Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 153511 July 18, 2012

LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or, NELSON NAPUD, in his
capacity as the President of Petitioner Corporation, Petitioner,
vs.
HERNANI S. REALUYO, also known as JOEY ROA, Respondent.

DECISION

BERSAMIN, J.:

This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a hotel. On
August 9, 1999, respondent, whose stage name was Joey R. Roa, filed a complaint for alleged unfair
labor practice, constructive illegal dismissal, and the underpayment/nonpayment of his premium pay for
holidays, separation pay, service incentive leave pay, and 13111 month pay. He prayed for attorney's fees,
moral damages off P100,000.00 and exemplary damages for P100,000.00. 1

Respondent averred that he had worked as a pianist at the Legend Hotels Tanglaw Restaurant from
September 1992 with an initial rate of P400.00/night that was given to him after each nights performance;
that his rate had increased to P750.00/night; and that during his employment, he could not choose the
time of performance, which had been fixed from 7:00 pm to 10:00 pm for three to six times/week. He
added that the Legend Hotels restaurant manager had required him to conform with the venues motif;
that he had been subjected to the rules on employees representation checks and chits, a privilege
granted to other employees; that on July 9, 1999, the management had notified him that as a cost-cutting
measure his services as a pianist would no longer be required effective July 30, 1999; that he disputed
the excuse, insisting that Legend Hotel had been lucratively operating as of the filing of his complaint; and
that the loss of his employment made him bring his complaint. 2

In its defense, petitioner denied the existence of an employer-employee relationship with respondent,
insisting that he had been only a talent engaged to provide live music at Legend Hotels Madison Coffee
Shop for three hours/day on two days each week; and stated that the economic crisis that had hit the
country constrained management to dispense with his services.

On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding that
the parties had no employer-employee relationship.3 The LA explained thusly:

xxx

On the pivotal issue of whether or not there existed an employer-employee relationship between the
parties, our finding is in the negative. The finding finds support in the service contract dated September 1,
1992 xxx.

xxx

Even if we grant the initial non-existence of the service contract, as complainant suggests in his reply
(third paragraph, page 4), the picture would not change because of the admission by complainant in his
letter dated October 8, 1996 (Annex "C") that what he was receiving was talent fee and not salary.
This is reinforced by the undisputed fact that complainant received his talent fee nightly, unlike the regular
employees of the hotel who are paid by monthly xxx.

xxx

And thus, absent the power to control with respect to the means and methods by which his work was to
be accomplished, there is no employer-employee relationship between the parties xxx.

xxx

WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.

SO ORDERED.4

Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA on May 31,
2001.5

Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.

On February 11, 2002, the CA set aside the decision of the NLRC, 6 holding:

xxx

Applying the above-enumerated elements of the employee-employer relationship in this case, the
question to be asked is, are those elements present in this case?

The answer to this question is in the affirmative.

xxx

Well settled is the rule that of the four (4) elements of employer-employee relationship, it is the power of
control that is more decisive.

In this regard, public respondent failed to take into consideration that in petitioners line of work, he was
supervised and controlled by respondents restaurant manager who at certain times would require him to
perform only tagalog songs or music, or wear barong tagalog to conform with Filipiniana motif of the place
and the time of his performance is fixed by the respondents from 7:00 pm to 10:00 pm, three to six times
a week. Petitioner could not choose the time of his performance. xxx.

As to the status of petitioner, he is considered a regular employee of private respondents since the job of
the petitioner was in furtherance of the restaurant business of respondent hotel. Granting that petitioner
was initially a contractual employee, by the sheer length of service he had rendered for private
respondents, he had been converted into a regular employee xxx.

xxx

xxx In other words, the dismissal was due to retrenchment in order to avoid or minimize business losses,
which is recognized by law under Article 283 of the Labor Code, xxx.

xxx

WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx. 7

Issues

In this appeal, petitioner contends that the CA erred:

I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER-EMPLOYEE

RELATIONSHIP BETWEEN THE PETITIONER HOTEL AND RESPONDENT ROA.

II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE TERMINATION OF
HIS SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED WHEN IT DECLARED THE
REINSTATEMENT OF ROA TO HIS FORMER POSITION OR BE GIVEN A SEPARATION PAY
EQUIVALENT TO ONE MONTH FOR EVERY YEAR OF SERVICE FROM SEPTEMBER 1999
UNTIL JULY 30, 1999 CONSIDERING THE ABSENCE OF AN EMPLOYMENT RELATIONSHIP
BETWEEN THE PARTIES.

III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES, SERVICE

INCENTIVE LEAVE AND OTHER BENEFITS CONSIDERING THAT THERE IS NO EMPLOYER
EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES.

IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC NCR CA NO.
023404-2000 OF THE NLRC AS WELL AS ITS RESOLUTION DATED JUNE 29, 2001 IN FAVOR
OF HEREIN PETITIONER HOTEL WHEN HEREIN RESPONDENT ROA FAILED TO SHOW
PROOF THAT THE NLRC AND THE LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF
DISCRETION OR LACK OF JURISDICTION IN THEIR RESPECTIVE DECISIONS.

V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA FILED IS
IMPROPER SINCE IT RAISED QUESTIONS OF FACT.

VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA WHEN IT IS
CLEARLY IMPROPER AND SHOULD HAVE BEEN DISMISSED OUTRIGHT CONSIDERING
THAT A PETITION FOR CERTIORARI UNDER RULE 65 IS LIMITED ONLY TO QUESTIONS OR
ISSUES OF GRAVE ABUSE OF DISCRETION OR LACK OF JURISDICTION COMMITTED BY
THE NLRC OR THE LABOR ARBITER, WHICH ISSUES ARE NOT PRESENT IN THE CASE AT
BAR.

