LABOR LAW 1 – Full Case (1-36)

1.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 102199 January 28, 1997

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

PANGANIBAN, J.:

The determination of the proper forum is crucial because the filing of the petition or complaint in the wrong court or
tribunal is fatal, even for a patently meritorious claim. More specifically, labor arbiters and the National Labor Relations
Commission have no jurisdiction to entertain and rule on money claims where no employer-employee relations is
involved. Thus, any such award rendered without jurisdiction is a nullity.

This petition for certiorari under Rule 65, Rules of Court seeks to annul the Resolution 1 of the National Labor Relations
Commission, promulgated September 27, 1991, in NLRC-NCR Case No. 00-02-01196-90, entitled "Eutiquio Bustamante
vs. AFP Mutual Benefit Association, Inc.," affirming the decision of the labor arbiter which ordered payment of the amount
of P319,796.00 as insurance commissions to private respondent.

The Antecedent Facts

The facts are simple. Private respondent Eutiquio Bustamante had been an insurance underwriter of petitioner AFP
Mutual Benefit Association, Inc. since 1975. The Sales Agent's Agreement between them provided: 2

B. Duties and Obligations:

1. During the lifetime of this Agreement, the SALES AGENT (private respondent) shall solicit exclusively
for AFPMBAI (petitioner), and shall be bound by the latter's policies, memo circulars, rules and
regulations which it may from time to time, revise, modify or cancel to serve its business interests.

2. The SALES AGENT shall confine his business activities for AFPMBAI while inside any military camp,
installation or residence of military personnel. He is free to solicit in the area for which he/she is licensed
and as authoriied, provided however, that AFPMBAI may from time to time, assign him a specific area of
responsibility and a production quota on a case to case basis.

xxx xxx xxx

C. Commission

1. The SALES AGENT shall be entitled to the commission due for all premiums actually due and received
by AFPMBAI out of life insurance policies solicited and obtained by the SALES AGENT at the rates set
forth in the applicant's commission schedules hereto attached.

xxx xxx xxx

D. General Provisions

1. There shall be no employer-employee relationship between the parties, the SALES AGENT being
hereby deemed an independent contractor.

3
As compensation, he received commissions based on the following percentages of the premiums paid:

"30% of premium paid within the first year;

10% of premium paid with the second year;
5% of the premium paid during the third year;
3% of the premium paid during the fourth year; and
1% of the premium paid during the fifth year up to
the tenth year.
On July 5, 1989, petitioner dismissed private respondent for misrepresentation and for simultaneously selling insurance
for another life insurance company in violation of said agreement.

At the time of his dismissal, private respondent was entitled to accrued commissions equivalent to twenty four (24) months
per the Sales Agent Agreement and as stated in the account summary dated July 5, 1989, approved by Retired Brig. Gen.
Rosalino Alquiza, president of petitioner-company. Said summary showed that private respondent had a total commission
receivable of P438,835.00, of which only P78,039.89 had been paid to him.

Private respondent wrote petitioner seeking the release of his commissions for said 24 months. Petitioner, through
Marketing Manager Juan Concepcion, replied that he was entitled to only P75,000.00 to P100,000.00. Hence, believing
Concepcion's computations, private respondent signed a quitclaim in favor of petitioner.

Sometime in October 1989, private respondent was informed that his check was ready for release. In collecting his check,
he discovered from a document (account summary) attached to said check that his total commissions for the 24 months
actually amounted to P354,796.09. Said document stated: 4

6. The total receivable for Mr. Bustamante out of the renewals and old business generated since 1983
grosses P438,835.00 less his outstanding obligation in the amount of P78,039.89 as of June 30, 1989,
total expected commission would amount to P354,796.09. From that figure at a 15% compromise
settlement this would mean P53,219.41 due him to settle his claim.

Private respondent, however, was paid only the amount of P35,000.00.

On November 23, 1989, private respondent filed a complaint with the Office of the Insurance Commissioner praying for
the payment of the correct amount of his commission. Atty. German C. Alejandria, Chief of the Public Assistance and
Information Division, Office of the Insurance Commissioner, advised private respondent that it was the Department of
Labor and Employment that had jurisdiction over his complaint.

On February 26, 1990, private respondent filed his complaint with the Department of Labor claiming: (1) commission for 2
years from termination of employment equivalent to 30% of premiums remitted during employment; (2) P354,796.00 as
commission earned from renewals and old business generated since 1983; (3) P100,000.00 as moral damages; and (4)
P100,000.00 as exemplary damages.

After submission of position papers, Labor Arbiter Jose G. de Vera rendered his decision, dated August 24, 1990, the
dispositive portion of which reads: 5

WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered declaring the
dismissal of the complainant as just and valid, and consequently, his claim for separation pay is denied.
On his money claim, the respondent company is hereby ordered to pay complainant the sum of
P319,796.00 plus attorney's fees in the amount of P31,976.60.

All other claims of the complainant are dismissed for want of merit.

The labor arbiter relied on the Sales Agent's Agreement proviso that petitioner could assign private respondent a specific
area of responsibility and a production quota, and read it as signalling the existence of employer- employee relationship
between petitioner and private respondent.

On appeal, the Second Division 6 of the respondent Commission affirmed the decision of the Labor Arbiter. In the assailed
Resolution, respondent Commission found no reason to disturb said ruling of the labor arbiter and
ruled: 7

WHEREFORE, in view of the foregoing considerations, the subject appeal should be as it is hereby,
denied and the decision appealed from affirmed

SO ORDERED.

Hence, this petition.

The Issue

Petitioner contends that respondent Commission committed grave abuse of discretion in ruling that the labor arbiter had
jurisdiction over this case. At the heart of the controversy is the issue of whether there existed an employer-employee
relationship between petitioner and private respondent.

Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's Agreement, there is no employer-employee
relationship between private respondent and itself. Hence, respondent commission gravely abused its discretion when it
held that the labor arbiter had jurisdiction over the case.

The Court's Ruling

The petition is meritorious.

First Issue: Not All That Glitters Is Control

Well-settled is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and
that the findings thereon by the labor arbiter and the National Labor Relations Commission shall be accorded not only
respect but even finality when supported by substantial evidence. 8 The determinative factor in such finality is the
presence of substantial evidence to support said finding, otherwise, such factual findings cannot bind this Court.

9
Respondent Commission concurred with the labor arbiter's findings that:

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

To this, respondent Commission added that the Sales Agent's Agreement specifically provided that petitioner may assign
private respondent a specific area of responsibility and a production quota. From there, it concluded that apparently there
is that exercise of control by the employer which is the most important element in determining employer- employee
relationship. 10

We hold, however, that respondent Commission misappreciated the facts of the case. Time and again, the Court has
applied the "four-fold" test in determining the existence of employer-employee relationship. This test considers the
following elements: (1) the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control,
the last being the most important element. 11

The difficulty lies in correctly assessing if certain factors or elements properly indicate the presence of control. Anent the
issue of exclusivity in the case at bar, the fact that private respondent was required to solicit business exclusively for
petitioner could hardly be considered as control in labor jurisprudence. Under Memo Circulars No. 2-81 12 and 2-85, dated
December 17, 1981 and August 7, 1985, respectively, issued by the Insurance Commissioner, insurance agents are
barred from serving more than one insurance company, in order to protect the public and to enable insurance companies
to exercise exclusive supervision over their agents in their solicitation work. Thus, the exclusivity restriction clearly springs
from a regulation issued by the Insurance Commission, and not from an intention by petitioner to establish control over the
method and manner by which private respondent shall accomplish his work. This feature is not meant to change the
nature of the relationship between the parties, nor does it necessarily imbue such relationship with the quality of control
envisioned by the law.

So too, the fact that private respondent was bound by company policies, memo/circulars, rules and regulations issued
from time to time is also not indicative of control. In its Reply to Complainant's Position Paper, 13 petitioner alleges that the
policies, memo/circulars, and rules and regulations referred to in provision B(1) of the Sales Agent's Agreement are only
those pertaining to payment of agents' accountabilities, availment by sales agents of cash advances for sorties, circulars
on incentives and awards to be given based on production, and other matters concerning the selling of insurance, in
accordance with the rules promulgated by the Insurance Commission. According to the petitioner, insurance solicitors are
never affected or covered by the rules and regulations concerning employee conduct and penalties for violations thereof,
work standards, performance appraisals, merit increases, promotions, absenteeism/attendance, leaves of absence,
management-union matters, employee benefits and the like. Since private respondent failed to rebut these allegations, the
same are deemed admitted, or at least proven, thereby leaving nothing to support the respondent Commission's
conclusion that the foregoing elements signified an employment relationship between the parties.

In regard to the territorial assignments given to sales agents, this too cannot be held as indicative of the exercise of
control over an employee. First of all, the place of work in the business of soliciting insurance does not figure prominently
in the equation. And more significantly, private respondent failed to rebut petitioner's allegation that it had never issued
him any territorial assignment at all. Obviously, this Court cannot draw the same inference from this feature as did the
respondent Commission.

To restate, the significant factor in determining the relationship of the parties is the presence or absence of supervisory
authority to control the method and the details of performance of the service being rendered, and the degree to which the
principal may intervene to exercise such control. The presence of such power of control is indicative of an employment
relationship, while absence thereof is indicative of independent contractorship. In other words, the test to determine the
existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the
work according to his own methods and without being subject to the control of the employer except only as to the result of
the work. 14 Such is exactly the nature of the relationship between petitioner and private respondent.

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this
case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
 Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve it. The distinction
acquires particular relevance in the case of an enterprise affected with public interest, as is the business
of insurance, and is on that account subject to regulation by the State with respect, not only to the
relations between insurer and insured but also to the internal affairs of the insurance company. Rules and
regulations governing the conduct of the business are provided for in the Insurance Code and enforced
by the Insurance Commissioner. It is, therefore, usual and expected for an insurande company to
promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul
of the law and what it requires or prohibits. . . . None of these really invades the agent's contractual
prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence
cannot justifiably be said to establish an employer-employee relationship between him and the
company. 15

Private respondent's contention that he was petitioner's employee is belied by the fact that he was free to sell insurance at
any time as he was not subject to definite hours or conditions of work and in turn was compensated according to the result
of his efforts. By the nature of the business of soliciting insurance, agents are normally left free to devise ways and means
of persuading people to take out insurance. There is no prohibition, as contended by petitioner, for private respondent to
work for as long as he does not violate the Insurance Code. As petitioner explains:

(Private respondent) was free to solicit life insurance anywhere he wanted and he had free and unfettered
time to pursue his business. He did not have to punch in and punch out the bundy clock as he was not
required to report to the (petitioner's) office regularly. He was not covered by any employee policies or
regulations and not subject to the disciplinary action of management on the basis of the Employee Code
of Conduct. He could go out and sell insurance at his own chosen time. He was entirely left to his own
choices of areas or territories, with no definite, much less supervised, time schedule.

(Private respondent) had complete control over his occupation and (petitioner) did not exercise any right
of Control and Supervision over his performance except as to the payment of commission the amount of
which entirely depends on the sole efforts of (private respondent). He was free to engage in other
occupation or practice other profession for as long as he did not commit any violation of the ethical
standards prescribed in the Sales Agent's Agreement. 16

Although petitioner could have, theoretically, disapproved any of private respondent's transactions, what could be
disapproved was only the result of the work, and not the means by which it was accomplished.

The "control" which the above factors indicate did not sum up to the power to control private respondent's conduct in and
mode of soliciting insurance. On the contrary, they clearly indicate that the juridical element of control had been absent in
this situation. Thus, the Court is constrained to rule that no employment relationship had ever existed between the parties.

Second Issue: Jurisdiction of Respondent

Commission & Labor Arbiter

Under the contract invoked, private respondent had never been petitioner's employee, but only its commission agent. As
an independent contractor, his claim for unpaid commission should have been litigated in an ordinary civil action. 17

The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217 of the Labor Code. 18 The unifying
element running through paragraphs (1) — (6) of said provision is the consistent reference to cases or disputes arising out
of or in connection with an employer-employee relationship. Prior to its amendment by Batas Pambansa Blg. 227 on June
1, 1982, this point was clear as the article included "all other cases arising from employer-employee relation unless
expressly excluded by this Code." 19 Without this critical element of employment relationship, the labor arbiter and
respondent Commission can never acquire jurisdiction over a dispute. As in the case at bar. It was serious error on the
part of the labor arbiter to have assumed jurisdiction and adjudicated the claim. Likewise, the respondent Commission's
affirmance thereof.

Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings, even on appeal. The doctrine
of estoppel cannot be properly invoked by respondent Commission to cure this fatal defect as it cannot confer jurisdiction
upon a tribunal that to begin with, was bereft of jurisdiction over a cause of action. 20 Moreover, in the proceedings below,
petitioner consistently challenged the jurisdiction of the labor arbiter 21 and respondent Commission. 22

It remains a basic fact in law that the choice of the proper forum is crucial as the decision of a court or tribunal without
jurisdiction is a total nullity. 23 A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any
right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no legal
effect. Hence, it can never become final. ". . . (I)t may be said to be a lawless thing which can be treated as an outlaw and
slain at sight, or ignored wherever and whenever it exhibits its head." 24

The way things stand, it becomes unnecessary to consider the merits of private respondent's claim for unpaid
commission. B
 2.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 112546 March 13, 1996

NORTH DAVAO MINING CORPORATION and ASSET PRIVATIZATION TRUST, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ANTONIO M. VILLANUEVA and WILFREDO
GUILLEMA, respondents.

PANGANIBAN, J.:p

Is a company which is forced by huge business losses to close its business, legally required to pay separation benefits to
its employees at the time of its closure in an amount equivalent to the separation pay paid to those who were separated
when the company was still a going concern? This is the main question brought before this Court in this petition
for certiorari under Rule 65 of the Revised Rules of Court, which seeks to reverse and set aside the Resolutions dated
July 29, 1993 1 and September 27, 1993 2 of the National Labor Relations Commission 3(NLRC) in NLRC CA No. M-
00139593.

The Resolution dated July 29, 1993 affirmed in toto the decision of the Labor Arbiter in RAB-11-08-00672-92 and RAB-11-
08-00713-92 ordering petitioners to pay the complainants therein certain monetary claims.

The Resolution dated September 27, 1993 denied the motion for reconsideration of the said July 29, 1993 Resolution.

The Facts

Petitioner North Davao Mining Corporation (North Davao) was incorporated in 1974 as a 100% privately-owned company.
Later, the Philippine National Bank (PNB) became part owner thereof as a result of a conversion into equity of a portion of
loans obtained by North Davao from said bank. On June 30, 1986, PNB transferred all its loans to and equity in North
Davao in favor of the national government which, by virtue of Proclamation No. 50 dated December 8, 1986, later turned
them over to petitioner Asset Privatization Trust (APT). As of December 31, 1990 the national government hold 81.8% of
the common stock and 100% of the preferred stock of said company.4

Respondent Wilfredo Guillema is one among several employees of North Davao who were separated by reason of the
company's closure on May 31, 1992, and who were the complainants in the cases before the respondent labor arbiter.

On May 31, 1992, petitioner North Davao completely ceased operations due to serious business reverses. From 1988
until its closure in 1992, North Davao suffered net losses averaging three billion pesos (P3,000,000,000.00) per year, for
each of the five years prior to its closure. All told, as of December 31, 1991, or five months prior to its closure, its total
liabilities had exceeded its assets by 20,392 billion pesos, as shown by its financial statements audited by the
Commission on Audit. When it ceased operations, its remaining employees were separated and given the equivalent of
12.5 days' pay for every year of service, computed on their basic monthly pay, in addition to the commutation to cash of
their unused vacation and sick leaves. However, it appears that, during the life of the petitioner corporation, from the
beginning of its operations in 1981 until its closure in 1992, it had been giving separation pay equivalent to thirty (30) days'
pay for every year of service. Moreover, inasmuch as the region where North Davao operated was plagued by insurgency
and other peace and order problems, the employees had to collect their salaries at a bank in Tagum, Davao del Norte,
some 58 kilometers from their workplace and about 2 1/2 hours' travel time by public transportation; this arrangement
lasted from 1981 up to 1990.

Subsequently, a complaint was filed with respondent Labor Arbiter by respondent Wilfredo Guillema and 271 other
separated employees for: (1) additional separation pay of 17.5 days for every year of service; (2) back wages equivalent
to two days a month; (3) transportation allowance; (4) hazard pay; (5) housing allowance; (6) food allowance; (7) post-
employment medical clearance; and (8) future medical allowance, all of which amounted to P58,022,878.31 as computed
by private respondent. 5

On May 6, 1993, respondent Labor Arbiter rendered a decision ordering petitioner North Davao to pay the complainants
the following:

(a) Additional separation pay of 17.5 days for every year of service;

(b) Backwages equivalent to two (2) days a month times the number of years of service but not to exceed
three (3) years;

(c) Transportation allowance at P80 a month times the number of years of service but not to exceed three
(3) years.

The benefits awarded by respondent Labor Arbiter amounted to P10,240,517.75. Attorney's fees equivalent to ten percent
(10%) thereof were also granted. 6
On appeal, respondent NLRC affirmed the decision in toto. Petitioner North Davao's motion for reconsideration was
likewise denied. Hence, this petition.

The Parties' Submissions and the Issues

In affirming the Labor Arbiter's decision, respondent NLRC ruled that "since (North Davao) has been paying its employees
separation pay equivalent to thirty (30) days pay for every year of service," knowing fully well that the law provides for a
lesser separation pay, then such company policy "has ripened into an obligation," and therefore, depriving now the herein
private respondent and others similarly situated of the same benefits would be discriminatory. 7 Quoting from Businessday
Information Systems and Services, Inc. (BISSI) vs. NLRC, 8 it said that petitioners "may not pay separation benefits
unequally for such discrimination breeds resentment and ill-will among those who have been treated less generously than
others." It also cited Abella vs. NLRC, 9 as authority for saying that Art. 283 of the Labor Code protects workers in case of
closure of the establishment.

To justify the award of two days a month in backwages and P80 per month of transportation allowance, respondent
Commission ruled:

As to the appellants' claim that complainants-appellees' time spent in collecting their wages at Tagum,
Davao is not compensable allegedly because it was on official time can not be given credence. No iota of
evidence has been presented to back up said contention. The same is true with appellants' assertion that
the claim for transportation expenses is without basis since they were incurred by the complainants.
Appellants should have submitted the payrolls to prove that complainants appellees were not the ones
who personally collected their wages and/or the bus/jeep trip tickets or vouchers to show that the
complainants-appellees were provided with free transportation as claimed.

Petitioner, through the Government Corporate Counsel, raised the following grounds for the allowance of the petition:

1. The NLRC acted with grave abuse of discretion in affirming without legal basis the award of additional
separation pay to private respondents who were separated due to serious business losses on the part of
petitioner.

2. The NLRC acted with grave abuse of discretion in affirming without sufficient factual basis the award of
backwages and transportation expenses to private respondents.

3. There is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of the law.

and the following issues:

1. Whether or not an employer whose business operations ceased due to serious business losses or
financial reverses is obliged to pay separation pay to its employees separated by reason of such closure.

2. Whether or not time spent in collecting wages in a place other than the place of employment is
compensable notwithstanding that the same is done during official time.

3. Whether or not private respondents are entitled to transportation expenses in the absence of evidence
that these expenses were incurred.

The First Issue: Separation Pay

To resolve this issue, it is necessary to revisit the provision of law adverted to by the parties in their submissions, namely,
Art. 283 of the Labor Code, which reads as follows:

Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay
or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six
(6) months shall be considered one (1) whole year. (emphasis supplied)

The underscored portion of Art. 283 governs the grant of separation benefits "in case of closures or cessation of
operation" of business establishments "NOT due to serious business losses or financial reverses . . . ". Where, however,
the closure was due to business losses — as in the instant case, in which the aggregate losses amounted to over P20
billion — the Labor Code does not impose any obligation upon the employer to pay separation benefits, for obvious
reasons. There is no need to belabor this point. Even the public respondents, in their Comment 10 filed by the Solicitor
General, impliedly concede this point.
However, respondents tenaciously insist on the award of separation pay, anchoring their claim solely on petitioner North
Davao's long-standing policy of giving separation pay benefits equivalent to 30-days' pay, which policy had been in force
in the years prior to its closure. Respondents contend that, by denying the same separation benefits to private respondent
and the others similarly situated, petitioners discriminated against them. They rely on this Court's ruling in Businessday
Information Systems and Services, Inc. (BISSI) vs. NLRC, (supra). In said case, petitioner BISSI, after experiencing
financial reverses, decided "as a retrenchment measure" to lay-off some employees on May 16, 1988 and gave them
separation pay equivalent to one-half (1/2) month pay for every year of service. BISSI retained some employees in an
attempt to rehabilitate its business as a trading company. However, barely two and a half months later, these remaining
employees were likewise discharged because the company decided to cease business operations altogether. Unlike the
earlier terminated employees, the second batch received separation pay equivalent to a full month's salary for every year
of service, plus a mid-year bonus. This Court ruled that "there was impermissible discrimination against the private
respondents in the payment of their separation benefits. The law requires an employer to extend equal treatment to its
employees. It may not, in the guise of exercising management prerogatives, grant greater benefits to some and less to
others. . . ."

In resolving the present case, it bears keeping in mind at the outset that the factual circumstances of BISSI are quite
different from the current case. The Court noted that BISSI continued to suffer losses even after the retrenchment of the
first batch of employees: clearly, business did not improve despite such drastic measure. That notwithstanding, when
BISSI finally shut down, it could well afford to (and actually did) pay off its remaining employees with MORE separation
benefits as compared with those earlier laid off; obviously, then, there was no reason for BISSI to skimp on separation pay
for the first batch of discharged employees. That it was able to pay one-month separation benefit for employees at
the time of closure of its business meant that it must have been also in a position to pay the same amount to those who
were separated prior to closure. That it did not do so was a wrongful exercise of management prerogatives. That is why
the Court correctly faulted it with "impermissible discrimination." Clearly, it exercised its management prerogatives
contrary to "general principles of fair play and justice."

In the instant case however, the company's practice of giving one month's pay for every year of service could no longer be
continued precisely because the company could not afford it anymore. It was forced to close down on account of
accumulated losses of over P20 billion. This could not be said of BISSI. In the case of North Davao, it gave 30-days'
separation pay to its employees when it was still a going concern even if it was already losing heavily. As a going concern,
its cash flow could still have sustained the payment of such separation benefits. But when a business enterprise
completely ceases operations, i.e., upon its death as a going business concern, its vital lifeblood — its cashflow — literally
dries up. Therefore, the fact that less separation benefits ware granted when the company finally met its business death
cannot be characterized as discrimination. Such action was dictated not by a discriminatory management option but by its
complete inability to continue its business life due to accumulated losses. Indeed, one cannot squeeze blood out of a dry
stone. Nor water out of parched land.

As already stated, Art. 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure
is due to losses. In the case before us, the basis for the claim of the additional separation benefit of 17.5 days is alleged
discrimination, i.e., unequal treatment of employees, which is proscribed as an unfair labor practice by Art. 248 (e) of said
Code. Under the facts and circumstances of the present case, the grant of a lesser amount of separation pay to private
respondent was done, not by reason of discrimination, but rather, out of sheer financial bankruptcy — a fact that is not
controlled by management prerogatives. Stated differently, the total cessation of operation due to mind-boggling losses
was a supervening fact that prevented the company from continuing to grant the more generous amount of separation
pay. The fact that North Davao at the point of its forced closure voluntarily paid any separation benefits at all — although
not required by law — and 12.5-days worth at that, should have elicited admiration instead of condemnation. But to
require it to continue being generous when it is no longer in a position to do so would certainly be unduly oppressive,
unfair and most revolting to the conscience. As this Court held in Manila Trading & Supply Co. vs. Zulueta, 11 and
reiterated in San Miguel Corporation vs. NLRC 12 and later, in Allied Banking Corporation vs. Castro, 13 "(t)he law, in
protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer."

At this juncture, we note that the Solicitor General in his Comment challenges the petitioners' assertion that North Davao,
having closed down, no longer has the means to pay for the benefits. The Solicitor General stresses that North Davao
was among the assets transferred by PNB to the national government, and that by virtue of Proclamation No. 50 dated
December 8, 1986, the APT was constituted trustee of this government asset. He then concludes that "(i)t would,
therefore, be incongruous to declare that the National Government, which should always be presumed to be solvent,
could not pay now private respondents' money claims." Such argumentation is completely misplaced. Even if the national
government owned or controlled 81.8% of the common stock and 100% of the preferred stock of North Davao, it remains
only a stockholder thereof, and under existing laws and prevailing jurisprudence, a stockholder as a rule is not directly,
individually and/or personally liable for the indebtedness of the corporation. The obligation of North Davao cannot be
considered the obligation of the national government, hence, whether the latter be solvent or not is not material to the
instant case. The respondents have not shown that this case constitutes one of the instances where the corporate veil
may be pierced. 14 From another angle, the national government is not the employer of private respondent and his co-
complainants, so there is no reason to expect any kind of bailout by the national government under existing law and
jurisprudence.

The Second and Third Issues:

Back Wages and Transportation Allowance

Anent the award of back wages and transportation allowance, the issues raised in connection therewith are factual, the
determination of which is best left to the respondent NLRC. It is well settled that this Court is bound by the findings of fact
of the NLRC, so long as said findings are supported by substantial evidence 15.
As the Solicitor General pointed out in his comment:

It is undisputed that because of security reasons, from the time of its operations, petitioner NDMC
maintained its policy of paying its workers at a bank in Tagum, Davao del Norte, which usually took the
workers about two and a half (2 1/2) hours of travel from the place of work and such travel time is not
official.

Records also show that on February 12, 1992, when an inspection was conducted by the Department of
Labor and Employment at the premises of petitioner NDMC at Amacan, Maco, Davao del Norte, it was
found out that petitioners had violated labor standards law, one of which is the place of payment of wages
(p. 109, Vol. 1, Record)

Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code provides that:

Sec. 4. Place of payment. — (a) As a general rule, the place of payment shall be at or near the place of
undertaking. Payment in a place other than the workplace shall be permissible only under the following
circumstances:

(1) When payment cannot be effected at or near the place of work by reason of the deterioration of peace
and order conditions, or by reason of actual or impending emergencies caused by fire, flood, epidemic or
other calamity rendering payment thereat impossible;

(2) When the employer provides free transportation to the employees back and forth; and

(3) Under any analogous circumstances; provided that the time spent by the employees in collecting their
wages shall be considered as compensable hours worked.

(b) xxx xxx xxx

(Emphasis supplied)

Accordingly, in his Order dated April 14, 1992 (p. 109, Vol. 1, Record), the Regional Director, Regional
Office No. XI, Department of Labor and Employment, Davao City, ordered petitioner NDMC, among
others, as follows:

WHEREFORE, . . . . Respondent is further ordered to pay its workers salaries at the

plantsite at Amacan, New Leyte, Maco, Davao del Norte or whenever not possible,
through the bank in Tagum, Davao del Norte as already been practiced subject, however
to the provisions of Section 4 of Rule VIII, Book III of the rules implementing the Labor
Code as amended.

Thus, public respondent Labor Arbiter Antonio M. Villanueva correctly held that:

From the evidence on record, we find that the hours spent by complainants in collecting
salaries at a bank in Tagum, Davao del Norte shall be considered compensable hours
worked. Considering further the distance between Amacan, Maco to Tagum which is 2
1/2 hours by travel and the risks in commuting all the time in collecting complainants'
salaries, would justify the granting of backwages equivalent to two (2) days in a month as
prayed for.

Corollary to the above findings, and for equitable reasons, we likewise hold respondents
liable for the transportation expenses incurred by complainants at P40.00 round trip fare
during pay days.

(p. 10, Decision; p. 207, Vol. 1, Record)

On the contrary, it will be petitioners' burden or duty to present evidence of compliance of

the law on labor standards, rather than for private respondents to prove that they were
not paid/provided by petitioners of their backwages and transportation expenses.

Other than the bare denials of petitioners, the above findings stand uncontradicted. Indeed we are not at liberty to set
aside findings of facts of the NLRC, absent any capriciousness, arbitrariness, or abuse or complete lack of basis. In Maya
Farms Employees Organizations vs. NLRC, 16 , we held:

This Court has consistently ruled that findings of fact of administrative agencies ad quasi-judicial bodies
which have acquired expertise because their jurisdiction is confined to specific matters are generally
accorded not only respect but even finality and are binding upon this Court unless there is a showing of
grave abuse of discretion, or where it is clearly shown that they were arrived at arbitrarily or in disregard
of the evidence on record.
WHEREFORE, judgment is hereby rendered MODIFYING the assailed Resolution by SETTING ASIDE and deleting the
award for "additional separation pay of 17.5 days for every year of service", and AFFIRMING it in all other aspects. No
costs.

SO ORDERED.

3.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-80680 January 26, 1989
DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES, EDUARDO R. ERISPE, JOEL MADRIAGA,
ARTHUR M. ESPINO, AMARO BONA, FERDINAND CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES, ELMER
ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITA QUIAMBOA, NOMER MATAGA, VIOLY ESTEBAN and
LYDIA ORTEGA, petitioners,
vs.
CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA A. AZARCON, NATIONAL LABOR RELATIONS
COMMISSION, and HON. EMERSON C. TUMANON, respondents.

SARMIENTO, J.:

On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the National Labor Relations Commission
for reinstatement and payment of various benefits, including minimum wage, overtime pay, holiday pay, thirteen-month
pay, and emergency cost of living allowance pay, against the respondent, the California Manufacturing Company. 1

On October 7, 1986, after the cases had been consolidated, the California Manufacturing Company (California) filed a
motion to dismiss as well as a position paper denying the existence of an employer-employee relation between the
petitioners and the company and, consequently, any liability for payment of money claims. 2 On motion of the petitioners,
Livi Manpower Services, Inc. was impleaded as a party-respondent.

It appears that the petitioners were, prior to their stint with California, employees of Livi Manpower Services, Inc. (Livi),
which subsequently assigned them to work as "promotional merchandisers" 3 for the former firm pursuant to a manpower
supply agreement. Among other things, the agreement provided that California "has no control or supervisions
whatsoever over [Livi's] workers with respect to how they accomplish their work or perform [Californias] obligation"; 4 the
Livi "is an independent contractor and nothing herein contained shall be construed as creating between [California] and
[Livi] . . . the relationship of principal[-]agent or employer[-]employee'; 5 that "it is hereby agreed that it is the sole
responsibility of [Livi] to comply with all existing as well as future laws, rules and regulations pertinent to employment of
labor" 6 and that "[California] is free and harmless from any liability arising from such laws or from any accident that may
befall workers and employees of [Livi] while in the performance of their duties for [California]. 7

It was further expressly stipulated that the assignment of workers to California shall be on a "seasonal and contractual
basis"; that "[c]ost of living allowance and the 10 legal holidays will be charged directly to [California] at cost "; and that
"[p]ayroll for the preceeding [sic] week [shall] be delivered by [Livi] at [California's] premises." 8

The petitioners were then made to sign employment contracts with durations of six months, upon the expiration of which
they signed new agreements with the same period, and so on. Unlike regular California employees, who received not less
than P2,823.00 a month in addition to a host of fringe benefits and bonuses, they received P38.56 plus P15.00 in
allowance daily.

The petitioners now allege that they had become regular California employees and demand, as a consequence whereof,
similar benefits. They likewise claim that pending further proceedings below, they were notified by California that they
would not be rehired. As a result, they filed an amended complaint charging California with illegal dismissal.

California admits having refused to accept the petitioners back to work but deny liability therefor for the reason that it is
not, to begin with, the petitioners' employer and that the "retrenchment" had been forced by business losses as well as
expiration of contracts. 9 It appears that thereafter, Livi re-absorbed them into its labor pool on a "wait-in or standby"
status. 10

Amid these factual antecedents, the Court finds the single most important issue to be: Whether the petitioners are
California's or Livi's employees.

The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled against the existence of any employer-employee
relation between the petitioners and California ostensibly in the light of the manpower supply contract, supra, and
consequently, against the latter's liability as and for the money claims demanded. In the same breath, however, the labor
arbiter absolved Livi from any obligation because the "retrenchment" in question was allegedly "beyond its control ." 13 He
assessed against the firm, nevertheless, separation pay and attorney's fees.

We reverse.
The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject of
agreement. Hence, the fact that the manpower supply agreement between Livi and California had specifically designated
the former as the petitioners' employer and had absolved the latter from any liability as an employer, will not erase either
party's obligations as an employer, if an employer-employee relation otherwise exists between the workers and either firm.
At any rate, since the agreement was between Livi and California, they alone are bound by it, and the petitioners cannot
be made to suffer from its adverse consequences.

This Court has consistently ruled that the determination of whether or not there is an employer-employee relation depends
upon four standards: (1) the manner of selection and engagement of the putative employee; (2) the mode of payment of
wages; (3) the presence or absence of a power of dismissal; and (4) the presence or absence of a power to control the
putative employee's conduct. 14 Of the four, the right-of-control test has been held to be the decisive factor. 15

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

ART. 106. Contractor or sub-contractor. — Whenever an employee enters into a contract with another
person for the performance of the former's work, the employees of the contractor and of the latter's sub-
contractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or sub-contractor fails to pay wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or sub-contractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he
is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to
protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations
within these types of contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any provisions of this
Code.

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

that notwithstanding the absence of a direct employer-employee relationship between the employer in whose favor work
had been contracted out by a "labor-only" contractor, and the employees, the former has the responsibility, together with
the "labor-only" contractor, for any valid labor claims, 16 by operation of law. The reason, so we held, is that the "labor-
only" contractor is considered "merely an agent of the employer," 17 and liability must be shouldered by either one or
shared by both. 18

There is no doubt that in the case at bar, Livi performs "manpower services", 19 meaning to say, it contracts out labor in
favor of clients. We hold that it is one notwithstanding its vehement claims to the contrary, and notwithstanding the
provision of the contract that it is "an independent contractor." 20 The nature of one's business is not determined by self-
serving appellations one attaches thereto but by the tests provided by statute and prevailing case law. 21 The bare fact
that Livi maintains a separate line of business does not extinguish the equal fact that it has provided California with
workers to pursue the latter's own business. In this connection, we do not agree that the petitioners had been made to
perform activities 'which are not directly related to the general business of manufacturing," 22 California's purported
"principal operation activity. " 23 The petitioner's had been charged with "merchandizing [sic] promotion or sale of the
products of [California] in the different sales outlets in Metro Manila including task and occational [sic] price tagging," 24 an
activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if Livi had served as its
(California's) promotions or sales arm or agent, or otherwise, rendered a piece of work it (California) could not have itself
done; Livi, as a placement agency, had simply supplied it with the manpower necessary to carry out its (California's)
merchandising activities, using its (California's) premises and equipment. 25

Neither Livi nor California can therefore escape liability, that is, assuming one exists.

The fact that the petitioners have allegedly admitted being Livi's "direct employees" 26 in their complaints is nothing
conclusive. For one thing, the fact that the petitioners were (are), will not absolve California since liability has been
imposed by legal operation. For another, and as we indicated, the relations of parties must be judged from case to case
and the decree of law, and not by declarations of parties.

The fact that the petitioners have been hired on a "temporary or seasonal" basis merely is no argument either. As we held
in Philippine Bank of Communications v. NLRC, 27 a temporary or casual employee, under Article 218 of the Labor Code,
becomes regular after service of one year, unless he has been contracted for a specific project. And we cannot say that
merchandising is a specific project for the obvious reason that it is an activity related to the day-to-day operations of
California.

It would have been different, we believe, had Livi been discretely a promotions firm, and that California had hired it to
perform the latter's merchandising activities. For then, Livi would have been truly the employer of its employees, and
California, its client. The client, in that case, would have been a mere patron, and not an employer. The employees would
not in that event be unlike waiters, who, although at the service of customers, are not the latter's employees, but of the
restaurant. As we pointed out in the Philippine Bank of Communications case:

xxx xxx xxx

... The undertaking given by CESI in favor of the bank was not the performance of a specific job for
instance, the carriage and delivery of documents and parcels to the addresses thereof. There appear to
be many companies today which perform this discrete service, companies with their own personnel who
pick up documents and packages from the offices of a client or customer, and who deliver such materials
utilizing their own delivery vans or motorcycles to the addressees. In the present case, the undertaking of
CESI was to provide its client the bank with a certain number of persons able to carry out the work of
messengers. Such undertaking of CESI was complied with when the requisite number of persons were
assigned or seconded to the petitioner bank. Orpiada utilized the premises and office equipment of the
bank and not those of CESI. Messengerial work the delivery of documents to designated persons whether
within or without the bank premises-is of course directly related to the day-to-day operations of the bank.
Section 9(2) quoted above does not require for its applicability that the petitioner must be engaged in the
delivery of items as a distinct and separate line of business.

Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a recruitment and
placement corporation placing bodies, as it were, in different client companies for longer or shorter
periods of time, ... 28

In the case at bar, Livi is admittedly an "independent contractor providing temporary services of manpower to its client.
" 29 When it thus provided California with manpower, it supplied California with personnel, as if such personnel had been
directly hired by California. Hence, Article 106 of the Code applies.

The Court need not therefore consider whether it is Livi or California which exercises control over the petitioner vis-a-vis
the four barometers referred to earlier, since by fiction of law, either or both shoulder responsibility.

It is not that by dismissing the terms and conditions of the manpower supply agreement, we have, hence, considered it
illegal. Under the Labor Code, genuine job contracts are permissible, provided they are genuine job contracts. But, as we
held in Philippine Bank of Communications, supra, when such arrangements are resorted to "in anticipation of, and for the
very purpose of making possible, the secondment" 30 of the employees from the true employer, the Court will be justified
in expressing its concern. For then that would compromise the rights of the workers, especially their right to security of
tenure.

This brings us to the question: What is the liability of either Livi or California?

The records show that the petitioners bad been given an initial six-month contract, renewed for another six months.
Accordingly, under Article 281 of the Code, they had become regular employees-of-California-and had acquired a secure
tenure. Hence, they cannot be separated without due process of law.

California resists reinstatement on the ground, first, and as we Id, that the petitioners are not its employees, and second,
by reason of financial distress brought about by "unfavorable political and economic atmosphere" 31"coupled by the
February Revolution." 32 As to the first objection, we reiterate that the petitioners are its employees and who, by virtue of
the required one-year length-of-service, have acquired a regular status. As to the second, we are not convinced that
California has shown enough evidence, other than its bare say so, that it had in fact suffered serious business reverses as
a result alone of the prevailing political and economic climate. We further find the attribution to the February Revolution as
a cause for its alleged losses to be gratuitous and without basis in fact.

California should be warned that retrenchment of workers, unless clearly warranted, has serious consequences not only
on the State's initiatives to maintain a stable employment record for the country, but more so, on the workingman himself,
amid an environment that is desperately scarce in jobs. And, the National Labor Relations Commission should have
known better than to fall for such unwarranted excuses and nebulous claims.

WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1): SETTING ASIDE the decision, dated
March 20, 1987, and the resolution, dated August 19, 1987; (2) ORDERING the respondent, the California Manufacturing
Company, to REINSTATE the petitioners with full status and rights of regular employees; and (3) ORDERING the
respondent, the California Manufacturing Company, and the respondents, Livi Manpower Service, Inc. and/or Lily-Victoria
Azarcon, to PAY, jointly and severally, unto the petitioners: (a) backwages and differential pays effective as and from the
time they had acquired a regular status under the second paragraph, of Section 281, of the Labor Code, but not to exceed
three (3) years, and (b) all such other and further benefits as may be provided by existing collective bargaining
agreement(s) or other relations, or by law, beginning such time; and (4) ORDERING the private respondents to PAY unto
the petitioners attorney's fees equivalent to ten (10%) percent of all money claims hereby awarded, in addition to those
money claims. The private respondents are likewise ORDERED to PAY the costs of this suit.

IT IS SO ORDERED.
 4.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-21120 February 28, 1967
PHILIPPINE AIR LINES, INC., petitioner,
vs.
PHILIPPINE AIR LINES EMPLOYEES ASSOCIATION and COURT OF INDUSTRIAL RELATIONS, respondents.

CONCEPCION, C.J.:

Appeal by certiorari , taken by the Philippine Air Lines, Inc. — hereinafter referred to as the PAL from an order of the
Court of Industrial Relations — hereinafter referred to as the CIR — the dispositive part of reads:

WHEREFORE , THE Philippine Air Lines is hereby ordered to pay the four claimants, Messrs. Fortuno Biangco,
Hernando Guevarra, Bernardino Abarrientos and 140 days each, sick leave which the two may use or enjoy
according to existing company rules, and regulations regarding this privilege, and to allow the four claimants the
enjoyment of their earned and accumulated free trip passes both here and aboard subject to the above-
mentioned plan the company may adopt. In order to effect early payment of the Christmas bonus, the Chief
Examiner of the Court or his duly authorized representatives is hereby directed to examine; pertinent records of
the company, to compute and determine the Christmas bonus due each of the four claimant and to submit a
report therefore immediately upon completion of the same.

It appears that on May 4, 1950, PAL dismissed its above named four (4) employees, who are member of the
Philippine Air Lines Employees Association — hereinafter referred to as PALEA — and that on July 13, 1954, the
CIR en banc passed resolution, in Case No. 465-V thereof, directing the reinstatement of said employess "to their
former or equivalent position in the company, with back wages from the date of their reinstatement, and without
prejudice to their seniority or other rights and privileges. This resolution was affirmed by the Supreme Court, in
G.R. No. L-8197, on October 31, 1958.

On January 14, 1959, said employees were reinstated and subsequently their backwages, computed at the rate of their
compensation at the time of the aforementioned dismissal, less the wages and salaries earned by them elsewhere during
the lay-off period, were paid to them. The employees objected to this deduction and the CIR sustained them, in a
Resolution dated May 22, 1960, which was reversed by the Supreme Court, on July 26, 1960, in G.R. No. L-15544. Soon
later, or on November 10, 1960, the PALEA moved for the execution of the CIR resolution of July 13, 1954, as regards the
"other rights and privileges" therein mentioned, referring, more specifically to: (1) Christmas bonus from 1950 to 1958; (2)
accumulated sick leave; (3) transportation allowance during lay-off period; and (4) accumulated free trip passes, both
domestic and international. By an order dated October 8, 1962, the CIR granted this motion, except as regards the sick
leave of Onofre Griño and Bernardino Abarrientos, and the transportation allowance, which were denied. Hence this
appeal.

PAL maintains that the CIR has erred in acting as it did, because : (1) the aforementioned privileges were not specifically
mentioned in the CIR resolution of July 13, 1954; (2) the order of the CIR dated October 8, 1962, had, allegedly, the effect
of amending said resolution; and (3) the clause therein "without prejudice to their seniority or other rights and privileges"
should be construed prospectively, not retroactively.

Insofar as the Christmas bonus, the accumulated sick leave privileges and the transportation allowance during the lay-off
period, the PAL's contention is clearly devoid of merit. The aforementioned clause must be considered in the light of the
entire context of the resolution of July 13, 1954 and of its dispositive part. In ordering therein the "reinstatement" of said
employees with "back wages from the date of their dismissal to the date of their reinstatement, and without prejudice to
their seniority or other rights and privileges," it is obvious that the resolution intended to restore the employees to their
status immediately prior to their dismissal.

Hence, it directed , not only their reinstatement, but, also, the payment of their back wages during the period of their lay-
off — thus referring necessarily to a period of time preceding their reinstatement — and the retention of "their seniority or
other rights and privileges". Rights reinstatement, but at the time? Certainly, not after their reinstatement, but at the time of
their aforementioned dismissal. In other words, the reinstatement was with back wages for the lay-off period, coupled with
"seniority or other rights and privileges", attached to the status of the employees when they were dismissed. To put it
differently, the CIR treated said employees as if they had not been absent form work and had been uninterruptedly
working during the lay-off period.1äwphï1.ñët

Thus, in Republic Steel Corporation vs. NLRB (114 F. 2d. 820), it was held that, under a decree of the Circuit Court of
Appeals and Order of the National Labor Relations Board directing the employer to reinstate the striking
employees without prejudice to their seniority or other rights or privileges, it was the intention of the Board and Court to
provide that, upon reinstatement the employees were to be treated in matters involving seniority and continuity of
employment as though they had not been absent from work, and hence the reinstated employees were entitled to the
benefits of the employer's vacation plan for the year in which they were reinstated and subsequent years upon the basis
of continuity of service computed as though they had been actually at during the entire period from the date of strike to the
date of reinstatement.
As a consequence, the employees involved in the case at bar are entitled to the Christmas bonus that PAL had given to
all of its employees during said period, for said bonus, having been paid regularly, has become part of the compensation
of the employees.1 Said employees are, likewise, entitled to transportation allowance and the corresponding sick leave
privileges. These sick leave privileges are subject, however, to the following qualifications, namely: (1) that the
accumulated sick leave cannot exceed 140 days, pursuant to the collective bargaining agreement between the PAL and
the PALEA, effective in 1959; and (2) that, pursuant to the same agreement, which denies sick leave privileges to retired
employees, Onofre Griño and Bernardino Abarrientos, who have retired, are not entitled to said privileges.

The PAL's appeal as regards the free trip passes is, however, well taken, for the employees had no absolute right thereto,
even if they had actually rendered services during the lay-off period. The free trip passes were given, neither
automatically, nor indiscriminately. The employees had to apply therefore and their applications were subject PAL's
approval.

Wherefore, except as to the free trip passes for the lay-off period, which should not be deemed included in the "rights and
privileges" awarded in the resolution of July 13, 1954, and subject to the qualification that the accumulated sick leave
privileges cannot exceed 140 days, the appealed resolution of October 8, 1962, is hereby affirmed in all other respects,
without pronouncement as to costs. It is so ordered.

Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, Sanchez and Castro, JJ., concur.

5.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 114733 January 2, 1997

AURORA LAND PROJECTS CORP. Doing business under the name "AURORA PLAZA" and TERESITA T.
QUAZON, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and HONORIO DAGUI, respondents.

HERMOSISIMA, JR., J.:

The question as to whether an employer-employee relationship exists in a certain situation continues to bedevil the courts.
Some businessmen try to avoid the bringing about of an employer-employee relationship in their enterprises because that
judicial relation spawns obligations connected with workmen's compensation, social security, medicare, minimum wage,
termination pay, and unionism. 1 In light of this observation, it behooves this Court to be ever vigilant in Checking the
unscrupulous efforts of some of our entrepreneurs, primarily aimed at maximizing their return on investments at the
expense of the lowly workingman.

This petition for certiorari seeks the reversal of the Resolution 2 of public respondent National Labor Relations
Commission dated March 16, 1994 affirming with modification the decision of the Labor Arbiter, dated May 25, 1992,
finding petitioners liable to pay private respondent the total amount of P195,624.00 as separation pay and attorney's fees.

The relevant antecedents:

Private respondent Honorio Dagui was hired by Doña Aurora Suntay Tanjangco in 1953 to take charge of the
maintenance and repair of the Tanjangco apartments and residential buildings. He was to perform carpentry, plumbing,
electrical and masonry work. Upon the death of Doña Aurora Tanjangco in 1982, her daughter, petitioner Teresita
Tanjangco Quazon, took over the administration of all the Tanjangco properties. On June 8, 1991, private respondent
Dagui received the shock of his life when Mrs. Quazon suddenly told him: "Wala ka nang trabaho mula ngayon," 3 on the
alleged ground that his work was unsatisfactory. On August 29, 1991, private respondent, who was then already sixty-two
(62) years old, filed a complaint for illegal dismissal with the Labor Arbiter.

On May 25, 1992, Labor Arbiter Ricardo C. Nora rendered judgment, the decretal portion of which reads:

IN VIEW OF ALL THE FOREGOING, respondents Aurora Plaza and/or Teresita Tanjangco Quazon are hereby
ordered to pay the complainant the total amount of ONE HUNDRED NINETY FIVE THOUSAND SIX HUNDRED
TWENTY FOUR PESOS (P195,624.00) representing complainant's separation pay and the ten (10%) percent
attorney's fees within ten (10) days from receipt of this Decision.

All other issues are dismissed for lack of merit. 4

Aggrieved, petitioners Aurora Land Projects Corporation and Teresita T. Quazon appealed to the National Labor
Relations Commission. The Commission affirmed, with modification, the Labor Arbiter's decision in a Resolution
promulgated on March 16, 1994, in the following manner:

WHEREFORE, in view of the above considerations, let the appealed decision be as it is hereby AFFIRMED with
(the) MODIFICATION that complainant must be paid separation pay in the amount of P88,920.00 instead of
P177,840.00. The award of attorney's fees is hereby deleted. 5

As a last recourse, petitioners filed the instant petition based on grounds not otherwise succinctly and distinctly
ascribed, viz:

I RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS

OF JURISDICTION IN AFFIRMING THE LABOR ARBITER'S DECISION SOLELY ON THE BASIS OF ITS
STATEMENT THAT "WE FAIL TO FIND ANY REASON OR JUSTIFICATION TO DISAGREE WITH THE LABOR
ARBITER IN HIS FINDING THAT HONORIO DAGUI WAS DISMISSED BY THE RESPONDENT" (p. 7,
RESOLUTION), DESPITE — AND WITHOUT EVEN BOTHERING TO CONSIDER — THE GROUNDS STATED
IN PETITIONERS' APPEAL MEMORANDUM WHICH ARE PLAINLY MERITORIOUS.

II RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR

EXCESS OF JURISDICTION IN FINDING THAT COMPLAINANT WAS EMPLOYED BY THE RESPONDENTS
MORE SO "FROM 1953 TO 1991" (p. 3, RESOLUTION).

III RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR

EXCESS OF JURISDICTION IN AWARDING SEPARATION PAY IN FAVOR OF PRIVATE RESPONDENT
MORE SO FOR THE EQUIVALENT OF 38 YEARS OF ALLEGED SERVICE.

IV RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR

EXCESS OF JURISDICTION IN HOLDING BOTH PETITIONERS LIABLE FOR SEPARATION PAY. 6

It is our impression that the crux of this petition rests on two elemental issues: (1) Whether or not private respondent
Honorio Dagui was an employee of petitioners; and (2) If he were, whether or not he was illegally dismissed.

Petitioners insist that private respondent had never been their employee. Since the establishment of Aurora Plaza, Dagui
served therein only as a job contractor. Dagui had control and supervision of whoever he would take to perform a
contracted job. On occasion, Dagui was hired only as a "tubero" or plumber as the need arises in order to unclog
sewerage pipes. Every time his services were needed, he was paid accordingly. It was understood that his job was limited
to the specific undertaking of unclogging the pipes. In effect, petitioners would like us to believe that private respondent
Dagui was an independent contractor, particularly a job contractor, and not an employee of Aurora Plaza.

We are not persuaded.

Section 8, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor Code provides in part:

There is job contracting permissible under the Code if the following conditions are met:

xxx xxx xxx

(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business.

Honorio Dagui earns a measly sum of P180.00 a day (latest salary). 7 Ostensibly, and by no stretch of the imagination can
Dagui qualify as a job contractor. No proof was adduced by the petitioners to show that Dagui was merely a job
contractor, and it is absurd to expect that private respondent, with such humble resources, would have substantial capital
or investment in the form of tools, equipment, and machineries, with which to conduct the business of supplying Aurora
Plaza with manpower and services for the exclusive purpose of maintaining the apartment houses owned by the
petitioners herein.

The bare allegation of petitioners, without more, that private respondent Dagui is a job contractor has been disbelieved by
the Labor Arbiter and the public respondent NLRC. Dagui, by the findings of both tribunals, was an employee of the
petitioners. We are not inclined to set aside these findings. The issue whether or not an employer-employee relationship
exists in a given case is essentially a question of fact. 8 As a rule, repetitious though it has become to state, this Court
does not review supposed errors in the decision of the NLRC which raise factual issues, because factual findings of
agencies exercising quasi-judicial functions [like public respondent NLRC] are accorded not only respect but even finality,
aside from the consideration that this Court is essentially not a trier of facts. 9

However, we deem it wise to discuss this issue full-length if only to bolster the conclusions reached by the labor tribunals,
to which we fully concur.

Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements
constitute the reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee's conduct. 10 It is the so-called "control test," and
that is, whether the employer controls or has reserved the right to control the employee not only as to the result of the
work to be done but also as to the means and methods by which the same is to be accomplished, 11which constitute the
most important index of the existence of the employer-employee relationship. Stated otherwise, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to control not only the end to
be achieved but also the means to be used in reaching such end. 12

All these elements are present in the case at bar. Private respondent was hired in 1953 by Doña Aurora Suntay
Tanjangco (mother of Teresita Tanjangco-Quazon), who was then the one in charge of the administration of the
Tanjangco's various apartments and other properties. He was employed as a stay-in worker performing carpentry,
plumbing, electrical and necessary work (sic) needed in the repairs of Tanjangco's properties. 13 Upon the demise of Doña
Aurora in 1982, petitioner Teresita Tanjangco-Quazon took over the administration of these properties and continued to
employ the private respondent, until his unceremonious dismissal on June 8, 1991. 14

Dagui was not compensated in terms of profits for his labor or services like an independent contractor. Rather, he was
paid on a daily wage basis at the rate of P180.00. 15 Employees are those who are compensated for their labor or services
by wages rather than by profits. 16 Clearly, Dagui fits under this classification.

Doña Aurora and later her daughter petitioner Teresita Quazon evidently had the power of dismissal for cause over the
private respondent. 17

Finally, the records unmistakably show that the most important requisite of control is likewise extant in this case. It should
be borne in mind that the power of control refers merely to the existence of the power and not to the actual exercise
thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough
that the former has a right to wield the power. 18 The establishment of petitioners is engaged in the leasing of residential
and apartment buildings. Naturally, private respondent's work therein as a maintenance man had to be performed within
the premises of herein petitioners. In fact, petitioners do not dispute the fact that Dagui reports for work from 7:00 o'clock
in the morning until 4:00 o'clock in the afternoon. It is not far-fetched to expect, therefore, that Dagui had to observe the
instructions and specifications given by then Doña Aurora and later by Mrs. Teresita Quazon as to how his work had to be
performed. Parenthetically, since the job of a maintenance crew is necessarily done within company premises, it can be
inferred that both Doña Aurora and Mrs. Quazon could easily exercise control on private respondent whenever they
please.

The employment relationship established, the next question would have to be: What kind of an employee is the private
respondent — regular, casual or probationary?

We find private respondent to be a regular employee, for Article 280 of the Labor Code provides:

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

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

As can be gleaned from this provision, there are two kinds of regular employees, namely: (1) those who are engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those
who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they
are employed. 19

Whichever standard is applied, private respondent qualifies as a regular employee. As aptly ruled by the Labor Arbiter:

. . . As owner of many residential and apartment buildings in Metro Manila, the necessity of maintaining and
employing a permanent stay-in worker to perform carpentry, plumbing, electrical and necessary work needed in
the repairs of Tanjangco's properties is readily apparent and is in fact needed. So much so that upon the demise
of Doña Aurora Tanjangco, respondent's daughter Teresita Tanjangco-Quazon apparently took over the
administration of the properties and continued to employ complainant until his outright dismissal on June 8, 1991.
. . . 20

The jobs assigned to private respondent as maintenance man, carpenter, plumber, electrician and mason were directly
related to the business of petitioners as lessors of residential and apartment buildings. Moreover, such a continuing need
for his services by herein petitioners is sufficient evidence of the necessity and indispensability of his services to
petitioners' business or trade.

