was similarly
situated as respondent De los Reyes in that he was appointed first as an agent
and then promoted as agency manager, and the contracts under which he was
appointed contained terms and conditions Identical to those of De los Reyes.
Petitioner concludes that since Basiao was declared by the Court to be an
independent contractor and not an employee of petitioner, there should be no
reason why the status of De los Reyes herein vis--vis petitioner should not be
similarly determined.
We reject the submissions of petitioner and hold that respondent NLRC acted
appropriately within the bounds of the law. The records of the case are
replete with telltale indicators of an existing employer-employee relationship
between the two parties despite written contractual disavowals.
These facts are undisputed: on 21 August 1992 petitioner entered into an
agency contract with respondent Pantaleon de los Reyes[4] authorizing the
latter to solicit within the Philippines applications for life insurance and
annuities for which he would be paid compensation in the form of
commissions. The contract was prepared by petitioner in its entirety and De
los Reyes merely signed his conformity thereto. It contained the stipulation
that no employer-employee relationship shall be created between the parties
and that the agent shall be free to exercise his own judgment as to time, place
and means of soliciting insurance. De los Reyes however was prohibited by
petitioner from working for any other life insurance company, and violation
of this stipulation was sufficient ground for termination of the contract. Aside
from soliciting insurance for the petitioner, private respondent was required
to submit to the former all completed applications for insurance within ninety
(90) consecutive days, deliver policies, receive and collect initial premiums
and balances of first year premiums, renewal premiums, deposits on
applications and payments on policy loans. Private respondent was also
bound to turn over to the company immediately any and all sums of money
collected by him. In a written communication by petitioner to respondent De
los Reyes, the latter was urged to register with the Social Security System as
a self-employed individual as provided under PD No. 1636.[5]
On 1 March 1993 petitioner and private respondent entered into another
contract[6]where the latter was appointed as Acting Unit Manager under its
office the Cebu DSO V (157). As such, the duties and responsibilities of De
los Reyes included the recruitment, training, organization and development
within his designated territory of a sufficient number of qualified, competent
and trustworthy underwriters, and to supervise and coordinate the sales
efforts of the underwriters in the active solicitation of new business and in
the furtherance of the agencys assigned goals. It was similarly provIded in
23
LABOR LAW 1
the management contract that the relation of the acting unit manager and/or
the agents of his unit to the company shall be that of independent contractor.
If the appointment was terminated for any reason other than for cause, the
acting unit manager would be reverted to agent status and assigned to any
unit. As in the previous agency contract, De los Reyes together with his unit
force was granted freedom to exercise judgment as to time, place and means
of soliciting insurance. Aside from being granted override commissions, the
acting unit manager was given production bonus, development allowance
and a unit development financing scheme euphemistically termed financial
assistance consisting of payment to him of a free portion of P300.00 per
month and a valIdate portion of P1,200.00. While the latter amount was
deemed as an advance against expected commissions, the former was not and
would be freely given to the unit manager by the company only upon
fulfillment by him of certain manpower and premium quota requirements.
The agents and underwriters recruited and trained by the acting unit manager
would be attached to the unit but petitioner reserved the right to determine if
such assignment would be made or, for any reason, to reassign them
elsewhere.
Aside from soliciting insurance, De los Reyes was also expressly obliged to
participate in the companys conservation program, i.e., preservation and
maintenance of existing insurance policies, and to accept moneys duly
receipted on agents receipts provided the same were turned over to the
company. As long as he was unit manager in an acting capacity, De los
Reyes was prohibited from working for other life insurance companies or
with the government. He could not also accept a managerial or supervisory
position in any firm doing business in the Philippines without the written
consent of petitioner.
Private respondent worked concurrently as agent and Acting Unit Manager
until he was notified by petitioner on 18 November 1993 that his services
were terminated effective 18 December 1993. On 7 March 1994 he filed a
complaint before the Labor Arbiter on the ground that he was illegally
dismissed and that he was not paid his salaries and separation pay.
Petitioner filed a motion to dismiss the complaint of De los Reyes for lack of
jurisdiction, citing the absence of employer-employee relationship. it
reasoned out that based on the criteria for determining the existence of such
relationship or the so-called four-fold test, i.e., (a) selection and engagement
of employee, (b) payment of wages, (c) power of dismissal, and, (d) power of
control, De los Reyes was not an employee but an independent contractor.
On 17 June 1994 the motion of petitioner was granted by the Labor Arbiter
and the case was dismissed on the ground that the element of control was not
sufficiently established since the rules and guidelines set by petitioner in its
agency agreement with respondent De los Reyes were formulated only to
achieve the desired result without dictating the means or methods of
attaining it.
Respondent NLRC however appreciated the evidence from a different
perspective. It determined that respondent De los Reyes was under the
effective control of petitioner in the critical and most important aspects of his
work as Unit Manager. This conclusion was derived from the provisions in
the contract which appointed private respondent as Acting Unit Manager, to
wit: (a) De los Reyes was to serve exclusively the company, therefore, he
was not an independent contractor; (b) he was required to meet certain
manpower and production quota; and, (c) petitioner controlled the
assignment to and removal of soliciting agents from his unit.
The NLRC also took into account other circumstances showing that
petitioner exercised employers prerogatives over De los Reyes, e.g., (a)
limiting the work of respondent De los Reyes to selling a life insurance
policy known as Salary Deduction Insurance only to members of the
Philippine National Police, public and private school teachers and other
employees of private companies; (b) assigning private respondent to a
particular place and table where he worked whenever he has not in the field;
(c) paying private respondent during the period of twelve (12) months of his
appointment as Acting Unit Manager the amount of P1,500.00 as Unit
Development Financing of which 20% formed his salary and the rest, i.e.,
80%, as advance of his expected commissions; and (d) promising that upon
completion of certain requirements, he would be promoted to Unit Manager
with the right of petitioner to revert him to agent status when warranted.
Parenthetically, both petitioner and respondent NLRC treated the agency
contract and the management contract entered into between petitioner and De
los Reyes as contracts of agency. We however hold otherwise.
Unquestionably there exist major distinctions between the two agreements.
While the first has the earmarks of an agency contract, the second is far
removed from the concept of agency in that provided therein are
conditionalities that indicate an employer-employee relationship. the NLRC
therefore was correct in finding that private respondent was an employee of
petitioner, but this holds true only insofar as the management contract is
concerned. In view thereof, he Labor Arbiter has jurisdiction over the case.
24
LABOR LAW 1
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 agreement clearly show otherwise. For, the employment status
of a person is defined and prescribed by law and not by what the parties say
it should be.[7] In determining the status of the management contract, the
four-fold test on employment earlier mentioned has to be applied.
Petitioner contends that De los Reyes was never required to go through the
pre-employment procedures and that the probationary employment status
was reserved only to employees of petitioner. On this score, it insists that the
