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Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-12582 January 28, 1961

LVN PICTURES, INC., petitioner-appellant,


vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees.

x---------------------------------------------------------x

G.R. No. L-12598 January 28, 1961

SAMPAGUITA PICTURES, INC., petitioner-appellant,


vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees.

Nicanor S. Sison for petitioner-appellant.


Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.

CONCEPCION, J.:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

By declaring a worker an employee of the person for whom he works and by recognizing and protecting his rights as such, we eliminate the cause of
industrial unrest and consequently we promote industrial peace, because we enable him to negotiate an agreement which will settle disputes
regarding conditions of employment, through the process of collective bargaining.

The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term embraces 'any employee' that is all employees in the
conventional as well in the legal sense expect those excluded by express provision. (Connor Lumber Co., 11 NLRB 776.).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This is not situation obtaining in the case at bar. The musical directors above referred to have no such control over the musicians involved in the present case.
Said musical directors control neither the music to be played, nor the musicians playing it. The film companies summon the musicians to work, through the
musical directors. The film companies, through the musical directors, fix the date, the time and the place of work. The film companies, not the musical directors,
provide the transportation to and from the studio. The film companies furnish meal at dinner time.

What is more in the language of the order appealed from "during the recording sessions, the motion picture director who is an employee of the company"
not the musical director "supervises the recording of the musicians and tells them what to do in every detail". The motion picture director not the musical
director "solely directs and performance of the musicians before the camera". The motion picture director "supervises the performance of all the
actors, including the musicians who appear in the scenes, so that in the actual performance to be shown in the screen, the musical director's intervention has
stopped." Or, as testified to in the lower court, "the movie director tells the musical director what to do; tells the music to be cut or tells additional music in this part
or he eliminates the entire music he does not (want) or he may want more drums or move violin or piano, as the case may be". The movie director "directly
controls the activities of the musicians." He "says he wants more drums and the drummer plays more" or "if he wants more violin or he does not like that.".

It is well settled that "an employer-employee relationship exists . . .where the person for whom the services are performed reserves a right to control not only the
end to be achieved but also the means to be used in reaching such end . . . ." (Alabama Highway Express Co., Express Co., v. Local 612, 108S. 2d. 350.) The
decisive nature of said control over the "means to be used", is illustrated in the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210, pp. 1197,
1199-1201), in which, by reason of said control, the employer-employee relationship was held to exist between the management and the workers,
notwithstanding the intervention of an alleged independent contractor, who had, and exercise, the power to hire and fire said workers. The aforementioned
control over the means to be used" in reading the desired end is possessed and exercised by the film companies over the musicians in the cases before us.

WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is so ordered.

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-32245 May 25, 1979

DY KEH BENG, petitioner,


vs.
INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL., respondents.

A. M Sikat for petitioner.

D. A. Hernandez for respondents.

DE CASTRO, J.:

Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations dated March 23, 1970 in Case No. 3019-ULP and the
Court's Resolution en banc of June 10, 1970 affirming said decision. The Court of Industrial Relations in that case found Dy Keh Beng guilty of the unfair labor
practice acts alleged and order him to

reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from their respective dates of dismissal until fully
reinstated without loss to their right of seniority and of such other rights already acquired by them and/or allowed by law. 1

Now, Dy Keh Beng assigns the following errors 2 as having been committed by the Court of Industrial Relations:

I. RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE EMPLOYEES OF PETITIONERS.

II.RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY
PETITIONER.

III.RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A
PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN.

IV.RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE
COMPLAINT.

V.RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES FROM THEIR
RESPECTIVE DATES OF DISMISSALS UNTIL FINALLY REINSTATED WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER RIGHTS
ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY LAW.

The facts as found by the Hearing Examiner are as follows:

A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for discriminatory acts within the meaning of Section 4(a), sub-
paragraph (1) and (4). Republic Act No. 875, 3 by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for their union
activities. After preliminary investigation was conducted, a case was filed in the Court of Industrial Relations for in behalf of the International Labor and Marine
Union of the Philippines and two of its members, Solano and Tudla In his answer, Dy Keh Beng contended that he did not know Tudla and that Solano was not
his employee because the latter came to the establishment only when there was work which he did on pakiaw basis, each piece of work being done under a
separate contract. Moreover, Dy Keh Beng countered with a special defense of simple extortion committed by the head of the labor union, Bienvenido Onayan.

After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the Court of Industrial Relations. An employee-employer
relationship was found to have existed between Dy Keh Beng and complainants Tudla and Solano, although Solano was admitted to have worked on piece
basis. 4 The issue therefore centered on whether there existed an employee employer relation between petitioner Dy Keh Beng and the respondents Solano and
Tudla .

According to the Hearing Examiner, the evidence for the complainant Union tended to show that Solano and Tudla became employees of Dy Keh Beng from May
2, 1953 and July 15, 1955, 5 respectively, and that except in the event of illness, their work with the establishment was continuous although their services were
compensated on piece basis. Evidence likewise showed that at times the establishment had eight (8) workers and never less than five (5); including the
complainants, and that complainants used to receive ?5.00 a day. sometimes less. 6

According to Dy Keh Beng, however, Solano was not his employee for the following reasons:

(1) Solano never stayed long enought at Dy's establishment;

(2) Solano had to leave as soon as he was through with the

(3) order given him by Dy;

(4) When there were no orders needing his services there was nothing for him to do;

(5) When orders came to the shop that his regular workers could not fill it was then that Dy went to his address in Caloocan and fetched
him for these orders; and

(6) Solano's work with Dy's establishment was not continuous. , 7

According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not employees under Republic Act 875, where an
employee 8 is referred to as

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

while an employer 9

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

Petitioner really anchors his contention of the non-existence of employee-employer relationship on the control test. He points to the case of Madrigal Shipping
Co., Inc. v. Nieves Baens del Rosario, et al., L-13130, October 31, 1959, where the Court ruled that:

The test ... of the existence of employee and employer relationship is whether there is an understanding between the parties that one is
to render personal services to or for the benefit of the other and recognition by them of the right of one to order and control the other in
the performance of the work and to direct the manner and method of its performance.

Petitioner contends that the private respondents "did not meet the control test in the fight of the ... definition of the terms employer and employee, because there
was no evidence to show that petitioner had the right to direct the manner and method of respondent's work. 10 Moreover, it is argued that petitioner's evidence
showed that "Solano worked on a pakiaw basis" and that he stayed in the establishment only when there was work.

While this Court upholds the control test 11 under which an employer-employee relationship exists "where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also the means to be used in reaching such end, " it finds no merit with petitioner's arguments as
stated above. It should be borne in mind that the control test calls merely for the existence of the right to control the manner of doing the work, not the actual
exercise of the right. 12Considering the finding by the Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of baskets known
as kaing, 13 it is natural to expect that those working under Dy would have to observe, among others, Dy's requirements of size and quality of the kaing. Some
control would necessarily be exercised by Dy as the making of thekaing would be subject to Dy's specifications. Parenthetically, since the work on the baskets is
done at Dy's establishments, it can be inferred that the proprietor Dy could easily exercise control on the men he employed.

As to the contention that Solano was not an employee because he worked on piece basis, this Court agrees with the Hearing Examiner that

circumstances must be construed to determine indeed if payment by the piece is just a method of compensation and does not define the
essence of the relation. Units of time ... and units of work are in establishments like respondent (sic) just yardsticks whereby to
determine rate of compensation, to be applied whenever agreed upon. We cannot construe payment by the piece where work is done in
such an establishment so as to put the worker completely at liberty to turn him out and take in another at pleasure.

At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras who penned the decision in "Sunrise Coconut Products Co.
v. Court of Industrial Relations" (83 Phil..518, 523), opined that

judicial notice of the fact that the so-called "pakyaw" system mentioned in this case as generally practiced in our country, is, in fact, a
labor contract -between employers and employees, between capitalists and laborers.

Insofar as the other assignments of errors are concerned, there is no showing that the Court of Industrial Relations abused its discretion when it concluded that
the findings of fact made by the Hearing Examiner were supported by evidence on the record. Section 6, Republic Act 875 provides that in unfair labor practice
cases, the factual findings of the Court of Industrial Relations are conclusive on the Supreme Court, if supported by substantial evidence. This provision has been
put into effect in a long line of decisions where the Supreme Court did not reverse the findings of fact of the Court of Industrial Relations when they were
supported by substantial evidence. 14

Nevertheless, considering that about eighteen (18) years have already elapsed from the time the complainants were dismissed, 15 and that the decision being
appealed ordered the payment of backwages to the employees from their respective dates of dismissal until finally reinstated, it is fitting to apply in this
connection the formula for backwages worked out by Justice Claudio Teehankee in "cases not terminated sooner." 16 The formula cans for fixing the award of
backwages without qualification and deduction to three years, "subject to deduction where there are mitigating circumstances in favor of the employer but subject
to increase by way of exemplary damages where there are aggravating circumstances. 17Considering there are no such circumstances in this case, there is no
reason why the Court should not apply the abovementioned formula in this instance.

WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein modified to an award of backwages for three years without
qualification and deduction at the respective rates of compensation the employees concerned were receiving at the time of dismissal. The execution of this award
is entrusted to the National Labor Relations Commission. Costs against petitioner.

SO ORDERED.

[G.R. No. 129315. October 2, 2000]

OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO LACAP, SIMPLICIO PEDELOS, PATRICIA NAS, and TERESITA
FLORES, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, LAO ENTENG COMPANY, INC. and/or TRINIDAD LAO
ONG, respondents.

DECISION

QUISUMBING, J.:

This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public respondent National Labor Relations
Commission (First Division),[1] in NLRC NCR Case No. 00-04-03163-95, and the Resolution dated March 5, 1997 denying the motion for reconsideration. The
aforecited October 17th Resolution affirmed the Decision dated September 28, 1996 of Labor Arbiter Potenciano S. Caizares dismissing the petitioners'
complaint for illegal dismissal and declaring that petitioners are not regular employees of private respondent Lao Enteng Company, Inc..

The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro Tolentino, Manuel Caparas, Elpidio Lacap, and Simplicio
Pedelos worked as barbers, while the two female petitioners, Teresita Flores and Patricia Nas worked as manicurists in New Look Barber Shop located at 651 P.
Paterno Street, Quiapo, Manila owned by private respondent Lao Enteng Co. Inc.. Petitioner Nas alleged that she also worked as watcher and marketer of
private respondent.
Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single proprietorship owned and managed by Mr. Vicente
Lao. In or about January 1982, the children of Vicente Lao organized a corporation which was registered with the Securities and Exchange Commission as Lao
Enteng Co. Inc. with Trinidad Ong as President of the said corporation. Upon its incorporation, the respondent company took over the assets, equipment, and
properties of the New Look Barber Shop and continued the business. All the petitioners were allowed to continue working with the new company until April 15,
1995 when respondent Trinidad Ong informed them that the building wherein the New Look Barber Shop was located had been sold and that their services were
no longer needed.[2]

On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal dismissal, illegal deduction, separation pay, non-
payment of 13th month pay, and salary differentials. Only petitioner Nas asked for payment of salary differentials as she alleged that she was paid a daily wage
of P25.00 throughout her period of employment.The petitioners also sought the refund of the P1.00 that the respondent company collected from each of them
daily as salary of the sweeper of the barber shop.

Private respondent in its position paper averred that the petitioners were joint venture partners and were receiving fifty percent commission of the amount
charged to customers.Thus, there was no employer-employee relationship between them and petitioners. And assuming arguendo, that there was an employer-
employee relationship, still petitioners are not entitled to separation pay because the cessation of operations of the barber shop was due to serious business
losses.

Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her affidavit dated September 06, 1995 that Lao Enteng
Company, Inc. did not take over the management of the New Look Barber Shop, that after the death Lao Enteng petitioner were verbally informed time and again
that the partnership may fold up anytime because nobody in the family had the time to be at the barber shop to look after their interest; that New Look Barber
Shop had always been a joint venture partnership and the operation and management of the barber shop was left entirely to petitioners; that her father's
contribution to the joint venture included the place of business, payment for utilities including electricity, water, etc. while petitioners as industrial partners,
supplied the labor; and that the barber shop was allowed to remain open up to April 1995 by the children because they wanted to give the partners a chance at
making it work. Eventually, they were forced to close the barber shop because they continued to lose money while petitioners earned from it. Trinidad also added
that private respondents had no control over petitioners who were free to come and go as they wished. Admittedly too by petitioners they received fifty percent to
sixty percent of the gross paid by customers. Trinidad explained that some of the petitioners were allowed to register with the Social Security System as
employees of Lao Enteng Company, Inc. only as an act of accommodation. All the SSS contributions were made by petitioners. Moreover, Osias Corporal,
Elpidio Lacap and Teresita Flores were not among those registered with the Social Security System. Lastly, Trinidad avers that without any employee-employer
relationship petitioners claim for 13th month pay and separation pay have no basis in fact and in law.[3]

In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Caizares, Jr. ordered the dismissal of the complaint on the basis of his findings that
the complainants and the respondents were engaged in a joint venture and that there existed no employer-employee relation between them. The Labor Arbiter
also found that the barber shop was closed due to serious business losses or financial reverses and consequently declared that the law does not compel the
establishment to pay separation pay to whoever were its employees.[4]

On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of merit, ratiocinating thus:

Indeed, complainants failed to show the existence of employer-employee relationship under the fourway test established by the Supreme Court. It is a common
practice in the Barber Shop industry that barbers supply their own scissors and razors and they split their earnings with the owner of the barber shop. The only
capital of the owner is the place of work whereas the barbers provide the skill and expertise in servicing customers. The only control exercised by the owner of
the barber shop is to ascertain the number of customers serviced by the barber in order to determine the sharing of profits. The barbers maybe characterized as
independent contractors because they are under the control of the barber shop owner only with respect to the result of the work, but not with respect to the
details or manner of performance. The barbers are engaged in an independent calling requiring special skills available to the public at large. [5]

Its motion for reconsideration denied in the Resolution [6] dated March 5, 1997, petitioners filed the instant petition assigning that the NLRC committed
grave abuse of discretion in:

I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS WERE EMPLOYEES OF RESPONDENT
COMPANY IN RULING THAT PETITIONERS WERE INDEPENDENT CONTRACTORS.