Private respondent Dagui should likewise be considered a regular employee by the mere fact that he rendered service for
the Tanjangcos for more than one year, that is, beginning 1953 until 1982, under Doña Aurora; and then from 1982 up to
June 8, 1991 under the petitioners, for a total of twenty-nine (29) and nine (9) years respectively. Owing to private
respondent's length of service, he became a regular employee, by operation of law, one year after he was employed in
1953 and subsequently in 1982. In Baguio Country Club Corp., v. NLRC, 21 we decided that it is more in consonance with
the intent and spirit of the law to rule that the status of regular employment attaches to the casual employee on the day
immediately after the end of his first year of service. To rule otherwise is to impose a burden on the employee which is not
sanctioned by law. Thus, the law does not provide the qualification that the employee must first be issued a regular
appointment or must first be formally declared as such before he can acquire a regular status.

Petitioners argue, however, that even assuming arguendo that private respondent can be considered an employee, he
cannot be classified as a regular employee. He was merely a project employee whose services were hired only with
respect to a specific job and only while the same exists, 22 thus falling under the exception of Article 280, paragraph 1 of
the Labor Code. Hence, it is claimed that he is not entitled to the benefits prayed for and subsequently awarded by the
Labor Arbiter as modified by public respondent NLRC.

The circumstances of this case in light of settled case law do not, at all, support this averment. Consonant with a string of
cases beginning with Ochoco v. NLRC, 23 followed by Philippine National Construction Corporation v. NLRC, 24Magante
v. NLRC, 25 and Capitol Industrial Construction Corporation v. NLRC, 26 if truly, private respondent was employed as a
"project employee," petitioners should have submitted a report of termination to the nearest public employment office
everytime his employment is terminated due to completion of each project, as required by Policy Instruction No. 20, which
provides:

Project employees are not entitled to termination pay if they are terminated as a result of the completion of the
project or any phase thereof in which they are employed, regardless of the number of project in which they have
been employed by a particular construction company. Moreover, the company is not required to obtain a
clearance from the Secretary of Labor in connection with such termination. What is required of the company is a
report to the nearest Public Employment Office for statistical purposes.

Throughout the duration of private respondent's employment as maintenance man, there should have been filed as many
reports of termination as there were projects actually finished, if it were true that private respondent was only a project
worker. Failure of the petitioners to comply with this simple, but nonetheless compulsory, requirement is proof that Dagui
is not a project employee. 27

Coming now to the second issue as to whether or not private respondent Dagui was illegally dismissed, we rule in the
affirmative.

Jurisprudence abound as to the rule that the twin requirements of due process, substantive and procedural, must be
complied with, before a valid dismissal exists. 28 Without which the dismissal becomes void. 29

The twin requirements of notice and hearing constitute the essential elements of due process. This simply means that the
employer shall afford the worker ample opportunity to be beard and to defend himself with the assistance of his
representative, if he so desires. 30 As held in the case of Pepsi Cola Bottling Co. v. NLRC: 31

The law requires that the employer must furnish the worker sought to be dismissed with two written notices before
termination of employee can be legally effected: (1) notice which apprises the employee of the particular acts or
omissions for which his dismissal is sought; and (2) the subsequent notice which informs the employee of the
employer's decision to dismiss him (Section 13, BP 130; Sections, 2-6, Rule XIV, Book V Rules and Regulations
Implementing the Labor Code as amended), Failure to comply with the requirements taints the dismissal with
illegality. This procedure is mandatory; in the absence of which, any judgment reached by management is void
and inexistent. (Tingson, Jr. v. NLRC, 185 SCRA 498 [1990]; National Service Corporation v. NLRC, 168 SCRA
122 [1988]; Ruffy v. NLRC, 182 SCRA 365 [1990].

These mandatory requirements were undeniably absent in the case at bar. Petitioner Quazon dismissed private
respondent on June 8, 1991, without giving him any written notice informing the worker herein of the cause for his
termination. Neither was there any hearing conducted in order to give Dagui the opportunity to be heard and defend
himself. He was simply told: "Wala ka nang trabaho mula ngayon," allegedly because of poor workmanship on a previous
job. 32 The undignified manner by which private respondent's services were terminated smacks of absolute denial of the
employee's right to due process and betrays petitioner Quazon's utter lack of respect for labor. Such an attitude indeed
deserves condemnation.

The Court, however, is bewildered why only an award for separation pay in lieu of reinstatement was made by both the
Labor Arbiter and the NLRC. No backwages were awarded. It must be remembered that backwages and reinstatement
are two reliefs that should be given to an illegally dismissed employee. They are separate and distinct from each other. In
the event that reinstatement is no longer possible, as in this case, 33 separation pay is awarded to the employee. The
award of separation pay is in lieu of reinstatement and not of backwages. In other words, an illegally dismissed employee
is entitled to (1) either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and (2)
backwages. 34 Payment of backwages is specifically designed to restore an employee's income that was lost because of
his unjust dismissal. 35 On the other hand, payment of separation pay is intended to provide the employee money during
the period in which he will be looking for another employment. 36

Considering, however, that the termination of private respondent Dagui was made on June 8, 1991 or after the effectivity
of the amendatory provision of Republic Act No. 6715 on March 21, 1989, private respondent's backwages should be
computed on the basis of said law.
It is true that private respondent did not appeal the award of the Labor Arbiter awarding separation pay sans backwages.
While as a general rule, a party who has not appealed is not entitled to affirmative relief other than the ones granted in the
decision of the court below, 37 law and jurisprudence authorize a tribunal to consider errors, although unassigned, if they
involve (1) errors affecting the lower court's jurisdiction over the subject matter, (2) plain errors not specified, and (3)
clerical errors. 38 In this case, the failure of the Labor Arbiter and the public respondent NLRC to award backwages to the
private respondent, who is legally entitled thereto having been illegally dismissed, amounts to a "plain error" which we
may rectify in this petition, although private respondent Dagui did not bring any appeal regarding the matter, in the interest
of substantial justice. The Supreme Court is clothed with ample authority to review matters, even if they are not assigned
as errors on appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. 39 Rules of
procedure are mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would
result in technicalities that tend to frustrate rather than promote substantial justice, must always be avoided. 40Thus,
substantive rights like the award of backwages resulting from illegal dismissal must not be prejudiced by a rigid and
technical application of the rules. 41

Petitioner Quazon argues that, granting the petitioner corporation should be held liable for the claims of private
respondent, she cannot be made jointly and severally liable with the corporation, notwithstanding the fact that she is the
highest ranking officer of the company, since Aurora Plaza has a separate juridical personality.

We disagree.

In the cases of Maglutac v. National Labor Relations Commission, 42 Chua v. National Labor Relations
Commission,43 and A.C. Ransom Labor Union-CCLU v. National Labor Relations Commission 44 we were consistent in
holding that the highest and most ranking officer of the corporation, which in this case is petitioner Teresita Quazon as
manager of Aurora Land Projects Corporation, can be held jointly and severally liable with the corporation for the payment
of the unpaid money claims of its employees who were illegally dismissed. In this case, not only was Teresita Quazon the
most ranking officer of Aurora Plaza at the time of the termination of the private respondent, but worse, she had a direct
hand in the private respondent's illegal dismissal. A corporate officer is not personally liable for the money claims of
discharged corporate employees unless he acted with evident malice and bad faith in terminating their
employment. 45 Here, the failure of petitioner Quazon to observe the mandatory requirements of due process in
terminating the services of Dagui evinced malice and bad faith on her part, thus making her liable.

Finally, we must address one last point. Petitioners aver that, assuming that private respondent can be considered an
employee of Aurora Plaza, petitioners cannot be held liable for separation pay for the duration of his employment with
Doña Aurora Tanjangco from 1953 up to 1982. If petitioners should be held liable as employers, their liability for
separation pay should only be counted from the time Dagui was rehired by the petitioners in 1982 as a maintenance man.

We agree.

Petitioners' liability for separation pay ought to be reckoned from 1982 when petitioner Teresita Quazon, as manager of
Aurora Plaza, continued to employ private respondent. From 1953 up to the death of Doña Aurora sometime in 1982,
private respondent's claim for separation pay should have been filed in the testate or intestate proceedings of Doña
Aurora. This is because the demand for separation pay covered by the years 1953-1982 is actually a money claim against
the estate of Doña Aurora, which claim did not survive the death of the old woman. Thus, it must be filed against her
estate in accordance with Section 5, Rule 86 of the Revised Rules of Court, to wit:

Sec. 5. Claims which must be filed under tire notice. If not filed, barred; exceptions. — All claims for money
against the decedent, arising from contract, express or implied, whether the same be due, not due, or contingent,
all claims for funeral expenses for the last sickness of the decedent, and judgment for money against the
decedent, must be filed within the time limited in the notice; otherwise they are barred forever, except that they
may be set forth as counterclaims in any action that the executor or administrator may bring against the
claimants. . . .

WHEREFORE, the instant petition is partly GRANTED and the Resolution of the public respondent National Labor
Relations Commission dated March 16, 1994 is hereby MODIFIED in that the award of separation pay against the
petitioners shall be reckoned from the date private respondent was re-employed by the petitioners in 1982, until June 8,
1991. In addition to separation pay, full backwages are likewise awarded to private respondent, inclusive of allowances,
and other benefits or their monetary equivalent pursuant to Article 279 46 of the Labor Code, as amended by Section 34 of
Republic Act No. 6715, computed from the time he was dismissed on June 8, 1991 up to the finality of this decision,
without deducting therefrom the earnings derived by private respondent elsewhere during the period of his illegal
dismissal, pursuant to our ruling in Osmalik Bustamante, et al. v. National Labor Relations Commission. 47

No costs.

SO ORDERED.
 6.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 95845 February 21, 1996
WILLIAM L. TIU, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and HERMES DELA CRUZ, respondents.

DECISION

MENDOZA, J.:

On February 18, 1986, private respondent filed a complaint, for illegal dismissal, violation of the Minimum Wage Law and
non-payment of the cost of living allowances, legal holiday pay, service incentive pay and separation pay, against
petitioner. Petitioner denied that private respondent was his employee. But after consideration of the parties' evidence, the
Labor Arbiter found that private respondent was an employee of petitioner and that he had been illegally dismissed. The
Labor Arbiter ordered petitioner to pay private respondent the sum of P25,076.96, corresponding to the latter's
differentials, 13th month pay and separation pay. On appeal, the Labor Arbiter's decision was affirmed in toto by the
NLRC. Hence this petition for certiorari. Petitioner alleges that the NLRC's decision was made in "reckless disregard" of
the applicable facts and law and that it amounts to a grave abuse of discretion of the NLRC.1

Petitioner, as operator of the D'Rough Riders Transportation, is engaged in the transportation of passengers from Cebu
City to the northern towns of Cebu. Private respondent worked in petitioner's bus terminals as a "dispatcher," assisting
and guiding passengers and carrying their bags. The Labor Arbiter and the NLRC found, and petitioner had admitted in
his position paper below, that private respondent was paid a regular daily wage of P20.00.

Petitioner denies that private respondent was his employee. He alleges that he did not have the power of selection and
dismissal nor the power of control over private respondent. According to petitioner, private respondent, together with so-
called "standbys," hung around his bus terminals, assisting passengers with their baggages as "dispatchers." Petitioner
claims that, in league with "bad elements" in the locality who threatened to cause damage to his passenger buses and
scare passengers away if petitioner and other bus operators did not let them, private respondent and other "standbys"
forced passengers to hire them as baggage boys. Petitioner alleges that he had no choice but to allow private respondent
and other "standbys" to carry on their activities within the premises of his bus terminals. 2 He also claims he allowed them
to do so even if their services as so-called "dispatchers" were not needed in his business. Petitioner insists that as
"dispatcher," private respondent worked in his own way, without supervision by him.

The Labor Arbiter and the NLRC found private respondent to be an employee of petitioner, applying the Four-fold test,
namely (a) who has the power of selection and engagement of the employees; (b) who pays the wages; (c) who has the
power of dismissal, and (d) and who has the power to control the employees' conduct. The Labor Arbiter stated in his
decision:

Respondents would want this office to believe that the sum of P20.00 that they pay complainant is ex gratia;
hence, not compensation for services rendered. This is however belied by respondents' own allegation in their
position paper that, "for purposes of preservation of his transportation business, agreed to give each 'standby' a
fixed daily rate; and in exchange, they would canvass, assist and help passengers of respondents' passenger
trucks. This privilege or arrangement was made possible due to the efforts and representation of complainant's
father, Mr. Regino dela Cruz, who is close and known to the standbys and/or dispatchers." The impression that
this office gets from said allegation is that the P20.00 received by complainant represents the value that
respondents attach to complainant's services; hence, it is remuneration for services rendered. Respondent's
admission of regular payment of such an amount, already establishes the existence of one of the factors that
indicate employment relationship.

The right to hire and fire, on the other hand, has been indubitably established by complainant's Exhibit A (rebuttal)
which remains untraversed and unrefuted, a translation of its contents of which are hereunder quoted for quick
and easy reference:

Since there was an agreement for your return that when you are caught that you are inside the terminal
you are to be dismissed outright and you agreed to this condition so that last Tuesday you were caught
taking a bath inside the terminal so that from now on you are no longer with the company "you are
dismissed" because you broke the agreement.

Evident therefrom is management's unequivocal language as regards its exercise of the prerogative to dismiss.

Complainant's Exhibit "D" rebuttal, respondent's official document, reflecting the designation of respondent's
witness, (Regino) dela Cruz as Chief Dispatcher, likewise buttresses complainant's claim of employment, for the
reason that the office of Chief (Dispatcher) presupposes the existence of subordinates over whom said chief
exercises supervisory control. If a chief dispatcher works with the company, uses and signs official documents as
is reflected in Exhibit "D," it follows that his employment as such was in consideration of a chief dispatcher's
exercise of his duties to supervise and control subordinate dispatchers. Along this line, Regino dela Cruz's
 testimony that D'Rough Riders does not exercise control over the complainant cannot preponderate over Exhibit
"D."

In fine, this Office finds that complainant was an employee of respondent.

Affirming the Labor Arbiter decision, the NLRC held:

We perused at length the record of the instant case, analyzing in the process, the grounds and supporting
arguments advanced in the appeal and the reply thereto and we found no merit in the appeal.

. . . A reading of the affidavit of Regino dela Cruz, a witness for the respondent who is the Chief Dispatcher and
father of the complainant would reveal that it was he who included the complainant as one of the dispatchers of
the respondents. Considering that Regino dela Cruz is the Chief Dispatcher, the selection and engagement of the
complainant as a dispatcher of the respondents was made thru him and with the acquiescence of the
management.

Also, it is admitted by the respondents, as borne out by the records, including the affidavit of Regino dela Cruz,
that complainant was receiving a fixed daily rate from the respondent. The Labor Arbiter is therefore correct when
she ruled that what complainant received from the respondents is a remuneration for services rendered.

The power of dismissal which respondents exercised over the person of the complainant is clearly established by
complainants' Exhibit "A" (rebuttal). This exhibit refers to a disciplinary memorandum to the - complainant written
in Visayan dialect. This exhibit was not refuted by the respondents.

Also, we agree with the observation of the Labor Arbiter that respondent's Chief Dispatcher is exercising his
supervision and control over the complainant who is a dispatcher as clearly manifested in Exhibit "D" (rebuttal) for
the complainant.

A close scrutiny of the same exhibit would reveal that complainant was indeed signing a daily time record of their
hours of work.

The evidences [sic] submitted by the complainant have proven that complainant is really an employee of the
respondents.

The question whether an employer-employee relationship exists is a question of fact. As long as the findings of the labor
agencies on this question are supported by substantial evidence, the findings will not be disturbed on review in this Court.
Review in this Court concerning factual findings in labor cases is confined to determining allegations of lack of jurisdiction
or grave abuse of discretion.3

We agree with the finding that an employer-employee relationship existed between petitioner and private respondent,
such finding being supported by substantial evidence. Petitioner has failed to refute the evidence presented by private
respondent. He points to his Chief Dispatcher, Regino de la Cruz, as the one who exercised the powers of an employer
over the "dispatchers." Petitioner argues that under an agreement with Regino de la Cruz, it is the latter who selects and
engages the "dispatchers," dictates their time, supervises the performance of their work, and pays their wages. He further
argues that the "disciplinary memorandum" issued by him was not addressed to private respondent but to Regino de la
Cruz, as employer of private respondent, to remind him regarding the discipline of the "dispatchers."

Petitioner's contention is without merit. In determining whether there is an employer-employee relationship between the
parties the following questions must be considered: (a) who has the power of selection and engagement of the employee?
(b) who pays the wages of employee? (c) who has the power of dismissal? and; (d) who has the power to control the
employee's conduct?4 Of these powers the power of control over the employees' conduct is generally regarded as
determinative of the existence of the relationship.5 The "control test," under which the person for whom the services are
rendered reserves the right to direct not only the end to be achieved but also the means for reaching such end, is
generally relied on by the courts.6

Petitioner would have us believe that Chief Dispatcher Regino de la Cruz exercised these powers on his own and
independently of petitioner. This is untenable. Petitioner admits that Regino de la Cruz was merely assigned to do
dispatch work. While Regino dela Cruz took charge of the hiring of men and paid their wages, he did so as he was told by
petitioner. The payment of salaries and wages came from petitioner. Regino de la Cruz filled up and signed daily time
records for dispatchers and took disciplinary action against erring employees in accordance with instructions given to him
by petitioner. In sum, it cannot be said that Regino de la Cruz was the employer of the "dispatchers" or that he was an
independent contractor. He was himself only an employee of petitioner.

Indeed the "control test" only requires the existence of the right to control the manner of doing the work in a person, not
necessarily the actual exercise of the power by him, which he can delegate.7 Consequently, in the case at bar, the power
is exercised by Regino de la Cruz but it is power which is only delegated to him so that in truth the power inherently and
primarily is possessed by petitioner. De la Cruz is a mere supervisor, while petitioner is the real employer.

Petitioner does not claim that Regino de la Cruz and his dispatchers were independent contractors. Even if this be his
contention, however, the argument would still be without merit. Job contracting is permissible only if the following
conditions are met: (1) the contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results thereof; and (2)
the contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business. 8In the absence of these requisites, what exists is a "labor-
only" contract under which the person acting as contractor is considered merely an agent or intermediary of the employer
who is responsible to the workers in the same manner and to the same extent as if they had been directly employed by
him.9 As held in Broadway Motors, Inc. v. NLRC,10 citing Philippine Bank of Communications v. NLRC, 11 the "labor-only"
contractor is a mere agent of the employer who is responsible to the employees of the "labor-only" contractor as if such
employees had been employed by him directly. In such a case the statute establishes an employer-employee relationship
between the employer and the employees of the "labor-only" contractor to prevent any violation or circumvention of the
provisions of the Labor Code, by holding both the employer and the "labor-only" contractor responsible to the employees.

For this reason, we hold that Regino de la Cruz can, at most, be considered a "labor-only" contractor and, therefore, a
mere agent of petitioner. As he is acting in behalf of petitioner, private respondent Hermes de la Cruz is actually the
employee of petitioner.

WHEREFORE, the petition is DENIED for lack of merit.

SO ORDERED.

7.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 111870 June 30, 1994

AIR MATERIAL WING SAVINGS AND LOAN ASSOCIATION, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.

CRUZ, J.:

Private respondent Luis S. Salas was appointed "notarial and legal counsel" for petitioner Air Material Wings Savings and
Loan Association (AMWSLAI) in 1980. The appointment was renewed for three years in an implementing order dated
January 23, 1987, reading as follows:

SUBJECT: Implementing Order on the Reappointment of the Legal Officer

TO: ATTY. LUIS S. SALAS

Per approval of the Board en banc in a regular meeting held on January 21, 1987, you are hereby
reappointed as Notarial and Legal Counsel of this association for a term of three (3) years effective March
1, 1987, unless sooner terminated from office for cause or as may be deemed necessary by the Board for
the interest and protection of the association.

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

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

This shall form part of your 201 file.

BY AUTHORITY OF THE BOARD:

LUVIN S. MANAY
President & Chief of the Board

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

Instead of filing an answer, AMWSLAI moved to dismiss for lack of jurisdiction. It averred that there was no employer-
employee relationship between it and Salas and that his monetary claims properly fell within the jurisdiction of the regular
courts. Salas opposed the motion and presented documentary evidence to show that he was indeed an employee of
AMWSLAI.
The motion was denied and both parties were required to submit their position papers. AMWSLAI filed a motion for
reconsideration ad cautelam, which was also denied. The parties were again ordered to submit their position papers but
AMWSLAI did not comply. Nevertheless, most of Salas' claims were dismissed by the labor arbiter in his decision dated
November 21, 1991. 1

It was there held that Salas was not illegally dismissed and so not entitled to collect separation benefits. His claims for
vacation leave, sick leave, medical and dental allowances and refund of SSS premiums were rejected on the ground that
he was a managerial employee. He was also denied moral and exemplary damages for lack of evidence of bad faith on
the part of AMWSLAI. Neither was he allowed to collect his notarial fees from 1980 up to 1986 because the claim therefor
had already prescribed. However, the petitioner was ordered to pay Salas his notarial fees from 1987 up to March 2,
1990, and attorney's fee equivalent to 10% of the judgment award.

On appeal, the decision was affirmed in toto by the respondent Commission, prompting the petitioner to seek relief in this
Court. 2

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

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

The existence of such a relationship is essentially a factual question. The findings of the NLRC on this matter are
accorded great respect and even finality when the same are supported by substantial evidence. 4

The terms and conditions set out in the letter-contract entered into by the parties on January 23, 1987, clearly show that
Salas was an employee of the petitioner. His selection as the company counsel was done by the board of directors in one
of its regular meetings. The petitioner paid him a monthly compensation/retainer's fee for his services. Though his
appointment was for a fixed term of three years, the petitioner reserved its power of dismissal for cause or as it might
deem necessary for its interest and protection. No less importantly, AMWSLAI also exercised its power of control over
Salas by defining his duties and functions as its legal counsel, to wit:

1. To act on all legal matters pertinent to his Office.

2. To seek remedies to effect collection of overdue accounts of members without prejudice to initiating
court action to protect the interest of the association.

5
3. To defend by all means all suit against the interest of the Association.

In the earlier case of Hydro Resources Contractors Corp. v.

Pagalilauan, 6 this Court observed that:

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

We hold, therefore, that the public respondent committed no grave abuse of discretion in ruling that an employer-
employee relationship existed between the petitioner and the private respondent.

We must disagree with the NLRC, however, on Salas' claims for notarial fees.

The petitioner contends that the public respondents are not empowered to adjudicate claims for notarial fees. On the other
hand, the Solicitor General believes that the NLRC acted correctly when it took cognizance of the claim because it arose
out of Salas' employment contract with the petitioner which assigned him the duty to notarize loan agreements and other
legal documents. Moreover, Section 9 of Rule 141 of the Rules of Court does not restrict or prevent the labor arbiter and
the NLRC from determining claims for notarial fees.

Labor arbiters have the original and exclusive jurisdiction over money claims of workers when such claims have some
reasonable connection with the employer-employee relationship. The money claims of workers referred to in paragraph 3
of Article 217 of the Labor Code are those arising out of or in connection with the employer-employee relationship or some
aspect or incident of such relationship.

Salas' claim for notarial fees is based on his employment as a notarial officer of the petitioner and thus comes under the
jurisdiction of the labor arbiter.

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

ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED, with the modification that the award of notarial fees
and attorney's fees is disallowed. It is so ordered.

8.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-75038 August 23, 1993

ELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES ABAD, BENJAMIN BRIZUELA, NORLITO LADIA,
MARCELO AGUILAN, DAVID ORO, NELIA BRIZUELA, FLORA ESCOBIDO, JUSTILITA CABANIG, and DOMINGO
SAGUIT, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) and BROAD STREET TAILORING and/or
RODOLFO ZAPANTA, respondents.

NOCON, J.:

A basic factor underlying the exercise of rights and the filing of claims for benefits under the Labor Code and other
presidential issuances or labor legislations is the status and nature of one's employment. Whether an employer-employee
relationship exist and whether such employment is managerial in character or that of a rank and file employee are
primordial considerations before extending labor benefits. Thus, petitioners in this case seek a definitive ruling on the
status and nature of their employment with Broad Street Tailoring and pray for the nullification of the resolution dated May
12, 1986 of the National Labor Relations Commissions in NLRC Case No. RB-IV- 21558-78-T affirming the decision of
Labor Arbiter Ernilo V. Peñalosa dated May 28, 1979, which held eleven of them as independent contractors and the
remaining one as employee but of managerial rank.

The facts of the case shows that petitioner Elias Villuga was employed as cutter in the tailoring shop owned by private
respondent Rodolfo Zapanta and known as Broad Street Tailoring located at Shaw Boulevard, Mandaluyong, Metro
Manila. As cutter, he was paid a fixed monthly salary of P840.00 and a monthly transportation allowance of P40.00. In
addition to his work as cutter, Villuga was assigned the chore of distributing work to the shop's tailors or sewers when both
the shop's manager and assistant manager would be absent. He saw to it that their work conformed with the pattern he
had prepared and if not, he had them redone, repaired or resewn.

The other petitioners were either ironers, repairmen and sewers. They were paid a fixed amount for every item ironed,
repaired or sewn, regardless of the time consumed in accomplishing the task. Petitioners did not fill up any time record
since they did not observe regular or fixed hours of work. They were allowed to perform their work at home especially
when the volume of work, which depended on the number of job orders, could no longer be coped up with.

From February 17 to 22, 1978, petitioner Villuga failed to report for work allegedly due to illness. For not properly notifying
his employer, he was considered to have abandoned his work.

In a complaint dated March 27, 1978, filed with the Regional Office of the Department of Labor, Villuga claimed that he
was refused admittance when he reported for work after his absence, allegedly due to his active participation in the union
organized by private respondent's tailors. He further claimed that he was not paid overtime pay, holiday pay, premium pay
for work done on rest days and holidays, service incentive leave pay and 13th month pay.

Petitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and David Oro also claimed that they were dismissed from
their employment because they joined the Philippine Social Security Labor Union (PSSLU). Petitioners Andres Abad,
Norlito Ladia, Marcelo Aguilan, Nelia Brizuela, Flora Escobido, Justilita Cabaneg and Domingo Saguit claimed that they
stopped working because private respondents gave them few pieces of work to do after learning of their membership with
PSSLU. All the petitioners laid claims under the different labor standard laws which private respondent allegedly violated.

On May 28, 1979, Labor Arbiter Ernilo V. Peñalosa rendered a decision ordering the dismissal of the complaint for unfair
labor practices, illegal dismissal and other money claims except petitioner Villuga's claim for 13th month pay for the years
1976, 1977 and 1980. The dispositive portion of the decision states as follows:

WHEREFORE, premises considered, the respondent Broad Street Tailoring and/or Rodolfo Zapanta are
hereby ordered to pay complainant Elias Villuga the sum of ONE THOUSAND TWO HUNDRED FORTY-
EIGHT PESOS AND SIXTY-SIX CENTAVOS (P1,248.66) representing his 13th month pay for the years
1976, 1977 and 1978. His other claims in this case are hereby denied for lack of merit.

The complaint insofar as the other eleven (11) complainants are concerned should be, as it is hereby
dismissed for want of jurisdiction. 1
On appeal, the National Labor Relations Commission affirmed the questioned decision in a resolution dated May 12,
1986, the dispositive portion of which states as follows:

WHEREFORE, premises considered, the decision appealed from is, as it is hereby AFFIRMED, and the
appeal dismissed. 2

Presiding Commissioner Guillermo C. Medina merely concurred in the result while Commissioner Gabriel M. Gatchalian
rendered a dissenting opinion which states as follows:

I am for upholding employer-employee relationship as argued by the complainants before the Labor
Arbiter and on appeal. The further fact that the proposed decision recognizes complainant's status as
piece-rate worker all the more crystallizes employer-employee relationship the benefits prayed for must
be granted. 3

Hence, petitioners filed this instant certiorari case on the following grounds:

1. That the respondent National Labor Relations Commission abused its discretion when it ruled that
petitioner/complainant, Elias Villuga falls within the category of a managerial employee;

2. . . . when it ruled that the herein petitioners were not dismissed by reason of their union activities;

3. . . . when it ruled that petitioners Andres Abad, Benjamin Brizuela, Norlito Ladia, Marcelo Aguilan,
David Oro, Nelia Brizuela, Flora Escobido, Justilita Cabaneg and Domingo Saguit were not employees of
private respondents but were contractors.

4. . . . when it ruled that petitioner Elias Villuga is not entitled to overtime pay and services for Sundays
and Legal Holidays; and

5. . . . when it failed to grant petitioners their respective claims under the provisions of P.D. Nos. 925,
1123 and 851. 4

Under Rule 1, Section 2(c), Book III of the Implementing Rules of Labor Code, to be a member of a managerial staff, the
following elements must concur or co-exist, to wit: (1) that his primary duty consists of the performance of work directly
related to management policies; (2) that he customarily and regularly exercises discretion and independent judgment in
the performance of his functions; (3) that he regularly and directly assists in the management of the establishment; and (4)
that he does not devote his twenty per cent of his time to work other than those described above.

Applying the above criteria to petitioner Elias Villuga's case, it is undisputed that his primary work or duty is to cut or
prepare patterns for items to be sewn, not to lay down or implement any of the management policies, as there is a
manager and an assistant manager who perform said functions. It is true that in the absence of the manager the assistant
manager, he distributes and assigns work to employees but such duty, though involving discretion, is occasional and not
regular or customary. He had also the authority to order the repair or resewing of defective item but such authority is part
and parcel of his function as cutter to see to it that the items cut are sewn correctly lest the defective nature of the
workmanship be attributed to his "poor cutting." Elias Villuga does not participate in policy-making. Rather, the functions of
his position involve execution of approved and established policies. In Franklin Baker Company of the Philippines
v. Trajano, 5 it was held that employees who do not participate in policy-making but are given ready policies to execute
and standard practices to observe are not managerial employees. The test of "supervisory or managerial status" depends
on whether a person possesses authority that is not merely routinary or clerical in nature but one that requires use of
independent judgment. In other words, the functions of the position are not managerial in nature if they only execute
approved and established policies leaving little or no discretion at all whether to implement said policies or not. 6

Consequently, the exclusion of Villuga from the benefits claimed under Article 87 (overtime pay and premium pay for
holiday and rest day work), Article 94, (holiday pay), and Article 95 (service incentive leave pay) of the Labor Code, on the
ground that he is a managerial employee is unwarranted. He is definitely a rank and file employee hired to perform the
work of the cutter and not hired to perform supervisory or managerial functions. The fact that he is uniformly paid by the
month does not exclude him from the benefits of holiday pay as held in the case of Insular Bank of America Employees
Union v. Inciong. 7 He should therefore be paid in addition to the 13th month pay, his overtime pay, holiday pay, premium
pay for holiday and rest day, and service incentive leave pay.

As to the dismissal of the charge for unfair labor practices of private respondent consisting of termination of employment
of petitioners and acts of discrimination against members of the labor union, the respondent Commission correctly held
the absence of evidence that Mr. Zapanta was aware of petitioners' alleged union membership on February 22, 1978 as
the notice of union existence in the establishment with proposal for recognition and collective bargaining negotiation was
received by management only an March 3, 1978. Indeed, self-serving allegations without concrete proof that the private
respondent knew of their membership in the union and accordingly reacted against their membership do not suffice.

Nor is private respondent's claim that petitioner Villuga abandoned his work acceptable. For abandonment to constitute a
valid cause for dismissal, there must be a deliberate and unjustified refusal of the employee to resume his employment.
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. 8 At any rate, dismissal of an employee due to his prolonged absence without
leave by reason of illness duly established by the presentation of a medical certificate is not justified. 9 In the case at bar,
however, considering that petitioner Villuga absented himself for four (4) days without leave and without submitting a
medical certificate to support his claim of illness, the imposition of a sanction is justified, but surely, not dismissal, in the
light of the fact that this is petitioner's first offense. In lieu of reinstatement, petitioner Villuga should be paid separation
pay where reinstatement can no longer be effected in view of the long passage of time or because of the realities of the
situation. 10 But petitioner should not be granted backwages in addition to reinstatement as the same is not just and
equitable under the circumstances considering that he was not entirely free from blame. 11

As to the other eleven petitioners, there is no clear showing that they were dismissed because the circumstances
surrounding their dismissal were not even alleged. However, we disagree with the finding of respondent Commission that
the eleven petitioners are independent contractors.

For an employer-employee relationship to exist, the following elements are generally considered: "(1) the selection and
engagement of the employee;
(2) the payment of wages; (3) the power of dismissal and (4) the power to control the employee's conduct." 12

Noting that the herein petitioners were oftentimes allowed to perform their work at home and were paid wages on a piece-
rate basis, the respondent Commission apparently found the second and fourth elements lacking and ruled that "there is
no employer-employee relationship, for it is clear that respondents are interested only in the result and not in the means
and manner and how the result is obtained."

Respondent Commission is in error. The mere fact that petitioners were paid on a piece-rate basis is no argument that
herein petitioners were not employees. The term "wage" has been broadly defined in Article 97 of the Labor Code as
remuneration or earnings, capable of being expressed in terms of money whether fixed or ascertained on a time, task,
piece or commission
basis. . . ." The facts of this case indicate that payment by the piece is just a method of compensation and does not define
the essence of the
relation. 13 The petitioners were allowed to perform their work at home does not likewise imply absence of control and
supervision. The control test calls merely for the existence of a right to control the manner of doing the work, not the
actual exercise of the right. 14

In determining whether the relationship is that of employer and employee or one of an independent contractor, "each case
must be determined on its own facts and all the features of the relationship are to be considered." 15Considering that
petitioners who are either sewers, repairmen or ironer, have been in the employ of private respondent as early as 1972 or
at the latest in 1976, faithfully rendering services which are desirable or necessary for the business of private respondent,
and observing management's approved standards set for their respective lines of work as well as the customers'
specifications, petitioners should be considered employees, not independent contractors.

Independent contractors are those who exercise independent employment, contracting to do a piece of work according to
their own methods and without being subjected to control of their employer except as to the result of their work. By the
nature of the different phases of work in a tailoring shop where the customers' specifications must be followed to the letter,
it is inconceivable that the workers therein would not be subjected to control.

In Rosario Brothers, Inc. v. Ople, 16 this Court ruled that tailors and similar workers hired in the tailoring department,
although paid weekly wages on piece work basis, are employees not independent contractors. Accordingly, as regular
employees, paid on a piece-rate basis, petitioners are not entitled to overtime pay, holiday pay, premium pay for
holiday/rest day and service incentive leave pay. Their claim for separation pay should also be defined for lack of
evidence that they were in fact dismissed by private respondent. They should be paid, however, their 13th month pay
under P.D. 851, since they are employees not independent contractors.

WHEREFORE, in view of the foregoing reasons, the assailed decision of respondent National Labor Relations
Commission is hereby MODIFIED by awarding —

(a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay for holiday and rest day, service incentive leave
pay and separation pay, in addition to his 13th month pay; and

(b) in favor of the rest of the petitioners, their respective 13th month pay.

The case is hereby REMANDED to the National Labor Relations Commission for the computation of the claims herein-
above mentioned.

SO ORDERED
 9.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 73887 December 21, 1989
GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,
vs.
HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION, respondents.

PARAS J.:

Before us is a Petition for certiorari to review the decision of the National Labor Relations Commission (NLRC, for brevity)
dated September 9, 1985 reversing the decision of Labor Arbiter Vito J. Minoria, dated June 9, 1983, by 1) ordering
petitioner insurance company, Great Pacific Life Assurance Corporation (Grepalife, for brevity) to recognize private
respondent Honorato Judico, as its regular employee as defined under Art. 281 of the Labor Code and 2) remanding the
case to its origin for the determination of private respondent Judico's money claims.

The records of the case show that Honorato Judico filed a complaint for illegal dismissal against Grepalife, a duly
organized insurance firm, before the NLRC Regional Arbitration Branch No. VII, Cebu City on August 27, 1982. Said
complaint prayed for award of money claims consisting of separation pay, unpaid salary and 13th month pay, refund of
cash bond, moral and exemplary damages and attorney's fees.

Both parties appealed to the NLRC when a decision was rendered by the Labor Arbiter dismissing the complaint on the
ground that the employer-employee relations did not exist between the parties but ordered Grepalife to pay complainant
the sum of Pl,000.00 by reason of Christian Charity.

On appeal, said decision was reversed by the NLRC ruling that complainant is a regular employee as defined under Art.
281 of the Labor Code and declaring the appeal of Grepalife questioning the legality of the payment of Pl,000.00 to
complainant moot and academic. Nevertheless, for the purpose of revoking the supersedeas bond of said company it
ruled that the Labor Arbiter erred in awarding Pl,000.00 to complainant in the absence of any legal or factual basis to
support its payment.

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

I. Whether the relationship between insurance agents and their principal, the insurance company, is that
of agent and principal to be governed by the Insurance Code and the Civil Code provisions on agency, or
one of employer-employee, to be governed by the Labor Code.

II. Whether insurance agents are entitled to the employee benefits prescribed by the Labor Code.

III. Whether the public respondent NLRC has jurisdiction to take cognizance of a controversy between
insurance agent and the insurance company, arising from their agency relations.

IV. Whether the public respondent acted correctly in setting aside the decision of Labor Arbiter Vito J.
Minoria and in ordering the case remanded to said Labor Arbiter for further proceedings.(p. 159, Rollo)

The crux of these issues boil down to the question of whether or not employer-employee relationship existed between
petitioner and private respondent.

Petitioner admits that on June 9, 1976, private respondent Judico entered into an agreement of agency with petitioner
Grepalife to become a debit agent attached to the industrial life agency in Cebu City. Petitioner defines a debit agent as
"an insurance agent selling/servicing industrial life plans and policy holders. Industrial life plans are those whose
premiums are payable either daily, weekly or monthly and which are collectible by the debit agents at the home or any
place designated by the policy holder" (p. 156, Rollo). Such admission is in line with the findings of public respondent that
as such debit agent, private respondent Judico had definite work assignments including but not limited to collection of
premiums from policy holders and selling insurance to prospective clients. Public respondent NLRC also found out that
complainant was initially paid P 200. 00 as allowance for thirteen (13) weeks regardless of production and later a certain
percentage denominated as sales reserve of his total collections but not lesser than P 200.00. Sometime in September
1981, complainant was promoted to the position of Zone Supervisor and was given additional (supervisor's) allowance
fixed at P110.00 per week. During the third week of November 1981, he was reverted to his former position as debit agent
but, for unknown reasons, not paid so-called weekly sales reserve of at least P 200.00. Finally on June 28, 1982,
complainant was dismissed by way of termination of his agency contract.

Petitioner assails the findings of the NLRC that private respondent is an employee of the former. Petitioner argues that
Judico's compensation was not based on any fixed number of hours he was required to devote to the service of petitioner
company but rather it was the production or result of his efforts or his work that was being compensated and that the so-
called allowance for the first thirteen weeks that Judico worked as debit agent, cannot be construed as salary but as a
subsidy or a way of assistance for transportation and meal expenses of a new debit agent during the initial period of his
training which was fixed for thirteen (13) weeks. Stated otherwise, petitioner contends that Judico's compensation, in the
form of commissions and bonuses, was based on actual production, (insurance plans sold and premium collections).

Said contentions of petitioner are strongly rejected by private respondent. He maintains that he received a definite amount
as his Wage known as "sales reserve" the failure to maintain the same would bring him back to a beginner's employment
with a fixed weekly wage of P 200.00 regardless of production. He was assigned a definite place in the office to work on
when he is not in the field; and in addition to canvassing and making regular reports, he was burdened with the job of
collection and to make regular weekly report thereto for which an anemic performance would mean dismissal. He earned
out of his faithful and productive service, a promotion to Zone Supervisor with additional supervisor's allowance, (a definite
or fixed amount of P110.00) that he was dismissed primarily because of anemic performance and not because of the
termination of the contract of agency substantiate the fact that he was indeed an employee of the petitioner and not an
insurance agent in the ordinary meaning of the term.

That private respondent Judico was an agent of the petitioner is unquestionable. But, as We have held in Investment
Planning Corp. vs. SSS, 21 SCRA 294, an insurance company may have two classes of agents who sell its insurance
policies: (1) salaried employees who keep definite hours and work under the control and supervision of the company; and
(2) registered representatives who work on commission basis. The agents who belong to the second category are not
required to report for work at anytime, they do not have to devote their time exclusively to or work solely for the company
since the time and the effort they spend in their work depend entirely upon their own will and initiative; they are not
required to account for their time nor submit a report of their activities; they shoulder their own selling expenses as well as
transportation; and they are paid their commission based on a certain percentage of their sales. One salient point in the
determination of employer-employee relationship which cannot be easily ignored is the fact that the compensation that
these agents on commission received is not paid by the insurance company but by the investor (or the person insured).
After determining the commission earned by an agent on his sales the agent directly deducts it from the amount he
received from the investor or the person insured and turns over to the insurance company the amount invested after such
deduction is made. The test therefore is whether the "employer" controls or has reserved the right to control the
"employee" not only as to the result of the work to be done but also as to the means and methods by which the same is to
be accomplished.

Applying the aforementioned test to the case at bar, We can readily see that the element of control by the petitioner on
Judico was very much present. The record shows that petitioner Judico received a definite minimum amount per week as
his wage known as "sales reserve" wherein the failure to maintain the same would bring him back to a beginner's
employment with a fixed weekly wage of P 200.00 for thirteen weeks regardless of production. He was assigned a definite
place in the office to work on when he is not in the field; and in addition to his canvassing work he was burdened with the
job of collection. In both cases he was required to make regular report to the company regarding these duties, and for
which an anemic performance would mean a dismissal. Conversely faithful and productive service earned him a
promotion to Zone Supervisor with additional supervisor's allowance, a definite amount of P110.00 aside from the regular
P 200.00 weekly "allowance". Furthermore, his contract of services with petitioner is not for a piece of work nor for a
definite period.

On the other hand, an ordinary commission insurance agent works at his own volition or at his own leisure without fear of
dismissal from the company and short of committing acts detrimental to the business interest of the company or against
the latter, whether he produces or not is of no moment as his salary is based on his production, his anemic performance
or even dead result does not become a ground for dismissal. Whereas, in private respondent's case, the undisputed facts
show that he was controlled by petitioner insurance company not only as to the kind of work; the amount of results, the
kind of performance but also the power of dismissal. Undoubtedly, private respondent, by nature of his position and work,
had been a regular employee of petitioner and is therefore entitled to the protection of the law and could not just be
terminated without valid and justifiable cause.

Premises considered, the appealed decision is hereby AFFIRMED in toto.

SO ORDERED.

10.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 84484 November 15, 1989
INSULAR LIFE ASSURANCE CO., LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.

NARVASA, J.:

On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered
into a contract 1 by which:

1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities
in accordance with the existing rules and regulations" of the Company;
 2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of
Commissions" of the contract to "constitute a part of the consideration of ... (said) agreement;" and

3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and
those which may from time to time be promulgated by it, ..." were made part of said contract.

The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the
acts prohibited to him, and the modes of termination of the agreement, viz.:

RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time,
place and means of soliciting insurance. Nothing herein contained shall therefore be construed to create
the relationship of employee and employer between the Agent and the Company. However, the Agent
shall observe and conform to all rules and regulations which the Company may from time to time
prescribe.

ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly,
rebates in any form, or from making any misrepresentation or over-selling, and, in general, from doing or
committing acts prohibited in the Agent's Manual and in circulars of the Office of the Insurance
Commissioner.

TERMINATION. The Company may terminate the contract at will, without any previous notice to the
Agent, for or on account of ... (explicitly specified causes). ...

Either party may terminate this contract by giving to the other notice in writing to that effect. It shall
become ipso facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority
previously issued or should the Agent fail to renew his existing Certificate of Authority upon its expiration.
The Agent shall not have any right to any commission on renewal of premiums that may be paid after the
termination of this agreement for any cause whatsoever, except when the termination is due to disability
or death in line of service. As to commission corresponding to any balance of the first year's premiums
remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if the balance of the
first year premium is paid, less actual cost of collection, unless the termination is due to a violation of this
contract, involving criminal liability or breach of trust.

ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations

shall be valid without the prior consent in writing of the Company. ...

Some four years later, in April 1972, the parties entered into another contract — an Agency Manager's Contract — and to
implement his end of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while
concurrently fulfilling his commitments under the first contract with the Company. 2

In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao
sued the Company in a civil action and this, he was later to claim, prompted the latter to terminate also his engagement
under the first contract and to stop payment of his commissions starting April 1, 1980. 3

Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president. Without
contesting the termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder,
plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the
Company's employee, but an independent contractor and that the Company had no obligation to him for unpaid
commissions under the terms and conditions of his contract. 5

The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had
established an employer-employee relationship between him and the Company, and this conferred jurisdiction on the
Ministry of Labor to adjudicate his claim. Said official's decision directed payment of his unpaid commissions "...
equivalent to the balance of the first year's premium remaining unpaid, at the time of his termination, of all the insurance
policies solicited by ... (him) in favor of the respondent company ..." plus 10% attorney's fees. 6

This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence, the
present petition for certiorari and prohibition.

The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue
of the contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive
jurisdiction of the Labor Arbiter under the provisions of Section 217 of the Labor Code, 8 or, contrarily, as the Company
would have it, that under said contract Basiao's status was that of an independent contractor whose claim was thus
cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action.

The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it
and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or by necessary
implication, made Basiao the master of his own time and selling methods, left to his judgment the time, place and means
of soliciting insurance, set no accomplishment quotas and compensated him on the basis of results obtained. He was not
bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects
anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most effective.
Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the
respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking
precedents to the effect that the critical feature distinguishing the status of an employee from that of an independent
contractor is control, that is, whether or not the party who engages the services of another has the power to control the
latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of
Basiao's contract obliging him to "... observe and conform to all rules and regulations which the Company may from time
to time prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for insurance,
processed their applications and determined the amounts of insurance cover to be issued as indicative of the control,
which made Basiao, in legal contemplation, an employee of the Company. 9

It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo
Al-Lagadan 10

... In determining the existence of employer-employee relationship, the following elements are generally
considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power to control the employees' conduct — although the latter is the
most important element (35 Am. Jur. 445). ...

has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid test of the
character of a contract or agreement to render service. It should, however, be obvious that not every form of control that
the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be
accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the
term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is
not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party
hired and eschews any intervention whatsoever in his performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix
the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the
result, create no employer-employee relationship unlike the second, which address both the result and the means used to
achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the
business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations
between insurer and insured but also to the internal affairs of the insurance company. 12 Rules and regulations governing
the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is,
therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in
selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules
which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and
approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the
schedules of payment. None of these really invades the agent's contractual prerogative to adopt his own selling methods
or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee
relationship between him and the company.

There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors,
instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople, 13 the Court ruled that
a person engaged to sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his own
workers, sell according to his own methods subject only to prearranged routes, observing no working hours fixed by the
other party and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a peddler's
discount given by the other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent
contractor.

In Investment Planning Corporation of the Philippines us. Social Security System 14 a case almost on all fours with the
present one, this Court held that there was no employer-employee relationship between a commission agent and an
investment company, but that the former was an independent contractor where said agent and others similarly placed
were: (a) paid compensation in the form of commissions based on percentages of their sales, any balance of
commissions earned being payable to their legal representatives in the event of death or registration; (b) required to put
up performance bonds; (c) subject to a set of rules and regulations governing the performance of their duties under the
agreement with the company and termination of their services for certain causes; (d) not required to report for work at any
time, nor to devote their time exclusively to working for the company nor to submit a record of their activities, and who,
finally, shouldered their own selling and transportation expenses.

More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell rice and
palay without compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure
without any supervision or control on the part of his principal and relied on his own resources in the performance of his
work, was a plain commission agent, an independent contractor and not an employee.

The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and
conform to such rules and regulations as the latter might from time to time prescribe. No showing has been made that any
such rules or regulations were in fact promulgated, much less that any rules existed or were issued which effectively
controlled or restricted his choice of methods — or the methods themselves — of selling insurance. Absent such showing,
the Court will not speculate that any exceptions or qualifications were imposed on the express provision of the contract
leaving Basiao "... free to exercise his own judgment as to the time, place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-
five years. Whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao's status under
the contract of July 2, 1968, not the length of his relationship with the Company.

The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a
commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an
ordinary civil action. The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without
jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. This conclusion renders it
unnecessary and premature to consider Basiao's claim for commissions on its merits.

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

SO ORDERED

11.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. Nos. 83380-81 November 15, 1989
MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G. INOCENCIO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor Arbiter, Department of Labor and
Employment, National Capital Region), SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP and its
members, JACINTO GARCIANO, ALFREDO C. BASCO, VICTORIO Y. LAURETO, ESTER NARVAEZ, EUGENIO L.
ROBLES, BELEN N. VISTA, ALEJANDRO A. ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA
ESTRABO, LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY, LILY OPINA, JANET SANGDANG,
JOSEFINA ALCOCEBA and MARIA ANGELES, respondents.

FERNAN, C.J.:

This petition for certiorari involving two separate cases filed by private respondents against herein petitioners assails the
decision of respondent National Labor Relations Commission in NLRC CASE No. 7-2603-84 entitled "Sandigan Ng
Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Makati Haberdashery and/or Toppers Makati, et al." and NLRC
CASE No. 2-428-85 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Toppers Makati, et
al.", affirming the decision of the Labor Arbiter who jointly heard and decided aforesaid cases, finding: (a) petitioners guilty
of illegal dismissal and ordering them to reinstate the dismissed workers and (b) the existence of employer-employee
relationship and granting respondent workers by reason thereof their various monetary claims.

The undisputed facts are as follows:

Individual complainants, private respondents herein, have been working for petitioner Makati Haberdashery, Inc. as
tailors, seamstress, sewers, basters (manlililip) and "plantsadoras". They are paid on a piece-rate basis except Maria
Angeles and Leonila Serafina who are paid on a monthly basis. In addition to their piece-rate, they are given a daily
allowance of three (P 3.00) pesos provided they report for work before 9:30 a.m. everyday.

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

On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the respondent workers, filed a
complaint docketed as NLRC NCR Case No. 7-2603-84 for (a) underpayment of the basic wage; (b) underpayment of
living allowance; (c) non-payment of overtime work; (d) non-payment of holiday pay; (e) non-payment of service incentive
pay; (f) 13th month pay; and (g) benefits provided for under Wage Orders Nos. 1, 2, 3, 4 and 5. 1

During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro Pelobello left with Salvador Rivera,
a salesman of petitioner Haberdashery, an open package which was discovered to contain a "jusi" barong tagalog. When
confronted, Pelobello replied that the same was ordered by respondent Casimiro Zapata for his customer. Zapata
allegedly admitted that he copied the design of petitioner Haberdashery. But in the afternoon, when again questioned
about said barong, Pelobello and Zapata denied ownership of the same. Consequently a memorandum was issued to
each of them to explain on or before February 4, 1985 why no action should be taken against them for accepting a job
order which is prejudicial and in direct competition with the business of the company. 2 Both respondents allegedly did not
submit their explanation and did not report for work. 3 Hence, they were dismissed by petitioners on February 4, 1985.
They countered by filing a complaint for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 on February 5,
1985. 4

On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-85 finding respondents guilty
of illegal dismissal and ordering them to reinstate Dioscoro Pelobello and Casimiro Zapata to their
 respective or similar positions without loss of seniority rights, with full backwages from July 4, 1985 up to
actual reinstatement. The charge of unfair labor practice is dismissed for lack of merit.

In NLRC NCR Case No. 7-26030-84, the complainants' claims for underpayment re violation of the
minimum wage law is hereby ordered dismissed for lack of merit.

Respondents are hereby found to have violated the decrees on the cost of living allowance, service
incentive leave pay and the 13th Month Pay. In view thereof, the economic analyst of the Commission is
directed to compute the monetary awards due each complainant based on the available records of the
respondents retroactive as of three years prior to the filing of the instant case.

SO ORDERED. 5

From the foregoing decision, petitioners appealed to the NLRC. The latter on March 30, 1988 affirmed said decision but
limited the backwages awarded the Dioscoro Pelobello and Casimiro Zapata to only one (1) year. 6

After their motion for reconsideration was denied, petitioners filed the instant petition raising the following issues:

I THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP

EXISTS BETWEEN PETITIONER HABERDASHERY AND RESPONDENTS WORKERS.

II THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS WORKERS ARE ENTITLED TO
MONETARY CLAIMS DESPITE THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUM WAGE.

III THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS PELOBELLO AND ZAPATA
WERE ILLEGALLY DISMISSED. 7

The first issue which is the pivotal issue in this case is resolved in favor of private respondents. We have repeatedly held
in countless decisions that the test of employer-employee relationship is four-fold: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct. It is
the so called "control test" that is the most important element. 8 This simply means the determination of whether the
employer controls or has reserved the right to control the employee not only as to the result of the work but also as to the
means and method by which the same is to be accomplished. 9

The facts at bar indubitably reveal that the most important requisite of control is present. As gleaned from the operations
of petitioner, when a customer enters into a contract with the haberdashery or its proprietor, the latter directs an employee
who may be a tailor, pattern maker, sewer or "plantsadora" to take the customer's measurements, and to sew the pants,
coat or shirt as specified by the customer. Supervision is actively manifested in all these aspects — the manner and
quality of cutting, sewing and ironing.

Furthermore, the presence of control is immediately evident in this memorandum issued by Assistant Manager Cecilio B.
Inocencio, Jr. dated May 30, 1981 addressed to Topper's Makati Tailors which reads in part:

4. Effective immediately, new procedures shall be followed:

A. To follow instruction and orders from the undersigned Roger Valderama, Ruben Delos Reyes and Ofel
Bautista. Other than this person (sic) must ask permission to the above mentioned before giving orders or
instructions to the tailors.

B. Before accepting the job orders tailors must check the materials, job orders, due dates and other
things to maximize the efficiency of our production. The materials should be checked (sic) if it is matched
(sic) with the sample, together with the number of the job order.

C. Effective immediately all job orders must be finished one day before the due date. This can be done by
proper scheduling of job order and if you will cooperate with your supervisors. If you have many due
dates for certain day, advise Ruben or Ofel at once so that they can make necessary adjustment on due
dates.

D. Alteration-Before accepting alteration person attending on customs (sic) must ask first or must advise
the tailors regarding the due dates so that we can eliminate what we call 'Bitin'.

E. If there is any problem regarding supervisors or co-tailor inside our shop, consult with me at once settle
the problem. Fighting inside the shop is strictly prohibited. Any tailor violating this memorandum will be
subject to disciplinary action.

For strict compliance. 10

From this memorandum alone, it is evident that petitioner has reserved the right to control its employees not only as to the
result but also the means and methods by which the same are to be accomplished. That private respondents are regular
employees is further proven by the fact that they have to report for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and
are paid an additional allowance of P 3.00 daily if they report for work before 9:30 a.m. and which is forfeited when they
arrive at or after 9:30 a.m. 11

Since private respondents are regular employees, necessarily the argument that they are independent contractors must
fail. As established in the preceding paragraphs, private respondents did not exercise independence in their own
methods, but on the contrary were subject to the control of petitioners from the beginning of their tasks to their completion.
Unlike independent contractors who generally rely on their own resources, the equipment, tools, accessories, and
paraphernalia used by private respondents are supplied and owned by petitioners. Private respondents are totally
dependent on petitioners in all these aspects.

Coming now to the second issue, there is no dispute that private respondents are entitled to the Minimum Wage as
mandated by Section 2(g) of Letter of Instruction No. 829, Rules Implementing Presidential Decree No. 1614 and
reiterated in Section 3(f), Rules Implementing Presidential Decree 1713 which explicitly states that, "All employees paid by
the result shall receive not less than the applicable new minimum wage rates for eight (8) hours work a day, except where
a payment by result rate has been established by the Secretary of Labor. ..." 12No such rate has been established in this
case.