The assigned errors are divided into the procedural issue of whether or not the petition for certiorari filed
in the CA was the proper recourse; and into two substantive issues, namely: (a) whether or not
respondent was an employee of petitioner; and (b) if respondent was petitioners employee, whether he
was validly terminated.

Ruling

The appeal fails.

Procedural Issue:

Certiorari was a proper recourse

Petitioner contends that respondents petition for certiorari was improper as a remedy against the NLRC
due to its raising mainly questions of fact and because it did not demonstrate that the NLRC was guilty of
grave abuse of discretion.

The contention is unwarranted. There is no longer any doubt that a petition for certiorari brought to assail
the decision of the NLRC may raise factual issues, and the CA may then review the decision of the NLRC
and pass upon such factual issues in the process.8 The power of the CA to review factual issues in the
exercise of its original jurisdiction to issue writs of certiorari is based on Section 9 of Batas Pambansa Blg.
129, which pertinently provides that the CA "shall have the power to try cases and conduct hearings,
receive evidence and perform any and all acts necessary to resolve factual issues raised in cases falling
within its original and appellate jurisdiction, including the power to grant and conduct new trials or further
proceedings."

Substantive Issue No. 1:

Employer-employee relationship existed between the parties

We next ascertain if the CA correctly found that an employer-employee relationship existed between the
parties.

The issue of whether or not an employer-employee relationship existed between petitioner and
respondent is essentially a question of fact.9 The factors that determine the issue include who has the
power to select the employee, who pays the employees wages, who has the power to dismiss the
employee, and who exercises control of the methods and results by which the work of the employee is
accomplished.10 Although no particular form of evidence is required to prove the existence of the
relationship, and any competent and relevant evidence to prove the relationship may be admitted, 11 a
finding that the relationship exists must nonetheless rest on substantial evidence, which is that amount of
relevant evidence that a reasonable mind might accept as adequate to justify a conclusion. 12

Generally, the Court does not review factual questions, primarily because the Court is not a trier of facts.
However, where, like here, there is a conflict between the factual findings of the Labor Arbiter and the
NLRC, on the one hand, and those of the CA, on the other hand, it becomes proper for the Court, in the
exercise of its equity jurisdiction, to review and re-evaluate the factual issues and to look into the records
of the case and re-examine the questioned findings. 13

A review of the circumstances reveals that respondent was, indeed, petitioners employee. He was
undeniably employed as a pianist in petitioners Madison Coffee Shop/Tanglaw Restaurant from
September 1992 until his services were terminated on July 9, 1999.

First of all, petitioner actually wielded the power of selection at the time it entered into the service contract
dated September 1, 1992 with respondent. This is true, notwithstanding petitioners insistence that
respondent had only offered his services to provide live music at petitioners Tanglaw Restaurant, and
despite petitioners position that what had really transpired was a negotiation of his rate and time of
availability. The power of selection was firmly evidenced by, among others, the express written
recommendation dated January 12, 1998 by Christine Velazco, petitioners restaurant manager, for the
increase of his remuneration.14

Petitioner could not seek refuge behind the service contract entered into with respondent. It is the law that
defines and governs an employment relationship, whose terms are not restricted to those fixed in the
written contract, for other factors, like the nature of the work the employee has been called upon to
perform, are also considered. The law affords protection to an employee, and does not countenance any
attempt to subvert its spirit and intent. Any stipulation in writing can be ignored when the employer utilizes
the stipulation to deprive the employee of his security of tenure. The inequality that characterizes
employer-employee relations generally tips the scales in favor of the employer, such that the employee is
often scarcely provided real and better options.15

Secondly, petitioner argues that whatever remuneration was given to respondent were only his talent fees
that were not included in the definition of wage under the Labor Code; and that such talent fees were but
the consideration for the service contract entered into between them.
The argument is baseless.

Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three to six
nights a week. Such rate of remuneration was later increased to P750.00 upon restaurant manager
Velazcos recommendation. There is no denying that the remuneration denominated as talent fees was
fixed on the basis of his talent and skill and the quality of the music he played during the hours of
performance each night, taking into account the prevailing rate for similar talents in the entertainment
industry.16

Respondents remuneration, albeit denominated as talent fees, was still considered as included in the
term wage in the sense and context of the Labor Code, regardless of how petitioner chose to designate
the remuneration. Anent this, Article 97(f) of the Labor Code clearly states:

xxx wage paid to any employee shall mean the remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services rendered or to be
rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the employee.

Clearly, respondent received compensation for the services he rendered as a pianist in petitioners hotel.
Petitioner cannot use the service contract to rid itself of the consequences of its employment of
respondent. There is no denying that whatever amounts he received for his performance, howsoever
designated by petitioner, were his wages.

It is notable that under the Rules Implementing the Labor Code and as held in Tan v. Lagrama, 17 every
employer is required to pay his employees by means of a payroll, which should show in each case,
among others, the employees rate of pay, deductions made from such pay, and the amounts actually paid
to the employee. Yet, petitioner did not present the payroll of its employees to bolster its insistence of
respondent not being its employee.

That respondent worked for less than eight hours/day was of no consequence and did not detract from
the CAs finding on the existence of the employer-employee relationship. In providing that the " normal
hours of work of any employee shall not exceed eight (8) hours a day," Article 83 of the Labor Code only
set a maximum of number of hours as "normal hours of work" but did not prohibit work of less than eight
hours.