II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT AWARDING THEIR MONEY CLAIMS.[7]

Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners were independent contractors. They contend that
they were employees of the respondent company and cannot be considered as independent contractors because they did not carry on an independent
business. They did not cut hair, manicure, and do their work in their own manner and method. They insist they were not free from the control and direction of
private respondents in all matters, and their services were engaged by the respondent company to attend to its customers in its barber shop. Petitioners also
stated that, individually or collectively, they do not have substantial capital nor investments in tools, equipments, work premises and other materials necessary in
the conduct of the barber shop. What the barbers owned were merely combs, scissors, and razors, while the manicurists owned only nail cutters, nail polishes,
nippers and cuticle removers. By no standard can these be considered "substantial capital" necessary to operate a barbers shop.

Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing that petitioners Pedro Tolentino, Manuel Caparas,
Simplicio Pedelos, and Patricia Nas were registered with the Social Security System as regular employees of the respondent company. The SSS employment
records in common show that the employer's ID No. of Vicente Lao/Barber and Pawn Shop was 03-0606200-1 and that of the respondent company was 03-
8740074-7. All the foregoing entries in the SSS employment records were painstakingly detailed by the petitioners in their position paper and in their
memorandum appeal but were arbitrarily ignored first by the Labor Arbiter and then by the respondent NLRC which did not even mention said employment
records in its questioned decision.

We found petition is impressed with merit.

In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be accorded respect and finality on appeal. We have
long settled that this Court will not uphold erroneous conclusions unsupported by substantial evidence. [8] We must also stress that where the findings of the
NLRC contradict those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned
findings.[9]

The issues raised by petitioners boil down to whether or not an employer-employee relationship existed between petitioners and private respondent Lao
Enteng Company, Inc.The Labor Arbiter has concluded that the petitioners and respondent company were engaged in a joint venture. The NLRC concluded that
the petitioners were independent contractors.

The Labor Arbiter's findings that the parties were engaged in a joint venture is unsupported by any documentary evidence. It should be noted that aside
from the self-serving affidavit of Trinidad Lao Ong, there were no other evidentiary documents, nor written partnership agreements presented. We have ruled that
even the sharing of proceeds for every job of petitioners in the barber shop does not mean they were not employees of the respondent company. [10]

Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors simply because they supplied their own working
implements, shared in the earnings of the barber shop with the owner and chose the manner of performing their work. They stressed that as far as the result of
their work was concerned the barber shop owner controlled them.

An independent contractor is one who undertakes "job contracting", i.e., a person who (a) carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as to the results thereof, and (b) has substantial capital or investment in the form of
tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of the business. [11]

Juxtaposing this provision vis--vis the facts of this case, we are convinced that petitioners are not "independent contractors". They did not carry on an
independent business.Neither did they undertake cutting hair and manicuring nails, on their own as their responsibility, and in their own manner and method. The
services of the petitioners were engaged by the respondent company to attend to the needs of its customers in its barber shop. More importantly, the petitioners,
individually or collectively, did not have a substantial capital or investment in the form of tools, equipment, work premises and other materials which are
necessary in the conduct of the business of the respondent company. What the petitioners owned were only combs, scissors, razors, nail cutters, nail polishes,
the nippers - nothing else. By no standard can these be considered substantial capital necessary to operate a barber shop. From the records, it can be gleaned
that petitioners were not given work assignments in any place other than at the work premises of the New Look Barber Shop owned by the respondent
company. Also, petitioners were required to observe rules and regulations of the respondent company pertaining, among other things, observance of daily
attendance, job performance, and regularity of job output. The nature of work performed by were clearly directly related to private respondent's business of
operating barber shops.Respondent company did not dispute that it owned and operated three (3) barber shops. Hence, petitioners were not independent
contractors.

Did an employee-employer relationship exist between petitioners and private respondent? The following elements must be present for an employer-
employee relationship to exist: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4)
the power to control the worker's conduct, with the latter assuming primacy in the overall consideration. Records of the case show that the late Vicente Lao
engaged the services of the petitioners to work as barbers and manicurists in the New Look Barber Shop, then a single proprietorship owned by him; that in
January 1982, his children organized a corporation which they registered with the Securities and Exchange Commission as Lao Enteng Company, Inc.; that upon
its incorporation, it took over the assets, equipment, and properties of the New Look Barber Shop and continued the business; that the respondent company
retained the services of all the petitioners and continuously paid their wages. Clearly, all three elements exist in petitioners' and private respondent's working
arrangements.

Private respondent claims it had no control over petitioners. The power to control refers to the existence of the power and not necessarily to the actual
exercise thereof, nor is it essential for the employer to actually supervise the performance of duties of the employee. It is enough that the employer has the right
to wield that power.[12] As to the "control test", the following facts indubitably reveal that respondent company wielded control over the work performance of
petitioners, in that: (1) they worked in the barber shop owned and operated by the respondents; (2) they were required to report daily and observe definite hours
of work; (3) they were not free to accept other employment elsewhere but devoted their full time working in the New Look Barber Shop for all the fifteen (15)
years they have worked until April 15, 1995; (4) that some have worked with respondents as early as in the 1960's; (5) that petitioner Patricia Nas was instructed
by the respondents to watch the other six (6) petitioners in their daily task. Certainly, respondent company was clothed with the power to dismiss any or all of
them for just and valid cause. Petitioners were unarguably performing work necessary and desirable in the business of the respondent company.

While it is no longer true that membership to SSS is predicated on the existence of an employee-employer relationship since the policy is now to
encourage even the self-employed dressmakers, manicurists and jeepney drivers to become SSS members, we could not agree with private respondents that
petitioners were registered with the Social Security System as their employees only as an accommodation. As we have earlier mentioned private respondent
showed no proof to their claim that petitioners were the ones who solely paid all SSS contributions. It is unlikely that respondents would report certain persons as
their workers, pay their SSS premium as well as their wages if it were not true that they were indeed their employees. [13]

Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was closed due to serious business losses and respondent
company closed its barber shop because the building where the barber shop was located was sold. An employer may adopt policies or changes or adjustments
in its operations to insure profit to itself or protect investment of its stockholders. In the exercise of such management prerogative, the employer may merge or
consolidate its business with another, or sell or dispose all or substantially all of its assets and properties which may bring about the dismissal or termination of its
employees in the process.[14]

Prescinding from the above, we hold that the seven petitioners are employees of the private respondent company; as such, they are to be accorded the
benefits provided under the Labor Code, specifically Article 283 which mandates the grant of separation pay in case of closure or cessation of employer's
business which is equivalent to one (1) month pay for every year of service. [15] Likewise, they are entitled to the protection of minimum wage statutes. Hence, the
separation pay due them may be computed on the basis of the minimum wage prevailing at the time their services were terminated by the respondent
company. The same is true with respect to the 13th month pay. The Revised Guidelines on the Implementation of the 13th Month Pay Law states that "all rank
and file employees are now entitled to a 13th month pay regardless of the amount of basic salary that they receive in a month. Such employees are entitled to
the benefit regardless of their designation or employment status, and irrespective of the method by which their wages are paid, provided that they have worked
for at least one (1) month during a calendar year" and so all the seven (7) petitioners who were not paid their 13th month pay must be paid accordingly.[16]

Anent the other claims of the petitioners, such as the P10,000.00 as penalty for non-compliance with procedural process; P10,000.00 as moral damages;
refund of P1.00 per day paid to the sweeper; salary differentials for petitioner Nas; attorney's fees), we find them without basis.

IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision dated October 17, 1996 and Resolution dated March 05, 1997 are
SET ASIDE. Private respondents are hereby ordered to pay, severally and jointly, the seven (7) petitioners their (1) 13th month pay and (2) separation pay
equivalent to one month pay for every year of service, to be computed at the then prevailing minimum wage at the time of their actual termination which was April
15, 1995.

Costs against private respondents.

SO ORDERED.

[G.R. No. 120969. January 22, 1998]

ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) composed
of Presiding Commissioner RAUL T. AQUINO, Commissioner ROGELIO I. RAYALA and Commissioner VICTORIANO R. CALAYCAY
(Ponente), VIC DEL ROSARIO and VIVA FILMS, respondents.

DECISION

DAVIDE, JR., J.:

By way of this special civil action for certiorari under Rule 65 of the Rules of Court, petitioners seek to annul the 10 February 1995 Decision [1] of the
National Labor Relations Commission (hereafter NLRC), and its 6 April 1995 Resolution [2] denying the motion to reconsider the former in NLRC-NCR-CA No.
006195-94. The decision reversed that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-03994-92.

The parties present conflicting sets of facts.


Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents on 18 July 1989 as part of the filming crew with a salary
of P375.00 per week. About four months later, he was designated Assistant Electrician with a weekly salary of P400.00, which was increased to P450.00 in May
1990. In June 1991, he was promoted to the rank of Electrician with a weekly salary of P475.00, which was increased to P593.00 in September 1991.

Petitioner Paulino Enero, on his part, claims that private respondents employed him in June 1990 as a member of the shooting crew with a weekly salary
of P375.00, which was increased to P425.00 in May 1991, then to P475.00 on 21 December 1991.[3]

Petitioners tasks consisted of loading, unloading and arranging movie equipment in the shooting area as instructed by the cameraman, returning the
equipment to Viva Films warehouse, assisting in the fixing of the lighting system, and performing other tasks that the cameraman and/or director may assign. [4]

Sometime in May 1992, petitioners sought the assistance of their supervisor, Mrs. Alejandria Cesario, to facilitate their request that private respondents
adjust their salary in accordance with the minimum wage law. In June 1992, Mrs. Cesario informed petitioners that Mr. Vic del Rosario would agree to increase
their salary only if they signed a blank employment contract. As petitioners refused to sign, private respondents forced Enero to go on leave in June 1992, then
refused to take him back when he reported for work on 20 July 1992. Meanwhile, Maraguinot was dropped from the company payroll from 8 to 21 June 1992, but
was returned on 22 June 1992. He was again asked to sign a blank employment contract, and when he still refused, private respondents terminated his services
on 20 July 1992.[5] Petitioners thus sued for illegal dismissal[6] before the Labor Arbiter.

On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the trade name of Viva Productions, Inc., and that it is primarily engaged
in the distribution and exhibition of movies -- but not in the business of making movies; in the same vein, private respondent Vic del Rosario is merely an
executive producer, i.e., the financier who invests a certain sum of money for the production of movies distributed and exhibited by VIVA.[7]

Private respondents assert that they contract persons called producers -- also referred to as associate producers [8] -- to produce or make movies for
private respondents; and contend that petitioners are project employees of the associate producers who, in turn, act as independent contractors. As such, there
is no employer-employee relationship between petitioners and private respondents.

Private respondents further contend that it was the associate producer of the film Mahirap Maging Pogi, who hired petitioner Maraguinot. The movie shot
from 2 July up to 22 July 1992, and it was only then that Maraguinot was released upon payment of his last salary, as his services were no longer needed. Anent
petitioner Enero, he was hired for the movie entitled Sigaw ng Puso, later re-titled Narito ang Puso. He went on vacation on 8 June 1992, and by the time he
reported for work on 20 July 1992, shooting for the movie had already been completed.[9]

After considering both versions of the facts, the Labor Arbiter found as follows:

On the first issue, this Office rules that complainants are the employees of the respondents. The producer cannot be considered as an independent contractor
but should be considered only as a labor-only contractor and as such, acts as a mere agent of the real employer, the herein respondents. Respondents even
failed to name and specify who are the producers. Also, it is an admitted fact that the complainants received their salaries from the respondents. The case cited
by the respondents, Rosario Brothers, Inc. vs. Ople, 131 SCRA 72 does not apply in this case.

It is very clear also that complainants are doing activities which are necessary and essential to the business of the respondents, that of movie-making.
Complainant Maraguinot worked as an electrician while complainant Enero worked as a crew [member].[10]

Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:

WHEREFORE, judgment is hereby rendered declaring that complainants were illegally dismissed.

Respondents are hereby ordered to reinstate complainants to their former positions without loss [of] seniority rights and pay their backwages starting July 21,
1992 to December 31, 1993 temporarily computed in the amount of P38,000.00 for complainant Paulino Enero and P46,000.00 for complainant Alejandro
Maraguinot, Jr. and thereafter until actually reinstated.

Respondents are ordered to pay also attorneys fees equivalent to ten (10%) and/or P8,400.00 on top of the award.[11]

Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-94). In its decision[12] of 10 February 1995, the NLRC found the
following circumstances of petitioners work clearly established:

1. Complainants [petitioners herein] were hired for specific movie projects and their employment was co-terminus with each movie project the
completion/termination of which are pre-determined, such fact being made known to complainants at the time of their engagement.
xxx

2. Each shooting unit works on one movie project at a time. And the work of the shooting units, which work independently from each other, are not continuous in
nature but depends on the availability of movie projects.

3. As a consequence of the non-continuous work of the shooting units, the total working hours logged by complainants in a month show extreme variations... For
instance, complainant Maraguinot worked for only 1.45 hours in June 1991 but logged a total of 183.25 hours in January 1992. Complainant Enero logged a total
of only 31.57 hours in September 1991 but worked for 183.35 hours the next month, October 1991.

4. Further shown by respondents is the irregular work schedule of complainants on a daily basis. Complainant Maraguinot was supposed to report on 05 August
1991 but reported only on 30 August 1991, or a gap of 25 days. Complainant Enero worked on 10 September 1991 and his next scheduled working day was 28
September 1991, a gap of 18 days.

5. The extremely irregular working days and hours of complainants work explain the lump sum payment for complainants services for each movie project. Hence,
complainants were paid a standard weekly salary regardless of the number of working days and hours they logged in. Otherwise, if the principle of no work no
pay was strictly applied, complainants earnings for certain weeks would be very negligible.

6. Respondents also alleged that complainants were not prohibited from working with such movie companies like Regal, Seiko and FPJ Productions whenever
they are not working for the independent movie producers engaged by respondents... This allegation was never rebutted by complainants and should be deemed
admitted.

The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances, taken together, indicated that complainants (herein petitioners) were
project employees.