But all these notwithstanding, the question as to whether or not there is in fact an underpayment of minimum wages to
private respondents has already been resolved in the decision of the Labor Arbiter where he stated: "Hence, for lack of
sufficient evidence to support the claims of the complainants for alleged violation of the minimum wage, their claims for
underpayment re violation of the Minimum Wage Law under Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce fall." 13

The records show that private respondents did not appeal the above ruling of the Labor Arbiter to the NLRC; neither did
they file any petition raising that issue in the Supreme Court. Accordingly, insofar as this case is concerned, that issue has
been laid to rest. As to private respondents, the judgment may be said to have attained finality. For it is a well-settled rule
in this jurisdiction that "an appellee who has not himself appealed cannot obtain from the appellate court-, any affirmative
relief other than the ones granted in the decision of the court below. " 14

As a consequence of their status as regular employees of the petitioners, they can claim cost of living allowance. This is
apparent from the provision defining the employees entitled to said allowance, thus: "... All workers in the private sector,
regardless of their position, designation or status, and irrespective of the method by which their wages are paid. " 15

Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules and Regulations
Implementing P.D. No. 851 which provides:

Section 3. Employers covered. — The Decree shall apply to all employers except to:

xxx xxx xxx

(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in which case the employer shall be
covered by this issuance insofar as such workers are concerned. (Emphasis supplied.)

On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th Month Pay, they are not
entitled to service incentive leave pay because as piece-rate workers being paid at a fixed amount for performing work
irrespective of time consumed in the performance thereof, they fall under one of the exceptions stated in Section 1(d),
Rule V, Implementing Regulations, Book III, Labor Code. For the same reason private respondents cannot also claim
holiday pay (Section 1(e), Rule IV, Implementing Regulations, Book III, Labor Code).

With respect to the last issue, it is apparent that public respondents have misread the evidence, for it does show that a
violation of the employer's rules has been committed and the evidence of such transgression, the copied barong tagalog,
was in the possession of Pelobello who pointed to Zapata as the owner. When required by their employer to explain in a
memorandum issued to each of them, they not only failed to do so but instead went on AWOL (absence without official
leave), waited for the period to explain to expire and for petitioner to dismiss them. They thereafter filed an action for
illegal dismissal on the far-fetched ground that they were dismissed because of union activities. Assuming that such acts
do not constitute abandonment of their jobs as insisted by private respondents, their blatant disregard of their employer's
memorandum is undoubtedly an open defiance to the lawful orders of the latter, a justifiable ground for termination of
employment by the employer expressly provided for in Article 283(a) of the Labor Code as well as a clear indication of
guilt for the commission of acts inimical to the interests of the employer, another justifiable ground for dismissal under the
same Article of the Labor Code, paragraph (c). Well established in our jurisprudence is the right of an employer to dismiss
an employee whose continuance in the service is inimical to the employer's interest. 16

In fact the Labor Arbiter himself to whom the explanation of private respondents was submitted gave no credence to their
version and found their excuses that said barong tagalog was the one they got from the embroiderer for the Assistant
Manager who was investigating them, unbelievable.

Under the circumstances, it is evident that there is no illegal dismissal of said employees. Thus, We have ruled that:

No employer may rationally be expected to continue in employment a person whose lack of morals,
respect and loyalty to his employer, regard for his employer's rules, and appreciation of the dignity and
responsibility of his office, has so plainly and completely been bared.
 That there should be concern, sympathy, and solicitude for the rights and welfare of the working class, is
meet and proper. That in controversies between a laborer and his master, doubts reasonably arising from
the evidence, or in the interpretation of agreements and writings should be resolved in the former's favor,
is not an unreasonable or unfair rule. But that disregard of the employer's own rights and interests can be
justified by that concern and solicitude is unjust and unacceptable. (Stanford Microsystems, Inc. v. NLRC,
157 SCRA 414-415 [1988] ).

The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer. 17 More
importantly, while the Constitution is committed to the policy of social justice and the protection of the working class, it
should not be supposed that every labor dispute will automatically be decided in favor of labor. 18

Finally, it has been established that the right to dismiss or otherwise impose discriplinary sanctions upon an employee for
just and valid cause, pertains in the first place to the employer, as well as the authority to determine the existence of said
cause in accordance with the norms of due process. 19

There is no evidence that the employer violated said norms. On the contrary, private respondents who vigorously insist on
the existence of employer-employee relationship, because of the supervision and control of their employer over them,
were the very ones who exhibited their lack of respect and regard for their employer's rules.

Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to terminate the services of private
respondents.

WHEREFORE, the decision of the National Labor Relations Commission dated March 30, 1988 and that of the Labor
Arbiter dated June 10, 1986 are hereby modified. The complaint filed by Pelobello and Zapata for illegal dismissal
docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack of factual and legal bases. Award of service incentive
leave pay to private respondents is deleted.

SO ORDERED.

12.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 86693 July 2, 1990
COSMOPOLITAN FUNERAL HOMES, INC., petitioner,
vs.
NOLI MAALAT and NATIONAL LABOR RELATIONS COMMISSION, respondents.

GUTIERREZ, JR., J.:

The nature of the work of a "funeraria" supervisor, whether employee or commission agent, is the issue raised in this
petition.

Sometime in 1962, petitioner Cosmopolitan Funeral Homes, Inc. engaged the services of private respondent Noli Maalat
as a "supervisor" to handle the solicitation of mortuary arrangements, sales and collections. The funeral services which he
sold refer to the taking of the corpse, embalming, casketing, viewing and delivery. The private respondent was paid on a
commission basis of 3.5% of the amounts actually collected and remitted.

On January 15, 1987, respondent Maalat was dismissed by the petitioner for commission of the following violations
despite previous warnings:

(a) Understatement of the reported contract price against the actual contract price charged to and paid by
the customers;

(b) Misappropriation of funds or collections by non-remittance of collections and non-issuance of Official

Receipt;

(c) Charging customers additional amount and pocketing the same for the cost of medicines, linen, and
security services without issuing Official Receipt;

(d) Non-reporting of some embalming and re-embalming charges and pocketing the same and non-
issuance of Official Receipt;

(e) Engaging in tomb making and inclusion of the price of the tomb in the package price without prior
knowledge of the customers and the company. (At p. 16, Records)

Maalat filed a complaint for illegal dismissal and non-payment of commissions.

On the basis of the parties' position papers, Labor Arbiter Newton R. Sancho rendered a decision declaring Maalat's
dismissal illegal and ordering the petitioner to pay separation pay, commission, interests and attorney's fee in the total
amount of P205,571.52.

In an appeal from the decision, the National Labor Relations Commission (NLRC), on May 31, 1988, reversed the
Arbiter's action and rendered a new decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the decision dated November 27, 1987, is hereby SET
ASIDE and VACATED and a New One ENTERED, ordering as follows:

1. Judgment is hereby rendered declaring the dismissal of complainant Noli Maalat by respondent-
appellant as justified and with lawful cause. By way of equitable relief and in the interest of social and
compassionate justice, We hereby order and direct respondent Cosmopolitan Funeral Homes, Inc. to pay
complainant Maalat his separation pay equivalent to one-half (1/2%) month average income for every
year of service to appellant, computed on his last year of service immediately preceding his separation
from respondent, subject to allowable set-offs and deductions of the counter-claims of respondent
company, after due notice and hearing.

2. The claims for accrued commissions by complainant may be admitted, subject to proofs thereof, and
allowable set-offs and deductions credited to the account of respondent-appellant by way of
counterclaims, after due notice and hearing.

3. All the evidence adduced by the parties are hereby admitted, subject to rebuttal and/or controvertion by
either party during the hearing and the hearings hereafter.

4. The Attorney's fee in favor of complainant's counsel is hereby fixed at two (2%) percent, assessable
over whatever final money award complainant may be entitled on the aggregate sums thereof, after
proper hearing on the same.

All other claims and counter-claims are hereby dismissed for lack of merit, except those specified above.

Finally, this case is remanded to the Regional Arbitration Branch of origin for further proceedings in
accordance with the above judgment. No findings as to costs. (At pp. 66-67, Rollo)

The petitioner's motion for reconsideration was denied, hence, this petition for review before this Court.

The issues raised in this petition are:

I. Whether or not the NLRC erred in ruling that an employment relationship existed between the parties; and

II. Whether or not there was equitable basis for the award of 1/2 month separation pay for every year of service.

In determining whether a person who performs work for another is the latter's employee or an independent contractor, the
prevailing test is the "right of control" test. Under this test, an employer-employee relationship exists where the person for
whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and
means to be used in reaching that end.

The petitioner argues that Maalat was never its employee for he was only a commission agent whose work was not
subject to its control. Citing Investment Planning Corporation of the Philippines v. Social Security System (21 SCRA 924
[1967]), the petitioner states that the work of its agents approximates that of an independent contractor since the agent is
not under control by the latter with respect to the means and methods employed in the performance of the work, but only
as to the results.

The NLRC, after its perusal of the facts and evidence on record, stated that there exists an employment relationship
between the parties. The petitioner has failed to overcome this factual finding.

The fact that the petitioner imposed and applied its rule prohibiting superiors from engaging in other funeral business
which it considered inimical to company interests proves that it had the right of control and actually exercised its
control over the private respondent. In other words, Maalat worked exclusively for the petitioner.

Moreover, the private respondent was prohibited from engaging in part-time embalming business outside of the company
and a violation thereof was cause for dismissal. Incurring absences without leave was likewise subject to disciplinary
action: a reprimand for the first offense, one week suspension for the second offense, and dismissal for the third offense.

The petitioner admits that these prohibitive rules bound the private respondent but states that these rules have no bearing
on the means and methods ordinarily required of a supervisor. The overall picture is one of employment. The petitioner
failed to prove that the contract with private respondent was but a mere agency, which indicates that a "supervisor" is free
to accomplish his work on his own terms and may engage in other means of livelihood.
In Investment Planning Corporation, supra, cited by the petitioner, the majority of the "commission agents" are regularly
employed elsewhere. Such a circumstance is absent in Maalat's case. Moreover, the private respondent's job description
states that ". . . he attends to the needs of the clientele and arranges the kind of casket and funeral services the
customers would like to avail themselves of" and indicates that he must always be on the job or at least most of time.

Likewise, the private respondent was not allowed to issue his own receipts, nor was he allowed to directly deduct his
commission as truly independent salesmen practice.

Worthy of note too are two other company rules which provide that "negotiation and making of contract with customers
shall be done inside the office" and "signing of contract should be made immediately before the cadaver or deceased is
place in the casket." (Annex 10-B, Petitioner's Position Paper, Records) Said rules belie the petitioner's stand that it does
not have control over the means and methods by which the work is accomplished. The control test has been satisfied.
(Social Security System v. Court of Appeals, 156 SCRA 383 [1987])

The finding by the public respondent that the petitioner has reported private respondent to the Social Security System as
a covered employee adds strength to the conclusion that Maalat is an employee.

There is no reversible error in the findings of facts by the NLRC which are supported by substantial evidence and which
we, therefore, do not disturb on appeal.

The payment of compensation by way of commission does not militate against the conclusion that private respondent was
an employee. Under Article 97 of the Labor Code, "wage" shall mean "the renumeration of earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, pace or commission basis . .
.".

The non-observance of regular office hours does not sufficiently show that Maalat is a "supervisor on commission basis"
nor does the same indicate that he is an independent salesman. As a supervisor, although compensated on commission
basis, he is exempt from the observance of normal hours of work for his compensation is measured by the number of
sales he makes. He may not have had the usual fixed time for starting and ending his work as in other types of
employment but he had to spend most of his working hours at his job. People die at all times of the day or night.

All considered, we rule that private respondent is an employee of petitioner corporation.

II

The petitioner impugns the award of separation pay equivalent to one-half (1/2) month average income for every year of
service to private respondent. The NLRC ruled that:

However, mindful of the fact the complainant Noli Maalat has served respondent company for the last
twenty four (24) years, more or less, it is but proper to afford him some equitable relief, consistent with the
recent rulings of the Supreme Court, due to his past services with no known previous record, and the
ends of social and compassionate justice will thus be served if he is paid a portion of his separation pay,
equivalent to one-half (1/2) month every year of his service to said company. (See Soco v. Mercantile
Corporation, G.R. No. 53364-65, March 16, 1987; and Firestone, et al, v. Lariosa et al., G.R. No. 70479,
February 27, 1987). We are not inclined to grant complainant his full month termination pay for every year
of his service because, unlike in the former Soco case, the misconduct of the employee merely involves
infraction of company rules while in the latter Firestone case it involves misconduct of a rank-and-file
employee, although similarly involving acts of dishonesty. (At pp. 65-66, Rollo)

This Court will not disturb the finding by the NLRC that private respondent Maalat was dishonest in the discharge of his
functions. The finding is sufficiently supported by the evidence on record.

Additionally, the private respondent did not appeal from the NLRC decision, thereby impliedly accepting the validity of his
dismissal.

We take exception, therefore, to the grant of separation pay to private respondent.

In Philippine Long Distance Telephone Company (PLDT) v. NLRC, (164 SCRA 671 [1988]), this Court re-examined, the
doctrine in the aforecited Firestone and Soco cases and other previous cases that employees dismissed for cause are
nevertheless entitled to separation pay on the ground of social and compassionate justice. In abandoning this doctrine,
the Court held, and we quote:

. . . We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker,
the employer may not be required to give the dismissed employee separation pay, or financial assistance,
or whatever other name it is called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect of rewarding rather than
punishing the erring employee for his offense. . . .
 The policy of social justice is not intended to countenance wrongdoing simply because it is committed by
the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every humane society but only when the recipient is not a
rascal claiming an undeserved privilege. . . .

Subsequent decisions have abided by this pronouncement. (See Philippine National Construction Corporation v. National
Labor Relations Commission, 170 SCRA 207 [1989]; Eastern Paper Mills, Inc. v. National Labor Relations Commission,
170 SCRA 597 [1989]; Osias Academy v. National Labor Relations Commission, G.R. No. 83234, April 18, 1989; and
Nasipit Lumber Co., Inc. v. National Labor Relations Commission, G.R. No. 54424, August 31, 1989.)

Conformably with the above cited PLDT ruling, this Court pronounces that the grant of separation pay to private
respondent Maalat, who was validly terminated for dishonesty, is not justified.

Parenthetically, it may be mentioned that the Labor Arbiter, apparently unaware of the petition for review pending before
this Court, conducted further proceedings to compute private respondent's separation pay, unclaimed commission and 2%
attorney's fees, in compliance with the NLRC decision of May 31, 1988. After hearing, the Labor Arbiter rendered a
decision on May 10, 1989, the pertinent portion of which reads:

In sum, the sustainable claims of complainant are as follows:

(1) Separation Pay : P 76,064.40

(2) Unpaid Commissions : 39,344.80
——————
Sub-total : P 115,409.20
(3) 2% Attorney's Fees : 2,308.18
——————
P 117, 717.38

WHEREFORE, judgment is hereby rendered ordering respondent Cosmopolitan Funeral Homes, Inc., to
pay complainant Noli Maalat his claims above set forth in the total amount of P117,717.38 only.

Neither party appealed from said decision.

For being in conflict with our holding that the private respondent is not entitled to separation pay, this Court sets aside the
Labor Arbiter's computation of separation pay. However, we uphold his computation of unclaimed commissions amounting
to P39,344.80. The amount of attorney's fee should consequently be recomputed at 2% of P39,344.80 or P786.89.

WHEREFORE, the judgment of the National Labor Relations Commission is AFFIRMED except for the grant of separation
pay which is hereby disallowed. Private respondent Maalat is entitled to unclaimed commissions of P39,344.80 and 2%
attorney's fees of P786.89, said amounts being considered final.

SO ORDERED.

13.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 73199 October 26, 1988
DR. RENATO SARA and/or ROMEO ARANA petitioners,
vs.
CERILA AGARRADO and the NATIONAL LABOR RELATIONS COMMISSION, respondents.

FERNAN, C.J.:

Challenged in this petition for certiorari is the jurisdiction of the Labor Tribunal over Case No. LRD-ROXII-006-82, a claim
for unpaid commissions and reimbursement of certain sums of money filed by herein private respondent Cerila Agarrado
against herein petitioners Dr. Renato Sara and Romeo Arabia.

Private respondent Cerila Agarrado was an attendant in the clinic of petitioner Dr. Renato Sara She quit her job in 1973.
Four years later, petitioners Dr. Sara and Romeo Arabia, being owners of a rice mill and having begun to engage in the
buy and sell of palay and rice, entered into a verbal agreement with private respondent Agarrado whereby it was agreed
that the latter would be paid P2.00 commission per sack of milled rice sold as well as a commission of 10% per kilo of
palay purchased. It was further agreed that private respondent would spend her own money for the undertaking, but to
enable her to carry out the agreement more effectively, she was authorized to borrow money from other persons, as in
fact she did, subject to reimbursement by petitioners. 1

In 1982, private respondent filed with the National Labor Relations Commission (NLRC) Regional Arbitration Branch No.
XI, Cotabato City, a complaint against petitioners for unpaid commission of P4,598.00 on milled rice sold, P2,982.80 on
palay sold, reimbursement of P17,500.00 which she had borrowed from various persons and Pl,749.00 of her own money
which petitioners allegedly had not reimbursed (LRD-ROXII-006- 82).

By way of defense, petitioners raised the issue of lack of jurisdiction on the part of the Labor Arbiter to take cognizance of
the case, there being no employer-employee relationship between the parties. They averred that the claim for alleged
unpaid commission and certain sums of money is governed by the law on agency under the Civil Code and hence a
purely civil obligation cognizable by the regular courts.

On January 17, 1973, Labor Arbiter Magno C. Cruz rendered a decision in favor of private respondent ordering petitioners
to pay all the claims amounting to P26,397.80. 2

Petitioner appealed the decision to the NLRC, which in a resolution dated June 25, 1986 affirmed the Labor Arbiter's
decision and dismissed the appeal. 3

Their motion for reconsideration having been denied, petitioners took the present recourse, maintaining lack of jurisdiction
on the part of the Labor Tribunal as well as grave abuse of discretion on its part in finding them liable to private
respondent.

In his comment, the Solicitor General agreed with petitioners that there was no employer-employee relationship between
the parties and that by reason thereof the Labor Arbiter had no jurisdiction over the case. The Solicitor General's comment
was accompanied by a manifestation and motion stating that he was filing the comment on his own behalf and that the
public respondent NLRC had been informed about his contrary stand. 4

The primordial issue in this case is whether an employer-employee relationship exists between petitioners and private
respondent as to warrant cognizance by the Labor Arbiter of LRD-ROXII-006-82.

To determine the existence of an employer-employee relationship, this Court in a long line of decisions 5 has invariably
applied the following four-fold test: [1] the selection and engagement of the employee; [2] the payment of wages; [3] the
power of dismissal; and [4] the power to control the employee's conduct.

In the case at bar, we find that although there was a selection and engagement of private respondent in 1977, the verbal
agreement between the parties negated the existence of the other requisites.

As to the payment of wages, the verbal agreement entered into by the parties stipulated that private respondent would be
paid a commission of P2.00 per sack of milled rice sold as well as a 10% commission on palay purchase. The
arrangement thus was explicitly on a commission basis dependent on the volume of sale or purchase. Private respondent
was not guaranteed any minimum compensation nor was she allowed any drawing account or advance of any kind
against unearned commissions. Her right to compensation depended upon and was measured by the tangible results she
produced the quantity of rice sold and the quantity of palay purchased.

The power to terminate the relationship was mutually vested upon the parties. Either may terminate the business
arrangement at will, with or without cause.

Finally, noticeably absent from the agreement between the parties is the element of control. Among the four (4) requisites,
control is deemed the most important that the other requisites may even be disregarded. 6 Under the control test, an
employer-employee relationship exists if the "employer" has reserved the right to control the "employee" not only as to the
result of the work done but also as to the means and methods by which the same is to be accomplished. 7Otherwise, no
such relationship exists.

We observe that the means and methods of purchasing and selling rice or palay by private respondent were totally
independent of petitioners' control. As established by the NLRC:

... Sometime in June 1977, respondent re-engaged the services of herein complainant to sell milled rice
to the customers of the former, as well as to buy palay for and in behalf of Dr. Renato Sara, with the
verbal agreement that to carry out effectively the said task, complainant was duly authorized by
respondent, Dr. Sara to spend her own money, if necessary but subject to reimbursment and if that would
not be sufficient, to borrow money from other sources with further understanding that Dr. Sala will repay
the ill thru the complainant; ... ([Emphasis supplied], p. 21, Rollo)

Note that private respondent was never given capital by his supposed employer but relied on her own resources and if
insufficient, she borrowed money from others. Petitioners did not supply private respondent with tools and appliances
needed to enable her to carry her undertaking, except to authorize her to borrow money from others, subject to
reimbursement.

The absence of control is made more evident by the fact that private respondent was not even obliged to sell the palay
she purchased to petitioners. She was at liberty to sell the palay to any trader offering higher buying rates. She was thus
free to sell it to anybody whom she pleased.

Moreover, private respondent worked for petitioners at her own pleasure and was not subject to definite hours or
conditions of work. She could even delegate the task of buying and selling to others, if she so desired, or simultaneously
engaged in other means of livelihood while selling and purchasing rice or palay.
Under the conditions set forth in their agreement, private respondent was an independent contractor, who exercising
independent employment, contracted to do a piece of work according to her own method and without being subject to the
control of her employer except as to the result of her work. She was paid for the result of her labor, unlike an employee
who is paid for the labor he performs. 8

The verbal agreement devoid as it was of any stipulations indicative of control leaves no doubt that private respondent
was not an employee of petitioners but was rather an independent contractor.

The Labor Tribunal's jurisdiction being primarily predicated upon the existence of an employer-employee relationship
between the parties, the absence of such element, as in the case at bar, removes the controversy from the scope of its
limited jurisdiction.

WHEREFORE, the instant petition for certiorari is granted. Case No. LRD-ROXII-006-82 of the National Labor Relations
Commission is hereby ordered DISMISSED for lack of jurisdiction.

SO ORDERED.

14.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-19124 November 18, 1967
INVESTMENT PLANNING CORPORATION OF THE PHILIPPINES, petitioner-appellant,
vs.
SOCIAL SECURITY SYSTEM, respondent-appellee.

MAKALINTAL, J.:

Petitioner is a domestic corporation engaged in business management and the sale of securities. It has two classes of
agents who sell its investment plans: (1) salaried employees who keep definite hours and work under the control and
supervision of the company; and (2) registered representatives who work on commission basis.

On August 27, 1960 petitioner, through counsel, applied to respondent Social Security Commission for exemption of its
so-called registered representatives from the compulsory coverage of the Social Security Act. The application was denied
in a letter signed by the Secretary to the Commission on January 16, 1961. A motion to reconsider was filed and also
denied, after hearing, by the Commission itself in its resolution dated September 8, 1961. The matter was thereafter
elevated to this Court for review.

The issue submitted for decision here is whether petitioner's registered representatives are employees within the meaning
of the Social Security Act (R.A. No. 1161 as amended). Section 8 (d) thereof defines the term "employee" — for purposes
of the Act — as "any person who performs services for an 'employer' in which either or both mental and physical efforts
are used and who receives compensation for such services, where there is, employer-employee relationship." (As
amended by Sec.4, R.A. No. 2658). These representatives are in reality commission agents. The uncontradicted
testimony of petitioner's lone witness, who was its assistant sales director, is that these agents are recruited and trained
by him particularly for the job of selling "'Filipinos Mutual Fund" shares, made to undergo a test after such training and, if
successful, are given license to practice by the Securities and Exchange Commission. They then execute an agreement
with petitioner with respect to the sale of FMF shares to the general public. Among the features of said agreement which
respondent Commission considered pertinent to the issue are: (a) an agent is paid compensation for services in the form
of commission; (b) in the event of death or resignation he or his legal representative shall be paid the balance of the
commission corresponding to him; (c) he is subject to a set of rules and regulations governing the performance of his
duties under the agreement; (d) he is required to put up a performance bond; and (e) his services may be terminated for
certain causes. At the same time the Commission found from the evidence and so stated in its resolution that the agents
"are not required to report (for work) at any time; they do not have to devote their time exclusively to or work solely for
petitioner; the time and the effort they spend in their work depend entirely upon their own will and initiative; they are not
required to account for their time nor submit a record of their activities; they shoulder their own selling expenses as well as
transportation; and they are paid their commission based on a certain percentage of their sales." The record also reveals
that the commission earned by an agent on his sales is directly deducted by him from the amount he receives from the
investor and turns over to the company the amount invested after such deduction is made. The majority of the agents are
regularly employed elsewhere — either in the government or in private enterprises.

Of the three requirements under Section 8 (d) of the Social Security Act it is admitted that the first is present in respect of
the agents whose status is in question. They exert both mental and physical efforts in the performance of their services.
The compensation they receive, however, is not necessarily for those efforts but rather for the results thereof, that is, for
actual sales that they make. This point is relevant in the determination of whether or not the third requisite is also present,
namely, the existence of employer-employee relationship. Petitioner points out that in effect such compensation is paid
not by it but by the investor, as shown by the basis on which the amount of the commission is fixed and the manner in
which it is collected.

Petitioner submits that its commission agents, engaged under the terms and conditions already enumerated, are not
employees but independent contractors, as defined in Article 1713 of the Civil Code, which provides:
 Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the
employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or
skill, or also furnish the material.

We are convinced from the facts that the work of petitioner's agents or registered representatives more nearly
approximates that of an independent contractor than that of an employee. The latter is paid for the labor he performs, that
is, for the acts of which such labor consists; the former is paid for the result thereof. This Court has recognized the
distinction in Chartered Bank, et al. vs. Constantino, 56 Phil. 717, where it said:

On this point, the distinguished commentator Manresa in referring to Article 1588 of the (Spanish) Civil Code has
the following to say. . . .

The code does not begin by giving a general idea of the subject matter, but by fixing its two distinguishing
characteristics.

But such an idea was not absolutely necessary because the difference between the lease of work by contract or
for a fixed price and the lease of services of hired servants or laborers is sufficiently clear. In the latter, the direct
object of the contract is the lessor's labor; the acts in which such labor consists, performed for the benefit of the
lessee, are taken into account immediately. In work done by contract or for a fixed price, the lessor's labor is
indeed an important, a most important factor; but it is not the direct object of the contract, nor is it immediately
taken into account. The object which the parties consider, which they bear in mind in order to determine the cause
of the contract, and upon which they really give their consent, is not the labor but its result, the complete and
finished work, the aggregate of the lessor's acts embodied in something material, which is the useful object of the
contract. . . . (Manresa Commentarios al Codigo Civil, Vol. X, ed., pp. 774-775.)

Even if an agent of petitioner should devote all of his time and effort trying to sell its investment plans would not
necessarily be entitled to compensation therefor. His right to compensation depends upon and is measured by the
tangible results he produces.

The specific question of when there is "employer-employee relationship" for purposes of the Social Security Act has not
yet been settled in this jurisdiction by any decision of this Court. But in other connections wherein the term is used the test
that has been generally applied is the so-called 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 to be done but also as to the means and methods by
which the same is to be accomplished.

Thus in Philippine Manufacturing Company vs. Geronimo, et al., L-6968, November 29, 1954, involving the Workmen's
Compensation Act, we read:

. . . Garcia, a painting contractor, had a contract undertaken to paint a water tank belonging to the Company "in
accordance with specifications and price stipulated," and with "the actual supervision of the work (being) taken
care of by" himself. Clearly, this made Garcia an independent contractor, for while the company prescribed what
should be done, the doing of it and the supervision thereof was left entirely to him, all of which meant that he was
free to do the job according to his own method without being subject to the control of the company except as to
the result.

Cruz, et al. vs. The Manila Hotel Company, L-9110, April 30, 1957, presented the issue of who were to be considered
employees of the defendant firm for purposes of separation gratuity. LVN Pictures, Inc. vs. Phil. Musicians Guild, et al., L-
12582, January 28, 1961, involved the status of certain musicians for purposes of determining the appropriate bargaining
representative of the employees. In both instances the "control" test was followed. (See also Mansal vs. P.P. Gocheco
Lumber Co., L-8017, April 30, 1955; and Viana vs. Allagadan, et al., L-8967, May 31, 1956.)

In the United States, the Federal Social Security Act of 1935 set forth no definition of the term 'employee' other than that it
'includes an officer of a corporation.' Under that Act the U.S. Supreme Court adopted for a time and in several cases the
so-called 'economic-reality' test instead of the 'control' test. (U.S. vs. Silk and Harrison, 91 Law Ed. 1757; Bartels vs.
Birmingham, Ibid, 1947, both decided in June 1947). In the Bartels case the Court said:

In United States v. Silk, No. 312, 331 US 704, ante, 1957, 67 SCt 1463, supra, we held that the relationship of
employer-employee, which determines the liability for employment taxes under the Social Security Act was not to
be determined solely by the idea of control which an alleged employer may or could exercise over the details of
the service rendered to his business by the worker or workers. Obviously control is characteristically associated
with the employer-employee relationship, but in the application of social legislation employees are those who as a
matter of economic reality are dependent upon the business to which they render service. In Silk, we pointed out
that permanency of the relation, the skill required, the investment in the facilities for work and opportunities for
profit or less from the activities were also factors that should enter into judicial determination as to the coverage of
the Social Security Act. It is the total situation that controls. The standards are as important in the entertainment
field as we have just said, in Silk, that they were in that of distribution and transportation. (91 Law, Ed. 1947,
1953;)

However, the 'economic-reality' test was subsequently abandoned as not reflective of the intention of Congress in the
enactment of the original Security Act of 1935. The change was accomplished by means of an amendatory Act passed in
1948, which was construed and applied in later cases. In Benson vs. Social Security Board, 172 F. 2d. 682, the U.S.
Supreme Court said:
 After the decision by the Supreme Court in the Silk case, the Treasury Department revamped its Regulation, 12
Fed. Reg. 7966, using the test set out in the Silk case for determining the existence of an employer-employee
relationship. Apparently this was not the concept of such a relationship that Congress had in mind in the passage
of such remedial acts as the one involved here because thereafter on June 14, 1948, Congress enacted Public
Law 642, 42 U.S C.A. Sec. 1301 (a) (6). Section 1101(a) (6) of the Social Security Act was amended to read as
follows:

The term "employee" includes an officer of a corporation, but such term does not include (1) any
individual who, under the usual common-law rules applicable in determining the employer-employee
relationship, has the status of an independent contractor or (2) any individual (except an officer of a
corporation) who is not an employee under such common law rules.

While it is not necessary to explore the full effect of this enactment in the determination of the existence of
employer-employee relationships arising in the future, we think it can fairly be said that the intent of Congress was
to say that in determining in a given case whether under the Social Security Act such a relationship exists, the
common-law elements of such a relationship, as recognized and applied by the courts generally at the time of the
passage of the Act, were the standard to be used . . . .

The common-law principles expressly adopted by the United States Congress are summarized in Corpus Juris Secundum
as follows:

Under the common-law principles as to tests of the independent contractor relationship, discussed in Master and
Servant, and applicable in determining coverage under the Social Security Act and related taxing provisions, the
significant factor in determining the relationship of the parties is the presence or absence of a supervisory power
to control the method and detail of performance of the service, and the degree to which the principal may
intervene to exercise such control, the presence of such power of control being indicative of an employment
relationship and the absence of such power being indicative of the relationship of independent contractor. In other
words, the test of existence of the relationship of independent contractor, which relationship is not taxable under
the Social Security Act and related provisions, is whether the one who is claimed to be an independent contractor
has contracted to do the work according to his own methods and without being subject to the control of the
employer except as to the result of the work. (81 C.J.S. Sec. 5, pp. 24-25); See also Millard's Inc. vs. United
States, 46 F. Supp. 385; Schmidt vs. Ewing, 108 F. Supp. 505; Ramblin vs. Ewing, 106 F. Supp. 268.

In the case last cited (Rambin v. Ewing) the question presented was whether the plaintiff there, who was a sales
representative of a cosmetics firm working on a commission basis, was to be considered an employee. Said the Court:

Plaintiff's only remuneration was her commission of 40%, plus $5 extra for every $250 of sales. Plaintiff was not
guaranteed any minimum compensation and she was not allowed a drawing account or advance of any kind
against unearned commissions. Plaintiff paid all of her traveling expenses and she even had to pay the postage
for sending orders to Avon.

The only office which Avon maintained in Shreveport was an office for the city manager. Plaintiff worked from her
own home and she was never furnished any leads. The relationship between plaintiff and Avon was terminable at
will . . .

xxx xxx xxx

. . . A long line of decisions holds that commission sales representatives are not employees within the coverage of
the Social Security Act. The underlying circumstances of the relationship between the sales representatives and
company often vary widely from case to case, but commission sales representatives have uniformly been held to
be outside the Social Security Act.

Considering the similarity between the definition of "employee" in the Federal Social Security Act (U.S.) as amended and
its definitions in our own Social Security Act, and considering further that the local statute is admittedly patterned after that
of the United States, the decisions of American courts on the matter before us may well be accorded persuasive force.
The logic of the situation indeed dictates that where the element of control is absent; where a person who works for
another does so more or less at his own pleasure and is not subject to definite hours or conditions of work, and in turn is
compensated according to the result of his efforts and not the amount thereof, we should not find that the relationship of
employer and employee exists.

We have examined the contract form between petitioner and its registered representatives and found nothing therein
which would indicate that the latter are under the control of the former in respect of the means and methods they employ
in the performance of their work. The fact that for certain specified causes the relationship may be terminated (e.g., failure
to meet the annual quota of sales, inability to make any sales production during a six-month period, conduct detrimental to
petitioner, etc.) does not mean that such control exists, for the causes of termination thus specified have no relation to the
means and methods of work that are ordinarily required of or imposed upon employees.

In view of the foregoing considerations, the resolution of respondent Social Security Commission subject of this appeal is
reversed and set aside, without pronouncement as to costs.
 15.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-12582 January 28, 1961
LVN PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees.
x---------------------------------------------------------x
G.R. No. L-12598 January 28, 1961
SAMPAGUITA PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees.

CONCEPCION, J.:

Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of an order of the Court of
Industrial Relations in Case No. 306-MC thereof, certifying the Philippine Musicians Guild (FFW), petitioner therein and
respondent herein, as the sole and exclusive bargaining agency of all musicians working with said companies, as well as
with the Premiere Productions, Inc., which has not appealed. The appeal of LVN Pictures, Inc., has been docketed as
G.R. No. L-12582, whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc. Involving as they do the same
order, the two cases have been jointly heard in this Court, and will similarly be disposed of.

In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the Guild, averred that it is
a duly registered legitimate labor organization; that LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere
Productions, Inc. are corporations, duly organized under the Philippine laws, engaged in the making of motion pictures
and in the processing and distribution thereof; that said companies employ musicians for the purpose of making music
recordings for title music, background music, musical numbers, finale music and other incidental music, without which a
motion picture is incomplete; that ninety-five (95%) percent of all the musicians playing for the musical recordings of said
companies are members of the Guild; and that the same has no knowledge of the existence of any other legitimate labor
organization representing musicians in said companies. Premised upon these allegations, the Guild prayed that it be
certified as the sole and exclusive bargaining agency for all musicians working in the aforementioned companies. In their
respective answers, the latter denied that they have any musicians as employees, and alleged that the musical numbers
in the filing of the companies are furnished by independent contractors. The lower court, however, rejected this pretense
and sustained the theory of the Guild, with the result already adverted to. A reconsideration of the order complained of
having been denied by the Court en banc, LVN Pictures, inc., and Sampaguita Pictures, Inc., filed these petitions for
review for certiorari.

Apart from impugning the conclusion of the lower court on the status of the Guild members as alleged employees of the
film companies, the LVN Pictures, Inc., maintains that a petition for certification cannot be entertained when the existence
of employer-employee relationship between the parties is contested. However, this claim is neither borne out by any legal
provision nor supported by any authority. So long as, after due hearing, the parties are found to bear said relationship, as
in the case at bar, it is proper to pass upon the merits of the petition for certification.

It is next urged that a certification is improper in the present case, because, "(a) the petition does not allege and no
evidence was presented that the alleged musicians-employees of the respondents constitute a proper bargaining unit, and
(b) said alleged musicians-employees represent a majority of the other numerous employees of the film companies
constituting a proper bargaining unit under section 12 (a) of Republic Act No. 875."

The absence of an express allegation that the members of the Guild constitute a proper bargaining unit is fatal
proceeding, for the same is not a "litigation" in the sense in which this term is commonly understood, but a mere
investigation of a non-adversary, fact finding character, in which the investigating agency plays the part of a disinterested
investigator seeking merely to ascertain the desires of employees as to the matter of their representation. In connection
therewith, the court enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of
bargaining representatives by employees.1 Moreover, it is alleged in the petition that the Guild it a duly registered
legitimate labor organization and that ninety-five (95%) percent of the musicians playing for all the musical recordings of
the film companies involved in these cases are members of the Guild. Although, in its answer, the LVN Pictures, Inc.
denied both allegations, it appears that, at the hearing in the lower court it was merely the status of the musicians as its
employees that the film companies really contested. Besides, the substantial difference between the work performed by
said musicians and that of other persons who participate in the production of a film, and the peculiar circumstances under
which the services of that former are engaged and rendered, suffice to show that they constitute a proper bargaining unit.
At this juncture, it should be noted that the action of the lower court in deciding upon an appropriate unit for collective
bargaining purposes is discretionary (N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its
judgment in this respect is entitled to almost complete finality, unless its action is arbitrary or capricious (Marshall Field &
Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the cases at bar.

Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for the musicians working in
the aforesaid film companies. It does not intend to represent the other employees therein. Hence, it was not necessary for
the Guild to allege that its members constitute a majority of all the employees of said film companies, including those who
are not musicians. The real issue in these cases, is whether or not the musicians in question are employees of the film
companies. In this connection the lower court had the following to say:

As a normal and usual course of procedure employed by the companies when a picture is to be made, the
producer invariably chooses, from the musical directors, one who will furnish the musical background for a film. A
price is agreed upon verbally between the producer and musical director for the cost of furnishing such musical
background. Thus, the musical director may compose his own music specially written for or adapted to the
picture. He engages his own men and pays the corresponding compensation of the musicians under him.

When the music is ready for recording, the musicians are summoned through 'call slips' in the name of the film
company (Exh 'D'), which show the name of the musician, his musical instrument, and the date, time and place
where he will be picked up by the truck of the film company. The film company provides the studio for the use of
the musicians for that particular recording. The musicians are also provided transportation to and from the studio
by the company. Similarly, the company furnishes them meals at dinner time.

During the recording sessions, the motion picture director, who is an employee of the company, supervises the
recording of the musicians and tells what to do in every detail. He solely directs the performance of the musicians
before the camera as director, he supervises the performance of all the action, including the musicians who
appear in the scenes so that in the actual performance to be shown on the screen, the musical director's
intervention has stopped.

And even in the recording sessions and during the actual shooting of a scene, the technicians, soundmen and
other employees of the company assist in the operation. Hence, the work of the musicians is an integral part of
the entire motion picture since they not only furnish the music but are also called upon to appear in the finished
picture.

The question to be determined next is what legal relationship exits between the musicians and the company in the
light of the foregoing facts.

We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned after the Wagner
Act substantially the same as a Act and the Taft-Hartley Law of the United States. Hence, reference to decisions
of American Courts on these laws on the point-at-issue is called for.

Statutes are to be construed in the light of purposes achieved and the evils sought to be remedied. (U.S. vs.
American Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) .

In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the United States Supreme
Court said the Wagner Act was designed to avert the 'substantial obstruction to the free flow of commerce which
results from strikes and other forms of industrial unrest by eliminating the causes of the unrest. Strikes and
industrial unrest result from the refusal of employers' to bargain collectively and the inability of workers to bargain
successfully for improvement in their working conditions. Hence, the purposes of the Act are to encourage
collective bargaining and to remedy the workers' inability to bargaining power, by protecting the exercise of full
freedom of association and designation of representatives of their own choosing, for the purpose of negotiating
the terms and conditions of their employment.'

The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to 'employees'
within the traditional legal distinctions, separating them from 'independent contractor'. Myriad forms of service
relationship, with infinite and subtle variations in the term of employment, blanket the nation's economy. Some are
within this Act, others beyond its coverage. Large numbers will fall clearly on one side or on the other, by
whatever test may be applied. Inequality of bargaining power in controversies of their wages, hours and working
conditions may characterize the status of one group as of the other. The former, when acting alone may be as
helpless in dealing with the employer as dependent on his daily wage and as unable to resist arbitrary and unfair
treatment as the latter.'

To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to create a balance
of forces in certain types of economic relationship. Congress recognized those economic relationships cannot be
fitted neatly into the containers designated as 'employee' and 'employer'. Employers and employees not in
proximate relationship may be drawn into common controversies by economic forces and that the very dispute
sought to be avoided might involve 'employees' who are at times brought into an economic relationship with
'employers', who are not their 'employers'. In this light, the language of the Act's definition of 'employee' or
'employer' should be determined broadly in doubtful situations, by underlying economic facts rather than
technically and exclusively established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.)

In other words, the scope of the term 'employee' must be understood with reference to the purposes of the Act
and the facts involved in the economic relationship. Where all the conditions of relation require protection,
protection ought to be given .

By declaring a worker an employee of the person for whom he works and by recognizing and protecting his rights
as such, we eliminate the cause of industrial unrest and consequently we promote industrial peace, because we
enable him to negotiate an agreement which will settle disputes regarding conditions of employment, through the
process of collective bargaining.
 The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term embraces 'any
employee' that is all employees in the conventional as well in the legal sense expect those excluded by express
provision. (Connor Lumber Co., 11 NLRB 776.).

It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial unrest by protecting
the exercise of their right to self-organization for the purpose of collective bargaining. (b) To promote sound stable
industrial peace and the advancement of the general welfare, and the best interests of employers and employees
by the settlement of issues respecting terms and conditions of employment through the process of collective
bargaining between employers and representatives of their employees.

The primary consideration is whether the declared policy and purpose of the Act can be effectuated by securing
for the individual worker the rights and protection guaranteed by the Act. The matter is not conclusively
determined by a contract which purports to establish the status of the worker, not as an employee.

The work of the musical director and musicians is a functional and integral part of the enterprise performed at the
same studio substantially under the direction and control of the company.

In other words, to determine whether a person who performs work for another is the latter's employee or an
independent contractor, the National Labor Relations relies on 'the right to control' test. Under this test an
employer-employee relationship exist where the person for whom the services are performed reserves the right to
control not only the end to be achieved, but also the manner and means to be used in reaching the end. (United
Insurance Company, 108, NLRB No. 115.).

Thus, in said similar case of Connor Lumber Company, the Supreme Court said:.

'We find that the independent contractors and persons working under them are employees' within the
meaning of Section 2 (3) of its Act. However, we are of the opinion that the independent contractors have
sufficient authority over the persons working under their immediate supervision to warrant their exclusion
from the unit. We shall include in the unit the employees working under the supervision of the
independent contractors, but exclude the contractors.'

'Notwithstanding that the employees are called independent contractors', the Board will hold them to be
employees under the Act where the extent of the employer's control over them indicates that the relationship is in
reality one of employment. (John Hancock Insurance Co., 2375-D, 1940, Teller, Labor Dispute Collective
Bargaining, Vol.).

The right of control of the film company over the musicians is shown (1) by calling the musicians through 'call
slips' in 'the name of the company; (2) by arranging schedules in its studio for recording sessions; (3) by
furnishing transportation and meals to musicians; and (4) by supervising and directing in detail, through the
motion picture director, the performance of the musicians before the camera, in order to suit the music they are
playing to the picture which is being flashed on the screen.

Thus, in the application of Philippine statutes and pertinent decisions of the United States Courts on the matter to
the facts established in this case, we cannot but conclude that to effectuate the policies of the Act and by virtue of
the 'right of control' test, the members of the Philippine Musicians Guild are employees of the three film
companies and, therefore, entitled to right of collective bargaining under Republic Act No. 875.

In view of the fact that the three (3) film companies did not question the union's majority, the Philippine Musicians
Guild is hereby declared as the sole collective bargaining representative for all the musicians employed by the
film companies."

We are fully in agreement with the foregoing conclusion and the reasons given in support thereof. Both are substantially in
line with the spirit of our decision in Maligaya Ship Watchmen Agency vs. Associated Watchmen and Security Union, L-
12214-17 (May 28, 1958). In fact, the contention of the employers in the Maligaya cases, to the effect that they had dealt
with independent contractors, was stronger than that of the film companies in these cases. The third parties with whom
the management and the workers contracted in the Maligaya cases were agencies registered with the Bureau of
Commerce and duly licensed by the City of Manila to engage in the business of supplying watchmen to steamship
companies, with permits to engage in said business issued by the City Mayor and the Collector of Customs. In the cases
at bar, the musical directors with whom the film companies claim to have dealt with had nothing comparable to the
business standing of said watchmen agencies. In this respect, the status of said musical directors is analogous to that of
the alleged independent contractor in Caro vs. Rilloraza, L-9569 (September 30, 1957), with the particularity that
the Caro case involved the enforcement of the liability of an employer under the Workmen's Compensation Act, whereas
the cases before us are merely concerned with the right of the Guild to represent the musicians as a collective bargaining
unit. Hence, there is less reason to be legalistic and technical in these cases, than in the Caro case.

Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product Co., Inc vs. CIR (46
Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-6968 (November 29, 1954), Viana
vs. Al-Lagadan, L-8967 (May 31, 1956), and Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead
of favoring the theory of said petitioners-appellants, the case of the Sunripe Coconut Product Co., Inc. is authority for
herein respondents-appellees. It was held that, although engaged as piece-workers, under the "pakiao" system, the
"parers" and "shellers" in the case were, not independent contractor, but employees of said company, because "the
requirement imposed on the 'parers' to the effect that 'the nuts are pared whole or that there is not much meat wasted,' in
effect limits or controls the means or details by which said workers are to accomplish their services" — as in the cases
before us.

The nature of the relation between the parties was not settled in the Viana case, the same having been remanded to the
Workmen's Compensation Commission for further evidence.

The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano Garcia, who
undertook to paint a tank of the former. Garcia, in turn engaged the services of Arcadio Geronimo, a laborer, who fell
while painting the tank and died in consequence of the injuries thus sustained by him. Inasmuch as the company was
engaged in the manufacture of soap, vegetable lard, cooking oil and margarine, it was held that the connection between
its business and the painting aforementioned was purely casual; that Eliano Garcia was an independent contractor; that
Geronimo was not an employee of the company; and that the latter was not bound, therefore, to pay the compensation
provided in the Workmen's Compensation Act. Unlike the Philippine Manufacturing case, the relation between the
business of herein petitioners-appellants and the work of the musicians is not casual. As held in the order appealed from
which, in this respect, is not contested by herein petitioners-appellants — "the work of the musicians is an integral part of
the entire motion picture." Indeed, one can hardly find modern films without music therein. Hence, in the Caro case
(supra), the owner and operator of buildings for rent was held bound to pay the indemnity prescribed in the Workmen's
Compensation Act for the injury suffered by a carpenter while working as such in one of said buildings even though his
services had been allegedly engaged by a third party who had directly contracted with said owner. In other words, the
repair work had not merely a casual connection with the business of said owner. It was a necessary incident thereof, just
as music is in the production of motion pictures.

The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially from the present
cases. It involved the interpretation of Republic Act No. 660, which amends the law creating and establishing the
Government Service Insurance System. No labor law was sought to be construed in that case. In act, the same was
originally heard in the Court of First Instance of Manila, the decision of which was, on appeal, affirmed by the Supreme
Court. The meaning or scope if the term "employee," as used in the Industrial Peace Act (Republic Act No. 875), was not
touched therein. Moreover, the subject matter of said case was a contract between the management of the Manila Hotel,
on the one hand, and Tirso Cruz, on the other, whereby the latter greed to furnish the former the services of his orchestra,
consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to closing time daily." In the language of this court in that
case, "what pieces the orchestra shall play, and how the music shall be arranged or directed, the intervals and other
details — such are left to the leader's discretion."

16.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 114787 June 2, 1995

MAM REALTY DEVELOPMENT CORPORATION and MANUEL CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and CELSO B. BALBASTRO respondents.

VITUG, J.:

A prime focus in the instant petition is the question of when to hold a director or officer of a corporation solidarily obligated
with the latter for a corporate liability.

The case originated from a complaint filed with the Labor Arbiter by private respondent Celso B. Balbastro against herein
petitioners, MAM Realty Development Corporation ("MAM") and its Vice President Manuel P. Centeno, for wage
differentials, "ECOLA," overtime pay, incentive leave pay, 13th month pay (for the years 1988 and 1989), holiday pay and
rest day pay. Balbastro alleged that he was employed by MAM as a pump operator in 1982 and had since performed such
work at its Rancho Estate, Marikina, Metro Manila. He earned a basic monthly salary of P1,590.00 for seven days of work
a week that started from 6:00 a.m. to up until 6:00 p.m. daily.

MAM countered that Balbastro had previously been employed by Francisco Cacho and Co., Inc., the developer of Rancho
Estates. Sometime in May 1982, his services were contracted by MAM for the operation of the Rancho Estates' water
pump. He was engaged, however, not as an employee, but as a service contractor, at an agreed fee of P1,590.00 a
month. Similar arrangements were likewise entered into by MAM with one Rodolfo Mercado and with a security guard of
Rancho Estates III Homeowners' Association. Under the agreement, Balbastro was merely made to open and close on a
daily basis the water supply system of the different phases of the subdivision in accordance with its water rationing
scheme. He worked for only a maximum period of three hours a day, and he made use of his free time by offering
plumbing services to the residents of the subdivision. He was not at all subject to the control or supervision of MAM for, in
fact, his work could so also be done either by Mercado or by the security guard. On 23 May 1990, prior to the filing of the
complaint, MAM executed a Deed of Transfer, 1 effective 01 July 1990, in favor of the Rancho Estates Phase III
Homeowners Association, Inc., conveying to the latter all its rights and interests over the water system in the subdivision.

In a decision, dated 23 December 1991, the Labor Arbiter dismissed the complaint for lack of merit.
On appeal to it, respondent National Labor Relations Commission ("NLRC") rendered judgment (a) setting aside the
questioned decision of the Labor Arbiter and (b) referring the case, pursuant to Article 218(c) of the Labor Code, to Arbiter
Cristeta D. Tamayo for further hearing and submission of a report within 20 days from receipt of the Order. 2 On 21 March
1994, respondent Commissioner, after considering the report of Labor Arbiter Tamayo, ordered:

WHEREFORE, the respondents are hereby directed to pay jointly and severally complainant the sum of
P86,641.05 as above-computed. 3

The instant petition asseverates that respondent NLRC gravely abused its discretion, amounting to lack or excess
of jurisdiction, (1) in finding that an employer-employee relationship existed between petitioners and private
respondent and (2) in holding petitioners jointly and severally liable for the money claims awarded to private
respondent.

Once again, the matter of ascertaining the existence of an employer-employee relationship is raised. Repeatedly, we have
said that this factual issue is determined by:

(a) the selection and engagement of the employee;

(b) the payment of wages;

(c) the power of dismissal; and

(d) the employer's power to control the employee with respect to the result of the work to be done and to
the means and methods by which the work is to be accomplished.

We see no grave abuse of discretion on the part of NLRC in finding a full satisfaction, in the case at bench, of
the criteria to establish that employer-employee relationship. The power of control, the most important feature of
that relationship and, here, a point of controversy, refers merely to the existence of the power and not to the
actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the
employee; it is enough that the former has a right to wield the power. 4 It is hard to accede to the contention of
petitioners that private respondent should be considered totally free from such control merely because the work
could equally and easily be done either by Mercado or by the subdivision's security guard. Not without any
significance is that private respondent's employment with MAM has been registered by petitioners with the Social
Security System. 5

It would seem that the money claims awarded to private respondent were computed from 06 March 1988 to 06 March
1991, 6 the latter being the date of the filing of the complaint. The NLRC might have missed the transfer by MAM of the
water system to the Homeowners Association on 01 July 1990, a matter that would appear not to be in dispute.
Accordingly, the period for the computation of the money claims should only be for the period from 06 March 1988 to 01
July 1990 (when petitioner corporation could be deemed to have ceased from the activity for which private respondent
was employed), and petitioner corporation should, instead, be made liable for the employee's separation pay equivalent to
one-half (1/2) month pay for every year of
service. 7 While the transfer was allegedly due to MAM's financial constraints, unfortunately for petitioner corporation,
however, it failed to sufficiently establish that its business losses or financial reverses were serious enough that possibly
can warrant an exemption under the law. 8

We agree with petitioners, however, that the NLRC erred in holding Centeno jointly and severally liable with MAM. A
corporation, being a juridical entity, may act only through its directors, officers and employees. Obligations incurred by
them, acting as such corporate agents, are not theirs but the direct accountabilities of the corporation they represent.
True, solidary liabilities may at times be incurred but only when exceptional circumstances warrant such as, generally, in
the following cases: 9

1. When directors and trustees or, in appropriate cases, the officers of a corporation —

(a) vote for or assent to patently unlawful acts of the corporation;

(b) act in bad faith or with gross negligence in directing the corporate affairs;

(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or
members, and other persons. 10

2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge
thereof, did not forthwith file with the corporate secretary his written objection thereto. 11

3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and
solidarily liable with the Corporation. 12

4 When a director, trustee or officer is made, by specific provision of law, personally liable for his
corporate action. 13
 In labor cases, for instance, the Court has held corporate directors and officers solidarily liable with the
corporation for the termination of employment of employees done with malice or in bad faith. 14

In the case at Bench, there is nothing substantial on record that can justify, prescinding from the foregoing, petitioner
Centeno's solidary liability with the corporation.

An extra note. Private respondent avers that the questioned decision, having already become final and executory, could
no longer be reviewed by this Court. The petition before us has been filed under Rule 65 of the Rules of Court, there
being no appeal, or any other plain, speedy and adequate remedy in the ordinary course of law from decisions of the
National Labor Relations Commission; it is a relief that is open so long as it is availed of within a reasonable time.

WHEREFORE, the order of 21 March 1994 is MODIFIED. The case is REMANDED to the NLRC for a re-computation of
private respondent's monetary awards, which, conformably with this opinion, shall be paid solely by petitioner MAM Realty
Development Corporation. No special pronouncement on costs.

SO ORDERED.

17.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 100665 February 13, 1995

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

VITUG, J.:

This petition for certiorari assails the 24th April 1991 resolution of respondent National Labor Relations Commission
("NLRC"), as well as its resolution of 30 May 1991 denying a motion for reconsideration, which has dismissed herein
petitioners' appeal of the 16th October 1989 decision of Labor Arbiter Benigno C. Villarente, Jr.

Private respondents filed a complaint for illegal dismissal and for various monetary claims, including the recovery of
damages and attorney's fees, against petitioners. In their supplemental position paper, the complainants
subsequently confined themselves to the illegal dismissal charge and abandoned the monetary claims. One of the
original eight complainants, Virgilio Alcunaba, decided to resume his work with petitioners, thus leaving the rest to
pursue the case. Private respondents averred that they started to work for petitioners on, respectively, the following
dates:

NAME DATE
1 Joseph Lluz March, 1985
2 Noel Adarayan Feb. 17, 1980
3 Rogelio Sira January, 1982
4 Lolito Lluz March, 1982
5 Virginia Heresano May, 1987
6 Genelito Heresano 20-Oct-87
7 Carmelita de Dios January, 1975 1

that they worked for a minimum of twelve hours daily, including Sundays and holidays when needed; that they were
paid on piece-work basis; that it "angered" petitioner Lorenzo when they requested to be made members of the
Social Security System ("SSS"); and that, when they demanded an increase in their pay rates, they were prevented
(starting 24 October 1988) from entering the work premises.

