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Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 84484 November 15, 1989
INSULAR LIFE ASSURANCE CO., LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered into a
contract 1 by which:
1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in
accordance with the existing rules and regulations" of the Company;
2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of Commissions"
of the contract to "constitute a part of the consideration of ... (said) agreement;" and
3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those
which may from time to time be promulgated by it, ..." were made part of said contract.
The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts
prohibited to him, and the modes of termination of the agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and
means of soliciting insurance. Nothing herein contained shall therefore be construed to create the relationship
of employee and employer between the Agent and the Company. However, the Agent shall observe and
conform to all rules and regulations which the Company may from time to time prescribe.
ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in
any form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts
prohibited in the Agent's Manual and in circulars of the Office of the Insurance Commissioner.
TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for
or on account of ... (explicitly specified causes). ...
Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso
facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority previously issued or
should the Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not have
any right to any commission on renewal of premiums that may be paid after the termination of this agreement
for any cause whatsoever, except when the termination is due to disability or death in line of service. As to
commission corresponding to any balance of the first year's premiums remaining unpaid at the termination of
this agreement, the Agent shall be entitled to it if the balance of the first year premium is paid, less actual cost of
collection, unless the termination is due to a violation of this contract, involving criminal liability or breach of
trust.
ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall
be valid without the prior consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into another contract an Agency Manager's Contract and to implement
his end of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while concurrently fulfilling
his commitments under the first contract with the Company. 2

In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the
Company in a civil action and this, he was later to claim, prompted the latter to terminate also his engagement under the first
contract and to stop payment of his commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president. Without contesting the
termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The
respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an
independent contractor and that the Company had no obligation to him for unpaid commissions under the terms and conditions of
his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an
employer-employee relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate
his claim. Said official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's
premium remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in favor of the respondent
company ..." plus 10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence, the present petition
for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the
contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of the Labor
Arbiter under the provisions of Section 217 of the Labor Code, 8 or, contrarily, as the Company would have it, that under said
contract Basiao's status was that of an independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor
case, but by the regular courts in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and
Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or by necessary implication, made
Basiao the master of his own time and selling methods, left to his judgment the time, place and means of soliciting insurance, set no
accomplishment quotas and compensated him on the basis of results obtained. He was not bound to observe any schedule of
working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime he chose to, and
was free to adopt the selling methods he deemed most effective.
Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the
respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to
the effect that the critical feature distinguishing the status of an employee from that of an independent contractor is control, that is,
whether or not the party who engages the services of another has the power to control the latter's conduct in rendering such
services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's contract obliging him to "... observe
and conform to all rules and regulations which the Company may from time to time prescribe ...," as well as to the fact that the
Company prescribed the qualifications of applicants for insurance, processed their applications and determined the amounts of
insurance cover to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of the Company. 9
It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo AlLagadan 10
... In determining the existence of employer-employee relationship, the following elements are generally
considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees' conduct although the latter is the most
important element (35 Am. Jur. 445). ...
has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid test of the character of a
contract or agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves
to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an
employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the
recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance
of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired
result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind
or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular
relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to
regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the
insurance company. 12 Rules and regulations governing the conduct of the business are provided for in the Insurance Code and
enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules

to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a
character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to
processing and approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the
schedules of payment. None of these really invades the agent's contractual prerogative to adopt his own selling methods or to sell
insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship
between him and the company.
There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of
employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople,13 the Court ruled that a person engaged to
sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his own workers, sell according to his own
methods subject only to prearranged routes, observing no working hours fixed by the other party and obliged to secure his own
licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the other party for at least 250
cases of soft drinks sold daily, was not an employee but an independent contractor.
In Investment Planning Corporation of the Philippines us. Social Security System 14 a case almost on all fours with the present one,
this Court held that there was no employer-employee relationship between a commission agent and an investment company, but
that the former was an independent contractor where said agent and others similarly placed were: (a) paid compensation in the form
of commissions based on percentages of their sales, any balance of commissions earned being payable to their legal
representatives in the event of death or registration; (b) required to put up performance bonds; (c) subject to a set of rules and
regulations governing the performance of their duties under the agreement with the company and termination of their services for
certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for the company nor to
submit a record of their activities, and who, finally, shouldered their own selling and transportation expenses.
More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell rice and palay
without compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any
supervision or control on the part of his principal and relied on his own resources in the performance of his work, was a plain
commission agent, an independent contractor and not an employee.
The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and conform to
such rules and regulations as the latter might from time to time prescribe. No showing has been made that any such rules or
regulations were in fact promulgated, much less that any rules existed or were issued which effectively controlled or restricted his
choice of methods or the methods themselves of selling insurance. Absent such showing, the Court will not speculate that any
exceptions or qualifications were imposed on the express provision of the contract leaving Basiao "... free to exercise his own
judgment as to the time, place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five years.
Whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao's status under the contract of July
2, 1968, not the length of his relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission
agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The
Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent
NLRC in affirming the Arbiter's decision. This conclusion renders it unnecessary and premature to consider Basiao's claim for
commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private
respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION
G.R. No. 119930 March 12, 1998
INSULAR LIFE ASSURANCE CO., LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Fourth Division, Cebu City), LABOR ARBITER NICASIO P. ANINON and
PANTALEON DE LOS REYES, respondents.
BELLOSILLO, J.:
On 17 June 1994 respondent Labor Arbiter dismissed for lack of jurisdiction NLRC RAB-VII Case No. 03-0309-94 filed by private
respondent Pantaleon de los Reyes against petitioner Insular Life Assurance Co., Ltd. (INSULAR LIFE), for illegal dismissal and
nonpayment of salaries and back wages after finding no employer-employee relationship between De los Reyes and petitioner
INSULAR LIFE. 1 On appeal by private respondent, the order of dismissal was reversed by the National Labor Relations
Commission (NLRC) which ruled that respondent De los Reyes was an employee of petitioner.2 Petitioner's motion for
reconsideration having been denied, the NLRC remanded the case to the Labor Arbiter for hearing on the merits.
Seeking relief through this special civil action for certiorari with prayer for a restraining order and/or preliminary injunction, petitioner
now comes to us praying for annulment of the decision of respondent NLRC dated 3 March 1995 and its Order dated 6 April 1995
denying the motion for reconsideration of the decision. It faults NLRC for acting without jurisdiction and/or with grave abuse of
discretion when, contrary to established facts and pertinent law and jurisprudence, it reversed the decision of the Labor Arbiter and
held instead that the complaint was properly filed as an employer-employee relationship existed between petitioner and private
respondent.
Petitioner reprises the stand it assumed below that it never had any employer-employee relationship with private respondent, this
being an express agreement between them in the agency contracts, particularly reinforced by the stipulation therein that De los
Reyes was allowed discretion to devise ways and means to fulfill his obligations as agent and would be paid commission fees based
on his actual output. It further insists that the nature of this work status as described in the contracts had already been squarely
resolved by the Court in the earlier case ofInsular Life Assurance Co., Ltd. v. NLRC and Basiao 3 where the complainant therein,
Melecio Basiao, was similarly situated as respondent De los Reyes in that he was appointed first as an agent and then promoted as
agency manager, and the contracts under which he was appointed contained terms and conditions identical to those of Delos
Reyes. Petitioner concludes that since Basiao was declared by the Court to be an independent contractor and not an employee of
petitioner, there should be no reason why the status of De los Reyes hereinvis-a-vis petitioner should not be similarly determined.
We reject the submissions of petitioner and hold that respondent NLRC acted appropriately within the bounds of the law. The
records of the case are replete with telltale indicators of an existing employer-employee relationship between the two parties despite
written contractual disavowals.
These facts are undisputed: on 21 August 1992 petitioner entered into an agency contract with respondent Pantaleon de los
Reyes4 authorizing the latter to solicit within the Philippines applications for life insurance and annuities for which he would be paid
compensation in the form of commissions. The contract was prepared by petitioner in its entirety and De los Reyes merely signed
his conformity thereto. It contained the stipulation that no employer-employee relationship shall be created between the parties and
that the agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. De los Reyes however
was prohibited by petitioner from working for any other life insurance company, and violation of this stipulation was sufficient ground
for termination of the contract. Aside from soliciting insurance for the petitioner, private respondent was required to submit to the
former all completed applications for insurance within ninety (90) consecutive days, deliver policies, receive and collect initial
premiums and balances of first year premiums, renewal premiums, deposits on applications and payments on policy loans. Private
respondent was also bound to turn over to the company immediately any and all sums of money collected by him. In a written
communication by petitioner to respondent De los Reyes, the latter was urged to register with the Social Security System as a selfemployed individual as provided under PD No. 1636. 5
On 1 March 1993 petitioner and private respondent entered into another contract 6 where the latter was appointed as Acting Unit
Manager under its office the Cebu DSO V (157). As such, the duties and responsibilities of De los Reyes included the
recruitment, training, organization and development within his designated territory of a sufficient number of qualified, competent and
trustworthy underwriters, and to supervise and coordinate the sales efforts of the underwriters in the active solicitation of new
business and in the furtherance of the agency's assigned goals. It was similarly provided in the management contract that the
relation of the acting unit manager and/or the agents of his unit to the company shall be that of independent contractor. If the
appointment was terminated for any reason other than for cause, the acting unit manager would be reverted to agent status and
assigned to any unit. As in the previous agency contract, De los Reyes together with his unit force was granted freedom to exercise
judgment as to time, place and means of soliciting insurance. Aside from being granted override commissions, the acting unit
manager was given production bonus, development allowance and a unit development financing scheme euphemistically termed
"financial assistance" consisting of payment to him of a free portion of P300.00 per month and a validate portion of P1,200.00. While
the latter amount was deemed as an advance against expected commissions, the former was not and would be freely given to the
unit manager by the company only upon fulfillment by him of certain manpower and premium quota requirements. The agents and

