1
[G.R. No. 122917. July 12, 1999]
MARITES BERNARDO, ELVIRA GO DIAMANTE, REBECCA E. DAVID, DAVID P. PASCUAL, RAQUEL
ESTILLER, ALBERT HALLARE, EDMUND M. CORTEZ, JOSELITO O. AGDON GEORGE P. LIGUTAN
JR., CELSO M. YAZAR, ALEX G. CORPUZ,….et al, Petitioners v. NATIONAL LABOR RELATIONS
COMMISSION & FAR EAST BANK AND TRUST COMPANY, Respondents.
DECISION
PANGANIBAN, J.:
The Magna Carta for Disabled Persons mandates that qualified disabled persons be granted
the same terms and conditions of employment as qualified able-bodied employees. Once
they have attained the status of regular workers, they should be accorded all the benefits
granted by law, notwithstanding written or verbal contracts to the contrary. This treatment is
rooted not merely on charity or accommodation, but on justice for all.
The Case
Challenged in the Petition for Certiorari1 before us is the June 20, 1995 Decision2 of the
National Labor Relations Commission (NLRC),3 which affirmed the August, 22 1994 ruling of
Labor Arbiter Cornelio L. Linsangan. The labor arbiters Decision disposed as
follows:4cräläwvirtualibräry
WHEREFORE, judgment is hereby rendered dismissing the above-mentioned complaint for
lack of merit.
Also assailed is the August 4, 1995 Resolution5 of the NLRC, which denied the Motion for
Reconsideration.
The Facts
The facts were summarized by the NLRC in this wise:6
Complainants numbering 43 (p. 176, Records) are deaf-mutes who were hired on various
periods from 1988 to 1993 by respondent Far East Bank and Trust Co. as Money Sorters and
Counters through a uniformly worded agreement called Employment Contract for
Handicapped Workers. (pp. 68 & 69, Records) The full text of said agreement is quoted
below:
EMPLOYMENT CONTRACT FOR HANDICAPPED WORKERS
This Contract, entered into by and between:
FAR EAST BANK AND TRUST COMPANY, a universal banking corporation duly organized and
existing under and by virtue of the laws of the Philippines, with business address at FEBTC
Building, Muralla, Intramuros, Manila, represented herein by its Assistant Vice President, MR.
FLORENDO G. MARANAN, (hereinafter referred to as the BANK);
- and -
________________, ________________ years old, of legal age, _____________, and residing
at __________________ (hereinafter referred to as the (EMPLOYEE).
WITNESSETH: That
WHEREAS, the BANK, cognizant of its social responsibility, realizes that there is a need to
provide disabled and handicapped persons gainful employment and opportunities to realize
their potentials, uplift their socio-economic well being and welfare and make them
productive, self-reliant and useful citizens to enable them to fully integrate in the
mainstream of society;
WHEREAS, there are certain positions in the BANK which may be filled-up by disabled and
handicapped persons, particularly deaf-mutes, and the BANK ha[s] been approached by some
civic-minded citizens and authorized government agencies [regarding] the possibility of hiring
handicapped workers for these positions;
WHEREAS, the EMPLOYEE is one of those handicapped workers who [were] recommended
for possible employment with the BANK;
NOW, THEREFORE, for and in consideration of the foregoing premises and in compliance with
Article 80 of the Labor Code of the Philippines as amended, the BANK and the EMPLOYEE
have entered into this Employment Contract as follows:
1. The BANK agrees to employ and train the EMPLOYEE, and the EMPLOYEE agrees to
diligently and faithfully work with the BANK, as Money Sorter and Counter.
2. The EMPLOYEE shall perform among others, the following duties and responsibilities:
i Sort out bills according to color;
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ii. Count each denomination per hundred, either manually or with the aid of a counting
machine;
iii. Wrap and label bills per hundred;
iv. Put the wrapped bills into bundles; and
v. Submit bundled bills to the bank teller for verification.
3. The EMPLOYEE shall undergo a training period of one (1) month, after which the BANK
shall determine whether or not he/she should be allowed to finish the remaining term of this
Contract.
4. The EMPLOYEE shall be entitled to an initial compensation of P118.00 per day, subject to
adjustment in the sole judgment of the BANK, payable every 15th and end of the month.
5. The regular work schedule of the EMPLOYEE shall be five (5) days per week, from Mondays
thru Fridays, at eight (8) hours a day. The EMPLOYEE may be required to perform overtime
work as circumstance may warrant, for which overtime work he/she [shall] be paid an
additional compensation of 125% of his daily rate if performed during ordinary days and
130% if performed during Saturday or [a] rest day.
6. The EMPLOYEE shall likewise be entitled to the following benefits:
i. Proportionate 13th month pay based on his basic daily wage.
ii. Five (5) days incentive leave.
iii. SSS premium payment.
7. The EMPLOYEE binds himself/herself to abide [by] and comply with all the BANK Rules and
Regulations and Policies, and to conduct himself/herself in a manner expected of all
employees of the BANK.
8. The EMPLOYEE acknowledges the fact that he/she had been employed under a special
employment program of the BANK, for which reason the standard hiring requirements of the
BANK were not applied in his/her case. Consequently, the EMPLOYEE acknowledges and
accepts the fact that the terms and conditions of the employment generally observed by the
BANK with respect to the BANKs regular employee are not applicable to the EMPLOYEE, and
that therefore, the terms and conditions of the EMPLOYEEs employment with the BANK shall
be governed solely and exclusively by this Contract and by the applicable rules and
regulations that the Department of Labor and Employment may issue in connection with the
employment of disabled and handicapped workers. More specifically, the EMPLOYEE hereby
acknowledges that the provisions of Book Six of the Labor Code of the Philippines as
amended, particularly on regulation of employment and separation pay are not applicable to
him/her.
9. The Employment Contract shall be for a period of six (6) months or from ____ to ____
unless earlier terminated by the BANK for any just or reasonable cause. Any continuation or
extension of this Contract shall be in writing and therefore this Contract will automatically
expire at the end of its terms unless renewed in writing by the BANK.
IN WITNESS WHEREOF, the parties, have hereunto affixed their signature[s] this ____ day of
_________________, ____________ at Intramuros, Manila, Philippines.
In 1988, two (2) deaf-mutes were hired under this Agreement; in 1989 another two (2); in
1990, nineteen (19); in 1991 six (6); in 1992, six (6) and in 1993, twenty-one (21). Their
employment[s] were renewed every six months such that by the time this case arose, there
were fifty-six (56) deaf-mutes who were employed by respondent under the said
employment agreement. The last one was Thelma Malindoy who was employed in 1992 and
whose contract expired on July 1993.
xxx
Disclaiming that complainants were regular employees, respondent Far East Bank and Trust
Company maintained that complainants who are a special class of workers the hearing
impaired employees were hired temporarily under [a] special employment arrangement
which was a result of overtures made by some civic and political personalities to the
respondent Bank; that complainant[s] were hired due to pakiusap which must be considered
in the light of the context of the respondent Banks corporate philosophy as well as its career
and working environment which is to maintain and strengthen a corps of professionals
trained and qualified officers and regular employees who are baccalaureate degree holders
from excellent schools which is an unbending policy in the hiring of regular employees; that
in addition to this, training continues so that the regular employee grows in the corporate
ladder; that the idea of hiring handicapped workers was acceptable to them only on a special
arrangement basis; that it adopted the special program to help tide over a group of
handicapped workers such as deaf-mutes like the complainants who could do manual work
for the respondent Bank; that the task of counting and sorting of bills which was being
performed by tellers could be assigned to deaf-mutes; that the counting and sorting of
3

money are tellering works which were always logically and naturally part and parcel of the
tellers normal functions; that from the beginning there have been no separate items in the 15. ROBERT G. NOORA Intramuros 15 FEB 93 15 AUG 93
respondent Bank plantilla for sorters or counters; that the tellers themselves already did the
sorting and counting chore as a regular feature and integral part of their duties (p. 97, 16. MILAGROS O. LEQUIGAN Intramuros 1 FEB 93 1 AUG 93
Records); that through the pakiusap of Arturo Borjal, the tellers were relieved of this task of
counting and sorting bills in favor of deaf-mutes without creating new positions as there is no 17. ADRIANA F. TATLONGHARI Intramuros 22 JAN 93 22 JUL 93
position either in the respondent or in any other bank in the Philippines which deals with
purely counting and sorting of bills in banking operations. 18. IKE CABANDUCOS Intramuros 24 FEB 93 24 AUG 93

Petitioners specified when each of them was hired and dismissed, viz:7cräläwvirtualibräry 19. COCOY NOBELLO Intramuros 22 FEB 93 22 AUG 93

NAME OF PETITIONER WORKPLACE Date Hired Date Dismissed 20. DORENDA CATIMBUHAN Intramuros 15 FEB 93 15 AUG 93

1. MARITES BERNARDO Intramuros 12 NOV 90 17 NOV 93 21. ROBERT MARCELO West 31 JUL 938 1 AUG 93

2. ELVIRA GO DIAMANTE Intramuros 24 JAN 90 11 JAN 94 22. LILIBETH Q. MARMOLEJO West 15 JUN 90 21 NOV 93

3. REBECCA E. DAVID Intramuros 16 APR 90 23 OCT 93 23. JOSE E. SALES West 6 AUG 92 12 OCT 93

4. DAVID P. PASCUAL Bel-Air 15 OCT 88 21 NOV 94 24. ISABEL MAMAUAG West 8 MAY 92 10 NOV 93

5. RAQUEL ESTILLER Intramuros 2 JUL 92 4 JAN 94 25. VIOLETA G. MONTES Intramuros 2 FEB 90 15 JAN 94

6. ALBERT HALLARE West 4 JAN 91 9 JAN 94 26. ALBINO TECSON Intramuros 7 NOV 91 10 NOV 93

7. EDMUND M. CORTEZ Bel-Air 15 JAN 91 3 DEC 93 27. MELODY V. GRUELA West 28 OCT 91 3 NOV 93

8. JOSELITO O. AGDON Intramuros 5 NOV 90 17 NOV 93 28. BERNADETH D. AGERO West 19 DEC 90 27 DEC 93

9. GEORGE P. LIGUTAN, JR. Intramuros 6 SEPT 89 19 JAN 94 29. CYNTHIA DE VERA Bel-Air 26 JUN 90 3 DEC 93

10. CELSO M. YAZAR Intramuros 8 FEB 93 8 AUG 93 30. LANI R. CORTEZ Bel-Air 15 OCT 88 10 DEC 93

11. ALEX G. CORPUZ Intramuros 15 FEB 93 15 AUG 93 31. MA. ISABEL B. CONCEPCION West 6 SEPT 90 6 FEB 94

12. RONALD M. DELFIN Intramuros 22 FEB 93 22 AUG 93 32. DINDO VALERIO Intramuros 30 MAY 93 30 NOV 93

13. ROWENA M. TABAQUERO Intramuros 22 FEB 93 22 AUG 93 33. ZENAIDA MATA Intramuros 10 FEB 93 10 AUG 93

14. CORAZON C. DELOS REYES Intramuros 8 FEB 93 8 AUG 93 34. ARIEL DEL PILAR Intramuros 24 FEB 93 24 AUG 93
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35. MARGARET CECILIA CANOZA Intramuros 27 JUL 90 4 FEB 94
36. THELMA SEBASTIAN Intramuros 12 NOV 90 17 NOV 93
37. MA. JEANETTE CERVANTES West 6 JUN 92 7 DEC 93
38. JEANNIE RAMIL Intramuros 23 APR 90 12 OCT 93
39. ROZAIDA PASCUAL Bel-Air 20 APR 89 29 OCT 93
40. PINKY BALOLOA West 3 JUN 91 2 DEC 93
41. ELIZABETH VENTURA West 12 MAR 90 FEB 94 [SIC]
42. GRACE S. PARDO West 4 APR 90 13 MAR 94
43. RICO TIMOSA Intramuros 28 APR 93 28 OCT 93
As earlier noted, the labor arbiter and, on appeal, the NLRC ruled against herein petitioners.
Hence, this recourse to this Court.9
The Ruling of the NLRC
In affirming the ruling of the labor arbiter that herein petitioners could not be deemed
regular employees under Article 280 of the Labor Code, as amended, Respondent
Commission ratiocinated as follows:
We agree that Art. 280 is not controlling herein. We give due credence to the conclusion that
complainants were hired as an accommodation to [the] recommendation of civic oriented
personalities whose employment[s] were covered by xxx Employment Contract[s] with
special provisions on duration of contract as specified under Art. 80. Hence, as correctly held
by the Labor Arbiter a quo, the terms of the contract shall be the law between the parties.10
The NLRC also declared that the Magna Carta for Disabled Persons was not applicable,
considering the prevailing circumstances/milieu of the case.
Issues
In their Memorandum, petitioners cite the following grounds in support of their cause:
I. The Honorable Commission committed grave abuse of discretion in holding that the
petitioners - money sorters and counters working in a bank - were not regular employees.
II. The Honorable Commission committed grave abuse of discretion in holding that the
employment contracts signed and renewed by the petitioners - which provide for a period of
six (6) months - were valid.
III. The Honorable Commission committed grave abuse of discretion in not applying the
provisions of the Magna Carta for the Disabled (Republic Act No. 7277), on proscription
against discrimination against disabled persons.11
In the main, the Court will resolve whether petitioners have become regular employees.
This Courts Ruling
The petition is meritorious. However, only the employees, who worked for more than six
months and whose contracts were renewed are deemed regular. Hence, their dismissal from
employment was illegal.
Preliminary Matter: Propriety of Certiorari
Respondent Far East Bank and Trust Company argues that a review of the findings of facts of
the NLRC is not allowed in a petition for certiorari. Specifically, it maintains that the Court
cannot pass upon the findings of public respondents that petitioners were not regular
employees.
True, the Court, as a rule, does not review the factual findings of public respondents in a
certiorari proceeding. In resolving whether the petitioners have become regular employees,
we shall not change the facts found by the public respondent. Our task is merely to
determine whether the NLRC committed grave abuse of discretion in applying the law to the
established facts, as above-quoted from the assailed Decision.
Main Issue: Are Petitioners Regular Employees?
Petitioners maintain that they should be considered regular employees, because their task as
money sorters and counters was necessary and desirable to the business of respondent bank.
They further allege that their contracts served merely to preclude the application of Article
280 and to bar them from becoming regular employees.
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Private respondent, on the other hand, submits that petitioners were hired only as special
workers and should not in any way be considered as part of the regular complement of the
Bank.12 Rather, they were special workers under Article 80 of the Labor Code. Private
respondent contends that it never solicited the services of petitioners, whose employment
was merely an accommodation in response to the requests of government officials and civic-
minded citizens. They were told from the start, with the assistance of government
representatives, that they could not become regular employees because there were no
plantilla positions for money sorters, whose task used to be performed by tellers. Their
contracts were renewed several times, not because of need but merely for humanitarian
reasons. Respondent submits that as of the present, the special position that was created for
the petitioners no longer exist[s] in private respondent [bank], after the latter had decided
not to renew anymore their special employment contracts.
At the outset, let it be known that this Court appreciates the nobility of private respondents
effort to provide employment to physically impaired individuals and to make them more
productive members of society. However, we cannot allow it to elude the legal consequences
of that effort, simply because it now deems their employment irrelevant. The facts, viewed in
light of the Labor Code and the Magna Carta for Disabled Persons, indubitably show that the
petitioners, except sixteen of them, should be deemed regular employees. As such, they have
acquired legal rights that this Court is duty-bound to protect and uphold, not as a matter of
compassion but as a consequence of law and justice.
The uniform employment contracts of the petitioners stipulated that they shall be trained for
a period of one month, after which the employer shall determine whether or not they should
be allowed to finish the 6-month term of the contract. Furthermore, the employer may
terminate the contract at any time for a just and reasonable cause. Unless renewed in writing
by the employer, the contract shall automatically expire at the end of the term.
According to private respondent, the employment contracts were prepared in accordance
with Article 80 of the Labor Code, which provides:
ART. 80. Employment agreement. Any employer who employs handicapped workers shall
enter into an employment agreement with them, which agreement shall include:
(a) The names and addresses of the handicapped workers to be employed;
(b) The rate to be paid the handicapped workers which shall be not less than seventy five
(75%) per cent of the applicable legal minimum wage;
(c) The duration of employment period; and
(d) The work to be performed by handicapped workers.
The employment agreement shall be subject to inspection by the Secretary of Labor or his
duly authorized representatives.
The stipulations in the employment contracts indubitably conform with the aforecited
provision. Succeeding events and the enactment of RA No. 7277 (the Magna Carta for
Disabled Persons),13 however, justify the application of Article 280 of the Labor Code.
Respondent bank entered into the aforesaid contract with a total of 56 handicapped workers
and renewed the contracts of 37 of them. In fact, two of them worked from 1988 to 1993.
Verily, the renewal of the contracts of the handicapped workers and the hiring of others lead
to the conclusion that their tasks were beneficial and necessary to the bank. More important,
these facts show that they were qualified to perform the responsibilities of their positions. In
other words, their disability did not render them unqualified or unfit for the tasks assigned to
them.
In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled
employee should be given the same terms and conditions of employment as a qualified able-
bodied person. Section 5 of the Magna Carta provides:
Section 5. Equal Opportunity for Employment.No disabled person shall be denied access to
opportunities for suitable employment. A qualified disabled employee shall be subject to the
same terms and conditions of employment and the same compensation, privileges, benefits,
fringe benefits, incentives or allowances as a qualified able bodied person.
The fact that the employees were qualified disabled persons necessarily removes the
employment contracts from the ambit of Article 80. Since the Magna Carta accords them the
rights of qualified able-bodied persons, they are thus covered by Article 280 of the Labor
Code, which provides:
ART. 280. Regular and Casual Employment. -- The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of
the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season.
6
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 as regular employee with respect to the
activity in which he is employed and his employment shall continue while such activity exists.
The test of whether an employee is regular was laid down in De Leon v. NLRC,14 in which this
Court held:
The primary standard, therefore, of determining regular employment is the reasonable
connection between the particular activity performed by the employee in relation to the
usual trade or business of the employer. The test is whether the former is usually necessary
or desirable in the usual business or trade of the employer. The connection can be
determined by considering the nature of the work performed and its relation to the scheme
of the particular business or trade in its entirety. Also if the employee has been performing
the job for at least one year, even if the performance is not continuous and merely
intermittent, the law deems repeated and continuing need for its performance as sufficient
evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity, and while such
activity exists.
Without a doubt, the task of counting and sorting bills is necessary and desirable to the
business of respondent bank. With the exception of sixteen of them, petitioners performed
these tasks for more than six months. Thus, the following twenty-seven petitioners should be
deemed regular employees: Marites Bernardo, Elvira Go Diamante, Rebecca E. David, David
P. Pascual, Raquel Estiller, Albert Hallare, Edmund M. Cortez, Joselito O. Agdon, George P.
Ligutan Jr., Lilibeth Q. Marmolejo, Jose E. Sales, Isabel Mamauag, Violeta G. Montes, Albino
Tecson, Melody V. Gruela, Bernadeth D. Agero, Cynthia de Vera, Lani R. Cortez, Ma. Isabel B.
Concepcion, Margaret Cecilia Canoza, Thelma Sebastian, Ma. Jeanette Cervantes, Jeannie
Ramil, Rozaida Pascual, Pinky Baloloa, Elizabeth Ventura and Grace S. Pardo.
As held by the Court, Articles 280 and 281 of the Labor Code put an end to the pernicious
practice of making permanent casuals of our lowly employees by the simple expedient of
extending to them probationary appointments, ad infinitum.15 The contract signed by
petitioners is akin to a probationary employment, during which the bank determined the
employees fitness for the job. When the bank renewed the contract after the lapse of the six-
month probationary period, the employees thereby became regular employees.16 No
employer is allowed to determine indefinitely the fitness of its employees.
As regular employees, the twenty-seven petitioners are entitled to security of tenure; that is,
their services may be terminated only for a just or authorized cause. Because respondent
failed to show such cause,17 these twenty-seven petitioners are deemed illegally dismissed
and therefore entitled to back wages and reinstatement without loss of seniority rights and
other privileges.18 Considering the allegation of respondent that the job of money sorting is
no longer available because it has been assigned back to the tellers to whom it originally
belonged,19 petitioners are hereby awarded separation pay in lieu of
reinstatement.20cräläwvirtualibräry
Because the other sixteen worked only for six months, they are not deemed regular
employees and hence not entitled to the same benefits.
Applicability of the Brent Ruling
Respondent bank, citing Brent School v. Zamora21 in which the Court upheld the validity of
an employment contract with a fixed term, argues that the parties entered into the contract
on equal footing. It adds that the petitioners had in fact an advantage, because they were
backed by then DSWD Secretary Mita Pardo de Tavera and Representative Arturo Borjal.
We are not persuaded. The term limit in the contract was premised on the fact that the
petitioners were disabled, and that the bank had to determine their fitness for the position.
Indeed, its validity is based on Article 80 of the Labor Code. But as noted earlier, petitioners
proved themselves to be qualified disabled persons who, under the Magna Carta for Disabled
Persons, are entitled to terms and conditions of employment enjoyed by qualified able-
bodied individuals; hence, Article 80 does not apply because petitioners are qualified for
their positions. The validation of the limit imposed on their contracts, imposed by reason of
their disability, was a glaring instance of the very mischief sought to be addressed by the new
law.
Moreover, it must be emphasized that a contract of employment is impressed with public
interest.22 Provisions of applicable statutes are deemed written into the contract, and the
parties are not at liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other.23 Clearly, the agreement
of the parties regarding the period of employment cannot prevail over the provisions of the
Magna Carta for Disabled Persons, which mandate that petitioners must be treated as
qualified able-bodied employees.
Respondents reason for terminating the employment of petitioners is instructive. Because
the Bangko Sentral ng Pilipinas (BSP) required that cash in the bank be turned over to the BSP
during business hours from 8:00 a.m. to 5:00 p.m., respondent resorted to nighttime sorting
7
and counting of money. Thus, it reasons that this task could not be done by deaf mutes
because of their physical limitations as it is very risky for them to travel at night.24 We find
no basis for this argument. Travelling at night involves risks to handicapped and able-bodied
persons alike. This excuse cannot justify the termination of their employment.
Other Grounds Cited by Respondent
Respondent argues that petitioners were merely accommodated employees. This fact does
not change the nature of their employment. As earlier noted, an employee is regular because
of the nature of work and the length of service, not because of the mode or even the reason
for hiring them.
Equally unavailing are private respondents arguments that it did not go out of its way to
recruit petitioners, and that its plantilla did not contain their positions. In L. T. Datu v.
NLRC,25 the Court held that the determination of whether employment is casual or regular
does not depend on the will or word of the employer, and the procedure of hiring x x x but
on the nature of the activities performed by the employee, and to some extent, the length of
performance and its continued existence.
Private respondent argues that the petitioners were informed from the start that they could
not become regular employees. In fact, the bank adds, they agreed with the stipulation in the
contract regarding this point. Still, we are not persuaded. The well-settled rule is that the
character of employment is determined not by stipulations in the contract, but by the nature
of the work performed.26 Otherwise, no employee can become regular by the simple
expedient of incorporating this condition in the contract of employment.
In this light, we iterate our ruling in Romares v. NLRC:27cräläwvirtualibräry
Article 280 was emplaced in our statute books to prevent the circumvention of the
employees right to be secure in his tenure by indiscriminately and completely ruling out all
written and oral agreements inconsistent with the concept of regular employment defined
therein. Where an employee has been engaged to perform activities which are usually
necessary or desirable in the usual business of the employer, such employee is deemed a
regular employee and is entitled to security of tenure notwithstanding the contrary
provisions of his contract of employment.
xxx
At this juncture, the leading case of Brent School, Inc. v. Zamora proves instructive. As
reaffirmed in subsequent cases, this Court has upheld the legality of fixed-term employment.
It ruled that the decisive determinant in term employment should not be the activities that
the employee is called upon to perform but the day certain agreed upon the parties for the
commencement and termination of their employment relationship. But this Court went on to
say that where from the circumstances it is apparent that the periods have been imposed to
preclude acquisition of tenurial security by the employee, they should be struck down or
disregarded as contrary to public policy and morals.
In rendering this Decision, the Court emphasizes not only the constitutional bias in favor of
the working class, but also the concern of the State for the plight of the disabled. The noble
objectives of Magna Carta for Disabled Persons are not based merely on charity or
accommodation, but on justice and the equal treatment of qualified persons, disabled or not.
In the present case, the handicap of petitioners (deaf-mutes) is not a hindrance to their work.
The eloquent proof of this statement is the repeated renewal of their employment contracts.
Why then should they be dismissed, simply because they are physically impaired? The Court
believes, that, after showing their fitness for the work assigned to them, they should be
treated and granted the same rights like any other regular employees.
In this light, we note the Office of the Solicitor Generals prayer joining the petitioners
cause.28cräläwvirtualibräry
WHEREFORE, premises considered, the Petition is hereby GRANTED. The June 20, 1995
Decision and the August 4, 1995 Resolution of the NLRC are REVERSEDand SETASIDE.
Respondent Far East Bank and Trust Company is hereby ORDEREDto pay back wages and
separation pay to each of the following twenty-seven (27) petitioners, namely, Marites
Bernardo, Elvira Go Diamante, Rebecca E. David, David P. Pascual, Raquel Estiller, Albert
Hallare, Edmund M. Cortez, Joselito O. Agdon, George P. Ligutan Jr., Lilibeth Q. Marmolejo,
Jose E. Sales, Isabel Mamauag, Violeta G. Montes, Albino Tecson, Melody V. Gruela,
Bernadeth D. Agero, Cynthia de Vera, Lani R. Cortez, Ma. Isabel B. Concepcion, Margaret
Cecilia Canoza, Thelma Sebastian, Ma. Jeanette Cervantes, Jeannie Ramil, Rozaida Pascual,
Pinky Baloloa, Elizabeth Ventura and Grace S. Pardo. The NLRC is hereby directed to compute
the exact amount due each of said employees, pursuant to existing laws and regulations,
within fifteen days from the finality of this Decision. No costs.
SO ORDERED.
8

that petitioner Bitoy Javier (Javier) was illegally dismissed from employment and ordering Fly
Ace Corporation (Fly Ace) to pay backwages and separation pay in lieu of reinstatement.

Antecedent Facts

On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and
other labor standard benefits. He alleged that he was an employee of Fly Ace since
September 2007, performing various tasks at the respondent’s warehouse such as cleaning
and arranging the canned items before their delivery to certain locations, except in instances
when he would be ordered to accompany the company’s delivery vehicles, as pahinante; that
he reported for work from Monday to Saturday from 7:00 o’clock in the morning to 5:00
o’clock in the afternoon; that during his employment, he was not issued an identification
card and payslips by the company; that on May 6, 2008, he reported for work but he was no
longer allowed to enter the company premises by the security guard upon the instruction of
Ruben Ong (Mr. Ong), his superior;5 that after several minutes of begging to the guard to
allow him to enter, he saw Ong whom he approached and asked why he was being barred
from entering the premises; that Ong replied by saying, "Tanungin mo anak mo;" 6 that he
then went home and discussed the matter with his family; that he discovered that Ong had
been courting his daughter Annalyn after the two met at a fiesta celebration in Malabon City;
that Annalyn tried to talk to Ong and convince him to spare her father from trouble but he
refused to accede; that thereafter, Javier was terminated from his employment without
notice; and that he was neither given the opportunity to refute the cause/s of his dismissal
from work.

To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who alleged
G.R. No. 192558 February 15, 2012 that Javier was a stevedore or pahinante of Fly Ace from September 2007 to January 2008.
The said affidavit was subscribed before the Labor Arbiter (LA).7
BITOY JAVIER (DANILO P. JAVIER), Petitioner,
vs. For its part, Fly Ace averred that it was engaged in the business of importation and sales of
FLY ACE CORPORATION/FLORDELYN CASTILLO, Respondents. groceries. Sometime in December 2007, Javier was contracted by its employee, Mr. Ong, as
extra helper on a pakyaw basis at an agreed rate of ₱ 300.00 per trip, which was later
DECISION increased to ₱ 325.00 in January 2008. Mr. Ong contracted Javier roughly 5 to 6 times only in
a month whenever the vehicle of its contracted hauler, Milmar Hauling Services, was not
MENDOZA, J.: available. On April 30, 2008, Fly Ace no longer needed the services of Javier. Denying that he
was their employee, Fly Ace insisted that there was no illegal dismissal.8 Fly Ace submitted a
This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010 copy of its agreement with Milmar Hauling Services and copies of acknowledgment receipts
Decision1 of the Court of Appeals (CA) and its June 7, 2010 Resolution,2 in CA-G.R. SP No. evidencing payment to Javier for his contracted services bearing the words, "daily manpower
109975, which reversed the May 28, 2009 Decision3 of the National Labor Relations (pakyaw/piece rate pay)" and the latter’s signatures/initials.
Commission (NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,4 holding
Ruling of the Labor Arbiter
9
On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that
Javier failed to present proof that he was a regular employee of Fly Ace. He wrote:
Complainant has no employee ID showing his employment with the Respondent nor any
document showing that he received the benefits accorded to regular employees of the
Respondents. His contention that Respondent failed to give him said ID and payslips implies
that indeed he was not a regular employee of Fly Ace considering that complainant was a
helper and that Respondent company has contracted a regular trucking for the delivery of its
products.
Respondent Fly Ace is not engaged in trucking business but in the importation and sales of
groceries. Since there is a regular hauler to deliver its products, we give credence to
Respondents’ claim that complainant was contracted on "pakiao" basis.
As to the claim for underpayment of salaries, the payroll presented by the Respondents
showing salaries of workers on "pakiao" basis has evidentiary weight because although the
signature of the complainant appearing thereon are not uniform, they appeared to be his
true signature.
xxxx
Hence, as complainant received the rightful salary as shown by the above described payrolls,
Respondents are not liable for salary differentials. 9
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of
Javier and immediately concluded that he was not a regular employee simply because he
failed to present proof. It was of the view that a pakyaw-basis arrangement did not preclude
the existence of employer-employee relationship. "Payment by result x x x is a method of
compensation and does not define the essence of the relation. It is a mere method of
computing compensation, not a basis for determining the existence or absence of an
employer-employee relationship.10 " The NLRC further averred that it did not follow that a
worker was a job contractor and not an employee, just because the work he was doing was
not directly related to the employer’s trade or business or the work may be considered as
"extra" helper as in this case; and that the relationship of an employer and an employee was
determined by law and the same would prevail whatever the parties may call it. In this case,
the NLRC held that substantial evidence was sufficient basis for judgment on the existence of
the employer-employee relationship. Javier was a regular employee of Fly Ace because there
was reasonable connection between the particular activity performed by the employee (as a
"pahinante") in relation to the usual business or trade of the employer (importation, sales
and delivery of groceries). He may not be considered as an independent contractor because
he could not exercise any judgment in the delivery of company products. He was only
engaged as a "helper."
Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of
tenure. For failing to present proof of a valid cause for his termination, Fly Ace was found to
be liable for illegal dismissal of Javier who was likewise entitled to backwages and separation
pay in lieu of reinstatement. The NLRC thus ordered:
WHEREFORE, premises considered, complainant’s appeal is partially GRANTED. The assailed
Decision of the labor arbiter is VACATED and a new one is hereby entered holding
respondent FLY ACE CORPORATION guilty of illegal dismissal and non-payment of 13th month
pay. Consequently, it is hereby ordered to pay complainant DANILO "Bitoy" JAVIER the
following:
1. Backwages -₱ 45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -₱ 59,854.16
All other claims are dismissed for lack of merit.
SO ORDERED.11
Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former
employee of Fly Ace and reinstated the dismissal of Javier’s complaint as ordered by the LA.
The CA exercised its authority to make its own factual determination anent the issue of the
existence of an employer-employee relationship between the parties. According to the CA:
xxx
In an illegal dismissal case the onus probandi rests on the employer to prove that its dismissal
was for a valid cause. However, before a case for illegal dismissal can prosper, an employer-
10
employee relationship must first be established. x x x it is incumbent upon private
respondent to prove the employee-employer relationship by substantial evidence.
xxx
It is incumbent upon private respondent to prove, by substantial evidence, that he is an
employee of petitioners, but he failed to discharge his burden. The non-issuance of a
company-issued identification card to private respondent supports petitioners’ contention
that private respondent was not its employee.12
The CA likewise added that Javier’s failure to present salary vouchers, payslips, or other
pieces of evidence to bolster his contention, pointed to the inescapable conclusion that he
was not an employee of Fly Ace. Further, it found that Javier’s work was not necessary and
desirable to the business or trade of the company, as it was only when there were scheduled
deliveries, which a regular hauling service could not deliver, that Fly Ace would contract the
services of Javier as an extra helper. Lastly, the CA declared that the facts alleged by Javier
did not pass the "control test."
He contracted work outside the company premises; he was not required to observe definite
hours of work; he was not required to report daily; and he was free to accept other work
elsewhere as there was no exclusivity of his contracted service to the company, the same
being co-terminous with the trip only.13 Since no substantial evidence was presented to
establish an employer-employee relationship, the case for illegal dismissal could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER
WAS NOT A REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER IS
NOT ENTITLED TO HIS MONETARY CLAIMS.14
The petitioner contends that other than its bare allegations and self-serving affidavits of the
other employees, Fly Ace has nothing to substantiate its claim that Javier was engaged on a
pakyaw basis. Assuming that Javier was indeed hired on a pakyaw basis, it does not preclude
his regular employment with the company. Even the acknowledgment receipts bearing his
signature and the confirming receipt of his salaries will not show the true nature of his
employment as they do not reflect the necessary details of the commissioned task. Besides,
Javier’s tasks as pahinante are related, necessary and desirable to the line of business by Fly
Ace which is engaged in the importation and sale of grocery items. "On days when there
were no scheduled deliveries, he worked in petitioners’ warehouse, arranging and cleaning
the stored cans for delivery to clients."15 More importantly, Javier was subject to the control
and supervision of the company, as he was made to report to the office from Monday to
Saturday, from 7:00 o’clock in the morning until 5:00 o’clock in the afternoon. The list of
deliverable goods, together with the corresponding clients and their respective purchases
and addresses, would necessarily have been prepared by Fly Ace. Clearly, he was subjected
to compliance with company rules and regulations as regards working hours, delivery
schedule and output, and his other duties in the warehouse.16
The petitioner chiefly relied on Chavez v. NLRC,17 where the Court ruled that payment to a
worker on a per trip basis is not significant because "this is merely a method of computing
compensation and not a basis for determining the existence of employer-employee
relationship." Javier likewise invokes the rule that, "in controversies between a laborer and
his master, x x x doubts reasonably arising from the evidence should be resolved in the
former’s favour. The policy is reflected is no less than the Constitution, Labor Code and Civil
Code."18
Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by
the latter’s failure to observe substantive and procedural due process. Since his dismissal was
not based on any of the causes recognized by law, and was implemented without notice,
Javier is entitled to separation pay and backwages.
In its Comment,19 Fly Ace insists that there was no substantial evidence to prove employer-
employee relationship. Having a service contract with Milmar Hauling Services for the
purpose of transporting and delivering company products to customers, Fly Ace contracted
Javier as an extra helper or pahinante on a mere "per trip basis." Javier, who was actually a
loiterer in the area, only accompanied and assisted the company driver when Milmar could
not deliver or when the exigency of extra deliveries arises for roughly five to six times a
month. Before making a delivery, Fly Ace would turn over to the driver and Javier the delivery
vehicle with its loaded company products. With the vehicle and products in their custody, the
driver and Javier "would leave the company premises using their own means, method, best
judgment and discretion on how to deliver, time to deliver, where and [when] to start, and
manner of delivering the products."20
11
Fly Ace dismisses Javier’s claims of employment as baseless assertions. Aside from his bare
allegations, he presented nothing to substantiate his status as an employee. "It is a basic rule
of evidence that each party must prove his affirmative allegation. If he claims a right granted
by law, he must prove his claim by competent evidence, relying on the strength of his own
evidence and not upon the weakness of his opponent."21 Invoking the case of Lopez v.
Bodega City,22 Fly Ace insists that in an illegal dismissal case, the burden of proof is upon the
complainant who claims to be an employee. It is essential that an employer-employee
relationship be proved by substantial evidence. Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the employer to prove that its
dismissal of an employee was for a valid cause. However, before a case for illegal dismissal
can prosper, an employer-employee relationship must first be established.
Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly
Ace, "which are unfortunately not supported by proof, documentary or otherwise."23 Javier
simply assumed that he was an employee of Fly Ace, absent any competent or relevant
evidence to support it. "He performed his contracted work outside the premises of the
respondent; he was not even required to report to work at regular hours; he was not made
to register his time in and time out every time he was contracted to work; he was not
subjected to any disciplinary sanction imposed to other employees for company violations;
he was not issued a company I.D.; he was not accorded the same benefits given to other
employees; he was not registered with the Social Security System (SSS) as petitioner’s
employee; and, he was free to leave, accept and engage in other means of livelihood as there
is no exclusivity of his contracted services with the petitioner, his services being co-terminus
with the trip only. All these lead to the conclusion that petitioner is not an employee of the
respondents."24
Moreover, Fly Ace claims that it had "no right to control the result, means, manner and
methods by which Javier would perform his work or by which the same is to be
accomplished."25 In other words, Javier and the company driver were given a free hand as to
how they would perform their contracted services and neither were they subjected to
definite hours or condition of work.
Fly Ace likewise claims that Javier’s function as a pahinante was not directly related or
necessary to its principal business of importation and sales of groceries. Even without Javier,
the business could operate its usual course as it did not involve the business of inland
transportation. Lastly, the acknowledgment receipts bearing Javier’s signature and words
"pakiao rate," referring to his earned salaries on a per trip basis, have evidentiary weight that
the LA correctly considered in arriving at the conclusion that Javier was not an employee of
the company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javier’s alleged illegal dismissal is anchored on the
existence of an employer-employee relationship between him and Fly Ace. This is essentially
a question of fact. Generally, the Court does not review errors that raise factual questions.
However, when there is conflict among the factual findings of the antecedent deciding bodies
like the LA, the NLRC and the CA, "it is proper, in the exercise of Our equity jurisdiction, to
review and re-evaluate the factual issues and to look into the records of the case and re-
examine the questioned findings."26 In dealing with factual issues in labor cases, "substantial
evidence – that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion – is sufficient."27
As the records bear out, the LA and the CA found Javier’s claim of employment with Fly Ace
as wanting and deficient. The Court is constrained to agree. Although Section 10, Rule VII of
the New Rules of Procedure of the NLRC28 allows a relaxation of the rules of procedure and
evidence in labor cases, this rule of liberality does not mean a complete dispensation of
proof. Labor officials are enjoined to use reasonable means to ascertain the facts speedily
and objectively with little regard to technicalities or formalities but nowhere in the rules are
they provided a license to completely discount evidence, or the lack of it. The quantum of
proof required, however, must still be satisfied. Hence, "when confronted with conflicting
versions on factual matters, it is for them in the exercise of discretion to determine which
party deserves credence on the basis of evidence received, subject only to the requirement
that their decision must be supported by substantial evidence."29 Accordingly, the petitioner
needs to show by substantial evidence that he was indeed an employee of the company
against which he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart and proffer allegations as different as
chalk and cheese. It is, therefore, incumbent upon the Court to determine whether the party
on whom the burden to prove lies was able to hurdle the same. "No particular form of
evidence is required to prove the existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may be
admitted.http://www.lawphil.net/judjuris/juri2009/may2009/gr_179652_2009.html - fnt31
Hence, while no particular form of evidence is required, a finding that such relationship exists
must still rest on some substantial evidence. Moreover, the substantiality of the evidence
depends on its quantitative as well as its qualitative aspects."30 Although substantial
evidence is not a function of quantity but rather of quality, the x x x circumstances of the
instant case demand that something more should have been proffered. Had there been other
proofs of employment, such as x x x inclusion in petitioner’s payroll, or a clear exercise of
control, the Court would have affirmed the finding of employer-employee relationship."31
12
In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or
substantiate such claim by the requisite quantum of evidence.32 "Whoever claims
entitlement to the benefits provided by law should establish his or her right thereto x x x."33
Sadly, Javier failed to adduce substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed to establish his employment
with Fly Ace. By way of evidence on this point, all that Javier presented were his self-serving
statements purportedly showing his activities as an employee of Fly Ace. Clearly, Javier failed
to pass the substantiality requirement to support his claim. Hence, the Court sees no reason
to depart from the findings of the CA.
While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was
made to work in the company premises during weekdays arranging and cleaning grocery
items for delivery to clients, no other proof was submitted to fortify his claim. The lone
affidavit executed by one Bengie Valenzuela was unsuccessful in strengthening Javier’s cause.
In said document, all Valenzuela attested to was that he would frequently see Javier at the
workplace where the latter was also hired as stevedore.34 Certainly, in gauging the evidence
presented by Javier, the Court cannot ignore the inescapable conclusion that his mere
presence at the workplace falls short in proving employment therein. The supporting
affidavit could have, to an extent, bolstered Javier’s claim of being tasked to clean grocery
items when there were no scheduled delivery trips, but no information was offered in this
subject simply because the witness had no personal knowledge of Javier’s employment
status in the company. Verily, the Court cannot accept Javier’s statements, hook, line and
sinker.
The Court is of the considerable view that on Javier lies the burden to pass the well-settled
tests to determine the existence of an employer-employee relationship, viz: (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. Of these elements, the most important
criterion is 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 methods by which the
result is to be accomplished.35
In this case, Javier was not able to persuade the Court that the above elements exist in his
case.1avvphi1 He could not submit competent proof that Fly Ace engaged his services as a
regular employee; that Fly Ace paid his wages as an employee, or that Fly Ace could dictate
what his conduct should be while at work. In other words, Javier’s allegations did not
establish that his relationship with Fly Ace had the attributes of an employer-employee
relationship on the basis of the above-mentioned four-fold test. Worse, Javier was not able
to refute Fly Ace’s assertion that it had an agreement with a hauling company to undertake
the delivery of its goods. It was also baffling to realize that Javier did not dispute Fly Ace’s
denial of his services’ exclusivity to the company. In short, all that Javier laid down were bare
allegations without corroborative proof.
Fly Ace does not dispute having contracted Javier and paid him on a "per trip" rate as a
stevedore, albeit on a pakyaw basis. The Court cannot fail to note that Fly Ace presented
documentary proof that Javier was indeed paid on a pakyaw basis per the acknowledgment
receipts admitted as competent evidence by the LA. Unfortunately for Javier, his mere denial
of the signatures affixed therein cannot automatically sway us to ignore the documents
because "forgery cannot be presumed and must be proved by clear, positive and convincing
evidence and the burden of proof lies on the party alleging forgery."36
Considering the above findings, the Court does not see the necessity to resolve the second issue
presented.
One final note. The Court’s decision does not contradict the settled rule that "payment by the piece is
just a method of compensation and does not define the essence of the relation."37 Payment on a piece-
rate basis does not negate regular employment. "The term ‘wage’ is 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. Payment by the piece is just a method of
compensation and does not define the essence of the relations. Nor does the fact that the petitioner is
not covered by the SSS affect the employer-employee relationship. However, 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."38
Unfortunately for Javier, the attendant facts and circumstances of the instant case do not provide the
Court with sufficient reason to uphold his claimed status as employee of Fly Ace.
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 be automatically decided in favor of labor.
Management also has its rights which are entitled to respect and enforcement in the interest of simple
fair play. Out of its concern for the less privileged in life, the Court has inclined, more often than not,
toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has
not blinded the Court to the rule that justice is in every case for the deserving, to be dispensed in the
light of the established facts and the applicable law and doctrine.39
WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals and its June 7,
2010 Resolution, in CA-G.R. SP No. 109975, are hereby AFFIRMED.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice
13

WE CONCUR:

G.R. No. 193493 June 13, 2013

JAIME N. GAPAYAO, Petitioner,

vs.
ROSARIO FULO, SOCIAL SECURITY SYSTEM and SOCIAL SECURITY COMMISSION, Respondents.

DECISION

SERENO, CJ.:

This is a Rule 45 Petition1 assailing the Decision2 and Resolution3 of the Court of Appeals (CA) in CA-G.R.
SP. No. 101688, affirming the Resolution4 of the Social Security Commission (SSC). The SSC held
petitioner Jaime N. Gapayao liable to pay the unpaid social security contributions due to the deceased
Jaime Fulo, and the Social Security System (SSS) to pay private respondent Rosario L. Fulo, the widow of
the deceased, the appropriate death benefits pursuant to the Social Security Law.

The antecedent facts are as follows:

On 4 November 1997, Jaime Fulo (deceased) died of "acute renal failure secondary to 1st degree burn
70% secondary electrocution"5 while doing repairs at the residence and business establishment of
petitioner located at San Julian, Irosin, Sorsogon.

Allegedly moved by his Christian faith, petitioner extended some financial assistance to private
respondent. On 16 November 1997, the latter executed an Affidavit of Desistance6 stating that she was
not holding them liable for the death of her late husband, Jaime Fulo, and was thereby waiving her right
and desisting from filing any criminal or civil action against petitioner.

On 14 January 1998, both parties executed a Compromise Agreement,7 the relevant portion of which is
quoted below:

We, the undersigned unto this Honorable Regional Office/District Office/Provincial Agency Office
respectfully state:

1. The undersigned employer, hereby agrees to pay the sum of FORTY THOUSAND PESOS (₱40,000.00) to
the surviving spouse of JAIME POLO, an employee who died of an accident, as a complete and full
payment for all claims due the victim.