first requirement of selection and engagement of the employee was not met.
A look at the provisions of the contract shows that private respondent was
appointed as Acting Unit Manager only upon recommendation of the District
Manager.[8] This indicates that private respondent was hired by petitioner
because of the favorable endorsement of its duly authorized officer. But, this
approbation could only have been based on the performance of De los Reyes
with petitioner was nothing more than a trial or probationary period for his
eventual appointment as Acting Unit Manager of petitioner. Then, again, the
very designation of the appointment of private respondent as acting unit
manager obviously implies a temporary employment status which may be
made permanent only upon compliance with company standards such as
those enumerated under Sec. 6 of the management contract.[9]
On the matter of payment of wages, petitioner points out that respondent was
compensated strictly on commission basis, the amount of which was totally
dependent on his total output. But, the managers contract speaks differently.
Thus
4. Performance Requirements.- To maintain your appointment as Acting Unit
Manager you must meet the following manpower and production
requirements:
Quarter Active Calendar Year
Production Agents Cumulative FYP
Production
1ST 2 P125,000
2ND 3 250,000
3RD 4 375,000
4TH 5 500,000
5.4 Unit Development Financing (UDF). As an Acting Unit Manager you
shall be given during the first 12 months of your appointment a financial
assistance which is composed of two parts:
5.4.1 Free Portion amounting to P300 per month, subject to your meeting
prescribed minimum performance requirement on manpower and premium
production. The free portion is not payable by you.
5.4.2 Validate Portion amounting to P1,200 per month, also subject to
meeting the same prescribed minimum performance requirements on
manpower and premium production. The valIdated portion is an advance
against expected compensation during the UDF period and thereafter as may
be necessary.
The above provisions unquestionably demonstrate that the performance
requirement imposed on De los Reyes was applicable quarterly while his
entitlement to the free portion (P300) and the validated portion (P1,200)
was monthly starting on the first month of the twelve (12) months of the
appointment. Thus, it has to be admitted that even before the end of the first
quarter and prior to the so-called quarterly performance evaluation, private
respondent was already entitled to be paid both the free and validated
portions of the UDF every month because his production performance could
not be determined until after the lapse of the quarter involved. This indicates
quite clearly that the unit managers quarterly performance had no bearing at
all on his entitlement at least to the free portion of the UDF which for all
intents and purposes comprised the salary regularly paid to him by petitioner.
Thus it cannot be validly claimed that the financial assistance consisting of
the free portion of the UDF was purely dependent on the premium
production of the agent. Be that as it may, it is worth considering that the
payment of compensation by way of commission does not militate against
the conclusion that private respondent was an employee of petitioner. Under
Art. 97 of the Labor Code, wage shall mean however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time,
task, price or commission basis x x x x [10]
As to the matter involving the power of dismissal and control by the
employer, the latter of which is the most important of the test, petitioner
asserts that its termination of De los Reyes was but an exercise of its inherent
right as principal under the contracts and that the rules and guIdelines it set
25
LABOR LAW 1
forth in the contract cannot, by any stretch of imagination, be deemed as an
exercise of control over the private respondent as these were merely
directives that fixed the desired result without dictating the means or method
to be employed in attaining it. The following factual findings of the
NLRC[11] however contradict such claims:
A perusal of the appointment of complainant as Acting Unit Manager reveals
that:
1. Complainant was to exclusively serve respondent company. Thus it is
provIded: x x x 7..7 Other causes of Termination: This Appointment may
likewise be terminated for any of the following causes: x x x 7..7..2. Your
entering the service of the government or another life insurance company;
7..7..3. Your accepting a managerial or supervisory position in any firm
doing business in the Philippines without the written consent of the
Company; x x x
2. Complainant was required to meet certain manpower and
production quotas.
3. Respondent (herein petitioner) controlled the assignment and removal of
soliciting agents to and from complainants unit, thus: x x x 7..2. Assignment
of Agents: Agents recruited and trained by you shall be attached to your unit
unless for reasons of Company policy, no such assignment should be made.
The Company retains the exclusive right to assign new soliciting agents
appointed and assigned to the saId unit x x x x
It would not be amiss to state the respondents duty to collect the companys
premiums using company receipts under Sec. 7.4 of the management contract
is further evIdence of petitioners control over respondent, thus:
xxxx
7.4 Acceptance and Remittance of Premiums. x x x x the Company hereby
authorizes you to accept and receive sums of money in payment of
premiums, loans, deposits on applications, with or without interest, due from
policy holders and applicants for insurance, and the like, specially from
policyholders of business solicited and sold by the agents attached to your
unit provIded however, that all such payments shall be duly receipted by you
on the corresponding Companys Agents Receipt to be provIded you for this
purpose and to be covered by such rules and accounting regulations the
Company may issue from time to time on the matter. Payments received by
you shall be turned over to the Companys designated District or Service
Office clerk or directly to the Home Office not later than the next working
day from receipt thereof x x x x
Petitioner would have us apply our ruling in Insular Life Assurance Co., Ltd.
v. NLRC and Basiao [12] to the instant case under the doctrine of stare decisis,
postulating that both cases involve parties similarly situated and facts which
are almost Identical.
But we are not convinced that the cited case is on all fours with the case at
bar. In Basiao, the agent was appointed Agency Manager under an Agency
Manager Contract. To implement his end of the agreement, Melecio Basiao
organized an agency office to which he gave the name M. Basiao and
Associates. The Agency Manager Contract practically contained the same
terms and conditions as the Agency Contract earlier entered into, and the
Court observed that drawn from the terms of the contract they had entered
into, (which) either expressly or by necessary implication, Basiao (was)
made the master of his own time and selling methods, left to his own
judgment the time, place and means of soliciting insurance, set no
accomplishment quotas and compensated him on the bases of results
obtained. He was not bound to observe any schedule of working hours or
report to any regular station; he could seek and work on his prospects
anywhere and anytime he chose to and was free to adopt the selling methods
he deemed most effective. Upon these premises, Basiao was considered as
agent an independent contractor of petitioner INSULAR LIFE.
Unlike Basiao, herein respondent De los Reyes was appointed Acting Unit
Manager, not agency manager. There is not evidence that to implement his
obligations under the management contract, De los Reyes had organized an
office. Petitioner in fact has admitted that it provIded De los Reyes a place
and a table at its office where he reported for and worked whenever he was
not out in the field. Placed under petitioners Cebu District Service Office, the
unit was given a name by petitioner De los Reyes and Associates and
assigned Code No. 11753 and Recruitment No. 109398. Under the
managership contract, De los Reyes was obliged to work exclusively for
petitioner in life insurance solicitation and was imposed premium
production quotas. Of course, the acting unit manager could not underwrite
other lines of insurance because his Permanent Certificate of Authority was
for life insurance only and for no other. He was proscribed from accepting a
managerial or supervisory position in any other office including the
government without the written consent of petitioner. De los Reyes could
only be promoted to permanent unit manager if he met certain requirements
and his promotion was recommended by the petitioners District Manager and
26
LABOR LAW 1