underwriters recruited and trained by the acting unit manager would be attached to the unit but petitioner reserved the right to
determine if such assignment would be made or, for any reason, to reassign them elsewhere.
Aside from soliciting insurance, De los Reyes was also expressly obliged to participate in the company's conservation program, i.e.,
preservation and maintenance of existing insurance policies, and to accept moneys duly receipted on agent's receipts provided the
same were turned over to the company. As long as he was unit manager in an acting capacity, De los Reyes was prohibited from
working for other life insurance companies or with the government. He could not also accept a managerial or supervisory position in
any firm doing business in the Philippines without the written consent of petitioner.
Private respondent worked concurrently as agent and Acting Unit Manager until he was notified by petitioner on 18 November 1993
that his services were terminated effective 18 December 1993. On 7 March 1994 he filed a complaint before the Labor Arbiter on the
ground that he was illegally dismissed and that he was not paid his salaries and separation pay.
Petitioner filed a motion to dismiss the complaint of De los Reyes for lack of jurisdiction, citing the absence of employer-employee
relationship. It reasoned out that based on the criteria for determining the existence of such relationship or the so-called "four-fold
test," i.e., (a) selection and engagement of employee, (b) payment of wages, (c) power of dismissal, and, (d) power of control, De
los Reyes was not an employee but an independent contractor.
On 17 June 1994 the motion of petitioner was granted by the Labor Arbiter and the case was dismissed on the ground that the
element of control was not sufficiently established since the rules and guidelines set by petitioner in its agency agreement with
respondent Delos Reyes were formulated only to achieve the desired result without dictating the means or methods of attaining it.
Respondent NLRC however appreciated the evidence from a different perspective. It determined that respondent De los Reyes was
under the effective control of petitioner in the critical and most important aspects of his work as Unit Manager. This conclusion was
derived from the provisions in the contract which appointed private respondent as Acting Unit Manager, to wit: (a) De los Reyes was
to serve exclusively the company, therefore, he was not an independent contractor; (b) he was required to meet certain manpower
and production quota; and, (c) petitioner controlled the assignment to and removal of soliciting agents from his unit.
The NLRC also took into account other circumstances showing that petitioner exercised employer's prerogatives over De los Reyes,
e.g., (a) limiting the work of respondent De los Reyes to selling a life insurance policy known as "Salary Deduction
Insurance" only to members of the Philippine National Police, public and private school teachers and other employees of private
companies; (b) assigning private respondent to a particular place and table where he worked whenever he was not in the field; (c)
paying private respondent during the period of twelve (12) months of his appointment as Acting Unit Manager the amount of
P1,500.00 as Unit Development Financing of which 20% formed his salary and the rest, i.e., 80%, as advance of his expected
commissions; and, (d) promising that upon completion of certain requirements, he would be promoted to Unit Manager with the right
of petitioner to revert him to agent status when warranted.
Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management contract entered into
between petitioner and De los Reyes as contracts of agency. We however hold otherwise. Unquestionably there exist major
distinctions between the two agreements. While the first has the earmarks of an agency contract, the second is far removed from
the concept of agency in that provided therein are conditionalities that indicate an employer-employee relationship. The NLRC
therefore was correct in finding that private respondent was an employee of petitioner, but this holds true only insofar as the
management contract is concerned. In view thereof, the Labor Arbiter has jurisdiction over the case..
It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in the
management contract and providing therein that the "employee" is an independent contractor when the terms of the agreement
clearly show otherwise. For, the employment status of a person is defined and prescribed by law and not by what the parties say it
should be. 7 In determining the status of the management contract, the "four-fold test" on employment earlier mentioned has to be
applied.
Petitioner contends that De los Reyes was never required to go through the pre-employment procedures and that the probationary
employment status was reserved only to employees of petitioner. On this score, it insists that the first requirement of selection and
engagement of the employee was not met.
A look at the provisions of the contract shows that private respondent was appointed as Acting Unit Manager only upon
recommendation of the District Manager. 8 This indicates that private respondent was hired by petitioner because of the favorable
endorsement of its duly authorized officer. But, this approbation could only have been based on the performance of De los Reyes as
agent under the agency contract so that there can be no other conclusion arrived under this premise than the fact that the agency or
underwriter phase of the relationship of De los Reyes with petitioner was nothing more than a trial or probationary period for his
eventual appointment as Acting Unit Manager of petitioner. Then, again, the very designation of the appointment of private
respondent as "acting" unit manager obviously implies a temporary employment status which may be made permanent only upon
compliance with company standards such as those enumerated under Sec. 6 of the management contract. 9

On the matter of payment of wages, petitioner points out that respondent was compensated strictly on commission basis, the
amount of which was totally dependent on his total output. But, the manager's contract, speaks differently. Thus
4. Performance Requirements. To maintain your appointment as Acting Unit Manager you must meet the
following manpower and production requirements:
Quarter Active Calendar Year
Production Agents Cumulative FYP
Production
1st 2 P 125,000
2nd 3 250,000
3rd 4 375,000
4th 5 500,000
5.4. Unit Development Financing (UDF). As an Acting Unit Manager you shall be given during the first 12
months of your appointment a financial assistance which is composed of two parts:
5.4.1. Free Portion amounting to P300 per month, subject to your meeting prescribed
minimum performance requirement on manpower and premium production. The free
portion is not payable by you.
5.4.2. Validate Portion amounting to P1,200 per month, also subject to meeting the same
prescribed minimum performance requirements on manpower and premium production.
The validated portion is an advance against expected compensation during the UDF period
and thereafter as may be necessary.
The above provisions unquestionably demonstrate that the performance requirement imposed on De los Reyes was
applicable quarterly while his entitlement to the free portion (P300) and the validated portion (P1,200) wasmonthly starting on the
first month of the twelve (12) months of the appointment. Thus, it has to be admitted that even before the end of the first quarter and
prior to the so-called quarterly performance evaluation, private respondent was already entitled to be paid both the free and
validated portions of the UDF every month because his production performance could not be determined until after the lapse of the
quarter involved. This indicates quite clearly that the unit manager's quarterly performance had no bearing at all on his entitlement at
least to the free portion of the UDF which for all intents and purposes comprised the salary regularly paid to him by petitioner. Thus it
cannot be validly claimed that the financial assistance consisting of the free portion of the UDF was purely dependent on the
premium production of the agent. Be that as it may, it is worth considering that the payment of compensation by way of commission
does not militate against the conclusion that private respondent was an employee of petitioner. Under Art. 97 of the Labor Code,
"wage" shall mean "however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time,
task, price or commission basis . . . ."10
As to the matter involving the power of dismissal and control by the employer, the latter of which is the most important of the test,
petitioner asserts that its termination of De los Reyes was but an exercise of its inherent right as principal under the contracts and
that the rules and guidelines it set forth in the contract cannot, by any stretch of the imagination, be deemed as an exercise of
control over the private respondent as these were merely directives that fixed the desired result without dictating the means or
method to be employed in attaining it. The following factual findings of the NLRC 11 however contradict such claims:
A perusal of the appointment of complainant as Acting Unit Manager reveals that:
1. Complainant was to "exclusively" serve respondent company. Thus it is provided: . . . 7..7 Other causes of
Termination:
This appointment may likewise be terminated for any of the following causes: . . . 7..7..2. Your entering the
service of the government or another life insurance company; 7..7..3. Your accepting a managerial or
supervisory position in any firm doing business in the Philippines without the written consent of the Company; . .
.
2. Complainant was required to meet certain manpower and production quotas.
3. Respondent (herein petitioner) controlled the assignment and removal of soliciting agents to and from
complainant's unit, thus: . . . 7..2. Assignment of Agents: Agents recruited and trained by you shall be attached
to your unit unless for reasons of Company policy, no such assignment should be made. The Company retains
the exclusive right to assign new soliciting agents to the unit. It is agreed that the Company may remove or
transfer any soliciting agents appointed and assigned to the said unit. . . .

