Labor Review 1st Set Cases

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Contents
1 Insular life vs basiao........................................................................................................................1
2 Tongko vs manufacturers.............................................................................................................7
3 Indophil vs adviento......................................................................................................................24
4 Phil journalist vs journal employees........................................................................................33
5 Julies bakeshop vs arnaiz...........................................................................................................43
6 GJT Builders vs ambos..................................................................................................................55
7 Mirant Phils. Vs Caro......................................................................................................................65
8 Benigno vs ABSCBN.......................................................................................................................86
9 Universidad vs Sambajon............................................................................................................96
10 Abbot vs Alcaraz.........................................................................................................................116
11 Colegio vs Rojo............................................................................................................................122
12 AMA computer vs Austria........................................................................................................132
13 Tirol vs NLRC................................................................................................................................145
14 Goma vs Pamplona....................................................................................................................159
G.R. No. 160905...............................................................................................................................159
15 Gadia vs Sykes............................................................................................................................172
16 Hacienda vs Lorenzo.................................................................................................................178
17 Tunay na pakakaisa vs Asia...................................................................................................186
18 Fuji vs Espiritu.............................................................................................................................196
19 Goya Inc. vs Goya Employees...............................................................................................232
20 Alviado vs Procter and Gamble.............................................................................................242
1 Insular life vs basiao
Labrador Notes Labor Review Set Cases 1 Atty. Beciera

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G.R. No. 84484 November 15, 1989
INSULAR LIFE ASSURANCE CO., LTD., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO,
respondents.
Tirol & Tirol for petitioner.
Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called
the Company) and Melecio T. Basiao entered into a contract 1 by which:
1. Basiao was "authorized to solicit within the Philippines

applications for insurance policies and annuities in accordance
with the existing rules and regulations" of the Company;
2. he would receive "compensation, in the form of

commissions ... as provided in the Schedule of Commissions" of
the contract to "constitute a part of the consideration of ... (said)
agreement;" and
3. the "rules in ... (the Company's) Rate Book and its Agent's
Manual, as well as all its circulars ... and those which may from
time to time be promulgated by it, ..." were made part of said
contract.
The contract also contained, among others, provisions governing the

relations of the parties, the duties of the Agent, the acts prohibited to him,
and the modes of termination of the agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to

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

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ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited

from giving, directly or indirectly, rebates in any form, or from
making any misrepresentation or over-selling, and, in general,
from doing or committing acts prohibited in the Agent's Manual
and in circulars of the Office of the Insurance Commissioner.
TERMINATION. The Company may terminate the contract at will,

without any previous notice to the Agent, for or on account of ...
(explicitly specified causes). ...
Either party may terminate this contract by giving to the other

notice in writing to that effect. It shall become ipso
facto cancelled if the Insurance Commissioner should revoke a
Certificate of Authority previously issued or should the Agent fail
to renew his existing Certificate of Authority upon its expiration.
The Agent shall not have any right to any commission on
renewal of premiums that may be paid after the termination of
this agreement for any cause whatsoever, except when the
termination is due to disability or death in line of service. As to
commission corresponding to any balance of the first year's
premiums remaining unpaid at the termination of this
agreement, the Agent shall be entitled to it if the balance of the
first year premium is paid, less actual cost of collection, unless
the termination is due to a violation of this contract, involving
criminal liability or breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or of

commissions or other compensations shall be valid without the
prior consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into another
contract an Agency Manager's Contract and to implement his end of it
Basiao organized an agency or office to which he gave the name M. Basiao
and Associates, while concurrently fulfilling his commitments under the first
contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract.

After vainly seeking a reconsideration, Basiao sued the Company in a civil
action and this, he was later to claim, prompted the latter to terminate also
his engagement under the first contract and to stop payment of his
commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against
the Company and its president. Without contesting the termination of the

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first contract, the complaint sought to recover commissions allegedly unpaid

thereunder, plus attorney's fees. The respondents disputed the Ministry's
jurisdiction over Basiao's claim, asserting that he was not the Company's
employee, but an independent contractor and that the Company had no
obligation to him for unpaid commissions under the terms and conditions of
his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled
that the underwriting agreement had established an employer-employee
relationship between him and the Company, and this conferred jurisdiction
on the Ministry of Labor to adjudicate his claim. Said official's decision
directed payment of his unpaid commissions "... equivalent to the balance of
the first year's premium remaining unpaid, at the time of his termination, of
all the insurance policies solicited by ... (him) in favor of the respondent
company ..." plus 10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National

Labor Relations Commission. 7 Hence, the present petition for certiorari and
prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he

had become the Company's employee by virtue of the contract invoked by
him, thereby placing his claim for unpaid commissions within the original
and exclusive jurisdiction of the Labor Arbiter under the provisions of Section
217 of the Labor Code, 8 or, contrarily, as the Company would have it, that
under said contract Basiao's status was that of an independent contractor
whose claim was thus cognizable, not by the Labor Arbiter in a labor case,
but by the regular courts in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and

generally accepted sense existed between it and Basiao, is drawn from the
terms of the contract they had entered into, which, either expressly or by
necessary implication, made Basiao the master of his own time and selling
methods, left to his judgment the time, place and means of soliciting
insurance, set no accomplishment quotas and compensated him on the basis
of results obtained. He was not bound to observe any schedule of working
hours or report to any regular station; he could seek and work on his
prospects anywhere and at anytime he chose to, and was free to adopt the
selling methods he deemed most effective.
Without denying that the above were indeed the expressed implicit
conditions of Basiao's contract with the Company, the respondents contend
that they do not constitute the decisive determinant of the nature of his
engagement, invoking precedents to the effect that the critical feature

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distinguishing the status of an employee from that of an independent

contractor is control, that is, whether or not the party who engages the
services of another has the power to control the latter's conduct in rendering
such services. Pursuing the argument, the respondents draw attention to the
provisions of Basiao's contract obliging him to "... observe and conform to all
rules and regulations which the Company may from time to time
prescribe ...," as well as to the fact that the Company prescribed the
qualifications of applicants for insurance, processed their applications and
determined the amounts of insurance cover to be issued as indicative of the
control, which made Basiao, in legal contemplation, an employee of the
Company. 9
It is true that the "control test" expressed in the following pronouncement of

the Court in the 1956 case of Viana vs. Alejo Al-Lagadan 10
... In determining the existence of employer-employee

relationship, the following elements are generally considered,
namely: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the
power to control the employees' conduct although the latter is
the most important element (35 Am. Jur. 445). ...
has been followed and applied in later cases, some fairly recent. 11 Indeed, it
is without question a valid test of the character of a contract or agreement
to render service. It should, however, be obvious that not every form of
control that the hiring party reserves to himself over the conduct of the
party hired in relation to the services rendered may be accorded the effect of
establishing an employer-employee relationship between them in the legal or
technical sense of the term. A line must be drawn somewhere, if the
recognized distinction between an employee and an individual contractor is
not to vanish altogether. Realistically, it would be a rare contract of service
that gives untrammelled freedom to the party hired and eschews any
intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create
no employer-employee relationship unlike the second, which address both
the result and the means used to achieve it. The distinction acquires
particular relevance in the case of an enterprise affected with public interest,
as is the business of insurance, and is on that account subject to regulation
by the State with respect, not only to the relations between insurer and

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insured but also to the internal affairs of the insurance company. 12 Rules
and regulations governing the conduct of the business are provided for in
the Insurance Code and enforced by the Insurance Commissioner. It is,
therefore, usual and expected for an insurance company to promulgate a set
of rules to guide its commission agents in selling its policies that they may
not run afoul of the law and what it requires or prohibits. Of such a character
are the rules which prescribe the qualifications of persons who may be
insured, subject insurance applications to processing and approval by the
Company, and also reserve to the Company the determination of the
premiums to be paid and the schedules of payment. None of these really
invades the agent's contractual prerogative to adopt his own selling methods
or to sell insurance at his own time and convenience, hence cannot
justifiably be said to establish an employer-employee relationship between
him and the company.
There is no dearth of authority holding persons similarly placed as

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

System 14 a case almost on all fours with the present one, this Court held
that there was no employer-employee relationship between a commission
agent and an investment company, but that the former was an independent
contractor where said agent and others similarly placed were: (a) paid
compensation in the form of commissions based on percentages of their
sales, any balance of commissions earned being payable to their legal
representatives in the event of death or registration; (b) required to put up
performance bonds; (c) subject to a set of rules and regulations governing
the performance of their duties under the agreement with the company and
termination of their services for certain causes; (d) not required to report for
work at any time, nor to devote their time exclusively to working for the
company nor to submit a record of their activities, and who, finally,
shouldered their own selling and transportation expenses.
More recently, in Sara vs. NLRC, 15 it was held that one who had been
engaged by a rice miller to buy and sell rice and palay without compensation

Page 7 of 260
except a certain percentage of what he was able to buy or sell, did work at
his own pleasure without any supervision or control on the part of his
principal and relied on his own resources in the performance of his work,
was a plain commission agent, an independent contractor and not an
employee.
The respondents limit themselves to pointing out that Basiao's contract with
the Company bound him to observe and conform to such rules and
regulations as the latter might from time to time prescribe. No showing has
been made that any such rules or regulations were in fact promulgated,
much less that any rules existed or were issued which effectively controlled
or restricted his choice of methods or the methods themselves of
selling insurance. Absent such showing, the Court will not speculate that any
exceptions or qualifications were imposed on the express provision of the
contract leaving Basiao "... free to exercise his own judgment as to the time,
place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having

been connected with the Company for twenty-five years. Whatever this is
meant to imply, the obvious reply would be that what is germane here is
Basiao's status under the contract of July 2, 1968, not the length of his
relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao
was not an employee of the petitioner, but a commission agent, an
independent contractor whose claim for unpaid commissions should have
been litigated in an ordinary civil action. The Labor Arbiter erred in taking
cognizance of, and adjudicating, said claim, being without jurisdiction to do
so, as did the respondent NLRC in affirming the Arbiter's decision. This
conclusion renders it unnecessary and premature to consider Basiao's claim
for commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations

Commission is set aside, and that complaint of private respondent Melecio T.
Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to
costs.
SO ORDERED.
2 Tongko vs manufacturers
GREGORIO V. TONGKO, G.R. No. 167622

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Petitioner,
Present:
CORONA, C.J.,
CARPIO,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
- versus - LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
THE MANUFACTURERS LIFE MENDOZA, and

INSURANCE CO. (PHILS.), INC.
SERENO, JJ.
and RENATO A. VERGEL DE
DIOS, Promulgated:
Respondents.
January 25, 2011
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RESOLUTION
BRION, J.:
We resolve petitioner Gregorio V. Tongkos bid, through his Motion for

Reconsideration,[1] to set aside our June 29, 2010 Resolution that
reversed our Decision of November 7, 2008.[2] With the reversal, the
assailed June 29, 2010 Resolution effectively affirmed the Court of Appeals
ruling[3] in CA-G.R. SP No. 88253 that the petitioner was an insurance agent,
not the employee, of the respondent The Manufacturers Life Insurance Co.
(Phils.), Inc. (Manulife).
In his Motion for Reconsideration, petitioner reiterates the arguments

he had belabored in his petition and various other submissions. He argues
that for 19 years, he performed administrative functions and exercised
supervisory authority over employees and agents of Manulife, in addition to
his insurance agent functions. [4] In these 19 years, he was designated as a
Unit Manager, a Branch Manager and a Regional Sales Manager, and now
posits that he was not only an insurance agent for Manulife but was its
employee as well.
We find no basis or any error to merit the reconsideration of

our June 29, 2010 Resolution.
A. Labor Law Control = Employment Relationship
Control over the performance of the task of one providing service both
with respect to the means and manner, and the results of the service is the
primary element in determining whether an employment relationship

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exists. We resolve the petitioners Motion against his favor since he failed to
show that the control Manulife exercised over him was the control required
to exist in an employer-employee relationship; Manulifes control fell short of
this norm and carried only the characteristic of the relationship between an
insurance company and its agents, as defined by the Insurance Code and by
the law of agency under the Civil Code.
The petitioner asserts in his Motion that Manulifes labor law control
over him was demonstrated (1) when it set the objectives and sales targets
regarding production, recruitment and training programs; and (2) when it
prescribed the Code of Conduct for Agents and the Manulife Financial Code
of Conduct to govern his activities.[5] We find no merit in these contentions.
In our June 29, 2010 Resolution, we noted that there are built-in
elements of control specific to an insurance agency, which do not amount to
the elements of control that characterize an employment relationship
governed by the Labor Code.The Insurance Code provides definite
parameters in the way an agent negotiates for the sale of the companys
insurance products, his collection activities and his delivery of the insurance
contract or policy.[6] In addition, the Civil Code defines an agent as a person
who binds himself to do something in behalf of another, with the consent or
authority of the latter.[7]Article 1887 of the Civil Code also provides that in
the execution of the agency, the agent shall act in accordance with the
instructions of the principal.
All these, read without any clear understanding of fine legal

distinctions, appear to speak of control by the insurance company over its
agents. They are, however, controls aimed only at specific results in
undertaking an insurance agency, and are, in fact, parameters set by law in
defining an insurance agency and the attendant duties and responsibilities
an insurance agent must observe and undertake. They do not reach the level
of control into the means and manner of doing an assigned task that

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invariably characterizes an employment relationship as defined by labor

law. From this perspective, the petitioners contentions cannot prevail.
To reiterate, guidelines indicative of labor law control do not merely

relate to the mutually desirable result intended by the contractual
relationship; they must have the nature of dictating the means and methods
to be employed in attaining the result. [8] Tested by this norm,
Manulifes instructions regarding the objectives and sales targets, in
connection with the training and engagement of other agents, are among
the directives that the principal may impose on the agent to achieve the
assigned tasks. They are targeted results that Manulife wishes to attain
through its agents. Manulifes codes of conduct, likewise, do not necessarily
intrude into the insurance agents means and manner of conducting their
sales. Codes of conduct are norms or standards of behavior rather than
employer directives into how specific tasks are to be done. These codes, as
well as insurance industry rules and regulations, are not per se indicative of
labor law control under our jurisprudence. [9]
The duties[10] that the petitioner enumerated in his Motion are not supported
by evidence and, therefore, deserve scant consideration. Even assuming
their existence, however, they mostly pertain to the duties of an insurance
agent such as remitting insurance fees to Manulife, delivering policies to the
insured, and after-sale services. For agents leading other agents, these
include the task of overseeing other insurance agents, the recruitment of
other insurance agents engaged by Manulife as principal, and ensuring that
these other agents comply with the paperwork necessary in selling
insurance. That Manulife exercises the power to assign and remove agents
under the petitioners supervision is in keeping with its role as a principal in
an agency relationship; they are Manulife agents in the same manner that
the petitioner had all along been a Manulife agent.

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The petitioner also questions Manulifes act of investing him with

different titles and positions in the course of their relationship, given the
respondents position that he simply functioned as an insurance agent. [11] He
also considers it an unjust and inequitable situation that he would be
unrewarded for the years he spent as a unit manager, a branch manager,
and a regional sales manager.[12]
Based on the evidence on record, the petitioners occupation was to sell

Manulifes insurance policies and products from 1977 until the termination of
the Career Agents Agreement (Agreement). The evidence also shows that
through the years, Manulife permitted him to exercise guiding authority over
other agents who operate under their own agency agreements with Manulife
and whose commissions he shared. [13] Under this scheme an arrangement
that pervades the insurance industry petitioner in effect became a lead agent
and his own commissions increased as they included his share in the
commissions of the other agents; [14] he also received greater
reimbursements for expenses and was allowed to use Manulifes facilities. His
designation also changed from unit manager to branch manager and then to
regional sales manager, to reflect the increase in the number of agents he
recruited and guided, as well as the increase in the area where these agents
operated.
As our assailed Resolution concluded and as we now similarly

conclude, these arrangements, and the titles and positions the petitioner
was invested with, did not change his status from the insurance agent that
he had always been (as evidenced by the Agreement that governed his
relationship with Manulife from the start to its disagreeable end). The
petitioner simply progressed from his individual agency to being a lead agent
who could use other agents in selling insurance and share in the earnings of
these other agents.

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In sum, we find absolutely no evidence of labor law control, as

extensively discussed in our Resolution of June 29, 2010, granting Manulifes
motion for reconsideration. The Dissent, unfortunately, misses this point.
B. No Resulting Inequity
We also do not agree that our assailed Resolution has the effect of
fostering an inequitable or unjust situation. The records show that the
petitioner was very amply paid for his services as an insurance agent, who
also shared in the commissions of the other agents under his guidance. In
1997, his income was P2,822,620; in 1998, P4,805,166.34; in
1999, P6,797,814.05; in 2001, P6,214,737.11; and in
2002, P8,003,180.38. All these he earned as an insurance agent, as he
failed to ever prove that he earned these sums as an employee. In technical
terms, he could not have earned all these as an employee because he failed
to provide the substantial evidence required in administrative cases to
support the finding that he was a Manulife employee. No inequity results
under this legal situation; what would be unjust is an award of backwages
and separation pay amounts that are not due him because he was never an
employee.
The Dissents discussion on this aspect of the case begins with the wide
disparity in the status of the parties that Manulife is a big Canadian
insurance company while Tongko is but a single agent of Manulife. The
Dissent then went on to say that [i]f is but just, it is but right, that the Court
interprets the relationship between Tongko and Manulife as one of
employment under labor laws and to uphold his constitutionally protected
right, as an employee, to security of tenure and entitlement to monetary
award should such right be infringed. [15] We cannot simply invoke the
magical formula by creating an employment relationship even when there is
none because of the unavoidable and inherently weak position of an
individual over a giant corporation.

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The Dissent likewise alluded to an ambiguity in the true relationship of

the parties after Tongkos successive appointments. We already pointed out
that the legal significance of these appointments had not been sufficiently
explained and that it did not help that Tongko never bothered to present
evidence on this point. The Dissent recognized this but tried to excuse
Tongko from this failure in the subsequent discussion, as follows:
[o]ther evidence was adduced to show such duties and

responsibilities. For one, in his letter of November 6, 2001,
respondent De Dios addressed petitioner as sales manager. And
as I wrote in my Dissent to the June 29, 2010 Resolution, it is
difficult to imagine that Manulife did not issue promotional
appointments to petitioner as unit manager, branch manager,
and, eventually, regional sales manager. Sound management
practice simply requires an appointment for any upward
personnel movement, particularly when additional functions and
the corresponding increase in compensation are involved. Then,
too, the adverted affidavits of the managers of Manulife as to the
duties and responsibilities of a unit manager, such as petitioner,
point to the conclusion that these managers were employees of
Manulife, applying the four-fold test.[16]
This Court (and all adjudicators for that matter) cannot and should not
fill in the evidentiary gaps in a partys case that the party failed to
support; we cannot and should not take the cudgels for any
party. Tongko failed to support his cause and we should simply view him
and his case as they are; our duty is to sit as a judge in the case that he and
the respondent presented.

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To support its arguments on equity, the Dissent uses the Constitution

and the Civil Code, using provisions and principles that are all motherhood
statements. The mandate of the Court, of course, is to decide cases based
on the facts and the law, and not to base its conclusions on fundamental
precepts that are far removed from the particular case presented before
it. When there is no room for their application, of capacity of principles,
reliance on the application of these fundamental principles is misplaced.
C. Earnings were Commissions
That his earnings were agents commissions arising from his work as
an insurance agent is a matter that the petitioner cannot deny, as these are
the declarations and representations he stated in his income tax returns
through the years. It would be doubly unjust, particularly to the
government, if he would be allowed at this late point to turn around and
successfully claim that he was merely an employee after he declared
himself, through the years, as an independent self-employed insurance
agent with the privilege of deducting business expenses. This aspect of the
case alone considered together with the probative value of income tax
declarations and returns filed prior to the present controversy should be
enough to clinch the present case against the petitioners favor.
D. The Dissents Solution:
Unwieldy and Legally Infirm
The Dissent proposes that Tongko should be considered as part

employee (as manager) and part insurance agent; hence, the original
decision should be modified to pertain only to the termination of his
employment as a manager and not as an insurance agent. Accordingly, the
backwages component of the original award to him should not include the
insurance sales commissions. This solution, according to the line taken by

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the Dissent then, was justified on the view that this was made on a case-to-
case basis.
Decisions of the Supreme Court, as the Civil Code provides, form part
of the law of the land. When the Court states that the determination of the
existence of an employment relationship should be on a case-to-case basis,
this does not mean that there will be as many laws on the issue as there are
cases. In the context of this case, the four-fold test is the established
standard for determining employer-employee relationship and the existence
of these elements, most notably control, is the basis upon which a
conclusion on the absence of employment relationship was anchored. This
simply means that a conclusion on whether employment relationship exists
in a particular case largely depends on the facts and, in no small measure,
on the parties evidence vis--vis the clearly defined jurisprudential
standards. Given that the parties control what and how the facts will be
established in a particular case and/or how a particular suit is to be litigated,
deciding the issues on a case-to-case basis becomes an imperative.
Another legal reality, a more important one, is that the duty of a court
is to say what the law is.[17] This is the same duty of the Supreme Court that
underlies the stare decisis principle. This is how the public, in general and
the insurance industry in particular, views the role of this Court and courts in
general in deciding cases. The lower courts and the bar, most specially, look
up to the rulings of this Court for guidance. Unless extremely unavoidable,
the Court must, as a matter of sound judicial policy, resist the temptation of
branding its ruling pro hac vice.
The compromise solution of declaring Tongko both an employee and

an agent is legally unrealistic, unwieldy and is, in fact, legally infirm, as it
goes against the above basic principles of judicial operation. Likewise, it
does not and cannot realistically solve the problem/issue in this case; it
actually leaves more questions than answers.

Page 17 of 260
As already pointed out, there is no legal basis (be it statutory or

jurisprudential) for the part-employee/part-insurance agent status under an
essentially principal-agent contractual relation which the Dissent proposes to
accord to Tongko. If the Dissent intends to establish one, this is highly
objectionable for this would amount to judicial legislation. A legal
relationship, be it one of employment or one based on a contract other than
employment, exists as a matter of law pursuant to the facts, incidents and
legal consequences of the relationship; it cannot exist devoid of these legally
defined underlying facts and legal consequences unless the law itself creates
the relationship an act that is beyond the authority of this Court to do.
Additionally, the Dissents conclusion completely ignores an

unavoidable legal reality that the parties are bound by a contract of agency
that clearly subsists notwithstanding the successive designation of Tongko as
a unit manager, a branch manager and a regional sales manager. (As
already explained in our Resolution granting Manulifes motion for
reconsideration, no evidence on record exists to provide the Court with clues
as to the precise impact of all these designations on the contractual agency
relationship.) The Dissent, it must be pointed out, concludes that Tongkos
employment as manager was illegally terminated; thus, he should be
accordingly afforded relief therefor. But, can Tongko be given the remedies
incidental to his dismissal as manager separately from his status as an
insurance agent? In other words, since the respondents terminated all
relationships with Tongko through the termination letter, can we simply rule
that his role as a manager was illegally terminated without touching on the
consequences of this ruling on his status as an insurance agent? Expressed
in these terms, the inseparability of his contract as agent with any other
relationship that springs therefrom can thus be seen as an insurmountable
legal obstacle.
The Dissents compromise approach would also sanction split

jurisdiction. The labor tribunals shall have jurisdiction over Tongkos

Page 18 of 260
employment as manager while another entity shall decide the issues/cases

arising from the agency relationship. If the managerial employment is
anchored on the agency, how will the labor tribunals decide an issue that is
inextricably linked with a relationship that is outside the loop of their
jurisdiction? As already mentioned in the Resolution granting Manulifes
reconsideration, the DOMINANT relationship in this case is agency and no
other.
E. The Dissents Cited Cases
The Dissent cites the cases of Great Pacific Life Assurance Corporation
v. National Labor Relations Commission [18] and Insular Life Assurance Co.,
Ltd. v. National Labor Relations Commission [19] to support the allegation that
Manulife exercised control over the petitioner as an employer.
In considering these rulings, a reality that cannot but be recognized is

that cases turn and are decided on the basis of their own unique facts; the
ruling in one case cannot simply be bodily lifted and applied to another,
particularly when notable differences exist between the cited cases and the
case under consideration; their respective facts must be strictly examined to
ensure that the ruling in one applies to another. This is particularly true in a
comparison of the cited cases with the present case. Specifically, care should
be taken in reading the cited cases and applying their rulings to the present
case as the cited cases all dealt with the proper legal characterization
of subsequent management contracts that superseded the original agency
contract between the insurance company and the agent.
In Great Pacific Life, the Ruiz brothers were appointed to positions

different from their original positions as insurance agents, whose duties were
clearly defined in a subsequent contract. Similarly, in Insular, de los Reyes,
a former insurance agent, was appointed as acting unit manager based on a

Page 19 of 260
subsequent contract. In both cases, the Court anchored its findings of labor
control on the stipulations of these subsequent contracts.
In contrast, the present case is remarkable for the absence of

evidence of any change in the nature of the petitioners employment with
Manulife. As previously stated above and in our assailed Resolution, the
petitioner had always been governed by the Agreement from the start until
the end of his relationship with Manulife. His agency status never changed
except to the extent of being a lead agent. Thus, the cited cases where
changes in company-agent relationship expressly changed and where the
subsequent contracts were the ones passed upon by the Court cannot be
totally relied upon as authoritative.
We cannot give credit as well to the petitioners claim of employment

based on the affidavits executed by other Manulife agents describing their
duties, because these same affidavits only affirm their status as independent
agents, not as employees. To quote these various claims:[20]
1.a. I have no fixed wages or salary since my services are

compensated by way of commissions based on the computed
premiums paid in full on the policies obtained thereat;
1.b. I have no fixed working hours and employ my own method

in soliciting insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my

daily work load;
1.d. I use my own facilities, tools, materials and supplies in

carrying out my business of selling insurance;

Page 20 of 260
xxxx
6. I have my own staff that handles day to day operations of my

office;
7. My staff are my own employees and received salaries from

me;
xxxx
9. My commission and incentives are all reported to the Bureau

of Internal Revenue (BIR) as income by a self-employed
individual or professional with a ten (10) percent creditable
withholding tax. I also remit monthly for professionals.
The petitioner cannot also rely on the letter written by respondent

Renato Vergel de Dios to prove that Manulife exercised control over him. As
we already explained in the assailed Resolution:
Even de Dios letter is not determinative of control as it

indicates the least amount of intrusion into Tongkos exercise of
his role as manager in guiding the sales agents. Strictly viewed,
de Dios directives are merely operational guidelines on how
Tongko could align his operations with Manulifes re-directed goal
of being a big league player. The method is to expand coverage
through the use of more agents. This requirement for the
recruitment of more agents is not a means-and-method control
as it relates, more than anything else, and is directly relevant, to
Manulifes objective of expanded business operations through the

Page 21 of 260
use of a bigger sales force whose members are all on a principal-

agent relationship. An important point to note here is that
Tongko was not supervising regular full-time employees of
Manulife engaged in the running of the insurance business;
Tongko was effectively guiding his corps of sales agents, who are
bound to Manulife through the same agreement that he had with
manulife, all the while sharing in these agents commissions
through his overrides.[21]
Lastly, in assailing the Agreement between him and Manulife, the

petitioner cites Paguio v. National Labor Relations Commission [22] on the
claim that the agreement that the parties signed did not conclusively
indicate the legal relationship between them.
The evidentiary situation in the present case, however, shows that

despite the petitioners insistence that the Agreement was no longer binding
between him and Manulife, no evidence was ever adduced to show that their
relationship changed so that Manulife at some point controlled the means
and method of the petitioners work. In fact, his evidence only further
supports the conclusion that he remained an independent insurance agent a
status he admits, subject only to the qualification that he is at the same time
an employee. Thus, we can only conclude that the Agreement governed his
relations with Manulife.
Additionally, it is not lost on us that Paguio is a ruling based on a

different factual setting; it involves a publishing firm and an account
executive, whose repeated engagement was considered as an indication of
employment. Our ruling in the present case is specific to the insurance
industry, where the law permits an insurance company to exercise control
over its agents within the limits prescribed by law, and to engage
independent agents for several transactions and within an unlimited period
of time without the relationship amounting to employment. In light of these
realities, the petitioners arguments on his last argument must also fail.

Page 22 of 260
The dissent also erroneously cites eight other cases Social Security System
v. Court of Appeals,[23] Cosmopolitan Funeral Homes, Inc. v. Maalat,[24] Algon
Engineering Construction Corporation v. National Labor Relations
Commission,[25]Equitable Banking Corporation v. National Labor Relations
Commission,[26] Lazaro v. Social Security Commission,[27]Dealco Farms, Inc.
v. National Labor Relations Commission,[28] South Davao Development
Company, Inc. v. Gamo,[29]and Abante, Jr. v. Lamadrid Bearing & Parts
Corporation.[30] The dissent cited these cases to support its allegation that
labor laws and jurisprudence should be applied in cases, to the exclusion of
other laws such as the Civil Code or the Insurance Code, even when the
latter are also applicable.
In Social Security System, Cosmopolitan Funeral Homes, Dealco

Farms, and South Davao Development, the issue that repeats itself is
whether complainants were employees or independent contractors; the legal
relationships involved are both labor law concepts and make no reference to
the Civil Code (or even the Insurance Code). The provisions cited in the
Dissent Articles 1458-1637 of the Civil Code [31] and Articles 1713-1720 of the
Civil Code [32] do not even appear in the decisions cited.
In Algon, the issue was whether the lease contract should dictate the
legal relationship between the parties, when there was proof of an employer-
employee relationship. In the cited case, the lease provisions on termination
were thus considered irrelevant because of a substantial evidence of an
employment relationship. The cited case lacks the complexity of the present
case; Civil Code provisions on lease do not prescribe that lessees exercise
control over their lessors in the way that the Insurance Code and the Civil
provide that insurance companies and principals exercised control over their
agents.

Page 23 of 260
The issue in Equitable, on the other hand, is whether a lawyer-client

relationship or an employment relationship governs the legal relation
between parties. Again, this case is inapplicable as it does not illustrate the
predominance of labor laws and jurisprudence over other laws, in general,
and the Insurance Code and Civil Code, in particular. It merely weighed the
evidence in favor of an employment relationship over that of a lawyer-client
relationship. Similarly in Lazaro, the Court found ample proof of control
determinative of an employer-employee relationship. Both cases are not
applicable to the present case, which is attended by totally different factual
considerations as the petitioner had not offered any evidence of the
companys control in the means and manner of the performance of his work.
On the other hand, we find it strange that the dissent cites Abante as a
precedent, since the Court, in this case, held that an employee-employer
relationship is notably absent in this case as the complainant was a sales
agent. This case better supports the majoritys position that a sales agent,
who fails to show control in the concept of labor law, cannot be considered
an employee, even if the company exercised control in the concept of a sales
agent.[33]
It bears stressing that our ruling in this case is not about which law
has primacy over the other, but that we should be able to reconcile these
laws. We are merely saying that where the law makes it mandatory for a
company to exercise control over its agents, the complainant in an illegal
dismissal case cannot rely on these legally prescribed control devices as
indicators of an employer-employee relationship. As shown in our discussion,
our consideration of the Insurance Code and Civil Code provisions does not
negate the application of labor laws and jurisprudence; ultimately, we
dismissed the petition because of its failure to comply with the control test.

Page 24 of 260
WHEREFORE, premises considered, we hereby DENY the Motion for

Reconsideration WITH FINALITY for lack of merit. No further pleadings
shall be entertained. Let entry of judgment proceed in due course.
SO ORDERED.
3 Indophil vs adviento
G.R. No. 171212 August 4, 2014
INDOPHIL TEXTILE MILLS, INC., Petitioner,

vs.
ENGR. SALVADOR ADVIENTO, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the
Revised Rules of Court which seeks to review, reverse and set-aside the
Decision1 of the Court of Appeals (CA), dated May 30, 2005, and its
Resolution2dated January 10, 2006 in the case entitled Jndophil Textile Mills,
Inc. v. Hon. Rolando R. Velasco and Engr. Salvador Adviento, docketed as
CA-G.R. SP No. 83099.
The facts are not disputed.
Petitioner Indophil Textile Mills, Inc. is a domestic corporation engaged in

the business of manufacturing thread for weaving. 3 On August 21, 1990,
petitioner hired respondent Engr. Salvador Adviento as Civil Engineer to
maintain its facilities in Lambakin, Marilao, Bulacan. 4 On August 7, 2002,
respondent consulted a physician due to recurring weakness and
dizziness.5 Few days later, he was diagnosed with Chronic Poly Sinusitis, and
thereafter, with moderate, severe and persistent Allergic
6
Rhinitis. Accordingly, respondent was advised by his doctor to totally avoid
house dust mite and textile dust as it will transmute into health problems. 7
Distressed, respondent filed a complaint against petitioner with the National

Labor Relations Commission (NLRC), San Fernando, Pampanga, for alleged

Page 25 of 260
illegal dismissal and for the payment of backwages, separation pay, actual
damages and attorneys fees. The said case, docketed as NLRC Case No.
RAB-III-05-5834-03, is still pending resolution with the NLRC at the time the
instant petition was filed.8
Subsequently, respondent filed another Complaint9 with the Regional Trial

Court (RTC) of Aparri, Cagayan, alleging that he contracted such
occupational disease by reason of the gross negligence of petitioner to
provide him with a safe, healthy and workable environment.
In his Complaint, respondent alleged that as part of his job description, he

conductsregular maintenance check on petitioners facilities including its dye
house area, which is very hot and emits foul chemical odor with no adequate
safety measures introduced by petitioner. 10 According to respondent, the air
washer dampers and all roof exhaust vests are blown into open air, carrying
dust thereto.11 Concerned, respondent recommended to management to
place roof insulation to minimize, if not, eradicate the health hazards
attendant in the work place.12 However, said recommendation was turned
down by management due to high cost. 13 Respondent further suggested to
petitioners management that the engineering office be relocated because
ofits dent prone location, such that even if the door of the office is sealed,
accumulated dust creeps in outside the office. 14 This was further aggravated
by the installation of new filters fronting the office. 15 However, no action was
taken by management.16According to respondent, these healthhazards have
been the persistent complaints of most, if not all, workers of
petitioner.17 Nevertheless, said complaints fell on deaf ears as petitioner
callously ignored the health problems of its workers and even tended to be
apathetic to their plight, including respondent.18
Respondent averred that, being the only breadwinner in the family, he made
several attempts to apply for a new job, but to his dismay and frustration,
employers who knew ofhis present health condition discriminated against
him and turned down his application. 19 By reason thereof, respondent
suffered intense moral suffering, mental anguish, serious anxiety and
wounded feelings, praying for the recovery of the following: (1) Five Million
Pesos (P5,000,000.00) asmoral damages; (2) Two Million Pesos
(P2,000,000.00) as exemplary damages; and (3) Seven Million Three
Thousand and Eight Pesos (P7,003,008.00) as compensatory
20
damages. Claiming to be a pauper litigant, respondent was not required to
pay any filing fee.21
In reply, petitioner filed a Motion to Dismiss 22 on the ground that: (1) the
RTC has no jurisdiction over the subject matter of the complaint because the
same falls under the original and exclusive jurisdiction of the Labor Arbiter

Page 26 of 260
(LA) under Article 217(a)(4) of the Labor Code; and (2) there is another
action pending with the Regional Arbitration Branch III of the NLRC in San
Fernando City, Pampanga, involving the same parties for the same cause.
On December 29, 2003, the RTC issued a Resolution 23 denying the aforesaid
Motion and sustaining its jurisdiction over the instant case. It held that
petitioners alleged failure to provide its employees with a safe, healthy and
workable environment is an act of negligence, a case of quasi-delict. As
such, it is not within the jurisdiction of the LA under Article 217 of the Labor
Code. On the matter of dismissal based on lis pendencia, the RTC ruled that
the complaint before the NLRC has a different cause of action which is for
illegal dismissal and prayer for backwages, actual damages, attorneys fees
and separation pay due to illegal dismissal while in the present case, the
cause of action is for quasi-delict.24 The falloof the Resolution is quoted
below:
WHEREFORE, finding the motion to dismiss to be without merit, the Court

deniesthe motion to dismiss.
SO ORDERED.25
On February 9, 2004, petitioner filed a motion for reconsideration thereto,

which was likewise denied in an Order issued on even date.
Expectedly, petitioner then filed a Petition for Certiorariwith the CA on the

ground that the RTC committed grave abuse of discretion amounting to lack
or excess of jurisdiction in upholding that it has jurisdiction over the subject
matter of the complaint despite the broad and clear terms of Article 217 of
the Labor Code, as amended.26
After the submission by the parties of their respective Memoranda, the CA

rendered a Decision27 dated May 30, 2005 dismissing petitioners Petition for
lack of merit, the dispositive portion of which states:
WHEREFORE, premises considered, petition for certiorari is hereby

DISMISSEDfor lack of merit. SO ORDERED.28
From the aforesaid Decision, petitioner filed a Motion for Reconsideration

which was nevertheless denied for lack of merit in the CAs
Resolution29 dated January 10, 2006. Hence, petitioner interposed the
instant petition upon the solitary ground that "THE HONORABLE COURT OF
APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF THE
HONORABLE SUPREME COURT."30 Simply, the issue presented before us is

Page 27 of 260
whether or not the RTC has jurisdiction over the subject matter of
respondents complaint praying for moral damages,exemplary damages,
compensatory damages, anchored on petitioners alleged gross negligence in
failing to provide a safe and healthy working environment for respondent.
The delineation between the jurisdiction of regular courts and labor courts
over cases involving workers and their employers has always been a matter
of dispute.31 It is up to the Courts to lay the line after careful scrutiny of the
factual milieu of each case. Here, we find that jurisdiction rests on the
regular courts.
In its attempt to overturn the assailed Decision and Resolution of the CA,
petitioner argues that respondentsclaim for damages is anchored on the
alleged gross negligence of petitioner as an employer to provide its
employees, including herein respondent, with a safe, healthy and workable
environment; hence, it arose from an employer-employee relationship. 32 The
fact of respondents employment withpetitioner as a civil engineer is a
necessary element of his cause ofaction because without the same,
respondent cannot claim to have a rightto a safe, healthy and workable
environment.33 Thus, exclusive jurisdiction over the same should be vested
in the Labor Arbiter and the NLRC pursuant to Article 217(a)(4) of the Labor
Code of the Philippines (Labor Code), as amended.34
We are not convinced.
The jurisdiction of the LA and the NLRC is outlined in Article 217 of the Labor
Code, as amended by Section 9 of Republic Act (R.A.) No. 6715, to wit:
ART. 217. Jurisdiction of Labor Arbiters and the Commission-- (a) Except as
otherwise provided under this Code the Labor Arbiter shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days
after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or nonagricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that

workers may file involvingwages, rates of pay, hours of work and other
terms and conditions of employment;

Page 28 of 260
4. Claims for actual, moral, exemplary and other forms of damages

arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code including
questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security,

Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in domestic
or household service,involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied with a claim for
reinstatement.
x x x.35
While we have upheld the present trend to refer worker-employer

controversies to labor courts in light of the aforequoted provision, we have
also recognized that not all claims involving employees can be resolved
solely by our labor courts, specifically when the law provides otherwise. 36 For
this reason, we have formulated the "reasonable causal connection rule,"
wherein if there is a reasonable causal connection between the claim
asserted and the employer-employee relations, then the case is within the
jurisdiction of the labor courts; and in the absence thereof, it is the regular
courts that have jurisdiction. 37 Such distinction is apt since it cannot be
presumed that money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and which would
therefore fall within the general jurisdiction of the regular courts of justice,
were intended by the legislative authority to be taken away from the
jurisdiction of the courts and lodged with Labor Arbiters on an exclusive
basis.38
In fact, as early as Medina vs. Hon. Castro-Bartolome, 39 in negating the

jurisdiction of the LA, although the parties involved were an employer and
two employees, the Court succinctly held that:
The pivotal question to Our mind iswhether or not the Labor Code has any
relevance to the reliefs sought by the plaintiffs. For if the Labor Code has no
relevance, any discussion concerning the statutes amending it and whether
or not they have retroactive effect is unnecessary.
It is obvious from the complaint that the plaintiffs have not alleged any
unfair labor practice. Theirs is a simple action for damages for tortious acts
allegedly committed by the defendants. Such being the case, the governing

Page 29 of 260
statute is the Civil Code and not the Labor Code. It results that the orders
under revieware based on a wrong premise.40
Similarly, we ruled in the recent case of Portillo v. Rudolf Lietz, Inc. 41 that
not all disputes between an employer and his employees fall within the
jurisdiction of the labor tribunals suchthat when the claim for damages is
grounded on the "wanton failure and refusal" without just cause of an
employee to report for duty despite repeated notices served upon him of the
disapproval of his application for leave ofabsence, the same falls within the
purview of Civil Law, to wit:
As early as Singapore Airlines Limited v. Pao, we established that not all

disputes between an employer and his employee(s) fall within the
jurisdiction of the labor tribunals. We differentiated between abandonment
per seand the manner and consequent effects of such abandonment and
ruled that the first, is a labor case, while the second, is a civil law case.
Upon the facts and issues involved, jurisdiction over the present controversy
must be held to belong to the civil Courts. While seemingly petitioner's claim
for damages arises from employer-employee relations, and the latest
amendment to Article 217 of the Labor Code under PD No. 1691 and BP Blg.
130 provides that all other claimsarising from employer-employee
relationship are cognizable by Labor Arbiters [citation omitted], in essence,
petitioner's claim for damages is grounded on the "wanton failure and
refusal"without just cause of private respondent Cruz to report for duty
despite repeated notices served upon him of the disapproval of his
application for leave of absence without pay. This, coupled with the further
averment that Cruz "maliciously and with bad faith" violated the terms and
conditions of the conversion training course agreement to the damage of
petitioner removes the present controversy from the coverage of the Labor
Code and brings it within the purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment per seby
private respondent Cruz of his jobas the latter was not required in the
Complaint to report back to workbut on the manner and consequent
effects of such abandonmentof work translated in terms of the damages
which petitioner had to suffer. x x x.42
Indeed, jurisprudence has evolved the rule that claims for damages under
Article 217(a)(4) of the Labor Code, to be cognizable by the LA, must have a
reasonable causal connection withany of the claims provided for in that
article.43 Only if there is such a connection with the other claims can a claim
for damages be considered as arising from employer-employee relations. 44

Page 30 of 260
In the case at bench, we find that such connection is nil.
True, the maintenance of a safe and healthy workplace is ordinarily a subject

of labor cases. More, the acts complained of appear to constitute matters
involving employee-employer relations since respondent used to be the Civil
Engineer of petitioner. However, it should be stressed that respondents
claim for damages is specifically grounded on petitioners gross negligenceto
provide a safe, healthy and workable environment for its employees a case
of quasi-delict. This is easily ascertained from a plain and cursory reading of
the Complaint,45 which enumerates the acts and/or omissions of petitioner
relative to the conditions in the workplace, to wit:
1. Petitioners textile mills have excessive flying textile dust and waste
in its operations and no effort was exerted by petitioner to minimize or
totally eradicate it;
2. Petitioner failed to provide adequate and sufficient dust suction

facilities;
3. Textile machines are cleaned with air compressors aggravating the

dusty work place;
4. Petitioner has no physician specializing in respiratoryrelated illness

considering it is a textile company;
5. Petitioner has no device to detectthe presence or density of dust

which is airborne;
6. The chemical and color room are not equipped with proper safety
chemical nose mask; and
7. The power and boiler plant emit too much smoke with solid particles
blown to the air from the smoke stack of the power plant emitting a
brown rust color which engulfs the entire compound. 46
In addition, respondent alleged that despite his earnest efforts to suggest to

management to place roof insulation to minimize, if not, eradicate the health
hazards attendant in the workplace, the same was not heeded.47
It is a basic tenet that jurisdiction over the subject matter is determined

upon the allegations made in the complaint, irrespective of whether or not
the plaintiff is entitled to recover upon the claim asserted therein, which is a
matter resolved only after and as a result of a trial. 48 Neither can jurisdiction
of a court bemade to depend upon the defenses made by a defendant in his

Page 31 of 260
answer or motion to dismiss.49 In this case, a perusal of the complaint would

reveal that the subject matter is one of claim for damages arising from
quasi-delict, which is within the ambit of the regular court's jurisdiction.
The pertinent provision of Article 2176 of the Civil Code which governs
quasi-delictprovides that: Whoever by act or omissioncauses damageto
another, there being fault or negligence, is obliged to pay for the
damagedone. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called quasi-delict.50
Thus, to sustain a claim liability under quasi-delict, the following requisites

must concur: (a) damages suffered by the plaintiff; (b) fault or negligence of
the defendant, or someother person for whose acts he must respond; and
(c) the connection of causeand effect between the fault or negligence of the
defendant and the damages incurred by the plaintiff.51
In the case at bar, respondent alleges that due to the continued and
prolonged exposure to textile dust seriously inimical to his health, he
suffered work-contracted disease which is now irreversible and incurable,
and deprived him of job opportunities. 52 Clearly, injury and damages were
allegedly suffered by respondent, an element of quasi-delict. Secondly, the
previous contract of employment between petitioner and respondent cannot
be used to counter the element of "no pre-existing contractual relation"
since petitioners alleged gross negligence in maintaining a hazardous work
environment cannot be considered a mere breach of such contract of
employment, but falls squarely within the elements of quasi-delictunder
Article 2176 of the Civil Code since the negligence is direct, substantive and
independent.53 Hence, we ruled in Yusen Air and Sea Services Phils., Inc. v.
Villamor54that:
When, as here, the cause of action is based on a quasi-delictor tort, which

has no reasonable causal connection with any of the claims provided for in
Article 217, jurisdiction over the action is with the regular courts. 55
It also bears stressing that respondent is not praying for any relief under the
Labor Code of the Philippines. He neither claims for reinstatement nor
backwages or separation pay resulting from an illegal termination. The cause
of action herein pertains to the consequence of petitioners omission which
led to a work-related disease suffered by respondent, causing harm or
damage to his person. Such cause of action is within the realm of Civil Law,
and jurisdiction over the controversy belongs to the regular courts. 56
Our ruling in Portillo, is instructive, thus:

Page 32 of 260
There is no causal connection between private respondents claim for

damages and the respondent employers claim for damages for the alleged
"Goodwill Clause" violation. Portillos claim for unpaid salaries did not have
anything to do with her alleged violation of the employment contract as, in
fact, her separation from employmentis not "rooted" in the alleged
contractual violation. She resigned from her employment. She was not
dismissed. Portillos entitlementto the unpaid salaries is not even contested.
Indeed, Lietz Inc.s argument about legal compensation necessarily admits
that it owesthe money claimed by Portillo.57
Further, it cannot be gainsaid that the claim for damages occurred afterthe
employer-employee relationship of petitioner and respondent has ceased.
Given that respondent no longer demands for any relief under the Labor
Code as well as the rules and regulations pertinent thereto, Article 217(a)(4)
of the Labor Code is inapplicable to the instant case, as emphatically held in
Portillo, to wit:
It is clear, therefore, that while Portillos claim for unpaid salaries is a money
claim that arises out ofor in connection with an employeremployee
relationship, Lietz Inc.s claim against Portillo for violation of the goodwill
clause is a money claim based on an act done after the cessation of the
employment relationship. And, while the jurisdiction over Portillos claim is
vested in the labor arbiter, the jurisdiction over Lietz Inc.s claim rests on
the regular courts. Thus:
As it is, petitioner does not ask for any relief under the Labor Code. It
merely seeks to recover damages based on the parties' contract of
employment as redress for respondent's breach thereof. Such cause of
action is within the realm of Civil Law, and jurisdiction over the controversy
belongs to the regular courts. More so must this be in the present case, what
with the reality that the stipulation refers to the post-employment relations
of the parties.58
Where the resolution of the dispute requires expertise, not in labor

management relations nor in wage structures and other terms and
conditions of employment, but rather in the application of the general civil
law, such claim falls outside the area of competence of expertise ordinarily
ascribed to the LA and the NLRC.59
Guided by the aforequoted doctrines, we find no reason to reverse the

findings of the CA.1wphi1 The RTC has jurisdiction over the subject matter
of respondent's complaint praying for moral damages, exemplary damages,
compensatory damages, anchored on petitioner's alleged gross negligence in
failing to provide a safe and healthy working environment for respondent.

Page 33 of 260
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals,

dated May 30, 2005, and its Resolution dated January 10, 2006 in CA-G.R.
SP No. 83099 are hereby AFFIRMED.
SO ORDERED.
4 Phil journalist vs journal employees
G.R. No. 192601 June 3, 2013
PHILIPPINE JOURNALISTS, INC., Petitioner,

vs.
JOURNAL EMPLOYEES UNION (JEU), FOR ITS UNION MEMBER,
MICHAEL ALFANTE, Respondents.
DECISION
BERSAMIN, J.:
The coverage of the term legal dependent as used in a stipulation in a

collective bargaining agreement (CBA) granting funeral or bereavement
benefit to a regular employee for the death of a legal dependent, if the CBA
is silent about it, is to be construed as similar to the meaning that
contemporaneous social legislations have set. This is because the terms of
such social legislations are deemed incorporated in or adopted by the CBA.
The decision of the Court of Appeals (CA) under review summarizes the
factual and procedural antecedents, as follows:
Complainant Judith Pulido alleged that she was hired by respondent as

proofreader on 10 January 1991; that she was receiving a monthly basic
salary of P-15,493.66 plus P-155.00 longevity pay plus other benefits
provided by law and their Collective Bargaining Agreement; that on 21
February 2003, as union president, she sent two letters to President Gloria
Arroyo, regarding their complaint of mismanagement being committed by
PIJ executive; that sometime in May 2003, the union was furnished with a
letter by Secretary Silvestre Afable, Jr. head of Presidential Management
Staff (PMS), endorsing their letter-complaint to Ombudsman Simeon V.
Marcelo; that respondents took offense and started harassments to
complainant union president; that on 30 May 2003, complainant received a
letter from respondent Fundador Soriano, International Edition managing

Page 34 of 260
editor, regarding complainants attendance record; that complainant

submitted her reply to said memo on 02 June 2003; that on 06 June 2003,
complainant received a memorandum of reprimand; that on 04 July 2003,
complainant received another memo from Mr. Soriano, for not wearing her
company ID, which she replied the next day 05 July 2003; that on 04 August
2003, complainant again received a memo regarding complainants
tardiness; that on 05 August 2003, complainant received another
memorandum asking her to explain why she should not be accused of fraud,
which she replied to on 07 August 2003; and that on the same day between
3:00 to 4:00 P.M., Mr. Ernesto "Estong" San Agustin, a staff of HRD handed
her termination paper.
Complainant added that in her thirteen (13) years with the company and
after so many changes in its management and executives, she had never
done anything that will cause them to issue a memorandum against her or
her work attitude, more so, reasons to terminate her services; that she got
dismissed because she was the Union President who was very active in
defending and pursuing the rights of her union members, and in fighting
against the abuses of respondent Corporate Officers; and that she got the
ire of respondents when the employees filed a complaint against the
Corporate Officers before Malacaang and which was later indorsed to the
Office of the Ombudsman.
The second complainant Michael L. Alfante alleged that he started to work

with respondents as computer technician at Management Information
System under manager Neri Torrecampo on 16 May 2000; that on 15 July
2001, he was regularized receiving a monthly salary of P9,070.00 plus other
monetary benefits; that sometime in 2001, Rico Pagkalinawan replaced
Torrecampo, which was opposed by complainant and three other co-
employees; that Pagkalinawan took offense of their objection; that on 22
October 2002, complainant Alfante received a memorandum from
Pagkalinawan regarding his excessive tardiness; that on 10 June 2003,
complainant Alfante received a memorandum from Executive Vice-President
Arnold Banares, requiring him to explain his side on the evaluation of his
performance submitted by manager Pagkalinawan; that one week after
complainant submitted his explanation, he was handed his notice of
dismissal on the ground of "poor performance"; and that complainant was
dismissed effective 28 July 2003.
Complainant Alfante submitted that he was dismissed without just cause.
Respondents, in their position paper, averred that complainants Pulido and

Alfante were dismissed for cause and with due process.

Page 35 of 260
With regard to complainant Pulido, respondents averred that in a

memorandum dated 30 May 2003, directed complainant to explain her
habitual tardiness, at least 75 times from January to May of 2003. In a
memorandum, dated 06 June 2003, directed complainant to observe the 3
p.m. rule to avoid grammatical lapses, use of stale stories just to beat the
10:00 p.m. deadline. In the same memorandum complainant was given the
warning that any repeated violation of the rules shall be dealt with more
severely. Once again, in a memorandum, dated 04 August 2003,
complainant Pulido was required to explain why no disciplinary action should
be taken against her for habitual tardiness 18 times out of the 23
reporting days during the period from 27 June 27 July 2003 and on 05
August 2003, complainant was directed to explain in writing why
complainant should not be administratively sanctioned for committing fraud
or attempting to commit fraud against respondents. Respondents found
complainants explanations unsatisfactory. On 07 August 2003, respondents
dismissed complainant Pulido for habitual tardiness, gross insubordination,
utter disrespect for superiors, and committing fraud or attempting to commit
fraud which led to the respondents loss of confidence upon complainant
Pulido.
In case of complainant Alfante, respondents averred in defense that

complainant was dismissed for "poor performance" after an evaluation by his
superior, and after being forewarned that complainant may be removed if
there was no showing of improvement in his skills and knowledge on current
technology.
In both instances, respondents maintained that they did not commit any act
of unfair labor practices; that they did not commit acts tantamount to
interfering, restraining, or coercing employees in the exercise of their right
to self-organization.
Respondents deny liabilities as far as complainants monetary claims are

concerned. Concerning violations of the provision on wage distortion under
Wage Order No. 9, respondents stressed that complainants were not
affected since their salary is way over the minimum wage.
With respect to the alleged non-adjustment of longevity pay and burial aid,
respondent PJI pointed out that it complies with the provisions of the CBA
and that both complainants have not claimed for the burial aid.
Respondents put forward the information that the alleged nonpayment of

rest days every Monday for the past three (3) years is a matter that is still
at issue in NLRC Case No. 02-0402973-93, which case is still pending before
this Commission.