2. On the other hand, the undersigned surviving spouse of the victim having received the said amount do
[sic] hereby release and discharge the employer from any and all claims that maybe due the victim in
connection with the victim’s employment thereat.
14
Thereafter, private respondent filed a claim for social security benefits with the Social Security System
(SSS)–Sorosogon Branch.8 However, upon verification and evaluation, it was discovered that the
deceased was not a registered member of the SSS.9
Upon the insistence of private respondent that her late husband had been employed by petitioner from
January 1983 up to his untimely death on 4 November 1997, the SSS conducted a field investigation to
clarify his status of employment. In its field investigation report,10 it enumerated its findings as follows:
In connection with the complaint filed by Mrs. Rosario Fulo, hereunder are the findings per interview
with Mr. Leonor Delgra, Santiago Bolanos and Amado Gacelo:
1. That Mr. Jaime Fulo was an employee of Jaime Gapayao as farm laborer from 1983 to 1997.
2. Mr. Leonor Delgra and Santiago Bolanos are co-employees of Jaime Fulo.
3. Mr. Jaime Fulo receives compensation on a daily basis ranging from ₱5.00 to ₱60.00 from 1983 to
1997.
Per interview from Mrs. Estela Gapayao, please be informed that:
1. Jaime Fulo is an employee of Mr. & Mrs. Jaime Gapayao on an extra basis.
2. Sometimes Jaime Fulo is allowed to work in the farm as abaca harvester and earn 1/3 share of its
harvest as his income.
3. Mr. & Mrs. Gapayao hired the services of Jaime Fulo not only in the farm as well as in doing house
repairs whenever it is available. Mr. Fulo receives his remuneration usually in the afternoon after doing
his job.
4. Mr. & Mrs. Gapayao hires 50-100 persons when necessary to work in their farm as laborer and Jaime
Fulo is one of them. Jaime Fulo receives more or less ₱50.00 a day. (Emphases in the original)
Consequently, the SSS demanded that petitioner remit the social security contributions of the deceased.
When petitioner denied that the deceased was his employee, the SSS required private respondent to
present documentary and testimonial evidence to refute petitioner’s allegations.11
Instead of presenting evidence, private respondent filed a Petition12 before the SSC on 17 February
2003. In her Petition, she sought social security coverage and payment of contributions in order to avail
herself of the benefits accruing from the death of her husband.
On 6 May 2003, petitioner filed an Answer13 disclaiming any liability on the premise that the deceased
was not the former’s employee, but was rather an independent contractor whose tasks were not subject
to petitioner’s control and supervision.14 Assuming arguendo that the deceased was petitioner’s
employee, he was still not entitled to be paid his SSS premiums for the intervening period when he was
not at work, as he was an "intermittent worker who was only summoned every now and then as the
need arose."15 Hence, petitioner insisted that he was under no obligation to report the former’s demise
to the SSS for social security coverage.
Subsequently, on 30 June 2003, the SSS filed a Petition-in-Intervention16 before the SSC, outlining the
factual circumstances of the case and praying that judgment be rendered based on the evidence
adduced by the parties.
On 14 March 2007, the SSC rendered a Resolution,17 the dispositive portion of which provides:
WHEREFORE, PREMISES CONSIDERED, this Commission finds, and so holds, that Jaime Fulo, the late
husband of petitioner, was employed by respondent Jaime N. Gapayao from January 1983 to November
4, 1997, working for nine (9) months a year receiving the minimum wage then prevailing.
Accordingly, the respondent is hereby ordered to pay ₱45,315.95 representing the unpaid SS
contributions due on behalf of deceased Jaime Fulo, the amount of ₱217,710.33 as 3% per month
penalty for late remittance thereof, computed as of March 30, 2006, without prejudice to the collection
of additional penalty accruing thereafter, and the sum of ₱230,542.20 (SSS) and ₱166,000.00 (EC) as
damages for the failure of the respondent to report the deceased Jaime Fulo for SS coverage prior to his
death pursuant to Section 24(a) of the SS Law, as amended.
The SSS is hereby directed to pay petitioner Rosario Fulo the appropriate death benefit, pursuant to
Section 13 of the SS Law, as amended, as well as its prevailing rules and regulations, and to inform this
Commission of its compliance herewith.
SO ORDERED.
On 18 May 2007, petitioner filed a Motion for Reconsideration,18 which was denied in an Order19 dated
16 August 2007.
Aggrieved, petitioner appealed to the CA on 19 December 2007.20 On 17 March 2010, the CA rendered a
Decision21 in favor of private respondent, as follows:
In fine, public respondent SSC had sufficient basis in concluding that private respondent’s husband was
an employee of petitioner and should, therefore, be entitled to compulsory coverage under the Social
Security Law.
Having ruled in favor of the existence of employer-employee relationship between petitioner and the
late Jaime Fulo, it is no longer necessary to dwell on the other issues raised.
Resultantly, for his failure to report Jaime Fulo for compulsory social security coverage, petitioner should
bear the consequences thereof. Under the law, an employer who fails to report his employee for social
security coverage is liable to [1] pay the benefits of those who die, become disabled, get sick or reach
retirement age; [2] pay all unpaid contributions plus a penalty of three percent per month; and [3] be
held liable for a criminal offense punishable by fine and/or imprisonment. But an employee is still
15
entitled to social security benefits even is (sic) his employer fails or refuses to remit his contribution to
the SSS.
WHEREFORE, premises considered, the Resolution appealed from is AFFIRMED in toto.
SO ORDERED.
In holding thus, the CA gave credence to the findings of the SSC. The appellate court held that it "does
not follow that a person who does not observe normal hours of work cannot be deemed an
employee."22 For one, it is not essential for the employer to actually supervise the performance of
duties of the employee; it is sufficient that the former has a right to wield the power. In this case,
petitioner exercised his control through an overseer in the person of Amado Gacelo, the tenant on
petitioner’s land.23 Most important, petitioner entered into a Compromise Agreement with private
respondent and expressly admitted therein that he was the employer of the deceased.24 The CA
interpreted this admission as a declaration against interest, pursuant to Section 26, Rule 130 of the Rules
of Court.25
Hence, this petition.
Public respondents SSS26 and SSC27 filed their Comments on 31 January 2011 and 28 February 2011,
respectively, while private respondent filed her Comment on 14 March 2011.28 On 6 March 2012,
petitioner filed a "Consolidated Reply to the Comments of the Public Respondents SSS and SSC and
Private Respondent Rosario Fulo."29
ISSUE
The sole issue presented before us is whether or not there exists between the deceased Jaime Fulo and
petitioner an employer-employee relationship that would merit an award of benefits in favor of private
respondent under social security laws.
THE COURT’S RULING
In asserting the existence of an employer-employee relationship, private respondent alleges that her late
husband had been in the employ of petitioner for 14 years, from 1983 to 1997.30 During that period, he
was made to work as a laborer in the agricultural landholdings, a harvester in the abaca plantation, and a
repairman/utility worker in several business establishments owned by petitioner.31 To private
respondent, the "considerable length of time during which [the deceased] was given diverse tasks by
petitioner was a clear indication of the necessity and indispensability of her late husband’s services to
petitioner’s business."32 This view is bolstered by the admission of petitioner himself in the Compromise
Agreement that he was the deceased’s employer.33
Private respondent’s position is similarly espoused by the SSC, which contends that its findings are duly
supported by evidence on record.34 It insists that pakyaw workers are considered employees, as long as
the employer exercises control over them. In this case, the exercise of control by the employer was
delegated to the caretaker of his farm, Amado Gacelo. The SSC further asserts that the deceased
rendered services essential for the petitioner’s harvest. While these services were not rendered
continuously (in the sense that they were not rendered every day throughout the year), still, the
deceased had never stopped working for petitioner from year to year until the day the former died.35 In
fact, the deceased was required to work in the other business ventures of petitioner, such as the latter’s
bakery and grocery store.36 The Compromise Agreement entered into by petitioner with private
respondent should not be a bar to an employee demanding what is legally due the latter.37
The SSS, while clarifying that it is "neither adversarial nor favoring any of the private parties x x x as it is
only tasked to carry out the purposes of the Social Security Law,"38 agrees with both private respondent
and SSC. It stresses that factual findings of the lower courts, when affirmed by the appellate court, are
generally conclusive and binding upon the Court.39
Petitioner, on the other hand, insists that the deceased was not his employee. Supposedly, the latter,
during the performance of his function, was not under petitioner’s control. Control is not necessarily
present even if the worker works inside the premises of the person who has engaged his services.40
Granting without admitting that petitioner gave rules or guidelines to the deceased in the process of the
latter’s performing his work, the situation cannot be interpreted as control, because it was only intended
to promote mutually desired results.41
Alternatively, petitioner insists that the deceased was hired by Adolfo Gamba, the contractor whom he
had hired to construct their building;42 and by Amado Gacelo, the tenant whom petitioner instructed to
manage the latter’s farm.43 For this reason, petitioner believes that a tenant is not beholden to the
landlord and is not under the latter’s control and supervision. So if a worker is hired to work on the land
of a tenant – such as petitioner – the former cannot be the worker of the landlord, but of the tenant’s.44
Anent the Compromise Agreement, petitioner clarifies that it was executed to buy peace, because
"respondent kept on pestering them by asking for money."45 Petitioner allegedly received threats that if
the matter was not settled, private respondent would refer the matter to the New Peoples’ Army.46
Allegedly, the Compromise Agreement was "extortion camouflaged as an agreement."47 Likewise,
petitioner maintains that he shouldered the hospitalization and burial expenses of the deceased to
express his "compassion and sympathy to a distressed person and his family," and not to admit
liability.48
Lastly, petitioner alleges that the deceased is a freelance worker. Since he was engaged on a pakyaw
basis and worked for a short period of time, in the nature of a farm worker every season, he was not
precluded from working with other persons and in fact worked for them. Under Article 280 of the Labor
Code,49 seasonal employees are not covered by the definitions of regular and casual employees.50
Petitioner cites Mercado, Sr. v. NLRC,51 in which the Court held that seasonal workers do not become
regular employees by the mere fact that they have rendered at least one year of service, whether
continuous or broken.52
We see no cogent reason to reverse the CA.
I
16
Findings of fact of the SSC are given weight and credence.
At the outset, it is settled that the Court is not a trier of facts and will not weigh evidence all over again.
Findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise
because their jurisdiction is confined to specific matters, are generally accorded not only respect but
finality when affirmed by the CA.53 For as long as these findings are supported by substantial evidence,
they must be upheld.54
II
Farm workers may be considered regular seasonal employees.
Article 280 of the Labor Code states:
Article 280. Regular and Casual Employment. — The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed
for a specific project or undertaking the completion or termination of which has been determined at the
time of the engagement of the employee or where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and
his employment shall continue while such actually exists.
Jurisprudence has identified the three types of employees mentioned in the provision: (1) regular
employees or those who have been engaged to perform activities that are usually necessary or desirable
in the usual business or trade of the employer; (2) project employees or those whose employment has
been fixed for a specific project or undertaking, the completion or termination of which has been
determined at the time of their engagement, or those whose work or service is seasonal in nature and is
performed for the duration of the season; and (3) casual employees or those who are neither regular nor
project employees.55
Farm workers generally fall under the definition of seasonal employees. We have consistently held that
seasonal employees may be considered as regular employees.56 Regular seasonal employees are those
called to work from time to time. The nature of their relationship with the employer is such that during
the off season, they are temporarily laid off; but reemployed during the summer season or when their
services may be needed.57 They are in regular employment because of the nature of their job,and not
because of the length of time they have worked.58
The rule, however, is not absolute. In Hacienda Fatima v. National Federation of Sugarcane Workers-
Food & General Trade,59 the Court held that seasonal workers who have worked for one season only
may not be considered regular employees. Similarly, in Mercado, Sr. v. NLRC,60 it was held that when
seasonal employees are free to contract their services with other farm owners, then the former are not
regular employees.
For regular employees to be considered as such, the primary standard used is the reasonable connection
between the particular activity they perform and the usual trade or business of the employer.61 This test
has been explained thoroughly in De Leon v. NLRC,62 viz:
The primary standard, therefore, of determining a regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual business or trade of
the employer. The test is whether the former is usually necessary or desirable in the usual business or
trade of the employer. The connection can be determined by considering the nature of the work
performed and its relation to the scheme of the particular business or trade in its entirety. Also if the
employee has been performing the job for at least one year, even if the performance is not continuous
or merely intermittent, the law deems the repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is also considered regular, but only with respect to such activity and while such activity
exists.
A reading of the records reveals that the deceased was indeed a farm worker who was in the regular
employ of petitioner. From year to year, starting January 1983 up until his death, the deceased had been
working on petitioner’s land by harvesting abaca and coconut, processing copra, and clearing weeds. His
employment was continuous in the sense that it was done for more than one harvesting season.
Moreover, no amount of reasoning could detract from the fact that these tasks were necessary or
desirable in the usual business of petitioner.
The other tasks allegedly done by the deceased outside his usual farm work only bolster the existence of
an employer-employee relationship. As found by the SSC, the deceased was a construction worker in the
building and a helper in the bakery, grocery, hardware, and piggery – all owned by petitioner.63 This fact
only proves that even during the off season, the deceased was still in the employ of petitioner.
The most telling indicia of this relationship is the Compromise Agreement executed by petitioner and
private respondent. It is a valid agreement as long as the consideration is reasonable and the employee
signed the waiver voluntarily, with a full understanding of what he or she was entering into.64 All that is
required for the compromise to be deemed voluntarily entered into is personal and specific individual
consent.65 Once executed by the workers or employees and their employers to settle their differences,
and done in good faith, a Compromise Agreement is deemed valid and binding among the parties.66
Petitioner entered into the agreement with full knowledge that he was described as the employer of the
deceased.67 This knowledge cannot simply be denied by a statement that petitioner was merely forced
or threatened into such an agreement.1âwphi1 His belated attempt to circumvent the agreement should
not be given any consideration or weight by this Court.
III
Pakyaw workers are regular employees,
17

provided they are subject to the control of petitioner.

Pakyaw workers are considered employees for as long as their employers exercise control over them. In
Legend Hotel Manila v. Realuyo,68 the Court held that "the power of the employer to control the work of
the employee is considered the most significant determinant of the existence of an employer-employee
relationship. This is the so-called control test and is premised on whether the person for whom the
services are performed reserves the right to control both the end achieved and the manner and means
used to achieve that end." It should be remembered that the control test merely calls for the existence
of the right to control, and not necessarily the exercise thereof.69 It is not essential that the employer
actually supervises the performance of duties by the employee. It is enough that the former has a right
to wield the power.70

In this case, we agree with the CA that petitioner wielded control over the deceased in the discharge of
his functions. Being the owner of the farm on which the latter worked, petitioner – on his own or
through his overseer – necessarily had the right to review the quality of work produced by his laborers. It
matters not whether the deceased conducted his work inside petitioner’s farm or not because petitioner
retained the right to control him in his work, and in fact exercised it through his farm manager Amado
Gacelo. The latter himself testified that petitioner had hired the deceased as one of the pakyaw workers
whose salaries were derived from the gross proceeds of the harvest.71

We do not give credence to the allegation that the deceased was an independent contractor hired by a
certain Adolfo Gamba, the contractor whom petitioner himself had hired to build a building. The
allegation was based on the self-serving testimony of Joyce Gapay Demate,72 the daughter of petitioner.
The latter has not offered any other proof apart from her testimony to prove the contention.

The right of an employee to be covered by the Social Security Act is premised on the existence of an
employer-employee relationship.73 That having been established, the Court hereby rules in h1vor of
private respondent. G.R. No. 173648 January 16, 2012

WHEREFORE, the Petition for Review on Certiorari is hereby DENIED. The assailed Decision and ABDULJUAHID R. PIGCAULAN,* Petitioner,
resolution of the Court of Appeals in CA-G.R. SP. No. 101688 dated 17 March 2010 and 13 August 2010, vs.
respectively, are hereby AFFIRMED. SECURITY and CREDIT NVESTIGATION, INC. and/or RENE AMBY REYES, Respondents.

SO ORDERED. DECISION

MARIA LOURDES P. A. SERENO DEL CASTILLO, J.:

Chief Justice, Chairperson
It is not for an employee to prove non-payment of benefits to which he is entitled by law. Rather, it is on
WE CONCUR: the employer that the burden of proving payment of these claims rests.

This Petition for Review on Certiorari1 assails the February 24, 2006 Decision2 of the Court of Appeals
(CA) in CA-G.R. SP No. 85515, which granted the petition for certiorari filed therewith, set aside the
March 23, 20043 and June 14, 20044 Resolutions of the National Labor Relations Commission (NLRC),
and dismissed the complaint filed by Oliver R. Canoy (Canoy) and petitioner Abduljuahid R. Pigcaulan
18
(Pigcaulan) against respondent Security and Credit Investigation, Inc. (SCII) and its General Manager,
respondent Rene Amby Reyes. Likewise assailed is the June 28, 2006 Resolution5 denying Canoy’s and
Pigcaulan’s Motion for Reconsideration.6
Factual Antecedents
Canoy and Pigcaulan were both employed by SCII as security guards and were assigned to SCII’s different
clients. Subsequently, however, Canoy and Pigcaulan filed with the Labor Arbiter separate complaints7
for underpayment of salaries and non-payment of overtime, holiday, rest day, service incentive leave
and 13th month pays. These complaints were later on consolidated as they involved the same causes of
action.
Canoy and Pigcaulan, in support of their claim, submitted their respective daily time records reflecting
the number of hours served and their wages for the same. They likewise presented itemized lists of their
claims for the corresponding periods served.
Respondents, however, maintained that Canoy and Pigcaulan were paid their just salaries and other
benefits under the law; that the salaries they received were above the statutory minimum wage and the
rates provided by the Philippine Association of Detective and Protective Agency Operators (PADPAO) for
security guards; that their holiday pay were already included in the computation of their monthly
salaries; that they were paid additional premium of 30% in addition to their basic salary whenever they
were required to work on Sundays and 200% of their salary for work done on holidays; and, that Canoy
and Pigcaulan were paid the corresponding 13th month pay for the years 1998 and 1999. In support
thereof, copies of payroll listings8 and lists of employees who received their 13th month pay for the
periods December 1997 to November 1998 and December 1998 to November 19999 were presented. In
addition, respondents contended that Canoy’s and Pigcaulan’s monetary claims should only be limited to
the past three years of employment pursuant to the rule on prescription of claims.
Ruling of the Labor Arbiter
Giving credence to the itemized computations and representative daily time records submitted by Canoy
and Pigcaulan, Labor Arbiter Manuel P. Asuncion awarded them their monetary claims in his Decision10
dated June 6, 2002. The Labor Arbiter held that the payroll listings presented by the respondents did not
prove that Canoy and Pigcaulan were duly paid as same were not signed by the latter or by any SCII
officer. The 13th month payroll was, however, acknowledged as sufficient proof of payment, for it bears
Canoy’s and Pigcaulan’s signatures. Thus, without indicating any detailed computation of the judgment
award, the Labor Arbiter ordered the payment of overtime pay, holiday pay, service incentive leave pay
and proportionate 13th month pay for the year 2000 in favor of Canoy and Pigcaulan, viz:
WHEREFORE, the respondents are hereby ordered to pay the complainants: 1) their salary differentials in
the amount of ₱166,849.60 for Oliver Canoy and ₱121,765.44 for Abduljuahid Pigcaulan; 2) the sum of
₱3,075.20 for Canoy and ₱2,449.71 for Pigcaulan for service incentive leave pay and; [3]) the sum of
₱1,481.85 for Canoy and ₱1,065.35 for Pigcaulan as proportionate 13th month pay for the year 2000.
The rest of the claims are dismissed for lack of sufficient basis to make an award.
SO ORDERED.11
Ruling of the National Labor Relations Commission
Respondents appealed to the NLRC. They alleged that there was no basis
for the awards made because aside from the self-serving itemized computations, no representative daily
time record was presented by Canoy and Pigcaulan. On the contrary, respondents asserted that the
payroll listings they submitted should have been given more probative value. To strengthen their cause,
they attached to their Memorandum on Appeal payrolls12 bearing the individual signatures of Canoy
and Pigcaulan to show that the latter have received their salaries, as well as copies of transmittal
letters13 to the bank to show that the salaries reflected in the payrolls were directly deposited to the
ATM accounts of SCII’s employees.
The NLRC, however, in a Resolution14 dated March 23, 2004, dismissed the appeal and held that the
evidence show underpayment of salaries as well as non-payment of service incentive leave benefit.
Accordingly, the Labor Arbiter’s Decision was sustained. The motion for reconsideration thereto was
likewise dismissed by the NLRC in a Resolution15 dated June 14, 2004.
Ruling of the Court of Appeals
In respondents’ petition for certiorari with prayer for the issuance of a temporary restraining order and
preliminary injunction16 before the CA, they attributed grave abuse of discretion on the part of the NLRC
in finding that Canoy and Pigcaulan are entitled to salary differentials, service incentive leave pay and
proportionate 13th month pay and in arriving at amounts without providing sufficient bases therefor.
The CA, in its Decision17 dated February 24, 2006, set aside the rulings of
both the Labor Arbiter and the NLRC after noting that there were no factual and legal bases mentioned
in the questioned rulings to support the conclusions made. Consequently, it dismissed all the monetary
claims of Canoy and Pigcaulan on the following rationale:
First. The Labor Arbiter disregarded the NLRC rule that, in cases involving money awards and at all
events, as far as practicable, the decision shall embody the detailed and full amount awarded.
Second. The Labor Arbiter found that the payrolls submitted by SCII have no probative value for being
unsigned by Canoy, when, in fact, said payrolls, particularly the payrolls from 1998 to 1999 indicate the
individual signatures of Canoy.
Third. The Labor Arbiter did not state in his decision the substance of the evidence adduced by Pigcaulan
and Canoy as well as the laws or jurisprudence that would show that the two are indeed entitled to the
salary differential and incentive leave pays.
Fourth. The Labor Arbiter held Reyes liable together with SCII for the payment of the claimed salaries and
benefits despite the absence of proof that Reyes deliberately or maliciously designed to evade SCII’s
19
alleged financial obligation; hence the Labor Arbiter ignored that SCII has a corporate personality
separate and distinct from Reyes. To justify solidary liability, there must be an allegation and showing
that the officers of the corporation deliberately or maliciously designed to evade the financial obligation
of the corporation.18
Canoy and Pigcaulan filed a Motion for Reconsideration, but same was denied by the CA in a
Resolution19 dated June 28, 2006.
Hence, the present Petition for Review on Certiorari.
Issues
The petition ascribes upon the CA the following errors:
I. The Honorable Court of Appeals erred when it dismissed the complaint on mere alleged failure of the
Labor Arbiter and the NLRC to observe the prescribed form of decision, instead of remanding the case for
reformation of the decision to include the desired detailed computation.
II. The Honorable Court of Appeals erred when it [made] complainants suffer the consequences of the
alleged non-observance by the Labor Arbiter and NLRC of the prescribed forms of decisions considering
that they have complied with all needful acts required to support their claims.
III. The Honorable Court of Appeals erred when it dismissed the complaint allegedly due to absence of
legal and factual [bases] despite attendance of substantial evidence in the records.20
It is well to note that while the caption of the petition reflects both the names of Canoy and Pigcaulan as
petitioners, it appears from its body that it is being filed solely by Pigcaulan. In fact, the Verification and
Certification of Non-Forum Shopping was executed by Pigcaulan alone.
In his Petition, Pigcaulan submits that the Labor Arbiter and the NLRC are not strictly bound by the rules.
And even so, the rules do not mandate that a detailed computation of how the amount awarded was
arrived at should be embodied in the decision. Instead, a statement of the nature or a description of the
amount awarded and the specific figure of the same will suffice. Besides, his and Canoy’s claims were
supported by substantial evidence in the form of the handwritten detailed computations which the Labor
Arbiter termed as "representative daily time records," showing that they were not properly
compensated for work rendered. Thus, the CA should have remanded the case instead of outrightly
dismissing it.
In their Comment,21 respondents point out that since it was only Pigcaulan who filed the petition, the
CA Decision has already become final and binding upon Canoy. As to Pigcaulan’s arguments, respondents
submit that they were able to present sufficient evidence to prove payment of just salaries and benefits,
which bits of evidence were unfortunately ignored by the Labor Arbiter and the NLRC. Fittingly, the CA
reconsidered these pieces of evidence and properly appreciated them. Hence, it was correct in
dismissing the claims for failure of Canoy and Pigcaulan to discharge their burden to disprove payment.
Pigcaulan, this time joined by Canoy, asserts in his Reply22 that his filing of the present petition
redounds likewise to Canoy’s benefit since their complaints were consolidated below. As such, they
maintain that any kind of disposition made in favor or against either of them would inevitably apply to
the other. Hence, the institution of the petition solely by Pigcaulan does not render the assailed Decision
final as to Canoy. Nonetheless, in said reply they appended Canoy’s affidavit23 where he verified under
oath the contents and allegations of the petition filed by Pigcaulan and also attested to the authenticity
of its annexes. Canoy, however, failed to certify that he had not filed any action or claim in another court
or tribunal involving the same issues. He likewise explains in said affidavit that his absence during the
preparation and filing of the petition was caused by severe financial distress and his failure to inform
anyone of his whereabouts.
Our Ruling
The assailed CA Decision is considered final as to Canoy.
We have examined the petition and find that same was filed by Pigcaulan solely on his own behalf. This is
very clear from the petition’s prefatory which is phrased as follows:
COMES NOW Petitioner Abduljuahid R. Pigcaulan, by counsel, unto this Honorable Court x x x. (Emphasis
supplied.)
Also, under the heading "Parties", only Pigcaulan is mentioned as petitioner and consistent with this, the
body of the petition refers only to a "petitioner" and never in its plural form "petitioners". Aside from the
fact that the Verification and Certification of Non-Forum Shopping attached to the petition was executed
by Pigcaulan alone, it was plainly and particularly indicated under the name of the lawyer who prepared
the same, Atty. Josefel P. Grageda, that he is the "Counsel for Petitioner Adbuljuahid Pigcaulan" only. In
view of these, there is therefore, no doubt, that the petition was brought only on behalf of Pigcaulan.
Since no appeal from the CA Decision was brought by Canoy, same has already become final and
executory as to him.
Canoy cannot now simply incorporate in his affidavit a verification of the contents and allegations of the
petition as he is not one of the petitioners therein. Suffice it to state that it would have been different
had the said petition been filed in behalf of both Canoy and Pigcaulan. In such a case, subsequent
submission of a verification may be allowed as non-compliance therewith or a defect therein does not
necessarily render the pleading, or the petition as in this case, fatally defective.24 "The court may order
its submission or correction, or act on the pleading if the attending circumstances are such that strict
compliance with the Rule may be dispensed with in order that the ends of justice may be served thereby.
Further, a verification is deemed substantially complied with when one who has ample knowledge to
swear to the truth of the allegations in the complaint or petition signs the verification, and when matters
alleged in the petition have been made in good faith or are true and correct."25 However, even if it were
so, we note that Canoy still failed to submit or at least incorporate in his affidavit a certificate of non-
forum shopping.
The filing of a certificate of non-forum shopping is mandatory so much so that non-compliance could
only be tolerated by special circumstances and compelling reasons.26 This Court has held that when
20
there are several petitioners, all of them must execute and sign the certification against forum shopping;
otherwise, those who did not sign will be dropped as parties to the case.27 True, we held that in some
cases, execution by only one of the petitioners on behalf of the other petitioners constitutes substantial
compliance with the rule on the filing of a certificate of non-forum shopping on the ground of common
interest or common cause of action or defense.28 We, however, find that common interest is not
present in the instant petition. To recall, Canoy’s and Pigcaulan’s complaints were consolidated because
they both sought the same reliefs against the same respondents. This does not, however, mean that they
share a common interest or defense. The evidence required to substantiate their claims may not be the
same. A particular evidence which could sustain Canoy’s action may not effectively serve as sufficient to
support Pigcaulan’s claim.
Besides, assuming that the petition is also filed on his behalf, Canoy failed to show any reasonable cause
for his failure to join Pigcaulan to personally sign the Certification of Non-Forum Shopping. It is his duty,
as a litigant, to be prudent in pursuing his claims against SCII, especially so, if he was indeed suffering
from financial distress. However, Canoy failed to advance any justifiable reason why he did not inform
anyone of his whereabouts when he knows that he has a pending case against his former employer.
Sadly, his lack of prudence and diligence cannot merit the court’s consideration or sympathy. It must be
emphasized at this point that procedural rules should not be ignored simply because their non-
observance may result in prejudice to a party’s substantial rights. The Rules of Court should be followed
except only for the most persuasive of reasons.29
Having declared the present petition as solely filed by Pigcaulan, this Court shall consider the subsequent
pleadings, although apparently filed under his and Canoy’s name, as solely filed by the former.
There was no substantial evidence to support the grant of overtime pay.
The Labor Arbiter ordered reimbursement of overtime pay, holiday pay, service incentive leave pay and
13th month pay for the year 2000 in favor of Canoy and Pigcaulan. The Labor Arbiter relied heavily on
the itemized computations they submitted which he considered as representative daily time records to
substantiate the award of salary differentials. The NLRC then sustained the award on the ground that
there was substantial evidence of underpayment of salaries and benefits.
We find that both the Labor Arbiter and the NLRC erred in this regard. The handwritten itemized
computations are self-serving, unreliable and unsubstantial evidence to sustain the grant of salary
differentials, particularly overtime pay. Unsigned and unauthenticated as they are, there is no way of
verifying the truth of the handwritten entries stated therein. Written only in pieces of paper and solely
prepared by Canoy and Pigcaulan, these representative daily time records, as termed by the Labor
Arbiter, can hardly be considered as competent evidence to be used as basis to prove that the two were
underpaid of their salaries. We find nothing in the records which could substantially support Pigcaulan’s
contention that he had rendered service beyond eight hours to entitle him to overtime pay and during
Sundays to entitle him to restday pay. Hence, in the absence of any concrete proof that additional
service beyond the normal working hours and days had indeed been rendered, we cannot affirm the
grant of overtime pay to Pigcaulan.
Pigcaulan is entitled to holiday pay, service incentive leave pay and proportionate 13th month pay for
year 2000.
However, with respect to the award for holiday pay, service incentive leave
pay and 13th month pay, we affirm and rule that Pigcaulan is entitled to these benefits.
Article 94 of the Labor Code provides that:
ART. 94. RIGHT TO HOLIDAY PAY. – (a) Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly employing less than ten (10) workers;
xxxx
While Article 95 of the Labor Code provides:
ART. 95. RIGHT TO SERVICE INCENTIVE LEAVE. – (a) Every employee who has rendered at least one year
of service shall be entitled to a yearly service incentive of five days with pay.
xxxx
Under the Labor Code, Pigcaulan is entitled to his regular rate on holidays even if he does not work.30
Likewise, express provision of the law entitles him to service incentive leave benefit for he rendered
service for more than a year already. Furthermore, under Presidential Decree No. 851,31 he should be
paid his 13th month pay. As employer, SCII has the burden of proving that it has paid these benefits to its
employees.32
SCII presented payroll listings and transmittal letters to the bank to show that Canoy and Pigcaulan
received their salaries as well as benefits which it claimed are already integrated in the employees’
monthly salaries. However, the documents presented do not prove SCII’s allegation. SCII failed to show
any other concrete proof by means of records, pertinent files or similar documents reflecting that the
specific claims have been paid. With respect to 13th month pay, SCII presented proof that this benefit
was paid but only for the years 1998 and 1999. To repeat, the burden of proving payment of these
monetary claims rests on SCII, being the employer. It is a rule that one who pleads payment has the
burden of proving it. "Even when the plaintiff alleges non-payment, still the general rule is that the
burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment."33
Since SCII failed to provide convincing proof that it has already settled the claims, Pigcaulan should be
paid his holiday pay, service incentive leave benefits and proportionate 13th month pay for the year
2000.
The CA erred in dismissing the claims instead of remanding the case to the Labor Arbiter for a detailed
computation of the judgment award.
Indeed, the Labor Arbiter failed to provide sufficient basis for the monetary awards granted.lawphi1
Such failure, however, should not result in prejudice to the substantial rights of the party.1avvphi1 While
21

we disallow the grant of overtime pay and restday pay in favor of Pigcaulan, he is nevertheless entitled,
as a matter of right, to his holiday pay, service incentive leave pay and 13th month pay for year 2000.
Hence, the CA is not correct in dismissing Pigcaulan’s claims in its entirety.

Consistent with the rule that all money claims arising from an employer-employee relationship shall be
filed within three years from the time the cause of action accrued,34 Pigcaulan can only demand the
amounts due him for the period within three years preceding the filing of the complaint in 2000.
Furthermore, since the records are insufficient to use as bases to properly compute Pigcaulan’s claims,
the case should be remanded to the Labor Arbiter for a detailed computation of the monetary benefits
due to him.

WHEREFORE, the petition is GRANTED. The Decision dated February 24, 2006 and Resolution dated June
28, 2006 of the Court of Appeals in CA-G.R. SP No. 85515 are REVERSED and SET ASIDE. Petitioner
Abduljuahid R. Pigcaulan is hereby declared entitled to holiday pay and service incentive leave pay for
the years 1997-2000 and proportionate 13th month pay for the year 2000.

The case is REMANDED to the Labor Arbiter for further proceedings to determine the exact amount and
to make a detailed computation of the monetary benefits due Abduljuahid R. Pigcaulan which Security
and Credit Investigation Inc. should pay without delay.

SO ORDERED.
22
G.R. No. L-18559 June 30, 1964
PHILIPPINE AIR LINES EMPLOYEES' ASSOCIATION, otherwise known as "PALEA"
as assignee of the employees of the PHILIPPINE AIR LINES, INC., plaintiff-appellant,
vs.
PHILIPPINE AIR LINES, INC., otherwise known as "PAL", defendant-appellant.
Ponce Enrile, Siguion Reyna, Montecillo and Belo for plaintiff-appellant.
Jimenez and Ampil for defendant-appellant.
CONCEPCION, J.:
Appeal, on questions of law from a decision of the Court of First Instance of Manila.
On January 4, 1956, plaintiff Philippine Airlines Employees' Association — otherwise known as the PALEA
— whose members are regular employees of defendant Philippine Air Lines Incorporated — otherwise
known as PAL — and the latter entered into a collective bargaining contract, effective up to January 4,
1959, stipulating, inter alia, that the regular working hours of said employees shall be on the basis of
forty-eight (48) hours a week. Soon after the approval of Republic Act No. 1880, on June 22, 1957,
providing that the "legal number of hours of labor", except for "schools, courts, hospitals and health
clinics ... shall be eight (8) hours a day, for five (5) days a week or a total of forty (40) hours a week,
exclusive of time for lunch," and that said Act "shall also be applicable to all laborers employed in
government-owned and controlled corporations", plaintiff made representations with the defendant for
the extension, to the members of the former, of the benefits of said Act, upon the theory that the PAL is
a government-controlled corporation, over 54% of its authorized capital stock being admittedly owned
by the National Development Co. — otherwise known as the NDC — which is wholly owned and
controlled by the government. As these representation did not meet with the approval of the PAL, which
contended that it is not a government owned and controlled corporation, plaintiff began this suit in the
Court of First Instance of Manila, on August 7, 1958, and prayed in its complaint, as twice amended, that
the PAL be declared a government-controlled corporation subject to the provisions of said Act, and
compelled to shorten the hours of work for its employees and daily wagers, from 48 to 40 hours a week,
from Monday thru Friday, at the rate of eight (8) hours a day, "but if the exigencies of the service
demands, to pay the overtime rates for services rendered or to be rendered beyond the 40 hours a week
required by said Republic Act No. 1880", in addition to attorney's fees and costs.
In its answer, defendant admitted the main allegations of fact in the complaint, and averred, by way of
affirmative defenses: (1) that it is not a government-owned and controlled corporation; (2) that, under
its aforementioned collective bargaining agreement with plaintiff, the regular schedule of hours of work
of its members shall be on the basis of 48 hours a week and only work performed in excess of eight (8)
hours daily from Monday to Saturday and work performed on Sundays and legal holidays shall be
compensated for at overtime rates; and (3) that plaintiff's cause of action involves money claims
allegedly due its members who have not assigned their rights to plaintiff, which is not the proper party in
interest to prosecute said money claims. Defendant, likewise, set up a counterclaim for attorney's fees.
Subsequently, plaintiff filed a third amended complaint — admitted over defendant's objection —
alleging, in addition to the averments contained in the second amended complaint, that, after the
commencement of this action, the PALEA members had assigned to plaintiff their claim and credit
against the defendant.
The latter's answer to the third amended complaint reproduced substantially the admissions and
allegations made in its answer to the second amended complaint, and alleged, as additional affirmative
defenses: (a) that Republic Act 1880 is unconstitutional; (b) that, after the expiration of the collective
bargaining agreement referred to in its previous answer, the parties had entered into another collective
bargaining agreement, effective up to December 31, 1961, stipulating that the regular schedule of
working hours of defendant's employees shall be on the basis of forty-eight (48) hours a week and that
only work performed in excess of eight (8) hours in any one day, from Monday to Saturday, and work
performed on Sundays and legal holidays shall be compensated at overtime rates; and (c) that the
assignment of right and cause of action made in favor of the plaintiff by its members is null and void.
In due course, thereafter, the lower court rendered a decision, the dispositive part of which reads:
FOR THE FOREGOING CONSIDERATIONS, the court hereby renders judgment as follows:
1. Declaring the defendant; Philippine Air Lines, Inc., otherwise known as "PAL", as a government-
controlled corporation and, therefore, falling within the purview of Republic Act No. 1880, as
implemented by Executive Order No. 251, series of 1957;
2. Ordering the defendant to comply with the provisions of Republic Act No. 1880 by shortening the
hours of work a week for its employees and daily wagers from 48 to 40 hours, and from Monday through
Friday at the rate of 8 hours of work a day; but if the exigencies of the service demand, it may require the
members of the plaintiff union to work beyond 40 hours a week by paying them their basic rate of
compensation only, pursuant to Section 4 of the Eight-Hour Labor Law;
3. Adjudging the defendant, once the decision has become final to render a report, within one month
from the date of its finality, containing the names of the members of the plaintiff union who have
worked on Saturdays beginning July 1, 1957, up to the time defendant has started complying with this
decision, and to pay said employees and laborers the compensation due on the Saturdays they have
worked thru the plaintiff union on the strength of the deed of assignment; and
4. Adjudging the defendant to pay attorney's fees to plaintiff's counsel in the sum of P3,000.00, and
costs.
Defendant's counterclaim is dismissed.
23
Both parties seek a review of said decision upon a joint record on appeal. Defendant maintains that the
lower court erred: (1) in assuming jurisdiction over the case; (2) in holding that plaintiff has a valid cause
of action against the defendant, in admitting plaintiff's third amended complaint and in not holding that
the assignment above referred to is null and void; (3) in holding that Republic Act No. 1880 is
constitutional; (4) in holding that defendant is a government-controlled corporation; (5) in holding that
plaintiff's members are entitled to the benefits of Republic Act No. 1880 and in requiring the defendant
to submit a list of plaintiff's members who worked on Saturdays beginning from July 1, 1957, and to pay
them the corresponding compensation through plaintiff herein; and (6) in sentencing the defendant to
pay attorney's fees. Upon the other hand, plaintiff contends that defendant should be sentenced, also, to
pay overtime compensation for work performed on Saturdays by plaintiff's members.
Jurisdiction of the Lower Court
It is urged by defendant that the lower court had no jurisdiction to hear and decide this case, and the
cases of PRISCO vs. CIR, L-13806, (May 23, 1960); Philippine Food vs. CIR, L-15279 (June 30, 1961); Santos
vs. Quisumbing, L-15376 (June 30, 1961); Sanchez vs. Clarete, L-16736 (June 30, 1961); Fookien Times vs.
CIR, L-16025 (March 27, 1961); PanAm vs. PanAm, L-16275 (February 23,1961); New Angat vs. CIR, L-
16283 (December 27, 1960); Ajax vs. Seguiritan, L-16038 (October 25, 1960); Sampaguita vs. CIR, L-16404
(October 25, 1960); Sta. Cecilia vs. CIR, L-14254-55 (May 27, 1960); Board of Liquidators vs. CIR, L-15485
(May 23, 1960), are cited in support of this view. It is true that in PRISCO vs. CIR, (supra) we held that,
"where the employer-employee relationship is still existing ... the Court of Industrial Relations has
jurisdiction over all claims arising out of or in connection with the employment, such as those related to
the Minimum Wage Law and Eight-Hour Labor Law." This notwithstanding, the aforementioned cases are
not decisive in favor of defendant's pretense, for:
1. The main issue in this case is the applicability of Republic Act No. 1880 to the defendant. The latter
maintained that it is not subject to the provisions of said Act merely upon the theory that it is not a
government-controlled corporation, which plaintiff asserts, it is. Thus the only bone of contention, when
this case was initiated, was whether or not the defendant is a government-controlled corporation, within
the purview of Republic Act No. 1880. Obviously, the determination of such issue is within the
jurisdiction of courts of First instance.
2. The question whether plaintiff's members are entitled to overtime compensation under the provisions
of the Eight-Hour Labor Law (Commonwealth Act No. 444), for services rendered on Saturdays, in excess
of 40 hours a week, is merely an incident of said main issue, and only if the latter were decided in the
affirmative. Such incident did not have the effect of depriving the lower court of its jurisdiction over the
case. Neither did it have the effect of vesting in the Court of Industrial Relations the exclusive jurisdiction
to pass upon said main issue. Needless to say, the interest of justice is against the splitting of the causes
of action between the parties herein, arising from the same facts.
3. Although defendant did not agree with the plaintiff on the applicability of Republic Act No. 1880 to the
former, the record indicates that there was between them a mere honest difference of opinion which did
not mar their harmonious relations. Hence, the present case was, in effect, more in the nature of an
action for a declaratory judgment, to settle the aforementioned non-hostile, if not, friendly divergence of
opinion on the main issue. There had been no threat of strike on account thereof. What is more,
plaintiff's members declared that they would not strike during the pendency of this case. In fact, after
the expiration of the collective bargaining contract which was in force at the time of the commencement
of this action, or on April 1, 1959, plaintiff entered into another collective bargaining contract with the
defendant, effective from January 1, 1959 to December 31, 1961. Unlike the cases of Manila Port
Terminal vs. CIR, L-16994 (June 30, 1961) and Manila Railroad Co. vs. CIR, L-17871, L-18160, L-18200, and
L-18249 (January 31, 1964), in which we upheld the jurisdiction of the Court of Industrial Relations
because the dispute was likely to cause a strike or had actually caused a strike, no such danger has
existed in this case and, consequently, there is no reason why it should be within the exclusive
competence of said Court. In fact, defendant alleged in its aforementioned answers that "the present
action is a money claim" and did not contest in the lower court its jurisdiction to entertain it.
4. It is well settled that:
A grant of jurisdiction implies the necessary and usual incidental powers essential to effectuate it, and
every regularly constituted court has power to do all things reasonably necessary for the administration
of justice within the scope of its jurisdiction, and for the enforcement of its judgments and mandates,
even though the court may thus be called upon to decide matters which would not be within its
cognizance as original causes of action.
While a court may be expressly granted the incidental powers necessary to effectuate its jurisdiction, a
grant of jurisdiction, in the absence of prohibitive legislation, implies the necessary and usual incidental
powers essential to effectuate it (In re Stinger's Estate, 201 P. 693), and, subject to existing laws and
constitutional provisions, every regularly constituted court has power to do all things that are reasonably
necessary for the administration of justice within the scope of its jurisdiction, and for the enforcement of
its judgments and mandates. So demands, matters, or questions ancillary or incidental to, or growing out
of, the main action, and coming within the above principles, may be taken cognizance of by the court and
determined, since such jurisdiction is in aid of its authority over the principal matter, even though the
court may thus be called on to consider and decide matters which, as original causes of action, would not
be within its cognizance (Bartolome vs. Shipe 251 S.W. 1031). (21 C. J., S., pp. 136-138.)
Thus, in Gomez vs. North Camarines Lumber Co., L-11945, August 18, 1958, and Serrano vs. Serrano, L-
19562, May 23, 1964, we held that the court having jurisdiction over the main cause of action, may grant
the relief incidental thereto, even if they would, otherwise, be outside its competence. Similarly
When in an action for forcible entry or detainer there is a claim for rentals, the amount of these rentals is
immaterial to the jurisdiction of the Court, for it is merely an incident to the principal action. When,
however, the action is exclusively for rentals, the amount thereof furnishes the test of jurisdiction (Boga
vs. Vecina, 11 Phil. 409; Hahn vs. Tuazon, 72 Phil. 53; Tenorio vs. Gomba, 81 Phil. 54; Hian vs. Almeda
Lopez, 83 Phil. 617; Baguioro vs. Barrios, 77 Phil. 120). (Moran, Comments on the Rules of Court, 1963
ed., Vol. I, p. 54.)
Accordingly, defendant's objection to the jurisdiction of the lower court is hereby overruled.
Plaintiff's Cause of Action
24
Defendant assails plaintiff's cause of action, upon the theory that the assignment of right and cause of
action made in favor of the plaintiff by its members took place after the institution of this case and that
said assignment is null and void. As above stated, the main issue in this case is whether defendant is a
government-controlled corporation under the provisions of Republic Act No. 1880, and it is obvious that,
regardless of and even without said assignment, the plaintiff, as a legitimate and registered labor
organization, may bring this action for the extension of the benefits of said Act to its members (Brown vs.
Stroechel, 74 Mich, 269, 41 NW 921, 3 LRA 430). The collection by them of additional compensation is
merely a possible incident of said main issue, if decided in their favor. 1äwphï1.ñët
Constitutionality of Section 3 of Republic Act No. 1880
Pursuant to said Section 3 of said Act, the provisions of its Sections 1 — to the effect that the legal hours
of labor "shall be eight (8) hours a day, for five (5) days a week, or a total of forty (40) hours a week" —
and 2 — fixing the legal hours of labor "during the hot season" — "shall also be applicable to all laborers
employed in government-owned and controlled corporations."
Defendant asserts that the subject matter of said Section 3 is not embraced in the title of Republic Act
No. 1880, reading: "An Act to Amend the Second Paragraph of Section Five Hundred and Sixty-Two and
Section Five Hundred and Sixty-four of the Revised Administrative Code (Re legal hours of labor —
minimum requirements)", because said sections are found in Book II, Title VI, Chapter 25 of the Revised
Administrative Code, which are captioned as follows:
BOOK II. — ORGANIZATION AND ADMINISTRATION OF BUREAUS
TITLE VI. — BUREAU ORGANIZATION IN GENERAL
Chapter 25
PROVISIONS COMMON TO VARIOUS
BUREAUS AND OFFICES
It is well settled, however, that the constitutional injunction that "no bill which may be enacted into law
shall embrace more than one subject which shall be expressed in the title of the bills does not require
said title to be an index of the contents of the bill and that it is enough that its provisions be germane or
related to the subject expressed in the title (People vs. Carlos, 44 Off. Gaz., 4281; Government vs.
Hongkong & Shanghai Bank, 66 Phil. 483; Sumulong vs. Commission on Elections, 73 Phil. 288). Inasmuch
as the title of Republic Act No. 1880 mentions Section 562 of the Revised Administrative Code, which
provides that "the chiefs of bureaus and office in every branch of the government service, shall require
all employees, of whatever grade or class, not less than the legal number of hours of labor" therein
prescribed, it is clear to us that service in government-owned and controlled corporations is related to
the subject of said Section 562 and to that set forth in the title of Republic Act No. 1880.
Is the PAL a government-controlled corporation?
The lower court answered this question in the affirmative considering that over 54% of the shares of
stock of the PAL belong to the NDC, which, in turn, is wholly owned by the government, so that the latter
has sufficient votes to elect, and has, in fact, been electing, six (6) of the eleven (11) members of PAL's
Board of Directors; that the voting power pertaining to said shares of stock of the PAL owned by the NDC
is exercised by the Administrator of Economic Coordination; that the latter has classified the PAL as a
government-controlled corporation, which, as such, shares in the cost of the operation and maintenance
of the Office of the Economic Coordination; that the Secretary of Justice ruled, in Opinion No. 312, series
of 1954, that the PAL is a government-controlled corporation; that the Executive Secretary and the
Postmaster General have so classified the PAL; that the NDC's general manager, likewise, so considers
the PAL; that on March 28, 1950, the Council of State exempted the PAL from the payment of take-off
fees, landing fees, parking fees, royalties on gasoline, and customs duties and other taxes on PAL
importations of machines, propellers and spare parts; that Republic Act No. 2232 has appropriated
P23,500,000 to enable PAL to purchase and operate jet planes for its projected international fights,
chargeable at the appropriations of the Bureau of Posts for future carriage of international mail; that,
upon the passage of Republic Act No. 2266 — extending the jurisdiction of the Auditor General to
corporations the majority of the shares of stock of which is owned by government-owned or controlled
corporations — the Auditor General has demanded compliance with the provisions of said Act by the
PAL; and that, although the shares of stock held by the government in the PAL are not enough to effect
changes in the organizational or fundamental structure of the corporation — for which the Corporation
Law requires the votes representing 2/3 of the shares of stock outstanding and entitled to vote they are
sufficient to control the regular operation and management thereof.
We are not prepared to disturb the aforementioned conclusion of His Honor, the trial Judge. Although
the Opinion of the Secretary of Justice relied upon in the decision appealed from was reversed in a
subsequent opinion of said official, we note that the same refers to Commonwealth Act No. 186, as
amended, and, hence, does not have much weight as regards the construction of Republic Act No. 1880.
Neither is the circumstance that the Civil Service Law has not been actually applied to the PAL. More
decisive is the fact that Republic Act No. 1880 reflects a humanitarian policy of the government aimed at
the protection and promotion of the health of laborers, workers and employees. It is only logical that
such policy be enforced, not only in bureaus, offices or agencies of the government performing purely
political functions, but, also in corporations either owned or controlled by the government. Indeed, what
is not sufficiently enlightened and humane as regards the treatment accorded to persons discharging
sovereign functions cannot be otherwise with respect to those engaged in corporate or proprietary
functions. Moreover, when a corporation is owned or controlled by the government, it is only natural
that the latter's policy be binding upon the management of such corporation. In any event, In Cervantes
vs. Auditor General (91 Phil. 359), we held that "there can be no question that the NAFCO" — 51" (3.19%
less than the amount of shares of the PAL owned by the NDC) of the capital stock of which was
subscribed by the national government — "is a government-controlled corporation."
Are the working hours of PAL employees governed by
their collective bargaining agreement with plaintiff
or by Republic Act No. 1880?
Defendant insists that the collective bargaining agreement controls, because the same provides that the
regular working hours of its employees shall be on the basis of 48 hours a week, and this stipulation does
25

not conflict with Republic Act No. 1880 which fixes the minimum, not the maximum number of hours of
work a week. The argument is specious, because the issue between the parties is not whether PAL WHEREFORE, the decision appealed from is hereby affirmed, without special pronouncement as to the
employees may be required to work 48 hours a week. Plaintiff admits that its members may be so costs in this instance. It is so ordered.
required, and they are willing to render said work. The issue is whether, since July 1, 1957, they are
entitled to their basic pay by rendering service for merely 40 hours a week and should, accordingly, be
given additional compensation for work done on Saturdays, in excess of 40 hours a week. In this respect
said agreement is inconsistent with Republic Act No. 1880, because the former resolves the issue in the
negative, whereas Republic Act No. 1880 explicitly ordains that there shall be "no diminution" in the
compensation of workers "on account of the reduction" in the number of days or hours of work in a
week pursuant to the provisions of said Act.