Regional Manager and approved by its Division Manager. As Acting Unit

Manager, De los Reyes performed functions beyond mere solicitation of
insurance business for petitioner. As found by the NLRC, he exercised
administrative functions which were necessary and beneficial to the business
of INSULAR LIFE.

In Great Pacific Life Insurance Company v. NLRC[13] which is closer in

application that Basiao to this present controversy, we found that the
relationships of the Ruiz brothers and Grepalife were those of employer-
employee. First, their work at the time of their dismissal as zone supervisor
and district manager was necessary and desirable to the usual business of the
insurance company. They were entrusted with supervisory, sales and other
functions to guard Grepalifes business interests and to bring in more clients
to the company, and even with administrative functions to ensure that all
collections, reports and data are faithfully brought to the company x x x x A
cursory reading of their respective functions as enumerated in their contracts
reveals that the company practically dictates the manner by which their jobs
are to be carried out x x x x We need elaborate no further.

Exclusivity of service, control of assignments and removal of agents under

private respondents unit, collection of premiums, furnishing of company
facilities and materials as well as capital described as Unit Development
Fund are but hallmarks of the management system in which herein private
respondent worked. This obtaining, there is no escaping the conclusion that
private respondent Pantaleon de los Reyes was an employee of herein
petitioner.

WHEREFORE, the petition of Insular Life Assurance Company, Ltd., is

DENIED and the Decision of the National Labor Relations Commission
dated 3 March 1995 and its Order of 6 April 1996 sustaining it are
AFFIRMED. Let this case be REMANDED to the Labor Arbiter a quo who
is directed to hear and dispose of this case with deliberate dispatch in light of
the views expressed herein.

SO ORDERED.

27
LABOR LAW 1

6.) SECOND DIVISION

ANGELITO L. LAZARO, G.R. No. 138254 Lazaro denied that Laudato was a sales supervisor of Royal Star, averring
Proprietor of Royal Star instead that she was a mere sales agent whom he paid purely on commission
Marketing, Present: basis.Lazaro also maintained that Laudato was not subjected to
Petitioner, definite hours and conditions of work. As such, Laudato could not be deemed
PUNO, an employee of Royal Star.[5]
Chairman,
- versus - AUSTRIA-MARTINEZ, After the parties submitted their respective position papers, the SSC
CALLEJO, SR., promulgated a Resolution[6] dated 8 November 1995 ruling in favor of
TINGA, and Laudato.[7] Applying the control test, it held that Laudato was an employee of
CHICO-NAZARIO, Royal Star, and ordered Royal Star to pay the unremitted social security
SOCIAL SECURITY COMMISSION, Members. ROSALINA contributions of Laudato in the amount of Five Thousand Seven Pesos and
LAUDATO, SOCIAL Thirty Five Centavos (P5,007.35), together with the penalties totaling
SECURITY SYSTEM and THE Twenty Two Thousand Two Hundred Eighteen Pesos and Fifty Four
HONORABLE COURT OF Centavos (P22,218.54). In addition, Royal Star was made liable to pay
APPEALS, damages to the SSC in the amount of Fifteen Thousand Six Hundred Eighty
Respondents. Promulgated: Pesos and Seven Centavos (P15,680.07) for not reporting Laudato for social
security coverage, pursuant to Section 24 of the Social Security Law.[8]
July 30, 2004
After Lazaros Motion for Reconsideration before the SSC was
denied,[9] Lazaro filed a Petition for Review with the Court of Appeals.
Lazaro reiterated that Laudato was merely a sales agent who was paid purely
DECISION on commission basis, not included in the company payroll, and who neither
observed regular working hours nor accomplished time cards.
TINGA, J.:
In its assailed Decision, the Court of Appeals noted that Lazaros arguments
Before us is a Petition for Review under Rule 45, assailing the Decision[1] of were a reprise of those already presented before the SSC.[10] Moreover,
the Court of Appeals Fifteenth Division[2] in CA-G.R. Sp. No. 40956, Lazaro had not come forward with particulars and specifics in his petition to
promulgated on 20 November 1998, which affirmed two rulings of the Social show that the Commissions ruling is not supported by substantial
Security Commission (SSC) dated 8 November 1995 and 24 April 1996. 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
Private respondent Rosalina M. Laudato (Laudato) filed a petition before the Security Law.
SSC for social security coverage and remittance of unpaid monthly social
security contributions against her three (3) employers. Among the Before this Court, Lazaro again insists that Laudato was not qualified for
respondents was herein petitioner Angelito L. Lazaro (Lazaro), proprietor of social security coverage, as she was not an employee of Royal Star, her
Royal Star Marketing (Royal Star), which is engaged in the business of income dependent on a generation of sales and based on commissions.[12] It is
selling home appliances.[3] Laudato alleged that despite her employment as argued that Royal Star had no control over Laudatos activities, and that under
sales supervisor of the sales agents for Royal Star from April of 1979 to the so-called control test, Laudato could not be deemed an employee.[13]
March of 1986, Lazaro had failed during the said period, to report her to the
SSC for compulsory coverage or remit Laudatos social security It is an accepted doctrine that for the purposes of coverage under the Social
contributions.[4] Security Act, the determination of employer-employee relationship warrants

28
LABOR LAW 1
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.
Lazaros 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]
Lazaros 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
commission basis 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 Laudatos 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 SSCs 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
Lazaros 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 Lazaros argument.
29
LABOR LAW 1

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 jockeys 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.