Page 36 of 260
Respondents asserted that the respondents Arturo Dela Cruz, Bobby Capco,
Arnold Banares, Ruby Ruiz-Bruno and Fundador Soriano should not be held
liable on account of complainants dismissal as they merely acted as agents
of respondent PJI.1
Upon the foregoing backdrop, Labor Arbiter Corazon C. Borbolla rendered

her decision on March 29, 2006, disposing thusly:
WHEREFORE, foregoing premises considered, judgment is hereby rendered,

finding complainant Judith Pulido to have been illegally dismissed. As such,
she is entitled to reinstatement and backwages from 07 August 2003 up to
her actual or payroll reinstatement. To date, complainants backwages
is P294,379.54.
Respondent Philippine Journalist, Inc. is hereby ordered to pay complainant

Judith Pulido her backwages from 07 August 2003 up to her actual or payroll
reinstatement and to reinstate her to her former position without loss of
seniority right.
Respondent is further ordered to submit a report to this Office on

complainants reinstatement ten (10) days from receipt of this decision.
The charge of illegal dismissal by Michael Alfante is hereby dismissed for lack
of merit.
The charge of unfair labor practice is dismissed for lack of basis.
SO ORDERED.2
Complainant Michael Alfante (Alfante), joined by his labor organization,

Journal Employees Union (JEU), filed a partial appeal in the National Labor
Relations Commission (NLRC).3
In the meantime, on May 10, 2006, petitioner and Judith Pulido (Pulido), the
other complainant, jointly manifested to the NLRC that the decision of March
29, 2006 had been fully satisfied as to Pulido under the following terms,
namely: (a) she would be reinstated to her former position as editorial
staffmember, or an equivalent position, without loss of seniority rights,
effective May 15, 2006; (b) she would go on maternity leave, and report to
work after giving birth; (c) she would be entitled to backwages
of P130,000.00; and (d) she would execute the quitclaim and release on May
11, 2006 in favor of petitioner.4 This left Alfante as the remaining
complainant.

Page 37 of 260
On January 31, 2007, the NLRC rendered its decision dismissing the partial
appeal for lack of merit.
JEU and Alfante moved for the reconsideration of the decision, but the NLRC
denied their motion on April 24, 2007.
Thereafter, JEU and Alfante assailed the decision of the NLRC before the CA
on certiorari (C.A.-G.R. SP No. 99407).
On February 5, 2010, the CA promulgated its decision in C.A.-G.R. SP No.

99407,7 decreeing:
WHEREFORE, premises considered, the instant petition is PARTLY GRANTED.
The twin Resolutions dated January 31, 2007 and April 24, 2007,
respectively, of the Third Division of the National Labor Relations
Commission (NLRC), in NLRC NCR CA No. 048785-06 (NLRC NCR Case No.
00-10-11413-04), are MODIFIED insofar as the funeral or bereavement aid
is concerned, which is hereby GRANTED, but only after submission of
conclusive proofs that the deceased is a parent, either father or mother, of
the employees concerned, as well as the death certificate to establish the
fact of death of the deceased legal dependent.
The rest of the findings of fact and law in the assailed Resolutions are hereby
AFFIRMED.
SO ORDERED.
Both parties moved for reconsideration, but the CA denied their respective
motions for reconsideration on June 2, 2010. 8
JEU and Alfante appealed to the Court (G.R. No. 192478) to challenge the
CAs dispositions regarding the legality of: (a) Alfantes dismissal; (b) the
non-compliance with Minimum Wage Order No. 9; and (c) the non-payment
of the rest day.9
On August 18, 2010, the Court denied due course to the petition in G.R. No.
192478 for failure of petitioners to sufficiently show that the CA had
committed any reversible error to warrant the Courts exercise of its
discretionary appellate jurisdiction.10
The Court denied with finality JEU and Alfantes ensuing motion for
reconsideration through the resolution of December 8, 2010. 11 The entry of
judgment in G.R. No. 192478 issued in due course on February 1, 2011. 12

Page 38 of 260
On its part, petitioner likewise appealed (G.R. No. 192601), seeking the
review of the CAs disposition in the decision of February 5, 2010 on the
granting of the funeral and bereavement aid stipulated in the CBA.
In its petition for review, petitioner maintained that under Section 4, Article
XIII of the CBA, funeral and bereavement aid should be granted upon the
death of a legal dependent of a regular employee; that consistent with the
definition provided by the Social Security System (SSS), the term legal
dependent referred to the spouse and children of a married regular
employee, and to the parents and siblings, 18 years old and below, of a
single regular employee;13 that the CBA considered the term dependents to
have the same meaning as beneficiaries, as provided in Section 5, Article
XIII of the CBA on the payment of death benefits; 14 that its earlier granting
of claims for funeral and bereavement aid without regard to the foregoing
definition of the legal dependents of married or single regular employees did
not ripen into a company policy whose unilateral withdrawal would constitute
a violation of Article 100 of the Labor Code, 15 the law disallowing the non-
diminution of benefits;16 that it had approved only four claims from 1999 to
2003 based on its mistaken interpretation of the term legal dependents, but
later corrected the same in 2000; 17 that the grant of funeral and
bereavement aid for the death of an employees legal dependent, regardless
of the employees civil status, did not occur over a long period of time, was
not consistent and deliberate, and was partly due to its mistake in
appreciating a doubtful question of law; and that its denial of subsequent
claims did not amount to a violation of the law against the non-diminution of
benefits.18
In their comment,19 JEU and Alfante countered that the CBA was a bilateral
contractual agreement that could not be unilaterally changed by any party
during its lifetime; and that the grant of burial benefits had already become
a company practice favorable to the employees, and could not anymore be
reduced, diminished, discontinued or eliminated by petitioner.
Issue
In view of the entry of judgment issued in G.R. No. 192478, JEU and
Alfantes submissions on the illegality of his dismissal, the non-payment of
his rest days, and the violation of Minimum Wage Order No. 9 shall no
longer be considered and passed upon.
The sole remaining issue is whether or not petitioners denial of respondents

claims for funeral and bereavement aid granted under Section 4, Article XIII
of their CBA constituted a diminution of benefits in violation of Article 100 of
the Labor Code.

Page 39 of 260
Ruling
The petition for review lacks merit.
The nature and force of a CBA are delineated in Honda Phils., Inc. v.
Samahan ng Malayang Manggagawa sa Honda,20 thuswise:
A collective bargaining agreement (or CBA) refers to the negotiated contract

between a legitimate labor organization and the employer concerning wages,
hours of work and all other terms and conditions of employment in a
bargaining unit. As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient
provided these are not contrary to law, morals, good customs, public order
or public policy. Thus, where the CBA is clear and unambiguous, it becomes
the law between the parties and compliance therewith is mandated by the
express policy of the law.
Accordingly, the stipulations, clauses, terms and conditions of the CBA,

being the law between the parties, must be complied with by them. The
literal meaning of the stipulations of the CBA, as with every other contract,
control if they are clear and leave no doubt upon the intention of the
contracting parties.22
Here, a conflict has arisen regarding the interpretation of the term legal
dependent in connection with the grant of funeral and bereavement aid to a
regular employee under Section 4, Article XIII of the CBA, 23 which stipulates
as follows:
SECTION 4. Funeral/Bereavement Aid. The COMPANY agrees to grant a

funeral/bereavement aid in the following instances:
a. Death of a regular employee in line of duty P50,000
b. Death of a regular employee not in line of duty P40,000
c. Death of legal dependent of a regular employee P15,000.

(Emphasis supplied)
Petitioner insists that notwithstanding the silence of the CBA, the term legal
dependent should follow the definition of it under Republic Act (R.A.) No.
8282 (Social Security Law),24 so that in the case of a married regular
employee, his or her legal dependents include only his or her spouse and
children, and in the case of a single regular employee, his or her legal
dependents include only his or her parents and siblings, 18 years old and

Page 40 of 260
below; and that the term dependents has the same meaning as beneficiaries
as used in Section 5, Article XIII of the CBA.
We cannot agree with petitioners insistence.
Social legislations contemporaneous with the execution of the CBA have

given a meaning to the term legal dependent. First of all, Section 8(e) of the
Social Security Law provides that a dependent shall be the following,
namely: (a) the legal spouse entitled by law to receive support from the
member; (b) the legitimate, legitimated, or legally adopted, and illegitimate
child who is unmarried, not gainfully employed and has not reached 21 of
age, or, if over 21 years of age, is congenitally or while still a minor has
been permanently incapacitated and incapable of self-support, physically or
mentally; and (c) the parent who is receiving regular support from the
member. Secondly, Section 4(f) of R.A. No. 7875, as amended by R.A. No.
9241,25 enumerates who are the legal dependents, to wit: (a) the legitimate
spouse who is not a member; (b) the unmarried and unemployed legitimate,
legitimated, illegitimate, acknowledged children as appearing in the birth
certificate; legally adopted or step-children below 21 years of age; (c)
children who are 21 years old and order but suffering from congenital
disability, either physical or mental, or any disability acquired that renders
them totally dependent on the member of our support; and (d) the parents
who are 60 years old or older whose monthly income is below an amount to
be determined by the Philippine Health Insurance Corporation in accordance
with the guiding principles set forth in Article I of R.A. No. 7875. And,
thirdly, Section 2(f) of Presidential Decree No. 1146, as amended by R.A.
No. 8291,dependent for support upon the member or pensioner; (b) the
legitimate, legitimated, legally adopted child, including the illegitimate child,
who is unmarried, not gainfully employed, not over the age of majority, or is
over the age of majority but incapacitated and incapable of self-support due
to a mental or physical defect acquired prior to age of majority; and (c) the
parents dependent upon the member for support.1wphi1
It is clear from these statutory definitions of dependent that the civil status
of the employee as either married or single is not the controlling
consideration in order that a person may qualify as the employees legal
dependent. What is rather decidedly controlling is the fact that the spouse,
child, or parent is actually dependent for support upon the employee.
Indeed, the Court has adopted this understanding of the term dependent in
Social Security System v. De Los Santos,27 viz:
Social Security System v. Aguas is instructive in determining the extent of

the required "dependency" under the SS Law. In Aguas, the Court ruled that
although a husband and wife are obliged to support each other, whether one

Page 41 of 260
is actually dependent for support upon the other cannot be presumed from
the fact of marriage alone.
Further, Aguas pointed out that a wife who left her family until her husband
died and lived with other men, was not dependent upon her husband for
support, financial or otherwise, during the entire period.
Said the Court:
In a parallel case involving a claim for benefits under the GSIS law, the
Court defined a dependent as "one who derives his or her main support from
another. Meaning, relying on, or subject to, someone else for support; not
able to exist or sustain oneself, or to perform anything without the will,
power, or aid of someone else." It should be noted that the GSIS law
likewise defines a dependent spouse as "the legitimate spouse dependent for
support upon the member or pensioner." In that case, the Court found it
obvious that a wife who abandoned the family for more than 17 years until
her husband died, and lived with other men, was not dependent on her
husband for support, financial or otherwise, during that entire period. Hence,
the Court denied her claim for death benefits.
The obvious conclusion then is that a wife who is already separated de facto
from her husband cannot be said to be "dependent for support" upon the
husband, absent any showing to the contrary. Conversely, if it is proved that
the husband and wife were still living together at the time of his death, it
would be safe to presume that she was dependent on the husband for
support, unless it is shown that she is capable of providing for herself.
Considering that existing laws always form part of any contract, and are
deemed incorporated in each and every contract, 28 the definition of legal
dependents under the aforecited social legislations applies herein in the
absence of a contrary or different definition mutually intended and adopted
by the parties in the CBA. Accordingly, the concurrence of a legitimate
spouse does not disqualify a child or a parent of the employee from being a
legal dependent provided substantial evidence is adduced to prove the actual
dependency of the child or parent on the support of the employee.
In this regard, the differentiation among the legal dependents is significant

only in the event the CBA has prescribed a hierarchy among them for the
granting of a benefit; hence, the use of the terms primary beneficiaries and
secondary beneficiaries for that purpose. But considering that Section 4,
Article XIII of the CBA has not included that differentiation, petitioner had no
basis to deny the claim for funeral and bereavement aid of Alfante for the

Page 42 of 260
death of his parent whose death and fact of legal dependency on him could
be substantially proved.
Pursuant to Article 100 of the Labor Code, petitioner as the employer could
not reduce, diminish, discontinue or eliminate any benefit and supplement
being enjoyed by or granted to its employees. This prohibition against the
diminution of benefits is founded on the constitutional mandate to protect
the rights of workers and to promote their welfare and to afford labor full
protection.29 The application of the prohibition against the diminution of
benefits presupposes that a company practice, policy or tradition favorable
to the employees has been clearly established; and that the payments made
by the employer pursuant to the practice, policy, or tradition have ripened
into benefits enjoyed by them.30 To be considered as a practice, policy or
tradition, however, the giving of the benefits should have been done over a
long period of time, and must be shown to have been consistent and
deliberate.31 It is relevant to mention that we have not yet settled on the
specific minimum number of years as the length of time sufficient to ripen
the practice, policy or tradition into a benefit that the employer cannot
unilaterally withdraw.32
The argument of petitioner that the grant of the funeral and bereavement
benefit was not voluntary but resulted from its mistaken interpretation as to
who was considered a legal dependent of a regular employee deserves scant
consideration. To be sure, no doubtful or difficult question of law was
involved inasmuch as the several cogent statutes existing at the time the
CBA was entered into already defined who were qualified as the legal
dependents of another. Moreover, the voluntariness of the grant of the
benefit became even manifest from petitioners admission that, despite the
memorandum it issued in 200033 in order to "correct" the interpretation of
the term legal dependent, it still approved in 2003 the claims for funeral and
bereavement aid of two employees, namely: (a) Cecille Bulacan, for the
death of her father; and (b) Charito Cartel, for the death of her mother,
based on its supposedly mistaken interpretation.34
It is further worthy to note that petitioner granted claims for funeral and
bereavement aid as early as 1999, then issued a memorandum in 2000 to
correct its erroneous interpretation of legal dependent under Section 4,
Article XIII of the CBA. This notwithstanding, the 2001-2004 CBA 35 still
contained the same provision granting funeral or bereavement aid in case of
the death of a legal dependent of a regular employee without differentiating
the legal dependents according to the employee's civil status as married or
single. The continuity in the grant of the funeral and bereavement aid to
regular employees for the death of their legal dependents has undoubtedly
ripened into a company policy. With that, the denial of Alfante's qualified

Page 43 of 260
claim for such benefit pursuant to Section 4, Article XIII of the CBA violated
the law prohibiting the diminution of benefits.
WHEREFORE, the Court AFFIRMS the decision promulgated on February 5,

201 0; and ORDERS petitioner to pay the costs of suit.
SO ORDERED.
5 Julies bakeshop vs arnaiz

JULIES BAKESHOP AND/OR G.R. No. 173882
EDGAR REYES,
Petitioners,
Present:
- versus- CORONA, C. J., Chairperson,

LEONARDO-DE CASTRO,
BERSAMIN,
HENRY ARNAIZ DEL CASTILLO, and
EDGAR NAPAL, and VILLARAMA, JR., JJ.
JONATHAN TOLORES,
Respondents. Promulgated:
February 15, 2012
x---------------------------------------------------
----------------x
DECISION
DEL CASTILLO, J.:
Management has a wide latitude to conduct its own affairs in accordance with the
necessities of its business. This so-called management prerogative, however,
should be exercised in accordance with justice and fair play.
By this Petition for Review on Certiorari,[1] petitioners Julies Bakeshop

and/or Edgar Reyes (Reyes) assail the September 23, 2005 Decision [2] of the
Court of Appeals (CA) in CA-G.R. SP No. 86257, which reversed the Resolutions

Page 44 of 260
dated December 18, 2003[3] and April 19, 2004[4] of the National Labor Relations
Commission (NLRC) and ordered petitioners to reinstate respondents Henry
Arnaiz (Arnaiz), Edgar Napal (Napal) and Jonathan Tolores (Tolores) and to pay
them their backwages for having been constructively dismissed, as well as their
other monetary benefits.
Factual Antecedents
Reyes hired respondents as chief bakers in his three franchise branches of Julies
Bakeshop in Sibalom and San Jose, Antique. On January 26, 2000, respondents
filed separate complaints against petitioners for underpayment of wages,
payment of premium pay for holiday and rest day, service incentive leave pay,
13th month pay, cost of living allowance (COLA) and attorneys fees. These
complaints were later on consolidated.
Subsequently, in a memorandum dated February 16, 2000, Reyes reassigned

respondents as utility/security personnel tasked to clean the outside vicinity of his
bakeshops and to maintain peace and order in the area. Upon service of the
memo, respondents, however, refused to sign the same and likewise refused to
perform their new assignments by not reporting for work.
In a letter-memorandum dated March 13, 2000, Reyes directed respondents to

report back for work and to explain why they failed to assume their duties as
utility/security personnel. A second letter-memorandum of the same tenor dated
March 28, 2000 was also sent to respondents. Respondents did not heed both
memoranda.
Proceedings before the Labor Arbiter
Meanwhile, in the preliminary conference set on February 21, 2000, respondents

with their counsel, Atty. Ronnie V. Delicana (Atty. Delicana), on one hand, and
Reyes on the other, appeared before the Labor Arbiter to explore the possibility of
an amicable settlement. It was agreed that the parties would enter into a
compromise agreement on March 7, 2000. However, on February 29, 2000,
respondents, who were then represented by a different counsel, Atty. Mariano R.

Page 45 of 260
Pefianco (Atty. Pefianco), amended their complaints by including in their causes of

action illegal dismissal and a claim for reinstatement and backwages.
The supposed signing of the compromise agreement (which could have
culminated in respondents receiving the total amount of P54,126.00 as payment
for their 13th month pay and separation pay) was reset to March 28, 2000
because of respondents non-appearance in the hearing of March 7, 2000. On
March 28, 2000, Atty. Pefianco failed to appear despite due notice. On the next
hearing scheduled on April 24, 2000, both Atty. Delicana and Atty. Pefianco
appeared but the latter verbally manifested his withdrawal as counsel for
respondents. Thus, respondents, through Atty. Delicana, and Reyes, continued to
explore the possibility of settling the case amicably. Manifesting that they need to
sleep on the proposed settlement, respondents requested for continuance of the
hearing on April 26, 2000. Come said date, however, respondents did not appear.
Realizing the futility of further resetting the case to give way to a possible
settlement, the Labor Arbiter ordered the parties to file their respective position
papers.
Despite his earlier withdrawal as counsel, Atty. Pefianco filed a Joint Position
Paper[5] on behalf of respondents alleging that they were dismissed from
employment on February 21, 2000 without valid cause. As for petitioners, they
stated in their position paper[6]that respondents were never dismissed but that
they abandoned their jobs after filing their complaints. Petitioners denied that
Reyes is the employer of Arnaiz and Napal but admitted such fact insofar as
Tolores is concerned.
In his Decision[7] dated August 25, 2000, the Labor Arbiter expressed dismay over
respondents lack of good faith in negotiating a settlement. The Labor Arbiter
denounced the way respondents dealt with Atty. Delicana during their discussions
for a possible settlement since respondents themselves later on informed the said
tribunal that at the time of the said discussions, they no longer considered Atty.
Delicana as their counsel. Despite this, the Labor Arbiter still required the parties
to submit their respective position papers. And as respondents position paper was
filed late and no evidence was attached to prove the allegations therein, the Labor
Arbiter resolved to dismiss the complaints, thus:

Page 46 of 260
WHEREFORE, premises considered the above-entitled cases

should be, as they are hereby dismissed without prejudice.
SO ORDERED.[8]
Proceedings before the National Labor Relations Commission
Respondents filed a joint appeal[9] with the NLRC. In a Decision[10] dated January
17, 2002, the NLRC overruled the Decision of the Labor Arbiter and held that the
burden of proof lies on herein petitioners as Reyes admitted being the employer of
Tolores.Hence, petitioners not Tolores, had the duty to advance proof. With
respect to Arnaiz and Napal, the NLRC noted that since their alleged employer
was not impleaded, said respondents cases should be remanded to the Labor
Arbiter, and tried as new and separate cases. The dispositive portion of the NLRCs
Decision reads:
WHEREFORE, the case is REMANDED for purposes of identifying

the real respondents, to be separated as discussed, if warranted,
and for further proceedings to be conducted.
SO ORDERED.[11]
Respondents filed a Motion for Reconsideration,[12] alleging that the NLRC

Decision violated their right to speedy disposition of their cases. They also insisted
that Reyes is their employer as shown by his letter-memorandum dated March
13, 2000 which directed all of them to report back for work. In addition, the fact
that Reyes was willing to pay all the respondents the amount of P54,126.00 as
settlement only proves that there is an employer-employee relationship between
them and Reyes.
In a Resolution[13] dated September 23, 2003, the NLRC found merit in

respondents Motion for Reconsideration. It held that Reyes failed to present
concrete proof of his allegation that a certain Rodrigo Gandiongco is the employer
of Arnaiz and Napal; hence, Reyes is still presumed to be their employer as
franchise owner of the branches where these employees were assigned. The
NLRC further ruled that respondents demotion in rank from chief bakers to
utility/security personnel is tantamount to constructive dismissal which entitles
Page 47 of 260
them to the reliefs available to illegally dismissed employees. As for the money
claims, the NLRC granted respondents their salary differentials, premium pay for
rest day, holiday pay, service incentive leave pay, 13th month pay and COLA.In
awarding such monetary awards, the NLRC ratiocinated that the employer bears
the burden of proving that the employees received their wages and benefits. In
this case, however, no proof of such payment was presented by the petitioners.
The claim for overtime pay though was denied since proof of overtime work is
necessary to warrant such award. Lastly, for Reyes unjustified act done in bad
faith, respondents were awarded 10% attorneys fees. The NLRC ruled as follows:
WHEREFORE, Our previous Decision is VACATED and a new

one rendered declaring complainants to have been illegally
dismissed. Complainants are to be reinstated to their former
positions without loss of seniority rights. Complainants are further
awarded backwages reckoned from the time they were constructively
dismissed up to the time of their actual reinstatement, whether
physically or on payroll.
Complainants being underpaid are to be [paid] their salary

differentials reckoned three (3) years backwards from the time they
filed the instant complaints on January 26, 2000, premium pay for
holiday, premium pay for rest day, holiday pay, service incentive
leave pay, 13th month pay and COLA, if these have not been paid to
them yet.
SO ORDERED.[14]
Petitioners sought to reconsider this ruling via a Motion for Reconsideration,

[15]
insisting that respondents were not illegally dismissed and that their
reassignment or transfer as utility/security personnel was indispensable, made in
good faith and in the exercise of a valid management prerogative. Hence, such
reassignment does not amount to constructive dismissal. Reyes claimed that it
would be likely for respondents, after filing complaints against him, to do
something prejudicial to the business as chief bakers, like mixing harmful
ingredients into the bread that they bake. This could be inimical to the health of
the consuming public. Petitioners averred that respondents reassignment as
utility/security personnel is a preventive measure designed to protect the business
and its customers. They likewise added that the transfer was meant to be only

Page 48 of 260
temporary and besides, same does not involve any diminution in pay, rights and
privileges of the respondents. Petitioners also alleged that respondents wage
of P115.00 per day is in consonance with and is even higher than the mandated
minimum wage of P105.00 under Wage Order No. RB6-09 for retail and service
establishments employing not more than 10 workers as in his business.
The NLRC, in its Resolution[16] dated December 18, 2003, again

reconsidered its own ruling and held that respondents were not dismissed, either
actually or constructively, but instead willfully disobeyed the return to work order
of their employer. The NLRC upheld petitioners prerogative to transfer
respondents if only to serve the greater interest, safety and well-being of the
buying public by forestalling irregular acts of said employees. The NLRC then put
the blame on respondents for disobeying the lawful orders of their employer,
noting that it was the same attitude displayed by them in their dealings with their
counsel, Atty. Delicana, in the proceedings before the Labor Arbiter. It also
reversed its previous ruling that respondents were underpaid their wages and
adjudged them to be even overpaid by P10.00 per Wage Order No. RB 6-09-A.
Thus, respondents complaints were dismissed except for their claims for premium
pay for holiday, and rest day, service incentive leave pay, 13th month pay and
COLA, which awards would stand only if no payment therefor has yet been made.
Respondents filed a Motion for Reconsideration[17] and sought for the

execution of the NLRC Resolution dated September 23, 2003 due to the alleged
finality of the ruling. According to them, petitioners pro forma Motion for
Reconsideration of the said resolution did not suspend the running of the period
for taking an appeal. This motion was, however, denied in the NLRC
Resolution[18] dated April 19, 2004.
Proceedings before the Court of Appeals
Respondents appealed to the CA through a petition for certiorari,[19] wherein they

imputed grave abuse of discretion on the part of the NLRC in not declaring them
to have been illegally dismissed and entitled to salary differentials.
The CA, in its Decision[20] dated September 23, 2005, found merit in the
petition, ruling that respondents were constructively dismissed since their
Page 49 of 260
designation from chief bakers to utility/security personnel is undoubtedly a

demotion in rank which involved a drastic change in the nature of work resulting
to a demeaning and humiliating work condition. It also held that petitioners fear
that respondents might introduce harmful foreign substances in baking bread is
more imaginary than real. Further, respondents could not be held guilty of
abandonment of work as this was negated by their immediate filing of complaints
to specifically ask for reinstatement. Nevertheless, the CA denied the claim for
salary differentials by totally agreeing with the NLRCs finding on the matter. Said
court then resolved to award respondents the rest of their monetary claims for
failure of petitioners to present proof of payment and 10% attorneys fees as
respondents dismissal was attended with bad faith which forced them to
litigate, viz:
WHEREFORE, in view of the foregoing premises, judgment is

hereby rendered by us SETTING ASIDE and REVERSING the
Resolutions dated December 18, 2003 and April 19, 2004 in NLRC
Case No. V-000785-2000. The record of this case is
hereby REMANDED to the Labor Arbiter for the computation of
backwages, premium pay for holidays and rest days, holiday pay,
service incentive leave pay, 13th month pay and attorneys fees due
to the petitioners and, thereafter, for the payment thereof by the
private respondent Reyes.[21]
Petitioners filed a Motion for Reconsideration[22] but the same was denied by
the CA in a Resolution[23] dated May 25, 2006.
Issues
Hence, this present petition raising the following issues for the Courts
consideration:
I. DID THE HONORABLE COURT OF APPEALS, IN

DISTURBING THE FINDINGS OF FACTS OF THE LABOR ARBITER
AS WELL AS THE NATIONAL LABOR [RELATIONS] COMMISSION
WHO HAVE TRIED THE CASE, [COMMIT] GRAVE ABUSE OF
DISCRETION TANTAMOUNT TO LACK OF JURISDICTION?

Page 50 of 260
II. DID THE HONORABLE COURT OF APPEALS MANIFESTLY

[OVERLOOK] RELEVANT FACTS NOT DISPUTED BY THE
RESPONDENTS, WHICH, IF PROPERLY CONSIDERED COULD
JUSTIFY A DIFFERENT CONCLUSION?
III. WAS THE TRANSFER/REASSIGNMENT OF RESPONDENTS TO

ANOTHER POSITION WITHOUT DIMINUTION IN PAY AND OTHER
PRIVILEGES TANTAMOUNT TO CONSTRUCTIVE DISMISSAL?[24]
Petitioners maintain that the NLRC, in its Resolution dated December 18,
2003, merely upheld the findings of the Labor Arbiter that there was no
constructive dismissal because of the absence of any evidence to prove such
allegation. As such, Reyes supposition is that the CA erred in coming up with a
contrary finding.
Petitioners insist that the order transferring or reassigning respondents

from chief bakers to utility/security personnel is a valid exercise of management
prerogative for it does not involve any diminution in pay and privileges and that
same is in accordance with the requirements of the business, viz: to protect its
goodwill and reputation as well as the health and welfare of the consuming public.
Our Ruling
We find no merit in the petition.
The Court of Appeals is correct in reviewing

the findings of the National Labor Relations
Commission.
Petitioners claim that the CA should have accorded respect and finality to the
factual findings rendered by the NLRC in its December 18, 2003 Resolution as the
same merely affirmed the findings of the Labor Arbiter. Citing several
jurisprudence on the matter, petitioners add that factual findings of labor officials
who acquired expertise on matters within their jurisdiction have conclusive effect.

Page 51 of 260
We reject this contention as none of the NLRC divergent rulings affirmed

the findings of the Labor Arbiter. To recall, the Labor Arbiter dismissed
respondents complaints on a technicality, that is, on the ground that respondents
Joint Position Paper was filed late and that it did not contain any attachments to
prove the allegations therein. Upon appeal, the NLRC rendered its first Decision
on January 17, 2002 which remanded the case to the Labor Arbiter for purposes
of identifying the real respondents and separating the consolidated cases if
warranted, and for the conduct of further proceedings due to Reyess allegation
that Arnaiz and Napal have a different employer. The NLRC also disagreed with
the Labor Arbiters ratiocination that it behooved upon respondents to attach proof
of their illegal dismissal. According to the NLRC, since Reyes admitted that he is
Toloress employer, the burden to prove that the termination is valid as well as the
due payment of money claims falls upon petitioners. Upon petitioners motion,
however, the NLRC reconsidered this ruling and resolved the case on the merits.
In so doing, it found the respondents to have been constructively dismissed
through its Resolution dated September 23, 2003. The NLRC, however, once
again reversed itself in a Resolution dated December 18, 2003 upon Reyess filing
of a Motion for Reconsideration. This time, the NLRC held that respondents were
not illegally dismissed but instead abandoned their jobs. It was at this point that
respondents sought recourse from the CA.
Indeed, factual findings of labor officials who are deemed to have acquired
expertise in matters within their respective jurisdictions are generally accorded
not only respect, but even finality.[25] It is a well-entrenched rule that findings of
facts of the NLRC, affirming those of the Labor Arbiter, are accorded respect and
due consideration when supported by substantial evidence.[26] We, however, find
that the doctrine of great respect and finality has no application to the case at
bar. As stated, the Labor Arbiter dismissed respondents complaints on mere
technicality. The NLRC, upon appeal, then came up with three divergent
rulings. At first, it remanded the case to the Labor Arbiter. However, in a
subsequent resolution, it decided to resolve the case on the merits by ruling that
respondents were constructively dismissed. But later on, it again reversed itself in
its third and final resolution of the case and ruled in petitioners favor. Therefore,
contrary to Reyess claim, the NLRC did not, on any occasion, affirm any factual
findings of the Labor Arbiter. The CA is thus correct in reviewing the entire records
of the case to determine which findings of the NLRC is sound and in accordance

Page 52 of 260
with law. Besides, the CA, at any rate, may still resolve factual issues by express
mandate of the law despite the respect given to administrative findings of fact.[27]
The transfer/reassignment of respondents

constitutes constructive dismissal.
Petitioners contend that the order transferring or reassigning respondents

from their position as chief bakers to utility/security personnel is within the ambit
of management prerogative as employer. They harp on the fact that no evidence
was presented by respondents to show that they were dismissed from
employment.
We have held that management is free to regulate, according to its own

discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, processes to be
followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay off of workers and discipline, dismissal and recall of workers. The
exercise of management prerogative, however, is not absolute as it must be
exercised in good faith and with due regard to the rights of labor.[28]
In constructive dismissal cases, the employer has the burden of proving

that the transfer of an employee is for just or valid ground, such as genuine
business necessity. The employer must demonstrate that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee and that the transfer
does not involve a demotion in rank or a diminution in salary and other
benefits. If the employer fails to overcome this burden of proof, the employees
transfer is tantamount to unlawful constructive dismissal.[29]
In this case, petitioners insist that the transfer of respondents was a

measure of self-preservation and was prompted by a desire to protect the health
of the buying public, claiming that respondents should be transferred to a position
where they could not sabotage the business pending resolution of their
cases. According to petitioners, the possibility that respondents might introduce
harmful substances to the bread while in the performance of their duties as chief

Page 53 of 260
bakers is not imaginary but real as borne out by what Tolores did in one of the
bakeshops in Culasi, Antique where he was assigned as baker.
This postulation is not well-taken. On the contrary, petitioners failed to

satisfy the burden of proving that the transfer was based on just or valid ground.
Petitioners bare assertions of imminent threat from the respondents are mere
accusations which are not substantiated by any proof. This Court is proscribed
from making conclusions based on mere presumptions or suppositions. An
employees fate cannot be justly hinged upon conjectures and surmises.[30] The act
attributed against Tolores does not even convince us as he was merely a
suspected culprit in the alleged sabotage for which no investigation took place to
establish his guilt or culpability. Besides, Reyes still retained Tolores as an
employee and chief baker when he could have dismissed him for cause if the
allegations were indeed found true. In view of these, this Court finds no
compelling reason to justify the transfer of respondents from chief bakers to
utility/security personnel. What appears to this Court is that respondents transfer
was an act of retaliation on the part of petitioners due to the formers filing of
complaints against them, and thus, was clearly made in bad faith. In fact,
petitioner Reyes even admitted that he caused the reassignments due to the
pending complaints filed against him. As the CA aptly held:
In the case at bench, respondent Reyes failed to justify

petitioners transfer from the position of chief bakers to utility/security
personnel. We find that the threat being alluded to by respondent
Reyes that the petitioners might introduce harmful foreign
substances in baking bread is imaginary and not real. We recall that
what triggered the petitioners reassignment was the filing of their
complaints against private respondents in the NLRC. The petitioners
were not even given an opportunity to refute the reason for the
transfer. The drastic change in petitioners nature of work
unquestionably resulted in, as rightly perceived by them, a
demeaning and humiliating work condition. The transfer was a
demotion in rank, beyond doubt. There is demotion when an
employee is transferred from a position of dignity to a servile or
menial job. One does not need to stretch the imagination to
distinguish the work of a chief baker to that of a security cum utility
man.[31]

Page 54 of 260
[D]emotion involves a situation in which an employee is relegated to a

subordinate or less important position constituting a reduction to a lower grade or
rank, with a corresponding decrease in duties and responsibilities, and usually
accompanied by a decrease in salary.[32] When there is a demotion in rank and/or
a diminution in pay; when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to the employee; or when continued employment
is rendered impossible, unreasonable or unlikely, the transfer of an employee may
constitute constructive dismissal.[33]
We agree with the CA in ruling that the transfer of respondents amounted

to a demotion. Although there was no diminution in pay, there was undoubtedly a
demotion in titular rank. One cannot deny the disparity between the duties and
functions of a chief baker to that of a utility/security personnel tasked to clean and
manage the orderliness of the outside premises of the bakeshop. Respondents
were even prohibited from entering the bakeshop. The change in the nature of
their work undeniably resulted to a demeaning and humiliating work condition.
In Globe Telecom, Inc. v. Florendo-Flores,[34] we held:
The managerial prerogative to transfer personnel must be

exercised without grave abuse of discretion. It must always bear in
mind the basic elements of justice and fair play. Having the right
must not be confused with the manner that right is exercised. Thus,
it cannot be used as a subterfuge by the employer to rid himself of
an undesirable worker.
Petitioners claim that respondents abandoned their job stands on shallow

grounds. Respondents cannot be faulted for refusing to report for work as they
were compelled to quit their job due to a demotion without any just
cause. Moreover, we have consistently held that a charge of abandonment is
inconsistent with the filing of a complaint for constructive dismissal.
[35]
Respondents demand to maintain their positions as chief bakers by filing a
case and asking for the relief of reinstatement belies abandonment.[36]
As the transfer proves unbearable to respondents as to foreclose any choice

on their part except to forego continued employment, same amounts to

Page 55 of 260
constructive dismissal for which reinstatement without loss of seniority rights, full
backwages, inclusive of allowances, and other benefits or their monetary
equivalent, computed from the time their compensation was withheld up to the
time of their actual reinstatement, should be granted.[37] The CA, therefore, did
not err in awarding the reliefs prayed for by the respondents as they were,
without a doubt, constructively dismissed.
WHEREFORE, the petition is DENIED. The September 23, 2005 Decision

of the Court of Appeals in CA-G.R. SP No. 86257 is AFFIRMED.
SO ORDERED.
6 GJT Builders vs ambos
G.R. No. 174184 January 28, 2015
G.J.T. REBUILDERS MACHINE SHOP, GODO FREDO TRILLANA, and

JULIANA TRILLANA, Petitioners,
vs.
RICARDO AMBOS, BENJAMIN PUTIAN, and RUSSELL
AMBOS, Respondents.
DECISION
LEONEN, J.:
To prove serious business losses, employers must present in evidence

financial statements showing the net losses suffered by the business within a
sufficient period of time. Generally, it cannot be based on a single financial
statement showing losses. Absent this proof, employers closing their
businesses must pay the dismissed employees separation pay equivalent to
one-month pay or to at least one-half-month pay for every year of service,
whichever is higher.
This is a Petition for Review on Certiorari 1 of the Court of Appeals'

Decision,2 granting Ricardo Ambos, Russell Ambos, 3 and Benjamin Putian's
Petition for Certiorari. The Court of Appeals found that G.J.T. Rebuilders
Machine Shop (G.J.T. Rebuilders) failed to prove its alleged serious business

Page 56 of 260
losses. Thus, when it closed its establishment on December 15, 1997, G.J.T.
Rebuilders should have paid the affected employees separation pay. 4
G.J.T. Rebuilders is a single proprietorship owned by the Spouses Godofredo

and Juliana Trillana (Trillana spouses). It was engaged in steel works and
metal fabrication, employing Ricardo Ambos (Ricardo), Russell Ambos
(Russell), and Benjamin Putian (Benjamin) as machinists. 5
G.J.T. Rebuilders rented space in the Far East Asia (FEA) Building in Shaw
Boulevard, Mandaluyong City, which served as the site of its machine shop.
On September 8, 1996, a fire partially destroyed the FEA Building. 6
Due to the damage sustained by the building, its owner notified its tenants
to vacate their rented units by the end of September 1996 "to avoid any
unforeseen accidents which may arise due to the damage." 7
Despite the building owners notice to vacate, G.J.T. Rebuilders continued its
business in the condemned building. When the building owner finally refused
to accommodate it, G.J.T. Rebuilders left its rented space and closed the
machine shop on December 15, 1997. 8 It then filed an Affidavit of Closure
before the Department of Labor and Employment on February 16, 1998 and
a sworn application to retire its business operations before the Mandaluyong
City Treasurers Office on February 25, 1998.9
Having lost their employment without receiving separation pay, Ricardo,

Russell, and Benjamin filed a Complaint for illegal dismissal before the Labor
Arbiter. They prayed for payment of allowance, separation pay, and
attorneys fees.10
In their defense, G.J.T. Rebuilders and the Trillana spouses argued that
G.J.T. Rebuilders suffered serious business losses and financial reverses,
forcing it to close its machine shop. Therefore, Ricardo, Russell, and
Benjamin were not entitled to separation pay.11
Labor Arbiter Facundo L. Leda (Labor Arbiter Leda) decided the Complaint,
finding no convincing proof of G.J.T. Rebuilders alleged serious business
losses. Labor Arbiter Leda, in the Decision 12 dated December 28, 1999,
found that Ricardo, Russell, and Benjamin were entitled to separation pay
under Article 283 of the Labor Code. 13In addition, they were awarded
attorneys fees, having been constrained to litigate their claims. 14
Even assuming that G.J.T. Rebuilders closure was due to serious business
losses, Labor Arbiter Leda held that the employees affected were still
entitled to separation pay "based on social justice and equity." 15

Page 57 of 260
G.J.T. Rebuilders and the Trillana spouses appealed Labor Arbiter Ledas
Decision before the National Labor Relations Commission. 16
In contrast with the Labor Arbiters finding, the National Labor Relations
Commission found G.J.T. Rebuilders to have suffered serious business
losses. Because of the fire that destroyed the building where G.J.T.
Rebuilders was renting space, the demand for its services allegedly declined
as "no same customer would dare to entrust machine works to be done for
them in a machine shop lying in a ruined and condemned building." 17 The
National Labor Relations Commission then concluded that the fire
"proximately caused"18 G.J.T. Rebuilders serious business losses, with its
financial statement for the fiscal year 1997 showing a net loss of
316,210.00.19
In the Decision20 dated January 25, 2001, the National Labor Relations
Commission vacated and set aside Labor Arbiter Ledas Decision and
dismissed the Complaint for lack of merit. Since the Commission found that
G.J.T. Rebuilders ceased operations due to serious business losses, it held
that G.J.T. Rebuilders and the Trillana spouses need not pay Ricardo,
Russell, and Benjamin separation pay.
Ricardo, Russell, and Benjamin filed a Motion for Reconsideration, which the
National Labor Relations Commission denied in the Resolution 21 dated March
5, 2001.
Because of the alleged grave abuse of discretion of the National Labor

Relations Commission, a Petition for Certiorari was filed before the Court of
Appeals.22
The Court of Appeals reversed the National Labor Relations Commissions

Decision, agreeing with Labor Arbiter Leda that G.J.T. Rebuilders failed to
prove its alleged serious business losses. The Court of Appeals conceded
that G.J.T. Rebuilders had to close the machine shop for reasons connected
with the fire that partially destroyed the building where it was renting space.
Nevertheless, G.J.T. Rebuilders continued its business for more than one
year after the fire. Thus, according to the Court of Appeals, G.J.T. Rebuilders
did not suffer from serious business losses but closed the machine shop to
prevent losses.23
With respect to G.J.T. Rebuilders financial statement showing an alleged net

loss in 1997, the Court of Appeals refused to admit it in evidence since it
was not subscribed under oath by the Certified Public Accountant who
prepared it. According to the Court of Appeals, the financial statement was
subscribed under oath only after G.J.T. Rebuilders had submitted it to Labor

Page 58 of 260
Arbiter Leda as an annex to its Motion to re-open proceedings and to submit

additional evidence. Thus, the Court of Appeals gave G.J.T. Rebuilders
financial statement "scant consideration."24
In the Decision25 dated January 17, 2006, the Court of Appeals granted the
Petition for Certiorari, vacating and setting aside the National Labor
Relations Commissions Decision. It reinstated Labor Arbiter Ledas Decision
dated December 28, 1999.
G.J.T. Rebuilders and the Trillana spouses filed a Motion for Reconsideration,
which the Court of Appeals denied in the Resolution 26 dated August 11,
2006.
Petitioners G.J.T. Rebuilders and the Trillana spouses filed before this court a
Petition for Review on Certiorari. 27Respondents Ricardo, Russell, and
Benjamin commented28 on the Petition, after which petitioners filed a
Reply.29
In their Petition for Review on Certiorari, petitioners maintain that G.J.T.

Rebuilders suffered serious business losses as evidenced by its financial
statement covering the years 1996 and 1997. Petitioners admit that the
financial statement was belatedly subscribed under oath. 30 Nevertheless,
"the credibility or veracity of the entries" 31 in the financial statement was not
affected since the Bureau of Internal Revenue received the same
unsubscribed financial statement when G.J.T. Rebuilders allegedly filed its
income tax return on April 15, 1998. 32
Considering that petitioners sufficiently proved G.J.T. Rebuilders serious

business losses, petitioners argue that respondents are not entitled to
separation pay.
As for respondents, they contend that G.J.T. Rebuilders failed to prove its
alleged serious business losses. They argue that the financial statement
showing a net loss for the year 1997 was not credible, having been belatedly
subscribed under oath by the Certified Public Accountant who prepared it. 33
With no credible proof of G.J.T. Rebuilders supposed serious business

losses, respondents argue that petitioners must pay them separation pay
under Article 283 of the Labor Code.34
The issue for our resolution is whether petitioners sufficiently proved that
G.J.T. Rebuilders suffered from serious business losses.
This petition should be denied.

Page 59 of 260
G.J.T. Rebuilders must pay respondents

their separation pay for failure to prove
its alleged serious business losses
Article 283 of the Labor Code allows an employer to dismiss an employee

due to the cessation of operation or closure of its establishment or
undertaking, thus:
Art. 283. Closure of establishment and reduction of personnel. The

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

courts cannot interfere with.35 Employers can "lawfully close shop at
anytime,"36 even for reasons of their own. "Just as no law forces anyone to
go into business, no law can compel anybody to continue in it." 37 In Mac
Adams Metal Engineering Workers Union-Independent v. Mac Adams Metal
Engineering,38 this court said:
It would indeed be stretching the intent and spirit of the law if [courts] were
to unjustly interfere with the managements prerogative to close or cease its
business operations just because [the] business operation or undertaking is
not suffering from any loss or simply to provide the workers continued
employment.39
However, despite this management prerogative, employers closing their

businesses must pay the affected workers separation pay equivalent to one-
month pay or to at least one-half-month pay for every year of service,

Page 60 of 260
whichever is higher.40 The reason is that an employee dismissed, even for an

authorized cause, loses his or her means of livelihood. 41
The only time employers are not compelled to pay separation pay is when
they closed their establishments or undertaking due to serious business
losses or financial reverses.42
Serious business losses are substantial losses, not de minimis. 43 "Losses"

means that the business must have operated at a loss for a period of time
for the employer "to [have] perceived objectively and in good faith" 44 that
the business financial standing is unlikely to improve in the future.
The burden of proving serious business losses is with the employer. 45 The
employer must show losses on the basis of financial statements covering a
sufficient period of time. The period covered must be sufficient for the
National Labor Relations Commission and this court to appreciate the nature
and vagaries of the business.
In North Davao Mining Corporation v. NLRC, 46 North Davao Mining

Corporation presented in evidence financial statements showing a continuing
pattern of loss from 1988 until its closure in 1992. The company suffered net
losses averaging 3 billion a year, with an aggregate loss of 20 billion by the
time of its closure.47 This court found that North Davao suffered serious
business losses.48
In Manatad v. Philippine Telegraph and Telephone Corporation, 49 the

Philippine Telegraph and Telephone Corporation presented in evidence
financial statements showing a continuing pattern of loss from 1995 to
1999.50By 2000, the corporation suffered an aggregate loss of 2.169 billion,
constraining it to retrench some of its employees. This court held that the
Philippine Telegraph and Telephone Corporation was "fully justified in
implementing a retrenchment program since it was undergoing business
reverses, not only for a single fiscal year, but for several years prior to and
even after the program."51
In LVN Pictures Employees and Workers Association (NLU) v. LVN Pictures,

Inc.,52 a case G.J.T. Rebuilders cited, LVN Pictures, Inc. presented in
evidence financial statements showing a continuing pattern of loss from
1957 to 1961. By the time the corporation closed its business, it had
suffered an aggregate loss of 1,560,985.14. 53 This court found that LVN
Pictures, Inc. suffered serious business losses.54
Aside from the obligation to pay separation pay, employers must comply
with the notice requirement under Article 283 of the Labor Code. Employers

Page 61 of 260
must serve a written notice on the affected employees and on the

Department of Labor and Employment at least one month before the
intended date of closure. Failure to comply with this requirement renders the
employer liable for nominal damages.55
We uphold G.J.T. Rebuilders decision to close its establishment as a valid

exercise of its management prerogative. G.J.T. Rebuilders closed its machine
shop, believing that its "former customers . . . seriously doubted [its]
capacity . . . to perform the same quality [of service]" 56 after the fire had
partially damaged the building where it was renting space.
Nevertheless, we find that G.J.T. Rebuilders failed to sufficiently prove its

alleged serious business losses.
The financial statement G.J.T. Rebuilders submitted in evidence covers the

fiscal years 1996 and 1997. Based on the financial statement, G.J.T.
Rebuilders earned a net income of 61,157.00 in 1996 and incurred a net loss
of 316,210.00 in 1997.57
We find the two-year period covered by the financial statement insufficient

for G.J.T. Rebuilders to have objectively perceived that the business would
not recover from the loss. Unlike in North Davao Mining Corporation,
Manatad, and LVN Pictures Employees and Workers Association (NLU), no
continuing pattern of loss within a sufficient period of time is present in this
case. In fact, in one of the two fiscal years covered by the financial
statement presented in evidence, G.J.T. Rebuilders earned a net income.
We, therefore, agree with the Labor Arbiter and the Court of Appeals that
G.J.T. Rebuilders closed its machine shop to prevent losses, not because of
serious business losses.58
Considering that G.J.T. Rebuilders failed to prove its alleged serious business
losses, it must pay respondents their separation pay equivalent to one-
month pay or at least one-half-month pay for every year of service,
whichever is higher. In computing the period of service, a fraction of at least
six months is considered a year.59
Ricardo began working as a machinist on February 9, 1978. 60 Since he last

worked for G.J.T. Rebuilders on December 15, 1997, he worked a total of 19
years, 10 months, and six days. This period is rounded off to 20 years, with
the last 10 months and six days being considered a year. 61
Ricardo had a daily salary of 230.00 and worked 13 days a month. 62 His one-
month pay, therefore, is equal to 2,990.00. On the other hand, his one-half-

Page 62 of 260
month pay for every year of service is equal to 29,250.00. The latter amount
being higher, Ricardo must receive 29,250.00 as separation pay.
With respect to Russell, he began his employment on September 1,

1992.63 Since he last worked for G.J.T. Rebuilders on December 15, 1997, he
worked a total of five years, three months, and 14 days. This period is
rounded off to five years, not six years, since the last three months and 14
days are less than the six months required to be considered a year. 64
Russell had a daily salary of 225.00 and worked 13 days a month. 65 His one-
month pay, therefore, is equal to 2,925.00. On the other hand, his one-half-
month pay for every year of service is equal to 7,312.50. The latter amount
being higher, Russell must receive 7,312.50 as separation pay.
As for Benjamin, he began working as a machinist on February 1,

1994.66 Since he last worked for G.J.T. Rebuilders on December 15, 1997, he
worked a total of three years, 10 months, and 14 days. This period is
rounded off to four years, with the last 10 months and 14 days being
considered a year.67
Benjamin had a daily salary of 225.00 and worked 13 days a month. 68 His
one-month pay, therefore, is equal to 2,925.00. On the other hand, his one-
half-month pay for every year of service is equal to 5,850.00. The latter
amount being higher, Benjamin must receive 5,850.00 as separation pay.
II
G.J.T. Rebuilders must pay respondents

nominal damages for failure to comply
with the procedural requirements for
closing its business
In addition to separation pay, G.J.T. Rebuilders must pay each of the

respondents nominal damages for failure to comply with the notice
requirement under Article 283 of the Labor Code.
Notice of the eventual closure of establishment is a "personal right of the

employee to be personally informed of his [or her] proposed dismissal as
well as the reasons therefor." 69 The reason for this requirement is to "give
the employee some time to prepare for the eventual loss of his [or her]
job."70
The requirement "is not a mere technicality or formality which the employer
may dispense with."71 Should employers fail to properly notify their

Page 63 of 260
employees, they shall be liable for nominal damages even if they validly
closed their businesses.72
Generally, employers that validly closed their businesses but failed to comply
with the notice requirement are liable in the amount of 50,000.00. 73 This
amount of nominal damages, however, may be reduced depending on "the
sound discretion of the court."74 In Sangwoo Philippines, Inc. v. Sangwoo
Philippines, Inc. Employees Union-OLALIA, 75 we said that:
[i]n the determination of the amount of nominal damages which is

addressed to the sound discretion of the court, several factors are taken into
account: (1) the authorized cause invoked . . .; (2) the number of
employees to be awarded; (3) the capacity of the employers to satisfy the
awards, taking into account their prevailing financial status as borne by the
records; (4) the employers grant of other termination benefits in favor of
the employees; and (5) whether there was bona fide attempt to comply with
the notice requirements as opposed to giving no notice at all. 76
G.J.T. Rebuilders allegedly "conferred with all [of its employees] of [its]
intention to cease business operations"77one month before closing its
business. It allegedly submitted an Affidavit of Closure to the Department of
Labor and Employment on February 16, 1998.78
"Conferring with employees" is not the notice required under Article 283 of
the Labor Code.1wphi1 The law requires a written notice of closure served
on the affected employees. As to when the written notice should be served
on the Department of Labor and Employment, the law requires that it be
served at least one month before the intended date of closure. G.J.T.
Rebuilders served the written notice on the Department of Labor and
Employment on February 16, 1998, two months after it had closed its
business on December 15, 1997.
With G.J.T. Rebuilders failing to comply with the notice requirement under
Article 283 of the Labor Code, we find that it deprived respondents of due
process. However, considering that G.J.T. Rebuilders attempted to comply
with the notice requirement, we find the nominal damages of 10,000.00 for
each of the respondents sufficient.79
III
Respondents are not entitled to attorneys fees
Attorneys fees "represent the reasonable compensation [a client pays his or

her lawyer] [for legal service rendered]." 80 The award of attorneys fees is

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the exception rather than the rule. 81 Specifically in labor cases, attorneys
fees are awarded only when there is unlawful withholding of wages 82 or when
the attorneys fees arise from collective bargaining negotiations that may be
charged against union funds in an amount to be agreed upon by the
parties.83 For courts and tribunals to properly award attorneys fees, they
must make "an express finding of fact and [citation] of applicable law" 84 in
their decisions.
In the present case, there is no unlawful withholding of wages or an award

of attorneys fees arising from collective bargaining negotiations. Neither did
the Labor Arbiter nor the Court of Appeals make findings of fact or cite the
applicable law in awarding attorneys fees. That respondents were
"constrained to engage the services of counsel to prosecute their claims" 85 is
not enough justification since "no premium should be placed on the right to
litigate."86
For these reasons, we delete the award of attorneys fees.
All told, G.J.T. Rebuilders failed to prove that it closed its machine shop due
to serious business losses. Moreover, it failed to comply with Article 283 of
the Labor Code on the notice requirement. Therefore, petitioners must pay
respondents Ricardo Ambos, Russell Ambos, and Benjamin Putian separation
pay and nominal damages.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The Court of

Appeals Decision dated January 17, 2006 is AFFIRMED with MODIFICATION.
Petitioners are ordered to PAY respondents their separation pay with 6%

legal interest87 from the finality of this Decision until full payment:
Ricardo Ambos P29,250.00
Russell Ambos P7,312.50
Benjamin Putian P5,850.00.
Furthermore, petitioners shall PAY each of the respondents P10,000.00 as

nominal damages with 6% legal interest88 from the finality of this Decision
until full payment.
The award of attorney's fees is DELETED.
SO ORDERED.