Petitioners, in turn, claimed that their business operations were only seasonal, normally twice a year, one in June
(coinciding with the opening of school classes) and another in December (during the Christmas holidays), when
heavy job orders would come in. Private respondents, according to petitioners, were engaged on purely contractual
basis and paid the rates conformably with their respective agreements.

On 16 October 1989, Labor Arbiter Benigno C. Villarente, Jr., rendered judgment in favor of the complainants, thus:
 WHEREFORE, judgment is hereby rendered declaring that there was an employer-employee
relationship between complainants and respondents and that the former were regular employees of
the latter. Accordingly, respondents are hereby directed to pay all complainants their respective
separation pay based on their one-half month's earnings per year of service, a fraction of at least six
months to be considered one whole year, or the following amounts:

1 Joseph Lluz P 7,488.00 (3 yrs. & 7 mos.)

2 Noel Adarayan 12,636.00 (8 yrs. & 8 mos.)
3 Rogelio Sira 8,828.00 (6 yrs. & 9 mos.)
4 Lolito Lluz 8,828.00 (6 yrs. & 7 mos.)
5 Genelito Heresano 1,404.00 (1 year)
6 Virginia Heresano 665.00 (1 yr. & 5 mos.)
7 Carmelita de Dios 19,656.00 (13 yrs. & 9 mos.)
Total P 59,515.002

Respondents are also hereby directed to pay complainants' counsel the amount of P5,950.00 which is
equivalent to 10% of the above total awards as attorney's fees.

SO ORDERED. 3

An appeal was interposed by petitioners. The NLRC, on 24 April 1991, sustained the findings of the Labor Arbiter
and dismissed the appeal. On 30 May 1991, the NLRC denied petitioners' motion for reconsideration.

Hence, the instant petition.

In his comment, dated 14 October 1991, the Solicitor General moved for the modification of NLRC's resolution of 24
April 1991. While conceding that an employer-employee relationship existed between petitioners and private
respondents, the Solicitor General, nevertheless, expressed strong reservations on the award of separation pay in
view of the findings by both the Labor Arbiter and the NLRC that there was neither dismissal nor abandonment in
the case at bench. The NLRC submitted its own comment on 11 February 1992.

Well-settled is the rule that factual findings of the NLRC, particularly when they coincide with that of the Labor
Arbiter, are accorded respect, if not finality, and will not be disturbed absent any showing that substantial evidence
which might otherwise affect the result of the case has been discarded. We see no reason, in this case at bench, for
disturbing the findings of the Labor Arbiter and the NLRC on the existence of an employer-employee relationship
between herein private parties. The work of private respondents is clearly related to, and in the pursuit of, the
principal business activity of petitioners. The indicia used for determining the existence of an employer-employee
relationship, all extant in the case at bench, include (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to
the result of the work to be done and to the means and methods by which the work to be done and to the means
and methods by which the work is to be accomplished. The requirement, so herein posed as an issue, refers to the
existence of the right to control and not necessarily to the actual exercise of the right. In Dy Keh Beng v.International
Labor and Marine Union of the Philippines, et al., 4 the Court has held:

While this Court up holds the control test under which an employer-employee relationship exists
"where the person for whom the services are performed reserves a right to control not only the end
to be achieved but also the means to be used in reaching such end," it finds no merit with petitioner's
arguments as stated above. It should be borne in mind that the control test calls merely for the
existence of the right to control the manner of doing the work, not the actual exercise of the right.
Considering the finding by the Hearing Examiner that the establishment of Dy Keh Beng is "engaged
in the manufacture of basket known as kaing," it is natural to expect that those working under Dy
would have to observe, among others, Dy's requirements of size and quality of the kaing. Some
control would necessarily be exercised by Dy's specifications. Parenthetically, since the work on the
baskets is done at Dy's establishments, it can be inferred that the proprietor Dy could easily exercise
control on the men he employed.

We share the opinion of the Solicitor General that the award of separation pay to private respondents appears,
nonetheless, to be unwarranted.

The Labor Arbiter, sustained by the NLRC, concluded that there was neither dismissal nor abandonment. The Labor
Arbiter said —

. . . At any rate, records show that even during the conciliation stage, respondents had repeatedly
indicated that they were willing to accept back all complainants aside from denying complainants
allegation. Hence, it is clear that there was no dismissal to talk about in the first place which would
have to be determined whether legal or not. We also take particular note of complainants' desire to
be given separation pay instead of being ordered back to work. Considering all these factors we
 hereby rule that there was neither dismissal nor abandonment but complainants are simply out of job
for reasons not attributable to either party. (Rollo, pp. 30-31.)

The NLRC, in nonetheless agreeing with the Labor Arbiter on the latter's award of separation pay, ventured to say:

. . . It is not difficult to see the rationale behind the Labor Arbiter's disposition — he saw in
respondents' offer of reinstatement the commanding advantage it had to later force (by whatever
unlawful means they may resort to) the complainants out of job, just as the Labor Arbiter saw that
fear on the part of complainants to enter into a trap being laid before them for indeed, it is peculiar
for an employer who wants to get rid of its employees, to insist on reinstatement rather than a
separation pay scheme which the law allows them so they may be able to better manage their
business. (Rollo, p. 39.)

We find the above disquisition of the NLRC too peculative and conjectural to be sustained. The fact of the matter is
that petitioners have repeatedly indicated their willingness to accept private respondents but the latter have
steadfastly refused the offer. For being without any clear legal basis, the award of separation pay must thus be set
aside. 5 There is nothing, however, that prevents petitioners from voluntarily giving private respondents some amounts
on ex gratia basis.

WHEREFORE, the questioned findings and resolutions of respondents Labor Arbiter and NLRC are MODIFIED by
deleting the award of separation pay and the corresponding attorney's fees. No costs.

SO ORDERED.

18.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-41182-3 April 16, 1988

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,

vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA
NOGUERA, respondents-appellees.

SARMIENTO , J.:

The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The facts are
beyond dispute:

xxx xxx xxx

On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on
Oct. 19, 1960 by and between Mrs. Segundina Noguera, party of the first part; the Tourist World
Service, Inc., represented by Mr. Eliseo Canilao as party of the second part, and hereinafter referred
to as appellants, the Tourist World Service, Inc. leased the premises belonging to the party of the
first part at Mabini St., Manila for the former-s use as a branch office. In the said contract the party of
the third part held herself solidarily liable with the party of the part for the prompt payment of the
monthly rental agreed on. When the branch office was opened, the same was run by the herein
appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in
on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the
Tourist World Service, Inc.

On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been
informed that Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since
the branch office was anyhow losing, the Tourist World Service considered closing down its office.
This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc. dated
Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager and vice-president of
the Tourist World Service, Inc., Ermita Branch, and the second,authorizing the corporate secretary to
receive the properties of the Tourist World Service then located at the said branch office. It further
appears that on Jan. 3, 1962, the contract with the appellees for the use of the Branch Office
premises was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no longer
used it. As a matter of fact appellants used it since Nov. 1961. Because of this, and to comply with
 the mandate of the Tourist World Service, the corporate secretary Gabino Canilao went over to the
branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla, he
padlocked the premises on June 4, 1962 to protect the interests of the Tourist World Service. When
neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a
complaint wall filed by the herein appellants against the appellees with a prayer for the issuance of
mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent lack of
interest of the parties therein, the trial court ordered the dismissal of the case without prejudice.

The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim
which the court a quo, in an order dated June 8, 1963, granted permitting her to present evidence in
support of her counterclaim.

On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the
issues were joined, the reinstated counterclaim of Segundina Noguera and the new complaint of
appellant Lina Sevilla were jointly heard following which the court a quo ordered both cases dismiss
for lack of merit, on the basis of which was elevated the instant appeal on the following assignment
of errors:

I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-

APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.

II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S
ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF
EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD THAT THE SAID
ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.

III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA O.
SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF
DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO
EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE
LAW INTO THEIR OWN HANDS.

V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S

RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE
A. MABINI PREMISES.

VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA O.
SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS.

On the foregoing facts and in the light of the errors asigned the issues to be resolved are:

1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the branch
office on Ermita;

2. Whether or not the padlocking of the office by the Tourist World Service was actionable or not;
and

3. Whether or not the lessee to the office premises belonging to the appellee Noguera was appellees
TWS or TWS and the appellant.

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

1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear
and nose specialist as well as a imediately columnist had been in the travel business
prior to the establishment of the joint business venture with appellee Tourist World
Service, Inc. and appellee Eliseo Canilao, her compadre, she being the godmother of
one of his children, with her own clientele, coming mostly from her own social circle
(pp. 3-6 tsn. February 16,1965).

2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960
(Exh. 'A') covering the premises at A. Mabini St., she expressly warranting and
holding [sic] herself 'solidarily' liable with appellee Tourist World Service, Inc. for the
prompt payment of the monthly rentals thereof to other appellee Mrs. Noguera (pp.
14-15, tsn. Jan. 18,1964).
 3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World
Service, Inc., which had its own, separate office located at the Trade & Commerce
Building; nor was she an employee thereof, having no participation in nor connection
with said business at the Trade & Commerce Building (pp. 16-18 tsn Id.).

4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own
bookings her own business (and not for any of the business of appellee Tourist
World Service, Inc.) obtained from the airline companies. She shared the 7%
commissions given by the airline companies giving appellee Tourist World Service,
Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn. Id.)

5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A.

Mabini St. office, paying for the salary of an office secretary, Miss Obieta, and other
sundry expenses, aside from desicion the office furniture and supplying some of fice
furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World Service, Inc.
shouldering the rental and other expenses in consideration for the 3% split in the co
procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).

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

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

xxx xxx xxx

The trial court 2 held for the private respondent on the premise that the private respondent, Tourist World Service, Inc.,
being the true lessee, it was within its prerogative to terminate the lease and padlock the premises. 3 It likewise found the
petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and as such, she was bound by the acts
of her employer. 4 The respondent Court of Appeal 5 rendered an affirmance.

The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state:

I THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE
KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O.
SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT
(SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE
CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED
THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT
(SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF
DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES
TO THE RULE OF LAW.

II THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP
PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN."
(ANNEX "A" P. 8)

III THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED
ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.

IV THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN
JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN
INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD
SERVICE INC. 6

As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and
Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue, in its opinion
being "whether or not the padlocking of the premises by the Tourist World Service, Inc. without the knowledge and
consent of the appellant Lina Sevilla entitled the latter to the relief of damages prayed for and whether or not the
evidence for the said appellant supports the contention that the appellee Tourist World Service, Inc. unilaterally and
without the consent of the appellant disconnected the telephone lines of the Ermita branch office of the appellee
Tourist World Service, Inc. 7 Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was a mere
employee, being "branch manager" of its Ermita "branch" office and that inferentially, she had no say on the lease
executed with the private respondent, Segundina Noguera. The petitioners contend, however, that relation between the
between parties was one of joint venture, but concede that "whatever might have been the true relationship between
Sevilla and Tourist World Service,"the Rule of Law enjoined Tourist World Service and Canilao from taking the law into
their own hands, 8 in reference to the padlocking now questioned.

The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc.,
maintains, that the relation between the parties was in the character of employer and employee, the courts would
have been without jurisdiction to try the case, labor disputes being the exclusive domain of the Court of Industrial
Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force. 9

In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee relation. In
general, we have relied on the so-called right of control test, "where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also the means to be used in reaching such
end." 10Subsequently, however, we have considered, in addition to the standard of right-of control, the existing economic
conditions prevailing between the parties, like the inclusion of the employee in the payrolls, in determining the existence of
an employer-employee relationship. 11

The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent Tourist
World Service, Inc., either as to the result of the enterprise or as to the means used in connection therewith. In the
first place, under the contract of lease covering the Tourist Worlds Ermita office, she had bound herself
in solidum as and for rental payments, an arrangement that would be like claims of a master-servant relationship.
True the respondent Court would later minimize her participation in the lease as one of mere guaranty, 12 that does
not make her an employee of Tourist World, since in any case, a true employee cannot be made to part with his own
money in pursuance of his employer's business, or otherwise, assume any liability thereof. In that event, the parties must
be bound by some other relation, but certainly not employment.

In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same was run
by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in on
the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was under the control of
Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the business, obviously relied on her own gifts and
capabilities.

It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions
from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then, who earns a fixed salary
usually, she earned compensation in fluctuating amounts depending on her booking successes.

The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's employee. As
we said, employment is determined by the right-of-control test and certain economic parameters. But titles are weak
indicators.

In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina
Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise, a partnership. And apparently,
Sevilla herself did not recognize the existence of such a relation. In her letter of November 28, 1961, she expressly
'concedes your [Tourist World Service, Inc.'s] right to stop the operation of your branch office 14 in effect, accepting
Tourist World Service, Inc.'s control over the manner in which the business was run. A joint venture, including a
partnership, presupposes generally a of standing between the joint co-venturers or partners, in which each party has an
equal proprietary interest in the capital or property contributed 15 and where each party exercises equal rights in the
conduct of the business.16 furthermore, the parties did not hold themselves out as partners, and the building itself was
embellished with the electric sign "Tourist World Service, Inc. 17in lieu of a distinct partnership name.

It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent,
Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It is the
essence of this contract that the agent renders services "in representation or on behalf of another. 18 In the case at
bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As
compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself based on
her letter of November 28, 1961, pre-assumed her principal's authority as owner of the business undertaking. We are
convinced, considering the circumstances and from the respondent Court's recital of facts, that the ties had contemplated
a principal agent relationship, rather than a joint managament or a partnership..

But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent
of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having
been created for mutual interest, of the agent and the principal. 19 It appears that Lina Sevilla is a bona fide travel agent
herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had assumed a
personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the
business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not to the
commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the
power of management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the
principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and
padlocking incidents. Anent the disconnection issue, it is the holding of the Court of Appeals that there is 'no
evidence showing that the Tourist World Service, Inc. disconnected the telephone lines at the branch office. 20 Yet,
what cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have them reconnected. Assuming,
therefore, that it had no hand in the disconnection now complained of, it had clearly condoned it, and as owner of the
telephone lines, it must shoulder responsibility therefor.

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

The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the
petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be sure, the
respondent court speaks of alleged business losses to justify the closure '21 but there is no clear showing that Tourist World Ermita
Branch had in fact sustained such reverses, let alone, the fact that Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is
that following such an information (that Sevilla was working for another company), Tourist World's board of directors adopted two resolutions abolishing the office
of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office properties. On January 3, 1962, the
private respondents ended the lease over the branch office premises, incidentally, without notice to her.

It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, personally by
the respondent Canilao, on the pretext that it was necessary to Protect the interests of the Tourist World Service.
" 22 It is strange indeed that Tourist World Service, Inc. did not find such a need when it cancelled the lease five months
earlier. While Tourist World Service, Inc. would not pretend that it sought to locate Sevilla to inform her of the closure, but
surely, it was aware that after office hours, she could not have been anywhere near the premises. Capping these series of "offensives," it cut the office's
telephone lines, paralyzing completely its business operations, and in the process, depriving Sevilla articipation therein.

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

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

We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina Sevilla
from its brazen conduct subsequent to the cancellation of the power of attorney granted to her on the authority of
Article 21 of the Civil Code, in relation to Article 2219 (10) thereof —

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the damage. 24

ART. 2219. Moral damages 25 may be recovered in the following and analogous cases:

xxx xxx xxx

(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same damages in
a solidary capacity.

Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown that
she had connived with Tourist World Service, Inc. in the disconnection and padlocking incidents. She cannot
therefore be held liable as a cotortfeasor.

The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary
damages, 25and P5,000.00 as nominal 26 and/or temperate 27 damages, to be just, fair, and reasonable under the
circumstances.

WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975,
by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World
Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the
sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary damages, and the sum of
P5,000.00, as and for nominal and/or temperate damages.

Costs against said private respondents.

SO ORDERED.
 19.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 106108 February 23, 1995
CABALAN PASTULAN NEGRITO LABOR ASSOCIATION (CAPANELA) and JOSE ALVIZ, SR. petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FERNANDO SANCHEZ, respondents.

REGALADO, J.:

A man said to the Universe,

Behold, I am born!
However, replied the Universe,
The fact does not create in me
A sense of obligation.

To most, these familiar verses express the article of faith for self-reliance. To the racist in some countries, however,
they mean that the world does not owe the Negroid or other colored people equal solicitude. The neo-colonial in the
Philippines would hold the Negrito or a member of indigenous cultural communities to the same social bondage. But
our Constitution and our laws were precisely formulated under a sense of obligation to the marginalized and the
under privileged. Under such mandates, this Court has always accorded them scrupulous and compassionate
attention. In now resolving their predicament in the case at bar, it call once again on the old Castilian tenet: A él que
la vida ha dado menos, désele mas por la ley. 1

In this petition for certiorari, the resolution of the National Labor Relations Commission (hereafter, NLRC) dated
February 28, 1992 2 which dismissed the appeal of herein petitioners from the decision of the labor arbiter 3 for failure to
file a supersedeas bond, as well as its April 30, 1992 4 denying their motion for reconsideration, are assailed for having
been rendered with grave abuse of discretion.

The antecedents of the present recourse, as culled from the records, are that herein private respondent, Fernando
Sanchez, filed a complaint for illegal dismissal, non-payment of back wages and other benefits on January 3, 1991
with Regional Office No. III of the Department of Labor and Employment in Olongapo City originally docketed therein
as NLRC Case No. RAB III 01-1931-91. The complaint, naming Cabalan Pastulan Negrito Labor Association
(CAPANELA, for brevity) and its president, Jose Alviz, Sr., as respondents, alleged that the former was employed by
CAPANELA as a foreman with a monthly salary of P3,245.70 from March, 1977 until he was illegally dismissed on
January 1, 1990. 5

Said complaint was later amended on February 22, 1991 to introduce the correction that private respondent was
illegally dismissed on March 27, 1990 (instead of January 1, 1990), and to further pray for reinstatement without loss
of seniority rights and payment of full back wages and moral and exemplary damages. 6 As no amicable settlement
was arrived at during the mandatory pre-conference despite efforts exerted by the labor arbiter, the parties were required
to simultaneously submit their respective position papers and/or affidavits. 7 The case was submitted for resolution on
March 11, 1991 on the bases of said position papers and other evidence, but the parties were further allowed to submit
their respective memoranda, 8 after which the case was deemed submitted for decision on May 29, 1991. 9

A decision was rendered on June 24, 1991 in favor of herein private respondent, declaring his dismissal illegal, and
ordering herein petitioners, jointly and severally —

1. To pay the backwages of complainant from March 24, 1990 until June 24, 1991 and for 15 months
at P3,245.70 a month equals P48,685.50;

2. To immediately reinstate complainant to his former or equivalent position without loss of seniority
rights and other privileges, and for this purpose, respondents are hereby ordered to submit proof of
the physical or payroll reinstatement of the complainant within five (5) working days from receipt
hereof, provided further that should reinstatement (be) not feasible due to any supervening event,
respondents are further ordered to pay the separation pay of complainant equivalent to one month
salary for every year of service, a fraction of at least six (6) months service considered as in addition
to his respondents are further one (1) whole year, in addition to his backwages; . . . .

but dismissing the claim for moral and exemplary damages for want of substantial evidence. 10

The records further reveal that private respondent subsequently filed a motion for the issuance of a writ of 11 This
was opposed by execution on July 15, 1991. 11 This was opposed by CAPANELA 12 through its new counsel, Atty.
13
Isagani M. Jungco, who at the same time filed a memorandum of appeal in its behalf, although admittedly without
posting a supersedeas bond because of want of funds of either CAPANELA or its president and co-petitioner Alviz, Sr.
Private respondent, in his answer to CAPANELA's memorandum of, appeal 14 and reply to opposition to motion for
execution, 15was unconvinced and adamantly insisted on the dismissal of the appeal due to non-perfection thereof for
failure to comply with the legal requirement of posting a cash or surety bond as a requisite for the perfection of an appeal.

A partial writ of execution 16 was issued by Labor Arbiter Saludares on August 15, 1991 ordering the physical or payroll
reinstatement of private respondent. The sheriff's return of November 4, 1991, signed by Numeriano S. Reyes, Sheriff II of
the NLRC Regional Arbitration Branch No. III, stated that the writ expired without any indication of private respondent
having been reinstated. 17

As stated at the outset, the NLRC dismissed the appeal on February 28, 1992 for failure of petitioners to post the
supersedeas bond required by law, stating that "(r)espondents' contention that it cannot post bond because it is
insolvent deserve(s) scant consideration not being accompanied by proof there(of)," and denied petitioner's motion
for reconsideration.

The present controversy raises as principal issues for resolution by the Court whether or not (1) the dismissal of
private respondent was legal, and; (2) the appeal was perfected despite failure to file a supersedeas bond.

Anent the first issue, before we delve into the matter of the alleged illegal dismissal of private respondent Sanchez
by petitioner CAPANELA, it is evidently necessary to ascertain the existence of an employer-employee relationship
between them.

Petitioners asseverate that CAPANELA is an association composed of Negritos who worked inside the American
naval base in Subic Bay (hereinafter referred to as the Base). They initially received a daily wage of P100.00 and
thus earned, on the average, less than P3,000.00 per month. Said association organized the system of employment
of members of this cultural community who were accorded special treatment concededly because of the occupancy
of their ancestral lands as part of the operational area and military facility used by the Base authorities.

CAPANELA, through its officers, saw to it that its members reported for work, recorded their attendance, and
distributed the workers' salaries paid by the Base at the end of a specific pay period, without gaining any amount
from such undertakings petitioner Alviz, Sr., for his part and as president of CAPANELA, was himself only an
employee at the Base. In other words, neither CAPANELA nor its president was the employer of private respondent
Sanchez; rather, it was the United States Government acting through the military base authorities. 18

Contrarily, private respondent maintains that there existed an employer-employee relationship, as allegedly
supported by the evidence on record, and that petitioners CAPANELA and Alviz, Sr. exercised control as employer
over the means and methods by which the work was accomplished. He further argues that since the determination
of the existence of an employer-employee relationship is a factual question, the findings of the labor officials thereon
should be considered conclusive and binding upon and respected by the appellate courts. 19

It is hence clearly apparent that the judgment of the labor arbiter, as affirmed by respondent commission, declaring
the dismissal of private respondent illegal and ordering the payment of back wages to him together with his payroll
or physical reinstatement, was premised on the finding that there was an existing employer-employee relationship.

Indeed, findings of fact and conclusions of the labor arbiter, 20 as well as those of the NLRC, 21 or, for that matter, any
other adjudicative body which
can be considered as a trier of facts on specific matters within its field of expertise, 22 should be considered as binding and
conclusive upon the appellate courts. This is in addition to the fact that they were in a better position to assess and
evaluate the credibility of the contending parties and the validity of their respective evidence. 23 However, these doctrinal
strictures hold true only when such findings and conclusions are supported by substantial evidence. 24

In the case at bar, we are hard put to find sufficient evidential support for public respondent's conclusion on the
putative existence of an employer-employee relationship between petitioners and private respondent. We are
accordingly persuaded that there is ample justification to disturb the findings of respondent NLRC and to hold that a
reconsideration of its challenged resolutions is in order.

A careful reevaluation of the documentary evidence of record belies the finding that CAPANELA, through its
president and co-petitioner, Jose Alviz, Sr., wielded control as an employer over private respondent. It will be noted
that in his affidavit dated March 4, 1991, 25 private respondent himself declared that through the intervention of
CAPANELA, by way of its June 13, 1389 letter 26 to Lt. Mark S. Kistner, he was cleared of the charge of larceny of U.S.
government property. Thereafter, in an indorsement dated July 11, 1989 from the Director of Security, U.S. Navy Public
Works Center, the recommendation for his reinstatement and the release of his gate pass to the Base was addressed to
the Director, Investigation Section, U.S. Facility Security Department via the Director of the Contracts Administration
Division. 27

This only goes to show that CAPANELA had in fact no control over the continued employment of its members
working in the U.S. naval base. For, after conducting its own investigation, CAPANELA could only intervene in
behalf of its members facing charges through a recommendatory action request for favorable consideration. It could
not, on its own authority, exonerate such members from the charges, much less effect their reinstatement without
the approval of the Base authorities. Interestingly, in order to comply with the labor arbiter's decision of June 24,
1991, CAPANELA even had to write to the Resident Officer-in-Charge of the Facility Support Contracts at Subic Bay
recommending the reinstatement of private respondent to his former position. 28

Under their arrangement, CAPANELA, through its officers, could only impose disciplinary sanctions upon its
members for infractions of its own rules and regulations, to the extent of ousting a member from the association
when called for under the circumstances. Nonetheless, such called termination of membership in the association,
which could result in curtailment of the privilege of working at the Base inasmuch as employment therein was
conditioned upon membership in CAPANELA, is not equivalent to the illegal dismissal from employment
contemplated in our labor laws. Petitioners, not being the employer, obviously could not arrogate unto themselves
an employer's prerogatives of hiring and firing workers.

As succinctly pointed out by the Solicitor General:

True, there was a stipulation to the effect that Fernando Sanchez was employed by petitioner
CAPANELA, but the real employer was the United States government and petitioner was just a
"labor-only contractor." Annexes "G" and "H" of CAPANELA's Memorandum on Appeal show that the
award or contract of work was between CAPANELA and the United States government through the
U.S. Navy. The same contract likewise clearly stipulated that CAPANELA was "to provide labor and
material to perform trash sorting services in the Base period for all work specified in Section C."
Annex "A" of complainant Fernando Sanchez' Answer to petitioner's Memorandum on Appeal itself
proves that the negotiation was between CAPANELA and the U.S. Navy, with the former supplying
the labor and the U.S. government paying the wages. Since CAPANELA merely provided the labor
force, it cannot be deduced therefrom that CAPANELA should also compensate the laborers; it is a
case of non sequitur. In other words, the actual mechanical act of making payments was done by
CAPANELA, but the monies therefor were provided and disbursements made by the disbursing
officer of the U.S. Naval Supply Depot, Subic Bay (see Annexes "G" and "H").

Moreover, ingress and egress in the work premises were controlled not by CAPANELA but by the
U.S. Base authorities who could even reject entry of CAPANELA members then duly employed as
part of the project, and impose disciplinary sanctions against them. Annex "1" of petitioners' Position
Paper as respondent in the NLRC Case No. RAB-III-01-193 1-91, which was the letter of Lt. M.E.
Kistner of the U.S. Navy, clearly proves this. 29 (Emphasis in the original text.)

Prevailing case law enumerates the essential elements of an employer-employee relationship as: (a) the selection
and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the power of control with regard to the means and
methods by which the work is to be accomplished, with the power of control being the most determinative factor. 30

The Solicitor General pertinently illustrates the glaring absence of these elements in the present case:

. . . , as aforeshown, CAPANELA had no control of the premises as it was the U.S. naval authorities
who had the power to issue passes or deny their issuance. In fact, CAPANELA did not have
absolute control on the disciplinary measures to be imposed on its members employed in the Base.
Annex "1" of CAPANELA's Position Paper submitted before the NLRC Regional Arbitration Branch
established the U.S. Navy's right to impose disciplinary measures for violations or infractions of its
rules and regulations as well as the right to recommend suspensions or dismissals of the workers.
Moreover, it was not shown that CAPANELA had control of the means and methods or manner by
which the workers were to go about their work. These are indeed strong indicia of the U.S. Navy's
right of control over the workers as direct employer.

Third, there is evidence to prove that payment of wages was merely done through CAPANELA, but
the source of payment was actually the U.S. government paying workers according to the volume of
work accomplished on rates agreed upon between CAPANELA and the U.S. government. . . . 31

It would, therefore, be inutile to discuss the matter of the legality or illegality of the dismissal of private respondent.
Considering that petitioners cannot legally be considered as the employer of herein private respondent, it follows
that it cannot be made liable as such nor be required to bear the responsibility for the legal consequences of the
charge of illegal dismissal. Granting arguendo that private respondent was illegally dismissed, the action should
properly be directed against the U.S. government which, through the Base authorities, was the true employer in this
case.

Neither can petitioners be deemed to have been engaged in permissible job contracting under the law, for failure to
satisfy the following prescribed conditions:

1. The contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected with performance of the work
except as to the results thereof; and
 2. The contractor has substantial capital or investment in the form of tools, equipment, machineries,
work premises and other materials which are necessary in the conduct of his business. 32

In the present case, the setup was such that CAPANELA was merely tasked with organizing the Negritos to facilitate
the orderly administration of work made available to them at the base facilities, that is, sorting scraps for recycling.
CAPANELA recorded the attendance of its members and submitted the same to the Base authorities for the
determination of wages due them and the preparation of the payroll. Payment of wages was coursed through
CAPANELA but the funds therefor came from the coffers of the Base. Once inside the Base, control over the means
and methods of work was exercised by the Base authorities. Accordingly, CAPANELA functioned as just an
administrator of its Negrito members employed at the Base.

From the legal standpoint, CAPANELA's activities may at most be considered akin to that of labor-only contracting,
albeit of a special or peculiar type, wherein CAPANELA, operating like a contractor, merely acted as an agent or
intermediary of the employer. 33

The Solicitor General ramifies this aspect:

. . . , petitioner CAPANELA could not be classified as an "independent contractor" because it was not
shown that it has substantial capital or investments to qualify as such under the law. On the other
hand, it was apparent that the premises, tools, equipment, and other paraphernalia used by the
workers were all supplied by the U.S. government through the U.S. Navy. What CAPANELA
supplied was only the local labor force, complainant Fernando Sanchez among them. It is therefore
clear that CAPANELA had no capital outlay involved in the business or in the maintenance thereof. 34

While it is not denied that an association or a labor organization or union can at times be an employer insofar as
people hired by it to dispose of its business are concerned, 35 the situation in this case is altogether different. A proper
and necessary distinction should be made between the employees of CAPANELA who actually attended to its myriad
functions as an association and its members who were employed in the jobsite inside the Base vis-a-vis CAPANELA's
relative position as the employer of the former and a mere administrator with respect to the latter.

On the matter of the perfection of an appeal from the decision of the NLRC, petitioners plead for a more considerate
and humane application of the law as would allow their appeal to prosper despite non-posting of a supersedeas
bond on account of their insolvency. To dismiss the appeal for failure to post said bond, petitioners aver, is
tantamount to denial of the constitutionally guaranteed right of access to courts by reason of poverty. 36 Private
respondent, on the other hand, argues that perfection of an appeal within the reglementary period and in compliance with
all requirements of the law therefor is jurisdictional. That petitioners do not have the funds for the premiums for posting a
supersedeas bond or for a cash deposit, disdainfully says private respondent, "is not in the least our problem." 37

We have no quarrel with the provision of Article 223 of the Labor Code which, in part and among others, requires
that in case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon
posting of a cash or surety bond issued by a reputable bonding company duly accredited by the commission in the
amount equivalent to the monetary award in the judgment appealed from. Perfection of an appeal within the period
and in the manner prescribed by law is jurisdictional 38 and non-compliance with such legal requirements is fatal and
39
has the effect of rendering the judgment final and executory.

However, in a number of recent cases, 40 the Court has eased the requirement of posting a bond, as a condition for
perfection of appeals in labor cases, when to do so would bring about the immediate and appropriate resolution of
controversies on the merits without over-indulgence in technicalities, 41 ever mindful of the underlying spirit and intention
of the Labor Code to ascertain the facts of each case speedily and objectively without regard to technical rules of law and
procedure, all in the interest of due process. 42 Punctilious adherence to stringent technical rules may be relaxed in the
interest of the working man, 43 and should not defeat the complete and equitable resolution of the rights and obligations of
the parties. 44 Moreover, it is the duty of labor officials to consider their decisions and inquire into the correctness of
execution, as supervening events may affect such execution. 45

The Solicitor General realistically assesses the situation, thus:

. . . As aforestated, above the technical consideration on whether failure to post a supersedeas bond
was fatal to petitioners' appeal is the importance of first resolving whether there was indeed an
employer-employee relationship in this case so as not to render the execution of the NLRC's
resolution unenforceable or impossible to implement. . . . Besides, it is of public notice that the U.S.
Navy had withdrawn from the Subic Base in view of the termination of the Bases Treaty. Even if
CAPANELA were ordered to reinstate complainant Fernando Sanchez, this is obviously an
impossible thing to perform as there is no longer any work to be done inside the Base. Nor is
petitioner CAPANELA in a position to pay Sanchez's back wages considering that it was the U.S.
Navy that paid his wages. . . . 46

In light of the circumstances in this case, the Solicitor General further suggests two ways of writing finis to this
dispute, i.e., to reconsider public respondent's resolution of February 28, 1992 and April 30, 1992 and reinstate
petitioner's appeal to give the latter a chance to prove CAPANELA's insolvency or poverty, or to reverse the
decision of the labor arbiter on the ground that there was no employer-employee relationship between petitioner
CAPANELA and private respondent Sanchez. Harmonizing our evaluation of the facts of this case with the greater
interests of social justice, and considering that the parties involved are those upon whose socio-economic status we
prefaced this opinion, we opt for the latter.

While this Court, when it finds that a lower court or quasi-judicial body is in error, may simply and conveniently nullify
the challenged decision, resolution or order and remand the case thereto for further appropriate action, it is well
within the conscientious exercise of its broad review powers to refrain from doing so and instead choose to render
judgment on the merits when all material facts have been duly laid before it as would buttress its ultimate
conclusion, in the public interest and for the expeditious administration of justice, such as where the ends of justice
would not be subserved by the remand of the case. 47

IN VIEW OF ALL THE FOREGOING PREMISES, the resolutions of February 28, 1992 and April 30, 1992 of
respondent National Labor Relations Commission are accordingly ANNULLED, and the adjudgment of Labor Arbiter
Dominador B. Saludares in NLRC Case No. RAB III 01-1931-91 is hereby REVERSED and SET ASIDE.

SO ORDERED.

20.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-43825 May 9, 1988
CONTINENTAL MARBLE CORP. and FELIPE DAVID, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC); ARBITRATOR JOSE T. COLLADO and RODITO
NASAYAO, respondents.

PADILLA, J.:

In this petition for mandamus, prohibition and certiorari with preliminary injunction, petitioners seek to annul and set
aside the decision rendered by the respondent Arbitrator Jose T. Collado, dated 29 December 1975, in NLRC Case
No. LR-6151, entitled: "Rodito Nasayao, complainant, versus Continental Marble Corp. and Felipe David,
respondents," and the resolution issued by the respondent Commission, dated 7 May 1976, which dismissed herein
petitioners' appeal from said decision.

In his complaint before the NLRC, herein private respondent Rodito Nasayao claimed that sometime in May 1974,
he was appointed plant manager of the petitioner corporation, with an alleged compensation of P3,000.00, a month,
or 25% of the monthly net income of the company, whichever is greater, and when the company failed to pay his
salary for the months of May, June, and July 1974, Rodito Nasayao filed a complaint with the National Labor
Relations Commission, Branch IV, for the recovery of said unpaid varies. The case was docketed therein as NLRC
Case No. LR-6151.

Answering, the herein petitioners denied that Rodito Nasayao was employed in the company as plant manager with
a fixed monthly salary of P3,000.00. They claimed that the undertaking agreed upon by the parties was a joint
venture, a sort of partnership, wherein Rodito Nasayao was to keep the machinery in good working condition and, in
return, he would get the contracts from end-users for the installation of marble products, in which the company
would not interfere. In addition, private respondent Nasayao was to receive an amount equivalent to 25% of the net
profits that the petitioner corporation would realize, should there be any. Petitioners alleged that since there had
been no profits during said period, private respondent was not entitled to any amount.

The case was submitted for voluntary arbitration and the parties selected the herein respondent Jose T. Collado as
voluntary arbitrator. In the course of the proceedings, however, the herein petitioners challenged the arbitrator's
capacity to try and decide the case fairly and judiciously and asked him to desist from further hearing the case. But,
the respondent arbitrator refused. In due time, or on 29 December 1975, he rendered judgment in favor of the
complainant, ordering the herein petitioners to pay Rodito Nasayao the amount of P9,000.00, within 10 days from
notice. 1

Upon receipt of the decision, the herein petitioners appealed to the National Labor Relations Commission on
grounds that the labor arbiter gravely abused his discretion in persisting to hear and decide the case
notwithstanding petitioners' request for him to desist therefrom: and that the appealed decision is not supported by
evidence. 2

On 18 March 1976, Rodito Nasayao filed a motion to dismiss the appeal on the ground that the decision of the
voluntary arbitrator is final, unappealable, and immediately executory; 3 and, on 23 March 1976, he filed a motion for
the issuance of a writ of execution. 4
Acting on the motions, the respondent Commission, in a resolution dated 7 May 1976, dismissed the appeal on the
ground that the decision appealed from is final, unappealable and immediately executory, and ordered the herein
petitioners to comply with the decision of the voluntary arbitrator within 10 days from receipt of the resolution. 5

The petitioners are before the Court in the present recourse. As prayed for, the Court issued a temporary restraining
order, restraining herein respondents from enforcing and/or carrying out the questioned decision and resolution. 6

The issue for resolution is whether or not the private respondent Rodito Nasayao was employed as plant manager
of petitioner Continental Marble Corporation with a monthly salary of P3,000.00 or 25% of its monthly income,
whichever is greater, as claimed by said respondent, or entitled to receive only an amount equivalent to 25% of net
profits, if any, that the company would realize, as contended by the petitioners.

The respondent arbitrator found that the agreement between the parties was for the petitioner company to pay the
private respondent, Rodito Nasayao, a monthly salary of P3,000.00, and, consequently, ordered the company to pay
Rodito Nasayao the amount of P9,000.00 covering a period of three (3) months, that is, May, June and July 1974.

The respondent Rodito Nasayao now contends that the judgment or award of the voluntary arbitrator is final,
unappealable and immediately executory, and may not be reviewed by the Court. His contention is based upon the
provisions of Art. 262 of the Labor Code, as amended.

The petitioners, upon the other hand, maintain that "where there is patent and manifest abuse of discretion, the rule
on unappealability of awards of a voluntary arbitrator becomes flexible and it is the inherent power of the Courts to
maintain the people's faith in the administration of justice." The question of the finality and unappealability of a
decision and/or award of a voluntary arbitrator had been laid to rest in Oceanic Bic Division (FFW) vs. Romero, 7and
reiterated in Mantrade FMMC Division Employees and Workers Union vs. Bacungan. 8 The Court therein ruled that it can
review the decisions of voluntary arbitrators, thus-

We agree with the petitioner that the decisions of voluntary arbitrators must be given the highest
respect and as a general rule must be accorded a certain measure of finality. This is especially true
where the arbitrator chosen by the parties enjoys the first rate credentials of Professor Flerida Ruth
Pineda Romero, Director of the U.P. Law Center and an academician of unquestioned expertise in
the field of Labor Law. It is not correct, however, that this respect precludes the exercise of judicial
review over their decisions. Article 262 of the Labor Code making voluntary arbitration awards final,
inappealable, and executory except where the money claims exceed P l 00,000.00 or 40% of paid-
up capital of the employer or where there is abuse of discretion or gross incompetence refers to
appeals to the National Labor Relations Commission and not to judicial review.

Inspite of statutory provisions making 'final' the decisions of certain administrative agencies, we have
taken cognizance of petitions questioning these decisions where want of jurisdiction, grave abuse of
discretion, violation of due process, denial of substantial justice, or erroneous interpretation of the
law were brought to our attention. There is no provision for appeal in the statute creating the
Sandiganbayan but this has not precluded us from examining decisions of this special court brought
to us in proper petitions. ...

The Court further said:

A voluntary arbitrator by the nature of her fucntions acts in quasi-judicial capacity. There is no
reason why herdecisions involving interpretation of law should be beyond this Court's review.
Administrative officials are presumed to act in accordance with law and yet we do hesitate to pass
upon their work where a question of law is involved or where a showing of abuse of authority or
discretion in their official acts is properly raised in petitions for certiorari.

The foregoing pronouncements find support in Section 29 of Republic Act No. 876, otherwise known as the
Arbitration Law, which provides:

Sec. 29. Appeals — An appeal may be taken from an order made in a proceeding under this Act, or
from a judgment entered upon an award through certiorari proceedings, but such appeals shall be
limited to questions of law. The proceedings upon such an appeal, including the judgment thereon
shall be governed by the Rules of Court in so far as they are applicable.

The private respondent, Rodito Nasayao, in his Answer to the petition, 9 also claims that the case is premature for non-
exhaustion of administrative remedies. He contends that the decision of the respondent Commission should have been
first appealed by petitioners to the Secretary of Labor, and, if they are not satisfied with his decision, to appeal to the
President of the Philippines, before resort is made to the Court.

The contention is without merit. The doctrine of exhaustion of administrative remedies cannot be invoked in this
case, as contended. In the recent case of John Clement Consultants, Inc. versus National Labor Relations
Commission, 10 the Court said:
 As is well known, no law provides for an appeal from decisions of the National Labor Relations
Commission; hence, there can be no review and reversal on appeal by higher authority of its factual
or legal conclusions. When, however, it decides a case without or in excess of its jurisdiction, or with
grave abuse of discretion, the party thereby adversely affected may obtain a review and nullification
of that decision by this Court through the extraordinary writ of certiorari. Since, in this case, it
appears that the Commission has indeed acted without jurisdiction and with grave abuse of
discretion in taking cognizance of a belated appeal sought to be taken from a decision of Labor
Arbiter and thereafter reversing it, the writ of certiorari will issue to undo those acts, and do justice to
the aggrieved party.

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

While the Court has accorded great respect for, and finality to, findings of fact of a voluntary arbitrator 11and
administrative agencies which have acquired expertise in their respective fields, like the Labor Department and the
National Labor Relations Commission, 12 their findings of fact and the conclusions drawn therefrom have to be supported
by substantial evidence. ln that instant case, the finding of the voluntary arbitrator that Rodito Nasayao was an employee
of the petitioner corporation is not supported by the evidence or by the law.

On the other hand, we find the version of the petitioners to be more plausible and in accord with human nature and
the ordinary course of things. As pointed out by the petitioners, it was illogical for them to hire the private respondent
Rodito Nasayao as plant manager with a monthly salary of P3,000.00, an amount which they could ill-afford to pay,
considering that the business was losing, at the time he was hired, and that they were about to close shop in a few
months' time.

Besides, there is nothing in the record which would support the claim of Rodito Nasayao that he was an employee of
the petitioner corporation. He was not included in the company payroll, nor in the list of company employees
furnished the Social Security System.

Most of all, the element of control is lacking. In Brotherhood Labor Unity Movement in the Philippines vs.
Zamora, 13the Court enumerated the factors in determining whether or not an employer-employee relationship exists, to
wit:

In determining the existence of an employer-employee relationship, the elements that are generally
considered are the following: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect
to the means and methods by which the work is to be accomplished. It is the so-called "control test"
that is the most important element (Investment Planning Corp. of the Phils. vs. The Social Security
System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario Brothers, Inc. v. Ople,
131 SCRA 72). <äre||anº• 1àw>

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

Absent the power to control the employee with respect to the means and methods by which his work was to be
accomplished, there was no employer-employee relationship between the parties. Hence, there is no basis for an
award of unpaid salaries or wages to Rodito Nasayao.

WHEREFORE, the decision rendered by the respondent Jose T. Collado in NLRC Case No. LR-6151, entitled:
"Rodito Nasayao, complainant, versus Continental Marble Corp. and Felipe David, respondents," on 29 December
1975, and the resolution issued by the respondent National Labor Relations Commission in said case on 7 May
1976, are REVERSED and SET ASIDE and another one entered DISMISSING private respondent's complaints.
The temporary restraning order heretofore isued by the Court is made permanent. Without costs.

SO ORDERED.
 21.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-16600 December 27, 1961
ILOILO CHINESE COMMERCIAL SCHOOL, petitioner,
vs.
LEONORA FABRIGAR and THE WORKMEN'S COMPENSATION COMMISSION, respondents.

PAREDES, J.:

As a result of the death of Santiago Fabrigar, on June 28, 1956, his heirs in the person of Leonora Fabrigar
(common-law wife) and their children, filed a claim for compensation with the Workmen's Compensation
Commission, Case No. 1085, W.C.C., entitled "Leonora Fabrigar, et al., Claimants, vs. Iloilo Chinese Commercial
School, Respondent." In this claim, it was alleged that the cause of death was " pulmonary tuberculosis
contracted during and as a result of his employment as janitor." The Hearing Officer of the WCC denied the claim
and dismissed the case, finding that the claimant failed to prove the casual effect of employment and death; nothing
was shown that the disease was contracted in line of duty; that whatever evidence claimant presented about the
cause of death was only a mere suggestion that progressively developed from tuberculosis with heart trouble to a
sudden fatal turn, ending up for the cause of "beriberi adult" at the time of death, as per certification of Sanitary
Inspector Dr. P. E. Labitoria, of Dao, Capiz (Exhibits C & 4).

The heirs of Santiago Fabrigar appealed the decision with the Workmen's Compensation Commission which, on
November 12, 1959, rendered judgment reversing the decision of its Hearing Officer, making the following findings
of facts:

That Santiago Fabrigar had been employed from 1947 to March 12, 1956, as a janitor-messenger of the respondent
Iloilo Chinese Commercial School, his work consisting of sweeping and scrubbing the floors, cleaning the
classrooms and the school premises, and other janitorial chores; on March 11, 1956, preparatory to graduation day,
he carried desks and chairs from the classrooms to the auditorium, set the curtains and worked harder and faster
than usual; that although he felt shortness of breath and did not feel very well that day, he continued working at the
request of the overseer of respondent, that on the following day he reported for work, but on March 13, he spat
blood and stopped working; that from April 29, 1956 to May 15, 1956, he was under treatment by Dr. Quirico
Villareal "for far advanced pulmonary tuberculosis and for heart disease"; and that previous to said treatment, he
was attended by Dr. Jaranilla for pulmonary tuberculosis. The Commission concluded that the short period of
intervention between his last day of work (March 13, 1956) when he spat blood and his death on June 28, 1956, due
to pulmonary tuberculosis, indicated that he had been suffering from such disease even during the time he was
employed by the respondent and considering the strenuous work he performed, his employment as janitor
aggravated his pre-existing illness; that although here is a discrepancy between the cause of death "beriberi adult,"
as appearing in the death Certificate and the testimony of Dr. Villareal, the latter deserves more credence, because
the information (cause of death) was given by the sanitary inspector who did not, in any way, examine the deceased
before or after his death. The Commission, therefore, ordered the respondent Chinese Commercial School, Inc., in
said case —

1. To pay to the claimant, for and in behalf of her minor children by the deceased, namely, Carlito, Gloria,
Rosita and Ernesto, all surnamed Fabrigar, the amount of TWO THOUSAND FOUR HUNDRED NINETY
SIX and 00/00 Pesos (P2,496.00) as Death benefits; and

2. To pay to the Commission the amount of P25.00 as fees pursuant to Section 55 of Act 3428, as
amended.

The above decision is now before Us for Review on a Writ of Certiorari, after the motion for reconsideration had
been denied, petitioner alleging that the Commission erred:

1. In disregarding completely the evidentiary value of the death certificate of the attending physician which
was presented as evidence by both claimants and respondent (Exhibits C & 4) to prove the cause of death;

2. In finding that the cause of death of said Santiago Fabrigar was tuberculosis and was contracted during
and as a result of the nature of his employment;

3. In holding that the herein petitioner was the employer of the deceased Santiago Fabrigar; and

4. In not holding that the herein petitioner is exempt from the scope of the Workmen's Compensation Law. law phil.net

Petitioner contends that the preponderance of evidence on the matters involved in this case, militates in its favor.
Considering the doctrine that the Commission, like the Court of Industrial Relations, is bound not by the rule of
preponderance of evidence as in ordinary civil cases, but by the rule of substantial evidence (Ang Tibay vs. CIR, 69
Phil. 635; Phil. Newspaper Guild vs. Evening News, 47 Off. Gaz. No. 12, p. 6188; Secs. 43 & 46 Rep. Act No. 772,
W.C. Act), petitioner's pretension is without merit. Substantial evidence supports the decision of the Commission.
While seemingly there exists an inconsistency in the cause of death, as appearing in the death certificate by Dr.
Labitoria and in Dr. Villareal's diagnosis, it is a fact found by the Commission, that the Sanitary Inspector did not
examine the deceased before and after his death. "Undoubtedly," says the Commission, "the information that he
died of beriberi adult, as appearing in the death certificate was given because it appears that the deceased had also
edema of the extremities (swollen legs)." The evidence of record sustains the following findings of the Commission,
is Fabrigar's cause of death to wit —

The short period of time intervening between his last day of work (March 13, 1956) when he spat blood and
his death June 28, 1956 due to pulmonary tuberculosis indicates that he had been suffering from the
disease even during the time that he was employed by the respondent. Considering the strenuous work that
he performed while in the service of the respondents and the unusually long hours of work he rendered
(6:00 p.m. to 1:30 p.m. and from 2:00 p.m. to 6:00 p.m. or 7:00 p.m.) beyond the normal and legal working
hours, we find that his employment aggravated his pre-existing illness and brought about his death.
Moreover, our conclusion finds support in the fact that immediately preceding his last day of work with the
respondent, he had an unusually hard day lifting desks and other furnitures and assisting in the preparations
for the graduation exercises of the school. Considering also his complaints during that day (March 11),
among which was "shortness of breath", we may also say that his work affected an already existing heart
ailment.

We find no plausible reason for altering or disturbing the above factual findings of the Commission, in the present
appeal by certiorari.

It is claimed that actually the deceased was not an employee of the petitioner, but by the Iloilo Chinese Chamber of
Commerce which was the one that furnished the janitor service in the premises of its buildings, including the part
thereof occupied by the petitioner; that the Chamber of Commerce paid the salaries of janitors, including the
deceased; that the petitioner could not afford to pay rentals of its premises and janitor due to limited finances
depended largely on funds raised among its Board of Directors, the Chinese Chamber of Commerce and Chinese
nationals who helped the school. In other words, it is pretended that the deceased was not an employee of the
school but of the Chinese Chamber of Commerce which should be the one responsible for the compensation of the
deceased. On one hand, according to the Commission, there is substantial proof to the effect that Fabrigar was
employed by and rendered service for the petitioner and was an employee within the purview of the Workmen's
Compensation Law. On the other hand, the most important test of employer-employee relation is the power to
control the employee's conduct. The records disclose that the person in charge (encargado) of the respondent
school supervised the deceased in his work and had control over the manner he performed the same.

It is finally contended that petitioner is an institution devoted solely for learning and is not an industry within the
meaning of the Workmen's Compensation Law. Consequently, it is argued, it is exempt from the scope of the same
law. Considering that this factual question has not been properly put in issue before the Commission, it may not now
be entertained in this appeal for the first time (Atlantic Gulf, etc. vs. CIR, et al., L-16992, Dec. 23, 1961, citing
International Oil Factory Union v. Hon. Martinez, et al., L-15560, Dec. 31, 1960). The decision of the Commission
does not show that the matter was taken up. We are at a loss to state whether the issue was raised in the motion for
reconsideration filed with the Commission, because the said motion is not found in the record before us. And the
resolution to the motion for reconsideration does not touch this question.

IN VIEW HEREOF, the appeal interposed by the petitioner is dismissed, and the decision appealed from is affirmed,
with costs against the herein petitioner.

22.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 75112 August 17, 1992

FILAMER CHRISTIAN INSTITUTE, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity as Judge of the
Regional Trial Court, Branch XIV, Roxas City and POTENCIANO KAPUNAN, SR., respondents.

GUTIERREZ, JR., J.:

The private respondents, heirs of the late Potenciano Kapunan, seek reconsideration of the decision rendered by
this Court on October 16, 1990 (Filamer Christian Institute v. Court of Appeals, 190 SCRA 477) reviewing the
appellate court's conclusion that there exists an employer-employee relationship between the petitioner and its co-
defendant Funtecha. The Court ruled that the petitioner is not liable for the injuries caused by Funtecha on the
grounds that the latter was not an authorized driver for whose acts the petitioner shall be directly and primarily
answerable, and that Funtecha was merely a working scholar who, under Section 14, Rule X, Book III of the Rules
and Regulations Implementing the Labor Code is not considered an employee of the petitioner.

The private respondents assert that the circumstances obtaining in the present case call for the application of Article
2180 of the Civil Code since Funtecha is no doubt an employee of the petitioner. The private respondents maintain
that under Article 2180 an injured party shall have recourse against the servant as well as the petitioner for whom, at
the time of the incident, the servant was performing an act in furtherance of the interest and for the benefit of the
petitioner. Funtecha allegedly did not steal the school jeep nor use it for a joy ride without the knowledge of the
school authorities.

After a re-examination of the laws relevant to the facts found by the trial court and the appellate court, the Court
reconsiders its decision. We reinstate the Court of Appeals' decision penned by the late Justice Desiderio Jurado
and concurred in by Justices Jose C. Campos, Jr. and Serafin E. Camilon. Applying Civil Code provisions, the
appellate court affirmed the trial court decision which ordered the payment of the P20,000.00 liability in the Zenith
Insurance Corporation policy, P10,000.00 moral damages, P4,000.00 litigation and actual expenses, and P3,000.00
attorney's fees.

It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar of petitioner Filamer.
He was, in relation to the school, an employee even if he was assigned to clean the school premises for only two (2)
hours in the morning of each school day.

Having a student driver's license, Funtecha requested the driver, Allan Masa, and was allowed, to take over the
vehicle while the latter was on his way home one late afternoon. It is significant to note that the place where Allan
lives is also the house of his father, the school president, Agustin Masa. Moreover, it is also the house where
Funtecha was allowed free board while he was a student of Filamer Christian Institute.

Allan Masa turned over the vehicle to Funtecha only after driving down a road, negotiating a sharp dangerous curb,
and viewing that the road was clear. (TSN, April 4, 1983, pp. 78-79) According to Allan's testimony, a fast moving
truck with glaring lights nearly hit them so that they had to swerve to the right to avoid a collision. Upon swerving,
they heard a sound as if something had bumped against the vehicle, but they did not stop to check. Actually, the
Pinoy jeep swerved towards the pedestrian, Potenciano Kapunan who was walking in his lane in the direction
against vehicular traffic, and hit him. Allan affirmed that Funtecha followed his advise to swerve to the right. (Ibid., p.
79) At the time of the incident (6:30 P.M.) in Roxas City, the jeep had only one functioning headlight.

Allan testified that he was the driver and at the same time a security guard of the petitioner-school. He further said
that there was no specific time for him to be off-duty and that after driving the students home at 5:00 in the
afternoon, he still had to go back to school and then drive home using the same vehicle.

Driving the vehicle to and from the house of the school president where both Allan and Funtecha reside is an act in
furtherance of the interest of the petitioner-school. Allan's job demands that he drive home the school jeep so he
can use it to fetch students in the morning of the next school day.

It is indubitable under the circumstances that the school president had knowledge that the jeep was routinely driven
home for the said purpose. Moreover, it is not improbable that the school president also had knowledge of
Funtecha's possession of a student driver's license and his desire to undergo driving lessons during the time that he
was not in his classrooms.