After their motion for reconsideration was denied by the NLRC in its Resolution [13] of 6 April 1995, petitioners filed the instant petition, claiming that the
NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction in: (1) finding that petitioners were project employees; (2) ruling that
petitioners were not illegally dismissed; and (3) reversing the decision of the Labor Arbiter.

To support their claim that they were regular (and not project) employees of private respondents, petitioners cited their performance of activities that were
necessary or desirable in the usual trade or business of private respondents and added that their work was continuous, i.e., after one project was completed they
were assigned to another project.Petitioners thus considered themselves part of a work pool from which private respondents drew workers for assignment to
different projects. Petitioners lamented that there was no basis for the NLRCs conclusion that they were project employees, while the associate producers were
independent contractors; and thus reasoned that as regular employees, their dismissal was illegal since the same was premised on a false cause, namely, the
completion of a project, which was not among the causes for dismissal allowed by the Labor Code.

Private respondents reiterate their version of the facts and stress that their evidence supports the view that petitioners are project employees; point to
petitioners irregular work load and work schedule; emphasize the NLRCs finding that petitioners never controverted the allegation that they were not prohibited
from working with other movie companies; and ask that the facts be viewed in the context of the peculiar characteristics of the movie industry.

The Office of the Solicitor General (OSG) is convinced that this petition is improper since petitioners raise questions of fact, particularly, the NLRCs finding
that petitioners were project employees, a finding supported by substantial evidence; and submits that petitioners reliance on Article 280 of the Labor Code to
support their contention that they should be deemed regular employees is misplaced, as said section merely distinguishes between two types of employees, i.e.,
regular employees and casual employees, for purposes of determining the right of an employee to certain benefits.

The OSG likewise rejects petitioners contention that since they were hired not for one project, but for a series of projects, they should be deemed regular
employees. CitingMamansag v. NLRC,[14] the OSG asserts that what matters is that there was a time-frame for each movie project made known to petitioners at
the time of their hiring. In closing, the OSG disagrees with petitioners claim that the NLRCs classification of the movie producers as independent contractors had
no basis in fact and in law, since, on the contrary, the NLRC took pains in explaining its basis for its decision.

As regards the propriety of this action, which the Office of the Solicitor General takes issue with, we rule that a special civil action for certiorari under Rule
65 of the Rules of Court is the proper remedy for one who complains that the NLRC acted in total disregard of evidence material to or decisive of the controversy.
[15]
In the instant case, petitioners allege that the NLRCs conclusions have no basis in fact and in law, hence the petition may not be dismissed on procedural or
jurisdictional grounds.

The judicious resolution of this case hinges upon, first, the determination of whether an employer-employee relationship existed between petitioners and
private respondents or any one of private respondents. If there was none, then this petition has no merit; conversely, if the relationship existed, then petitioners
could have been unjustly dismissed.
A related question is whether private respondents are engaged in the business of making motion pictures. Del Rosario is necessarily engaged in such
business as he finances the production of movies. VIVA, on the other hand, alleges that it does not make movies, but merely distributes and exhibits motion
pictures. There being no further proof to this effect, we cannot rely on this self-serving denial. At any rate, and as will be discussed below, private respondents
evidence even supports the view that VIVA is engaged in the business of making movies.

We now turn to the critical issues. Private respondents insist that petitioners are project employees of associate producers who, in turn, act as
independent contractors. It is settled that the contracting out of labor is allowed only in case of job contracting. Section 8, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code describes permissible job contracting in this wise:

Sec. 8. Job contracting. -- There is job contracting permissible under the Code if the following conditions are met:

(1) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with
the performance of the work except as to the results thereof; and

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

Assuming that the associate producers are job contractors, they must then be engaged in the business of making motion pictures. As such, and to be a
job contractor under the preceding description, associate producers must have tools, equipment, machinery, work premises, and other materials necessary to
make motion pictures. However, the associate producers here have none of these. Private respondents evidence reveals that the movie-making equipment are
supplied to the producers and owned by VIVA. These include generators,[16] cables and wooden platforms,[17] cameras and shooting equipment;[18] in fact, VIVA
likewise owns the trucks used to transport the equipment.[19] It is thus clear that the associate producer merely leases the equipment from VIVA. [20] Indeed, private
respondents Formal Offer of Documentary Evidence stated one of the purposes of Exhibit 148 as:

To prove further that the independent Producers rented Shooting Unit No. 2 from Viva to finish their films.[21]

While the purpose of Exhibits 149, 149-A and 149-B was:

[T]o prove that the movies of Viva Films were contracted out to the different independent Producers who rented Shooting Unit No. 3 with a fixed budget and time-
frame of at least 30 shooting days or 45 days whichever comes first.[22]

Private respondents further narrated that VIVAs generators broke down during petitioners last movie project, which forced the associate producer
concerned to rent generators, equipment and crew from another company. [23] This only shows that the associate producer did not have substantial capital nor
investment in the form of tools, equipment and other materials necessary for making a movie. Private respondents in effect admit that their producers, especially
petitioners last producer, are not engaged in permissible job contracting.

If private respondents insist that their associate producers are labor contractors, then these producers can only be labor-only contractors, defined by the
Labor Code as follows:

Art. 106. Contractor or subcontractor.-- x x x

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

A more detailed description is provided by Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code:

Sec. 9. Labor-only contracting. -- (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting
where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and

(2) The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the
employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or
intermediary of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly
employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether or not the contracting out of
labor is permissible in the light of the circumstances of each case and after considering the operating needs of the employer and the
rights of the workers involved. In such case, he may prescribe conditions and restrictions to insure the protection and welfare of the
workers.

As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere agent or intermediary of the direct
employer. But even by the preceding standards, the associate producers of VIVA cannot be considered labor-only contractors as they did not supply, recruit nor
hire the workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew members from an available
group of free-lance workers which includes the complainants Maraguinot and Enero. [24] And in their Memorandum, private respondents declared that the
associate producer hires the services of... 6) camera crew which includes (a) cameraman; (b) the utility crew; (c) the technical staff; (d) generator man and
electrician; (e) clapper; etc....[25] This clearly showed that the associate producers did not supply the workers required by the movie project.

The relationship between VIVA and its producers or associate producers seems to be that of agency, [26] as the latter make movies on behalf of VIVA,
whose business is to make movies. As such, the employment relationship between petitioners and producers is actually one between petitioners and VIVA, with
the latter being the direct employer.

The employer-employee relationship between petitioners and VIVA can further be established by the control test. While four elements are usually
considered in determining the existence of an employment relationship, namely: (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 employees conduct, the most important element is the employers control of the employees
conduct, not only as to the result of the work to be done but also as to the means and methods to accomplish the same. [27] These four elements are present
here. In their position paper submitted to the Labor Arbiter, private respondents narrated the following circumstances:

[T]he PRODUCER has to work within the limits of the budget he is given by the company, for as long as the ultimate finish[ed] product is acceptable to the
company...

To ensure that quality films are produced by the PRODUCER who is an independent contractor, the company likewise employs a Supervising PRODUCER, a
Project accountant and a Shooting unit supervisor. The Companys Supervising PRODUCER is Mr. Eric Cuatico, the Project accountant varies from time to time,
and the Shooting Unit Supervisor is Ms. Alejandria Cesario.

The Supervising PRODUCER acts as the eyes and ears of the company and of the Executive Producer to monitor the progress of the PRODUCERs work
accomplishment. He is there usually in the field doing the rounds of inspection to see if there is any problem that the PRODUCER is encountering and to assist in
threshing out the same so that the film project will be finished on schedule. He supervises about 3 to 7 movie projects simultaneously [at] any given time by
coordinating with each film PRODUCER. The Project Accountant on the other hand assists the PRODUCER in monitoring the actual expenses incurred
because the company wants to insure that any additional budget requested by the PRODUCER is really justified and warranted especially when there is a
change of original plans to suit the tast[e] of the company on how a certain scene must be presented to make the film more interesting and more commercially
viable. (emphasis ours)

VIVAs control is evident in its mandate that the end result must be a quality film acceptable to the company. The means and methods to accomplish the
result are likewise controlled by VIVA, viz., the movie project must be finished within schedule without exceeding the budget, and additional expenses must be
justified; certain scenes are subject to change to suit the taste of the company; and the Supervising Producer, the eyes and ears of VIVA and del Rosario,
intervenes in the movie-making process by assisting the associate producer in solving problems encountered in making the film.

It may not be validly argued then that petitioners are actually subject to the movie directors control, and not VIVAs direction. The director merely instructs
petitioners on how to better comply with VIVAs requirements to ensure that a quality film is completed within schedule and without exceeding the budget. At
bottom, the director is akin to a supervisor who merely oversees the activities of rank-and-file employees with control ultimately resting on the employer.

Moreover, appointment slips [28] issued to all crew members state:

During the term of this appointment you shall comply with the duties and responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.

The words superiors and Top Management can only refer to the superiors and Top Management of VIVA. By commanding crew members to observe the
rules and regulations promulgated by VIVA, the appointment slips only emphasize VIVAs control over petitioners.
Aside from control, the element of selection and engagement is likewise present in the instant case and exercised by VIVA. A sample appointment slip
offered by private respondents to prove that members of the shooting crew except the driver are project employees of the Independent Producers [29] reads as
follows:

VIVA PRODUCTIONS, INC.

16 Sct. Albano St.

Diliman, Quezon City

PEDRO NICOLAS Date: June 15, 1992

__________________

APPOINTMENT SLIP

You are hereby appointed as SOUNDMAN for the film project entitled MANAMBIT. This appointment shall be effective upon the commencement of the said
project and shall continue to be effective until the completion of the same.

For your services you shall receive the daily/weekly/monthly compensation of P812.50.

During the term of this appointment you shall comply with the duties and responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.

Very truly yours,

(an illegible signature)

CONFORME:

___________________

Name of appointee

Signed in the presence of:

_____________________

Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer who hired the crew members; moreover, it is
VIVAs corporate name which appears on the heading of the appointment slip. What likewise tells against VIVA is that it paid petitioners salaries as evidenced by
vouchers, containing VIVAs letterhead, for that purpose.[30]

All the circumstances indicate an employment relationship between petitioners and VIVA alone, thus the inevitable conclusion is that petitioners are
employees only of VIVA.

The next issue is whether petitioners were illegally dismissed. Private respondents contend that petitioners were project employees whose employment
was automatically terminated with the completion of their respective projects. Petitioners assert that they were regular employees who were illegally dismissed.

It may not be ignored, however, that private respondents expressly admitted that petitioners were part of a work pool; [31] and, while petitioners were initially
hired possibly as project employees, they had attained the status of regular employees in view of VIVAs conduct.

A project employee or a member of a work pool may acquire the status of a regular employee when the following concur:

1) There is a continuous rehiring of project employees even after cessation of a project; [32] and
2) The tasks performed by the alleged project employee are vital, necessary and indispensable to the usual business or trade of the employer. [33]

However, the length of time during which the employee was continuously re-hired is not controlling, but merely serves as a badge of regular employment.
[34]

In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2) years and engaged in at least eighteen (18)
projects, while petitioner Maraguinot was employed for some three (3) years and worked on at least twenty-three (23) projects. [35] Moreover, as petitioners tasks
involved, among other chores, the loading, unloading and arranging of movie equipment in the shooting area as instructed by the cameramen, returning the
equipment to the Viva Films warehouse, and assisting in the fixing of the lighting system, it may not be gainsaid that these tasks were vital, necessary and
indispensable to the usual business or trade of the employer. As regards the underscored phrase, it has been held that this is ascertained by considering the
nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. [36]

A recent pronouncement of this Court anent project or work pool employees who had attained the status of regular employees proves most instructive:

The denial by petitioners of the existence of a work pool in the company because their projects were not continuous is amply belied by petitioners themselves
who admit that: xxx

A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment during temporary breaks in the business,
provided that the worker shall be available when called to report for a project. Although primarily applicable to regular seasonal workers, this set-up can likewise
be applied to project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the employer and employee for it
prevents the unjust situation of coddling labor at the expense of capital and at the same time enables the workers to attain the status of regular
employees. Clearly, the continuous rehiring of the same set of employees within the framework of the Lao Group of Companies is strongly indicative that private
respondents were an integral part of a work pool from which petitioners drew its workers for its various projects.

In a final attempt to convince the Court that private respondents were indeed project employees, petitioners point out that the workers were not regularly
maintained in the payroll and were free to offer their services to other companies when there were no on-going projects. This argument however cannot defeat
the workers status of regularity. We apply by analogy the case of Industrial-Commercial-Agricultural Workers Organization v. CIR [16 SCRA 562, 567-68 (1966)]
which deals with regular seasonal employees. There we held: xxx

Truly, the cessation of construction activities at the end of every project is a foreseeable suspension of work. Of course, no compensation can be demanded from
the employer because the stoppage of operations at the end of a project and before the start of a new one is regular and expected by both parties to the labor
relations. Similar to the case of regular seasonal employees, the employment relation is not severed by merely being suspended. [citing Manila Hotel Co. v. CIR,
9 SCRA 186 (1963)] The employees are, strictly speaking, not separated from services but merely on leave of absence without pay until they are
reemployed. Thus we cannot affirm the argument that non-payment of salary or non-inclusion in the payroll and the opportunity to seek other employment denote
project employment.[37] (underscoring supplied)

While Lao admittedly involved the construction industry, to which Policy Instruction No. 20/Department Order No. 19 [38] regarding work pools specifically
applies, there seems to be no impediment to applying the underlying principles to industries other than the construction industry. [39] Neither may it be argued that
a substantial distinction exists between the projects undertaken in the construction industry and the motion picture industry. On the contrary, the raison d' etre of
both industries concern projects with a foreseeable suspension of work.