Page 65 of 260
7 Mirant Phils. Vs Caro
G.R. No. 181490 April 23, 2014
MIRANT (PHILIPPINES) CORPORATION AND EDGARDO A.

BAUTISTA, Petitioners,
vs.
JOSELITO A. CARO, Respondent.
DECISION
VILLARAMA, JR., J.:
At bar is a petition1 under Rule 45 of the 1997 Rules of Civil Procedure, as

amended, assailing the Decision2 and Resolution3 of the Court of Appeals
(CA) dated June 26, 2007 and January 11, 2008, respectively, which
reversed and set aside the Decision 4 of the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 046551-05 (NCR-00-03-02511-
05). The NLRC decision vacated and set aside the Decision 5 of the Labor
Arbiter which found that respondent Joselito A. Caro (Caro) was illegally
dismissed by petitioner Mirant (Philippines) Corporation (Mirant).
Petitioner corporation is organized and operating under and by virtue of the

laws of the Republic of the Philippines. It is a holding company that owns
shares in project companies such as Mirant Sual Corporation and Mirant
Pagbilao Corporation (Mirant Pagbilao) which operate and maintain power
stations located in Sual, Pangasinan and Pagbilao, Quezon, respectively.
Petitioner corporation and its related companies maintain around 2,000
employees detailed in its main office and other sites. Petitioner corporation
had changed its name to CEPA Operations in 1996 and to Southern
Company in 2001. In 2002, Southern Company was sold to petitioner Mirant
whose corporate parent is an Atlanta-based power producer in the United
States of America.6 Petitioner corporation is now known as Team Energy
Corporation.7
Petitioner Edgardo A. Bautista (Bautista) was the President of petitioner

corporation when respondent was terminated from employment. 8
Respondent was hired by Mirant Pagbilao on January 3, 1994 as its Logistics

Officer. In 2002, when Southern Company was sold to Mirant, respondent
was already a Supervisor of the Logistics and Purchasing Department of
petitioner. At the time of the severance of his employment, respondent was
the Procurement Supervisor of Mirant Pagbilao assigned at petitioner
corporations corporate office. As Procurement Supervisor, his main task was

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to serve as the link between the Materials Management Department of

petitioner corporation and its staff, and the suppliers and service contractors
in order to ensure that procurement is carried out in conformity with set
policies, procedures and practices. In addition, respondent was put incharge
of ensuring the timely, economical, safe and expeditious delivery of
materials at the right quality and quantity to petitioner corporations plant.
Respondent was also responsible for guiding and overseeing the welfare and
training needs of the staff of the Materials Management Department. Due to
the nature of respondents functions, petitioner corporation considers his
position as confidential.9
The antecedent facts follow:
Respondent filed a complaint10 for illegal dismissal and money claims for
13th and 14th month pay, bonuses and other benefits, as well as the
payment of moral and exemplary damages and attorneys fees. Respondent
posits the following allegations in his Position Paper: 11
On January 3, 1994, respondent was hired by petitioner corporation as its

Logistics Officer and was assigned at petitioner corporations corporate office
in Pasay City. At the time of the filing of the complaint, respondent was
already a Supervisor at the Logistics and Purchasing Department with a
monthly salary of P39,815.00.
On November 3, 2004, petitioner corporation conducted a random drug test

where respondent was randomly chosen among its employees who would be
tested for illegal drug use. Through an Intracompany
Correspondence,12 these employees were informed that they were selected
for random drug testing to be conducted on the same day that they received
the correspondence. Respondent was duly notified that he was scheduled to
be tested after lunch on that day. His receipt of the notice was evidenced by
his signature on the correspondence.
Respondent avers that at around 11:30 a.m. of the same day, he received a
phone call from his wifes colleague who informed him that a bombing
incident occurred near his wifes work station in Tel Aviv, Israel where his
wife was then working as a caregiver. Respondent attached to his Position
Paper a Press Release13 of the Department of Foreign Affairs (DFA) in Manila
to prove the occurrence of the bombing incident and a letter 14 from the
colleague of his wife who allegedly gave him a phone call from Tel Aviv.
Respondent claims that after the said phone call, he proceeded to the Israeli
Embassy to confirm the news on the alleged bombing incident. Respondent
further claims that before he left the office on the day of the random drug

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test, he first informed the secretary of his Department, Irene Torres

(Torres), at around 12:30 p.m. that he will give preferential attention to the
emergency phone call that he just received. He also told Torres that he
would be back at the office as soon as he has resolved his predicament.
Respondent recounts that he tried to contact his wife by phone but he could
not reach her. He then had to go to the Israeli Embassy to confirm the
bombing incident. However, he was told by Eveth Salvador (Salvador), a
lobby attendant at the Israeli Embassy, that he could not be allowed entry
due to security reasons.
On that same day, at around 6:15 p.m., respondent returned to petitioner

corporations office. When he was finally able to charge his cellphone at the
office, he received a text message from Tina Cecilia (Cecilia), a member of
the Drug Watch Committee that conducted the drug test, informing him to
participate in the said drug test. He immediately called up Cecilia to explain
the reasons for his failure to submit himself to the random drug test that
day. He also proposed that he would submit to a drug test the following day
at his own expense. Respondent never heard from Cecilia again.
On November 8, 2004, respondent received a Show Cause Notice 15 from

petitioner corporation through Jaime Dulot (Dulot), his immediate
supervisor, requiring him to explain in writing why he should not be charged
with "unjustified refusal to submit to random drug testing." Respondent
submitted his written explanation16 on November 11, 2004. Petitioner
corporation further required respondent on December 14, 2004 to submit
additional pieces of supporting documents to prove that respondent was at
the Israeli Embassy in the afternoon of November 3, 2004 and that the said
bombing incident actually occurred. Respondent requested for a hearing to
explain that he could not submit proof that he was indeed present at the
Israeli Embassy during the said day because he was not allegedly allowed
entry by the embassy due to security reasons. On January 3, 2005,
respondent submitted the required additional supporting documents. 17
On January 13, 2005, petitioner corporations Investigating Panel issued an

Investigating Report18 finding respondent guilty of "unjustified refusal to
submit to random drug testing" and recommended a penalty of four working
weeks suspension without pay, instead of termination, due to the presence
of mitigating circumstances. In the same Report, the Investigating Panel
also recommended that petitioner corporation should review its policy on
random drug testing, especially of the ambiguities cast by the term
"unjustified refusal."
On January 19, 2005, petitioner corporations Asst. Vice President for

Material Management Department, George K. Lamela, Jr. (Lamela),

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recommended19 that respondent be terminated from employment instead of

merely being suspended. Lamela argued that even if respondent did not
outrightly refuse to take the random drug test, he avoided the same. Lamela
averred that "avoidance" was synonymous with "refusal."
On February 14, 2005, respondent received a letter20 from petitioner

corporations Vice President for Operations, Tommy J. Sliman (Sliman),
terminating him on the same date. Respondent filed a Motion to Appeal 21 his
termination on February 23, 2005. The motion was denied by petitioner
corporation on March 1, 2005.
It is the contention of respondent that he was illegally dismissed by

petitioner corporation due to the latters non-compliance with the twin
requirements of notice and hearing. He asserts that while there was a notice
charging him of "unjustified refusal to submit to random drug testing," there
was no notice of hearing and petitioner corporations investigation was not
the equivalent of the "hearing" required under the law which should have
accorded respondent the opportunity to be heard.
Respondent further asserts that he was illegally dismissed due to the

following circumstances:
1. He signed the notice that he was randomly selected as a participant

to the company drug testing;
2. Even the Investigating Panel was at a loss in interpreting the charge

because it believed that the term "refusal" was ambiguous, and
therefore such doubt must be construed in his favor; and
3. He agreed to take the drug test the following day at his own
expense, which he says was clearly not an indication of evasion from
the drug test.
Petitioner corporation counters with the following allegations:
On November 3, 2004, a random drug test was conducted on petitioner

corporations employees at its Corporate Office at the CTC Bldg. in Roxas
Blvd., Pasay City. The random drug test was conducted pursuant to Republic
Act No. 9165, otherwise known as the "Comprehensive Dangerous Drugs Act
of 2002." Respondent was randomly selected among petitioners employees
to undergo the said drug test which was to be carried out by Drug Check
Philippines, Inc.22

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When respondent failed to appear at the scheduled drug test, Cecilia

prepared an incident report addressed to Dulot, the Logistics Manager of the
Materials Management Department.23 Since it was stated under petitioner
corporations Mirant Drugs Policy Employee Handbook to terminate an
employee for "unjustified refusal to submit to a random drug test" for the
first offense, Dulot sent respondent a Show Cause Notice 24 dated November
8, 2004, requiring him to explain why no disciplinary action should be
imposed for his failure to take the random drug test. Respondent, in a letter
dated November 11, 2004, explained that he attended to an emergency call
from his wifes colleague and apologized for the inconvenience he had
caused. He offered to submit to a drug test the next day even at his
expense.25 Finding respondents explanation unsatisfactory, petitioner
corporation formed a panel to investigate and recommend the penalty to be
imposed on respondent.26 The Investigating Panel found respondents
explanations as to his whereabouts on that day to be inconsistent, and
recommended that he be suspended for four weeks without pay. The
Investigating Panel took into account that respondent did not directly refuse
to be subjected to the drug test and that he had been serving the company
for ten years without any record of violation of its policies. The Investigating
Panel further recommended that the Mirant Drug Policy be reviewed to
clearly define the phrase "unjustified refusal to submit to random drug
testing."27 Petitioner corporations Vice-President for Operations, Sliman,
however disagreed with the Investigating Panels recommendations and
terminated the services of respondent in accordance with the subject drug
policy. Sliman likewise stated that respondents violation of the policy
amounted to willful breach of trust and loss of confidence. 28
A cursory examination of the pleadings of petitioner corporation would show

that it concurs with the narration of facts of respondent on material events
from the time that Cecilia sent an electronic mail at about 9:23 a.m. on
November 3, 2004 to all employees of petitioner corporation assigned at its
Corporate Office advising them of the details of the drug test up to the
time of respondents missing his schedule to take the drug test. Petitioner
corporation and respondents point of disagreement, however, is whether
respondents proffered reasons for not being able to take the drug test on
the scheduled day constituted valid defenses that would have taken his
failure to undergo the drug test out of the category of "unjustified refusal."
Petitioner corporation argues that respondents omission amounted to
"unjustified refusal" to submit to the random drug test as he could not
proffer a satisfactory explanation why he failed to submit to the drug test:
1. Petitioner corporation is not convinced that there was indeed such a

phone call at noon of November 3, 2004 as respondent could not even
tell who called him up.

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2. Respondent could not even tell if he received the call via the
landline telephone service at petitioner corporations office or at his
mobile phone.
3. Petitioner corporation was also of the opinion that granting there

was such a phone call, there was no compelling reason for respondent
to act on it at the expense of his scheduled drug testing. Petitioner
corporation principally pointed out that the call merely stated that a
bomb exploded near his wifes work station without stating that his
wife was affected. Hence, it found no point in confirming it with
extraordinary haste and forego the drug test which would have taken
only a few minutes to accomplish. If at all, respondent should have
undergone the drug testing first before proceeding to confirm the news
so as to leave his mind free from this obligation.
4. Petitioner corporation maintained that respondent could have easily

asked permission from the Drug Watch Committee that he was leaving
the office since the place where the activity was conducted was very
close to his work station.29
To the mind of petitioners, they are not liable for illegal dismissal because all
of these circumstances prove that respondent really eluded the random drug
test and was therefore validly terminated for cause after being properly
accorded with due process. Petitioners further argue that they have already
fully settled the claim of respondent as evidenced by a Quitclaim which he
duly executed. Lastly, petitioners maintain that they are not guilty of unfair
labor practice as respondents dismissal was not intended to curtail his right
to self-organization; that respondent is not entitled to the payment of his
13th and 14th month bonuses and other incentives as he failed to show that
he is entitled to these amounts according to company policy; that
respondent is not entitled to reinstatement, payment of full back wages,
moral and exemplary damages and attorneys fees due to his termination for
cause.
In a decision dated August 31, 2005, Labor Arbiter Aliman D. Mangandog

found respondent to have been illegally dismissed. The Labor Arbiter also
found that the quitclaim purportedly executed by respondent was not a bona
fide quitclaim which effectively discharged petitioners of all the claims of
respondent in the case at bar. If at all, the Labor Arbiter considered the
execution of the quitclaim as a clear attempt on the part of petitioners to
mislead its office into thinking that respondent no longer had any cause of
action against petitioner corporation. The decision stated, viz.:

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WHEREFORE, premises considered, this Office finds respondents GUILTY of

illegal dismissal, and hereby ordered to jointly and severally reinstate
complainant back to his former position without loss on seniority rights and
benefits and to pay him his backwages and other benefits from the date he
was illegally dismissed up to the time he is actually reinstated, partially
computed as of this date in the amount of P258,797.50 (P39,815.00 x 6.5
mos.) plus his 13th and 14th month pay in the amount of P43,132.91 or in
the total amount of P301,930.41.
Respondents are also ordered to pay complainant the amount

of P3,000,000.00 as and by way of moral and exemplary damages, and to
pay complainant the amount equivalent to ten percent (10%) of the total
awards as and by way of attorneys fees.
SO ORDERED.30
The Labor Arbiter stated that while petitioner corporation observed the
proper procedure in the termination of an employee for a purported
authorized cause, such just cause did not exist in the case at bar. The
decision did not agree with the conclusions reached by petitioner
corporations own Investigating Panel that while respondent did not refuse to
submit to the questioned drug test and merely "avoided" it on the
designated day, "avoidance" and "refusal" are one and the same. It also held
that the terms "avoidance" and "refusal" are separate and distinct and that
"the two words are not even synonymous with each other." 31 The Labor
Arbiter considered as more tenable the stance of respondent that his
omission merely resulted to a "failure" to submit to the said drug test and
not an "unjustified refusal." Even if respondents omission is to be
considered as refusal, the Labor Arbiter opined that it was not tantamount to
"unjustified refusal" which constitutes as just cause for his termination.
Finally, the Labor Arbiter found that respondent was entitled to moral and
exemplary damages and attorneys fees.
On appeal to the NLRC, petitioners alleged that the decision of the Labor
Arbiter was rendered with grave abuse of discretion for being contrary to
law, rules and established jurisprudence, and contained serious errors in the
findings of facts which, if not corrected, would cause grave and irreparable
damage or injury to petitioners. The NLRC, giving weight and emphasis to
the inconsistencies in respondents explanations, considered his omission as
"unjustified refusal" in violation of petitioner corporations drug policy. Thus,
in a decision dated May 31, 2006, the NLRC ruled, viz.:
x x x [Respondent] was duly notified as shown by copy of the notice x x x

which he signed to acknowledge receipt thereof on the said date.

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[Respondent] did not refute [petitioner corporations] allegation that he was

also personally reminded of said drug test on the same day by Ms. Cecilia of
[petitioner corporations] drug watch committee. However, [respondent] was
nowhere to be found at [petitioner corporations] premises at the time when
he was supposed to be tested. Due to his failure to take part in the random
drug test, an incident report x x x was prepared by the Drug Cause Notice x
x x to explain in writing why no disciplinary action should be taken against
him for his unjustified refusal to submit to random drug test, a type D
offense punishable with termination. Pursuant to said directive, [respondent]
submitted an explanation x x x on 11 November 2004, pertinent portions of
which read:
"I was scheduled for drug test after lunch that day of November 3, 2004 as
confirmed with Tina Cecilia. I was having my lunch when a colleague of my
wife abroad called up informing me that there was something wrong [that]
happened in their neighborhood, where a bomb exploded near her
workstation. Immediately, I [left] the office to confirm said information but
at around 12:30 P.M. that day, I informed MS. IRENE TORRES, our
Department Secretary[,] that I would be attending to this emergency call.
Did even [inform] her that Ill try to be back as soon as possible but
unfortunately, I was able to return at 6:15 P.M. I didnt know that Tina was
the one calling me on my cell that day. Did only receive her message after I
charged my cell at the office that night. I was able to call back Tina Cecilia
later [that] night if its possible to have it (drug test) the next day.
My apology [for] any inconvenience to the Drug Watch Committee, that I

forgot everything that day including my scheduled drug test due to confusion
of what had happened. It [was] not my intention not to undergo nor refuse
to have a drug test knowing well that its a company policy and its
mandated by law."
In the course of the investigation, [respondent] was requested to present

proof pertaining to the alleged call he received on 3 November 2004 from a
colleague of his wife regarding the bomb explosion in Tel Aviv, his presence
at the Israel Embassy also on 3 November 2004. [Respondent], thereafter,
submitted a facsimile which he allegedly received from his wife's colleague
confirming that she called and informed him of the bombing incident.
However, a perusal of said facsimile x x x reveals that the same cannot be
given any probative value because, as correctly observed by [petitioners], it
can barely be read and upon inquiry with PLDT, the international area code
of Israel which is 00972 should appear on the face of the facsimile if indeed
said facsimile originated from Israel. [Respondent] also could not present
proof of his presence at the Israel Embassy on said time and date. He
instead provided the name of a certain Ms. Eveth Salvador of said embassy

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who could certify that he was present thereat. Accordingly, Mr. Bailon, a
member of the investigation panel, verified with Ms. Salvador who told him
that she is only the telephone operator of the Israel Embassy and that she
was not in a position to validate [respondents] presence at the Embassy.
Mr. Bailon was then referred to a certain Ms. Aimee Zandueta, also of said
embassy, who confirmed that based on their records, [respondent] did not
visit the embassy nor was he attended to by any member of said embassy
on 3 November 2004. Ms. Zandueta further informed Mr. Bailon that no
bombing occurred in Tel Aviv on 3 November 2004 and that the only
reported incident of such nature occurred on 1 November 2004. A letter x x
x to this effect was written by Consul Ziva Samech of the Embassy of Israel.
A press release x x x of the Department of Foreign Affairs confirm[ed] that
the bombing occurred on 1 November 2004.
In his explanation, the [respondent] stated that the reason why he had to
leave the office on 3 November 2004 was to verify an information at the
Israel Embassy of the alleged bombing incident on the same day. However,
[petitioners] in their position paper alleged that Ms. Torres of [petitioner]
company received a text message from him at around 12:47 p.m. informing
her that he will try to be back since he had a lot of things to do and asking
her if there was a signatory on that day. [Respondent] did not deny sending
said text messages to Ms. Torres in his reply and rejoinder x x x. He actually
confirmed that he was involved in the CIIS registration with all companies
that was involved with [petitioner] company and worked on the registration
of [petitioner] companys vehicles with TRO.
It is also herein noted that [respondent] had initially reported to Ms. Torres
that it was his mother in law who informed him about the problem
concerning his wife. However, in his written explanation x x x, the
[respondent] stated that it was a friend of his wife, whom he could not even
identify, who informed him of the alleged bombing incident in Tel Aviv,
Israel. [Respondent] also did not deny receiving a cellphone call from Ms.
Cecilia that day. He merely stated that he did not know that it was Ms.
Cecilia calling him up in a cellphone and it was only after he charged his
cellphone at the office that night that he received her message. In effect,
[respondent] asserted that his cellphone battery was running low or drained.
[Petitioners] were able to refute [these] averments of [respondent] when
they presented [respondents] Smart Billing Statement
x x x showing that he was able to make a cellphone call at 5:29 p.m. to

[petitioner corporations] supplier, Mutico for a duration of two (2) minutes. 32
Given the foregoing facts, the NLRC stated that the offer of respondent to
submit to another drug test the following day, even at his expense, cannot

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operate to free him from liability. The NLRC opined that taking the drug test
on the day following the scheduled random drug test would affect both the
integrity and the accuracy of the specimen which was supposed to be taken
from a randomly selected employee who was notified of his/her selection on
the same day that the drug test was to be administered. The NLRC further
asserted that a drug test, conducted many hours or a day after the
employee was notified, would compromise its results because the employee
may have possibly taken remedial measures to metabolize or eradicate
whatever drugs s/he may have ingested prior to the drug test.
The NLRC further stated that these circumstances have clearly established
the falsity of respondents claims and found no justifiable reason for
respondent to refuse to submit to the petitioner corporations random drug
test. While the NLRC acknowledged that it was petitioner corporations own
Investigating Panel that considered respondents failure to take the required
drug test as mere "avoidance" and not "unjustified refusal," it concluded that
such finding was merely recommendatory to guide top management on what
action to take.
The NLRC also found that petitioner corporations denial of respondents

motion to reconsider his termination was in order. Petitioner corporations
reasons for such denial are quoted in the NLRC decision, viz.:
"Your appeal is anchored on your claim that you responded to an emergency

call from someone abroad informing you that a bomb exploded near the
work station of your wife making you unable to undergo the scheduled drug
testing. This claim is groundless taking into account the following:
We are not convinced that there was indeed that call which you claim to
have received noon of November 3, 2004. On the contrary, our belief is
based on the fact that you could not tell who called you up or how the call
got to you. If you forgot to ask the name of the person who called you up,
surely you would have known how the call came to you. You said you were
having lunch at the third floor of the CTC building when you received the
call. There were only two means of communication available to you then:
the land line telephone service in your office and your mobile phone. If your
claim were (sic) not fabricated, you would be able to tell which of these two
was used.
Granting that you indeed received that alleged call, from your own account,
there was no compelling reason for you to act on it at the expense of your
scheduled drug testing. The call, as it were, merely stated that something
wrong happened (sic) in their neighborhood, where a bomb exploded near
her workstation. Nothing was said if your wife was affected. There is no

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point in confirming it with extraordinary haste and forego the drug test
which would have taken only a few minutes to accomplish. If at all, you
should have undergone the drug testing first before proceeding to confirm
the news so as to leave your mind free from this obligation.
Additionally, if it was indeed necessary that you skip the scheduled drug
testing to verify that call, why did you not ask permission from the Drug
Watch [C]ommittee that you were leaving? The place where the activity was
being conducted was very close to your workstation. It was absolutely within
your reach to inform any of its members that you were attending to an
emergency call. Why did you not do so?
All this undisputedly proves that you merely eluded the drug testing. Your
claim that you did not refuse to be screened carries no value. Your act was a
negation of your words."33
The NLRC found that respondent was not only validly dismissed for cause
he was also properly accorded his constitutional right to due process as
shown by the following succession of events:
1. On November 8, 2004, respondent was given a show-cause notice

requiring him to explain in writing within three days why no
disciplinary action should be taken against him for violation of
company policy on unjustified refusal to submit to random drug testing
a type D offense which results in termination.
2. Respondent submitted his explanation on November 11, 2004.
3. On December 9, 2004, respondent was given a notice of

investigation34 informing him of a meeting on December 13, 2004 at
9:00 a.m. In this meeting, respondent was allowed to explain his side,
present his evidences and witnesses, and confront the witnesses
presented against him.
4. On February 14, 2005, respondent was served a letter of

termination which clearly stated the reasons therefor.35
The NLRC, notwithstanding its finding that respondent was dismissed for
cause and with due process, granted financial assistance to respondent on
equitable grounds. It invoked the past decisions of this Court which allowed
the award of financial assistance due to factors such as long years of service
or the Courts concern and compassion towards labor where the infraction
was not so serious. Thus, considering respondents 10 years of service with
petitioner corporation without any record of violation of company policies,

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the NLRC ordered petitioner corporation to pay respondent financial

assistance equivalent to one-half (1/2) month pay for every year of service
in the amount of One Hundred Ninety-Nine Thousand Seventy-Five Pesos
(P199,075.00). The NLRC decision states thus:
WHEREFORE, the decision dated 31 August 2005 is VACATED and SET

ASIDE. The instant complaint is dismissed for lack of merit. However,
respondent Mirant [Philippines] Corp. is ordered to pay complainant financial
assistance in the amount of one hundred ninety-nine thousand seventy five
pesos (P199,075.00).
SO ORDERED.36
Respondent filed a motion for reconsideration, 37 while petitioners filed a

motion for partial reconsideration 38 of the NLRC decision. In a
Resolution39 dated June 30, 2006, the NLRC denied both motions.
In a petition for certiorari before the CA, respondent raised the following
issues: whether the NLRC acted without or in excess of its jurisdiction, or
with grave abuse of discretion amounting to lack or excess of its jurisdiction
when it construed that the terms "failure," "avoidance," "refusal" and
"unjustified refusal" have similar meanings; reversed the factual findings of
the Labor Arbiter; and held that respondent deliberately breached
petitioners Anti-Drugs Policy.40 Respondent further argued before the
appellate court that his failure to submit himself to the random drug test
was justified because he merely responded to an emergency call regarding
his wifes safety in Tel Aviv, and that such failure cannot be considered
synonymous with "avoidance" or "refusal" so as to mean "unjustified refusal"
in order to be meted the penalty of termination.41
The CA disagreed with the NLRC and ruled that it was immaterial whether
respondent failed, refused, or avoided being tested. To the appellate court,
the singular fact material to this case was that respondent did not get
himself tested in clear disobedience of company instructions and policy.
Despite such disobedience, however, the appellate court considered the
penalty of dismissal to be too harsh to be imposed on respondent, viz.:
x x x While it is a management prerogative to terminate its erring employee

for willful disobedience, the Supreme Court has recognized that such penalty
is too harsh depending on the circumstances of each case. "There must be
reasonable proportionality between, on the one hand, the willful
disobedience by the employee and, on the other hand, the penalty imposed
therefor" x x x.

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In this case, [petitioner corporations] own investigating panel has revealed

that the penalty of dismissal is too harsh to impose on [respondent],
considering that this was the first time in his 10-year employment that the
latter violated its company policies. The investigating panel even suggested
that a review be had of the company policy on the term "unjustified refusal"
to clearly define what constitutes a violation thereof. The recommendation of
the investigating panel is partially reproduced as follows:
"VII. Recommendation
However, despite having violated the company policy, the panel

recommends 4 working weeks suspension without pay (twice the company
policys maximum of 2 working weeks suspension) instead of termination
due to the following mitigating circumstances.
1. Mr. Joselito A. Caro did not directly refuse to be subjected to the

random drug test scheduled on November 3, 2004.
2. In the case of Mr. Joselito A. Caro, the two conditions for

termination (Unjustified and Refusal) were not fully met as he
expressly agreed to undergo drug test.
3. Mr. Joselito A. Caro voluntarily offered himself to undergo drug test

the following day at his own expense.
Doubling the maximum of 2 weeks suspension to 4 weeks is indicative of the

gravity of the offense committed. The panel believes that although
mitigating factors partially offset reasons for termination, the 2 weeks
maximum suspension is too lenient penalty for such an offense.
The Panel also took into consideration that Mr. Joselito A. Caro has served
the company for ten (10) years without any record of violation of the
company policies.
xxxx
The Panel also recommends that Management review the Mirant Drug Policy
specifically Unjustified [R]efusal to submit to random drug testing. The
Panel believes that the term refusal casts certain ambiguities and should be
clearly defined."42
The CA however found that award of moral and exemplary damages is

without basis due to lack of bad faith on the part of the petitioner

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corporation which merely acted within its management prerogative. In its

assailed Decision dated June 26, 2007, the CA ruled, viz.:
IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED. The

assailed Decision dated May 31, 2006 and Resolution dated June 30, 2006
rendered by the National Labor Relations Commission (NLRC) in NLRC NCR
CA No. 046551-05 (NCR-00-03-02511-05) are REVERSED and SET ASIDE.
The Labor Arbiters Decision dated August 31, 2005 is hereby REINSTATED
with MODIFICATION by omitting the award of moral and exemplary damages
as well as attorneys fees, and that the petitioners salary equivalent to four
(4) working weeks at the time he was terminated be deducted from his
backwages. No cost.
SO ORDERED.43
Petitioner moved for reconsideration. In its assailed Resolution dated

January 11, 2008, the CA denied petitioners motion for reconsideration for
lack of merit. It ruled that the arguments in the motion for reconsideration
were already raised in their past pleadings.
In this instant Petition, petitioners raise the following grounds:
I. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT

FAILED TO CONSIDER THAT:
A. THE PETITION FOR CERTIORARI FILED BY RESPONDENT CARO

SHOULD HAVE BEEN SUMMARILY DISMISSED CONSIDERING THAT IT
LACKED THE REQUISITE VERIFICATION AND CERTIFICATION AGAINST
FORUM SHOPPING REQUIRED BY THE RULES OF COURT; OR
B. AT THE VERY LEAST, THE SAID PETITION FOR CERTIORARI FILED

BY RESPONDENT CARO SHOULD HAVE BEEN CONSIDERED MOOT
SINCE RESPONDENT CARO HAD ALREADY PREVIOUSLY EXECUTED A
QUITCLAIM DISCHARGING THE PETITIONERS FROM ALL HIS
MONETARY CLAIMS.
II. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND DECIDED

QUESTIONS OF SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW
AND APPLICABLE DECISIONS OF THE HONORABLE COURT, CONSIDERING
THAT:
A. THE COURT OF APPEALS REVERSED THE DECISION DATED 31 MAY

2006 OF THE NLRC ON THE GROUND THAT THERE WAS GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION

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NOTWITHSTANDING THE FACT THAT IT AFFIRMED THE NLRCS

FINDINGS THAT RESPONDENT CARO DELIBERATELY DISOBEYED
PETITIONER MIRANTS ANTI-DRUGS POLICY.
B. THE PENALTY OF TERMINATION SHOULD HAVE BEEN SUSTAINED

BY THE COURT OF APPEALS GIVEN ITS POSITIVE FINDING THAT
RESPONDENT CARO DELIBERATELY AND WILLFULLY DISOBEYED
PETITIONER MIRANTS ANTI-DRUGS POLICY.
C. IN INVALIDATING RESPONDENT CAROS DISMISSAL, THE COURT

OF APPEALS SUBSTITUTED WITH ITS OWN DISCRETION A CLEAR
MANAGEMENT PREROGATIVE BELONGING ONLY TO PETITIONER
MIRANT IN THE INSTANT CASE.
D. THE WILLFUL AND DELIBERATE VIOLATION OF PETITIONER

MIRANTS ANTI-DRUGS POLICY AGGRAVATED RESPONDENT CAROS
WRONGFUL CONDUCT WHICH JUSTIFIED HIS TERMINATION.
E. IN INVALIDATING RESPONDENT CAROS DISMISSAL, THE COURT

OF APPEALS, IN EFFECT, BELITTLED THE IMPORTANCE AND
SERIOUSNESS OF PETITIONER MIRANTS ANTI-DRUGS POLICY AND
CONSEQUENTLY HAMPERED THE EFFECTIVE IMPLEMENTATION OF THE
SAME.
F. THE EXISTENCE OF OTHER GROUNDS FOR CAROS DISMISSAL,

SUCH AS WILLFUL DISOBEDIENCE AND [LOSS] OF TRUST AND
CONFIDENCE, JUSTIFIED HIS TERMINATION FROM EMPLOYMENT.
III. NONETHELESS, THE AWARD OF FINANCIAL ASSISTANCE IN FAVOR OF

RESPONDENT CARO IS NOT WARRANTED CONSIDERING THAT RESPONDENT
CAROS WILLFUL AND DELIBERATE REFUSAL TO SUBJECT HIMSELF TO
PETITIONER MIRANTS DRUG TEST AND HIS SUBSEQUENT EFFORTS TO
CONCEAL THE SAME SHOWS HIS DEPRAVED MORAL CHARACTER.
IV. THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT HELD

PETITIONER BAUTISTA PERSONALLY LIABLE FOR [RESPONDENT] CAROS
UNFOUNDED CLAIMS CONSIDERING THAT, ASIDE FROM RESPONDENT
CAROS DISMISSAL BEING LAWFUL, PETITIONER BAUTISTA MERELY ACTED
WITHIN THE SCOPE OF HIS FUNCTIONS IN GOOD FAITH.44
We shall first rule on the issue raised by petitioners that the petition for
certiorari filed by respondent with the CA should have been summarily
dismissed as it lacked the requisite verification and certification against
forum shopping under Sections 4 and 5, Rule 7 of the Rules, viz.:

Page 80 of 260
SEC. 4. Verification. Except when otherwise specifically required by law or

rule, pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading
and that the allegations therein are true and correct of his knowledge and
belief.
A pleading required to be verified which contains a verification based on

"information and belief," or upon "knowledge, information and belief," or
lacks a proper verification, shall be treated as an unsigned pleading.
SEC. 5. Certification against forum shopping. The plaintiff or principal party

shall certify under oath in the complaint or other initiatory pleading asserting
a claim for relief, or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced
any action or filed any claim involving the same issues in any court, tribunal
or quasi-judicial agency and, to the best of his knowledge, no such other
action or claim is pending therein; (b) if there is such other pending action
or claim, a complete statement of the present status thereof; and (c) if he
should thereafter learn that the same or similar action or claim has been
filed or is pending, he shall report that fact within five (5) days therefrom to
the court wherein his aforesaid complaint or initiatory pleading has been
filed.
Failure to comply with the foregoing requirements shall not be curable by

mere amendment of the complaint or other initiatory pleading but shall be
cause for the dismissal of the case without prejudice, unless otherwise
provided, upon motion and after hearing. The submission of a false
certification or noncompliance with any of the undertakings therein shall
constitute indirect contempt of court, without prejudice to the corresponding
administrative and criminal actions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall constitute direct
contempt, as well as a cause for administrative sanctions.
It is the contention of petitioners that due to respondents failure to

subscribe the Verification and Certification of Non-Forum Shopping before a
Notary Public, the said verification and certification cannot be considered to
have been made under oath. Accordingly, such omission is fatal to the entire
petition for not being properly verified and certified. The CA therefore erred
when it did not dismiss the petition.
This jurisdiction has adopted in the field of labor protection a liberal stance
towards the construction of the rules of procedure in order to serve the ends

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of substantial justice. This liberal construction in labor law emanates from

the mandate that the workingmans welfare should be the primordial and
paramount consideration.45 Thus, if the rules of procedure will stunt courts
from fulfilling this mandate, the rules of procedure shall be relaxed if the
circumstances of a case warrant the exercise of such liberality. If we sustain
the argument of petitioners in the case at bar that the petition for certiorari
should have been dismissed outright by the CA, the NLRC decision would
have reached finality and respondent would have lost his remedy and denied
his right to be protected against illegal dismissal under the Labor Code, as
amended.
It is beyond debate that petitioner corporations enforcement of its Anti-

Drugs Policy is an exercise of its management prerogative. It is also a
conceded fact that respondent "failed" to take the random drug test as
scheduled, and under the said company policy, such failure metes the
penalty of termination for the first offense. A plain, simple and literal
application of the said policy to the omission of respondent would have
warranted his outright dismissal from employment if the facts were that
simple in the case at bar. Beyond debate the facts of this case are not
and this disables the Court from permitting a straight application of an
otherwise prima facie straightforward rule if the ends of substantial justice
have to be served.
It is the crux of petitioners argument that respondents omission amounted

to "unjust refusal" because he could not sufficiently support with convincing
proof and evidence his defenses for failing to take the random drug test. For
petitioners, the inconsistencies in respondents explanations likewise
operated to cast doubt on his real reasons and motives for not submitting to
the random drug test on schedule. In recognition of these inconsistencies
and the lack of convincing proof from the point of view of petitioners, the
NLRC reversed the decision of the Labor Arbiter. The CA found the ruling of
the Labor Arbiter to be more in accord with the facts, law and existing
jurisprudence.
We agree with the disposition of the appellate court that there was illegal
dismissal in the case at bar.
While the adoption and enforcement by petitioner corporation of its Anti-

Drugs Policy is recognized as a valid exercise of its management prerogative
as an employer, such exercise is not absolute and unbridled. Managerial
prerogatives are subject to limitations provided by law, collective bargaining
agreements, and the general principles of fair play and justice. 46 In the
exercise of its management prerogative, an employer must therefore ensure
that the policies, rules and regulations on work-related activities of the

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employees must always be fair and reasonable and the corresponding

penalties, when prescribed, commensurate to the offense involved and to
the degree of the infraction.47 The Anti-Drugs Policy of Mirant fell short of
these requirements.
Petitioner corporations subject Anti-Drugs Policy fell short of being fair and
reasonable.
First. The policy was not clear on what constitutes "unjustified refusal" when
the subject drug policy prescribed that an employees "unjustified refusal" to
submit to a random drug test shall be punishable by the penalty of
termination for the first offense. To be sure, the term "unjustified refusal"
could not possibly cover all forms of "refusal" as the employees resistance,
to be punishable by termination, must be "unjustified." To the mind of the
Court, it is on this area where petitioner corporation had fallen short of
making it clear to its employees as well as to management as to what
types of acts would fall under the purview of "unjustified refusal." Even
petitioner corporations own Investigating Panel recognized this ambiguity,
viz.:
The Panel also recommends that Management review the Mirant Drug Policy
specifically "Unjustified [R]efusal to submit to random drug testing." The
Panel believes that the term "refusal" casts certain ambiguities and should
be clearly defined.48
The fact that petitioner corporations own Investigating Panel and its Vice
President for Operations, Sliman, differed in their recommendations
regarding respondents case are first-hand proof that there, indeed, is
ambiguity in the interpretation and application of the subject drug policy.
The fact that petitioner corporations own personnel had to dissect the
intended meaning of "unjustified refusal" is further proof that it is not clear
on what context the term "unjustified refusal" applies to. It is therefore not a
surprise that the Labor Arbiter, the NLRC and the CA have perceived the
term "unjustified refusal" on different prisms due to the lack of parameters
as to what comes under its purview. To be sure, the fact that the courts and
entities involved in this case had to engage in semantics and come up with
different constructions is yet another glaring proof that the subject policy
is not clear creating doubt that respondents dismissal was a result of
petitioner corporations valid exercise of its management prerogative.
It is not a mere jurisprudential principle, but an enshrined provision of law,

that all doubts shall be resolved in favor of labor. Thus, in Article 4 of the
Labor Code, as amended, "[a]ll doubts in the implementation and
interpretation of the provisions of [the Labor] Code, including its

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implementing rules and regulations, shall be resolved in favor of labor." In

Article 1702 of the New Civil Code, a similar provision states that "[i]n case
of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer." Applying these
provisions of law to the circumstances in the case at bar, it is not fair for this
Court to allow an ambiguous policy to prejudice the rights of an employee
against illegal dismissal. To hold otherwise and sustain the stance of
petitioner corporation would be to adopt an interpretation that goes against
the very grain of labor protection in this jurisdiction. As correctly stated by
the Labor Arbiter, "when a conflicting interest of labor and capital are
weighed on the scales of social justice, the heavier influence of the latter
must be counter-balanced by the sympathy and compassion the law must
accord the underprivileged worker."49
Second. The penalty of termination imposed by petitioner corporation upon

respondent fell short of being reasonable. Company policies and regulations
are generally valid and binding between the employer and the employee
unless shown to be grossly oppressive or contrary to law 50 as in the case
at bar. Recognizing the ambiguity in the subject policy, the CA was more
inclined to adopt the recommendation of petitioner corporations own
Investigating Panel over that of Sliman and the NLRC. The appellate court
succinctly but incisively pointed out, viz.:
x x x We find, as correctly pointed out by the investigating panel, that the

[petitioner corporations] Anti-Drug Policy is excessive in terminating an
employee for his "unjustified refusal" to subject himself to the random drug
test on first offense, without clearly defining what amounts to an "unjustified
refusal."
Thus, We find that the recommended four (4) working weeks suspension
without pay as the reasonable penalty to be imposed on [respondent] for his
disobedience. x x x51 (Additional emphasis supplied.)
To be sure, the unreasonableness of the penalty of termination as imposed

in this case is further highlighted by a fact admitted by petitioner corporation
itself: that for the ten-year period that respondent had been employed by
petitioner corporation, he did not have any record of a violation of its
company policies.
As to the other issue relentlessly being raised by petitioner corporation that

respondents petition for certiorari before the CA should have been
considered moot as respondent had already previously executed a quitclaim
discharging petitioner corporation from all his monetary claims, we cannot
agree. Quitclaims executed by laborers are ineffective to bar claims for the

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full measure of their legal rights,52 especially in this case where the evidence
on record shows that the amount stated in the quitclaim exactly corresponds
to the amount claimed as unpaid wages by respondent under Annex A 53 of
his Reply54 filed with the Labor Arbiter. Prima facie, this creates a false
impression that respondents claims have already been settled by petitioner
corporation discharging the latter from all of respondents monetary
claims. In truth and in fact, however, the amount paid under the subject
quitclaim represented the salaries of respondent that remained unpaid at the
time of his termination not the amounts being claimed in the case at bar.
We believe that this issue was extensively discussed by both the Labor
Arbiter and the CA and we find no reversible error on the disposition of this
issue, viz.:
A review of the records show that the alluded quitclaim, which was undated
and not even notarized although signed by the petitioner, was for the
amount of P59,630.05. The said quitclaim was attached as Annex 26 in the
[petitioners] Position Paper filed before the Labor Arbiter. As fully explained
by [respondent] in his Reply filed with the Labor Arbiter, the amount stated
therein was his last pay due to him when he was terminated, not the amount
representing his legitimate claims in this labor suit x x x. To bolster his
defense, [respondent] submitted the pay form issued to him by the
[petitioner corporation], showing his net pay at P59,630.05 exactly the
amount stated in the quitclaim x x x. Then, too, as stated on the quitclaim
itself, the intention of the waiver executed by the [respondent] was to
release [petitioner corporation] from any liability only on the said amount
representing [respondents] "full and final payment of [his] last
salary/separation pay" x x x. It did not in any way waive [respondents]
right to pursue his legitimate claims regarding his dismissal in a labor suit.
Thus, We gave no credence to [petitioners] private defense that alleged
quitclaim rendered the instant petition moot.55
Finally, the petition avers that petitioner Bautista should not be held
personally liable for respondents dismissal as he acted in good faith and
within the scope of his official functions as then president of petitioner
corporation. We agree with petitioners.1wphi1 Both decisions of the Labor
Arbiter and the CA did not discuss the basis of the personal liability of
petitioner Bautista, and yet the dispositive portion of the decision of the
Labor Arbiter - which was affirmed by the appellate court - held him jointly
and severally liable with petitioner corporation, viz.:
WHEREFORE, premises considered, this Office finds respondents GUILTY of

illegal dismissal, and hereby ordered to jointly and severally reinstate
complainant back to his former position without loss on seniority rights and

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benefits and to pay him his backwages and other benefits from the date he
was illegally dismissed up to the time he is actually reinstated, partially
computed as of this date in the amount of P258,797.50 (P39,815.00 x 6.5
mos.) plus his 13th and 14th month pay in the amount of P43,132.91 or in
the total amount of P301,930.41. Respondents are also ordered to pay
complainant the amount of P3,000,000.00 as and by way of moral and
exemplary damages, and to pay complainant the amount equivalent to ten
percent (10%) of the total awards as and by way of attorney's fees.
SO ORDERED.56 (Emphasis supplied.)
A corporation has a personality separate and distinct from its officers and
board of directors who may only be held personally liable for damages if it is
proven that they acted with malice or bad faith in the dismissal of an
employee.57 Absent any evidence on record that petitioner Bautista acted
maliciously or in bad faith in effecting the termination of respondent, plus
the apparent lack of allegation in the pleadings of respondent that petitioner
Bautista acted in such manner, the doctrine of corporate fiction dictates that
only petitioner corporation should be held liable for the illegal dismissal of
respondent.
WHEREFORE, the petition for review on certiorari is DENIED. The assailed

Decision dated June 26, 2007 and the Resolution dated January 11, 2008 in
CA-G.R. SP No. 96153 are AFFIRMED with the MODIFICATION that only
petitioner corporation is found GUILTY of the illegal dismissal of respondent
Joselito A. Caro. Petitioner Edgardo A. Bautista is not held personally liable
as then President of petitioner corporation at the time of the illegal
dismissal.
No pronouncement as to costs.
SO ORDERED.
8 Benigno vs ABSCBN
G.R. No. 199166 April 20, 2015
NELSON V. BEGINO, GENER DEL VALLE, MONINA A VILA-LLORIN AND

MA. CRISTINA SUMAYAO,Petitioners,
vs.

Page 86 of 260
ABS-CBN CORPORATION (FORMERLY, ABS-CBN BROADCASTING

CORPORATION) AND AMALIA VILLAFUERTE, Respondents.
DECISION
PEREZ, J.:
The existence of an employer-employee relationship is at the heart of this

Petition for Review on Certiorari filed pursuant to Rule 45 of the Rules of
Court, primarily assailing the 29 June 2011 Decision 1 rendered by the Fourth
Division of the Court of Appeals (CA) in CA-G.R. SP No. 116928 which ruled
out said relationship between the parties.
The Facts
Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting

Corporation) is a television and radio broadcasting corporation which, for its
Regional Network Group in Naga City, employed respondent Amalia
Villafuerte (Villafuerte) as Manager. There is no dispute regarding the fact
that, thru Villafuerte, ABS-CBN engaged the services of petitioners Nelson
Begino (Begino) and Gener Del Valle (Del Valle) sometime in 1996 as
Cameramen/Editors for TV Broadcasting. Petitioners Ma. Cristina Sumayao
(Sumayao) and Monina Avila-Llorin (Llorin) were likewise similarly engaged
as reporters sometime in 1996 and 2002, respectively. With their services
engaged by respondents thru Talent Contracts which, though regularly
renewed over the years, provided terms ranging from three (3) months to
one (1) year, petitioners were given Project Assignment Forms which
detailed, among other matters, the duration of a particular project as well as
the budget and the daily technical requirements thereof. In the aforesaid
capacities, petitioners were tasked with coverage of news items for
subsequent daily airings in respondents TV Patrol Bicol Program. 2
While specifically providing that nothing therein shall be deemed or

construed to establish an employer-employee relationship between the
parties, the aforesaid Talent Contracts included, among other matters,
provisions on the following matters: (a) the Talents creation and
performance of work in accordance with the ABS-CBNs professional
standards and compliance with its policies and guidelines covering
intellectual property creators, industry codes as well as the rules and
regulations of the Kapisanan ng mga Broadcasters sa Pilipinas (KBP) and
other regulatory agencies; (b) the Talents non-engagement in similar work
for a person or entity directly or indirectly in competition with or adverse to
the interests of ABS-CBN and non-promotion of any product or service
without prior written consent; and (c) the results-oriented nature of the

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talents work which did not require them to observe normal or fixed working
hours.3 Subjected to contractors tax, petitioners remunerations were
denominated as Talent Fees which, as of last renewal, were admitted to be
pegged per airing day at P273.35 for Begino, P 302.92 for Del Valle, P
323.08 for Sumayao and P 315.39 for Llorin.4
Claiming that they were regular employees of ABS-CBN, petitioners filed

against respondents the complaint5docketed as Sub-RAB 05-04- 00041-07
before the National Labor Relations Commissions (NLRC) Sub-Regional
Arbitration Branch No. 5, Naga City. In support of their claims for
regularization, underpayment of overtime pay, holiday pay, 13th month pay,
service incentive leave pay, damages and attorney's fees, petitioners alleged
that they performed functions necessary and desirable in ABS-CBN's
business. Mandated to wear company IDs and provided all the equipment
they needed, petitioners averred that they worked under the direct control
and supervision of Villafuerte and, at the end of each day, were informed
about the news to be covered the following day, the routes they were to
take and, whenever the subject of their news coverage is quite distant, even
the start of their workday. Due to the importance of the news items they
covered and the necessity of their completion for the success of the
program, petitioners claimed that, under pain of immediate termination,
they were bound by the companys policy on, among others, attendance and
punctuality.6
Aside from the constant evaluation of their actions, petitioners were

reportedly subjected to an annual competency assessment alongside other
ABS-CBN employees, as condition for their continued employment. Although
their work involved dealing with emergency situations at any time of the day
or night, petitioners claimed that they were not paid the labor standard
benefits the law extends to regular employees. To avoid paying what is due
them, however, respondents purportedly resorted to the simple expedient of
using said Talent Contracts and/or Project Assignment Forms which
denominated petitioners as talents, despite the fact that they are not actors
or TV hosts of special skills. As a result of this iniquitous situation,
petitioners asseverated that they merely earned an average of P7,000.00
to P8,000.00 per month, or decidedly lower than the P21,773.00 monthly
salary ABS-CBN paid its regular rank-and-file employees. Considering their
repeated re-hiring by respondents for ostensible fixed periods, this situation
had gone on for years since TV Patrol Bicol has continuously aired from 1996
onwards.7
In refutation of the foregoing assertions, on the other hand, respondents

argued that, although it occasionally engages in production and generates
programs thru various means, ABS-CBN is primarily engaged in the business

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of broadcasting television and radio content. Not having the full manpower
complement to produce its own program, the company had allegedly
resorted to engaging independent contractors like actors, directors, artists,
anchormen, reporters, scriptwriters and various production and technical
staff, who offered their services in relation to a particular program. Known in
the industry as talents, such independent contractors inform ABSCBN of
their availability and were required to accomplish Talent Information Forms
to facilitate their engagement for and appearance on designated project
days. Given the unpredictability of viewer preferences, respondents argued
that the company cannot afford to provide regular work for talents with
whom it negotiates specific or determinable professional fees on a per
project, weekly or daily basis, usually depending on the budget allocation for
a project.8
Respondents insisted that, pursuant to their Talent Contracts and/or Project

Assignment Forms, petitioners were hired as talents, to act as reporters
and/or cameramen for TV Patrol Bicol for designated periods and rates. Fully
aware that they were not considered or to consider themselves as
employees of a particular production or film outfit, petitioners were
supposedly engaged on the basis of the skills, knowledge or expertise they
already possessed and, for said reason, required no further training from
ABS-CBN. Although petitioners were inevitably subjected to some degree of
control, the same was allegedly limited to the imposition of general
guidelines on conduct and performance, simply for the purpose of upholding
the standards of the company and the strictures of the industry. Never
subjected to any control or restrictions over the means and methods by
which they performed or discharged the tasks for which their services were
engaged, petitioners were, at most, briefed whenever necessary regarding
the general requirements of the project to be executed.9
Having been terminated during the pendency of the case, Petitioners filed on
10 July 2007 a second complaint against respondents, for regularization,
payment of labor standard benefits, illegal dismissal and unfair labor
practice, which was docketed as Sub-RAB 05-08-00107-07. Upon
respondents motion, this complaint was dismissed for violation of the rules
against forum shopping in view of the fact that the determination of the
issues in the second case hinged on the resolution of those raised in the
first.10 On 19 December 2007, however, Labor Arbiter Jesus Orlando
Quiones (Labor Arbiter Quiones) resolved Sub-RAB 05-04-00041-07 in
favor of petitioners who, having rendered services necessary and related to
ABS-CBNs business for more than a year, were determined to be its regular
employees. With said conclusion found to be buttressed by, among others,
the exclusivity clause and prohibitions under petitioners Talent Contracts

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and/or Project Assignment Forms which evinced respondents control over

them,11 Labor Arbiter Quiones disposed of the case in the following wise:
WHEREFORE, finding merit in the causes of action set forth by the

complainants, judgment is hereby rendered declaring complainants MONINA
AVILA-LLORIN, GENER L. DEL VALLE, NELSON V. BEGINO and MA. CRISTINA
V. SUMAYAO, as regular employees of respondent company, ABS-CBN
BROADCASTING CORPORATION.
Accordingly, respondent ABS-CBN Broadcasting Corporation is hereby

ORDERED to pay complainants, subject to the prescriptive period provided
under Article 291 of the Labor Code, however applicable, the total amount of
Php2,440,908.36, representing salaries/wage differentials, holiday pay,
service incentive leave pay and 13th month pay, to include 10% of the
judgment award as attorneys fees of the judgment award (computation of
the monetary awards are attached hereto as integral part of this decision).
Moreover, respondents are directed to admit back complainants to work

under the same terms and conditions prevailing prior to their separation or,
at respondents' option, merely reinstated in the payroll.
Other than the above, all other claims and charges are ordered DISMISSED
for lack of merit.12
Aggrieved by the foregoing decision, respondents elevated the case on

appeal before the NLRC, during the pendency of which petitioners filed a
third complaint against the former, for illegal dismissal, regularization,
nonpayment of salaries and 13th month pay, unfair labor practice, damages
and attorneys fees. In turn docketed as NLRC Case No. Sub-RAB-V-05-03-
00039-08, the complaint was raffled to Labor Arbiter Quiones who issued
an Order dated 30 April 2008, inhibiting himself from the case and denying
respondents motion to dismiss on the grounds of res judicata and forum
shopping.13 Finding that respondents control over petitioners was indeed
manifest from the exclusivity clause and prohibitions in the Talent Contracts
and/or Project Assignment Forms, on the other hand, the NLRC rendered a
Decision dated 31 March 2010, affirming said Labor Arbiters appealed
decision.14 Undeterred by the NLRCs 31 August 2010 denial of their motion
for reconsideration,15 respondents filed the Rule 65 petition for certiorari
docketed before the CA as CA-G.R. SP No. 116928 which, in addition to
taking exceptions to the findings of the assailed decision, faulted petitioners
for violating the rule against forum shopping.16
On 29 June 2011, the CA rendered the herein assailed decision, reversing

the findings of the Labor Arbiter and the NLRC. Ruling out the existence of

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forum shopping on the ground that petitioners' second and third complaints
were primarily anchored on their termination from employment after the
filing of their first complaint, the CA nevertheless discounted the existence of
an employer-employee relation between the parties upon the following
findings and conclusions: (a) petitioners, were engaged by respondents as
talents for periods, work and the program specified in the Talent Contracts
and/or Project Assignment Forms concluded between them; (b) instead of
fixed salaries, petitioners were paid talent fees depending on the budget
allocated for the program to which they were assigned; (c) being mainly
concerned with the result, respondents did not exercise control over the
manner and method by which petitioner accomplished their work and, at
most, ensured that they complied with the standards of the company, the
KBP and the industry; and, (d) the existence of an employer-employee
relationship is not necessarily established by the exclusivity clause and
prohibitions which are but terms and conditions on which the parties are
allowed to freely stipulate.17
Petitioners motion for reconsideration of the foregoing decision was denied

in the CA's 3 October 2011 Resolution,18 hence, this petition.
The Issues
Petitioners seek the reversal of the CAs assailed Decision and Resolution on
the affirmative of the following issues:
1. Whether or not the CA seriously and reversibly erred in not dismissing

respondents petition for certiorari in view of the fact that they did file a
Notice of Appeal at the NLRC level and did not, by themselves or through
their duly authorized representative, verify and certify the Memorandum of
Appeal they filed thereat, in accordance with the NLRC Rules of Procedure;
and 2. Whether or not the CA seriously and reversibly erred in brushing
aside the determination made by both the Labor Arbiter and the NLRC of the
existence of an employer-employee relationship between the parties, despite
established jurisprudence supporting the same.
The Court's Ruling
The Court finds the petition impressed with merit.
Petitioners preliminarily fault the CA for not dismissing respondents Rule 65

petition for certiorari in view of the fact that the latter failed to file a Notice
of Appeal from the Labor Arbiters decision and to verify and certify the
Memorandum of Appeal they filed before the NLRC. While concededly
required under the NLRC Rules of Procedure, however, these matters should

Page 91 of 260
have been properly raised during and addressed at the appellate stage
before the NLRC. Instead, the record shows that the NLRC took cognizance
of respondents appeal and proceeded to resolve the same in favor of
petitioners by affirming the Labor Arbiters decision. Not having filed their
own petition for certiorari to take exception to the liberal attitude the NLRC
appears to have adopted towards its own rules of procedure, petitioners
were hardly in the proper position to raise the same before the CA or, for
that matter, before this Court at this late stage. Aside from the settled rule
that a party who has not appealed is not entitled to affirmative relief other
than the ones granted in the decision19 rendered, liberal interpretation of
procedural rules on appeal had, on occasion, been favored in the interest of
substantive justice.20
Although the existence of an employer-employee relationship is, on the

other hand, a question of fact21 which is ordinarily not the proper subject of
a Rule 45 petition for review on certiorari like the one at bar, the conflicting
findings between the labor tribunals and the CA justify a further
consideration of the matter.22 To determine the existence of said relation,
case law has consistently applied the four-fold test, to wit: (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 on the
means and methods by which the work is accomplished. 23 Of these criteria,
the so-called "control test" is generally regarded as the most crucial and
determinative indicator of the presence or absence of an employer-employee
relationship. Under this test, an employer-employee relationship is said to
exist where the person for whom the services are performed reserves the
right to control not only the end result but also the manner and means
utilized to achieve the same.24
In discounting the existence of said relationship between the parties, the CA

ruled that Petitioners' services were, first and foremost, engaged thru their
Talent Contracts and/or Project Assignment Forms which specified the work
to be performed by them, the project to which they were assigned, the
duration thereof and their rates of pay according to the budget therefor
allocated. Because they are imbued with public interest, it cannot be
gainsaid, however, that labor contracts are subject to the police power of the
state and are placed on a higher plane than ordinary contracts. The
recognized supremacy of the law over the nomenclature of the contract and
the stipulations contained therein is aimed at bringing life to the policy
enshrined in the Constitution to afford protection to labor. 25 Insofar as the
nature of ones employment is concerned, Article 280 of the Labor Code of
the Philippines also provides as follows:

Page 92 of 260
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 service to be performed is seasonal in nature and the employment is
for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the

preceding paragraph: Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken, shall
be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such actually exists.
It has been ruled that the foregoing provision contemplates four kinds of
employees, namely: (a) regular employees or those who have been engaged
to perform activities which are usually necessary or desirable in the usual
business or trade of the employer; (b) project employees or those whose
employment has been fixed for a specific project or undertaking, the
completion or termination of which has been determined at the time of the
engagement of the employee; (c) seasonal employees or those who work or
perform services which are seasonal in nature, and the employment is for
the duration of the season; and (d) casual employees or those who are not
regular, project, or seasonal employees.26 To the foregoing classification of
employee, jurisprudence has added that of contractual or fixed term
employee which, if not for the fixed term, would fall under the category of
regular employment in view of the nature of the employees engagement,
which is to perform activity usually necessary or desirable in the employers
business.27
The Court finds that, notwithstanding the nomenclature of their Talent

Contracts and/or Project Assignment Forms and the terms and condition
embodied therein, petitioners are regular employees of ABS-CBN. Time and
again, it has been ruled that the test to determine whether employment is
regular or not is the reasonable connection between the activity performed
by the employee in relation to the business or trade of the employer. 28 As
cameramen/editors and reporters, petitioners were undoubtedly performing
functions necessary and essential to ABS-CBNs business of broadcasting
television and radio content. It matters little that petitioners services were
engaged for specified periods for TV Patrol Bicol and that they were paid
according to the budget allocated therefor. Aside from the fact that said

Page 93 of 260
program is a regular weekday fare of the ABS-CBNs Regional Network

Group in Naga City, the record shows that, from their initial engagement in
the aforesaid capacities, petitioners were continuously re-hired by
respondents over the years. To the mind of the Court, respondents repeated
hiring of petitioners for its long-running news program positively indicates
that the latter were ABS-CBNs regular employees.
If the employee has been performing the job for at least one year, even if
the performance is not continuous or merely intermittent, the law deems the
repeated or continuing performance as sufficient evidence of the necessity, if
not indispensability of that activity in the business. 29 Indeed, an employment
stops being co-terminous with specific projects where the employee is
continuously re-hired due to the demands of the employers business. 30When
circumstances show, moreover, that contractually stipulated periods of
employment have been imposed to preclude the acquisition of tenurial
security by the employee, this Court has not hesitated in striking down such
arrangements as contrary to public policy, morals, good customs or public
order.31 The nature of the employment depends, after all, on the nature of
the activities to be performed by the employee, considering the nature of the
employers business, the duration and scope to be done, and, in some cases,
even the length of time of the performance and its continued existence. 32 In
the same manner that the practice of having fixed-term contracts in the
industry does not automatically make all talent contracts valid and compliant
with labor law, it has, consequently, been ruled that the assertion that a
talent contract exists does not necessarily prevent a regular employment
status.33
As cameramen/editors and reporters, it also appears that petitioners were

subject to the control and supervision of respondents which, first and
foremost, provided them with the equipments essential for the discharge of
their functions. Prepared at the instance of respondents, petitioners Talent
Contracts tellingly provided that ABS-CBN retained "all creative,
administrative, financial and legal control" of the program to which they
were assigned. Aside from having the right to require petitioners "to attend
and participate in all promotional or merchandising campaigns, activities or
events for the Program," ABS-CBN required the former to perform their
functions "at such locations and Performance/Exhibition Schedules" it
provided or, subject to prior notice, as it chose determine, modify or change.
Even if they were unable to comply with said schedule, petitioners were
required to give advance notice, subject to respondents approval. 34 However
obliquely worded, the Court finds the foregoing terms and conditions
demonstrative of the control respondents exercised not only over the results
of petitioners work but also the means employed to achieve the same.