Thirdly, the power of the employer to control the work of the employee is considered the most significant
determinant of the existence of an employer-employee relationship. 18 This is the so-called control test,
and is premised on whether the person for whom the services are performed reserves the right to control
both the end achieved and the manner and means used to achieve that end. 19

Petitioner submits that it did not exercise the power of control over respondent and cites the following to
buttress its submission, namely: (a) respondent could beg off from his nightly performances in the
restaurant for other engagements; (b) he had the sole prerogative to play and perform any musical
arrangements that he wished; (c) although petitioner, through its manager, required him to play at certain
times a particular music or song, the music, songs, or arrangements, including the beat or tempo, were
under his discretion, control and direction; (d) the requirement for him to wear barong Tagalog to conform
with the Filipiniana motif of the venue whenever he performed was by no means evidence of control; (e)
petitioner could not require him to do any other work in the restaurant or to play the piano in any other
places, areas, or establishments, whether or not owned or operated by petitioner, during the three hour
period from 7:00 pm to 10:00 pm, three to six times a week; and (f) respondent could not be required to
sing, dance or play another musical instrument.
A review of the records shows, however, that respondent performed his work as a pianist under
petitioners supervision and control. Specifically, petitioners control of both the end achieved and the
manner and means used to achieve that end was demonstrated by the following, to wit:

a. He could not choose the time of his performance, which petitioners had fixed from 7:00 pm to
10:00 pm, three to six times a week;

b. He could not choose the place of his performance;

c. The restaurants manager required him at certain times to perform only Tagalog songs or
music, or to wear barong Tagalog to conform to the Filipiniana motif; and

d. He was subjected to the rules on employees representation check and chits, a privilege
granted to other employees.

Relevantly, it is worth remembering that the employer need not actually supervise the performance of
duties by the employee, for it sufficed that the employer has the right to wield that power.

Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject to its
Code of Discipline, and that the power to terminate the working relationship was mutually vested in the
parties, in that either party might terminate at will, with or without cause.

The claim is contrary to the records. Indeed, the memorandum informing respondent of the
discontinuance of his service because of the present business or financial condition of petitioner 20 showed
that the latter had the power to dismiss him from employment. 21

Substantive Issue No. 2:

Validity of the Termination

Having established that respondent was an employee whom petitioner terminated to prevent losses, the
conclusion that his termination was by reason of retrenchment due to an authorized cause under the
Labor Code is inevitable.

Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor
Code. It is a management prerogative resorted to by employers to avoid or to minimize business losses.
On this matter, Article 283 of the Labor Code states:

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

The Court has laid down the following standards that an employer should meet to justify retrenchment
and to foil abuse, namely:

(a) The expected losses should be substantial and not merely de minimis in extent;
 (b) The substantial losses apprehended must be reasonably imminent;

(c) The retrenchment must be reasonably necessary and likely to effectively prevent the expected
losses; and

(d) The alleged losses, if already incurred, and the expected imminent losses sought to be
forestalled must be proved by sufficient and convincing evidence. 22

Anent the last standard of sufficient and convincing evidence, it ought to be pointed out that a less
exacting standard of proof would render too easy the abuse of retrenchment as a ground for termination
of services of employees.23

Was the retrenchment of respondent valid?

In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests
upon the employer. Here, petitioner did not submit evidence of the losses to its business operations and
the economic havoc it would thereby imminently sustain. It only claimed that respondents termination
was due to its "present business/financial condition." This bare statement fell short of the norm to show a
valid retrenchment. Hence, we hold that there was no valid cause for the retrenchment of respondent.

Indeed, not every loss incurred or expected to be incurred by an employer can justify
retrenchment.1wphi1 The employer must prove, among others, that the losses are substantial and that
the retrenchment is reasonably necessary to avert such losses. Thus, by its failure to present sufficient
and convincing evidence to prove that retrenchment was necessary, respondents termination due to
retrenchment is not allowed.

The Court realizes that the lapse of time since the retrenchment might have rendered respondent's
reinstatement to his former job no longer feasible. If that should be true, then petitioner should instead
pay to him separation pay at the rate of one. month pay for every year of service computed from
September 1992 (when he commenced to work for the petitioners) until the finality of this decision, and
full backwages from the time his compensation was withheld until the finality of this decision.

WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the Court of
Appeals promulgated on February 11, 2002, subject to the modification that should reinstatement be no
longer feasible, petitioner shall pay to respondent separation pay of one month for every year of service
computed from September 1992 until the finality of this decision, and full backwages from the time his
compensation was withheld until the finality of this decision.

Costs of suit to be paid by the petitioners.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT

FIRST DIVISION

G.R. No. 145443. March 18, 2005

RAQUEL P. CONSULTA, Petitioner,

vs.
COURT OF APPEALS, PAMANA PHILIPPINES, INC., RAZUL Z. REQUESTO, and ALETA
TOLENTINO, Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 assailing the Decision of 28 April 2000 and Resolution of 9 October 2000
promulgated by the Court of Appeals ("appellate court")2 in CA-G.R. SP No. 50462. The appellate court
reversed the Resolution of the National Labor Relations Commission ("NLRC") which in turn affirmed the
Labor Arbiters Decision.

The Antecedent Facts

Pamana Philippines, Inc. ("Pamana") is engaged in health care business. Raquel P. Consulta ("Consulta")
was a Managing Associate of Pamana. Consultas appointment dated 1 December 1987 states:

We are pleased to formally confirm your appointment and confer upon you the authority as MANAGING
ASSOCIATE (MA) effective on December 1, 1987 up to January 2, 1988. Your area of operation shall be
within Metro Manila.

In this capacity, your principal responsibility is to organize, develop, manage, and maintain a sales
division and a full complement of agencies and Health Consultants (HealthCons) and to submit such
number of enrollments and revenue attainments as may be required of your position in accordance with
pertinent Company policies and guidelines. In pursuit of this objective, you are hereby tasked with the
responsibilities of recruiting, training and directing your Supervising Associates (SAs) and the Health
Consultants under their respective agencies, for the purpose of promoting our corporate Love Mission.