It would not be amiss to state that respondent's duty to collect the company's premiums using company receipts under Sec. 7.4 of
the management contract is further evidence of petitioner's control over respondent, thus:
xxx

xxx

xxx

7.4. Acceptance and Remittance of Premiums. . . . . the Company hereby authorizes you to accept and to
receive sums of money in payment of premiums, loans, deposits on applications, with or without interest, due
from policyholders and applicants for insurance, and the like, specially from policyholders of business solicited
and sold by the agents attached to your unit provided however, that all such payments shall be duly receipted
by you on the corresponding Company's "Agents' Receipt" to be provided you for this purpose and to be
covered by such rules and accounting regulations the Company may issue from time to time on the matter.
Payments received by you shall be turned over to the Company's designated District or Service Office clerk or
directly to the Home Office not later than the next working day from receipt thereof . . . .
Petitioner would have us apply our ruling in Insular Life Assurance Co., Ltd. v. NLRC and Basiao12 to the instant case under the
doctrine of stare decisis, postulating that both cases involve parties similarly situated and facts which are almost identical.
But we are not convinced that the cited case is on all fours with the case at bar. In Basiao, the agent was appointed Agency
Manager under an Agency Manager Contract. To implement his end of the agreement, Melecio Basiao organized an agency office
to which he gave the name M. Basiao and Associates. The Agency Manager Contract practically contained the same terms and
conditions as the Agency Contract earlier entered into, and the Court observed that, "drawn from the terms of the contract they had
entered into, (which) either expressly or by necessary implication, Basiao (was) made the master of his own time and selling
methods, left to his own judgment the time, place and means of soliciting insurance, set no accomplishment quotas and
compensated him on the bases of results obtained. He was not bound to observe any schedule of working hours or report to any
regular station; he could seek and work on his prospects anywhere and at anytime he chose to and was free to adopt the selling
methods he deemed most effective." Upon these premises, Basiao was considered as agent an independent contractor of
petitioner INSULAR LIFE.
Unlike Basiao, herein respondent De los Reyes was appointed Acting Unit Manager, not agency manager. There is no evidence that
to implement his obligations under the management contract, De los Reyes had organized an office. Petitioner in fact has admitted
that it provided De los Reyes a place and a table at its office where he reported for and worked whenever he was not out in the field.
Placed under petitioner's Cebu District Service Office, the unit was given a name by petitioner De los Reyes and Associates
and assigned Code No. 11753 and Recruitment No. 109398. Under the managership contract, De los Reyes was obliged to work
exclusively for petitioner in life insurance solicitation and was imposed premium production quotas. Of course, the acting unit
manager could not underwrite other lines of insurance because his Permanent Certificate of Authority was for life insurance only and
for no other. He was proscribed from accepting a managerial or supervisory position in any other office including the government
without the written consent of petitioner. De los Reyes could only be promoted to permanent unit manager if he met certain
requirements and his promotion was recommended by the petitioner's District Manager and Regional Manager and approved by its
Division Manager. As Acting Unit Manager, De los Reyes performed functions beyond mere solicitation of insurance business for
petitioner. As found by the NLRC, he exercised administrative functions which were necessary and beneficial to the business of
INSULAR LIFE.
In Great Pacific Life Insurance Company v. NLRC 13 which is closer in application than Basiao to this present controversy, we found
that "the relationships of the Ruiz brothers and Grepalife were those of employer-employee. First, their work at the time of their
dismissal as zone supervisor and district manager was necessary and desirable to the usual business of the insurance company.
They were entrusted with supervisory, sales and other functions to guard Grepalife's business interests and to bring in more clients
to the company, and even with administrative functions to ensure that all collections, reports and data are faithfully brought to the
company . . . . 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 . . . ." We need elaborate no further.
Exclusivity of service, control of assignments and removal of agents under private respondent's unit, collection of premiums,
furnishing of company facilities and materials as well as capital described as Unit Development Fund are but hallmarks of the
management system in which herein private respondent worked. This obtaining, there is no escaping the conclusion that private
respondent Pantaleon de los Reyes was an employee of herein petitioner.
WHEREFORE, the petition of Insular Life Assurance Company, Ltd., is DENIED and the Decision of the National Labor Relations
Commission dated 3 March 1995 and its Order of 6 April 1996 sustaining it are AFFIRMED. Let this case be REMANDED to the
Labor Arbiter a quo who is directed to hear and dispose of this case with deliberate dispatch in light of the views expressed herein.
SO ORDERED.
SECOND DIVISION

[G.R. No. 155207. April 29, 2005]

WILHELMINA S. OROZCO, petitioner, vs. THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS, PHILIPPINE
DAILY INQUIRER, AND LETICIA JIMENEZ MAGSANOC, respondents.
RESOLUTION
TINGA, J.:
Ostensibly, the question raised in this present petition is of general interest to students of lawwhether a newspaper columnist
is an employee of the newspaper which publishes the columns. However, for failure to file the appeal bond required by law, the
Court is impelled to defer the settlement of the above issue until the jurisdictional requirement has been duly complied with.
This Petition for Review under Rule 45 of the Rules of Court assails the Resolution[1] of the Court of Appeals Fifth Division
denying the Motion for Reconsideration filed by Wilhelmina Orozco (Orozco) and the Decision[2] of the same division in CA-G.R. SP
No. 50970, the dispositive portion of which provides:
WHEREFORE, based on the foregoing, the petition is hereby GRANTED. The assailed decision of the public respondent NLRC
affirming the decision of the Labor Arbiter that private respondent Wilhelmina Orozco is an employee of petitioner PDI is hereby SET
ASIDE. Private respondent Orozcos complaint is hereby DISMISSED for lack of merit.
SO ORDERED.[3]
The above ruling of the Court of Appeals reversed the Decision[4] of the National Labor Relations Commission (NLRC) which
affirmed the Decision[5] of the Labor Arbiter,[6] the decretal portion of which stated:
WHEREFORE, judgment is hereby rendered, finding complainant to be an employee of respondent company; ordering respondent
company to reinstate her to her former or equivalent position, with backwages.
Respondent company is also ordered to pay her 13th month pay and service incentive leave pay.
Other claims are hereby dismissed for lack of merit.
SO ORDERED.[7]
This case arose out of the complaint filed by Orozco against private respondents Philippine Daily Inquirer (PDI) and Leticia
Jimenez-Magsanoc (Magsanoc), the editor-in-chief of the PDI at that time, for illegal dismissal, underpayment, non-payment of
allowance, separation pay, retirement pay, service incentive leave pay, 13 th month pay, moral and exemplary damages,
discrimination in pay and for attorneys fees[8] with the Arbitration Branch of the NLRC on 1 June 1993.[9]
Based on the records of this case, Orozco was engaged as a columnist by PDI on 8 March 1990. She penned the column
Feminist Reflections which appeared in the Lifestyle Section under the editorship of Lolita T. Logarta. [10]
Orozco worked by submitting weekly columns with a per article wage of Two Hundred Fifty Pesos ( P250.00) which was later
increased to Three hundred Pesos (P300.00).[11]
In June 1991, Magsanoc as editor-in-chief of PDI discussed how to improve the Lifestyle section of the newspaper with the
Lifestyle editor. They agreed to cut down the number of columnists and for this reason, PDI decided to drop or terminate Orozcos
column in November 1992.[12]
Orozcos column thus appeared in PDI for the last time on 7 November 1992. Upon inquiry at the office of Magsanoc as to why
her column was stopped, the secretary told Orozco that it was Eugenia Apostol (Apostol), the chairperson of PDI, who had decided
to stop her column.[13]