Page 94 of 260
In finding that petitioners were regular employees, the NLRC further ruled
that the exclusivity clause and prohibitions in their Talent Contracts and/or
Project Assignment Forms were likewise indicative of respondents control
over them. Brushing aside said finding, however, the CA applied the ruling in
Sonza v. ABS-CBN Broadcasting Corporation 35 where similar restrictions
were considered not necessarily determinative of the existence of an
employer-employee relationship. Recognizing that independent contractors
can validly provide his exclusive services to the hiring party, said case
enunciated that guidelines for the achievement of mutually desired results
are not tantamount to control. As correctly pointed out by petitioners,
however, parallels cannot be expediently drawn between this case and that
of Sonza case which involved a well-known television and radio personality
who was legitimately considered a talent and amply compensated as such.
While possessed of skills for which they were modestly recompensed by
respondents, petitioners lay no claim to fame and/or unique talents for
which talents like actors and personalities are hired and generally
compensated in the broadcast industry.
Later echoed in Dumpit-Murillo v. Court of Appeals, 36 this Court has rejected

the application of the ruling in the Sonza case to employees similarly
situated as petitioners in ABS-CBN Broadcasting Corporation v.
Nazareno.37The following distinctions were significantly observed between
employees like petitioners and television or radio personalities like Sonza, to
wit:
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.1wphi1 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.

Page 95 of 260
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. The Court will peruse beyond any such agreement
to examine the facts that typify the parties actual relationship. 38 (Emphasis
omitted)
Rather than the project and/or independent contractors respondents claim

them to be, it is evident from the foregoing disquisition that petitioners are
regular employees of ABS-CBN. This conclusion is borne out by the
ineluctable showing that petitioners perform functions necessary and
essential to the business of ABS-CBN which repeatedly employed them for a
long-running news program of its Regional Network Group in Naga City. In
the course of said employment, petitioners were provided the equipments
they needed, were required to comply with the Company's policies which
entailed prior approval and evaluation of their performance. Viewed from the
prism of these considerations, we find and so hold that the CA reversibly
erred when it overturned the NLRC's affirmance of the Labor Arbiter's finding
that an employer-employee relationship existed between the parties. Given
the fact, however, that Sub-RAB-V-05-03-00039-08 had not been
consolidated with this case and appears, for all intents and purposes, to be
pending still, the Court finds that the reinstatement of petitioners ordered by
said labor officer and tribunal should, as a relief provided in case of illegal
dismissal, be left for determination in said case.
WHEREFORE, the Court of Appeals' assailed Decision dated 29 June 2011

and Resolution dated 3 October 2011 in CA-G.R. SP No. 116928 are
REVERSED and SET ASIDE. Except for the reinstatement of Nelson V.
Begino, Gener Del Valle, Monina Avila-Llorin and Ma. Cristina Sumayao, the
National Labor and Relations Commission's 31 March 2010 Decision is,
accordingly, REINSTATED.
SO ORDERED.
9 Universidad vs Sambajon
G.R. Nos. 196280 & 196286 April 2, 2014

Page 96 of 260
UNIVERSIDAD DE STA. ISABEL, Petitioner,

vs.
MARVIN-JULIAN L. SAMBAJON, JR., Respondent.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 urging this

Court to set aside the Decision 1 dated March 25, 2011 of the Court of
Appeals (CA) in CA-GR. SP Nos. 108103 and 108168 which affirmed with
modification the Decision2 dated August 1, 2008 of the National Labor
Relations Commission (NLRC). The NLRC affirmed the Decision 3 dated
August 22, 2006 of the Labor Arbiter in NLRC Sub-RAB V-05-04-00053-05)
declaring petitioner liable for illegal dismissal of respondent.
The Facts
Universidad de Sta. Isabel (petitioner) is a non-stock, non-profit religious

educational institution in Naga City. Petitioner hired Marvin-Julian L.
Sambajon, Jr. (respondent) as a full-time college faculty member with the
rank of Assistant Professor on probationary status, as evidenced by an
Appointment Contract4 dated November 1, 2002, effective November 1,
2002 up to March 30, 2003.
After the aforesaid contract expired, petitioner continued to give teaching

loads to respondent who remained a full-time faculty member of the
Department of Religious Education for the two semesters of school-year (SY)
2003-2004 (June 1, 2003 to March 31, 2004); and two semesters of SY
2004-2005 (June 2004 to March 31, 2005).5
Sometime in June 2003, after respondent completed his course in Master of

Arts in Education, major in Guidance and Counseling, he submitted the
corresponding Special Order from the Commission on Higher Education
(CHED), together with his credentials for the said masters degree, to the
Human Resources Department of petitioner for the purpose of salary
adjustment/increase. Subsequently, respondents salary was increased, as
reflected in his pay slips starting October 1-15, 2004. 6 He was likewise re-
ranked from Assistant Professor to Associate Professor.
In a letter dated October 15, 2004 addressed to the President of petitioner,

Sr. Ma. Asuncion G. Evidente, D.C., respondent vigorously argued that his
salary increase should be made effective as of June 2003 and demanded the
payment of his salary differential. The school administration thru Sr. Purita

Page 97 of 260
Gatongay, D.C., replied by explaining its policy on re-ranking of faculty

members7, viz:
xxxx
Please be informed that teachers in the Universidad are not re-ranked during
their probationary period. The Faculty Manual as revised for school year
2002-2003 provides (page 38) "Re-ranking is done every two years, hence
the personnel hold their present rank for two years. Those undergoing
probationary period and those on part-time basis of employment are not
covered by this provision." This provision is found also in the 2000-2001
Operations Manual.
Your personnel file shows that you were hired as a probationary teacher in
the second semester of school year 2002-2003. By October 2004, you will
be completing four (4) semesters (two school years) of service. Even
permanent teachers are re-ranked only every two years, and you are not
even a permanent teacher. I am informed that you have been told several
times and made to read the Provision in the Faculty Manual by the personnel
office that you cannot be re-ranked because you are still a probationary
teacher.
x x x x8
Respondent insisted on his demand for retroactive pay. In a letter dated

January 10, 2005, Sr. Evidente reiterated the school policy on re-ranking of
teachers, viz:
xxx
Under the Faculty Manual a permanent teacher is not entitled to re-ranking

oftener than once every two years. From this it should be obvious that, with
all the more reason, a probationary teacher would not be entitled to
"evaluation," which could result in re-ranking or "adjustment in salary"
oftener than once every two years.
Since you are a probationary teacher, the University is under no obligation

to re-rank you or adjust your salary after what you refer to as "evaluation."
Nevertheless, considering that in October 2004 you were completing two
years of service, the University adjusted your salary in the light of the CHED
Special Order you submitted showing that you had obtained the degree of
Master of Arts in Education. Instead of being grateful for the adjustment,
you insist that the adjustment be made retroactive to June 2003. Simply
stated, you want your salary adjusted after one semester of probationary

Page 98 of 260
service. We do not think a probationary teacher has better rights than a

permanent teacher in the matter of re-ranking or "evaluation." 9
However, respondent found the above explanation insufficient and not clear
enough. In his letter dated January 12, 2005, he pointed out the case of
another faculty member -- whom he did not name -- also on probationary
status whose salary was supposedly adjusted by petitioner at the start of
school year (June) after he/she had completed his/her masters degree in
March. Respondent thus pleaded for the release of his salary differential, or
at the very least, that petitioner give him categorical answers to his
questions.10
Apparently, to resolve the issue, a dialogue was held between respondent

and Sr. Evidente. As to the outcome of this conversation, the parties gave
conflicting accounts. Respondent claimed that Sr. Evidente told him that the
school administration had decided to shorten his probationary period to two
years on the basis of his satisfactory performance. 11 This was categorically
denied by Sr. Evidente though the latter admitted having informed
respondent "that he was made Associate Professor on account of his
incessant requests for a salary increase which the Universidad de Santa
Isabel eventually accommodatedconsidering that [respondent] had
obtained a Masters Degree in June 2003." She further informed respondent
that "his appointment as Associate Professor did not affect his status as a
probationary employee" and that petitioner "was not and did not exercise its
prerogative to shorten his probationary period to only two years." Sr. Stella
O. Real, D.C., who issued a Certificate of Employment to respondent,
likewise denied that she confirmed to respondent that petitioner has
shortened his probationary employment.12
On February 26, 2005, respondent received his letter of termination which

stated:
Greetings of Peace in the Lord!
We regret to inform your good self that your full time probationary
appointment will not be renewed when it expires at the end of this coming
March 31, 2005.
Thank you so much for the services that you have rendered to USI and to
her clientele the past several semesters. We strongly and sincerely
encourage you to pursue your desire to complete your Post Graduate studies
in the University of your choice as soon as you are able.
God bless you in all your future endeavors.

Page 99 of 260
Godspeed!13
On April 14, 2005, respondent filed a complaint for illegal dismissal against
the petitioner.
In his Decision dated August 22, 2006, Labor Arbiter Jesus Orlando M.
Quinones ruled that there was no just or authorized cause in the termination
of respondents probationary employment. Consequently, petitioner was
found liable for illegal dismissal, thus:
WHEREFORE, in view of the foregoing, judgment is hereby rendered finding

respondent school UNIVERSIDAD DE SANTA ISABEL liable for the illegal
dismissal of complainant MARVIN-JULIAN L. SAMBAJON, JR.
Accordingly, and consistent with Article 279 of the Labor Code, respondent
school is hereby directed to pay complainant full backwages covering the
period/duration of the 1st semester of academic year 2005-2006.
Reinstatement being rendered moot by the expiration of the probationary
period, respondent school is directed to pay complainant separation pay in
lieu of reinstatement computed at one (1) months pay for every year of
service. An award of 10% attorneys fees in favor of complainant is also held
in order.
(please see attached computation of monetary award as integral part of this

decision).
All other claims and charges are DISMISSED for lack of legal and factual
basis.
SO ORDERED.14
Petitioner appealed to the NLRC raising the issue of the correct interpretation
of Section 92 of the Manual of Regulations for Private Schools and DOLE-
DECS-CHED-TESDA Order No. 01, series of 1996, and alleging grave abuse
of discretion committed by the Labor Arbiter in ruling on a cause of
action/issue not raised by the complainant (respondent) in his position
paper.
On August 1, 2008, the NLRC rendered its Decision affirming the Labor
Arbiter and holding that respondent had acquired a permanent status
pursuant to Sections 91, 92 and 93 of the 1992 Manual of Regulations for
Private Schools, in relation to Article 281 of the Labor Code, as amended.
Thus:

Page 100 of 260
In the instant case, the first contract (records, pp. 36; 92) executed by the
parties provides that he was hired on a probationary status effective
November 1, 2002 to March 30, 2003. While his employment continued
beyond the above-mentioned period and lasted for a total of five (5)
consecutive semesters, it appears that the only other contract he signed is
the one (records, p. 103) for the second semester of SY 2003-2004. A
portion of this contract reads:
"I am pleased to inform you that you are designated and commissioned to
be an Apostle of Love and Service, Unity and Peace as you dedicate and
commit yourself in the exercise of your duties and responsibilities as a:
FULL-TIME FACULTY MEMBER

of the Religious Education Department from November 1, 2003 to March 31,
2004.
Unless otherwise renewed in writing this designation automatically

terminates as of the date expiration above stated without further notice."
There is no showing that the complainant signed a contract for the first and
second semesters of SY 2004-2005.
Under the circumstances, it must be concluded that the complainant has

acquired permanent status. The last paragraph of Article 281 of the Labor
Code provides that "an employee who is allowed to work after a
probationary period shall be considered a regular employee." Based thereon,
the complainant required [sic] permanent status on the first day of the first
semester of SY 2003-2004.
As presently worded, Section 92 of the revised Manual of Regulations for

Private Schools merely provides for the maximum lengths of the
probationary periods of academic personnel of private schools in the three
(3) levels of education (elementary, secondary, tertiary). The periods
provided therein are not requirements for the acquisition, by them, of
permanent status.
WHEREFORE, the decision appealed from is hereby AFFIRMED.
SO ORDERED.15
Petitioner and respondent sought reconsideration of the above decision, with

the former contending that the NLRC resolved an issue not raised in the
appeal memorandum, while the latter asserted that the NLRC erred in not
awarding him full back wages so as to conform to the finding that he had

Page 101 of 260
acquired a permanent status. Both motions were denied by the NLRC which
ruled that regardless of whether or not the parties were aware of the rules
for the acquisition of permanent status by private school teachers, these
rules applied to them and overrode their mistaken beliefs. As to
respondents plea for back wages, the NLRC said the award of back wages
was not done in this case because respondent did not appeal the Labor
Arbiters decision.
Both parties filed separate appeals before the CA. On motion by respondent,
the two cases were consolidated (CA-G.R. SP Nos. 108103 and 108168). 16
By Decision dated March 25, 2011, the CA sustained the conclusion of the
NLRC that respondent had already acquired permanent status when he was
allowed to continue teaching after the expiration of his first appointment-
contract on March 30, 2003. However, the CA found it necessary to modify
the decision of the NLRC to include the award of back wages to respondent.
The dispositive portion of the said decision reads:
WHEREFORE, premises considered, the petition docketed as CA-G.R. SP No.

108103 is GRANTED. The challenged Decision of the NLRC dated August 1,
2008 in NLRC NCR CA No. 050481-06 (NLRC Sub-RAB V-05-04-00053-05) is
AFFIRMED with MODIFICATION in that Universidad de Sta. Isabel is directed
to reinstate Marvin-Julian L. Sambajon, Jr. to his former position without
loss of seniority rights and to pay him full backwages computed from the
time his compensation was withheld from him up to the time of his actual
reinstatement. All other aspects are AFFIRMED.
As regards CA-G.R. SP No. 108168, the petition is DENIED for lack of merit.
SO ORDERED.17
The Petition/Issues
Before this Court, petitioner ascribes grave error on the part of the CA in
sustaining the NLRC which ruled that respondent was dismissed without just
or authorized cause at the time he had already acquired permanent or
regular status since petitioner allowed him to continue teaching despite the
expiration of the first contract of probationary employment for the second
semester of SY 2002-2003. Petitioner at the outset underscores the fact that
the NLRC decided an issue which was not raised on appeal, i.e., whether
respondent had attained regular status. It points out that the Labor Arbiters
finding that respondent was dismissed while still a probationary employee
was not appealed by him, and hence such finding had already become final.

Page 102 of 260
In fine, petitioner asks this Court to rule on the following issues: (1) whether
the NLRC correctly resolved an issue not raised in petitioners appeal
memorandum; and (2) whether respondents probationary employment was
validly terminated by petitioner.
Our Ruling
The petition is partly meritorious.
Issues on Appeal before the NLRC
Section 4(d), Rule VI of the 2005 Revised Rules of Procedure of the NLRC,
which was in force at the time petitioner appealed the Labor Arbiters
decision, expressly provided that, on appeal, the NLRC shall limit itself only
to the specific issues that were elevated for review, to wit:
Section 4. Requisites for perfection of appeal. x x x.
xxxx
(d) Subject to the provisions of Article 218 of the Labor Code, once the
appeal is perfected in accordance with these Rules, the Commission shall
limit itself to reviewing and deciding only the specific issues that were
elevated on appeal.
We have clarified that the clear import of the aforementioned procedural rule
is that the NLRC shall, in cases of perfected appeals, limit itself to reviewing
those issues which are raised on appeal. As a consequence thereof, any
other issues which were not included in the appeal shall become final and
executory.18
In this case, petitioner sets forth the following issues in its appeal
memorandum:
5.01
WHETHER THE MARVIN JULIAN L. SAMBAJON, JR. WAS ILLEGALLY

DISMISSED FROM THE UNIVERSIDAD DE STA. ISABEL.
5.02
WHETHER THE UNIVERSIDAD DE STA. ISABEL SHORTENED THE

PROBATIONARY PERIOD OF MARVIN JULIAN L. SAMBAJON.

Page 103 of 260
5.03
WHETHER RESPONDENTS-APPELLANTS ARE ENTITLED TO DAMAGES. 19
Specifically, petitioner sought the correct interpretation of the Manual of

Regulations for Private School Teachers and DOLE-DECS-CHED-TESDA Order
No. 01, series of 1996, insofar as the probationary period for teachers.
In reviewing the Labor Arbiters finding of illegal dismissal, the NLRC

concluded that respondent had already attained regular status after the
expiration of his first appointment contract as probationary employee. Such
conclusion was but a logical result of the NLRCs own interpretation of the
law. Since petitioner elevated the questions of the validity of respondents
dismissal and the applicable probationary period under the aforesaid
regulations, the NLRC did not gravely abuse its discretion in fully resolving
the said issues.
As the Court held in Roche (Phils.) v. NLRC 20:
Petitioners then suggest that the respondent Commission abused its

discretion in awarding reliefs in excess of those stated in the decision of the
labor arbiter despite the absence of an appeal by Villareal. To stress this
point, they cited Section 5(c) of the Rules of Procedure of the National Labor
Relations Commission which provides that the Commission shall, in cases of
perfected appeals, limits itself to reviewing those issues which were raised
on appeal. Consequently, those which were not raised on appeal shall be
final and executory.
There is no merit to this contention. The records show that the petitioners
elevated the issues regarding the correctness of the award of damages,
reinstatement with backpay, retirement benefits and the cost-saving bonus
to the respondent Commission in their appeal. This opened the said issues
for review and any action taken thereon by the Commission was well within
the parameters of its jurisdiction. (Emphasis supplied.)
Probationary Employment Period
A probationary employee is one who is on trial by the employer during which

the employer determines whether or not said employee is qualified for
permanent employment. A probationary appointment is made to afford the
employer an opportunity to observe the fitness of a probationary employee
while at work, and to ascertain whether he will become a proper and
efficient employee. The word probationary as used to describe the period of
employment implies the purpose of the term or period, but not its length. 21

Page 104 of 260
It is well settled that the employer has the right or is at liberty to choose
who will be hired and who will be denied employment. In that sense, it is
within the exercise of the right to select his employees that the employer
may set or fix a probationary period within which the latter may test and
observe the conduct of the former before hiring him permanently. 22 The law,
however, regulates the exercise of this prerogative to fix the period of
probationary employment. While there is no statutory cap on the minimum
term of probation, the law sets a maximum "trial period" during which the
employer may test the fitness and efficiency of the employee. 23
Article 281 of the Labor Code provides:
ART. 281. Probationary Employment.Probationary employment shall not

exceed six (6) months from the date the employee started working, unless it
is covered by an apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a probationary basis may
be terminated for a just cause or when he fails to qualify as a regular
employee in accordance with reasonable standards made known by the
employer to the employee at the time of his engagement. An employee who
is allowed to work after a probationary period shall be considered a regular
employee.
The probationary employment of teachers in private schools is not governed

purely by the Labor Code. The Labor Code is supplemented with respect to
the period of probation by special rules found in the Manual of Regulations
for Private Schools.24 On the matter of probationary period, Section 92 of the
1992 Manual of Regulations for Private Schools regulations states:
Section 92. Probationary Period. Subject in all instances to compliance

with the Department and school requirements, the probationary period for
academic personnel shall not be more than three (3) consecutive years of
satisfactory service for those in the elementary and secondary levels, six (6)
consecutive regular semesters of satisfactory service for those in the tertiary
level, and nine (9) consecutive trimesters of satisfactory service for those in
the tertiary level where collegiate courses are offered on a trimester basis.
(Emphasis supplied.)
Thus, it is the Manual of Regulations for Private Schools, and not the Labor
Code, that determines whether or not a faculty member in an educational
institution has attained regular or permanent status. 25 Section 9326 of the
1992 Manual of Regulations for Private Schools provides that full-time
teachers who have satisfactorily completed their probationary period shall be
considered regular or permanent.

Page 105 of 260
In this case, the CA sustained the NLRCs ruling that respondent was illegally
dismissed considering that he had become a regular employee when
petitioner allowed him to work beyond the date specified in his first
probationary appointment contract which expired on March 30, 2003.
According to the CA:
As can be gleaned from Section 92 of the 1992 Manual of Regulations for

Private Schools, the probationary period applicable in this case is not more
than six (6) consecutive regular semesters of satisfactory service. In other
words, the probationary period for academic personnel in the tertiary level
runs from one (1) semester to six (6) consecutive regular semesters of
satisfactory service. In the instant case, records reveal that Sambajon, Jr.
only signed two appointment contracts. The first appointment-contract which
he signed was dated November 2002 for the period November 1, 2002 to
March 30, 2003, as Assistant Professor 10 on probationary status. x x x The
second appointment-contract which Sambajon, Jr. executed was dated
February 26, 2004, for the period November 1, 2003 to March 31, 2004. x x
x Compared with the first appointment-contract, it was not indicated in the
February 26, 2004 appointment-contract that Sambajon, Jr. was hired on
probationary status, which explains the NLRCs conclusion that Sambajon,
Jr. already attained permanent status. At this juncture, it is worthy to
emphasize that other than the period provided under Article 281 of the
Labor Code, the following quoted portion of Article 281 of the Labor Code
still applies:
"ART. 281. PROBATIONARY EMPLOYMENT.
x x x x An employee who is allowed to work after a probationary period shall

be considered a regular employee."
Thus, We sustain the NLRCs conclusion that Sambajon, Jr. acquired

permanent status on the first day of the first semester of SY 2003-2004
when he was allowed to continue with his teaching stint after the expiration
of his first appointment-contract on March 30, 2003.27
On record are five appointment contracts28 of respondent:
Date Contract Period

November 1, 2002 November 1, 2002-March 30, 2003
September 28, 2003 June 1, 2003-October 31, 2003
February 26, 2004 November 1, 2003-March 31, 2004
September 30, 2004 June 1, 2004-October 31, 2004

Page 106 of 260
October 28, 2004 November 3, 2004-March 31, 2005
Only the first and third contracts were signed by the respondent. However,
such lack of signature in the second contract appears not to be the crucial
element considered by the CA but the fact that the third contract dated
February 26, 2004, unlike the previous contracts, does not indicate the
nature of the appointment as probationary employment. According to the
CA, this implies, as concluded by the NLRC, that respondent was already a
regular employee.
We disagree.
The third appointment contract dated February 26, 2004 reads:
February 26, 2004
MR. MARVIN JULIAN SAMBAJON

Religious Education Department
Dear Mr. Sambajon,
I am pleased to inform you that you are designated and commissioned to be

an Apostle of Love and Service, Unity and Peace as you dedicate and commit
yourself in the exercise of your duties and responsibilities as a:
FULL TIME FACULTY MEMBER

of the Religious Education Department from November 1, 2003 to March 31,
2004.
Unless otherwise renewed in writing, this designation automatically

terminates as of the date expiration above states without further notice.
As a member of the academic/clinical community, you are expected to live

by and give your full support to the promotion and attainment of the Vision-
Mission, goals and objectives, the rules and regulations, the Core Values
which the University professes to believe and live by.
Congratulations and keep your work full in the spirit of the Lord for the
Charity of Christ urges us to live life to the fullest.
God bless
In Christ,

Page 107 of 260
Sr. Ma. Asuncion G. Evidente, D.C.

USI President
Witness:
Sr. Stella O. Real, D.C.

HR Officer
I, ______________________ understand that unless renewed in writing,

my services as ________________ expires automatically on the specific
date above stated.
Furthermore, I fully accept this appointment to help build the Kingdom of

God here and now and to facilitate the living of the Core Values and the
attainment of the Vision-Mission and the goals and objectives of the
University.
Received and Conforme:
(SGD.) MARVIN-JULIAN L. SAMBAJON, JR.29
Since it was explicitly provided in the above contract that unless renewed in
writing respondents appointment automatically expires at the end of the
stipulated period of employment, the CA erred in concluding that simply
because the word "probationary" no longer appears below the designation
(Full-Time Faculty Member), respondent had already become a permanent
employee. Noteworthy is respondents admission of being still under
probationary period in his January 12, 2005 letter to Sr. Evidente reiterating
his demand for salary differential, which letter was sent almost one year
after he signed the February 26, 2004 appointment contract, to wit:
The problem is that your good office has never categorically resolved
whether or not probationary teachers can also be evaluated for salary
adjustment. Nevertheless, inferring from your statement that evaluation
precedes re-ranking and in fact is the basis for re-ranking, may I
categorically ask: does it really mean that since, it precedes re-ranking,
evaluation should not take place among probationary teachers for they can
not yet be re-ranked? If so, then how pitiful are we, probationary teachers
for our credentials are never evaluated since we cannot yet be re-ranked. Oh
my goodness! Can your good office not give me a clearer and more
convincing argument shedding light on this matter?30
Respondent nonetheless claims that subsequently, the probationary period

of three years under the regulations was shortened by petitioner as relayed

Page 108 of 260
to him by Sr. Evidente herself. However, the latter, together with Sr. Real,
categorically denied having informed respondent that his probationary period
was abbreviated, allegedly the reason his salary adjustment was not made
retroactive. Apart from his bare assertion, respondent has not adduced proof
of any decision of the school administration to shorten his probationary
period.
In Rev. Fr. Labajo v. Alejandro,31 we held that:
The three (3)-year period of service mentioned in paragraph 75 [of the

Manual of Regulations for Private Schools] is of course the maximum period
or upper limit, so to speak, of probationary employment allowed in the case
of private school teachers. This necessarily implies that a regular or
permanent employment status may, under certain conditions, be attained in
less than three (3) years. By and large, however, whether or not one has
indeed attained permanent status in ones employment, before the passage
of three (3) years, is a matter of proof. (Emphasis supplied.)
There can be no dispute that the period of probation may be reduced if the
employer, convinced of the fitness and efficiency of a probationary
employee, voluntarily extends a permanent appointment even before the
three-year period ends. Conversely, if the purpose sought by the employer is
neither attained nor attainable within the said period, the law does not
preclude the employer from terminating the probationary employment on
justifiable ground; or, a shorter probationary period may be incorporated in
a collective bargaining agreement. But absent any circumstances which
unmistakably show that an abbreviated probationary period has been agreed
upon, the three-year probationary term governs.32
As to the Certificate of Employment 33 issued by Sr. Real on January 31,

2005, it simply stated that respondent "was a full time faculty member in
the Religious Education Department of this same institution" and that he
holds the rank of Associate Professor. There was no description or
qualification of respondents employment as regular or permanent. Neither
did the similar Certification34 also issued by Sr. Real on March 18, 2005
prove respondents status as a permanent faculty member of petitioner.
It bears stressing that full-time teaching primarily refers to the extent of

services rendered by the teacher to the employer school and not to the
nature of his appointment. Its significance lies in the rule that only full-time
teaching personnel can acquire regular or permanent status. The provisions
of DOLE-DECS-CHED-TESDA Order No. 01, series of 1996, "Guidelines on
Status of Employment of Teachers and of Academic Personnel in Private
Educational Institutions" are herein reproduced:

Page 109 of 260
2. Subject in all instances to compliance with the concerned agency

and school requirements, the probationary period for teaching or
academic personnel shall not be more than three (3) consecutive
school years of satisfactory service for those in the elementary and
secondary levels; six (6) consecutive regular semesters of satisfactory
service for those in the tertiary and graduate levels, and nine (9)
consecutive trimesters of satisfactory service for those in the tertiary
level where collegiate courses are offered on a trimester basis.
Unless otherwise provided by contract, school academic personnel who

are under probationary employment cannot be dismissed during the
applicable probationary period, unless dismissal is compelled by a just
cause or causes.
3. Teachers or academic personnel who have served the probationary

period as provided for in the immediately preceding paragraph shall be
made regular or permanent if allowed to work after such probationary
period. The educational institution, however, may shorten the
probationary period after taking into account the qualifications and
performance of the probationary teachers and academic personnel.
Full-time teaching or academic personnel are those meeting all the

following requirements:
3.1. Who possess at least the minimum academic qualifications

prescribed by the Department of Education, Culture and Sports
for Basic Education, the Commission on Higher Education for
Tertiary Education, and the Technical Education and Skills
Development Authority for Technical and Vocational Education
under their respective Manual of Regulations governing said
personnel;
3.2 Who are paid monthly or hourly, based on the normal or

regular teaching loads as provided for in the policies, rules and
standards of the agency concerned;
3.3 Whose regular working day of not more than eight (8) hours
a day is devoted to the school;
3.4 Who have no other remunerative occupation elsewhere

requiring regular hours of work that will conflict with the working
hours in the school; and

Page 110 of 260
3.5 Who are not teaching full-time in any other educational

institution.
All teaching or academic personnel who do not meet the foregoing

qualifications are considered part time.
4. Part-time teaching or academic personnel cannot acquire regular or

permanent employment status.
5. Teaching or academic personnel who do not meet the minimum

academic qualifications shall not acquire tenure or regular status. The
school may terminate their services when a qualified teacher becomes
available.35
In this case, petitioner applied the maximum three-year probationary period

equivalent to six consecutive semesters provided in the Manual of
Regulations. This can be gleaned from the letter dated March 24, 2004 of Sr.
Grace Namocancat, D.C. addressed to respondent, informing the latter of
the result of evaluation of his performance for SY 2003-2004 and stating
that November 2004 marks his second year of full-time teaching, which
means he had one more year to become a permanent employee. 36
The circumstance that respondents services were hired on semester basis

did not negate the applicable probationary period, which is three school
years or six consecutive semesters. In Magis Young Achievers Learning
Center37 the Court explained the three years probationary period rule in this
wise:
The common practice is for the employer and the teacher to enter into a
contract, effective for one school year. At the end of the school year, the
employer has the option not to renew the contract, particularly considering
the teachers performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually for another
school year, the probationary employment continues. Again, at the end of
that period, the parties may opt to renew or not to renew the contract. If
renewed, this second renewal of the contract for another school year would
then be the last year since it would be the third school year of
probationary employment. At the end of this third year, the employer may
now decide whether to extend a permanent appointment to the employee,
primarily on the basis of the employee having met the reasonable standards
of competence and efficiency set by the employer. For the entire duration of
this three-year period, the teacher remains under probation. Upon the
expiration of his contract of employment, being simply on probation, he
cannot automatically claim security of tenure and compel the employer to

Page 111 of 260
renew his employment contract. It is when the yearly contract is renewed for
the third time that Section 93 of the Manual becomes operative, and the
teacher then is entitled to regular or permanent employment
status.38 (Emphasis supplied.)
Petitioner argues that respondents probationary period expires after each

semester he was contracted to teach and hence it was not obligated to
renew his services at the end of the fifth semester (March 2005) of his
probationary employment. It asserts that the practice of issuing appointment
contracts for every semester was legal and therefore respondent was not
terminated when petitioner did not renew his contract for another semester
as his probationary contract merely expired. Plainly, petitioner considered
the subject appointment contracts as fixed-term contracts such that it can
validly dismiss respondent at the end of each semester for the reason that
his contract had expired.
The Court finds no merit in petitioners interpretation of the Manual of

Regulations, supplemented by DOLE-DECS-CHED-TESDA Order No. 01,
series of 1996. As we made clear in the afore-cited case of Magis Young
Achievers Learning Center, the teacher remains under probation for the
entire duration of the three-year period. Subsequently, in the case of
Mercado v. AMA Computer College-Paraaque City, Inc. 39 the Court,
speaking through Justice Arturo D. Brion, recognized the right of respondent
school to determine for itself that it shall use fixed-term employment
contracts as its medium for hiring its teachers. Nevertheless, the Court held
that the teachers probationary status should not be disregarded simply
because their contracts were fixed-term. Thus:
The Conflict: Probationary Status

and Fixed-term Employment
The existence of the term-to-term contracts covering the petitioners

employment is not disputed, nor is it disputed that they were on
probationary status not permanent or regular status from the time they
were employed on May 25, 1998 and until the expiration of their Teaching
Contracts on September 7, 2000. As the CA correctly found, their teaching
stints only covered a period of at least seven (7) consecutive trimesters or
two (2) years and three (3) months of service. This case, however, brings to
the fore the essential question of which, between the two factors affecting
employment, should prevail given AMACCs position that the teachers
contracts expired and it had the right not to renew them. In other words,
should the teachers probationary status be disregarded simply because the
contracts were fixed-term?

Page 112 of 260
The provision on employment on probationary status under the Labor Code

is a primary example of the fine balancing of interests between labor and
management that the Code has institutionalized pursuant to the underlying
intent of the Constitution.
On the one hand, employment on probationary status affords management

the chance to fully scrutinize the true worth of hired personnel before the full
force of the security of tenure guarantee of the Constitution comes into play.
Based on the standards set at the start of the probationary period,
management is given the widest opportunity during the probationary period
to reject hirees who fail to meet its own adopted but reasonable standards.
These standards, together with the just and authorized causes for
termination of employment the Labor Code expressly provides, are the
grounds available to terminate the employment of a teacher on probationary
status. For example, the school may impose reasonably stricter attendance
or report compliance records on teachers on probation, and reject a
probationary teacher for failing in this regard, although the same attendance
or compliance record may not be required for a teacher already on
permanent status. At the same time, the same just and authorize[d] causes
for dismissal under the Labor Code apply to probationary teachers, so that
they may be the first to be laid-off if the school does not have enough
students for a given semester or trimester. Termination of employment on
this basis is an authorized cause under the Labor Code.
Labor, for its part, is given the protection during the probationary period of
knowing the company standards the new hires have to meet during the
probationary period, and to be judged on the basis of these standards, aside
from the usual standards applicable to employees after they achieve
permanent status. Under the terms of the Labor Code, these standards
should be made known to the teachers on probationary status at the start of
their probationary period, or at the very least under the circumstances of the
present case, at the start of the semester or the trimester during which the
probationary standards are to be applied. Of critical importance in invoking a
failure to meet the probationary standards, is that the school should show
as a matter of due process how these standards have been applied. This is
effectively the second notice in a dismissal situation that the law requires as
a due process guarantee supporting the security of tenure provision, and is
in furtherance, too, of the basic rule in employee dismissal that the employer
carries the burden of justifying a dismissal. These rules ensure compliance
with the limited security of tenure guarantee the law extends to probationary
employees.
When fixed-term employment is brought into play under the above

probationary period rules, the situation as in the present case may at

Page 113 of 260
first blush look muddled as fixed-term employment is in itself a valid

employment mode under Philippine law and jurisprudence. The conflict,
however, is more apparent than real when the respective nature of fixed-
term employment and of employment on probationary status are closely
examined.
The fixed-term character of employment essentially refers to the period

agreed upon between the employer and the employee; employment exists
only for the duration of the term and ends on its own when the term expires.
In a sense, employment on probationary status also refers to a period
because of the technical meaning "probation" carries in Philippine labor law
a maximum period of six months, or in the academe, a period of three years
for those engaged in teaching jobs. Their similarity ends there, however,
because of the overriding meaning that being "on probation" connotes, i.e.,
a process of testing and observing the character or abilities of a person who
is new to a role or job.
Understood in the above sense, the essentially protective character of

probationary status for management can readily be appreciated. But this
same protective character gives rise to the countervailing but equally
protective rule that the probationary period can only last for a specific
maximum period and under reasonable, well-laid and properly
communicated standards. Otherwise stated, within the period of the
probation, any employer move based on the probationary standards and
affecting the continuity of the employment must strictly conform to the
probationary rules.
Under the given facts where the school year is divided into trimesters, the
school apparently utilizes its fixed-term contracts as a convenient
arrangement dictated by the trimestral system and not because the
workplace parties really intended to limit the period of their relationship to
any fixed term and to finish this relationship at the end of that term. If we
pierce the veil, so to speak, of the parties so-called fixed-term employment
contracts, what undeniably comes out at the core is a fixed-term contract
conveniently used by the school to define and regulate its relations with its
teachers during their probationary period.
To be sure, nothing is illegitimate in defining the school-teacher relationship

in this manner. The school, however, cannot forget that its system of fixed-
term contract is a system that operates during the probationary period and
for this reason is subject to the terms of Article 281 of the Labor Code.
Unless this reconciliation is made, the requirements of this Article on
probationary status would be fully negated as the school may freely choose
not to renew contracts simply because their terms have expired. The

Page 114 of 260
inevitable effect of course is to wreck the scheme that the Constitution and
the Labor Code established to balance relationships between labor and
management.
Given the clear constitutional and statutory intents, we cannot but conclude
that in a situation where the probationary status overlaps with a fixed-term
contract not specifically used for the fixed term it offers, Article 281 should
assume primacy and the fixed-period character of the contract must give
way. This conclusion is immeasurably strengthened by the petitioners and
the AMACCs hardly concealed expectation that the employment on
probation could lead to permanent status, and that the contracts are
renewable unless the petitioners fail to pass the schools
standards.40 (Additional emphasis supplied.)
Illegal Dismissal
Notwithstanding the limited engagement of probationary employees, they

are entitled to constitutional protection of security of tenure during and
before the end of the probationary period. 41 The services of an employee
who has been engaged on probationary basis may be terminated for any of
the following: (a) a just or (b) an authorized cause; and (c) when he fails to
qualify as a regular employee in accordance with reasonable standards
prescribed by the employer.42
Thus, while no vested right to a permanent appointment had as yet accrued

in favor of respondent since he had not completed the prerequisite three-
year period (six consecutive semesters) necessary for the acquisition of
permanent status as required by the Manual of Regulations for Private
Schools43 -- which has the force of law44 -- he enjoys a limited tenure. During
the said probationary period, he cannot be terminated except for just or
authorized causes, or if he fails to qualify in accordance with reasonable
standards prescribed by petitioner for the acquisition of permanent status of
its teaching personnel.
In a letter dated February 26, 2005, petitioner terminated the services of

respondent stating that his probationary employment as teacher will no
longer be renewed upon its expiry on March 31, 2005, respondents fifth
semester of teaching. No just or authorized cause was given by petitioner.
Prior to this, respondent had consistently achieved above average rating
based on evaluation by petitioners officials and students. He had also been
promoted to the rank of Associate Professor after finishing his masters
degree course on his third semester of teaching. Clearly, respondents
termination after five semesters of satisfactory service was illegal.

Page 115 of 260
Respondent therefore is entitled to continue his three-year probationary

period, such that from March 31, 2005, his probationary employment is
deemed renewed for the following semester (1st semester of SY 2005-
2006). However, given the discordant relations that had arisen from the
parties dispute, it can be inferred with certainty that petitioner had opted
not to retain respondent in its employ beyond the three-year period.
On the appropriate relief and damages, we adhere to our disposition in

Magis Young Achievers Learning Center45:
Finally, we rule on the propriety of the monetary awards.1wphi1 Petitioner,

as employer, is entitled to decide whether to extend respondent a
permanent status by renewing her contract beyond the three-year period.
Given the acrimony between the parties which must have been generated by
this controversy, it can be said unequivocally that petitioner had opted not to
extend respondent's employment beyond this period. Therefore, the award
of backwages as a consequence of the finding of illegal dismissal in favor of
respondent should be confined to the three-year probationary period.
Computing her monthly salary of F15,000.00 for the next two school years
(F15,000.00 x 10 months x 2), respondent already having received her full
salaries for the year 2002-2003, she is entitled to a total amount of
F300,000.00. Moreover, respondent is also entitled to receive her 13th
month pay correspondent to the said two school years, computed as yearly
salary, divided by 12 months in a year, multiplied by 2, corresponding to the
school years 2003-2004 and 2004-2005, or F150,000.00 I 12 months x 2 =
F25,000.00. Thus, the NLRC was correct in awarding respondent the amount
of F325,000.00 as backwages, inclusive of 13th month pay for the school
years 2003-2004 and 2004-2005, and the amount of P3,750.00 as pro-rated
13th month pay.
WHEREFORE, the petition for review on certiorari is PARTLY GRANTED. The

Decision dated March 25, 2011 of the Court of Appeals in CA-G.R. SP Nos.
108103 & 108168 is hereby MODIFIED. Petitioner Universidad de Sta. Isabel
is hereby DIRECTED to PAY respondent Marvin-Julian L. Sambajon, Jr. back
wages corresponding to his full monthly salaries for one semester (1st
semester of SY 2005-2006) and pro-rated 13th month pay.
The case is REMANDED to the Labor Arbiter for a recomputation of the

amounts due to respondent in conformity with this Decision.
No pronouncement as to costs.
SO ORDERED.