At this time, we wish to allay any fears that this decision unduly burdens an employer by imposing a duty to re-hire a project employee even after
completion of the project for which he was hired. The import of this decision is not to impose a positive and sweeping obligation upon the employer to re-hire
project employees. What this decision merely accomplishes is a judicial recognition of the employment status of a project or work pool employee in accordance
with what is fait accompli, i.e., the continuous re-hiring by the employer of project or work pool employees who perform tasks necessary or desirable to the
employers usual business or trade. Let it not be said that this decision coddles labor, for as Lao has ruled, project or work pool employees who have gained the
status of regular employees are subject to the no work-no pay principle, to repeat:

A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment during temporary breaks in the business,
provided that the worker shall be available when called to report for a project. Although primarily applicable to regular seasonal workers, this set-up can likewise
be applied to project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the employer and employee for it
prevents the unjust situation of coddling labor at the expense of capital and at the same time enables the workers to attain the status of regular employees.

The Courts ruling here is meant precisely to give life to the constitutional policy of strengthening the labor sector, [40] but, we stress, not at the expense of
management. Lest it be misunderstood, this ruling does not mean that simply because an employee is a project or work pool employee even outside the
construction industry, he is deemed, ipso jure, a regular employee. All that we hold today is that once a project or work pool employee has been: (1) continuously,
as opposed to intermittently, re-hired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to
the usual business or trade of the employer, then the employee must be deemed a regular employee, pursuant to Article 280 of the Labor Code and
jurisprudence. To rule otherwise would allow circumvention of labor laws in industries not falling within the ambit of Policy Instruction No. 20/Department Order
No. 19, hence allowing the prevention of acquisition of tenurial security by project or work pool employees who have already gained the status of regular
employees by the employers conduct.

In closing then, as petitioners had already gained the status of regular employees, their dismissal was unwarranted, for the cause invoked by private
respondents for petitioners dismissal, viz., completion of project, was not, as to them, a valid cause for dismissal under Article 282 of the Labor Code. As such,
petitioners are now entitled to back wages and reinstatement, without loss of seniority rights and other benefits that may have accrued. [41] Nevertheless, following
the principles of suspension of work and no pay between the end of one project and the start of a new one, in computing petitioners back wages, the amounts
corresponding to what could have been earned during the periods from the date petitioners were dismissed until their reinstatement when petitioners respective
Shooting Units were not undertaking any movie projects, should be deducted.

Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was already in effect. Pursuant to Section 34 thereof which amended
Section 279 of the Labor Code of the Philippines and Bustamante v. NLRC,[42] petitioners are entitled to receive full back wages from the date of their dismissal
up to the time of their reinstatement, without deducting whatever earnings derived elsewhere during the period of illegal dismissal, subject, however, to the above
observations.

WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor Relations Commission in NLRC NCR CA No. 006195-94
dated 10 February 1995, as well as its Resolution dated 6 April 1995, are hereby ANNULLED and SET ASIDE for having been rendered with grave abuse of
discretion, and the decision of the Labor Arbiter in NLRC NCR Case No. 00-07-03994-92 is REINSTATED, subject, however, to the modification above
mentioned in the computation of back wages.

No pronouncement as to costs.

SO ORDERED.

[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 certiorari[1] assailing the 26 March 1999 Decision[2] 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. Manager[4]

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, 13 th 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 Arbiter[5] 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 13 th month pay[20] which the law automatically incorporates into every
employer-employee contract.[21] Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.[22]

SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that they indicate more an
independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of
SONZAs unique skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to
demand and receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary employees is a
circumstance indicative, but not conclusive, of an independent contractual relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent contractor. The parties
expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee
accruing under the Agreement.

C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show that ABS-CBN could terminate his
services on grounds other than breach of contract, such as retrenchment to prevent losses as provided under labor laws. [23]

During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as AGENT and Jay Sonza shall faithfully and completely perform
each condition of this Agreement. [24] Even if it suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to
pay SONZAs talent fees during the life of the Agreement. This circumstance indicates an independent contractual relationship between SONZA and ABS-CBN.

SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly, 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. [38] Even 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, 13 th 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

FIRST DIVISION

G.R. No. 164156 September 26, 2006

ABS-CBN BROADCASTING CORPORATION, petitioner,


vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE LERASAN, respondents.

DECISION

CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for
reconsideration thereof. The CA affirmed the Decision2 and Resolution3 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001
(RAB Case No. VII-10-1661-2001) which likewise affirmed, with modification, the decision of the Labor Arbiter declaring the respondents Marlyn Nazareno,
Merlou Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.

The Antecedents
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and owns a network of television and radio stations, whose
operations revolve around the broadcast, transmission, and relay of telecommunication signals. It sells and deals in or otherwise utilizes the airtime it generates
from its radio and television operations. It has a franchise as a broadcasting company, and was likewise issued a license and authority to operate by the National
Telecommunications Commission.

Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on different dates. They were assigned at the news
and public affairs, for various radio programs in the Cebu Broadcasting Station, with a monthly compensation of P4,000. They were issued ABS-CBN employees
identification cards and were required to work for a minimum of eight hours a day, including Sundays and holidays. They were made to perform the following
tasks and duties:

a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of respondent ABS-CBN;

b) Coordinate, arrange personalities for air interviews;

c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming reports;

d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints;

e) Assist, anchor program interview, etc; and

f) Record, log clerical reports, man based control radio.4

Their respective working hours were as follows:

Name Time No. of Hours

1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7

8:00 A.M.-12:00 noon

2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7

3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.

9:00 A.M.-6:00 P.M. (WF) 9 hrs.

4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5

The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and News Manager Leo Lastimosa.

On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining Agreement (CBA) to be effective during the
period from December 11, 1996 to December 11, 1999. However, since petitioner refused to recognize PAs as part of the bargaining unit, respondents were not
included to the CBA.6

On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that effective August 1, 2000, they would be assigned to non-drama
programs, and that the DYAB studio operations would be handled by the studio technician. Thus, their revised schedule and other assignments would be as
follows:

Monday Saturday

4:30 A.M. 8:00 A.M. Marlene Nazareno.

Miss Nazareno will then be assigned at the Research Dept.


From 8:00 A.M. to 12:00

4:30 P.M. 12:00 MN Jennifer Deiparine

Sunday

5:00 A.M. 1:00 P.M. Jennifer Deiparine

1:00 P.M. 10:00 P.M. Joy Sanchez

Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to Leo Lastimosa.

On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay,
Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against the petitioner before the NLRC. The Labor Arbiter directed the parties to
submit their respective position papers. Upon respondents failure to file their position papers within the reglementary period, Labor Arbiter Jose G. Gutierrez
issued an Order dated April 30, 2001, dismissing the complaint without prejudice for lack of interest to pursue the case. Respondents received a copy of the
Order on May 16, 2001.7Instead of re-filing their complaint with the NLRC within 10 days from May 16, 2001, they filed, on June 11, 2001, an Earnest Motion to
Refile Complaint with Motion to Admit Position Paper and Motion to Submit Case For Resolution.8 The Labor Arbiter granted this motion in an Order dated June
18, 2001, and forthwith admitted the position paper of the complainants. Respondents made the following allegations:

1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a continuous period of more than five (5) years with a monthly
salary rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of this complaint on November 20, 2000.

Machine copies of complainants ABS-CBN Employees Identification Card and salary vouchers are hereto attached as follows, thus:

I. Jennifer Deiparine:

Exhibit "A" - ABS-CBN Employees Identification Card

Exhibit "B", - ABS-CBN Salary Voucher from Nov.

Exhibit "B-1" & 1999 to July 2000 at P4,000.00

Exhibit "B-2"

Date employed: September 15, 1995

Length of service: 5 years & nine (9) months

II. Merlou Gerzon - ABS-CBN Employees Identification Card

Exhibit "C"

Exhibit "D"

Exhibit "D-1" &

Exhibit "D-2" - ABS-CBN Salary Voucher from March

1999 to January 2001 at P4,000.00

Date employed: September 1, 1995

Length of service: 5 years & 10 months


III. Marlene Nazareno

Exhibit "E" - ABS-CBN Employees Identification Card

Exhibit "E" - ABS-CBN Salary Voucher from Nov.

Exhibit "E-1" & 1999 to December 2000

Exhibit :E-2"

Date employed: April 17, 1996

Length of service: 5 years and one (1) month

IV. Joy Sanchez Lerasan

Exhibit "F" - ABS-CBN Employees Identification Card

Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.

Exhibit "F-2" & 2000 to Jan. 2001

Exhibit "F-3"

Exhibit "F-4" - Certification dated July 6, 2000

Acknowledging regular status of

Complainant Joy Sanchez Lerasan

Signed by ABS-CBN Administrative

Officer May Kima Hife

Date employed: April 15, 1998

Length of service: 3 yrs. and one (1) month9

Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be given specific assignments at its discretion, and were thus
under its direct supervision and control regardless of nomenclature. They prayed that judgment be rendered in their favor, thus:

WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an order compelling defendants to pay complainants the
following:

1. One Hundred Thousand Pesos (P100,000.00) each

and by way of moral damages;

2. Minimum wage differential;

3. Thirteenth month pay differential;

4. Unpaid service incentive leave benefits;


5. Sick leave;

6. Holiday pay;

7. Premium pay;

8. Overtime pay;

9. Night shift differential.

Complainants further pray of this Arbiter to declare them regular and permanent employees of respondent ABS-CBN as a condition precedent for their admission
into the existing union and collective bargaining unit of respondent company where they may as such acquire or otherwise perform their obligations thereto or
enjoy the benefits due therefrom.

Complainants pray for such other reliefs as are just and equitable under the premises.10

For its part, petitioner alleged in its position paper that the respondents were PAs who basically assist in the conduct of a particular program ran by an anchor or
talent. Among their duties include monitoring and receiving incoming calls from listeners and field reporters and calls of news sources; generally, they perform leg
work for the anchors during a program or a particular production. They are considered in the industry as "program employees" in that, as distinguished from
regular or station employees, they are basically engaged by the station for a particular or specific program broadcasted by the radio station. Petitioner asserted
that as PAs, the complainants were issued talent information sheets which are updated from time to time, and are thus made the basis to determine the programs
to which they shall later be called on to assist. The program assignments of complainants were as follows:

a. Complainant Nazareno assists in the programs:

1) Nagbagang Balita (early morning edition)

2) Infor Hayupan

3) Arangkada (morning edition)

4) Nagbagang Balita (mid-day edition)

b. Complainant Deiparine assists in the programs:

1) Unzanith

2) Serbisyo de Arevalo

3) Arangkada (evening edition)

4) Balitang K (local version)

5) Abante Subu

6) Pangutana Lang

c. Complainant Gerzon assists in the program:

1) On Mondays and Tuesdays:

(a) Unzanith

(b) Serbisyo de Arevalo


(c) Arangkada (evening edition)

(d) Balitang K (local version)

(e) Abante Sugbu

(f) Pangutana Lang

2) On Thursdays

Nagbagang Balita

3) On Saturdays

(a) Nagbagang Balita

(b) Info Hayupan

(c) Arangkada (morning edition)

(d) Nagbagang Balita (mid-day edition)

4) On Sundays:

(a) Siesta Serenata

(b) Sunday Chismisan

(c) Timbangan sa Hustisya

(d) Sayri ang Lungsod

(e) Haranahan11

Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs they produce, such as drama talents in other
productions. As program employees, a PAs engagement is coterminous with the completion of the program, and may be extended/renewed provided that the
program is on-going; a PA may also be assigned to new programs upon the cancellation of one program and the commencement of another. As such program
employees, their compensation is computed on a program basis, a fixed amount for performance services irrespective of the time consumed. At any rate,
petitioner claimed, as the payroll will show, respondents were paid all salaries and benefits due them under the law.12

Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the same, especially since respondents were not covered by the
bargaining unit.

On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared that they were regular employees of petitioner; as such, they
were awarded monetary benefits. The fallo of the decision reads:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the complainants regular employees of the respondent ABS-CBN
Broadcasting Corporation and directing the same respondent to pay complainants as follows:

I - Merlou A. Gerzon P12,025.00

II - Marlyn Nazareno 12,025.00

III - Jennifer Deiparine 12,025.00


IV - Josephine Sanchez Lerazan 12,025.00

_________

P48,100.00

plus ten (10%) percent Attorneys Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00).

Respondent Veneranda C. Sy is absolved from any liability.

SO ORDERED.13

However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that he had no jurisdiction to interpret and apply the agreement, as
the same was within the jurisdiction of the Voluntary Arbitrator as provided in Article 261 of the Labor Code.

Respondents counsel received a copy of the decision on August 29, 2001. Respondent Nazareno received her copy on August 27, 2001, while the other
respondents received theirs on September 8, 2001. Respondents signed and filed their Appeal Memorandum on September 18, 2001.

For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and considered as an appeal, conformably with Section 5, Rule V, of the
NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the NLRC, while respondents filed a partial appeal.

In its appeal, petitioner alleged the following:

1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed without prejudice for more than thirty (30) calendar days;

2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law;

3. That the Labor Arbiter erred in denying respondents Motion for Reconsideration on an interlocutory order on the ground that the same is a prohibited pleading;

4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the respondent;

5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay, service incentive leave pay and salary differential; and

6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorneys fees. 14

On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The fallo of the decision reads:

WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and VACATED and a new one is entered
ORDERING respondent ABS-CBN Broadcasting Corporation, as follows:

1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30 September 2002 in the aggregate amount of Two Million Five
Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100 (P2,561,948.22), broken down as follows:

a. Deiparine, Jennifer - P 716,113.49

b. Gerzon, Merlou - 716,113.49

c. Nazareno, Marlyn - 716,113.49

d. Lerazan, Josephine Sanchez - 413,607.75

Total - P 2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September 2002 representing their rice subsidy in the CBA, broken down
as follows:

a. Deiparine, Jennifer - 60 Sacks

b. Gerzon, Merlou - 60 Sacks

c. Nazareno, Marlyn - 60 Sacks

d. Lerazan, Josephine Sanchez - 53 Sacks

Total 233 Sacks; and

3. To grant to the complainants all the benefits of the CBA after 30 September 2002.

SO ORDERED.15

The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted respondents motion to refile the complaint and admit their
position paper. Although respondents were not parties to the CBA between petitioner and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless
granted and computed respondents monetary benefits based on the 1999 CBA, which was effective until September 2002. The NLRC also ruled that the Labor
Arbiter had jurisdiction over the complaint of respondents because they acted in their individual capacities and not as members of the union. Their claim for
monetary benefits was within the context of Article 217(6) of the Labor Code. The validity of respondents claim does not depend upon the interpretation of the
CBA.