In learning how to drive while taking the vehicle home in the direction of Allan's house, Funtecha definitely was not
having a joy ride. Funtecha was not driving for the purpose of his enjoyment or for a "frolic of his own" but ultimately,
for the service for which the jeep was intended by the petitioner school. (See L. Battistoni v. Thomas, Can SC 144, 1
D.L.R. 577, 80 ALR 722 [1932]; See also Association of Baptists for World Evangelism, Inc. v. Fieldmen's Insurance
Co., Inc. 124 SCRA 618 [1983]). Therefore, the Court is constrained to conclude that the act of Funtecha in taking
over the steering wheel was one done for and in behalf of his employer for which act the petitioner-school cannot
deny any responsibility by arguing that it was done beyond the scope of his janitorial duties. The clause "within the
scope of their assigned tasks" for purposes of raising the presumption of liability of an employer, includes any act
done by an employee, in furtherance of the interests of the employer or for the account of the employer at the time
of the infliction of the injury or damage. (Manuel Casada, 190 Va 906, 59 SE 2d 47 [1950]) Even if somehow, the
employee driving the vehicle derived some benefit from the act, the existence of a presumptive liability of the
employer is determined by answering the question of whether or not the servant was at the time of the accident
performing any act in furtherance of his master's business. (Kohlman v. Hyland, 210 NW 643, 50 ALR 1437 [1926];
Jameson v. Gavett, 71 P 2d 937 [1937])

Section 14, Rule X, Book III of the Rules implementing the Labor Code, on which the petitioner anchors its defense,
was promulgated by the Secretary of Labor and Employment only for the purpose of administering and enforcing the
provisions of the Labor Code on conditions of employment. Particularly, Rule X of Book III provides guidelines on
the manner by which the powers of the Labor Secretary shall be exercised; on what records should be kept;
maintained and preserved; on payroll; and on the exclusion of working scholars from, and inclusion of resident
physicians in the employment coverage as far as compliance with the substantive labor provisions on working
conditions, rest periods, and wages, is concerned.
In other words, Rule X is merely a guide to the enforcement of the substantive law on labor. The Court, thus, makes
the distinction and so holds that Section 14, Rule X, Book III of the Rules is not the decisive law in a civil suit for
damages instituted by an injured person during a vehicular accident against a working student of a school and
against the school itself.

The present case does not deal with a labor dispute on conditions of employment between an alleged employee and
an alleged employer. It invokes a claim brought by one for damages for injury caused by the patently negligent acts
of a person, against both doer-employee and his employer. Hence, the reliance on the implementing rule on labor to
disregard the primary liability of an employer under Article 2180 of the Civil Code is misplaced. An implementing rule
on labor cannot be used by an employer as a shield to avoid liability under the substantive provisions of the Civil
Code.

There is evidence to show that there exists in the present case an extra-contractual obligation arising from the
negligence or reckless imprudence of a person "whose acts or omissions are imputable, by a legal fiction, to
other(s) who are in a position to exercise an absolute or limited control over (him)." (Bahia v. Litonjua and Leynes,
30 Phil. 624 [1915])

Funtecha is an employee of petitioner Filamer. He need not have an official appointment for a driver's position in
order that the petitioner may be held responsible for his grossly negligent act, it being sufficient that the act of driving
at the time of the incident was for the benefit of the petitioner. Hence, the fact that Funtecha was not the school
driver or was not acting within the scope of his janitorial duties does not relieve the petitioner of the burden of
rebutting the presumption juris tantum that there was negligence on its part either in the selection of a servant or
employee, or in the supervision over him. The petitioner has failed to show proof of its having exercised the required
diligence of a good father of a family over its employees Funtecha and Allan.

The Court reiterates that supervision includes the formulation of suitable rules and regulations for the guidance of its
employees and the issuance of proper instructions intended for the protection of the public and persons with whom
the employer has relations through his employees. (Bahia v. Litonjua and Leynes, supra, at p. 628; Phoenix
Construction, v. Intermediate Appellate Court, 148 SCRA 353 [1987])

An employer is expected to impose upon its employees the necessary discipline called for in the performance of any
act indispensable to the business and beneficial to their employer.

In the present case, the petitioner has not shown that it has set forth such rules and guidelines as would prohibit any
one of its employees from taking control over its vehicles if one is not the official driver or prohibiting the driver and
son of the Filamer president from authorizing another employee to drive the school vehicle. Furthermore, the
petitioner has failed to prove that it had imposed sanctions or warned its employees against the use of its vehicles
by persons other than the driver.

The petitioner, thus, has an obligation to pay damages for injury arising from the unskilled manner by which
Funtecha drove the vehicle. (Cangco v. Manila Railroad Co., 38 Phil. 768, 772 [1918]). In the absence of evidence
that the petitioner had exercised the diligence of a good father of a family in the supervision of its employees, the
law imposes upon it the vicarious liability for acts or omissions of its employees. (Umali v. Bacani, 69 SCRA 263
[1976]; Poblete v. Fabros, 93 SCRA 200 [1979]; Kapalaran Bus Liner v. Coronado, 176 SCRA 792 [1989]; Franco v.
Intermediate Appellate Court, 178 SCRA 331 [1989]; Pantranco North Express, Inc. v. Baesa, 179 SCRA 384
[1989]) The liability of the employer is, under Article 2180, primary and solidary. However, the employer shall have
recourse against the negligent employee for whatever damages are paid to the heirs of the plaintiff.

It is an admitted fact that the actual driver of the school jeep, Allan Masa, was not made a party defendant in the civil
case for damages. This is quite understandable considering that as far as the injured pedestrian, plaintiff Potenciano
Kapunan, was concerned, it was Funtecha who was the one driving the vehicle and presumably was one authorized
by the school to drive. The plaintiff and his heirs should not now be left to suffer without simultaneous recourse
against the petitioner for the consequent injury caused by a janitor doing a driving chore for the petitioner even for a
short while. For the purpose of recovering damages under the prevailing circumstances, it is enough that the plaintiff
and the private respondent heirs were able to establish the existence of employer-employee relationship between
Funtecha and petitioner Filamer and the fact that Funtecha was engaged in an act not for an independent purpose
of his own but in furtherance of the business of his employer. A position of responsibility on the part of the petitioner
has thus been satisfactorily demonstrated.

WHEREFORE, the motion for reconsideration of the decision dated October 16, 1990 is hereby GRANTED. The
decision of the respondent appellate court affirming the trial court decision is REINSTATED.

SO ORDERED.
 23.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-21278 December 27, 1966
FEATI UNIVERSITY, petitioner,
vs.
HON. JOSE S. BAUTISTA, Presiding Judge of the Court of Industrial Relations and FEATI UNIVERSITY
FACULTY CLUB-PAFLU, respondents.
----------------------------------------
G.R. No. L-21462 December 27, 1966
FEATI UNIVERSITY, petitioner-appellant,
vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
----------------------------------------
G.R. No. L-21500 December 27, 1966
FEATI UNIVERSITY, petitioner-appellant,
vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.

ZALDIVAR, J.:

This Court, by resolution, ordered that these three cases be considered together, and the parties were allowed to file
only one brief for the three cases.

On January 14, 1963, the President of the respondent Feati University Faculty Club-PAFLU — hereinafter referred
to as Faculty Club — wrote a letter to Mrs. Victoria L. Araneta, President of petitioner Feati University — hereinafter
referred to as University — informing her of the organization of the Faculty Club into a registered labor union. The
Faculty Club is composed of members who are professors and/or instructors of the University. On January 22, 1963,
the President of the Faculty Club sent another letter containing twenty-six demands that have connection with the
employment of the members of the Faculty Club by the University, and requesting an answer within ten days from
receipt thereof. The President of the University answered the two letters, requesting that she be given at least thirty
days to study thoroughly the different phases of the demands. Meanwhile counsel for the University, to whom the
demands were referred, wrote a letter to the President of the Faculty Club demanding proof of its majority status and
designation as a bargaining representative. On February 1, 1963, the President of the Faculty Club again wrote the
President of the University rejecting the latter's request for extension of time, and on the same day he filed a notice
of strike with the Bureau of Labor alleging as reason therefor the refusal of the University to bargain collectively. The
parties were called to conferences at the Conciliation Division of the Bureau of Labor but efforts to conciliate them
failed. On February 18, 1963, the members of the Faculty Club declared a strike and established picket lines in the
premises of the University, resulting in the disruption of classes in the University. Despite further efforts of the
officials from the Department of Labor to effect a settlement of the differences between the management of the
University and the striking faculty members no satisfactory agreement was arrived at. On March 21, 1963, the
President of the Philippines certified to the Court of Industrial Relations the dispute between the management of the
University and the Faculty Club pursuant to the provisions of Section 10 of Republic Act No. 875.

In connection with the dispute between the University and the Faculty Club and certain incidents related to said
dispute, various cases were filed with the Court of Industrial Relations — hereinafter referred to as CIR. The three
cases now before this Court stemmed from those cases that were filed with the CIR.

CASE NO. G.R. NO. L-21278

On May 10, 1963, the University filed before this Court a "petition for certiorari and prohibition with writ of preliminary
injunction", docketed as G.R. No. L-21278, praying: (1) for the issuance of the writ of preliminary injunction enjoining
respondent Judge Jose S. Bautista of the CIR to desist from proceeding in CIR Cases Nos. 41-IPA, 1183-MC, and
V-30; (2) that the proceedings in Cases Nos. 41-IPA and 1183-MC be annulled; (3) that the orders dated March 30,
1963 and April 6, 1963 in Case No. 41-IPA, the order dated April 6, 1963 in Case No. 1183-MC, and the order dated
April 29, 1963 in Case No. V-30, all be annulled; and (4) that the respondent Judge be ordered to dismiss said
cases Nos. 41-IPA, 1183-MC and V-30 of the CIR.

On May 10, 1963, this Court issued a writ of preliminary injunction, upon the University's filing a bond of P1,000.00,
ordering respondent Judge Jose S. Bautista as Presiding Judge of the CIR, until further order from this Court, "to
desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of
Industrial Relations)."1 On December 4, 1963, this Court ordered the injunction bond increased to P100,000.00; but
on January 23, 1964, upon a motion for reconsideration by the University, this Court reduced the bond to
P50,000.00.

A brief statement of the three cases — CIR Cases 41-IPA, 1183-MC and V-30 — involved in the Case G.R. No. L-
21278, is here necessary.
 CIR Case No. 41-IPA, relates to the case in connection with the strike staged by the members of the Faculty Club.
As we have stated, the dispute between the University and the Faculty Club was certified on March 21, 1963 by the
President of the Philippines to the CIR. On the strength of the presidential certification, respondent Judge Bautista
set the case for hearing on March 23, 1963. During the hearing, the Judge endeavored to reconcile the part and it
was agreed upon that the striking faculty members would return to work and the University would readmit them
under a status quo arrangement. On that very same day, however, the University, thru counsel filed a motion to
dismiss the case upon the ground that the CIR has no jurisdiction over the case, because (1) the Industrial Peace
Act is not applicable to the University, it being an educational institution, nor to the members of the Faculty Club,
they being independent contractors; and (2) the presidential certification is violative of Section 10 of the Industrial
Peace Act, as the University is not an industrial establishment and there was no industrial dispute which could be
certified to the CIR. On March 30, 1963 the respondent Judge issued an order denying the motion to dismiss and
declaring that the Industrial Peace Act is applicable to both parties in the case and that the CIR had acquired
jurisdiction over the case by virtue of the presidential certification. In the same order, the respondent Judge,
believing that the dispute could not be decided promptly, ordered the strikers to return immediately to work and the
University to take them back under the last terms and conditions existing before the dispute arose, as per
agreement had during the hearing on March 23, 1963; and likewise enjoined the University, pending adjudication of
the case, from dismissing any employee or laborer without previous authorization from the CIR. The University filed
on April 1, 1963 a motion for reconsideration of the order of March 30, 1963 by the CIR en banc, and at the same
time asking that the motion for reconsideration be first heard by the CIR en banc. Without the motion for
reconsideration having been acted upon by the CIR en banc, respondent Judge set the case for hearing on the
merits for May 8, 1963. The University moved for the cancellation of said hearing upon the ground that the court en
banc should first hear the motion for reconsideration and resolve the issues raised therein before the case is heard
on the merits. This motion for cancellation of the hearing was denied. The respondent Judge, however, cancelled
the scheduled hearing when counsel for the University manifested that he would take up before the Supreme Court,
by a petition for certiorari, the matter regarding the actuations of the respondent Judge and the issues raised in the
motion for reconsideration, specially the issue relating to the jurisdiction of the CIR. The order of March 30, 1963 in
Case 41-IPA is one of the orders sought to be annulled in the case, G.R. No. L-21278.

Before the above-mentioned order of March 30, 1963 was issued by respondent Judge, the University had
employed professors and/or instructors to take the places of those professors and/or instructors who had struck. On
April 1, 1963, the Faculty Club filed with the CIR in Case 41-IPA a petition to declare in contempt of court certain
parties, alleging that the University refused to accept back to work the returning strikers, in violation of the return-to-
work order of March 30, 1963. The University filed, on April 5,1963, its opposition to the petition for contempt,
denying the allegations of the Faculty Club and alleging by way of special defense that there was still the motion for
reconsideration of the order of March 30, 1963 which had not yet been acted upon by the CIR en banc. On April 6,
1963, the respondent Judge issued an order stating that "said replacements are hereby warned and cautioned, for
the time being, not to disturb nor in any manner commit any act tending to disrupt the effectivity of the order of
March 30,1963, pending the final resolution of the same."2 On April 8, 1963, there placing professors and/or
instructors concerned filed, thru counsel, a motion for reconsideration by the CIR en banc of the order of respondent
Judge of April 6, 1963. This order of April 6, 1963 is one of the orders that are sought to be annulled in case G.R.
No. L-21278.

CIR Case No. 1183-MC relates to a petition for certification election filed by the Faculty Club on March 8, 1963
before the CIR, praying that it be certified as the sole and exclusive bargaining representative of all the employees
of the University. The University filed an opposition to the petition for certification election and at the same time a
motion to dismiss said petition, raising the very same issues raised in Case No. 41-IPA, claiming that the petition did
not comply with the rules promulgated by the CIR; that the Faculty Club is not a legitimate labor union; that the
members of the Faculty Club cannot unionize for collective bargaining purposes; that the terms of the individual
contracts of the professors, instructors, and teachers, who are members of the Faculty Club, would expire on March
25 or 31, 1963; and that the CIR has no jurisdiction to take cognizance of the petition because the Industrial Peace
Act is not applicable to the members of the Faculty Club nor to the University. This case was assigned to Judge
Baltazar Villanueva of the CIR. Before Judge Villanueva could act on the motion to dismiss, however, the Faculty
Club filed on April 3, 1963 a motion to withdraw the petition on the ground that the labor dispute (Case No. 41-IPA)
had already been certified by the President to the CIR and the issues raised in Case No. 1183-MC were absorbed
by Case No. 41-IPA. The University opposed the withdrawal, alleging that the issues raised in Case No. 1183-MC
were separate and distinct from the issues raised in Case No. 41-IPA; that the questions of recognition and majority
status in Case No. 1183-MC were not absorbed by Case No. 41-IPA; and that the CIR could not exercise its power
of compulsory arbitration unless the legal issue regarding the existence of employer-employee relationship was first
resolved. The University prayed that the motion of the Faculty Club to withdraw the petition for certification election
be denied, and that its motion to dismiss the petition be heard. Judge Baltazar Villanueva, finding that the reasons
stated by the Faculty Club in the motion to withdraw were well taken, on April 6, 1963, issued an order granting the
withdrawal. The University filed, on April 24, 1963, a motion for reconsideration of that order of April 6, 1963 by the
CIR en banc. This order of April 6, 1963 in Case No. 1183-MC is one of the orders sought to be annulled in the
case, G.R. No. L-21278, now before Us.

CIR Case No. V-30 relates to a complaint for indirect contempt of court filed against the administrative officials of the
University. The Faculty Club, through the Acting Chief Prosecutor of the CIR, filed with the CIR a complaint
docketed as Case No. V-30, charging President Victoria L. Araneta, Dean Daniel Salcedo, Executive Vice-President
Rodolfo Maslog, and Assistant to the President Jose Segovia, as officials of the University, with indirect contempt of
court, reiterating the same charges filed in Case No. 41-IPA for alleged violation of the order dated March 30, 1963.
Based on the complaint thus filed by the Acting Chief Prosecutor of the CIR, respondent Judge Bautista issued on
 April 29, 1963 an order commanding any officer of the law to arrest the above named officials of the University so
that they may be dealt with in accordance with law, and the same time fixed the bond for their release at P500.00
each. This order of April 29, 1963 is also one of the orders sought to be annulled in the case, G.R. No. L-2l278.

The principal allegation of the University in its petition for certiorari and prohibition with preliminary injunction in Case
G.R. No. L-21278, now before Us, is that respondent Judge Jose S. Bautista acted without, or in excess of,
jurisdiction, or with grave abuse of discretion, in taking cognizance of, and in issuing the questioned orders in, CIR
Cases Nos. 41-IPA 1183-MC and V-30. Let it be noted that when the petition for certiorari and prohibition with
preliminary injunction was filed on May 10, 1963 in this case, the questioned order in CIR Cases Nos. 41-IPA, 1183-
MC and V-30 were still pending action by the CIR en banc upon motions for reconsideration filed by the University.

On June 10, 1963, the Faculty Club filed its answer to the petition for certiorari and prohibition with preliminary
injunction, admitting some allegations contained in the petition and denying others, and alleging special defenses
which boil down to the contentions that (1) the CIR had acquired jurisdiction to take cognizance of Case No. 41-IPA
by virtue of the presidential certification, so that it had jurisdiction to issue the questioned orders in said Case No.
41-IPA; (2) that the Industrial Peace Act (Republic Act 875) is applicable to the University as an employer and to the
members of the Faculty Club as employees who are affiliated with a duly registered labor union, so that the Court of
Industrial Relations had jurisdiction to take cognizance of Cases Nos. 1183-MC and V-30 and to issue the
questioned orders in those two cases; and (3) that the petition for certiorari and prohibition with preliminary
injunction was prematurely filed because the orders of the CIR sought to be annulled were still the subjects of
pending motions for reconsideration before the CIR en banc when said petition for certiorari and prohibition with
preliminary injunction was filed before this Court.

CASE G.R. NO. L-21462

This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As already stated Case No. 1183-MC relates to
a petition for certification election filed by the Faculty Club as a labor union, praying that it be certified as the sole
and exclusive bargaining representative of all employees of the University. This petition was opposed by the
University, and at the same time it filed a motion to dismiss said petition. But before Judge Baltazar Villanueva could
act on the petition for certification election and the motion to dismiss the same, Faculty Club filed a motion to
withdraw said petition upon the ground that the issue raised in Case No. 1183-MC were absorbed by Case No. 41-
IPA which was certified by the President of the Philippines. Judge Baltazar Villanueva, by order April 6, 1963,
granted the motion to withdraw. The University filed a motion for reconsideration of that order of April 6, 1963 by the
CIR en banc. That motion for reconsideration was pending action by the CIR en banc when the petition
for certiorariand prohibition with preliminary injunction in Case G.R. no. L-21278 was filed on May 10, 1963. As
earlier stated this Court, in Case G.R. No. L-21278, issued a writ of preliminary injunction on May 10, 1963, ordering
respondent Judge Bautista, until further order from this Court, to desist and refrain from further proceeding in the
premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations).

On June 5, 1963, that is, after this Court has issued the writ of preliminary injunction in Case G.R. No. L-21278, the
CIR en banc issued a resolution denying the motion for reconsideration of the order of April 6, 1963 in Case No.
1183-MC.

On July 8, 1963, the University filed before this Court a petition for certiorari, by way of an appeal from the resolution
of the CIR en banc, dated June 5, 1963, denying the motion for reconsideration of the order of April 6, 1963 in Case
No. 1183-MC. This petition was docketed as G.R. No. L-21462. In its petition for certiorari, the University alleges (1)
that the resolution of the Court of Industrial Relations of June 5, 1963 was null and void because it was issued in
violation of the writ of preliminary injunction issued in Case G.R. No. L-21278; (2) that the issues of employer-
employee relationship, the alleged status as a labor union, majority representation and designation as bargaining
representative in an appropriate unit of the Faculty Club should have been resolved first in Case No. 1183-MC prior
to the determination of the issues in Case No. 41-IPA and therefore the motion to withdraw the petition for
certification election should not have been granted upon the ground that the issues in the first case have been
absorbed in the second case; and (3) the lower court acted without or in excess of jurisdiction in taking cognizance
of the petition for certification election and that the same should have been dismissed instead of having been
ordered withdrawn. The University prayed that the proceedings in Case No. 1183-MC and the order of April 6, 1963
and the resolution of June 5, 1963 issued therein be annulled, and that the CIR be ordered to dismiss Case No.
1183-MC on the ground of lack of jurisdiction.

The Faculty Club filed its answer, admitting some, and denying other, allegations in the petition for certiorari; and
specially alleging that the lower court's order granting the withdrawal of the petition for certification election was in
accordance with law, and that the resolution of the court en banc on June 5, 1963 was not a violation of the writ of
preliminary injunction issued in Case G.R. No. L-21278 because said writ of injunction was issued against Judge
Jose S. Bautista and not against the Court of Industrial Relations, much less against Judge Baltazar Villanueva who
was the trial judge of Case No. 1183-MC.

CASE G.R. NO. L-21500

This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier stated, Case No. 41-IPA relates to the
strike staged by the members of the Faculty Club and the dispute was certified by the President of the Philippines to
the CIR. The University filed a motion to dismiss that case upon the ground that the CIR has no jurisdiction over the
 case, and on March 30, 1963 Judge Jose S. Bautista issued an order denying the motion to dismiss and declaring
that the Industrial Peace Act is applicable to both parties in the case and that the CIR had acquired jurisdiction over
the case by virtue of the presidential certification; and in that same order Judge Bautista ordered the strikers to
return to work and the University to take them back under the last terms and conditions existing before the dispute
arose; and enjoined the University from dismissing any employee or laborer without previous authority from the
court. On April 1, 1963, the University filed a motion for reconsideration of the order of March 30, 1963 by the
CIR en banc. That motion for reconsideration was pending action by the CIR en banc when the petition
for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278 was filed on May 10, 1963. As we
have already stated, this Court in said case G.R. No. L-21278, issued a writ of preliminary injunction on May 10,
1963 ordering respondent Judge Jose S. Bautista, until further order from this Court, to desist and refrain from
further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations).

On July 2, 1963, the University received a copy of the resolution of the CIR en banc, dated May 7, 1963 but actually
received and stamped at the Office of the Clerk of the CIR on June 28, 1963, denying the motion for reconsideration
of the order dated March 30, 1963 in Case No. 41-IPA.

On July 23, 1963, the University filed before this Court a petition for certiorari, by way of an appeal from the
resolution of the Court of Industrial Relations en banc dated May 7, 1963 (but actually received by said petitioner on
July 2, 1963) denying the motion for reconsideration of the order of March 30, 1963 in Case No. 41-IPA. This
petition was docketed as G.R. No. L-21500. In its petition for certiorari the University alleges (1) that the resolution
of the CIR en banc, dated May 7, 1963 but filed with the Clerk of the CIR on June 28, 1963, in Case No. 41-IPA, is
null and void because it was issued in violation of the writ of preliminary injunction issued by this Court in G.R. No.
L-21278; (2) that the CIR, through its Presiding Judge, had no jurisdiction to take cognizance of Case No. 41-IPA
and the order of March 30, 1963 and the resolution dated May 7, 1963 issued therein are null and void; (3) that the
certification made by the President of the Philippines is not authorized by Section 10 of Republic Act 875, but is
violative thereof; (4) that the Faculty Club has no right to unionize or organize as a labor union for collective
bargaining purposes and to be certified as a collective bargaining agent within the purview of the Industrial Peace
Act, and consequently it has no right to strike and picket on the ground of petitioner's alleged refusal to bargain
collectively where such duty does not exist in law and is not enforceable against an educational institution; and (5)
that the return-to-work order of March 30, 1963 is improper and illegal. The petition prayed that the proceedings in
Case No. 41-IPA be annulled, that the order dated March 30, 1963 and the resolution dated May 7, 1963 be
revoked, and that the lower court be ordered to dismiss Case 41-IPA on the ground of lack of jurisdiction.

On September 10, 1963, the Faculty Club, through counsel, filed a motion to dismiss the petition for certiorari on the
ground that the petition being filed by way of an appeal from the orders of the Court of Industrial Relations denying
the motion to dismiss in Case No. 41-IPA, the petition for certiorari is not proper because the orders appealed from
are interlocutory in nature.

This Court, by resolution of September 26, 1963, ordered that these three cases (G.R. Nos. L-21278, L-21462 and
L-21500) be considered together and the motion to dismiss in Case G.R. No. L-21500 be taken up when the cases
are decided on the merits after the hearing.

Brushing aside certain technical questions raised by the parties in their pleadings, We proceed to decide these three
cases on the merits of the issues raised.

The University has raised several issues in the present cases, the pivotal one being its claim that the Court of
Industrial Relations has no jurisdiction over the parties and the subject matter in CIR Cases 41-IPA, 1183-MC and
V-30, brought before it, upon the ground that Republic Act No. 875 is not applicable to the University because it is
an educational institution and not an industrial establishment and hence not an "employer" in contemplation of said
Act; and neither is Republic Act No. 875 applicable to the members of the Faculty Club because the latter are
independent contractors and, therefore, not employees within the purview of the said Act.

In support of the contention that being an educational institution it is beyond the scope of Republic Act No. 875, the
University cites cases decided by this Court: Boy Scouts of the Philippines vs. Juliana Araos, L-10091, Jan. 29,
1958; University of San Agustin vs. CIR, et al., L-12222, May 28, 1958; Cebu Chinese High School vs. Philippine
Land-Air-Sea Labor Union, PLASLU, L-12015, April 22, 1959; La Consolacion College, et al. vs. CIR, et al., L-
13282, April 22, 1960; University of the Philippines, et al. vs. CIR, et al., L-15416, April 8, 1960; Far Eastern
University vs. CIR, L-17620, August 31, 1962. We have reviewed these cases, and also related cases subsequent
thereto, and We find that they do not sustain the contention of the University. It is true that this Court has ruled that
certain educational institutions, like the University of Santo Tomas, University of San Agustin, La Consolacion
College, and other juridical entities, like the Boy Scouts of the Philippines and Manila Sanitarium, are beyond the
purview of Republic Act No. 875 in the sense that the Court of Industrial Relations has no jurisdiction to take
cognizance of charges of unfair labor practice filed against them, but it is nonetheless true that the principal reason
of this Court in ruling in those cases that those institutions are excluded from the operation of Republic Act 875 is
that those entities are not organized, maintained and operated for profit and do not declare dividends to
stockholders. The decision in the case of University of San Agustin vs. Court of Industrial Relations, G.R. No. L-
12222, May 28, 1958, is very pertinent. We quote a portion of the decision:

It appears that the University of San Agustin, petitioner herein, is an educational institution conducted and
managed by a "religious non-stock corporation duly organized and existing under the laws of the
 Philippines." It was organized not for profit or gain or division of the dividends among its stockholders, but
solely for religious and educational purposes. It likewise appears that the Philippine Association of College
and University Professors, respondent herein, is a non-stock association composed of professors and
teachers in different colleges and universities and that since its organization two years ago, the university
has adopted a hostile attitude to its formation and has tried to discriminate, harass and intimidate its
members for which reason the association and the members affected filed the unfair labor practice
complaint which initiated this proceeding. To the complaint of unfair labor practice, petitioner filed an answer
wherein it disputed the jurisdiction of the Court of Industrial Relations over the controversy on the following
grounds:

"(a) That complainants therein being college and/or university professors were not "industrial"
laborers or employees, and the Philippine Association of College and University Professors being
composed of persons engaged in the teaching profession, is not and cannot be a legitimate labor
organization within the meaning of the laws creating the Court of Industrial Relations and defining its
powers and functions;

"(b) That the University of San Agustin, respondent therein, is not an institution established for the
purpose of gain or division of profits, and consequently, it is not an "industrial" enterprise and the
members of its teaching staff are not engaged in "industrial" employment (U.S.T. Hospital
Employees Association vs. Sto. Tomas University Hospital, G.R. No. L-6988, 24 May 1954; and San
Beda College vs. Court of Industrial Relations and National Labor Union, G.R. No. L-7649, 29
October 1955; 51 O.G. (Nov. 1955) 5636-5640);

"(c) That, as a necessary consequence, alleged controversy between therein complainants and
respondent is not an "industrial" dispute, and the Court of Industrial Relations has no
jurisdiction, not only on the parties but also over the subject matter of the complaint."

The issue now before us is: Since the University of San Agustin is not an institution established for profit or
gain, nor an industrial enterprise, but one established exclusively for educational purposes, can it be said
that its relation with its professors is one of employer and employee that comes under the jurisdiction of the
Court of Industrial Relations? In other words, do the provisions of the Magna Carta on unfair labor practice
apply to the relation between petitioner and members of respondent association?

The issue is not new. Thus, in the case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L-
10091, promulgated on January 29, 1958, this Court, speaking thru Mr. Justice Montemayor, answered the
query in the negative in the following wise:

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

xxx xxx xxx

"On the basis of the foregoing considerations, there is every reason to believe that our labor
legislation from Commonwealth Act No. 103, creating the Court of Industrial Relations, down through
the Eight-Hour Labor Law, to the Industrial Peace Act, was intended by the Legislature to apply only
to industrial employment and to govern the relations between employers engaged in industry and
occupations for purposes of profit and gain, and their industrial employees, but not to organizations
and entities which are organized, operated and maintained not for profit or gain, but for elevated and
lofty purposes, such as, charity, social service, education and instruction, hospital and medical
service, the encouragement and promotion of character, patriotism and kindred virtues in youth of
the nation, etc.

"In conclusion, we find and hold that Republic Act No. 875, particularly, that portion thereof regarding
labor disputes and unfair labor practice, does not apply to the Boy Scouts of the Philippines, and
consequently, the Court of Industrial Relations had no jurisdiction to entertain and decide the action
or petition filed by respondent Araos. Wherefore, the appealed decision and resolution of the CIR
are hereby set aside, with costs against respondent."

There being a close analogy between the relation and facts involved in the two cases, we cannot but
conclude that the Court of Industrial Relations has no jurisdiction to entertain the complaint for unfair labor
practice lodged by respondent association against petitioner and, therefore, we hereby set aside the order
and resolution subject to the present petition, with costs against respondent association.
The same doctrine was confirmed in the case of University of Santo Tomas v. Hon. Baltazar Villanueva, et al., G.R.
No. L-13748, October 30, 1959, where this Court ruled that:

In the present case, the record reveals that the petitioner University of Santo Tomas is not an industry
organized for profit but an institution of learning devoted exclusively to the education of the youth. The Court
of First Instance of Manila in its decision in Civil Case No. 28870, which has long become final and
consequently the settled law in the case, found as established by the evidence adduced by the parties
therein (herein petitioner and respondent labor union) that while the University collects fees from its
students, all its income is used for the improvement and enlargement of the institution. The University
declares no dividend, and the members of the corporation who founded it, as ordained in its articles of
incorporation, receive no material compensation for the time and sacrifice they render to the University and
its students. The respondent union itself in a case before the Industrial Court (Case No. 314-MC) has
averred that "the University of Santo Tomas, like the San Beda College, is an educational institution
operated not for profit but for the sole purpose of educating young men." (See Annex "B" to petitioner's
motion to dismiss.). It is apparent, therefore, that on the face of the record the University of Santo Tomas is
not a corporation created for profit but an educational institution and therefore not an industrial or business
organization.

In the case of La Consolacion College, et al. vs. CIR, et al., G.R. No. L-13282, April 22, 1960, this Court repeated
the same ruling when it said:

The main issue in this appeal by petitioner is that the industry trial court committed an error in holding that it
has jurisdiction to act in this case even if it involves unfair labor practice considering that the La Consolacion
College is not a business enterprise but an educational institution not organized for profit.

If the claim that petitioner is an educational institution not operated for profit is true, which apparently is the
case, because the very court a quo found that it has no stockholder, nor capital . . . then we are of the
opinion that the same does not come under the jurisdiction of the Court of Industrial Relations in view of the
ruling in the case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L-10091, decided on
January 29, 1958.

It is noteworthy that the cases of the University of San Agustin, the University of Santo Tomas, and La Consolacion
College, cited above, all involve charges of unfair labor practice under Republic Act No. 875, and the uniform rulings
of this Court are that the Court of Industrial Relations has no jurisdiction over the charges because said Act does not
apply to educational institutions that are not operated or maintained for profit and do not declare dividends. On the
other hand, in the cases of Far Eastern University v. CIR, et al., G.R. No. L-17620, August 31, 1962, this Court
upheld the decision of the Court of Industrial Relations finding the Far Eastern University, also an educational
institution, guilty of unfair labor practice. Among the findings of fact in said case was that the Far Eastern University
made profits from the school year 1952-1953 to 1958-1959. In affirming the decision of the lower court, this Court
had thereby ratified the ruling of the Court of Industrial Relations which applied the Industrial Peace Act to
educational institutions that are organized, operated and maintained for profit.

It is also noteworthy that in the decisions in the cases of the Boy Scouts of the Philippines, the University of San
Agustin, the University of Sto. Tomas, and La Consolacion College, this Court was not unanimous in the view that
the Industrial Peace Act (Republic Act No. 875) is not applicable to charitable, eleemosynary or non-profit
organizations — which include educational institutions not operated for profit. There are members of this Court who
hold the view that the Industrial Peace Act would apply also to non-profit organizations or entities — the only
exception being the Government, including any political subdivision or instrumentality thereof, in so far as
governmental functions are concerned. However, in the Far Eastern University case this Court is unanimous in
supporting the view that an educational institution that is operated for profit comes within the scope of the Industrial
Peace Act. We consider it a settled doctrine of this Court, therefore, that the Industrial Peace Act is applicable to any
organization or entity — whatever may be its purpose when it was created — that is operated for profit or gain.

Does the University operate as an educational institution for profit? Does it declare dividends for its stockholders? If
it does not, it must be declared beyond the purview of Republic Act No. 875; but if it does, Republic Act No. 875
must apply to it. The University itself admits that it has declared dividends.3 The CIR in its order dated March 30,
1963 in CIR Case No. 41-IPA — which order was issued after evidence was heard — also found that the University
is not for strictly educational purposes and that "It realizes profits and parts of such earning is distributed as
dividends to private stockholders or individuals (Exh. A and also 1 to 1-F, 2-x 3-x and 4-x)"4 Under this
circumstance, and in consonance with the rulings in the decisions of this Court, above cited, it is obvious that
Republic Act No. 875 is applicable to herein petitioner Feati University.

But the University claims that it is not an employer within the contemplation of Republic Act No. 875, because it is
not an industrial establishment. At most, it says, it is only a lessee of the services of its professors and/or instructors
pursuant to a contract of services entered into between them. We find no merit in this claim. Let us clarify who is an
"employer" under the Act. Section 2(c) of said Act provides:

Sec. 2. Definitions.—As used in this Act —

 (c) The term employer include any person acting in the interest of an employer, directly or indirectly, but
shall not include any labor organization (otherwise than when acting as an employer) or any one acting in
the capacity or agent of such labor organization.

It will be noted that in defining the term "employer" the Act uses the word "includes", which it also used in defining
"employee". [Sec. 2 (d)], and "representative" [Sec. 2(h)]; and not the word "means" which the Act uses in defining
the terms "court" [Sec. 2(a)], "labor organization" [Sec. 2(e)], "legitimate labor organization [Sec. 2(f)], "company
union" [Sec. 2(g)], "unfair labor practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)], "strike" [Sec. 2(l)] and "lock-out" [Sec.
2(m)]. A methodical variation in terminology is manifest. This variation and distinction in terminology and
phraseology cannot be presumed to have been the inconsequential product of an oversight; rather, it must have
been the result of a deliberate and purposeful act, more so when we consider that as legislative records show,
Republic Act No. 875 had been meticulously and painstakingly drafted and deliberated upon. In using the word
"includes" and not "means", Congress did not intend to give a complete definition of "employer", but rather that such
definition should be complementary to what is commonly understood as employer. Congress intended the term to
be understood in a broad meaning because, firstly, the statutory definition includes not only "a principal employer
but also a person acting in the interest of the employer"; and, secondly, the Act itself specifically enumerated those
who are not included in the term "employer", namely: (1) a labor organization (otherwise than when acting as an
employer), (2) anyone acting in the capacity of officer or agent of such labor organization [Sec. 2(c)], and (3) the
Government and any political subdivision or instrumentality thereof insofar as the right to strike for the purpose of
securing changes or modifications in the terms and conditions of employment is concerned (Section 11). Among
these statutory exemptions, educational institutions are not included; hence, they can be included in the term
"employer". This Court, however, has ruled that those educational institutions that are not operated for profit are not
within the purview of Republic Act No. 875.5

As stated above, Republic Act No. 875 does not give a comprehensive but only a complementary definition of the
term "employer". The term encompasses those that are in ordinary parlance "employers." What is commonly meant
by "employer"? The term "employer" has been given several acceptations. The lexical definition is "one who
employs; one who uses; one who engages or keeps in service;" and "to employ" is "to provide work and pay for; to
engage one's service; to hire." (Webster's New Twentieth Century Dictionary, 2nd ed., 1960, p. 595). The
Workmen's Compensation Act defines employer as including "every person or association of persons, incorporated
or not, public or private, and the legal representative of the deceased employer" and "includes the owner or lessee
of a factory or establishment or place of work or any other person who is virtually the owner or manager of the
business carried on in the establishment or place of work but who, for reason that there is an independent contractor
in the same, or for any other reason, is not the direct employer of laborers employed there." [Sec. 39(a) of Act No.
3428.] The Minimum Wage Law states that "employer includes any person acting directly or indirectly in the interest
of the employer in relation to an employee and shall include the Government and the government corporations".
[Rep. Act No. 602, Sec. 2(b)]. The Social Security Act defines employer as "any person, natural or juridical,
domestic or foreign, who carries in the Philippines any trade, business, industry, undertaking, or activity of any kind
and uses the services of another person who is under his orders as regards the employment, except the
Government and any of its political subdivisions, branches or instrumentalities, including corporations owned or
controlled by the Government." (Rep. Act No. 1161, Sec. 8[c]).

This Court, in the cases of the The Angat River Irrigation System, et al. vs. Angat River Workers' Union (PLUM), et
al., G.R. Nos. L-10934 and L-10944, December 28, 1957, which cases involve unfair labor practices and hence
within the purview of Republic Act No. 875, defined the term employer as follows:

An employer is one who employs the services of others; one for whom employees work and who pays their
wages or salaries (Black Law Dictionary, 4th ed., p. 618).

An employer includes any person acting in the interest of an employer, directly or indirectly (Sec. 2-c, Rep.
Act 875).

Under none of the above definitions may the University be excluded, especially so if it is considered that every
professor, instructor or teacher in the teaching staff of the University, as per allegation of the University itself, has a
contract with the latter for teaching services, albeit for one semester only. The University engaged the services of
the professors, provided them work, and paid them compensation or salary for their services. Even if the University
may be considered as a lessee of services under a contract between it and the members of its Faculty, still it is
included in the term "employer". "Running through the word `employ' is the thought that there has been an
agreement on the part of one person to perform a certain service in return for compensation to be paid by an
employer. When you ask how a man is employed, or what is his employment, the thought that he is under
agreement to perform some service or services for another is predominant and paramount." (Ballentine Law
Dictionary, Philippine ed., p. 430, citing Pinkerton National Detective Agency v. Walker, 157 Ga. 548, 35 A. L. R.
557, 560, 122 S.E. Rep. 202).

To bolster its claim of exception from the application of Republic Act No. 875, the University contends that it is not
state that the employers included in the definition of 2 (c) of the Act. This contention can not be sustained. In the first
place, Sec. 2 (c) of Republic Act No. 875 does not state that the employers included in the definition of the term
"employer" are only and exclusively "industrial establishments"; on the contrary, as stated above, the term
"employer" encompasses all employers except those specifically excluded by the Act. In the second place, even the
Act itself does not refer exclusively to industrial establishments and does not confine its application thereto. This is
 patent inasmuch as several provisions of the Act are applicable to non-industrial workers, such as Sec. 3, which
deals with "employees' right to self-organization"; Sections 4 and 5 which enumerate unfair labor practices; Section
8 which nullifies private contracts contravening employee's rights; Section 9 which relates to injunctions in any case
involving a labor dispute; Section 11 which prohibits strikes in the government; Section 12 which provides for the
exclusive collective bargaining representation for labor organizations; Section 14 which deals with the procedure for
collective bargaining; Section 17 which treats of the rights and conditions of membership in labor organizations;
Sections 18, 19, 20 and 21 which provide respectively for the establishment of conciliation service, compilation of
collective bargaining contracts, advisory labor-management relations; Section 22 which empowers the Secretary of
Labor to make a study of labor relations; and Section 24 which enumerates the rights of labor organizations. (See
Dissenting Opinion of Justice Concepcion in Boy Scouts of the Philippines v. Juliana Araos, G.R. No. L-10091,
January 29, 1958.)

This Court, in the case of Boy Scouts of the Philippines v. Araos, supra, had occasion to state that the Industrial
Peace Act "refers only to organizations and entities created and operated for profits, engaged in a profitable trade,
occupation or industry". It cannot be denied that running a university engages time and attention; that it is an
occupation or a business from which the one engaged in it may derive profit or gain. The University is not an
industrial establishment in the sense that an industrial establishment is one that is engaged in manufacture or trade
where raw materials are changed or fashioned into finished products for use. But for the purposes of the Industrial
Peace Act the University is an industrial establishment because it is operated for profit and it employs persons who
work to earn a living. The term "industry", for the purposes of the application of our labor laws should be given a
broad meaning so as to cover all enterprises which are operated for profit and which engage the services of persons
who work to earn a living.

The word "industry" within State Labor Relations Act controlling labor relations in industry, cover labor
conditions in any field of employment where the objective is earning a livelihood on the one side and gaining
of a profit on the other. Labor Law Sec. 700 et seq. State Labor Relations Board vs. McChesney, 27 N.Y.S.
2d 866, 868." (Words and Phrases, Permanent Edition, Vol. 21, 1960 edition p. 510).

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

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

(d) The term "employee" shall include any employee and shall not be limited to the employee of a particular
employer unless the act explicitly states otherwise and shall include any individual whose work has ceased
as a consequence of, or in connection with, any current labor dispute or because of any unfair labor practice
and who has not obtained any other substantially equivalent and regular employment.

This definition is again, like the definition of the term "employer" [Sec. 2(c)], by the use of the term "include",
complementary. It embraces not only those who are usually and ordinarily considered employees, but also those
who have ceased as employees as a consequence of a labor dispute. The term "employee", furthermore, is not
limited to those of a particular employer. As already stated, this Court in the cases of The Angat River Irrigation
System, et al. v. Angat River Workers' Union (PLUM), et al., supra, has defined the term "employer" as "one who
employs the services of others; one for whom employees work and who pays their wages or salaries. "Correlatively,
an employee must be one who is engaged in the service of another; who performs services for another; who works
for salary or wages. It is admitted by the University that the striking professors and/or instructors are under contract
to teach particular courses and that they are paid for their services. They are, therefore, employees of the
University.

In support of its claim that the members of the Faculty Club are not employees of the University, the latter cites as
authority Francisco's Labor Laws, 2nd ed., p. 3, which states:

While the term "workers" as used in a particular statute, has been regarded as limited to those performing
physical labor, it has been held to embrace stenographers and bookkeepers. Teachers are not included,
however.

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

That teachers are "employees' has been held in a number of cases (Aebli v. Board of Education of City and County
of San Francisco, 145 P. 2d 601, 62 Col. App 2.d 706; Lowe & Campbell Sporting Goods Co. v. Tangipahoa Parish
School Board, La. App., 15 So. 2d 98, 100; Sister Odelia v. Church of St. Andrew, 263 N. W. 111, 112, 195 Minn.
357, cited in Words and Phrases, Permanent ed., Vol. 14, pp. 806-807). This Court in the Far Eastern University
case, supra, considered university instructors as employees and declared Republic Act No. 875 applicable to them
in their employment relations with their school. The professors and/or instructors of the University neither ceased to
be employees when they struck, for Section 2 of Rep. Act 875 includes among employees any individual whose
work has ceased as consequence of, or in connection with a current labor dispute. Striking employees maintain their
status as employees of the employer. (Western Cartridge Co. v. NLRB, C.C.A. 7, 139 F2d 855, 858).

The contention of the University that the professors and/or instructors are independent contractors, because the
University does not exercise control over their work, is likewise untenable. This Court takes judicial notice that a
university controls the work of the members of its faculty; that a university prescribes the courses or subjects that
professors teach, and when and where to teach; that the professors' work is characterized by regularity and
continuity for a fixed duration; that professors are compensated for their services by wages and salaries, rather than
by profits; that the professors and/or instructors cannot substitute others to do their work without the consent of the
university; and that the professors can be laid off if their work is found not satisfactory. All these indicate that the
university has control over their work; and professors are, therefore, employees and not independent contractors.
There are authorities in support of this view.

The principal consideration in determining whether a workman is an employee or an independent contractor

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

Where, under Employers' Liability Act, A was instructed when and where to work . . . he is an employee, and
not a contractor, though paid specified sum per square. (Heine v. Hill, Harris & Co., 2 La. App. 384, 390, in
Words and Phrases, loc, cit.) .

Employees are those who are compensated for their labor or services by wages rather than by profits.
(People vs. Distributors Division, Smoked Fish Workers Union Local No. 20377, Sup. 7 N. Y. S. 2d 185, 187
in Words and Phrases, loc, cit.)

Services of employee or servant, as distinguished from those of a contractor, are usually characterized by
regularity and continuity of work for a fixed period or one of indefinite duration, as contrasted with
employment to do a single act or a series of isolated acts; by compensation on a fixed salary rather than one
regulated by value or amount of work; . . . (Underwood v. Commissioner of Internal Revenue, C.C.A., 56 F.
2d 67, 71 in Words and Phrases, op. cit., p. 579.)

Independent contractors can employ others to work and accomplish contemplated result without consent of
contractee, while "employee" cannot substitute another in his place without consent of his employer. (Luker
Sand & Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82 Utah, 188, in Words and Phrases, Vol. 14, p.
576).

Moreover, even if university professors are considered independent contractors, still they would be covered by Rep.
Act No. 875. In the case of the Boy Scouts of the Philippines v. Juliana Araos, supra, this Court observed that
Republic Act No. 875 was modelled after the Wagner Act, or the National Labor Relations Act, of the United States,
and this Act did not exclude "independent contractors" from the orbit of "employees". It was in the subsequent
legislation — the Labor Management Relation Act (Taft-Harley
Act) — that "independent contractors" together with agricultural laborers, individuals in domestic service of the
home, supervisors, and others were excluded. (See Rothenberg on Labor Relations, 1949, pp. 330-331).

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

Sec. 3. Employees' right to self-organization.—Employees shall have the right to self-organization and to
form, join or assist labor organizations of their own choosing for the purpose of collective bargaining through
representatives of their own choosing and to engage in concerted activities for the purpose of collective
bargaining and other mutual aid or protection. . . .

We agree with the statement of the lower court, in its order of March 30, 1963 which is sought to be set aside in the
instant case, that the right of employees to self-organization is guaranteed by the Constitution, that said right would
exist even if Republic Act No. 875 is repealed, and that regardless of whether their employers are engaged in
commerce or not. Indeed, it is Our considered view that the members of the faculty or teaching staff of private
universities, colleges, and schools in the Philippines, regardless of whether the university, college or school is run
for profit or not, are included in the term "employees" as contemplated in Republic Act No. 875 and as such they
may organize themselves pursuant to the above-quoted provision of Section 3 of said Act. Certainly, professors,
instructors or teachers of private educational institutions who teach to earn a living are entitled to the protection of
our labor laws — and one such law is Republic Act No. 875.

The contention of the University in the instant case that the members of the Faculty Club can not unionize and the
Faculty Club can not exist as a valid labor organization is, therefore, without merit. The record shows that the
Faculty Club is a duly registered labor organization and this fact is admitted by counsel for the University.5a
 The other issue raised by the University is the validity of the Presidential certification. The University contends that
under Section 10 of Republic Act No. 875 the power of the President of the Philippines to certify is subject to the
following conditions, namely: (1) that here is a labor dispute, and (2) that said labor dispute exists in an industry that
is vital to the national interest. The University maintains that those conditions do not obtain in the instant case. This
contention has also no merit.

We have previously stated that the University is an establishment or enterprise that is included in the term "industry"
and is covered by the provisions of Republic Act No. 875. Now, was there a labor dispute between the University
and the Faculty Club?

Republic Act No. 875 defines a labor dispute as follows:

The term "labor dispute" includes any controversy concerning terms, tenure or conditions of employment, or
concerning the association or representation of persons in negotiating, fixing, maintaining, changing, or
seeking to arrange terms or conditions of employment regardless of whether the disputants stand in
proximate relation of employer and employees.

The test of whether a controversy comes within the definition of "labor dispute" depends on whether the controversy
involves or concerns "terms, tenure or condition of employment" or "representation." It is admitted by the University,
in the instant case, that on January 14, 1963 the President of the Faculty Club wrote to the President of the
University a letter informing the latter of the organization of the Faculty Club as a labor union, duly registered with
the Bureau of Labor Relations; that again on January 22, 1963 another letter was sent, to which was attached a list
of demands consisting of 26 items, and asking the President of the University to answer within ten days from date of
receipt thereof; that the University questioned the right of the Faculty Club to be the exclusive representative of the
majority of the employees and asked proof that the Faculty Club had been designated or selected as exclusive
representative by the vote of the majority of said employees; that on February 1, 1963 the Faculty Club filed with the
Bureau of Labor Relations a notice of strike alleging as reason therefor the refusal of the University to bargain
collectively with the representative of the faculty members; that on February 18, 1963 the members of the Faculty
Club went on strike and established picket lines in the premises of the University, thereby disrupting the schedule of
classes; that on March 1, 1963 the Faculty Club filed Case No. 3666-ULP for unfair labor practice against the
University, but which was later dismissed (on April 2, 1963 after Case 41-IPA was certified to the CIR); and that on
March 7, 1963 a petition for certification election, Case No. 1183-MC, was filed by the Faculty Club in the CIR.6 All
these admitted facts show that the controversy between the University and the Faculty Club involved terms and
conditions of employment, and the question of representation. Hence, there was a labor dispute between the
University and the Faculty Club, as contemplated by Republic Act No. 875. It having been shown that the University
is an institution operated for profit, that is an employer, and that there is an employer-employee relationship,
between the University and the members of the Faculty Club, and it having been shown that a labor dispute existed
between the University and the Faculty Club, the contention of the University, that the certification made by the
President is not only not authorized by Section 10 of Republic Act 875 but is violative thereof, is groundless.

Section 10 of Republic Act No. 875 provides:

When in the opinion of the President of the Philippines there exists a labor dispute in an industry
indispensable to the national interest and when such labor dispute is certified by the President to the Court
of Industrial Relations, said Court may cause to be issued a restraining order forbidding the employees to
strike or the employer to lockout the employees, and if no other solution to the dispute is found, the Court
may issue an order fixing the terms and conditions of employment.

This Court had occasion to rule on the application of the above-quoted provision of Section 10 of Republic Act No.
875. In the case of Pampanga Sugar Development Co. v. CIR, et al., G.R. No. L-13178, March 24, 1961, it was
held:

It thus appears that when in the opinion of the President a labor dispute exists in an industry indispensable
to national interest and he certifies it to the Court of Industrial Relations the latter acquires jurisdiction to act
thereon in the manner provided by law. Thus the court may take either of the following courses: it may issue
an order forbidding the employees to strike or the employer to lockout its employees, or, failing in this, it may
issue an order fixing the terms and conditions of employment. It has no other alternative. It can not throw the
case out in the assumption that the certification was erroneous.

xxx xxx xxx

. . . The fact, however, is that because of the strike declared by the members of the minority union which
threatens a major industry the President deemed it wise to certify the controversy to the Court of Industrial
Relations for adjudication. This is the power that the law gives to the President the propriety of its exercise
being a matter that only devolves upon him. The same is not the concern of the industrial court. What
matters is that by virtue of the certification made by the President the case was placed under the jurisdiction
of said court. (Emphasis supplied)
To certify a labor dispute to the CIR is the prerogative of the President under the law, and this Court will not interfere
in, much less curtail, the exercise of that prerogative. The jurisdiction of the CIR in a certified case is exclusive (Rizal
Cement Co., Inc. v. Rizal Cement Workers Union (FFW), et al., G.R. No. L-12747, July 30, 1960). Once the
jurisdiction is acquired pursuant to the presidential certification, the CIR may exercise its broad powers as provided
in Commonwealth Act 103. All phases of the labor dispute and the employer-employee relationship may be threshed
out before the CIR, and the CIR may issue such order or orders as may be necessary to make effective the exercise
of its jurisdiction. The parties involved in the case may appeal to the Supreme Court from the order or orders thus
issued by the CIR.

And so, in the instant case, when the President took into consideration that the University "has some 18,000
students and employed approximately 500 faculty members", that `the continued disruption in the operation of the
University will necessarily prejudice the thousand of students", and that "the dispute affects the national
interest",7and certified the dispute to the CIR, it is not for the CIR nor this Court to pass upon the correctness of the
reasons of the President in certifying the labor dispute to the CIR.

The third issue raised by the University refers to the question of the legality of the return-to-work order (of March 30,
1963 in Case 41-IPA) and the order implementing the same (of April 6, 1963). It alleges that the orders are illegal
upon the grounds: (1) that Republic Act No. 875, supplementing Commonwealth Act No. 103, has withdrawn from
the CIR the power to issue a return-to-work order; (2) that the only power granted by Section 10 of Republic Act No.
875 to the CIR is to issue an order forbidding the employees to strike or forbidding the employer to lockout the
employees, as the case may be, before either contingency had become a fait accompli; (3) that the taking in by the
University of replacement professors was valid, and the return-to-work order of March 30, 1963 constituted
impairment of the obligation of contracts; and (4) the CIR could not issue said order without having previously
determined the legality or illegality of the strike.

The contention of the University that Republic Act No. 875 has withdrawn the power of the Court of Industrial
Relations to issue a return-to-work order exercised by it under Commonwealth Act No. 103 can not be sustained.
When a case is certified by the President to the Court of Industrial Relations, the case thereby comes under the
operation of Commonwealth Act No. 103, and the Court may exercise the broad powers and jurisdiction granted to it
by said Act. Section 10 of Republic Act No. 875 empowers the Court of Industrial Relations to issue an order "fixing
the terms of employment." This clause is broad enough to authorize the Court to order the strikers to return to work
and the employer to readmit them. This Court, in the cases of the Philippine Marine Officers Association vs. The
Court of Industrial Relations, Compania Maritima, et al.; and Compañia Martima, et al. vs. Philippine Marine Radio
Officers Association and CIR, et al., G.R. Nos. L-10095 and L-10115, October 31, 1957, declared:

We cannot subscribe to the above contention. We agree with counsel for the Philippine Radio Officers'
Association that upon certification by the President under Section 10 of Republic Act 875, the case comes
under the operation of Commonwealth Act 103, which enforces compulsory arbitration in cases of labor
disputes in industries indispensable to the national interest when the President certifies the case to the Court
of Industrial Relations. The evident intention of the law is to empower the Court of Industrial Relations to act
in such cases, not only in the manner prescribed under Commonwealth Act 103, but with the same broad
powers and jurisdiction granted by that act. If the Court of Industrial Relations is granted authority to find a
solution to an industrial dispute and such solution consists in the ordering of employees to return back to
work, it cannot be contended that the Court of Industrial Relations does not have the power or jurisdiction to
carry that solution into effect. And of what use is its power of conciliation and arbitration if it does not have
the power and jurisdiction to carry into effect the solution it has adopted? Lastly, if the said court has the
power to fix the terms and conditions of employment, it certainly can order the return of the workers with or
without backpay as a term or condition of employment.