Page 116 of 260
10 Abbot vs Alcaraz
G.R. No. 192571 April 22, 2014
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE,

EDWIN D. FEIST, MARIA OLIVIA T. YABUT-MISA, TERESITA C.
BERNARDO, AND ALLAN G. ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.
RESOLUTION
PERLAS-BERNABE, J.:
For resolution is respondent Pearlie Ann Alcaraz's (Alcaraz) Motion for

Reconsideration dated August 23, 2013 of the Court's Decision dated July
23, 2013 (Decision).1
At the outset, there appears to be no substantial argument in the said

motion sufficient for the Court to depart from the pronouncements made in
the initial ruling. But if only to address Akaraz's novel assertions, and to so
placate any doubt or misconception in the resolution of this case, the Court
proceeds to shed light on the matters indicated below.
A. Manner of review.
Alcaraz contends that the Court should not have conducted a re-weighing of
evidence since a petition for review on certiorari under Rule 45 of the Rules
of Court (Rules) is limited to the review of questions of law. She submits
that since what was under review was a ruling of the Court of Appeals (CA)
rendered via a petition for certiorari under Rule 65 of the Rules, the Court
should only determine whether or not the CA properly determined that the
National Labor Relations Commission (NLRC) committed a grave abuse of
discretion.
The assertion does not justify the reconsideration of the assailed Decision.
A careful perusal of the questioned Decision will reveal that the Court
actually resolved the controversy under the above-stated framework of
analysis. Essentially, the Court found the CA to have committed an error in
holding that no grave abuse of discretion can be ascribed to the NLRC since

Page 117 of 260
the latter arbitrarily disregarded the legal implication of the attendant

circumstances in this case which should have simply resulted in the finding
that Alcaraz was apprised of the performance standards for her
regularization and hence, was properly a probationary employee. As the
Court observed, an employees failure to perform the duties and
responsibilities which have been clearly made known to him constitutes a
justifiable basis for a probationary employees non-regularization. As
detailed in the Decision, Alcaraz was well-apprised of her duties and
responsibilities as well as the probationary status of her employment:
(a) On June 27, 2004, [Abbott Laboratories, Philippines (Abbott)]

caused the publication in a major broadsheet newspaper of its need for
a Regulatory Affairs Manager, indicating therein the job description for
as well as the duties and responsibilities attendant to the aforesaid
position; this prompted Alcaraz to submit her application to Abbott on
October 4, 2004;
(b) In Abbotts December 7, 2004 offer sheet, it was stated that

Alcaraz was to be employed on a probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract

which specifically stated, inter alia, that she was to be placed on
probation for a period of six (6) months beginning February 15, 2005
to August 14, 2005;
(d) On the day Alcaraz accepted Abbotts employment offer, Bernardo

sent her copies of Abbotts organizational structure and her job
description through e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation where

[Allan G. Almazar] informed her that she had to implement Abbotts
Code of Conduct and office policies on human resources and finance
and that she would be reporting directly to [Kelly Walsh];
(f) Alcaraz was also required to undergo a training program as part of

her orientation;
(g) Alcaraz received copies of Abbotts Code of Conduct and

Performance Modules from [Maria Olivia T. Yabut-Misa] who explained
to her the procedure for evaluating the performance of probationary
employees; she was further notified that Abbott had only one
evaluation system for all of its employees; and

Page 118 of 260
(h) Moreover, Alcaraz had previously worked for another

pharmaceutical company and had admitted to have an "extensive
training and background" to acquire the necessary skills for her job. 2
Considering the foregoing incidents which were readily observable from the
records, the Court reached the conclusion that the NLRC committed grave
abuse of discretion, viz.:
[I]n holding that Alcaraz was illegally dismissed due to her status as a
regular and not a probationary employee, the Court finds that the NLRC
committed a grave abuse of discretion.
To elucidate, records show that the NLRC based its decision on the premise
that Alcarazs receipt of her job description and Abbotts Code of Conduct
and Performance Modules was not equivalent to being actually informed of
the performance standards upon which she should have been evaluated on.
It, however, overlooked the legal implication of the other attendant
circumstances as detailed herein which should have warranted a contrary
finding that Alcaraz was indeed a probationary and not a regular employee
more particularly the fact that she was well-aware of her duties and
responsibilities and that her failure to adequately perform the same would
lead to her non-regularization and eventually, her termination. 3
Consequently, since the CA found that the NLRC did not commit grave abuse
of discretion and denied the certiorari petition before it, the reversal of its
ruling was thus in order.
At this juncture, it bears exposition that while NLRC decisions are, by their
nature, final and executory4 and, hence, not subject to appellate review, 5 the
Court is not precluded from considering other questions of law aside from
the CAs finding on the NLRCs grave abuse of discretion. While the focal
point of analysis revolves on this issue, the Court may deal with ancillary
issues such as, in this case, the question of how a probationary employee
is deemed to have been informed of the standards of his regularization if
only to determine if the concepts and principles of labor law were correctly
applied or misapplied by the NLRC in its decision. In other words, the Courts
analysis of the NLRCs interpretation of the environmental principles and
concepts of labor law is not completely prohibited in as it is
complementary to a Rule 45 review of labor cases.
Finally, if only to put to rest Alcarazs misgivings on the manner in which this
case was reviewed, it bears pointing out that no "factual appellate review"
was conducted by the Court in the Decision. Rather, the Court proceeded to
interpret the relevant rules on probationary employment as applied to

Page 119 of 260
settled factual findings. Besides, even on the assumption that a scrutiny of

facts was undertaken, the Court is not altogether barred from conducting the
same. This was explained in the case of Career Philippines Shipmanagement,
Inc. v. Serna6 wherein the Court held as follows:
Accordingly, we do not re-examine conflicting evidence, re-evaluate the

credibility of witnesses, or substitute the findings of fact of the NLRC, an
administrative body that has expertise in its specialized field. Nor do we
substitute our "own judgment for that of the tribunal in determining where
the weight of evidence lies or what evidence is credible." The factual findings
of the NLRC, when affirmed by the CA, are generally conclusive on this
Court.
Nevertheless, there are exceptional cases where we, in the exercise of our
discretionary appellate jurisdiction may be urged to look into factual issues
raised in a Rule 45 petition. For instance, when the petitioner persuasively
alleges that there is insufficient or insubstantial evidence on record to
support the factual findings of the tribunal or court a quo, as Section 5, Rule
133 of the Rules of Court states in express terms that in cases filed before
administrative or quasi-judicial bodies, a fact may be deemed established
only if supported by substantial evidence.7 (Emphasis supplied)
B. Standards for regularization;

conceptual underpinnings.
Alcaraz posits that, contrary to the Courts Decision, ones job description
cannot by and of itself be treated as a standard for regularization as a
standard denotes a measure of quantity or quality. By way of example,
Alcaraz cites the case of a probationary salesperson and asks how does such
employee achieve regular status if he does not know how much he needs to
sell to reach the same.
The argument is untenable.
First off, the Court must correct Alcarazs mistaken notion: it is not the
probationary employees job description but the adequate performance of his
duties and responsibilities which constitutes the inherent and implied
standard for regularization. To echo the fundamental point of the Decision, if
the probationary employee had been fully apprised by his employer of these
duties and responsibilities, then basic knowledge and common sense dictate
that he must adequately perform the same, else he fails to pass the
probationary trial and may therefore be subject to termination. 8

Page 120 of 260
The determination of "adequate performance" is not, in all cases,

measurable by quantitative specification, such as that of a sales quota in
Alcarazs example. It is also hinged on the qualitative assessment of the
employees work; by its nature, this largely rests on the reasonable exercise
of the employers management prerogative. While in some instances the
standards used in measuring the quality of work may be conveyed such as
workers who construct tangible products which follow particular metrics, not
all standards of quality measurement may be reducible to hard figures or are
readily articulable in specific pre-engagement descriptions. A good example
would be the case of probationary employees whose tasks involve the
application of discretion and intellect, such as to name a few lawyers,
artists, and journalists. In these kinds of occupation, the best that the
employer can do at the time of engagement is to inform the probationary
employee of his duties and responsibilities and to orient him on how to
properly proceed with the same. The employer cannot bear out in exacting
detail at the beginning of the engagement what he deems as "quality work"
especially since the probationary employee has yet to submit the required
output. In the ultimate analysis, the communication of performance
standards should be perceived within the context of the nature of the
probationary employees duties and responsibilities.
The same logic applies to a probationary managerial employee who is tasked

to supervise a particular department, as Alcaraz in this case.1wphi1 It is
hardly possible for the employer, at the time of the employees engagement,
to map into technical indicators, or convey in precise detail the quality
standards by which the latter should effectively manage the department.
Factors which gauge the ability of the managerial employee to either deal
with his subordinates (e.g., how to spur their performance, or command
respect and obedience from them), or to organize office policies, are hardly
conveyable at the outset of the engagement since the employee has yet to
be immersed into the work itself. Given that a managerial role essentially
connotes an exercise of discretion, the quality of effective management can
only be determined through subsequent assessment. While at the time of
engagement, reason dictates that the employer can only inform the
probationary managerial employee of his duties and responsibilities as such
and provide the allowable parameters for the same. Verily, as stated in the
Decision, the adequate performance of such duties and responsibilities is, by
and of itself, an implied standard of regularization.
In this relation, it bears mentioning that the performance standard

contemplated by law should not, in all cases, be contained in a specialized
system of feedbacks or evaluation. The Court takes judicial notice of the fact
that not all employers, such as simple businesses or small-scale enterprises,
have a sophisticated form of human resource management, so much so that

Page 121 of 260
the adoption of technical indicators as utilized through "comment cards" or

"appraisal" tools should not be treated as a prerequisite for every case of
probationary engagement. In fact, even if a system of such kind is employed
and the procedures for its implementation are not followed, once an
employer determines that the probationary employee fails to meet the
standards required for his regularization, the former is not precluded from
dismissing the latter. The rule is that when a valid cause for termination
exists, the procedural infirmity attending the termination only warrants the
payment of nominal damages. This was the principle laid down in the
landmark cases of Agabon v. NLRC9 (Agabon) and Jaka Food Processing
Corporation v. Pacot10 (Jaka). In the assailed Decision, the Court actually
extended the application of the Agabon and Jaka rulings to breaches of
company procedure, notwithstanding the employers compliance with the
statutory requirements under the Labor Code. 11 Hence, although Abbott did
not comply with its own termination procedure, its non-compliance thereof
would not detract from the finding that there subsists a valid cause to
terminate Alcarazs employment. Abbott, however, was penalized for its
contractual breach and thereby ordered to pay nominal damages.
As a final point, Alcaraz cannot take refuge in Aliling v. Feliciano 12 (Aliling)

since the same is not squarely applicable to the case at bar. The employee in
Aliling, a sales executive, was belatedly informed of his quota requirement.
Thus, considering the nature of his position, the fact that he was not
informed of his sales quota at the time of his engagement changed the
complexion of his employment. Contrarily, the nature of Alcaraz's duties and
responsibilities as Regulatory Affairs Manager negates the application of the
foregoing. Records show that Alcaraz was terminated because she (a) did
not manage her time effectively; (b) failed to gain the trust of her staff and
to build an effective rapport with them; (c) failed to train her staff
effectively; and (d) was not able to obtain the knowledge and ability to make
sound judgments on case processing and article review which were
necessary for the proper performance of her duties. 13 Due to the nature and
variety of these managerial functions, the best that Abbott could have done,
at the time of Alcaraz's engagement, was to inform her of her duties and
responsibilities, the adequate performance of which, to repeat, is an inherent
and implied standard for regularization; this is unlike the circumstance in
Aliling where a quantitative regularization standard, in the term of a sales
quota, was readily articulable to the employee at the outset. Hence, since
the reasonableness of Alcaraz's assessment clearly appears from the
records, her termination was justified. Bear in mind that the quantum of
proof which the employer must discharge is only substantial evidence which,
as defined in case law, means that amount of relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, even if

Page 122 of 260
other minds, equally reasonable, might conceivably opine otherwise. 14 To the

Court's mind, this threshold of evidence Abbott amply overcame in this case.
All told, the Court hereby denies the instant motion for reconsideration and
thereby upholds the Decision in the main case.
WHEREFORE, the motion for reconsideration dated August 23, 2013 of the
Court's Decision dated July 23, 2013 in this case is hereby DENIED.
SO ORDERED.
11 Colegio vs Rojo
G.R. No. 170388 September 4, 2013
COLEGIO DEL SANTISIMO ROSARIO AND SR. ZENAIDA S. MOFADA,

OP, PETITIONERS,
vs.
EMMANUEL ROJO,* RESPONDENT.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari 1 assails the August 31, 2005
Decision2 and the November 10, 2005 Resolution 3 of the Court of Appeals
(CA) in CA-G.R. SP No. 85188, which affirmed the July 31, 2003 Decision 4 of
the National Labor Relations Commission (NLRC). Said NLRC Decision
affirmed with modification the October 7, 2002 Decision 5 of the Labor Arbiter
(LA) which, in turn, granted respondent Emmanuel Rojos (respondent)
Complaint6 for illegal dismissal.
Factual Antecedents
Petitioner Colegio del Santisimo Rosario (CSR) hired respondent as a high

school teacher on probationary basis for the school years 1992-1993, 1993-
19947 and 1994-1995.8
On April 5, 1995, CSR, through petitioner Sr. Zenaida S. Mofada, OP

(Mofada), decided not to renew respondents services.9

Page 123 of 260
Thus, on July 13, 1995, respondent filed a Complaint 10 for illegal dismissal.
He alleged that since he had served three consecutive school years which is
the maximum number of terms allowed for probationary employment, he
should be extended permanent employment. Citing paragraph 75 of the
1970 Manual of Regulations for Private Schools (1970 Manual), respondent
asserted that "full- time teachers who have rendered three (3) consecutive
years of satisfactory services shall be considered permanent."11
On the other hand, petitioners argued that respondent knew that his
Teachers Contract for school year 1994-1995 with CSR would expire on
March 31, 1995.12 Accordingly, respondent was not dismissed but his
probationary contract merely expired and was not renewed. 13 Petitioners also
claimed that the "three years" mentioned in paragraph 75 of the 1970
Manual refer to "36 months," not three school years. 14 And since respondent
served for only three school years of 10 months each or 30 months, then he
had not yet served the "three years" or 36 months mentioned in paragraph
75 of the 1970 Manual.15
Ruling of the Labor Arbiter
The LA ruled that "three school years" means three years of 10 months, not
12 months.16 Considering that respondent had already served for three
consecutive school years, then he has already attained regular employment
status. Thus, the non-renewal of his contract for school year 1995-1996
constitutes illegal dismissal.17
The LA also found petitioners guilty of bad faith when they treated
respondents termination merely as the expiration of the third employment
contract and when they insisted that the school board actually deliberated on
the non-renewal of respondents employment without submitting admissible
proof of his alleged regular performance evaluation. 18
The dispositive portion of the LAs Decision19 reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering

the [petitioners]:
1. To pay [respondent] the total amount of P39,252.00 corresponding

to his severance compensation and 13th month pay, moral and
exemplary damages.
2. To pay 10% of the total amount due to [respondent] as attorneys

fees.

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All other claims are dismissed for lack of merit.
SO ORDERED.20
Ruling of the National Labor Relations Commission
On appeal, the NLRC affirmed the LAs Decision with modification. It held
that after serving three school years, respondent had attained the status of
regular employment21 especially because CSR did not make known to
respondent the reasonable standards he should meet. 22 The NLRC also
agreed with the LA that respondents termination was done in bad faith. It
held that respondent is entitled to reinstatement, if viable; or separation
pay, if reinstatement was no longer feasible, and backwages, viz:
WHEREFORE, premises considered, the appealed Decision is hereby,

AFFIRMED with MODIFICATION only insofar as the award of separation pay
is concerned. Since [respondent] had been illegally dismissed, [petitioner]
Colegio Del Santisimo Rosario is hereby ordered to reinstate him to his
former position without loss of seniority rights with full backwages until he is
actually reinstated. However, if reinstatement is no longer feasible, the
respondent shall pay separation pay, in [addition] to the payment of his full
backwages.
The Computation Division is hereby directed to compute [respondents] full

backwages to be attached and to form part of this Decision.
The rest of the appealed Decision stands.
SO ORDERED.23
Petitioners moved for reconsideration which the NLRC denied in its April 28,
2004 Resolution24 for lack of merit.
Ruling of the Court of Appeals
Petitioners filed a Petition for Certiorari 25 before the CA alleging grave abuse
of discretion on the part of the NLRC in finding that respondent had attained
the status of a regular employee and was illegally dismissed from
employment.
In a Decision26 dated August 31, 2005, the CA denied the Petition for lack of
merit. Citing Cagayan Capitol College v. National Labor Relations
Commission,27 it held that respondent has satisfied all the requirements
necessary to acquire permanent employment and security of tenure viz:

Page 125 of 260
1. The teacher is a full-time teacher;
2. The teacher must have rendered three (3) consecutive years of

service; and
3. Such service must be satisfactory.28
According to the CA, respondent has attained the status of a regular

employee after he was employed for three consecutive school years as a
full-time teacher and had served CSR satisfactorily. Aside from being a high
school teacher, he was also the Prefect of Discipline, a task entailing much
responsibility. The only reason given by Mofada for not renewing
respondents contract was the alleged expiration of the contract, not any
unsatisfactory service. Also, there was no showing that CSR set performance
standards for the employment of respondent, which could be the basis of his
satisfactory or unsatisfactory performance. Hence, there being no
reasonable standards made known to him at the time of his engagement,
respondent was deemed a regular employee and was, thus, declared illegally
dismissed when his contract was not renewed.
Petitioners moved for reconsideration. However, the CA denied the motion

for lack of merit in its November 10, 2005 Resolution. 29
Hence, the instant Petition. Incidentally, on May 23, 2007, we issued a

Resolution30 directing the parties to maintain the status quo pending the
resolution of the present Petition.
Issue
WHETHER THE COURT OF APPEALS [AS WELL AS THE NATIONAL LABOR

RELATIONS COMMISSION] COMMITTED GRIEVOUS AND REVERSIBLE ERROR
WHEN IT RULED THAT A BASIC EDUCATION (ELEMENTARY) TEACHER HIRED
FOR THREE (3) CONSECUTIVE SCHOOL YEARS AS A PROBATIONARY
EMPLOYEE AUTOMATICALLY AND/OR BY LAW BECOMES A PERMANENT
EMPLOYEE UPON COMPLETION OF HIS THIRD YEAR OF PROBATION
NOTWITHSTANDING [A] THE PRONOUNCEMENT OF THIS HONORABLE
COURT IN COLEGIO SAN AGUSTIN V. NLRC, 201 SCRA 398 1991 THAT A
PROBATIONARY TEACHER ACQUIRES PERMANENT STATUS "ONLY WHEN HE
IS ALLOWED TO WORK AFTER THE PROBATIONARY PERIOD" AND [B] DOLE-
DECS-CHED-TESDA ORDER NO. 01, S. 1996 WHICH PROVIDE THAT
TEACHERS WHO HAVE SERVED THE PROBATIONARY PERIOD "SHALL BE
MADE REGULAR OR PERMANENT IF ALLOWED TO WORK AFTER SUCH
PROBATIONARY PERIOD."31

Page 126 of 260
Petitioners maintain that upon the expiration of the probationary period,

both the school and the respondent were free to renew the contract or let it
lapse. Petitioners insist that a teacher hired for three consecutive years as a
probationary employee does not automatically become a regular employee
upon completion of his third year of probation. It is the positive act of the
school the hiring of the teacher who has just completed three consecutive
years of employment on probation for the next school year that makes the
teacher a regular employee of the school.
Our Ruling
We deny the Petition.
In Mercado v. AMA Computer College-Paraaque City, Inc., 32 we had

occasion to rule that cases dealing with employment on probationary status
of teaching personnel are not governed solely by the Labor Code as the law
is supplemented, with respect to the period of probation, by special rules
found in the Manual of Regulations for Private Schools (the Manual). With
regard to the probationary period, Section 92 of the 1992 Manual 33 provides:
Section 92. Probationary Period. Subject in all instances to compliance

with the Department and school requirements, the probationary period for
academic personnel shall not be more than three (3) consecutive years of
satisfactory service for those in the elementary and secondary levels, six (6)
consecutive regular semesters of satisfactory service for those in the tertiary
level, and nine (9) consecutive trimesters of satisfactory service for those in
the tertiary level where collegiate courses are offered on a trimester basis.
(Emphasis supplied)
In this case, petitioners teachers who were on probationary employment

were made to enter into a contract effective for one school year. Thereafter,
it may be renewed for another school year, and the probationary
employment continues. At the end of the second fixed period of probationary
employment, the contract may again be renewed for the last time.
Such employment for fixed terms during the teachers probationary period is
an accepted practice in the teaching profession. In Magis Young Achievers
Learning Center v. Manalo,34 we noted that:
The common practice is for the employer and the teacher to enter into a
contract, effective for one school year. At the end of the school year, the
employer has the option not to renew the contract, particularly considering
the teachers performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually for another

Page 127 of 260
school year, the probationary employment continues. Again, at the end of

that period, the parties may opt to renew or not to renew the contract. If
renewed, this second renewal of the contract for another school year would
then be the last year since it would be the third school year of
probationary employment. At the end of this third year, the employer may
now decide whether to extend a permanent appointment to the employee,
primarily on the basis of the employee having met the reasonable standards
of competence and efficiency set by the employer. For the entire duration of
this three-year period, the teacher remains under probation. Upon the
expiration of his contract of employment, being simply on probation, he
cannot automatically claim security of tenure and compel the employer to
renew his employment contract. It is when the yearly contract is renewed for
the third time that Section 93 of the Manual becomes operative, and the
teacher then is entitled to regular or permanent employment status.
(Emphases supplied)
However, this scheme "of fixed-term contract is a system that operates

during the probationary period and for this reason is subject to Article 281 of
the Labor Code,"35 which provides:
x x x The services of an employee who has been engaged on a probationary

basis may be terminated for a just cause or when he fails to qualify as a
regular employee in accordance with reasonable standards made known by
the employer to the employee at the time of his engagement. An employee
who is allowed to work after a probationary period shall be considered a
regular employee. [Emphasis supplied]
In Mercado, we held that "[u]nless this reconciliation is made, the

requirements of [Article 281 on probationary status would be fully negated
as the school may freely choose not to renew contracts simply because their
terms have expired."36 This will have an unsettling effect in the equilibrium
vis-a-vis the relations between labor and management that the Constitution
and Labor Code have worked hard to establish.
That teachers on probationary employment also enjoy the protection

afforded by Article 281 of the Labor Code is supported by Section 93 of the
1992 Manual which provides:
Sec. 93. Regular or Permanent Status. - Those who have served the
probationary period shall be made regular or permanent. Full-time teachers
who have satisfactorily completed their probationary period shall be
considered regular or permanent. (Emphasis supplied)

Page 128 of 260
The above provision clearly provides that full-time teachers become regular
or permanent employees once they have satisfactorily completed the
probationary period of three school years. 37 The use of the term satisfactorily
necessarily connotes the requirement for schools to set reasonable
standards to be followed by teachers on probationary employment. For how
else can one determine if probationary teachers have satisfactorily
completed the probationary period if standards therefor are not provided?
As such, "no vested right to a permanent appointment shall accrue until the
employee has completed the prerequisite three-year period necessary for
the acquisition of a permanent status. [However, it must be emphasized
that] mere rendition of service for three consecutive years does not
automatically ripen into a permanent appointment. It is also necessary that
the employee be a full-time teacher, and that the services he rendered are
satisfactory."38
In Mercado, this Court, speaking through J. Brion, held that:
The provision on employment on probationary status under the Labor Code

is a primary example of the fine balancing of interests between labor and
management that the Code has institutionalized pursuant to the underlying
intent of the Constitution.
On the one hand, employment on probationary status affords management

the chance to fully scrutinize the true worth of hired personnel before the full
force of the security of tenure guarantee of the Constitution comes into play.
Based on the standards set at the start of the probationary period,
management is given the widest opportunity during the probationary period
to reject hirees who fail to meet its own adopted but reasonable standards.
These standards, together with the just and authorized causes for
termination of employment [which] the Labor Code expressly provides, are
the grounds available to terminate the employment of a teacher on
probationary status. x x x
Labor, for its part, is given the protection during the probationary period of
knowing the company standards the new hires have to meet during the
probationary period, and to be judged on the basis of these standards, aside
from the usual standards applicable to employees after they achieve
permanent status. Under the terms of the Labor Code, these standards
should be made known to the teachers on probationary status at the start of
their probationary period, or at the very least under the circumstances of the
present case, at the start of the semester or the trimester during which the
probationary standards are to be applied. Of critical importance in invoking a
failure to meet the probationary standards, is that the school should show

Page 129 of 260
as a matter of due process how these standards have been applied. This is
effectively the second notice in a dismissal situation that the law requires as
a due process guarantee supporting the security of tenure provision, and is
in furtherance, too, of the basic rule in employee dismissal that the employer
carries the burden of justifying a dismissal. These rules ensure compliance
with the limited security of tenure guarantee the law extends to probationary
employees.
When fixed-term employment is brought into play under the above

probationary period rules, the situation as in the present case may at
first blush look muddled as fixed-term employment is in itself a valid
employment mode under Philippine law and jurisprudence. The conflict,
however, is more apparent than real when the respective nature of fixed-
term employment and of employment on probationary status are closely
examined.
The fixed-term character of employment essentially refers to the period

agreed upon between the employer and the employee; employment exists
only for the duration of the term and ends on its own when the term expires.
In a sense, employment on probationary status also refers to a period
because of the technical meaning "probation" carries in Philippine labor law
a maximum period of six months, or in the academe, a period of three years
for those engaged in teaching jobs. Their similarity ends there, however,
because of the overriding meaning that being "on probation" connotes, i.e.,
a process of testing and observing the character or abilities of a person who
is new to a role or job.
Understood in the above sense, the essentially protective character of

probationary status for management can readily be appreciated. But this
same protective character gives rise to the countervailing but equally
protective rule that the probationary period can only last for a specific
maximum period and under reasonable, well-laid and properly
communicated standards. Otherwise stated, within the period of the
probation, any employer move based on the probationary standards and
affecting the continuity of the employment must strictly conform to the
probationary rules.
x x x If we pierce the veil, so to speak, of the parties so-called fixed-term

employment contracts, what undeniably comes out at the core is a fixed-
term contract conveniently used by the school to define and regulate its
relations with its teachers during their probationary period. 39 (Emphasis
supplied; italics in the original)

Page 130 of 260
In the same case, this Court has definitively pronounced that "in a situation
where the probationary status overlaps with a fixed-term contract not
specifically used for the fixed term it offers, Article 281 should assume
primacy and the fixed-period character of the contract must give way." 40
An example given of a fixed-term contract specifically used for the fixed

term it offers is a replacement teacher or a reliever contracted for a period
of one year to temporarily take the place of a permanent teacher who is on
leave. The expiration of the relievers fixed-term contract does not have
probationary status implications as he or she was never employed on
probationary basis. This is because his or her employment is for a specific
purpose with particular focus on the term. There exists an intent to end his
or her employment with the school upon expiration of this term. 41
However, for teachers on probationary employment, in which case a fixed

term contract is not specifically used for the fixed term it offers, it is
incumbent upon the school to have not only set reasonable standards to be
followed by said teachers in determining qualification for regular
employment, the same must have also been communicated to the teachers
at the start of the probationary period, or at the very least, at the start of
the period when they were to be applied. These terms, in addition to those
expressly provided by the Labor Code, would serve as the just cause for the
termination of the probationary contract.1wphi1 The specific details of this
finding of just cause must be communicated to the affected teachers as a
matter of due process.42 Corollarily, should the teachers not have been
apprised of such reasonable standards at the time specified above, they shall
be deemed regular employees.
In Tamsons Enterprises, Inc. v. Court of Appeals, 43 we held that "[t]he law

is clear that in all cases of probationary employment, the employer shall
[convey] to the employee the standards under which he will qualify as a
regular employee at the time of his engagement. Where no standards are
made known to the employee at that time, he shall be deemed a regular
employee.
In this case, glaringly absent from petitioners evidence are the reasonable
standards that respondent was expected to meet that could have served as
proper guidelines for purposes of evaluating his performance. Nowhere in
the Teachers Contract44 could such standards be found. 45 Neither was it
mentioned that the same were ever conveyed to respondent. Even assuming
that respondent failed to meet the standards set forth by CSR and made
known to the former at the time he was engaged as a teacher on
probationary status, still, the termination was flawed for failure to give the

Page 131 of 260
required notice to respondent. 46 This is because Book VI, Rule I, Section 2 of

the IRR of the Labor Code provides:
Section 2. Security of Tenure. (a) In cases of regular employment, the

employer shall not terminate the services of an employee except for just or
authorized causes as provided by law, and subject to the requirements of
due process.
(b) The foregoing shall also apply in cases of probationary

employment; provided, however, that in such cases, termination of
employment due to failure of the employee to qualify in accordance
with the standards of the employer made known to the former at the
time of engagement may also be a ground for termination of
employment.
xxxx
(d) In all cases of termination of employment, the following standards

of due process shall be substantially observed:
xxxx
If the termination is brought about by the completion of a contract or phase

thereof, or by failure of an employee to meet the standards of the employer
in the case of probationary employment, it shall be sufficient that a written
notice is served the employee, within a reasonable time from the effective
date of termination. (Emphasis supplied)
Curiously, despite the absence of standards, Mofada mentioned the

existence of alleged performance evaluations47 in respondents case. We are,
however, in a quandary as to what could have been the basis of such
evaluation, as no evidence were adduced to show the reasonable standards
with which respondents performance was to be assessed or that he was
informed thereof. Notably too, none of the supposed performance
evaluations were presented. These flaws violated respondents right to due
process. As such, his dismissal is, for all intents and purposes, illegal.
As a matter of due process, teachers on probationary employment, just like

all probationary employees, have the right to know whether they have met
the standards against which their performance was evaluated. Should they
fail, they also have the right to know the reasons therefor.
It should be pointed out that absent any showing of unsatisfactory

performance on the part of respondent, it can be presumed that his

Page 132 of 260
performance was satisfactory, especially taking into consideration the fact

that even while he was still more than a year into his probationary
employment, he was already designated Prefect of Discipline. In such
capacity, he was able to uncover the existence of a drug syndicate within the
school and lessen the incidence of drug use therein. Yet despite respondents
substantial contribution to the school, petitioners chose to disregard the
same and instead terminated his services; while most of those who were
involved in drug activities within the school were punished with a slap on the
wrist as they were merely made to write letters promising that the incident
will not happen again.48
Mofada would also have us believe that respondent chose to resign as he

feared for his life, thus, the schools decision not to renew his contract.
However, no resignation letter was presented. Besides, this is contrary to
respondents act of immediately filing the instant case against petitioners.
WHEREFORE, the Petition is hereby DENIED. The August 31, 2005 Decision
and the November 10, 2005 Resolution of the Court of Appeals in CA-G.R.
SP No. 85188 are AFFIRMED. The status quo order of this Court is LIFTED.
SO ORDERED.
12 AMA computer vs Austria

THIRD DIVISION

Page 133 of 260
AMA COMPUTER COLLEGE, G.R. No. 164078

PARAAQUE, and/or
AMABLE C. AGUILUZ IX,
President, MRS. CELESTE BANSALE, Present:
School Director, MS. SOCORRO,
MR. PATRICK AZANZA, YNARES-SANTIAGO, J.,
GRACE BERANIA and MAJAL JACOB, Chairperson,
Petitioners, AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
- versus - REYES, JJ.
ROLANDO A. AUSTRIA,
Respondent.
Promulgated:
November 23, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
---x
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the
Rules of Civil Procedure seeking the reversal of the Court of Appeals (CA)
Decision[2] dated March 29, 2004 which affirmed with modification the
Decision[3]of the National Labor Relations Commission (NLRC), dated March
31, 2003.
The Facts
Petitioner AMA Computer College, Paraaque (AMA) is an educational

institution duly organized under the laws of the Philippines. The rest of the
petitioners are principal officers of AMA. Respondent Rolando A.
Austria[4] (respondent) was hired by AMA on probationary employment as a

Page 134 of 260
college dean on April 24, 2000.[5] On August 22, 2000, respondents

appointment as dean was confirmed by AMAs Officer-in-Charge (OIC),
Academic Affairs, in his Memorandum,[6] which reads:
After a thorough evaluation of the performance of Mr.

Rolando Austria as Dean, we are happy to inform you that he is
hereby officially confirmed as Dean of AMA College Paraaque
effective April 17, 2000 to September 17, 2000.
In view of this, he will be entitled to a transportation allowance

of One Thousand Five Hundred Sixty Pesos (P1,560.00).
In the event that Mr. Austria gives up the Dean position or fails
to meet the standards of the (sic) based on the evaluation of his
immediate superior, he shall be considered for a faculty position
and the appointee agrees that he shall lose the transportation
allowance he enjoys as Dean and be entitled to his faculty rate.
Sometime in August 2000, respondent was charged with violating AMAs

Employees Conduct and Discipline provided in its Orientation Handbook
(Handbook),[7] as follows:
1) leaking of test questions;

2) failure to monitor general requirements vital to the operations of the
company; and
3) gross inefficiency.
In a Memorandum[8] dated August 29, 2000, respondent refuted the charges

against him. Thereafter, respondent was placed on preventive suspension
from September 8, 2000 to October 10, 2000. Notices[9] of Investigation
were sent to respondent. Eventually, on September 29, 2000, respondent
was informed of his dismissal, to wit:
Dear Mr. Austria[,]
Please be informed that after a careful deliberation on the case

filed against you and upon serious consideration of the evidences
(sic) presented, the Management has found you guilty of
violating the following policies:

Page 135 of 260
A. Loss of trust and confidence by management due

to gross inefficiency.
(5.21 Very Serious/Grave Offense)
B. Failure to monitor general requirements vital

to the operations of the company.
(5.10 Medium Offense)
C. Leaking of test questions.

(4.17 Very Serious/Grave Offense)
This resulted to the loss of trust and confidence in your

credibility as a company officer holding a highly sensitive
position. In view of this, your services as Dean of AMA Paraaque
is hereby terminated effective immediately.
You are hereby instructed to report to the branch HR Personnel

for further instructions. Please bear in mind that as a company
policy you are required to accomplish your clearance and turn
over all documents and responsibilities to the appropriate
officers.
You are barred from entering the company premises unless with
clearance from the HRD.[10]
On October 27, 2000, respondent filed a Complaint [11] for Illegal Dismissal,
Illegal Suspension, Non-Payment of Salary and 13 th Month Pay with prayer
for Damages and Attorney's Fees against AMA and the rest of the
petitioners. Trial on the merits ensued.
The Labor Arbiter's Ruling
In his Decision[12] dated December 6, 2000, the Labor Arbiter held that
petitioners accorded respondent due process. The Labor Arbiter however,
also held that respondent substantially refuted the charges of gross
inefficiency, incompetence, and leaking of test questions filed against him.
But since respondent can no longer be reinstated beyond September 17,
2000 as his designation as college dean was only until such date, respondent
should instead be paid his compensation and transportation allowance for

Page 136 of 260
the period from September 8, 2000 to September 17, 2000, or the salary
and benefits withheld prior thereto. Thus:
WHEREFORE, premises considered, judgment is hereby

rendered ordering respondent AMA Computer College, Paraaque
to pay complainants proportionate salary for the period
beginning 8 September 2000 to 17 September 2000.
P30,000 x 10/30 days = P10,000.00 and

his proportionate transportation allowance.
P1,560.00 x 10/30 days = P520.00 and the

salary/benefits withheld prior to 8 September 2000, if
any.
All other claims are hereby dismissed for lack of

merit.
SO ORDERED.
Aggrieved, respondent appealed the said Decision to the NLRC. [13]
The NLRC's Ruling
On March 31, 2003, the NLRC, in its Decision,[14] found merit in respondent's
appeal. The NLRC opined that the petitioners did not
contravene respondent's allegation that he had attained regular status after
serving the three (3)-month probationary period required under the

Handbook.[15] Thus, while the NLRC sustained the Labor Arbiter's finding that
petitioners failed to establish the grounds for respondent's dismissal, it held
that the Labor Arbiter erred in declaring that respondent's appointment was
only from April 24 to September 17, 2000. Accordingly, the NLRC declared
that respondent was a regular employee and that he was illegally dismissed.
Nevertheless, the NLRC held that reinstatement would not promote industrial
harmony; hence, the NLRC disposed of the case in this wise:

Page 137 of 260
PREMISES CONSIDERED the Decision of December 6,

2000 is VACATED and a new one entered declaring complainant
illegally dismissed. Respondents are directed to pay complainant
separation pay computed at one (1) month per year of service in
addition to full backwages from September 29, 2000 until
December 6, 2000, or in the amount of one hundred thousand
three hundred seventy eight-pesos & 80/100 (P100,378.80).
SO ORDERED.[16]
Petitioners filed a Motion for Reconsideration [17] assailing respondent's

regular status, which the NLRC in a Resolution, [18] denied for having been
filed out of time and for lack of merit. Respondent also filed a Motion for
Partial Reconsideration,[19] which the NLRC, in another Resolution, [20] denied
for lack of merit.
Thus, petitioners went to the CA via Petition for Certiorari[21] under Rule 65
of the 1997 Rules of Civil Procedure.
The CA's Ruling
On March 29, 2004, the CA held that based on the Handbook and on
respondent's appointment, it can be inferred that respondent was a regular
employee, and as such, his employment can only be terminated for any of
the causes provided under Article 282 [22] of the Labor Code and after
observance of the requirements of due process. Furthermore, the CA upheld
the Labor Arbiters and the NLRCs similar findings that respondent sufficiently
rebutted the charges against him and that petitioners failed to prove the
grounds for respondent's dismissal. The dispositive portion of the said
Decision reads:
WHEREFORE, premises considered, the petition is

hereby DENIED DUE COURSE and DISMISSED for lack of
merit. The decision of the NLRC
is AFFIRMED with MODIFICATION as above stated, with
regard to the computation of backwages.

Page 138 of 260
SO ORDERED.
Petitioners filed a Motion for Reconsideration [23] of the said Decision, which
the CA denied, in its Resolution[24] dated June 11, 2004, for lack of merit.
Hence, this Petition based on the sole ground that the CA committed serious
error of law in affirming and then further modifying the erroneous decision of
the NLRC declaring that herein respondent was illegally dismissed by AMA. [25]
Petitioners argue that respondent, as college dean, was an academic

personnel of AMA under Section 4(m) (4)(c) of theManual of Regulations for
Private Schools[26] (Manual) and, as such, his probationary employment is
governed by Section 92[27] thereof and not by the Labor Code or AMA's
Handbook; that under the circumstances, respondent has not yet attained
the status of a regular employee; that respondent's employment was for a
fixed term as found by the Labor Arbiter but the same was terminated
earlier due to just causes; that the respondent, whether he may be
considered as a probationary or a regular employee, was dismissed for just
causes; and that the award of backwages in favor of the respondent, up to
the finality of the decision, is oppressive to the petitioners, considering the
absence of an order of reinstatement and the respondent's fixed period of
employment.[28]
On the other hand, respondent counters that both the NLRC and the CA
found that respondent was a regular employee and that he was illegally
dismissed; that the instant Petition raises questions of fact - such as
whether or not respondent is a regular employee and whether or not
circumstances existed warranting his dismissal - which can no longer
be inquired into by
this Court;[29] that petitioners assailed the regular status of the respondent
for the first time only before the CA; that they never raised as issue
respondent's regular status before the Labor Arbiter and the NLRC because
they merely concentrated on their stand that respondent was lawfully
dismissed; that petitioners failed to discharge the burden of proving the

Page 139 of 260
existence of a valid ground in dismissing respondent as found by the Labor

Arbiter, the NLRC, and the CA; and that the CA's award of backwages from
the date of actual dismissal up to the date of the finality of the decision in
favor of the respondent is consonant with Article 279 [30] of the Labor Code,
and hence, valid.[31]
From this exchange of arguments, we glean two ultimate questions that

require resolution, viz.:
1. What is the nature of respondent's employment?

2. Was he lawfully dismissed?
The first question, i.e., whether respondent is a regular, probationary, or

fixed term employee is essentially factual in nature. [32] However, the Court
opts to resolve this question due to the far-reaching effects it could bring to
the sector of the academe.
As an exception to the general rule, we held in Molina v. Pacific Plans,

Inc.: [33]
A disharmony between the factual findings of the Labor Arbiter

and the National Labor Relations Commission opens the door to
a review thereof by this Court. Factual findings of administrative
agencies are not infallible and will be set aside when they fail the
test of arbitrariness. Moreover, when the findings of the National
Labor Relations Commission contradict those of the Labor
Arbiter, this Court, in the exercise of its equity jurisdiction, may
look into the records of the case and reexamine the questioned
findings.
The instant case falls squarely within the aforesaid exception. The Labor
Arbiter held that, while petitioners did not prove the existence of just causes
in order to warrant respondent's dismissal, the latter's employment as dean
ceased to exist upon expiration of respondent's term of employment
on September 17, 2000. In sum, the Labor Arbiter held that the nature of
respondent's employment is one for a fixed term. On the other hand, the
NLRC and the CA both held that respondent is a regular employee because

Page 140 of 260
respondent had fully served the three (3)-month probationary period

required in the Handbook, which the petitioners failed to deny or contravene
in the proceedings before the Labor Arbiter.
Prior to his dismissal, respondent held the position of college dean. The
letter of appointment states that he was officially confirmed as Dean of AMA
College, Paraaque, effective from April 17, 2000 to September 17, 2000.
Petitioners submit that the nature of respondent's employment as dean is
one with a fixed term.
We agree.
We held that Article 280 of the Labor Code does not proscribe or prohibit an
employment contract with a fixed period. Even if the duties of the employee
consist of activities necessary or desirable in the usual
business of the employer, the parties are free to agree on a fixed period
of time for the performance of such activities. There is nothing essentially
contradictory between a definite period of employment and the nature of the

employees duties.[34]
Thus, this Court's ruling in Brent School, Inc. v. Zamora[35] is instructive:
The question immediately provoked. . .

is whether or not a voluntary agreement on a fixed ter
m or period would be valid where the employee "has b
een engaged to perform activities which are usually ne
cessary or desirable in the usual business or trade of t
he employer." The definition seems non sequitur. Fro
m the premise that the duties of an employee entail "a
ctivities which are usually necessary or desirable in the
usual business or trade of the employer"the conclusion
does not necessarily follow that the employer and emp
loyee should be forbidden to stipulate any period of ti
me for the performance of those activities. There is no
thing essentially contradictory between a definiteperio
d of an employment contract and the nature of the em
ployee's duties set down in that contract as being "usu

Page 141 of 260
ally necessary or desirable in the usual business or tra

de of the employer." The concept of the employee's du
ties as being"usually necessary or desirable in the usu
al business or trade of the employer" is not synonymo
us with or identical to employment with a fixed term. L
ogically, the decisive determinant in term employment
should not be the activities that the employee is called
upon to perform, but the day certain agreed upon by t
he parties for thecommencement and termination of th
eir employment relationship, a day certain being under
stood to be "that which must necessarily come, althou
gh it may not be known when." Seasonal employment,
and employment for a particular project are merely ins
tances of employment in which a period, where not ex
pressly set down, is necessarily implied.
xxxxxxxxx
Some familiar examples may be cited of employment c

ontracts which may be neither for seasonal work nor f
orspecific projects, but to which a fixed term is an
essential and natural appurtenance: overseas emp
loyment contracts, for one, to which, whatever the nat
ure of the engagement, the concept of regular employ
ment with all that it implies does not appear ever to h
ave been applied, Article 280 of the Labor Code notwit
hstanding; also appointments to the positions of d
ean, assistant dean, college secretary, principal,
and other administrative offices in educational in
stitutions, which are by practice or tradition rota
ted among the faculty members, and where fixed
terms are a necessity without which no reasonab
le rotation would be possible . . . .
xxx
The instant case involves respondent's position as dean, and comes within
the purview of the Brent School doctrine.
First. The letter of appointment was clear. Respondent was confirmed as

Dean of AMA College, Paraaque, effective from April 17, 2000 to September
17, 2000. In numerous cases decided by this Court, we had taken notice,
that by way of practice and tradition, the position of dean is normally an

Page 142 of 260
employment for a fixed term. [36] Although it does not appear on record and
neither was it alleged by any of the parties that respondent, other than
holding the position of dean, concurrently occupied a teaching position, it
can be deduced from the last paragraph of said letter that the respondent
shall be considered for a faculty position in the event he gives up his
deanship or fails to meet AMA's standards. Such provision reasonably serves
the intention set forth in Brent School that the deanship may be rotated
among the other members of the faculty.
Second. The fact that respondent did not sign the letter of appointment is of
no moment. We held in Brent School, to wit:
Accordingly, and since the entire purpose behind the

development of legislation culminating in the present
Article 280 of the Labor Code clearly appears to have
been, as already observed, to prevent circumvention
of the employee's right to be secure in his tenure, the
clause in said article indiscriminately and completely
ruling out all written or oral agreements conflicting
with the concept of regular employment as defined
therein should be construed to refer to the substantive
evil that the Code itself has singled out: agreements
entered into precisely to circumvent security of
tenure. It should have no application to instances
where a fixed period of employment was agreed
upon knowingly and voluntarily by the parties,
without any force, duress or improper pressure
being brought to bear upon the employee and
absent any other circumstances vitiating his
consent, or where it satisfactorily appears that
the employer and employee dealt with each
other on more or less equal terms with no moral
dominance whatever being exercised by the
former over the latter. Unless, thus, limited in its
purview, the law would be made to apply to purposes
other than those explicitly stated by its framers; it
thus becomes pointless and arbitrary, unjust in its
effects and apt to lead to absurd and unintended
consequences.[37]

Page 143 of 260
The fact that respondent voluntarily accepted the employment, assumed the
position, and performed the functions of dean is clear indication that he
knowingly and voluntarily consented to the terms and conditions of the
appointment, including the fixed period of his deanship. Other than the
handwritten notes made in the letter of appointment, no evidence was ever
presented to show that respondents consent was vitiated, or that respondent
objected to the said appointment or to any of its conditions. Furthermore, in
his status as dean, there can be no valid inference that he was shackled by
any form of moral dominance exercised by AMA and the rest of the
petitioners.
Alternatively, petitioners also claim that respondent did not attain regular
status, relying on Section 92 of the Manual in connection with Section 4(m)
4(c) thereof which provides for a three (3)-year probationary period for
Academic Personnel. Petitioners submit that the position of dean is included
in the provision school officials responsible for academic matters, and may
include other school officials. As such, petitioners aver that the three (3)-
month probationary period for officers set forth in the Handbook is not
applicable to the case of respondent.
The Handbook merely provides for two classes of employees for purposes of
permanency, i.e., Faculty and Non-Academic. However, the same does not
specifically classify the position of dean as part of the Faculty or of the Non-
Academic personnel. At this juncture, we find solace in the Manual of
Regulations for Private Schools Annotated, [38] which provides that the college
dean is the senior officer responsible for the operation of an academic
program, the enforcement of rules and regulations, and the supervision of
faculty and student services. We already had occasion to state that the
position of dean is primarily academic [39] and, as such, he is considered a
managerial employee.[40] Yet, a perusal of the Handbook yields the
interpretation that the provision on the permanency of Faculty members
applies to teachers only. But the Handbook or school manual must yield to
the decree of the Manual, the latter having the character of law. [41] The
specified probationary periods in Section 92 of the Manual are the maximum
periods; under certain conditions, regular status may be achieved by the
employee in less time.[42] However, under the given circumstances and the
Page 144 of 260
fact that the position of dean in this case is for a fixed term, the issue
whether the respondent attained a regular status is not in point. By the
same token, the application of the provision in the Manual as to the required
probationary period is misplaced. It can be well said that a tenured status of
employment co-exists and is co-terminous only with the definite term fixed
in the contract of employment.
In light of the foregoing disquisition, the resolution of the second question

requires full cognizance of respondents fixed term of employment and all the
effects thereof. It is axiomatic that a contract of employment for a definite
period terminates on its own force at the end of such period. [43] The lack of
notice of termination is of no consequence because when the contract
specifies the length of its duration, it comes to an end upon the expiration of
such period.[44]
Thus, the unanimous finding of the Labor Arbiter, the NLRC and the CA that
respondent adequately refuted all the charges against him assumes
relevance only insofar as respondents dismissal from the service was
effected by petitioners before expiration of the fixed period of employment.
True, petitioners erred in dismissing the respondent, acting on the mistaken
belief that respondent was liable for the charges leveled against him. But
respondent also cannot claim entitlement to any benefit flowing from such
employment after September 17, 2000, because the employment, which is
the source of the benefits, had, by then, already ceased to exist.
Finally, while this Court adheres to the principle of social justice and
protection to labor, the constitutional policy to provide such protection to
labor is not meant to be an instrument to oppress employers. The
commitment under the fundamental law is that the cause of labor does not
prevent us from sustaining the employer when the law is clearly on its side.
[45]
WHEREFORE, the instant Petition is GRANTED and the CA Decision in CA-

G.R. SP No. 78455 is REVERSED and SET ASIDE. The Decision of the Labor
Arbiter, dated December 6, 2000, is hereby REINSTATED. No costs.

Page 145 of 260
SO ORDERED.
13 Tirol vs NLRC
WILFREDO ARO, RONILO TIROL, JOSE PACALDO, G.R. No. 174792
PRIMITIVO CASQUEJO and MARCIAL ABGO,
Petitioners,
Present:
VELASCO, JR., J., Chairperson,

- versus
PERALTA,
ABAD,
MENDOZA, and
NATIONAL LABOR RELATIONS COMMISSION, FOURTH
PERLAS-BERNABE, JJ.
DIVISION and BENTHEL DEVELOPMENT
CORPORATION,
Respondents. Promulgated:
March 7, 2012
x-----------------------------------------------------------------------------------------x
DECISION
PERALTA, J.:

Page 146 of 260
For resolution of this Court is the Petition for Review on Certiorari under Rule
45 of the Rules of Court, dated October 7, 2006, of petitioners Wilfredo Aro,
Ronilo Tirol, Jose Pacaldo, Primitivo Casquejo and Marcial Abgo, seeking to
reverse and set aside the Decision [1] dated March 7, 2006, and
Resolution[2] dated July 27, 2006, of the Court of Appeals (CA) in CA-G.R.
CEB-SP No. 01012 which reversed the Decision and Resolution dated June
25, 2004 and June 30, 2005, respectively, of the National Labor Relations
Commission (NLRC).
The facts, as culled from the records, are the following:
Several employees of private respondent Benthel Development Corporation,

including the petitioners, filed a Complaint for illegal dismissal with various
money claims and prayer for damages against the latter, in the NLRC
Arbitration Branch No. VII in Cebu City and docketed as RAB Case No. 07-
09-1222-97/12-1609-97. Thereafter, Labor Arbiter Ernesto F. Carreon
rendered a decision finding private respondent guilty of illegal dismissal and
ordering it to pay its thirty-six (36) employees P446,940.00 as separation
pay.
The employees, including the petitioners herein, appealed from the said
decision. The NLRC, in NLRC Case No. V-000399-98, affirmed the decision of
Labor Arbiter Carreon in its Decision dated January 12, 1999, with the
modification that private respondent pay backwages computed from the
respective dates of dismissal until finality of the decision.
Private respondent, unsatisfied with the modification made by the NLRC,

filed a motion for reconsideration with the contention that, since it has been
found by the Labor Arbiter and affirmed in the assailed decision that the
employees were project employees, the computation of backwages should
be limited to the date of the completion of the project and not to the finality
of the decision. The NLRC, however, denied the motion ruling that private
respondent failed to establish the date of the completion of the project.

Page 147 of 260
Aggrieved, private respondent filed a Petition for Certiorari with the CA,
docketed as CA-G.R. SP No. UDK 3092 assailing the January 12, 1999
decision of the NLRC and the denial of its motion for reconsideration which
was dismissed for non-payment of docket fees and insufficiency of form. It
filed a motion for reconsideration, but the latter was also denied.
Thus, private respondent filed with this Court, docketed as G.R. No. 144433
a Petition for Review on Certiorari. In a Resolution dated September 20,
2000, this Court denied the petition for having been filed out of time and for
non-payment of docket and other lawful fees.
The employees, including the petitioners, upon the finality of this Court's
resolution, filed a Motion for Execution before the Labor Arbiter of the
January 12, 1999 decision. Thereafter, the Labor Arbiter ordered for the
issuance of a writ of execution directing the computation of the awards.
Afterwards, private respondent filed an appeal from the said Order with an
urgent prayer for the issuance of a temporary restraining order and/or
preliminary injunction with public respondent NLRC. The said appeal was
denied. The NLRC held that the appeal was premature, there having been no
computation yet made by the Labor Arbiter as to the exact amount to be
paid to the employees. Public respondent remanded the case to the
arbitration branch for appropriate action.
Labor Arbiter Carreon inhibited himself from further proceedings in the case
upon motion of private respondent. In the meantime, fifteen (15) employees
have executed Affidavits of Full Settlement after having settled amicably
with the private respondent. Labor Arbiter Violeta Ortiz-Bantug issued an
Order dated July 31, 2003 for the issuance of a writ of execution only for the
payment of the claims of the twenty-one (21) remaining employees in the
Page 148 of 260
total amount of P4,383,225.00, which included attorney's fees equivalent to

ten (10%) percent of the sum received as settlement by the fifteen (15)
employees who had earlier settled with the private respondent.
Private respondent appealed to public respondent NLRC contending that the

computation for backwages must be only until the completion of the project
and not until the finality of the decision. Public respondent, in its Decision
dated June 25, 2004, affirmed the Order of Labor Arbiter Bantug, but
reduced the total amount to P4,073,858.00, inclusive of attorney's
fees. Thereafter, private respondent filed a motion for reconsideration of the
June 25, 2004 decision which was denied by the public respondent, but not
before the admittance of the affidavits of withdrawal, release/waiver and
quitclaim executed by another group of fourteen (14) employees, leaving
unresolved only the claims of the petitioners herein. Thus, in the resolution
of the private respondent's motion for reconsideration, the award was
reduced to the sum of P1,374,339.00, inclusive of attorney's fees.
As a recourse, private respondent filed a petition for certiorari with the CA,
alleging that public respondent committed grave abuse of discretion in
promulgating its assailed decision and denying its motion for
reconsideration. The CA granted the petition, therefore, annulling and
setting aside the decision and resolution of the NLRC as to the award for
backwages and remanded the case to the same public respondent for the
proper computation of the backwages due to each of the petitioners
herein. The dispositive portion of the decision reads:
WHEREFORE, in view of the foregoing premises, judgment is

hereby rendered by us GRANTING the petition filed in this
case. The assailed Decision and Resolution dated June 04, 2004
(sic) and June 30, 2005, respectively, issued by the public
respondent in NLRC Case No. V-000586-2003 are hereby

Page 149 of 260
ANNULLED and SET ASIDE as to the award for backwages

granted to the seven private respondents named in the petition
at bench.
The case is hereby remanded to the public respondent for the

proper computation of the backwages due to each of the said
seven private respondents, computed until March 18, 1997.
SO ORDERED.[3]
Hence, the present petition.
Petitioners assigned the following errors:
GROUND/ASSIGNMENT OF ERRORS
THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF

DISCRETION WHEN IT OVERTURNED ITS OWN DECISION AND
THAT OF THE SUPREME COURT.
THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF

DISCRETION IN DECLARING THAT PETITIONERS ARE PROJECT
EMPLOYEES, CONSIDERING THAT THE NLRC 4TH DIVISION
HAD LONG RULED THAT SAID EMPLOYEES ARE IN FACT
REGULAR EMPLOYEES AND WHICH RULING WAS LONG
CONFIRMED AND AFFIRMED NOT ONLY BY THE COURT OF
APPEALS BUT BY THE SUPREME COURT ITSELF.

Page 150 of 260
THE RESPONDENT COURT ACTED WITH GRAVE ABUSE OF

DISCRETION WHEN IT REFUSED TO RULE ON THE INVALIDITY
OF THE RELEASE AND QUITCLAIMS EXECUTED BY SOME OF
THE EMPLOYEES WITHOUT THE ASSISTANCE OF COUNSEL.[4]
In its Comment[5] dated January 24, 2007, private respondent stated the
following counter-arguments:
1. The issues presented in CA-G.R. SP No. UDK 3092 and

SC G.R. No. 144433 are not the same issues recently raised in
the Petition for Certiorari before the Court of Appeals.
2. There is no final and executory ruling that herein

petitioners were regular employees and not just project
employees.[6]
First of all, this Court has to address the nature of the petition filed by
petitioners. As pointed out by private respondent, and not disputed by
petitioners, the present petition was filed out of time. Petitioners received,
on August 4, 2006, a copy of the CA Resolution dated July 27, 2006. The
period within which to file a petition for review under Rule 45 is within
fifteen (15) days from notice of the judgment or final order or resolution
appealed from, or from the denial of the petitioners' motion for new trial or
reconsideration filed in due time after notice of the judgment, or in this
case, not later than August 19, 2006. Under Rule 65, a petition
for certiorari may be filed not later than sixty (60) days from notice of the
judgment, order or resolution, or in this case, not later than October 3,
2006. However, the present petition is dated October 7, 2006 and as it

Page 151 of 260
appears on the records, this Court received the said petition on October 17,
2006. Thus, on its face and in reality, the present petition was filed out of
time, whether it be under Rule 45 or Rule 65 of the Rules of
Court.Nevertheless, this Court did not dismiss the present petition and
required private respondent to file its Comment.Consequently, a Reply from
petitioners and eventually, both parties' respective memorandum were
filed. In view of that premise and in the interest of justice, this Court shall
forego the technicalities and is constrained to resolve the present petition as
a petition for certiorari under Rule 65, since the main issue raised by
petitioners is whether or not the CA committed grave abuse of discretion
which amounted to lack or excess of its jurisdiction.
Petitioners argue that the CA should have dismissed private respondent's

petition, since there was already a finality of the judgment of the NLRC. It is
not disputed that on January 31, 2000, the CA, through its 17 th Division,
issued a Resolution dismissing private respondent's petition
for certiorari (docketed as CA-G.R. SP No. UDK 3092. Subsequently, the
same private respondent filed a motion for reconsideration, which was
denied by the CA in its Resolution dated June 8, 2000.Not contented, private
respondent filed a petition with this Court, which the latter denied, through
its Second Division (G.R. No. 144433), in its Resolution dated September
20, 2000. Still aggrieved, private respondent filed a second motion for
reconsideration, which was dismissed by this Court. Thus, according to
petitioners, there was already a finality of judgment.
On the other hand, private respondent insists that the inequitable, nay
illegal, in a decision cannot lapse into finality, referring to the computation
of the backwages which is not commensurate to the factual findings of the
Labor Arbiter and the NLRC. Basically, according to private respondent, the
CA merely sought to correct the NLRC's and the Labor Arbiter's one-sided
and blind adherence to and/or misguided application of strict technical rules,
and their overzealous partiality in favor of labor. Private respondent further
claims that the issues presented in their earlier petitions with the CA and

Page 152 of 260
this Court (CA-G.R. SP No. UDK 3092 and SC G.R. No. 144433, respectively)
are not the same issues raised in the petition for certiorari later filed with
the CA and the decision of which is now the subject of herein
petition. Private respondent clarifies that there is no final and executory
ruling that petitioners were regular and not just project employees, hence,
there was a need to file a petition with the CA.
The issue as to whether petitioners were project employees or regular

employees is factual in nature. It is well-settled in jurisprudence that factual
findings of administrative or quasi-judicial bodies, which are deemed to have
acquired expertise in matters within their respective jurisdictions, are
generally accorded not only respect but even finality, and bind the Court
when supported by substantial evidence. [7] Section 5, Rule 133 of the Rules
of Court, defines substantial evidence as "that amount of relevant evidence
which a reasonable mind might accept as adequate to justify a
conclusion." Consistent therewith is the doctrine that this Court is not a trier
of facts, and this is strictly adhered to in labor cases. [8] We [this Court] may
take cognizance of and resolve factual issues, only when the findings of fact
and conclusions of law of the Labor Arbiter or the NLRC are inconsistent with
those of the CA.[9] In the present case, the NLRC and the CA have opposing
views.
According to the CA, petitioners are project employees as found by Labor

Arbiter Ernesto Carreon in his Decision dated May 28, 1998, because they
were hired for the construction of the Cordova Reef Village Resort in
Cordova, Cebu, which was later on affirmed by the NLRC in its January 12,
1999 decision. The only discrepancy is the Order of the NLRC that petitioners
are entitled to backwages up to the finality of its decision, when as project
employees, private respondents are only entitled to payment of backwages
until the date of the completion of the project. In a later resolution on
private respondent's motion for reconsideration of its January 12, 1999
decision, the NLRC changed its findings by ruling that petitioners herein were

Page 153 of 260
regular employees and, therefore, entitled to full backwages, until finality of

the decision, citing that petitioners repeated rehiring over a long span of
time made them regular employees.
Article 280 of the Labor Code distinguishes a "project employee" from a

"regular employee," thus:
Article 280. Regular and Casual Employment The provisions of

written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature
and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered

by the preceding paragraph: Provided, That, any employee who
has rendered at least one year 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.
In Hanjin Heavy Industries and Construction Co. Ltd. v. Ibaez, [10] this Court
extensively discussed the above distinction, thus:
x x x [T]he principal test for determining whether particular

employees are properly characterized as "project employees" as
distinguished from "regular employees" is whether or not the

Page 154 of 260
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.[11]
In a number of cases,[12] the Court has held that the length of

service or the re-hiring of construction workers on a project-to-
project basis does not confer upon them regular employment
status, since their re-hiring is only a natural consequence of the
fact that experienced construction workers are preferred.
Employees who are hired for carrying out a separate job, distinct
from the other undertakings of the company, the scope and
duration of which has been determined and made known to the
employees at the time of the employment , are properly treated
as project employees and their services may be lawfully
terminated upon the completion of a project. [13] Should the terms
of their employment fail to comply with this standard, they
cannot be considered project employees.
In Abesco Construction and Development Corporation v.