The NLRC ruled that respondents were entitled to the benefits under the CBA because they were regular employees who contributed to the profits of petitioner
through their labor. The NLRC cited the ruling of this Court in New Pacific Timber & Supply Company v. National Labor Relations Commission. 16

Petitioner filed a motion for reconsideration, which the NLRC denied.

Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising both procedural and substantive issues, as follows: (a)
whether the NLRC acted without jurisdiction in admitting the appeal of respondents; (b) whether the NLRC committed palpable error in scrutinizing the reopening
and revival of the complaint of respondents with the Labor Arbiter upon due notice despite the lapse of 10 days from their receipt of the July 30, 2001 Order of
the Labor Arbiter; (c) whether respondents were regular employees; (d) whether the NLRC acted without jurisdiction in entertaining and resolving the claim of the
respondents under the CBA instead of referring the same to the Voluntary Arbitrators as provided in the CBA; and (e) whether the NLRC acted with grave abuse
of discretion when it awarded monetary benefits to respondents under the CBA although they are not members of the appropriate bargaining unit.

On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection of an appeal shall be upon the expiration of the last day to
appeal by all parties, should there be several parties to a case. Since respondents received their copies of the decision on September 8, 2001 (except
respondent Nazareno who received her copy of the decision on August 27, 2001), they had until September 18, 2001 within which to file their Appeal
Memorandum. Moreover, the CA declared that respondents failure to submit their position paper on time is not a ground to strike out the paper from the records,
much less dismiss a complaint.

Anent the substantive issues, the appellate court stated that respondents are not mere project employees, but regular employees who perform tasks necessary
and desirable in the usual trade and business of petitioner and not just its project employees. Moreover, the CA added, the award of benefits accorded to rank-
and-file employees under the 1996-1999 CBA is a necessary consequence of the NLRC ruling that respondents, as PAs, are regular employees.

Finding no merit in petitioners motion for reconsideration, the CA denied the same in a Resolution 17 dated June 16, 2004.

Petitioner thus filed the instant petition for review on certiorari and raises the following assignments of error:

1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS
COMMISSION NOTWITHSTANDING THE PATENT NULLITY OF THE LATTERS DECISION AND RESOLUTION.

2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC FINDING RESPONDENTS REGULAR
EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC AWARDING CBA BENEFITS TO
RESPONDENTS.18

Considering that the assignments of error are interrelated, the Court shall resolve them simultaneously.

Petitioner asserts that the appellate court committed palpable and serious error of law when it affirmed the rulings of the NLRC, and entertained respondents
appeal from the decision of the Labor Arbiter despite the admitted lapse of the reglementary period within which to perfect the same. Petitioner likewise maintains
that the 10-day period to appeal must be reckoned from receipt of a partys counsel, not from the time the party learns of the decision, that is, notice to counsel is
notice to party and not the other way around. Finally, petitioner argues that the reopening of a complaint which the Labor Arbiter has dismissed without prejudice
is a clear violation of Section 1, Rule V of the NLRC Rules; such order of dismissal had already attained finality and can no longer be set aside.

Respondents, on the other hand, allege that their late appeal is a non-issue because it was petitioners own timely appeal that empowered the NLRC to reopen
the case. They assert that although the appeal was filed 10 days late, it may still be given due course in the interest of substantial justice as an exception to the
general rule that the negligence of a counsel binds the client. On the issue of the late filing of their position paper, they maintain that this is not a ground to strike
it out from the records or dismiss the complaint.

We find no merit in the petition.

We agree with petitioners contention that the perfection of an appeal within the statutory or reglementary period is not only mandatory, but also jurisdictional;
failure to do so renders the assailed decision final and executory and deprives the appellate court or body of the legal authority to alter the final judgment, much
less entertain the appeal. However, this Court has time and again ruled that in exceptional cases, a belated appeal may be given due course if greater injustice
may occur if an appeal is not given due course than if the reglementary period to appeal were strictly followed. 19 The Court resorted to this extraordinary measure
even at the expense of sacrificing order and efficiency if only to serve the greater principles of substantial justice and equity. 20

In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 223 21 of the Labor Code a liberal application to prevent the
miscarriage of justice. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties. 22 We
have held in a catena of cases that technical rules are not binding in labor cases and are not to be applied strictly if the result would be detrimental to the
workingman.23

Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within the reglementary period therefor. However, petitioner perfected
its appeal within the period, and since petitioner had filed a timely appeal, the NLRC acquired jurisdiction over the case to give due course to its appeal and
render the decision of November 14, 2002. Case law is that the party who failed to appeal from the decision of the Labor Arbiter to the NLRC can still participate
in a separate appeal timely filed by the adverse party as the situation is considered to be of greater benefit to both parties. 24

We find no merit in petitioners contention that the Labor Arbiter abused his discretion when he admitted respondents position paper which had been belatedly
filed. It bears stressing that the Labor Arbiter is mandated by law to use every reasonable means to ascertain the facts in each case speedily and objectively,
without technicalities of law or procedure, all in the interest of due process.25 Indeed, as stressed by the appellate court, respondents failure to submit a position
paper on time is not a ground for striking out the paper from the records, much less for dismissing a complaint. 26 Likewise, there is simply no truth to petitioners
assertion that it was denied due process when the Labor Arbiter admitted respondents position paper without requiring it to file a comment before admitting said
position paper. The essence of due process in administrative proceedings is simply an opportunity to explain ones side or an opportunity to seek reconsideration
of the action or ruling complained of. Obviously, there is nothing in the records that would suggest that petitioner had absolute lack of opportunity to be
heard.27 Petitioner had the right to file a motion for reconsideration of the Labor Arbiters admission of respondents position paper, and even file a Reply thereto.
In fact, petitioner filed its position paper on April 2, 2001. It must be stressed that Article 280 of the Labor Code was encoded in our statute books to hinder the
circumvention by unscrupulous employers of the employees right to security of tenure by indiscriminately and absolutely ruling out all written and oral
agreements inharmonious with the concept of regular employment defined therein. 28

We quote with approval the following pronouncement of the NLRC:

The complainants, on the other hand, contend that respondents assailed the Labor Arbiters order dated 18 June 2001 as violative of the NLRC Rules of
Procedure and as such is violative of their right to procedural due process. That while suggesting that an Order be instead issued by the Labor Arbiter for
complainants to refile this case, respondents impliedly submit that there is not any substantial damage or prejudice upon the refiling, even so, respondents
suggestion acknowledges complainants right to prosecute this case, albeit with the burden of repeating the same procedure, thus, entailing additional time,
efforts, litigation cost and precious time for the Arbiter to repeat the same process twice. Respondents suggestion, betrays its notion of prolonging, rather than
promoting the early resolution of the case.

Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the dismissed case without prejudice beyond the ten (10) day
reglementary period had inadvertently failed to follow Section 16, Rule V, Rules Procedure of the NLRC which states:
"A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10) calendar days from receipt of notice of the order dismissing the
same; otherwise, his only remedy shall be to re-file the case in the arbitration branch of origin."

the same is not a serious flaw that had prejudiced the respondents right to due process. The case can still be refiled because it has not yet prescribed. Anyway,
Article 221 of the Labor Code provides:

"In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is
the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts
in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process."

The admission by the Labor Arbiter of the complainants Position Paper and Supplemental Manifestation which were belatedly filed just only shows that he acted
within his discretion as he is enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, all in the interest of due process. Indeed, the failure to submit a position paper on time is not a ground for striking out the paper
from the records, much less for dismissing a complaint in the case of the complainant. (University of Immaculate Conception vs. UIC Teaching and Non-Teaching
Personnel Employees, G.R. No. 144702, July 31, 2001).

"In admitting the respondents position paper albeit late, the Labor Arbiter acted within her discretion. In fact, she is enjoined by law to use every reasonable
means to ascertain the facts in each case speedily and objectively, without technicalities of law or procedure, all in the interest of due process". (Panlilio vs.
NLRC, 281 SCRA 53).

The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact, the respondents had filed their position paper on 2 April 2001.
What is material in the compliance of due process is the fact that the parties are given the opportunities to submit position papers.

"Due process requirements are satisfied where the parties are given the opportunities to submit position papers". (Laurence vs. NLRC, 205 SCRA 737).

Thus, the respondent was not deprived of its Constitutional right to due process of law. 29

We reject, as barren of factual basis, petitioners contention that respondents are considered as its talents, hence, not regular employees of the broadcasting
company. Petitioners claim that the functions performed by the respondents are not at all necessary, desirable, or even vital to its trade or business is belied by
the evidence on record.

Case law is that this Court has always accorded respect and finality to the findings of fact of the CA, particularly if they coincide with those of the Labor Arbiter
and the National Labor Relations Commission, when supported by substantial evidence. 30 The question of whether respondents are regular or project employees
or independent contractors is essentially factual in nature; nonetheless, the Court is constrained to resolve it due to its tremendous effects to the legions of
production assistants working in the Philippine broadcasting industry.

We agree with respondents contention that where a person has rendered at least one year of service, regardless of the nature of the activity performed, or where
the work is continuous or intermittent, the employment is considered regular as long as the activity exists, the reason being that a customary appointment is not
indispensable before one may be formally declared as having attained regular status. Article 280 of the Labor Code provides:

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

In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in determining whether one is a regular employee:

The primary standard, therefore, of determining regular employment is the reasonable connection between the particular activity performed by the employee in
relation to the usual trade or business of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the
employer. The connection can be determined by considering the nature of work performed and its relation to the scheme of the particular business or trade in its
entirety. Also, if the employee has been performing the job for at least a year, even if the performance is not continuous and merely intermittent, the law deems
repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and while such activity exists.32

As elaborated by this Court in Magsalin v. National Organization of Working Men:33


Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure a "regular" workers security of tenure, however,
can hardly be doubted. In determining whether an employment should be considered regular or non-regular, the applicable test is the reasonable connection
between the particular activity performed by the employee in relation to the usual business or trade of the employer. The standard, supplied by the law itself, is
whether the work undertaken is necessary or desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the nature of
the services rendered and its relation to the general scheme under which the business or trade is pursued in the usual course. It is distinguished from a specific
undertaking that is divorced from the normal activities required in carrying on the particular business or trade. But, although the work to be performed is only for a
specific project or seasonal, where a person thus engaged has been performing the job for at least one year, even if the performance is not continuous or is
merely intermittent, the law deems the repeated and continuing need for its performance as being sufficient to indicate the necessity or desirability of that activity
to the business or trade of the employer. The employment of such person is also then deemed to be regular with respect to such activity and while such activity
exists.34

Not considered regular employees are "project employees," the completion or termination of which is more or less determinable at the time of employment, such
as those employed in connection with a particular construction project, and "seasonal employees" whose employment by its nature is only desirable for a limited
period of time. Even then, any employee who has rendered at least one year of service, whether continuous or intermittent, is deemed regular with respect to the
activity performed and while such activity actually exists.

It is of no moment that petitioner hired respondents as "talents." The fact that respondents received pre-agreed "talent fees" instead of salaries, that they did not
observe the required office hours, and that they were permitted to join other productions during their free time are not conclusive of the nature of their
employment. Respondents cannot be considered "talents" because they are not actors or actresses or radio specialists or mere clerks or utility employees. They
are regular employees who perform several different duties under the control and direction of ABS-CBN executives and supervisors.

Thus, there are two kinds of regular employees under the law: (1) those engaged to perform activities which are necessary or desirable in the usual business or
trade of the employer; and (2) those casual employees who have rendered at least one year of service, whether continuous or broken, with respect to the
activities in which they are employed.35

The law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining situation necessitates the succor of the State. What
determines whether a certain employment is regular or otherwise is not the will or word of the employer, to which the worker oftentimes acquiesces, much less
the procedure of hiring the employee or the manner of paying the salary or the actual time spent at work. It is the character of the activities performed in relation
to the particular trade or business taking into account all the circumstances, and in some cases the length of time of its performance and its continued
existence.36 It is obvious that one year after they were employed by petitioner, respondents became regular employees by operation of law.37

Additionally, respondents cannot be considered as project or program employees because no evidence was presented to show that the duration and scope of the
project were determined or specified at the time of their engagement. Under existing jurisprudence, project could refer to two distinguishable types of activities.
First, a project may refer to a particular job or undertaking that is within the regular or usual business of the employer, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. Second, the
term project may also refer to a particular job or undertaking that is not within the regular business of the employer. Such a job or undertaking must also be
identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or
determinable times.38

The principal test is whether or not the project employees were assigned to carry out a specific project or undertaking, the duration and scope of which were
specified at the time the employees were engaged for that project.39

In this case, it is undisputed that respondents had continuously performed the same activities for an average of five years. Their assigned tasks are necessary or
desirable in the usual business or trade of the petitioner. The persisting need for their services is sufficient evidence of the necessity and indispensability of such
services to petitioners business or trade.40 While length of time may not be a sole controlling test for project employment, it can be a strong factor to determine
whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are vital, necessary and indispensable to the usual trade
or business of the employer.41We note further that petitioner did not report the termination of respondents employment in the particular "project" to the
Department of Labor and Employment Regional Office having jurisdiction over the workplace within 30 days following the date of their separation from work,
using the prescribed form on employees termination/ dismissals/suspensions. 42

As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In its earlier pleadings, petitioner classified respondents as
program employees, and in later pleadings, independent contractors. Program employees, or project employees, are different from independent contractors
because in the case of the latter, no employer-employee relationship exists.

Petitioners reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting Corporation43 is misplaced. In that case, the Court explained why Jose Sonza,
a well-known television and radio personality, was an independent contractor and not a regular employee:

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 which the law automatically incorporates into every employer-
employee contract. Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.

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.44

In the case at bar, however, the employer-employee relationship between petitioner and respondents has been proven.

First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was required from them because they were merely
hired through petitioners personnel department just like any ordinary employee.

Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-employee relationship. Respondents did not have the
power to bargain for huge talent fees, a circumstance negating independent contractual relationship.

Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are highly dependent on the petitioner for
continued work.

Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors negates the allegation that respondents are
independent contractors.