30
LABOR LAW 1
7.) [G.R. No. 118101. September 16, 1996]
EDDIE DOMASIG, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION (SECOND DIVISION), CATA GARMENTS
CORPORATION and/or OTTO ONG and CATALINA
CO, respondents.
DECISION
PADILLA, J.:
This petition for certiorari under Rule 65 of the Rules of Court seeks to
nullify and set aside the Resolution[1] of respondent National Labor Relations
Commission (NLRC) rendered on 20 September 1994remanding the records
of the case to the arbitration branch of origin for further proceedings.
The antecedent facts as narrated by public respondent in the assailed
resolution are as follows:
The complaint was instituted by Eddie Domasig against respondents Cata
Garments Corporation, a company engaged in garments business and its
owner/manager Otto Ong and Catalina Co for illegal dismissal, unpaid
commission and other monetary claim[s]. Complainant alleged that he started
working with the respondent on July 6, 1986 as Salesman when the company
was still named Cato Garments Corporation; that three (3) years ago, because
of a complaint against respondent by its workers, it changed its name to Cata
Garments Corporation; and that on August 29, 1992, he was dismissed when
respondent learned that he was being pirated by a rival corporation which
offer he refused. Prior to his dismissal, complainant alleged that he was
receiving a salary of P1,500.00 a month plus commission. On September 3,
1992 he filed the instant complaint.
Respondent denied complainants claim that he is a regular employee
contending that he is a mere commission agent who receives a commission
of P5.00 per piece of article sold at regular price and P2.50 per piece sold in
[sic] bargain price; that in addition to commission, complainant received a
fixed allowance of P1,500.00 a month; that he had no regular time schedule;
and that the company come [sic] into existence only on September 17,
1991. In support of its claim that complainant is a commission agent,
respondent submitted as Annexes B and B-1 the List of Sales Collections,
Computation of Commission due, expenses incurred, cash advances received
for the month of January and March 1992 (Rollo pp. 22-27). Respondent
further contends that complainant failed to turn over to the respondent his
collection from two (2) buyers as per affidavit executed by these buyers
(Rollo pp. 28-29) and for which, according to respondent it initiated criminal
proceedings against the complainant.
The Labor Arbiter held that complainant was illegally dismissed and entitled
to reinstatement and backwages as well as underpayment of salary; 13th
month pay; service incentive leave and legal holiday. The Arbiter also
awarded complainant his claim for unpaid commission in the amount
of P143,955.00.[2]
Private respondents appealed the decision of the labor arbiter to public
respondent. As aforesaid, the NLRC resolved to remand the case to the labor
arbiter for further proceeding. It declared as follows:
We find the decision of the Labor Arbiter not supported by evidence on
record. The issue of whether or not complainant was a commission agent was
not fully resolved in the assailed decision. It appears that the Labor Arbiter
failed to appreciate the evidences submitted by respondent as Annexes B and
B-1 (Rollo pp. 22-27) in support of its allegation as regard[s] the nature of
complainants employment. Neither is there a showing that the parties were
required to adduce further evidence to support their respective claim. The
resolution of the nature of complainants employment is vital to the case at
bar considering that it would be determinative to his entitlement of monetary
benefits. The same is similarly true as regard the claim [sic] for unpaid
commission. The amount being claim [sic] for unpaid commission as big as it
is requires substantial proof to establish the entitlement of the complainant to
the same. We take note of the respondents claim that while they admit that
complainant has an unpaid commission due him, the same is only for his
additional sale of 4,027 pieces at regular price and 1,047 pieces at bargain
price for a total sum of (P20,135.00 + 2,655.00) or P22,820.00 as appearing
in the list of Sales and unpaid commission (Annex C and C-1'
Appeal, Rollo pp. 100-102). Said amount according to respondent is being
withheld by them pending the accounting of money collected by complainant
from his two (2) buyers which was not remitted to them. Considering the
conflicting version of the parties regarding the issues on hand, it was
incumbent on the Labor Arbiter to conduct further proceedings thereon. The
ends of justice would better be served if both parties are given the
opportunity to ventilate further their positions.[3]
In their comment on the petition at bar, private respondents agree with the
finding of the NLRC that the nature of petitioners employment with private
respondents is vital to the case as it will determine the monetary benefits to
31
LABOR LAW 1
which he is entitled. They further aver that the evidence presented upon
which the labor arbiter based her decision is insufficient, so that the NLRC
did not commit grave abuse of discretion in remanding the case to the
arbitration branch of origin for further proceedings.
The comment of the Solicitor General is substantially the same as that of
private respondents, i.e., there is no sufficient evidence to prove employer-
employee relationship between the parties. Furthermore, he avers that the
order of the NLRC to the labor arbiter for further proceedings does not
automatically translate to a protracted trial on the merits for such can be
faithfully complied with through the submission of additional documents or
pleadings only.
The only issue to be resolved in this petition is whether or not the NLRC
gravely abused its discretion in vacating and setting aside the decision of the
labor arbiter and remanding the case to the arbitration branch of origin for
further proceedings.
In essence, respondent NLRC was not convinced that the evidence presented
by the petitioner, consisting of the identification card issued to him by private
respondent corporation and the cash vouchers reflecting his monthly salaries
covering the months stated therein, settled the issue of employer-employee
relationship between private respondents and petitioner.
It has long been established that in administrative and quasi-judicial
proceedings, substantial evidence is sufficient as a basis for judgment on the
existence of employer-employee relationship. No particular form of evidence
is required to prove the existence of such employer-employee
relationship. Any competent and relevant evidence to prove the relationship
may be admitted.[4]
Substantial evidence has been defined to be such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, and its
absence is not shown by stressing that there is contrary evidence on record,
direct or circumstantial, for the appellate court cannot substitute its own
judgment or criterion for that of the trial court in determining wherein lies the
weight of evidence or what evidence is entitled to belief.[5]
In a business establishment, an identification card is usually provided not
only as a security measure but mainly to identify the holder thereof as a bona
fide employee of the firm that issues it. Together with the cash vouchers
covering petitioners salaries for the months stated therein, we agree with the
labor arbiter that these matters constitute substantial evidence adequate to
support a conclusion that petitioner was indeed an employee of private
respondent.
Section 4, Rule V of the Rules of Procedure of the National Labor Relations
Commission provides thus:
Section 4. Determination of Necessity of Hearing. Immediately after the
submission of the parties of their position papers/memoranda, the Labor
Arbiter shall motu propio determine whether there is need for a formal trial
or hearing.At this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to further elicit facts
or information, including but not limited to the subpoena of relevant
documentary evidence, if any, from any party or witness.
It is clear from the law that it is the arbiters who are authorized to determine
whether or not there is a necessity for conducting formal hearings in cases
brought before them for adjudication. Such determination is entitled to great
respect in the absence of arbitrariness.[6]
In the case at bar, we do not believe that the labor arbiter acted
arbitrarily. Contrary to the finding of the NLRC, her decision at least on the
existence of an employer-employee relationship between private respondents
and petitioner, is supported by substantial evidence on record.
The list of sales collection including computation of commissions due,
expenses incurred and cash advances received (Exhibits B and B-1) which,
according to public respondent, the labor arbiter failed to appreciate in
support of private respondents allegation as regards the nature of petitioners
employment as a commission agent, cannot overcome the evidence of the ID
card and salary vouchers presented by petitioner which private respondents
have not denied. The list presented by private respondents would even
support petitioners allegation that, aside from a monthly salary of P1,500.00,
he also received commissions for his work as a salesman of private
respondents.
Having been in the employ of private respondents continuously for more than
one year, under the law, petitioner is considered a regular employee. Proof
beyond reasonable doubt is not required as a basis for judgment on the
legality of an employers dismissal of an employee, nor even preponderance
of evidence for that matter, substantial evidence being
sufficient.[7] Petitioners contention that private respondents terminated his
employment due to their suspicion that he was being enticed by another firm
to work for it was not refuted by private respondents. The labor arbiters
32
LABOR LAW 1