Ramirez,[14] which also involved a construction company and its
workers, this Court considered it crucial that the employees were
informed of their status as project employees:
The principal test for determining whether

employees are "project employees" or "regular
employees" is whether they are assigned to carry out
a specific project or undertaking, the duration and
scope of which are specified at the time they are
engaged for that project. Such duration, as well as
the particular work/service to be performed, is
defined in an employment agreement and is made
clear to the employees at the time of hiring.
In this case, petitioners did not have that kind of

agreement with respondents. Neither did they inform

Page 155 of 260
respondents of the nature of the latters work at the

time of hiring. Hence, for failure of petitioners to
substantiate their claim that respondents
were project employees, we are constrained to
declare them as regular employees.
In Caramol v. National Labor Relations Commission,[15] and later

reiterated in Salinas, Jr. v. National Labor Relations Commission,
[16]
the Court markedly stressed the importance of the
employees' knowing consent to being engaged
as project employees when it clarified that "there is no question
that stipulation on employment contract providing for a fixed
period of employment such as project-to-project contract is valid
provided the period was agreed upon knowingly and voluntarily
by the parties, without any force, duress or improper pressure
being brought to bear upon the employee and absent any other
circumstances vitiating his consent x x x."
Applying the above disquisition, this Court agrees with the findings of the CA
that petitioners were project employees. It is not disputed that petitioners
were hired for the construction of the Cordova Reef Village Resort in
Cordova, Cebu. By the nature of the contract alone, it is clear that
petitioners' employment was to carry out a specific project. Hence, the CA
did not commit grave abuse of discretion when it affirmed the findings of the
Labor Arbiter. The CA correctly ruled:
A review of the facts and the evidence in this case readily shows
that a finding had been made by Labor Arbiter Ernesto Carreon,
in his decision dated May 28, 1998, that complainants, including
private respondents, are project employees. They were hired for
the construction of the Cordova Reef Village Resort in Cordova,
Cebu. We note that no appeal had been made by the
complainants, including herein private respondents, from the

Page 156 of 260
said finding. Thus, that private respondents are project

employees has already been effectively established.
Likewise, a review of the public respondent's January 12, 1999

decision shows that it affirmed the labor arbiter's finding of the
private respondents' being project employees.
We therefore cannot fathom how the public respondent could

have ordered backwages up to the finality of its decision when,
as project employees, private respondents are only entitled to
payment of the same until the date of the completion of the
project. It is settled that, without a valid cause, the employment
of project employees cannot be terminated prior to
expiration. Otherwise, they shall be entitled to reinstatement
with full backwages. However, if the project or work is
completed during the pendency of the ensuing suit for illegal
dismissal, the employees shall be entitled only to full backwages
from the date of the termination of their employment until the
actual completion of the work.
While it may be true that in the proceedings below the date of

completion of the project for which the private respondents
were hired had not been clearly established, it constitutes grave
abuse of discretion on the part of the public respondent for not
determining for itself the date of said completion instead of
merely ordering payment of backwages until finality of its
decision.
xxxx
The decision of the labor arbiter, as affirmed by the public

respondent in its January 12, 1999 decision, clearly established

Page 157 of 260
that private respondents were project employees. Because

there was no showing then that the project for which their
services were engaged had already been completed, the public
respondent likewise found that private respondents were
illegally dismissed and thus entitled to backwages.
However, in utter disregard of the law and prevailing

jurisprudence, the public respondents capriciously and
arbitrarily ordered that the said backwages be computed until
the finality of its decision instead of only until the date of the
project completion. In grave abuse of its discretion, the public
respondent refused to consider the evidence presented before it
as to the date of completion of the Cordova Reef Village Resort
project. The records show that affidavits have been executed by
the petitioner's manager, corporate architect and project
engineer as to the fact of the completion of the project in
October 1996. As these evidences [sic] were already a matter of
record, the public respondent should not have closed its eyes
and should have endeavored to render a correct and just
judgment.
xxxx
Furthermore, as earlier noted, private respondents did not

appeal from the Labor Arbiter's findings that they were
indubitably project employees. However, they were entitled to
the payment of separation pay only for the reason that the date
of the completion of the project for which they were hired had
not been clearly established. Thus, in affirming the labor
arbiter's decision, the public respondent in effect sustained the
finding that private respondents are project employees. The
statement, therefore, contained in the resolution of the
petitioner's motion for reconsideration of its January 12, 1999
decision that repeated rehiring makes the worker a regular
employee, is at best an obiter, especially considering that such

Page 158 of 260
conclusion had not been shown to apply to the circumstances

then obtaining with the private respondents' employment with
the petitioner.[17]
Therefore, being project employees, petitioners are only entitled to full

backwages, computed from the date of the termination of their employment
until the actual completion of the work. Illegally dismissed workers are
entitled to the payment of their salaries corresponding to the unexpired
portion of their employment where the employment is for a definite period.
[18]
In this case, as found by the CA, the Cordova Reef Village Resort project
had been completed in October 1996 and private respondent herein had
signified its willingness, by way of concession to petitioners, to set the date
of completion of the project as March 18, 1997; hence, the latter date
should be considered as the date of completion of the project for purposes
of computing the full backwages of petitioners.
As to the issue that the CA committed grave abuse of discretion in refusing

to rule on the invalidity of the release and quitclaims executed by some of
the employees other than the petitioners, such is inconsequential as those
employees are not parties in the present case.
WHEREFORE, the Petition for Review dated October 7, 2006, of petitioners

Wilfredo Aro, Ronilo Tirol, Jose Pacaldo, Primitivo Casquejo and Marcial Abgo
is hereby DENIED. Consequently, the Decision dated March 7, 2006 and
Resolution dated July 27, 2006 of the Court of Appeals are
hereby AFFIRMED in toto.
SO ORDERED.

Page 159 of 260
14 Goma vs Pamplona
BIENVENIDO D. GOMA, G.R. No. 160905
Petitioner,
Present:
YNARES-SANTIAGO,
J.,
Chairperson,
- versus -
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
PAMPLONA PLANTATION INCORPORATED,

Promulgated:
Respondent.
July 4, 2008
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

Page 160 of 260
For review is the Decision[1] of the Court of Appeals (CA) dated August
27, 2003 granting respondent Pamplona Plantation, Inc.s petition
for certiorari and its Resolution[2] dated November 11, 2003 denying
petitioner Bienvenido Gomas motion for reconsideration, in CA-G.R. SP No.
74892.
Petitioner commenced[3] the instant suit by filing a complaint for illegal

dismissal, underpayment of wages, non-payment of premium pay for holiday
and rest day, five (5) days incentive leave pay, damages and attorneys fees,
against the respondent. The case was filed with the Sub-Regional Arbitration
Branch No. VII of Dumaguete City. Petitioner claimed that he worked as a
carpenter at the Hacienda Pamplona since 1995; that he worked from 7:30
a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. daily with a salary rate
of P90.00 a day paid weekly; and that he worked continuously until 1997
when he was not given any work assignment. [4] On a claim that he was a
regular employee, petitioner alleged to have been illegally dismissed when
the respondent refused without just cause to give him work
assignment. Thus, he prayed for backwages, salary differential, service
incentive leave pay, damages and attorneys fees.[5]
On the other hand, respondent denied having hired the petitioner as

its regular employee. It instead argued that petitioner was hired by a certain
Antoy Caaveral, the manager of the hacienda at the time it was owned by
Mr. Bower and leased by Manuel Gonzales, a jai-alai pelotari known as
Ybarra.[6] Respondent added that it was not obliged to absorb the employees
of the former owner.

Page 161 of 260
In 1995, Pamplona Plantation Leisure Corporation (PPLC) was created

for the operation of tourist resorts, hotels and bars. Petitioner, thus,
rendered service in the construction of the facilities of PPLC. If at all,
petitioner was a project but not a regular employee.[7]
On June 28, 1999, Labor Arbiter Geoffrey P. Villahermosa dismissed

the case for lack of merit.[8] The Labor Arbiter concluded that petitioner was
hired by the former owner, hence, was not an employee of the
respondent. Consequently, his money claims were denied.[9]
On appeal to the National Labor Relations Commission (NLRC), the

petitioner obtained favorable judgment when the tribunal reversed and set
aside the Labor Arbiters decision. The dispositive portion of the NLRC
decision reads:
WHEREFORE, the Decision of the Labor Arbiter is hereby

SET ASIDE and a new one is hereby issued ORDERING the
respondent, Pamplona Plantation Incorporated, the following:
1) to reinstate the complainant, BIENVENIDO D. GOMA to

his former position immediately without loss of seniority rights
and other privileges;
2) to pay the same complainant TWELVE THOUSAND

THREE HUNDRED FIFTY-NINE PESOS (P12,359.00) in salary
differentials;
3) to pay to the same complainant ONE HUNDRED ONE

THOUSAND SIX HUNDRED SIXTY PESOS (P101,660.00) in
backwages to be updated until actual reinstatement; and

Page 162 of 260
4) to pay attorneys fee in the amount of ELEVEN

THOUSAND FOUR HUNDRED TWO PESOS (P11,402.00) which is
equivalent to ten percent (10%) of the total judgment award.
The respondent is further ordered to pay the aggregate

amount of ONE HUNDRED FOURTEEN THOUSAND AND
NINETEEN PESOS (P114,019.00) to the complainant through the
cashier of this Commission within ten (10) days from receipt
hereof.
SO ORDERED.[10]
Respondents motion for reconsideration was denied by the NLRC

on September 9, 2002.[11]
The NLRC upheld the existence of an employer-employee relationship,

ratiocinating that it was difficult to believe that a simple carpenter from far
away Pamplona would go to Dumaguete City to hire a competent lawyer to
help him secure justice if he did not believe that his right as a laborer had
been violated.[12] It added that the creation of the PPLC required the
tremendous task of constructing hotels, inns, restaurants, bars, boutiques
and service shops, thus involving extensive carpentry work. As an old
carpentry hand in the old corporation, the possibility of petitioners
employment was great.[13]The NLRC likewise held that the respondent should
have presented its employment records if only to show that petitioner was
not included in its list of employees; its failure to do so was fatal.
[14]
Considering that petitioner worked for the respondent for a period of two
years, he was a regular employee.[15]

Page 163 of 260
Aggrieved, respondent instituted a special civil action for certiorari under

Rule 65 before the Court of Appeals which granted the same; and
consequently annulled and set aside the NLRC decision. The CA disposed, as
follows:
WHEREFORE, premises considered, the instant petition

is GRANTED. The assailed decision of the NLRC dated October
24, 2000, as well as the Resolution dated September 9, 2002 in
NLRC Case No. V-000882-99, RAB VII-0088-98-D are
hereby ANNULLED and SET ASIDE. The complaint is
ordered DISMISSED.
SO ORDERED.[16]
Contrary to the NLRCs finding, the CA concluded that there was no

employer-employee relationship. The CA stressed that petitioner having
raised a positive averment, had the burden of proving the existence of an
employer-employee relationship. Respondent, therefore, had no obligation to
prove its negative averment.[17] The appellate court further held that while
the respondents business required the performance of occasional repairs and
carpentry work, the retention of a carpenter in its payroll was not necessary
or desirable in the conduct of its usual business. [18] Lastly, although the
petitioner was an employee of the former owner of the hacienda, the
respondent was not required to absorb such employees because
employment contracts are in personam and binding only between the
parties.[19]
Petitioner now comes before this Court raising the sole issue:
WHETHER OR NOT THE DECISION OF [THE] COURT OF

APPEALS DATED AUGUST 27, 2003, REVERSING AND SETTING

Page 164 of 260
ASIDE THE NLRC (Fourth Division, Cebu City) RULING THAT THE
PETITIONER WAS NOT ILLEGALLY DISMISSED AS HE WAS NOT
AN EMPLOYEE OF RESPONDENT, IS CONTRARY TO LAW AND
JURISPRUDENCE ON WHICH IT WAS BASED, AND NOT IN
CONSONANCE WITH THE EVIDENCE ON RECORD.[20]
The disposition of this petition rests on the resolution of the following

questions: 1) Is the petitioner a regular employee of the respondent? 2) If
so, was he illegally dismissed from employment? and 3) Is he entitled to his
monetary claims?
Petitioner insists that he was a regular employee of the respondent

corporation. The respondent, on the other hand, counters that it did not hire
the petitioner, hence, he was never an employee, much less a regular one.
Both the Labor Arbiter and the CA concluded that there was no
employer-employee relationship between the petitioner and
respondent. They based their conclusion on the alleged admission of the
petitioner that he was previously hired by the former owner of the
hacienda. Thus, they rationalized that since the respondent was not obliged
to absorb all the employees of the former owner, petitioners claim of
employment could not be sustained. The NLRC, on the other hand, upheld
petitioners claim of regular employment because of the respondents failure
to present its employment records.
The existence of an employer-employee relationship involves a

question of fact which is well within the province of the CA to determine.
Nonetheless, given the reality that the CAs findings are at odds with those of

Page 165 of 260
the NLRC, the Court is constrained to probe into the attendant circumstances
as appearing on record.[21]
A thorough examination of the records compels this Court to reach a

conclusion different from that of the CA. It is true that petitioner admitted
having been employed by the former owner prior to 1993 or before the
respondent took over the ownership and management of the plantation,
however, he likewise alleged having been hired by the respondent as a
carpenter in 1995 and having worked as such for two years until
1997. Notably, at the outset, respondent categorically denied that it hired
the petitioner. Yet, in its petition filed before the CA, respondent made this
admission:
Private respondent [petitioner herein] cannot be considered a

regular employee since the nature of his work is merely
project in character in relation to the construction of the facilities
of the Pamplona Plantation Leisure Corporation.
He is a project employee as he was hired 1) for a specific project

or undertaking, and 2) the completion or termination of such
project or undertaking has been determined at the time of
engagement of the employee. x x x.
xxxx
In other words, as regards those workers who worked in

1995 specifically in connection with the construction of the
facilities of Pamplona Plantation Leisure Corporation, their
employment was definitely temporary in character and not
regular employment.Their employment was deemed terminated

Page 166 of 260
by operation of law the moment they had finished the job or

activity under which they were employed.[22]
Thus, departing from its initial stand that it never hired petitioner, the
respondent eventually admitted the existence of employer-employee
relationship before the CA. It, however, qualified such admission by claiming
that it was PPLC that hired the petitioner and that the nature of his
employment therein was that of a project and not regular employee.
Parenthetically, this Court in Pamplona Plantation Company, Inc. v.

Tinghil[23] and Pamplona Plantation Company v. Acosta [24] had pierced the
veil of corporate fiction and declared that the two corporations, [25] PPLC and
the herein respondent, are one and the same.
By setting forth these defenses, respondent, in effect, admitted that

petitioner worked for it, albeit in a different capacity. Such an allegation is in
the nature of a negative pregnant, a denial pregnant with the admission of
the substantial facts in the pleadings responded to which are not squarely
denied, and amounts to an acknowledgment that petitioner was indeed
employed by respondent.[26]
The employment relationship having been established, the next

question we must answer is: Is the petitioner a regular or project employee?
We find the petitioner to be a regular employee.

Page 167 of 260
Article 280 of the Labor Code, as amended, 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 service to be performed is
seasonal in nature and the employment is for the duration of the
season.
An employment shall be deemed to be casual if it is not

covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while
such activity exists.
As can be gleaned from this provision, there are two kinds of regular
employees, namely: (1) those who are engaged to perform activities which
are usually necessary or desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which they are
employed.[27] Simply stated, regular employees are classified into: regular
employees by nature of work; and regular employees by years of
service. The former refers to those employees who perform a particular
activity which is necessary or desirable in the usual business or trade of the
employer, regardless of their length of service; while the latter refers to
those employees who have been performing the job, regardless of the

Page 168 of 260
nature thereof, for at least a year. [28] If the employee has been performing
the job for at least one year, even if the performance is not continuous or
merely intermittent, the law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity, if not indispensability, of
that activity to the business.[29]
Respondent is engaged in the management of the Pamplona Plantation

as well as in the operation of tourist resorts, hotels, inns, restaurants,
etc. Petitioner, on the other hand, was engaged to perform carpentry
work. His services were needed for a period of two years until such time that
the respondent decided not to give him work assignment anymore.Owing to
his length of service, petitioner became a regular employee, by operation of
law.
Respondent argues that, even assuming that petitioner can be

considered an employee, he cannot be classified as a regular employee, but
merely as a project employee whose services were hired only with respect to
a specific job and only while that specific job existed.
A project employee is assigned to carry out a specific project or

undertaking the duration and scope of which are specified at the time the
employee is engaged in the project. A project is a job or undertaking which
is distinct, separate and identifiable from the usual or regular undertakings
of the company. A project employee is assigned to a project which begins
and ends at determined or determinable times.[30]
The principal test used to determine whether employees are project

employees as distinguished from regular employees, is whether or not the
employees were assigned to carry out a specific project or undertaking, the

Page 169 of 260
duration or scope of which was specified at the time the employees were
engaged for that project.[31] In this case, apart from respondents bare
allegation that petitioner was a project employee, it had not shown that
petitioner was informed that he would be assigned to a specific project or
undertaking. Neither was it established that he was informed of the duration
and scope of such project or undertaking at the time of his engagement.
Most important of all, based on the records, respondent did not report the
termination of petitioners supposed project employment to the Department
of Labor and Employment (DOLE). Department Order No. 19 (as well as the
old Policy Instructions No. 20) requires employers to submit a report of an
employees termination to the nearest public employment
office every time the employment is terminated due to a completion of a
project. Respondents failure to file termination reports, particularly on the
cessation of petitioners employment, was an indication that the petitioner
was not a project but a regular employee.[32]
We stress herein that the law overrides such conditions which are prejudicial
to the interest of the worker whose weak bargaining position 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. Neither is it the procedure ofhiring the
employee nor the manner of paying the salary or the actual time spent at
work. It is the character of the activities performed by the employer in
relation to the particular trade or business of the employer, taking into
account all the circumstances, including the length of time of its
performance and its continued existence. Given the attendant circumstances
in the case at bar, it is obvious that one year after he was employed by the
respondent, petitioner became a regular employee by operation of law. [33]
As to the question of whether petitioner was illegally dismissed, we

answer in the affirmative.

Page 170 of 260
Well-established is the rule that regular employees enjoy security of tenure

and they can only be dismissed for just cause and with due process, i.e.,
after notice and hearing. In cases involving an employees dismissal, the
burden is on the employer to prove that the dismissal was legal. This burden
was not amply discharged by the respondent in this case.
Obviously, petitioners dismissal was not based on any of the just or

authorized causes enumerated under Articles 282, [34] 283[35] and 284[36] of
the Labor Code, as amended. After working for the respondent for a period
of two years, petitioner was shocked to find out that he was not given any
work assignment anymore. Hence, the requirement of substantive due
process was not complied with.
Apart from the requirement that the dismissal of an employee be based on

any of the just or authorized causes, the procedure laid down in Book VI,
Rule I, Section 2 (d) of the Omnibus Rules Implementing the Labor Code,
must be followed.[37] Failure to observe the rules is a violation of the
employees right to procedural due process.
In view of the non-observance of both substantive and procedural due

process, in accordance with the guidelines outlined by this Court in Agabon
v. National Labor Relations Commission, [38] we declare that petitioners
dismissal from employment is illegal.[39]
Having shown that petitioner is a regular employee and that his

dismissal was illegal, we now discuss the propriety of the monetary claims of
the petitioner. An illegally dismissed employee is entitled to: (1) either
reinstatement, if viable, or separation pay if reinstatement is no longer
viable, and (2) backwages.[40]
In the instant case, we are prepared to concede the impossibility of

the reinstatement of petitioner considering that his position or any
equivalent position may no longer be available in view of the length of time

Page 171 of 260
that this case has been pending. Moreover, the protracted litigation may
have seriously abraded the relationship of the parties so as to render
reinstatement impractical. Accordingly, petitioner may be awarded
separation pay in lieu of reinstatement.[41]
Petitioners separation pay is pegged at the amount equivalent to

petitioners one (1) month pay, or one-half (1/2) month pay for every year of
service, whichever is higher, reckoned from his first day of employment up
to finality of this decision. Full backwages, on the other hand, should be
computed from the date of his illegal dismissal until the finality of this
decision.
On petitioners entitlement to attorneys fees, we must take into

account the fact that petitioner was illegally dismissed from his employment
and that his wages and other benefits were withheld from him without any
valid and legal basis. As a consequence, he was compelled to file an action
for the recovery of his lawful wages and other benefits and, in the process,
incurred expenses. On these bases, the Court finds that he is entitled
to attorneys fees equivalent to ten percent (10%) of the monetary award. [42]
Lastly, we affirm the NLRCs award of salary differential. In light of our

foregoing disquisition on the illegality of petitioners dismissal, and our
adoption of the NLRCs findings, suffice it to state that such issue is a
question of fact, and we find no cogent reason to disturb the findings of the
labor tribunal.
WHEREFORE, premises considered, the petition is GRANTED. The

Decision of the Court of Appeals dated August 27, 2003 and its Resolution
dated November 11, 2003 in CA-G.R. SP No. 74892 are REVERSED and SET
ASIDE. Petitioner is found to have been illegally dismissed from
employment and thus, is ENTITLED to: 1) Salary Differential embodied in

Page 172 of 260
the NLRC decision dated October 24, 2000 in NLRC Case No. V-000882-99;
2) Separation Pay; 3) Backwages; and 4) Attorneys fees equivalent to ten
percent (10%) of the monetary awards. Upon finality of this judgment, let
the records of the case be remanded to the NLRC for the computation of the
exact amounts due the petitioner.
SO ORDERED.
15 Gadia vs Sykes
G.R. No. 209499 January 28, 2015
MA. CHARITO C. GADIA, ERNESTO M. PENAS, GEMMABELLE B. REMO,

LORENA S. QUESEA, MARIE JOY FRANCISCO, BEVERLY A. CABINGAS,
IVEE U. BALINGIT, ROMA ANGELICA 0. BORJA, MARIE JOAN RAMOS,
KIM GUEVARRA, LYNN S. DE LOS SANTOS, CAREN C. ENCANTO,
EIDEN BALDOVINO, JACQUELINE B. CASTRENCE,MA.ESTRELLA V.
LAPUZ, JOSELITO L. LORD, RAYMOND G. SANTOS, ABIGAIL M.
VILORIA, ROMMEL C. ACOSTA, FRANCIS JAN S. BAYLON, ERIC 0.
PADIERNOS, MA. LENELL P. AARON, CRISNELL P. AARON, and
LAWRENCE CHRISTOPHER F. PAPA, Petitioners,
vs.
SYKES ASIA, INC./ CHUCK SYKES/ MIKE HINDS/ MICHAEL
HENDERSON, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari 1 are the Decision2 dated April
29, 2013 and the Resolution3 dated October 3, 2013 of the Court of Appeals
(CA) in CA-G.R. SP No. 120433, which annulled and set aside the
Decision4 dated November 15, 2010 and the Resolution 5 dated May 10, 2011
of the National Labor Relations Commission (NLRC), in NLRC LAC No. 07-
001583-10, and reinstated the Decision 6 dated June 23, 2010 of the Labor
Arbiter (LA), holding that herein petitioners Ma. Charito C. Gadia 7 (Gadia),
Ernesto M. Peas,8 Gemmabelle B. Remo (Remo), Lorena S. Quesea
(Quesea), Marie Joy Francisco, Beverly A. Cabingas, Ivee U.

Page 173 of 260
Balingit9(Balingit), Roma Angelica O. Borja, Marie Joan Ramos, Kim

Guevarra, Lynn S. De Los Santos, Caren C. Encanto, Eiden Baldovino,
Jacqueline B. Castrence (Castrence), Ma. Estrella V.Lapuz (Lapuz), Joselito
L. Lord (Lord), Raymond G. Santos, Abigail M. Viloria (Viloria), Rommel C.
Acosta10 (Acosta), Francis Jan S. Baylon,Eric O. Padiernos, Ma. Lenell P.
Aaron, Crisnell P. Aaron, and Lawrence Christopher F.Papa (petitioners) are
project employees of respondent Sykes Asia, Inc. (Sykes Asia), and thus,
were validly terminated from employment.
The Facts
Sykes Asia is a corporation engaged in Business Process Outsourcing (BPO)

which provides support to its international clients from various sectors (e.g.,
technology, telecommunications, retail services) by carrying on some of their
operations, governed by service contracts that it enters with them. 11 On
September 2, 2003,12 Alltel Communications, Inc. (Alltel), a United States-
based telecommunications firm, contracted Sykes Asias services to
accommodate the needs and demands of Alltel clients for its postpaid and
prepaid services (Alltel Project). Thus, on different dates, Sykes Asia hired
petitioners as customer service representatives, team leaders, and trainers
for the Alltel Project.13
Services for the said project went on smoothly until Alltel sent two (2)
letters to Sykes Asia dated August 7, 2009 14and September 9,
200915 informing the latter that it was terminating all support services
provided by Sykes Asia related to the Alltel Project. In view of this
development, Sykes Asia sent each of the petitioners end-of-life
notices,16 informing them of their dismissal from employment due to the
termination of the Alltel Project. Aggrieved, petitioners filed separate
complaints17 for illegal dismissal against respondents Sykes Asia, Chuck
Sykes, the President and Chief Operating Officer of Sykes Enterprise, Inc.,
and Mike Hinds and Michael Henderson, the President and Operations
Director, respectively, of Sykes Asia (respondents), praying for
reinstatement, backwages, 13th month pay, service incentive leave pay,
night shift differential, moral and exemplary damages, and attorneys fees.
In their complaints, petitioners alleged that their dismissal from service was
unjust as the same was effected without substantive and procedural due
process.18
In their defense,19 respondents averred that petitioners were not regular

employees but merely project-based employees, and as such, the
termination of the Alltel Project served as a valid ground for their
dismissal.20 In support of their position, respondents noted that it was
expressly indicated in petitioners respective employment contracts that their

Page 174 of 260
positions are "project-based" and thus, "co-terminus to the

project."21 Respondents further maintained that they complied with the
requirements of procedural due process in dismissing petitioners by
furnishing each of them their notices of termination at least thirty (30) days
prior to their respective dates of dismissal.22
The LA Ruling
In a Decision23 dated June 23, 2010 the LA ruled in favor of respondents,

and accordingly, dismissed petitioners complaints for lack of merit. 24 It
found that petitioners are merely project-based employees, as their
respective employment contracts indubitably provided for the duration and
term of their employment, as well as the specific project to which they were
assigned, i.e., the Alltel Project.25 Hence, the LA concluded that the cessation
of the Alltel Project naturally resulted in the termination of petitioners
employment in Sykes Asia.26 Dissatisfied, petitioners appealed27 to the NLRC.
The NLRC Ruling
In a Decision28 dated November 15, 2010, the NLRC modified the LA

Decision, ruling that petitioners are regular employees but were validly
terminated due to redundancy.29 Accordingly, petitioners, except Viloria and
Acosta whose complaints were dismissed without prejudice for failure to
prosecute,30 were awarded their separation pay with interest of 12% per
annum reckoned from the date of their actual dismissal until full payment,
plus attorneys fees amounting to 10% of the total monetary award. In
addition, the NLRC awarded nominal damages in the amount of P10,000.00
each to petitioners Gadia, Remo, Quesea, Balingit, Castrence, Lapuz, and
Lord for respondents failure to furnish them the required written notice of
termination within the prescribed period.31
Contrary to the LAs finding, the NLRC found that petitioners could not be
properly characterized as project-based employees, ratiocinating that while
it was made known to petitioners that their employment would be co-
terminus to the Alltel Project, it was neither determined nor made known to
petitioners, at the time of hiring, when the said project would end, be
terminated, or be completed.32 In this relation, the NLRC concluded that
inasmuch as petitioners had been engaged to perform activities which are
necessary or desirable in respondents usual business or trade of BPO,
petitioners should be deemed regular employees of Sykes Asia. 33 This
notwithstanding, and in view of the cessation of the Alltel Project, the NLRC
found petitioners employment with Sykes Asia to be redundant; hence,
declared that they were legally dismissed from service and were only
entitled to receive their respective separation pay.34

Page 175 of 260
Respondents moved for reconsideration, 35 which was, however, denied in a

Resolution36 dated May 10, 2011. Unconvinced, Sykes Asia37 elevated the
case to the CA on certiorari.38
The CA Ruling
In a Decision39 dated April 29, 2013, the CA annulled and set aside the ruling
of the NLRC, and accordingly, reinstated that of the LA. 40 It held that a
perusal of petitioners respective employment contracts readily shows that
they were hired exclusively for the Alltel Project and that it was specifically
stated therein that their employment would be project-based. 41 The CA
further held that petitioners employment contracts need not state an actual
date as to when their employment would end, opining that it is enough that
such date is determinable.42
Petitioners moved for reconsideration, 43 which was, however, denied in a

Resolution44 dated October 3, 2013, hence, this petition.
The Issue Before the Court
The primordial issue for the Courts resolution is whether or not the CA
correctly granted respondents petition for certiorari, thereby setting aside
the NLRCs decision holding that petitioners were regular employees and
reinstating the LA ruling that petitioners were merely project-based
employees, and thus, validly dismissed from service.
The Courts Ruling
The petition is without merit.
At the outset, it must be stressed that to justify the grant of the

extraordinary remedy of certiorari, petitioners must satisfactorily show that
the court or quasi-judicial authority gravely abused the discretion conferred
upon it. Grave abuse of discretion connotes judgment exercised in a
capricious and whimsical manner that is tantamount to lack of jurisdiction.
To be considered "grave," discretion must be exercised in a despotic manner
by reason of passion or personal hostility, and must be so patent and gross
as to amount to an evasion of positive duty or to a virtual refusal to perform
the duty enjoined by or to act at all in contemplation of law. 45
In labor disputes, grave abuse of discretion may be ascribed to the NLRC

when, inter alia, its findings and the conclusions reached thereby are not
supported by substantial evidence. This requirement of substantial evidence
is clearly expressed in Section 5, Rule 133 of the Rules of Court which

Page 176 of 260
provides that "in cases filed before administrative or quasi-judicial bodies, a

fact may be deemed established if it is supported by substantial evidence, or
that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion."46
Tested against these considerations, the Court finds that the CA correctly
granted respondents certiorari petition before it, since the NLRC gravely
abused its discretion in ruling that petitioners were regular employees of
Sykes Asia when the latter had established by substantial evidence that they
were merely project-based.
Article 29447 of the Labor Code,48 as amended, distinguishes a project-based

employee from a regular employee as follows:
Art. 294. Regular and casual employment.The provisions of written

work or services to be performed is seasonal in nature and the employment
is for the duration of the season.
x x x x (Emphasis and underscoring supplied)
In Omni Hauling Services, Inc. v. Bon, 49 the Court extensively discussed how
to determine whether an employee may be properly deemed project-based
or regular, to wit:
A project employee is assigned to a project which begins and ends at

determined or determinable times.1wphi1 Unlike regular employees who
may only be dismissed for just and/or authorized causes under the Labor
Code, the services of employees who are hired as "project[-based]
employees" may be lawfully terminated at the completion of the project.
According to jurisprudence, the principal test for determining whether

particular employees are properly characterised as "project[-based]
employees" as distinguished from "regular employees," is whether or not the
employees were assigned to carry out a "specific project or undertaking,"
the duration (and scope) of which were specified at the time they were
engaged for that project. The project could either be (1) a particular job or
undertaking that is within the regular or usual business of the employer

Page 177 of 260
company, but which is distinct and separate, and identifiable as such, from
the other undertakings of the company; or (2) a particular job or
undertaking that is not within the regular business of the corporation. In
order to safeguard the rights of workers against the arbitrary use of the
word "project" to prevent employees from attaining a regular status,
employers claiming that their workers are project[-based] employees should
not only prove that the duration and scope of the employment was specified
at the time they were engaged, but also, that there was indeed a
project.50(Emphases and underscoring supplied)
Verily, for an employee to be considered project-based, the employer must

show compliance with two (2) requisites, namely that: (a) the employee was
assigned to carry out a specific project or undertaking; and (b) the duration
and scope of which were specified at the time they were engaged for such
project.
In this case, records reveal that Sykes Asia adequately informed petitioners
of their employment status at the time of their engagement, as evidenced by
the latters employment contracts which similarly provide that they were
hired in connection with the Alltel Project, and that their positions were
"project-based and as such is co-terminus to the project." In this light, the
CA correctly ruled that petitioners were indeed project-based employees,
considering that: (a) they were hired to carry out a specific undertaking, i.e.,
the Alltel Project; and (b) the duration and scope of such project were made
known to them at the time of their engagement, i.e., "co-terminus with the
project."
As regards the second requisite, the CA correctly stressed that "[t]he law
and jurisprudence dictate that the duration of the undertaking begins and
ends at determined or determinable times" while clarifying that "[t]he
phrase determinable times simply means capable of being determined or
fixed."51 In this case, Sykes Asia substantially complied with this requisite
when it expressly indicated in petitioners employment contracts that their
positions were "co-terminus with the project." To the mind of the Court, this
caveat sufficiently apprised petitioners that their security of tenure with
Sykes Asia would only last as long as the Alltel Project was subsisting. In
other words, when the Alltel Project was terminated, petitioners no longer
had any project to work on, and hence, Sykes Asia may validly terminate
them from employment. Further, the Court likewise notes the fact that
Sykes Asia duly submitted an Establishment Employment Report 52 and an
Establishment Termination Report53 to the Department of Labor and
Employment Makati-Pasay Field Office regarding the cessation of the Alltel
Project and the list of employees that would be affected by such cessation.

Page 178 of 260
As correctly pointed out by the CA, case law deems such submission as an
indication that the employment was indeed project-based. 54
In sum, respondents have shown by substantial evidence that petitioners

were merely project-based employees, and as such, their services were
lawfully terminated upon the cessation of the Alltel Project.
WHEREFORE, the petition is DENIED. Accordingly, the Decision dated April

29, 2013 and the Resolution dated October 3, 2013 of the Court of Appeals
in CA-G.R. SP No. 120433 are hereby AFFIRMED.
SO ORDERED.
16 Hacienda vs Lorenzo
G.R. No. 179640, March 18, 2015
HACIENDA CATAYWA/MANUEL VILLANUEVA, owner, JOEMARIE

VILLANUEVA, manager, MANCY AND SONS ENTERPRISES,
INC., Petitioners, v. ROSARIO LOREZO, Respondent.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari dated September 28,
2007 of petitioner Hacienda Cataywa, Manuel Villanueva, et al.,
(petitioners) seeking to reverse and set aside the Resolutions, dated October
17, 20061 and August 10, 2007,2 respectively, of the Court of Appeals (CA)
and the Resolution and Order, dated October 12, 2005 and March 8, 2006,
respectively, of the Social Security Commission, ordering petitioners to pay
jointly and severally all delinquent contributions, 3% penalty per month of
delayed payment and damages to respondent Rosario Lorezo.
The antecedent facts follow:
On October 22, 2002, respondent Rosario Lorezo received, upon inquiry, a

letter from the Social Security System (SSS) Western Visayas Group
informing her that she cannot avail of their retirement benefits since per
their record she has only paid 16 months. Such is 104 months short of the
minimum requirement of 120 months payment to be entitle to the benefit.

Page 179 of 260
She was also informed that their investigation of her alleged employment
under employer Hda. Cataywa could not be confirmed because Manuel
Villanueva was permanently residing in Manila and Joemarie Villanueva
denied having managed the farm. She was also advised of her options:
continue paying contributions as voluntary member; request for refund;
leave her contributions in-trust with the System, or file a petition before the
Social Security Commission (SSC) so that liabilities, if any, of her employer
may be determined.3cralawred
Aggrieved, respondent then filed her Amended Petition dated September 30,
2003, before the SSC. She alleged that she was employed as laborer in Hda.
Cataywa managed by Jose Marie Villanueva in 1970 but was reported to the
SSS only in 1978. She alleged that SSS contributions were deducted from
her wages from 1970 to 1995, but not all were remitted to the SSS which,
subsequently, caused the rejection of her claim. She also impleaded Talisay
Farms, Inc. by virtue of its Investment Agreement with Mancy and Sons
Enterprises. She also prayed that the veil of corporate fiction be pierced
since she alleged that Mancy and Sons Enterprises and Manuel and Jose
Marie Villanueva are one and the same.4cralawred
Petitioners Manuel and Jose Villanueva refuted in their answer, the allegation
that not all contributions of respondent were remitted. Petitioners alleged
that all farm workers of Hda. Cataywa were reported a^id their contributions
were duly paid and remitted to SSS. It was the late Domingo Lizares, Jr.
who managed and administered the hacienda.5 While, Talisay Farms, Inc.
filed a motion to dismiss on the ground of lack of cause of action in the
absence of an allegation that there was an employer-employee relationship
between Talisay Farms and respondent. 6cralawred
Consequently, the SSC rendered its Resolution dated October 12, 2005,
thus:chanRoblesvirtualLawlibrary
WHEREFORE, PREMISES CONSIDERED, this Commission finds, and so holds,

that Rosario M. Lorezo was a regular employee subject to compulsory
coverage of Hda. Cataywa/Manuel Villanueva/ Mancy and Sons Enterprises,
Inc. within the period of 1970 to February 25, 1990. In view thereof, the
aforenamed respondents are hereby ordered to pay jointly and severally,
within thirty (30) days from receipt hereof, all delinquent contributions
within the proven employment period computed in accordance with the then
prevailing minimum wage (at 11 months per year) in the amount of
P8,293.90, the 3% per month penalty on the delayed payment of
contributions in the amount of P59,786.10 (computed as of September 9,
2005), pursuant to Section 22 of the SS Law and the damages in the
amount of P32,356.21 for misrepresentation of the real date of employment,

Page 180 of 260
pursuant to Section 24 (b) of the said statute.
The SSS, on the other hand, is ordered to pay (subject to existing rules and
regulations) petitioner Rosario M. Lorezo her retirement benefit, upon the
filing of the claim therefor, and to inform this Commission of its compliance
herewith.
SO ORDERED.7cralawred
cralawlawlibrary
The SSC denied petitioners' Motion for Reconsideration. The petitioner, then,
elevated the case before the CA where the case was dismissed outrightly
due to technicalities, thus:chanRoblesvirtualLawlibrary
The Court Resolved to DISMISS the instant petition on the basis of the
following observations:
1. Signatory to the Verification failed to attach his authority to sign for

and [in] behalf of the other Petitioners.
(Violation of Section 5, Rule 43 of the Rules of Court, in relation to
Section 7, Rule 45 of the Rules of Court)
2. Certified true copies of pleadings and documents relevant and

pertinent to the petition are incomplete, to wit:
-Petitioner failed to attach the following:
- Petition/Amended Petition filed before the SSS of Makati City
- Respondents' Answer filed before the SSS of Makati City
- Parties' respective position paper filed before the SSS of Makati
City
- Parties' respective memorandum of appeal filed before the
Commission
(Violation of Section 6, Rule 43 of the Rules of Court, in relation to Section

7, Rule 43 of the Rules of Court) 8cralawred
cralawlawlibrary
Following the denial of petitioners' Motion for Reconsideration of the CA,

petitioner filed with this Court the present petition stating the following
grounds:chanRoblesvirtualLawlibrary
1) THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR

IN STRICTLY AND RIGIDLY APPLYING THE TECHNICAL RULES OF
PROCEDURE AND DISMISSING THE CASE ON TECHNICALITY WITHOUT
EVALUATING THE MERITS OF THE CASE;ChanRoblesVirtualawlibrary

Page 181 of 260
2) THE [SSC] COMMITTED REVERSIBLE ERROR IN MAKING CONCLUSIONS

FOUNDED ON SPECULATIONS AND SURMISES NOT CONFORMING TO
EVIDENCE ON RECORD, MAKING MANIFESTLY MISTAKEN INFERENCES, AND
RENDERING JUDGMENT BASED ON MISAPPREHENSION OF FACTS AND
MISAPPLICATION OF THE LAW, RULING AND RENDERING JUDGMENT THAT:
a) RESPONDENT WORKED FROM 1970 TO FEBRUARY 25,1990
b) PETITIONERS ARE LIABLE FOR DELINQUENT CONTRIBUTIONS
c) PETITIONERS ARE LIABLE FOR 3% PER MONTH PENALTY
d) PETITIONERS ARE LIABLE FOR DAMAGES DUE TO MISREPRESENTATION
e) MANCY & SONS ENTERPRISES, INC. AND MANUEL VILLANUEVA ARE ONE
AND THE SAME.9
cralawlawlibrary
The petition is partially meritorious.
Petitioners argues that the CA has been too rigid in the application of the
rules of procedure in dismissing the appeal without evaluation of the merits.
This Court has emphasized that procedural rules should be treated with
utmost respect and due regard, since they are designed to facilitate the
adjudication of cases to remedy the worsening problem of delay in the
resolution of rival claims and in the administration of justice. However, this
Court has recognized exceptions to the Rules, but only for the most
compelling reasons where stubborn obedience to the Rules would defeat
rather than serve the ends of justice.10cralawred
As in the case of Obut v. Court of Appeals,11 this Court held that "judicial
orders are issued to be obeyed, nonetheless a non-compliance is to be dealt
with as the circumstances attending the case may warrant. What should
guide judicial action is the principle that a party-litigant is to be given the
fullest opportunity to establish the merits of his complaint of defense rather
than for him to lose life, liberty, honor or property on
12
technicalities." cralawred
When the CA dismisses a petition outright and the petitioner files a motion
for the reconsideration of such dismissal, appending thereto the requisite
pleadings, documents or order/resolution, this would constitute substantial
compliance with the Revised Rules of Court. 13 Thus, in the present case,
there was substantial compliance when in their Motion for Reconsideration,
they attached a secretary certificate giving Joemarie's authority to sign on
behalf of the corporation. Petitioners also included the necessary
attachment.14cralawred

Page 182 of 260
At the outset, it is settled that this Court is not a trier of facts and will not
weigh evidence all over again. 15 However, considering the issues raised
which can be resolved on the basis of the pleadings and documents filed,
and the fact that respondent herself has asked this Court for early
resolution, this Court deems it more practical and in the greater interest of
justice not to remand the case to the CA but, instead, to resolve the
controversy once and for all.
Petitioners are of the opinion that the SSC committed reversible error in
making conclusions founded on speculations and surmises that respondent
worked from 1970 to February 25, 1990. Petitioners argue that the SSC did
not give credence nor weight at all to the existing SSS Form R-1A and farm
bookkeeper Wilfredo Ibalobor. Petitioners insist that after thirty long years,
all the records of the farm were already destroyed by termites and elements,
thus, they relied on the SSS Form R-1A as the only remaining source of
information available. Petitioners also alleged that respondent was a very
casual worker.
This Court disagrees.
It was settled that there is no particular form of evidence required to Drove

the existence of the employer-employee relationship. Any competent and
relevant evidence to prove such relationship may be admitted. This may
entirely be testimonial.16 If only documentary evidence would be required to
demonstrate the relationship, no scheming employer would be brought
before the bar of justice.17 Petitioners erred in insisting that, due to passage
of time, SSS Form R-1A is the only remaining source of information available
to prove when respondent started working for them. However, such form
merely reflected the time in which the petitioners reported the respondent
for coverage of the SSS benefit. They failed to substantiate their claim that it
was only in 1978 that respondent reported for work.
The records are bereft of any showing that Demetria Denaga and Susano
Jugue harbored any ill will against the petitioners prompting them to execute
false affidavit. There lies no reason for this Court not to afford full faith and
credit to their testimonies. Denaga, in her Joint Affidavit with Jugue, stated
that she and respondent started working in Hda. Cataywa in 1970 and like
her, she was reported to the SSS on December 19, 1978. 18 It was also
revealed in the records that the SSC found that Denaga was employed by
Manuel Villanueva at Hda. Cataywa from 1970 to December
1987.19cralawred
Jurisprudence has identified the three types of employees mentioned in the

provision20 of the Labor Code: (1) regular employees or those who have

Page 183 of 260
been engaged to perform activities that are usually necessary or desirable in

the usual business or trade of the employer; (2) project employees or those
whose employment has been fixed for a specific project or undertaking, the
completion or termination of which has been determined at the time of their
engagement, or those whose work or service is seasonal in nature and is
performed for the duration of the season; and (3) casual employees or those
who are neither regular nor project employees. 21cralawred
Farm workers generally fall under the definition of seasonal employees. 22 It

was also consistently held that seasonal employees may be considered as
regular employees when they are called to work from time to time. 23 They
are in regular employment because of the nature of the job, and not because
of the length of time they have worked. However, seasonal workers who
have worked for one season only may not be considered regular
employees.24cralawred
The nature of the services performed and not the duration thereof, is
determinative of coverage under the law. 25 To be exempted on the basis of
casual employment, the services must not merely be irregular, temporary or
intermittent, but the same must not also be in connection with the business
or occupation of the employer. 26 Thus, it is erroneous for the petitioners to
conclude that the respondent was a very casual worker simply because the
SSS form revealed that she had 16 months of contributions. It does not, in
any way, prove that the respondent performed a job which is not in
connection with the business or occupation of the employer to be considered
as casual employee.
The test for regular employees to be considered as such has been thoroughly
explained in De Leon v. NLRC,27viz.:chanRoblesvirtualLawlibrary
The primary standard, therefore, of determining a regular employment is the

reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. The test
is whether the former is usually necessary or desirable in the usual business
or trade of the employer. The connection can be determined by considering
the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if the employee has been
performing the job for at least one year, even if the performance is not
continuous or merely intermittent, the law deems the repeated and
continuing need for its performance as sufficient evidence of the necessity if
not indispensability of that activity to the business. Hence, the employment
is also considered regular, but only with respect to such activity and while
such activity exists.28cralawred
cralawlawlibrary

Page 184 of 260
A reading of the records would reveal that petitioners failed to dispute the
allegation that the respondent performed hacienda work, such as planting
sugarcane point, fertilizing, weeding, replanting dead sugarcane fields and
routine miscellaneous hacienda work. 29 They merely alleged that respondent
was a very casual worker because she only rendered work for 16
months.30 Thus, respondent is considered a regular seasonal worker and not
a casual worker as the petitioners alleged.
Petitioners also assert that the sugarcane cultivation covers only a period of
six months, thus, disproving the allegation of the respondent that she
worked for 11 months a year for 25 years. This Court has classified farm
workers as regular seasonal employees who are called to work from time to
time and the nature of their relationship with the employer is such that
during the off season, they are temporarily laid off; but reemployed during
the summer season or when their services may be needed.31 Respondent,
therefore, as a farm worker is only a seasonal employee. Since petitioners
provided that the cultivation of sugarcane is only for six] months,
respondent cannot be considered as regular employee during the months
when there is no cultivation.
Based on the foregoing facts and evidence on record, petitioners are liable
for delinquent contributions. It being proven by sufficient evidence that
respondent started working for the hacienda in 1970, it follows that
petitioners are liable for deficiency in the SSS contributions.
The imposition upon and payment by the delinquent employer of the three
percent (3%) penalty for the late remittance of premium contributions is
mandatory and cannot be waived by the System. The law merely gives to
the Commission the power to prescribe the manner of paying the premiums.
Thus, the power to remit or condone the penalty for late remittance of
premium contributions is not embraced therein. 32 Petitioners erred in
alleging that the imposition of penalty is not proper.
Petitioners also insist that the award of damages for misrepresentation is

without basis. This Court disagrees.
The law provides that should the employer misrepresent the true date of the
employment of the employee member, such employer shall pay to the SSS
damages equivalent to the difference between the amount of benefit to
which the employee member or his beneficiary is entitled had the proper
contributions been remitted to the SSS and the amount payable on the basis
of the contributions actually remitted. However, should the employee
member or his beneficiary is entitled to pension benefits, the damages shall

Page 185 of 260
be equivalent to the accumulated pension due as of the date of settlement of

the claim or to the five years' pension, whichever is higher, including the
dependent's pension.33cralawred
Lastly, petitioners aver that there is no legal basis to pierce the veil of
corporation entity.
It was held in Rivera v. United Laboratories, Inc.34 that -
While a corporation may exist for any lawful purpose, the law will regard it
as an association of persons or, in case of two corporations, merge them
into one, when its corporate legal entity is used as a cloak for fraud or
illegality. This is the doctrine of piercing the veil of corporate fiction. The
doctrine applies only when such corporate fiction is used to defeat public
convenience, justify wrong, protect fraud, or defend crime, or when it is
made as a shield to confuse the legitimate issues, or where a corporation is
the mere alter ego or business conduit of a person, or where the corporation
is so organized and controlled and its affairs are so conducted as to make it
merely an instrumentality, agency, conduit or adjunct of another
corporation. To disregard the separate juridical personality of a corporation,
the wrongdoing must be established clearly and convincingly. It cannot be
presumed.35cralawlawlibrary
This Court has cautioned against the inordinate application of this doctrine,
reiterating the basic rule that "the corporate veil may be pierced only if it
becomes a shield for fraud, illegality or inequity committed against a third
person.36cralawred
The Court has expressed the language of piercing doctrine when applied to
alter ego cases, as follows: Where the stock of a corporation is owned by
one person whereby the corporation functions only for the benefit of such
individual owner, the corporation and the individual should be deemed the
same.37cralawred
This Court agrees with the petitioners that there is no need to pierce the
corporate veil. Respondent failed to substantiate her claim that Mancy and
Sons Enterprises, Inc. and Manuel and Jose Marie Villanueva are one and the
same. She based her claim on the SSS form wherein Manuel Villanueva
appeared as employer. However, this does not prove, in any way, that the
corporation is used to defeat public convenience, justify wrong, protect
fraud, or defend crime, or when it is made as a shield to confuse the
legitimate issues, warranting that its separate and distinct personality be set
aside. Also, it was not alleged nor proven that Mancy and Sons Enterprises,
Inc. functions only for the benefit of Manuel Villanueva, thus, one cannot be

Page 186 of 260
an alter ego of the other.
WHEREFORE, the petition for review on certiorari dated September 28,

2007 of petitioners Hda. Cataywa, Manuel Villanueva, et al. is
hereby DENIED. Consequently, the resolution by the Social Security
Commission is hereby AFFIRMED with MODIFICATIONS that the
delinquent contributions should be computed as six months per year of
service, and the case against Manuel and Jose Marie Villanueva
be DISMISSED.
SO ORDERED.cralawlawlibrary
17 Tunay na pakakaisa vs Asia

TUNAY NA PAGKAKAISA NG G.R. No. 162025
MANGGAGAWA
SA ASIA BREWERY, Present:
Petitioner,
CARPIO MORALES, J.,
Chairperson,
- versus - BRION,
BERSAMIN,
ABAD,* and
VILLARAMA, JR., JJ.
ASIA BREWERY, INC., Promulgated:

Respondent.
August 3, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - -x
DECISION
VILLARAMA, JR., J.:
For resolution is an appeal by certiorari filed by petitioner under Rule 45 of

the 1997 Rules of Civil Procedure, as amended, assailing the
Decision[1] dated November 22, 2002 and Resolution [2] dated January 28,
2004 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 55578,
granting the petition of respondent company and reversing the Voluntary
Arbitrators Decision[3] dated October 14, 1999.

Page 187 of 260
The facts are:
Respondent Asia Brewery, Inc. (ABI) is engaged in the manufacture, sale

and distribution of beer, shandy, bottled water and glass products. ABI
entered into a Collective Bargaining Agreement (CBA), [4] effective for five (5)
years from August 1, 1997 to July 31, 2002, with Bisig at Lakas ng mga
Manggagawa sa Asia-Independent (BLMA-INDEPENDENT), the exclusive
bargaining representative of ABIs rank-and-file employees. On October 3,
2000, ABI and BLMA-INDEPENDENT signed a renegotiated CBA effective
from August 1, 2000 to 31 July 2003.[5]
Article I of the CBA defined the scope of the bargaining unit, as follows:
Section 1. Recognition. The COMPANY recognizes

the UNION as the sole and exclusive bargaining representative of
all the regular rank-and-file daily paid employees within the
scope of the appropriate bargaining unit with respect to rates of
pay, hours of work and other terms and conditions of
employment. The UNION shall not represent or accept for
membership employees outside the scope of the
bargaining unit herein defined.
Section 2. Bargaining Unit. The bargaining unit shall be

comprised of all regular rank-and-file daily-paid employees of
the COMPANY. However, the following jobs/positions as herein
defined shall be excluded from the bargaining unit, to wit:
1. Managers
2. Assistant Managers
3. Section Heads
4. Supervisors
5. Superintendents
6. Confidential and Executive Secretaries
7. Personnel, Accounting and Marketing Staff
8. Communications Personnel
9. Probationary Employees
10. Security and Fire Brigade Personnel
11. Monthly Employees
12. Purchasing and Quality Control
Staff[6] [EMPHASIS SUPPLIED.]