It being obvious that the same has been passed in the exercise of the police power of the State, the
validity of which is not impugned by the defendant, and that it must prevail over the provisions of the
aforementioned agreement, insofar as inconsistent therewith, it follows that the lower court did not err
in finding that defendant is subject to the provisions of Republic Act No. 1880 and in requiring the
submission of a list of workers who had, since July 1, 1957, rendered services on Saturdays, in excess of
40 hours a week, for payment of the corresponding additional compensation. Indeed, we have held,
under conditions substantially analogous to those obtaining in the case at bar, that Republic Act No.
1880 applies to the Manila Port Service (Manila Port Service vs. CIR, L-16994, June 30, 1961) and the
Manila Railroad Co. (Manila Railroad Co. vs. CIR. L-17871, L-18160, L-18200 and L-18249, January 31,
1964).

What shall be the rate of the additional compensation,

due for services rendered on Saturdays, in excess of
40 hours a week?

Plaintiff contends that, for such services, its members are entitled to twice their pay at the basic rate,
plus the 25% overtime compensation prescribed in Commonwealth Act No. 444. The case of the Manila
Hotel Co. vs. Manila Hotel Employees Association, G.R. No. L-9190 (November 23, 1960), cited in support
of this contention, is not in point. That case refers to employees who, under their collective bargaining
contract, had a right to one off-day a week with full compensation at the basic rate. Accordingly, when
required to work on such day, they were entitled, in addition to such basic pay, to the regular pay for the
work on that day, plus a 25% for overtime under Commonwealth Act No. 444. No Stipulation analogous
to the one adverted to above exists between the parties in the case at bar.

Upon the other hand, we are not concerned with work rendered on Sundays and regular legal holidays,
for, admittedly, the collective bargaining agreement between the parties herein stipulated therefor the
payment of compensation at overtime rates. The issue before us refers to work on Saturdays, in excess
of the 40-hour-a-week provision of Republic Act No. 1880. Inasmuch as Section 4 of Commonwealth Act
No. 444 explicitly authorizes public utilities performing some public service — such as, among others,
providing transportation (to which class defendant admittedly belongs) — to require its employees or
laborers to work on Sundays and legal holidays without paying them the overtime rates, it is obvious that
the lower court was justified in fixing the compensation due to PAL employees for services rendered on
Saturdays, not exceeding eight (8) hours, at the basic rates (Manila Electric Co. vs. Public Utilities
Employees Association, 79 Phil. 409, 415; Manila Railroad Co. vs. CIR, supra).
26

Siguion Reyna, Montecillo, Belo & Ongsiako for Philippines Air lines, Inc.

Laquihon & Legayada for Philippine Air Lines Supervisors' Association (PALEA).

MAKASIAR, J.:

Before US are consolidated petitions to review the Court of industrial Relations en banc resolution dated
October 9, 1969 in CIR Case No. 43-IPA.

In G.R. No. L-31341 (PALEA vs. PAL), petitioners question the date of effectivity of the adjudicated pay
differentials due to the monthly-salaried employees of Philippine Air Lines, Inc.

In G.R. No. L-31343 (PAL vs. PALEA), petitioner assails the reversal by the Court of Industrial Relations of
its earlier resolution on the method employed by the Philippine Air Lines in computing the basic daily
and hourly rate of its monthly salaried employees.

On February 14, 1963, the Philippine Air Lines Employees' Association (PALEA) and the Philippine Air
Lines Supervisors' Association (PALSA) — petitioners in G.R. No. L-31341 and respondents in G.R. No.
31343 — commenced an action against the Philippine Air Lines (PAL) in the Court of Industrial Relations,
praying that PAL be ordered to revise its method of computing the basic daily and hourly rate of its
monthly salaried employees, and necessarily, to pay them their accrued sala differentials.

Sought to be revised is PAL's formula in computing wages of its employees:

Monthly salary x 12 365 (No. of calendar = x (Basic dailr rate) days in a year)

x 8 = Basic hourly rate

The unions would like PAL to modify the above formula in this wise:

G.R. No. L-31341 March 31, 1976 Monthly salary x 12 No. of actual working = x (Basic daily rate) days

PHILIPPINE AIR LINES EMPLOYEES ASSOCIATION (PALEA) and PHILIPPINE AIR LINES SUPERVISORS' x 8 = Basic hourly rate
ASSOCIATION (PALSA), petitioners,
vs. On May 23, 1964, the Court of Industrial Relations, through Presiding Judge Jose S. Bautista, issued an
PHILIPPINE AIR INES, INC., respondent. order denying the unions' prayer for a modified wage formula. Pertinent portion of the order reads:

G.R. No. L-31341-43 March 31, 1976 On the issue of rate of pay, PALSA and PALEA seek to change the long standing method in PAL of
computing the basic daily and hourly rate of monthly salaried employees for the purpose of determining
PHILIPPINE AIR LINES, INC., petitioner, overtime pay, Sunday and legal holiday premium pay, night differential pay, vacation and sick leave pay,
vs. to wit, the monthly salary multiplied by 12 and dividing the product thereof by 365 and then the
PHILIPPINE AIR LINES EMPLOYEES' ASSOCIATION, PHILIPPINE AIR LINES SUPERVISORS' ASSOCIATION, and quotient by 8. PALEA and PALSA claim that the method of computing the basic daily and hourly rate of
the COURT OF INDUSTRIAL RELATIONS, respondents. monthly salaried employees of PAL prior to the implementation of the 40-hour week schedule in PAL
27
should be by dividing the monthly salary by 26 working days, and after the 40-hour week schedule, by
dividing the monthly salary by 20 working days, and then dividing the quotient thereof in each case by 8.
From the records, however, it appears that for may years since 1952, and even previously, PAL has been
consistently and regularly determining the basic and hourly rates of monthly salaried employees by
multiplying the monthly salary by 12 momths and dividing the product by 365 days to arive at the basic
daily rate, and dividing the quotient by 8 to compute the basic hourly rate. There has been no attempt to
revise this formula notwithstanding the various negotiations PAL and with the unions ever since its
operations, and it was only on July 18, 1962, when PALSA, for the first time, proposed that it be changed
in accordance with what is now alleged in the petition. This, however, was a mere proposal by PALSA for
the adoption of a new formula; it was not a demand for the application of a formula claimed to be
correct under the law. Under this circumstance, PALSA and PALEA are estopped from questioning the
correctness and propriety of PAL's method of determining the basic hourly and daily rate of pay of its
monthly salaried personnel, and considering the long period of time that elapsed before they brought
their petition, are barred from insisting or demanding a different rate of pay formula.
xxx xxx xxx
Upon the foregoing, the Court, therefore, declares PAL's method of computing the basic daily and hourly
rate of its monthly salaried employees as legal and proper, and denies the petition of PALSA and PALEA.
xxx xxx xxx
(pp. 47-48, 49, rec. G.R. No. L-31343).
On May 30, 1964, complaining unions promptly moved for the reconsideration of the above-sais order
(p. 51, rec. G.R. No. L-31343).
On June 9, 1964, the unions filed their memorandum in support of their motion for reconsideration
alleging that the questioned order is (a) contrary to law, and (b) contrary to evidence adduced during the
trial (p. 53, ree G.R. No. L-31343).
The unions attributed error to PAL's wage formula, particularly in the use of 365 days as divisor. The
unions contended that the use of 365 days as divisor would necessarily include off-days which, under the
terms of the collective bargaining agreements entered into between the parties, were not paid days. This
is so since for work done on an off-day, an employee was paid 100% plus 25%, or 100% plus 37-½ of his
regular working hour rate.
On the issue of prescription, the unions pointed out:
With respect to the period of prescription, it is clear that since the claim arises from the written
contracts or collective bargaining agreements between the petitioner unions and the PAL, the action
thereon prescribes in ten years from the time the right of action accrues, in accordance with Article 1144
of the New Civil Code. .... (p. 68, rec., G.R. No. L-31343).
On June 26, 1964, the Philippine Air Lines answered point by point the unions' memorandum, in a
prompt reply.
On October 9, 1969, the Court of Industrial Relations, through Presiding Judge Arsenio I. Martinez,
ordered the reversal of its decision dated May 34, 1964 and sustained the unions' method of age
computation.
The industrial court, however, ordered the computation of pay differentials in accordance with the
sustained method of computation effective only July 1, 1957.
Said the Court of Industrial Relations in this regard:
... In this connection, however, it will be noted as previously stated, that this case was considered as an
incident of Case No. 39-IPA, in which the issues involved were related to the respondent PAL of the 40-
Hour Week Law (Rep. Act 1880) from the date of its effectivity July 1, 1957. ...
This Cout therefore belives that in justice and equity and substantial merits of the case, the aforesaid pay
differentials due to the employees involved herein by the application of the correct methods of
computation of the rate of pay should be paid by the respondent also beginning July 1, 1957 (p. 117, rec.,
G.R. No. L-31343).
From the above resolution, both parties appealed to this COURT. The Philippine Air Lines filed its appeal
petition on December 13, 1969, while PALEA filed its petition for review on certiorari on January 3, 1970.
I
For easy comprehension, WE start with the Philippine Air Lines, Inc. versus Philippine Air Lines
Employees Association, Philippine Air Lines Supervisors Association, and the Court of Industrial Relations,
G.R. No. L-31343.
In this appeal PAL emphasizes three assignments of error, to wit:
1. RESPONDENT CIR ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT
THE METHOD OF COMPUTATION USED BY PAL IN DETERMINING TIIE BASIC DAILY OR HOURLY RATE OF
ITS MONTLY SALARIED EMPLOYEES WHICH IS:
MONTHLY SALARY x 1 365 (NO. OF CALENDAR DAYS IN YEAR) = x (BASIC DAILY RATE)
x 8 = BASIC HOURLY RATE 8
IS NOT CORRECT, CONSIDERING THAT PAL, A PUBLIC UTILITY WHERE THERE IS WORK EVERYDAY OF THE
WEEK FOR MANY YEARS EVEN BEFORE REPUBLIC ACT 602 AND WITH THE CONSENT AND APPROVAL OF
THE EMPLOYEES, CONSISTENT WITH SECTION 19 OF REPUBLIC ACT 602 PROHIBITING REDUCTION OF
WAGES FOR OFF DAYS-WHICH WAS SUSTAINED BY THIS HONORABLE COURT IN AUTOMOTIVE PARTS &
EQUIPMENT CO., INC. VS. JOSE B. LINGAD, G.R. NO. L- 26406, OCTOBER 31, 1969 — HAS BEEN TREATING
28
OFFSITE DAYS, 11 AS SATURDAYS, SUNDAYS, COMPANY OBSERVED HOLIDAYS OR ANY OTHER
DESIGNATED HOLIDAYS AS PAID DAYS.
2. RESPONDENT CIR ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION IN NOT FINDING. THAT
RESPONDENT UNIONS, BY THEIR LONG PERIOD OF CONSENT, ACQUIESCENCE, INACTION AND
ACCEPTANCE OF BENEFITS THEREUNDER, ARE ESTOPPED AND BARRED FROM CLAIMING THAT PAL'S
FORMULA FOR DETERMINING THE BASIC DAILY AND HOURLY RATE OF PAY IS INCORRECT.
3. RESPONDENT CIR ERED AND ACTED IN EXCESS OF ITS JURISDICTION IN SENTENCING PAL TO PAY
DIFFERENTIALS FOR OVERTIME WORK, NIGHTWORK, HOLIDAY AND SUNDAY PAY FROM JULY 1, 1957
CONSIDERING THAT UNDER THE THREE-YEAR PRESCRIPTIVE PERIOD PROVIDED IN SECTION 7-a OF
COMMONWEALTH ACT NO. 444, AS AMENDED, THE EIGHT-HOUR LABOR LAW, RESPONDENT UNIONS,
ASSUMING THEY HAD ANY CAUSE OF ACTION, COULD RECOVER ONLY FROM FEBRUARY 14, 1960 UP TO
THE PRESENT, SINCE RESPONDENT UNIONS FILED THEIR ACTION ONLY ON FEBRUARY 14, 1963.
A PAL maintains that the NAWASA doctrine should not apply to a public utility like PAL which, from the
PAL's maiden argument has a strong tendency to mislead. In an effort to emphasize that off-days are
paid and therefore should be reckoned with in determing the divisor for computing daily and hourly rate,
PAL leans heavily on what it considers as additional payment of 125% or 137 ½%, as the case may be, of
an employee's basic hourly rate, given to a worker who worked on his off-days. PAL would like us to
believe that the word "Additional" all but accentuates the existence of a regular basic rate; otherwise,
the 125% or 137½% shall be in addition to what?
The industrial court, however, had this to say:
Moreover, it will be noted that before September 4, 1961, a monthly salaried employee of PAL had to
work 304 days only in a year,a nd after said date, he had to work only 258 days in ayear, to be entitled to
his equivalent yearly salary. When he worked on his off-day, he was paid accordingly (125% or 137%),
indicating that his off-days were not with pay. It seems illogical for said employe to be paid 125% or 137
½% of his basic daily rate, if such off-days are already wtih pay, as indicated by the company (p. 107, rec.,
G.R. No. L-31343, emphasis supplied).
WE agree.
There should hardly be any doubt that off-days are not paid days, Precisely, off-days are rest days for the
worker. He is not required to work on such days. This finds support not only in the basic principle in labor
that the basis of remuneration or compensation is actual service rendered, but in the ever pervading
labor spirit aimed at humanizing the conditions of hie working man.
Since during his off-days an employee is not compelled to work he cannot, conversely, demand for his
corresponding pay. If, however, a worker works on his off-day, our welfare laws duly reward him with a
premium higher than what he would receive when he works on his regular working day.
Such being the case, the divisor in computing an employee's basic daily rate should be the actual working
days in a yar The number of off-days are not to be counted precisely because on such off-days, an
employee is not required to work.
Simple common sense dictates that should an employee opt not to work — which he can legally do — on
an off-day, and for such he gets no pay, he would be unduly robbed of a portion of his legitimate pay if
and when in computing his basic daily and hourly rate, such off-day is deemed subsumed by the divisor.
For it is elementary in the fundamental process of division that with a constant dividend, the bigger your
divisor is, the smaller our quotient will be.
It bears emphasis that OUR view above constitutes the rationale behind the landmark ruling, surprisingly,
by the same trial Judge Jose S. Bautista of the Court of Industrial Relations, in National Waterworks and
Sewerage Authority vs. NWSA Consolidated Unions, et al., (G.R. No. L-18938, August 31, 1964, 11 SCRA
766, 793-794), to which decision WE gave OUR affirmance.
nature of its operations, requires a whole-year-round, uninterrupted work by personnel. What PAL
apparently forgets is that just like it, NAWASA is also a public utility which likewise requires its workers to
work the whole year round. Moreover, the NAWASA is a government-owned corporation — to which
PAL is akin, it being a government-controlled corporation.
As will later be stated herein, PAL inked with the representative unions of the employees collective
bargaining agreements wherein it bound itself to duly compensate employer working on their off-days.
The same situation obtained in the NAWASA case, wherein WE held:
And in the collective bargaining agreement entered into between the NAWASA and respondent unions it
was agreed that all existing benefits enjoyed by the employees and laborers prior to its effectivity shall
remain in force and shall form part of the agreement, among which certainly is the 25% additional
compensation for work on Sundays and legal holidays theretofore enjoyed by said laborers and
employees. It may, therefore, be said that while under Commonwealth Act No. 444 a public utility is not
required to pay additional compensation to its employees and workers for work done on Sundays and
legal holidays, there is, however, no prohibition ofr it to pay such additional compensation if it
voluntarily agrees to do so. The NAWASA committed itself to pay this additional compensation. It must
pay not because of compulsion of law but because of contractual obligation (11 SCRA 766, 776).
The settled NAWASA doctrine should not be disturbed.
B
PAL also vigorously argues that the unions' longstanding silence with respect, and acquiescence, to PAL's
method of computation has placed them in estoppel to impugn the correctness of the questioned wage
formula. PAL furthermore contends that laches has likewise set in precisely because of stich long-
standing inaction.
Our jurisprudence on estoppel is, however, to the effect that:
29
... (I)t is meet to recall that "mere innocent silence will not work estoppel. There must also be some
element of turpitude or neglignece connected with the silence by which another is misled to his injury"
(Civil Code of the philippines by Tolentino, Vol. IV, p. 600) ... [Beronilla vs. GSISK, G.R. No. L-21723, Nov.
26, 1970, 36 SCRA 44, 46, 55, emphasis supplied].
In the case befor US, it is not denied that PAL's formula of determining daily and hourly rate of pay has
been decided and adopted by it unilaterally without the knowedge and express consent of the
employees. It was only later on that the employees came to know of the formula's irregularity and its
being violative of the collective bargaining agreements previously executed by PAL and the unions.
Precisely, PALSA immediately proposed that PAL and the unions. Precisely, PALSA immediately proposed
that PAL use the correct method of computation, which proposa PAL chose to ignore.
Clearly, therefore, the alleged long-standing silence by the PAL employees is in truth and in fact innocent
silence, which cannot place a party in estoppel.
The rationale for this is not difficult to see. The doctrine of estoppel had its origin in equity. As such, its
applicability depends, to a large extent, on the circumstances surrounding a particular case. Where,
therefore, the neglect or omission alleged to haveplaced a party in estoppel cannot be invoked. This was
the essence of OUR ruling in the case of Mirasol vs. Municipality of Tabaco (43 Phil. 610, 614). And this,
in quintessence, was the compelling reason why in Lodovica vs. Court of Appeals (L-29678, July 18, 1975,
65 SCRA 154, 158), WE held that a party who had no knowledge of or gave no consent to a transaction
may not be estopped by it.
Furthermore, jurisprudence likewise fortifies the position that in the interest of public policy, estoppel
and laches cannot arrest recover of evertime compensation. The case of Manila Terminal Co. vs. CIR (G.R.
NO. L-9265, April 29, 1957, 91 Phil. 625), is squarely in point. In this case We intoned.
The principle of estoppel and laches cannot well be invoked agains the Association. In the first place, it
would be contrary to the spirit of the Eight-Hour Labor Law, under which, as already seen, the laborers
cannot waive their right to extra compensation. In the second place, the law principally obligates the
employer to observe it, as much so that it punishes the employer for its employer for its violation and
leaves the employee or laborer is in such a disadvantageous position as to be naturally reluctant or even
apprehensive in asserting any claim which may cause the employher to devise a way for exercising his
right to terminate the employment.
If the principle of estoppel and laches is to be applied, it may bring about a situation, whereby the
employee or laborer, who cannot expressly renounce their right to extra compensation under the Eight-
Hour Labor Law, may be compelled to accomplish the same thing by mere silence or lapse of time,
thereby frustrating the purpose of the law by indirection (91 Phil. 625, 633, emphasis supplied).
In another count, the unilateral adoption by PAL of an irregular wage formula being an act against public
policy, the doctrine of estoppel cannot give validity to the same (Auyong Hian vs. Court of Tax Appeals,
59 SCRA 110, 112).
II
G.R. No. L-31341 is an appeal from that portion of the en banc resolution of the Court of Industrial
Relations dated October 9, 1969 in case 43-IPA making the payment of the adjudicated pay differentials
effective only from July 1, 1957.
In their lone assignment of error, February 14, 1953, or ten (10) years from the date of the filing of their
original complaint; because the claim for pay differentials is based on written contracts — i.e., the
collective bargaining agreements between PAL and the employees' representative uniuons — and under
Article 1144(1) of the Civil Code, actions based on written contracts prescribe in ten (10) years.
PAL, on the other hand, maintains that the employees' claim for pay differential is"an action to enforce a
cause of action under the Eight-Hour Labor Law (CA No. 444, as amended): (p. 592, rec., G.R. No. L-
31341). As such, the applicable provision is Section 7-a of CA No. 4444, which reads:
Sec. 7-a. Any action to enforce any cause of action under this Act shall be commenced within three
years after the cause of action accrued, otherwise such action shall be forever barred; provided,
however, that actions already commenced before the effecitve date of this Act shall not be affected by
the period herein prescribed (As amended by Rep. Act No. 1993, approved June 22, 1957, emphasis
supplied).
Moreover, PAL argues that even assuming that the issue calls for the application of Article 1144(1) of the
New Civil Code, a general law, still in case of conflict, Commonwealth ACt No. 444, as amended, should
prevail because the latter is a special law.
WE believe that the present case calls for the application of the Civil Code provisions on the prescriptive
period in the filing of actions based on written contracts. The rason should be fairly obvious. Petitioners'
claim fundamentally involves the strict compliance by PAL of the pvosions on wage computation
embodied in the collective bargaining agreements inked between it and the employees representative
unions. These collective bargaining agreements were: the PAS-PALEA collective bargaining agreement of
1952-53; the PAL-PALEA collective bargaining agreement of 1956-59; the PAL-PALEA collective bargaining
agreement of 1959-61 (with Article VI as supplement); the PAL-PALEA agreement of September 4, 1961;
the PAL-ACAP collective bargaining agreement of 1952-54; the PAL-ACAP collective bargaining
agreement of September 6, 1955; the PAL-ACAP collective bargaining agreement of 1959-61; the PAL-
PALSA collective bargaining agreement of 1959-62; and the supplementary PAL-PALSA collective
bargaining agreement (pp. 54-55, rec., G.R. No. L-31343).
The three-year prescribed period fixed in the Eight-Hour Labor Law (CA No. 444, as amended) will apply,
if the claim for differentials for overtime work is solely based on said law, and not on a collective
bargaining agreement or any other contract. In the instant cases, the claim for overtime compensation is
not so much because of Commonwealth Act No. 444, as amended, but because the claim is a
demandable right of the employees, by reason of the above-mentioned collective bargaining
agreements. That is precisely why petitioners did not make any reference as to the computation for
overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 444), and instead inissited that
work computation provided in the collective bargaining agreements between the parties be observed.
30
Since the claim for pay differentials is principally anchored on the written contracts between the
litigants, the ten-year prescriptive period between the litigants, the ten-year prescriptive period provided
by Art. 1144(1) of the New Civil Code should govern. (General Insurance and Surety Corp. vs. Republic, L-
13873, January 31, 1963, 7 SCRA 4; Heirs of the Deceased Juan Sindiong vs. Committee on Burnt Areas
and Improvements of Cebu, L-15975, April 30, 1964, 10 SCRA 715; Conde vs. Cuenca and Malaga, L-9405,
July 31, 1956; Veluz vs. Veluz, L-23261, July 31, 1968, 24 SCRA 559).
Finally, granting arguendo that there is doubt as to what labor legislation to apply to the grievances of
the employees in the cases at bar, it is OUR view that that legislation which would enhance the plight of
the workers should be followed, consonant with the express pronouncement of the New Civil Code that:
In case of doubt, all labor legislation and labor contracts should be construed in favor of the safety and
decent living of the laborer (Article 1702).
WHEREFORE, THE APPEALED RESOLUTION IS HEREBY AFFIRMED, WITH THE MODIFICATION THAT PAY
DIFFERENTIALS BE PAID EFFECTIVE FEBRUARY 14, 1953. WITH COSTS AGAINST PHILIPPINE AIR LINES, INC.
IN BOTH CASES.
[G.R. NO. 168424 : June 8, 2007]
CONSOLIDATED BROADCASTING SYSTEM, INC., Petitioner, v. DANNY OBERIO, ELNA DE PEDRO, LUISITO
VILLAMOR, WILMA SUGATON, RUFO DEITA, JR., EMILY DE GUZMAN, CAROLINE LADRILLO, JOSE ROBERTO
REGALADO, ROSEBEL NARCISO & ANANITA TANGETE, Respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this Petition for Review is the July 30, 2004 Decision1 of the Court of Appeals in CA-G.R. SP
No. 77098, which affirmed the December 5, 2001 Decision2 of the National Labor Relations Commission
(NLRC) holding that respondents were regular employees of petitioner and that they were illegally
dismissed.
Respondents alleged that they were employed as drama talents by DYWB-Bombo Radyo, a radio station
owned and operated by petitioner Consolidated Broadcasting System, Inc. They reported for work daily
for six days in a week and were required to record their drama production in advance. Some of them
were employed by petitioner since 1974, while the latest one was hired in 1997.3 Their drama programs
were aired not only in Bacolod City but also in the sister stations of DYWB in the Visayas and Mindanao
areas.4
Sometime in August 1998, petitioner reduced the number of its drama productions from 14 to 11, but
was opposed by respondents. After the negotiations failed, the latter sought the intervention of the
Department of Labor and Employment (DOLE), which on November 12, 1998, conducted through its
Regional Office, an inspection of DWYB station. The results thereof revealed that petitioner is guilty of
violation of labor standard laws, such as underpayment of wages, 13th month pay, non-payment of
service incentive leave pay, and non-coverage of respondents under the Social Security System.
Petitioner contended that respondents are not its employees and refused to submit the payroll and daily
time records despite the subpoena duces tecum issued by the DOLE Regional Director. Petitioner further
argued that the case should be referred to the NLRC because the Regional Director has no jurisdiction
over the determination of the existence of employer-employee relationship which involves evidentiary
matters that are not verifiable in the normal course of inspection.
Vexed by the respondents' complaint, petitioner allegedly pressured and intimidated respondents.
Respondents Oberio and Delta were suspended for minor lapses and the payment of their salaries were
purportedly delayed. Eventually, on February 3, 1999, pending the outcome of the inspection case with
31
the Regional Director, respondents were barred by petitioner from reporting for work; thus, the former
claimed constructive dismissal.5
On April 8, 1999, the DOLE Regional Director issued an order directing petitioner to pay respondents a
total of P318,986.74 representing non-payment/underpayment of the salary and benefits due them.6
However, on July 8, 1999, the Regional Director reconsidered the April 8, 1999 order and certified the
records of the case to the NLRC, Regional Arbitration Branch VI, for determination of employer-employee
relationship.7 Respondents appealed said order to the Secretary of Labor.
On October 12, 1999, respondents filed a case for illegal dismissal, underpayment/non-payment of
wages and benefits plus damages against petitioner. On April 10, 2000, the Labor Arbiter dismissed the
case without prejudice while waiting for the decision of the Secretary of Labor on the same issue of the
existence of an employer-employee relationship between petitioner and respondents.
On appeal to the NLRC, respondents raised the issue of employer-employee relationship and submitted
the following to prove the existence of such relationship, to wit: time cards, identification cards, payroll,
a show cause order of the station manager to respondent Danny Oberio and memoranda either noted or
issued by said manager. Petitioner, on the other hand, did not present any documentary evidence in its
behalf and merely denied the allegations of respondents. It claimed that the radio station pays for the
drama recorded by piece and that it has no control over the conduct of respondents.
On December 5, 2001, the NLRC rendered a decision holding that respondents were regular employees
of petitioner who were illegally dismissed by the latter. It further held that respondents complied with
the requirements of the rule on forum shopping. The decretal portion thereof, provides:
WHEREFORE, premises considered, the decision of Labor Arbiter Ray Alan T. Drilon dated 10 April 2000 is
SET ASIDE and VACATED and a new one entered.
Ordering respondent Consolidated Broadcasting System, Inc. (Bombo Radyo Philippines), DYWB to
reinstate the complainants without loss of seniority rights wi[th] full back wages computed from
February 1999 up to the time of actual reinstatement.
SO ORDERED.8
Hence, petitioner filed the instant recourse.
The issues for resolution are as follows: (1) Did respondents violate the rule on forum shopping; (2)
whether the NLRC correctly ruled on the merits of the case instead of remanding the case to the Labor
Arbiter; (3) whether respondents were employees of petitioner; and (4) whether their dismissal was
illegal.
Respondents' complaint in the inspection case before the DOLE Regional Director alleged that they were
under the employ of petitioner at the time of the filing of said complaint. Pending the resolution thereof,
they claimed to have been dismissed; hence, the filing of the present illegal dismissal case before the
Labor Arbiter. The causes of action in these two complaints are different, i.e., one for violation of labor
standard laws, and the other, for illegal dismissal, but the entitlement of respondents to the reliefs
prayed for hinges on the same issue of the existence of an employer-employee relationship. While the
decision on the said issue by one tribunal may operate as res judicata on the other, dismissal of the
present illegal dismissal case on the ground of forum shopping, would work injustice to respondents
because it is the law itself which provides for two separate remedies for their distinct causes of action.
Under Article 2179 of the Labor Code, termination cases fall under the jurisdiction of Labor Arbiters.
Whereas, Article 12810 of the same Code vests the Secretary of Labor or his duly authorized
representatives with the power to inspect the employer's records to determine and compel compliance
with labor standard laws. The exercise of the said power by the Secretary or his duly authorized
representatives is exclusive to cases where employer-employee relationship still exists. Thus, in cases
where the complaint for violation of labor standard laws preceded the termination of the employee and
the filing of the illegal dismissal case, it would not be in consonance with justice to charge the
complainants with engaging in forum shopping when the remedy available to them at the time their
causes of action arose was to file separate cases before different fora. Besides, in the instant case,
respondent Danny Oberio disclosed in the verification the pendency of the case regarding wage
differential.11 In addition, said case was discussed in detail in the position paper,12 evincing the absence
of any intention on the part of respondents to mislead the Labor Arbiter.
Similarly, in Benguet Management Corporation v. Court of Appeals,13 petitioner filed separate actions to
enjoin the foreclosure of real estate mortgages before the Regional Trial Courts of San Pablo City and
Zambales which has jurisdiction over the place where the properties were located. In both cases,
petitioner contended, among others, that the loan secured by said mortgages imposed unauthorized
penalties, interest and charges. The Court did not find the mortgagors guilty of forum shopping
considering that since injunction is enforceable only within the territorial limits of the trial court, the
mortgagor is left without remedy as to the properties located outside the jurisdiction of the issuing
court, unless an application for injunction is made with another court which has jurisdiction over the
latter properties.
By parity of reasoning, it would be unfair to hold respondents in the instant case guilty of forum
shopping because the recourse available to them after their termination, but pending resolution of the
inspection case before the DOLE, was to file a case for illegal dismissal before the Labor Arbiter who has
jurisdiction over termination disputes.
More importantly, substantial justice dictates that this case be resolved on the merits considering that
the NLRC and the Court of Appeals correctly found that there existed an employer-employee relationship
between petitioner and respondents and that the latter's dismissal was illegal, as will be discussed
hereunder.
In the same vein, the NLRC correctly ruled on the merits instead of remanding the case to the Labor
Arbiter. Respondents specifically raised the issue of the existence of employer-employee relationship but
petitioner refused to submit evidence to disprove such relationship on the erroneous contention that to
do so would constitute a waiver of the right to question the jurisdiction of the NLRC to resolve the case
on the merits.14 This is rather odd because it was the stand of petitioner in the inspection case before
the DOLE that the case should be certified to the NLRC for the resolution of the issue of employer-
32
employee relationship. But when the same issue was proffered before the NLRC, it refused to present
evidence and instead sought the dismissal of the case invoking the pendency of the inspection case
before the DOLE. Petitioner refused to meet head on the substantial aspect of this controversy and
resorted to technicalities to delay its disposition. It must be stressed that labor tribunals are not bound
by technical rules and the Court would sustain the expedient disposition of cases so long as the parties
are not denied due process.15 The rule is that, due process is not violated where a person is given the
opportunity to be heard, but chooses not to give his or her side of the case.16 Significantly, petitioner
never claimed that it was denied due process. Indeed, no such denial exists because it had all the
opportunities to present evidence before the labor tribunals below, the Court of Appeals, and even
before this Court, but chose not to do so for reasons which will not warrant the sacrifice of substantial
justice over technicalities.
On the third issue, respondents' employment with petitioner passed the "four-fold test" on employer-
employee relations, namely: (1) the selection and engagement of the employee, or the power to hire; (2)
the payment of wages; (3) the power to dismiss; and (4) the power to control the employee.
Petitioner failed to controvert with substantial evidence the allegation of respondents that they were
hired by the former on various dates from 1974 to 1997. If petitioner did not hire respondents and if it
was the director alone who chose the talents, petitioner could have easily shown, being in possession of
the records, a contract to such effect. However, petitioner merely relied on its contention that
respondents were piece rate contractors who were paid by results.17 Note that under Policy Instruction
No. 40, petitioner is obliged to execute the necessary contract specifying the nature of the work to be
performed, rates of pay, and the programs in which they will work. Moreover, project or contractual
employees are required to be apprised of the project they will undertake under a written contract. This
was not complied with by the petitioner, justifying the reasonable conclusion that no such contracts exist
and that respondents were in fact regular employees.
In ABS-CBN v. Marquez,18 the Court held that the failure of the employer to produce the contract
mandated by Policy Instruction No. 40 is indicative that the so called talents or project workers are in
reality, regular employees. Thus'
Policy Instruction No. 40 pertinently provides:
Program employees are those whose skills, talents or services are engaged by the station for a particular
or specific program or undertaking and who are not required to observe normal working hours such that
on some days they work for less than eight (8) hours and on other days beyond the normal work hours
observed by station employees and are allowed to enter into employment contracts with other persons,
stations, advertising agencies or sponsoring companies. The engagement of program employees,
including those hired by advertising or sponsoring companies, shall be under a written contract
specifying, among other things, the nature of the work to be performed, rates of pay, and the programs
in which they will work. The contract shall be duly registered by the station with the Broadcast Media
Council within three days from its consummation. (Emphasis supplied)cralawlibrary
Ironically, however, petitioner failed to adduce an iota proof that the requirements for program
employment were even complied with by it. It is basic that project or contractual employees are
appraised of the project they will work under a written contract, specifying, inter alia, the nature of work
to be performed and the rates of pay and the program in which they will work. Sadly, however, no such
written contract was ever presented by the petitioner. Petitioner is in the best of position to present
these documents. And because none was presented, we have every reason to surmise that no such
written contract was ever accomplished by the parties, thereby belying petitioner's posture.
Worse, there was no showing of compliance with the requirement that after every engagement or
production of a particular television series, the required reports were filed with the proper government
agency, as provided no less under the very Policy Instruction invoked by the petitioner, nor under the
Omnibus Implementing Rules of the Labor Code for project employees. This alone bolsters respondents'
contention that they were indeed petitioner's regular employees since their employment was not only
for a particular program.
Moreover, the engagement of respondents for a period ranging from 2 to 25 years and the fact that their
drama programs were aired not only in Bacolod City but also in the sister stations of DYWB in the Visayas
and Mindanao areas, undoubtedly show that their work is necessary and indispensable to the usual
business or trade of petitioner. The test to determine whether employment is regular or not is the
reasonable connection between the particular activity performed by the employee in relation to the
usual business or trade of the employer. Also, if the employee has been performing the job for at least
one year, even if the performance is not continuous or merely intermittent, the law deems the repeated
and continuing need for its performance as sufficient evidence of the necessity, if not indispensability of
that activity to the business. Thus, even assuming that respondents were initially hired as
project/contractual employees who were paid per drama or per project/contract, the engagement of
their services for 2 to 25 years justify their classification as regular employees, their services being
deemed indispensable to the business of petitioner.19
As to the payment of wages, it was petitioner who paid the same as shown by the payroll bearing the
name of petitioner company in the heading with the respective salaries of respondents opposite their
names. Anent the power of control, dismissal, and imposition of disciplinary measures, which are
indicative of an employer-employee relationship,20 the same were duly proven by the following: (1)
memorandum21 duly noted by Wilfredo Alejaga, petitioner's station manager, calling the attention of
the "Drama Department" to the late submission of scripts by writers and the tardiness and absences of
directors and talents, as well as the imposable fines of P100 to P200 for future infractions; (2) the
memorandum22 of the station manager directing respondent Oberio to explain why no disciplinary
action should be taken against him for punching the time card of a certain Mrs. Fe Oberio who was not
physically present in their office; and (3) the station manager's memorandum23 suspending respondent
Oberio for six days for the said infraction which constituted violation of petitioner's network policy. All
these, taken together, unmistakably show the existence of an employer-employee relationship. Not only
did petitioner possess the power of control over their work but also the power to discipline them
through the imposition of fines and suspension for violation of company rules and policies.
Finally, we find that respondents were illegally dismissed. In labor cases, the employer has the burden of
proving that the dismissal was for a just cause; failure to show this would necessarily mean that the
dismissal was unjustified and, therefore, illegal. To allow an employer to dismiss an employee based on
mere allegations and generalities would place the employee at the mercy of his employer; and the right
33

to security of tenure, which this Court is bound to protect, would be unduly emasculated.24 In this case,
petitioner merely contended that it was respondents who ceased to report to work, and never presented
any substantial evidence to support said allegation. Petitioner therefore failed to discharge its burden,
hence, respondents were correctly declared to have been illegally dismissed.

Furthermore, if doubts exist between the evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter - the employer must affirmatively show rationally
adequate evidence that the dismissal was for a justifiable cause. It is a time-honored rule that in
controversies between a laborer and his master, doubts reasonably arising from the evidence should be
resolved in the former's favor. The policy is to extend the doctrine to a greater number of employees
who can avail of the benefits under the law, which is in consonance with the avowed policy of the State
to give maximum aid and protection of labor.25

When a person is illegally dismissed, he is entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages. In the event, however, that reinstatement is no longer
feasible, or if the employee decides not to be reinstated, the employer shall pay him separation pay in
lieu of reinstatement. Such a rule is likewise observed in the case of a strained employer-employee
relationship or when the work or position formerly held by the dismissed employee no longer exists. In
sum, an illegally dismissed employee is entitled to: (1) either reinstatement if viable or separation pay if
reinstatement is no longer viable, and (2) backwages. In the instant controversy, reinstatement is no
longer viable considering the strained relations between petitioner and respondents. As admitted by the
latter, the complaint filed before the DOLE strained their relations with petitioner who eventually
dismissed them from service. Payment of separation pay instead of reinstatement would thus better
promote the interest of both parties.

Respondents' separation pay should be computed based on their respective one (1) month pay, or one-
half (1/2) month pay for every year of service, whichever is higher, reckoned from their first day of
employment up to finality of this decision. Full backwages, on the other hand, should be computed from
the date of their dismissal until the finality of this decision.26

WHEREFORE, the petition is DENIED. The July 30, 2004 Decision of the Court of Appeals in CA-G.R. SP No.
77098, finding respondents to be regular employees of petitioner and holding them to be illegally
dismissed and directing petitioner to pay full backwages, is AFFIRMED with the MODIFICATION that
petitioner is ordered to pay respondents their separation pay instead of effecting their reinstatement.