Apostol was out of the country at that time so Orozco waited until February 1993 to talk to her. In a telephone conversation
with Orozco, Apostol stated that she had been told by Magsanoc that there were too many columnists in the Lifestyle Section. [14]
Aggrieved at the stoppage of her column, Orozco filed the instant case against private respondents before the NLRC. The PDI
raised as primary defense the claim that Orozco was not an employee of the newspaper. However, in a Decision dated 29 October
1993, Labor Arbiter Arthur L. Amansec ruled that Orozco had been illegally dismissed, after concluding that Orozco had indeed been
an employee of the PDI.
The PDI, through counsel, received a copy of the Labor Arbiters Decision on 16 December 1993.[15] It timely filed a Notice and
Memorandum dated 24 December 1993, but it did not lodge a cash or surety bond in the amount equivalent to the monetary award
in the judgment appealed from. PDI adverted to such failure on its part before the NLRC but justified the same on the ground that
the Decision of the Labor Arbiter did not fix any amount but merely stated that Orozco was entitled to backwages.
The NLRC dismissed the appeal in its Decision dated 23 August 1994. In this Decision, it made note of the failure of PDI to
perfect the appeal by filing the cash or surety bond. Nonetheless, the NLRC ventured to delve on the merits, and thereupon,
affirmed the finding of the Labor Arbiter that Orozco was an employee of PDI.
Private respondents elevated the case to the Supreme Court by way of the special civil action of certiorari. Pursuant to the
ruling in St. Martin Funeral Homes v. NLRC,[16] this Court referred the case to the Court of Appeals.
On 11 July 2002, the Court of Appeals reversed the decision of the NLRC by holding that Orozco is not an employee of PDI.
The reversal was grounded on factual premises, the appellate court concluding that the NLRC had misappreciated the facts and
rendered a ruling wanting in substantial evidence. It thereby dismissed Orozcos complaint for lack of merit. The Court of Appeals
likewise dismissed Orozcos motion for reconsideration on 11 September 2002. Hence, this petition.
In her Memorandum, Orozco posits that the Court of Appeals should have dismissed outright the private respondents petition
for certiorari for their failure to file a cash bond or a surety bond as provided for in Article 223 of the Labor Code.
In support of the argument, Orozco contends that a grievous error tantamount to grave abuse of discretion was committed by
the Court of Appeals when it failed to appreciate the observation of the NLRC that private respondents did not perfect their appeal
as they did not deposit on time any cash or surety bond in compliance with the provision of Art. 223 of the Labor Code when they
filed an appeal of the Labor Arbiters decision at the NLRC. Orozco argues that the posting of the cash or surety bond is mandatory
and must be made by the employer within the reglementary period of ten (10) days from receipt of the Labor Arbiters decision so as
to perfect his appeal. Failing to do so, the employer loses the right to appeal, and the Labor Arbiters decision becomes final and
executory, regardless of whether or not the NLRC declares it so, by operation of law.[17]
The NLRC in its decision concluded that it had no jurisdiction over PDIs appeal but proceeded nonetheless to discuss the
merits of the case. On the other hand, the Court of Appeals made no mention at all of the jurisdictional defect, whether in its recital
of facts or discussion of the arguments.
The novelty of the argument on the merits aside, it is essential not to lose sight of the jurisdictional issue, as it determines
whether or not an appeal had indeed been perfected.
The provisions of the Labor Code are quite clear cut on the matter. The relevant portion of Article 223 states:
ART. 223. Appeal. - Decisions, awards or orders of the Labor Arbiter are final and executory unless appealed to the Commission by
any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. . .
In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a
cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the
monetary award in the judgment appealed from. (emphasis supplied)
By explicit provision of law, an appeal is perfected only upon the posting of a cash or surety bond. The reason behind the
imposition of this requirement is not difficult to divine. As the Court said in Viron Garments Mftg., Co., Inc. v. NLRC:[18]
The requirement that the employer post a cash or surety bond to perfect its/his appeal is apparently intended to assure the workers
that if they prevail in the case, they will receive the money judgment in their favor upon the dismissal of the employer's appeal. It
was intended to discourage employers from using an appeal to delay, or even evade, their obligation to satisfy their employees' just
and lawful claims.[19]

But while the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to the perfection of an appeal,
there is a plethora of jurisprudence recognizing exceptional instances wherein the Court relaxed the bond requirement as a
condition for posting the appeal.
In Olacao v. NLRC[20] for example, the NLRC had discovered that the separation pay awarded by the Labor Arbiter had
already been paid by the employer. Since a modification of the Labor Arbiters Decision was the only way to forestall the grant of
separation pay twice, the NLRC allowed the appeal perfected only on the twelfth (12th) day. [21] In Cosico, Jr. v. NLRC,[22] the
employer timely posted the bond based on the monetary award for back wages and thirteenth month pay, but excluding the
exorbitant award for moral and exemplary damages. The Court ruled that there was substantial compliance, owing to the fact that
the NLRC had since excluded the award of damages from the computation of the surety bond. [23] And in Star Angel Handicraft v.
NLRC,[24] the Court noted that a motion for reduction of the appeal bond had been filed within the reglementary period, and that the
appeal should not be deemed perfected until the NLRC has acted on the motion and the appellant has filed the bond as fixed by the
NLRC.[25]
In YBL v. NLRC,[26] the appeal was interposed by the employers on 11 September 1989, or only six (6) days from the effectivity
of the Interim Rules on Appeals which incorporated for the first time the appeal bond requirement imposed by Republic Act No.
6715, an amendatory law to the Labor Code. The Court therein considered the apparent fact that neither the counsel for the
employer nor that for the employee was already aware of the then new requirement requiring the posting of a bond on appeal.
[27]
The same justification was cited with approval by the Court in Blancaflor v. NLRC,[28] and the same circumstance is likewise
apparent in Rada v. NLRC.[29]
In the case of Taberrah v. NLRC,[30] the Court made note of the fact that the assailed decision of the Labor Arbiter concerned
did not contain a computation of the monetary award due the employees, a circumstance which is likewise present in this case. In
said case, the Court stated,
As a rule, compliance with the requirements for the perfection of an appeal within the reglamentary period is mandatory and
jurisdictional. However, in National Federation of Labor Unions v. Ladrido as well as in several other cases, this Court relaxed the
requirement of the posting of an appeal bond within the reglementary period as a condition for perfecting the appeal. This is in line
with the principle that substantial justice is better served by allowing the appeal to be resolved on the merits rather than dismissing it
based on a technicality.[31]
The judgment of the Labor Arbiter in this case merely stated that petitioner was entitled to backwages, 13 th month pay and
service incentive leave pay without however including a computation of the alleged amounts. As the private respondents asserted in
their motion for reconsideration anent the NLRC decision:
III. NO BOND WAS FILED BECAUSE OF THE VAGUENESS OF THE AWARD
The award as contained in the appealed 29 October 1993 decision did not state the exact amount to be awarded. In particular, while
it may be assumed, as stated in the decision subject of this motion, the award be based on the P300.00 per column/article basis,
this is not clear in the decision which likewise mentioned an award for thirteenth (13 th) month pay and service incentive leave pay.
Noteworthy is the fact that the complainant, not being an employee, was not being paid a fixed salary. Hence, herein respondentsappellants requested in their memorandum on appeal that the Commission fixes (sic) the amount of the bond, if it finds the same
necessary in exceptional cases like the present case, to wit:
xxx Respondents-appellants however manifest that they are able and willing to post a bond that this Commission may fix if the latter
finds it necessary. (Notice and Memorandum on Appeal dated 24 December 1993, p. 7).[32] (Emphasis in the original)
In the case of NFLU v. Ladrido III,[33] this Court postulated that private respondents cannot be expected to post such appeal
bond equivalent to the amount of the monetary award when the amount thereof was not included in the decision of the labor arbiter.
[34]
The computation of the amount awarded to petitioner not having been clearly stated in the decision of the labor arbiter, private
respondents had no basis for determining the amount of the bond to be posted.
Thus, while the requirements for perfecting an appeal must be strictly followed as they are considered indispensable
interdictions against needless delays and for orderly discharge of judicial business, [35] the law does admit of exceptions when
warranted by the circumstances. Technicality should not be allowed to stand in the way of equitably and completely resolving the
rights and obligations of the parties.[36] But while this Court may relax the observance of reglementary periods and technical rules to
achieve substantial justice,[37] it is not prepared to give due course to this petition and make a pronouncement on the weighty issue
obtaining in this case until the law has been duly complied with and the requisite appeal bond duly paid by private respondents.

WHEREFORE, without giving due course to the petition, the Labor Arbiter is hereby ordered to clarify the amount of the award
due the petitioner. Private respondents are ordered to post the requisite bond in accordance with Article 223 of the Labor Code,
whereupon, the petition will be given due course. No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 138051

June 10, 2004

JOSE Y. SONZA, petitioner,


vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of Appeals in CA-G.R. SP
No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed the findings of the National
Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiters dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("Agreement") with the Mel and
Jay Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its corporate officers while MJMDC was
represented by SONZA, as President and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer. Referred
to in the Agreement as "AGENT," MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio and
television. The Agreement listed the services SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays. 3

ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and P317,000 for the second and
third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABSCBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. We
consider these acts of the station violative of the Agreement and the station as in breach thereof. In this connection, we
hereby serve notice of rescission of said Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of
the Agreement but reserves the right to seek recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment, National Capital
Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay, service incentive leave pay, 13th
month pay, signing bonus, travel allowance and amounts due under the Employees Stock Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed between the
parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank, Quezon Avenue Branch,
Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited SONZAs talent fees
and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed the parties to file their respective
position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent company until April
15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the instant case in
this Office. And as to whether or not such claim would entitle complainant to recover upon the causes of action asserted is
a matter to be resolved only after and as a result of a hearing. Thus, the respondents plea of lack of employer-employee
relationship may be pleaded only as a matter of defense. It behooves upon it the duty to prove that there really is no
employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24 February
1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge Respondents Annex 4 and Annex
5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These
witnesses stated in their affidavits that the prevailing practice in the television and broadcast industry is to treat talents like SONZA
as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction. 6 The pertinent parts of
the decision read as follows:
xxx