conclusion that petitioners dismissal is therefore illegal, is not necessarily

arbitrary or erroneous. It is entitled to great weight and respect.

It was error and grave abuse of discretion for the NLRC to remand the case
for further proceedings to determine whether or not petitioner was private
respondents employee. This would only prolong the final disposition of the
complaint. It is stressed that, in labor cases, simplification of procedures,
without regard to technicalities and without sacrificing the fundamental
requisites of due process, is mandated to ensure the speedy administration of
justice.[8]

After all, Article 218 of the Labor Code grants the Commission and the labor
arbiter broad powers, including issuance of subpoena, requiring the
attendance and testimony of witnesses or the production of such
documentary evidence as may be material to a just determination of the
matter under investigation.

Additionally, the National Labor Relations Commission and the labor arbiter
have authority under the Labor Code to decide a case based on the position
papers and documents submitted without resorting to the technical rules of
evidence.[9]

However, in view of the need for further and correct computation of the
petitioners commissions in the light of the exhibits presented and the
dismissal of the criminal cases filed against petitioner, the labor arbiter is
required to undertake a new computation of the commissions to which
petitioner may be entitled, within thirty (30) days from submission by the
parties of all necessary documents.

WHEREFORE, the resolutions of the public respondent dated 20

September 1994 and 9 November 1994 are SET ASIDE. The decision of the
labor arbiter dated 19 May 1993 is REINSTATED and AFFIRMED subject
to the modification above-stated as regards a re-computation by the labor
arbiter of the commissions to which petitioner maybe actually entitled.

SO ORDERED.