SO ORDERED.
34
G.R. No. 146881 February 5, 2007
COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, Petitioners,
vs.
DR. DEAN N. CLIMACO, Respondent.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari of the Decision of the Court of Appeals1 promulgated on July 7,
2000, and its Resolution promulgated on January 30, 2001, denying petitioner’s motion for
reconsideration. The Court of Appeals ruled that an employer-employee relationship exists between
respondent Dr. Dean N. Climaco and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-Cola), and that
respondent was illegally dismissed.
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola Bottlers
Phils., Inc. by virtue of a Retainer Agreement that stated:
WHEREAS, the COMPANY desires to engage on a retainer basis the services of a physician and the said
DOCTOR is accepting such engagement upon terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter contained,
the parties agree as follows:
1. This Agreement shall only be for a period of one (1) year beginning January 1, 1988 up to December
31, 1988. The said term notwithstanding, either party may terminate the contract upon giving a thirty
(30)-day written notice to the other.
2. The compensation to be paid by the company for the services of the DOCTOR is hereby fixed at PESOS:
Three Thousand Eight Hundred (₱3,800.00) per month. The DOCTOR may charge professional fee for
hospital services rendered in line with his specialization. All payments in connection with the Retainer
Agreement shall be subject to a withholding tax of ten percent (10%) to be withheld by the COMPANY
under the Expanded Withholding Tax System. In the event the withholding tax rate shall be increased or
decreased by appropriate laws, then the rate herein stipulated shall accordingly be increased or
decreased pursuant to such laws.
3. That in consideration of the above mentioned retainer’s fee, the DOCTOR agrees to perform the duties
and obligations enumerated in the COMPREHENSIVE MEDICAL PLAN, hereto attached as Annex "A" and
made an integral part of this Retainer Agreement.
4. That the applicable provisions in the Occupational Safety and Health Standards, Ministry of Labor and
Employment shall be followed.
5. That the DOCTOR shall be directly responsible to the employee concerned and their dependents for
any injury inflicted on, harm done against or damage caused upon the employee of the COMPANY or
their dependents during the course of his examination, treatment or consultation, if such injury, harm or
damage was committed through professional negligence or incompetence or due to the other valid
causes for action.
6. That the DOCTOR shall observe clinic hours at the COMPANY’S premises from Monday to Saturday of a
minimum of two (2) hours each day or a maximum of TWO (2) hours each day or treatment from 7:30
a.m. to 8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless such schedule is otherwise changed by
the COMPANY as [the] situation so warrants, subject to the Labor Code provisions on Occupational
Safety and Health Standards as the COMPANY may determine. It is understood that the DOCTOR shall
stay at least two (2) hours a day in the COMPANY clinic and that such two (2) hours be devoted to the
workshift with the most number of employees. It is further understood that the DOCTOR shall be on call
at all times during the other workshifts to attend to emergency case[s];
7. That no employee-employer relationship shall exist between the COMPANY and the DOCTOR whilst
this contract is in effect, and in case of its termination, the DOCTOR shall be entitled only to such retainer
fee as may be due him at the time of termination.2
The Comprehensive Medical Plan,3 which contains the duties and responsibilities of respondent,
adverted to in the Retainer Agreement, provided:
A. OBJECTIVE
These objectives have been set to give full consideration to [the] employees’ and dependents’ health:
1. Prompt and adequate treatment of occupational and non-occupational injuries and diseases.
2. To protect employees from any occupational health hazard by evaluating health factors related to
working conditions.
3. To encourage employees [to] maintain good personal health by setting up employee orientation and
education on health, hygiene and sanitation, nutrition, physical fitness, first aid training, accident
prevention and personnel safety.
4. To evaluate other matters relating to health such as absenteeism, leaves and termination.
5. To give family planning motivations.
B. COVERAGE
1. All employees and their dependents are embraced by this program.
35
2. The health program shall cover pre-employment and annual p.e., hygiene and sanitation,
immunizations, family planning, physical fitness and athletic programs and other activities such as group
health education program, safety and first aid classes, organization of health and safety committees.
3. Periodically, this program will be reviewed and adjusted based on employees’ needs.
C. ACTIVITIES
1. Annual Physical Examination.
2. Consultations, diagnosis and treatment of occupational and non-occupational illnesses and injuries.
3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest rooms.
5. Conduct health education programs and present education materials.
6. Coordinate with Safety Committee in developing specific studies and program to minimize
environmental health hazards.
7. Give family planning motivations.
8. Coordinate with Personnel Department regarding physical fitness and athletic programs.
9. Visiting and follow-up treatment of Company employees and their dependents confined in the
hospital.
The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one expired
on December 31, 1993. Despite the non-renewal of the Retainer Agreement, respondent continued to
perform his functions as company doctor to Coca-Cola until he received a letter4 dated March 9, 1995
from petitioner company concluding their retainership agreement effective 30 days from receipt thereof.
It is noted that as early as September 1992, petitioner was already making inquiries regarding his status
with petitioner company. First, he wrote a letter addressed to Dr. Willie Sy, the Acting President and
Chairperson of the Committee on Membership, Philippine College of Occupational Medicine. In
response, Dr. Sy wrote a letter5 to the Personnel Officer of Coca-Cola Bottlers Phils., Bacolod City, stating
that respondent should be considered as a regular part-time physician, having served the company
continuously for four (4) years. He likewise stated that respondent must receive all the benefits and
privileges of an employee under Article 157 (b)6 of the Labor Code.
Petitioner company, however, did not take any action. Hence, respondent made another inquiry directed
to the Assistant Regional Director, Bacolod City District Office of the Department of Labor and
Employment (DOLE), who referred the inquiry to the Legal Service of the DOLE, Manila. In his letter7
dated May 18, 1993, Director Dennis P. Ancheta, Legal Service, DOLE, stated that he believed that an
employer-employee relationship existed between petitioner and respondent based on the Retainer
Agreement and the Comprehensive Medical Plan, and the application of the "four-fold" test. However,
Director Ancheta emphasized that the existence of employer-employee relationship is a question of fact.
Hence, termination disputes or money claims arising from employer-employee relations exceeding
₱5,000 may be filed with the National Labor Relations Commission (NLRC). He stated that their opinion is
strictly advisory.
An inquiry was likewise addressed to the Social Security System (SSS). Thereafter, Mr. Romeo R. Tupas,
OIC-FID of SSS-Bacolod City, wrote a letter8 to the Personnel Officer of Coca-Cola Bottlers Phils., Inc.
informing the latter that the legal staff of his office was of the opinion that the services of respondent
partake of the nature of work of a regular company doctor and that he was, therefore, subject to social
security coverage.
Respondent inquired from the management of petitioner company whether it was agreeable to
recognizing him as a regular employee. The management refused to do so.
On February 24, 1994, respondent filed a Complaint9 before the NLRC, Bacolod City, seeking recognition
as a regular employee of petitioner company and prayed for the payment of all benefits of a regular
employee, including 13th Month Pay, Cost of Living Allowance, Holiday Pay, Service Incentive Leave Pay,
and Christmas Bonus. The case was docketed as RAB Case No. 06-02-10138-94.
While the complaint was pending before the Labor Arbiter, respondent received a letter dated March 9,
1995 from petitioner company concluding their retainership agreement effective thirty (30) days from
receipt thereof. This prompted respondent to file a complaint for illegal dismissal against petitioner
company with the NLRC, Bacolod City. The case was docketed as RAB Case No. 06-04-10177-95.
In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr. found that petitioner
company lacked the power of control over respondent’s performance of his duties, and recognized as
valid the Retainer Agreement between the parties. Thus, the Labor Arbiter dismissed respondent’s
complaint in the first case, RAB Case No. 06-02-10138-94. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint
seeking recognition as a regular employee.
SO ORDERED.11
In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed the case for illegal
dismissal (RAB Case No. 06-04-10177-95) in view of the previous finding of Labor Arbiter Jesus N.
Rodriguez, Jr. in RAB Case No. 06-02-10138-94 that complainant therein, Dr. Dean Climaco, is not an
employee of Coca-Cola Bottlers Phils., Inc.
Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City.
In a Decision13 promulgated on November 28, 1997, the NLRC dismissed the appeal in both cases for
lack of merit. It declared that no employer-employee relationship existed between petitioner company
36
and respondent based on the provisions of the Retainer Agreement which contract governed
respondent’s employment.
Respondent’s motion for reconsideration was denied by the NLRC in a Resolution14 promulgated on
August 7, 1998.
Respondent filed a petition for review with the Court of Appeals.
In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an employer-employee
relationship existed between petitioner company and respondent after applying the four-fold test: (1)
the power to hire the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employer’s power to control the employee with respect to the means and methods by which the work is
to be accomplished.
The Court of Appeals held:
The Retainer Agreement executed by and between the parties, when read together with the
Comprehensive Medical Plan which was made an integral part of the retainer agreements, coupled with
the actual services rendered by the petitioner, would show that all the elements of the above test are
present.
First, the agreements provide that "the COMPANY desires to engage on a retainer basis the services of a
physician and the said DOCTOR is accepting such engagement x x x" (Rollo, page 25). This clearly shows
that Coca-Cola exercised its power to hire the services of petitioner.
Secondly, paragraph (2) of the agreements showed that petitioner would be entitled to a final
compensation of Three Thousand Eight Hundred Pesos per month, which amount was later raised to
Seven Thousand Five Hundred on the latest contract. This would represent the element of payment of
wages.
Thirdly, it was provided in paragraph (1) of the agreements that the same shall be valid for a period of
one year. "The said term notwithstanding, either party may terminate the contract upon giving a thirty
(30) day written notice to the other." (Rollo, page 25). This would show that Coca-Cola had the power of
dismissing the petitioner, as it later on did, and this could be done for no particular reason, the sole
requirement being the former’s compliance with the 30-day notice requirement.
Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised the most important
element of all, that is, control, over the conduct of petitioner in the latter’s performance of his duties as
a doctor for the company.
It was stated in paragraph (3) that the doctor agrees to perform the duties and obligations enumerated
in the Comprehensive Medical Plan referred to above. In paragraph (6), the fixed and definite hours
during which the petitioner must render service to the company is laid down.
We say that there exists Coca-Cola’s power to control petitioner because the particular objectives and
activities to be observed and accomplished by the latter are fixed and set under the Comprehensive
Medical Plan which was made an integral part of the retainer agreement. Moreover, the times for
accomplishing these objectives and activities are likewise controlled and determined by the company.
Petitioner is subject to definite hours of work, and due to this, he performs his duties to Coca-Cola not at
his own pleasure but according to the schedule dictated by the company.
In addition, petitioner was designated by Coca-Cola to be a member of its Bacolod Plant’s Safety
Committee. The minutes of the meeting of the said committee dated February 16, 1994 included the
name of petitioner, as plant physician, as among those comprising the committee.
It was averred by Coca-Cola in its comment that they exercised no control over petitioner for the reason
that the latter was not directed as to the procedure and manner of performing his assigned tasks. It went
as far as saying that "petitioner was not told how to immunize, inject, treat or diagnose the employees of
the respondent (Rollo, page 228). We believe that if the "control test" would be interpreted this strictly,
it would result in an absurd and ridiculous situation wherein we could declare that an entity exercises
control over another’s activities only in instances where the latter is directed by the former on each and
every stage of performance of the particular activity. Anything less than that would be tantamount to no
control at all.
To our minds, it is sufficient if the task or activity, as well as the means of accomplishing it, is dictated, as
in this case where the objectives and activities were laid out, and the specific time for performing them
was fixed by the controlling party.15
Moreover, the Court of Appeals declared that respondent should be classified as a regular employee
having rendered six years of service as plant physician by virtue of several renewed retainer agreements.
It underscored the provision in Article 28016 of the Labor Code stating that "any employee who has
rendered at least one year of service, whether such service is continuous or broken, shall be considered a
regular employee with respect to the activity in which he is employed, and his employment shall
continue while such activity exists." Further, it held that the termination of respondent’s services without
any just or authorized cause constituted illegal dismissal.
In addition, the Court of Appeals found that respondent’s dismissal was an act oppressive to labor and
was effected in a wanton, oppressive or malevolent manner which entitled respondent to moral and
exemplary damages.
The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations Commission dated
November 28, 1997 and its Resolution dated August 7, 1998 are found to have been issued with grave
abuse of discretion in applying the law to the established facts, and are hereby REVERSED and SET ASIDE,
and private respondent Coca-Cola Bottlers, Phils.. Inc. is hereby ordered to:
1. Reinstate the petitioner with full backwages without loss of seniority rights from the time his
compensation was withheld up to the time he is actually reinstated; however, if reinstatement is no
37
longer possible, to pay the petitioner separation pay equivalent to one (1) month’s salary for every year
of service rendered, computed at the rate of his salary at the time he was dismissed, plus backwages.
2. Pay petitioner moral damages in the amount of ₱50,000.00.
3. Pay petitioner exemplary damages in the amount of ₱50,000.00.
4. Give to petitioner all other benefits to which a regular employee of Coca-Cola is entitled from the time
petitioner became a regular employee (one year from effectivity date of employment) until the time of
actual payment.
SO ORDERED.17
Petitioner company filed a motion for reconsideration of the Decision of the Court of Appeals.
In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that petitioner company
noted that its Decision failed to mention whether respondent was a full-time or part-time regular
employee. It also questioned how the benefits under their Collective Bargaining Agreement which the
Court awarded to respondent could be given to him considering that such benefits were given only to
regular employees who render a full day’s work of not less that eight hours. It was admitted that
respondent is only required to work for two hours per day.
The Court of Appeals clarified that respondent was a "regular part-time employee and should be
accorded all the proportionate benefits due to this category of employees of [petitioner] Corporation
under the CBA." It sustained its decision on all other matters sought to be reconsidered.
Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The issues are:
1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, CONTRARY TO THE DECISIONS OF THE HONORABLE
SUPREME COURT ON THE MATTER.
2. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE WORK OF A PHYSICIAN IS
NECESSARY AND DESIRABLE TO THE BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO THE
RULINGS OF THE SUPREME COURT IN ANALOGOUS CASES.
3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE PETITIONERS EXERCISED
CONTROL OVER THE WORK OF THE RESPONDENT.
4. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE IS EMPLOYER-EMPLOYEE
RELATIONSHIP PURSUANT TO ARTICLE 280 OF THE LABOR CODE.
5. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE EXISTED ILLEGAL DISMISSAL
WHEN THE EMPLOYENT OF THE RESPONDENT WAS TERMINATED WITHOUT JUST CAUSE.
6. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS A REGULAR PART
TIME EMPLOYEE WHO IS ENTITLED TO PROPORTIONATE BENEFITS AS A REGULAR PART TIME EMPLOYEE
ACCORDING TO THE PETITIONERS’ CBA.
7. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS ENTITLED TO
MORAL AND EXEMPLARY DAMAGES.
The main issue in this case is whether or not there exists an employer-employee relationship between
the parties. The resolution of the main issue will determine whether the termination of respondent’s
employment is illegal.
The Court, in determining the existence of an employer-employee relationship, has invariably adhered to
the four-fold test: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employee’s conduct, or the so-called "control test,"
considered to be the most important element.18
The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of this case
show that no employer-employee relationship exists between the parties. The Labor Arbiter and the
NLRC correctly found that petitioner company lacked the power of control over the performance by
respondent of his duties. The Labor Arbiter reasoned that the Comprehensive Medical Plan, which
contains the respondent’s objectives, duties and obligations, does not tell respondent "how to conduct
his physical examination, how to immunize, or how to diagnose and treat his patients, employees of
[petitioner] company, in each case." He likened this case to that of Neri v. National Labor Relations
Commission,19 which held:
In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her
functions as a radio/telex operator. However, a cursory reading of the job description shows that what
was sought to be controlled by FEBTC was actually the end result of the task, e.g., that the daily incoming
and outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of
38

the register. The guidelines were laid down merely to ensure that the desired end result was achieved. It
did not, however, tell Neri how the radio/telex machine should be operated.

In effect, the Labor Arbiter held that petitioner company, through the Comprehensive Medical Plan,
provided guidelines merely to ensure that the end result was achieved, but did not control the means
and methods by which respondent performed his assigned tasks.

The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely because the company
lacks the power of control that the contract provides that respondent shall be directly responsible to the employee
concerned and their dependents for any injury, harm or damage caused through professional negligence, incompetence
or other valid causes of action.

The Labor Arbiter also correctly found that the provision in the Retainer Agreement that respondent was on call during
emergency cases did not make him a regular employee. He explained, thus:

Likewise, the allegation of complainant that since he is on call at anytime of the day and night makes him a regular
employee is off-tangent. Complainant does not dispute the fact that outside of the two (2) hours that he is required to
be at respondent company’s premises, he is not at all further required to just sit around in the premises and wait for an
emergency to occur so as to enable him from using such hours for his own benefit and advantage. In fact, complainant
maintains his own private clinic attending to his private practice in the city, where he services his patients, bills them
accordingly -- and if it is an employee of respondent company who is attended to by him for special treatment that
needs hospitalization or operation, this is subject to a special billing. More often than not, an employee is required to
stay in the employer’s workplace or proximately close thereto that he cannot utilize his time effectively and gainfully for
his own purpose. Such is not the prevailing situation here.1awphi1.net

In addition, the Court finds that the schedule of work and the requirement to be on call for emergency cases do not
amount to such control, but are necessary incidents to the Retainership Agreement.

The Court also notes that the Retainership Agreement granted to both parties the power to terminate their relationship
upon giving a 30-day notice. Hence, petitioner company did not wield the sole power of dismissal or termination.

The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the employment of respondent
as a retained physician of petitioner company and upholds the validity of the Retainership Agreement which clearly
stated that no employer-employee relationship existed between the parties. The Agreement also stated that it was only
for a period of 1 year beginning January 1, 1988 to December 31, 1998, but it was renewed on a yearly basis.

Considering that there is no employer-employee relationship between the parties, the termination of the Retainership
Agreement, which is in accordance with the provisions of the Agreement, does not constitute illegal dismissal of
respondent. Consequently, there is no basis for the moral and exemplary damages granted by the Court of Appeals to
respondent due to his alleged illegal dismissal.

WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court of Appeals are REVERSED and SET
ASIDE. The Decision and Resolution dated November 28, 1997 and August 7, 1998, respectively, of the National Labor
Relations Commission are REINSTATED.

No costs.

SO ORDERED.
39

[G.R. NO. 162813 : February 12, 2007]

P 223.50 x 26 x 9.23 = P 53,635.53
FAR EAST AGRICULTURAL SUPPLY, INC. and/or ALEXANDER UY, Petitioners, v. JIMMY LEBATIQUE and THE
HONORABLE COURT OF APPEALS, Respondents. 11/01/00 - 06/26/01 = 7.86 mos.

DECISION P 250.00 x 26 x 7.86 = 51,090.00 P 104,725.53

QUISUMBING, J.: 13th Month Pay: 1/12 of P 104,725.53 = 8,727.13

Before us is a Petition for Review on Certiorari assailing the Decision1 dated September 30, 2003 of the Service Incentive Leave Pay
Court of Appeals in CA-G.R. SP No. 76196 and its Resolution2 dated March 15, 2004 denying the motion
for reconsideration. The appellate court had reversed the Decision3 dated October 15, 2002 of the 01/25/00 - 10/31/00 = 9.23 mos.
National Labor Relations Commission (NLRC) setting aside the Decision4 dated June 27, 2001 of the
Labor Arbiter. P 223.50 x 5/12 x 9.23 = P 859.54

Petitioner Far East Agricultural Supply, Inc. (Far East) hired on March 4, 1996 private respondent Jimmy 11/01/00 - 06/26/01 = 7.86 mos.
Lebatique as truck driver with a daily wage of P223.50. He delivered animal feeds to the company's
clients. P 250.00 x 5/12 x 7.86 = [818.75] 1,678.29 115,130.95

On January 24, 2000, Lebatique complained of nonpayment of overtime work particularly on January 22, b) Overtime Pay: (3 hours/day)
2000, when he was required to make a second delivery in Novaliches, Quezon City. That same day,
Manuel Uy, brother of Far East's General Manager and petitioner Alexander Uy, suspended Lebatique 03/20/97 - 4/30/97 = 1.36 mos.
apparently for illegal use of company vehicle. Even so, Lebatique reported for work the next day but he
was prohibited from entering the company premises. P 180/8 x 1.25 x 3 x 26 x 1.36 = P 2,983.50

On January 26, 2000, Lebatique sought the assistance of the Department of Labor and Employment 05/01/97 - 02/05/98 = 9.16 mos.
(DOLE) Public Assistance and Complaints Unit concerning the nonpayment of his overtime pay. According
to Lebatique, two days later, he received a telegram from petitioners requiring him to report for work. P 185/8 x 1.25 x 3 x 26 x 9.16 = 20,652.94
When he did the next day, January 29, 2000, Alexander asked him why he was claiming overtime pay.
Lebatique explained that he had never been paid for overtime work since he started working for the 02/06/98 - 10/30/99 = 20.83 mos.
company. He also told Alexander that Manuel had fired him. After talking to Manuel, Alexander
terminated Lebatique and told him to look for another job. P 198/8 x 1.25 x 3 x 26 x [20.83] = 50,265.39

On March 20, 2000, Lebatique filed a complaint for illegal dismissal and nonpayment of overtime pay. 10/31/99 - 01/24/00 = 2.80 mos.
The Labor Arbiter found that Lebatique was illegally dismissed, and ordered his reinstatement and the
payment of his full back wages, 13th month pay, service incentive leave pay, and overtime pay. The P 223.50/8 x 1.25 x 3 x 26 x 2.80 = 7,626.94 81,528.77
dispositive portion of the decision is quoted herein in full, as follows:
TOTAL AWARD P 196,659.72
WHEREFORE, we find the termination of complainant illegal. He should thus be ordered reinstated with
full backwages. He is likewise ordered paid his 13th month pay, service incentive leave pay and overtime SO ORDERED.5
pay as computed by the Computation and Examination Unit as follows:
On appeal, the NLRC reversed the Labor Arbiter and dismissed the complaint for lack of merit. The NLRC
a) Backwages: held that there was no dismissal to speak of since Lebatique was merely suspended. Further, it found
that Lebatique was a field personnel, hence, not entitled to overtime pay and service incentive leave pay.
01/25/00 - 10/31/00 = 9.23 mos. Lebatique sought reconsideration but was denied.
40
Aggrieved, Lebatique filed a petition for certiorari with the Court of Appeals.ςηαñrοblεš νιr†υαl lαω
lιbrαrÿ
The Court of Appeals, in reversing the NLRC decision, reasoned that Lebatique was suspended on January
24, 2000 but was illegally dismissed on January 29, 2000 when Alexander told him to look for another
job. It also found that Lebatique was not a field personnel and therefore entitled to payment of overtime
pay, service incentive leave pay, and 13th month pay.
It reinstated the decision of the Labor Arbiter as follows:
WHEREFORE, premises considered, the decision of the NLRC dated 27 December 2002 is hereby
REVERSED and the Labor Arbiter's decision dated 27 June 2001 REINSTATED.
SO ORDERED.6
Petitioners moved for reconsideration but it was denied.
Hence, the instant petition wherein petitioners assign the following errors:
THE COURT OF APPEALS - ERRED IN REVERSING THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION DATED 15 OCTOBER 2002 AND IN RULING THAT THE PRIVATE RESPONDENT WAS
ILLEGALLY DISMISSED.
THE COURT OF APPEALS - ERRED IN REVERSING THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION DATED 15 OCTOBER 2002 AND IN RULING THAT PRIVATE RESPONDENT IS NOT A FIELD
PERSONNEL AND THER[E]FORE ENTITLED TO OVERTIME PAY AND SERVICE INCENTIVE LEAVE PAY.
THE COURT OF APPEALS - ERRED IN NOT DISMISSING THE PETITION FOR CERTIORARI FOR FAILURE OF
PRIVATE RESPONDENT TO ATTACH CERTIFIED TRUE COPIES OF THE QUESTIONED DECISION AND
RESOLUTION OF THE PUBLIC RESPONDENT.7
Simply stated, the principal issues in this case are: (1) whether Lebatique was illegally dismissed; and (2)
whether Lebatique was a field personnel, not entitled to overtime pay.
Petitioners contend that, (1) Lebatique was not dismissed from service but merely suspended for a day
due to violation of company rules; (2) Lebatique was not barred from entering the company premises
since he never reported back to work; and (3) Lebatique is estopped from claiming that he was illegally
dismissed since his complaint before the DOLE was only on the nonpayment of his overtime pay.
Also, petitioners maintain that Lebatique, as a driver, is not entitled to overtime pay since he is a field
personnel whose time outside the company premises cannot be determined with reasonable certainty.
According to petitioners, the drivers do not observe regular working hours unlike the other office
employees. The drivers may report early in the morning to make their deliveries or in the afternoon,
depending on the production of animal feeds and the traffic conditions. Petitioners also aver that
Lebatique worked for less than eight hours a day.8
Lebatique for his part insists that he was illegally dismissed and was not merely suspended. He argues
that he neither refused to work nor abandoned his job. He further contends that abandonment of work
is inconsistent with the filing of a complaint for illegal dismissal. He also claims that he is not a field
personnel, thus, he is entitled to overtime pay and service incentive leave pay.
After consideration of the submission of the parties, we find that the petition lacks merit. We are in
agreement with the decision of the Court of Appeals sustaining that of the Labor Arbiter.
It is well settled that in cases of illegal dismissal, the burden is on the employer to prove that the
termination was for a valid cause.9 In this case, petitioners failed to discharge such burden. Petitioners
aver that Lebatique was merely suspended for one day but he abandoned his work thereafter. To
constitute abandonment as a just cause for dismissal, there must be: (a) absence without justifiable
reason; and (b) a clear intention, as manifested by some overt act, to sever the employer-employee
relationship.10
The records show that petitioners failed to prove that Lebatique abandoned his job. Nor was there a
showing of a clear intention on the part of Lebatique to sever the employer-employee relationship.
When Lebatique was verbally told by Alexander Uy, the company's General Manager, to look for another
job, Lebatique was in effect dismissed. Even assuming earlier he was merely suspended for illegal use of
company vehicle, the records do not show that he was afforded the opportunity to explain his side. It is
clear also from the sequence of the events leading to Lebatique's dismissal that it was Lebatique's
complaint for nonpayment of his overtime pay that provoked the management to dismiss him, on the
erroneous premise that a truck driver is a field personnel not entitled to overtime pay.
An employee who takes steps to protest his layoff cannot by any stretch of imagination be said to have
abandoned his work and the filing of the complaint is proof enough of his desire to return to work, thus
negating any suggestion of abandonment.11 A contrary notion would not only be illogical but also
absurd.
It is immaterial that Lebatique had filed a complaint for nonpayment of overtime pay the day he was
suspended by management's unilateral act. What matters is that he filed the complaint for illegal
dismissal on March 20, 2000, after he was told not to report for work, and his filing was well within the
prescriptive period allowed under the law.
On the second issue, Article 82 of the Labor Code is decisive on the question of who are referred to by
the term "field personnel." It provides, as follows:
ART. 82. Coverage. - The provisions of this title [Working Conditions and Rest Periods] shall apply to
employees in all establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the employer who are
dependent on him for support, domestic helpers, persons in the personal service of another, and
workers who are paid by results as determined by the Secretary of Labor in appropriate regulations.
41

MODIFICATION to the effect that the case is hereby REMANDED to the Labor Arbiter for further
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away from proceedings to determine the exact amount of overtime pay and other monetary benefits due Jimmy
the principal place of business or branch office of the employer and whose actual hours of work in the Lebatique which herein petitioners should pay without further delay.
field cannot be determined with reasonable certainty.
Costs against petitioners.
In Auto Bus Transport Systems, Inc. v. Bautista,12 this Court emphasized that the definition of a "field
personnel" is not merely concerned with the location where the employee regularly performs his duties SO ORDERED.
but also with the fact that the employee's performance is unsupervised by the employer. We held that
field personnel are those who regularly perform their duties away from the principal place of business of
the employer and whose actual hours of work in the field cannot be determined with reasonable
certainty. Thus, in order to determine whether an employee is a field employee, it is also necessary to
ascertain if actual hours of work in the field can be determined with reasonable certainty by the
employer. In so doing, an inquiry must be made as to whether or not the employee's time and
performance are constantly supervised by the employer.13

As correctly found by the Court of Appeals, Lebatique is not a field personnel as defined above for the
following reasons: (1) company drivers, including Lebatique, are directed to deliver the goods at a
specified time and place; (2) they are not given the discretion to solicit, select and contact prospective
clients; and (3) Far East issued a directive that company drivers should stay at the client's premises
during truck-ban hours which is from 5:00 to 9:00 a.m. and 5:00 to 9:00 p.m.14 Even petitioners admit
that the drivers can report early in the morning, to make their deliveries, or in the afternoon, depending
on the production of animal feeds.15 Drivers, like Lebatique, are under the control and supervision of
management officers. Lebatique, therefore, is a regular employee whose tasks are usually necessary and
desirable to the usual trade and business of the company. Thus, he is entitled to the benefits accorded to
regular employees of Far East, including overtime pay and service incentive leave pay.

Note that all money claims arising from an employer-employee relationship shall be filed within three
years from the time the cause of action accrued; otherwise, they shall be forever barred.16 Further, if it
is established that the benefits being claimed have been withheld from the employee for a period longer
than three years, the amount pertaining to the period beyond the three-year prescriptive period is
therefore barred by prescription. The amount that can only be demanded by the aggrieved employee
shall be limited to the amount of the benefits withheld within three years before the filing of the
complaint.17

Lebatique timely filed his claim for service incentive leave pay, considering that in this situation, the
prescriptive period commences at the time he was terminated.18 On the other hand, his claim regarding
nonpayment of overtime pay since he was hired in March 1996 is a different matter. In the case of
overtime pay, he can only demand for the overtime pay withheld for the period within three years
preceding the filing of the complaint on March 20, 2000. However, we find insufficient the selected time
records presented by petitioners to compute properly his overtime pay. The Labor Arbiter should have
required petitioners to present the daily time records, payroll, or other documents in management's
control to determine the correct overtime pay due Lebatique.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated September 30, 2003 of the
Court of Appeals in CA-G.R. SP No. 76196 and itsResolutiondated March 15, 2004 are AFFIRMED with
42
G.R. No. 162833 June 15, 2007
LAKAS SA INDUSTRIYA NG KAPATIRANG HALIGI NG ALYANSA-PINAGBUKLOD NG MANGGAGAWANG
PROMO NG BURLINGAME, petitioner,
vs.
BURLINGAME CORPORATION, respondent.
DECISION
QUISUMBING, J.:
This is an appeal to reverse and set aside both the Decision1 dated August 29, 2003 of the Court of
Appeals and its Resolution2 dated March 15, 2004 in CA-G.R. SP No. 69639. The appellate court had
reversed the decision3 dated December 29, 2000 of the Secretary of Labor and Employment which
ordered the holding of a certification election among the rank-and-file promo employees of respondent
Burlingame Corporation.
The facts are undisputed.
On January 17, 2000, the petitioner Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng
Manggagawang Promo ng Burlingame (LIKHA-PMPB) filed a petition for certification election before the
Department of Labor and Employment (DOLE). LIKHA-PMPB sought to represent all rank-and-file promo
employees of respondent numbering about 70 in all. The petitioner claimed that there was no existing
union in the aforementioned establishment representing the regular rank-and-file promo employees. It
prayed that it be voluntarily recognized by the respondent to be the collective bargaining agent, or, in
the alternative, that a certification/consent election be held among said regular rank-and-file promo
employees.
The respondent filed a motion to dismiss the petition. It argued that there exists no employer-employee
relationship between it and the petitioner’s members. It further alleged that the petitioner’s members
are actually employees of F. Garil Manpower Services (F. Garil), a duly licensed local employment agency.
To prove such contention, respondent presented a copy of its contract for manpower services with F.
Garil.
On June 29, 2000, Med-Arbiter Renato D. Parungo dismissed4 the petition for lack of employer-
employee relationship, prompting the petitioner to file an appeal5 before the Secretary of Labor and
Employment.
On December 29, 2000, the Secretary of Labor and Employment ordered the immediate conduct of a
certification election.6
A motion for reconsideration of the said decision was filed by the respondent on January 19, 2001, but
the same was denied in the Resolution7 of February 19, 2002 of the Secretary of Labor and Employment.
Respondent then filed a complaint with the Court of Appeals, which then reversed8 the decision of the
Secretary. The petitioner then filed a motion for reconsideration,9 which the Court of Appeals denied10
on March 15, 2004.
Hence the instant petition for review on certiorari.
The issue raised in the petition is:
WHETHER THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN DECLARING THAT THERE IS NO
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PETITIONER’S MEMBERS AND BURLINGAME BECAUSE F.
GARIL MANPOWER SERVICES IS AN INDEPENDENT CONTRACTOR.11
Respondent contends that there is no employer-employee relationship between the parties.12
Petitioner, on the other hand, insists that there is.13
The resolution of this issue boils down to a determination of the true status of F. Garil, i.e., whether it is
an independent contractor or a labor-only contractor.
The case of De Los Santos v. NLRC14 succinctly enunciates the statutory criteria:
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 the business.15
According to Section 5 of DOLE Department Order No. 18-02, Series of 2002:16
Section 5. Prohibition against labor-only contracting. – Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal, and any of the following elements are [is] present:
i) The contractor or sub-contractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or placed by such contractor
or subcontractor are performing activities which are directly related to the main business of the
principal; or
ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248(C) of the Labor Code,
as amended.
43
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used
by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end.
Given the above criteria, we agree with the Secretary that F. Garil is not an independent contractor.
First, F. Garil does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises, and other materials, to qualify as an independent contractor. No proof was
adduced to show F. Garil’s capitalization.
Second, the work of the promo-girls was directly related to the principal business or operation of
Burlingame. Marketing and selling of products is an essential activity to the main business of the
principal.
Lastly, F. Garil did not carry on an independent business or undertake the performance of its service
contract according to its own manner and method, free from the control and supervision of its principal,
Burlingame.
The "four-fold test" will show that respondent is the employer of petitioner’s members. The elements to
determine the existence of an employment relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control
the employee’s conduct. The most important element is the employer’s control of the employee’s
conduct, not only as to the result of the work to be done, but also as to the means and methods to
accomplish it.17
A perusal of the contractual stipulations between Burlingame and F. Garil shows the following:
1. The AGENCY shall provide Burlingame Corporation or the CLIENT, with sufficient number of screened,
tested and pre-selected personnel (professionals, highly-skilled, skilled, semi-skilled and unskilled) who
will be deployed in establishment selling products manufactured by the CLIENT.
2. The AGENCY shall be responsible in paying its workers under this contract in accordance with the new
minimum wage including the daily living allowances and shall pay them overtime or remuneration that
which is authorized by law.
3. It is expressly understood and agreed that the worker(s) supplied shall be considered or treated as
employee(s) of the AGENCY. Consequently, there shall be no employer-employee relationship between
the worker(s) and the CLIENT and as such, the AGENCY shall be responsible to the benefits mandated by
law.
4. For and in consideration of the service to be rendered by the AGENCY to the CLIENT, the latter shall
during the terms of agreement pay to the AGENCY the sum of Seven Thousand Five Hundred Pesos Only
(P7,500.00) per month per worker on the basis of Eight (8) hours work payable up-to-date, semi-
monthly, every 15th and 30th of each calendar month. However, these rates may be subject to change
proportionately in the event that there will be revisions in the Minimum Wage Law or any law related to
salaries and wages.
5. The CLIENT shall report to the AGENCY any of its personnel assigned to it if those personnel are found
to be inefficient, troublesome, uncooperative and not observing the rules and regulations set forth by
the CLIENT. It is understood and agreed that the CLIENT may request any time the immediate
replacement of any personnel(s) assigned to them.18
It is patent that the involvement of F. Garil in the hiring process was only with respect to the recruitment
aspect, i.e. the screening, testing and pre-selection of the personnel it provided to Burlingame. The
actual hiring itself was done through the deployment of personnel to establishments by Burlingame.
The contract states that Burlingame would pay the workers through F. Garil, stipulating that Burlingame
shall pay F. Garil a certain sum per worker on the basis of eight-hour work every 15th and 30th of each
calendar month. This evinces the fact that F. Garil merely served as conduit in the payment of wages to
the deployed personnel. The interpretation would have been different if the payment was for the job,
project, or services rendered during the month and not on a per worker basis. In Vinoya v. National Labor
Relations Commission,19 we held:
The Court takes judicial notice of the practice of employers who, in order to evade the liabilities under
the Labor Code, do not issue payslips directly to their employees. Under the current practice, a third
person, usually the purported contractor (service or manpower placement agency), assumes the act of
paying the wage. For this reason, the lowly worker is unable to show proof that it was directly paid by
the true employer. Nevertheless, for the workers, it is enough that they actually receive their pay,
oblivious of the need for payslips, unaware of its legal implications. Applying this principle to the case at
bar, even though the wages were coursed through PMCI, we note that the funds actually came from the
pockets of RFC. Thus, in the end, RFC is still the one who paid the wages of petitioner albeit indirectly.20
The contract also provides that "any personnel found to be inefficient, troublesome, uncooperative and
not observing the rules and regulations set forth by Burlingame shall be reported to F. Garil and may be
replaced upon request." Corollary to this circumstance would be the exercise of control and supervision
by Burlingame over workers supplied by F. Garil in order to establish the inefficient, troublesome, and
uncooperative nature of undesirable personnel. Also implied in the provision on replacement of
personnel carried upon request by Burlingame is the power to fire personnel.
These are indications that F. Garil was not left alone in the supervision and control of its alleged
employees. Consequently, it can be concluded that F. Garil was not an independent contractor since it
did not carry a distinct business free from the control and supervision of Burlingame.
It goes without saying that the contractual stipulation on the nonexistence of an employer-employee
relationship between Burlingame and the personnel provided by F. Garil has no legal effect. While the
44

parties may freely stipulate terms and conditions of a contract, such contractual stipulations should not
be contrary to law, morals, good customs, public order or public policy. A contractual stipulation to the
contrary cannot override factual circumstances firmly establishing the legal existence of an employer-
employee relationship.

Under this circumstance, there is no doubt that F. Garil was engaged in labor-only contracting, and as
such, is considered merely an agent of Burlingame. In labor-only contracting, the law creates an
employer-employee relationship to prevent a circumvention of labor laws. The contractor is considered
merely an agent of the principal employer and the latter is responsible to the employees of the labor-
only contractor as if such employees had been directly employed by the principal employer.21 Since F.
Garil is a labor-only contractor, the workers it supplied should be considered as employees of Burlingame
in the eyes of the law.

WHEREFORE, the challenged Decision of the Court of Appeals dated August 29, 2003 and the Resolution
dated March 15, 2004 denying the motion for reconsideration are REVERSED and SET ASIDE. The decision
of the Secretary of Labor and Employment ordering the holding of a certification election among the
rank-and-file promo employees of Burlingame is reinstated.

Costs against respondent.

SO ORDERED.
45
[G.R. NO. 156146 : June 21, 2007]
OLONGAPO MAINTENANCE SERVICES, INC., Petitioner, v. EDGARDO B. CHANTENGCO, SALVACION S.
ANIGAN, POLICARPIO S. ANIGAN, NOEL C. MENDOZA, DANIEL VALENTIN, MANUEL T. MARIANO, CARLOS
PALABYAB, BETTY B. OLA, SALICIO R. MAGNO, MICHAEL SALAZAR, LOPE R. MAGNO, GERARDO G.
AQUINO, EDWIN Q. DAYANDANTE, JOSE P. PRIEL, ROMEO O. CLETE, ERNESTO O. CLETE, SAMUEL P.
MIRALPES, PATERNO R. BERZUELA, ANTONIO C. VALDEZ, et al Respondents.
DECISION
NACHURA, J.:
This Petition for Review on Certiorari assails the July 29, 2002 Decision1 of the Court of Appeals and its
Resolution2 dated November 14, 2002 in CA-G.R. SP No. 67474, which, respectively, denied the Petition
for Certiorari and the motion for reconsideration filed by Olongapo Maintenance Services, Inc. (OMSI).
OMSI is a corporation engaged in the business of providing janitorial and maintenance services to various
clients, including government-owned and controlled corporations. On various dates beginning 1986,
OMSI hired the respondents as janitors, grass cutters, and degreasers, and assigned them at the Ninoy
Aquino International Airport (NAIA). On January 14, 1999, OMSI terminated respondents' employment.
Claiming termination without just cause and non-payment of labor standard benefits, respondents filed a
complaint for illegal dismissal, underpayment of wages, and non-payment of holiday and service
incentive leave pays, with prayer for payment of separation pay, against OMSI.
For its part, OMSI denied the allegations in the complaint. It averred that when Manila International
Airport Authority (MIAA) awarded to OMSI the service contracts for the airport, OMSI hired respondents
as janitors, cleaners, and degreasers to do the services under the contracts. OMSI informed the
respondents that they were hired for the MIAA project and their employments were coterminous with
the contracts. As project employees, they were not dismissed from work but their employments ceased
when the MIAA contracts were not renewed upon their expiration. The termination of respondents'
employment cannot, thus, be considered illegal.
In a Decision3 dated November 19, 1999, the Labor Arbiter dismissed the complaint, viz.:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING for lack of merit the claims
for separation pay, wage differentials and holiday pay except that respondent is hereby ordered to pay
the seventy one (71) complainants listed in pages three and four of the latter's position paper their
service incentive leave pay.
SO ORDERED.4
On appeal by the respondents, the NLRC modified the Labor Arbiter's ruling. It held that respondents
were regular and not project employees. Hence, they are entitled to separation pay:
WHEREFORE, the decision appealed from is hereby modified by granting in addition to the grant of
service incentive leave pay, payment of separation pay equivalent to half-month pay per [every] year of
service or one month pay, whichever is higher.
SO ORDERED.5
OMSI sought reconsideration of the ruling, but the NLRC denied the motion on July 30, 2001.
Petitioner went up to the Court of Appeals via a Petition for Certiorari, imputing grave abuse of
discretion to the NLRC for reversing the factual findings and the decision of the Labor Arbiter. However,
the Court of Appeals dismissed the petition. The appellate court agreed with the NLRC that the
continuous rehiring of respondents, who performed tasks necessary and desirable in the usual business
of OMSI, was a clear indication that they were regular, not project employees. The court added that
OMSI failed to establish that respondents' employment had been fixed for a specific project or
undertaking, the completion or termination of which had been determined at the time of their
engagement or hiring. Neither had it shown that respondents were informed of the duration and scope
of their work when they were hired. Furthermore, OMSI did not submit to the Department of Labor and
Employment (DOLE) reports of termination of the respondents, thereby bolstering respondents' claim of
regular employment. OMSI filed a motion for reconsideration, but the Court of Appeals denied it on
November 14, 2002.
Aggrieved by the resolutions of the Court of Appeals, OMSI comes to this Court theorizing that:
THE COURT OF APPEALS COMMITTED GRAVE ERROR AND GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION IN SUSTAINING THE NLRC'S RULING THAT RESPONDENTS ARE NOT
PROJECT EMPLOYEES. CONCOMITANT THERETO, THERE IS NEITHER FACTUAL NOR LEGAL BASIS FOR THE
AWARD OF SEPARATION PAY.6
OMSI insists that respondents were project employees. Respondents, on the other hand, maintain that
they were OMSI's regular employees.
Article 280 of the Labor Code provides:
ART. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed
for a specific project or undertaking the completion or termination of which has been determined at the
time of the engagement of the employee or where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season . . . (Italics supplied.)
Without question, respondents, as janitors, grass cutters, and degreasers, performed work "necessary or
desirable" in the janitorial and maintenance service business of OMSI.
46

OMSI, however, argues that the respondents' performance of activities necessary and desirable to its
business does not necessarily and conclusively mean that respondents were regular employees. OMSI In termination cases, the burden of proof rests on the employer to show that the dismissal is for a just
asserts that respondents were project employees and their employment was coterminous with OMSI's cause. Thus, employers who hire project employees are mandated to state and, once its veracity is
service contracts with the MIAA. Thus, when the service contracts were terminated and the respondents challenged, to prove the actual basis for the latter's dismissal.16 Unfortunately for OMSI, it failed to
were not re-assigned to another project, OMSI cannot be held liable for illegal dismissal. discharge the burden. All that we have is OMSI's self-serving assertion that the respondents were hired
as project employees.
The argument does not persuade.
Having been illegally dismissed, the NLRC cannot be considered to have acted whimsically in granting
The principal test in determining whether an employee is a project employee is whether he/she is respondents separation pay in lieu of their reinstatement. Accordingly, the Court of Appeals committed
assigned to carry out a "specific project or undertaking," the duration and scope of which are specified at no reversible error nor grave abuse of discretion in denying OMSI's petition for certiorari.
the time the employee is engaged in the project,7 or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season.8 A true project employee WHEREFORE, the Petition for Review is DENIED and the assailed Decision and Resolution of the Court of
should be assigned to a project which begins and ends at determined or determinable times, and be Appeals are AFFIRMED.
informed thereof at the time of hiring.9
SO ORDERED.
In the instant case, the record is bereft of proof that the respondents' engagement as project employees
has been predetermined, as required by law. We agree with the Court of Appeals that OMSI did not
provide convincing evidence that respondents were informed that they were to be assigned to a "specific
project or undertaking" when OMSI hired them. Notably, the employment contracts for the specific
project signed by the respondents were never presented. All that OMSI submitted in the proceedings a
quo are the service contracts between OMSI and the MIAA. Clearly, OMSI utterly failed to establish by
substantial evidence that, indeed, respondents were project employees and their employment was
coterminous with the MIAA contract.