The presumption is that when the work done is an integral part of the regular business of the employer and when the worker, relative to the employer, does not
furnish an independent business or professional service, such work is a regular employment of such employee and not an independent contractor. 45 The Court
will peruse beyond any such agreement to examine the facts that typify the parties actual relationship.46

It follows then that respondents are entitled to the benefits provided for in the existing CBA between petitioner and its rank-and-file employees. As regular
employees, respondents are entitled to the benefits granted to all other regular employees of petitioner under the CBA. 47 We quote with approval the ruling of the
appellate court, that the reason why production assistants were excluded from the CBA is precisely because they were erroneously classified and treated as
project employees by petitioner:
x x x The award in favor of private respondents of the benefits accorded to rank-and-file employees of ABS-CBN under the 1996-1999 CBA is a necessary
consequence of public respondents ruling that private respondents as production assistants of petitioner are regular employees. The monetary award is not
considered as claims involving the interpretation or implementation of the collective bargaining agreement. The reason why production assistants were excluded
from the said agreement is precisely because they were classified and treated as project employees by petitioner.

As earlier stated, it is not the will or word of the employer which determines the nature of employment of an employee but the nature of the activities performed
by such employee in relation to the particular business or trade of the employer. Considering that We have clearly found that private respondents are regular
employees of petitioner, their exclusion from the said CBA on the misplaced belief of the parties to the said agreement that they are project employees, is
therefore not proper. Finding said private respondents as regular employees and not as mere project employees, they must be accorded the benefits due under
the said Collective Bargaining Agreement.

A collective bargaining agreement is a contract entered into by the union representing the employees and the employer. However, even the non-member
employees are entitled to the benefits of the contract. To accord its benefits only to members of the union without any valid reason would constitute undue
discrimination against non-members. A collective bargaining agreement is binding on all employees of the company. Therefore, whatever benefits are given to
the other employees of ABS-CBN must likewise be accorded to private respondents who were regular employees of petitioner. 48

Besides, only talent-artists were excluded from the CBA and not production assistants who are regular employees of the respondents. Moreover, under Article
1702 of the New Civil Code: "In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living of the laborer."

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
76582 are AFFIRMED. Costs against petitioner.

SO ORDERED.

WPP MARKETING VS GALERA

DECISION

CARPIO, Acting C.J.:


The Case
G.R. Nos. 169207 and 169239 are petitions for review[1] assailing the Decision[2] promulgated on 14 April 2005 as well as the Resolution[3] promulgated on 1
August 2005 of the Court of Appeals (appellate court) in CA-G.R. SP No. 78721. The appellate court granted and gave due course to the petition filed by Jocelyn
M. Galera(Galera). The appellate courts decision reversed and set aside that of the National Labor Relations Commission (NLRC), and directed WPP Marketing
Communications, Inc. (WPP) to pay Galera backwages, separation pay, unpaid housing benefit, unpaid personal and accident insurance benefits, cash value
under the companys pension plan, 30 days paid holiday benefit, moral damages, exemplary damages, 10% of the total judgment award as attorneys fees, and
costs of the suit.
The Facts

The appellate court narrated the facts as follows:


Petitioner is Jocelyn Galera (GALERA), a [sic] American citizen who was recruited from the United States of America by private respondent
John Steedman, Chairman-WPP Worldwide and Chief Executive Officer of Mindshare, Co., a corporation based in Hong Kong, China, to work in the
Philippines for private respondent WPP Marketing Communications, Inc. (WPP), a corporation registered and operating under the laws of
Philippines. GALERA accepted the offer and she signed an Employment Contract entitled Confirmation of Appointment and Statement of Terms and
Conditions (Annex B to Petition for Certiorari). The relevant portions of the contract entered into between the parties are as follows:

Particulars:
Name: Jocelyn M. Galera
Address: 163 Mediterranean Avenue
Hayward, CA 94544

Position: Managing Director


Mindshare Philippines
Annual Salary: Peso 3,924,000
Start Date: 1 September 1999
Commencement Date: 1 September 1999
(for continuous service)
Office: Mindshare Manila

6. Housing Allowance
The Company will provide suitable housing in Manila at a maximum cost (including management fee and other associated costs) of
Peso 576,000 per annum.

7. Other benefits.
The Company will provide you with a fully maintained company car and a driver.
The Company will continue to provide medical, health, life and personal accident insurance plans, to an amount not exceeding Peso
300,000 per annum, in accordance with the terms of the respective plans, as provided by JWT Manila.
The Company will reimburse you and your spouse one way business class air tickets from USA to Manila andthe related shipping and
relocation cost not exceeding US$5,000 supported by proper documentation. If you leave the Company within one year, you will
reimburse the Company in full for all costs of the initial relocation as described therein.
You will participate in the JWT Pension Plan under the terms of this plan, the Company reserves the right to transfer this benefit to a
Mindshare Pension Plan in the future, if so required.

8. Holidays
You are entitled to 20 days paid holiday in addition to public holidays per calendar year to be taken at times agreed with the
Company. Carry-over of unused accrued holiday entitlement into a new holiday year will not normally be allowed. No payment will be
made for holidays not taken. On termination of your employment, unless you have been summarily dismissed, you will be entitled to
receive payment for unused accrued holiday pay. Any holiday taken in excess of your entitlement shall be deducted from your final
salary payment.

9. Leave Due to Sickness or Injury


The maximum provision for sick leave is 15 working days per calendar year.

12. Invention/Know-How
Any discovery, invention, improvement in procedure, trademark, trade name, designs, copyrights or get-ups made, discovered or
created by you during the continuance of your employment hereunder relating to the business of the Company shall belong to and shall
be the absolute property of the Company. If required to do so by the Company (whether during or after the termination of your
employment) you shall at the expense of the company execute all instruments and do all things necessary to vest in ownership for all
other rights, title and interests (including any registered rights therein) in such discovery, invention, improvement in procedure,
trademark, trade name, design, copyright or get-up in the Company (or its Nominee) absolutely and as sole beneficial owner.

14. Notice.
The first three months of your employment will be a trial period during which either you or the Company may terminate your employment
on one weeks notice. If at the end of that period, the Company is satisfied with your performance, you will become a permanent
employee. Thereafter you will give Company and the Company will give you three months notice of termination of employment. The
above is always subject to the following: (1) the Companys right to terminate the contract of employment on no or short notice where
you are in breach of contract; (2) your employment will at any event cease without notice on your retirement date when you are 60 years
of age.

SIGNED JOCELYN M. GALERA 8-16-99


Date of Borth [sic] 12-25-55

Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on the instruction of the CEO and upon
signing of the contract, without any further action from the Board of Directors of private respondent WPP.

Four months had passed when private respondent WPP filed before the Bureau of Immigration an application for petitioner GALERA to receive a
working visa, wherein she was designated as Vice President of WPP. Petitioner alleged that she was constrained to sign the application in order that
she could remain in the Philippines and retain her employment.

Then, on December 14, 2000, petitioner GALERA alleged she was verbally notified by private respondent STEEDMAN that her services had been
terminated from private respondent WPP.A termination letter followed the next day. [4]

On 3 January 2001, Galera filed a complaint for illegal dismissal, holiday pay, service incentive leave pay, 13 th month pay, incentive plan, actual and
moral damages, and attorneys fees against WPP and/or John Steedman (Steedman), Mark Webster (Webster)
and Nominada Lansang (Lansang). The case was docketed as NLRC NCR Case No. 30-01-00044-01.

The Labor Arbiters Ruling


In his Decision dated 31 January 2002, Labor Arbiter Edgardo M. Madriaga (Arbiter Madriaga) held WPP, Steedman, Webster, and Lansang liable
for illegal dismissal and damages. Arbiter Madriaga stated that Galera was not only illegally dismissed but was also not accorded due
process. Arbiter Madriaga explained, thus:

[WPP] failed to observe the two-notice rule. [WPP] through respondent Steedman for a five (5) minute meeting on December 14, 2000 where she
was verbally told that as of that day, her employment was being terminated. [WPP] did not give [Galera] an opportunity to defend herself and explain
her side. [Galera] was even prohibited from reporting for work that day and was told not to report for work the next day as it would be awkward for
her and respondent Steedman to be in the same premises after her termination. [WPP] only served [Galera] her written notice of termination only on
15 December 2001, one day after she was verbally apprised thereof.

The law mandates that the dismissal must be properly done otherwise, the termination is gravely defective and may be declared unlawful as we
hereby hold [Galeras] dismissal to be illegal and unlawful. Where there is no showing of a clear, valid and legal cause for the termination of
employment, the law considers the matter a case of illegal dismissal and the burden is on the employer to prove that the termination was for a valid
or authorized cause. The law mandates that both the substantive and procedural aspects of due process should be observed. The facts clearly show
that respondents were remiss on both aspects. Perforce, the dismissal is void and unlawful.
xxxx
Considering the work performance and achievements of [Galera] for the year 2000, we do not find any basis for the alleged claim of incompetence
by herein respondents. Had [Galera] been really incompetent, she would not have been able to generate enormous amounts [sic] of revenues and
business for [WPP]. She also appears to be well liked as a leader by her subordinates, who have come forth in support of [Galera]. These facts
remain undisputed by respondents.

A mans job being a property right duly protected by our laws, an employer who deprives an employee [of] the right to defend himself is liable for
damages consistent with Article 32 of the Civil Code. To allow an employer to terminate the employment of his worker based merely on allegations
without proof places the [employee] in an uncertain situation. The unflinching rule in illegal dismissal cases is that the employer bears the burden of
proof.
In the instant case, respondents have not been able to muster evidence to counter [Galeras] allegations. [Galeras] allegations remain and stand
absent proof from respondents rebutting them.Hence, our finding of illegal dismissal against respondents who clearly have conspired in bad faith to
deprive [Galera] of her right to substantive and procedural due process.[5]

The dispositive portion of Arbiter Madriagas decision reads as follows:

WHEREFORE, premises considered, we hereby hold herein respondents liable for illegal dismissal and damages, and award to [Galera], by virtue

of her expatriate status, the following:

a. Reinstatement without loss of seniority rights.

b. Backwages amounting to $120,000 per year at P50.00 to US $1 exchange rate, 13th month pay,
transportation and housing benefits.

c. Remuneration for business acquisitions amounting to Two Million Eight Hundred Fifty Thousand Pesos
(P2,850,000.00) and Media Plowback Incentive equivalent to Three Million Pesos (P3,000,000.00) or a total of not less than
One Hundred Thousand US Dollars ($100,000.00).

d. US Tax Protection of up to 35% coverage equivalent to Thirty Eight Thousand US Dollars ($38,000).

e. Moral damages including implied defamation and punitive damages equivalent to Two Million Dollars
(US$2,000,000.00).

f. Exemplary damages equivalent to One Million Dollars ($1,000,000.00).

g. Attorneys fees of 10% of the total award herein.

SO ORDERED.[6]

The Ruling of the NLRC

The First Division of the NLRC reversed the ruling of Arbiter Madriaga. In its Decision[7] promulgated on 19 February 2003, the NLRC stressed

that Galera wasWPPs Vice-President, and therefore, a corporate officer at the time she was removed by the Board of Directors on 14 December 2000. The

NLRC stated thus:


It matters not that her having been elected by the Board to an added position of being a member of the Board of Directors did not take effect as her
May 31, 2000 election to such added position was conditioned to be effective upon approval by SEC of the Amended By-Laws, an approval which
took place only in February 21, 2001, i.e., after her removal on December 14, 2000. What counts is, at the time of her removal, she continued to
be WPPs Vice-President, a corporate officer, on hold over capacity.

Ms. Galeras claim that she was not a corporate officer at the time of her removal because her May 31, 2000 election as Vice President for Media,
under WPPs Amended By-Laws, was subject to the approval by the Securities and Exchange Commission and that the SEC approved the Amended
By-Laws only in February 2001. Such claim is unavailing. Even if Ms. Galerassubsequent election as Vice President for Media on May 31, 2000 was
subject to approval by the SEC, she continued to hold her previous position as Vice President under the December 31, 1999 election until such time
that her successor is duly elected and qualified. It is a basic principle in corporation law, which principle is also embodied in WPPs by-laws, that a
corporate officer continues to hold his position as such until his successor has been duly elected and qualified. When Ms. Galera was elected as
Vice President on December 31, 1999, she was supposed to have held that position until her successor has been duly elected and qualified. The
record shows that Ms. Galera was not replaced by anyone. She continued to be Vice President of WPP with the same operational title of Managing
Director for Mindshare and continued to perform the same functions she was performing prior to her May 31, 2000 election.

In the recent case of Dily Dany Nacpil v. International Broadcasting Corp., the definition of corporate officer for purposes of intra-corporate
controversy was even broadened to include a Comptroller/Assistant Manager who was appointed by the General Manager, and whose appointment
was later approved by the Board of Directors. In this case, the position of comptroller was not even expressly mentioned in the By-Laws of the
corporation, and yet, the Supreme Court found him to be a corporate officer. The Court ruled that
(since) petitioners appointment as comptroller required the approval and formal action of IBCs Board of Directors to become valid, it is
clear therefore that petitioner is a corporate officer whose dismissal may be the subject of a controversy cognizable by the SEC... Had
the petitioner been an ordinary employee, such board action would not have been required.

Such being the case, the imperatives of law require that we hold that the Arbiter below had no jurisdiction over Galeras case as, again, she was a
corporate officer at the time of her removal.

WHEREFORE, the appeals of petitioner from the Decision of Labor Arbiter Edgardo Madriaga dated January 31, 2002 and his Order dated March
21, 2002, respectively, are granted. The January 31, 2002 decision of the Labor Arbiter is set aside for being null and void and the temporary
restraining order we issued on April 24, 2002 is hereby made permanent. The complaint of Jocelyn Galera is dismissed for lack of jurisdiction.

SO ORDERED.[8]

In its Resolution[9] promulgated on 4 June 2003, the NLRC further stated:

We are fully convinced that this is indeed an intra-corporate dispute which is beyond the labor arbiters jurisdiction. These consolidated
cases clearly [involve] the relationship between a corporation and its officer and is properly within the definition of an intra-corporate
relationship which, under P.D. No. 902-A, is within the jurisdiction of the SEC (now the commercial courts). Such being the case, We are
constrained to rule that the Labor Arbiter below had no jurisdiction over Ms. Galeras complaint for illegal dismissal.