33
LABOR LAW 1
8.) [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[1] and the 13 February 2003 Resolution[2] of the
Court of Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal
dismissal by the National Labor Relations Commission against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a
corporation engaged in the business of communication services and allied
activities, while respondent Ricardo De Vera is a physician by profession
whom petitioner enlisted to attend to the medical needs of its employees. At
the crux of the controversy is Dr. De Veras status vis a vis petitioner when
the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May
1981,[3] offered his services to the petitioner, therein proposing his plan of
works required of a practitioner in industrial medicine, to include the
following:
1. Application of preventive medicine including periodic check-up of
employees;
2. Holding of clinic hours in the morning and afternoon for a total of five (5)
hours daily for consultation services to employees;
3. Management and treatment of employees that may necessitate
hospitalization including emergency cases and accidents;
4. Conduct pre-employment physical check-up of prospective employees
with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative function such as accomplishing
medical forms, evaluating conditions of employees applying for sick leave of
absence and subsequently issuing proper certification, and all matters
referred which are medical in nature.
The parties agreed and formalized respondents proposal in a document
denominated as RETAINERSHIP CONTRACT[4] which will be for a
period of one year subject to renewal, it being made clear therein that
respondent will cover the retainership the Company previously had with Dr.
K. Eulau and that respondents retainer fee will be at P4,000.00 a month. Said
contract was renewed yearly.[5] The retainership arrangement went on from
1981 to 1994 with changes in the 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[6] bearing on the subject boldly 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[7] dismissing De Veras complaint for lack of merit, on the
rationale that as a retained physician under a valid contract mutually agreed
upon by the parties, De Vera was an independent contractor and that he was
not dismissed but rather his contract with [PHILCOM] ended when said
contract was not renewed after December 31, 1996.
On De Veras appeal to the NLRC, the latter, in a decision[8] dated 23 October
2000, reversed (the word used is modified) that of the 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
34
LABOR LAW 1
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,[9] Philcom then went to the Court of Appeals on a
petition for certiorari, thereat docketed as CA-G.R. SP No. 65178, imputing
grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the NLRC when it reversed the findings of the labor arbiter and
awarded thirteenth month pay and traveling allowance to De Vera even as
such award had no basis in fact and in law.
On 12 September 2002, the Court of Appeals rendered a
decision,[10] modifying that of the NLRC by deleting the award of traveling
allowance, and ordering payment of separation pay to De Vera in lieu of
reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of public
respondent, dated 23 October 2000, is MODIFIED. The award of traveling
allowance is deleted as the same is hereby DELETED. Instead of
reinstatement, private respondent shall be paid separation pay computed at
one (1) month salary for every year of service computed from the time
private respondent commenced his employment in 1981 up to the actual
payment of the backwages and separation pay. The awards of backwages and
13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was denied by the
appellate court in its resolution of 13 February 2003.[11]
Hence, 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]
35
LABOR LAW 1
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[13] well within the province of the NLRC. 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,[14] is constrained to look deeper into the attendant
circumstances obtaining in this case, as appearing on record.
In a long line of decisions,[15] the Court, in determining the existence of an
employer-employee relationship, has invariably adhered to the four-fold test,
to wit: [1] the selection and engagement of the employee; [2] the payment of
wages; [3] the power of dismissal; and [4] the power to control the
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[16] which, in full, reads:
May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company physician with
your corporation if you deemed it necessary. I have the necessary
qualifications, training and experience required by such position and I am
confident that I can serve the best interests of your employees, medically.
My plan of works and targets shall cover the duties and responsibilities
required of a practitioner in industrial medicine which includes the
following:
1. Application of preventive medicine including periodic check-up of
employees;
2. Holding of clinic hours in the morning and afternoon for a total of five (5)
hours daily for consultation services to employees;
3. Management and treatment of employees that may necessitate
hospitalization including emergency cases and accidents;
4. Conduct pre-employment physical check-up of prospective employees
with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative functions such as accomplishing
medical forms, evaluating conditions of employees applying for sick leave of
absence and subsequently issuing proper certification, and all matters
referred which are medical in nature.
On the subject of compensation for the services that I propose to render to
the corporation, you may state an offer based on your belief that I can very
well qualify for the job having worked with your organization for sometime
now.
I shall be very grateful for whatever kind attention you may extend on this
matter and hoping that it will merit acceptance, I remain
Very truly yours,
(signed)
RICARDO V. DE VERA, M.D.
Significantly, the foregoing letter was substantially the basis of the labor
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
36
LABOR LAW 1
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.[19] It
simply runs against the grain of common experience to imagine that an
ordinary employee has yet to bill his employer to receive his salary.
We note, too, that the power to terminate the parties relationship was
mutually vested on both. Either may terminate the arrangement at will, with
or without cause.[20]
Finally, remarkably absent from the parties arrangement is the element of
control, whereby the employer has reserved the right to control the employee
not only as to the result of the work done but also as to the means and
methods by which the same is to be accomplished.[21]
Here, petitioner had no control over the means and methods by which
respondent went about performing his work at the company premises. He
could even embark in the private practice of his profession, not to mention
the fact that respondents work hours and the additional compensation
therefor were negotiated upon by the parties.[22] In fine, the parties
themselves practically agreed on every terms and conditions of 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:
37
LABOR LAW 1
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
38
LABOR LAW 1

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.
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.

Had only respondent read carefully the very statutory provision invoked by
him, he would have noticed that in non-hazardous workplaces, the employer
may engage the services of a physician on retained basis. As correctly
observed by the petitioner, while it is true that the provision requires
employers to engage the services of medical practitioners in certain
establishments depending on the number of their employees, nothing is there
in the law which says that medical practitioners so engaged be actually hired
as employees,[24] adding that the law, as written, only requires the employer
to retain, not employ, a part-time physician who needed to stay in the
premises of the non-hazardous workplace for two (2) hours.[25]
Respondent takes no issue on the fact that 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.
Be that as it may, the record shows, and this is admitted by both
parties,[28] that execution of the NLRC decision had already been made at the
NLRC despite the pendency of the present recourse. For sure, accounts of
petitioner had already been garnished and released to respondent despite the
previous Status Quo Order[29] issued by this Court. To all intents and
purposes, therefore, the 60-day notice requirement has become moot and
academic if not waived by the respondent himself.
WHEREFORE, the petition is GRANTED and the challenged decision of
the Court of Appeals REVERSED and SET ASIDE. The 21 December 1998
decision of the labor arbiter is REINSTATED.
No pronouncement as to costs.
SO ORDERED.

Deeply embedded in our jurisprudence is the rule that courts may not
construe a statute that is free from doubt. Where the law is clear and
unambiguous, it must be taken to mean exactly what it says, and courts have
no choice but to see to it that the mandate is obeyed.[26] As it is, Article 157
of the Labor Code clearly and unequivocally allows employers in non-
hazardous establishments to engage on retained basis the service of a dentist
or physician. Nowhere does the law provide that the physician or dentist so
engaged thereby becomes a regular employee. The very phrase that they may
be engaged on retained basis, revolts against the idea that this engagement
gives rise to an employer-employee relationship.

With the recognition of the fact that petitioner consistently engaged the
services of respondent on a retainer basis, as shown by their various
retainership contracts, so can petitioner put an end, with or without cause, to
their retainership agreement as therein provided.[27]