Evidently cognizant of such neglect, OMSI attempted to correct the situation by attaching copies of the
application forms10 of the respondents to its motion for reconsideration of the Court of Appeals'
Decision. Such practice cannot be tolerated. This practice of submitting evidence late is properly rejected
as it defeats the speedy administration of justice involving poor workers. It is also unfair.11

OMSI's reliance on Mamansag v. National Labor Relations Commission,12 Cartagenas v. Romago Electric
Company, Inc.,13 and Sandoval Shipyards, Inc. v. National Labor Relations Commission14 is misplaced.
Said cases are not on all fours with the case at bench.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

In Mamansag, Consumer Pulse Inc. duly presented the contract of employment showing that Mamansag
was hired for a specific project and the completion or termination of said project was determined at the
start of the employment. In Cartagenas, documentary exhibits were offered showing that the employee
had been issued appointments from project to project and was issued a notice of temporary lay-off when
the project was suspended due to lack of funds. Finally, in the case of Sandoval Shipyards, the
termination of the project employees was duly reported to the then Ministry of Labor and Employment.
These circumstances are not true in OMSI's case. As mentioned, no convincing evidence was offered to
prove that respondents were informed that they were to be assigned to a "specific project or
undertaking." Also, OMSI never reported respondents' termination to the then Department of Labor and
Employment (DOLE). In Philippine Long Distance Telephone Co. v. Ylagan,15 we held that the failure of
the employee to file termination reports was an indication that an employee was not a project but a
regular employee.
47

G.R. No. 167622 November 7, 2008 terminate this Agreement by the Company shall be construed for any previous failure to exercise its right
under any provision of this Agreement.
GREGORIO V. TONGKO, petitioner
vs. Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, respondents. to the other party fifteen (15) days notice in writing. x x x

DECISION In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency Organization. In 1990, he
became a Branch Manager. As the CA found, Tongko's gross earnings from his work at Manulife,
VELASCO, JR., J.: consisting of commissions, persistency income, and management overrides, may be summarized as
follows:
The Case
January to December 10, 2002
This Petition for Review on Certiorari under Rule 45 seeks the reversal of the March 29, 2005 Decision1
of the Court of Appeals (CA) in CA-G.R. SP No. 88253, entitled The Manufacturers Life Insurance Co. -
(Phils.), Inc. v. National Labor Relations Commission and Gregorio V. Tongko. The assailed decision set
aside the Decision dated September 27, 2004 and Resolution dated December 16, 2004 rendered by the P 865,096.07
National Labor Relations Commission (NLRC) in NLRC NCR CA No. 040220-04.
2001
The Facts
-
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life
insurance business. Renato A. Vergel De Dios was, during the period material, its President and Chief 6,214,737.11
Executive Officer. Gregorio V. Tongko started his professional relationship with Manulife on July 1, 1977
by virtue of a Career Agent's Agreement2 (Agreement) he executed with Manulife. 2000

In the Agreement, it is provided that: -

It is understood and agreed that the Agent is an independent contractor and nothing contained herein 8,003,180.38
shall be construed or interpreted as creating an employer-employee relationship between the Company
and the Agent. 1999

xxxx -

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other 6,797,814.05
products offered by the Company, and collect, in exchange for provisional receipts issued by the Agent,
money due or to become due to the Company in respect of applications or policies obtained by or 1998
through the Agent or from policyholders allotted by the Company to the Agent for servicing, subject to
subsequent confirmation of receipt of payment by the Company as evidenced by an Official Receipt -
issued by the Company directly to the policyholder.
4,805,166.34
xxxx
1997
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof
by the Agent by giving written notice to the Agent within fifteen (15) days from the time of the discovery -
of the breach. No waiver, extinguishment, abandonment, withdrawal or cancellation of the right to
48
2,822,620.003
The problem started sometime in 2001, when Manulife instituted manpower development programs in
the regional sales management level. Relative thereto, De Dios addressed a letter dated November 6,
20014 to Tongko regarding an October 18, 2001 Metro North Sales Managers Meeting. In the letter, De
Dios stated:
The first step to transforming Manulife into a big league player has been very clear - to increase the
number of agents to at least 1,000 strong for a start. This may seem diametrically opposed to the way
Manulife was run when you first joined the organization. Since then, however, substantial changes have
taken place in the organization, as these have been influenced by developments both from within and
without the company.
xxxx
The issues around agent recruiting are central to the intended objectives hence the need for a Senior
Managers' meeting earlier last month when Kevin O'Connor, SVP - Agency, took to the floor to
determine from our senior agency leaders what more could be done to bolster manpower development.
At earlier meetings, Kevin had presented information where evidently, your Region was the lowest
performer (on a per Manager basis) in terms of recruiting in 2000 and, as of today, continues to remain
one of the laggards in this area.
While discussions, in general, were positive other than for certain comments from your end which were
perceived to be uncalled for, it became clear that a one-on-one meeting with you was necessary to
ensure that you and management, were on the same plane. As gleaned from some of your previous
comments in prior meetings (both in group and one-on-one), it was not clear that we were proceeding in
the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those
subsequent meetings you reiterated certain views, the validity of which we challenged and subsequently
found as having no basis.
With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may
be a bit confused as to the directions the company was taking. For this reason, I sought a meeting with
everyone in your management team, including you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North Region's Sales
Managers meeting held at the 7/F Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of
agents."
This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue
on the table before the rest of your Region's Sales Managers to verify its validity. As you must have
noted, no Sales Manager came forward on their own to confirm your statement and it took you to name
Malou Samson as a source of the same, an allegation that Malou herself denied at our meeting and in
your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had
thought all along, that these allegations were simply meant to muddle the issues surrounding the
inability of your Region to meet its agency development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn
less."
xxxx
All the above notwithstanding, we had your own records checked and we found that you made a lot
more money in the Year 2000 versus 1999. In addition, you also volunteered the information to Kevin
when you said that you probably will make more money in the Year 2001 compared to Year 2000.
Obviously, your above statement about making "less money" did not refer to you but the way you
argued this point had us almost believing that you were spouting the gospel of truth when you were not.
xxx
xxxx
All of a sudden, Greg, I have become much more worried about your ability to lead this group towards
the new direction that we have been discussing these past few weeks, i.e., Manulife's goal to become a
major agency-led distribution company in the Philippines. While as you claim, you have not stopped
anyone from recruiting, I have never heard you proactively push for greater agency recruiting. You have
not been proactive all these years when it comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are
making the following changes in the interim:
1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks
which can be easily delegated. This assistant should be so chosen as to complement your skills and help
you in the areas where you feel "may not be your cup of tea".
You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for
your health. The above could solve this problem.
xxxx
49
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star
Branch (NSB) in autonomous fashion. x x x
I have decided to make this change so as to reduce your span of control and allow you to concentrate
more fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the
Sales Managers in Metro North. I will hold you solely responsible for meeting the objectives of these
remaining groups.
xxxx
The above changes can end at this point and they need not go any further. This, however, is entirely
dependent upon you. But you have to understand that meeting corporate objectives by everyone is
primary and will not be compromised. We are meeting tough challenges next year and I would want
everybody on board. Any resistance or holding back by anyone will be dealt with accordingly.
Subsequently, De Dios wrote Tongko another letter dated December 18, 2001,5 terminating Tongko's
services, thus:
It would appear, however, that despite the series of meetings and communications, both one-on-one
meetings between yourself and SVP Kevin O'Connor, some of them with me, as well as group meetings
with your Sales Managers, all these efforts have failed in helping you align your directions with
Management's avowed agency growth policy.
xxxx
On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract
as we are now issuing this notice of termination of your Agency Agreement with us effective fifteen days
from the date of this letter.
Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against Manulife for illegal
dismissal. The case, docketed as NLRC NCR Case No. 11-10330-02, was raffled to Labor Arbiter Marita V.
Padolina.
In the Complaint, Tongko, in a bid to establish an employer-employee relationship, alleged that De Dios
gave him specific directives on how to manage his area of responsibility in the latter's letter dated
November 6, 2001. He further claimed that Manulife exercised control over him as follows:
Such control was certainly exercised by respondents over the herein complainant. It was Manulife who
hired, promoted and gave various assignments to him. It was the company who set objectives as regards
productions, recruitment, training programs and all activities pertaining to its business. Manulife
prescribed a Code of Conduct which would govern in minute detail all aspects of the work to be
undertaken by employees, including the sales process, the underwriting process, signatures, handling of
money, policyholder service, confidentiality, legal and regulatory requirements and grounds for
termination of employment. The letter of Mr. De Dios dated 06 November 2001 left no doubt as to who
was in control. The subsequent termination letter dated 18 December 2001 again established in no
uncertain terms the authority of the herein respondents to control the employees of Manulife. Plainly,
the respondents wielded control not only as to the ends to be achieved but the ways and means of
attaining such ends.6
Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC (4th Division)7 and Great
Pacific Life Assurance Corporation v. NLRC,8 which Tongko claimed to be similar to the instant case.
Tongko further claimed that his dismissal was without basis and that he was not afforded due process.
He also cited the Manulife Code of Conduct by which his actions were controlled by the company.
Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003,9 in which it alleged
that Tongko is not its employee, and that it did not exercise "control" over him. Thus, Manulife claimed
that the NLRC has no jurisdiction over the case.
In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the complaint for lack of
an employer-employee relationship. Padolina found that applying the four-fold test in determining the
existence of an employer-employee relationship, none was found in the instant case. The dispositive
portion thereof states:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant complaint for
lack of jurisdiction, there being no employer-employee relationship between the parties.
SO ORDERED.
Tongko appealed the arbiter's Decision to the NLRC which reversed the same and rendered a Decision
dated September 27, 2004 finding Tongko to have been illegally dismissed.
The NLRC's First Division, while finding an employer-employee relationship between Manulife and
Tongko applying the four-fold test, held Manulife liable for illegal dismissal. It further stated that
Manulife exercised control over Tongko as evidenced by the letter dated November 6, 2001 of De Dios
and wrote:
The above-mentioned letter shows the extent to which respondents controlled complainant's manner
and means of doing his work and achieving the goals set by respondents. The letter shows how
respondents concerned themselves with the manner complainant managed the Metro North Region as
Regional Sales Manager, to the point that respondents even had a say on how complainant interacted
with other individuals in the Metro North Region. The letter is in fact replete with comments and
criticisms on how complainant carried out his functions as Regional Sales Manager.
More importantly, the letter contains an abundance of directives or orders that are intended to directly
affect complainant's authority and manner of carrying out his functions as Regional Sales Manager.10 x x
x
Additionally, the First Division also ruled that:
50
Further evidence of [respondents'] control over complainant can be found in the records of the case.
[These] are the different codes of conduct such as the Agent Code of Conduct, the Manulife Financial
Code of Conduct, and the Manulife Financial Code of Conduct Agreement, which serve as the
foundations of the power of control wielded by respondents over complainant that is further manifested
in the different administrative and other tasks that he is required to perform. These codes of conduct
corroborate and reinforce the display of respondents' power of control in their 06 November 2001 Letter
to complainant.11
The fallo of the September 27, 2004 Decision reads:
WHEREFORE, premises considered, the appealed Decision is hereby reversed and set aside. We find
complainant to be a regular employee of respondent Manulife and that he was illegally dismissed from
employment by respondents.
In lieu of reinstatement, respondent Manulife is hereby ordered to pay complainant separation pay as
above set forth. Respondent Manulife is further ordered to pay complainant backwages from the time he
was dismissed on 02 January 2002 up to the finality of this decision also as indicated above.
xxxx
All other claims are hereby dismissed for utter lack of merit.
From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC First
Division in a Resolution dated December 16, 2004.12
Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253. Thereafter, the CA issued
the assailed Decision dated March 29, 2005, finding the absence of an employer-employee relationship
between the parties and deeming the NLRC with no jurisdiction over the case. The CA arrived at this
conclusion while again applying the four-fold test. The CA found that Manulife did not exercise control
over Tongko that would render the latter an employee of Manulife. The dispositive portion reads:
WHEREFORE, premises considered, the present petition is hereby GRANTED and the writ prayed for
accordingly GRANTED. The assailed Decision dated September 27, 2004 and Resolution dated December
16, 2004 of the National Labor Relations Commission in NLRC NCR Case No. 00-11-10330-2002 (NLRC
NCR CA No. 040220-04) are hereby ANNULLED and SET ASIDE. The Decision dated April 15, 2004 of Labor
Arbiter Marita V. Padolina is hereby REINSTATED.
Hence, Tongko filed this petition and presented the following issues:
A
The Court of Appeals committed grave abuse of discretion in granting respondents' petition for
certiorari.
B
The Court of Appeals committed grave abuse of discretion in annulling and setting aside the Decision
dated September 27, 2004 and Resolution dated December 16, 2004 in finding that there is no employer-
employee relationship between petitioner and respondent.
C
The Court of Appeals committed grave abuse of discretion in annulling and setting aside the Decision
dated September 27, 2004 and Resolution dated December 16, 2004 which found petitioner to have
been illegally dismissed and ordered his reinstatement with payment of backwages.13
Restated, the issues are: (1) Was there an employer-employee relationship between Manulife and
Tongko? and (2) If yes, was Manulife guilty of illegal dismissal?
The Court's Ruling
This petition is meritorious.
Tongko Was An Employee of Manulife
The basic issue of whether or not the NLRC has jurisdiction over the case resolves itself into the question
of whether an employer-employee relationship existed between Manulife and Tongko. If no employer-
employee relationship existed between the two parties, then jurisdiction over the case properly lies with
the Regional Trial Court.
In the determination of whether an employer-employee relationship exists between two parties, this
Court applies the four-fold test to determine the existence of the elements of such relationship. In Pacific
Consultants International Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-
employee relationship, thus:
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. It is the so-called "control test" which constitutes the most important index of the
existence of the employer-employee relationship 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. 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.14
The NLRC, for its part, applied the four-fold test and found the existence of all the elements and declared
Tongko an employee of Manulife. The CA, on the other hand, found that the element of control as an
indicator of the existence of an employer-employee relationship was lacking in this case. The NLRC and
the CA based their rulings on the same findings of fact but differed in their interpretations.
51
The NLRC arrived at its conclusion, first, on the basis of the letter dated November 6, 2001 addressed by
De Dios to Tongko. According to the NLRC, the letter contained "an abundance of directives or orders
that are intended to directly affect complainant's authority and manner of carrying out his functions as
Regional Sales Manager." It enumerated these "directives" or "orders" as follows:
1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks
which can be easily delegated. x x x
xxxx
This assistant should be hired immediately.
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star
Branch (NSB) in autonomous fashion x x x.
xxxx
I have decided to make this change so as to reduce your span of control and allow you to concentrate
more fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the
Sales Managers in Metro North. x x x
3. Any resistance or holding back by anyone will be dealt with accordingly.
4. I have been straightforward in this my letter and I know that we can continue to work together… but it
will have to be on my terms. Anything else is unacceptable!
The NLRC further ruled that the different codes of conduct that were applicable to Tongko served as the
foundations of the power of control wielded by Manulife over Tongko that is further manifested in the
different administrative and other tasks that he was required to perform.
The NLRC also found that Tongko was required to render exclusive service to Manulife, further bolstering
the existence of an employer-employee relationship.
Finally, the NLRC ruled that Tongko was integrated into a management structure over which Manulife
exercised control, including the actions of its officers. The NLRC held that such integration added to the
fact that Tongko did not have his own agency belied Manulife's claim that Tongko was an independent
contractor.
The CA, however, considered the finding of the existence of an employer-employee relationship by the
NLRC as far too sweeping having as its only basis the letter dated November 6, 2001 of De Dios. The CA
did not concur with the NLRC's ruling that the elements of control as pointed out by the NLRC are
"sufficient indicia of control that negates independent contractorship and conclusively establish an
employer-employee relationship between"15 Tongko and Manulife. The CA ruled that there is no
employer-employee relationship between Tongko and Manulife.
An impasse appears to have been reached between the CA and the NLRC on the sole issue of control
over an employee's conduct. It bears clarifying that such control not only applies to the work or goal to
be done but also to the means and methods to accomplish it.16 In Sonza v. ABS-CBN Broadcasting
Corporation, we explained that not all forms of control would establish an employer-employee
relationship, to wit:
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.17
(Emphasis supplied.)
We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular) that:
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.18
Hence, we ruled in Insular that no employer-employee relationship existed therein. However, such ruling
was tempered with the qualification that had there been evidence that the company promulgated rules
or regulations that effectively controlled or restricted an insurance agent's choice of methods or the
methods themselves in selling insurance, an employer-employee relationship would have existed. In
other words, the Court in Insular in no way definitively held that insurance agents are not employees of
insurance companies, but rather made the same a case-to-case basis. We held:
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."19 (Emphasis
supplied.)
52
There is no conflict between our rulings in Insular and in Great Pacific Life Assurance Corporation. We
said in the latter case:
[I]t cannot be gain said that Grepalife had control over private respondents' performance as well as the
result of their efforts. A cursory reading of their respective functions as enumerated in their contracts
reveals that the company practically dictates the manner by which their jobs are to be carried out. For
instance, the District Manager must properly account, record and document the company's funds spot-
check and audit the work of the zone supervisors, conserve the company's business in the district
through ‘reinstatements', follow up the submission of weekly remittance reports of the debit agents and
zone supervisors, preserve company property in good condition, train understudies for the position of
district manager, and maintain his quota of sales (the failure of which is a ground for termination). On
the other hand, a zone supervisor must direct and supervise the sales activities of the debit agents under
him, conserve company property through "reinstatements", undertake and discharge the functions of
absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales
and collections by the debit agents.20 (Emphasis supplied.)
Based on the foregoing cases, if the specific rules and regulations that are enforced against insurance
agents or managers are such that would directly affect the means and methods by which such agents or
managers would achieve the objectives set by the insurance company, they are employees of the
insurance company.
In the instant case, Manulife had the power of control over Tongko that would make him its employee.
Several factors contribute to this conclusion.
In the Agreement dated July 1, 1977 executed between Tongko and Manulife, it is provided that:
The Agent hereby agrees to comply with all regulations and requirements of the Company as herein
provided as well as maintain a standard of knowledge and competency in the sale of the Company's
products which satisfies those set by the Company and sufficiently meets the volume of new business
required of Production Club membership.21
Under this provision, an agent of Manulife must comply with three (3) requirements: (1) compliance with
the regulations and requirements of the company; (2) maintenance of a level of knowledge of the
company's products that is satisfactory to the company; and (3) compliance with a quota of new
businesses.
Among the company regulations of Manulife are the different codes of conduct such as the Agent Code
of Conduct, Manulife Financial Code of Conduct, and Manulife Financial Code of Conduct Agreement,
which demonstrate the power of control exercised by the company over Tongko. The fact that Tongko
was obliged to obey and comply with the codes of conduct was not disowned by respondents.
Thus, with the company regulations and requirements alone, the fact that Tongko was an employee of
Manulife may already be established. Certainly, these requirements controlled the means and methods
by which Tongko was to achieve the company's goals.
More importantly, Manulife's evidence establishes the fact that Tongko was tasked to perform
administrative duties that establishes his employment with Manulife.
In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005, Manulife attached
affidavits of its agents purportedly to support its claim that Tongko, as a Regional Sales Manager, did not
perform any administrative functions. An examination of these affidavits would, however, prove the
opposite.
In an Affidavit dated April 28, 2003,22 John D. Chua, a Regional Sales Manager of Manulife, stated:
4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional Sales Manager
("RSM") for Metro South Region pursuant to an Agency Contract. As such RSM, I have the following
functions:
1. Refer and recommend prospective agents to Manulife
2. Coach agents to become productive
3. Regularly meet with, and coordinate activities of agents affiliated to my region.
While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April 29, 200323 that:
3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for the Metro North Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission agents;
c. Coordinate activities of Agency Managers who, in turn, train and coordinate activites of other
commission agents;
d. Achieve agreed production objectives in terms of Net Annualized Commissions and Case Count and
recruitment goals; and
e. Sell the various products of Manulife to my personal clients.
While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated April 28, 200324
that:
3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks Unit, North Star Branch, Metro North
Region;
4. As such UM, I render the following services:
53
a. To render or recommend prospective agents to be licensed, trained and contracted to sell Manulife
products and who will be part of my Unit;
b. To coordinate activities of the agents under my Unit in their daily, weekly and monthly selling
activities, making sure that their respective sales targets are met;
c. To conduct periodic training sessions for my agents to further enhance their sales skills.
d. To assist my agents with their sales activities by way of joint fieldwork, consultations and one-on- one
evaluation and analysis of particular accounts.
e. To provide opportunities to motivate my agents to succeed like conducting promos to increase sales
activities and encouraging them to be involved in company and industry activities.
f. To provide opportunities for professional growth to my agents by encouraging them to be a member of
the LUCAP (Life Underwriters Association of the Philippines).
A comparison of the above functions and those contained in the Agreement with those cited in Great
Pacific Life Assurance Corporation25 reveals a striking similarity that would more than support a similar
finding as in that case. Thus, there was an employer-employee relationship between the parties.
Additionally, it must be pointed out that the fact that Tongko was tasked with recruiting a certain
number of agents, in addition to his other administrative functions, leads to no other conclusion that he
was an employee of Manulife.
In his letter dated November 6, 2001, De Dios harped on the direction of Manulife of becoming a major
agency-led distribution company whereby greater agency recruitment is required of the managers,
including Tongko. De Dios made it clear that agent recruitment has become the primary means by which
Manulife intends to sell more policies. More importantly, it is Tongko's alleged failure to follow this
principle of recruitment that led to the termination of his employment with Manulife. With this, it is
inescapable that Tongko was an employee of Manulife.
Tongko Was Illegally Dismissed
In its Petition for Certiorari dated January 7, 200526 filed before the CA, Manulife argued that even if
Tongko is considered as its employee, his employment was validly terminated on the ground of gross and
habitual neglect of duties, inefficiency, as well as willful disobedience of the lawful orders of Manulife.
Manulife stated:
In the instant case, private respondent, despite the written reminder from Mr. De Dios refused to shape
up and altogether disregarded the latter's advice resulting in his laggard performance clearly indicative of
his willful disobedience of the lawful orders of his superior. x x x
xxxx
As private respondent has patently failed to perform a very fundamental duty, and that is to yield
obedience to all reasonable rules, orders and instructions of the Company, as well as gross failure to
reach at least minimum quota, the termination of his engagement from Manulife is highly warranted and
therefore, there is no illegal dismissal to speak of.
It is readily evident from the above-quoted portions of Manulife's petition that it failed to cite a single
iota of evidence to support its claims. Manulife did not even point out which order or rule that Tongko
disobeyed. More importantly, Manulife did not point out the specific acts that Tongko was guilty of that
would constitute gross and habitual neglect of duty or disobedience. Manulife merely cited Tongko's
alleged "laggard performance," without substantiating such claim, and equated the same to
disobedience and neglect of duty.
We cannot, therefore, accept Manulife's position.
In Quebec, Sr. v. National Labor Relations Commission, we ruled that:
When there is no showing of a clear, valid and legal cause for the termination of employment, the law
considers the matter a case of illegal dismissal and the burden is on the employer to prove that the
termination was for a valid or authorized cause. This burden of proof appropriately lies on the shoulders
of the employer and not on the employee because a worker's job has some of the characteristics of
property rights and is therefore within the constitutional mantle of protection. No person shall be
deprived of life, liberty or property without due process of law, nor shall any person be denied the equal
protection of the laws.
Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit terms that the burden of
proving the validity of the termination of employment rests on the employer. Failure to discharge this
evidential burden would necessarily mean that the dismissal was not justified, and, therefore, illegal.27
We again ruled in Times Transportation Co., Inc. v. National Labor Relations Commission that:
The law mandates that the burden of proving the validity of the termination of employment rests with
the employer. Failure to discharge this evidentiary burden would necessarily mean that the dismissal was
not justified, and, therefore, illegal. Unsubstantiated suspicions, accusations and conclusions of
employers do not provide for legal justification for dismissing employees. In case of doubt, such cases
should be resolved in favor of labor, pursuant to the social justice policy of our labor laws and
Constitution.28
This burden of proof was clarified in Community Rural Bank of San Isidro (N.E.), Inc. v. Paez to mean
substantial evidence, to wit:
The Labor Code provides that an employer may terminate the services of an employee for just cause and
this must be supported by substantial evidence. The settled rule in administrative and quasi-judicial
proceedings is that proof beyond reasonable doubt is not required in determining the legality of an
employer's dismissal of an employee, and not even a preponderance of evidence is necessary as
54
substantial evidence is considered sufficient. Substantial evidence is more than a mere scintilla of
evidence or relevant evidence as a reasonable mind might accept as adequate to support a conclusion,
even if other minds, equally reasonable, might conceivably opine otherwise.29
Here, Manulife failed to overcome such burden of proof. It must be reiterated that Manulife even failed
to identify the specific acts by which Tongko's employment was terminated much less support the same
with substantial evidence. To repeat, mere conjectures cannot work to deprive employees of their
means of livelihood. Thus, it must be concluded that Tongko was illegally dismissed.
Moreover, as to Manulife's failure to comply with the twin notice rule, it reasons that Tongko not being
its employee is not entitled to such notices. Since we have ruled that Tongko is its employee, however,
Manulife clearly failed to afford Tongko said notices. Thus, on this ground too, Manulife is guilty of illegal
dismissal. In Quebec, Sr., we also stated:
Furthermore, not only does our legal system dictate that the reasons for dismissing a worker must be
pertinently substantiated, it also mandates that the manner of dismissal must be properly done,
otherwise, the termination itself is gravely defective and may be declared unlawful.30
For breach of the due process requirements, Manulife is liable to Tongko in the amount of PhP 30,000 as
indemnity in the form of nominal damages.31
Finally, Manulife raises the issue of the correctness of the computation of the award to Tongko made by
the NLRC by claiming that Songco v. National Labor Relations Commission32 is inapplicable to the instant
case, considering that Songco was dismissed on the ground of retrenchment.
An examination of Songco reveals that it may be applied to the present case. In that case, Jose Songco
was a salesman of F.E. Zuellig (M), Inc. which terminated the services of Songco on the ground of
retrenchment due to financial losses. The issue raised to the Court, however, was whether commissions
are considered as part of wages in order to determine separation pay. Thus, the fact that Songco was
dismissed due to retrenchment does not hamper the application thereof to the instant case. What is
pivotal is that we ruled in Songco that commissions are part of wages for the determination of
separation pay.
Article 279 of the Labor Code on security of tenure pertinently provides that:
In cases of regular employment the employer shall not terminate the services of an employee except for
a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement.
In Triad Security & Allied Services, Inc. v. Ortega, Jr. (Triad), we thus stated that an illegally dismissed
employee shall be entitled to backwages and separation pay, if reinstatement is no longer viable:
As the law now stands, an illegally dismissed employee is entitled to two reliefs, namely: backwages and
reinstatement. These are separate and distinct from each other. However, separation pay is granted
where reinstatement is no longer feasible because of strained relations between the employee and the
employer. In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or
separation pay if reinstatement is no longer viable and backwages.33
Taking into consideration the cases of Songco and Triad, we find correct the computation of the NLRC
that the monthly gross wage of Tongko in 2001 was PhP 518,144.76. For having been illegally dismissed,
Tongko is entitled to reinstatement with full backwages under Art. 279 of the Labor Code. Due to the
strained relationship between Manulife and Tongko, reinstatement, however, is no longer advisable.
Thus, Tongko will be entitled to backwages from January 2, 2002 (date of dismissal) up to the finality of
this decision. Moreover, Manulife will pay Tongko separation pay of one (1) month salary for every year
of service that is from 1977 to 2001 amounting to PhP 12,435,474.24, considering that reinstatement is
not feasible. Tongko shall also be entitled to an award of attorney's fees in the amount of ten percent
(10%) of the aggregate amount of the above awards.
WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005 Decision of the CA in CA-G.R.
SP No. 88253 is REVERSED and SET ASIDE. The Decision dated September 27, 2004 of the NLRC is
REINSTATED with the following modifications:
Manulife shall pay Tongko the following:
(1) Full backwages, inclusive of allowances and other benefits or their monetary equivalent from January
2, 2002 up to the finality of this Decision;
(2) Separation pay of one (1) month salary for every year of service from 1977 up to 2001 amounting to
PhP 12,435,474.24;
(3) Nominal damages of PhP 30,000 as indemnity for violation of the due process requirements; and
(4) Attorney's fees equivalent to ten percent (10%) of the aforementioned backwages and separation
pay.
Costs against respondent Manulife.
SO ORDERED.
55
[G.R. NO. 151309 : October 15, 2008]
BISIG MANGGAGAWA SA TRYCO and/or FRANCISCO SIQUIG, as Union President, JOSELITO LARIÑO,
VIVENCIO B. BARTE, SATURNINO EGERA and SIMPLICIO AYA-AY, Petitioners, v. NATIONAL LABOR
RELATIONS COMMISSION, TRYCO PHARMA CORPORATION, and/or WILFREDO C. RIVERA, Respondents.
DECISION
NACHURA, J.:
This petition seeks a review of the Decision1 of the Court of Appeals (CA) dated July 24, 2001 and
Resolution dated December 20, 2001, which affirmed the finding of the National Labor Relations
Commission (NLRC) that the petitioners' transfer to another workplace did not amount to a constructive
dismissal and an unfair labor practice.
The pertinent factual antecedents are as follows:
Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines and its principal office is
located in Caloocan City. Petitioners Joselito Lariño, Vivencio Barte, Saturnino Egera and Simplicio Aya-
ay are its regular employees, occupying the positions of helper, shipment helper and factory workers,
respectively, assigned to the Production Department. They are members of Bisig Manggagawa sa Tryco
(BMT), the exclusive bargaining representative of the rank-and-file employees.
Tryco and the petitioners signed separate Memorand[a] of Agreement2 (MOA), providing for a
compressed workweek schedule to be implemented in the company effective May 20, 1996. The MOA
was entered into pursuant to Department of Labor and Employment Department Order (D.O.) No. 21,
Series of 1990, Guidelines on the Implementation of Compressed Workweek. As provided in the MOA,
8:00 a.m. to 6:12 p.m., from Monday to Friday, shall be considered as the regular working hours, and no
overtime pay shall be due and payable to the employee for work rendered during those hours. The MOA
specifically stated that the employee waives the right to claim overtime pay for work rendered after 5:00
p.m. until 6:12 p.m. from Monday to Friday considering that the compressed workweek schedule is
adopted in lieu of the regular workweek schedule which also consists of 46 hours. However, should an
employee be permitted or required to work beyond 6:12 p.m., such employee shall be entitled to
overtime pay.
Tryco informed the Bureau of Working Conditions of the Department of Labor and Employment of the
implementation of a compressed workweek in the company.3
In January 1997, BMT and Tryco negotiated for the renewal of their collective bargaining agreement
(CBA) but failed to arrive at a new agreement.
Meantime, Tryco received the Letter dated March 26, 1997 from the Bureau of Animal Industry of the
Department of Agriculture reminding it that its production should be conducted in San Rafael, Bulacan,
not in Caloocan City:
MR. WILFREDO C. RIVERA
President, Tryco Pharma Corporation
San Rafael, Bulacan
Subject: LTO as VDAP Manufacturer at San Rafael, Bulacan
Dear Mr. Rivera:
This is to remind you that your License to Operate as Veterinary Drug and Product Manufacturer is
addressed at San Rafael, Bulacan, and so, therefore, your production should be done at the above
mentioned address only. Further, production of a drug includes propagation, processing, compounding,
finishing, filling, repacking, labeling, advertising, storage, distribution or sale of the veterinary drug
product. In no instance, therefore, should any of the above be done at your business office at 117 M.
Ponce St., EDSA, Caloocan City.
Please be guided accordingly.
Thank you.
Very truly yours,
(sgd.)
EDNA ZENAIDA V. VILLACORTE, D.V.M.
Chief, Animal Feeds Standard Division4
Accordingly, Tryco issued a Memorandum5 dated April 7, 1997 which directed petitioner Aya-ay to
report to the company's plant site in Bulacan. When petitioner Aya-ay refused to obey, Tryco reiterated
the order on April 18, 1997.6 Subsequently, through a Memorandum7 dated May 9, 1997, Tryco also
directed petitioners Egera, Lariño and Barte to report to the company's plant site in Bulacan.
BMT opposed the transfer of its members to San Rafael, Bulacan, contending that it constitutes unfair
labor practice. In protest, BMT declared a strike on May 26, 1997.
In August 1997, petitioners filed their separate complaints8 for illegal dismissal, underpayment of wages,
nonpayment of overtime pay and service incentive leave, and refusal to bargain against Tryco and its
President, Wilfredo C. Rivera. In their Position Paper,9 petitioners alleged that the company acted in bad
faith during the CBA negotiations because it sent representatives without authority to bind the company,
and this was the reason why the negotiations failed. They added that the management transferred
petitioners Lariño, Barte, Egera and Aya-ay from Caloocan to San Rafael, Bulacan to paralyze the union.
They prayed for the company to pay them their salaries from May 26 to 31, 1997, service incentive leave,
and overtime pay, and to implement Wage Order No. 4.
56
In their defense, respondents averred that the petitioners were not dismissed but they refused to
comply with the management's directive for them to report to the company's plant in San Rafael,
Bulacan. They denied the allegation that they negotiated in bad faith, stating that, in fact, they sent the
Executive Vice-President and Legal Counsel as the company's representatives to the CBA negotiations.
They claim that the failure to arrive at an agreement was due to the stubbornness of the union panel.
Respondents further averred that, long before the start of the negotiations, the company had already
been planning to decongest the Caloocan office to comply with the government policy to shift the
concentration of manufacturing activities from the metropolis to the countryside. The decision to
transfer the company's production activities to San Rafael, Bulacan was precipitated by the letter-
reminder of the Bureau of Animal Industry.
On February 27, 1998, the Labor Arbiter dismissed the case for lack of merit.10 The Labor Arbiter held
that the transfer of the petitioners would not paralyze or render the union ineffective for the following
reasons: (1) complainants are not members of the negotiating panel; and (2) the transfer was made
pursuant to the directive of the Department of Agriculture.
The Labor Arbiter also denied the money claims, ratiocinating that the nonpayment of wages was
justified because the petitioners did not render work from May 26 to 31, 1997; overtime pay is not due
because of the compressed workweek agreement between the union and management; and service
incentive leave pay cannot be claimed by the complainants because they are already enjoying vacation
leave with pay for at least five days. As for the claim of noncompliance with Wage Order No. 4, the Labor
Arbiter held that the issue should be left to the grievance machinery or voluntary arbitrator.
On October 29, 1999, the NLRC affirmed the Labor Arbiter's Decision, dismissing the case, thus:
PREMISES CONSIDERED, the Decision of February 27, 1998 is hereby AFFIRMED and complainants' appeal
therefrom DISMISSED for lack of merit. Complainants Joselito Lariño, Vivencio Barte, Saturnino Egera
and Simplicio Aya-ay are directed to report to work at respondents' San Rafael Plant, Bulacan but
without backwages. Respondents are directed to accept the complainants back to work.
SO ORDERED.11
On December 22, 1999, the NLRC denied the petitioners' motion for reconsideration for lack of merit.12
Left with no recourse, petitioners filed a Petition for Certiorari with the CA.
On July 24, 2001, the CA dismissed the Petition for Certiorari and ruled that the transfer order was a
management prerogative not amounting to a constructive dismissal or an unfair labor practice. The CA
further sustained the enforceability of the MOA, particularly the waiver of overtime pay in light of this
Court's rulings upholding a waiver of benefits in exchange of other valuable privileges. The dispositive
portion of the said CA decision reads:
WHEREFORE, the instant petition is DISMISSED. The Decision of the Labor Arbiter dated February 27,
1998 and the Decision and Resolution of the NLRC promulgated on October 29, 1999 and December 22,
1999, respectively, in NLRC-NCR Case Nos. 08-05715-97, 08-06115-97 and 08-05920-97, are AFFIRMED.
SO ORDERED.13
The CA denied the petitioners' motion for reconsideration on December 20, 2001.14
Dissatisfied, petitioners filed this Petition for Review raising the following issues:
-A -
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE PATENTLY ERRONEOUS RULING OF THE
LABOR ARBITER AND THE COMMISSION THAT THERE WAS NO DISMISSAL, MUCH LESS ILLEGAL
DISMISSAL, OF THE INDIVIDUAL PETITIONERS.
-B -
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AND CONCLUDING THAT PRIVATE
RESPONDENTS COMMITTED ACTS OF UNFAIR LABOR PRACTICE.
-C -
THE COURT OF APPEALS ERRED IN NOT FINDING AND CONCLUDING THAT PETITIONERS ARE ENTITLED TO
THEIR MONEY CLAIMS AND TO DAMAGES, AS WELL AS LITIGATION COSTS AND ATTORNEY'S FEES.15
The petition has no merit.
We have no reason to deviate from the well-entrenched rule that findings of fact of labor officials, who
are deemed to have acquired expertise in matters within their respective jurisdiction, are generally
accorded not only respect but even finality, and bind us when supported by substantial evidence.16 This
is particularly true when the findings of the Labor Arbiter, the NLRC and the CA are in absolute
agreement.17 In this case, the Labor Arbiter, the NLRC, and the CA uniformly agreed that the petitioners
were not constructively dismissed and that the transfer orders did not amount to an unfair labor
practice. But if only to disabuse the minds of the petitioners who have persistently pursued this case on
the mistaken belief that the labor tribunals and the appellate court committed grievous errors, this Court
will go over the issues raised in this petition.
Petitioners mainly contend that the transfer orders amount to a constructive dismissal. They maintain
that the letter of the Bureau of Animal Industry is not credible because it is not authenticated; it is only a
ploy, solicited by respondents to give them an excuse to effect a massive transfer of employees. They
point out that the Caloocan City office is still engaged in production activities until now and respondents
even hired new employees to replace them.
We do not agree.
57
We refuse to accept the petitioners' wild and reckless imputation that the Bureau of Animal Industry
conspired with the respondents just to effect the transfer of the petitioners. There is not an iota of proof
to support this outlandish claim. Absent any evidence, the allegation is not only highly irresponsible but
is grossly unfair to the government agency concerned. Even as this Court has given litigants and counsel a
relatively wide latitude to present arguments in support of their cause, we will not tolerate outright
misrepresentation or baseless accusation. Let this be fair warning to counsel for the petitioners.
Furthermore, Tryco's decision to transfer its production activities to San Rafael, Bulacan, regardless of
whether it was made pursuant to the letter of the Bureau of Animal Industry, was within the scope of its
inherent right to control and manage its enterprise effectively. While the law is solicitous of the welfare
of employees, it must also protect the right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own business affairs to achieve its purpose
cannot be denied.18
This prerogative extends to the management's right to regulate, according to its own discretion and
judgment, all aspects of employment, including the freedom to transfer and reassign employees
according to the requirements of its business.19 Management's prerogative of transferring and
reassigning employees from one area of operation to another in order to meet the requirements of the
business is, therefore, generally not constitutive of constructive dismissal.20 Thus, the consequent
transfer of Tryco's personnel, assigned to the Production Department was well within the scope of its
management prerogative.
When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee, and it does not
involve a demotion in rank or diminution of salaries, benefits, and other privileges, the employee may
not complain that it amounts to a constructive dismissal.21 However, the employer has the burden of
proving that the transfer of an employee is for valid and legitimate grounds. The employer must show
that the transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a
demotion in rank or a diminution of his salaries, privileges and other benefits.22
Indisputably, in the instant case, the transfer orders do not entail a demotion in rank or diminution of
salaries, benefits and other privileges of the petitioners. Petitioners, therefore, anchor their objection
solely on the ground that it would cause them great inconvenience since they are all residents of Metro
Manila and they would incur additional expenses to travel daily from Manila to Bulacan.
The Court has previously declared that mere incidental inconvenience is not sufficient to warrant a claim
of constructive dismissal.23 Objection to a transfer that is grounded solely upon the personal
inconvenience or hardship that will be caused to the employee by reason of the transfer is not a valid
reason to disobey an order of transfer.24
Incidentally, petitioners cite Escobin v. NLRC25 where the Court held that the transfer of the employees
therein was unreasonable. However, the distance of the workplace to which the employees were being
transferred can hardly compare to that of the present case. In that case, the employees were being
transferred from Basilan to Manila; hence, the Court noted that the transfer would have entailed the
separation of the employees from their families who were residing in Basilan and accrual of additional
expenses for living accommodations in Manila. In contrast, the distance from Caloocan to San Rafael,
Bulacan is not considerably great so as to compel petitioners to seek living accommodations in the area
and prevent them from commuting to Metro Manila daily to be with their families.
Petitioners, however, went further and argued that the transfer orders amounted to unfair labor practice
because it would paralyze and render the union ineffective.
To begin with, we cannot see how the mere transfer of its members can paralyze the union. The union
was not deprived of the membership of the petitioners whose work assignments were only transferred
to another location.
More importantly, there was no showing or any indication that the transfer orders were motivated by an
intention to interfere with the petitioners' right to organize. Unfair labor practice refers to acts that
violate the workers' right to organize. With the exception of Article 248(f) of the Labor Code of the
Philippines, the prohibited acts are related to the workers' right to self-organization and to the
observance of a CBA. Without that element, the acts, no matter how unfair, are not unfair labor
practices.26
Finally, we do not agree with the petitioners' assertion that the MOA is not enforceable as it is contrary
to law. The MOA is enforceable and binding against the petitioners. Where it is shown that the person
making the waiver did so voluntarily, with full understanding of what he was doing, and the
consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid
and binding undertaking.27
D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the employees will
derive from the adoption of a compressed workweek scheme, thus:
The compressed workweek scheme was originally conceived for establishments wishing to save on
energy costs, promote greater work efficiency and lower the rate of employee absenteeism, among
others. Workers favor the scheme considering that it would mean savings on the increasing cost of
transportation fares for at least one (1) day a week; savings on meal and snack expenses; longer
weekends, or an additional 52 off-days a year, that can be devoted to rest, leisure, family responsibilities,
studies and other personal matters, and that it will spare them for at least another day in a week from
certain inconveniences that are the normal incidents of employment, such as commuting to and from
the workplace, travel time spent, exposure to dust and motor vehicle fumes, dressing up for work, etc.
Thus, under this scheme, the generally observed workweek of six (6) days is shortened to five (5) days
but prolonging the working hours from Monday to Friday without the employer being obliged for pay
overtime premium compensation for work performed in excess of eight (8) hours on weekdays, in
exchange for the benefits abovecited that will accrue to the employees.
Moreover, the adoption of a compressed workweek scheme in the company will help temper any
inconvenience that will be caused the petitioners by their transfer to a farther workplace.
Notably, the MOA complied with the following conditions set by the DOLE, under D.O. No. 21, to protect
the interest of the employees in the implementation of a compressed workweek scheme:
58

1. The employees voluntarily agree to work more than eight (8) hours a day the total in a week of which
shall not exceed their normal weekly hours of work prior to adoption of the compressed workweek
arrangement;

2. There will not be any diminution whatsoever in the weekly or monthly take-home pay and fringe
benefits of the employees;

3. If an employee is permitted or required to work in excess of his normal weekly hours of work prior to
the adoption of the compressed workweek scheme, all such excess hours shall be considered overtime
work and shall be compensated in accordance with the provisions of the Labor Code or applicable
Collective Bargaining Agreement (CBA);

4. Appropriate waivers with respect to overtime premium pay for work performed in excess of eight (8)
hours a day may be devised by the parties to the agreement.

5. The effectivity and implementation of the new working time arrangement shall be by agreement of
the parties.

PESALA v. NLRC,28 cited by the petitioners, is not applicable to the present case. In that case, an
employment contract provided that the workday consists of 12 hours and the employee will be paid a
fixed monthly salary rate that was above the legal minimum wage. However, unlike the present MOA
which specifically states that the employee waives his right to claim overtime pay for work rendered
beyond eight hours, the employment contract in that case was silent on whether overtime pay was
included in the payment of the fixed monthly salary. This necessitated the interpretation by the Court as
to whether the fixed monthly rate provided under the employment contract included overtime pay. The
Court noted that if the employee is paid only the minimum wage but with overtime pay, the amount is
still greater than the fixed monthly rate as provided in the employment contract. It, therefore, held that
overtime pay was not included in the agreed fixed monthly rate.

Considering that the MOA clearly states that the employee waives the payment of overtime pay in
exchange of a five-day workweek, there is no room for interpretation and its terms should be
implemented as they are written.

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated July 24, 2001 and Resolution
dated December 20, 2001 are AFFIRMED.