WHEREFORE, the motion for reconsideration filed by Ms. Galera is hereby denied for lack of merit. We reiterate our February 19, 2003
Decision setting aside the Labor Arbiters Decision dated January 31, 2002 for being null and void.
SO ORDERED.[10]
Galera assailed the NLRCs decision and resolution before the appellate court and raised a lone assignment of error.

The National Labor Relations Commission acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it
reversed the decision of the Labor Arbiter not on the merits but for alleged lack of jurisdiction. [11]

The Decision of the Appellate Court

The appellate court reversed and set aside the decision of the NLRC. The appellate court ruled that the NLRCs dismissal of Galeras appeal is not in accord with
jurisprudence. A person could be considered a corporate officer only if appointed as such by a corporations Board of Directors, or if pursuant to the power given
them by either the Articles of Incorporation or the By-Laws.[12]

The appellate court explained:


A corporation, through its board of directors, could only act in the manner and within the formalities, if any, prescribed by its charter or by the general law. If the
action of the Board is ultravires such is motu proprio void ab initio and without legal effect whatsoever. The by-laws of a corporation are its own private laws
which substantially have the same effect as the laws of the corporation. They are, in effect, written into the charter. In this sense, they beome part of the
fundamental law of the corporation with which the corporation and its directors and officers must comply.
Even if petitioner GALERA had been appointed by the Board of Directors on December 31, 1999, private respondent WPPs By-Laws provided for
only one Vice-President, a position already occupied by private respondent Webster. The same defect also stains the Board of Directors
appointment of petitioner GALERA as a Director of the corporation, because at that time the By-Laws provided for only five directors. In addition, the
By-laws only empowered the Board of Directors to appoint a general manager and/or assistant general manager as corporate officers in addition to a
chairman, president, vice-president and treasurer. There is no mention of a corporate officer entitled Managing Director.

Hence, when the Board of Directors enacted the Resolutions of December 31, 1999 and May 31, 2000, it exceeded its authority under
the By-Laws and are, therefore, ultra vires. Although private respondent WPP sought to amend these defects by filing Amended By-
Laws with the Securities and Exchange Commission, they did not validate the ultra vires resolutions because the Amended By-Laws did
not take effect until February 16, 2001, when it was approved by the SEC. Since by-laws operate only prospectively, they could not
validate the ultra viresresolutions.[13]
The dispositive portion of the appellate courts decision reads:

WHEREFORE, the petition is hereby GRANTED and GIVEN DUE COURSE. The assailed Decision of the National Labor Relations
Commission is hereby REVERSED and SET ASIDE and a new one is entered DIRECTING private respondent WPP MARKETING
COMMUNICATIONS, INC. to:

1. Pay [Galera] backwages at the peso equivalent of US$120,000.00 per annum plus three months from her summary
December 14, 2000 dismissal up to March 14, 2001 because three months notice is required under the contract, plus
13th month pay, bonuses and general increases to which she would have been normally entitled, had she not been
dismissed and had she not been forced to stop working, including US tax protection of up to 35% coverage which she
had been enjoying as an expatriate;

2. Pay x x x GALERA the peso equivalent of US$185,000.00 separation pay (1 years);

3. Pay x x x GALERA any unpaid housing benefit for the 18 months of her employment in the service to the Company as
an expatriate in Manila, Philippines at the rate of P576,000 per year; unpaid personal and accident insurance benefits
for premiums at the rate of P300,000.00 per year; whatever cash value in the JWT Pension Plan; and thirty days paid
holiday benefit under the contract for the 1 calendar years with the Company;
4. Pay x x x GALERA the reduced amount of PhP2,000,000.00 as moral damages;

5. Pay [Galera] the reduced amount of PhP1,000,000.00 as exemplary damages;

6. Pay [Galera] an amount equivalent to 10% of the judgment award as attorneys fees;

7. Pay the cost of the suit.

SO ORDERED.[14]
Respondents filed a motion for reconsideration on 5 May 2005. Galera filed a motion for partial reconsideration and/or clarification on
the same date. The appellate court found no reason to revise or reverse its previous decision and subsequently denied the motions in a
Resolution promulgated on 1 August 2005.[15]

The Issues

WPP, Steedman, Webster, and Lansang raised the following grounds in G.R. No. 169207:

I. The Court of Appeals seriously erred in ruling that the NLRC has jurisdiction over [Galeras] complaint because she was not an
employee. [Galera] was a corporate officer of WPP from the beginning of her term until her removal from office.

II. Assuming arguendo that the Court of Appeals correctly ruled that the NLRC has jurisdiction over [Galeras] complaint, it should
have remanded the case to the Labor Arbiter for reception of evidence on the merits of the case.

III. [Galera] is an alien, hence, can never attain a regular or permanent working status in the Philippines.

IV. [Galera] is not entitled to recover backwages, other benefits and damages from WPP.[16]

On the other hand, in G.R. No. 169239, Galera raised the following grounds in support of her petition:

The CA decision should be consistent with Article 279 of the Labor Code and applicable jurisprudence, that full backwages and
separation pay (when in lieu of reinstatement), should be reckoned from time of dismissal up to time of reinstatement (or payment of
separation pay, in case separation instead of reinstatement is awarded).

Accordingly, petitioner Galera should be awarded full backwages and separation pay for the period from 14 December 2000 until the
finality of judgment by the respondents, or, at the very least, up to the promulgation date of the CA decision.

The individual respondents Steedman, Webster and Lansang must be held solidarily liable with respondent WPP for the wanton and
summary dismissal of petitioner Galera, to be consistent with law and jurisprudence as well as the specific finding of the CA of bad faith
on the part of respondents.[17]
This Court ordered the consolidation of G.R. Nos. 169207 and 169239 in a resolution dated 16 January 2006.[18]

The Ruling of the Court


In its consolidated comment, the Office of the Solicitor General (OSG) recommended that (A) the Decision dated 14 April 2005 of the appellate court finding
(1)Galera to be a regular employee of WPP; (2) the NLRC to have jurisdiction over the present case; and (3) WPP to have illegally dismissed Galera, be
affirmed; and (B) the case remanded to the Labor Arbiter for the computation of the correct monetary award. Despite the OSGs recommendations, we see
that Galeras failure to seek an employment permit prior to her employment poses a serious problem in seeking relief before this Court. Hence, we settle the
various issues raised by the parties for the guidance of the bench and bar.
Whether Galera is an Employee or a Corporate Officer

Galera, on the belief that she is an employee, filed her complaint before the Labor Arbiter. On the other hand, WPP, Steedman, Webster and Lansang contend
thatGalera is a corporate officer; hence, any controversy regarding her dismissal is under the jurisdiction of the Regional Trial Court. We agree with Galera.

Corporate officers are given such character either by the Corporation Code or by the corporations by-laws. Under Section 25 of the Corporation Code, the
corporate officers are the president, secretary, treasurer and such other officers as may be provided in the by-laws.[19] Other officers are sometimes created by
the charter or by-laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation to create additional offices as may be
necessary.

An examination of WPPs by-laws resulted in a finding that Galeras appointment as a corporate officer (Vice-President with the operational title of Managing
Director of Mindshare) during a special meeting of WPPs Board of Directors is an appointment to a non-existent corporate office. WPPs by-laws provided for only
one Vice-President. At the time of Galeras appointment on 31 December 1999, WPP already had one Vice-President in the person of Webster. Galera cannot be
said to be a director of WPP also because all five directorship positions provided in the by-laws are already occupied. Finally, WPP cannot rely on its Amended
By-Laws to support its argument that Galera is a corporate officer. The Amended By-Laws provided for more than one Vice-President and for two additional
directors. Even though WPPs stockholders voted for the amendment on 31 May 2000, the SEC approved the amendments only on 16 February
2001. Galera was dismissed on 14 December 2000. WPP, Steedman, Webster, and Lansang did not present any evidence that Galeras dismissal took effect with
the action of WPPs Board of Directors.
The appellate court further justified that Galera was an employee and not a corporate officer by subjecting WPP and Galeras relationship to the four-fold test: (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 with
respect to the means and methods by which the work is to be accomplished. The appellate court found:

x x x Sections 1 and 4 of the employment contract mandate where and how often she is to perform her work; sections 3, 5, 6 and 7 show that wages
she receives are completely controlled by x x x WPP; and sections 10 and 11 clearly state that she is subject to the regular disciplinary procedures of
x x x WPP.

Another indicator that she was a regular employee and not a corporate officer is Section 14 of the contract, which clearly states that she is a
permanent employee not a Vice-President or a member of the Board of Directors.

xxxx

Another indication that the Employment Contract was one of regular employment is Section 12, which states that the rights to any invention,
discovery, improvement in procedure, trademark, or copyright created or discovered by petitioner GALERA during her employment shall
automatically belong to private respondent WPP. Under Republic Act 8293, also known as the Intellectual Property Code, this condition prevails if the
creator of the work subject to the laws of patent or copyright is an employee of the one entitled to the patent or copyright.

Another convincing indication that she was only a regular employee and not a corporate officer is the disciplinary procedure under Sections 10 and
11 of the Employment Contract, which states that her right of redress is through Mindshares Chief Executive Officer for the Asia-Pacific. This implies
that she was not under the disciplinary control of private respondent WPPs Board of Directors (BOD), which should have been the case if in fact she
was a corporate officer because only the Board of Directors could appoint and terminate such a corporate officer.

Although petitioner GALERA did sign the Alien Employment Permit from the Department of Labor and Employment and the application for a 9(g) visa
with the Bureau of Immigration both of which stated that she was private respondents WPP Vice President these should not be considered against
her. Assurming arguendo that her appointment as Vice-President was a valid act, it must be noted that these appointments occurred afater she was
hired as a regular employee. After her appointments, there was no appreciable change in her duties.[20]

Whether the Labor Arbiter and the NLRC


have jurisdiction over the present case

Galera being an employee, then the Labor Arbiter and the NLRC have jurisdiction over the present case. Article 217 of the Labor Code provides:

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 xx x 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;

6. Except claims for Employees Compensation, Social Security, Medicare and other 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 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.

In contrast, Section 5.2 of Republic Act No. 8799, or the Securities Regulation Code, states:

The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the
courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court in the exercise of its authority
may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission shall retain
jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one year
from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases
filed as of 30 June 2000 until finally disposed.
The pertinent portions of Section 5 of Presidential Decree No. 902-A, mentioned above, states:

b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members or associates;
between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates,
respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or
right to exist as such entity;

c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or
associations.

Whether WPP illegally dismissed Galera

WPPs dismissal of Galera lacked both substantive and procedural due process.

Apart from Steedmans letter dated 15 December 2000 to Galera, WPP failed to prove any just or authorized cause for Galeras dismissal. Steedmans letter
to Galerareads:

The operations are currently in a shamble. There is lack of leadership and confidence in your abilities from within, our agency partners
and some clients.

Most of the staff I spoke with felt they got more guidance and direction from Minda than yourself. In your role as Managing Director, that
is just not acceptable.

I believe your priorities are mismanaged. The recent situation where you felt an internal strategy meeting was more important than a
new business pitch is a good example.

You failed to lead and advise on the two new business pitches. In both cases, those involved sort (sic) Mindas input. As I discussed with
you back in July, my directive was for you to lead and review all business pitches. It is obvious [that] confusion existed internally right up
until the day of the pitch.

The quality output is still not to an acceptable standard, which was also part of my directive that you needed to focus on back in July.

I do not believe you understand the basic skills and industry knowledge required to run a media special operation.[21]

WPP, Steedman, Webster, and Lansang, however, failed to substantiate the allegations in Steedmans letter. Galera, on the other hand, presented documentary
evidence[22] in the form of congratulatory letters, including one from Steedman, which contents are diametrically opposed to the 15 December 2000 letter.

The law further requires that the employer must furnish the worker sought to be dismissed with two written notices before termination of employment can be
legally effected: (1) notice which apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice which
informs the employee of the employers decision to dismiss him. Failure to comply with the requirements taints the dismissal with illegality.[23] WPPs acts clearly
show that Galerasdismissal did not comply with the two-notice rule.

Whether Galera is entitled to the monetary award

WPP, Steedman, Webster, and Lansang argue that Galera is not entitled to backwages because she is an alien. They further state that there is no guarantee that
the Bureau of Immigration and the Department of Labor and Employment will continue to grant favorable rulings on the applications for a 9(g) visa and an Alien
Employment Permit after the expiry of the validity of Galeras documents on 31 December 2000. WPPs argument is a circular argument, and assumes what it
attempts to prove. Had WPP not dismissed Galera, there is no doubt in our minds that WPP would have taken action for the approval of documents required
for Galerascontinued employment.

This is Galeras dilemma: Galera worked in the Philippines without a proper work permit but now wants to claim employees benefits under Philippine labor laws.

Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on the instruction of the
CEO and upon signing of the contract, without any further action from the Board of Directors of private respondent WPP.

Four months had passed when private respondent WPP filed before the Bureau of Immigration an application for petitioner
GALERA to receive a working visa, wherein she was designated as Vice President of WPP. Petitioner alleged that she was
constrained to sign the application in order that she could remain in the Philippines and retain her employment.[24]

The law and the rules are consistent in stating that the employment permit must be acquired prior to employment. The Labor Code states: Any alien seeking
admission to the Philippines for employment purposes and any domestic or foreign employer who desires to engage an alien for employment in the Philippines
shall obtain an employment permit from the Department of Labor.[25] Section 4, Rule XIV, Book 1 of the Implementing Rules and Regulations provides:

Employment permit required for entry. No alien seeking employment, whether as a resident or non-resident, may enter the Philippines
without first securing an employment permit from the Ministry. If an alien enters the country under a non-working visa and wishes to be
employed thereafter, he may only be allowed to be employed upon presentation of a duly approved employment permit.
Galera cannot come to this Court with unclean hands. To grant Galeras prayer is to sanction the violation of the Philippine labor laws requiring aliens to secure
work permits before their employment. We hold that the status quo must prevail in the present case and we leave the parties where they are. This ruling,
however, does not bar Galera from seeking relief from other jurisdictions.