While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a talent," it stands
to reason that a "talent" as above-described cannot be considered as an employee by reason of the peculiar
circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV
host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services he undertook to
render in accordance with his own style. The benefits conferred to complainant under the May 1994 Agreement are
certainly very much higher than those generally given to employees. For one, complainant Sonzas monthly talent fees
amount to a staggering P317,000. Moreover, his engagement as a talent was covered by a specific contract. Likewise, he
was not bound to render eight (8) hours of work per day as he worked only for such number of hours as may be
necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties and not by
reason of employer-employee relationship. As correctly put by the respondent, "All these benefits are merely talent
fees and other contractual benefits and should not be deemed as salaries, wages and/or other remuneration accorded to
an employee, notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule that the term or
nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring such
benefit."
The fact that complainant was made subject to respondents Rules and Regulations, likewise, does not detract
from the absence of employer-employee relationship. As held by the Supreme Court, "The line should be drawn
between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means to achieve it." (Insular Life Assurance Co.,
Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiters decision. SONZA
filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and resolution
of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case.8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between SONZA and ABS-CBN.
Adopting the NLRCs decision, the appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of complainant
Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the principal itself. This fact is
made particularly true in this case, as admittedly MJMDC is a management company devoted exclusively to managing
the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between ABSCBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically referred to MJMDC as
the AGENT. As a matter of fact, when complainant herein unilaterally rescinded said May 1994 Agreement, it was
MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as
President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the said
agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement
executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there exist[s] employeremployee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent,

not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994
Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same
being in the nature of an action for alleged breach of contractual obligation on the part of respondent-appellee. As
squarely apparent from complainant-appellants Position Paper, his claims for compensation for services, 13th month
pay, signing bonus and travel allowance against respondent-appellee are not based on the Labor Code but rather on the
provisions of the May 1994 Agreement, while his claims for proceeds under Stock Purchase Agreement are based on the
latter. A portion of the Position Paper of complainant-appellant bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay
complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED THOUSAND PESOS
(P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the amount
he was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit
amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations with ABSCBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from ABS-CBN,
complainant-appellant served upon the latter a notice of rescission of Agreement with the station, per his letter dated
April 1, 1996, which asserted that instead of referring to unpaid employee benefits, he is waiving and renouncing recovery
of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to such recovery of the other
benefits under said Agreement. (Annex 3 of the respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase
Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-appellants claims being
anchored on the alleged breach of contract on the part of respondent-appellee, the same can be resolved by reference to
civil law and not to labor law. Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As
held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action for
breach of contractual obligation is intrinsically a civil dispute.9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a factual
question that is within the jurisdiction of the NLRC to resolve.10 A special civil action for certiorari extends only to issues of want or
excess of jurisdiction of the NLRC.11 Such action cannot cover an inquiry into the correctness of the evaluation of the evidence
which served as basis of the NLRCs conclusion.12 The Court of Appeals added that it could not re-examine the parties evidence
and substitute the factual findings of the NLRC with its own.13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO FIND THAT
AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT
OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING. 14
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling which upheld the
Labor Arbiters dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the elements of
an employer-employee relationship, this is the first time that the Court will resolve the nature of the relationship between a television
and radio station and one of its "talents." There is no case law stating that a radio and television program host is an employee of the
broadcast station.

The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and radio personality,
and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the other
hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of the Labor
Arbiter and the NLRC not only respect but also finality when supported by substantial evidence. 15 Substantial evidence means such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion.16 A party cannot prove the absence of
substantial evidence by simply pointing out that there is contrary evidence on record, direct or circumstantial. The Court does not
substitute its own judgment for that of the tribunal in determining where the weight of evidence lies or what evidence is credible. 17
SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has
consistently held that the elements of an employer-employee relationship are: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means and
methods by which the work is accomplished.18 The last element, the so-called "control test", is the most important element.19
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs peculiar skills, talent and
celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring complainant over other
broadcasters of possibly similar experience and qualification as complainant belies respondents claim of independent
contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary
employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not
possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship. If
SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with
SONZA but would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all the
circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of
fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and
privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBNs
employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month
pay"20 which the law automatically incorporates into every employer-employee contract. 21 Whatever benefits SONZA enjoyed arose
from contract and not because of an employer-employee relationship.22
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that they
indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed to pay
SONZA such huge talent fees precisely because of SONZAs unique skills, talent and celebrity status not possessed by ordinary
employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees for
his services. The power to bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative, but
not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent
contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show that ABS-CBN
could terminate his services on grounds other than breach of contract, such as retrenchment to prevent losses as provided under
labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as "AGENT and Jay Sonza shall faithfully
and completely perform each condition of this Agreement."24 Even if it suffered severe business losses, ABS-CBN could not retrench
SONZA because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the Agreement. This circumstance
indicates an independent contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly, ABSCBN adhered to its undertaking in the Agreement to continue paying SONZAs talent fees during the remaining life of the Agreement
even if ABS-CBN cancelled SONZAs programs through no fault of SONZA.25
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that he is not an employee of
ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was really an employee, he would merely resign, instead."
SONZA did actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZAs letter clearly
bears this out.26 However, the manner by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA
rescinded the Agreement or resigned from work does not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an independent contractor, we
refer to foreign case law in analyzing the present case. The United States Court of Appeals, First Circuit, recently held in AlbertyVlez v. Corporacin De Puerto Rico Para La Difusin Pblica ("WIPR")27 that a television program host is an independent
contractor. We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position
requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a masters degree in
public communications and journalism; is trained in dance, singing, and modeling; taught with the drama department at
the University of Puerto Rico; and acted in several theater and television productions prior to her affiliation with "Desde Mi
Pueblo." Second, Alberty provided the "tools and instrumentalities" necessary for her to perform. Specifically, she
provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and services
necessary for her appearance. Alberty disputes that this factor favors independent contractor status because WIPR
provided the "equipment necessary to tape the show." Albertys argument is misplaced. The equipment necessary for
Alberty to conduct her job as host of "Desde Mi Pueblo" related to her appearance on the show. Others provided
equipment for filming and producing the show, but these were not the primary tools that Alberty used to perform her
particular function. If we accepted this argument, independent contractors could never work on collaborative projects
because other individuals often provide the equipment required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Albertys contracts with WIPR
specifically provided that WIPR hired her "professional services as Hostess for the Program Desde Mi Pueblo." There is
no evidence that WIPR assigned Alberty tasks in addition to work related to these tapings. x x x28 (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an independent contractor. The control
test is the most important test our courts apply in distinguishing an employee from an independent contractor.29 This test is based
on the extent of control the hirer exercises over a worker. The greater the supervision and control the hirer exercises, the more likely
the worker is deemed an employee. The converse holds true as well the less control the hirer exercises, the more likely the worker
is considered an independent contractor.30
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the "Mel & Jay" programs. ABS-CBN
did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA delivered his
lines, appeared on television, and sounded on radio were outside ABS-CBNs control. SONZA did not have to render eight hours of
work per day. The Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and postproduction staff meetings.31 ABS-CBN could not dictate the contents of SONZAs script. However, the Agreement prohibited SONZA
from criticizing in his shows ABS-CBN or its interests.32 The clear implication is that SONZA had a free hand on what to say or
discuss in his shows provided he did not attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs work. 33 ABS-CBN
did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program format and airtime
schedule "for more effective programming."34 ABS-CBNs sole concern was the quality of the shows and their standing in the ratings.
Clearly, ABS-CBN did not exercise control over the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means and methods of the
performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs show, ABS-CBN was still obligated to
pay SONZAs talent fees... Thus, even if ABS-CBN was completely dissatisfied with the means and methods of SONZAs
performance of his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All
that ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay his talent fees in full. 35
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue paying in full SONZAs
talent fees, did not amount to control over the means and methods of the performance of SONZAs work. ABS-CBN could not
terminate or discipline SONZA even if the means and methods of performance of his work - how he delivered his lines and appeared
on television - did not meet ABS-CBNs approval. This proves that ABS-CBNs control was limited only to the result of SONZAs
work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the expiry
of the Agreement.
In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville performers were independent
contractors although the management reserved the right to delete objectionable features in their shows. Since the management did
not have control over the manner of performance of the skills of the artists, it could only control the result of the work by deleting
objectionable features.37
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-CBN
supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs. However, the equipment, crew and airtime
are not the "tools and instrumentalities" SONZA needed to perform his job. What SONZA principally needed were his talent or skills
and the costumes necessary for his appearance.38Even though ABS-CBN provided SONZA with the place of work and the
necessary equipment, SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABSCBNs sole concern was for SONZA to display his talent during the airing of the programs. 39
A radio broadcast specialist who works under minimal supervision is an independent contractor.40 SONZAs work as television and
radio program host required special skills and talent, which SONZA admittedly possesses. The records do not show that ABS-CBN
exercised any supervision and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its rules and standards of
performance. SONZA claims that this indicates ABS-CBNs control "not only [over] his manner of work but also the quality of his
work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering talents"41 of ABS-CBN.
The Agreement does not require SONZA to comply with the rules and standards of performance prescribed for employees of ABSCBN. The code of conduct imposed on SONZA under the Agreement refers to the "Television and Radio Code of the Kapisanan ng
mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics." 42 The KBP code
applies to broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of radio and
television stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents and
not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former.43 In this
case, SONZA failed to show that these rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that
comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being
rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the
case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which address both the result and the means used to
achieve it.44