SO ORDERED.
59
G.R. No. 157680 October 8, 2008
EQUIPMENT TECHNICAL SERVICES or JOSEPH JAMES DEQUITO, petitioners,
vs.
COURT OF APPEALS, ALEX ALBINO, REY ALBINO, JULIUS ABANES, MIGUEL ALINAB, CHRISTOPHER BIOL,
NELSON CATONG, RENATO DULOT, FLORO PACUNDO, MARCELITO GAMAS, REYNALDO LIMA, SAMMY
MESAGAL, ERNESTO PADILLA, and CONRADO SULIBAGA, respondents.
DECISION
VELASCO, JR., J.:
This petition for review under Rule 45 assails and seeks the reversal of the Amended Decision and
Resolution dated March 3, 2003 and March 24, 2003, respectively, of the Court of Appeals (CA) in CA-
G.R. SP No. 67568. The assailed amended decision and resolution effectively set aside and reversed the
consolidated resolutions dated July 30, 2001 and September 24, 2001 rendered by the National Labor
Relations Commission (NLRC) and reinstated the July 24, 2000 Decision of Labor Arbiter Ermita T.
Abrasaldo-Cuyuca in NLRC NCR Case Nos. 00-01-00571-99, 00-02-01429-99, and 00-02-01615-99.
Petitioner Equipment Technical Services (ETS) is primarily engaged in the business of sub-contracting
plumbing works of on-going building construction. Among its clients was Uniwide Sales, Inc. (Uniwide).
Petitioner Joseph James Dequito was, during the period material, occupying the position of manager of
ETS,1 albeit the CA referred to him as ETS’ president. On various occasions involving different projects,
ETS hired the services of private respondents as pipe fitters, plumbers, or threaders.
In December 1998, ETS experienced financial difficulties when Uniwide, its client at the time, failed to
pay for the plumbing work being done at its Coastal Mall. As a result, ETS was only able to pay its
employees 13th month pay equivalent to two weeks’ salary.
Unhappy over what they thought was ETS’ failure to release the balance of their 13th month pay, private
respondents brought their case before the Arbitration Branch of the NLRC, docketed as NLRC NCR Case
No. 00-01-00571-99 and entitled as Alex Albino, Renato Dulot, Miguel Alinab, Marcelito Gamas, Julius
Abanes, Christopher Biol, Sammy Mesagal, Conrado Sulibaga, Floro Pacundo v. Equipment Technical
Services or Joseph James Dequito.
Later, two other cases were filed against ETS for illegal dismissal and payment of money claims when the
complainants thereat were refused work in another ETS project, i.e., Richville project, allegedly because
they refused to sign individual employment contracts with ETS. These two other cases were Nelson
Catong, Roger Lamayon, Christopher Lamayon v. Equipment Technical Services or Joseph James Dequito,
docketed as NLRC NCR Case No. 00-02-01429-99; and Rey Albino, Ernesto Padilla, Reynaldo Lima v.
Equipment Technical Services or Joseph James Dequito, docketed as NLRC NCR Case No. 00-02-01615-99.
The three cases were consolidated before the labor arbiter. Following failed conciliation efforts, all
concerned, except Roger and Christopher Lamayon, submitted, as the labor arbiter directed, their
respective position papers.
Private respondents’ position2 is summed up as follows: (1) they are regular employees of ETS; (2) ETS
dismissed them without cause and without due process after they filed cases for money claims against
ETS in the arbitration branch of the NLRC; (3) ETS has not paid them their salaries, 13th month pay,
service incentive leave pay, overtime pay, and premium pay for holidays and rest days; and (4) they are
entitled to reinstatement to their former positions with paid backwages in addition to their money
claims and payment of attorney’s fees.
ETS’ position3 may be summed up as follows: (1) private respondents were its contractual/project
employees engaged for different projects of the company; (2) they were not illegally dismissed, having
been hired on a per project basis; (3) ETS was unable to fully release private respondents’ 13th month
pay because Uniwide failed to pay for its contracted plumbing project; (4) ETS was forced to abandon the
Uniwide project and undertake another project, the Richville project, because the chances of being paid
by Uniwide were dim; (5) ETS asked private respondents to sign employment contracts to formalize their
previous agreement but said private respondents refused; and (6) as a result, ETS was constrained to
deny employment to private respondents as it considered the execution of employment contracts part of
management prerogative before employment commences.
On July 24, 2000, Labor Arbiter Abrasaldo-Cuyuca issued a Decision, holding that private respondents
were ETS’ regular, not merely project, employees. Accordingly, ETS was adjudged liable for illegal
dismissal and directed to pay private respondents their money claims plus 10% of the total award as
attorney’s fees. The fallo of the subject decision reads as follows:
WHEREFORE, judgment is hereby rendered declaring the dismissal of the complainants illegal.
Further, respondents are further ordered to pay the complainants their backwages, proportionate 13th
month pay, [holiday] and service incentive leave pay.
Ten percent of the total award as attorney’s fees.
Other claims are dismissed for lack of merit.
The complaints of Roger and Christopher all surnamed Lamayon are dismissed without prejudice.
The computation prepared by the Computation Unit, NCR, this Commission is attached [sic] forming part
of this decision.
SO ORDERED.4
ETS appealed from the above labor arbiter’s decision. On July 30, 2001, the NLRC rendered a resolution
which, while reversing the labor arbiter’s holding with respect to the nature of private respondents’
employment and the illegality of their dismissal, nevertheless upheld the validity of the monetary award
extended by the labor arbiter, part of which included the award of backwages. The pertinent portion of
the modificatory resolution reads as follows:
60
ACCORDINGLY, premises considered, the decision appealed from is hereby MODIFIED in that the findings
of regularity of employment and illegal dismissal are hereby VACATED. However, respondents are
ordered to give complainants priority in hiring for present and future projects. All other dispositions are
hereby AFFIRMED in toto.
SO ORDERED.
Following the denial on September 24, 2001 of ETS’ motion for reconsideration, ETS elevated its case to
the CA via a petition for certiorari under Rule 65, the recourse docketed as CA-G.R. SP No. 67568. As its
principal contention, ETS ascribed on the NLRC the commission of grave abuse of discretion in affirming
the monetary award in favor of private respondents, despite its finding that there was no illegal dismissal
in this case.
On January 23, 2002, the CA rendered judgment disposing as follows:
WHEREFORE, premises considered, the assailed resolutions of the National Labor Relations Commission
dated July 30, 2001 and September 24, 2001 are hereby ANNULLED and SET ASIDE and a new one
rendered ORDERING petitioner Equipment Technical Services to pay private respondents their holiday
pay and service incentive leave pay for the year 1998 and the balance of their 13th month pay for the
year 1999.
The case is hereby REMANDED to Labor Arbiter Ermita T. Abrasaldo-Cuyuca for the computation of the
same.
The complaint against petitioner Joseph James Dequito is hereby DISMISSED, for lack of merit.
No pronouncement as to costs.
SO ORDERED.
Upon motion of private respondents for reconsideration, the CA issued an Amended Decision5 dated
March 3, 2003 vacating its earlier January 23, 2002 decision. The CA, in main support of its present
disposition, stated that the NLRC’s determination that private respondents are "project workers" is
"utterly unsupported by the evidence on record and is patently erroneous" and, therefore, is tainted
with grave abuse of discretion.6 The fallo of the Amended Decision reads:
WHEREFORE, premises considered, the present motion for reconsideration is hereby GRANTED. The
petition is hereby DENIED DUE COURSE and accordingly DISMISSED, for lack of merit. Our Decision dated
January 23, 2002 is hereby RECONSIDERED and SET ASIDE and a new one is hereby entered REVERSING
and SETTING ASIDE the assailed Resolutions dated July 30, 2001 and September 24, 2001 of public
respondent NLRC in NLRC NCR case No. 00-01-00571-99 (NLRC CA No. 027203-2001), NLRC NCR Case No.
00-02-01429-99 and NLRC NCR Case No. 00-02-01615-99. The Decision dated July 24, 2000 rendered by
Labor Arbiter Ermita T. Abrasaldo-Cuyuca is hereby REINSTATED and AFFIRMED in all respects, including
the computation of the monetary awards in favor of private respondents forming part of and attached to
the same.
With costs against the petitioners.
SO ORDERED.
Hence, this petition on the submission that, contrary to the findings of the CA, but conformably with the
determination of the NLRC, private respondents are seasonal or project workers; the duration of their
employment is not permanent but coterminus with the project to which they are assigned and from
whose payroll they are paid. As project employees, private respondents cannot, according to petitioners,
validly maintain an action for illegal dismissal with prayer for reinstatement and payment of backwages,
both reliefs being usually accorded following a finding of illegal dismissal.
The petition is without merit. As we see it, as did the CA and the NLRC, the primary question to be
resolved and to which all others must yield is whether or not private respondents are project employees.
The CA, siding with the labor arbiter, as indicated earlier, answered the poser in the affirmative, while
the NLRC resolved it in the negative.
As the Court has consistently held, the service of project employees are coterminus with the project and
may be terminated upon the end or completion of that project or project phase for which they were
hired. Regular employees, in contrast, enjoy security of tenure and are entitled to hold on to their work
or position until their services are terminated by any of the modes recognized under the Labor Code.7
The principal test for determining whether an employee is properly characterized as "project employee,"
as distinguished from "regular employee," is whether or not "the project employee" was assigned to
carry out "a specific project or undertaking," the duration and scope of which were specified at the time
the employees were engaged for that project.8 And as Article 280 of the Labor Code, defining a regular
employee vis-à-vis a project employee, would have it:
Art. 280. Regular and casual employment. – The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed
for a specific project or undertaking the completion or termination of which has been determined at the
time of the engagement of the employee x x x.
It bears to stress at the outset that ETS admits hiring or employing private respondents to perform
plumbing works for various projects. Given this postulate, regular employment may reasonably be
presumed and it behooves ETS to prove otherwise, that is, that the employment in question was
contractual in nature ending upon the expiration of the term fixed in the contract or for a specific project
or undertaking. But the categorical finding of the CA, confirmatory for the most part of that of the labor
arbiter, is that not a single written contract of employment fixing the terms of employment for the
duration of the Uniwide project, or any other project, was submitted by ETS despite the latter’s
allegations that private respondents were merely contractual employees. Records of payroll and other
pertinent documents, such as job contracts secured by ETS showing that private respondents were hired
for specific projects, were also not submitted by ETS.9
61
Moreover, if private respondents were indeed employed as project employees, petitioners should have
had submitted a report of termination every time their employment was terminated owing to the
completion of each plumbing project. As correctly held by the CA in its Amended Decision, citing Tomas
Lao Construction v. NLRC,10 ETS’ failure to report the employment termination and file the necessary
papers after every project completion tends to support the claim of private respondents about their not
being project employees.11 Under Policy Instruction No. 20, Series of 1977,12 the report must be made
to the nearest public office employment.13 The decision in Violeta v. NLRC is also apropos, particularly
when it held:
[The employer] should have filed as many reports of termination as there were construction projects
actually finished if petitioners [employees] were indeed project employees, considering that petitioners
were hired and again [hired] for various projects or phases of work therein. Its failure to submit reports
of termination cannot but sufficiently convince us further that petitioners are truly regular employees.
Just as important, the fact that petitioners had rendered more than one year of service at the time of
their dismissal overturns private respondent’s allegations that petitioners were hired for a specific or
fixed undertaking for a limited period of time.14
The Court can allow that, in the instant case, private respondents may have initially been hired for
specific projects or undertaking of petitioner ETS and, hence, may be classified as project employees.
Their repeated rehiring to perform tasks necessary to the usual trade or business of ETS changed the
legal situation altogether, for in the later instance, their continuous rehiring took them out from the
scope of workers coterminus with specific projects and had made them regular employees. We said as
much in Phesco, Inc. v. NLRC that "where the employment of project employees is extended long after
the supposed project had been finished, the employees are removed from the scope of project
employees and they shall be considered regular employees."15
Parenthetically, petitioners’ assertion that there can be no illegal dismissal of project employees
inasmuch as they are not entitled to security of tenure is inaccurate. The constitutionally-protected right
of labor to security of tenure covers both regular and project workers.16 Their termination must be for
lawful cause and must be done in a way which affords them proper notice and hearing.17
In termination disputes, the burden of proving that an employee had been dismissed for a lawful cause
or that the exacting procedural requirements under the Labor Code had been complied with lies with the
employer.18 Where there is no showing of a clear, valid, and legal cause for termination of employment,
the law considers the case a matter of illegal dismissal.19
Based on the foregoing criteria, the factual findings of the labor arbiter on the regular nature of private
respondents’ employment, juxtaposed with ETS’ failure to support its "project-workers theory," impel us
to dismiss the instant petition. This is as it should be for, to paraphrase Asuncion v. NLRC, if doubt exists
between the evidence of the employers and the employees, the scales of justice must be tilted in favor
of the latter––the employers must adequately show rationally adequate evidence that their case is
preponderantly superior.20
As did the CA, the Court holds that private respondents are regular employees whose services were
terminated without lawful cause and effected without the requisite notice and hearing.
In view of the illegality of the dismissal, the fallo of the Decision of Labor Arbiter Abrasaldo-Cuyuca, as
reinstated by the CA in its assailed Amended Decision, has to be modified in the sense that private
respondents are entitled to reinstatement to their previous positions as pipe fitters or threaders, as the
case may be, without loss of rank and seniority rights and with full backwages.
At this juncture, the Court wishes to state that it is taking judicial notice of the fact that no corporation is
registered with the Securities and Exchange Commission under the name "Equipment Technical
Services." It is thus but fair that both petitioners’ liability under this Decision be joint and several.
WHEREFORE, the Amended Decision dated March 3, 2003 of the CA in CA-G.R. SP No. 67568, reinstating
the July 24, 2000 Decision of Labor Arbiter Abrasaldo-Cuyuca, is AFFIRMED with the MODIFICATION that
petitioners are jointly and severally ordered to reinstate private respondents to their former positions,
without loss of rank and seniority rights, with backwages from the date of dismissal until reinstated. As
modified, the fallo of the labor arbiter’s Decision shall read:
WHEREFORE, judgment is hereby rendered declaring the dismissal of private respondents illegal.
Petitioners ETS and Joseph James Dequito are ordered jointly and severally to reinstate private
respondents ALEX ALBINO, REY ALBINO, JULIUS ABANES, MIGUEL ALINAB, CHRISTOPHER BIOL, NELSON
CATONG, RENATO DULOT, FLORO PACUNDO, MARCELITO GAMAS, REYNALDO LIMA, SAMMY MESAGAL,
ERNESTO PADILLA, and CONRADO SULIBAGA to their respective positions without loss of rank and
seniority rights with full backwages from the date of dismissal up to the date of actual reinstatement.
Petitioners are likewise jointly and severally liable to private respondents for proportionate 13th month
pay, holiday pay, and service incentive leave pay.
Ten percent of the total award shall be paid to the counsel of private respondents as attorney’s fees.
Other claims are dismissed for lack of merit.
The complaints of Roger and Christopher, both surnamed Lamayon, are dismissed without prejudice.
Costs against petitioners.
SO ORDERED.
62
G.R. No. 195466 July 2, 2014
ARIEL L. DAVID, doing business under the name and style "YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010 decision2
and the January 31, 2011 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116003. The CA
decision annulled and set aside the May 26, 2010 decision4 of the National Labor Relations Commission
(NLRC)5 which, in turn, affirmed the April 30, 2009 Decision6 of the Labor Arbiter (LA). The LA's decision
dismissed respondent John G. Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing
business under the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay and
13th month pay. He also claimed payment for moral and exemplary damages and attorney’s fees.
Macasio also claimed payment for service incentive leave (SIL).8
Macasio alleged9 before the LA that he had been working as a butcher for David since January 6, 1995.
Macasio claimed that David exercised effective control and supervision over his work, pointing out that
David: (1) set the work day, reporting time and hogs to be chopped, as well as the manner by which he
was to perform his work; (2) daily paid his salary of ₱700.00, which was increased from ₱600.00 in 2007,
₱500.00 in 2006 and ₱400.00 in 2005; and (3) approved and disapproved his leaves. Macasio added that
David owned the hogs delivered for chopping, as well as the work tools and implements; the latter also
rented the workplace. Macasio further claimed that David employs about twenty-five (25) butchers and
delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has ten
employees. He alleged that he hired Macasio as a butcher or chopper on "pakyaw" or task basis who is,
therefore, not entitled to overtime pay, holiday pay and 13th month pay pursuant to the provisions of
the Implementing Rules and Regulations (IRR) of the Labor Code. David pointed out that Macasio: (1)
usually starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or earlier, depending on
the volume of the delivered hogs; (2) received the fixed amount of ₱700.00 per engagement, regardless
of the actual number of hours that he spent chopping the delivered hogs; and (3) was not engaged to
report for work and, accordingly, did not receive any fee when no hogs were delivered.
Macasio disputed David’s allegations.11 He argued that, first, David did not start his business only in
2005. He pointed to the Certificate of Employment12 that David issued in his favor which placed the date
of his employment, albeit erroneously, in January 2000. Second, he reported for work every day which
the payroll or time record could have easily proved had David submitted them in evidence.
Refuting Macasio’s submissions,13 David claims that Macasio was not his employee as he hired the latter
on "pakyaw" or task basis. He also claimed that he issued the Certificate of Employment, upon Macasio’s
request, only for overseas employment purposes. He pointed to the "Pinagsamang Sinumpaang
Salaysay,"14 executed by Presbitero Solano and Christopher (Antonio Macasio’s co-butchers), to
corroborate his claims.
In the April 30, 2009 decision,15 the LA dismissed Macasio’s complaint for lack of merit. The LA gave
credence to David’s claim that he engaged Macasio on "pakyaw" or task basis. The LA noted the
following facts to support this finding: (1) Macasio received the fixed amount of ₱700.00 for every work
done, regardless of the number of hours that he spent in completing the task and of the volume or
number of hogs that he had to chop per engagement; (2) Macasio usually worked for only four hours,
beginning from 10:00 p.m. up to 2:00 a.m. of the following day; and (3) the ₱700.00 fixed wage far
exceeds the then prevailing daily minimum wage of ₱382.00. The LA added that the nature of David’s
business as hog dealer supports this "pakyaw" or task basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to overtime,
holiday, SIL and 13th month pay.
The NLRC’s Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did not
require Macasio to observe an eight hour work schedule to earn the fixed ₱700.00 wage; and that
Macasio had been performing a non-time work, pointing out that Macasio was paid a fixed amount for
the completion of the assigned task, irrespective of the time consumed in its performance. Since Macasio
was paid by result and not in terms of the time that he spent in the workplace, Macasio is not covered by
the Labor Standards laws on overtime, SIL and holiday pay, and 13th month pay under the Rules and
Regulations Implementing the 13th month pay law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010
resolution,20 prompting Macasio to elevate his case to the CA via a petition for certiorari.21
The CA’s Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasio’s certiorari petition and reversed the
NLRC’s ruling for having been rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it nevertheless
found Macasio entitled to his monetary claims following the doctrine laid down in Serrano v. Severino
Santos Transit.23 The CA explained that as a task basis employee, Macasio is excluded from the coverage
of holiday, SIL and 13th month pay only if he is likewise a "field personnel." As defined by the Labor
Code, a "field personnel" is one who performs the work away from the office or place of work and whose
regular work hours cannot be determined with reasonable certainty. In Macasio’s case, the elements
that characterize a "field personnel" are evidently lacking as he had been working as a butcher at David’s
63
"Yiels Hog Dealer" business in Sta. Mesa, Manila under David’s supervision and control, and for a fixed
working schedule that starts at 10:00 p.m.
Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th month pay for three years, with
10% attorney’s fees on the total monetary award. The CA, however, denied Macasio’s claim for moral
and exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration24 in the CA’s January
31, 2011 resolution.25
The Petition
In this petition,26 David maintains that Macasio’s engagement was on a "pakyaw" or task basis. Hence,
the latter is excluded from the coverage of holiday, SIL and 13th month pay. David reiterates his
submissions before the lower tribunals27 and adds that he never had any control over the manner by
which Macasio performed his work and he simply looked on to the "end-result." He also contends that
he never compelled Macasio to report for work and that under their arrangement, Macasio was at
liberty to choose whether to report for work or not as other butchers could carry out his tasks. He points
out that Solano and Antonio had, in fact, attested to their (David and Macasio’s) established "pakyawan"
arrangement that rendered a written contract unnecessary. In as much as Macasio is a task basis
employee – who is paid the fixed amount of ₱700.00 per engagement regardless of the time consumed
in the performance – David argues that Macasio is not entitled to the benefits he claims. Also, he posits
that because he engaged Macasio on "pakyaw" or task basis then no employer-employee relationship
exists between them.
Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality especially
when, as in this case, they are supported by substantial evidence. Hence, David posits that the CA erred
in reversing the labor tribunals’ findings and granting the prayed monetary claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel" as David would have this
Court believe.28 He reiterates his arguments before the lower tribunals and adds that, contrary to
David’s position, the ₱700.00 fee that he was paid for each day that he reported for work does not
indicate a "pakyaw" or task basis employment as this amount was paid daily, regardless of the number or
pieces of hogs that he had to chop. Rather, it indicates a daily-wage method of payment and affirms his
regular employment status. He points out that David did not allege or present any evidence as regards
the quota or number of hogs that he had to chop as basis for the "pakyaw" or task basis payment;
neither did David present the time record or payroll to prove that he worked for less than eight hours
each day. Moreover, David did not present any contract to prove that his employment was on task basis.
As David failed to prove the alleged task basis or "pakyawan" agreement, Macasio concludes that he was
David’s employee. Procedurally, Macasio points out that David’s submissions in the present petition raise
purely factual issues that are not proper for a petition for review on certiorari. These issues – whether he
(Macasio) was paid by result or on "pakyaw" basis; whether he was a "field personnel"; whether an
employer-employee relationship existed between him and David; and whether David exercised control
and supervision over his work – are all factual in nature and are, therefore, proscribed in a Rule 45
petition. He argues that the CA’s factual findings bind this Court, absent a showing that such findings are
not supported by the evidence or the CA’s judgment was based on a misapprehension of facts. He adds
that the issue of whether an employer-employee relationship existed between him and David had
already been settled by the LA29 and the NLRC30 (as well as by the CA per Macasio’s manifestation
before this Court dated November 15, 2012),31 in his favor, in the separate illegal case that he filed
against David.
The Issue
The issue revolves around the proper application and interpretation of the labor law provisions on
holiday, SIL and 13th month pay to a worker engaged on "pakyaw" or task basis. In the context of the
Rule 65 petition before the CA, the issue is whether the CA correctly found the NLRC in grave abuse of
discretion in ruling that Macasio is entitled to these labor standards benefits.
The Court’s Ruling
We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CA’s decision rendered under a Rule 65 proceeding,
this Court’s power of review is limited to resolving matters pertaining to any perceived legal errors that
the CA may have committed in issuing the assailed decision. This is in contrast with the review for
jurisdictional errors, which we undertake in an original certiorari action. In reviewing the legal
correctness of the CA decision, we examine the CA decision based on how it determined the presence or
absence of grave abuse of discretion in the NLRC decision before it and not on the basis of whether the
NLRC decision on the merits of the case was correct.32 In other words, we have to be keenly aware that
the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision challenged before it.33
Moreover, the Court’s power in a Rule 45 petition limits us to a review of questions of law raised against
the assailed CA decision.34
In this petition, David essentially asks the question – whether Macasio is entitled to holiday, SIL and 13th
month pay. This one is a question of law. The determination of this question of law however is
intertwined with the largely factual issue of whether Macasio falls within the rule on entitlement to
these claims or within the exception. In either case, the resolution of this factual issue presupposes
another factual matter, that is, the presence of an employer-employee relationship between David and
Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he engaged the latter
on "pakyaw" or task basis. Very noticeably, David confuses engagement on "pakyaw" or task basis with
the lack of employment relationship. Impliedly, David asserts that their "pakyawan" or task basis
arrangement negates the existence of employment relationship.
64
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis does not
characterize the relationship that may exist between the parties, i.e., whether one of employment or
independent contractorship. Article 97(6) of the Labor Code defines wages as "xxx 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[.]"35 In relation to Article 97(6),
Article 10136 of the Labor Code speaks of workers paid by results or those whose pay is calculated in
terms of the quantity or quality of their work output which includes "pakyaw" work and other non-time
work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis
negates employer-employee relationship, David would want the Court to engage on a factual appellate
review of the entire case to determine the presence or existence of that relationship. This approach
however is not authorized under a Rule 45 petition for review of the CA decision rendered under a Rule
65 proceeding.
First, the LA and the NLRC denied Macasio’s claim not because of the absence of an employer-employee
but because of its finding that since Macasio is paid on pakyaw or task basis, then he is not entitled to
SIL, holiday and 13th month pay. Second, we consider it crucial, that in the separate illegal dismissal case
Macasio filed with the LA, the LA, the NLRC and the CA uniformly found the existence of an employer-
employee relationship.37
In other words, aside from being factual in nature, the existence of an employer-employee relationship is
in fact a non-issue in this case. To reiterate, in deciding a Rule 45 petition for review of a labor decision
rendered by the CA under 65, the narrow scope of inquiry is whether the CA correctly determined the
presence or absence of grave abuse of discretion on the part of the NLRC. In concrete question form,
"did the NLRC gravely abuse its discretion in denying Macasio’s claims simply because he is paid on a
non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employer-employee relationship
exists baseless. Employing the control test,38 we find that such a relationship exist in the present case.
Even a factual review shows that Macasio is David’s employee
To determine the existence of an employer-employee relationship, four elements generally need to be
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 employee’s conduct. These elements or
indicators comprise the so-called "four-fold" test of employment relationship. Macasio’s relationship
with David satisfies this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection and engagement
of the employee." David categorically confirmed this fact when, in his "Sinumpaang Salaysay," he stated
that "nag apply po siya sa akin at kinuha ko siya na chopper[.]"39 Also, Solano and Antonio stated in their
"Pinagsamang Sinumpaang Salaysay"40 that "[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel
David bilang butcher" and "kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama
namin siya sa aming trabaho."
Second, David paid Macasio’s wages.Both David and Macasio categorically stated in their respective
pleadings before the lower tribunals and even before this Court that the former had been paying the
latter ₱700.00 each day after the latter had finished the day’s task. Solano and Antonio also confirmed
this fact of wage payment in their "Pinagsamang Sinumpaang Salaysay."41 This satisfies the element of
"payment of wages."
Third, David had been setting the day and time when Macasio should report for work. This power to
determine the work schedule obviously implies power of control. By having the power to control
Macasio’s work schedule, David could regulate Macasio’s work and could even refuse to give him any
assignment, thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise Macasio’s work as to the means and
methods of performing it. In addition to setting the day and time when Macasio should report for work,
the established facts show that David rents the place where Macasio had been performing his tasks.
Moreover, Macasio would leave the workplace only after he had finished chopping all of the hog meats
given to him for the day’s task. Also, David would still engage Macasio’s services and have him report for
work even during the days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally be expected to
observe certain rules and requirements and David would necessarily exercise some degree of control as
the chopping of the hog meats would be subject to his specifications. Also, since Macasio performed his
tasks at David’s workplace, David could easily exercise control and supervision over the former.
Accordingly, whether or not David actually exercised this right or power to control is beside the point as
the law simply requires the existence of this power to control 4243 or, as in this case, the existence of
the right and opportunity to control and supervise Macasio.44
In sum, the totality of the surrounding circumstances of the present case sufficiently points to an
employer-employee relationship existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals – the LA, the NLRC and the CA – found that Macasio was
engaged or paid on "pakyaw" or task basis. This factual finding binds the Court under the rule that
factual findings of labor tribunals when supported by the established facts and in accord with the laws,
especially when affirmed by the CA, is binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour wage
payment, is the non-consideration of the time spent in working. In a task-basis work, the emphasis is on
the task itself, in the sense that payment is reckoned in terms of completion of the work, not in terms of
the number of time spent in the completion of work.45 Once the work or task is completed, the worker
receives a fixed amount as wage, without regard to the standard measurements of time generally used
in pay computation.
65
In Macasio’s case, the established facts show that he would usually start his work at 10:00 p.m.
Thereafter, regardless of the total hours that he spent at the workplace or of the total number of the
hogs assigned to him for chopping, Macasio would receive the fixed amount of ₱700.00 once he had
completed his task. Clearly, these circumstances show a "pakyaw" or task basis engagement that all
three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by applying the
"four-fold" test; engagement on "pakyaw" or task basis does not determine the parties’ relationship as it
is simply a method of pay computation. Accordingly, Macasio is David’s employee, albeit engaged on
"pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether Macasio
is entitled to holiday, 13th month, and SIL pay.
On the issue of Macasio’s entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasio’s claims pursuant to Article 94 of the Labor Code in relation to Section 1, Rule
IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential Decree (PD) No.
851. The NLRC, on the other hand, relied on Article 82 of the Labor Code and the Rules and Regulations
Implementing PD No. 851. Uniformly, these provisions exempt workers paid on "pakyaw" or task basis
from the coverage of holiday, SIL and 13th month pay.
In reversing the labor tribunals’ rulings, the CA similarly relied on these provisions, as well as on Section
1, Rule V of the IRR of the Labor Code and the Court’s ruling in Serrano v. Severino Santos Transit.46
These labor law provisions, when read together with the Serrano ruling, exempt those engaged on
"pakyaw" or task basis only if they qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the correct interpretation
of these labor code provisions and the implementing rules; although, to conclude that the worker is
exempted or covered depends on the facts and in this sense, is a question of fact: first, whether Macasio
is a "field personnel"; and second, whether those engaged on "pakyaw" or task basis, but who are not
"field personnel," are exempted from the coverage of holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA decision rendered
under Rule 65 and framed in question form, the legal question is whether the CA correctly ruled that it
was grave abuse of discretion on the part of the NLRC to deny Macasio’s monetary claims simply because
he is paid on a non-time basis without determining whether he is a field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the Labor
Code - provisions governing working conditions and rest periods.
Art. 82. Coverage.— The provisions of [Title I] shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers who are paid by results as determined
by the Secretary of Labor in appropriate regulations.
xxxx
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away from
the principal place of business or branch office of the employer and whose actual hours of work in the
field cannot be determined with reasonable certainty. [emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code) and
SIL pay (under Article 95 of the Labor Code). Under Article 82,"field personnel" on one hand and
"workers who are paid by results" on the other hand, are not covered by the Title I provisions. The
wordings of Article82 of the Labor Code additionally categorize workers "paid by results" and "field
personnel" as separate and distinct types of employees who are exempted from the Title I provisions of
the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the IRR47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than (10) workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. – This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those who are
paid a fixed amount for performing work irrespective of the time consumed in the performance thereof.
[emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the IRR48 pertinently
provides:
Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year of service shall
be entitled to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those
enjoying vacation leave with pay of at least five days and those employed in establishments regularly
employing less than ten employees or in establishments exempted from granting this benefit by the
66
Secretary of Labor and Employment after considering the viability or financial condition of such
establishment. [emphases ours]
xxxx
Section 1. Coverage. – This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed
amount for performing work irrespective of the time consumed in the performance thereof. [emphasis
ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees. To be
excluded from their coverage, an employee must be one of those that these provisions expressly
exempt, strictly in accordance with the exemption. Under the IRR, exemption from the coverage of
holiday and SIL pay refer to "field personnel and other employees whose time and performance is
unsupervised by the employer including those who are engaged on task or contract basis[.]" Note that
unlike Article 82 of the Labor Code, the IRR on holiday and SIL pay do not exclude employees "engaged
on task basis" as a separate and distinct category from employees classified as "field personnel." Rather,
these employees are altogether merged into one classification of exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to mean that those
who are engaged on task basis, per se, are excluded from the SIL and holiday payment since this is what
the Labor Code provisions, in contrast with the IRR, strongly suggest. The arguable interpretation of this
rule may be conceded to be within the discretion granted to the LA and NLRC as the quasi-judicial bodies
with expertise on labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the phrase "those who
are engaged on task or contract basis" in the rule has already been interpreted to mean as follows:
[the phrase] should however, be related with "field personnel" applying the rule on ejusdem generis that
general and unlimited terms are restrained and limited by the particular terms that they follow xxx
Clearly, petitioner's teaching personnel cannot be deemed field personnel which refers "to non-
agricultural employees who regularly perform their duties away from the principal place of business or
branch office of the employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that private
respondents are not entitled to the service incentive leave benefit cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from
the coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including the
holiday and SIL pay) only if they qualify as "field personnel." The IRR therefore validly qualifies and limits
the general exclusion of "workers paid by results" found in Article 82 from the coverage of holiday and
SIL pay. This is the only reasonable interpretation since the determination of excluded workers who are
paid by results from the coverage of Title I is "determined by the Secretary of Labor in appropriate
regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v.
Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive
leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to
those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules,
Service Incentive Leave shall not apply to employees classified as "field personnel." The phrase "other
employees whose performance is unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be granted. Rather, it serves as an
amplification of the interpretation of the definition of field personnel under the Labor Code as those
"whose actual hours of work in the field cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract basis, purely
commission basis." Said phrase should be related with "field personnel," applying the rule on ejusdem
generis that general and unlimited terms are restrained and limited by the particular terms that they
follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of
granting Macasio’s petition.
In Serrano, the Court, applying the rule on ejusdem generis50 declared that "employees engaged on task
or contract basis xxx are not automatically exempted from the grant of service incentive leave, unless,
they fall under the classification of field personnel."51 The Court explained that the phrase "including
those who are engaged on task or contract basis, purely commission basis" found in Section 1(d), Rule V
of Book III of the IRR should not be understood as a separate classification of employees to which SIL
shall not be granted. Rather, as with its preceding phrase - "other employees whose performance is
unsupervised by the employer" - the phrase "including those who are engaged on task or contract basis"
serves to amplify the interpretation of the Labor Code definition of "field personnel" as those "whose
actual hours of work in the field cannot be determined with reasonable certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the Labor
Code provisions and the IRR as exempting an employee from the coverage of Title I of the Labor Code
based simply and solely on the mode of payment of an employee. The NLRC’s utter disregard of this
consistent jurisprudential ruling is a clear act of grave abuse of discretion.52 In other words, by
dismissing Macasio’s complaint without considering whether Macasio was a "field personnel" or not, the
NLRC proceeded based on a significantly incomplete consideration of the case. This action clearly smacks
of grave abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only taken
counsel from Serrano and earlier cases, they would have correctly reached a similar conclusion regarding
67

the payment of holiday pay since the rule exempting "field personnel" from the grant of holiday pay is law did not intend to qualify the exemption from its coverage with the requirement that the task worker
identically worded with the rule exempting "field personnel" from the grant of SIL pay. To be clear, the be a "field personnel" at the same time.
phrase "employees engaged on task or contract basis "found in the IRR on both SIL pay and holiday pay
should be read together with the exemption of "field personnel." WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as the
payment of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM the decision
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday and dated November 22, 2010 and the resolution dated January 31, 2011 of the Court of Appeals in CA-G.R.
SIL pay, the presence (or absence) of employer supervision as regards the worker’s time and SP No. 116003.
performance is the key: if the worker is simply engaged on pakyaw or task basis, then the general rule is
that he is entitled to a holiday pay and SIL pay unless exempted from the exceptions specifically provided SO ORDERED.
under Article 94 (holiday pay) and Article95 (SIL pay) of the Labor Code. However, if the worker engaged
on pakyaw or task basis also falls within the meaning of "field personnel" under the law, then he is not ARTURO D. BRION
entitled to these monetary benefits. Associate Justice

Macasio does not fall under the classification of "field personnel" WE CONCUR:

Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does not
fall under the definition of "field personnel." The CA’s finding in this regard is supported by the
established facts of this case: first, Macasio regularly performed his duties at David’s principal place of
business; second, his actual hours of work could be determined with reasonable certainty; and, third,
David supervised his time and performance of duties. Since Macasio cannot be considered a "field
personnel," then he is not exempted from the grant of holiday, SIL pay even as he was engaged on
"pakyaw" or task basis.

Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRC’s ruling
dismissing Macasio’s complaint for holiday and SIL pay for having been rendered with grave abuse of
discretion.

Entitlement to 13th month pay

With respect to the payment of 13th month pay however, we find that the CA legally erred in finding
that the NLRC gravely abused its discretion in denying this benefit to Macasio.1âwphi1

The governing law on 13th month pay is PD No. 851.53

As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee must
be one of those expressly enumerated to be exempted. Section 3 of the Rules and Regulations
Implementing P.D. No. 85154 enumerates the exemptions from the coverage of 13th month pay
benefits. Under Section 3(e), "employers of those who are paid on xxx task basis, and those who are paid
a fixed amount for performing a specific work, irrespective of the time consumed in the performance
thereof"55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and
Regulations Implementing PD No. 851 exempts employees "paid on task basis" without any reference to
"field personnel." This could only mean that insofar as payment of the 13th month pay is concerned, the
68
G.R. No. 198783 April 15, 2013
ROYAL PLANT WORKERS UNION, Petitioner,
vs.
COCA-COLA BOTTLERS PHILIPPINES, INC.-CEBU PLANT, Respondent.
DECISION
MENDOZA, J.:
Assailed in this petition is the May 24, 2011 Decision1 and the September 2, 2011 Resolution2 of the
Court of Appeals (CA) in CA-G.R. SP No. 05200, entitled Coca-Cola Bottlers Philippines, Inc.-Cebu Plant v.
Royal Plant Workers Union, which nullified and set aside the June 11, 2010 Decision3 of the Voluntary
Arbitration Panel (Arbitration Committee) in a case involving the removal of chairs in the bottling plant of
Coca-Cola Bottlers Philippines, Inc. (CCBPI).
The Factual and Procedural
Antecedents
The factual and procedural antecedents have been accurately recited in the May 24, 2011 CA decision as
follows:
Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation engaged in the
manufacture, sale and distribution of softdrink products. It has several bottling plants all over the
country, one of which is located in Cebu City. Under the employ of each bottling plant are bottling
operators. In the case of the plant in Cebu City, there are 20 bottling operators who work for its Bottling
Line 1 while there are 12-14 bottling operators who man its Bottling Line 2. All of them are male and they
are members of herein respondent Royal Plant Workers Union (ROPWU).
The bottling operators work in two shifts. The first shift is from 8 a.m. to 5 p.m. and the second shift is
from 5 p.m. up to the time production operations is finished. Thus, the second shift varies and may end
beyond eight (8) hours. However, the bottling operators are compensated with overtime pay if the shift
extends beyond eight (8) hours. For Bottling Line 1, 10 bottling operators work for each shift while 6 to 7
bottling operators work for each shift for Bottling Line 2.
Each shift has rotations of work time and break time. Prior to September 2008, the rotation is this: after
two and a half (2 ½) hours of work, the bottling operators are given a 30-minute break and this goes on
until the shift ends. In September 2008 and up to the present, the rotation has changed and bottling
operators are now given a 30-minute break after one and one half (1 ½) hours of work.
In 1974, the bottling operators of then Bottling Line 2 were provided with chairs upon their request. In
1988, the bottling operators of then Bottling Line 1 followed suit and asked to be provided also with
chairs. Their request was likewise granted. Sometime in September 2008, the chairs provided for the
operators were removed pursuant to a national directive of petitioner. This directive is in line with the "I
Operate, I Maintain, I Clean" program of petitioner for bottling operators, wherein every bottling
operator is given the responsibility to keep the machinery and equipment assigned to him clean and
safe. The program reinforces the task of bottling operators to constantly move about in the performance
of their duties and responsibilities.
With this task of moving constantly to check on the machinery and equipment assigned to him, a bottling
operator does not need a chair anymore, hence, petitioner’s directive to remove them. Furthermore,
CCBPI rationalized that the removal of the chairs is implemented so that the bottling operators will avoid
sleeping, thus, prevent injuries to their persons. As bottling operators are working with machines which
consist of moving parts, it is imperative that they should not fall asleep as to do so would expose them to
hazards and injuries. In addition, sleeping will hamper the efficient flow of operations as the bottling
operators would be unable to perform their duties competently.
The bottling operators took issue with the removal of the chairs. Through the representation of herein
respondent, they initiated the grievance machinery of the Collective Bargaining Agreement (CBA) in
November 2008. Even after exhausting the remedies contained in the grievance machinery, the parties
were still at a deadlock with petitioner still insisting on the removal of the chairs and respondent still
against such measure. As such, respondent sent a Notice to Arbitrate, dated 16 July 2009, to petitioner
stating its position to submit the issue on the removal of the chairs for arbitration. Nevertheless, before
submitting to arbitration the issue, both parties availed of the conciliation/mediation proceedings before
the National Conciliation and Mediation Board (NCMB) Regional Branch No. VII. They failed to arrive at
an amicable settlement.
Thus, the process of arbitration continued and the parties appointed the chairperson and members of
the Arbitration Committee as outlined in the CBA. Petitioner and respondent respectively appointed as
members to the Arbitration Committee Mr. Raul A. Kapuno, Jr. and Mr. Luis Ruiz while they both chose
Atty. Alice Morada as chairperson thereof. They then executed a Submission Agreement which was
accepted by the Arbitration Committee on 01 October 2009. As contained in the Submission Agreement,
the sole issue for arbitration is whether the removal of chairs of the operators assigned at the
production/manufacturing line while performing their duties and responsibilities is valid or not.
Both parties submitted their position papers and other subsequent pleadings in amplification of their
respective stands. Petitioner argued that the removal of the chairs is valid as it is a legitimate exercise of
management prerogative, it does not violate the Labor Code and it does not violate the CBA it contracted
with respondent. On the other hand, respondent espoused the contrary view. It contended that the
bottling operators have been performing their assigned duties satisfactorily with the presence of the
chairs; the removal of the chairs constitutes a violation of the Occupational Health and Safety Standards,
the policy of the State to assure the right of workers to just and humane conditions of work as stated in
Article 3 of the Labor Code and the Global Workplace Rights Policy.
Ruling of the Arbtration Committee
On June 11, 2010, the Arbitration Committee rendered a decision in favor of the Royal Plant Workers
Union (the Union) and against CCBPI, the dispositive portion of which reads, as follows:
69
Wherefore, the undersigned rules in favor of ROPWU declaring that the removal of the operators chairs
is not valid. CCBPI is hereby ordered to restore the same for the use of the operators as before their
removal in 2008.4
The Arbitration Committee ruled, among others, that the use of chairs by the operators had been a
company practice for 34 years in Bottling Line 2, from 1974 to 2008, and 20 years in Bottling Line 1, from
1988 to 2008; that the use of the chairs by the operators constituted a company practice favorable to the
Union; that it ripened into a benefit after it had been enjoyed by it; that any benefit being enjoyed by the
employees could not be reduced, diminished, discontinued, or eliminated by the employer in accordance
with Article 100 of the Labor Code, which prohibited the diminution or elimination by the employer of
the employees’ benefit; and that jurisprudence had not laid down any rule requiring a specific minimum
number of years before a benefit would constitute a voluntary company practice which could not be
unilaterally withdrawn by the employer.
The Arbitration Committee further stated that, although the removal of the chairs was done in good
faith, CCBPI failed to present evidence regarding instances of sleeping while on duty. There were no
specific details as to the number of incidents of sleeping on duty, who were involved, when these
incidents happened, and what actions were taken. There was no evidence either of any accident or injury
in the many years that the bottling operators used chairs. To the Arbitration Committee, it was puzzling
why it took 34 and 20 years for CCBPI to be so solicitous of the bottling operators’ safety that it removed
their chairs so that they would not fall asleep and injure themselves.
Finally, the Arbitration Committee was of the view that, contrary to CCBPI’s position, line efficiency was
the result of many factors and it could not be attributed solely to one such as the removal of the chairs.
Not contented with the Arbitration Committee’s decision, CCBPI filed a petition for review under Rule 43
before the CA.
Ruling of the CA
On May 24, 2011, the CA rendered a contrasting decision which nullified and set aside the decision of the
Arbitration Committee. The dispositive portion of the CA decision reads:
WHEREFORE, premises considered, the petition is hereby GRANTED and the Decision, dated 11 June
2010, of the Arbitration Committee in AC389-VII-09-10-2009D is NULLIFIED and SET ASIDE. A new one is
entered in its stead SUSTAINING the removal of the chairs of the bottling operators from the
manufacturing/production line.5
The CA held, among others, that the removal of the chairs from the manufacturing/production lines by
CCBPI is within the province of management prerogatives; that it was part of its inherent right to control
and manage its enterprise effectively; and that since it was the employer’s discretion to constantly
develop measures or means to optimize the efficiency of its employees and to keep its machineries and
equipment in the best of conditions, it was only appropriate that it should be given wide latitude in
exercising it.
The CA stated that CCBPI complied with the conditions of a valid exercise of a management prerogative
when it decided to remove the chairs used by the bottling operators in the manufacturing/production
lines. The removal of the chairs was solely motivated by the best intentions for both the Union and
CCBPI, in line with the "I Operate, I Maintain, I Clean" program for bottling operators, wherein every
bottling operator was given the responsibility to keep the machinery and equipment assigned to him
clean and safe. The program would reinforce the task of bottling operators to constantly move about in
the performance of their duties and responsibilities. Without the chairs, the bottling operators could
efficiently supervise these machineries’ operations and maintenance. It would also be beneficial for
them because the working time before the break in each rotation for each shift was substantially
reduced from two and a half hours (2 ½ ) to one and a half hours (1 ½) before the 30-minute break. This
scheme was clearly advantageous to the bottling operators as the number of resting periods was
increased. CCBPI had the best intentions in removing the chairs because some bottling operators had the
propensity to fall asleep while on the job and sleeping on the job ran the risk of injury exposure and
removing them reduced the risk.
The CA added that the decision of CCBPI to remove the chairs was not done for the purpose of defeating
or circumventing the rights of its employees under the special laws, the Collective Bargaining Agreement
(CBA) or the general principles of justice and fair play. It opined that the principles of justice and fair play
were not violated because, when the chairs were removed, there was a commensurate reduction of the
working time for each rotation in each shift. The provision of chairs for the bottling operators was never
part of the CBAs contracted between the Union and CCBPI. The chairs were not provided as a benefit
because such matter was dependent upon the exigencies of the work of the bottling operators. As such,
CCBPI could withdraw this provision if it was not necessary in the exigencies of the work, if it was not
contributing to the efficiency of the bottling operators or if it would expose them to some hazards.
Lastly, the CA explained that the provision of chairs to the bottling operators cannot be covered by
Article 100 of the Labor Code on elimination or diminution of benefits because the employee’s benefits
referred to therein mainly involved monetary considerations or privileges converted to their monetary
equivalent.
Disgruntled with the adverse CA decision, the Union has come to this Court praying for its reversal on the
following GROUNDS
I
THAT WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT A
PETITION FOR REVIEW UNDER RULE 43 OF THE RULES OF COURT IS THE PROPER REMEDY OF
CHALLENGING BEFORE SAID COURT THE DECISION OF THE VOLUNTARY ARBITRATOR OR PANEL OF
VOLUNTARY ARBITRATORS UNDER THE LABOR CODE.
II
THAT WITH DUE RESPECT, THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN NULLIFYING
AND SETTING ASIDE THE DECISION OF THE PANEL OF VOLUNTARY ARBITRATORS WHICH DECLARED AS
NOT VALID THE REMOVAL OF THE CHAIRS OF THE OPERATORS IN THE MANUFACTURING AND/OR
PRODUCTION LINE.
70
In advocacy of its positions, the Union argues that the proper remedy in challenging the decision of the
Arbitration Committee before the CA is a petition for certiorari under Rule 65. The petition for review
under Rule 43 resorted to by CCBPI should have been dismissed for being an improper remedy. The
Union points out that the parties agreed to submit the unresolved grievance involving the removal of
chairs to voluntary arbitration pursuant to the provisions of Article V of the existing CBA. Hence, the
assailed decision of the Arbitration Committee is a judgment or final order issued under the Labor Code
of the Philippines. Section 2, Rule 43 of the 1997 Rules of Civil Procedure, expressly states that the said
rule does not cover cases under the Labor Code of the Philippines. The judgments or final orders of the
Voluntary Arbitrator or Panel of Voluntary Arbitrators are governed by the provisions of Articles 260,
261, 262, 262-A, and 262-B of the Labor Code of the Philippines.
On the substantive aspect, the Union argues that there is no connection between CCBPI’s "I Operate, I
Maintain, I Clean" program and the removal of the chairs because the implementation of the program
was in 2006 and the removal of the chairs was done in 2008. The 30-minute break is part of an
operator’s working hours and does not make any difference. The frequency of the break period is not
advantageous to the operators because it cannot compensate for the time they are made to stand
throughout their working time. The bottling operators get tired and exhausted after their tour of duty
even with chairs around. How much more if the chairs are removed?
The Union further claims that management prerogatives are not absolute but subject to certain
limitations found in law, a collective bargaining agreement, or general principles of fair play and justice.
The operators have been performing their assigned duties and responsibilities satisfactorily for thirty (30)
years using chairs. There is no record of poor performance because the operators are sitting all the time.
There is no single incident when the attention of an operator was called for failure to carry out his
assigned tasks. CCBPI has not submitted any evidence to prove that the performance of the operators
was poor before the removal of the chairs and that it has improved after the chairs were removed. The
presence of chairs for more than 30 years made the operators awake and alert as they could relax from
time to time. There are sanctions for those caught sleeping while on duty. Before the removal of the
chairs, the efficiency of the operators was much better and there was no recorded accident. After the
removal of the chairs, the efficiency of the operators diminished considerably, resulting in the drastic
decline of line efficiency.
Finally, the Union asserts that the removal of the chairs constitutes violation of the Occupational Health
and Safety Standards, which provide that every company shall keep and maintain its workplace free from
hazards that are likely to cause physical harm to the workers or damage to property. The removal of the
chairs constitutes a violation of the State policy to assure the right of workers to a just and humane
condition of work pursuant to Article 3 of the Labor Code and of CCBPI’s Global Workplace Rights Policy.
Hence, the unilateral withdrawal, elimination or removal of the chairs, which have been in existence for
more than 30 years, constitutes a violation of existing practice.
The respondent’s position
CCBPI reiterates the ruling of the CA that a petition for review under Rule 43 of the Rules of Court was
the proper remedy to question the decision of the Arbitration Committee. It likewise echoes the ruling of
the CA that the removal of the chairs was a legitimate exercise of management prerogative; that it was
done not to harm the bottling operators but for the purpose of optimizing their efficiency and CCBPI’s
machineries and equipment; and that the exercise of its management prerogative was done in good faith
and not for the purpose of circumventing the rights of the employees under the special laws, the CBA or
the general principles of justice and fair play.
The Court’s Ruling
The decision in this case rests on the resolution of two basic questions. First, is an appeal to the CA via a
petition for review under Rule 43 of the 1997 Rules of Civil Procedure a proper remedy to question the
decision of the Arbitration Committee? Second, was the removal of the bottling operators’ chairs from
CCBPI’s production/manufacturing lines a valid exercise of a management prerogative?
The Court sustains the ruling of the CA on both issues.
Regarding the first issue, the Union insists that the CA erred in ruling that the recourse taken by CCBPI in
appealing the decision of the Arbitration Committee was proper. It argues that the proper remedy in
challenging the decision of the Voluntary Arbitrator before the CA is by filing a petition for certiorari
under Rule 65 of the Rules of Court, not a petition for review under Rule 43.
CCBPI counters that the CA was correct in ruling that the recourse it took in appealing the decision of the
Arbitration Committee to the CA via a petition for review under Rule 43 of the Rules of Court was proper
and in conformity with the rules and prevailing jurisprudence.
A Petition for Review
under Rule 43 is the
proper remedy
CCBPI is correct. This procedural issue being debated upon is not novel. The Court has already ruled in a
number of cases that a decision or award of a voluntary arbitrator is appealable to the CA via a petition
for review under Rule 43. The recent case of Samahan Ng Mga Manggagawa Sa Hyatt (SAMASAH-
NUWHRAIN) v. Hon. Voluntary Arbitrator Buenaventura C. Magsalin and Hotel Enterprises of the
Philippines6 reiterated the well-settled doctrine on this issue, to wit:
In the case of Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL v. Bacungan,7 we repeated the
well-settled rule that a decision or award of a voluntary arbitrator is appealable to the CA via petition for
review under Rule 43. We held that:
"The question on the proper recourse to assail a decision of a voluntary arbitrator has already been
settled in Luzon Development Bank v. Association of Luzon Development Bank Employees, where the
Court held that the decision or award of the voluntary arbitrator or panel of arbitrators should likewise
be appealable to the Court of Appeals, in line with the procedure outlined in Revised Administrative
Circular No. 1-95 (now embodied in Rule 43 of the 1997 Rules of Civil Procedure), just like those of the
71
quasi-judicial agencies, boards and commissions enumerated therein, and consistent with the original
purpose to provide a uniform procedure for the appellate review of adjudications of all quasi-judicial
entities.
Subsequently, in Alcantara, Jr. v. Court of Appeals, and Nippon Paint Employees Union-Olalia v. Court of
Appeals, the Court reiterated the aforequoted ruling. In Alcantara, the Court held that notwithstanding
Section 2 of Rule 43, the ruling in Luzon Development Bank still stands. The Court explained, thus:
‘The provisions may be new to the Rules of Court but it is far from being a new law. Section 2, Rules 42 of
the 1997 Rules of Civil Procedure, as presently worded, is nothing more but a reiteration of the exception
to the exclusive appellate jurisdiction of the Court of Appeals, as provided for in Section 9, Batas
Pambansa Blg. 129, as amended by Republic Act No. 7902:
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the
Securities and Exchange Commission, the Employees’ Compensation Commission and the Civil Service
Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance
with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended,
the provisions of this Act and of subparagraph (1) of the third paragraph and subparagraph (4) of the
fourth paragraph of Section 17 of the Judiciary Act of 1948.’
The Court took into account this exception in Luzon Development Bank but, nevertheless, held that the
decisions of voluntary arbitrators issued pursuant to the Labor Code do not come within its ambit x x x."
Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997 Rules of Civil Procedure, as amended, provide:
"SECTION 1. Scope. - This Rule shall apply to appeals from judgments or final orders of the Court of Tax
Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial
agency in the exercise of its quasi-judicial functions. Among these agencies are the x x x, and voluntary
arbitrators authorized by law.
xxxx
SEC. 3. Where to appeal. - An appeal under this Rule may be taken to the Court of Appeals within the
period and in the manner therein provided, whether the appeal involves questions of fact, of law, or
mixed questions of fact and law.
SEC. 4. Period of appeal. - The appeal shall be taken within fifteen (15) days from notice of the award,
judgment, final order or resolution, or from the date of its last publication, if publication is required by
law for its effectivity, or of the denial of petitioner’s motion for new trial or reconsideration duly filed in
accordance with the governing law of the court or agency a quo. x x x. (Emphasis supplied.)’
Hence, upon receipt on May 26, 2003 of the Voluntary Arbitrator’s Resolution denying petitioner’s
motion for reconsideration, petitioner should have filed with the CA, within the fifteen (15)-day
reglementary period, a petition for review, not a petition for certiorari.
On the second issue, the Union basically claims that the CCBPI’s decision to unilaterally remove the
operators’ chairs from the production/manufacturing lines of its bottling plants is not valid because it
violates some fundamental labor policies. According to the Union, such removal constitutes a violation of
the 1) Occupational Health and Safety Standards which provide that every worker is entitled to be
provided by the employer with appropriate seats, among others; 2) policy of the State to assure the right
of workers to a just and humane condition of work as provided for in Article 3 of the Labor Code;8 3)
Global Workplace Rights Policy of CCBPI which provides for a safe and healthy workplace by maintaining
a productive workplace and by minimizing the risk of accident, injury and exposure to health risks; and 4)
diminution of benefits provided in Article 100 of the Labor Code.9
Opposing the Union’s argument, CCBPI mainly contends that the removal of the subject chairs is a valid
exercise of management prerogative. The management decision to remove the subject chairs was made
in good faith and did not intend to defeat or circumvent the rights of the Union under the special laws,
the CBA and the general principles of justice and fair play.
Again, the Court agrees with CCBPI on the matter.
A Valid Exercise of
Management Prerogative
The Court has held that management is free to regulate, according to its own discretion and judgment,
all aspects of employment, including hiring, work assignments, working methods, time, place, and
manner of work, processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers, and discipline, dismissal and recall of workers. The
exercise of management prerogative, however, is not absolute as it must be exercised in good faith and
with due regard to the rights of labor.10
In the present controversy, it cannot be denied that CCBPI removed the operators’ chairs pursuant to a
national directive and in line with its "I Operate, I Maintain, I Clean" program, launched to enable the
Union to perform their duties and responsibilities more efficiently. The chairs were not removed
indiscriminately. They were carefully studied with due regard to the welfare of the members of the
Union. The removal of the chairs was compensated by: a) a reduction of the operating hours of the
bottling operators from a two-and-one-half (2 ½)-hour rotation period to a one-and-a-half (1 ½) hour
rotation period; and b) an increase of the break period from 15 to 30 minutes between rotations.
Apparently, the decision to remove the chairs was done with good intentions as CCBPI wanted to avoid
instances of operators sleeping on the job while in the performance of their duties and responsibilities
and because of the fact that the chairs were not necessary considering that the operators constantly
move about while working. In short, the removal of the chairs was designed to increase work efficiency.
Hence, CCBPI’s exercise of its management prerogative was made in good faith without doing any harm
to the workers’ rights.
72
The fact that there is no proof of any operator sleeping on the job is of no moment. There is no
guarantee that such incident would never happen as sitting on a chair is relaxing. Besides, the operators
constantly move about while doing their job. The ultimate purpose is to promote work efficiency.
No Violation of Labor Laws
The rights of the Union under any labor law were not violated. There is no law that requires employers to
provide chairs for bottling operators. The CA correctly ruled that the Labor Code, specifically Article
13211 thereof, only requires employers to provide seats for women. No similar requirement is mandated
for men or male workers. It must be stressed that all concerned bottling operators in this case are men.
There was no violation either of the Health, Safety and Social Welfare Benefit provisions under Book IV
of the Labor Code of the Philippines. As shown in the foregoing, the removal of the chairs was
compensated by the reduction of the working hours and increase in the rest period. The directive did not
expose the bottling operators to safety and health hazards.
The Union should not complain too much about standing and moving about for one and one-half (1 ½)
hours because studies show that sitting in workplaces for a long time is hazardous to one’s health. The
report of VicHealth, Australia,12 disclosed that "prolonged workplace sitting is an emerging public health
and occupational health issue with serious implications for the health of our working population.
Importantly, prolonged sitting is a risk factor for poor health and early death, even among those who
meet, or exceed, national13 activity guidelines." In another report,14 it was written:
Workers needing to spend long periods in a seated position on the job such as taxi drivers, call centre
and office workers, are at risk for injury and a variety of adverse health effects.
The most common injuries occur in the muscles, bones, tendons and ligaments, affecting the neck and
lower back regions. Prolonged sitting:
● reduces body movement making muscles more likely to pull, cramp or strain when stretched suddenly,
causes fatigue in the back and neck muscles by slowing the blood supply and puts high tension on the
spine, especially in the low back or neck, and
● causes a steady compression on the spinal discs that hinders their nutrition and can contribute to their
premature degeneration.
Sedentary employees may also face a gradual deterioration in health if they do not exercise or do not
lead an otherwise physically active life. The most common health problems that these employees
experience are disorders in blood circulation and injuries affecting their ability to move. Deep Vein
Thrombosis (DVT), where a clot forms in a large vein after prolonged sitting (eg after a long flight) has
also been shown to be a risk.
Workers who spend most of their working time seated may also experience other, less specific adverse
health effects. Common effects include decreased fitness, reduced heart and lung efficiency, and
digestive problems. Recent research has identified too much sitting as an important part of the physical
activity and health equation, and suggests we should focus on the harm caused by daily inactivity such as
prolonged sitting.
Associate professor David Dunstan leads a team at the Baker IDI in Melbourne which is specifically
researching sitting and physical activity. He has found that people who spend long periods of time seated
(more than four hours per day) were at risk of:
● higher blood levels of sugar and fats,
● larger waistlines, and
● higher risk of metabolic syndrome
regardless of how much moderate to vigorous exercise they had.
In addition, people who interrupted their sitting time more often just by standing or with light activities
such as housework, shopping, and moving about the office had healthier blood sugar and fat levels, and
smaller waistlines than those whose sitting time was not broken up.
Of course, in this case, if the chairs would be returned, no risks would be involved because of the shorter
period of working time. The study was cited just to show that there is a health risk in prolonged sitting.
No Violation of the CBA
The CBA15 between the Union and CCBPI contains no provision whatsoever requiring the management
to provide chairs for the operators in the production/manufacturing line while performing their duties
and responsibilities. On the contrary, Section 2 of Article 1 of the CBA expressly provides as follows:
Article I
SCOPE
SECTION 2. Scope of the Agreement. All the terms and conditions of employment of employees and
workers within the appropriate bargaining unit (as defined in Section 1 hereof) are embodied in this
Agreement and the same shall govern the relationship between the COMPANY and such employees
and/or workers. On the other hand, all such benefits and/or privileges as are not expressly provided for
in this Agreement but which are now being accorded, may in the future be accorded, or might have
previously been accorded, to the employees and/or workers, shall be deemed as purely voluntary acts
on the part of the COMPANY in each case, and the continuance and repetition thereof now or in the
future, no matter how long or how often, shall not be construed as establishing an obligation on the part
of the COMPANY. It is however understood that any benefits that are agreed upon by and between the
COMPANY and the UNION in the Labor-Management Committee Meetings regarding the terms and
conditions of employment outside the CBA that have general application to employees who are similarly
situated in a Department or in the Plant shall be implemented. [emphasis and underscoring supplied]
73