WHEREFORE, we PARTIALLY GRANT the petitions in G.R. Nos. 169207 and 169239. We SET ASIDE the Decision of the Court of Appeals promulgated on 14
April 2005 as well as the Resolution promulgated on 1 August 2005 in CA-G.R. SP No. 78721.

SO ORDERED.
TV and prod. Exponents vs Servana

DECISION
TINGA, J.:

This petition for review under Rule 45 assails the 21 December 2004 Decision[1] and 8 April 2005 Resolution[2] 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 isREINSTATED 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! from11:30 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. [24] Aside 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

2000Memorandum 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.

xxx
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.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 119268 February 23, 2000

ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS, LUIS DE LOS ANGELES, JOEL ORDENIZA and AMADO
CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN TAXI (PHILJAMA INTERNATIONAL, INC.) respondents.

QUISUMBING, J.:

This special civil action for certiorari seeks to annul the decision1 of public respondent promulgated on October 28, 1994, in NLRC NCR CA No. 003883-92, and
its resolution2 dated December 13, 1994 which denied petitioners motion for reconsideration.

Petitioners were drivers of private respondent, Philjama International Inc., a domestic corporation engaged in the operation of "Goodman Taxi." Petitioners used
to drive private respondent's taxicabs every other day on a 24-hour work schedule under the boundary system. Under this arrangement, the petitioners earned
an average of P400.00 daily. Nevertheless, private respondent admittedly regularly deducts from petitioners, daily earnings the amount of P30.00 supposedly for
the washing of the taxi units. Believing that the deduction is illegal, petitioners decided to form a labor union to protect their rights and interests.

Upon learning about the plan of petitioners, private respondent refused to let petitioners drive their taxicabs when they reported for work on August 6, 1991, and
on succeeding days. Petitioners suspected that they were singled out because they were the leaders and active members of the proposed union. Aggrieved,
petitioners filed with the labor arbiter a complaint against private respondent for unfair labor practice, illegal dismissal and illegal deduction of washing fees. In a
decision3 dated August 31, 1992, the labor arbiter dismissed said complaint for lack of merit.

On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994, reversed and set aside the judgment of the labor arbiter. The labor tribunal
declared that petitioners are employees of private respondent, and, as such, their dismissal must be for just cause and after due process. It disposed of the case
as follows:

WHEREFORE, in view of all the foregoing considerations, the decision of the Labor Arbiter appealed from is hereby SET ASIDE and another one
entered:

1. Declaring the respondent company guilty of illegal dismissal and accordingly it is directed to reinstate the complainants, namely, Alberto A.
Gonzales, Joel T. Morato, Gavino Panahon, Demetrio L. Calagos, Sonny M. Lustado, Romeo Q. Clariza, Luis de los Angeles, Amado Centino, Angel
Jardin, Rosendo Marcos, Urbano Marcos, Jr., and Joel Ordeniza, to their former positions without loss of seniority and other privileges appertaining
thereto; to pay the complainants full backwages and other benefits, less earnings elsewhere, and to reimburse the drivers the amount paid as
washing charges; and
2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.

SO ORDERED.4

Private respondent's first motion for reconsideration was denied. Remaining hopeful, private respondent filed another motion for reconsideration. This time, public
respondent, in its decision5 dated October 28, 1994, granted aforesaid second motion for reconsideration. It ruled that it lacks jurisdiction over the case as
petitioners and private respondent have no employer-employee relationship. It held that the relationship of the parties is leasehold which is covered by the Civil
Code rather than the Labor Code, and disposed of the case as follows:

VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under reconsideration is hereby given due course.

Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994 are hereby SET ASIDE. The Decision of the Labor Arbiter subject
of the appeal is likewise SET ASIDE and a NEW ONE ENTERED dismissing the complaint for lack of jurisdiction.

No costs.

SO ORDERED.6

Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision which was denied. Hence, the instant petition.

In this recourse, petitioners allege that public respondent acted without or in excess of jurisdiction, or with grave abuse of discretion in rendering the assailed
decision, arguing that:

THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S SECOND MOTION FOR RECONSIDERATION WHICH IS ADMITTEDLY A PLEADING
PROHIBITED UNDER THE NLRC RULES, AND TO GRANT THE SAME ON GROUNDS NOT EVEN INVOKED THEREIN.

II

THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES IS ALREADY A SETTLED ISSUE CONSTITUTING RES
JUDICATA, WHICH THE NLRC HAS NO MORE JURISDICTION TO REVERSE, ALTER OR MODIFY.

III

N ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE VIEW THAT PETITIONERS-TAXI DRIVERS ARE EMPLOYEES OF
RESPONDENT TAXI COMPANY.7

The petition is impressed with merit.

The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled meaning in the jurisprudence of procedure. It means such
capricious and whimsical exercise of judgment by the tribunal exercising judicial or quasi-judicial power as to amount to lack of power. 8 In labor cases, this Court
has declared in several instances that disregarding rules it is bound to observe constitutes grave abuse of discretion on the part of labor tribunal.

In Garcia vs. NLRC,9 private respondent therein, after receiving a copy of the labor arbiter's decision, wrote the labor arbiter who rendered the decision and
expressed dismay over the judgment. Neither notice of appeal was filed nor cash or surety bond was posted by private respondent. Nevertheless, the labor
tribunal took cognizance of the letter from private respondent and treated said letter as private respondent's appeal. In a certiorari action before this Court, we
ruled that the labor tribunal acted with grave abuse of discretion in treating a mere letter from private respondent as private respondent's appeal in clear violation
of the rules on appeal prescribed under Section 3(a), Rule VI of the New Rules of Procedure of NLRC.

In Philippine Airlines Inc. vs. NLRC,10 we held that the labor arbiter committed grave abuse of discretion when he failed to resolve immediately by written order a
motion to dismiss on the ground of lack of jurisdiction and the supplemental motion to dismiss as mandated by Section 15 of Rule V of the New Rules of
Procedure of the NLRC.
In Unicane Workers Union-CLUP vs. NLRC,11 we held that the NLRC gravely abused its discretion by allowing and deciding an appeal without an appeal bond
having been filed as required under Article 223 of the Labor Code.

In Maebo vs. NLRC,12 we declared that the labor arbiter gravely abused its discretion in disregarding the rule governing position papers. In this case, the parties
have already filed their position papers and even agreed to consider the case submitted for decision, yet the labor arbiter still admitted a supplemental position
paper and memorandum, and by taking into consideration, as basis for his decision, the alleged facts adduced therein and the documents attached thereto.

In Gesulgon vs. NLRC,13 we held that public respondent gravely abused its discretion in treating the motion to set aside judgment and writ of execution as a
petition for relief of judgment. In doing so, public respondent had, without sufficient basis, extended the reglementary period for filing petition for relief from
judgment contrary to prevailing rule and case law.

In this case before us, private respondent exhausted administrative remedy available to it by seeking reconsideration of public respondent's decision dated April
28, 1994, which public respondent denied. With this motion for reconsideration, the labor tribunal had ample opportunity to rectify errors or mistakes it may have
committed before resort to courts of justice can be had.14 Thus, when private respondent filed a second motion for reconsideration, public respondent should
have forthwith denied it in accordance with Rule 7, Section 14 of its New Rules of Procedure which allows only one motion for reconsideration from the same
party, thus:

Sec. 14. Motions for Reconsideration. Motions for reconsideration of any order, resolution or decision of the Commission shall not be entertained
except when based on palpable or patent errors, provided that the motion is under oath and filed within ten (10) calendar days from receipt of the
order, resolution or decision with proof of service that a copy of the same has been furnished within the reglementary period the adverse party
and provided further, that only one such motion from the same party shall be entertained. [Emphasis supplied]

The rationale for allowing only one motion for reconsideration from the same party is to assist the parties in obtaining an expeditious and inexpensive settlement
of labor cases. For obvious reasons, delays cannot be countenanced in the resolution of labor disputes. The dispute may involve no less than the livelihood of an
employee and that of his loved ones who are dependent upon him for food, shelter, clothing, medicine, and education. It may as well involve the survival of a
business or an industry.15

As correctly pointed out by petitioner, the second motion for reconsideration filed by private respondent is indubitably a prohibited pleading 16 which should have
not been entertained at all. Public respondent cannot just disregard its own rules on the pretext of "satisfying the ends of justice", 17 especially when its disposition
of a legal controversy ran afoul with a clear and long standing jurisprudence in this jurisdiction as elucidated in the subsequent discussion. Clearly, disregarding a
settled legal doctrine enunciated by this Court is not a way of rectifying an error or mistake. In our view, public respondent gravely abused its discretion in taking
cognizance and granting private respondent's second motion for reconsideration as it wrecks the orderly procedure in seeking reliefs in labor cases.

But, there is another compelling reason why we cannot leave untouched the flip-flopping decisions of the public respondent. As mentioned earlier, its October 28,
1994 judgment is not in accord with the applicable decisions of this Court. The labor tribunal reasoned out as follows:

On the issue of whether or not employer-employee relationship exists, admitted is the fact that complainants are taxi drivers purely on the "boundary
system". Under this system the driver takes out his unit and pays the owner/operator a fee commonly called "boundary" for the use of the unit. Now,
in the determination the existence of employer-employee relationship, the Supreme Court in the case of Sara, et al., vs. Agarrado, et al. (G.R. No.
73199, 26 October 1988) has applied the following four-fold test: "(1) the selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power of control the employees conduct."

"Among the four (4) requisites", the Supreme Court stresses that "control is deemed the most important that the other requisites may even be
disregarded". Under the control test, an employer-employee relationship exists if the "employer" has reserved the right to control the "employee" not
only as to the result of the work done but also as to the means and methods by which the same is to be accomplished. Otherwise, no such
relationship exists. (Ibid.)

Applying the foregoing parameters to the case herein obtaining, it is clear that the respondent does not pay the drivers, the complainants herein,
their wages. Instead, the drivers pay a certain fee for the use of the vehicle. On the matter of control, the drivers, once they are out plying their trade,
are free to choose whatever manner they conduct their trade and are beyond the physical control of the owner/operator; they themselves determine
the amount of revenue they would want to earn in a day's driving; and, more significantly aside from the fact that they pay for the gasoline they
consume, they likewise shoulder the cost of repairs on damages sustained by the vehicles they are driving.

Verily, all the foregoing attributes signify that the relationship of the parties is more of a leasehold or one that is covered by a charter agreement
under the Civil Code rather than the Labor Code.18

The foregoing ratiocination goes against prevailing jurisprudence.


In a number of cases decided by this Court,19 we ruled that the relationship between jeepney owners/operators on one hand and jeepney drivers on the other
under the boundary system is that of employer-employee and not of lessor-lessee. We explained that in the lease of chattels, the lessor loses complete control
over the chattel leased although the lessee cannot be reckless in the use thereof, otherwise he would be responsible for the damages to the lessor. In the case of
jeepney owners/operators and jeepney drivers, the former exercise supervision and control over the latter. The management of the business is in the owner's
hands. The owner as holder of the certificate of public convenience must see to it that the driver follows the route prescribed by the franchising authority and the
rules promulgated as regards its operation. Now, the fact that the drivers do not receive fixed wages but get only that in excess of the so-called "boundary" they
pay to the owner/operator is not sufficient to withdraw the relationship between them from that of employer and employee. We have applied by analogy the
abovestated doctrine to the relationships between bus owner/operator and bus conductor, 20 auto-calesa owner/operator and driver,21 and recently between taxi
owners/operators and taxi drivers.22 Hence, petitioners are undoubtedly employees of private respondent because as taxi drivers they perform activities which
are usually necessary or desirable in the usual business or trade of their employer.

As consistently held by this Court, termination of employment must be effected in accordance with law. The just and authorized causes for termination of
employment are enumerated under Articles 282, 283 and 284 of the Labor Code. The requirement of notice and hearing is set-out in Article 277 (b) of the said
Code. Hence, petitioners, being employees of private respondent, can be dismissed only for just and authorized cause, and after affording them notice and
hearing prior to termination. In the instant case, private respondent had no valid cause to terminate the employment of petitioners. Neither were there two (2)
written notices sent by private respondent informing each of the petitioners that they had been dismissed from work. These lack of valid cause and failure on the
part of private respondent to comply with the twin-notice requirement underscored the illegality surrounding petitioners' dismissal.

Under the law, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his
full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him
up to the time of his actual reinstatement.23 It must be emphasized, though, that recent judicial pronouncements 24 distinguish between employees illegally
dismissed prior to the effectivity of Republic Act No. 6715 on March 21, 1989, and those whose illegal dismissals were effected after such date. Thus, employees
illegally dismissed prior to March 21, 1989, are entitled to backwages up to three (3) years without deduction or qualification, while those illegally dismissed after
that date are granted full backwages inclusive of allowances and other benefits or their monetary equivalent from the time their actual compensation was
withheld from them up to the time of their actual reinstatement. The legislative policy behind Republic Act No. 6715 points to "full backwages" as meaning exactly
that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal. Considering
that petitioners were terminated from work on August 1, 1991, they are entitled to full backwages on the basis of their last daily earnings.

With regard to the amount deducted daily by private respondent from petitioners for washing of the taxi units, we view the same as not illegal in the context of the
law. We note that after a tour of duty, it is incumbent upon the driver to restore the unit he has driven to the same clean condition when he took it out. Car
washing after a tour of duty is indeed a practice in the taxi industry and is in fact dictated by fair play.25 Hence, the drivers are not entitled to reimbursement of
washing charges.1wphi1.nt

WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respondent dated October 28, 1994, is hereby SET ASIDE. The DECISION of
public respondent dated April 28, 1994, and its RESOLUTION dated December 13, 1994, are hereby REINSTATED subject to MODIFICATION. Private
respondent is directed to reinstate petitioners to their positions held at the time of the complained dismissal. Private respondent is likewise ordered to pay
petitioners their full backwages, to be computed from the date of dismissal until their actual reinstatement. However, the order of public respondent that
petitioners be reimbursed the amount paid as washing charges is deleted. Costs against private respondents.

SO ORDERED.