39
LABOR LAW 1
10.) [G.R. No. 120466. May 17, 1999]
COCA COLA BOTTLERS PHILS., INC., petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION and RAMON B.
CANONICATO, respondents.
DECISION
BELLOSILLO, J.:
This petition for certiorari under Rule 65 of the Revised Rules of Court
assails the 3 January 1995 decision[1] of the National Labor Relations
Commission (NLRC) holding that private respondent Ramon B. Canonicato
is a regular employee of petitioner Coca Cola Bottlers Phils. Inc. (COCA
COLA) entitled to reinstatement and back wages. The NLRC reversed the
decision of the Labor Arbiter of 28 April 1994[2] which declared that no
employer-employee relationship existed between COCA COLA and
Canonicato thereby foreclosing entitlement to reinstatement and back wages.
On 7 April 1986 COCA COLA entered into a contract of janitorial services
with Bacolod Janitorial Services (BJS) stipulating[3] among others -
That the First Party (COCA COLA) desires to engage the services of the
Second Party (BJS), as an Independent Contractor, to perform and provide
for the maintenance, sanitation and cleaning services for the areas
hereinbelow mentioned, all located within the aforesaid building of the First
Party x x x x
1. The scope of work of the Second Party includes all floors, walls, doors,
vertical and horizontal areas, ceiling, all windows, glass surfaces, partitions,
furniture, fixtures and other interiors within the aforestated covered areas.
2. Except holidays which are rest days, the Second Party will undertake daily
the following: 1) Sweeping, damp-mopping, spot scrubbing and polishing of
floors; 2) Cleaning, sanitizing and disinfecting agents to be used on
commodes, urinals and washbasins, water spots on chrome and other fixtures
to be checked; 3) Cleaning of glass surfaces, windows and glass partitions
that require daily attention; 4) Cleaning and dusting of horizontal and vertical
surfaces; 5) Cleaning of fixtures, counters, panels and sills; 6) Clean, pick-up
cigarette butts from sandburns and ashtrays and trash receptacles; 7) Trash
and rubbish disposal and burning.
In addition, the Second Party will also do the following once a week, to wit:
1) Cleaning, waxing and polishing of lobbies and offices; 2) Washing of
windows, glasses that require cleaning; 3) Thorough disinfecting and
cleaning of toilets and washrooms.
3. The Second Party shall supply the necessary utensils, equipment and
supervision, and it shall only employ the services of fifteen (15) honest,
reliable, carefully screened, cooperative and trained personnel, who are in
good faith, in the performance of its herein undertaking x x x x
4. The Second Party hereby guarantees against unsatisfactory
workmanship. Minor repair of comfort rooms are free of charge provided the
First Party will supply the necessary materials for such repairs at its
expense. As may be necessary, the Second Party shall also report on such
part or areas of the premises covered by this contract which may require
repairs from time to time x x x (italics supplied).
Every year thereafter a service contract was entered into between the parties
under similar terms and conditions until about May 1994.[4]
On 26 October 1989 COCA COLA hired private respondent Ramon
Canonicato as a casual employee and assigned him to the bottling crew as a
substitute for absent employees. In April 1990 COCA COLA terminated
Canonicato's casual employment. Later that year COCA COLA availed of
Canonicato's services, this time as a painter in contractual projects which
lasted from fifteen (15) to thirty (30) days.[5]
On 1 April 1991 Canonicato was hired as a janitor by BJS[6] which assigned
him to COCA COLA considering his familiarity with its premises. On 5 and
7 March 1992 Canonicato started painting the facilities of COCA COLA and
continued doing so several months thereafter or so for a few days every time
until 6 to 25 June 1993.[7]
Goaded by information that COCA COLA employed previous BJS
employees who filed a complaint against the company for regularization
pursuant to a compromise agreement,[8] Canonicato submitted a similar
complaint against COCA COLA to the Labor Arbiter on 8 June 1993.[9] The
complaint was docketed as RAB Case No. 06-06-10337-93.
Without notifying BJS, Canonicato no longer reported to his COCA COLA
assignment starting 29 June 1993. On 15 July 1993 he sent his sister Rowena
to collect his salary from BJS.[10] BJS released his salary but advised Rowena
to tell Canonicato to report for work. Claiming that he was barred from
40
LABOR LAW 1
entering the premises of COCA COLA on either 14 or 15 July 1993,
Canonicato met with the proprietress of BJS, Gloria Lacson, who offered him
assignments in other firms which he however refused.[11]
On 23 July 1993 Canonicato amended his complaint against COCA COLA
by citing instead as grounds therefor illegal dismissal and underpayment of
wages. He included BJS therein as a co-respondent.[12] On 28 September
1993 BJS sent him a letter advising him to report for work within three (3)
days from receipt, otherwise, he would be considered to have abandoned his
job.[13]
On 28 April 1994 the Labor Arbiter ruled that: (a) there was no employer-
employee relationship between COCA COLA and Ramon Canonicato
because BJS was Canonicato's real employer; (b) BJS was a legitimate job
contractor, hence, any liability of COCA COLA as to Canonicato's salary or
wage differentials was solidary with BJS in accordance with pars. 1 and 2 of
Art. 106, Labor Code; (c) COCA COLA and BJS must jointly and severally
pay Canonicato his wage differentials amounting to P2,776.80 and his 13th
month salary of P1,068.00, including ten (10%) percent attorney's fees in the
sum of P384.48. The Labor Arbiter also ordered that all other claims by
Canonicato against COCA COLA be dismissed for lack of employer-
employee relationship; that the complaint for illegal dismissal as well as all
the other claims be likewise dismissed for lack of merit; and that COCA
COLA and BJS deposit P4,429.28 with the Department of Labor Regional
Arbitration Branch Office within ten (10) days from receipt of the
decision.[14]
The NLRC rejected on appeal the decision of the Labor Arbiter on the
ground that the janitorial services of Canonicato were found to be necessary
or desirable in the usual business or trade of COCA COLA. The NLRC
accepted Canonicato's proposition that his work with the BJS was the same
as what he did while still a casual employee of COCA COLA. In so holding
the NLRC applied Art. 280 of the Labor Code and declared that Canonicato
was a regular employee of COCA COLA and entitled to reinstatement and
payment of P18,105.10 in back wages.[15]
On 26 May 1995 the NLRC denied COCA COLA's motion for
reconsideration for lack of merit.[16] Hence, this petition, assigning as
errors: (a) NLRC's finding that janitorial services were necessary and
desirable in COCA COLA's trade and business; (b) NLRC's application of
Art. 280 of the Labor Code in resolving the issue of whether an employment
relationship existed between the parties; (c) NLRC's ruling that there was an
employer-employee relationship between petitioner and Canonicato despite
its virtual affirmance that BJS was a legitimate job contractor; (d) NLRC's
declaration that Canonicato was a regular employee of petitioner although he
had rendered the company only five (5) months of casual employment; and,
(e) NLRC's order directing the reinstatement of Canonicato and the payment
to him of six (6) months back wages.[17]
We find good cause to sustain petitioner. Findings of fact of administrative
offices are generally accorded respect by us and no longer reviewed for the
reason that such factual findings are considered to be within their field of
expertise. Exception however is made, as in this case, when the NLRC and
the Labor Arbiter made contradictory findings.
We perceive at the outset the disposition of the NLRC that janitorial services