The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain supervision to
insure the attainment of the desired result. The hirer, however, must not deprive the one hired from performing his services
according to his own initiative.45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-CBN exercised
over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an
independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46 This practice is not designed to
control the means and methods of work of the talent, but simply to protect the investment of the broadcast station. The broadcast
station normally spends substantial amounts of money, time and effort "in building up its talents as well as the programs they appear
in and thus expects that said talents remain exclusive with the station for a commensurate period of time." 47 Normally, a much higher
fee is paid to talents who agree to work exclusively for a particular radio or television station. In short, the huge talent fees partially
compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN. The Labor
Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only"
contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is ostensibly under the
employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer. Under this scheme, the "labor-only"
contractor is the agent of the principal. The law makes the principal responsible to the employees of the "labor-only contractor"
as if the principal itself directly hired or employed the employees.48 These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted as
SONZAs agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The records do not show that
MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA himself. It
is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in
entering into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both ABSCBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his broadcast
partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting. MJMDC does not have any other
function apart from acting as agent of SONZA or TIANGCO to promote their careers in the broadcast and television industry.49

Policy Instruction No. 40


SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled the status
of workers in the broadcast industry. Under this policy, the types of employees in the broadcast industry are the station and program
employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal
presumption that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance cannot exclude independent
contractors from the class of service providers to the broadcast industry. The classification of workers in the broadcast industry into
only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no basis either in
law or in fact.
Affidavits of ABS-CBNs Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving his counsel the
opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing practice in
the radio and television industry. SONZA views the affidavits of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or refuting the allegations in the
affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the submission of the position
papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those
that may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of
their respective witnesses which shall take the place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their position
papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or hearing. At
this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to
further elicit facts or information, including but not limited to the subpoena of relevant documentary evidence, if any from
any party or witness.50
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a formal trial. 51 The
holding of a formal hearing or trial is something that the parties cannot demand as a matter of right.52 If the Labor Arbiter is confident
that he can rely on the documents before him, he cannot be faulted for not conducting a formal trial, unless under the particular
circumstances of the case, the documents alone are insufficient. The proceedings before a Labor Arbiter are non-litigious in nature.
Subject to the requirements of due process, the technicalities of law and the rules obtaining in the courts of law do not strictly apply
in proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like SONZA as
independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an employer-employee relationship
under labor laws. Not every performance of services for a fee creates an employer-employee relationship. To hold that every person
who renders services to another for a fee is an employee - to give meaning to the security of tenure clause - will lead to absurd
results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent contractors. The right to life
and livelihood guarantees this freedom to contract as independent contractors. The right of labor to security of tenure cannot
operate to deprive an individual, possessed with special skills, expertise and talent, of his right to contract as an independent
contractor. An individual like an artist or talent has a right to render his services without any one controlling the means and methods
by which he performs his art or craft. This Court will not interpret the right of labor to security of tenure to compel artists and talents
to render their services only as employees. If radio and television program hosts can render their services only as employees, the
station owners and managers can dictate to the radio and television hosts what they say in their shows. This is not conducive to
freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended by Republic Act No.
8241,56 treats talents, television and radio broadcasters differently. Under the NIRC, these professionals are subject to the 10%
value-added tax ("VAT") on services they render. Exempted from the VAT are those under an employer-employee relationship. 57 This
different tax treatment accorded to talents and broadcasters bolters our conclusion that they are independent contractors, provided
all the basic elements of a contractual relationship are present as in this case.
Nature of SONZAs Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave, signing bonus,
travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and the
Court of Appeals that SONZAs claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor
Code. Clearly, the present case does not call for an application of the Labor Code provisions but an interpretation and
implementation of the May 1994 Agreement. In effect, SONZAs cause of action is for breach of contract which is intrinsically a civil
dispute cognizable by the regular courts.58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP No.
49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 96520 June 28, 1996

RESTITUTO C. PALOMADO, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, MARLING RICE MILL and/or MARIO TAN TENG KUAN and ROLANDO
TAN, respondents.
PANGANIBAN, J.:p
In this Decision, this Court reiterates some well-entrenched doctrines in labor cases, like (1) the appropriate remedy to challenge
rulings of the NLRC is a petition for certiorari under Rule 65, not a petition for review under Rule 45 or 43; (2) a motion for
reconsideration is an essential prerequisite to certiorari; (3) only questions relating to jurisdiction or grave abuse of discretion -- not
ordinary errors of law -- are reviewable on certiorari; (4) hence, findings of facts of the NLRC are generally accorded great respect,
even finality; (5) the law grants the labor arbiter wide latitude to determine the need for a formal hearing after the submission by the
parties of their position papers; (6) labor tribunals need only substantial evidence -- not beyond reasonable doubt -- as basis for their
decisions; and (7) before a case for illegal dismissal can prosper, an employer-employee relationship must first be established.
Petitioner questions the correctness of the Resolution 1 dated November 29, 1990 of respondent National Labor Relations
Commission 2 in Case No. RAB-IV-4-2385-90, which affirmed in toto the decision dated June 27, 1990 rendered by Labor Arbiter
Numeriano D. Villena dismissing herein petitioner's complaint for alleged illegal dismissal, underpayment of wages and various
benefits.
Antecedent Facts
The labor arbiter made the following factual findings:
As viewed from the complaint filed on April 17, 1990, complainant Restituto Palomado charges respondents
Marling Rice Mill and/or Mario Tan Teng (sic) Kuan and Rolando S. (sic) Tan for alleged illegal dismissal,
underpayment of wages, overtime pay, legal holiday pay, premium pay for holiday and rest day and separation
pay/retirement/resignation benefit.
After a careful appraisal of the verified position papers together with their supporting proofs, documents and
affidavits submitted by the parties, the undersigned finds that the case could be decided judiciously without the
necessity of going through formal hearings, hence this Decision.
In support of his claims, complainant, in his verified position paper submitted on June 7, 1990 gave the following
averments: that on January 2, 1970, he was hired by respondent Marline Rice Mill as a truck driver paid on a
"per trip basis" amounting to a monthly average of P3,000.00; that he allegedly worked thereat continuously up
to August 1987 when he was illegally dismissed by respondent Rolando O. Tan, in his capacity as
manager/operator of respondent Marling Rice Mill. Complainant likewise averred that sometime in 1973,
respondent Mario Tan Ten (sic) Kuan suffered from stroke and in view thereof, his son, respondent Rolando O.
Tan, managed and operated Marling Rice Mill. It was further argued that sometime in August 1987, respondent
Rolando Tan talked to him (complainant) and told him that he (R. Tan) would sell the Isuzu cargo truck which
complainant used to drive in order to buy a new truck with the assurance that he would be retained as the driver
of the new unit, however, when the Isuzu cargo truck was bought, respondent Tan dismissed him without cause
and hired a new driver by the name of Antonio Pustrado. Complainant contended that because of his unjustified
dismissal from Marling Rice Mill, he suffered and continues to suffer loss of income in the average amount of
P3,000.00 a month starting September 1987.
With regards to his money claims, complainant argued that he had to take trips which took 2-3 days to complete
for which he was paid minimal amounts depending on the load of his truck and that for said minimal amounts,
he had to work continuously for days and even nights; that there were occasions when he had to drive even
during holidays and his rest days as per order of the respondents (,) hence, for these, he is entitled to overtime
pay, legal holiday pay and premium pay for holiday and rest day.
Complainant submitted as part of its (sic) documentary evidence a "Certification of Premium Payments" issued
by the Employee Accounts Department of the Social Security System dated October 26, 1988 showing the
premium payments made by Marling Trading and Ricemill in his favor from April 1972 to July 1979. As likewise
indicated by the letters "NI" in the columns corresponding to the months after July 1979, complainant's name
was no longer included in the quarterly collection list submitted by the respondents on file with the Social
Security System.