The foregoing ruling was reiterated by this Court in the case of Hind Sugar Co. v. CIR, et al., G.R. No. L-13364, July
26, 1960.

When a case is certified to the CIR by the President of the Philippines pursuant to Section 10 of Republic Act No.
875, the CIR is granted authority to find a solution to the industrial dispute; and the solution which the CIR has found
under the authority of the presidential certification and conformable thereto cannot be questioned (Radio Operators
Association of the Philippines vs. Philippine Marine Radio Officers Association, et al., L-10112, Nov. 29, 1957, 54
O.G. 3218).

Untenable also is the claim of the University that the CIR cannot issue a return-to-work order after strike has been
declared, it being contended that under Section 10 of Republic Act No. 875 the CIR can only prevent a strike or a
lockout — when either of this situation had not yet occurred. But in the case of Bisaya Land Transportation Co., Inc.
vs. Court of Industrial Relations, et al., No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this Court declared:

There is no reason or ground for the contention that Presidential certification of labor dispute to the CIR is
limited to the prevention of strikes and lockouts. Even after a strike has been declared where the President
believes that public interest demands arbitration and conciliation, the President may certify the ease for that
purpose. The practice has been for the Court of Industrial Relations to order the strikers to work, pending the
determination of the union demands that impelled the strike. There is nothing in the law to indicate that this
practice is abolished." (Emphasis supplied)
 Likewise untenable is the contention of the University that the taking in by it of replacements was valid and the
return-to-work order would be an impairment of its contract with the replacements. As stated by the CIR in its order
of March 30, 1963, it was agreed before the hearing of Case 41-IPA on March 23, 1963 that the strikers would
return to work under the status quo arrangement and the University would readmit them, and the return-to-work
order was a confirmation of that agreement. This is a declaration of fact by the CIR which we cannot disregard. The
faculty members, by striking, have not abandoned their employment but, rather, they have only ceased from their
labor (Keith Theatre v. Vachon et al., 187 A. 692). The striking faculty members have not lost their right to go back
to their positions, because the declaration of a strike is not a renunciation of their employment and their employee
relationship with the University (Rex Taxicab Co. vs. CIR, et al., 40 O.G., No. 13, 138). The employment of
replacements was not authorized by the CIR. At most, that was a temporary expedient resorted to by the University,
which was subject to the power of the CIR to allow to continue or not. The employment of replacements by the
University prior to the issuance of the order of March 30, 1963 did not vest in the replacements a permanent right to
the positions they held. Neither could such temporary employment bind the University to retain permanently the
replacements.

Striking employees maintained their status as employees of the employer (Western Castridge Co. v.
National Labor Relations Board, C.C.A. 139 F. 2d 855, 858) ; that employees who took the place of strikers
do not displace them as `employees." ' (National Labor Relations Board v. A. Sartorius & Co., C.C.A. 2, 140
F. 2d 203, 206, 207.)

It is clear from what has been said that the return-to-work order cannot be considered as an impairment of the
contract entered into by petitioner with the replacements. Besides, labor contracts must yield to the common good
and such contracts are subject to the special laws on labor unions, collective bargaining, strikes and similar subjects
(Article 1700, Civil Code).

Likewise unsustainable is the contention of the University that the Court of Industrial Relations could not issue the
return-to-work order without having resolved previously the issue of the legality or illegality of the strike, citing as
authority therefor the case of Philippine Can Company v. Court of Industrial Relations, G.R. No. L-3021, July 13,
1950. The ruling in said case is not applicable to the case at bar, the facts and circumstances being very different.
The Philippine Can Company case, unlike the instant case, did not involve the national interest and it was not
certified by the President. In that case the company no longer needed the services of the strikers, nor did it need
substitutes for the strikers, because the company was losing, and it was imperative that it lay off such laborers as
were not necessary for its operation in order to save the company from bankruptcy. This was the reason of this
Court in ruling, in that case, that the legality or illegality of the strike should have been decided first before the
issuance of the return-to-work order. The University, in the case before Us, does not claim that it no longer needs
the services of professors and/or instructors; neither does it claim that it was imperative for it to lay off the striking
professors and instructors because of impending bankruptcy. On the contrary, it was imperative for the University to
hire replacements for the strikers. Therefore, the ruling in the Philippine Can case that the legality of the strike
should be decided first before the issuance of the return-to-work order does not apply to the case at bar. Besides, as
We have adverted to, the return-to-work order of March 30, 1963, now in question, was a confirmation of an
agreement between the University and the Faculty Club during a prehearing conference on March 23, 1963.

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

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

On May 9, 1939 the striking employees, eighty-four in number, offered to the company to return to their
employment. The company believing it had not committed any unfair labor practice, refused the employees'
offer and claimed the right to employ others to take the place of the strikers, as it might see fit. This
constituted discrimination in the hiring and tenure of the striking employees. When the employees went out
on a strike because of the unfair labor practice of the company, their status as employees for the purpose of
any controversy growing out of that unfair labor practice was fixed. Sec. 2 (3) of the Act. Phelps Dodge
Corp. v. National Labor Relations Board, 313 U.S. 177, 61 S. Ct. 845, 85. L. ed. 1271, 133 A.L.R. 1217.

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

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

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

Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial Relations of any Judge thereof to punish
direct and indirect contempts as provided in Rule 64 (now Rule 71) of the Rules of Court, under the same procedure
and penalties provided therein. Section 3 of Rule 71 enumerates the acts which would constitute indirect contempt,
among which is "disobedience or resistance to lawful writ, process, order, judgment, or command of a court," and
the person guilty thereof can be punished after a written charge has been filed and the accused has been given an
opportunity to be heard. The last paragraph of said section provides:

But nothing in this section shall be so construed as to prevent the court from issuing process to bring the
accused party into court, or from holding him in custody pending such proceedings.

The provision authorizes the judge to order the arrest of an alleged contemner (Francisco, et al. v. Enriquez, L-7058,
March 20, 1954, 94 Phil., 603) and this, apparently, is the provision upon which respondent Judge Bautista relied
when he issued the questioned order of arrest.

The contention of petitioner that the order of arrest is illegal is unwarranted. The return-to-work order allegedly
violated was within the court's jurisdiction to issue.

Section 14 of Commonwealth Act No. 103 provides that in cases brought before the Court of Industrial Relations
under Section 4 of the Act (referring to strikes and lockouts) the appeal to the Supreme Court from any award, order
or decision shall not stay the execution of said award, order or decision sought to be reviewed unless for special
reason the court shall order that execution be stayed. Any award, order or decision that is appealed is necessarily
not final. Yet under Section 14 of Commonwealth Act No. 103 that award, order or decision, even if not yet final, is
executory, and the stay of execution is discretionary with the Court of Industrial Relations. In other words, the Court
of Industrial Relations, in cases involving strikes and lockouts, may compel compliance or obedience of its award,
order or decision even if the award, order or decision is not yet final because it is appealed, and it follows that any
disobedience or non-compliance of the award, order or decision would constitute contempt against the Court of
Industrial Relations which the court may punish as provided in the Rules of Court. This power of the Court of
Industrial Relations to punish for contempt an act of non-compliance or disobedience of an award, order or decision,
even if not yet final, is a special one and is exercised only in cases involving strikes and lockouts. And there is
reason for this special power of the industrial court because in the exercise of its jurisdiction over cases involving
strikes and lockouts the court has to issue orders or make decisions that are necessary to effect a prompt solution of
the labor dispute that caused the strike or the lockout, or to effect the prompt creation of a situation that would be
most beneficial to the management and the employees, and also to the public — even if the solution may be
temporary, pending the final determination of the case. Otherwise, if the effectiveness of any order, award, or
decision of the industrial court in cases involving strikes and lockouts would be suspended pending appeal then it
can happen that the coercive powers of the industrial court in the settlement of the labor disputes in those cases
would be rendered useless and nugatory.

The University points to Section 6 of Commonwealth Act No. 103 which provides that "Any violation of any order,
award, or decision of the Court of Industrial Relations shall after such order, award or decision has become final,
conclusive and executory constitute contempt of court," and contends that only the disobedience of orders that are
final (meaning one that is not appealed) may be the subject of contempt proceedings. We believe that there is no
inconsistency between the above-quoted provision of Section 6 and the provision of Section 14 of Commonwealth
Act No. 103. It will be noted that Section 6 speaks of order, award or decision that is executory. By the provision of
Section 14 an order, award or decision of the Court of Industrial Relations in cases involving strikes and lockouts are
immediately executory, so that a violation of that order would constitute an indirect contempt of court.

We believe that the action of the CIR in issuing the order of arrest of April 29, 1963 is also authorized under Section
19 of Commonwealth Act No. 103 which provides as follows:

SEC. 19. Implied condition in every contract of employment.—In every contract of employment whether
verbal or written, it is an implied condition that when any dispute between the employer and the employee or
laborer has been submitted to the Court of Industrial Relations for settlement or arbitration pursuant to the
provisions of this Act . . . and pending award, or decision by the Court of such dispute . . . the employee or
 laborer shall not strike or walk out of his employment when so enjoined by the Court after hearing and when
public interest so requires, and if he has already done so, that he shall forthwith return to it, upon order of
the Court, which shall be issued only after hearing when public interest so requires or when the dispute
cannot, in its opinion, be promptly decided or settled; and if the employees or laborers fail to return to work,
the Court may authorize the employer to accept other employees or laborers. A condition shall further be
implied that while such dispute . . . is pending, the employer shall refrain from accepting other employees or
laborers, unless with the express authority of the Court, and shall permit the continuation in the service of his
employees or laborers under the last terms and conditions existing before the dispute arose. . . . A violation
by the employer or by the employee or laborer of such an order or the implied contractual condition set forth
in this section shall constitute contempt of the Court of Industrial Relations and shall be punished by the
Court itself in the same manner with the same penalties as in the case of contempt of a Court of First
Instance. . . .

We hold that the CIR acted within its jurisdiction when it ordered the arrest of the officers of the University upon a
complaint for indirect contempt filed by the Acting Special Prosecutor of the CIR in CIR Case V-30, and that order
was valid. Besides those ordered arrested were not yet being punished for contempt; but, having been charged,
they were simply ordered arrested to be brought before the Judge to be dealt with according to law. Whether they
are guilty of the charge or not is yet to be determined in a proper hearing.

Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-30 is being questioned in Case G.R. No.
L-21278 before this Court in a special civil action for certiorari. The University did not appeal from that order. In other
words, the only question to be resolved in connection with that order in CIR Case V-30 is whether the CIR had
jurisdiction, or had abused its discretion, in issuing that order. We hold that the CIR had jurisdiction to issue that
order, and neither did it abuse its discretion when it issued that order.

In Case G.R. No. L-21462 the University appealed from the order of Judge Villanueva of the CIR in Case No. 1183-
MC, dated April 6, 1963, granting the motion of the Faculty Club to withdraw its petition for certification election, and
from the resolution of the CIR en banc, dated June 5, 1963, denying the motion to reconsider said order of April 6,
1963. The ground of the Faculty Club in asking for the withdrawal of that petition for certification election was
because the issues involved in that petition were absorbed by the issues in Case 41-IPA. The University opposed
the petition for withdrawal, but at the same time it moved for the dismissal of the petition for certification election.

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

We believe that these contentions of the University in Case G.R. No. L-21462 have been sufficiently covered by the
discussion in this decision of the main issues raised in the principal case, which is Case G.R. No. L-21278. After all,
the University wanted CIR Case 1183-MC dismissed, and the withdrawal of the petition for certification election had
in a way produced the situation desired by the University. After considering the arguments adduced by the
University in support of its petition for certiorari by way of appeal in Case G.R. No. L-21278, We hold that the CIR
did not commit any error when it granted the withdrawal of the petition for certification election in Case No. 1183-
MC. The principal case before the CIR is Case No. 41-IPA and all the questions relating to the labor disputes
between the University and the Faculty Club may be threshed out, and decided, in that case.

In Case G.R. No. L-21500 the University appealed from the order of the CIR of March 30, 1963, issued by Judge
Bautista, and from the resolution of the CIR en banc promulgated on June 28, 1963, denying the motion for the
reconsideration of that order of March 30, 1963, in CIR Case No. 41-IPA. We have already ruled that the CIR has
jurisdiction to issue that order of March 30, 1963, and that order is valid, and We, therefore, hold that the CIR did not
err in issuing that order of March 30, 1963 and in issuing the resolution promulgated on June 28, 1963 (although
dated May 7, 1963) denying the motion to reconsider that order of March 30, 1963.

IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition with preliminary injunction in Case G.R.
No. L-21278 is dismissed and the writs prayed for therein are denied. The writ of preliminary injunction issued in
Case G.R. No. L-21278 is dissolved. The orders and resolutions appealed from, in Cases Nos. L-21462 and L-
21500, are affirmed, with costs in these three cases against the petitioner-appellant Feati University. It is so ordered.
 24.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-17620 August 31, 1962
FAR EASTERN UNIVERSITY, petitioner,
vs.
THE COURT OF INDUSTRIAL RELATIONS, PHILIPPINE ASSOCIATION OF COLLEGES AND UNIVERSITY
PROFESSORS (PACUP) and TOMAS N. AGUIRRE, respondents.

CONCEPCION, J.:

Appeal by certiorari, taken by the Far Eastern University, hereafter referred to as the University, from resolution of
the Court of Industrial Relations sitting en banc, modifying a decision of one of the Judges of said Court. The main
facts are set forth in said decision, from which we quote:

From the evidence on record, it appears that Tomas N. Aguirre became a faculty member of the respondent
in 1948. He was first employed at the rate of P6.00 per hour and then was contracted to teach in the Boys'
High School Department in the same university at the rate of P30.00 per class, earning an average of
P500.00 to P600.00 a month. Aguirre joined the PACUP, a legitimate labor organization in June 1953. In
July or August, 1953, upon orders of the president of the PACUP, Jose M. Hernandez, Aguirre began to
campaign and recruit members for the PACUP. As a result of his efforts in campaigning for membership, he
was able to influence seven members from the faculty of the university (Exhibits "B", "B-1" to "B-6",
inclusive). In his campaign for membership, he approached practically all of the faculty members of the
respondent's Institute of Education and some from the Arts and Sciences, Business Administration and
Finance, but most of them were afraid to join the union. They were afraid of any retaliation that the
respondent may make because of their joining the union.

In the year 1953, respondent formed a committee to classify all faculty members and determine the rates of
their backpay and assignments. Ninety-six of the more than four hundred faculty members were classified
as full time instructors. Aguirre was one of those who was classified by the said committee as full time
instructor in the respondent's Institute of Education, with a fixed compensation of P450.00 a month, effective
September 1, 1953.

During the months of December, 1953 up to May, 1954, for teaching in the Far Eastern University,
respondent herein, Aguirre was paid the following: December, 1953-P210.00; January, 1954 — P302.40;
February, 1954 — P313.20; March, 1954 — P249.00. In June, 1954, respondent stopped giving him
teaching assignments.

Aguirre claims that in June, 1954, he was no longer given an assignment because of his union activities
while respondent claims that Aguirre was not given assignment because of decreased enrollment in the
university. He further avers that after recruiting some members, his classification as full time instructor
changed to reserved full time instructor and his teaching load was decreased to two hours a day. Hence, his
reduced earnings from December, 1953 to May, 1954 as previously mentioned. His salary as a full time
instructor was P5,400.00 per annum or P450.00 per month, irrespective of his teaching load. Respondent,
thru its witness, the dean in the Institute of Education where Aguirre was teaching, testified and admitted
that the reason for Aguirre's not receiving any teaching assignment in June, 1954 was because enrollment in
the Institute of Education was going down steadily in the Filipino Language class where Aguirre was
teaching. Among the other Filipino Language instructors are Baldomero de Jesus, Teodoro Gener, Rosario
Bernards, Dolores Gupit, Inigo Regalado, and Flordeliza Mendoza who are older members of the faculty
than Aguirre except Regalado, Bernards and Mendoza. The dean of the Institute of Education, Luz A. Zafra,
admitted also that in the assignment of subjects to faculty members, length of service, experience,
preparation and professional growth as well as student-faculty relation were taken into consideration. Hence
if these above-mentioned factors, particularly length of service and experience, were really taken into
consideration, Aguirre a full time professor should have been given the assignment in stead of Regalado
and Mendoza who were only part time professors and who started teaching after him. The other Tagalo
instructors (professors under the classification) who were given assignments when Aguirre was not, are not
members of the PACUP. It should also be noted that since before the last war, Aguirre had been teaching in
the University of the Philippines.

It is true that there were charges brought by respondent against Aguirre but the same had been investigated
and found to be groundless. On the other hand, Aguirre brought charge against the respondent before the
Department of Education when his teaching load was reduced and the Director of Private Schools, in his
decision of November 9, 1954, directed the respondent to pay the salary differential which Aguirre fail to
earn from December 1, 1953 to 1954 and to give Aguirre assignment in the college department during the
first semester of the current school year under the same condition before his teaching load was reduced.
The Secretary of Education, in his decision, dated June 22, 1955, affirmed the decision of the Director of
Private Schools and on December 8, 1956, the Executive Secretary, by authority of the President of the
 Philippines affirmed the decision of the Director of Private School as well as the Secretary of Education's
decision, previously mentioned. Of course, those proceedings in no way could considered as controlling or
affecting the case at bar. At best, they may serve as a grim reminder of the actions, of the governmental
entity that could do something to bolster the relationship between the university and the faculty members.
The allegation of respondent to the effect that it suffered reduce enrollment in 1953-1954, hence
necessitating the laying off of Aguirre, cannot be taken into consideration after a careful examination of the
balance sheet submitted by the respondent in relation to its motion to dismiss. Said balance sheet shows
that in the 1952-1953 fiscal year, respondent made a net profit of P158,035.25 and in 1953-1954,
P258,619.98, while in 1954-1955, a net profit of P707,003.70 and in 1955-1956, P999,766.88. The figures
show that respondent from 1952 to 1956, has been steadily increasing its income until in 1958-1959 when it
made net income of P1,511,293.42. And even on the assumption the enrollment in the department where
Aguirre was teaching reduced, still the Court cannot validly reconcile the fact that Aguirre who was a full time
professor receiving a fixed monthly salary could not any further be given assignment the time professors and
whose length of service in the university cannot compare with that of Aguirre were given assignment and
suffered no reeducating in salary. Undoubtedly, this Court cannot but conclude that when the respondent
changed status of Aguirre from a full time professor at P450.00 a month to that of a reserved full time
professor with a teaching load of two hours and finally got no assignments in June, 1964, it was motivated
other than decreased enrollment, especially in the case of the evidence that Aguirre campaigned for union
membership among the professors, instructors and teachers of the respondent and the further fact, that
other full time instructors similarly situated but are not union members did not suffer the same facts of abrupt
reduction in their teaching load and salary. As indicated, Aguirre was later deprived of any teaching load in
the Institute of Education. Even part time professors as Panganiban, Mendoza and Regalado had
assignments to the exclusion of Aguirre who was a full time professor. This eventuality, was apparently, the
fear of most of the faculty members who refused to join the PACUP when Aguirre asked them to become
members.

Ordinarily, back wages are granted whenever there is a finding of a commission of unfair labor practices.
However, in this particular case the testimony of Aguirre, himself as well as the documentary evidence on
the record show that since June, 1958, Aguirre began teaching at the Philippine College of Commerce with
an income of P100.00 a month and on November 17, 1955, he began working as a permanent employee in
the Central Bank of the Philippines with a compensation of P3,000.00 per annum. On September 5, 1956,
his salary was raised to P3,600.00 per annum. The permanent employment obtained by Aguirre in the
Central Bank of the Philippines as well as in the Philippine College of Commerce is substantial and under
the concept of the Industrial Peace Act, his employment elsewhere in a permanent capacity is sufficient to
bar his reinstatement to his former position in the respondent. While it may be true that his earnings with the
Central Bank may be less than that he was receiving from the Far Eastern University, yet his status with the
Central Bank, is permanent and he could teach as a sideline in any school, as in fact he is connected with
the Philippine College of Commerce, a fact that could not happen if he were still connected with the Far
Eastern University.

At the instance of the Philippine Association of Colleges and University Professors, hereafter referred to as the
PACUP, and/or Tomas N. Aguirre, on September 28, 1954, an Acting Prosecutor of the Court of Industrial Relations
filed a complaint for unfair labor practice against the University, which later moved on November 17, 1954, to
dismiss the complaint. Subsequently, or on February 4, 1955, the complainant and/or the offended party, Tomas N.
Aguirre filed a motion to withdraw said complaint upon the ground that there was a decision of the Director of Private
Schools ordering his reinstatement and the payment of back wages, as well as wage differential, and that the
University was "using the pendency" of the case "as a ground for not complying with the said decision". Acting upon
this latter motion, on March 29, 1955, the Court dismissed said complaint. However, on August 30, 1955 the order of
dismissal was, on motion of the complainant dated April 22, 1955, set aside for the reason that the expected
amicable settlement of the case had not materialized. On October 16, 1955, the University filed a "supplemental
pleading" to its motion to dismiss of November 17, 1954 both of which were denied by the Court on June 23, 1956.
Later on the University filed its answer and, the issue having been joined, the case was tried, after which Judge
Arsenio L. Martinez of said Court rendered the aforementioned decision finding the University guilty of unfair labor
practice and sentencing said institution to pay to Aguirre the salary differential due him from December 1, 1953 to
May 31, 1954, based on Aguirre's salary of P450.00 a month, as well as back wages at the same rate, from June 1,
1954 to November 17, 1955, after deducting therefrom the compensation paid to him by the Philippine College of
Commerce from June 1, 1955 to November 17, 1955, as well as to cease and desist from further committing unfair
labor practices. However, said Judge did not order the reinstatement of Aguirre in the University, upon the ground
that his employment in the Central Bank of the Philippines, is, within the purview of the Industrial Peace Act, a
substantial equivalent of his position as full time instructor in said University.

On motion for reconsideration filed by the complainant, a majority of the judges of said Court sitting en banc,
affirmed the decision of Judge Martinez, insofar as the commission of unfair labor practice charged and the payment
of the salary differential and back wages are concerned, but held that Aguirre's employment in the Central Bank and
the Philippine College of Commerce are not the substantial equivalent of his aforementioned position as full time
instructor in the University, and, accordingly, modified said decision by, likewise, sentencing the University to
reinstate Tomas N. Aguirre, in addition to paying him the aforementioned wages differential and back wages plus
"other emoluments". Hence this appeal by certiorari taken by the University. The Court of Industrial Relation, as one
of the appellees herein, has filed a motion, which we consider as its answer, to dismiss the appeal for lack of merit
upon the ground that appellant raises no question of law.
Appellant's contention is that the employment of Aguirre in the Central Bank and his teaching load in the Philippine
College of Commerce are substantially equivalent to his former position in the University. Upon the other hand, the
resolution appealed reached the opposite conclusion for the following reasons:

(a) Aguirre's work in the respondent university is that of a professor, ]while his work in the Central Bank is
clerical in nature;

(b) As professor Aguirre's maximum teaching period is five (5) hours daily; while in the bank he works eight
(8) hours a day;

(c) Although his work in the bank allows him to teach part time in the Philippine College of Commerce for
one hour, he could also do the same work even if he were employed in the university; and

(d) Aguirre was receiving from the respondent university P5,400.00 a year, while he receives from the
Central Bank P3,000.00 a year only. This alone fact decides the issue, namely, that Aguirre's position in the
Central Bank is not substantially equivalent to his position in the Far Eastern University. "Any employment at
lower wage rate is not substantially equivalent employment" [Willard, Inc. (1937 2 NLRB 1094, Moorseville
Cotton Mills vs. NLRB (CCA-4, 1940), 2. Labor Cases. 18.576; 110 fed. (2d) 79; Puleski Veneer Corn.
(1938) 10 NLRB 136; Quidnick Dye Works, Inc. (1937) 2 NLRB 963].

Although Mr. Aguirre was, not a professor, but a full time instructor in the University, we agree with the opinion of the
lower court, sitting en banc. In addition to the circumstances relied upon by the latter, one important factor, not
mentioned in the resolution appealed from, is decisively in favor of the conclusion therein reached, and that is that
Mr. Aguirre is an instructor in Tagalog, and that, as such, his position as researcher in the Central Bank has no
future for him. The situation would perhaps have been different had his line been economics. Inasmuch, however,
as Mr. Aguirre has especialized in the Tagalog dialect, his work as a researcher in the Central Bank is inferior to his
job as full time instructor in the University, not so much because his salary in the latter is substantially bigger, even if
we add thereto his emoluments in the Philippine College of Commerce, but, specially, because of the future his
position as instructor in the University offers him as a career, which is non-existent in the Central Bank.

WHEREFORE, the resolution appealed from is hereby affirmed, with costs against petitioner. It is so ordered.. 1äw phï1.ñët

25.

Republic of the Philippines

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

DE CASTRO, J.:

Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations dated March
23, 1970 in Case No. 3019-ULP and the Court's Resolution en banc of June 10, 1970 affirming said decision. The
Court of Industrial Relations in that case found Dy Keh Beng guilty of the unfair labor practice acts alleged and order
him to

reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from their respective
dates of dismissal until fully reinstated without loss to their right of seniority and of such other rights
already acquired by them and/or allowed by law. 1

Now, Dy Keh Beng assigns the following errors 2 as having been committed by the Court of Industrial Relations:

I RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE
EMPLOYEES OF PETITIONERS.

II RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE DISMISSED
FROM THEIR EMPLOYMENT BY PETITIONER.

III RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY COMPLAINANT ARE
CONVINCING AND DISCLOSES (SIC) A PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN.

IV RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR LABOR PRACTICE ACTS
AS ALLEGED AND DESCRIBED IN THE COMPLAINT.
V RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS TO THEIR FORMER JOBS
WITH BACKWAGES FROM THEIR RESPECTIVE DATES OF DISMISSALS UNTIL FINALLY REINSTATED
WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER RIGHTS ALREADY ACQUIRED BY
THEM AND/OR ALLOWED BY LAW.

The facts as found by the Hearing Examiner are as follows:

A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for discriminatory
acts within the meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No. 875, 3 by dismissing on
September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for their union activities. After preliminary
investigation was conducted, a case was filed in the Court of Industrial Relations for in behalf of the International Labor
and Marine Union of the Philippines and two of its members, Solano and Tudla In his answer, Dy Keh Beng contended
that he did not know Tudla and that Solano was not his employee because the latter came to the establishment only when
there was work which he did on pakiaw basis, each piece of work being done under a separate contract. Moreover, Dy
Keh Beng countered with a special defense of simple extortion committed by the head of the labor union, Bienvenido
Onayan.

After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the Court of Industrial
Relations. An employee-employer relationship was found to have existed between Dy Keh Beng and complainants
Tudla and Solano, although Solano was admitted to have worked on piece basis. 4 The issue therefore centered on
whether there existed an employee employer relation between petitioner Dy Keh Beng and the respondents Solano and
Tudla .

According to the Hearing Examiner, the evidence for the complainant Union tended to show that Solano and Tudla
became employees of Dy Keh Beng from May 2, 1953 and July 15, 1955, 5 respectively, and that except in the event
of illness, their work with the establishment was continuous although their services were compensated on piece basis.
Evidence likewise showed that at times the establishment had eight (8) workers and never less than five (5); including the
complainants, and that complainants used to receive ?5.00 a day. sometimes less. 6

According to Dy Keh Beng, however, Solano was not his employee for the following reasons:

(1) Solano never stayed long enought at Dy's establishment;

(2) Solano had to leave as soon as he was through with the

(3) order given him by Dy;

(4) When there were no orders needing his services there was nothing for him to do;

(5) When orders came to the shop that his regular workers could not fill it was then that Dy went to
his address in Caloocan and fetched him for these orders; and

(6) Solano's work with Dy's establishment was not continuous. , 7

According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not employees
under Republic Act 875, where an employee 8 is referred to as

shall include any employee and shag not be limited to the employee of a particular employer unless
the Act explicitly states otherwise and shall include any individual whose work has ceased as a
consequence of, or in connection with any current labor dispute or because of any unfair labor
practice and who has not obtained any other substantially equivalent and regular employment.

while an employer 9

includes any person acting in the interest of an employer, directly or indirectly but shall not include
any labor organization (otherwise than when acting as an employer) or anyone acting in the capacity
of officer or agent of such labor organization.

Petitioner really anchors his contention of the non-existence of employee-employer relationship on the control test.
He points to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-13130, October 31, 1959,
where the Court ruled that:

The test ... of the existence of employee and employer relationship is whether there is an
understanding between the parties that one is to render personal services to or for the benefit of the
other and recognition by them of the right of one to order and control the other in the performance of
the work and to direct the manner and method of its performance.

Petitioner contends that the private respondents "did not meet the control test in the fight of the ... definition of the
terms employer and employee, because there was no evidence to show that petitioner had the right to direct the
manner and method of respondent's work. 10 Moreover, it is argued that petitioner's evidence showed that "Solano
worked on a pakiaw basis" and that he stayed in the establishment only when there was work.

While this Court upholds the control test 11 under which an employer-employee relationship exists "where the person for
whom the services are performed reserves a right to control not only the end to be achieved but also the means to be
used in reaching such end, " it finds no merit with petitioner's arguments as stated above. It should be borne in mind that
the control test calls merely for the existence of the right to control the manner of doing the work, not the actual exercise
of the right. 12Considering the finding by the Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the
manufacture of baskets known as kaing, 13 it is natural to expect that those working under Dy would have to observe,
among others, Dy's requirements of size and quality of the kaing. Some control would necessarily be exercised by Dy as
the making of the kaingwould be subject to Dy's specifications. Parenthetically, since the work on the baskets is done at
Dy's establishments, it can be inferred that the proprietor Dy could easily exercise control on the men he employed.

As to the contention that Solano was not an employee because he worked on piece basis, this Court agrees with the
Hearing Examiner that

circumstances must be construed to determine indeed if payment by the piece is just a method of
compensation and does not define the essence of the relation. Units of time ... and units of work are
in establishments like respondent (sic) just yardsticks whereby to determine rate of compensation, to
be applied whenever agreed upon. We cannot construe payment by the piece where work is done in
such an establishment so as to put the worker completely at liberty to turn him out and take in
another at pleasure.

At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras who penned
the decision in "Sunrise Coconut Products Co. v. Court of Industrial Relations" (83 Phil..518, 523), opined that

judicial notice of the fact that the so-called "pakyaw" system mentioned in this case as generally
practiced in our country, is, in fact, a labor contract -between employers and employees, between
capitalists and laborers.

Insofar as the other assignments of errors are concerned, there is no showing that the Court of Industrial Relations
abused its discretion when it concluded that the findings of fact made by the Hearing Examiner were supported by
evidence on the record. Section 6, Republic Act 875 provides that in unfair labor practice cases, the factual findings
of the Court of Industrial Relations are conclusive on the Supreme Court, if supported by substantial evidence. This
provision has been put into effect in a long line of decisions where the Supreme Court did not reverse the findings of
fact of the Court of Industrial Relations when they were supported by substantial evidence. 14

Nevertheless, considering that about eighteen (18) years have already elapsed from the time the complainants were
dismissed, 15 and that the decision being appealed ordered the payment of backwages to the employees from their
respective dates of dismissal until finally reinstated, it is fitting to apply in this connection the formula for backwages
worked out by Justice Claudio Teehankee in "cases not terminated sooner." 16 The formula cans for fixing the award of
backwages without qualification and deduction to three years, "subject to deduction where there are mitigating
circumstances in favor of the employer but subject to increase by way of exemplary damages where there are aggravating
circumstances. 17Considering there are no such circumstances in this case, there is no reason why the Court should not
apply the abovementioned formula in this instance.

WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein modified to an award
of backwages for three years without qualification and deduction at the respective rates of compensation the
employees concerned were receiving at the time of dismissal. The execution of this award is entrusted to the
National Labor Relations Commission. Costs against petitioner. SO ORDERED.

26.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-9417 December 22, 1958
ISABELO DOCE, petitioner,
vs.
WORKMEN'S COMPENSATION COMMISSION and DADO JADAO, respondents.

BAUTISTA ANGELO, J.:

Dado Jadao filed with the Workmen's Compensation Commission a claim for compensation against Isabelo Doce
for injuries he suffered in an accident that occurred on June 11, 1953 in the City of Manila while working as a
conductor of a bus belonging to the latter under a boundary system. Doce interposed the defense that there was no
employer-employee relationship between him and Jadao and hence the Commission has no jurisdiction to act on
the claim.
The claim was assigned to a referee for hearing who, after receiving the evidence, rendered decision holding that a
conductor who works under the boundary system in the operation of the bus of another is considered an employee
of the latter within the meaning of the law and as such Doce is responsible to pay to Jadao the compensation
prescribed in the Workmen's Compensation Act. Consequently, the referee ordered Doce to pay Jadao a
compensation of P757.43, plus the cost of the medical and surgical expenses incurred by the latter, and to pay the
Commission the amount of P8.00 as fees in accordance with the law. This decision was affirmed by the Commission
on July 2, 1955. Doce interposed the present petition for review.

The facts as found by the Commission are: Dado Jadao was a conductor of Bus No. 9 of the B-Twelve Liner owned
and operated by Isabelo Doce who was paid under the boundary system. His average daily earnings as conductor
was P4.00, working five days a week. On June 11, 1953, while acting as such conductor, Jadao was pinned by two
buses on Quezon Boulevard, Manila, suffering injuries on the right leg, head and left ear. He was treated in the
North General Hospital and in the National Orthopedic Hospital, and as a result he suffered temporary total disability
from June 11, 1953 to May 10, 1954 and a partial loss of the use of his right leg.

It was also proven that under the boundary system adopted by petitioner and respondent, the driver and conductor
of the bus gave to the owner a fixed amount out of the daily earnings derived from its operation. In this case, the
conductor and the driver used to give to respondent P15.00 daily. The owner supplied the gasoline at the beginning
but its cost is later reimbursed out of the earnings of the day. After deducting the cost of the gasoline and the rental
of P15.00, the remainder is divided between the conductor and the driver. lawphil.net

The issue to be determined is whether the employer-employee relationship existed between the owner of the bus
and the conductor considering that the latter worked under a boundary system as explained above and is not paid
directly by the former.

This case falls squarely within our ruling in National Labor Union vs. Dinglasan, 52 Off. Gaz., No. 4, 1933, wherein
this Court held that a driver of a jeep who operates the same under the boundary system is considered an employee
within the meaning of the law and as such the case comes under the jurisdiction of the Court of Industrial Relations.
In that case, Benedicto Dinglasan was the owner and operator of TPU jeepneys which were driven by petitioners
under verbal contracts that they will pay P7.50 for 10 hours use under the so-called "boundary system." The drivers
did not receive salaries or wages from the owner. Their day's earning were the excess over the P7.50 they paid for
the use of the jeepneys. In the event that they did not earn more, the owner did not have to pay them anything. In
holding that the employer-employee relationship existed between the owner of the jeepneys and the driven even if
the latter worked under the boundary system, this court said:

The only features that would make the relationship of lessor and lessee between the respondent, owner of
the jeeps, and the drivers, members of the petitioner union, are the fact that he does not pay them any fixed
wage but their compensation is the excess of the total amount of fares earned or collected by them over and
above the amount of P7.50 which they agreed to pay to the respondent, and the fact that the gasoline
burned by the jeeps is for the account of the drivers. These two features are not, however, sufficient to
withdraw the relationship between them from that of employer-employee, because the estimated earnings
for fares must be over and above the amount they agreed to pay to the respondent for a ten-hour shift or
ten-hour a day operation of the jeeps. Not having any interest in the business because they did not invest
anything in the acquisition of the jeeps and did not participate in the management thereof, their service as
drivers of the jeeps being their only contribution to the business, the relationship of lessor and lessee cannot
be sustained.

The contention of petitioner that the relation that existed between him and the respondent is only one of lessor and
lessee cannot therefore be sustained. Wherefore, the decision appealed from is affirmed, with costs against
petitioner.

27.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

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

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR
FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO
DE GUZMAN, respondents.

FERNAN, C.J.: The issue to be resolved in the instant case is whether or not the fishermen-crew members of the
trawl fishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises, and if
so, whether or not they were illegally dismissed from their employment.

Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing
vessels owned and operated by private respondent De Guzman Fishing Enterprises which is primarily engaged in
the fishing business with port and office at Camaligan, Camarines Sur. Petitioners rendered service aboard said
fishing vessel in various capacities, as follows: Alipio Ruga and Jose Parma patron/pilot; Eladio Calderon, chief
engineer; Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor Francisco, second fisherman;
Philip Cervantes and Eleuterio Barbin, fishermen.

For services rendered in the conduct of private respondent's regular business of "trawl" fishing, petitioners were paid
on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of private respondent. As agreed
upon, they received thirteen percent (13%) of the proceeds of the sale of the fish-catch if the total proceeds
exceeded the cost of crude oil consumed during the fishing trip, otherwise, they received ten percent (10%) of the
total proceeds of the sale. The patron/pilot, chief engineer and master fisherman received a minimum income of
P350.00 per week while the assistant engineer, second fisherman, and fisherman-winchman received a minimum
income of P260.00 per week. 1

On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president of
private respondent, to proceed to the police station at Camaligan, Camarines Sur, for investigation on the report that
they sold some of their fish-catch at midsea to the prejudice of private respondent. Petitioners denied the charge
claiming that the same was a countermove to their having formed a labor union and becoming members of
Defender of Industrial Agricultural Labor Organizations and General Workers Union (DIALOGWU) on September 3,
1983.

During the investigation, no witnesses were presented to prove the charge against petitioners, and no criminal
charges were formally filed against them. Notwithstanding, private respondent refused to allow petitioners to return
to the fishing vessel to resume their work on the same day, September 11, 1983.

On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment of 13th
month pay, emergency cost of living allowance and service incentive pay, with the then Ministry (now Department)
of Labor and Employment, Regional Arbitration Branch No. V, Legaspi City, Albay, docketed as Cases Nos. 1449-
83 to 1456-83. 2 They uniformly contended that they were arbitrarily dismissed without being given ample time to look for
a new job.

On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman, submitted its
position paper denying the employer-employee relationship between private respondent and petitioners on the
theory that private respondent and petitioners were engaged in a joint venture. 3

After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for joint hearing
furnishing the parties with notice and summons. On December 27, 1983, after two (2) previously scheduled joint
hearings were postponed due to the absence of private respondent, one of the petitioners herein, Alipio Ruga, the
pilot/captain of the 7/B Sandyman II, testified, among others, on the manner the fishing operations were conducted,
mode of payment of compensation for services rendered by the fishermen-crew members, and the circumstances
leading to their dismissal. 4

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

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

On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6 affirming the decision of the
labor arbiter that a "joint fishing venture" relationship existed between private respondent and petitioners.

Hence, the instant petition.

Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent and
petitioners is a joint venture arrangement and not an employer-employee relationship. To stress that there is an
employer-employee relationship between them and private respondent, petitioners invite attention to the following:
that they were directly hired by private respondent through its general manager, Arsenio de Guzman, and its
operations manager, Conrado de Guzman; that, except for Laurente Bautu, they had been employed by private
respondent from 8 to 15 years in various capacities; that private respondent, through its operations manager,
supervised and controlled the conduct of their fishing operations as to the fixing of the schedule of the fishing trips,
the direction of the fishing vessel, the volume or number of tubes of the fish-catch the time to return to the fishing
port, which were communicated to the patron/pilot by radio (single side band); that they were not allowed to join
other outfits even the other vessels owned by private respondent without the permission of the operations manager;
that they were compensated on percentage commission basis of the gross sales of the fish-catch which were
delivered to them in cash by private respondent's cashier, Mrs. Pilar de Guzman; and that they have to follow
company policies, rules and regulations imposed on them by private respondent.

Disputing the finding of public respondent that a "joint fishing venture" exists between private respondent and
petitioners, petitioners claim that public respondent exceeded its jurisdiction and/or abused its discretion when it
added facts not contained in the records when it stated that the pilot-crew members do not receive compensation
from the boat-owners except their share in the catch produced by their own efforts; that public respondent ignored
the evidence of petitioners that private respondent controlled the fishing operations; that public respondent did not
take into account established jurisprudence that the relationship between the fishing boat operators and their crew is
one of direct employer and employee.

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

We rule in favor of petitioners.

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

Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly engaged in trawl
fishing, as in the case of petitioners herein, who spend one (1) whole week or more 7 in the open sea performing their
job to earn a living to support their families, convince Us to adopt a more liberal attitude in applying to petitioners the 10-
calendar day rule in the filing of appeals with the NLRC from the decision of the labor arbiter.

Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on July 3,1984
by their non-lawyer representative during the arbitration proceedings, Jose Dialogo who received the decision eight
(8) days earlier, or on June 25, 1984. As adverted to earlier, the circumstances peculiar to petitioners' occupation as
fishermen-crew members, who during the pendency of the case understandably have to earn a living by seeking
employment elsewhere, impress upon Us that in the ordinary course of events, the information as to the adverse
decision against them would not reach them within such time frame as would allow them to faithfully abide by the
10-calendar day appeal period. This peculiar circumstance and the fact that their representative is a non-lawyer
provide equitable justification to conclude that there is substantial compliance with the ten-calendar day rule of filing
of appeals with the NLRC when petitioners filed on July 10, 1984, or seven (7) days after receipt of the decision,
their appeal with the NLRC through registered mail.

We have consistently ruled that in determining the existence of an employer-employee relationship, the elements
that are generally considered are the following (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to the
means and methods by which the work is to be accomplished. 8 The employment relation arises from contract of hire,
express or implied. 9 In the absence of hiring, no actual employer-employee relation could exist.

From the four (4) elements mentioned, We have generally relied on the so-called right-of-control test 10 where the
person for whom the services are performed reserves a right to control not only the end to be achieved but also the
means to be used in reaching such end. The test calls merely for the existence of the right to control the manner of doing
the work, not the actual exercise of the right. 11

The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a "joint fishing
venture" existed between private respondent and petitioners is not applicable in the instant case. There is neither
light of control nor actual exercise of such right on the part of the boat-owners in the Pajarillo case, where the Court
found that the pilots therein are not under the order of the boat-owners as regards their employment; that they go
out to sea not upon directions of the boat-owners, but upon their own volition as to when, how long and where to go
fishing; that the boat-owners do not in any way control the crew-members with whom the former have no
relationship whatsoever; that they simply join every trip for which the pilots allow them, without any reference to the
owners of the vessel; and that they only share in their own catch produced by their own efforts.

The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The conduct of the
fishing operations was undisputably shown by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II, to
be under the control and supervision of private respondent's operations manager. Matters dealing on the fixing of
the schedule of the fishing trip and the time to return to the fishing port were shown to be the prerogative of private
respondent. 12 While performing the fishing operations, petitioners received instructions via a single-side band radio from
private respondent's operations manager who called the patron/pilot in the morning. They are told to report their activities,
their position, and the number of tubes of fish-catch in one day. 13 Clearly thus, the conduct of the fishing operations was
monitored by private respondent thru the patron/pilot of 7/B Sandyman II who is responsible for disseminating the
instructions to the crew members.

The conclusion of public respondent that there had been no change in the situation of the parties since 1968 when
De Guzman Fishing Enterprises, private respondent herein, obtained a favorable judgment in Case No. 708
exempting it from compulsory coverage of the SSS law is not supported by evidence on record. It was erroneous for
public respondent to apply the factual situation of the parties in the 1968 case to the instant case in the light of the
changes in the conditions of employment agreed upon by the private respondent and petitioners as discussed
earlier.

Records show that in the instant case, as distinguished from the Pajarillo case where the crew members are under
no obligation to remain in the outfit for any definite period as one can be the crew member of an outfit for one day
and be the member of the crew of another vessel the next day, the herein petitioners, on the other hand, were
directly hired by private respondent, through its general manager, Arsenio de Guzman, and its operations manager,
Conrado de Guzman and have been under the employ of private respondent for a period of 8-15 years in various
capacities, except for Laurente Bautu who was hired on August 3, 1983 as assistant engineer. Petitioner Alipio
Ruga was hired on September 29, 1974 as patron/captain of the fishing vessel; Eladio Calderon started as a
mechanic on April 16, 1968 until he was promoted as chief engineer of the fishing vessel; Jose Parma was
employed on September 29, 1974 as assistant engineer; Jaime Barbin started as a pilot of the motor boat until he
was transferred as a master fisherman to the fishing vessel 7/B Sandyman II; Philip Cervantes was hired as
winchman on August 1, 1972 while Eleuterio Barbin was hired as winchman on April 15, 1976.

While tenure or length of employment is not considered as the test of employment, nevertheless the hiring of
petitioners to perform work which is necessary or desirable in the usual business or trade of private respondent for a
period of 8-15 years since 1968 qualify them as regular employees within the meaning of Article 281 of the Labor
Code as they were indeed engaged to perform activities usually necessary or desirable in the usual fishing business
or occupation of private respondent. 14

Aside from performing activities usually necessary and desirable in the business of private respondent, it must be
noted that petitioners received compensation on a percentage commission based on the gross sale of the fish-
catch i.e. 13% of the proceeds of the sale if the total proceeds exceeded the cost of the crude oil consumed during
the fishing trip, otherwise only 10% of the proceeds of the sale. Such compensation falls within the scope and
meaning of the term "wage" as defined under Article 97(f) of the Labor Code, thus:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered, and included the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to
the employee. . . .

The claim of private respondent, which was given credence by public respondent, that petitioners get paid in the
form of share in the fish-catch which the patron/pilot as head of the team distributes to his crew members in
accordance with their own understanding 15 is not supported by recorded evidence. Except that such claim appears as
an allegation in private respondent's position paper, there is nothing in the records showing such a sharing scheme as
preferred by private respondent.

Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their fish-catch at
midsea without the knowledge and consent of private respondent, petitioners were unjustifiably not allowed to board
the fishing vessel on September 11, 1983 to resume their activities without giving them the opportunity to air their
side on the accusation against them unmistakably reveals the disciplinary power exercised by private respondent
over them and the corresponding sanction imposed in case of violation of any of its rules and regulations. The virtual
dismissal of petitioners from their employment was characterized by undue haste when less extreme measures
consistent with the requirements of due process should have been first exhausted. In that sense, the dismissal of
petitioners was tainted with illegality.

Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private respondent virtually
resulting in their dismissal evidently contradicts private respondent's theory of "joint fishing venture" between the
parties herein. A joint venture, including partnership, presupposes generally a parity of standing between the joint
co-venturers or partners, in which each party has an equal proprietary interest in the capital or property
contributed 16 and where each party exercises equal lights in the conduct of the business. 17 It would be inconsistent with
the principle of parity of standing between the joint co-venturers as regards the conduct of business, if private respondent
would outrightly exclude petitioners from the conduct of the business without first resorting to other measures consistent
with the nature of a joint venture undertaking, Instead of arbitrary unilateral action, private respondent should have
discussed with an open mind the advantages and disadvantages of petitioners' action with its joint co-venturers if indeed
there is a "joint fishing venture" between the parties. But this was not done in the instant case. Petitioners were arbitrarily
dismissed notwithstanding that no criminal complaints were filed against them. The lame excuse of private respondent
that the non-filing of the criminal complaints against petitioners was for humanitarian reasons will not help its cause either.

We have examined the jurisprudence on the matter and find the same to be supportive of petitioners' stand.
In Negre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were recruited by one master
fisherman locally known as "maestro" in charge of recruiting others to complete the crew members are considered
employees, not industrial partners, of the boat-owners. In an earlier case of Abong vs. WCC, 54 SCRA 379 (1973)
where petitioner therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he was not the employer of the
fishermen crew members because of an alleged partnership agreement between him, as financier, and Simplicio
Panganiban, as his team leader in charge of recruiting said fishermen to work for him, we affirmed the finding of the
WCC that there existed an employer-employee relationship between the boat-owner and the fishermen crew
members not only because they worked for and in the interest of the business of the boat-owner but also because
they were subject to the control, supervision and dismissal of the boat-owner, thru its agent, Simplicio Panganiban,
the alleged "partner" of Dr. Abong; that while these fishermen crew members were paid in kind, or by "pakiao basis"
still that fact did not alter the character of their relationship with Dr. Abong as employees of the latter.

In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA 159 (1982), we
held that the employer-employee relationship between the crew members and the owners of the fishing vessels
engaged in deep sea fishing is merely suspended during the time the vessels are drydocked or undergoing repairs
or being loaded with the necessary provisions for the next fishing trip. The said ruling is premised on the principle
that all these activities i.e., drydock, repairs, loading of necessary provisions, form part of the regular operation of
the company fishing business.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the National Labor
Relations Commission dated May 30,1985 is hereby REVERSED and SET ASIDE. Private respondent is ordered to
reinstate petitioners to their former positions or any equivalent positions with 3-year backwages and other monetary
benefits under the law. No pronouncement as to costs. SO ORDERED.

28.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-21696 February 25, 1967
VISAYAN STEVEDORE TRANSPORTATION COMPANY (VISTRANCO) and RAFAEL XAUDARO, petitioners,
vs.
COURT OF INDUSTRIAL RELATIONS, UNITED WORKERS' & FARMERS' ASSOCIATION (UWFA) VENANCIO
DANO-OG, BUENAVENTURA AGARCIO and 137 others, respondents.

CONCEPCION, C.J.:

Appeal by certiorari, taken by the Visayan Stevedoring Transportation Co. — hereinafter referred to as the Company
— and Rafael Xaudaro from an order of the Court of Industrial Relations the dispositive part of which reads:

The Court, finding respondents guilty of unfair labor practice as charged, directs them to cease and desist
from such unfair labor practice and to reinstate the complainants, with back wages from the date they were
laid off until reinstated.

The Company is engaged in the loading and unloading of vessels, with a branch office in Hinigaran, Negros
Occidental, under the management of said Rafael Xaudaro. Its workers are supplied by the United Workers and
Farmers Association, a labor organization — hereinafter referred to as UWFA — whose men (affiliated to various
labor unions) have regularly worked as laborers of the Company during every milling season since immediately after
World War II up to the milling season immediately preceding November 11, 1955, when the Company refused to
engage the services of Venancio Dano-og, Buenaventura, Agarcio and 137 other persons named in the complaint
filed in case No. 62-ULP-Cebu of the Court of Industrial Relations — and hereinafter referred to as the
Complainants — owing, they claim, to their union activities. At the behest of the UWFA and the Complainants, a
complaint for unfair labor practice was, accordingly, filed against the Company and Xaudaro with the Court of
Industrial Relations — hereinafter referred to as the CIR — in which it was docketed as Case No. 62-ULP-Cebu. In
due course, its Presiding Judge issued the order appealed from, which was affirmed by the CIR sitting en banc.
Hence this petition for review by certiorari.

The issues raised in this appeal, are (1) whether there is employer-employee relationship between the Company
and the Complainants; (2) whether the Company has been guilty of unfair labor practice; and (3) whether the order
of reinstatement of Complainants, with backpay, is a reversible error. 1äwphï1.ñët

With respect to the first question, the Company maintains that it had never had an employer-employee relationship
with the Complainants, the latter's services having allegedly been engaged by the UWFA not by the Company, and
that, in any event, whatever contractual relation there may have been between the Company and the Complainants
had ceased at the end of each milling season, so that the Company can not be guilty of unfair labor practice in
refusing to renew said relation at the beginning of the milling season in November, 1955.

This pretense is untenable. Although Complainants, through the labor union to which they belong, form part of
UWFA, there was no independent contract between the latter, as an organization, and the Company. After the first
milling season subsequently to the liberation of the Philippines, Complainants merely reported for work, at the
beginning of each succeeding milling season, and their services were invariably availed of by the Company,
although an officer of the UWFA or union concerned determined the laborers who would work at a given time,
following a rotation system arranged therefor.

In the performance of their duties, Complainants worked, however, under the direction and control of the officers of
the Company, whose paymaster, or disbursing officer paid the corresponding compensation directly to said
Complainants, who, in turn, acknowledged receipt in payrolls of the Company. We have already held that laborers
working under these conditions are employees of the Company,1 in the same manner as watchmen or security
guards furnished, under similar circumstances, by watchmen or security agencies,2 inasmuch as the agencies
and/or labor organizations involved therein merely performed the role of a representative or agent of the employer in
the recruitment of men needed for the operation of the latter's business.3

As regards the alleged termination of employer-employee relationship between the Company and the Complainants
at the conclusion of each milling season, it is, likewise, settled that the workers concerned are considered, not
separated from the service, but, merely on leave of absence, without pay, during the off-season, their employer-
employee relationship being merely deemed suspended, not severed, in the meanwhile.4

Referring to the unfair labor practice charge against the Company, we find, with the CIR, that said charge is
substantially borne out by the evidence of record, it appearing that the workers not admitted to work beginning from
November, 1955, were precisely those belonging to the UWFA and the Xaudaro, the Company Branch Manager,
had told them point-blank that severance of their connection with the UWFA was the remedy, if they wanted to
continue working with the Company.

As to the payment of back wages, the law5 explicitly vests in the CIR discretion to order the reinstatement with back
pay of laborers dismissed due to union activities, and the record does not disclose any cogent reason to warrant
interference with the action taken by said Court.6

Wherefore, the order and resolution appealed from are hereby affirmed, with costs against petitioners herein. It is so
ordered.

29.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 109704 January 17, 1995

ALFREDO B. FELIX, petitioner,
vs.
DR. BRIGIDA BUENASEDA, in her capacity as Director, and ISABELO BAÑEZ, JR., in his capacity as
Administrator, both of the National Center for Mental Health, and the CIVIL SERVICE
COMMISSION, respondents.

KAPUNAN, J.:

Taking advantage of this Court's decisions involving the removal of various civil servants pursuant to the general
reorganization of the government after the EDSA Revolution, petitioner assails his dismissal as Medical Specialist I
of the National Center for Mental Health (formerly the National Mental Hospital) as illegal and violative of the
constitutional provision on security of tenure allegedly because his removal was made pursuant to an invalid
reorganization.

In Mendoza vs. Quisumbing 1 and the consolidated cases involving the reorganization of various government
departments and agencies we held:

We are constrained to set aside the reorganizations embodied in these consolidated petitions
because the heads of departments and agencies concerned have chosen to rely on their own
concepts of unlimited discretion and "progressive" ideas on reorganization instead of showing that
they have faithfully complied with the clear letter and spirit of the two Constitutions and the statutes
affecting reorganization. 2

In De Guzman vs. CSC 3, we upheld the principle, laid down by Justice J.B.L. Reyes in Cruz vs. Primicias 4 that a valid
abolition of an office neither results in a separation or removal, likewise upholding the corollary principle that "if the
abolition is void, the incumbent is deemed never to have ceased to hold office," in sustaining therein petitioner's right to
the position she held prior to the reorganization.

The instant petition on its face turns on similar facts and issues, which is, that petitioner's removal from a permanent
position in the National Center for Mental Health as a result of the reorganization of the Department of Health was
void.

However, a closer look at the facts surrounding the instant petition leads us to a different conclusion.

After passing the Physician's Licensure Examinations given by the Professional Regulation Commission in June of
1979, petitioner, Dr. Alfredo B. Felix, joined the National Center for Mental Health (then the National Mental
Hospital) on May 26, 1980 as a Resident Physician with an annual salary of P15,264.00. 5 In August of 1983, he was
promoted to the position of Senior Resident Physician 6 a position he held until the Ministry of Health reorganized the
National Center for Mental Health (NCMH) in January of 1988, pursuant to Executive Order No. 119.