As can be gleaned from the aforecited provision, the CBA expressly provides that benefits and/or
privileges, not expressly given therein but which are presently being granted by the company and
enjoyed by the employees, shall be considered as purely voluntary acts by the management and that the
continuance of such benefits and/or privileges, no matter how long or how often, shall not be
understood as establishing an obligation on the company’s part. Since the matter of the chairs is not
expressly stated in the CBA, it is understood that it was a purely voluntary act on the part of CCBPI and
the long practice did not convert it into an obligation or a vested right in favor of the Union.
remuneration besides his or her basic ordinary earnings and wages. From this definition, We can only
deduce that the other employee benefits spoken of by Article 100 pertain only to those which are
susceptible of monetary considerations. Indeed, this could only be the most plausible conclusion because
the cases tackling Article 100 involve mainly with monetary considerations or privileges converted to
their monetary equivalents.
xxxx

No Violation of the general principles
of justice and fair play
The Court completely agrees with the CA ruling that the removal of the chairs did not violate the general
principles of justice and fair play because the bottling operators’ working time was considerably reduced
from two and a half (2 ½) hours to just one and a half (1 ½) hours and the break period, when they could
sit down, was increased to 30 minutes between rotations. The bottling operators’ new work schedule is
certainly advantageous to them because it greatly increases their rest period and significantly decreases
their working time. A break time of thirty (30) minutes after working for only one and a half (1 ½) hours is
a just and fair work schedule.
Without a doubt, equating the provision of chairs to the bottling operators Ds something within the
ambit of "benefits'' in the context of Article 100 of the Labor Code is unduly stretching the coverage of
the law. The interpretations of Article 100 of the Labor Code do not show even with the slightest hint
that such provision of chairs for the bottling operators may be sheltered under its mantle.21
Jurisprudence recognizes the exercise of management prerogatives. Labor Jaws also discourage
interference with an employer's judgment in the conduct of its business. For this reason, the Court often
declines to interfere in legitimate business decisions of employers. The law must protect not only the
welfare of the employees, but also the right of the employers.22
WHEREFORE, the petition is DENIED.

No Violation of Article 100 SO ORDERED.

of the Labor Code JOSE CATRAL MENDOZA

Associate Justice
The operators’ chairs cannot be considered as one of the employee benefits covered in Article 10016 of
the Labor Code. In the Court’s view, the term "benefits" mentioned in the non-diminution rule refers to
monetary benefits or privileges given to the employee with monetary equivalents.

Such benefits or privileges form part of the employees’ wage, salary or compensation making them
enforceable obligations.

This Court has already decided several cases regarding the non-diminution rule where the benefits or
privileges involved in those cases mainly concern monetary considerations or privileges with monetary
equivalents. Some of these cases are: Eastern Telecommunication Phils. Inc. v. Eastern Telecoms
Employees Union,17 where the case involves the payment of 14th, 15th and 16th month bonuses;
Central Azucarera De Tarlac v. Central Azucarera De Tarlac Labor Union-NLU,18 regarding the 13th
month pay, legal/special holiday pay, night premium pay and vacation and sick leaves; TSPIC Corp. v.
TSPIC Employees Union,19 regarding salary wage increases; and American Wire and Cable Daily
Employees Union vs. American Wire and Cable Company, Inc.,20 involving service awards with cash
incentives, premium pay, Christmas party with incidental benefits and promotional increase.

In this regard, the Court agrees with the CA when it resolved the matter and wrote:

Let it be stressed that the aforequoted article speaks of non-diminution of supplements and other
employee benefits. Supplements arc privileges given to an employee which constitute as extra
74
G.R. No. 145402 March 14, 2008
MERALCO INDUSTRIAL ENGINEERING SERVICES CORPORATION, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, OFELIA P. LANDRITO GENERAL SERVICES and/or OFELIA P.
LANDRITO, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil
Procedure seeking to reverse and set aside (1) the Decision1 of the Court of Appeals in CA-G.R. SP No.
50806, dated 24 April 2000, which modified the Decision2 of the National Labor Relations Commission
(NLRC), dated 30 January 1996 in NLRC NCR CA No. 001737-91 (NLRC NCR Case No. 00-09-04432-89), and
thereby held the petitioner solidarily liable with the private respondents for the satisfaction of the
separation pay of the latter’s employees; and (2) the Resolution3 of the appellate court, dated 27
September 2000, in the same case which denied the petitioner’s Motion for Reconsideration.
Petitioner Meralco Industrial Engineering Services Corporation (MIESCOR) is a corporation duly organized
and existing under the laws of the Republic of the Philippines and a client of private respondents. Private
respondent Ofelia P. Landrito General Services (OPLGS) is a business firm engaged in providing and
rendering general services, such as janitorial and maintenance work to its clients, while private
respondent Ofelia P. Landrito is the Proprietor and General Manager of OPLGS.
The factual milieu of the present case is as follows:
On 7 November 1984, petitioner and private respondents executed Contract Order No. 166-84,4
whereby the latter would supply the petitioner janitorial services, which include labor, materials, tools
and equipment, as well as supervision of its assigned employees, at petitioner’s Rockwell Thermal Plant
in Makati City. Pursuant thereto, private respondents assigned their 49 employees as janitors to
petitioner’s Rockwell Thermal Plant with a daily wage of ₱51.50 per employee.
On 20 September 1989, however, the aforesaid 49 employees (complainants) lodged a Complaint for
illegal deduction, underpayment, non-payment of overtime pay, legal holiday pay, premium pay for
holiday and rest day and night differentials5 against the private respondents before the Labor Arbiter.
The case was docketed as NLRC NCR Case No. 00-09-04432-89.
In view of the enactment of Republic Act No. 6727,6 the contract between the petitioner and the private
respondents was amended7 for the 10th time on 3 November 1989 to increase the minimum daily wage
per employee from ₱63.55 to ₱89.00 or ₱2,670.00 per month. Two months thereafter, or on 2 January
1990,8 petitioner sent a letter to private respondents informing them that effective at the close of
business hours on 31 January 1990, petitioner was terminating Contract Order No. 166-84. Accordingly,
at the end of the business hours on 31 January 1990, the complainants were pulled out from their work
at the petitioner’s Rockwell Thermal Plant. Thus, on 27 February 1990, complainants amended their
Complaint to include the charge of illegal dismissal and to implead the petitioner as a party respondent
therein.
Since the parties failed to settle amicably before the Labor Arbiter, they submitted their respective
position papers and other pleadings together with their documentary evidence. Thereafter, a Decision
was rendered by the Labor Arbiter on 26 March 1991, dismissing the Complaint against the petitioner for
lack of merit, but ordering the private respondents to pay the complainants the total amount of
₱487,287.07 representing unpaid wages, separation pay and overtime pay; as well as attorney’s fees in
an amount equivalent to 10% of the award or ₱48,728.70. All other claims of the complainants against
the private respondents were dismissed. 9
Feeling aggrieved, private respondents appealed the aforesaid Decision to the NLRC. Private respondents
alleged, among other things, that: (1) 48 of the 49 complainants had executed affidavits of desistance
and they had never attended any hearing nor given any authority to anyone to file a case on their behalf;
(2) the Labor Arbiter erred in not conducting a full-blown hearing on the case; (3) there is only one
complainant in that case who submitted a position paper on his own; (4) the complainants were not
constructively dismissed when they were not given assignments within a period of six months, but had
abandoned their jobs when they failed to report to another place of assignment; and (5) the petitioner,
being the principal, was solidarily liable with the private respondents for failure to make an adjustment
on the wages of the complainants.10 On 28 May 1993, the NLRC issued a Resolution11 affirming the
Decision of the Labor Arbiter dated 26 March 1991 with the modification that the petitioner was
solidarily liable with the private respondents, ratiocinating thus:
We, however, disagree with the dismissal of the case against [herein petitioner]. Under Art. 10712 of the
Labor Code of the Philippines, [herein petitioner] is considered an indirect employer and can be held
solidarily liable with [private respondents] as an independent contractor. Under Art. 109,13 for purposes
of determining the extent of its liability, [herein petitioner] is considered a direct employer, hence, it is
solidarily liable for complainant’s (sic) wage differentials and unpaid overtime. We find this situation
obtaining in this case in view of the failure of [private respondents] to pay in full the labor standard
benefits of complainants, in which case liability is limited thereto and does not extend to the
establishment of employer-employee relations.14 [Emphasis supplied].
Both private respondents and petitioner separately moved for reconsideration of the aforesaid
Resolution of the NLRC. In their Motion for Reconsideration, private respondents reiterated that the
complainants abandoned their work, so that private respondents should not be liable for separation pay;
and that petitioner, not private respondents, should be liable for complainants’ other monetary claims,
i.e., for wage differentials and unpaid overtime. The petitioner, in its own Motion for Reconsideration,
asked that it be excluded from liability. It averred that private respondents should be solely responsible
for their acts as it sufficiently paid private respondents all the benefits due the complainants.
On 30 July 1993, the NLRC issued an Order15 noting that based on the records of the case, the judgment
award in the amount of ₱487,287.07 was secured by a surety bond posted by the private respondents;16
hence, there was no longer any impediment to the satisfaction of the complainants’ claims. Resultantly,
the NLRC denied the private respondents’ Motion for Reconsideration. The NLRC likewise directed the
75
Labor Arbiter to enforce the monetary award against the private respondents’ surety bond and to
determine who should finally shoulder the liability therefor.17
Alleging grave abuse of discretion of the NLRC in its issuance of the Resolution and Order dated 28 May
1993 and 30 July 1993, respectively, private respondents filed before this Court a Petition for Certiorari
with prayer for the issuance of a writ of preliminary injunction. The same was docketed as G.R. No.
111506 entitled Ofelia Landrito General Services v. National Labor Relations Commission. The said
Petition suspended the proceedings before the Labor Arbiter.
On 23 May 1994, however, this Court issued a Resolution18 dismissing G.R. No. 111506 for failure of
private respondents to sufficiently show that the NLRC had committed grave abuse of discretion in
rendering its questioned judgment. This Court’s Resolution in G.R. No. 111506 became final and
executory on 25 July 1994.19
As a consequence thereof, the proceedings before the Labor Arbiter resumed with respect to the
determination of who should finally shoulder the liability for the monetary awards granted to the
complainants, in accordance with the NLRC Order dated 30 July 1993.
On 5 October 1994, the Labor Arbiter issued an Order,20 which reads:
As can be gleaned from the Resolution dated [28 May 1993], there is that necessity of clarifying the
respective liabilities of [herein petitioner] and [herein private respondents] insofar as the judgment
award in the total sum of ₱487,287.07 is concerned.
The judgment award in the total sum of ₱487,287.07 as contained in the Decision dated [26 March 1991]
consists of three (3) parts, as follows: First, the judgment award on the underpayment; Second, the
judgment award on separation pay; and Third, the judgment award on the overtime pay.
The question now is: Which of these awards is [petitioner] solidarily liable with [private respondents]?
An examination of the record elicits the finding that [petitioner] is solidarily liable with [private
respondents] on the judgment awards on the underpayment and on the non-payment of the overtime
pay. xxx. This joint and several liability of the contractor [private respondents] and the principal
[petitioner] is mandated by the Labor Code to assure compliance of the provisions therein, including the
statutory minimum wage (Art. 99,21 Labor Code). The contractor-agency is made liable by virtue of his
status as direct employer. The principal, on the other hand, is made the indirect employer of the
contractor-agency’s employees for purposes of paying the employees their wages should the contractor-
agency be unable to pay them. This joint and several liability facilitates, if not guarantees, payment of the
workers performance of any work, task, job or project, thus giving the workers ample protection as
mandated by the 1987 Constitution.
In sum, the complainants may enforce the judgment award on underpayment and the non-payment of
overtime pay against either [private respondents] and/or [petitioner].
However, in view of the finding in the Decision that [petitioner] had adjusted its contract price for the
janitorial services it contracted with [private respondents] conforming to the provisions of Republic Act
No. 6727, should the complainants enforce the judgment on the underpayment and on the non-payment
of the overtime pay aginst (sic) [petitioner], the latter can seek reimbursement from the former
[meaning (private respondents)], but should the judgment award on the underpayment and on the non-
payment of the overtime pay be enforced against [private respondents], the latter cannot seek
reimbursement against [petitioner].
The judgment award on separation pay is the sole liability of [private respondents].
WHEREFORE, [petitioner] is jointly and severally liable with [private respondents] in the judgment award
on underpayment and on the non-payment of overtime pay. Should the complainants enforce the above
judgment award against [petitioner], the latter can seek reimbursement against [private respondents],
but should the aforementioned judgment award be enforced against [private respondents], the latter
cannot seek reimbursement from the [petitioner].
The judgment award on the payment of separation pay is the sole liability of [private respondents].
Let an alias writ of execution be issued. [Emphasis supplied].
Again, both the private respondents and the petitioner appealed the afore-quoted Order of the Labor
Arbiter to the NLRC. On 25 April 1995, the NLRC issued a Resolution22 affirming the Order dated 5
October 1994 of the Labor Arbiter and dismissing both appeals for non-posting of the appeal or surety
bond and/or for utter lack of merit.23 When the private respondents and the petitioner moved for
reconsideration, however, it was granted by the NLRC in its Order24 dated 27 July 1995. The NLRC thus
set aside its Resolution dated 25 April 1995, and directed the private respondents and the petitioner to
each post an appeal bond in the amount of ₱487,287.62 to perfect their respective appeals.25 Both
parties complied.26
On 30 January 1996, the NLRC rendered a Decision modifying the Order of the Labor Arbiter dated 5
October 1994, the dispositive portion of which reads:
WHEREFORE, the [21 November 1994] appeal of [herein petitioner] is hereby granted. The [5 October
1994] Order of Labor Arbiter Donato G. Quinto, Jr., is modified to the extent that it still held [petitioner]
as "jointly and severally liable with [herein private respondents] in the judgment award on
underpayment and on the non-payment of overtime pay," our directive being that the Arbiter should
now satisfy said labor-standards award, as well as that of the separation pay, exclusively through the
surety bond posted by [private respondents].27 [Emphasis supplied].
Dissatisfied, private respondents moved for the reconsideration of the foregoing Decision, but it was
denied by the NLRC in an Order28 dated 30 October 1996. This NLRC Order dated 30 October 1996
became final and executory on 29 November 1996.
On 4 December 1996, private respondents filed a Petition for Certiorari29 before this Court assailing the
Decision and the Order of the NLRC dated 30 January 1996 and 30 October 1996, respectively. On 9
76
December 1998, this Court issued a Resolution30 referring the case to the Court of Appeals conformably
with its ruling in St. Martin Funeral Home v. National Labor Relations Commission.31 The case was
docketed before the appellate court as CA-G.R. SP No. 50806.
The Petition made a sole assignment of error, to wit:
THE HONORABLE COMMISSION GRAVELY ERRED AND GRAVELY ABUSED ITS DISCRETION IN FINDING
THAT THE ULTIMATE LIABILITY SHOULD FALL ON THE [HEREIN PRIVATE RESPONDENTS] ALONE, WITHOUT
REIMBURSEMENT FROM THE [HEREIN PETITIONER], IN ORDER TO SATISFY THE MONETARY AWARDS OF
THE [THEREIN COMPLAINANTS].32
After due proceedings, the Court of Appeals rendered the assailed Decision on 24 April 2000, modifying
the Decision of the NLRC dated 30 January 1996 and holding the petitioner solidarily liable with the
private respondents for the satisfaction of the laborers’ separation pay. According to the Court of
Appeals:
The [NLRC] adjudged the payment of separation pay to be the sole responsibility of [herein private
respondents] because (1) there is no employer-employee relationship between [herein petitioner] and
the forty-nine (49) [therein complainants]; (2) the payment of separation pay is not a labor standard
benefit. We disagree.
Again, We quote Article 109 of the Labor Code, as amended, viz:
"The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer
shall be held responsible with his contractor or subcontractor for any violation of any provision of this
Code…"
The abovementioned statute speaks of "any violation of any provision of this Code." Thus, the existence
or non-existence of employer-employee relationship and whether or not the violation is one of labor
standards is immaterial because said provision of law does not make any distinction at all and, therefore,
this Court should also refrain from making any distinction. Concomitantly, [herein petitioner] should be
jointly and severally liable with [private respondents] for the payment of wage differentials, overtime
pay and separation pay of the [therein complainants]. The joint and several liability imposed to
[petitioner] is, again, without prejudice to a claim for reimbursement by [petitioner] against [private
respondents] for reasons already discusses (sic).
WHEREFORE, premises studiedly considered, the assailed 30 January 1996 decision of [the NLRC] is
hereby modified insofar as [petitioner] should be held solidarily liable with [the private respondents] for
the satisfaction of the laborers’ separation pay. No pronouncement as to costs.33 [Emphasis supplied].
The petitioner filed a Motion for Reconsideration of the aforesaid Decision but it was denied by the
Court of Appeals in a Resolution dated 27 September 2000.
Petitioner now comes before this Court via a Petition for Review on Certiorari, docketed as G.R. No.
145402, raising the sole issue of "whether or not the Honorable Court of Appeals palpably erred when it
went beyond the issues of the case as it modified the factual findings of the Labor Arbiter which attained
finality after it was affirmed by Public Respondent NLRC and by the Supreme Court which can no longer
be disturbed as it became the law of the case."34
Petitioner argues that in the assailed Decision dated 24 April 2000, the Court of Appeals found that the
sole issue for its resolution was whether the ultimate liability to pay the monetary awards in favor of the
49 employees falls on the private respondents without reimbursement from the petitioner. Hence, the
appellate court should have limited itself to determining the right of private respondents to still seek
reimbursement from petitioner for the monetary awards on the unpaid wages and overtime pay of the
complainants.
According to petitioner, the NLRC, in its Resolution dated 28 May 1993, already found that petitioner had
fully complied with its salary obligations to the complainants. Petitioner invokes the same NLRC
Resolution to support its claim that it was not liable to share with the private respondents in the
payment of separation pay to complainants. When private respondents questioned the said NLRC
Resolution in a Petition for Certiorari with this Court, docketed as G.R. No. 111506, this Court found that
the NLRC did not commit grave abuse of discretion in the issuance thereof and accordingly dismissed
private respondents’ Petition. Said NLRC Resolution, therefore, has since become final and executory and
can no longer be disturbed for it now constitutes the law of the case.
Assuming for the sake of argument that the Court of Appeals can still take cognizance of the issue of
petitioner’s liability for complainants’ separation pay, petitioner asserts that the appellate court seriously
erred in concluding that it is jointly and solidarily liable with private respondents for the payment
thereof. The payment of separation pay should be the sole responsibility of the private respondents
because there was no employer-employee relationship between the petitioner and the complainants,
and the payment of separation pay is not a labor standards benefit.
Law of the case has been defined as the opinion delivered on a former appeal. It is a term applied to an
established rule that when an appellate court passes on a question and remands the case to the lower
court for further proceedings, the question there settled becomes the law of the case upon subsequent
appeal. It means that whatever is once irrevocably established as the controlling legal rule or decision
between the same parties in the same case continues to be the law of the case, whether correct on
general principles or not, so long as the facts on which such decision was predicated continue to be the
facts of the case before the court.35 Indeed, courts must adhere thereto, whether the legal principles
laid down were "correct on general principles or not" or "whether the question is right or wrong"
because public policy, judicial orderliness and economy require such stability in the final judgments of
courts or tribunals of competent jurisdiction.36
Petitioner’s application of the law of the case principle to the case at bar as regards its liability for
payment of separation pay is misplaced.
The only matters settled in the 23 May 1994 Resolution of this Court in G.R. No. 111506, which can be
regarded as the law of the case, were (1) both the petitioner and the private respondents were jointly
and solidarily liable for the judgment awards due the complainants; and (2) the said judgment awards
shall be enforced against the surety bond posted by the private respondents. However, the issue as
77
regards the liability of the petitioner for payment of separation pay was yet to be resolved because
precisely, the NLRC, in its Order dated 30 July 1993, still directed the Labor Arbiter to make a
determination on who should finally shoulder the monetary awards granted to the complainants. And it
was only after G.R. No. 111506 was dismissed by this Court that the Labor Arbiter promulgated his
Decision dated 5 October 1994, wherein he clarified the respective liabilities of the petitioner and the
private respondents for the judgment awards. In his 5 October 1994 Decision, the Labor Arbiter
explained that the solidary liability of the petitioner was limited to the monetary awards for wage
underpayment and non-payment of overtime pay due the complainants, and it did not, in any way,
extend to the payment of separation pay as the same was the sole liability of the private respondents.
Nonetheless, this Court finds the present Petition meritorious.
The Court of Appeals indeed erred when it ruled that the petitioner was jointly and solidarily liable with
the private respondents as regards the payment of separation pay.
The appellate court used as basis Article 109 of the Labor Code, as amended, in holding the petitioner
solidarily liable with the private respondents for the payment of separation pay:
ART. 109. Solidary Liability. - The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purposes of determining the extent of their civil liability under
this Chapter, they shall be considered as direct employers. [Emphasis supplied].1avvphi1
However, the afore-quoted provision must be read in conjunction with Articles 106 and 107 of the Labor
Code, as amended.
Article 107 of the Labor Code, as amended, defines an indirect employer as "any person, partnership,
association or corporation which, not being an employer, contracts with an independent contractor for
the performance of any work, task, job or project." To ensure that the contractor’s employees are paid
their appropriate wages, Article 106 of the Labor Code, as amended, provides:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. – x x x.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him. [Emphasis supplied].
Taken together, an indirect employer (as defined by Article 107) can only be held solidarily liable with the
independent contractor or subcontractor (as provided under Article 109) in the event that the latter fails
to pay the wages of its employees (as described in Article 106).
Hence, while it is true that the petitioner was the indirect employer of the complainants, it cannot be
held liable in the same way as the employer in every respect. The petitioner may be considered an
indirect employer only for purposes of unpaid wages. As this Court succinctly explained in Philippine
Airlines, Inc. v. National Labor Relations Commission37:
While USSI is an independent contractor under the security service agreement and PAL may be
considered an indirect employer, that status did not make PAL the employer of the security guards in
every respect. As correctly posited by the Office of the Solicitor General, PAL may be considered an
indirect employer only for purposes of unpaid wages since Article 106, which is applicable to the
situation contemplated in Section 107, speaks of wages. The concept of indirect employer only relates or
refers to the liability for unpaid wages. Read together, Articles 106 and 109 simply mean that the party
with whom an independent contractor deals is solidarily liable with the latter for unpaid wages, and only
to that extent and for that purpose that the latter is considered a direct employer. The term "wage" is
defined in Article 97(f) of the Labor Code as "the remuneration of 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 unwritten contract of employment for work done or to be
done, or for services rendered or to be rendered and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the
employer to the employee."
Further, there is no question that private respondents are operating as an independent contractor and
that the complainants were their employees. There was no employer-employee relationship that existed
between the petitioner and the complainants and, thus, the former could not have dismissed the latter
from employment. Only private respondents, as the complainants’ employer, can terminate their
services, and should it be done illegally, be held liable therefor. The only instance when the principal can
also be held liable with the independent contractor or subcontractor for the backwages and separation
pay of the latter’s employees is when there is proof that the principal conspired with the independent
contractor or subcontractor in the illegal dismissal of the employees, thus:
The liability arising from an illegal dismissal is unlike an order to pay the statutory minimum wage,
because the workers’ right to such wage is derived from law. The proposition that payment of back
wages and separation pay should be covered by Article 109, which holds an indirect employer solidarily
responsible with his contractor or subcontractor for "any violation of any provision of this Code," would
have been tenable if there were proof - there was none in this case - that the principal/employer had
conspired with the contractor in the acts giving rise to the illegal dismissal. 38
It is the established fact of conspiracy that will tie the principal or indirect employer to the illegal
dismissal of the contractor or subcontractor’s employees. In the present case, there is no allegation,
much less proof presented, that the petitioner conspired with private respondents in the illegal dismissal
of the latter’s employees; hence, it cannot be held liable for the same.
Neither can the liability for the separation pay of the complainants be extended to the petitioner based
on contract. Contract Order No. 166-84 executed between the petitioner and the private respondents
contains no provision for separation pay in the event that the petitioner terminates the same. It is basic
that a contract is the law between the parties and the stipulations therein, provided that they are not
contrary to law, morals, good customs, public order or public policy, shall be binding as between the
78

parties.39 Hence, if the contract does not provide for such a liability, this Court cannot just read the on record, or the assailed judgment is based on a gross misapprehension of facts. Besides, factual
same into the contract without possibly violating the intention of the parties. findings of quasi-judicial agencies like the NLRC, when affirmed by the Court of Appeals, are conclusive
upon the parties and binding on this Court.47
It is also worth noting that although the issue in CA-G.R. SP No. 50806 pertains to private respondents’
right to reimbursement from petitioner for the "monetary awards" in favor of the complainants, they Having already received from petitioner the correct amount of wages and benefits, but having failed to
limited their arguments to the monetary awards for underpayment of wages and non-payment of turn them over to the complainants, private respondents should now solely bear the liability for the
overtime pay, and were conspicuously silent on the monetary award for separation pay. Thus, private underpayment of wages and non-payment of the overtime pay.
respondents’ sole liability for the separation pay of their employees should have been deemed settled
and already beyond the power of the Court of Appeals to resolve, since it was an issue never raised WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and Resolution
before it.40 of the Court of Appeals dated 24 April 2000 and 27 September 2000, respectively, in CA-G.R. SP No.
50806, are hereby REVERSED AND SET ASIDE. The Decision dated 30 January 1996 of the National Labor
Although petitioner is not liable for complainants’ separation pay, the Court conforms to the consistent Relations Commission in NLRC NCR CA No. 001737-91 (NLRC NCR Case No. 00-09-04432-89) is hereby
findings in the proceedings below that the petitioner is solidarily liable with the private respondents for REINSTATED. No costs.
the judgment awards for underpayment of wages and non-payment of overtime pay.
SO ORDERED.
In this case, however, private respondents had already posted a surety bond in an amount sufficient to
cover all the judgment awards due the complainants, including those for underpayment of wages and
non-payment of overtime pay. The joint and several liability of the principal with the contractor and
subcontractor were enacted to ensure compliance with the provisions of the Labor Code, principally
those on statutory minimum wage. This liability facilitates, if not guarantees, payment of the workers’
compensation, thus, giving the workers ample protection as mandated by the 1987 Constitution.41 With
private respondents’ surety bond, it can therefore be said that the purpose of the Labor Code provision
on the solidary liability of the indirect employer is already accomplished since the interest of the
complainants are already adequately protected. Consequently, it will be futile to continuously hold the
petitioner jointly and solidarily liable with the private respondents for the judgment awards for
underpayment of wages and non-payment of overtime pay.

But while this Court had previously ruled that the indirect employer can recover whatever amount it had
paid to the employees in accordance with the terms of the service contract between itself and the
contractor,42 the said ruling cannot be applied in reverse to this case as to allow the private respondents
(the independent contractor), who paid for the judgment awards in full, to recover from the petitioner
(the indirect employer).

Private respondents have nothing more to recover from petitioner.

Petitioner had already handed over to private respondent the wages and other benefits of the
complainants. Records reveal that it had complied with complainants’ salary increases in accordance
with the minimum wage set by Republic Act No. 6727 by faithfully adjusting the contract price for the
janitorial services it contracted with private respondents. 43 This is a finding of fact made by the Labor
Arbiter,44 untouched by the NLRC45 and explicitly affirmed by the Court of Appeals,46 and which should
already bind this Court.

This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court in a petition for
review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law,
not of fact, unless the factual findings complained of are completely devoid of support from the evidence
79
G.R. No. 146408 February 29, 2008
PHILIPPINE AIRLINES, INC., petitioner,
vs.
ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON
PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M.
CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL,
ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE
ALEGRES, BENEDICTO AUXTERO, EDUARDO MAGDADARAUG, NELSON M. DULCE, and ALLAN BENTUZAL,
respondents.
DECISION
CARPIO MORALES, J.:
Petitioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as Contractor,
entered into an Agreement1 on July 15, 1991 whereby Synergy undertook to "provide loading,
unloading, delivery of baggage and cargo and other related services to and from [petitioner]'s aircraft at
the Mactan Station."2
The Agreement specified the following "Scope of Services" of Contractor Synergy:
1.2 CONTRACTOR shall furnish all the necessary capital, workers, loading, unloading and delivery
materials, facilities, supplies, equipment and tools for the satisfactory performance and execution of the
following services (the Work):
a. Loading and unloading of baggage and cargo to and from the aircraft;
b. Delivering of baggage from the ramp to the baggage claim area;
c. Picking up of baggage from the baggage sorting area to the designated parked aircraft;
d. Delivering of cargo unloaded from the flight to cargo terminal;
e. Other related jobs (but not janitorial functions) as may be required and necessary;
CONTRACTOR shall perform and execute the aforementioned Work at the following areas located at
Mactan Station, to wit:
a. Ramp Area
b. Baggage Claim Area
c. Cargo Terminal Area, and
d. Baggage Sorting Area3 (Underscoring supplied)
And it expressly provided that Synergy was "an independent contractor and . . . that there w[ould] be no
employer-employee relationship between CONTRACTOR and/or its employees on the one hand, and
OWNER, on the other."4
On the duration of the Agreement, Section 10 thereof provided:
10. 1 Should at any time OWNER find the services herein undertaken by CONTRACTOR to be
unsatisfactory, it shall notify CONTRACTOR who shall have fifteen (15) days from such notice within
which to improve the services. If CONTRACTOR fails to improve the services under this Agreement
according to OWNER'S specifications and standards, OWNER shall have the right to terminate this
Agreement immediately and without advance notice.
10.2 Should CONTRACTOR fail to improve the services within the period stated above or should
CONTRACTOR breach the terms of this Agreement and fail or refuse to perform the Work in such a
manner as will be consistent with the achievement of the result therein contracted for or in any other
way fail to comply strictly with any terms of this Agreement, OWNER at its option, shall have the right to
terminate this Agreement and to make other arrangements for having said Work performed and
pursuant thereto shall retain so much of the money held on the Agreement as is necessary to cover the
OWNER's costs and damages, without prejudice to the right of OWNER to seek resort to the bond
furnished by CONTRACTOR should the money in OWNER's possession be insufficient.
x x x x (Underscoring supplied)
Except for respondent Benedicto Auxtero (Auxtero), the rest of the respondents, who appear to have
been assigned by Synergy to petitioner following the execution of the July 15, 1991 Agreement, filed on
March 3, 1992 complaints before the NLRC Regional Office VII at Cebu City against petitioner, Synergy
and their respective officials for underpayment, non-payment of premium pay for holidays, premium pay
for rest days, service incentive leave pay, 13th month pay and allowances, and for regularization of
employment status with petitioner, they claiming to be "performing duties for the benefit of [petitioner]
since their job is directly connected with [its] business x x x."5
Respondent Auxtero had initially filed a complaint against petitioner and Synergy and their respective
officials for regularization of his employment status. Later alleging that he was, without valid ground,
verbally dismissed, he filed a complaint against petitioner and Synergy and their respective officials for
illegal dismissal and reinstatement with full backwages.6
The complaints of respondents were consolidated.
By Decision7 of August 29, 1994, Labor Arbiter Dominador Almirante found Synergy an independent
contractor and dismissed respondents' complaint for regularization against petitioner, but granted their
money claims. The fallo of the decision reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered as follows:
80
(1) Ordering respondents PAL and Synergy jointly and severally to pay all the complainants herein their
13th month pay and service incentive leave benefits;
xxxx
(3) Ordering respondent Synergy to pay complainant Benedicto Auxtero a financial assistance in the
amount of P5,000.00.
The awards hereinabove enumerated in the aggregate total amount of THREE HUNDRED TWENTY-TWO
THOUSAND THREE HUNDRED FIFTY NINE PESOS AND EIGHTY SEVEN CENTAVOS (P322,359.87) are
computed in detail by our Fiscal Examiner which computation is hereto attached to form part of this
decision.
The rest of the claims are hereby ordered dismissed for lack of merit.8 (Underscoring supplied)
On appeal by respondents, the NLRC, Fourth Division, Cebu City, vacated and set aside the decision of
the Labor Arbiter by Decision9 of January 5, 1996, the fallo of which reads:
WHEREFORE, the Decision of the Labor Arbiter Dominador A. Almirante, dated August 29, 1994, is
hereby VACATED and SET ASIDE and judgment is hereby rendered:
1. Declaring respondent Synergy Services Corporation to be a 'labor-only' contractor;
2. Ordering respondent Philippine Airlines to accept, as its regular employees, all the complainants, . . .
and to give each of them the salaries, allowances and other employment benefits and privileges of a
regular employee under the Collective Bargaining Agreement subsisting during the period of their
employment;
xxxx
4. Declaring the dismissal of complainant Benedicto Auxtero to be illegal and ordering his reinstatement
as helper or utility man with respondent Philippine Airlines, with full backwages, allowances and other
benefits and privileges from the time of his dismissal up to his actual reinstatement; and
5. Dismissing the appeal of respondent Synergy Services Corporation, for lack of merit.10 (Emphasis and
underscoring supplied)
Only petitioner assailed the NLRC decision via petition for certiorari before this Court.
By Resolution11 of January 25, 1999, this Court referred the case to the Court of Appeals for appropriate
action and disposition, conformably with St. Martin Funeral Homes v. National Labor Relations
Commission which was promulgated on September 16, 1998.
The appellate court, by Decision of September 29, 2000, affirmed the Decision of the NLRC.12
Petitioner's motion for reconsideration having been denied by Resolution of December 21, 2000,13 the
present petition was filed, faulting the appellate court
I.
. . . IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION DECISION WHICH IMPOSED THE
RELATIONSHIP OF EMPLOYER-EMPLOYEE BETWEEN PETITIONER AND THE RESPONDENTS HEREIN.
II.
. . . IN AFFIRMING THE RULING OF THE NATIONAL LABOR RELATIONS COMMISSION ORDERING THE
REINSTATEMENT OF RESPONDENT AUXTERO DESPITE THE ABSENCE [OF] ANY FACTUAL FINDING IN THE
DECISION THAT PETITIONER ILLEGALLY TERMINATED HIS EMPLOYMENT.
III.
. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND GRAVE ERROR IN UPHOLDING THE DECISION OF
THE NATIONAL LABOR RELATIONS COMMISSION WHICH COMPELLED THE PETITIONER TO EMPLOY THE
RESPONDENTS AS REGULAR EMPLOYEES DESPITE THE FACT THAT THEIR SERVICES ARE IN EXCESS OF
PETITIONER COMPANY'S OPERATIONAL REQUIREMENTS.14 (Underscoring supplied)
Petitioner argues that the law does not prohibit an employer from engaging an independent contractor,
like Synergy, which has substantial capital in carrying on an independent business of contracting, to
perform specific jobs.
Petitioner further argues that its contracting out to Synergy various services like janitorial, aircraft
cleaning, baggage-handling, etc., which are directly related to its business, does not make respondents
its employees.
Petitioner furthermore argues that none of the four (4) elements of an employer-employee relationship
between petitioner and respondents, viz: selection and engagement of an employee, payment of wages,
power of dismissal, and the power to control employee's conduct, is present in the case.15
Finally, petitioner avers that reinstatement of respondents had been rendered impossible because it had
reduced its personnel due to heavy losses as it had in fact terminated its service agreement with Synergy
effective June 30, 199816 as a cost-saving measure.
The decision of the case hinges on a determination of whether Synergy is a mere job-only contractor or a
legitimate contractor. If Synergy is found to be a mere job-only contractor, respondents could be
considered as regular employees of petitioner as Synergy would then be a mere agent of petitioner in
which case respondents would be entitled to all the benefits granted to petitioner's regular employees;
otherwise, if Synergy is found to be a legitimate contractor, respondents' claims against petitioner must
fail as they would then be considered employees of Synergy.
81
The statutory basis of legitimate contracting or subcontracting is provided in Article 106 of the Labor
Code which reads:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. - Whenever an employer enters into a contract with
another person for the performance of the former's work, the employees of the contractor and of the
latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor
to protect the rights of workers established under the Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations
within these types of contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any provision of this
Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, AND the workers recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him. (Emphasis, capitalization and
underscoring supplied)
Legitimate contracting and labor-only contracting are defined in Department Order (D.O.) No. 18-02,
Series of 2002 (Rules Implementing Articles 106 to 109 of the Labor Code, as amended) as follows:
Section 3. Trilateral relationship in contracting arrangements. In legitimate contracting, there exists a
trilateral relationship under which there is a contract for a specific job, work or service between the
principal and the contractor or subcontractor, and a contract of employment between the contractor or
subcontractor and its workers. Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake the performance of the job, work or
service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job,
work or service. (Emphasis and underscoring supplied)
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal, and any of the following elements are [sic] present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or placed by such contractor
or subcontractor are performing activities which are directly related to the main business of the
principal; OR
(ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee. (Emphasis, underscoring and capitalization supplied)
"Substantial capital or investment" and the "right to control" are defined in the same Section 5 of the
Department Order as follows:
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used
by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end. (Emphasis and underscoring supplied)
From the records of the case, it is gathered that the work performed by almost all of the respondents -
loading and unloading of baggage and cargo of passengers - is directly related to the main business of
petitioner. And the equipment used by respondents as station loaders, such as trailers and conveyors,
are owned by petitioner.17
Petitioner asserts, however, that mere compliance with substantial capital requirement suffices for
Synergy to be considered a legitimate contractor, citing Neri v. National Labor Relations Commission.18
Petitioner's reliance on said case is misplaced.
In Neri, the Labor Arbiter and the NLRC both determined that Building Care Corporation had a capital
stock of P1 million fully subscribed and paid for.19 The corporation's status as independent contractor
had in fact been previously confirmed in an earlier case20 by this Court which found it to be serving,
among others, a university, an international bank, a big local bank, a hospital center, government
agencies, etc."
In stark contrast to the case at bar, while petitioner steadfastly asserted before the Labor Arbiter and the
NLRC that Synergy has a substantial capital to engage in legitimate contracting, it failed to present
evidence thereon. As the NLRC held:
The decision of the Labor Arbiter merely mentioned on page 5 of his decision that respondent SYNERGY
has substantial capital, but there is no showing in the records as to how much is that capital. Neither had
respondents shown that SYNERGY has such substantial capital. x x x21 (Underscoring supplied)
It was only after the appellate court rendered its challenged Decision of September 29, 2002 when
petitioner, in its Motion for Reconsideration of the decision, sought to prove, for the first time, Synergy's
82
substantial capitalization by attaching photocopies of Synergy's financial statements, e.g., balance
sheets, statements of income and retained earnings, marked as "Annexes 'A' - 'A-4.'"22
More significantly, however, is that respondents worked alongside petitioner's regular employees who
were performing identical work.23 As San Miguel Corporation v. Aballa24 and Dole Philippines, Inc. v.
Esteva, et al.25 teach, such is an indicium of labor-only contracting.
For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two elements to be
present is, for convenience, re-quoted:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or placed by such contractor
or subcontractor are performing activities which are directly related to the main business of the
principal, OR
(ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee. (Emphasis and CAPITALIZATION supplied)
Even if only one of the two elements is present then, there is labor-only contracting.
The control test element under the immediately-quoted paragraph (ii), which was not present in the old
Implementing Rules (Department Order No. 10, Series of 1997),26 echoes the prevailing jurisprudential
trend27 elevating such element as a primary determinant of employer-employee relationship in job
contracting agreements.
One who claims to be an independent contractor has to prove that he contracted to do the work
according to his own methods and without being subject to the employer's control except only as to the
results.28
While petitioner claimed that it was Synergy's supervisors who actually supervised respondents, it failed
to present evidence thereon. It did not even identify who were the Synergy supervisors assigned at the
workplace.
Even the parties' Agreement does not lend support to petitioner's claim, thus:
Section 6. Qualified and Experienced Worker: Owner's Right to Dismiss Workers.
CONTRACTOR shall employ capable and experienced workers and foremen to carry out the loading,
unloading and delivery Work as well as provide all equipment, loading, unloading and delivery
equipment, materials, supplies and tools necessary for the performance of the Work. CONTRACTOR shall
upon OWNER'S request furnish the latter with information regarding the qualifications of the former's
workers, to prove their capability and experience. Contractor shall require all its workers, employees,
suppliers and visitors to comply with OWNER'S rules, regulations, procedures and directives relative to
the safety and security of OWNER'S premises, properties and operations. For this purpose, CONTRACTOR
shall furnish its employees and workers identification cards to be countersigned by OWNER and uniforms
to be approved by OWNER. OWNER may require CONTRACTOR to dismiss immediately and prohibit
entry into OWNER'S premises of any person employed therein by CONTRACTOR who in OWNER'S
opinion is incompetent or misconducts himself or does not comply with OWNER'S reasonable
instructions and requests regarding security, safety and other matters and such person shall not again be
employed to perform the services hereunder without OWNER'S permission.29 (Underscoring partly in
the original and partly supplied; emphasis supplied)
Petitioner in fact admitted that it fixes the work schedule of respondents as their work was dependent
on the frequency of plane arrivals.30 And as the NLRC found, petitioner's managers and supervisors
approved respondents' weekly work assignments and respondents and other regular PAL employees
were all referred to as "station attendants" of the cargo operation and airfreight services of petitioner.31
Respondents having performed tasks which are usually necessary and desirable in the air transportation
business of petitioner, they should be deemed its regular employees and Synergy as a labor-only
contractor.32
The express provision in the Agreement that Synergy was an independent contractor and there would be
"no employer-employee relationship between [Synergy] and/or its employees on one hand, and
[petitioner] on the other hand" is not legally binding and conclusive as contractual provisions are not
valid determinants of the existence of such relationship. For it is the totality of the facts and surrounding
circumstances of the case33 which is determinative of the parties' relationship.
Respecting the dismissal on November 15, 199234 of Auxtero, a regular employee of petitioner who had
been working as utility man/helper since November 1988, it is not legally justified for want of just or
authorized cause therefor and for non-compliance with procedural due process. Petitioner's claim that
he abandoned his work does not persuade.35 The elements of abandonment being (1) the failure to
report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the
employer-employee relationship manifested by some overt acts,36 the onus probandi lies with
petitioner which, however, failed to discharge the same.
Auxtero, having been declared to be a regular employee of petitioner, and found to be illegally dismissed
from employment, should be entitled to salary differential37 from the time he rendered one year of
service until his dismissal, reinstatement plus backwages until the finality of this decision.38 In view,
however, of the long period of time39 that had elapsed since his dismissal on November 15, 1992, it
would be appropriate to award separation pay of one (1) month salary for each year of service, in lieu of
reinstatement.40
As regards the remaining respondents, the Court affirms the ruling of both the NLRC and the appellate
court, ordering petitioner to accept them as its regular employees and to give each of them the salaries,
allowances and other employment benefits and privileges of a regular employee under the pertinent
Collective Bargaining Agreement.
Petitioner claims, however, that it has become impossible for it to comply with the orders of the NLRC
and the Court of Appeals, for during the pendency of this case, it was forced to reduce its personnel due
83

to heavy losses caused by economic crisis and the pilots' strike of June 5, 1998.41 Hence, there are no
available positions where respondents could be placed.