In the performance of such duties, you are expected to uphold and promote the Companys interests and
good image and to abide by its principles and established norms of conduct necessary and appropriate in
the discharge of your functions. The authority as MA likewise vests upon you command responsibility for
the actions of your SAs and HealthCons; the Company therefore reserves the right to debit your account
for any accountabilities/financial obligations arising therefrom.

By your acceptance of this appointment, it is understood that you must represent the Company on an
exclusive basis, and must not engage directly or indirectly in activities, nor become affiliated in official or
unofficial capacity with companies or organizations which compete or have the same business as
Pamana. It is further understood that his [sic] self-inhibition shall be effective for a period of one year from
date of official termination with the Company arising from any cause whatsoever.

In consideration of your undertaking the assignment and the accompanying duties and responsibilities,
you shall be entitled to compensation computed as follows:
On Initial Membership Fee Entrance Fee 5%

Medical Fee 6%

On Subsequent Membership Fee 6%

You are likewise entitled to participate in sales contests and such other incentives that may be
implemented by the Company.

This appointment is on a non-employer-employee relationship basis, and shall be in accordance with the
Company Guidelines on Appointment, Reclassification and Transfer of Sales Associates. 3

Sometime in 1987, Consulta negotiated with the Federation of Filipino Civilian Employees Association
("FFCEA") working at the United States Subic Naval Base for a Health Care Plan for the FFCEA
members. Pamana issued Consulta a Certification4 dated 23 November 1987, as follows:

This certifies that the Emerald Group under Ms. Raquel P. Consulta, as Managing Consultant, is duly
authorized to negotiate for and in behalf of PAMANA with the Federation of Filipino Civilian Employees
Association covering all U.S. facilities in the Philippines, the coverage of FFCEA members under the
Pamana Golden Care Health Plans.

Upon such negotiation and eventual execution of the contract agreements, entitlements of all benefits due
the Emerald Group in its [sic] entirely including its [sic] Supervising Consultants and Health Consultants,
by of commissions, over-rides and other package of benefits is hereby affirmed, obligated and confirmed
as long as the contracts negotiated and executed are in full force and effect, including any and all
renewals made. And provided further that the herein authorized consultants remain in active status with
the Pamana Golden Care sales group.5

On 4 March 1988, Pamana and the U.S. Naval Supply Depot signed the FFCEA account. Consulta,
claiming that Pamana did not pay her commission for the FFCEA account, filed a complaint for unpaid
wages or commission against Pamana, its President Razul Z. Requesto ("Requesto"), and its Executive
Vice-President Aleta Tolentino ("Tolentino").

The Rulings of the Labor Arbiter and the NLRC

In a Decision promulgated on 23 June 1993, Labor Arbiter Alex Arcadio Lopez ruled, as follows:

ACCORDINGLY, respondent is hereby ordered to pay complainant her unpaid commission to be

computed as against actual transactions between respondent PAMANA and the contracting Department
of U.S. Naval Supply Depot upon presentation of pertinent document.

Respondent is further ordered to pay ten (10%) percent attorneys fees.

SO ORDERED.6

Pamana, Requesto and Tolentino ("Pamana et al.") appealed the Decision of the Labor Arbiter.

In a Resolution7 promulgated on 22 July 1994, the NLRC dismissed the appeal and affirmed the Decision
of the Labor Arbiter. In its Order promulgated on 3 October 1994, the NLRC denied the motion for
reconsideration of Pamana et al.
Pamana et al. filed a petition for certiorari before this Court. In compliance with this Courts resolution
dated 6 February 1995, the Office of the Solicitor General submitted a Manifestation in Lieu of Comment
praying to grant the petition on the ground that Consulta was not an employee of Pamana. On 23
November 1998, this Court referred the case to the appellate court pursuant to St. Martin Funeral Home
v. NLRC.8

The Decision of the Appellate Court

In its Decision promulgated on 28 April 2000, the appellate court reversed the NLRC Decision. The
appellate court ruled that Consulta was a commission agent, not an employee of Pamana. The appellate
court also ruled that Consulta should have litigated her claim for unpaid commission in an ordinary civil
action.

Hence, Consultas recourse to this Court.

The Issues

The issues are:

1. Whether Consulta was an employee of Pamana.

2. Whether the Labor Arbiter had jurisdiction over Consultas claim for unpaid commission.

The Ruling of the Court

We affirm the Decision of the appellate court. Consulta was an independent agent and not an employee
of Pamana.

The Four-Fold Test

In Viaa v. Al-Lagadan,9 the Court first laid down the four-fold test to determine the existence of an
employer-employee relationship. The four elements of an employer-employee relationship, which have
since been adopted in subsequent jurisprudence,10 are (1) the power to hire; (2) the payment of wages;
(3) the power to dismiss; and (4) the power to control. The power to control is the most important of the
four elements.

In Insular Life Assurance Co., Ltd. v. NLRC,11 the Court explained the scope of the power to control,
thus:

x x x 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.
In the present case, the power to control is missing. Pamana tasked Consulta to organize, develop,
manage, and maintain a sales division, submit a number of enrollments and revenue attainments in
accordance with company policies and guidelines, and to recruit, train and direct her Supervising
Associates and Health Consultants.12However, the manner in which Consulta was to pursue these
activities was not subject to the control of Pamana. Consulta failed to show that she had to report for work
at definite hours. The amount of time she devoted to soliciting clients was left entirely to her discretion.
The means and methods of recruiting and training her sales associates, as well as the development,
management and maintenance of her sales division, were left to her sound judgment.

Consulta claims that the documents she submitted show that Pamana had control on the conduct of her
work and the means and methods to accomplish the work. However, the documents only prove the
absence of the power to control. The Minutes of the meeting on 31 May 1988 of the Managing Associates
with Fely Whitfield, Vice-President for Sales of Pamana, reflect the following:

At this point Mrs. Whitfield gave some pointers on recruitment and selling techniques and reminded
the group that the success of an agency is still people. The more recruits you have the better is your
chance to achieve your quota.