Under the reorganization, petitioner was appointed to the position of Senior Resident Physician in a temporary
capacity immediately after he and other employees of the NCMH allegedly tendered their courtesy resignations to
the Secretary of Health. 7 In August of 1988, petitioner was promoted to the position of Medical Specialist I (Temporary
Status), which position was renewed the following year. 8

In 1988, the Department of Health issued Department Order No. 347 which required board certification as a
prerequisite for renewal of specialist positions in various medical centers, hospitals and agencies of the said
department. Specifically, Department Order No. 347 provided that specialists working in various hospitals and
branches of the Department of Health be recognized as "Fellows" of their respective specialty societies and/or
"Diplomates" of their specialty boards or both. The Order was issued for the purpose of upgrading the quality of
specialties in DOH hospitals by requiring them to pass rigorous theoretical and clinical (bedside) examinations given
by recognized specialty boards, in keeping up with international standards of medical practice.

Upon representation of the Chiefs of Hospitals of various government hospitals and medical centers, (then)
Secretary of Health Alfredo Bengzon issued Department Order No. 347 providing for an extension of appointments
of Medical Specialist positions in cases where the termination of medical specialist who failed to meet the
requirement for board certification might result in the disruption of hospital services. Department Order No. 478
issued the following guidelines:

1. As a general policy, the provision of Department Order No. 347, Sec. 4 shall apply unless the
Chief of Hospital requests for exemption, certifies that its application will result in the disruption of
the delivery service together with the steps taken to implement Section 4, and submit a plan of
action, lasting no more than 3-years, for the eventual phase out of non-Board certified medical
specialties.

2. Medical specialist recommended for extension of appointment shall meet the following minimum
criteria:

a. DOH medical specialist certified

b. Has been in the service of the Department at least three (3) years prior to
December 1988.

c. Has applied or taken the specialty board examination.

3. Each recommendation for extension of appointment must be individually justified to show not only
the qualification of the recommendee, but also what steps he has taken to be board certified.

4. Recommendation for extension of appointment shall be evaluated on a case to case basis.

5. As amended, the other provisions of Department Order No. 34/s. 1988 stands.

Petitioner was one of the hundreds of government medical specialist who would have been adversely affected by
Department Order No. 347 since he was no yet accredited by the Psychiatry Specialty Board. Under Department
Order No. 478, extension of his appointment remained subject to the guidelines set by the said department order.
On August 20, 1991, after reviewing petitioner's service record and performance, the Medical Credentials
Committee of the National Center for Mental Health recommended non-renewal of his appointment as Medical
Specialist I, informing him of its decision on August 22, 1991. He was, however, allowed to continue in the service,
and receive his salary, allowances and other benefits even after being informed of the termination of his
appointment.

On November 25, 1991, an emergency meeting of the Chiefs of Service was held to discuss, among other matters,
the petitioner's case. In the said meeting Dr. Vismindo de Grecia, petitioner's immediate supervisor, pointed out
petitioner's poor performance, frequent tardiness and inflexibility as among the factors responsible for the
recommendation not to renew his appointment. 9 With one exception, other department heads present in the meeting
expressed the same opinion, 10 and the overwhelming concensus was for non-renewal. The matter was thereafter referred
to the Civil Service Commission, which on February 28, 1992 ruled that "the temporary appointment (of petitioner) as
Medical Specialist I can be terminated at any time . . ." and that "[a]ny renewal of such appointment is within the discretion
of the appointing authority." 11 Consequently, in a memorandum dated March 25, 1992 petitioner was advised by hospital
authorities to vacate his cottage since he was no longer with said memorandum petitioner filed a petition with the Merit
System Protection Board (MSPB) complaining about the alleged harassment by respondents and questioning the non-
renewal of his appointment. In a Decision rendered on July 29, 1992, the (MSPB) dismissed petitioner's complaint for lack
of merit, finding that:

As an apparent incident of the power to appoint, the renewal of a temporary appointment upon or
after its expiration is a matter largely addressed to the sound discretion of the appointing authority. In
this case, there is no dispute that Complainant was a temporary employee and his appointment
expired on August 22, 1991. This being the case, his re-appointment to his former position or the
renewal of his temporary appointment would be determined solely by the proper appointing authority
who is the Secretary, Department of Health upon the favorable recommendation of the Chief of
Hospital III, NCMH. The Supreme Court in the case of Central Bank vs. Civil Service
Commission G.R. Nos. 80455-56 dated April 10, 1989, held as follows:

The power of appointment is essentially a political question involving considerations of wisdom

which only the appointing authority can decide.

In this light, Complainant therefore, has no basis in law to assail the non-renewal of his expired
temporary appointment much less invoke the aid of this Board cannot substitute its judgment to that
of the appointing authority nor direct the latter to issue an appointment in the complainant's favor.

Regarding the alleged Department Order secured by the complainant from the Department of Health
(DOH), the Board finds the same inconsequential. Said Department Order merely allowed the
extension of tenure of Medical Specialist I for a certain period but does not mandate the renewal of
the expired appointment.

The Board likewise finds as baseless complainant's allegation of harassment. It should be noted that the
subsistence, quarters and laundry benefits provided to the Complainant were in connection with his employment
with the NCMH. Now that his employment ties with the said agency are severed, he eventually loses his right to the
said benefits. Hence, the Hospital Management has the right to take steps to prevent him from the continuous
enjoyment thereof, including the occupancy of the said cottage, after his cessation form office.

In sum, the actuations of Dr. Buenaseda and Lt. Col. Balez are not shown to have been tainted with any legal
infirmity, thus rendering as baseless, this instant complaint.

Said decision was appealed to the Civil Service Commission which dismissed the same in its Resolution dated
December 1, 1992. Motion for Reconsideration was denied in CSC Resolution No. 93-677 dated February 3, 1993,
hence this appeal, in which petitioner interposes the following assignments of errors:

I THE PUBLIC RESPONDENT CIVIL SERVICE COMMISSION ERRED IN HOLDING THAT BY

SUBMITTING HIS COURTESY RESIGNATION AND ACCEPTING HIS TEMPORARY
APPOINTMENT PETITIONER HAD EFFECTIVELY DIVESTED HIMSELF OF HIS SECURITY OF
TENURE, CONSIDERING THE CIRCUMSTANCES OF SUCH COURTESY RESIGNATION AND
ACCEPTANCE OF APPOINTMENT.

II THE RESPONDENT COMMISSION IN NOT DECLARING THAT THE CONVERSION OF THE

PERMANENT APPOINTMENT OF PETITIONER TO TEMPORARY WAS DONE IN BAD FAITH IN
THE GUISE OF REORGANIZATION AND THUS INVALID, BEING VIOLATIVE OF THE
PETITIONER'S RIGHT OF SECURITY OF TENURE.

Responding to the instant petition, 12 the Solicitor General contends that 1) the petitioner's temporary appointment after
the reorganization pursuant to E.O. No. 119 were valid and did not violate his constitutional right of security of tenure; 13 2)
petitioner is guilty of estoppel or laches, having acquiesced to such temporary appointments from 1988 to 1991; 14 and 3)
the respondent Commission did not act with grave abuse of discretion in affirming the petitioner's non-renewal of his
appointment at the National Center for Mental Hospital. 15

We agree.

The patent absurdity of petitioner's posture is readily obvious. A residency or resident physician position in a
medical specialty is never a permanent one. Residency connotes training and temporary status. It is the step taken
by a physician right after post-graduate internship (and after hurdling the Medical Licensure Examinations) prior to
his recognition as a specialist or sub-specialist in a given field.

A physician who desires to specialize in Cardiology takes a required three-year accredited residency in Internal
Medicine (four years in DOH hospitals) and moves on to a two or three-year fellowship or residency in Cardiology
before he is allowed to take the specialty examinations given by the appropriate accrediting college. In a similar
manner, the accredited Psychiatrist goes through the same stepladder process which culminates in his recognition
as a fellow or diplomate (or both) of the Psychiatry Specialty Board. 16 This upward movement from residency to
specialist rank, institutionalized in the residency training process, guarantees minimum standards and skills and
ensures that the physician claiming to be a specialist will not be set loose on the community without the basic
knowledge and skills of his specialty. Because acceptance and promotion requirements are stringent, competitive,
and based on merit. acceptance to a first year residency program is no guaranty that the physician will complete the
program. Attribution rates are high. Some programs are pyramidal. Promotion to the next post-graduate year is
based on merit and performance determined by periodic evaluations and examinations of knowledge, skills and
bedside manner. 17 Under this system, residents, specialty those in university teaching hospitals 18 enjoy their right to
security of tenure only to the extent that they periodically make the grade, making the situation quite unique as far as
physicians undergoing post-graduate residencies and fellowships are concerned. While physicians (or consultants) of
specialist rank are not subject to the same stringent evaluation procedures, 19 specialty societies require continuing
education as a requirement for accreditation for good standing, in addition to peer review processes based on
performance, mortality and morbidity audits, feedback from residents, interns and medical students and research output.
The nature of the contracts of resident physicians meet traditional tests for determining employer-employee relationships,
but because the focus of residency is training, they are neither here nor there. Moreover, stringent standards and
requirements for renewal of specialist-rank positions or for promotion to the next post-graduate residency year are
necessary because lives are ultimately at stake.

Petitioner's insistence on being reverted back to the status quo prior to the reorganizations made pursuant to
Executive Order No. 119 would therefore be akin to a college student asking to be sent back to high school and
staying there. From the position of senior resident physician, which he held at the time of the government
reorganization, the next logical step in the stepladder process was obviously his promotion to the rank of Medical
Specialist I, a position which he apparently accepted not only because of the increase in salary and rank but
because of the prestige and status which the promotion conferred upon him in the medical community. Such status,
however, clearly carried with it certain professional responsibilities including the responsibility of keeping up with the
minimum requirements of specialty rank, the responsibility of keeping abreast with current knowledge in his
specialty rank, the responsibility of completing board certification requirements within a reasonable period of time.
The evaluation made by the petitioner's peers and superiors clearly showed that he was deficient in a lot of areas, in
addition to the fact that at the time of his non-renewal, he was not even board-certified.

It bears emphasis that at the time of petitioner's promotion to the position of Medical Specialist I (temporary) in
August of 1988, no objection was raised by him about the change of position or the temporary nature of designation.
The pretense of objecting to the promotion to specialist rank apparently came only as an afterthought, three years
later, following the non-renewal of his position by the Department of Health.

We lay stress to the fact that petitioner made no attempt to oppose earlier renewals of his temporary Specialist I
contracts in 1989 and 1990, clearly demonstrating his acquiescence to — if not his unqualified acceptance of the
promotion (albeit of a temporary nature) made in 1988. Whatever objections petitioner had against the earlier
change from the status of permanent senior resident physician to temporary senior physician were neither pursued
nor mentioned at or after his designation as Medical Specialist I (Temporary). He is therefore estopped from
insisting upon a right or claim which he had plainly abandoned when he, from all indications, enthusiastically
accepted the promotion. His negligence to assert his claim within a reasonable time, coupled with his failure to
repudiate his promotion to a temporary position, warrants a presumption, in the words of this Court in Tijam vs.
Sibonghanoy, 20that he "either abandoned (his claim) or declined to assert it."

There are weighty reasons of public policy and convenience which demand that any claim to any position in the civil
service, permanent, temporary of otherwise, or any claim to a violation of the constitutional provision on security of
tenure be made within a reasonable period of time. An assurance of some degree of stability in the civil service is
necessary in order to avoid needless disruptions in the conduct of public business. Delays in the statement of a right
to any position are strongly discouraged. 21 In the same token, the failure to assert a claim or the voluntary acceptance
of another position in government, obviously without reservation, leads to a presumption that the civil servant has either
given up his claim of has already settled into the new position. This is the essence of laches which is the failure or neglect,
for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have
been done earlier; it is the negligence or omission to assert a right within a reasonable time, warranting a presumption
that the party entitled to assert it either has abandoned it or declined to assert it. 22

In fine, this petition, on its surface, seems to be an ordinary challenge against the validity of the conversion of
petitioner's position from permanent resident physician status to that of a temporary resident physician pursuant to
the government reorganization after the EDSA Revolution. What is unique to petitioner's averments is the fact that
he hardly attempts to question the validity of his removal from his position of Medical Specialist I (Temporary) of the
National Center for Mental Health, which is plainly the pertinent issue in the case at bench. The reason for this is at
once apparent, for there is a deliberate and dishonest attempt to a skirt the fundamental issue first, by falsely
claiming that petitioner was forced to submit his courtesy resignation in 1987 when he actually did not; and second,
by insisting on a right of claim clearly abandoned by his acceptance of the position of Medical Specialist I
(Temporary), which is hence barred by laches.

The validity of the government reorganization of the Ministry of Health pursuant to E.O. 119 not being the real issue
in the case at bench, we decline to make any further pronouncements relating to petitioner's contentions relating to
the effect on him of the reorganization except to say that in the specific case of the change in designation from
permanent resident physician to temporary resident physician, a change was necessary, overall, to rectify a
ludicrous situation whereby some government resident physicians were erroneously being classified as permanent
resident physicians in spite of the inherently temporary nature of the designation. The attempts by the Department of
Health not only to streamline these positions but to make them conform to current standards of specialty practice is
a step in a positive direction. The patient who consults with a physician of specialist rank should at least be safe in
the assumption that the government physician of specialist rank: 1.) has completed all necessary requirements at
least assure the public at large that those in government centers who claim to be specialists in specific areas of
Medicine possess the minimum knowledge and skills required to fulfill that first and foremost maxim, embodied in
the Hippocratic Oath, that they do their patients no harm. Primium non nocere.

Finally, it is crystal clear, from the facts of the case at bench, that the petitioner accepted a temporary appointment
(Medical Specialist I). As respondent Civil Service Commission has correctly pointed out 23, the appointment was
for a definite and renewable period which, when it was not renewed, did not involve a dismissal but an expiration of
the petitioner's term.

ACCORDINGLY, the petition is hereby DISMISSED, for lack of merit.

30.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 76452 July 26, 1994

PHILIPPINE AMERICAN LIFE INSURANCE COMPANY and RODRIGO DE LOS REYES, petitioners,
vs.
HON. ARMANDO ANSALDO, in his capacity as Insurance Commissioner, and RAMON MONTILLA
PATERNO, JR., respondents.

QUIASON, J.:

This is a petition for certiorari and prohibition under Rule 65 of the Revised Rules of Court, with preliminary
injunction or temporary restraining order, to annul and set aside the Order dated November 6, 1986 of the Insurance
Commissioner and the entire proceedings taken in I.C. Special Case No. 1-86.

We grant the petition.

The instant case arose from a letter-complaint of private respondent Ramon M. Paterno, Jr. dated April 17, 1986, to
respondent Commissioner, alleging certain problems encountered by agents, supervisors, managers and public
consumers of the Philippine American Life Insurance Company (Philamlife) as a result of certain practices by said
company.

In a letter dated April 23, 1986, respondent Commissioner requested petitioner Rodrigo de los Reyes, in his capacity
as Philamlife's president, to comment on respondent Paterno's letter.

In a letter dated April 29, 1986 to respondent Commissioner, petitioner De los Reyes suggested that private
respondent "submit some sort of a 'bill of particulars' listing and citing actual cases, facts, dates, figures, provisions
of law, rules and regulations, and all other pertinent data which are necessary to enable him to prepare an intelligent
reply" (Rollo, p. 37). A copy of this letter was sent by the Insurance Commissioner to private respondent for his
comments thereon.

On May 16, 1986, respondent Commissioner received a letter from private respondent maintaining that his letter-
complaint of April 17, 1986 was sufficient in form and substance, and requested that a hearing thereon be
conducted.

Petitioner De los Reyes, in his letter to respondent Commissioner dated June 6, 1986, reiterated his claim that
private respondent's letter of May 16, 1986 did not supply the information he needed to enable him to answer the
letter-complaint.

On July 14, a hearing on the letter-complaint was held by respondent Commissioner on the validity of the Contract
of Agency complained of by private respondent.

In said hearing, private respondent was required by respondent Commissioner to specify the provisions of the
agency contract which he claimed to be illegal.

On August 4, private respondent submitted a letter of specification to respondent Commissioner dated July 31,
1986, reiterating his letter of April 17, 1986 and praying that the provisions on charges and fees stated in the
Contract of Agency executed between Philamlife and its agents, as well as the implementing provisions as
published in the agents' handbook, agency bulletins and circulars, be declared as null and void. He also asked that
the amounts of such charges and fees already deducted and collected by Philamlife in connection therewith be
reimbursed to the agents, with interest at the prevailing rate reckoned from the date when they were deducted.

Respondent Commissioner furnished petitioner De los Reyes with a copy of private respondent's letter of July 31,
1986, and requested his answer thereto.

Petitioner De los Reyes submitted an Answer dated September 8, 1986, stating inter alia that:

(1) Private respondent's letter of August 11, 1986 does not contain any of the particular information
which Philamlife was seeking from him and which he promised to submit.

(2) That since the Commission's quasi-judicial power was being invoked with regard to the
complaint, private respondent must file a verified formal complaint before any further proceedings.

In his letter dated September 9, 1986, private respondent asked for the resumption of the hearings on his complaint.

On October 1, private respondent executed an affidavit, verifying his letters of April 17, 1986, and July 31, 1986.

In a letter dated October 14, 1986, Manuel Ortega, Philamlife's Senior Assistant Vice-President and Executive
Assistant to the President, asked that respondent Commission first rule on the questions of the jurisdiction of the
Insurance Commissioner over the subject matter of the letters-complaint and the legal standing of private
respondent.

On October 27, respondent Commissioner notified both parties of the hearing of the case on November 5, 1986.

On November 3, Manuel Ortega filed a Motion to Quash Subpoena/Notice on the following grounds;

1. The Subpoena/Notice has no legal basis and is premature because:

(1) No complaint sufficient in form and contents has been filed;

(2) No summons has been issued nor received by the

respondent De los Reyes, and hence, no jurisdiction
has been acquired over his person;

(3) No answer has been filed, and hence, the hearing

scheduled on November 5, 1986 in the
Subpoena/Notice, and wherein the respondent is
required to appear, is premature and lacks legal
basis.

II. The Insurance Commission has no jurisdiction over;

(1) the subject matter or nature of the action; and

(2) over the parties involved (Rollo, p. 102).

In the Order dated November 6, 1986, respondent Commissioner denied the Motion to Quash. The dispositive
portion of said Order reads:

NOW, THEREFORE, finding the position of complainant thru counsel tenable and considering the
fact that the instant case is an informal administrative litigation falling outside the operation of the
aforecited memorandum circular but cognizable by this Commission, the hearing officer, in open
session ruled as it is hereby ruled to deny the Motion to Quash Subpoena/Notice for lack of merit
(Rollo, p. 109).

Hence, this petition.

II

The main issue to be resolved is whether or not the resolution of the legality of the Contract of Agency falls within
the jurisdiction of the Insurance Commissioner.

Private respondent contends that the Insurance Commissioner has jurisdiction to take cognizance of the complaint
in the exercise of its quasi-judicial powers. The Solicitor General, upholding the jurisdiction of the Insurance
Commissioner, claims that under Sections 414 and 415 of the Insurance Code, the Commissioner has authority to
nullify the alleged illegal provisions of the Contract of Agency.
III

The general regulatory authority of the Insurance Commissioner is described in Section 414 of the Insurance Code,
to wit:

The Insurance Commissioner shall have the duty to see that all laws relating to insurance, insurance
companies and other insurance matters, mutual benefit associations and trusts for charitable uses
are faithfully executed and to perform the duties imposed upon him by this Code, . . .

On the other hand, Section 415 provides:

In addition to the administrative sanctions provided elsewhere in this Code, the Insurance
Commissioner is hereby authorized, at his discretion, to impose upon insurance companies, their
directors and/or officers and/or agents, for any willful failure or refusal to comply with, or violation of
any provision of this Code, or any order, instruction, regulation or ruling of the Insurance
Commissioner, or any commission of irregularities, and/or conducting business in an unsafe and
unsound manner as may be determined by the the Insurance Commissioner, the following:

(a) fines not in excess of five hundred pesos a day; and

(b) suspension, or after due hearing, removal of

directors and/or officers and/or agents.

A plain reading of the above-quoted provisions show that the Insurance Commissioner has the authority to regulate
the business of insurance, which is defined as follows:

(2) The term "doing an insurance business" or "transacting an insurance business," within the
meaning of this Code, shall include
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or activity of the surety; (c) doing any kind of
business, including a reinsurance business, specifically recognized as constituting the doing of an
insurance business within the meaning of this Code; (d) doing or proposing to do any business in
substance equivalent to any of the foregoing in a manner designed to evade the provisions of this
Code. (Insurance Code, Sec. 2[2]; Emphasis supplied).

Since the contract of agency entered into between Philamlife and its agents is not included within the meaning of an
insurance business, Section 2 of the Insurance Code cannot be invoked to give jurisdiction over the same to the
Insurance Commissioner. Expressio unius est exclusio alterius.

With regard to private respondent's contention that the quasi-judicial power of the Insurance Commissioner under
Section 416 of the Insurance Code applies in his case, we likewise rule in the negative. Section 416 of the Code in
pertinent part, provides:

The Commissioner shall have the power to adjudicate claims and complaints involving any loss,
damage or liability for which an insurer may be answerable under any kind of policy or contract of
insurance, or for which such insurer may be liable under a contract of suretyship, or for which a
reinsurer may be used under any contract or reinsurance it may have entered into, or for which a
mutual benefit association may be held liable under the membership certificates it has issued to its
members, where the amount of any such loss, damage or liability, excluding interest, costs and
attorney's fees, being claimed or sued upon any kind of insurance, bond, reinsurance contract, or
membership certificate does not exceed in any single claim one hundred thousand pesos.

A reading of the said section shows that the quasi-judicial power of the Insurance Commissioner is limited by law "to
claims and complaints involving any loss, damage or liability for which an insurer may be answerable under any kind
of policy or contract of insurance, . . ." Hence, this power does not cover the relationship affecting the insurance
company and its agents but is limited to adjudicating claims and complaints filed by the insured against the
insurance company.

While the subject of Insurance Agents and Brokers is discussed under Chapter IV, Title I of the Insurance Code, the
provisions of said Chapter speak only of the licensing requirements and limitations imposed on insurance agents
and brokers.

The Insurance Code does not have provisions governing the relations between insurance companies and their
agents. It follows that the Insurance Commissioner cannot, in the exercise of its quasi-judicial powers, assume
jurisdiction over controversies between the insurance companies and their agents.

We have held in the cases of Great Pacific Life Assurance Corporation v. Judico, 180 SCRA 445 (1989),
and Investment Planning Corporation of the Philippines v. Social Security Commission, 21 SCRA 904 (1962), that
an insurance company may have two classes of agents who sell its insurance policies: (1) salaried employees who
keep definite hours and work under the control and supervision of the company; and (2) registered representatives,
who work on commission basis.

Under the first category, the relationship between the insurance company and its agents is governed by the Contract
of Employment and the provisions of the Labor Code, while under the second category, the same is governed by the
Contract of Agency and the provisions of the Civil Code on the Agency. Disputes involving the latter are cognizable
by the regular courts.

WHEREFORE, the petition is GRANTED. The Order dated November 6, 1986 of the Insurance Commission is SET
ASIDE. SO ORDERED.

31.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-37790 March 25, 1976
MAFINCO TRADING CORPORATION, petitioner,
vs.
THE HON. BLAS F. OPLE, in his capacity as Secretary of Labor, The NATIONAL LABOR RELATIONS
COMMISSION RODRIGO REPOMANTA and REY MORALDE, respondents.

AQUINO, J.:

Mafinco Trading Corporation (Mafinco for short) filed these special civil actions of certiorari and prohibition in order
to annul the decision of the Secretary of Labor dated April 16, 1973. In that decision the Secretary reversed an order
of the old National Labor Relations Commission (NLRC) and held that the NLRC had jurisdiction over the complaint
lodged by the Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas (FOITAF) against
Mafinco for having dismissed Rodrigo Repomanta and Rey Moralde (NLRC Case No. LR-086). The voluminous
record reveals the following facts:

Peddling contracts and their termination. — On April 30, 1968 Cosmos Aerated Water Factory, Inc., hereinafter
called Cosmos, a firm based at Malabon, Rizal, appointed Mafinco as its sole distributor of Cosmos soft drinks in
Manila. On May 31, 1972 Rodrigo Repomanta and Mafinco executed a peddling contract whereby Repomanta
agreed to "buy and sell" Cosmos soft drinks. Rey Moralde entered into a similar contract. The contracts were to
remain in force for one year unless sooner terminated by either party upon five days notice to the other. 1 The
contract with Repomanta reads as follows:

PEDDLING CONTRACT

KNOW ALL MEN BY THESE PRESENTS:

This CONTRACT, entered into by and between:

The MAFINCO TRADING CORPORATION, a domestic corporation duly organized and existing
under the laws of the Philippines, doing business at Rm. 715 Equitable Bank Bldg., Juan Luna St.,
Manila, under the style MAFINCO represented in this act by its General Manager, SALVADOR C.
PICA, duly authorized for the purpose and hereinafter referred to as MAFINCO, and RODRIGO
REPOMANTA, married/single, of legal age, and a resident of 70-D Bo. Potrero, MacArthur Highway,
Malabon, Rizal hereinafter referred to as PEDDLER, WITNESSETH:

WHEREAS, MAFINCO has been appointed as the exclusive distributor of 'COSMOS' Soft Drink
Products for and within the City of Manila;

WHEREAS, the PEDDLER is desirous of buying and selling in Manila the 'COSMOS' Soft Drink
Products handled by MAFINCO;

NOW THEREFORE, for and in consideration of the foregoing premises and the covenants and
conditions hereinafter set forth, the parties hereto has agreed as follows:

1. That in consideration of the competence of the PEDDLER and his ability to promote mutual benefits for the
parties hereto, MAFINCO shall provide the PEDDLER with a delivery truck with which the latter shall exclusively
peddle the soft drinks of the former, under the terms set forth herein;

2. The PEDDLER himself shall, carefully and in strict observance to traffic regulations, drive the truck furnished him
by MAFINCO or should he employ a driver or helpers such driver or helpers shall be his employees under his
direction and responsibility and not that of MAFINCO, and their compensation including salaries, wages, overtime
pay, separation pay, bonus or other remuneration and privileges shall be for the PEDDLER'S own account; The
PEDDLER shall likewise bind himself to comply with the provisions of the Social Security Act and all the applicable
labor laws in relation to his employees;

3. The PEDDLER shall be responsible for any damage to property, death or injuries to persons or damage to the
truck used by him caused by his own acts or omission or that of his driver and helpers;

4. MAFINCO shall furnish the gasoline and oil to run the said truck in business trips, bear the cost of maintenance
and repairs of the said truck arising from ordinary wear and tear;

5. The PEDDLER shall secure at his own expense all necessary licenses and permits required by law or ordinance
and shall bear any and all expenses which may be incurred by him in the sales of the soft drink products covered by
the contract;

6. All purchases by the PEDDLER shall be charged to him at a price of P2.52 per case of 24 bottles, ex-warehouse;
PROVIDED, However, that if the PEDDLER purchases a total of not less than 250 cases a day, he shall be entitled
further to a Peddler's Discount of P11.00;

7. Upon the execution of this contract, the PEDDLER shall give a cash bond in the amount of P1,500.00 against
which MAFINCO shall charge the PEDDLER with any unpaid account at the end of each day or with any damage to
the truck of other account which is properly chargeable to the PEDDLER; within 30 days after the termination of this
contract, the cash bond, after deducting proper charges, shall be returned to the PEDDLER;

8. The PEDDLER shall liquidate and pay all his accounts to MAFINCO'S authorized representative at the end of
each day, and his failure to do so shall subject his cash bond at once to answer for any unliquidated accounts;

9. This contract shall be effective up to May 31, 1973 and supersedes any or all other previous contracts, if any, that
may have been entered into between the parties; However, either of the parties may terminate the same upon five
(5) days prior notice to the other;

10. Upon the. termination of this contract, unless the same is renewed, the delivery truck and such other equipment
furnished by MAFINCO to the PEDDLER shall be returned by the latter in good order and workable condition,
ordinary wear and tear excepted, und shall promptly settle his outstanding account if any, with MAFINCO;

11. To assure performance by the PEDDLER of his obligation to his employees under the Social Security Act, the
applicable labor laws and for damages suffered by third persons, PEDDLER shall furnish a performance bond of
P1,000.00 in favor of MAFINCO from a SURETY COMPANY acceptable to MAFINCO.

IN WITNESS WHEREOF, the parties hereto have signed this instrument at the City of Manila,
Philippines, this May 31, 1972.

MAFINCO TRADING CORPORATION

By:

(Sgd.) RODRIGO REPOMANTA (Sgd.) SALVADOR C. PICA

Peddler General Manager

(Witnesses and notarial acknowledgment are omitted)

On December 7, 1972 Mafinco, pursuant to section 9 of the contract, terminated the same. The notice to
Repomanta reads as follows:

Dear Mr. Repomanta:

This has reference to the Peddling Contract you executed with the Mafinco Trading Corporation on
May 31, 1972. Please be informed that in accordance with the provisions of paragraph 9 of the said
peddling contract, we are hereby serving notice of termination thereof effective on December 12,
1972.

Yours truly,

(Sgd.) SALVADOR C. PICA

General Manager
Complaints of Repomanta and Moralde and NLRCs dismissal thereof. — Four days later or on December 11, 1972
Repomanta and Moralde, through their union, the FOITAF, filed a complaint with the NLRC, charging the general
manager of Mafinco with having violated Presidential Decree No. 21, issued on October 14, 1972, which created the
NLRC and which was intended "to promote industrial peace, maximize productivity and secure social justice for all".
The brief complaint reads as follows:

Hon. Amado Gat Inciong, Chairman

National Labor Relations Commission

Phoenix Bldg., Intramuros,

Manila

Sir:

Pursuant to the Presidential Decree No. 21, Sections 2 and 11, the FOITAF files a complaint against
SALVADOR C. PICA, General Manager of MAFINCO TRADING CORP. located at Room 715,
Equitable Bank Bldg., Juan Luna, Manila, for terminating union officials (sic), Mr. Rodrigo Refumanta
and Mr. Rey Moralde, which is a violation of the above mentioned decree.

Notice of termination is herewith attach (sic).

We anticipate your due attention and assistance.

Respectfully yours,

(Signed by National Secretary of FOITAF)

Mafinco filed a motion to dismiss the complaint on the ground that the NLRC had no jurisdiction because
Repomanta and Moralde were not its employees but were independent contractors. It stressed that there was
termination of the contract, not a dismissal of an employee. In Repomanta's case, it pointed out that he was
registered with the Social Security System as an employer who, as a peddler, paid premiums for his employees; that
he secured the mayor's permit to do business and the corresponding peddler's license and paid the privilege tax and
that he obtained workmen's compensation insurance for his own employees or helpers. It alleged that Moralde was
in the same situation as Repomanta.

Mafinco further alleged that the Bureau of Labor Relations denied the application of peedlers for registration as a
labor union because they were not employees but employers in their own right of delivery helpers (Decision dated
January 4, 1966 by the Registrar of Labor Organizations in Registration Proceeding No. 4, In the Matter of Cosmos
Supervisors Association-PTGWO); that the Court of Industrial Relations in Case No. 4399-ULP, Cosmos
Supervisors' Association — PTGWO vs. Manila Cosmos Aerated Water Factory, Inc., held in its decision dated July
17, 1967 that the peddlers were not employees of Cosmos, and that the Court of Appeals held in Rapajon vs. Fong
Kui and Figueras vs. Asierto, CA-G.R. No. 19477-R and 21397-R, March 18, 1958 that the delivery helpers of the
peddlers were not employees of Cosmos, a ruling which this Court refused to review (L-14072-74, Rapajon vs. Fung
Kui, Resolution dated July 16, 1958).

The complaint was referred to a factfinder who in a lengthy report dated January 22, 1973 found, after "exhaustively
and impartially" considering the contentions of the parties, that the peddlers were employers or "independent
businessmen', as held by the Court of Industrial Relations and the Court of Appeals, and that that holding has the
force of res judicata. The factfinder recommended the dismissal of the complaint.

The old NLRC, composed of Amado G. Inciong, Diego P. Atienza and Ricardo O. Castro, adopted that
recommendation in its order dated February 2, 1973. That order, which analyzes the peddling contract and reviews
the court rulings on the matter, is quoted below:

The question of whether peddling contracts of the kind entered into between the parties give rise to
an employer-employee relationship is not new. Nor are the contracts themselves of recent vintage.

For at least twenty years respondent MAFINCO and its predecessor and/or principal, the Manila-
Cosmos Aerated Water Factory, have entered into contracts with peddlers, under the terms of which
the latter buy from the former at a special price, and sell in Manila, the former's soft drink products.
The distributor provides the peddler with a delivery truck with the distributor answering for the cost of
fuel and maintenance. If a peddler buys a certain number of cases or more a day, he is entitled to a
fixed amount of peddler's discount.
 The peddler himself drives the truck but if he engages a driver or helpers, the latter are his
employees and he assumes all the responsibilities of an employer in relation to them. He also
obtains at his own expense all licenses and permits required by law of salesmen.

The peddler clears his accounts with the distributor at the end of each day, and unpaid accounts are
charged against the cash deposit or bond which he gives the distributor upon the execution of the
peddling contract. He answers for damages caused by him or his employees to third persons.

Ruling upon this type of contracts, and the practices and relationships that attended its
implementation, the Court of Appeals, in CA-G.R. No. 19477-R, said that it did not create a
relationship of employer and employee; that the peddlers under such contract were not employees
of the manufacturer or distributor, and accordingly dismissed the complaints in the said case. (The
peddler-complainants in that case were claiming overtime pay and damages, among others.)
Elevated to the Supreme Court on review (G.R. Nos.
L-14072 to L-14074, 2 August 1958), the decision of the Court of Appeals was in effect affirmed, for
the petition for review was dismissed by the Supreme Court 'for being factual and for lack of merit!

The Court of Industrial Relations is of the same persuasion. After inquiring extensively into
substantially the same terms and conditions of peddling contracts and the practices and
relationships that went into their implementation, the Court said in Case No. 4399ULP that the
peddlers of the Manila-Cosmos Aerated Water Factory were not employees of the latter.

These precedents apply squarely to the case at hand. The complainants here have not shown that
their peddling contracts with the respondent differ in any substantial degree from those that were at
issue in the Court of Industrial Relations, the Court of Appeals and the Supreme Court in the cases
cited above. Indeed, a comparison between the contracts involved in those cases and those in the
instant litigation do not show any difference that would warrant a different conclusion than that
reached by those courts. If at all, the additional stipulations in the present contracts strengthen the
position that the complainant peddlers are independent contractors or businessman, not employees
of the respondent.

Nor has there been shown any substantial change in the old practices of peddlers vis-a-vis the
distributor or manufacturer. The points raised by the complainants in their pleadings regarding these
practices were extensively discussed by the CIR in the ULP case above referred to.

We are not prepared to depart from this rule of long standing. It is the law of the case.

We therefore hold that the complainants in this case were not employees of MAFINCO and
Presidential Decree No. 21 does not I apply to them.

Complainants' appeal and the Labor Secretary's decision that they were employees of Mafinco. — Complainants
Repomanta and Moralde appealed to the Secretary of Labor. They argued that the NLRC erred (1) in holding that
they were independent contractors and not employees; (2) in relying on the peddler's contract to determine the
existence of employer-employee relationship; (3) in anchoring its decisions on precedents which have only
persuasive force and which did not rule squarely on the issue of employer-employee relationship, and (4) in
dismissing their complaint.

As stated at the outset, the Secretary in his decision reversed al the NLRC order. He ruled that Repomanta and
Moralde were employees of Mafinco and that, consequently, the NLRC had jurisdiction over their complaint. The
Secretary directed the NLRC to hear the case on the merits.

The Secretary found that the complainants "were driver-salesmen of the company, driving the trucks and distributing
the products of the company" and that they were not independent contractors because they had no capital of their
own. That finding was based on the following considerations:

(1) That the contracts are Identical; (2) that the complainants were originally plant drivers' of the
company; (3) that the complainants had no capital of their own; (4) that their delivery trucks were
provided by the company; (5) that the use of the trucks were 'exclusively' for peddling the products of
the company; (6) that they were required to observe regulations; (7) that they were required to drive
the trucks; (8) that the company furnished the gasoline and oil to run the said trucks in business
trips; (9) that the company shouldered the cost of maintenance and repair of the said trucks arising
from an ordinary wear and tear; (10) that the company required them to secure the necessary
licenses and permits; (11) that the company prohibited them from selling the company's products
higher than the fixed price of the company; and (12) that they and their helpers were paid on
commission basis.

The Secretary relied on this Court's ruling that a person who possesses no capital or money of his own to pay his
obligations to his workers but relies-entirely upon the contract price to be paid by the company, falls short of the
requisites or conditions necessary for an independent contractor (Mansal vs. Gocheco Lumber Co., 96 Phil. 941).
He observed that "behind the peddling cloak there was in fact employee-employer relationship". He said:

While, generally, written employment contracts are held sufficient in determining the nature of
employment, such contracts, however, cannot be always held conclusive where the actual
circumstances of employment indicate otherwise. For example, some employers, in order to avoid or
evade coverage of the Workmen's Compensation Act, enter into pseudo contracts with their
employees who are named as 'employers' or 'independent contractors'. Such 'written contracts as
distinguished from oral Agreements, purporting to make persons independent contractors, no matter
how 'adroitly framed', can be carefully scanned and the real relationship ascertained' (Glielmi vs.
Netherlands Dairy Co., 254 N.Y. 60 (1930), Morabe & Inton, Workmen's Compensation Act. p. 69).

If the Peddling Contract were carefully scanned, the conclusion may be drawn that the contract is
but a device and subterfuge to evade coverage under the labor laws. There is more than meets the
eye in item 2 of the Peddling Contract which required the peddlers to do that which the law intends
the employer to have done.

In fact, such contracts, as the one in question, exempting or tending to exempt the employers from
their legal obligations to their workers are null and void under Sec. 7 of the Workmen's
Compensation Act, as amended, which states:

Any contract, regulation or device of any sort intended to exempt the employer from all or part of the
liability created by this Act shall be null and void.

To rule otherwise would be to open the floodgate to employers in this territory to evade liabilities to
their workers by simply letting contracts for the doing of their business. 'Such construction could not
only narrow the provisions of the Act, but would defeat its intent and purposes in their entirety.
(Andoyo vs. Manila Railroad Co., supra).

The motion for the reconsideration of the decision was denied by the Secretary in his order of July 16,1973.

The Committee's report that the peddlers are independent contractors. — On July 25, 1973 Mafinco moved for the
clarification of the decision by inquiring whether the question of employee-employer relationship would be included
in the hearing on the merits.

Action on the said motion was deferred until the receipt of the report of the committee created to study the status of
peddlers of Cosmos products. On September 3, 1973- the Secretary directed the committee composed of Ernesto
Valencia, Vicente R. Guzman and Eleo Cayapas to conduct an in-depth study of the actual relationship existing
between the Cosmos Bottling Co. and its peddlers.

The committee in its report dated September 17, 1973 arrived at the conclusion that the relationship actually existing
between Cosmos and Mafinco, on one hand, and the peddlers of Cosmos products, on the other, is not one of
employer and employee and "that the peddlers are independent contractors".

The committee after a perusal of the record of NLRC Case No. LR-086 interviewed twenty peddlers, an officer of
Cosmos and an officer of Mafinco. In the conduct of the interviews it 44 observed judicious adherence to impartiality
and openmindedness but with a modicum of friendliness and much of informality". The report reads in part as
follows:

(1) Implications of the 'Agreement To Peddler Soft Drinks'. — Of vital importance to the mind of your committee is
the fact that this Agreement entered into between Cosmos and the Peddlers has, as its prefatory statement but
before the enumeration of its terms and conditions, the following:

That the Peddler has agreed to buy and sell the products of the MANUFACTURER under the
following conditions:

Similarly, the 'Peddling Contract' entered into between Mafinco and the Peddlers. contains peculiarly
Identical wordings. viz:

WHEREAS, the PEDDLER is desirious of buying and selling in Manila the 'COSMOS' Soft Drink
Products handled by

MAFINCO:

It is immediately clear from the beginning that the relationship that the parties would want to
establish between them is one of buyer and seller of the Cosmos Products. Moreover, this type of
Agreement or Contract has its roots since some twenty (20) years earlier, with modifications only
with respect to the factory price, the amount of over prices or what the peddlers refer to as
commission, and the amount pertaining to the dealer's discount. which appear to vary depending
upon the market demands.
 We are, however, tempted to argue, as did the Peddlers, that this Agreement or Contract might have
been contrived as a device to evade responsibilities imposed upon Cosmos or Mafinco under our
labor laws as well as under other national or municipal laws. Nevertheless, a close reading thereof
will show a flaw in this line of insistence, when we consider that this type of Agreement or Contract
has been substantially the same since the beginning of this relationship. More than this, it has
withstood the test of time by pronouncements of the CIR in ULP Case No. 4399, Cosmos
Supervisors Association vs. Manila Cosmos Aerated Water Factory, Inc.' July 17, 1967; by judicial
review of the Court of Appeals in CA-G.R. Nos. 19477-R, 19478-R and 21397-R, 'Eustaquio
Repajon, et al. vs. Manila Cosmos Aerated Water Factory, Inc.', promulgated on March 18, 1958;
and impliedly by resolution of the Supreme Court in G.R. Nos. L-14072 to L-14074 when the Court of
Appeals cases were appealed to that Tribunal.

But the more basic and indeed forceful ratiocination in favor of the validity of the Agreement or
Contract which covenants that the relationship between the Peddlers and Cosmos or Mafinco is one
of buyer and seller of the Cosmos Products on the part of the Peddlers, and, therefore, one of an
independent contractorship, finds substantive support in our Civil Code which provides: (here arts.
1370 and 1374 of the Civil Code regarding interpretation of contracts are quoted).

For its adjective interpretation, our Rules of Court specifically provides: (Here parol evidence rule in
see. 7, Rule 130, Rules of Court is quoted)

It must b restated at this point for purposes of emphasis that the validity of the aforesaid Agreement
or Contract has not been seriously assailed by the parties. In fact, their rallying cause was the
Agreement or Contract itself. To strengthen these provisions of the Civil Code and the Rules of
Court, stabilized jurisprudence have held that it is elementary rule of contract that the laws in force at
the time the contract was made must govern its interpretation and application; that the terms of the
contract, where unambiguous, are conclusive, in the absence of averment and proof of mistake, the
question being, not what intention existed in the minds of the parties, but what intention is expressed
by the language used; that interpretation of an agreement does not include its modifications or the
creation of a new or different one; that Courts cannot make for the parties better agreements than
they themselves have been satisfied to make, or rewrite contracts because they operate harshly or
inequitably as to one of the parties; and that there is no right to interpret an agreement as meaning
something different from what the parties intended as expressed by the language they saw fit to
employ.

xxx xxx xxx

(1) The selection and engagement of the employees.-Nothing in the Agreement to Peddler Soft Drinks in the case of
Cosmos and in the Peddling Contract in the case of Mafinco, will reveal and we cannot logically infer therefrom, that
the Peddlers were engaged as employees of Cosmos or Mafinco. The selection of the Peddlers who will buy and
sell Cosmos products is left entirely between the parties; it is not the sole prerogative of either one of the parties.
There must be meeting of the minds in order to consummate the Agreement or Contract and no evidence of
coercion or imposition of the will of one over the other is evident or apparent from the Peddlers' or Managements'
interviews had by the members of your Committee. This test, therefore, cannot be invoked by the Peddlers in their
attempt at presenting arguments to the effect that they are employees of Cosmos or Mafinco. Upon the other hand,
the Agreement or Contract itself provides that the Peddlers can hire helpers and drivers under their direction and
responsibility, and to whom they shall be liable for payment of 'salaries, wages, overtime pay, separation pay, bonus
and other remuneration and privileges.' As a matter of fact, drivers were employed by Mrs. Victoria Ariz and M. Fong
Kui, who are peddlers in their own right. This evidently shows the discretion granted the peddlers to hire employees
of their own.

(2) The payment of wages. — On the basis of the clear terms of the Agreement or Contract, no mention is made of
the wages of the Peddlers; neither can an inference be made that any salary or wage is given to Peddlers. In the
interviews, however, with the Peddlers, they vehemently take the position that the 'dealer's discount' which was
given to them at the rate of Pll.50 in excess of 200 cases of Cosmos products they sell a day, constitutes their
'wages'. The term 'wages' as defined in Section 2 of the Minimum Wage Law (Rep. Act No. 602, as amended) is as
follows:

(g) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable of being
expressed in terms of money whether fixed or ascertained on a time, task, piece, commission basis, or other
method of calculating the same, which is payable by an employer to an under a written or unwritten contract of
employement for work done or to be done or for services rendered or to be rendered, and includes the fair and
reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee. ...

Section 10 (k) of the same law provides as follows:

(k) Notification of wage conditions. — It shall be the duty of every employer to notify his employees at the time of
hiring of the wage conditions under which they are employed, which shall include the following particulars:
(1) The rate of wages payable;

(2) The method of calculation of wages;

(3) The periodicity of wage payment; the day, the hour and pIace of payment; and

(4) Any change with respect to any of the foregoing items.

To the Committee's mind, all these requirements have not been shown to exist in the relationship
between the Peddlers and the Cosmos or Mafinco. If it were true that the Pedders' 'dealer's discount'
is in the nature of wages, then they must be notifed fully of the wage conditions. Moreover, such
'wages' must be paid to them periodically at least once every two weeks or twice a month. (See Par.
(h) of See. 10 of Act No. 602, as amended). The absence of such notification to the Peddlers and
the lack of periodicity of such payment in the manner and procedure contemplated in the Minimum
Wage Law destroy, quiet evidently, their allegation that the 'dealer's discount' was their 'wage'. Take
note that the 'dealer's discount' was given only about a week after the end of the month, and from
the evidence submitted by Cosmos, it appears clearly that the 'dealer's discount' varies from month
to month. Thus, the earnings of Mr. Salvador Abonales, who is a Peddler, from January to August,
1973, amounted to P12,520.70, while that of Mr. Alberto S. Garcia, for the same period, amounted to
P13,633.42, and 4 their earnings every month vary decisively. This factor defeats factually the
insistence of the Peddlers that they are employees of Cosmos or Mafinco.

Upon the other hand, the Peddlers' declarations reveal that the wages of their helpers are taken from
the overprice or what is ordinarily termed as 'commission' of ten centavos (P0.10) per case that they
get-a factor which indicates that they are themselves employers of their helpers. In addition, the
Peddlers are reported as Employers of these helpers with the Social Security System, and that they
also purchase workmen's compensation policies in their names as Employers of their own helpers
for purposes of workmen's compensation insurance of their liabilities, which are all in accordance
with the terms and conditions of the Agreement or Contract and indicative of an attribute of one who
is an independent merchant.

(3) The power of dismissal. — In the case of 'Rodrigo Repomanta and Rey Moralde vs. Mafinco Trading Corp.,'
NLRC Case No. LR-086, which served as one of our bases for this study, the complainants therein appear to have
complained before the National Labor Relations Commission for being allegedly illegally dismissed or that their
services were terminated without cause. A search of the alleged dismissal however shows that the Identical letters
both dated December 7, 1972 addressed to the said complainants were not actually what complainants pictured
them to be, but the termination of the peddling in accordance with paragraph 9 of said Contract.

xxx xxx xxx

Thus, complainants' services were not terminated, only their Peddling Contracts with Mafinco were.
The power of dismissal is not lodged with either Mafinco or Cosmos, for based on the Agreement or
Contract none whatsoever exists. Certainly, to attribute a power of dismissal to Cosmos or Mafinco
where none exists is careless imprudence and a height of inaccuracy. This power of dismissal by
Cosmos or Mafinco is not countenanced in the Agreement or Contract.

There is, however, an allegation by the Peddlers that the hiring and firing of the helpers ultimately
rest on Cosmos or Mafinco. This allegation nevertheless, is controverted by Cosmos and Mafinco.
Nonetheless, we checked the basic document — the Agreement or Contract — and we find that the
hiring and, impliedly firing, we is a prerogative of the Peddlers and not of Cosmos or Mafinco.

(4) The power to control the employee's conduct. — From the interviews had by your Committee with both the
Peddlers and the representatives of Cosmos and Mafinco, we gather that the following findings on the power of
control are substantially correct:

(a) That the delivery trucks assigned to the Peddlers are available to them early in the morning and
are free to get them, which they usually do between 5:30 A.M. to 6:30 A.M. There was no
compulsion on the part of the Peddlers to report for work at that time, as in fact, they did not sign any
time record. The practice of getting the delivery trucks early in the morning is more beneficial to the
Peddlers than to Cosmos or Mafinco since they can finish the peddling of Cosmos products much
earlier and spend the rest of the day at their own pleasure. The signing of the 'logbooks' is both
pertinent and necessary since the trucks used in the delivery of Cosmos products are owned by
Cosmos or Mafinco and are simply utilized by Peddlers as a measure of convenience and for
advertising purposes. But peddlers are not precluded from getting trucks of their own should they so
desire.

(b) That liaison officers (supervisors) are assigned by Cosmos or Mafinco in definite areas routes or
zones, not so much of supervision over Peddlers, since their areas, routes or zones were already
agreed upon or pre-arranged among them through the Cosmos Peddlers Association, Inc. of which
 all Peddlers are members, as principally for market analysis since soft drinks selling is a highly
competitive business, and also to inquire or check on sales, and the result of which, report is made
direct to the Office of Cosmos or Mafinco.

(c) That the use of the uniform does not seem to be an imposition by management of Cosmos or
Mafinco upon the Peddlers, but a voluntary arrangement among the Peddlers themselves. For, from
the documents submitted to this Committee, it appears that the Cosmos Peddlers Association, in a
meeting held on August 5, 1967, adopted a resolution to 'always wear their uniform while in the
performance of their sales work,' and in their meeting on January 25, 1969, it adopted another
resolution penalizing Peddlers who failed to wear their uniform in the amount of P2.00 per violation.
Certainly, the resolutions of the Cosmos Peddlers Association, an independent association of
Peddlers and duly registered with the Securities and Exchange Commission, and possessing an
entirely distinct existence, cannot be taken as impositions from Cosmos or Mafinco.

(d) That the matter of turning in of sales of collection which, if found short, is charged against the
Peddler's cash bond, is to the mind of the Committee, giving effect to the valid terms and conditions
of the Agreement or Contract, and also an ordinary business practice which necessarily requires
liquidation of the day's accounts. We do not see any evidence of control on the part of Cosmos or
Mafinco over the activities, including the sales, of the Cosmos products by the Peddlers themselves
who are, apparently, left to their own choices of routes, areas or zones as pre-arranged, with no
definite, much less supervised, time schedule.

(e) That in the matter of reprimand or discipline which the peddlers attempt to project when they
failed to report for work, your Committee found no substantial evidence on this point. The evidence
shows that the peddlers are free to choose their time. Obviously, any absence that they may incur
means so much reduction from their earnings. Thus, if their attention is incidentally called on this
matter it is for the observance of their agreements which is present in any contractual relations.

As to the aspect of employer-employee relation, therefore, between Cosmos or Mafinco and the
Peddlers, your Committee does not have sufficient basis to reasonably sustain the stand of the
Peddlers that there is such relationship.

(c) Attributes of an independent contractor. — As a countercheck, as it were, to the issue of

employer-employee relationship your committee has taken the task of testing such relationship
against the attributes of an independent contractor which, from the interviews and documents
submitted by the parties, appear to exists on the part of the Peddlers. The earlier case of Andoyo vs.
Manila Railroad Co., G.R. No. 34722, promulgated on March 28, 1932, furnishes us the definition of
an 'independent contractor.' Our Supreme Court of pre-war composition, ruled:

An independent contractor is one who exercises independent employment and contracts to do a

piece of work according to his own methods and without being subject to control of his employer
except as to the resuIt of thework. A person who has no capital or money of his own to pay his
laborers or to comply with his obligations to them, who files no bond to answer for the fulfillment of
his contract with his employer, falls short of the requisites or conditions necessary to classify him as
independent contractor.

These requisites and conditions were reiterated in the postwar cases of Philippine Manufacturing
Co., Inc. vs. Geronimo, G. R. No. L-6968, promulgated on November 29, 1954, and Koppel (Phil.),
Inc. vs. Darlucio et, al., G.R. No. L-14903, promulgated on August. 29, 1960. Analyzing the definition
of 'independent contractor', the following may be gathered from the relationship between the
Peddlers, on the one hand, and Cosmos or Mafinco, on the other:

(1) Peddlers contract to sell and buy Cosmos products from Cosmos or Mafinco, the latter furnishing the delivery
truck, but the former sell Cosmos products according to their own methods, subject to the pre-arranged routes,
areas and zones, and go back to the Company compound to return the delivery truck and to make accounting of the
day's sales collection at any time in the morning or in the afternoon. Essentially, control, if at all, extends only as to
observance of traffic regulations which is inherent in ownership of the delivery truck by Cosmos or Mafinco and the
end result which is the liquidation of the sales collection. Control over the details of the Peddlers' sales activities
seems to be farfetched in this case.

(2) Capital or money of the Peddlers to pay their own helpers is evidently within their prerogative, although it
appears that the wages of helpers are uniform at P6.00 per trip. But can we safely say that the cash bond of
Pl,500.00 by the Peddlers constitute their capital? For big-time businessmen, this small amount may not be
considered capital, but when it is taken as a 'deposit on consignment' since the same answers for any deficiencies
that the Peddlers may incur during the day's sales collection, then it can be taken to mean 'capital' within its
signification that it allocates to every day business dealing. The amount of capital, to us, is immaterial; it is the
purpose for which the same is deposited that is most significant.
(3) The Peddlers are required under the Agreement to Peddler Soft Drinks and Peddling Contract to put up not only
the cash bond of P1,500.00, but also a performance bond of P1,000.00 as embodied in said Agreement to Peddler
Soft Drinks as follows:

(4) To assure performance by the PEDDLER of his obligation to his employees under the Social Security Act, the
applicable labor laws, and for damages suffered by third persons PEDDLER shall furnish a performance bond of
P1,000.00 in favor of the MANUFACTURER from a surety Company acceptable to the MANUFACTURER. And, in
case Performance Bond within 30 days from the date of signing of this Contract, such failure shall be sufficient
ground for the MANUFACTURER to suspend the business relationship with the Peddler until the Peddler complies
with this provision.

Again, to the mind of your Committee, the amount of the Performance Bond is not so relevant and
material as to the purpose for which the same is executed- which is to assure performance of the
Peddlers' obligations as employer of his helpers. This is an attribute of an independent contractor to
which the Peddlers are bound under the Agreement or Contract.

(4) Peddlers are doing business for themselves since they took out licenses in the City of Manila,
and have paid their corresponding professional or occupation tax to the Bureau of Internal Avenue.
This fact strengthens the Committee findings that the peddlers are carrying on a business as
independent merchants.

The Secretary in his resolution of October 18, 1973 ignored the committee's conclusion. He clarified that the NLRC
should determine whether the two complainants were illegally dismissed and that the jurisdictional issue should not
be taken up anymore.

The instant petition; the issue and the ruling thereon. — Mafinco filed the instant actions on November 14, 1973. It
prayed for a declaration that the Secretary of Labor and the NLRC had no jurisdiction to entertain the complaints of
Repomanta and Moralde; that the Secretary's decision should be set aside, and that the NLRC and the Secretary be
enjoined from further proceeding in NLRC Case No. LR-086.