And petitioner informs that "the employment contracts of all if not most of the respondents . . . were
terminated by Synergy effective 30 June 1998 when petitioner terminated its contract with Synergy."42

Other than its bare allegations, petitioner presented nothing to substantiate its impossibility of
compliance. In fact, petitioner waived this defense by failing to raise it in its Memorandum filed on June
14, 1999 before the Court of Appeals.43 Further, the notice of termination in 1998 was in disregard of a
subsisting temporary restraining order44 to preserve the status quo, issued by this Court in 1996 before
it referred the case to the Court of Appeals in January 1999. So as to thwart the attempt to subvert the
implementation of the assailed decision, respondents are deemed to be continuously employed by
petitioner, for purposes of computing the wages and benefits due respondents.

Finally, it must be stressed that respondents, having been declared to be regular employees of
petitioner, Synergy being a mere agent of the latter, had acquired security of tenure. As such, they could
only be dismissed by petitioner, the real employer, on the basis of just or authorized cause, and with
observance of procedural due process.

WHEREFORE, the Court of Appeals Decision of September 29, 2000 is AFFIRMED with MODIFICATION.

Petitioner PHILIPPINE AIRLINES, INC. is ordered to:

(a) accept respondents ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD
GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P.
CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY
LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO
TUNACAO, CHERRIE ALEGRES, EDUARDO MAGDADARAUG, NELSON M. DULCE and ALLAN BENTUZAL as
its regular employees in their same or substantially equivalent positions, and pay the wages and benefits
due them as regular employees plus salary differential corresponding to the difference between the
wages and benefits given them and those granted to petitioner's other regular employees of the same
rank; and

(b) pay respondent BENEDICTO AUXTERO salary differential; backwages from the time of his dismissal
until the finality of this decision; and separation pay, in lieu of reinstatement, equivalent to one (1)
month pay for every year of service until the finality of this decision.

There being no data from which this Court may determine the monetary liabilities of petitioner, the case
is REMANDED to the Labor Arbiter solely for that purpose.

SO ORDERED.
84
[G.R. NO. 177785 : September 3, 2008]
RANDY ALMEDA, EDWIN M. AUDENCIAL, NOLIE D. RAMIREZ, ERNESTO M. CALICAGAN and REYNALDO M.
CALICAGAN, Petitioners, v. ASAHI GLASS PHILIPPINES, INC., Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed
by petitioners Randy Almeda, Edwin Audencial, Nolie Ramirez, Ernesto Calicagan and Reynaldo
Calicagan, seeking to reverse and set aside the Decision1 dated 10 November 2006 and the Resolution2
dated 27 April 2007 of the Court of Appeals in CA-G.R. SP No. 93291. The appellate court reversed and
set aside the Decision dated 29 June 2005 and Resolution dated 24 November 2005 of the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 039768-04 finding respondent Asahi Glass Philippines,
Inc. jointly and severally liable with San Sebastian Allied Services, Inc. (SSASI) for illegal dismissal, and
ordering both respondent and SSASI to reinstate petitioners to their former positions and to pay their
backwages from 2 December 2002 up to the date of their actual reinstatement. Instead, the Court of
Appeals reinstated the Decision dated 18 February 2004 of the Labor Arbiter dismissing petitioners'
complaint for illegal dismissal against respondent and SSASI, but ordering the payment of separation
benefits to petitioners.
The present Petition arose from a complaint for illegal dismissal with claims for moral and exemplary
damages and attorney's fees filed by petitioners against respondent and SSASI.
In their Complaint3 filed before the Labor Arbiter, petitioners alleged that respondent (a domestic
corporation engaged in the business of glass manufacturing) and SSASI (a labor-only contractor) entered
into a service contract on 5 March 2002 whereby the latter undertook to provide the former with the
necessary manpower for its operations. Pursuant to such a contract, SSASI employed petitioners Randy
Almeda, Edwin Audencial, Nolie Ramirez and Ernesto Calicagan as glass cutters, and petitioner Reynaldo
Calicagan as Quality Controller,4 all assigned to work for respondent. Petitioners worked for respondent
for periods ranging from three to 11 years.5 On 1 December 2002, respondent terminated its service
contract with SSASI, which in turn, terminated the employment of petitioners on the same date.
Believing that SSASI was a labor-only contractor, and having continuously worked as glass cutters and
quality controllers for the respondent - functions which are directly related to its main line of business as
glass manufacturer - for three to 11 years, petitioners asserted that they should be considered regular
employees of the respondent; and that their dismissal from employment without the benefit of due
process of law was unlawful. In support of their complaint, petitioners submitted a copy of their work
schedule to show that they were under the direct control of the respondent which dictated the time and
manner of performing their jobs.
Respondent, on the other hand, refuted petitioners' allegations that they were its regular employees.
Instead, respondent claimed that petitioners were employees of SSASI and were merely assigned by
SSASI to work for respondent to perform intermittent services pursuant to an Accreditation Agreement,
dated 5 March 2002, the validity of which was never assailed by the petitioners. Respondent contested
petitioners' contention that they were performing functions that were directly related to respondent's
main business since petitioners were simply tasked to do mirror cutting, an activity occasionally
performed upon a customer's order. Respondent likewise denied exercising control over petitioners and
asserted that such was wielded by SSASI. Finally, respondent maintained that SSASI was engaged in
legitimate job contracting and was licensed by the Department of Labor and Employment (DOLE) to
engage in such activity as shown in its Certificate of Registration.6 Respondent presented before the
Labor Arbiter copies of the Opinion dated 18 February 2003 of DOLE Secretary Patricia Sto. Tomas
authorizing respondent to contract out certain activities not necessary or desirable to the business of the
company; and the Opinion dated 10 July 2003 of DOLE Bureau of Labor Relations (DOLE-BLR) Director
Hans Leo Cacdac allowing respondent to contract out even services that were not directly related to its
main line of business.
SSASI, for its part, claimed that it was a duly registered independent contractor as evidenced by the
Certificate of Registration issued by the DOLE on 3 January 2003. SSASI averred that it was the one who
hired petitioners and assigned them to work for respondent on occasions that the latter's work force
could not meet the demands of its customers. Eventually, however, respondent ceased to give job orders
to SSASI, constraining the latter to terminate petitioners' employment.
On 18 February 2004, the Labor Arbiter promulgated his Decision7 finding that respondent submitted
overwhelming documentary evidence to refute the bare allegations of the petitioners and accordingly
dismissing the complaint for lack of merit. However, he also ordered the payment of separation benefits
to petitioners. The Labor Arbiter thus decreed:
WHEREFORE, premises considered, judgment is hereby rendered declaring that the instant case should
be, as it is hereby DISMISSED for lack of merit. However, the respondent San Sebastian Allied Services,
Inc. is hereby ordered to pay the [herein petitioners] Edwin M. Audencial, Reynaldo Calicagan, Randy
Almeda, Nolie D. Ramirez and Ernesto Calicagan their respective separation benefits in the following
specified amounts:
(1) Edwin Audencial
P 41,327.00
(2) Reynaldo M. Calicagan
15, 860.00
(3) Randy V. Almeda
45,084.00
(4) Nolie Ramirez
15,028.00
85
(5) Ernesto Calicagan
22,542.00
All other claims are dismissed.
On appeal, the NLRC reversed the afore-quoted Decision of the Labor Arbiter, giving more evidentiary
weight to petitioners' testimonies. It appeared to the NLRC that SSASI was engaged in labor-only
contracting since it did not have substantial capital and investment in the form of tools, equipment and
machineries. The petitioners were recruited and assigned by SSASI to respondent as glass cutters,
positions which were directly related to respondent's principal business of glass manufacturing. In light
of the factual circumstances of the case, the NLRC declared that petitioners were employees of
respondent and not of SSASI. Hence, the NLRC ruled in its Decision8 dated 29 June 2005:
WHEREFORE, the decision appealed from is hereby VACATED and SET ASIDE. [Herein respondent] and
[SSASI] are hereby ordered to: (1) reinstate the [herein petitioners] to their former position as glass
cutters; and (2) pay [petitioners'] full backwages from December 2, 2002 up to the date of their actual
reinstatement. The liability of [respondent] and [SSASI] for [petitioners'] backwages is further declared to
be joint and several.
Only respondent moved for the reconsideration of the foregoing NLRC Decision. Respondent prayed that
the NLRC vacate its previous finding that SSASI was a labor-only contractor and that it was guilty of the
illegal dismissal of petitioners. In a Resolution9 dated 24 November 2005, the NLRC denied the Motion
for Reconsideration of respondent for lack of compelling justification to modify, alter or reverse its
earlier Decision.
This prompted respondent to elevate its case to the Court of Appeals by the filing of a Petition for
Certiorari with Application for the Issuance of Temporary Restraining Order (TRO),10 alleging that the
NLRC abused its discretion in ignoring the established facts and legal principles fully substantiated by the
documentary evidence on record and legal opinions of labor officials, and in giving more credence to the
empty allegations advanced by petitioners.
To prevent the execution of the Decision dated 25 June 2005 and Resolution dated 24 November 2005 of
the NLRC, respondent included in its Petition a prayer for the issuance of a TRO, which it reiterated in a
motion filed on 29 August 2006. Acting on respondent's motion, the Court of Appeals issued a TRO on 11
September 2006 enjoining the NLRC from enforcing its 25 June 2005 Decision and 24 November 2005
Resolution.11
On 10 November 2006, the Court of Appeals rendered a Decision granting respondent's Petition for
Certiorari and reversingthe NLRC Decision dated 25 June 2005. The appellate court found merit in
respondent's argument that the NLRC gravely abused its discretion in not finding that there was a
legitimate job contracting between respondent and SSASI. SSASI is a legitimate job contractor as proven
by its Certificate of Registration issued by the DOLE. Respondent entered into a valid service contract
with SSASI, by virtue of which petitioners were assigned by SSASI to work for respondent. The service
contract itself, which was duly approved by the DOLE, defined the relationship between SSASI and
petitioners as one of employer-employees. It was SSASI which exercised the power of control over
petitioners. Petitioners were merely allowed to work at respondent's premises for reasons of efficiency.
Moreover, it was SSASI, not respondent, who terminated petitioners' services. The fallo of the Decision
of the Court of Appeals state:
WHEREFORE, premises considered, the petition is GRANTED and [NLRC's] assailed 29 June 2005 Decision
is, accordingly, REVERSED and SET ASIDE. In lieu thereof, the 18 February 2004 Decision rendered in the
case by Labor Arbiter Francisco A. Robles is REINSTATED.12
The Court of Appeals denied petitioners' Motion for Reconsideration in a Resolution dated 27 April 2007.
Hence, petitioners come before this Court via the instant Petition for Review on Certiorari assailing the
10 November 2006 Decision and 27 April 2007 Resolution of the Court of Appeals based on the following
assignment of errors:
I.
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REVERSING THE FINDING OF THE NLRC THAT
RESPONDENT COMPANY IS ENGAGED IN LABOR-ONLY CONTRACTING.
II.
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REVERSING THE RULING OF THE NLRC THAT
SAN SEBASTIAN ALLIED SERVICES, INC. IS MERELY RESPONDENT'S AGENT AND RESPONDENT IS
PETITIONERS' REAL EMPLOYER.
III.
THE COURT OF APPEALS COMMITTED AN ERROR IN DISMISSING PETITIONERS' COMPLAINT FOR ILLEGAL
DISMISSAL.
It is apparent to this Court that the judicious resolution of the Petition at bar hinges on two elemental
issues: (1) whether petitioners were employees of respondent; and (2) if they were, whether they were
illegally dismissed.
Respondent adamantly insists that petitioners were not its employees but those of SSASI, a legitimate
job contractor duly licensed by the DOLE to undertake job contracting activities. The job performed by
petitioners were not directly related to respondent's primary venture as flat glass manufacturer, for they
were assigned to the mirroring line to perform glass cutting on occasions when the employees of
respondent could not comply with the market's intermittent increased demand. And even if petitioners
were working at respondent's premises, it was SSASI which effectively supervised the manner and
method petitioners performed their jobs, except as to the result thereof.
The Court would only be able to deem petitioners as employees of respondent if it is established that
SSASI was a labor-only contractor, and not a legitimate job contractor or subcontractor.
86
Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put
out or farm out to a contractor or subcontractor the performance or completion of a specific job, work or
service within a definite or predetermined period, regardless of whether such job, work or service is to
be performed or completed within or outside the premises of the principal.13 A person is considered
engaged in legitimate job contracting or subcontracting if the following conditions concur:
(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to
perform the job, work or service on its own account and under its own responsibility according to its own
manner and method, and free from the control and direction of the principal in all matters connected
with the performance of the work except as to the results thereof;
(b) The contractor or subcontractor has substantial capital or investment; andcralawlibrary
(c) The agreement between the principal and contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational safety and health standards, free exercise of the
right to self-organization, security of tenure, and social and welfare benefits.14
On the other hand, labor-only contracting, a prohibited act, is an arrangement in which the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal.15 In labor-only contracting, the following elements are present:
(a) The contractor or subcontractor does not have substantial capital or investment to actually perform
the job, work or service under its own account and responsibility;
(b) The employees recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal.16
In labor-only contracting, the statutes create an employer-employee relationship for a comprehensive
purpose: to prevent circumvention of labor laws. The contractor is considered as merely the agent of the
principal employer and the latter is responsible to the employees of the labor-only contractor as if such
employees are directly employed by the principal employer.17 Therefore, if SSASI was a labor-only
contractor, then respondent shall be considered as the employer of petitioners who must bear the
liability for the dismissal of the latter, if any.
An important element of legitimate job contracting is that the contractor has substantial capital or
investment, which respondent failed to prove. There is a dearth of evidence to prove that SSASI
possessed substantial capital or investment when respondent began contractual relations with it more
than a decade before 2003. Respondent's bare allegations, without supporting proof that SSASI had
substantial capital or investment, do not sway this Court. The Court did not find a single financial
statement or record to attest to the economic status and financial capacity of SSASI to venture into and
sustain its own business independent from petitioner.
Furthermore, the Court is unconvinced by respondent's argument that petitioners were performing jobs
that were not directly related to respondent's main line of business. Respondent is engaged in glass
manufacturing. One of the petitioners served as a quality controller, while the rest were glass cutters.
The only excuse offered by respondent - that petitioners' services were required only when there was an
increase in the market's demand with which respondent could not cope - only prove even more that the
services rendered by petitioners were indeed part of the main business of respondent. It would mean
that petitioners supplemented the regular workforce when the latter could not comply with the market's
demand; necessarily, therefore, petitioners performed the same functions as the regular workforce.
Even respondent's claim that petitioners' services were required only intermittently, depending on the
market, deserves scant credit. The indispensability of petitioners' services was fortified by the length and
continuity of their performance, lasting for periods ranging from three to 11 years.
More importantly, the Court finds that the crucial element of control over petitioners rested in
respondent. The power of control refers to the authority of the employer to control the employee not
only with regard to the result of work to be done, but also to the means and methods by which the work
is to be accomplished. It should be borne in mind that the power of control refers merely to the
existence of the power and not to the actual exercise thereof. It is not essential for the employer to
actually supervise the performance of duties of the employee; it is enough that the former has a right to
wield the power.18
In the instant case, petitioners worked at the respondent's premises, and nowhere else. Petitioners
followed the work schedule prepared by respondent. They were required to observe all rules and
regulations of the respondent pertaining to, among other things, the quality of job performance,
regularity of job output, and the manner and method of accomplishing the jobs. Obscurity hounds
respondent's argument that even if petitioners were working under its roof, it was still SSASI which
exercised control over the manner in which they accomplished their work. There was no showing that it
was SSASI who established petitioners' working procedure and methods, or who supervised petitioners
in their work, or who evaluated the same. Other than being the one who hired petitioners, there was
absolute lack of evidence that SSASI exercised control over them or their work.
The fact that it was SSASI which dismissed petitioners from employment is irrelevant. It is hardly proof of
control, since it was demonstrated only at the end of petitioners' employment. What is more, the
dismissal of petitioners by SSASI was a mere result of the termination by respondent of its contractual
relations with SSASI.
Despite respondent's disavowal of the existence of an employer-employee relationship between it and
petitioners and its unyielding insistence that petitioners were employees of SSASI, the totality of the
facts and the surrounding circumstances of the case convey otherwise. SSASI is a labor-only contractor;
hence, it is considered as the agent of respondent. Respondent is deemed by law as the employer of
petitioners. Surely, respondent cannot expect this Court to sustain its stance and accord full evidentiary
weight to the documentary evidence belatedly procured in its vain attempt to evade liability as
petitioners' employer.
The Certificate of Registration presented by respondent to buttress its position that SSASI is a duly
registered job contractor is of little significance, considering that it were issued only on 3 January 2003.
There is no further proof that prior to said date, SSASI had already registered with and had been
recognized by the DOLE as a job contractor.
87

Verily, the Certificate of Registration of SSASI, instead of supporting respondent's case, only served to An employment shall be deemed to be casual if its is not covered by the preceding paragraph: Provided, That, any
raise more doubts. The timing of the registration of SSASI is highly suspicious. It is important to note that 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
SSASI was already providing respondent with workers, including petitioners, long before SSASI was
while such activity exists.
registered with the DOLE as a job contractor. Some of the petitioners were hired by SSASI and made to
work for respondent for 11 years. Petitioners were also dismissed from service only a month prior to the This Court expounded on the afore-quoted provision, thus -
issuance of the Certificate of Registration of SSASI. Neither respondent nor SSASI exerted any effort to
explain the reason for the belated registration with the DOLE by SSASI as a purported job contractor. It The primary standard, therefore, of determining a regular employment is the reasonable connection between the
may be safely discerned from the surrounding circumstances that the Certificate of Registration of SSASI particular activity performed by the employee in relation to the usual business or trade of the employer. x x x The
was merely secured in order to blanket the previous relations between SSASI and respondent with connection can be determined by considering the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even
legality.
if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the
Moreover, the Certificate of Registration issued by the DOLE recognized that SSASI was a legitimate job contractor only
employment is also considered regular, but only with respect to such activity and while such activity exists.20
as of the date of its issuance, 3 January 2003. There is no basis whatsoever to give the said Certificate any retroactive
effect. The Certificate can only be used as reference by persons who would consider the services offered by SSASI
In the instant Petition, the Court has already declared that petitioners' employment as quality controllers and glass
subsequent to its issuance. Respondent, who entered into contractual relations with SSASI way before the said
cutters are directly related to the usual business or trade of respondent as a glass manufacturer. Respondent would
Certificate, cannot claim that it relied thereon.
have wanted this Court to believe that petitioners' employment was dependent on the increased market demand.
However, bearing in mind that petitioners have worked for respondent for not less than three years and as much as 11
Hence, the status of SSASI as a job contractor previous to its registration with the DOLE on 3 January 2003 is still
years, which respondent did not refute, then petitioners' continued employment clearly demonstrates its continuing
refutable. It can only be determined upon an evaluation of its activities as contractor prior to the issuance of its
necessity and indispensability to the business of respondent, raising their employment to regular status. Thus, having
Certificate of Registration.
gained regular status, petitioners were entitled to security of tenure and could only be dismissed on just or authorized
causes and after they had been accorded due process.21
For the same reasons, this Court cannot give much weight to the Opinions dated 18 February 2003 and 10 July 2003 of
DOLE Secretary Sto. Tomas and DOLE-BLR Director Cacdac, respectively, allowing respondent to contract out certain
As petitioners' employer, respondent has the burden of proving that the dismissal was for a cause allowed under the
services. The said Opinions were noticeably issued only after the hiring and termination of petitioners. And, although
law, and that they were afforded procedural due process.22 However, respondent failed to discharge this burden with
the Opinions allow respondent to contract out certain services, they do not necessarily prove that the services
substantial evidence as it noticeably narrowed its defense to the denial of any employer-employee relationship
respondent contracted to SSASI were actually among those it was allowed to contract out; or that SSASI was a
between it and petitioners.
legitimate job contractor, thus, relieving respondent of any liability for the dismissal of petitioners by SSASI.

The sole reason given for the dismissal of petitioners by SSASI was the termination of its service contract with
Equally unavailing is respondent's stance that its relationship with petitioners should be governed by the Accreditation
respondent. But since SSASI was a labor-only contractor, and petitioners were to be deemed the employees of
Agreement stipulating that petitioners were to remain employees of SSASI and shall not become regular employees of
respondent, then the said reason would not constitute a just or authorized cause23 for petitioners' dismissal. It would
the respondent. To permit respondent to disguise the true nature of its transactions with SSASI by the terms of its
then appear that petitioners were summarily dismissed based on the afore-cited reason, without compliance with the
contract, for the purpose of evading its liabilities under the law, would seriously impair the administration of justice. A
procedural due process for notice and hearing.
party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character of its business, i.e.,
whether as labor-only contractor or as job contractor, it being crucial that its character be measured in terms of and
Herein petitioners, having been unjustly dismissed from work, are entitled to reinstatement without loss of seniority
determined by the criteria set by statute.19
rights and other privileges and to full back wages, inclusive of allowances, and to other benefits or their monetary
equivalents computed from the time compensation was withheld up to the time of actual reinstatement.24 Their
Having established that respondent was petitioners' employer, the Court now proceeds to determining whether
earnings elsewhere during the periods of their illegal dismissal shall not be deducted therefrom.25
petitioners were dismissed in accordance with law.

WHEREFORE, premises considered, the instant Petition is GRANTED. The Decision dated 10 November 2006 and
Article 280 of the Labor Code, as amended, reads -
Resolution dated 27 April 2007 of the Court of Appeals in CA-G.R. SP No. 93291 are REVERSED and SET ASIDE. The
Decision dated 29 June 2005 of the National Labor Relations Commission in NLRC-NCR CA No. 039768-04 is thereby
ART. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary REINSTATED. Let the records of this case be remanded to the Computation and Examination Unit of the NLRC for the
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to proper computation of subject money claims as above-discussed. No costs.
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 SO ORDERED.
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.
88
[G.R. NO. 168537 : December 11, 2008]
DAMIAN AKLAN, JUANITO AMIDO, REYNALDO BATICA, RAMIL BAUTISTA, WELARD BAUTISTA, MAMERTO BRIGOLI,
ELMER CABOTEJA, JOEL CAMMAYO, WELFREDO CARIO, et al, Petitioners, v. SAN MIGUEL CORPORATION, BMA PHILASIA,
INC., and ARLENE EUSEBIO, Respondents.
DECISION
REYES, R.T., J.:
WE tackle in this labor case the dichotomy between impermissible labor-only contracting and legitimate job contracting.
This is a review on certiorari of the Decision1 of the Court of Appeals (CA) upholding that of the National Labor Relations
Commission (NLRC), finding the dismissal of petitioners justified.
The Facts
Respondent BMA Philasia, Inc. (BMA) is a domestic corporation engaged in the business of transporting and hauling of
cargoes, goods, and commodities of all kinds. Respondent Arlene Eusebio is the president of BMA.
Petitioners, numbering forty-seven (47) in all, are the former employees of respondent BMA at respondent San Miguel
Corporation's (SMC) warehouse in Pasig City. They were hired under fixed-term contracts beginning October 1999.
On July 31, 2001, a number of petitioners went to the Department of Labor and Employment (DOLE) District Office to
file a complaint against BMA and Eusebio for underpayment of wages and non-payment of premium pay for rest day,
13th month pay, and service incentive leave pay.2
On August 14, 2001, petitioner Elmer Caboteja was charged with insubordination and disrespect to superior, failure to
properly perform his job assignment, and unauthorized change of schedule. He was directed to submit his written
explanation within forty-eight (48) hours. On August 17, 2001, Caboteja was terminated for the offenses of disregard of
company rules and regulations and rude attitude to supervisors. On August 27, 2001, he filed a complaint for illegal
dismissal against BMA.3
On various dates thereafter, BMA agreed to a settlement with some of the complainants in the case4 for underpayment
of wages.5 Eleven of the present petitioners executed quitclaims and releases in favor of BMA and Eusebio in the
presence of DOLE district officers. BMA refused to settle the claim of other complainants.
On September 13, 2001, petitioners Joan Erico Dumalagan and Ronaldo Salvador were also terminated for failure to
perform their job responsibilities. On September 17, 2001, Dumalagan and Salvador filed complaints for illegal dismissal
against BMA.6
On October 18, 2001, petitioners held a picket at the warehouse premises to protest BMA's refusal to pay the claim for
underpayment of the rest of the workers. This picket disrupted the business operations of private respondents,
prompting BMA to terminate their services. Subsequently, petitioners filed separate complaints against BMA, Eusebio,
and SMC for illegal dismissal.7 All the complaints for illegal dismissal were consolidated.
Petitioners alleged that they were illegally dismissed after filing a complaint for underpayment of wages and non-
payment of benefits before the DOLE; they were terminated after staging a peaceful picket to protest the non-payment
of their claims. According to them, BMA is a labor-only contractor. SMC was not only the owner of the warehouse and
equipment used by BMA, it was their true employer. The manner and means by which they performed their work were
controlled by SMC through its Sales Logistic Coordinator who was overseeing their performance everyday.
Private respondents BMA and Eusebio countered that petitioners Caboteja, Dumalagan, and Salvador were validly and
justly dismissed. They were among the eleven who already signed quitclaims and releases before the DOLE district
office after receiving an amount in settlement of their claims. As for the rest of petitioners (36 complainants), there was
no illegal dismissal to speak of. Said employees simultaneously did not go back to work for no apparent reason on
October 18, 2001.
Private respondent SMC maintained that it had no employer-employee relationship with petitioners who were hired
and supervised exclusively by BMA pursuant to a warehousing and delivery agreement in consideration of a fixed
monthly fee. SMC argued that BMA is a legitimate and independent contractor, duly registered with the Securities and
Exchange Commission (SEC) as a separate and distinct corporation with substantial capitalization, investment,
equipment, and tools. It submitted documentary evidence proving that BMA engaged the services of petitioners, paid
for their wages and benefits, and exercised exclusive control and supervision over them.
SMC showed that under their contract, BMA provided delivery trucks, drivers, and helpers in the storage and
distribution of SMC products. On a day-to-day basis, after the routes were made by SMC salesmen, they would book the
orders they obtained. In turn, BMA's Schedular Planner, detailed at the Pasig Warehouse, downloaded these booked
orders from the computer and processed the necessary documents to be forwarded to the Warehouse Checker, also an
employee of BMA. SMC contended that petitioners were dismissed by BMA for staging a two-hour strike without
complying with the mandatory requirements for a valid strike. As a result, BMA had to come up with ways and means in
order to avoid the disruption of delivery operations.
Labor Arbiter and NLRC Dispositions
After due hearings, Labor Arbiter Veneranda C. Guerrero found respondent BMA liable for illegal dismissal and ordered
the reinstatement of petitioners. She ruled that the evidence presented duly established that BMA was a legitimate
independent contractor and the actual employer of petitioners. Its failure, however, to comply with the registration and
reportorial requirements of the DOLE rendered SMC, its principal, directly liable to the claims of petitioners.8 Thus,
BMA and SMC were found jointly and severally liable for the payment of petitioners' backwages and money claims. The
dispositive part of the Arbiter ruling runs in this wise:
WHEREFORE, all the foregoing considered, judgment is hereby rendered finding respondent BMA Philasia, Inc., liable for
illegal dismissal. Accordingly, is it hereby ordered to reinstate all of the complainants to their previous positions, and to
pay jointly and severally with respondent San Miguel the complainants' backwages reckoned from the time of their
illegal dismissal up to their actual/payroll reinstatement, the aggregate amount of which as of this date amounts to
SEVEN MILLION FIVE HUNDRED EIGHTEEN THOUSAND TWO HUNDRED FIFTY-TWO AND 89/100 PESOS (P7,518,252.89).
In addition respondents are solidarily held liable to pay the complainants' Daniel Jamisola, Rodolfo Cinco, Eduardo
Garcia, Dario Macaraeg, Romeo Del Rosario, Alan Quiles, Joseph Quiles, Ronald Suprino, Rolando Felizardo, Efren
Fernandez, Damian Aklan, Welard Bautista, Rodrigo Suprino, Noel Janer, Jesus Macaraeg, Reynaldo Batica, Rhonnel
Rodil, Eduardo Peremne, Mamerto Brigoli, Ireneo Odiamar, Rex Ignacio, Edgardo Mahaguay, Reyes Suprino, Rodrigo
Dela Cruz, Ramil Bautista, Francis Suprino, Eduardo Tiongson, Joel Cammayo, Arwen Dablo, Alex Dela Vega, Bernard
Gallogo, Rex Farnacio, Ruben De Castro, Rowan Janer, Raquel Janer, and Bernardo Macaraeg their salary differentials,
service incentive leave pay and 13th month pay in the aggregate amount of ONE MILLION TWO HUNDRED FIFTY-SIX
THOUSAND THREE HUNDRED SIXTY-SIX and 80/100 PESOS (P1,256,366.80).
Respondents are further assessed the amount equivalent to ten percent (10%) of the total award, as and for attorney's
fees.
The computation of the complainants' individually adjudged benefits shall form part of this Decision as Annex "A"
hereof.
All other claims are DISMISSED for lack of merit.
89
SO ORDERED.9 (Emphasis supplied)cralawlibrary
Respondents appealed the decision of the Labor Arbiter to the NLRC. On December 19, 2003, the NLRC reversed the
Labor Arbiter disposition and ruled that there was no illegal dismissal. The fallo of the NLRC decision reads:
WHEREFORE, in view of all the foregoing, the appealed decision of the Labor Arbiter is hereby REVERSED and SET ASIDE
and a new decision is hereby rendered finding that there was no illegal dismissal committed by respondents, hence, no
liability for backwages. However, complainants are awarded their salary differentials, service incentive leave pay and
13th month pay except for the year 2000 in the aggregate amount of ONE MILLION TWO HUNDRED FIFTY-SIX
THOUSAND THREE HUNDRED SIXTY-SIX AND 80/100 (P1,256,366.80) and 10% ATTORNEY's FEES based on the salary
differentials, SILP and 13th month pay.
SO ORDERED.10
The NLRC found that petitioners Caboteja, Dumalagan, and Salvador were separated from their jobs for just and valid
causes. They were given the opportunity to explain their sides. As for the quitclaims previously executed by the other
petitioners, the NLRC ruled that these were sufficient basis to release respondent BMA from liability.
With respect to the first and second assigned errors, the records show that complainants Elmer Caboteja, Erico "Jojo"
Dumalagan and Ronaldo Salvador were separated from their jobs for just and valid causes and after they were given the
chance to explain their sides. Copies of memoranda were served upon them advising their violation of company rules
and regulations and rude attitude and disrespect to superiors and disrespect to superiors in the case of Caboteja and
failure to perform duties and responsibilities in the case of Dumalagan and Salvador. They were asked to explain and
finding their explanations unacceptable, respondents dismissed them. Hence, they are not entitled to separation pay.
As regards the other complainants, there is no showing that they were illegally dismissed from their jobs by BMA. They
have not given details on to whom they reported for work, who barred them from entering the respondents' premises
and from working, in so many words how they were told that they were already dismissed. The only evident fact is that
they just stopped reporting for work beginning October 18, 2001 without informing BMA why there were doing so.
Their claim that they were not allowed by the respondents to return to their work is hard to believe. Why should the
respondents terminate simultaneously the services of the complainants and completely paralyze respondents' business
operation, particularly their service contract with SMC? Complainants have not shown any reason which would compel
the respondents to resort to mass dismissal. On the other hand, complainants have strong reason to paralyze
respondents' operation in order to force compliance to their demands.
x x x
In fact, the records of this case also disclose that during the mandatory conciliation proceedings, BMA urged these
complainants to go back to work, but may refused to do so. Obviously, their refusal to go back to their work was a
deliberate move to force respondents to give in to their demands. Considering this refusal, it is not hard to believe that
complainants were not dismissed but rather they refused to work in order to paralyze respondents' operations and
force them to give in to complainants' demands.11 (Emphasis supplied)cralawlibrary
CA Disposition
Aggrieved, petitioners filed a Rule 65 petition with the CA. The following grounds were interposed: (1) that the NLRC
gravely abused its discretion in holding that Caboteja, Dumalagan, and Salvador were validly dismissed; (2) that the
other petitioners were not dismissed but were guilty of abandonment; and (3) that the quitclaims executed by eleven of
the petitioners barred the complaint for illegal dismissal.12
On April, 15, 2005, the CA denied the petition, affirming in full the NLRC disposition, thus:
WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly DISMISSED, for
lack of merit. The assailed Decision dated December 19, 2003 and Resolution dated July 20, 2004 of the National Labor
Relations Commission in the consolidated cases, NLRC Case No. CN 08-04522-01-CA No. 036856-03 (NLRC NCR North
Sector Case Nos. 08-04522-2001, 09-04941-2001, 00-11-05023-2001, 00-11-05969-2001, 11-01-00450-2002, 02-00934-
2002, 12-06288-2001, and 12-06320-2001), are hereby AFFIRMED and UPHELD.
No pronouncement as to costs.
SO ORDERED.13
In ruling against petitioners, the CA found that the NLRC committed no reversible error or grave abuse of discretion in
ruling that petitioners were not illegally dismissed but actually refused to report back to work after staging a surprise
stoppage that paralyzed respondent BMA's business operations at the Pasig warehouse on October 18, 2001.
Issues
Undaunted, petitioners resorted to this review on certiorari, anchored on the following grounds:
The CA committed a serious legal error in not ruling that respondent San Miguel Corporation (principal of respondent
BMA Philasia), and respondent Arlene Eusebio, (president and owner of respondent BMA Philasia) are all solidarily liable
for petitioners' money claims.
The CA committed a serious legal error in ruling that the quitclaims executed by eleven (11) of the petitioners, in
relation to their claims for underpayment of wages before the DOLE, also barred their subsequent complaint for illegal
dismissal, despite the fact that the said complaint was not yet in existence at the time the quitclaims were executed.
The CA committed a serious legal error in refusing to hold that respondent San Miguel Corporation was petitioners' real
employer despite the fact that respondent BMA Philasia was not duly registered with the DOLE and caused the workers
to perform tasks directly related to the business of respondent San Miguel Corporation and under the latter's
supervision.
The CA committed a legal error and acted with grave abuse of discretion in holding that petitioners Elmer Caboteja,
Joan Erico Dumalagan, and Ronaldo Salvador were not illegally dismissed from their jobs, despite a previous ruling of
the Labor Arbiter to the contrary.
The CA committed a serious legal error in not awarding damages, at the very least, to petitioners Joan Erico Dumalagan,
and Ronaldo Salvador for violation of their right to due process.
The CA seriously committed an error of law in holding that the rest of the petitioners abandoned their jobs and were
not dismissed therefrom, contrary to the findings of the Labor Arbiter who heard the case.14 (Underscoring
supplied)cralawlibrary
Our Ruling
Petitioners argue mainly that their employer is, in fact, respondent SMC, not respondent BMA. They contend that BMA
is a labor-only contractor and SMC, as their true employer, should be held directly liable for their money claims.
A finding that a contractor is a "labor-only" contractor, as opposed to permissible job contracting, is equivalent to
declaring that there is an employer-employee relationship between the principal and the employees of the supposed
contractor, and the "labor-only" contractor is considered as a mere agent of the principal, the real employer.15
90
Both the Labor Arbiter and the NLRC found that the employment contracts of petitioners duly prove that an employer-
employee relationship existed between petitioners and BMA. We hasten to add that the existence of an employer-
employee relationship is ultimately a question of fact and the findings by the Labor Arbiter and the NLRC on that score
shall be accorded not only respect but even finality when supported by ample evidence.16
In its ruling, the NLRC considered the following elements to determine the existence of an employer-employee
relationship: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by
whatever means; and (4) the power to control the worker's conduct.17 All four elements were found by the NLRC to be
vested in BMA. This NLRC finding was affirmed by the CA:
x x x It is the BMA which actually conducts the hauling, storage, handling, transporting, and delivery operations of SMC's
products pursuant to their warehousing and Delivery Agreement. BMA itself hires and supervises its own workers to
carry out the aforesaid business activities. Apart from the fact that it was BMA which paid for the wages and benefits, as
well as SSS contributions of petitioners, it was also the management of BMA which directly supervised and imposed
disciplinary actions on the basis of established rules and regulations of the company. The documentary evidence
consisting of numerous memos throughout the period of petitioners' employment leaves no doubt in the mind of this
Court that petitioners are only too aware of who is their true employer. Petitioners received daily instructions on their
tasks form BMA management, particularly, private respondent Arlene C. Eusebio, and whenever they committed lapses
or offenses in connection with their work, it was to said officer that they submitted compliance such as written
explanations, and brought matters connected with their specific responsibilities.18
The employer-employee relationship between BMA and petitioners is not tarnished by the absence of registration with
DOLE as an independent job contractor on the part of BMA. The absence of registration only gives rise to the
presumption that the contractor is engaged in labor-only contracting, a presumption that respondent BMA ably refuted.
Thus, We find no grave abuse of discretion in the CA observation that respondent BMA is the true employer of
petitioners who should be held directly liable for their claims. Likewise, no grave abuse of discretion can be ascribed to
the CA when it ruled that illegal dismissal was absent.
The records fully disclose that petitioners Caboteja, Dumalagan, and Salvador were separated from their jobs for just
and valid causes. Caboteja was cited for violation of company rules and regulations and disrespectful conduct.
Dumalagan and Salvador were investigated for failure to perform duties and responsibilities. After their explanations
were found unacceptable, they were accordingly dismissed.
As for the other petitioners, they contend that they were illegally dismissed when respondent BMA barred them from
entering the work premises and from performing their work. Both the NLRC and the CA found that petitioners failed to
substantiate this contention. Rather, what was shown in the records was that they simply stopped reporting for work
starting October 18, 2001 when they staged a picket. The CA observation along this line is worth restating:
x x x petitioners failed to substantiate their claim that they had been prevented from entering the work premises after
staging a "picket" on October 18, 2001 to further press their demands for payment of their money claims. At this time,
the labor standards case was already pending with the DOLE District Office and petitioners could have availed of said
proceedings with the intervention of DOLE officials. Instead, however, they resorted to an illegal stoppage of work that
paralyzed the business operations of BMA. As aptly noted by the NLRC, there is simply no probable or logical reason for
private respondent BMA to simultaneously dismiss its workers that will disrupt business operations at the warehouse.
Under the factual circumstances, it clearly appears that petitioners refused to report back to their work in order to force
their employer BMA to give in to their immediate demand for the salary differentials and unpaid benefits subject of
their complaint with the DOLE. Hence, BMA cannot be held liable for illegal dismissal.
While it is true that the defense of abandonment may not be given credence or is negated by the immediate filing of
illegal dismissal cases by the affected employees, records clearly reveal that as of October 18, 2001, petitioners without
justifiable cause failed and refused to report back to their work. Their claim of having been prevented from entering the
work premises was not given due weight for no particulars was even alleged by them in their report back to their jobs,
who prevented their entry to the company premises and details as to what steps they took to bring the matter to the
attention of DOLE District Office wherein their complaint for labor standards violation was already pending.19
(Emphasis supplied)cralawlibrary
Moreover, eleven of petitioners contend that their quitclaims should not be considered as a bar to their complaint for
illegal dismissal because that complaint was not yet in existence at the time the quitclaims were executed. That the
quitclaims were executed voluntarily is not denied by petitioners. They, however, contend that the quitclaims should be
construed as limited to the money claims in connection with the first labor standards complaint20 they had filed before
the DOLE district office.
Unless there is a showing that the employee signed involuntarily or under duress, quitclaims and releases are upheld by
this Court as the law between the parties.21 If the agreement was voluntarily entered into by the employee, with full
understanding of what he was doing, and represents a reasonable settlement of the claims of the employee, it is
binding on the parties and may not be later disowned simply because of a change of mind.22 In the case under review,
the quitclaims and releases signed by petitioners stated:
That for and in consideration of the sum of FIFTY-THREE THOUSAND PESOS (P53,000.00)23 in settlement of my/our
claim/s as financial assistance and/or gratuitously given by my/our employer receipt of which is hereby acknowledge to
my/our complete and full satisfaction, I/we hereby release and discharge the above respondent and/or its officers from
any and all claims by way of wages, overtime pay, differential pay, or otherwise as may be due me/us incident to
my/our past employment with said establishment. I/we hereby state further that I/we have no more claim, right or
action of whatsoever nature whether past, present or contingent against the said respondent and/or its officers.24
(Emphasis supplied)cralawlibrary
As correctly observed by the NLRC, the language employed by the above quitclaims and releases indicates in no
uncertain terms that petitioners voluntarily and freely acknowledged receipt of full satisfaction of all claims against
respondents. Thus, the quitclaims effectively barred petitioners from questioning their dismissal.
Social justice must be founded on the recognition of the necessity of interdependence among diverse units of a society
and of the protection that should be equally and evenly extended to all groups as a combined force in our social and
economic life.25 While labor should be protected at all times, this protection must not be at the expense of capital.
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED.
SO ORDERED.