On the other hand, respondent Rolando S. (sic) Tan, in his verified position paper submitted on May 28, 1990
alleged among others that he is the proprietor of R.S. Ricemill located in Bo. Hibanga, Sariaya, Quezon, which
business he started in 1987 while respondent Mario Tan Ten (sic) Kuan was the proprietor of "Marling Rice Mill",
which ceased operations in 1987 following the infirmity and poor health of Mr. Mario Tan Teng Kuan who died of
cardiac arrest on March 15, 1989.
Respondent Rolando S. (sic) Tan strongly argued that he is not the owner neither the manager of Marling Rice
Mill although he was a former employee of Mr. Mario Tan Teng Kuan and that complainant had never been an
employee of R.S. Ricemill which he owned and operated.
The labor arbiter found that there was no dispute as to the fact that respondent Mario Tan Teng Kuan (as owner of Marling Rice Mill)
employed petitioner herein as truck driver, the real controversy being when the latter's services actually ended, particularly in view of
the untimely death of respondent Mario Tan Teng Kuan in 1989 and the Marling Rice Mill's cessation of operation in 1987. Absent
other concrete evidence of petitioner's length of service, the labor arbiter relied upon the "certification of premium payments"
prepared and issued by the SSS Employee Accounts Department, Premium Verification Division II at the instance of petitioner
himself, which certification showed that after June 1979, petitioner was no longer included among the employees listed in the
quarterly collection list filed with the Social Security System -- in other words, he ceased to be employed with respondent Marling
Rice Mill after June 1979. This was buttressed by the payrolls of Marling Rice Mill submitted to the SSS for various periods after
June 1979, as well as by the unrebutted sworn statement of one Dionisio Belda, petitioner's co-worker and pahinante, who alleged
that petitioner asked to go on vacation leave in June 1979 and did not report back to work after that. The arbiter thus concluded that
petitioner ceased to be an employee of respondent Marling Rice Mill since July 1979, and therefore, inasmuch as the complaint
against his former employer Marling Rice Mill and/or Mario Tan Teng Kuan was filed only on April 17, 1990, or beyond the
reglementary period prescribed by law, 3 the complaint was already barred by prescription.
As to petitioner's claims against respondent Rolando O. Tan, the labor arbiter found that the documentary evidence presented by
said respondent overwhelmingly negated petitioner's allegations that he had been employed by Tan, who it turned out was himself
but an employee of Marling Rice Mill, and who subsequently became proprietor of his own business (R.S. Ricemill), which started
operations in 1986, and which was never impleaded by petitioner as party-respondent in the case below. Thus, the arbiter ruled that
there existed no employer-employee relationship between the herein petitioner and respondent Rolando O. Tan, and dismissed the
petitioner's claims for lack of merit.
Dissatisfied, petitioner appealed the decision to public respondent NLRC, claiming grave abuse of discretion by the arbiter and
serious errors in his findings of fact. But the public respondent agreed with the findings made by the arbiter and then concluded:
We have gone over the entire records of this case, and We find no evidentiary support for complainant's
(petitioner's) allegations against respondent Rolando Tan. Thus, it is Our opinion that the Labor Arbiter neither
abused his discretion nor committed serious errors in his findings of facts. Hence, We affirm. 4
Aggrieved, petitioner now pleads NLRC's abuse of discretion before this Court.
Issues Raised
Petitioner framed the "principal issue" this-wise:
Whether or not public respondent NLRC erred in finding that the Labor Arbiter did not act with grave abuse of
discretion amounting to lack of jurisdiction nor commit serious errors in his findings both in questions of fact and
of law.
and then proceeded to attack the labor arbiter's rulling by alleging the following specific "grounds" for the petition:
I. The labor arbiter acted with grave abuse of discretion amounting to lack of jurisdiction in the conduct of the
proceedings in this case.
II. The labor arbiter committed serious errors in his findings in questions of fact.
III. The labor arbiter committed serious errors in his findings in questions of law.
The Court's Ruling

We find for the respondents, the instant petition being obviously and indubitably bereft of merit.
At the outset, it must be noted that this petition suffers from serious procedural defects which would have warranted its outright
dismissal. First of all, it was incorrectly brought "under the provisions of Rule 43 of the Rules of Court" (rollo, p. 6). We have time
and again ruled that the appropriate remedy to challenge a resolution of the NLRC is a special civil action for certiorari under Rule
65 of the Rules of Court, and not a petition for review under Rule 45, 5 much less Rule 43. However, in order to afford the parties
substantial justice, the Court decided to treat the instant petition as a special civil action for certiorari.
Additionally, the allegations in the petition clearly show that petitioner failed to file a motion for reconsideration of the assailed
Resolution before filing the instant petition. As correctly argued by private respondent Rolando Tan, such failure constitutes a fatal
infirmity even if the petition be treated as a special civil action for certiorari. The unquestioned rule in this jurisdiction is
that certiorari will lie only if there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law against
the acts of public respondent. In the instant case, the plain and adequate remedy expressly provided by law 6 was a motion for
reconsideration of the assailed decision, based on palpable or patent errors, to be made under oath and filed within ten (10)
calendar days from receipt of the questioned decision. And for failure to avail of the correct remedy expressly provided by law,
petitioner has permitted the subject Resolution to become final and executory after the lapse of the ten day period within which to
file such motion for reconsideration. We have held in Pure Foods Corporation vs. NLRC 7 that:
(T)he filing of such a motion is intended to afford public respondent an opportunity to correct any actual or
fancied error attributed to it by way of a re-examination of the legal and factual aspects of the case. Petitioner's
inaction or negligence under the circumstances is tantamount to a deprivation of the right and opportunity of the
respondent commission to cleanse itself of an error unwittingly committed or to vindicate itself of an act unfairly
imputed. An improvident resort to certiorari cannot be used as a tool to circumvent the right of public respondent
to review and purge its decision of an oversight, if any. Neither should this special civil action be resorted to as a
shield from the adverse consequences of petitioner's own negligence or error in the choice of remedies. Having
allowed the decision to become final and executory, petitioner cannot by an overdue strategy question the
correctness of the decision of the respondent commission when a timely motion for reconsideration was the
legal remedy indicated.
Likewise, in the case of Zapata vs. NLRC, 8 this Court held:
Furthermore, fatal to this action is petitioner's failure to move for the reconsideration of the assailed decision on
the dubious pretext that it will be a mere rehash of the arguments and issues previously raised in his position
paper, but which stratagem conveniently skirts as a consequence the reglementary period therefor, especially if
the same has already expired. The implementing rules of respondent NLRC are unequivocal in requiring that a
motion for reconsideration of the order, resolution, or decision of respondent commission should be seasonably
filed as a precondition for pursuing any further or subsequent remedy, otherwise the said order resolution, or
decision shall become final and executory after ten calendar days from receipt thereof . Obviously, the rationale
therefor is that the law intends to afford the NLRC an opportunity to rectify such errors or mistakes it may have
lapsed into before resort to the courts of justice can be had. This merely adopts the rule that the function of a
motion for reconsideration is to point out to the court (or commission) the error that it may have committed and
to give it a chance to correct itself. (footnote omitted; emphasis supplied.)
But even if the aforementioned procedural flaws were to be disregarded, the herein petition nevertheless suffers from even more
grievous substantive defects. A petition for certiorari under Rule 65 of the Rules of Court will lie only where a grave abuse of
discretion or an act without or in excess of jurisdiction on the part of the respondent commission is clearly shown. In Loadstar
Shipping Co., Inc. vs. Gallo, 9 we reiterated the basic policy that the original and exclusive jurisdiction of this Court to review a
decision or resolution of respondent NLRC does not include a correction of its evaluation of the evidence but is confined to issues of
jurisdiction or grave abuse of discretion. But the instant petition is a mere rehash of petitioner's Memorandum of Appeal 10 dated July
13, 1990 filed with respondent NLRC. Nowhere in the petition is it shown that the respondent commission committed such patent,
gross and prejudicial errors of law or fact, or a capricious disregard of settled law and jurisprudence, as to amount to a grave abuse
of discretion or lack of jurisdiction on its part. Absent such showing, this Court ordinarily will not engage in a review of the facts found
nor even of the law as interpreted or applied by respondent, for the writ of certiorari is an extraordinary remedy,
and certiorari jurisdiction is not to be equated with appellate jurisdiction. 11 Moreover, it is a fundamental rule that factual findings of
quasi-judicial agencies like the public respondent NLRC if supported by substantial evidence are generally accorded not only great
respect but even finality, and are binding upon this Court, unless petitioner is able to show that respondent Commission had
arbitrarily disregarded evidence before it or had misapprehended evidence to such an extent as to compel a contrary conclusion if
such evidence had been properly appreciated. 12 This is rooted in the fact that this Court is not a trier of facts, as well as in the
respect to be accorded the determinations made by administrative bodies in general on matters falling within their respective fields
of specialization or expertise. 13