Parenthetically, it should be noted that under section 5 of Presidential Decree No. 21 the Secretary's decision "is
appealable" to the President of the Philippines (Nation Multi Service Labor Union vs. Agcaoili, L-39741, May 30,
1975, 64 SCRA 274). However, under section 22 of the old NLRC regulations, an appeal to the President should be
made only "in national interest cases".

On the other hand, judicial review of the decision of an administrative agency or official exercising quasi-judicial
functions is proper in cases of lack of jurisdiction, error of law, grave abuse of discretion, fraud or collusion or in
case the administrative action or resolution is "corrupt, arbitrary or capricious (San Miguel Corporation vs. Secretary
of Labor, L-39195, May 16, 1975, 64 SCRA 56; Commissioner of Customs vs. Valencia, 100 Phil. 165; Villegas vs.
Auditor General, L-21352, November 29, 1966, 18 SCRA 877, 891).

After the parties had submitted their illuminating memoranda, Mafinco filed a motion in this Court for the dismissal of
the complaint in the defunct NLRC on three grounds, to wit: (1) that the NLRC had no jurisdiction over the case
because Repomanta and Moralde had not sought reinstatement or backwages; (2) that the employer's failure to
secure written clearance from the Secretary of Labor before dismissing an employee might constitute a crime
punishable under article 327 of the Labor Code and not mere contempt, as contemplated in section 10 of
Presidential Decree No. 21, and (3) that the contempt provisions of that decree were abrogated by the Labor Code.

Mafinco in support of its motion for dismissal cited Quisaba vs. Sta. Ines-Melale Veneer & Plywood, Inc., L-38088,
August 30, 1974, 58 SCRA 771, where it was held that the regular court, not the NLRC, has jurisdiction over an
employee's action for damages against his employer's act of demoting him.

Respondent Repomanta and Moralde opposed that motion to dismiss. They Pointed out that, inasmuch as their
complaint is pending in the new NLRC, this Court cannot dismiss it. They also observed that article 327 was
eliminated from the Labor Code which, as amended by Presidential Decrees Nos. 570-A, 626 and 643, contains
only 292 articles. Article 327 was superseded by article 278 of the amended Code.

The truth is that Mafinco's motion merely adduced additional grounds to support its stand that the Secretary of Labor
had no jurisdiction over the complaint of Repomanta and Moralde.

This case was not rendered moot by the Labor Code. Although the Code abolished the old NLRC (Art. 289), it
created a new NLRC (Art. 213) and provided that cases pending before the old NLRC should be transferred to, and
processed by, the corresponding labor relations division or the new NLRC and should be decided in accordance
with Presidential Decree No. 21 and the rules and regulations adopted thereunder (Art. 290. See Sec. 5, P.D. No.
626).

The issue is whether the dismissal of Repomanta and Moralde was within the jurisdiction of the old NLRC. If, as
held by the old NLRC, it had no jurisdiction over their complaint because they were not employees of Mafinco but
independent contractors, then the Secretary of Labor had no jurisdiction to remand the case to the NLRC for a
hearing on the merits of the complaint.

Hence, the crucial issue is whether Repomanta and Moralde were employees of Mafinco under the peddling
contract already quoted. Is the contract an employment contract or a contract to sell or distribute Cosmos products?

The question of whether an employer-employee relationship exists in a certain situation has bedevilled the courts.
Businessmen, with the aid of lawyers, have tried to avoid the bringing about of an employer-employee relationship in
some of their enterprises because that juridical relation spawns obligations connected with workmen's
compensation, social security, medicare, minimum wage, termination pay and unionism.

Presidential Decree No. 21 provides:

SEC. 2. The Commission shall have original and exclusive jurisdiction over the following:

1) All matters involving employee-employer relations including all disputes and grievances which may otherwise
lead to strikes and lockouts under Republic Act No. 875;

xxx xxx xxx

SEC. 10. The President of the Philippines, on recommendation of the Commission and the Secretary
of Labor, may order the arrest and detention of any person held in contempt by the Commission for
non-compliance and defiance of any subpoena, order or decision duly issued by the Commission in
accordance with this Decree and its implementing rules and regulations and for any violation of the
provisions of this Decree.

SEC. 11. No employer may shut down his establishment or dismiss or terminate the services of
regular employees with at least one year of service without the written clearance of the Secretary of ,
Labor.

The Solicitor General, as counsel for the old NLRC and the Secretary of Labor, argues that the question of whether
Repomanta and Morale are independent contractors or employees is factual in character and cannot be resolved by
merely construing the peddling contracts; that other relevant facts aliunde or dehors the said contracts should be
taken into account, and that the contracts were a part of an "intricate network of devices (of Mafinco and Cosmos)
developed. and perfected through the years to conceal the true nature of their relationship to their sales agents".

Repomanta and Moralde contend that their peddling contracts were terminated because of their activities in
organizing a union among the peddlers. Annexed to their memorandum is a joint affidavit of sixty-three sales agents
of Cosmos products who described therein the nature of their work, the organization of their union and the dismissal
of Repomanta and Moralde. Annexed to their answer is Resolution No. 921 of the Social Security Commission
dated November 16, 1972 in SSS Case No. 602 wherein it was held that peddlers and their helpers were employees
of Cosmos.

Like the Solicitor General, Repomanta and Moralde harp on the argument that the peddling contracts were a
scheme to camouflage an employer-employee relationship and thus evade the coverage of labor laws.

The parties in their pleadings and memoranda injected conflicting factual allegations to support their diametrically
opposite contentions. From the factual angle, the case has become highly controversial.

In a certiorari and prohibition case, like the instant case, only legal issues affecting the jurisdiction of the tribunal,
board or officer involved may be resolved on the basis of undisputed facts. Sections 1, 2 and 3, Rule 65 of the Rules
of Court require that in the verified petition for certiorari, mandamus and prohibition the petitioner should allege
"facts with certainty".

In this case the facts have become uncertain. Controversial evidentiary facts have been alleged. What is certain and
indubitable is that a notarized peddling contract was executed.

This Court is not a trier of facts. It would be difficult, if not anomalous, to decide the jurisdictional issue on the basis
of the parties' contradictory factual submissions. The record has become voluminous because of their efforts to
persuade this Court to accept their discordant factual statements.

Pro hac vice the issue of whether Repomanta and Moralde were employees of Mafinco or were independent
contractors should be resolved mainly in the light of their peddling contracts. A different approach would lead this
Court astray into the field of factual controversy where its legal pronouncements would not rest on solid grounds.

A restatement of the provisions of the peddling contract is necessary in order to find out whether under that
instrument Repomanta and Moralde were independent contractors or mere employees of Mafinco.
Under the peddling contract, Mafinco would provide the peddler with a delivery truck to be used in the distribution of
Cosmos soft drinks (Par. 1). Should the peddler employ a driver and helpers, he would be responsible for their
compensation and social security contributions and he should comply with applicable labor laws "in relation to his
employees" (Par. 2).

The peddler would be responsible for any damage to persons or property or to the truck caused by his own acts or
omissions or those of his driver and helpers (Par. 3). Mafinco would bear the cost of gasoline and maintenance of
the truck (Par. 4). The peddler would secure at his own expense the necessary licenses and permits and bear the
expenses to be incurred in the sale of Cosmos products (Par. 5).

The soft drinks would be charged to the peddler at P2.52 per case of 24 bottles, ex-warehouse. Should he purchase
at least 250 cases a day, he would be entitled to a peddler's discount of eleven pesos (Par. 6). The peddler would
post a cash bond in the sum of P1,500 to answer for his obligations to Mafinco (Par. 7) and another cash bond of
P1,000 to answer for his obligations to his employees (Par. 11). He should liquidate his accounts at the end of each
day (Par. 8). The contract would be effective up to May 31, 1973. Either party might terminate it upon five days' prior
notice to the other (Par. 9).

We hold that under their peddling contracts Repomanta and Moralde were not employees of Mafinco but were
independent contractors as found by the NLRC and its fact-finder and by the committee appointed by the Secretary
of Labor to look into the status of Cosmos and Mafinco peddlers. They were distributors of Cosmos soft drinks with
their own capital and employees. Ordinarily, an employee or a mere peddler does not execute a formal contract of
employment. He is simply hired and he works under the direction and control of the employer.

Repomanta and Moralde voluntarily executed with Mafinco formal peddling contracts which indicate the manner in
which they would sell Cosmos soft drinks. That Circumstance signifies that they were acting as independent
businessmen. They were to sign or not to sign that contract. If they did not want to sell Cosmos products under the
conditions defined in that contract; they were free to reject it.

But having signed it, they were bound by its stipulations and the consequences thereof under existing labor laws.
One such stipulation is the right of the parties to terminate the contract upon five days' prior notice (Par. 9). Whether
the termination in this case was an unwarranted dismissal of an employee, as contended by Repomanta and
Moralde, is a point that cannot be resolved without submission of evidence. Using the contract itself as the sole
criterion, the termination should perforce be characterized as simply the exercise of a right freely stipulated upon by
the parties.

"In determining the existence of employer-employee relationship, the following elements are generally considered,
namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power to control the employees' conduct-although the latter is the most important element" (Viana vs. Al-
Lagadan and Piga, 99 Phil. 408, 411, citing 35 Am. Jur. 445).

On the other hand, an independent contractor is "one who exercises independent employment and contracts to do a
piece of work according to his own methods and without being subject to control of his employer except as to the
result of the work" (Mansal vs. P.P. Gocheco Lumber Co., supra).

Among the factors to be considered are whether the contractor is carrying on an independent
business; whether the work is part of the employer's general business; the nature and extent of the
work; the skill required; the term and duration of the relationship; the right to assign the performance
of the work to another; the power to terminate the relationship; the existence of a contract for the
performance of a specified piece of work; the control and supervision of the work; the employer's
powers and duties with respect to the hiring, firing, and payment of the contractor's servants; the
control of the premises; the duty to supply the premises, tools, appliances, material and labor; and
the mode, manner, and terms of payment. (56 C.J.S. 46).

Those tests to determine the existence of an employer-employee relationship or whether the person doing a
particular work for another is an independent contractor cannot be satisfactorily applied in the instant case. It should
be obvious by now that the instant case is a penumbral, sui generis case lying on the shadowy borderline that
separates an employee from an independent contractor.

In determining whether the relationship is that of employer and employee or whether one is an independent
contractor, "each case must be determined on its own facts and all the features of the relationship are to be
considered" (56 C.J.S. 45). We are convinced that on the basis of the peddling contract, no employer-employee
relationship was created. Hence, the old NLRC had no jurisdiction over the termination of the peddling contract.

However, this ruling is without prejudice to the right of Repomanta and Moralde and the other peddlers to sue in the
proper Court of First Instance and to ask for a reformation of the instrument evidencing the contract or for its
annulment or to secure a declaration that, disregarding the peddling contract, the actual juridical relationship
between them and Mafinco or Cosmos is that of employer and employee. In that action a fulldress trial may be held
and the parties may introduce the evidence necessary to sustain their respective contentions.
Paragphrasing the dictum in the Quisaba case, supra, if Mafinco and Cosmos had acted oppressively towards their
peddlers, as contemplated in article 1701 of the Civil Code, then they should file the proper action for damages in
the regular courts. Where there is a right, there is a remedy (Ubi jus, ubi remedium).

WHEREFORE, the decision, order and resolution of the Secretary of Labor in NLRC Case No. LR-086 dated April
16, July 16 and October 18, 1973, respectively, are set aside and the order of the NLRC dated February 2, 1973,
dismissing the case for lack of jurisdiction, is affirmed. No costs. SO ORDERED.

32.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 64948 September 27, 1994

MANILA GOLF & COUNTRY CLUB, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.

NARVASA, C.J.:

The question before the Court here is whether or not persons rendering caddying services for members of golf clubs
and their guests in said clubs' courses or premises are the employees of such clubs and therefore within the
compulsory coverage of the Social Security System (SSS).

That question appears to have been involved, either directly or peripherally, in three separate proceedings, all
initiated by or on behalf of herein private respondent and his fellow caddies. That which gave rise to the present
petition for review was originally filed with the Social Security Commission (SSC) via petition of seventeen (17)
persons who styled themselves "Caddies of Manila Golf and Country Club-PTCCEA" for coverage and availment of
benefits under the Social Security Act as amended, "PTCCEA" being
the acronym of a labor organization, the "Philippine Technical, Clerical, Commercial Employees Association," with
which the petitioners claimed to be affiliated. The petition, docketed as SSC Case No. 5443, alleged in essence that
although the petitioners were employees of the Manila Golf and Country Club, a domestic corporation, the latter had
not registered them as such with the SSS.

At about the same time, two other proceedings bearing on the same question were filed or were pending; these
were:

(1) a certification election case filed with the Labor Relations Division of the Ministry of Labor by the
PTCCEA on behalf of the same caddies of the Manila Golf and Country Club, the case being titled
"Philippine Technical, Clerical, Commercial Association vs. Manila Golf and Country Club" and
docketed as Case No. R4-LRDX-M-10-504-78; it appears to have been resolved in favor of the
petitioners therein by Med-Arbiter Orlando S. Rojo who was thereafter upheld by Director Carmelo
S. Noriel, denying the Club's motion for reconsideration; 1

(2) a compulsory arbitration case initiated before the Arbitration Branch of the Ministry of Labor by the
same labor organization, titled "Philippine Technical, Clerical, Commercial Employees Association
(PTCCEA), Fermin Lamar and Raymundo Jomok vs. Manila Golf and Country Club, Inc., Miguel Celdran,
Henry Lim and Geronimo Alejo;" it was dismissed for lack of merit by Labor Arbiter Cornelio T. Linsangan,
a decision later affirmed on appeal by the National Labor Relations Commission on the ground that there
was no employer-employee relationship between the petitioning caddies and the respondent Club. 2

In the case before the SSC, the respondent Club filed answer praying for the dismissal of the petition, alleging in
substance that the petitioners, caddies by occupation, were allowed into the Club premises to render services as
such to the individual members and guests playing the Club's golf course and who themselves paid for such
services; that as such caddies, the petitioners were not subject to the direction and control of the Club as regards
the manner in which they performed their work; and hence, they were not the Club's employees.

Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for social security
coverage, avowedly coming to realize that indeed there was no employment relationship between them and the
Club. The case continued, and was eventually adjudicated by the SSC after protracted proceedings only as regards
the two holdouts, Fermin Llamar and Raymundo Jomok. The Commission dismissed the petition for lack of
merit, 3ruling:

. . . that the caddy's fees were paid by the golf players themselves and not by respondent club. For
instance, petitioner Raymundo Jomok averred that for their services as caddies a caddy's Claim
Stub (Exh. "1-A") is issued by a player who will in turn hand over to management the other portion of
the stub known as Caddy Ticket (Exh. "1") so that by this arrangement management will know how
 much a caddy will be paid (TSN, p. 80, July 23, 1980). Likewise, petitioner Fermin Llamar admitted
that caddy works on his own in accordance with the rules and regulations (TSN, p. 24, February 26,
1980) but petitioner Jomok could not state any policy of respondent that directs the manner of
caddying (TSN, pp. 76-77, July 23, 1980). While respondent club promulgates rules and regulations
on the assignment, deportment and conduct of caddies (Exh. "C") the same are designed to impose
personal discipline among the caddies but not to direct or conduct their actual work. In fact, a golf
player is at liberty to choose a caddy of his preference regardless of the respondent club's group
rotation system and has the discretion on whether or not to pay a caddy. As testified to by petitioner
Llamar that their income depends on the number of players engaging their services and liberality of
the latter (TSN, pp. 10-11, Feb. 26, 1980). This lends credence to respondent's assertion that the
caddies are never their employees in the absence of two elements, namely, (1) payment of wages
and (2) control or supervision over them. In this connection, our Supreme Court ruled that in the
determination of the existence of an employer-employee relationship, the "control test" shall be
considered decisive (Philippine Manufacturing Co. vs. Geronimo and Garcia, 96 Phil. 276; Mansal
vs. P.P. Coheco Lumber Co., 96 Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila Hotel Co., 101 Phil. 358, LVN
Pictures Inc. vs. Phil. Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being made also to Investment Planning
Corporation Phil. vs. SSS 21 SCRA 925).

Records show the respondent club had reported for SS coverage Graciano Awit and Daniel Quijano,
as bat unloader and helper, respectively, including their ground men, house and administrative
personnel, a situation indicative of the latter's concern with the rights and welfare of its employees
under the SS law, as amended. The unrebutted testimony of Col. Generoso A. Alejo (Ret.) that the
ID cards issued to the caddies merely intended to identify the holders as accredited caddies of the
club and privilege(d) to ply their trade or occupation within its premises which could be withdrawn
anytime for loss of confidence. This gives us a reasonable ground to state that the defense posture
of respondent that petitioners were never its employees is well taken. 4

From this Resolution appeal was taken to the Intermediate appellate Court by the union representing Llamar and
Jomok. After the appeal was docketed 5 and some months before decision thereon was reached and promulgated,
6
Raymundo Jomok's appeal was dismissed at his instance, leaving Fermin Llamar the lone appellant.

The appeal ascribed two errors to the SSC:

(1) refusing to suspend the proceedings to await judgment by the Labor Relations Division of
National Capital Regional Office in the certification election case (R-4-LRD-M-10-504-78) supra, on
the precise issue of the existence of employer-employee relationship between the respondent club
and the appellants, it being contended that said issue was "a function of the proper labor office"; and

(2) adjudicating that self same issue a manner contrary to the ruling of the Director of the Bureau of
Labor Relations, which "has not only become final but (has been) executed or (become) res
adjudicata." 7

The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of the least importance.
Nor, it would appear, did it find any greater merit in the second alleged error. Although said Court reserved the
appealed SSC decision and declared Fermin Llamar an employee of the Manila Gold and Country Club, ordering
that he be reported as such for social security coverage and paid any corresponding benefits, 8 it conspicuously
ignored the issue of res adjudicata raised in said second assignment. Instead, it drew basis for the reversal from this
Court's ruling in Investment Planning Corporation of the Philippines vs. Social Security System, supra 9 and declared that
upon the evidence, the questioned employer-employee relationship between the Club and Fermin Llamar passed the so-
called "control test," establishment in the case — i.e., "whether the employer controls or has reserved the right to control
the employee not only as to the result of the work to be done but also as to the means and methods by which the same is
to be accomplished," — the Club's control over the caddies encompassing:

(a) the promulgation of no less than twenty-four (24) rules and regulations just about every aspect of
the conduct that the caddy must observe, or avoid, when serving as such, any violation of any which
could subject him to disciplinary action, which may include suspending or cutting off his access to
the club premises;

(b) the devising and enforcement of a group rotation system whereby a caddy is assigned a number
which designates his turn to serve a player;

(c) the club's "suggesting" the rate of fees payable to the caddies.

Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid by the players, not by
the Club, that they observed no definite working hours and earned no fixed income. It quoted with approval from an
American decision 10 to the effect that: "whether the club paid the caddies and afterward collected in the first instance, the
caddies were still employees of the club." This, no matter that the case which produced this ruling had a slightly different
factual cast, apparently having involved a claim for workmen's compensation made by a caddy who, about to leave the
premises of the club where he worked, was hit and injured by an automobile then negotiating the club's private driveway.

That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as already pointed out, is now
among the mainways of the private respondent's defenses to the petition for review. Considered in the perspective
of the incidents just recounted, it illustrates as well as anything can, why the practice of forum-shopping justly merits
censure and punitive sanction. Because the same question of employer-employee relationship has been dragged
into three different fora, willy-nilly and in quick succession, it has birthed controversy as to which of the resulting
adjudications must now be recognized as decisive. On the one hand, there is the certification case [R4-LRDX-M-10-
504-78), where the decision of the Med-Arbiter found for the existence of employer-employee relationship between
the parties, was affirmed by Director Carmelo S. Noriel, who ordered a certification election held, a disposition never
thereafter appealed according to the private respondent; on the other, the compulsory arbitration case (NCR Case
No. AB-4-1771-79), instituted by or for the same respondent at about the same time, which was dismissed for lack
of merit by the Labor Arbiter, which was afterwards affirmed by the NLRC itself on the ground that there existed no
such relationship between the Club and the private respondent. And, as if matters were not already complicated
enough, the same respondent, with the support and assistance of the PTCCEA, saw fit, also contemporaneously, to
initiate still a third proceeding for compulsory social security coverage with the Social Security Commission (SSC
Case No. 5443), with the result already mentioned.

Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the certification case had
never become final, being in fact the subject of three pending and unresolved motions for reconsideration, as well as
of a later motion for early resolution. 11 Unfortunately, none of these motions is incorporated or reproduced in the record
before the Court. And, for his part, the private respondent contends, not only that said decision had been appealed to and
been affirmed by the Director of the BLR, but that a certification election had in fact been held, which resulted in the
PTCCEA being recognized as the sole bargaining agent of the caddies of the Manila Golf and Country Club with respect
to wages, hours of work, terms of employment, etc. 12 Whatever the truth about these opposing contentions, which the
record before the Court does not adequately disclose, the more controlling consideration would seem to be that, however,
final it may become, the decision in a certification case, by the
very nature of that proceedings, is not such as to foreclose all further dispute between the parties as to the existence, or
non-existence, of employer-employee relationship between them.

It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the following essential
requisites must concur: (1) there must be a final judgment or order; (2) said judgment or order must be on the
merits; (3) the court rendering the same must have jurisdiction over the subject matter and the parties; and (4) there
must be between the two cases identity of parties, identity of subject matter and identity of cause of action. 13

Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior Judgment" that
would operate in bar of a subsequent action between the same parties for the same cause, be adversarial, or
contentious, "one having opposing parties; (is) contested, as distinguished from an ex parte hearing or proceeding. .
. . of which the party seeking relief has given legal notice to the other party and afforded the latter an opportunity to
contest it" 14 and a certification case is not such a proceeding, as this Court already ruled:

A certification proceedings is not a "litigation" in the sense in which the term is commonly
understood, but mere investigation of a non-adversary, fact-finding character, in which the
investigating agency plays the part of a disinterested investigator seeking merely to ascertain the
desires of the employees as to the matter of their representation. The court enjoys a wide discretion
in determining the procedure necessary to insure the fair and free choice of bargaining
representatives by the employees. 15

Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested issue of employer-
employee relationship between present petitioner and the private respondent, it would logically be that rendered in
the compulsory arbitration case (NCR Case No. AB-4-771-79, supra), petitioner having asserted, without dispute
from the private respondent, that said issue was there squarely raised and litigated, resulting in a ruling of the
Arbitration Branch (of the same Ministry of Labor) that such relationship did not exist, and which ruling was
thereafter affirmed by the National Labor Relations Commission in an appeal taken by said respondent. 16

In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to which of the
conflicting ruling just adverted to should be accorded primacy, given the fact that it was he who actively sought them
simultaneously, as it were, from separate fora, and even if the graver sanctions more lately imposed by the Court for
forum-shopping may not be applied to him retroactively.

Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res adjudicata; on contrary, it
acted correctly in doing so.

Said Court’s holding that upon the facts, there exists (or existed) a relationship of employer and employee between
petitioner and private respondent is, however, another matter. The Court does not agree that said facts necessarily
or logically point to such a relationship, and to the exclusion of any form of arrangements, other than of employment,
that would make the respondent's services available to the members and guest of the petitioner.
As long as it is, the list made in the appealed decision detailing the various matters of conduct, dress, language, etc.
covered by the petitioner's regulations, does not, in the mind of the Court, so circumscribe the actions or judgment
of the caddies concerned as to leave them little or no freedom of choice whatsoever in the manner of carrying out
their services. In the very nature of things, caddies must submit to some supervision of their conduct while enjoying
the privilege of pursuing their occupation within the premises and grounds of whatever club they do their work in.
For all that is made to appear, they work for the club to which they attach themselves on sufference but, on the other
hand, also without having to observe any working hours, free to leave anytime they please, to stay away for as long
they like. It is not pretended that if found remiss in the observance of said rules, any discipline may be meted them
beyond barring them from the premises which, it may be supposed, the Club may do in any case even absent any
breach of the rules, and without violating any right to work on their part. All these considerations clash frontally with
the concept of employment.

The IAC would point to the fact that the Club suggests the rate of fees payable by the players to the caddies as still
another indication of the latter's status as employees. It seems to the Court, however, that the intendment of such
fact is to the contrary, showing that the Club has not the measure of control over the incidents of the caddies' work
and compensation that an employer would possess.

The Court agrees with petitioner that the group rotation system so-called, is less a measure of employer control than
an assurance that the work is fairly distributed, a caddy who is absent when his turn number is called simply losing
his turn to serve and being assigned instead the last number for the day. 17

By and large, there appears nothing in the record to refute the petitioner's claim that:

(Petitioner) has no means of compelling the presence of a caddy. A caddy is not required to exercise
his occupation in the premises of petitioner. He may work with any other golf club or he may seek
employment a caddy or otherwise with any entity or individual without restriction by petitioner. . . .

. . . In the final analysis, petitioner has no was of compelling the presence of the caddies as they are
not required to render a definite number of hours of work on a single day. Even the group rotation of
caddies is not absolute because a player is at liberty to choose a caddy of his preference regardless
of the caddy's order in the rotation.

It can happen that a caddy who has rendered services to a player on one day may still find sufficient
time to work elsewhere. Under such circumstances, he may then leave the premises of petitioner
and go to such other place of work that he wishes (sic). Or a caddy who is on call for a particular day
may deliberately absent himself if he has more profitable caddying, or another, engagement in some
other place. These are things beyond petitioner's control and for which it imposes no direct sanctions
on the caddies. . . . 18

WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is reversed and set
aside, it being hereby declared that the private respondent, Fermin Llamar, is not an employee of petitioner Manila
Golf and Country Club and that petitioner is under no obligation to report him for compulsory coverage to the Social
Security System. No pronouncement as to costs. SO ORDERED.

33.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 118101 September 16, 1996

EDDIE DOMASIG, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), CATA GARMENTS CORPORATION
and/or OTTO ONG and CATALINA CO., respondents.

PADILLA, J.:

This petition for certiorari under Rule 65 of the Rules of Court seeks to nullify and set aside the Resolution 1of
respondent National Labor Relations Commission (NLRC) rendered on 20 September 1994 remanding the records of the
case to the arbitration branch of origin for further proceedings.

The antecedent facts as narrated by public respondent in the assailed resolution are as follows:

The complaint was instituted by Eddie Domasig against respondent Cata Garments Corporation, a
company engaged in garments business and its owner/manager Otto Ong and Catalina Co for illegal
dismissal, unpaid commission and other monetary claim[s]. Complainant alleged that he started
working with the respondent on July 6, 1986 as Salesman when the company was still named Cato
 Garments Corporation; that three (3) years ago, because of a complaint against respondent by its
workers, its changed its name to Cata Garments Corporation; and that on August 29, 1992, he was
dismissed when respondent learned that he was being pirated by a rival corporation which offer he
refused. Prior to his dismissal, complainant alleged that he was receiving a salary of P1,500.00 a
month plus commission. On September 3, 1992 he filed the instant complaint.

Respondent denied complainant's claim that he is a regular employee contending that he is a mere
commission agent who receives a commission of P5.00 per piece of article sold at regular price and
P2.50 per piece sold in [sic] bargain price; that in addition to commission, complainant received a
fixed allowance of P1,500.00 a month; that he had no regular time schedule; and that the company
come [sic] into existence only on September 17, 1991. In support of its claim that complainant is a
commission agent, respondent submitted as Annexes "B" and "B-1" the List of Sales Collections,
Computation of Commission due, expenses incurred, cash advances received for the month of
January and March 1992 (Rollo, p. 22-27). Respondent further contends that complainant failed to
turn over to the respondent his collection from two (2) buyers as per affidavit executed by these
buyers (Rollo p. 28-29) and for which, according to respondent it initiated criminal proceedings
against the complainant.

The Labor Arbiter held that complainant was illegally dismissed and entitled to reinstatement and
backwages as well as underpayment of salary; 13th month pay; service incentive leave and legal
holiday. The Arbiter also awarded complainant his claim for unpaid commission in the amount of
P143,955.00. 2

Private respondents appealed the decision of the labor arbiter to public respondent. As aforesaid, the NLRC
resolved to remand the case to the labor arbiter for further proceeding. It declared as follows:

We find the decision of the Labor Arbiter not supported by evidence on record. The issue of whether
or not complainant was a commission agent was not fully resolved in the assailed decision. It
appears that the Labor Arbiter failed to appreciate the evidences submitted by respondent as
Annexes "B" and "B-1" (Rollo p. 22-27) in support of its allegation as regard[s] the nature of
complainant's employment. Neither is there a showing that the parties were required to adduce
further to support their respective claim. The resolution of the nature of complainant's employment is
vital to the case at bar considering that it would be determinative to his entitlement of monetary
benefits. The same is similarly true as regard the claim [sic] for unpaid commission. The amount
being claim [sic] for unpaid commission as big as it is requires substantial proof to establish the
entitlement of the complainant proof to establish the entitlement of the complainant to the same. We
take not of the respondent's claim that "while they admit that complainant has an unpaid commission
due him, the same is only for his additional sale of 4,027 pieces at regular price and 1,047 pieces at
bargain price for a total sum of (P20,135.00 + 2,655.00) or P22,820.00 as appearing in the list of
Sales and unpaid commission" (Annex "C" and "C-1" Appeal, Rollo p. 100-102). Said amount
according to respondent is being withheld by them pending the accounting of money collected by
complainant from his two (2) buyers which was not remitted to them. Considering the conflicting
version of the parties regarding the issues on hand, it was incumbent on the Labor Arbiter to conduct
further proceedings thereon. The ends of justice would better be served if both partied are given the
opportunity to ventilate further their positions. 3

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

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 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 petitioner's salaries for the months stated therein, we agree with the labor arbiter that these matters
constitute substantial evidence adequate to support a conclusion that petitioner was indeed an employee of private
respondent.

Section 4, Rule V of the Rules of Procedure of the National Labor Relations Commission provides thus:

Sec. 4. Determination of Necessity of Hearing. — Immediately after the submission of the parties of
their position papers/memoranda, the Labor Arbiter shall motu propio determine whether there is
need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to further elicit facts or information, including
but not limited to the subpoena of relevant documentary evidence, if any, from any party or witness.

It is clear from the law that it is the arbiters who are authorized to determine whether or not there is a
necessity for conducting formal hearings in cases brought before them for adjudication. Such
determination is entitled to great respect in the absence of arbitrariness. 6

In the case at bar, we do not believe that the labor arbiter acted arbitrarily. Contrary to the finding of the NLRC, her
decision at least on the existence of an employer-employee relationship between private respondents and petitioner,
is supported by substantial evidence on record.

The list of sales collection including computation of commissions due, expenses incurred and cash advances
received (Exhibits "B" and "B-1") which, according to public respondent, the labor arbiter failed to appreciate in
support of private respondents" allegation as regards the nature of petitioner's employment as a commission agent,
cannot overcome the evidence of the ID card and salary vouchers presented petitioner which private respondents
have not denied. The list presented by private respondents would even support petitioner's allegations that, aside
from a monthly salary of P1,500.00, he also received commissions for his work as a salesman of private
respondents.

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

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

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

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

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

WHEREFORE, the resolutions of the public respondent dated 20 September 1994 and 9 November 1994 are SET
ASIDE. The decision of the labor arbiter dated 19 may 1993 us REINSTATED and AFFIRMED subject to the
modification above-stated as regards a re-computation by the labor arbiter of the commissions to which petitioner
maybe actually entitled.

SO ORDERED.
 34.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 154463 September 5, 2006
CEBU METAL CORPORATION, petitioner,
vs.
GREGORIO ROBERT SALILING, ELIAS BOLIDO, MANUEL ALQUIZA, and BENJIE AMPARADO, respondents.

DECISION

CHICO-NAZARIO, J.:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of the
Decision1dated 18 February 2002, and the Resolution2 dated 27 June 2002, rendered by the Court of Appeals in
CA-G.R. SP No. 66480, which annulled and set aside the decision3 dated 9 October 2000, and resolution4 dated 2
July 2001, of the National Labor Relations Commission (NLRC) in NLRC Case No.V-000840-99. In its decision, the
NLRC reversed and set aside the decision5 dated 27 May 1999 of Labor Arbiter Jesus N. Rodriguez, Jr. in favor of
complainant employees, herein respondents Gregorio Saliling, Elias Bolido, Manuel Alquiza and Benjie Amparado,
RAB Case No. 06-01-10019-97.

The Facts

Parties herein are somewhat at variance with respect to the basic facts of the case at bar.

The facts of the case as recounted6 by petitioner Cebu Metal Corporation are as follows:

Respondent (Cebu Metal Corporation) is a corporation engage (sic) in buying and selling of scrap iron x x x.
In the Bacolod Branch, it has three regular (3) employees holding such positions as Officer-in-Charge, a
scaler and a yardman, x x x whose salaries are paid directly by its main office in Cebu while others are
undertaking pakiao work in the unloading of scrap iron for stockpiling.

Among those workers who presented for work in the unloading of scrap iron in the area are the unemployed
persons or trisicad drivers standing by in the vicinity some of whom are the herein complainants x x x
Gregorio Robert Saliling, Elias Bolido, Manuel Alquiza, Benjie Amparado and non-complainants Arnel Allera,
Eliseo Torralba or any other persons who wanted to augment their income aside from their regular jobs.
Robert Gregorio Saliling started working in 1996, Elias Bolido on (sic) October 1995 while Manuel Alquiza
and Benjie Amparado, on (sic) February 1996.

As compensation for their services, these workers including the herein complainants are paid at the rate of
P15.00 per ton for which each person can unload at least two (2) to three (3) tons per hour or can earn at
least P240.00 to P360.00 in eight (8) hours if work is only available which payment necessarily includes cost
of living allowance (COLA) and 13th-month pay.

xxxx

Petitioner company further elaborated7 on the nature of its business and the circumstances surrounding the
employment of respondent complainants, to wit:

The Bacolod buying station is mainly a stockyard where scrap metal delivered by its suppliers are
stockpiled.

The supply of scrap metal is not steady as it depends upon many factors, such as availability of supplies,
price, competition and demand among others. There are therefore (sic) instances when in a single week ,
one or two trucks of scrap metal are delivered while there are weeks when not a single truck of scrap metal
are delivered although there may also be weeks when quite a number of trucks are delivered to the
stockyard x x x. The arrivals of these trucks and the deliveries of scrap metal are not regular and the
schedules of deliveries x x x to the stockyard x x x are not known before hand by the respondent (petitioner
company).

x x x [t]he trucks used in the delivery of scrap metal are owned and/or rented by the different suppliers of
scrap metal. These trucks have their own driver and truck boys employed by these different suppliers.
Sometimes, these trucks do not have any truck boys, and in these instances, the respondent hires the
services of people for the purpose of unloading the scrap metal from these trucks.
 It is for this reason that the unloaders hired by the respondent to unload the scrap metal from these trucks
are basically seasonal workers. They are hired only whenever there are trucks of suppliers of scrap metal
that deliver scrap metal to the yard of the respondent and these trucks happen not to have any
accompanying truck boys. Whoever are available and whoever are willing to help unload x x x on a
particular occasion are hired to unload x x x.

Usually, there is a leader for a particular group who is tasked to unload the scrap metal from a particular
truck. It is this leader who distributes the individual take of each member of the particular group unloading
the scrap metal from a particular truck.

In contrast, respondent complainants, Gregorio Saliling, Elias Bolido, Manuel Alquiza and Benjie Amparado, in their
position paper8 submitted to the Labor Arbiter, narrate:

1. That complainants Gregorio Saliling was employed by defendant Corporation x x x in 1988, complainant
Elias Bolido was hired in 1992 and complainant Benjie Amparado was hired by respondent in 1994; x x x.

2. The aforesaid complainants, from the time they were employed by respondent, they received their salary
on (sic) the following rate:

GREGORIO ROBERT ------- P5.00/hour in 1988

SALILING 5.00/hour in 1989
6.00/hour in 1990
7.00/hour in 1991
7.00/hour in 1992
7.00/hour in 1993
7.00/hour in 1994
7.50/hour in 1995
8.75/hour in 1996
ELIAS BOLIDO ------- P100.00/day in 1992
7.00/hour in 1993
7.00/hour in 1994
7.50/hour in 1995
8.75/hour in 1996
BENJIE AMPARADO ------- P7.00/hour in 1994
7.50/hour in 1995
8.75/hour in 1996

3. That the aforesaid complainants never received any other benefits from the respondent, except the
amount indicated above; (sic) They received the sum of P10.93 per hour in case of overtime work, but they
never received additional benefits in case, (sic) they worked on Saturdays, Sundays, and Holidays;

Complainants likewise never received 13th month pay, holiday pay, incentive leave pay, bonuses and other
labor benefits;

4. Complainants were required to work from 8:00 A.M. to 12:00 noon and from 1:00 P.M. to 5:00 P.M. or for
eight hours a day; seven days a week and thirty days a month;

5. When these complainants demanded from respondent for the increase of their salary, respondent through
Marlon got irritated and instructed complainants to stop working, thus, complainants, effective December
1996 were precluded from entering respondent loading and unloading compound x x x.

On 10 January 1997, respondent complainants filed a Complaint9 before the Regional Arbitration Branch No VI,
Bacolod City for underpayment of wages and non-payment of the following benefits: 1) 13th month pay; 2) holiday
pay; and 3) service incentive leave pay.

On 6 March 1998, respondent complainants manifested10 that they were including in their complaint against
petitioner company, the claim for illegal dismissal. Such belated filing was alleged to have been due to the fact that
they were only dismissed after the filing of their complaint.

On 27 May 1999, the Labor Arbiter rendered a decision11 the dispositive of which reads:

CONFORMABLY TO THE FOREGOING, respondent Cebu Metal Corporation, through its manager,
MARLON RADEN, is hereby ordered to REINSTATE complainants to their former positions with backwages
limited to one (1) year and 13th month pay, ERA and COLA as follows:

NAME OF COMPLAINANTS:
 1. Gregorio Robert Saliling
A) Backwages ----- P42,238.30
B) 13 Month Pay
th ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38
2. Elias Bolido
A) Backwages ----- P42,238.30
B) 13th Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38

A) Backwages ----- P42,238.30

B) 13th Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38
3. Manuel Alquiza
A) Backwages ----- P42,238.30
B) 13th Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38
4. Benjie Amparado
A) Backwages ----- P42,238.30
B) 13th Month Pay ----- 7,912.34
C) ERA ----- 1,139.83
D) COLA ----- 12,961.91
TOTAL ----- P64,252.38
GRAND TOTAL ----- P257,009.52

In case reinstatement is no longer feasible, complainants are to be given separation pay equivalent to fifteen
(15) days to be given for every year of service.

Attorney's fees of five percent (5%) of the total judgment award of the amount of Twelve Thousand Eight
Hundred fifty Pesos and Forty-Eight Centavos (P12,850.48) is also awarded.

In ordering the reinstatement of respondent complainants, the Labor Arbiter found them to have been illegally
dismissed from their employment with petitioner company. The decision explained that:

Regarding the second issue which is illegal dismissal, we find the same meritorious. Under Article 280 of the
Labor Code, complainants are regular employees since they are "engaged to perform activities which are
necessary and desirable in the usual business or trade of the employer", (sic) x x x. Complainants job of
loading, unloading and stockpiling scrap iron is necessary and part of the business of respondent. Since
complainants were dismissed without cause and due process of law, they are entitled to reinstatement with
backwages limited to one (1) year.

Aggrieved, petitioner company appealed the foregoing decision to the NLRC.

In a Decision12 promulgated on 9 October 2000, the Fourth Division of the NLRC reversed and set aside the ruling of
the Labor Arbiter. Instead, the Commission held that respondent complainants were not regular employees of
petitioner company, thus, they could not have been illegally dismissed. The order of reversal was based on the
Commission's finding that the petty cash vouchers13 submitted by petitioner company confirmed the fact that
unloaders were paid on "pakiao" or task basis at P15.00 per metric ton. The Commission further rationalized that
with the irregular nature of the work involved, the stoppage and resumption of which depended solely on the
availability or supply of scrap metal, it necessarily follows that after the job of unloading was completed and
"unloaders" were paid the contract price, the latter's working relationship with petitioner company legally ended.
They were then free to offer their services to others.

As an aside, the Commission observed that it was erroneous for the Labor Arbiter to rule on the question of whether
or not respondent complainants were illegally dismissed since the complaint filed on 10 January 1997 failed to
include such matter. To be sure, the complaint merely imputed the following causes of action: 1) underpayment of
wages; and 2) non-payment of a) 13th month pay; b) holiday pay; and c) service incentive leave pay. Nowhere was
the matter of illegal dismissal written on the same. The issue was formally brought up only on 6 March 1998, via a
Manifestation, long after the filing of the parties' respective position papers.

In view of the above, the Commission declared that respondent complainants invalidly raised the issue of illegal
dismissal in the position paper they filed before the Labor Arbiter.

Dissatisfied by the above, it was the turn of respondent complainants to challenge the same but this time before the
Court of Appeals.

In a Decision dated 18 February 2002, the Court of Appeals annulled and set aside the assailed decision of the
NLRC. Said Decision was grounded exclusively on the argument that the Commission committed grave abuse of
discretion in reversing and setting aside the Decision of the Labor Arbiter since petitioner company did not make an
issue out of the Labor Arbiter's action in ruling on a cause of action, i.e., illegal dismissal, not specifically stated in
the complaint. Stated differently, the NLRC gravely abused its discretion in ruling on an issue that was allegedly not
raised on appeal before it.

The Court of Appeals decision ended in this wise:

WHEREFORE, foregoing premises considered, the PETITION HAVING MERIT is hereby GIVEN DUE
COURSE. RESULTANTLY, the challenged decision of Public Respondent National Labor Relations
Commission is hereby ANNULLED AND SET ASIDE AND THE JUDGMENT OF THE LABOR ARBITER IN
RAB-CASE No. 06-01-10019-97 REINSTATED. No costs.

SO ORDERED.

The Issues

Its Motion for Reconsideration having been denied14, petitioner company now comes to this Court imputing the
following errors on the Court of Appeals:

I.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE NATIONAL LABOR RELATIONS
COMMISSION FOURTH DIVISION, CEBU CITY HAD NO AUTHORITY TO DISMISS PRIVATE
RESPONDENT'S CLAIMS FOR ILLEGAL DISMISSAL AND OTHER MONEY CLAIMS;

II.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE NATIONAL LABOR RELATIONS
COMMISSION FOURTH DIVISION, CEBU CITY HAD NO AUTHORITY TO REVERSE THE LABOR
ARBITER'S DECISION; and

III.

THE COURT OF APPEALS ERRED IN GRANTING THE PETITION FOR CERTIORARI IN CA G.R. SP.
NO. 66480 AND IN ANNULING (sic) THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION.

In essence, the issue for resolution in the case at bar is whether or not the Court of Appeals committed reversible
error in ruling that the NLRC had no authority to adjudicate on an issue not properly raised in petitioner company's
Memorandum on Appeal.

Petitioner company posits that contrary to the argument of the appellate court, the main or primary reason for the
reversal of the Labor Arbiter's decision was the finding that respondent complainants could not be regarded, based
on the facts of the case and the evidence presented, as regular employees of petitioner company.

Conversely, respondent complainants allege that an appellate court has no power to resolve an unassigned error
that does not affect the court's jurisdiction or is an error that is neither plain nor clerical. Likewise, they contend that
"there is nothing to show that petitioner company made an issue of the Labor Arbiter's action in ruling on a cause of
action not specifically stated in the complaint."

The Court's Ruling

We find merit in the petition.

It was plain error for the Court of Appeals to annul and set aside the decision of the NLRC on the lone reason that
the latter "dismissed Petitioner's appeal on the basis of an issue not raised by Private Respondent in its appeal x x
x."15 A painstaking review of the decision of the NLRC will readily reveal that the Commission's finding that
respondent complainants were not regular employees was the raison d'être for the subsequent turnaround of the
state of affairs.

What the NLRC made use of to reverse the Labor Arbiter's decision was precisely the conclusion of the latter that
respondent complainants were regular employees of petitioner company. According to the Commission, such
conclusion was predicated merely on the consideration that respondent complainants were performing activities
necessary and desirable to the business or trade of their employer. Based on the facts of the case and the evidence
presented by the parties to the case at bar, however, the NLRC arrived at a divergent conclusion, which we fully
agree in. We quote with approval its disquisition:

It is interesting to note that the Labor Arbiter had given credence and probative value to the Petty Cash
Vouchers submitted by the respondents. Thus he said:

"The petty cash vouchers (Annexes "1" to"1-A-62", respondents position paper) show that
complainants are not paid on hourly or daily basis as they would like this office to believe but on
"pakiao" or task basis at P15.00 per metric ton. There is no basis then for complainants to claim that
they are underpaid since there is no minimum wage in this type of work. Complainants' earnings
depend upon their own diligence and speed in unloading and stockpiling scrap iron. More
importantly, it depends upon the availability of scrap iron to be unloaded and stockpiled."

The above findings validate respondent's position as to the nature of complainants' work. Their services are
needed only when scrap metals are delivered which occurs only one or twice a week or sometimes no
delivery at all in a given week. The irregular nature of work, stoppage of work and then work again
depending on the supply of scrap metal has not been denied by complainants. On the contrary they even
admitted the same in their Reply to respondent's Appeal. x x x. Indeed, it would be unjust to require
respondent to maintain complainants in the payroll even if there is no more work to be done. To do so would
make complainants privileged retainers who collect payment from their employer for work not done. This is
extremely unfair and amount to cuddling of labor at the expense of management.16

It should be remembered that The Philippine Constitution, while inexorably committed towards the protection of the
working class from exploitation and unfair treatment, nevertheless mandates the policy of social justice so as to
strike a balance between an avowed predilection for labor, on the one hand, and the maintenance of the legal rights
of capital, the proverbial hen that lays the golden egg, on the other. Indeed, we should not be unmindful of the legal
norm that justice is in every case for the deserving, to be dispensed with in the light of established facts, the
applicable law, and existing jurisprudence.17

Under the circumstances abovestated:

x x x there can be no illegal dismissal to speak of. Besides, complainants cannot claim regularity in the hiring
every time a truck comes loaded with scrap metal. This is confirmed in the Petty cash Vouchers which are in
the names of different leaders who apportion the amount earned among his members.18

And, quite telling is the fact that not every truck delivery of scrap metal requires the services of respondent
complainants when a particular truck is accompanied by its own "unloader." And whenever required, respondent
complainants were not always the ones contracted to undertake the unloading of the trucks since the work was
offered to whomever were available at a given time.

Finally, the judgment of the Commission that the Labor Arbiter acted incorrectly in ruling on a cause of action, i.e.,
illegal dismissal, not specifically stated in the complaint, did not constitute grave abuse of discretion on its part.

It is well settled that an act of a court or tribunal may only be considered to have been done in grave abuse of
discretion when the same was performed in a capricious or whimsical exercise of judgment which is equivalent to
lack of jurisdiction.19 The abuse of discretion must be so patent and gross as to amount to an evasion of positive
duty or to a virtual refusal to perform a duty enjoined or to a ct at all in contemplation of law, as where the power is
exercised in an arbitrary power and despotic manner by reason of passion or personal hostility.20

In the case at bar, from the preceding definition, it is quite apparent that no grave abuse of discretion can be
attributed to the NLRC. Its decision simply expressed an observation, to wit:

Moreover, We note that in the complaint filed last January 10, 1997, the issue of illegal dismissal was not
raised as a cause of action although it was later discussed in their position paper filed on January 12, 1998.
x x x. [Emphasis supplied.]

The use of the word "moreover" clearly expresses NLRC's position in treating the matter of the non-inclusion of the
issue of illegal dismissal in the complaint merely as an add-on, adjunct or a supplement to its finding that respondent
complainants' were not regular employees of petitioner company.
At any rate, the Court is clothed with authority to review matters, even if they are not assigned as errors in their
appeal, if it finds that their consideration is necessary in arriving at a just decision of the case.21

WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The Decision dated 18 February 2002,
and the Resolution dated 27 June 2002, both rendered by the Court of Appeals in CA-G.R. SP No. 66480, are
hereby REVERSED and SET ASIDE. Accordingly, the Decision of the NLRC dated 9 October 2000
is REINSTATED. Costs against respondent complainants. SO ORDERED.

35.

Republic of the Philippines

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

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision
and Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP
No. 78515 dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The
appellate court reversed and set aside the Decision of the National Labor Relations Commission (NLRC) dated April
15, 2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter
dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for
constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as
Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company. She
was also designated as Liaison Officer to the City of Makati to secure business permits, construction permits and
other licenses for the initial operation of the company. 5

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither
did she attend any board meeting nor required to do so. She never prepared any legal document and never
represented the company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign
documentation for the company. 6

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of
petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings with government agencies, especially
with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and
to administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by
Kasei Corporation. 7

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was
P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to
sign a prepared resolution for her replacement but she was assured that she would still be connected with Kasei
Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation
and announced that nothing had changed and that petitioner was still connected with Kasei Corporation as
Technical Assistant to Seiji Kamura and in charge of all BIR matters. 9

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001
for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly
because the company was not earning well. On October 2001, petitioner did not receive her salary from the
company. She made repeated follow-ups with the company cashier but she was advised that the company was not
earning well. 10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed
that she is no longer connected with the company. 11
Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive
dismissal before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner
was hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate
Secretary. As technical consultant, petitioner performed her work at her own discretion without control and
supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office any time she
wanted. The company never interfered with her work except that from time to time, the management would ask her
opinion on matters relating to her profession. Petitioner did not go through the usual procedure of selection of
employees, but her services were engaged through a Board Resolution designating her as technical consultant. The
money received by petitioner from the corporation was her professional fee subject to the 10% expanded
withholding tax on professionals, and that she was not one of those reported to the BIR or SSS as one of the
company’s employees. 12

Petitioner’s designation as technical consultant depended solely upon the will of management. As such, her
consultancy may be terminated any time considering that her services were only temporary in nature and dependent
on the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees
for the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees
reported to the BIR, as well as a list of payees subject to expanded withholding tax which included petitioner. SSS
records were also submitted showing that petitioner’s latest employer was Seiji Corporation. 13

The Labor Arbiter found that petitioner was illegally dismissed, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainant’s dismissal as illegal;

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

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

(27,500 x 10 mos.)

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

c. Housing Allowance (01/2001 – 07/2002) 57,000.00

d. Midyear Bonus 2001 27,500.00

e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei

Corp. from 1996-2001 361,175.00

g. Moral and exemplary damages 100,000.00

h. 10% Attorney’s fees 87,076.50

P957,742.50

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

SO ORDERED. 14

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of
which reads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay computed at one month per year of service in
addition to full backwages from October 2001 to July 31, 2002;

2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of
P100,000.00 and P361,175.00 are deleted;

3) The award of 10% attorney’s fees shall be based on salary differential award only;

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

SO ORDERED. 15

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

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

SO ORDERED. 16

The appellate court denied petitioner’s motion for reconsideration, hence, the present recourse.

The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between
petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand,
and the Court of Appeals on the other, there is a need to reexamine the records to determine which of the
propositions espoused by the contending parties is supported by substantial evidence. 17

We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the
existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test
where the person for whom the services are performed reserves a right to control not only the end to be achieved
but also the means to be used in reaching such end. In addition to the standard of right-of-control, the existing
economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in
determining the existence of an employer-employee relationship.

However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the
parties, owing to the complexity of such a relationship where several positions have been held by the worker. There
are instances when, aside from the employer’s power to control the employee with respect to the means and
methods by which the work is to be accomplished, economic realities of the employment relations help provide a
comprehensive analysis of the true classification of the individual, whether as employee, independent contractor,
corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s power to
control the employee with respect to the means and methods by which the work is to be accomplished; and (2) the
underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in
this case where there is no written agreement or terms of reference to base the relationship on; and due to the
complexity of the relationship based on the various positions and responsibilities given to the worker over the period
of the latter’s employment.

The control test initially found application in the case of Viaña v. Al-Lagadan and Piga, 19 and lately in Leonardo v.
Court of Appeals, 20 where we held that there is an employer-employee relationship when the person for whom the
services are performed reserves the right to control not only the end achieved but also the manner and means used
to achieve that end.

In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing
between the parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls,
to give a clearer picture in determining the existence of an employer-employee relationship based on an analysis of
the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the
whole economic activity, 22 such as: (1) the extent to which the services performed are an integral part of the
employer’s business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature and degree
of control exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and
duration of the relationship between the worker and the employer; and (7) the degree of dependency of the worker
upon the employer for his continued employment in that line of business. 23

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his
continued employment in that line of business. 24 In the United States, the touchstone of economic reality in
analyzing possible employment relationships for purposes of the Federal Labor Standards Act is dependency. 25 By
analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes of the
Labor Code ought to be the economic dependence of the worker on his employer.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was
under the direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant. She reported for
work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting
Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for the proper operation of the
corporation such as securing business permits and other licenses over an indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent
corporation because she had served the company for six years before her dismissal, receiving check vouchers
indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social
Security contributions from August 1, 1999 to December 18, 2000. 26 When petitioner was designated General
Manager, respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioner’s membership in
the SSS as manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei
Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an
employer-employee relationship between petitioner and respondent corporation. 27

It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued
employment in the latter’s line of business.

In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification
card is provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of
the firm that issues it. Together with the cash vouchers covering petitioner’s salaries for the months stated therein,
these matters constitute substantial evidence adequate to support a conclusion that petitioner was an employee of
private respondent.

We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the
latter were the former’s employees. The coverage of Social Security Law is predicated on the existence of an
employer-employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never
acted as Corporate Secretary and that her designation as such was only for convenience. The actual nature of
petitioner’s job was as Kamura’s direct assistant with the duty of acting as Liaison Officer in representing the
company to secure construction permits, license to operate and other requirements imposed by government
agencies. Petitioner was never entrusted with corporate documents of the company, nor required to attend the
meeting of the corporation. She was never privy to the preparation of any document for the corporation, although
once in a while she was required to sign prepared documentation for the company. 30

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been
allegedly withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced
that the allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor
on any retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth
and would make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous
witnesses. 32 A recantation does not necessarily cancel an earlier declaration, but like any other testimony the same
is subject to the test of credibility and should be received with caution. 33

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for compensation, and is economically dependent
upon respondent for her continued employment in that line of business. Her main job function involved accounting
and tax services rendered to respondent corporation on a regular basis over an indefinite period of engagement.
Respondent corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause.
More importantly, respondent corporation had the power to control petitioner with the means and methods by which
the work is to be accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to
September 2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full
backwages. Since the position of petitioner as accountant is one of trust and confidence, and under the principle of
strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement. 34

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is
an involuntary resignation resulting in cessation of work resorted to when continued employment becomes
impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to an employee. 35 In Globe Telecom,
Inc. v. Florendo-Flores, 36 we ruled that where an employee ceases to work due to a demotion of rank or a
diminution of pay, an unreasonable situation arises which creates an adverse working environment rendering it
impossible for such employee to continue working for her employer. Hence, her severance from the company was
not of her own making and therefore amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed.
Even as we, in every case, attempt to carefully balance the fragile relationship between employees and employers,
we are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of employees.
This would enable employees to avail of the benefits accorded to them by law, in line with the constitutional
mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary social
economic force in furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29,
2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision
of the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02,
is REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina
Francisco’s full backwages from the time she was illegally terminated until the date of finality of this decision, and
separation pay representing one-half month pay for every year of service, where a fraction of at least six months
shall be considered as one whole year.

SO ORDERED.

36. Sevilla vs. CA G.R. Nos. L-41182, April 15, 1988, 160 SCRA 171 (Duplicate)