She also announced June be made a recruitment month, and told the MAs to remind their associates that
if you cannot sell to a prospect then recruit him or her.

She also discussed extensively the survey method of selling and recruitment and that the sales
associates should be more aggressive in their day to day sales activity. She reminded the MAs to fill up
their recruitment requirements to be able to participate in the monthly and quarterly contest.

xxx

4. Recruitment Campaign

In connection with the Recruitment Campaign for June, Mr. R. Canon 13 requested for Management
support. He suggested that a recruitment Advertisement be placed in a leading Metropolitan daily
Newspaper. The cost of which was unanimously suggested by MAs that Management should share
at least 50%.

5. MAs agreed to pay in advance their share for the salary of the MAs Secretary.14 (Emphasis
supplied)

The Minutes of the 7 June 1988 meeting reflect the following:

III. PRODUCTION & RECRUITMENT INCENTIVES

To help the MAs in their recruitment drive Mrs. Whitfield suggested some incentives to be undertaken by
the MAs like (1) cash incentives for associates that bring in a recruit, (2) cash incentives based on
production brought in by these new recruits.

She said that MAs, as businessm[e]n should invest time, effort & money to their work, because it will
redown [sic] to their own good anyway, that the success of their agency should not depend solely on what
management could give as incentives but also on incentives of MAs within their agencies. It should be a
concerted effort.

After a thorough discussion on the pros & cons of the suggestions it was agreed that a P10.00 per recruit
be given to the associate that will recruit and an additional cash prize based on production of these new
recruits.15
Clearly, the Managing Associates only received suggestions from Pamana on how to go about their
recruitment and sales activities. They could adopt the suggestions but the suggestions were not binding
on them. They could adopt other methods that they deemed more effective.

Further, the Managing Associates had to ask the Management of Pamana to shoulder half of the
advertisement cost for their recruitment campaign. They shelled out their own resources to bolster their
recruitment. They shared in the payment of the salaries of their secretaries. They gave cash incentives to
their sales associates from their own pocket. These circumstances show that the Managing Associates
were independent contractors, not employees, of Pamana.

Finally, Pamana paid Consulta not for labor she performed but only for the results of her labor.16 Without
results, Consultas labor was her own burden and loss. Her right to compensation, or to commission,
depended on the tangible results of her work 17 - whether she brought in paying recruits. Consultas
appointment paper provides:

In consideration of your undertaking the assignment and the accompanying duties and responsibilities,
you shall be entitled to compensation computed as follows:

On Initial Membership Fee Entrance Fee 5%

Medical Fee 6%

On Subsequent Membership Fee 6%

You are likewise entitled to participation in sales contests and such other incentives that may be
implemented by the Company.18

The Guidelines on Appointment of Associates show that a Managing Associate received the following
commissions and bonuses:

3. Compensation Package of Regular MAs

Regular MAs shall be entitled to the following compensation and benefits:

3.1 Compensation

a) Personal Production

Individual/Family Institutional Acct.

commission 30% 30%

bonus 40% -

b) Group Production

overriding commission 6% 6%

bonus 5% -

3.2 Benefits
Participation in all sales contests corresponding to the MA position plus any such other benefits as may
be provided for the MA on regular status.19

Aside from commissions, bonuses and other benefits that depended solely on actual sales, Pamana did
not pay Consulta any compensation for managing her sales division, or for recruiting and training her
sales consultants. As a Managing Associate, she was only entitled to commissions, bonuses and other
benefits, which depended solely on her sales and on the sales of her group.

The Exclusivity Provision

Consultas appointment had an exclusivity provision. The appointment provided that Consulta must
represent Pamana on an exclusive basis. She must not engage directly or indirectly in activities of other
companies that compete with the business of Pamana. However, the fact that the appointment required
Consulta to solicit business exclusively for Pamana did not mean that Pamana exercised control over the
means and methods of Consultas work as the term control is understood in labor jurisprudence. 20 Neither
did it make Consulta an employee of Pamana. Pamana did not prohibit Consulta from engaging in any
other business, or from being connected with any other company, for as long as the business or company
did not compete with Pamanas business.

The prohibition applied for one year after the termination of the contract with Pamana. In one of their
meetings, one of the Managing Associates reported that he was transferring his sales force and account
from another company to Pamana.21 The exclusivity provision was a reasonable restriction designed to
prevent similar acts prejudicial to Pamanas business interest. Article 1306 of the Civil Code provides that
"[t]he contracting parties may establish such stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, morals, good customs, public order, or public
policy."

Jurisdiction over Claim for Unpaid Commission

There being no employer-employee relationship between Pamana and Consulta, the Labor Arbiter and
the NLRC had no jurisdiction to entertain and rule on Consultas money claim.

Article 217 of the Labor Code provides:

ART. 217. Jurisdiction of Labor Arbiters and the Commission. - (a) Except as otherwise provided under
this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty
(30) calendar days after the submission of the case by the parties for decision without extension, even in
the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-
agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates
of pay, hours of work and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of
strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other
claims, arising from employer-employee relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.

(c) Cases arising from the interpretation or implementation of collective bargaining agreements and those
arising from the interpretation or enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be
provided in said agreements.

Consulta filed her action under Article 217(a)(6) of the Labor Code. However, since there was no
employer-employee relationship between Pamana and Consulta, the Labor Arbiter should have dismissed
Consultas claim for unpaid commission. Consultas remedy is to file an ordinary civil action to litigate her
claim.