Page 188 of 260
Subsequently, a dispute arose when ABIs management stopped deducting

union dues from eighty-one (81) employees, believing that their
membership in BLMA-INDEPENDENT violated the CBA. Eighteen (18) of
these affected employees are QA Sampling Inspectors/Inspectresses and
Machine Gauge Technician who formed part of the Quality Control
Staff.Twenty (20) checkers are assigned at the Materials Department of the
Administration Division, Full Goods Department of the Brewery Division and
Packaging Division. The rest are secretaries/clerks directly under their
respective division managers.[7]
BLMA-INDEPENDENT claimed that ABIs actions restrained the employees

right to self-organization and brought the matter to the grievance
machinery. As the parties failed to amicably settle the controversy, BLMA-
INDEPENDENT lodged a complaint before the National Conciliation and
Mediation Board (NCMB). The parties eventually agreed to submit the case
for arbitration to resolve the issue of [w]hether or not there is restraint to
employees in the exercise of their right to self-organization.[8]
In his Decision, Voluntary Arbitrator Bienvenido Devera sustained the BLMA-

INDEPENDENT after finding that the records submitted by ABI showed that
the positions of the subject employees qualify under the rank-and-file
category because their functions are merely routinary and clerical. He noted
that the positions occupied by the checkers and secretaries/clerks in the
different divisions are not managerial or supervisory, as evident from the
duties and responsibilities assigned to them. With respect to QA Sampling
Inspectors/Inspectresses and Machine Gauge Technician, he ruled that ABI
failed to establish with sufficient clarity their basic functions as to consider
them Quality Control Staff who were excluded from the coverage of the CBA.
Accordingly, the subject employees were declared eligible for inclusion within
the bargaining unit represented by BLMA-INDEPENDENT. [9]
On appeal, the CA reversed the Voluntary Arbitrator, ruling that:
WHEREFORE, foregoing premises considered, the

questioned decision of the Honorable Voluntary Arbitrator
Bienvenido De Vera is hereby REVERSED and SET ASIDE, and A
NEW ONE ENTERED DECLARING THAT:

Page 189 of 260
a) the 81 employees are excluded from and are not

eligible for inclusion in the bargaining unit as
defined in Section 2, Article I of the CBA;
b) the 81 employees cannot validly become

members of respondent and/or if already
members, that their membership is violative of
the CBA and that they should disaffiliate from
respondent; and
c) petitioner has not committed any act that

restrained or tended to restrain its employees in
the exercise of their right to self-organization.
NO COSTS.
SO ORDERED.[10]
BLMA-INDEPENDENT filed a motion for reconsideration. In the meantime, a

certification election was held on August 10, 2002 wherein petitioner Tunay
na Pagkakaisa ng Manggagawa sa Asia (TPMA) won. As the incumbent
bargaining representative of ABIs rank-and-file employees claiming interest
in the outcome of the case, petitioner filed with the CA an omnibus motion
for reconsideration of the decision and intervention, with attached petition
signed by the union officers.[11] Both motions were denied by the CA.[12]
The petition is anchored on the following grounds:
(1)
THE COURT OF APPEALS ERRED IN RULING THAT THE 81

EMPLOYEES ARE EXCLUDED FROM AND ARE NOT ELIGIBLE FOR
INCLUSION IN THE BARGAINING UNIT AS DEFINED IN SECTION
2, ARTICLE 1 OF THE CBA[;]
(2)
THE COURT OF APPEALS ERRED IN HOLDING THAT THE 81

EMPLOYEES CANNOT VALIDLY BECOME UNION MEMBERS, THAT
THEIR MEMBERSHIP IS VIOLATIVE OF THE CBA AND THAT THEY
SHOULD DISAFFILIATE FROM RESPONDENT;
(3)

Page 190 of 260
THE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT

PETITIONER (NOW PRIVATE RESPONDENT) HAS NOT
COMMITTED ANY ACT THAT RESTRAINED OR TENDED TO
RESTRAIN ITS EMPLOYEES IN THE EXERCISE OF THEIR RIGHT
TO SELF-ORGANIZATION.[13]
Although Article 245 of the Labor Code limits the ineligibility to join, form
and assist any labor organization to managerial employees, jurisprudence
has extended this prohibition to confidential employees or those who by
reason of their positions or nature of work are required to assist or act in a
fiduciary manner to managerial employees and hence, are likewise privy to
sensitive and highly confidential records. [14] Confidential employees are thus
excluded from the rank-and-file bargaining unit. The rationale for their
separate category and disqualification to join any labor organization is
similar to the inhibition for managerial employees because if allowed to be
affiliated with a Union, the latter might not be assured of their loyalty in view
of evident conflict of interests and the Union can also become company-
denominated with the presence of managerial employees in the Union
membership.[15] Having access to confidential information, confidential
employees may also become the source of undue advantage. Said
employees may act as a spy or spies of either party to a collective
bargaining agreement.[16]
In Philips Industrial Development, Inc. v. NLRC,[17] this Court held that

petitioners division secretaries, all Staff of General Management, Personnel
and Industrial Relations Department, Secretaries of Audit, EDP and Financial
Systems are confidential employees not included within the rank-and-file
bargaining unit.[18] Earlier, in Pier 8 Arrastre & Stevedoring Services, Inc. v.
Roldan-Confesor,[19] we declared that legal secretaries who are tasked with,
among others, the typing of legal documents, memoranda and
correspondence, the keeping of records and files, the giving of and receiving
notices, and such other duties as required by the legal personnel of the
corporation, fall under the category of confidential employees and hence
excluded from the bargaining unit composed of rank-and-file employees. [20]
Also considered having access to vital labor information are the executive
secretaries of the General Manager and the executive secretaries of the
Quality Assurance Manager, Product Development Manager, Finance
Director, Management System Manager, Human Resources Manager,

Page 191 of 260
Marketing Director, Engineering Manager, Materials Manager and Production

Manager.[21]
In the present case, the CBA expressly excluded Confidential and Executive
Secretaries from the rank-and-file bargaining unit, for which reason ABI
seeks their disaffiliation from petitioner. Petitioner, however, maintains that
except for Daisy Laloon, Evelyn Mabilangan and Lennie Saguan who had
been promoted to monthly paid positions, the following secretaries/clerks
are deemed included among the rank-and-file employees of ABI: [22]
NAME DEPARTMENT IMMEDIATE SUPERIO
R
C1 ADMIN DIVISION
1. Angeles, Cristina C. Transportation Mr. Melito K. Tan

2. Barraquio, Carina P. Transportation Mr. Melito K. Tan
3. Cabalo, Marivic B. Transportation Mr. Melito K. Tan
4. Fameronag, Transportation Mr. Melito K. Tan
Leodigario C.
1. Abalos, Andrea A. Materials Mr. Andres G. Co

2. Algire, Juvy L. Materials Mr. Andres G. Co
3. Anouevo, Shirley P. Materials Mr. Andres G. Co
4. Aviso, Rosita S. Materials Mr. Andres G. Co
5. Barachina, Pauline C. Materials Mr. Andres G. Co
6. Briones, Catalina P. Materials Mr. Andres G. Co
7. Caralipio, Juanita P. Materials Mr. Andres G. Co
8. Elmido, Ma. Rebecca Materials Mr. Andres G. Co
S.
9. Giron, Laura P. Materials Mr. Andres G. Co
10. Mane, Edna A. Materials Mr. Andres G. Co
xxxx
C2 BREWERY DIVISION
1. Laloon, Daisy S. Brewhouse Mr. William Tan
1. Arabit, Myrna F. Bottling Mr. Julius Palmares

Production
2. Burgos, Adelaida D. Bottling Mr. Julius Palmares
Production
3. Menil, Emmanuel S. Bottling Mr. Julius Palmares

Page 192 of 260
Production
4. Nevalga, Marcelo G. Bottling Mr. Julius Palmares
Production
1. Mapola, Ma. Esraliza Bottling Mr. Ernesto

T. Maintenance Ang
2. Velez, Carmelito A. Bottling Mr. Ernesto Ang
Maintenance
1. Bordamonte, Bottled Water Mr. Faustino

Rhumela D. Tetonche
2. Deauna, Edna R. Bottled Water Mr. Faustino
Tetonche
3. Punongbayan, Bottled Water Mr. Faustino
Marylou F. Tetonche
4. Saguan, Lennie Y. Bottled Water Mr. Faustino
Tetonche
1. Alcoran, Simeon A. Full Goods Mr. Tsoi Wah Tung

2. Cervantes, Ma. Full Goods Mr. Tsoi Wah Tung
Sherley Y.
3. Diongco, Ma. Teresa Full Goods Mr. Tsoi Wah Tung
M.
4. Mabilangan, Evelyn Full Goods Mr. Tsoi Wah Tung
M.
5. Rivera, Aurora M. Full Goods Mr. Tsoi Wah Tung
6. Salandanan, Nancy G. Full Goods Mr. Tsoi Wah Tung
1. Magbag, Ma. Corazon Tank Farm/ Mr. Manuel Yu Liat

C. Cella Services
1. Capiroso, Francisca A. Quality Ms. Regina Mirasol

Assurance
1. Alconaba, Elvira C. Engineering Mr. Clemente Wong

2. Bustillo, Bernardita E. Electrical Mr. Jorge Villarosa
3. Catindig, Ruel A. Civil Works Mr. Roger Giron
4. Sison, Claudia B. Utilities Mr. Venancio
Alconaba
xxxx
C3 PACKAGING
DIVISION

Page 193 of 260
1. Alvarez, Ma. GP Ms. Susan Bella

Luningning L. Administration
2. Caiza, Alma A. GP Technical Mr. Chen Tsai Tyan
3. Cantalejo, Aida S. GP Engineering Mr. Noel Fernandez
4. Castillo, Ma. Riza R. GP Production Mr. Tsai Chen Chih
5. Lamadrid, Susana C. GP Production Mr. Robert Bautista
6. Mendoza, Jennifer L. GP Technical Mr. Mel Oa
As can be gleaned from the above listing, it is rather curious that there
would be several secretaries/clerks for just one (1) department/division
performing tasks which are mostly routine and clerical. Respondent insisted
they fall under the Confidential and Executive Secretaries expressly excluded
by the CBA from the rank-and-file bargaining unit. However, perusal of the
job descriptions of these secretaries/clerks reveals that their assigned duties
and responsibilities involve routine activities of recording and monitoring,
and other paper works for their respective departments while secretarial
tasks such as receiving telephone calls and filing of office correspondence
appear to have been commonly imposed as additional duties. [23] Respondent
failed to indicate who among these numerous secretaries/clerks have access
to confidential data relating to management policies that could give rise to
potential conflict of interest with their Union membership. Clearly, the
rationale under our previous rulings for the exclusion of executive
secretaries or division secretaries would have little or no significance
considering the lack of or very limited access to confidential information of
these secretaries/clerks. It is not even farfetched that the job category may
exist only on paper since they are all daily-paid workers. Quite
understandably, petitioner had earlier expressed the view that the positions
were just being reclassified as these employees actually discharged routine
functions.
We thus hold that the secretaries/clerks, numbering about forty (40), are
rank-and-file employees and not confidential employees.
With respect to the Sampling Inspectors/Inspectresses and the Gauge

Machine Technician, there seems no dispute that they form part of the
Quality Control Staff who, under the express terms of the CBA, fall under a
distinct category. But we disagree with respondents contention that the
twenty (20) checkers are similarly confidential employees being quality

Page 194 of 260
control staff entrusted with the handling and custody of company properties
and sensitive information.
Again, the job descriptions of these checkers assigned in the storeroom

section of the Materials Department, finishing section of the Packaging
Department, and the decorating and glass sections of the Production
Department plainly showed that they perform routine and mechanical tasks
preparatory to the delivery of the finished products. [24] While it may be
argued that quality control extends to post-production phase -- proper
packaging of the finished products -- no evidence was presented by the
respondent to prove that these daily-paid checkers actually form part of the
companys Quality Control Staff who as such were exposed to sensitive, vital
and confidential information about [companys] products or have knowledge
of mixtures of the products, their defects, and even their formulas which are
considered trade secrets. Such allegations of respondent must be supported
by evidence.[25]
Consequently, we hold that the twenty (20) checkers may not be

considered confidential employees under the category of Quality Control
Staff who were expressly excluded from the CBA of the rank-and-file
bargaining unit.
Confidential employees are defined as those who (1) assist or act in a

confidential capacity, (2) to persons who formulate, determine, and effectuate
management policies in the field of labor relations. The two (2) criteria are
cumulative, and both must be met if an employee is to be considered a
confidential employee that is, the confidential relationship must exist between
the employee and his supervisor, and the supervisor must handle the
prescribed responsibilities relating to labor relations. The exclusion from
bargaining units of employees who, in the normal course of their duties,
become aware of management policies relating to labor relations is a principal
objective sought to be accomplished by the confidential employee rule.
[26]
There is no showing in this case that the secretaries/clerks and checkers
assisted or acted in a confidential capacity to managerial employees and
obtained confidential information relating to labor relations policies. And even
assuming that they had exposure to internal business operations of the
company, respondent claimed, this is not per se ground for their exclusion in
the bargaining unit of the daily-paid rank-and-file employees.[27]

Page 195 of 260
Not being confidential employees, the secretaries/clerks and checkers are

not disqualified from membership in the Union of respondents rank-and-file
employees. Petitioner argues that respondents act of unilaterally stopping
the deduction of union dues from these employees constitutes unfair labor
practice as it restrained the workers exercise of their right to self-
organization, as provided in Article 248 (a) of the Labor Code.
Unfair labor practice refers to acts that violate the workers right to organize.
The prohibited acts are related to the workers right to self organization and
to the observance of a CBA. For a charge of unfair labor practice to prosper,
it must be shown that ABI was motivated by ill will, bad faith, or fraud, or
was oppressive to labor, or done in a manner contrary to morals, good
customs, or public policy, and, of course, that social humiliation, wounded
feelings or grave anxiety resulted x x x [28]from ABIs act in discontinuing the
union dues deduction from those employees it believed were excluded by the
CBA.Considering that the herein dispute arose from a simple disagreement
in the interpretation of the CBA provision on excluded employees from the
bargaining unit, respondent cannot be said to have committed unfair labor
practice that restrained its employees in the exercise of their right to self-
organization, nor have thereby demonstrated an anti-union stance.
WHEREFORE, the petition is GRANTED. The Decision dated November 22,

2002 and Resolution dated January 28, 2004 of the Court of Appeals in CA-
G.R. SP No. 55578 are hereby REVERSED and SET ASIDE. The checkers
and secretaries/clerks of respondent company are hereby declared rank-
and-file employees who are eligible to join the Union of the rank-and-file
employees.
No costs.
SO ORDERED.
18 Fuji vs Espiritu
G.R. No. 204944-45 December 3, 2014

Page 196 of 260
FUJI TELEVISION NETWORK, INC., Petitioner,

vs.
ARLENE S. ESPIRITU, Respondent.
DECISION
LEONEN, J.:
It is the burden of the employer to prove that a person whose services it

pays for is an independent contractor rather than a regular employee with or
without a fixed term. That a person has a disease does not per se entitle the
employer to terminate his or her services. Termination is the last resort. At
the very least, a competent public health authority must certify that the
disease cannot be cured within six ( 6) months, even with appropriate
treatment.
We decide this petition for review1 on certiorari filed by Fuji Television

Network, Inc., seeking the reversal of the Court of Appeals Decision 2 dated
June 25, 2012, affirming with modification the decision 3 of the National
Labor Relations Commission.
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television

Network, Inc. ("Fuji") asa news correspondent/producer 4 "tasked to report
Philippine news to Fuji through its Manila Bureau field office." 5 Arlenes
employment contract initially provided for a term of one (1) year but was
successively renewed on a yearly basis with salary adjustment upon every
renewal.6 Sometime in January 2009, Arlenewas diagnosed with lung
cancer.7She informed Fuji about her condition. In turn, the Chief of News
Agency of Fuji, Yoshiki Aoki, informed Arlene "that the company will have a
problem renewing her contract"8 since it would be difficult for her to perform
her job.9 She "insisted that she was still fit to work as certified by her
attending physician."10
After several verbal and written communications, 11 Arlene and Fuji signed a
non-renewal contract on May 5, 2009 where it was stipulated that her
contract would no longer be renewed after its expiration on May 31, 2009.
The contract also provided that the parties release each other from liabilities
and responsibilities under the employment contract. 12
In consideration of the non-renewal contract, Arlene "acknowledged receipt

of the total amount of US$18,050.00 representing her monthly salary from
March 2009 to May 2009, year-end bonus, mid-year bonus, and separation
pay."13 However, Arlene affixed her signature on the nonrenewal contract
with the initials "U.P." for "under protest."14

Page 197 of 260
On May 6, 2009, the day after Arlene signed the non-renewal contract, she
filed a complaint for illegal dismissal and attorneys fees with the National
Capital Region Arbitration Branch of the National Labor Relations
Commission. She alleged that she was forced to sign the nonrenewal
contract when Fuji came to know of her illness and that Fuji withheld her
salaries and other benefits for March and April 2009 when she refused to
sign.15
Arlene claimed that she was left with no other recourse but to sign the non-
renewal contract, and it was only upon signing that she was given her
salaries and bonuses, in addition to separation pay equivalent to four (4)
years.16
In the decision17 dated September 10, 2009, Labor Arbiter Corazon C.

Borbolla dismissed Arlenes complaint.18Citing Sonza v. ABS-CBN19 and
applying the four-fold test, the Labor Arbiter held that Arlene was not Fujis
employee but an independent contractor.20
Arlene appealed before the National Labor Relations Commission. In its

decision dated March 5, 2010, the National Labor Relations Commission
reversed the Labor Arbiters decision.21 It held that Arlene was a regular
employee with respect to the activities for which she was employed since
she continuously rendered services that were deemednecessary and
desirable to Fujis business.22 The National Labor Relations Commission
ordered Fuji to pay Arlene backwages, computed from the date of her illegal
dismissal.23 The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered GRANTING

the instant appeal. The Decision of the Labor Arbiter dated 19 September
2009 is hereby REVERSED and SET ASIDE, and a new one is issued ordering
respondents-appellees to pay complainant-appellant backwages computed
from the date of her illegal dismissal until finality of this Decision.
SO ORDERED.24
Arlene and Fuji filed separat emotions for reconsideration. 25 Both motions
were denied by the National Labor Relations Commission for lack of merit in
the resolution dated April 26, 2010. 26 From the decision of the National Labor
Relations Commission, both parties filed separate petitions for
certiorari27 before the Court of Appeals. The Court of Appeals consolidated
the petitions and considered the following issues for resolution:
1) Whether or not Espirituis a regular employee or a fixed-term

contractual employee;

Page 198 of 260
2) Whether or not Espiritu was illegally dismissed; and
3) Whether or not Espirituis entitled to damages and attorneys fees. 28
In the assailed decision, the Court of Appeals affirmed the National

Labor Relations Commission with the modification that Fuji
immediately reinstate Arlene to her position as News Producer without
loss of seniority rights, and pay her backwages, 13th-month pay, mid-
year and year-end bonuses, sick leave and vacation leave with pay
until reinstated, moral damages, exemplary damages, attorneysfees,
and legal interest of 12% per annum of the total monetary
awards.29 The Court of Appeals ruled that:
WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc.
and Yoshiki Aoki is DENIED and the petition of Arlene S. Espiritu is
GRANTED. Accordingly, the Decision dated March 5, 2010 of the National
Labor Relations Commission, 6th Division in NLRC NCR Case No. 05-06811-
09 and its subsequent Resolution dated April 26, 2010 are hereby AFFIRMED
with MODIFICATIONS, as follows:
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene

S. Espiritu to her position as News Producer without loss of seniority rights
and privileges and to pay her the following:
1. Backwages at the rate of $1,900.00 per month computed from May

5, 2009 (the date of dismissal), until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date
of dismissal, until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus

per year from the date of dismissal, until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus

per year from the date of dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date
of dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per

annum from date of dismissal, until reinstated.
7. The amount of P100,000.00 as moral damages;

Page 199 of 260
8. The amount of P50,000.00 as exemplary damages;
9. Attorneys fees equivalent to 10% of the total monetary awards

herein stated; and
10. Legal interest of twelve percent (12%) per annum of the total
monetary awards computed from May 5, 2009, until their full
satisfaction.
The Labor Arbiter is hereby DIRECTED to make another recomputation of the

above monetary awards consistent with the above directives.
SO ORDERED.30
In arriving at the decision, the Court of Appeals held that Arlene was a
regular employee because she was engaged to perform work that was
necessary or desirable in the business of Fuji, 31 and the successive renewals
of her fixed-term contract resulted in regular employment. 32
According to the Court of Appeals, Sonzadoes not apply in order to establish

that Arlene was an independent contractor because she was not contracted
on account of any peculiar ability, special talent, or skill. 33 The fact that
everything used by Arlene in her work was owned by Fuji negated the idea
of job contracting.34
The Court of Appeals also held that Arlene was illegally dismissed because
Fuji failed to comply with the requirements of substantive and procedural
due process necessary for her dismissal since she was a regular employee. 35
The Court of Appeals found that Arlene did not sign the non-renewal contract
voluntarily and that the contract was a mere subterfuge by Fuji to secure its
position that it was her choice not to renew her contract. She was left with
no choice since Fuji was decided on severing her employment. 36
Fuji filed a motion for reconsideration that was denied in the

resolution37 dated December 7, 2012 for failure to raise new matters.38
Aggrieved, Fuji filed this petition for review and argued that the Court of
Appeals erred in affirming with modification the National Labor Relations
Commissions decision, holding that Arlene was a regular employee and that
she was illegally dismissed. Fuji also questioned the award of monetary
claims, benefits, and damages.39

Page 200 of 260
Fuji points out that Arlene was hired as a stringer, and it informed her that
she would remain one.40 She was hired as an independent contractor as
defined in Sonza.41 Fuji had no control over her work.42 The employment
contracts were executed and renewed annually upon Arlenes insistence to
which Fuji relented because she had skills that distinguished her from
ordinary employees.43 Arlene and Fuji dealt on equal terms when they
negotiated and entered into the employment contracts. 44 There was no
illegal dismissal because she freely agreed not to renew her fixed-term
contract as evidenced by her e-mail correspondences with Yoshiki Aoki. 45 In
fact, the signing of the non-renewal contract was not necessary to terminate
her employment since "such employment terminated upon expiration of her
contract."46 Finally, Fuji had dealt with Arlene in good faith, thus, she should
not have been awarded damages.47
Fuji alleges that it did not need a permanent reporter since the news
reported by Arlene could easily be secured from other entities or from the
internet.48 Fuji "never controlled the manner by which she performed her
functions."49 It was Arlene who insisted that Fuji execute yearly fixed-term
contracts so that she could negotiate for annual increases in her pay. 50
Fuji points out that Arlene reported for work for only five (5) days in
February 2009, three (3) days in March 2009, and one (1) day in April
2009.51 Despite the provision in her employment contract that sick leaves in
excess of 30 days shall not be paid, Fuji paid Arlene her entire salary for the
months of March, April, and May; four(4) months of separation pay; and a
bonus for two and a half months for a total of US$18,050.00. 52 Despite
having received the amount of US$18,050.00, Arlene still filed a case for
illegal dismissal.53
Fuji further argues that the circumstances would show that Arlene was not
illegally dismissed. The decision tonot renew her contract was mutually
agreed upon by the parties as indicated in Arlenes e-mail 54 dated March 11,
2009 where she consented to the non-renewal of her contract but refused to
sign anything.55 Aoki informed Arlene in an e-mail 56 dated March 12, 2009
that she did not need to sign a resignation letter and that Fuji would pay
Arlenes salary and bonus until May 2009 as well as separation pay. 57
Arlene sent an e-mail dated March 18, 2009 with her version of the non-
renewal agreement that she agreed to sign this time. 58 This attached version
contained a provision that Fuji shall re-hire her if she was still interested to
work for Fuji.59 For Fuji, Arlenes e-mail showed that she had the power to
bargain.60

Page 201 of 260
Fuji then posits that the Court of Appeals erred when it held that the
elements of an employer-employee relationship are present, particularly that
of control;61 that Arlenes separation from employment upon the expiration
of her contract constitutes illegal dismissal; 62 that Arlene is entitled to
reinstatement;63 and that Fuji is liable to Arlene for damages and attorneys
fees.64
This petition for review on certiorari under Rule 45 was filed on February 8,
2013.65 On February 27, 2013, Arlene filed a manifestation 66 stating that this
court may not take jurisdiction over the case since Fuji failed to authorize
Corazon E. Acerden to sign the verification. 67 Fuji filed a comment on the
manifestation68 on March 9, 2013.
Based on the arguments of the parties, there are procedural and substantive
issues for resolution:
I. Whether the petition for review should be dismissed as Corazon E.

Acerden, the signatory of the verification and certification of non forum
shopping of the petition, had no authority to sign the verification and
certification on behalf of Fuji;
II. Whether the Court of Appeals correctly determined that no grave

abuse of discretion was committed by the National Labor Relations
Commission when it ruled that Arlene was a regular employee, not an
independent contractor, and that she was illegally dismissed; and
III. Whether the Court of Appeals properly modified the National Labor
Relations Commissions decision by awarding reinstatement, damages,
and attorneys fees.
The petition should be dismissed.
Validity of the verification and certification against forum shopping
In its comment on Arlenes manifestation, Fuji alleges that Corazon was

authorized to sign the verification and certification of non-forum shopping
because Mr. Shuji Yano was empowered under the secretarys certificate to
delegate his authority to sign the necessary pleadings, including the
verification and certification against forum shopping. 69
On the other hand, Arlene points outthat the authority given to Mr. Shuji
Yano and Mr. Jin Eto in the secretarys certificate is only for the petition for

Page 202 of 260
certiorari before the Court of Appeals. 70 Fuji did not attach any board
resolution authorizing Corazon orany other person tofile a petition for review
on certiorari with this court.71 Shuji Yano and Jin Eto could not re-delegate
the power thatwas delegated to them.72 In addition, the special power of
attorney executed by Shuji Yano in favor of Corazon indicated that she was
empowered to sign on behalf of Shuji Yano, and not on behalf of Fuji. 73
The Rules of Court requires the

submission of verification and
certification against forum shopping
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the

requirement of verification, while Section 5 of the same rule provides the
requirement of certification against forum shopping. These sections state:
SEC. 4. Ver if ica tio n. Except when otherwise specifically required by law
or rule, pleadings need not be under oath, verified or accompanied by
affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading
and that the allegations therein are true and correct of his knowledge and
belief.
A pleading required to be verifiedwhich containsa verification based on

"information and belief," or upon "knowledge, information and belief," or
lacks a proper verification, shall be treated as an unsigned pleading.
SEC. 5. Certification against forum shopping. The plaintiff or principal

party shall certify under oath in the complaint orother initiatory pleading
asserting a claim for relief or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced
any action or filed any claim involving the same issues in any court, tribunal
or quasi-judicial agency and, to the best of his knowledge, no such other
action or claim is pending therein; (b) if there is such other pending action
or claim, a complete statement of the present status thereof; and (c) if he
should thereafter learn that the same or similar action or claim has been
filed or is pending, he shall report that fact within five (5) days therefrom to
the court wherein his aforesaid complaint or initiatory pleading has been
filed.
Failure to comply with the foregoing requirements shall not be curable by

mere amendment of the complaint or other initiatory pleading but shall be
cause for the dismissal of the case without prejudice, unless otherwise
provided, upon motion and after hearing. The submission of a false

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certification or non-compliance with any of the undertakings therein shall

constitute indirect contempt ofcourt, without prejudice to the corresponding
administrative and criminalactions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall constitute direct
contempt, as well as a cause for administrative sanctions.
Section 4(e) of Rule 4574 requires that petitions for review should "contain a
sworn certification against forum shopping as provided in the last paragraph
of section 2, Rule 42." Section 5 of the same rule provides that failure to
comply with any requirement in Section 4 is sufficient ground to dismiss the
petition.
Effects of non-compliance
Uy v. Landbank75 discussed the effect of non-compliance with regard to

verification and stated that:
[t]he requirement regarding verification of a pleading is formal, not

jurisdictional. Such requirement is simply a condition affecting the form of
pleading, the non-compliance of which does not necessarily render the
pleading fatally defective. Verification is simply intended to secure an
assurance that the allegations in the pleading are true and correct and not
the product of the imagination or a matter of speculation, and that the
pleading is filed in good faith. The court may order the correction of the
pleading if the verification is lacking or act on the pleading although it is not
verified, if the attending circumstances are such that strict compliance with
the rules may be dispensed with inorder that the ends of justice may
thereby be served.76 (Citations omitted)
Shipside Incorporated v. Court of Appeals 77 cited the discussion in Uy and

differentiated its effect from non-compliance with the requirement of
certification against forum shopping:
On the other hand, the lack of certification against forum shopping is

generally not curable by the submission thereof after the filing of the
petition. Section 5, Rule 45 of the 1997 Rules of Civil Procedure provides
that the failure of the petitioner tosubmit the required documents that
should accompany the petition, including the certification against forum
shopping, shall be sufficient ground for the dismissal thereof. The same rule
applies to certifications against forum shopping signed by a person on behalf
of a corporation which are unaccompanied by proof that said signatory is
authorized to file a petition on behalf of the corporation. 78 (Emphasis

Page 204 of 260
supplied) Effects of substantial compliance with the requirement of

verification and certification against forum shopping
Although the general rule is that failure to attach a verification and

certification against forum shopping isa ground for dismissal, there are cases
where this court allowed substantial compliance.
In Loyola v. Court of Appeals, 79 petitioner Alan Loyola submitted the required

certification one day after filing his electoral protest. 80 This court considered
the subsequent filing as substantial compliance since the purpose of filing
the certification is to curtail forum shopping.81
In LDP Marketing, Inc. v. Monter, 82 Ma. Lourdes Dela Pea signed the
verification and certification against forum shopping but failed to attach the
board resolution indicating her authority to sign. 83 In a motion for
reconsideration, LDP Marketing attached the secretarys certificate quoting
the board resolution that authorized Dela Pea. 84 Citing Shipside, this court
deemed the belated submission as substantial compliance since LDP
Marketing complied with the requirement; what it failed to do was to attach
proof of Dela Peas authority to sign. 85 Havtor Management Phils., Inc. v.
National Labor Relations Commission86 and General Milling Corporation v.
National Labor Relations Commission87 involved petitions that were
dismissed for failure to attach any document showing that the signatory on
the verification and certification against forum-shopping was authorized. 88 In
both cases, the secretarys certificate was attached to the motion for
reconsideration.89 This court considered the subsequent submission of proof
indicating authority to sign as substantial compliance. 90 Altres v.
Empleo91 summarized the rules on verification and certification against forum
shopping in this manner:
For the guidance of the bench and bar, the Court restates in capsule form
the jurisprudential pronouncements . . . respecting non-compliance with the
requirement on, or submission of defective, verification and certification
against forum shopping:
1) A distinction must be made between non-compliance with the

requirement on or submission of defective verification, and
noncompliance with the requirement on or submission of defective
certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein

does not necessarily render the pleading fatally defective. The court
may order its submission or correction or act on the pleading if the
attending circumstances are such that strict compliance with the Rule

Page 205 of 260
may be dispensed with in order that the ends of justice may be served
thereby.
3) Verification is deemed substantially complied with when one who

has ample knowledge to swear to the truth of the allegations in the
complaint or petition signs the verification, and when matters alleged
in the petition have been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance

therewith or a defect therein, unlike in verification, is generally not
curable by its subsequent submission or correction thereof, unless
there is a need to relax the Rule on the ground of "substantial
compliance" or presence of "special circumstances or compelling
reasons."
5) The certification against forum shopping must be signed by all the

plaintiffs or petitioners in a case; otherwise, those who did not sign will
be dropped as parties to the case. Under reasonable or justifiable
circumstances, however, as when all the plaintiffs or petitioners share
a common interest and invoke a common cause of action or defense,
the signature of only one of them inthe certification against forum
shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed

by the party-pleader, not by his counsel. If, however, for reasonable or
justifiable reasons, the party-pleader is unable to sign, he must
execute a Special Power of Attorney designating his counsel of record
to sign on his behalf.92
There was substantial compliance

by Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be sued through its
board of directors or duly authorized officers and agents. Thus, the physical
act of signing the verification and certification against forum shopping can
only be done by natural persons duly authorized either by the corporate by-
laws or a board resolution.93
In its petition for review on certiorari, Fuji attached Hideaki Otas secretarys
certificate,94 authorizing Shuji Yano and Jin Eto to represent and sign for and
on behalf of Fuji.95 The secretarys certificate was duly authenticated 96by
Sulpicio Confiado, Consul-General of the Philippines in Japan. Likewise
attached to the petition is the special power of attorney executed by Shuji

Page 206 of 260
Yano, authorizing Corazon to sign on his behalf. 97 The verification and

certification against forum shopping was signed by Corazon. 98
Arlene filed the manifestation dated February 27, 2013, arguing that the
petition for review should be dismissed because Corazon was not duly
authorized to sign the verification and certification against forum shopping.
Fuji filed a comment on Arlenes manifestation, stating that Corazon was

properly authorized to sign. On the basis of the secretarys certificate, Shuji
Yano was empowered to delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's certificate
states:
(a) The Corporation shall file a Petition for Certiorari with the Court of
Appeals, against Philippines National Labor Relations Commission
("NLRC") and Arlene S. Espiritu, pertaining to NLRC-NCR Case No. LAC
00-002697-09, RAB No. 05-06811-00 and entitled "Arlene S. Espiritu
v. Fuji Television Network, Inc./Yoshiki Aoki", and participate in any
other subsequent proceeding that may necessarily arise therefrom,
including but not limited to the filing of appeals in the appropriate
venue;
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby
authorized, to verify and execute the certification against nonforum
shopping which may be necessary or required to be attached to any
pleading to [sic] submitted to the Court of Appeals; and the authority
to so verify and certify for the Corporation in favor of the said persons
shall subsist and remain effective until the termination of the said
case;
....
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby
authorized, to represent and appear on behalf the [sic] Corporation in
all stages of the [sic] this case and in any other proceeding that may
necessarily arise thereform [sic], and to act in the Corporations name,
place and stead to determine, propose, agree, decide, do, and perform
any and all of the following:
1. The possibility of amicable settlement or of submission to

alternative mode of dispute resolution;
2. The simplification of the issue;

Page 207 of 260
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts

and documents; and
5. Such other matters as may aid in the prompt disposition of

the action.99 (Emphasis in the original; Italics omitted)
Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon
E. Acerden and Mr. Moises A. Rollera as his attorneys-in-fact. 100 The special
power of attorney states:
That I, SHUJI YANO, of legal age, Japanese national, with office address at
2-4-8 Daiba, Minato-Ku, Tokyo, 137-8088 Japan, and being the
representative of Fuji TV, INc., [sic] (evidenced by the attached Secretarys
Certificate) one of the respondents in NLRC-NCR Case No. 05-06811-00
entitled "Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki", and
subsequently docketed before the Court of Appeals asC.A. G.R. S.P. No.
114867 (Consolidated with SP No. 114889) do hereby make, constitute and
appoint Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rolleraas my true and
lawful attorneys-infact for me and my name, place and stead to act and
represent me in the above-mentioned case, with special power to make
admission/s and stipulations and/or to make and submit as well as to accept
and approve compromise proposals upon such terms and conditions and
under such covenants as my attorney-in-fact may deem fit, and to engage
the services of Villa Judan and Cruz Law Officesas the legal counsel to
represent the Company in the Supreme Court;
The said Attorneys-in-Fact are hereby further authorized to make, sign,

execute and deliver such papers ordocuments as may be necessary in
furtherance of the power thus granted, particularly to sign and execute the
verification and certification of non-forum shopping needed to be
filed.101 (Emphasis in the original)
In its comment102 on Arlenes manifestation, Fuji argues that Shuji Yano

could further delegate his authority because the board resolution empowered
him to "act in the Corporations name, place and stead to determine,
propose, agree, decided [sic], do and perform any and all of the
following: . . . such other matters as may aid in the prompt disposition of
the action."103 To clarify, Fuji attached a verification and certification against
forum shopping, but Arlene questions Corazons authority to sign. Arlene
argues that the secretarys certificate empowered Shuji Yano to file a
petition for certiorari before the Court of Appeals, and not a petition for
review before this court, and that since Shuji Yanos authority was delegated

Page 208 of 260
to him, he could not further delegate such power. Moreover, Corazon was
representing Shuji Yano in his personal capacity, and not in his capacity as
representative of Fuji.
A review of the board resolution quoted in the secretarys certificate shows

that Fuji shall "file a Petition for Certiorari with the Court of Appeals" 104 and
"participate in any other subsequent proceeding that may necessarily arise
therefrom, including but not limited to the filing of appeals in the appropriate
venue,"105 and that Shuji Yano and Jin Eto are authorized to represent Fuji
"in any other proceeding that may necessarily arise thereform [sic]." 106 As
pointed out by Fuji, Shuji Yano and Jin Eto were also authorized to "act in
the Corporations name, place and stead to determine, propose, agree,
decide, do, and perform anyand all of the following: . . . 5. Such other
matters as may aid in the prompt disposition of the action." 107
Considering that the subsequent proceeding that may arise from the petition
for certiorari with the Court of Appeals is the filing of a petition for review
with this court, Fuji substantially complied with the procedural requirement.
On the issue of whether Shuji Yano validly delegated his authority to

Corazon, Article 1892 of the Civil Code of the Philippines states:
ART. 1892. The agent may appoint a substitute if the principal has not
prohibited him from doing so; but he shall be responsible for the acts of the
substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the
person, and the person appointed was notoriously incompetent or
insolvent. All acts of the substitute appointed against the prohibition of
the principal shall be void.
The secretarys certificate does not state that Shuji Yano is prohibited from
appointing a substitute. In fact, heis empowered to do acts that will aid in
the resolution of this case.
This court has recognized that there are instances when officials or
employees of a corporation can sign the verification and certification against
forum shopping without a board resolution. In Cagayan Valley Drug
Corporation v. CIR,108 it was held that:
In sum, we have held that the following officials or employees of the

company can sign the verification and certification without need of a board

Page 209 of 260
resolution: (1) the Chairperson of the Board of Directors, (2) the President
of a corporation, (3) the General Manager or Acting General Manager, (4)
Personnel Officer, and (5) an Employment Specialist in a labor case.
While the above cases109 do not provide a complete listing of authorized

signatories to the verification and certification required by the rules, the
determination of the sufficiency of the authority was done on a case to case
basis. The rationale applied in the foregoing cases is to justify the authority
of corporate officers or representatives of the corporation to sign the
verification or certificate against forum shopping, being in a position to
verify the truthfulness and correctness of the allegations in the petition. 110
Corazons affidavit111 states that she is the "office manager and resident
interpreter of the Manila Bureau of Fuji Television Network, Inc." 112 and that
she has "held the position for the last twenty-three years."113
As the office manager for 23 years,Corazon can be considered as having

knowledge of all matters in Fujis Manila Bureau Office and is in a position to
verify "the truthfulness and the correctness of the allegations in the
Petition."114
Thus, Fuji substantially complied with the requirements of verification and

certification against forum shopping.
Before resolving the substantive issues in this case, this court will discuss
the procedural parameters of a Rule 45 petition for review in labor cases.
II
Procedural parameters of petitions for review in labor cases
Article 223 of the Labor Code 115 does not provide any mode of appeal for
decisions of the National Labor Relations Commission. It merely states that
"[t]he decision of the Commission shall be final and executory after ten (10)
calendar days from receipt thereof by the parties." Being final, it is no longer
appealable. However, the finality of the National Labor Relations
Commissions decisions does not mean that there is no more recourse for
the parties.
In St. Martin Funeral Home v. National Labor Relations Commission, 116 this
court cited several cases117 and rejected the notion that this court had no
jurisdiction to review decisions of the National Labor Relations Commission.
It stated that this court had the power to review the acts of the National
Labor Relations Commission to see if it kept within its jurisdiction in deciding

Page 210 of 260
cases and alsoas a form of check and balance. 118 This court then clarified
that judicial review of National Labor Relations Commission decisions shall
be by way of a petition for certiorari under Rule 65. Citing the doctrine of
hierarchy of courts, it further ruled that such petitions shall be filed before
the Court of Appeals. From the Court of Appeals, an aggrieved party may file
a petition for review on certiorari under Rule 45.
A petition for certiorari under Rule 65 is an original action where the issue is
limited to grave abuse of discretion. As an original action, it cannot be
considered as a continuation of the proceedings of the labor tribunals.
On the other hand, a petition for review on certiorari under Rule 45 is a

mode of appeal where the issue is limited to questions of law. In labor cases,
a Rule 45 petition is limited toreviewing whether the Court of Appeals
correctly determined the presence or absence of grave abuse of discretion
and deciding other jurisdictional errors of the National Labor Relations
Commission.119
In Odango v. National Labor Relations Commission, 120 this court explained

that a petition for certiorari is an extraordinary remedy that is "available
only and restrictively in truly exceptional cases" 121 and that its sole office "is
the correction of errors of jurisdiction including commission of grave abuse
of discretion amounting to lack or excess of jurisdiction." 122 A petition for
certiorari does not include a review of findings of fact since the findings of
the National Labor Relations Commission are accorded finality. 123 In cases
where the aggrieved party assails the National Labor Relations Commissions
findings, he or she must be able to show that the Commission "acted
capriciously and whimsically or in total disregard of evidence material to the
controversy."124
When a decision of the Court of Appeals under a Rule 65 petition is brought

to this court by way of a petition for review under Rule 45, only questions of
law may be decided upon. As held in Meralco Industrial v. National Labor
Relations Commission:125
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction
of this Court ina petition for review on certiorari under Rule 45 of the
Revised Rules of Court is limited to reviewing only errors of law, not of fact,
unless the factual findings complained of are completely devoid of support
from the evidence on record, or the assailed judgment is based on a gross
misapprehension of facts. Besides, factual findings of quasi-judicial agencies
like the NLRC, when affirmed by the Court of Appeals, are conclusive upon
the parties and binding on this Court.126

Page 211 of 260
Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is instructive

on the parameters of judicial review under Rule 45:
As a rule, only questions of law may be raised in a Rule 45 petition. In one

case, we discussed the particular parameters of a Rule 45 appeal from the
CAs Rule 65 decision on a labor case, as follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision,

in contrast with the review for jurisdictional error that we undertake under
Rule 65. Furthermore, Rule 45 limits us to the review of questions of law
raised against the assailed CA decision. In ruling for legal correctness, we
have to view the CA decision in the same context that the petition for
certiorari it ruled upon was presented to it; we have to examine the CA
decision from the prism of whether it correctly determined the presence or
absence of grave abuse of discretion in the NLRC decision before it, not on
the basis of whether the NLRC decision on the merits of the case was
correct. In other words, we have to be keenly aware that the CA undertook a
Rule 65 review, not a review on appeal, of the NLRC decision challenged
before it.129 (Emphasis in the original)
Justice Brions dissenting opinion in Abott Laboratories, PhiIippines v.

Aicaraz130 discussed that in petitions for review under Rule 45, "the Court
simply determines whether the legal correctness of the CAs finding that the
NLRC ruling . . . had basis in fact and in Iaw." 131 In this kind of petition, the
proper question to be raised is, "Did the CA correctly determine whether the
NLRC committed grave abuse of discretion in ruling on the case?" 132
Justice Brions dissenting opinion also laid down the following guidelines:
If the NLRC ruling has basis in the evidence and the applicable law and
jurisprudence, then no grave abuse of discretion exists and the CA should so
declare and, accordingly, dismiss the petition. If grave abuse of discretion
exists, then the CA must grant the petition and nullify the NLRC ruling,
entering at the same time the ruling that isjustified under the evidence and
the governing law, rules and jurisprudence. In our Rule 45 review, this Court
must denythe petition if it finds that the CA correctly acted. 133 (Emphasis in
the original)
These parameters shall be used in resolving the substantive issues in this

petition.
III
Determination of employment status; burden of proof

Page 212 of 260
In this case, there is no question thatArlene rendered services to Fuji.

However, Fuji alleges that Arlene was an independent contractor, while
Arlene alleges that she was a regular employee. To resolve this issue, we
ascertain whether an employer-employee relationship existed between Fuji
and Arlene.
This court has often used the four-fold test to determine the existence of an
employer-employee relationship. Under the four-fold test, the "control test"
is the most important.134 As to how the elements in the four-fold test are
proven, this court has discussed that:
[t]here is no hard and fast rule designed to establish the aforesaid elements.
Any competent and relevant evidence to prove the relationship may be
admitted. Identification cards, cash vouchers, social security registration,
appointment letters or employment contracts, payrolls, organization charts,
and personnel lists, serve as evidence of employee status. 135
If the facts of this case vis--vis the four-fold test show that an employer-
employee relationship existed, we then determine the status of Arlenes
employment, i.e., whether she was a regular employee. Relative to this, we
shall analyze Arlenes fixed-term contract and determine whether it supports
her argument that she was a regular employee, or the argument of Fuji that
she was an independent contractor. We shall scrutinize whether the nature
of Arlenes work was necessary and desirable to Fujis business or whether
Fuji only needed the output of her work. If the circumstances show that
Arlenes work was necessary and desirable to Fuji, then she is presumed to
be a regular employee. The burden of proving that she was an independent
contractor lies with Fuji.
In labor cases, the quantum of proof required is substantial

evidence.136 "Substantial evidence" has been defined as "such amount of
relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion."137
If Arlene was a regular employee, we then determine whether she was

illegally dismissed. In complaints for illegal dismissal, the burden of proof is
on the employee to prove the fact of dismissal. 138 Once the employee
establishes the fact of dismissal, supported by substantial evidence, the
burden of proof shifts tothe employer to show that there was a just or
authorized cause for the dismissal and that due process was observed. 139
IV

Page 213 of 260
Whether the Court of Appeals correctly affirmed the National Labor

Relations Commissions finding that Arlene was a regular employee
Fuji alleges that Arlene was anindependent contractor, citing Sonza v. ABS-
CBN and relying on the following facts: (1) she was hired because of her
skills; (2) her salary was US$1,900.00, which is higher than the normal rate;
(3) she had the power to bargain with her employer; and (4) her contract
was for a fixed term. According to Fuji, the Court of Appeals erred when it
ruled that Arlene was forcedto sign the non-renewal agreement, considering
that she sent an email with another version of the non-renewal
agreement.140 Further, she is not entitled tomoral damages and attorneys
fees because she acted in bad faith when she filed a labor complaint against
Fuji after receiving US$18,050.00 representing her salary and other
benefits.141 Arlene argues that she was a regular employee because Fuji had
control and supervision over her work. The news events that she covered
were all based on the instructions of Fuji. 142 She maintains that the
successive renewal of her employment contracts for four (4) years indicates
that her work was necessary and desirable. 143 In addition, Fujis payment of
separation pay equivalent to one (1) months pay per year of service
indicates that she was a regular employee. 144 To further support her
argument that she was not an independent contractor, she states that Fuji
owns the laptop computer and mini-camera that she used for work. 145 Arlene
also argues that Sonza is not applicable because she was a plain reporter for
Fuji, unlike Jay Sonza who was a news anchor, talk show host, and who
enjoyed a celebrity status.146 On her illness, Arlene points outthat it was not
a ground for her dismissal because her attending physician certified that she
was fit to work.147
Arlene admits that she signed the non-renewal agreement with quitclaim,
not because she agreed to itsterms, but because she was not in a position to
reject the non-renewal agreement. Further, she badly needed the salary
withheld for her sustenance and medication. 148 She posits that her
acceptance of separation pay does not bar filing of a complaint for illegal
dismissal.149
Article 280 of the Labor Code provides that:
Art. 280. Regular and casual employment.The provisions of written


Page 214 of 260

work or services to be performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the

preceding paragraph; Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken, shall
be considered a regular employee with respect to the activity in which heis
employed and his employment shall continue while such activity exist.
This provision classifies employees into regular, project, seasonal, and

casual. It further classifies regular employees into two kinds: (1) those
"engaged to perform activities which are usually necessary or desirable in
the usual business or trade of the employer"; and (2) casual employees who
have "rendered at least one year of service, whether such service is
continuous or broken."
Another classification of employees, i.e., employees with fixed-term

contracts, was recognized in Brent School, Inc. v. Zamora 150 where this court
discussed that:
Logically, the decisive determinant in the term employment should not be

the activities that the employee is called upon to perform, but the day
certain agreed upon by the parties for the commencement and termination
of their employment relationship, a day certainbeing understood to be "that
which must necessarily come, although it may not be known
when."151 (Emphasis in the original)
This court further discussed that there are employment contracts where "a
fixed term is an essential and natural appurtenance" 152 such as overseas
employment contracts and officers in educational institutions. 153
Distinctions among fixed-term

employees, independent contractors,
and regular employees
GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed term

contracts laid down in Brentin the following manner:
Cognizant of the possibility of abuse in the utilization of fixed term

employment contracts, we emphasized in Brentthat where from the
circumstances it is apparent that the periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down
as contrary to public policy or morals. We thus laid down indications or

Page 215 of 260
criteria under which "term employment" cannot be said to be in

circumvention of the law on security of tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed

upon by the parties without any force, duress, or improper pressure being
brought to bear upon the employee and absent any other circumstances
vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with
each other on more or less equal terms with no moral dominance exercised
by the former or the latter.
These indications, which must be read together, make the Brent doctrine
applicable only in a few special cases wherein the employer and employee
are on more or less in equal footing in entering into the contract. The reason
for this is evident: whena prospective employee, on account of special skills
or market forces, is in a position to make demands upon the prospective
employer, such prospective employee needs less protection than the
ordinary worker. Lesser limitations on the parties freedom of contract are
thus required for the protection of the employee.155 (Citations omitted)
For as long as the guidelines laid down in Brentare satisfied, this court will
recognize the validity of the fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixedterm
employment of petitioners because from the time they were hired, they were
informed that their engagement was for a specific period. This court stated
that:
[s]imply put, petitioners were notregular employees. While their

employment as mixers, packers and machine operators was necessary and
desirable in the usual business ofrespondent company, they were employed
temporarily only, during periods when there was heightened demand for
production. Consequently, there could have been no illegal dismissal when
their services were terminated on expiration of their contracts. There was
even no need for notice of termination because they knew exactly when
their contracts would end. Contracts of employment for a fixed period
terminate on their own at the end of such period.
Contracts of employment for a fixed period are not unlawful. What is

objectionable is the practice of some scrupulous employers who try to
circumvent the law protecting workers from the capricious termination of
employment.157 (Citation omitted)

Page 216 of 260
Caparoso v. Court of Appeals158 upheld the validity of the fixed-term contract

of employment. Caparoso and Quindipan were hired as delivery men for
three (3) months. At the end of the third month, they were hired on a
monthly basis. In total, they were hired for five (5) months. They filed a
complaint for illegal dismissal. 159 This court ruled that there was no evidence
indicating that they were pressured into signing the fixed-term contracts.
There was likewise no proof that their employer was engaged in hiring
workers for five (5) months onlyto prevent regularization. In the absence of
these facts, the fixed-term contracts were upheld as valid. 160 On the other
hand, an independent contractor is defined as:
. . . one who carries on a distinct and independent business and undertakes

to perform the job, work, or service on its own account and under ones own
responsibility according to ones own manner and method, 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.161
In view of the "distinct and independent business" of independent

contractors, no employer-employee relationship exists between independent
contractors and their principals. Independent contractors are recognized
under Article 106 of the Labor Code:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a

contract with another person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
....
The Secretary of Labor and Employment may, by appropriate regulations,

restrict or prohibit the contracting-out of labor to protect the rights of
workers established under this Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the employer
for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an

employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities which
are directly related to the principal business of such employer. In such
cases, the person or intermediary shall be considered merely as an agent of

Page 217 of 260
the employer who shall be responsible to the workers in the same manner
and extent as if the latterwere directly employed by him.
In Department Order No. 18-A, Seriesof 2011, of the Department of Labor

and Employment, a contractor is defined as having:
Section 3. . . .
....
(c) . . . an arrangement whereby a principal agrees to put out or farm out

with a contractor the performance or completion of a specific job, work or
service within a definite or predetermined period, regardless of whether such
job, work or service is to be performed or completed within oroutside the
premises of the principal.
This department order also states that there is a trilateral relationship in

legitimate job contracting and subcontracting arrangements among the
principal, contractor, and employees of the contractor. There is no employer-
employee relationship between the contractor and principal who engages the
contractors services, but there is an employer-employee relationship
between the contractor and workers hired to accomplish the work for the
principal.162
Jurisprudence has recognized another kind of independent contractor:

individuals with unique skills and talents that set them apart from ordinary
employees. There is no trilateral relationship in this case because the
independent contractor himself or herself performs the work for the
principal. In other words, the relationship is bilateral.
In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for the

Philippine Daily Inquirer. This court ruled that she was an independent
contractor because of her "talent, skill, experience, and her unique viewpoint
as a feminist advocate."164 In addition, the Philippine Daily Inquirer did not
have the power of control over Orozco, and she worked at her own
pleasure.165
Semblante v. Court of Appeals166 involved a masiador167 and a

sentenciador.168 This court ruled that "petitioners performed their functions
as masiadorand sentenciador free from the direction and control of
respondents"169 and that the masiador and sentenciador "relied mainly on
their expertise that is characteristic of the cockfight gambling." 170 Hence, no
employer-employee relationship existed.