are necessary and desirable to the trade or business of petitioner COCA
COLA. But this is inconsistent with our pronouncement in Kimberly
Independent Labor Union v. Drilon[18] where the Court took judicial notice of
the practice adopted in several government and private institutions and
industries of hiring janitorial services on an "independent contractor
basis." In this respect, although janitorial services may be considered directly
related to the principal business of an employer, as with every business, we
deemed them unnecessary in the conduct of the employer's principal
business.[19]
This judicial notice, of course, rests on the assumption that the independent
contractor is a legitimate job contractor so that there can be no doubt as to the
existence of an employer-employee relationship between contractor and the
worker. In this situation, the only pertinent question that may arise will no
longer deal with whether there exists an employment bond but whether the
employee may be considered regular or casual as to deserve the application
of Art. 280 of the Labor Code.
It is an altogether different matter when the very existence of an employment
relationship is in question. This was the issue generated by Canonicato's
application for regularization of his employment with COCA COLA and the
subsequent denial by the latter of an employer-employee relationship with
the applicant. It was error therefore for the NLRC to apply Art. 280 of the
Labor Code in determining the existence of an employment relationship of
the parties herein, especially in light of our explicit holding in Singer Sewing
Machine Company v. Drilon[20] that -
41
LABOR LAW 1
x x x x [t]he definition 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. Any agreement may provide that one party
shall render services for and in behalf of another for a consideration (no
matter how necessary for the latter's business) even without being hired as an
employee. This is precisely true in the case of an independent contractorship
as well as in an agency agreement. The Court agrees with the petitioner's
argument that Article 280 is not the yardstick for determining the existence
of an employment relationship because it merely distinguishes between two
kinds of employees, i.e., regular employees and casual employees, for
purposes of determining the right of an employee to certain benefits, to join
or form a union, or to security of tenure. Article 280 does not apply where
the existence of an employment relationship is in dispute.
In determining the existence of an employer-employee relationship it is
necessary to determine whether the following factors are present: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the
power to dismiss; and, (d) the power to control the employee's
conduct.[21] Notably, these are all found in the relationship between BJS and
Canonicato and not between Canonicato and petitioner COCA COLA. As the
Solicitor-General manifested[22]-
In the instant case, the selection and engagement of the janitors for petitioner
were done by BJS. The application form and letter submitted by private
respondent (Canonicato) to BJS show that he acknowledged the fact that it
was BJS who did the hiring and not petitioner x x x x
BJS paid the wages of private respondent, as evidenced by the fact that on
July 15, 1993, private respondent sent his sister to BJS with a note
authorizing her to receive his pay.
Power of dismissal is also exercised by BJS and not petitioner. BJS is the one
that assigns the janitors to its clients and transfers them when it sees fit. Since
BJS is the one who engages their services, then it only follows that it also has
the power to dismiss them when justified under the circumstances.
Lastly, BJS has the power to control the conduct of the janitors. The
supervisors of petitioner, being interested in the result of the work of the
janitors, also gives suggestions as to the performance of the janitors, but this
does not mean that BJS has no control over them. The interest of petitioner is
only with respect to the result of their work. On the other hand, BJS oversees
the totality of their performance.
The power of the employer to control the work of the employee is said to be
the most the most significant determinant. Canonicato disputed this power of
BJS over him by asserting that his employment with COCA COLA was not
interrupted by his application with BJS since his duties before and after he
applied for regularization were the same, involving as they did, working in
the maintenance department and doing painting tasks within its
facilities.Canonicato cited the Labor Utilization Reports of COCA COLA
showing his painting assignments. These reports, however, are not expressive
of the true nature of the relationship between Canonicato and COCA COLA;
neither do they detract from the fact that BJS exercised real authority over
Canonicato as its employee.
Moreover, a closer scrutiny of the reports reveals that the painting jobs were
performed by Canonicato sporadically, either in a few days within a month
and only for a few months in a year.[23] This infrequency or irregularity of
assignments countervails Canonicatos submission that he was assigned
specifically to undertake the task of painting the whole year round. If
anything, it hews closely to the assertion of BJS that it assigned Canonicato
to these jobs to maintain and sanitize the premises of petitioner COCA
COLA pursuant to its contract of services with the company.[24]
It is clear from these established circumstances that NLRC should have
recognized BJS as the employer of Canonicato and not COCA COLA. This
is demanded by the fact that it did not disturb, and therefore it upheld, the
finding of the Labor Arbiter that BJS was truly a legitimate job-contractor
and could by itself hire its own employees. The Commission could not have
reached any other legitimate conclusion considering that BJS satisfied all the
requirements of a job-contractor under the law, namely, (a) the ability to
carry on an independent business and undertake the contract work on its own
account under its own responsibility according to its manner and method,
free from the control and direction of its principal or client in all matters
connected with the performance of the work except as to the results thereof;
and, (b) the substantial capital or investment in the form of tools, equipment,
machinery, work premises, and other materials which are necessary in the
conduct of its business.[25]
It is to be noted that COCA COLA is not the only client of BJS which has its
roster of clients like San Miguel Corporation, Distileria Bago Incorporated,
University of Negros Occidental-Recolletos, University of St. La Salle,
Riverside College, College Assurance Plan Phil., Inc., and Negros
Consolidated Farmers Association, Inc.[26] This is proof enough that BJS has
the capability to carry on its business of janitorial services with big
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LABOR LAW 1

establishments aside from petitioner and has sufficient capital or materials

necessary therefor.[27] All told, there being no employer-employee
relationship between Canonicato and COCA COLA, the latter cannot be
validly ordered to reinstate the former and pay him back wages.

WHEREFORE, the petition is GRANTED. The NLRC decision of 3

January 1995 declaring Ramon B. Canonicato a regular employee of
petitioner Coca Cola Bottlers Phils., Inc., entitled to reinstatement and back
wages is REVERSED and SET ASIDE. The decision of the Labor Arbiter of
28 April 1994 finding no employer-employee relationship between petitioner
and private respondent but directing petitioner Coca Cola Bottlers Phils.,
Inc., instead and Bacolod Janitorial Services to pay jointly and severally
Ramon B. Canonicato P2,776.80 as wage differentials, P1,068.00 as 13th
month pay and P384.48 as attorney's fees, is REINSTATED.

SO ORDERED.

43