WHEREFORE, the petition is DISMISSED and the Decision of the Court of Appeals in CA-G.R. SP No.
50462 is AFFIRMED in toto.

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 ABS-CBN 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 ABS-CBN 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] employer-employee 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 ABS-CBN 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.21Whatever 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, ABS-CBN 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 Alberty-Vlez 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 x 28 (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 post-
production 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. ABS-CBNs 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 ABS-CBN. 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 ABS-CBN 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 Constitution 53 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

SECOND DIVISION
G.R. No. 167648 January 28, 2008

TELEVISION AND PRODUCTION EXPONENTS, INC. and/or ANTONIO P. TUVIERA, petitioners,

vs.
ROBERTO C. SERVAA, respondent.

DECISION

TINGA, J.:

This petition for review under Rule 45 assails the 21 December 2004 Decision 1 and 8 April 2005
Resolution2 of the Court of Appeals declaring Roberto Servaa (respondent) a regular employee of
petitioner Television and Production Exponents, Inc. (TAPE). The appellate court likewise ordered TAPE
to pay nominal damages for its failure to observe statutory due process in the termination of respondents
employment for authorized cause.

TAPE is a domestic corporation engaged in the production of television programs, such as the long-
running variety program, "Eat Bulaga!". Its president is Antonio P. Tuviera (Tuviera). Respondent Roberto
C. Servaa had served as a security guard for TAPE from March 1987 until he was terminated on 3
March 2000.

Respondent filed a complaint for illegal dismissal and nonpayment of benefits against TAPE. He alleged
that he was first connected with Agro-Commercial Security Agency but was later on absorbed by TAPE as
a regular company guard. He was detailed at Broadway Centrum in Quezon City where "Eat Bulaga!"
regularly staged its productions. On 2 March 2000, respondent received a memorandum informing him of
his impending dismissal on account of TAPEs decision to contract the services of a professional security
agency. At the time of his termination, respondent was receiving a monthly salary of P6,000.00. He
claimed that the holiday pay, unpaid vacation and sick leave benefits and other monetary considerations
were withheld from him. He further contended that his dismissal was undertaken without due process and
violative of existing labor laws, aggravated by nonpayment of separation pay.3

In a motion to dismiss which was treated as its position paper, TAPE countered that the labor arbiter had
no jurisdiction over the case in the absence of an employer-employee relationship between the parties.
TAPE made the following assertions: (1) that respondent was initially employed as a security guard for
Radio Philippines Network (RPN-9); (2) that he was tasked to assist TAPE during its live productions,
specifically, to control the crowd; (3) that when RPN-9 severed its relationship with the security agency,
TAPE engaged respondents services, as part of the support group and thus a talent, to provide security
service to production staff, stars and guests of "Eat Bulaga!" as well as to control the audience during the
one-and-a-half hour noontime program; (4) that it was agreed that complainant would render his services
until such time that respondent company shall have engaged the services of a professional security
agency; (5) that in 1995, when his contract with RPN-9 expired, respondent was retained as a talent and
a member of the support group, until such time that TAPE shall have engaged the services of a
professional security agency; (6) that respondent was not prevented from seeking other employment,
whether or not related to security services, before or after attending to his "Eat Bulaga!" functions; (7) that
sometime in late 1999, TAPE started negotiations for the engagement of a professional security agency,
the Sun Shield Security Agency; and (8) that on 2 March 2000, TAPE issued memoranda to all talents,
whose functions would be rendered redundant by the engagement of the security agency, informing them
of the managements decision to terminate their services. 4

TAPE averred that respondent was an independent contractor falling under the talent group category and
was working under a special arrangement which is recognized in the industry.5

Respondent for his part insisted that he was a regular employee having been engaged to perform an
activity that is necessary and desirable to TAPEs business for thirteen (13) years. 6
On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared respondent to be a regular
employee of TAPE. The Labor Arbiter relied on the nature of the work of respondent, which is securing
and maintaining order in the studio, as necessary and desirable in the usual business activity of TAPE.
The Labor Arbiter also ruled that the termination was valid on the ground of redundancy, and ordered the
payment of respondents separation pay equivalent to one (1)-month pay for every year of service. The
dispositive portion of the decision reads:

WHEREFORE, complainants position is hereby declared redundant. Accordingly, respondents

are hereby ordered to pay complainant his separation pay computed at the rate of one (1) month
pay for every year of service or in the total amount of P78,000.00.7

On appeal, the National Labor Relations Commission (NLRC) in a Decision 8 dated 22 April 2002 reversed
the Labor Arbiter and considered respondent a mere program employee, thus:

We have scoured the records of this case and we find nothing to support the Labor Arbiters
conclusion that complainant was a regular employee.

xxxx

The primary standard to determine regularity of employment is the reasonable connection

between the particular activity performed by the employee in relation to the usual business or
trade of the employer. This connection can be determined by considering the nature and work
performed and its relation to the scheme of the particular business or trade in its entirety. x x x
Respondent company is engaged in the business of production of television shows. The records
of this case also show that complainant was employed by respondent company beginning 1995
after respondent company transferred from RPN-9 to GMA-7, a fact which complainant does not
dispute. His last salary was P5,444.44 per month. In such industry, security services may not be
deemed necessary and desirable in the usual business of the employer. Even without the
performance of such services on a regular basis, respondents companys business will not grind
to a halt.

xxxx

Complainant was indubitably a program employee of respondent company. Unlike [a] regular
employee, he did not observe working hours x x x. He worked for other companies, such as M-
Zet TV Production, Inc. at the same time that he was working for respondent company. The
foregoing indubitably shows that complainant-appellee was a program employee. Otherwise, he
would have two (2) employers at the same time. 9

Respondent filed a motion for reconsideration but it was denied in a Resolution 10 dated 28 June 2002.