In any event, a careful perusal of the records of this case leads to the inescapable conclusion that respondent NLRC acted correctly
in affirming in toto the decision of the labor arbiter dismissing the claims of petitioner. Clearly, the arbiter's decision is based
on substantial evidence, and no infirmity or circumstance can be found in its factual findings as would detract from the
conclusiveness thereof. Thus, there being nothing irregular, arbitrary, capricious or oppressive, amounting to lack of jurisdiction, nor
erroneous exercise of discretion, much less any grave abuse thereof, on the part of public respondent, we therefore may not amend
or revoke its factual findings. Any error which may be attributed to respondent NLRC would at most be a mere error of judgment
which cannot be a proper subject of the special civil action for certiorari. 14
But if only to demonstrate the utter lack of basis for the instant petition and obliterate all doubts as to the correctness of the
respondent Commission's ruling, we shall delve into the alleged errors assigned by the petitioner.
Firstly, petitioner complains that the labor arbiter "acted with grave abuse of discretion . . ." when on May 17, 1990 he terminated the
preliminary conference and directed the parties to file their respective position papers without even requiring the private respondents
to answer the claims of petitioner and in spite of the fact that petitioner's counsel had moved for ten days to file a reply/comment to
respondent Tan's Letter-Answer (Petitioner's Memorandum, pp. 7-8; rollo, pp. 185-186). Petitioner also insists that inasmuch as the
parties held totally conflicting positions, the arbiter ought to have held formal hearings.
These arguments are simply untenable. Petitioner should know that the basic purpose of the initial conference/hearing is to explore
the possibility of amicably settling the case upon a fair compromise (Sec. 1, Rule VII, Revised Rules of the NLRC). Therefore, when
the possibility of an amicable settlement appears remote, either in whole or in part, it becomes imperative for the labor arbiter to
terminate the conference and require the parties to submit their respective verified position papers pursuant to Sec. 2 of Rule VII. In
the case below, the arbiter's exercise of his discretion, which carries with it the presumption of regularity, was based only on the
belief that it was futile to continue exploring the possibility of a settlement. The arbiter ordered submission of position papers also
because of the "failure of complainant's representative to appear" (rollo, p. 41). This, however, did not preclude the petitioner's filing
of a reply/comment to respondent Tan's Letter-Answer if he had so desired. In any event, we do not see how the failure of the arbiter
to conduct a formal hearing could constitute "grave abuse of discretion". Sec. 3, Rule VII grants an arbiter wide latitude to
"determine whether there is a need for a formal hearing or investigation . . . after the submission by the parties of their position
papers and supporting proofs." Additionally, the records show that petitioner signed the minutes of the hearing of May 17, 1990,
signifying his agreement to the arbiter's colatilla that "in case a formal hearing is no longer necessary, this case shall be deemed
submitted for decision." (Rollo, p. 41.)
Secondly, petitioner believes that had there been a formal hearing, the arbiter's allegedly mistaken reliance on certain of the
documentary evidence submitted by parties "would have been cured and remedied by the parties", presumably through the
presentation of controverting evidence. This postulate is not in consonance with the need for speedy disposition of labor cases, for
the parties may then willfully withhold their evidence and disclose the same only during the formal hearing, thus creating surprises
which would merely complicate the issues and prolong the trial. There is a dire need to lessen technicalities in the process of settling
labor disputes; hence, Sec. 2 of Rule VII provides:
Sec. 2. Submission of position papers. -- During the initial conference/hearing, or immediately thereafter, the
Labor Arbiter shall require the parties to simultaneously submit to him their respective verified position papers,
which shall cover only the issues raised in the complaint, accompanied by all supporting documents then
available to them and the affidavits of their witnesses which shall take the place of their direct testimony. The
parties shall thereafter not be allowed to allege, or present evidence to prove, facts not referred to and any
cause or causes of action not included in their complaint or position papers, affidavits and other documents.
The parties shall furnish each other with copies of the position papers, together with the supporting affidavits
and documents submitted by them.
Petitioner further alleges that the arbiter ignored all his documentary exhibits save one, which was even used against him, "while
laboriously enumerating one by one all the documentary exhibits of respondent Rolando Tan without qualification whatsoever on the
admissibility and credibility of the same." The one piece of documentary evidence being referred to was the SSS's certification of
premium payments which, as earlier mentioned, indicated on its face that by July 1979 petitioner was no longer an employee of
Marling Rice Mill. Other documentary evidence presented by petitioner consisted of various receipts for purchases of gasoline,
which cannot be regarded as relevant to nor in any way supportive of his allegation of having been employed from 1979 onwards,
and so were correctly disregarded.
Petitioner also questions respondent Commission's condonation of the labor arbiter's "serious errors" in determining the nonexistence of employer-employee relationship based on (i) the SSS certification of premium payments, (ii) the payrolls of Marling
Rice Mill submitted to the SSS, and (iii) the sworn statement executed by Dionisio Belda.
The petitioner's proposition is tenuous if not flimsy. He himself procured and submitted to the arbiter the SSS certification of
premium payments to prove his employment from 1979 to his alleged date of termination. Thus, he must have foreseen the
consequences of such evidence, for the certification "clearly showed that after June 1979, his name as an employee of respondent

Marling Rice Mill was no longer included in the submitted quarterly collection list on file with the Social Security System, or in short,
he ceased to be employed with the respondent Marling Rice Mill after June 1979." 15 As for the payrolls of Marline Rice Mill
pertaining to various parts of 1979, 1984, 1985 and 1986, we agree with respondent Tan 16 that petitioner's accusation that Tan
deliberately and unlawfully withheld the payrolls for the intervening periods is unfounded, reckless and irresponsible. In the first
place, he did not prove the existence of such unpresented payrolls (said rice mill having ceased operation in 1987) and secondly, he
failed to prove that respondent Tan (who insists he was not the manager thereof) was in possession or custody of such payrolls. If
he indeed believe that by such withheld payrolls he could have proven the existence of an employer-employee relationship in his
favor, then he should have exerted diligent efforts to secure the same through subpoena duces tecum. But he did not. In any event,
quasi-judicial agencies need only substantial evidence as basis for their decisions. Petitioner submitted a "Sinumpaang Salaysay"
dated July 26, 1990 of Mr. Dionisio Belda (which, incidentally, was presented for the first time only before this Court) in order to
counteract and offset the effects of the sworn statement dated October 28, 1979 executed by the same Mr. Belda in which he
categorically stated that petitioner did not return to work after going on vacation leave in June 1979, Nevertheless, it is obvious that
the new sworn statement does not in the least detract from the weight of the evidence showing that petitioner was not an employee
of private respondent Rolando Tan and that Rolando Tan was not the manager of Marling Rice Mill but merely an employee thereof.
The petitioner also failed to explain why, in the payrolls of Marling Rice Mill, a certain Guillermo Tan signed as the manager thereof,
if indeed it is true that Rolando Tan was the manager of said rice mill. The "Bilihang Lampasan" between respondent Tan and
Antonio Lindog for the sale of an Isuzu cargo truck does not, contrary to petitioner's contention, prove that respondent Tan was in
"absolute control" of Marling Rice Mill. To begin with, the mentioned truck was not even shown to have been owned by the rice mill,
thus no presumption of absolute control by respondent Tan over the rice mill could have arisen from that contract of sale.
Disregarding the peripheral matters, the key issue in this case is whether there exists an employer-employee relationship between
petitioner and private respondent Rolando Tan, who, petitioner claims, exercised the power to select and engage the services of the
Marling Rice Mill's employees; to dismiss employees (in the same way petitioner was allegedly dismissed), and paid the wages and
controlled all work of the mill's employees. Petitioner likewise avers that he was terminated without "cause, just or authorized,
thereby making the same illegal". As discussed earlier, and as found by the labor arbiter and affirmed by the public respondent
NLRC, there never existed an employer-employee relationship between petitioner and private respondent Rolando Tan. Thus the
labor arbiter held (and public respondent NLRC concurred):
With regards to complainant's claims against respondent. Rolando O. Tan, the overwhelming documentary
evidences presented by said respondent strongly negated complainant's charges that he had been under the
employ of Rolando O. Tan who appeared to be the registered proprietor/owner of R.S. Rice Mill, (an) entity
which started to operate in 1986 as per Certificate of Registration issued by the Bureau of Domestic Trade
dated April 11, 1986 and which was never interpleaded (sic) by herein complainant as party-respondent in this
case. Respondent Rolando Tan, whom complainant alluded to as the manager/operator of Marling Rice Mill
after respondent. Mario Tan Ten (sic) Kuan suffered (a) stroke some time in 1973 was nothing more than a mere
employee of Marling Rice Mill as shown by the payrolls submitted to the Social Security System by respondent
Marling Rice Mill. Complainant's allegation that Rolando Tan managed, operated and transacted business for
Marling Rice Mill is of no moment and wanting in evidence since it is even clear from the said payrolls that it
was one Guillermo Tan who was the manager of Marling Rice Mill. Complainant's documentary exhibits
(Annexes "I", "I-1" to "I-16", inclusive, and Annex "J") failed to serve their purpose as they are in themselves
mere scraps of paper, irrelevant and immaterial.
In view of all the foregoing, the undersigned finds that there existed no employee-employer relationship
between complainant and respondent Rolando O. Tan. (Rollo, pp. 49-50.)
An indispensable precondition of illegal dismissal is the prior existence of an employer-employee relationship; in this case, since it
was established that there was no such relationship between petitioner and private respondent Tan, therefore the allegation of illegal
dismissal does not have any leg to stand on. The claims for backwages, separation pay and other benefits must likewise fail.
WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED for lack of merit and the Resolution of the public
respondent NLRC dated November 29, 1990 is AFFIRMED in toto. No costs.
SO ORDERED.