Respondent filed a petition for certiorari with the Court of Appeals contending that the NLRC acted with
grave abuse of discretion amounting to lack or excess of jurisdiction when it reversed the decision of the
Labor Arbiter. Respondent asserted that he was a regular employee considering the nature and length of
service rendered.11

Reversing the decision of the NLRC, the Court of Appeals found respondent to be a regular employee.
We quote the dispositive portion of the decision:

IN LIGHT OF THE FOREGOING, the petition is hereby GRANTED. The Decision dated 22 April
2002 of the public respondent NLRC reversing the Decision of the Labor Arbiter and its
Resolution dated 28 June 2002 denying petitioners motion for reconsideration
are REVERSED and SET ASIDE. The Decision dated 29 June 2001 of the Labor Arbiter
 is REINSTATED with MODIFICATION in that private respondents are ordered to pay jointly and
severally petitioner the amount of P10,000.00 as nominal damages for non-compliance with the
statutory due process.

SO ORDERED.12

Finding TAPEs motion for reconsideration without merit, the Court of Appeals issued a Resolution 13 dated
8 April 2005 denying said motion.

TAPE filed the instant petition for review raising substantially the same grounds as those in its petition for
certiorari before the Court of Appeals. These matters may be summed up into one main issue: whether an
employer-employee relationship exists between TAPE and respondent.

On 27 September 2006, the Court gave due course to the petition and considered the case submitted for
decision.14

At the outset, it bears emphasis that the existence of employer-employee relationship is ultimately a
question of fact. Generally, only questions of law are entertained in appeals by certiorari to the Supreme
Court. This rule, however, is not absolute. Among the several recognized exceptions is when the findings
of the Court of Appeals and Labor Arbiters, on one hand, and that of the NLRC, on the other, are
conflicting,15 as obtaining in the case at bar.

Jurisprudence is abound with cases that recite the factors to be considered in determining the existence
of employer-employee relationship, namely: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee with
respect to the means and method by which the work is to be accomplished. 16 The most important factor
involves the control test. Under the control test, there is an employer-employee relationship when the
person for whom the services are performed reserves the right to control not only the end achieved but
also the manner and means used to achieve that end. 17

In concluding that respondent was an employee of TAPE, the Court of Appeals applied the "four-fold test"
in this wise:

First. The selection and hiring of petitioner was done by private respondents. In fact, private
respondents themselves admitted having engaged the services of petitioner only in 1995 after
TAPE severed its relations with RPN Channel 9.

By informing petitioner through the Memorandum dated 2 March 2000, that his services will be
terminated as soon as the services of the newly hired security agency begins, private
respondents in effect acknowledged petitioner to be their employee. For the right to hire and fire
is another important element of the employer-employee relationship.

Second. Payment of wages is one of the four factors to be considered in determining the
existence of employer-employee relation. . . Payment as admitted by private respondents was
given by them on a monthly basis at a rate of P5,444.44.

Third. Of the four elements of the employer-employee relationship, the "control test" is the most
important. x x x

The bundy cards representing the time petitioner had reported for work are evident proofs of
private respondents control over petitioner more particularly with the time he is required to report
for work during the noontime program of "Eat Bulaga!" If it were not so, petitioner would be free to
report for work anytime even not during the noontime program of "Eat Bulaga!" from 11:30 a.m. to
 1:00 p.m. and still gets his compensation for being a "talent." Precisely, he is being paid for being
the security of "Eat Bulaga!" during the above-mentioned period. The daily time cards of petitioner
are not just for mere record purposes as claimed by private respondents. It is a form of control by
the management of private respondent TAPE.18

TAPE asseverates that the Court of Appeals erred in applying the "four-fold test" in determining the
existence of employer-employee relationship between it and respondent. With respect to the elements of
selection, wages and dismissal, TAPE proffers the following arguments: that it never hired respondent,
instead it was the latter who offered his services as a talent to TAPE; that the Memorandum dated 2
March 2000 served on respondent was for the discontinuance of the contract for security services and not
a termination letter; and that the talent fees given to respondent were the pre-agreed consideration for the
services rendered and should not be construed as wages. Anent the element of control, TAPE insists that
it had no control over respondent in that he was free to employ means and methods by which he is to
control and manage the live audiences, as well as the safety of TAPEs stars and guests. 19

The position of TAPE is untenable. Respondent was first connected with Agro-Commercial Security
Agency, which assigned him to assist TAPE in its live productions. When the security agencys contract
with RPN-9 expired in 1995, respondent was absorbed by TAPE or, in the latters language, "retained as
talent."20 Clearly, respondent was hired by TAPE. Respondent presented his identification card 21 to prove
that he is indeed an employee of TAPE. It has been in held that in a business establishment, an
identification card is usually provided not just as a security measure but to mainly identify the holder
thereof as a bona fide employee of the firm who issues it.22

Respondent claims to have been receiving P5,444.44 as his monthly salary while TAPE prefers to
designate such amount as talent fees. Wages, as defined in the Labor Code, are remuneration or
earnings, however designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of employment for work
done or to be done, or for service rendered or to be rendered. It is beyond dispute that respondent
received a fixed amount as monthly compensation for the services he rendered to TAPE.

The Memorandum informing respondent of the discontinuance of his service proves that TAPE had the
power to dismiss respondent.

Control is manifested in the bundy cards submitted by respondent in evidence. He was required to report
daily and observe definite work hours. To negate the element of control, TAPE presented a certification
from M-Zet Productions to prove that respondent also worked as a studio security guard for said
company. Notably, the said certificate categorically stated that respondent reported for work on Thursdays
from 1992 to 1995. It can be recalled that during said period, respondent was still working for RPN-9. As
admitted by TAPE, it absorbed respondent in late 1995. 23

TAPE further denies exercising control over respondent and maintains that the latter is an independent
contractor.24Aside from possessing substantial capital or investment, a legitimate job contractor or
subcontractor carries on a distinct and independent business and undertakes to perform the job, work or
service on its own account and under its own responsibility according to its own manner and method, and
free from the control and direction of the principal in all matters connected with the performance of the
work except as to the results thereof.25 TAPE failed to establish that respondent is an independent
contractor. As found by the Court of Appeals:

We find the annexes submitted by the private respondents insufficient to prove that herein
petitioner is indeed an independent contractor. None of the above conditions exist in the case at
bar. Private respondents failed to show that petitioner has substantial capital or investment to be
qualified as an independent contractor. They likewise failed to present a written contract which
 specifies the performance of a specified piece of work, the nature and extent of the work and the
term and duration of the relationship between herein petitioner and private respondent TAPE. 26

TAPE relies on Policy Instruction No. 40, issued by the Department of Labor, in classifying respondent as
a program employee and equating him to be an independent contractor.

Policy Instruction No. 40 defines program employees as

x x x those whose skills, talents or services are engaged by the station for a particular or specific
program or undertaking and who are not required to observe normal working hours such that on
some days they work for less than eight (8) hours and on other days beyond the normal work
hours observed by station employees and are allowed to enter into employment contracts with
other persons, stations, advertising agencies or sponsoring companies. The engagement of
program employees, including those hired by advertising or sponsoring companies, shall be
under a written contract specifying, among other things, the nature of the work to be performed,
rates of pay and the programs in which they will work. The contract shall be duly registered by the
station with the Broadcast Media Council within three (3) days from its consummation. 27

TAPE failed to adduce any evidence to prove that it complied with the requirements laid down in the
policy instruction. It did not even present its contract with respondent. Neither did it comply with the
contract-registration requirement.

Even granting arguendo that respondent is a program employee, stills, classifying him as an independent
contractor is misplaced. The Court of Appeals had this to say:

We cannot subscribe to private respondents conflicting theories. The theory of private

respondents that petitioner is an independent contractor runs counter to their very own allegation
that petitioner is a talent or a program employee. An independent contractor is not an employee
of the employer, while a talent or program employee is an employee. The only difference between
a talent or program employee and a regular employee is the fact that a regular employee is
entitled to all the benefits that are being prayed for. This is the reason why private respondents try
to seek refuge under the concept of an independent contractor theory. For if petitioner were
indeed an independent contractor, private respondents will not be liable to pay the benefits
prayed for in petitioners complaint.28

More importantly, respondent had been continuously under the employ of TAPE from 1995 until his
termination in March 2000, or for a span of 5 years. Regardless of whether or not respondent had been
performing work that is necessary or desirable to the usual business of TAPE, respondent is still
considered a regular employee under Article 280 of the Labor Code which provides:

Art. 280. Regular and Casual Employment.The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of engagement of the employee or where the work or
service to be performed is seasonal in nature and employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph.

Provided, that, any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while such activity exists.
As a regular employee, respondent cannot be terminated except for just cause or when authorized by
law.29 It is clear from the tenor of the 2 March 2000 Memorandum that respondents termination was due
to redundancy. Thus, the Court of Appeals correctly disposed of this issue, viz:

Article 283 of the Labor Code provides that the employer may also terminate the employment of
any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of this Title, by serving a written
notice on the workers and the Ministry of Labor and Employment at least one (1) month before
the intended date thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1) month pay for every year or service, whichever
is higher.

xxxx

We uphold the finding of the Labor Arbiter that "complainant [herein petitioner] was terminated
upon [the] managements option to professionalize the security services in its operations. x x x"
However, [we] find that although petitioners services [sic] was for an authorized cause, i.e.,
redundancy, private respondents failed to prove that it complied with service of written notice to
the Department of Labor and Employment at least one month prior to the intended date of
retrenchment. It bears stressing that although notice was served upon petitioner through a
Memorandum dated 2 March 2000, the effectivity of his dismissal is fifteen days from the start of
the agencys take over which was on 3 March 2000. Petitioners services with private
respondents were severed less than the month requirement by the law.

Under prevailing jurisprudence the termination for an authorized cause requires payment of
separation pay. Procedurally, if the dismissal is based on authorized causes under Articles 283
and 284, the employer must give the employee and the Deparment of Labor and Employment
written notice 30 days prior to the effectivity of his separation. Where the dismissal is for an
authorized cause but due process was not observed, the dismissal should be upheld. While the
procedural infirmity cannot be cured, it should not invalidate the dismissal. However, the employer
should be liable for non-compliance with procedural requirements of due process.

xxxx

Under recent jurisprudence, the Supreme Court fixed the amount of P30,000.00 as nominal
damages. The basis of the violation of petitioners right to statutory due process by the private
respondents warrants the payment of indemnity in the form of nominal damages. The amount of
such damages is addressed to the sound discretion of the court, taking into account the relevant
circumstances. We believe this form of damages would serve to deter employer from future
violations of the statutory due process rights of the employees. At the very least, it provides a
vindication or recognition of this fundamental right granted to the latter under the Labor Code and
its Implementing Rules. Considering the circumstances in the case at bench, we deem it proper
to fix it at P10,000.00.30

In sum, we find no reversible error committed by the Court of Appeals in its assailed decision.

However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any showing that he
acted with malice or bad faith in terminating respondent, he cannot be held solidarily liable with
TAPE.31 Thus, the Court of Appeals ruling on this point has to be modified.

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with
MODIFICATION in that only petitioner Television and Production Exponents, Inc. is liable to pay
respondent the amount of P10,000.00 as nominal damages for non-compliance with the statutory due
process and petitioner Antonio P. Tuviera is accordingly absolved from liability.

SO ORDERED.