Page 218 of 260
Bernarte v. Philippine Basketball Association 171 involved a basketball referee.

This court ruled that "a referee is an independent contractor, whose special
skills and independent judgment are required specifically for such position
and cannot possibly be controlled by the hiring party." 172
In these cases, the workers were found to be independent contractors

because of their unique skills and talents and the lack of control over the
means and methods in the performance of their work.
In other words, there are different kinds of independent contractors: those

engaged in legitimate job contracting and those who have unique skills and
talents that set them apart from ordinary employees.
Since no employer-employee relationship exists between independent

contractors and their principals, their contracts are governed by the Civil
Code provisions on contracts and other applicable laws. 173
A contract is defined as "a meeting of minds between two persons whereby

one binds himself, with respect to the other, to give something or to render
some service."174 Parties are free to stipulate on terms and conditions in
contracts as long as these "are not contrary to law, morals, good customs,
public order, or public policy."175 This presupposes that the parties to a
contract are on equal footing. Theycan bargain on terms and conditions until
they are able to reach an agreement.
On the other hand, contracts of employment are different and have a higher
level of regulation because they are impressed with public interest. Article
XIII, Section 3 of the 1987 Constitution provides full protection to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
Section 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective

bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They shall also

Page 219 of 260
participate in policy and decision-making processes affecting their rights and

benefits as may be provided by law.
The State shall promote the principle of shared responsibility between

workers and employers and the preferential use of voluntary modes in
settling disputes, including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers,
recognizing the right of labor to its just share in the fruits of production and
the right of enterprises to reasonable returns on investments, and to
expansion and growth.
Apart from the constitutional guarantee of protection to labor, Article 1700

of the Civil Code states:
ART. 1700. The relations between capital and labor are not merely
contractual. They are so impressed with public interest that labor contracts
must yield to the common good. Therefore, such contracts are subject to the
special laws on labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and similar subjects.
In contracts of employment, the employer and the employee are not on

equal footing. Thus, it is subject to regulatory review by the labor tribunals
and courts of law. The law serves to equalize the unequal. The labor force is
a special class that is constitutionally protected because of the inequality
between capital and labor.176 This presupposes that the labor force is weak.
However, the level of protection to labor should vary from case to case;
otherwise, the state might appear to be too paternalistic in affording
protection to labor. As stated in GMA Network, Inc. v. Pabriga, the ruling in
Brent applies in cases where it appears that the employer and employee are
on equal footing.177 This recognizes the fact that not all workers are weak. To
reiterate the discussion in GMA Network v. Pabriga:
The reason for this is evident: when a prospective employee, on account of

special skills or market forces, is in a position to make demands upon the
prospective employer, such prospective employee needs less protection than
the ordinary worker. Lesser limitations on the parties freedom of contract
are thus required for the protection of the employee.178
The level of protection to labor mustbe determined on the basis of the

nature of the work, qualifications of the employee, and other relevant
circumstances.

Page 220 of 260
For example, a prospective employee with a bachelors degree cannot be

said to be on equal footing witha grocery bagger with a high school diploma.
Employees who qualify for jobs requiring special qualifications such as
"[having] a Masters degree" or "[having] passed the licensure exam" are
different from employees who qualify for jobs that require "[being a] high
school graduate; withpleasing personality." In these situations, it is clear
that those with special qualifications can bargain with the employer on equal
footing. Thus, the level of protection afforded to these employees should be
different.
Fujis argument that Arlene was an independent contractor under a fixed-

term contract is contradictory. Employees under fixed-term contracts cannot
be independent contractors because in fixed-term contracts, an employer-
employee relationship exists. The test in this kind of contract is not the
necessity and desirability of the employees activities, "but the day certain
agreed upon by the parties for the commencement and termination of the
employment relationship."179 For regular employees, the necessity and
desirability of their work in the usual course of the employers business are
the determining factors. On the other hand, independent contractors do not
have employer-employee relationships with their principals. Hence, before
the status of employment can be determined, the existence of an employer-
employee relationship must be established.
The four-fold test180 can be used in determining whether an

employeremployee relationship exists. The elements of the four-fold test are
the following: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power of control,
which is the most important element.181
The "power of control" was explained by this court in Corporal, Sr. v.

National Labor Relations Commission:182
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.183 (Citation omitted)
Orozco v. Court of Appeals further elucidated the meaning of "power of

control" and stated the following:
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

Page 221 of 260
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. . . .184 (Citation omitted)
In Locsin, et al. v. Philippine Long Distance Telephone Company, 185 the

"power of control" was defined as "[the] right to control not only the end to
be achieved but also the means to be used in reaching such end." 186
Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v.
Court of Appeals187 in determining whether Arlene was an independent
contractor or a regular employee.
In deciding Sonza and Dumpit-Murillo, this court used the four-fold test.
Both cases involved newscasters and anchors. However, Sonza was held to
be an independent contractor, while Dumpit-Murillo was held to be a regular
employee.
Comparison of the Sonza and

Dumpit-Murillo cases using
the four-fold test
Sonza was engaged by ABS-CBN in view of his "unique skills, talent and
celebrity status not possessed by ordinary employees." 188 His work was for
radio and television programs.189 On the other hand, Dumpit-Murillo was
hired by ABC as a newscaster and co-anchor. 190 Sonzas talent fee amounted
to P317,000.00 per month, which this court found to be a substantial
amount that indicatedhe was an independent contractor rather than a
regular employee.191 Meanwhile, Dumpit-Murillos monthly salary
was P28,000.00, a very low amount compared to what Sonza received.192
Sonza was unable to prove that ABS-CBN could terminate his services apart
from breach of contract. There was no indication that he could be terminated
based on just or authorized causes under the Labor Code. In addition, ABS-
CBN continued to pay his talent fee under their agreement, even though his
programs were no longer broadcasted. 193 Dumpit-Murillo was found to have
beenillegally dismissed by her employer when they did not renew her
contract on her fourth year with ABC.194
In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered
his lines, how he appeared on television, or how he sounded on radio. 195 All
that Sonza needed was his talent. 196 Further, "ABS-CBN could not terminate
or discipline SONZA even if the means and methods of performance of his
work . . . did not meet ABS-CBNs approval." 197 In Dumpit-Murillo, the duties

Page 222 of 260
and responsibilities enumerated in her contract was a clear indication that

ABC had control over her work.198
Application of the four-fold test
The Court of Appeals did not err when it relied on the ruling in Dumpit-
Murillo and affirmed the ruling of the National Labor Relations Commission
finding that Arlene was a regular employee. Arlene was hired by Fuji as a
news producer, but there was no showing that she was hired because of
unique skills that would distinguish her from ordinary employees. Neither
was there any showing that she had a celebrity status. Her monthly salary
amounting to US$1,900.00 appears tobe a substantial sum, especially if
compared to her salary whenshe was still connected with GMA. 199 Indeed,
wages may indicate whether oneis an independent contractor. Wages may
also indicate that an employee is able to bargain with the employer for
better pay. However, wages should not be the conclusive factor in
determining whether one is an employee or an independent contractor.
Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her
professional employment contract.200Her contract also indicated that Fuji had
control over her work because she was required to work for eight (8) hours
from Monday to Friday, although on flexible time. 201 Sonza was not required
to work for eight (8) hours, while Dumpit-Murillo had to be in ABC to do both
on-air and off-air tasks.
On the power to control, Arlene alleged that Fuji gave her instructions on
what to report.202 Even the mode of transportation in carrying out her
functions was controlled by Fuji. Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is change of place or change
of place of work, the train, bus, or public transport shall be used for the trip.
If the Employee uses the private car during the work and there is an
accident the Employer shall not be responsible for the damage, which may
be caused to the Employee.203
Thus, the Court of Appeals did not err when it upheld the findings of the
National Labor Relations Commission that Arlene was not an independent
contractor.
Having established that an employer-employee relationship existed between

Fuji and Arlene, the next questions for resolution are the following: Did the
Court of Appeals correctly affirm the National Labor Relations Commission
that Arlene had become a regular employee? Was the nature of Arlenes
work necessary and desirable for Fujis usual course of business?

Page 223 of 260
Arlene was a regular employee

with a fixed-term contract
The test for determining regular employment is whether there is a

reasonable connection between the employees activities and the usual
business of the employer. Article 280 provides that the nature of work must
be "necessary or desirable in the usual business or trade of the employer" as
the test for determining regular employment. As stated in ABS-CBN
Broadcasting Corporation v. Nazareno:204
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 incarrying on the particular business or trade. 205
However, there may be a situation where an employees work is necessary

but is not always desirable inthe usual course of business of the employer.
In this situation, there is no regular employment.
In San Miguel Corporation v. National Labor Relations

206
Commission, Francisco de Guzman was hired to repair furnaces at San
Miguel Corporations Manila glass plant. He had a separate contract for every
furnace that he repaired. He filed a complaint for illegal dismissal three (3)
years after the end of his last contract. 207 In ruling that de Guzman did not
attain the status of a regular employee, this court explained:
Note that the plant where private respondent was employed for only seven
months is engaged in the manufacture of glass, an integral component of
the packaging and manufacturing business of petitioner. The process of
manufacturing glass requires a furnace, which has a limited operating life.
Petitioner resorted to hiring project or fixed term employees in having said
furnaces repaired since said activity is not regularly performed. Said
furnaces are to be repaired or overhauled only in case of need and after
being used continuously for a varying period of five (5) to ten (10) years. In
1990, one of the furnaces of petitioner required repair and upgrading. This
was an undertaking distinct and separate from petitioner's business of
manufacturing glass. For this purpose, petitioner must hire workers to
undertake the said repair and upgrading. . . .

Page 224 of 260
....
Clearly, private respondent was hired for a specific project that was not
within the regular business of the corporation. For petitioner is not engaged
in the business of repairing furnaces. Although the activity was necessary to
enable petitioner to continue manufacturing glass, the necessity therefor
arose only when a particular furnace reached the end of its life or operating
cycle. Or, as in the second undertaking, when a particular furnace required
an emergency repair. In other words, the undertakings where private
respondent was hired primarily as helper/bricklayer have specified goals and
purposes which are fulfilled once the designated work was completed.
Moreover, such undertakings were also identifiably separate and distinct
from the usual, ordinary or regular business operations of petitioner, which
is glass manufacturing. These undertakings, the duration and scope of which
had been determined and made known to private respondent at the time of
his employment, clearly indicated the nature of his employment as a project
employee.208
Fuji is engaged in the business of broadcasting, 209 including news

programming.210 It is based in Japan211 and has overseas offices to cover
international news.212
Based on the record, Fujis Manila Bureau Office is a small unit 213 and has a
few employees.214 As such, Arlene had to do all activities related to news
gathering. Although Fuji insists that Arlene was a stringer, it alleges that her
designation was "News Talent/Reporter/Producer."215
A news producer "plans and supervises newscast . . . [and] work[s] with

reporters in the field planning and gathering information. . . ." 216 Arlenes
tasks included "[m]onitoring and [g]etting [n]ews [s]tories, [r]eporting
interviewing subjects in front of a video camera," 217 "the timely submission
of news and current events reports pertaining to the Philippines[,] and
traveling [sic] to [Fujis] regional office in Thailand." 218 She also had to
report for work in Fujis office in Manila from Mondays to Fridays, eight (8)
hours per day.219 She had no equipment and had to use the facilities of Fuji
to accomplish her tasks.
The Court of Appeals affirmed the finding of the National Labor Relations
Commission that the successive renewals of Arlenes contract indicated the
necessity and desirability of her work in the usual course of Fujis business.
Because of this, Arlene had become a regular employee with the right to
security of tenure.220 The Court of Appeals ruled that:

Page 225 of 260
Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its
Manila Bureau. She was hired for the primary purpose of news gathering and
reporting to the television networks headquarters. Espiritu was not
contracted on account of any peculiar ability or special talent and skill that
she may possess which the network desires to make use of. Parenthetically,
ifit were true that Espiritu is an independent contractor, as claimed by Fuji,
the factthat everything that she uses to perform her job is owned by the
company including the laptop computer and mini camera discounts the idea
of job contracting.221
Moreover, the Court of Appeals explained that Fujis argument that no

employer-employee relationship existed in view of the fixed-term contract
does not persuade because fixed-term contracts of employment are strictly
construed.222 Further, the pieces of equipment Arlene used were all owned
by Fuji, showing that she was a regular employee and not an independent
contractor.223
The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-

term contracts that were successively renewed for four (4) years. 224 This
court held that "[t]his repeated engagement under contract of hire is
indicative of the necessity and desirability of the petitioners work in private
respondent ABCs business."225
With regard to Fujis argument that Arlenes contract was for a fixed term,
the Court of Appeals cited Philips Semiconductors, Inc. v. Fadriquela 226 and
held that where an employees contract "had been continuously extended or
renewed to the same position, with the same duties and remained in the
employ without any interruption,"227 then such employee is a regular
employee. The continuous renewal is a scheme to prevent regularization. On
this basis, the Court of Appeals ruled in favor of Arlene.
As stated in Price, et al. v. Innodata Corp., et al.:228
The employment status of a person is defined and prescribed by law and not
by what the parties say it should be. Equally important to consider is that a
contract of employment is impressed with public interest such that labor
contracts must yield to the common good. Thus, provisions of applicable
statutes are deemed written into the contract, and the parties are not at
liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each
229
other. (Citations omitted)
Arlenes contract indicating a fixed term did not automatically mean that she
could never be a regular employee. This is precisely what Article 280 seeks

Page 226 of 260
to avoid. The ruling in Brent remains as the exception rather than the
general rule.
Further, an employee can be a regular employee with a fixed-term contract.

The law does not preclude the possibility that a regular employee may opt to
have a fixed-term contract for valid reasons. This was recognized in Brent:
For as long as it was the employee who requested, or bargained, that the
contract have a "definite date of termination," or that the fixed-term
contract be freely entered into by the employer and the employee, then the
validity of the fixed-term contract will be upheld.230
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commissions finding of illegal dismissal
Fuji argues that the Court of Appeals erred when it held that Arlene was
illegally dismissed, in view of the non-renewal contract voluntarily executed
by the parties. Fuji also argues that Arlenes contract merely expired; hence,
she was not illegally dismissed.231
Arlene alleges that she had no choice but to sign the non-renewal contract
because Fuji withheldher salary and benefits.
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fujis assertion that Espiritus contract merely

expired and that she voluntarily agreed not to renew the same. Even a
cursory perusal of the subject Non-Renewal Contract readily shows that the
same was signed by Espiritu under protest. What is apparent is that the
Non-Renewal Contract was crafted merely as a subterfuge to secure Fujis
position that it was Espiritus choice not to renew her contract. 232
As a regular employee, Arlene was entitled to security of tenure and could

be dismissed only for just or authorized causes and after the observance of
due process.
The right to security of tenureis guaranteed under Article XIII, Section 3 of

the 1987 Constitution: ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR

Page 227 of 260
....
It shall guarantee the rights of all workers to self-organization, collective

bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.
Article 279 of the Labor Code also provides for the right to security of tenure
and states the following:
Art. 279. Security of tenure.In cases of regular employment, the employer

shall not terminate the services of an employee except for a just cause of
when authorized by this Title. An employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.
Thus, on the right to security of tenure, no employee shall be dismissed,

unless there are just orauthorized causes and only after compliance with
procedural and substantive due process is conducted.
Even probationary employees are entitled to the right to security of tenure.

This was explained in Philippine Daily Inquirer, Inc. v. Magtibay, Jr.: 233
Within the limited legal six-month probationary period, probationary

employees are still entitled to security of tenure. It is expressly provided in
the afore-quoted Article 281 that a probationary employee may be
terminated only on two grounds: (a) for just cause, or (b) when he fails to
qualify as a regular employee in accordance with reasonable standards made
known by the employer to the employee at the time of his
engagement.234 (Citation omitted)
The expiration of Arlenes contract does not negate the finding of illegal
dismissal by Fuji. The manner by which Fuji informed Arlene that her
contract would no longer be renewed is tantamount to constructive
dismissal. To make matters worse, Arlene was asked to sign a letter of
resignation prepared by Fuji.235 The existence of a fixed-term contract should
not mean that there can be no illegal dismissal. Due process must still be
observed in the pre-termination of fixed-term contracts of employment.

Page 228 of 260
In addition, the Court of Appeals and the National Labor Relations

Commission found that Arlene was dismissed because of her health
condition. In the non-renewal agreement executed by Fuji and Arlene, it is
stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents

her from continuing to effectively perform her functions under the said
Contract such as the timely submission of news and current events reports
pertaining to the Philippines and travelling [sic] to the FIRST PARTYs
regional office in Thailand.236 (Emphasis supplied)
Disease as a ground for termination is recognized under Article 284 of the

Labor Code:
Art. 284. Disease as ground for termination. An employer may terminate the
services of an employee who has been found to be suffering from any
disease and whose continued employment is prohibited by law or is
prejudicial to his health as well as to the health of his co-employees:
Provided, That he is paid separation pay equivalent to at least one (1) month
salary or to one-half (1/2) month salary for every year of service, whichever
is greater, a fraction of at least six (6) months being considered as one (1)
whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor
Code provides:
Sec. 8. Disease as a ground for dismissal. Where the employee suffers from
a disease and his continued employment is prohibited by law or prejudicial
to his healthor to the health of his coemployees, the employer shall not
terminate his employment unless there is a certification by a competent
public health authority that the disease is of such nature or at such a stage
that it cannot be cured within a period of six (6) months even with proper
medical treatment. If the disease or ailment can be cured within the period,
the employer shall not terminate the employee but shall ask the employee to
take a leave. The employer shall reinstate such employee to his former
position immediately upon the restoration of his normal health.
For dismissal under Article 284 to bevalid, two requirements must be

complied with: (1) the employees disease cannot be cured within six (6)
months and his "continued employment is prohibited by law or prejudicial to
his health as well as to the health of his co-employees"; and (2) certification
issued by a competent public health authority that even with proper medical
treatment, the disease cannot be cured within six (6) months. 237 The burden
of proving compliance with these requisites is on the

Page 229 of 260
employer.238 Noncompliance leads to the conclusion that the dismissal was

illegal.239
There is no evidence showing that Arlene was accorded due process. After
informing her employer of her lung cancer, she was not given the chance to
present medical certificates. Fuji immediately concluded that Arlene could no
longer perform her duties because of chemotherapy. It did not ask her how
her condition would affect her work. Neither did it suggest for her to take a
leave, even though she was entitled to sick leaves. Worse, it did not present
any certificate from a competent public health authority. What Fuji did was
to inform her thather contract would no longer be renewed, and when she
did not agree, her salary was withheld. Thus, the Court of Appeals correctly
upheld the finding of the National Labor Relations Commission that for
failure of Fuji to comply with due process, Arlene was illegally dismissed. 240
VI
Whether the Court of Appeals properly modified

the National Labor Relations Commissions decision
when it awarded reinstatement, damages, and attorneys fees
The National Labor Relations Commission awarded separation pay in lieu of

reinstatement, on the ground that the filing of the complaint for illegal
dismissal may have seriously strained relations between the parties.
Backwages were also awarded, to be computed from date of dismissal until
the finality of the National Labor Relations Commissions decision. However,
only backwages were included in the dispositive portion because the National
Labor Relations Commission recognized that Arlene had received separation
pay in the amount of US$7,600.00. The Court of Appeals affirmed the
National Labor Relations Commissions decision but modified it by awarding
moral and exemplary damages and attorneys fees, and all other benefits
Arlene was entitled to under her contract with Fuji. The Court of Appeals also
ordered reinstatement, reasoning that the grounds when separation pay was
awarded in lieu of reinstatement were not proven.241
Article 279 of the Labor Code provides:
Art. 279. Security of tenure. In cases of regular employment, the employer

shall not terminate the services of an employee except for a just cause or
when authorized by this Title. An employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his

Page 230 of 260
compensation was withheld from him up to the time of his actual

reinstatement. (Emphasis supplied)
The Court of Appeals modification of the National Labor Relations

Commissions decision was proper because the law itself provides that
illegally dismissed employees are entitled to reinstatement, backwages
including allowances, and all other benefits.
On reinstatement, the National Labor Relations Commission ordered

payment of separation pay in lieu of reinstatement, reasoning "that the filing
of the instant suit may have seriously abraded the relationship of the parties
so as to render reinstatement impractical."242 The Court of Appeals reversed
this and ordered reinstatement on the ground that separation pay in lieu of
reinstatement is allowed only in several instances such as (1) when the
employer has ceased operations; (2) when the employees position is no
longer available; (3) strained relations; and (4) a substantial period has
lapsed from date of filing to date of finality.243
On this matter, Quijano v. Mercury Drug Corp.244 is instructive:
Well-entrenched is the rule that an illegally dismissed employee is entitled to

reinstatement as a matter of right. . . .
To protect labors security of tenure, we emphasize that the doctrine of

"strained relations" should be strictly applied so as not to deprive an illegally
dismissed employee of his right to reinstatement. Every labor dispute almost
always results in "strained relations" and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly dismissed employee can
never be reinstated.245 (Citations omitted)
The Court of Appeals reasoned that strained relations are a question of fact
that must be supported by evidence.246 No evidence was presented by Fuji to
prove that reinstatement was no longer feasible. Fuji did not allege that it
ceased operations or that Arlenes position was no longer available. Nothing
in the records shows that Arlenes reinstatement would cause an atmosphere
of antagonism in the workplace. Arlene filed her complaint in 2009. Five (5)
years are not yet a substantial period247 to bar reinstatement.
On the award of damages, Fuji argues that Arlene is notentitled to the award
of damages and attorneys fees because the non-renewal agreement
contained a quitclaim, which Arlene signed. Quitclaims in labor cases do not
bar illegally dismissed employees from filing labor complaints and money
claim. As explained by Arlene, she signed the non-renewal agreement out of
necessity. In Land and Housing Development Corporation v. Esquillo, 248this

Page 231 of 260
court explained: We have heretofore explained that the reason why

quitclaims are commonly frowned upon as contrary to public policy, and why
they are held to be ineffective to bar claims for the full measure of the
workers legal rights, is the fact that the employer and the employee
obviously do not stand on the same footing. The employer drove the
employee to the wall. The latter must have to get holdof money. Because,
out of a job, he had to face the harsh necessities of life. He thus found
himself in no position to resist money proffered. His, then, is a case of
adherence, not of choice.249
With regard to the Court of Appeals award of moral and exemplary damages
and attorneys fees, this court has recognized in several cases that moral
damages are awarded "when the dismissal is attended by bad faith or fraud
or constitutes an act oppressive to labor, or is done in a manner contrary to
good morals, good customs or public policy." 250 On the other hand,
exemplary damages may be awarded when the dismissal was effected "in a
wanton, oppressive or malevolent manner."251
The Court of Appeals and National Labor Relations Commission found that
after Arlene had informed Fuji of her cancer, she was informed that there
would be problems in renewing her contract on account of her condition.
This information caused Arlene mental anguish, serious anxiety, and
wounded feelings that can be gleaned from the tenor of her email dated
March 11, 2009. A portion of her email reads:
I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick

and very weak, you suddenly came to deliver to me the NEWS that you will
no longer renew my contract.1awp++i1 I knew this will come but I never
thought that you will be so heartless and insensitive to deliver that news
just a month after I informed you that I am sick. I was asking for patience
and understanding and your response was not to RENEW my contract. 252
Apart from Arlenes illegal dismissal, the manner of her dismissal was
effected in an oppressive approach withher salary and other benefits being
withheld until May 5, 2009, when she had no other choice but to sign the
non-renewal contract. Thus, there was legal basis for the Court of Appeals to
modify the National Labor Relations Commissions decision.
However, Arlene receivedher salary for May 2009.253 Considering that the
date of her illegal dismissal was May 5, 2009, 254 this amount may be
subtracted from the total monetary award. With regard to the award of
attorneys fees, Article 111 of the Labor Code states that "[i]n cases of
unlawful withholding of wages, the culpable party may be assessed
attorneys fees equivalent to ten percent of the amount of wages recovered."

Page 232 of 260
Likewise, this court has recognized that "in actions for recovery of wages or
where an employee was forced to litigate and, thus, incur expenses to
protect his rights and interest, the award of attorneys fees is legallyand
morally justifiable."255 Due to her illegal dismissal, Arlene was forced to
litigate.
In the dispositive portion of its decision, the Court of Appeals awarded legal
interest at the rate of 12% per annum. 256 In view of this courts ruling in
Nacar v. Gallery Frames,257 the legal interest shall be reducd to a rate of 6%
per annum from July 1, 2013 until full satisfaction.
WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision

dated June 25, 2012 is AFFIRMED with the modification that backwages shall
be computed from June 2009. Legal interest shall be computed at the rate of
6% per annum of the total monetary award from date of finality of this
decision until full satisfaction.
SO ORDERED.
19 Goya Inc. vs Goya Employees
G.R. No. 170054 January 21, 2013
GOYA, INC., Petitioner,

vs.
GOYA, INC. EMPLOYEES UNION-FFW, Respondent.
DECISION
PERALTA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Civil
Procedure seeks to reverse and set aside the June 16, 2005 Decision 1 and
October 12, 2005 Resolution2 of the Court of Appeals in CA-G.R. SP No.
87335, which sustained the October 26, 2004 Decision 3 of Voluntary
Arbitrator Bienvenido E. Laguesma, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that the Company is

NOT guilty of unfair labor practice in engaging the services of PESO.

Page 233 of 260
The company is, however, directed to observe and comply with its
commitment as it pertains to the hiring of casual employees when
necessitated by business circumstances.4
The facts are simple and appear to be undisputed.
Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic

corporation engaged in the manufacture, importation, and wholesale of top
quality food products, hired contractual employees from PESO Resources
Development Corporation (PESO) to perform temporary and occasional
services in its factory in Parang, Marikina City. This prompted respondent
Goya, Inc. Employees UnionFFW (Union) to request for a grievance
conference on the ground that the contractual workers do not belong to the
categories of employees stipulated in the existing Collective Bargaining
Agreement (CBA).5 When the matter remained unresolved, the grievance
was referred to the National Conciliation and Mediation Board (NCMB) for
voluntary arbitration.
During the hearing on July 1, 2004, the Company and the Union manifested
before Voluntary Arbitrator (VA) Bienvenido E. Laguesma that amicable
settlement was no longer possible; hence, they agreed to submit for
resolution the solitary issue of "[w]hether or not the Company is guilty of
unfair labor acts in engaging the services of PESO, a third party service
provider, under the existing CBA, laws, and jurisprudence." 6 Both parties
thereafter filed their respective pleadings.
The Union asserted that the hiring of contractual employees from PESO is
not a management prerogative and in gross violation of the CBA tantamount
to unfair labor practice (ULP). It noted that the contractual workers engaged
have been assigned to work in positions previously handled by regular
workers and Union members, in effect violating Section 4, Article I of the
CBA, which provides for three categories of employees in the Company, to
wit:
Section 4. Categories of Employees. The parties agree on the following

categories of employees:
(a) Probationary Employee. One hired to occupy a regular rank-and-file

position in the Company and is serving a probationary period. If the
probationary employee is hired or comes from outside the Company (non-
Goya, Inc. employee), he shall be required to undergo a probationary period
of six (6) months, which period, in the sole judgment of management, may
be shortened if the employee has already acquired the knowledge or skills
required of the job. If the employee is hired from the casual pool and has

Page 234 of 260
worked in the same position at any time during the past two (2) years, the
probationary period shall be three (3) months.
(b) Regular Employee. An employee who has satisfactorily completed his

probationary period and automatically granted regular employment status in
the Company.
(c) Casual Employee, One hired by the Company to perform occasional or

seasonal work directly connected with the regular operations of the
Company, or one hired for specific projects of limited duration not connected
directly with the regular operations of the Company.
It was averred that the categories of employees had been a part of the CBA
since the 1970s and that due to this provision, a pool of casual employees
had been maintained by the Company from which it hired workers who then
became regular workers when urgently necessary to employ them for more
than a year. Likewise, the Company sometimes hired probationary
employees who also later became regular workers after passing the
probationary period. With the hiring of contractual employees, the Union
contended that it would no longer have probationary and casual employees
from which it could obtain additional Union members; thus, rendering inutile
Section 1, Article III (Union Security) of the CBA, which states:
Section 1. Condition of Employment. As a condition of continued

employment in the Company, all regular rank-and-file employees shall
remain members of the Union in good standing and that new employees
covered by the appropriate bargaining unit shall automatically become
regular employees of the Company and shall remain members of the Union
in good standing as a condition of continued employment.
The Union moreover advanced that sustaining the Companys position would
easily weaken and ultimately destroy the former with the latters resort to
retrenchment and/or retirement of employees and not filling up the vacant
regular positions through the hiring of contractual workers from PESO, and
that a possible scenario could also be created by the Company wherein it
could "import" workers from PESO during an actual strike.
In countering the Unions allegations, the Company argued that: (a) the law
expressly allows contracting and subcontracting arrangements through
Department of Labor and Employment (DOLE) Order No. 18-02; (b) the
engagement of contractual employees did not, in any way, prejudice the
Union, since not a single employee was terminated and neither did it result
in a reduction of working hours nor a reduction or splitting of the bargaining
unit; and (c) Section 4, Article I of the CBA merely provides for the definition

Page 235 of 260
of the categories of employees and does not put a limitation on the

Companys right to engage the services of job contractors or its
management prerogative to address temporary/occasional needs in its
operation.
On October 26, 2004, VA Laguesma dismissed the Unions charge of ULP for
being purely speculative and for lacking in factual basis, but the Company
was directed to observe and comply with its commitment under the CBA.
The VA opined:
We examined the CBA provision Section 4, Article I of the CBAallegedly

violated by the Company and indeed the agreement prescribes three (3)
categories of employees in the Company and provides for the definition,
functions and duties of each. Material to the case at hand is the definition as
regards the functions of a casual employee described as follows:
Casual Employee One hired by the COMPANY to perform occasional or

seasonal work directly connected with the regular operations of the
COMPANY, or one hired for specific projects of limited duration not
connected directly with the regular operations of the COMPANY.
While the foregoing agreement between the parties did eliminate

managements prerogative of outsourcing parts of its operations, it serves as
a limitation on such prerogative particularly if it involves functions or duties
specified under the aforequoted agreement. It is clear that the parties
agreed that in the event that the Company needs to engage the services of
additional workers who will perform "occasional or seasonal work directly
connected with the regular operations of the COMPANY," or "specific projects
of limited duration not connected directly with the regular operations of the
COMPANY", the Company can hire casual employees which is akin to
contractual employees. If we note the Companys own declaration that PESO
was engaged to perform "temporary or occasional services" (See the
Companys Position Paper, at p. 1), then it should have directly hired the
services of casual employees rather than do it through PESO.
It is evident, therefore, that the engagement of PESO is not in keeping with

the intent and spirit of the CBA provision in question. It must, however, be
stressed that the right of management to outsource parts of its operations is
not totally eliminated but is merely limited by the CBA. Given the foregoing,
the Companys engagement of PESO for the given purpose is indubitably a
violation of the CBA.7
While the Union moved for partial reconsideration of the VA Decision, 8 the
Company immediately filed a petition for review 9 before the Court of Appeals

Page 236 of 260
(CA) under Rule 43 of the Revised Rules of Civil Procedure to set aside the
directive to observe and comply with the CBA commitment pertaining to the
hiring of casual employees when necessitated by business circumstances.
Professing that such order was not covered by the sole issue submitted for
voluntary arbitration, the Company assigned the following errors:
THE HONORABLE VOLUNTARY ARBITRATOR EXCEEDED HIS POWER WHICH

WAS EXPRESSLY GRANTED AND LIMITED BY BOTH PARTIES IN RULING
THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE INTENT
AND SPIRIT OF THE CBA.10
THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED A PATENT AND

PALPABLE ERROR IN DECLARING THAT THE ENGAGEMENT OF PESO IS NOT
IN KEEPING WITH THE INTENT AND SPIRIT OF THE CBA.11
On June 16, 2005, the CA dismissed the petition. In dispensing with the
merits of the controversy, it held:
This Court does not find it arbitrary on the part of the Hon. Voluntary
Arbitrator in ruling that "the engagement of PESO is not in keeping with the
intent and spirit of the CBA." The said ruling is interrelated and intertwined
with the sole issue to be resolved that is, "Whether or not the Company is
guilty of unfair labor practice in engaging the services of PESO, a third party
service provider, under existing CBA, laws, and jurisprudence." Both issues
concern the engagement of PESO by the Company which is perceived as a
violation of the CBA and which constitutes as unfair labor practice on the
part of the Company. This is easily discernible in the decision of the Hon.
Voluntary Arbitrator when it held:
x x x x While the engagement of PESO is in violation of Section 4, Article I of

the CBA, it does not constitute unfair labor practice as it (sic) not
characterized under the law as a gross violation of the CBA. Violations of a
CBA, except those which are gross in character, shall no longer be treated as
unfair labor practice. Gross violations of a CBA means flagrant and/or
malicious refusal to comply with the economic provisions of such agreement.
xxx
Anent the second assigned error, the Company contends that the Hon.
Voluntary Arbitrator erred in declaring that the engagement of PESO is not in
keeping with the intent and spirit of the CBA. The Company justified its
engagement of contractual employees through PESO as a management
prerogative, which is not prohibited by law. Also, it further alleged that no
provision under the CBA limits or prohibits its right to contract out certain
services in the exercise of management prerogatives.

Page 237 of 260
Germane to the resolution of the above issue is the provision in their CBA
with respect to the categories of the employees:
xxxx
A careful reading of the above-enumerated categories of employees reveals

that the PESO contractual employees do not fall within the enumerated
categories of employees stated in the CBA of the parties. Following the said
categories, the Company should have observed and complied with the
provision of their CBA. Since the Company had admitted that it engaged the
services of PESO to perform temporary or occasional services which is akin
to those performed by casual employees, the Company should have tapped
the services of casual employees instead of engaging PESO.
In justifying its act, the Company posits that its engagement of PESO was a
management prerogative. It bears stressing that a management prerogative
refers to the right of the employer to regulate all aspects of employment,
such as the freedom to prescribe work assignments, working methods,
processes to be followed, regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and dismissal and recall of
work, presupposing the existence of employer-employee relationship. On the
basis of the foregoing definition, the Companys engagement of PESO was
indeed a management prerogative. This is in consonance with the
pronouncement of the Supreme Court in the case of Manila Electric Company
vs. Quisumbing where it ruled that contracting out of services is an exercise
of business judgment or management prerogative.
This management prerogative of contracting out services, however, is not

without limitation. In contracting out services, the management must be
motivated by good faith and the contracting out should not be resorted to
circumvent the law or must not have been the result of malicious arbitrary
actions. In the case at bench, the CBA of the parties has already provided
for the categories of the employees in the Companysestablishment. These
categories of employees particularly with respect to casual employees serve
as limitation to the Companys prerogative to outsource parts of its
operations especially when hiring contractual employees. As stated earlier,
the work to be performed by PESO was similar to that of the casual
employees. With the provision on casual employees, the hiring of PESO
contractual employees, therefore, is not in keeping with the spirit and intent
of their CBA. (Citations omitted)12
The Company moved to reconsider the CA Decision, 13 but it was

denied;14 hence, this petition.

Page 238 of 260
Incidentally, on July 16, 2009, the Company filed a Manifestation 15 informing

this Court that its stockholders and directors unanimously voted to shorten
the Companys corporate existence only until June 30, 2006, and that the
three-year period allowed by law for liquidation of the Companys affairs
already expired on June 30, 2009. Referring to Gelano v. Court of
Appeals,16 Public Interest Center, Inc. v. Elma, 17 and Atienza v. Villarosa,18 it
urged Us, however, to still resolve the case for future guidance of the bench
and the bar as the issue raised herein allegedly calls for a clarification of a
legal principle, specifically, whether the VA is empowered to rule on a matter
not covered by the issue submitted for arbitration.
Even if this Court would brush aside technicality by ignoring the supervening
event that renders this case moot and academic 19 due to the permanent
cessation of the Companys business operation on June 30, 2009, the
arguments raised in this petition still fail to convince Us.
We confirm that the VA ruled on a matter that is covered by the sole issue
submitted for voluntary arbitration. Resultantly, the CA did not commit
serious error when it sustained the ruling that the hiring of contractual
employees from PESO was not in keeping with the intent and spirit of the
CBA. Indeed, the opinion of the VA is germane to, or, in the words of the CA,
"interrelated and intertwined with," the sole issue submitted for resolution
by the parties. This being said, the Companys invocation of Sections 4 and
5, Rule IV20 and Section 5, Rule VI21of the Revised Procedural Guidelines in
the Conduct of Voluntary Arbitration Proceedings dated October 15, 2004
issued by the NCMB is plainly out of order.
Likewise, the Company cannot find solace in its cited case of Ludo & Luym
Corporation v. Saornido.22 In Ludo, the company was engaged in the
manufacture of coconut oil, corn starch, glucose and related products. In the
course of its business operations, it engaged the arrastre services of CLAS
for the loading and unloading of its finished products at the wharf. The
arrastre workers deployed by CLAS to perform the services needed were
subsequently hired, on different dates, as Ludos regular rank-and-file
employees. Thereafter, said employees joined LEU, which acted as the
exclusive bargaining agent of the rank-and-file employees. When LEU
entered into a CBA with Ludo, providing for certain benefits to the
employees (the amount of which vary according to the length of service
rendered), it requested to include in its members period of service the time
during which they rendered arrastre services so that they could get higher
benefits. The matter was submitted for voluntary arbitration when Ludo
failed to act. Per submission agreement executed by both parties, the sole
issue for resolution was the date of regularization of the workers. The VA
Decision ruled that: (1) the subject employees were engaged in activities

Page 239 of 260
necessary and desirable to the business of Ludo, and (2) CLAS is a labor-
only contractor of Ludo. It then disposed as follows: (a) the complainants
were considered regular employees six months from the first day of service
at CLAS; (b) the complainants, being entitled to the CBA benefits during the
regular employment, were awarded sick leave, vacation leave, and annual
wage and salary increases during such period; (c) respondents shall pay
attorneys fees of 10% of the total award; and (d) an interest of 12% per
annum or 1% per month shall be imposed on the award from the date of
promulgation until fully paid. The VA added that all separation and/or
retirement benefits shall be construed from the date of regularization subject
only to the appropriate government laws and other social legislation. Ludo
filed a motion for reconsideration, but the VA denied it. On appeal, the CA
affirmed in toto the assailed decision; hence, a petition was brought before
this Court raising the issue, among others, of whether a voluntary arbitrator
can award benefits not claimed in the submission agreement. In denying the
petition, We ruled:
Generally, the arbitrator is expected to decide only those questions

expressly delineated by the submission agreement. Nevertheless, the
arbitrator can assume that he has the necessary power to make a final
settlement since arbitration is the final resort for the adjudication of
disputes. The succinct reasoning enunciated by the CA in support of its
holding, that the Voluntary Arbitrator in a labor controversy has jurisdiction
to render the questioned arbitral awards, deserves our concurrence, thus:
In general, the arbitrator is expected to decide those questions expressly

stated and limited in the submission agreement. However, since arbitration
is the final resort for the adjudication of disputes, the arbitrator can assume
that he has the power to make a final settlement. Thus, assuming that the
submission empowers the arbitrator to decide whether an employee was
discharged for just cause, the arbitrator in this instance can reasonably
assume that his powers extended beyond giving a yes-or-no answer and
included the power to reinstate him with or without back pay.
In one case, the Supreme Court stressed that "xxx the Voluntary Arbitrator
had plenary jurisdiction and authority to interpret the agreement to arbitrate
and to determine the scope of his own authority subject only, in a proper
case, to the certiorari jurisdiction of this Court. The Arbitrator, as already
indicated, viewed his authority as embracing not merely the determination of
the abstract question of whether or not a performance bonus was to be
granted but also, in the affirmative case, the amount thereof.
By the same token, the issue of regularization should be viewed as two-

tiered issue. While the submission agreement mentioned only the

Page 240 of 260
determination of the date or regularization, law and jurisprudence give the

voluntary arbitrator enough leeway of authority as well as adequate
prerogative to accomplish the reason for which the law on voluntary
arbitration was created speedy labor justice. It bears stressing that the
underlying reason why this case arose is to settle, once and for all, the
ultimate question of whether respondent employees are entitled to higher
benefits. To require them to file another action for payment of such benefits
would certainly undermine labor proceedings and contravene the
constitutional mandate providing full protection to labor. 23
Indubitably, Ludo fortifies, not diminishes, the soundness of the questioned

VA Decision. Said case reaffirms the plenary jurisdiction and authority of the
voluntary arbitrator to interpret the CBA and to determine the scope of
his/her own authority. Subject to judicial review, the leeway of authority as
well as adequate prerogative is aimed at accomplishing the rationale of the
law on voluntary arbitration speedy labor justice. In this case, a complete
and final adjudication of the dispute between the parties necessarily called
for the resolution of the related and incidental issue of whether the Company
still violated the CBA but without being guilty of ULP as, needless to state,
ULP is committed only if there is gross violation of the agreement.
Lastly, the Company kept on harping that both the VA and the CA conceded
that its engagement of contractual workers from PESO was a valid exercise
of management prerogative. It is confused. To emphasize, declaring that a
particular act falls within the concept of management prerogative is
significantly different from acknowledging that such act is a valid exercise
thereof. What the VA and the CA correctly ruled was that the Companys act
of contracting out/outsourcing is within the purview of management
prerogative. Both did not say, however, that such act is a valid exercise
thereof. Obviously, this is due to the recognition that the CBA provisions
agreed upon by the Company and the Union delimit the free exercise of
management prerogative pertaining to the hiring of contractual employees.
Indeed, the VA opined that "the right of the management to outsource parts
of its operations is not totally eliminated but is merely limited by the CBA,"
while the CA held that "this management prerogative of contracting out
services, however, is not without limitation. x x x These categories of
employees particularly with respect to casual employees serve as limitation
to the Companys prerogative to outsource parts of its operations especially
when hiring contractual employees."
A collective bargaining agreement is the law between the parties:
It is familiar and fundamental doctrine in labor law that the CBA is the law
between the parties and they are obliged to comply with its provisions. We

Page 241 of 260
said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa

Honda:
A collective bargaining agreement or CBA refers to the negotiated contract

between a legitimate labor organization and the employer concerning wages,
hours of work and all other terms and conditions of employment in a
bargaining unit.1wphi1 As in all contracts, the parties in a CBA may
establish such stipulations, clauses, terms and conditions as they may deem
convenient provided these are not contrary to law, morals, good customs,
public order or public policy. Thus, where the CBA is clear and unambiguous,
it becomes the law between the parties and compliance therewith is
mandated by the express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave no

doubt upon the intention of the contracting parties, the literal meaning of
their stipulations shall control. x x x.24
In this case, Section 4, Article I (on categories of employees) of the CBA

between the Company and the Union must be read in conjunction with its
Section 1, Article III (on union security). Both are interconnected and must
be given full force and effect. Also, these provisions are clear and
unambiguous. The terms are explicit and the language of the CBA is not
susceptible to any other interpretation. Hence, the literal meaning should
prevail. As repeatedly held, the exercise of management prerogative is not
unlimited; it is subject to the limitations found in law, collective bargaining
agreement or the general principles of fair play and justice 25 Evidently, this
case has one of the restrictions- the presence of specific CBA provisions-
unlike in San Miguel Corporation Employees Union-PTGWO v.
Bersamira,26 De Ocampo v. NLRC,27 Asian Alcohol Corporation v. NLRC, 28 and
Serrano v. NLRC29cited by the Company. To reiterate, the CBA is the norm of
conduct between the parties and compliance therewith is mandated by the
express policy of the law.30
WHEREFORE, the petition is DENIED. The assailed June 16, 2005 Decision,
as well as the October 12, 2005 Resolution of the Court of Appeals, which
sustained the October 26, 2004 Decision of the Voluntary Arbitrator, are
hereby AFFIRMED.
SO ORDERED.

Page 242 of 260
20 Alviado vs Procter and Gamble

JOEB M. ALIVIADO, ARTHUR G.R. No. 160506
CORPUZ, ERIC ALIVIADO,
MONCHITO AMPELOQUIO,
ABRAHAM BASMAYOR,
JONATHAN MATEO, LORENZO
PLATON, JOSE FERNANDO
GUTIERREZ, ESTANISLAO
BUENAVENTURA, LOPE SALONGA,
FRANZ DAVID, NESTOR IGNACIO,
JULIO REY, RUBEN MARQUEZ, JR.,
MAXIMINO PASCUAL, ERNESTO
CALANAO, ROLANDO
ROMASANTA, RHUEL AGOO,
BONIFACIO ORTEGA, ARSENIO
SORIANO, JR., ARNEL ENDAYA,
ROBERTO ENRIQUEZ, NESTOR
BAQUILA, EDGARDO QUIAMBAO,
SANTOS BACALSO, SAMSON BASCO,
ALADINO GREGORO, JR., EDWIN
GARCIA, ARMANDO VILLAR, EMIL
TAWAT, MARIO P. LIONGSON,
CRESENTE J. GARCIA, FERNANDO
MACABENTE, MELECIO CASAPAO,
REYNALDO JACABAN, FERDINAND
SALVO, ALSTANDO MONTOS,
RAINER N. SALVADOR, RAMIL
REYES, PEDRO G. ROY, LEONARDO
P. TALLEDO, ENRIQUE F. TALLEDO,
WILLIE ORTIZ, ERNESTO SOYOSA,
ROMEO VASQUEZ, JOEL BILLONES,
ALLAN BALTAZAR, NOLI GABUYO,
EMMANUEL E. LABAN, RAMIR E.
PIAT, RAUL DULAY, TADEO DURAN,
JOSEPH BANICO, ALBERT LEYNES,
ANTONIO DACUNA, RENATO DELA
CRUZ, ROMEO VIERNES, JR., ELAIS
BASEO, WILFREDO TORRES,
MELCHOR CARDANO, MARIANO
NARANIAN, JOHN SUMERGIDO,
ROBERTO ROSALES, GERRY C.
GATPO, GERMAN N. GUEVARRA, Present:
GILBERT Y. MIRANDA, RODOLFO C.
TOLEDO, ARNOLD D. LASTONA, CARPIO, J., Chairperson,

Page 243 of 260
PHILIP M. LOZA, MARIO N. BRION,

CULDAYON, ORLANDO P. JIMENEZ, DEL CASTILLO,
FRED P. JIMENEZ, RESTITUTO C. ABAD, and
PAMINTUAN, JR., ROLANDO J. DE PEREZ, JJ.
ANDRES, ARTUZ BUSTENERA,
ROBERTO B. CRUZ, ROSEDY O.
YORDAN, DENNIS DACASIN,
ALEJANDRINO ABATON, and
ORLANDO S. BALANGUE,
Petitioners,
- versus -
PROCTER & GAMBLE PHILS., INC., Promulgated:

and PROMM-GEM INC., March 9, 2010
Respondents.
x---------------------------------------------------
----------------x
DECISION
DEL CASTILLO, J.:
Labor laws expressly prohibit labor-only contracting. To prevent its circumvention,

the Labor Code establishes an employer-employee relationship between the
employer and the employees of the labor-only contractor.
The instant petition for review assails the March 21, 2003 Decision[1] of the Court
of Appeals (CA) in CA-G.R. SP No. 52082 and its October 20, 2003
Resolution[2] denying the motions for reconsideration separately filed by
petitioners and respondent Procter & Gamble Phils. Inc. (P&G). The appellate
court affirmed the July 27, 1998 Decision of the National Labor Relations
Commission (NLRC), which in turn affirmed the November 29, 1996 Decision[3] of
the Labor Arbiter. All these decisions found Promm-Gem, Inc. (Promm-Gem) and
Sales and Promotions Services (SAPS) to be legitimate independent contractors
and the employers of the petitioners.
Factual Antecedents

Page 244 of 260
Petitioners worked as merchandisers of P&G from various dates, allegedly

starting as early as 1982 or as late as June 1991, to either May 5, 1992 or March
11, 1993, more specifically as follows:
Name Date Employed Date Dismissed

1. Joeb M. Aliviado November, 1985 May 5, 1992
2. Arthur Corpuz 1988 March 11, 1993
3. Eric Aliviado 1985 March 11, 1993
4. Monchito Ampeloquio September, 1988 March 11, 1993
5. Abraham Basmayor[, Jr.] 1987 March 11, 1993
6. Jonathan Mateo May, 1988 March 11, 1993
7. Lorenzo Platon 1985 March 11, 1993
8. Jose Fernando Gutierrez 1988 May 5, 1992
9. Estanislao Buenaventura June, 1988 March 11, 1993
10. Lope Salonga 1982 March 11, 1993
11. Franz David 1989 March 11, 1993
12. Nestor Ignacio 1982 March 11, 1993
13. Julio Rey 1989 May 5, 1992
14. Ruben [Vasquez], Jr. 1985 May 5, 1992
15. Maximino Pascual 1990 May 5, 1992
16. Ernesto Calanao[, Jr.] 1987 May 5, 1992
17. Rolando Romasanta 1983 March 11, 1993
18. [Roehl] Agoo 1988 March 11, 1993
19. Bonifacio Ortega 1988 March 11, 1993
20. Arsenio Soriano, Jr. 1985 March 11, 1993
21. Arnel Endaya 1983 March 11, 1993
22. Roberto Enriquez December, 1988 March 11, 1993
23. Nestor [Es]quila 1983 May 5, 1992
24. Ed[g]ardo Quiambao 1989 March 11, 1993
25. Santos Bacalso 1990 March 11, 1993
26. Samson Basco 1984 March 11, 1993
27. Aladino Gregor[e], Jr. 1980 May 5, 1992
28. Edwin Garcia 1987 May 5, 1992
29. Armando Villar 1990 May 5, 1992
30. Emil Tawat 1988 March 11, 1993
31. Mario P. Liongson 1991 May 5, 1992
32. Cresente J. Garcia 1984 March 11, 1993
33. Fernando Macabent[a] 1990 May 5, 1992
34. Melecio Casapao 1987 March 11, 1993
35. Reynaldo Jacaban 1990 May 5, 1992
36. Ferdinand Salvo 1985 May 5, 1992
37. Alstando Montos 1984 March 11, 1993
38. Rainer N. Salvador 1984 May 5, 1992

Page 245 of 260
39. Ramil Reyes 1984 March 11, 1993

40. Pedro G. Roy 1987
41. Leonardo [F]. Talledo 1985 March 11, 1993
42. Enrique [F]. Talledo 1988 March 11, 1993
43. Willie Ortiz 1987 May 5, 1992
44. Ernesto Soyosa 1988 May 5, 1992
45. Romeo Vasquez 1985 March 11, 1993
46. Joel Billones 1987 March 11, 1993
47. Allan Baltazar 1989 March 11, 1993
48. Noli Gabuyo 1991 March 11, 1993
49. Emmanuel E. Laban 1987 May 5, 1992
50. Ramir[o] E. [Pita] 1990 May 5, 1992
51. Raul Dulay 1988 May 5, 1992
52. Tadeo Duran[o] 1988 May 5, 1992
53. Joseph Banico 1988 March 11, 1993
54. Albert Leynes 1990 May 5, 1992
55. Antonio Dacu[m]a 1990 May 5, 1992
56. Renato dela Cruz 1982
57. Romeo Viernes, Jr. 1986
58. El[ia]s Bas[c]o 1989
59. Wilfredo Torres 1986 May 5, 1992
60. Melchor Carda[]o 1991 May 5, 1992
61. [Marino] [Maranion] 1989 May 5, 1992
62. John Sumergido 1987 May 5, 1992
63. Roberto Rosales May, 1987 May 5, 1992
64. Gerry [G]. Gatpo November, 1990 March 11, 1993
65. German N. Guevara May, 1990 March 11, 1993
66. Gilbert Y. Miranda June, 1991 March 11, 1993
67. Rodolfo C. Toledo[, Jr.] May 14, 1991 March 11, 1993
68. Arnold D. [Laspoa] June 1991 March 11, 1993
69. Philip M. Loza March 5, 1992 March 11, 1993
70. Mario N. C[o]ldayon May 14, 1991 March 11, 1993
71. Orlando P. Jimenez November 6, 1992 March 11, 1993
72. Fred P. Jimenez September, 1991 March 11, 1993
73. Restituto C. Pamintuan, Jr. March 5, 1992 March 11, 1993
74. Rolando J. de Andres June, 1991 March 11, 1993
75. Artuz Bustenera[, Jr.] December, 1989 March 11, 1993
76. Roberto B. Cruz May 4, 1990 March 11, 1993
77. Rosedy O. Yordan June, 1991 May 5, 1992
78. Dennis Dacasin May. 1990 May 5, 1992
79. Alejandrino Abaton 1988 May 5, 1992
80. Orlando S. Balangue March, 1989 March 11, 1993[4]

Page 246 of 260
They all individually signed employment contracts with either Promm-Gem or

SAPS for periods of more or less five months at a time. [5] They were assigned at
different outlets, supermarkets and stores where they handled all the products of
P&G. They received their wages from Promm-Gem or SAPS.[6]
SAPS and Promm-Gem imposed disciplinary measures on erring
merchandisers for reasons such as habitual absenteeism, dishonesty or changing
day-off without prior notice.[7]
P&G is principally engaged in the manufacture and production of different

consumer and health products, which it sells on a wholesale basis to various
supermarkets and distributors.[8] To enhance consumer awareness and
acceptance of the products, P&G entered into contracts with Promm-Gem and
SAPS for the promotion and merchandising of its products.[9]
In December 1991, petitioners filed a complaint [10] against P&G for

regularization, service incentive leave pay and other benefits with damages. The
complaint was later amended[11] to include the matter of their subsequent
dismissal.
Ruling of the Labor Arbiter
On November 29, 1996, the Labor Arbiter dismissed the complaint for lack
of merit and ruled that there was no employer-employee relationship between
petitioners and P&G. He found that the selection and engagement of the
petitioners, the payment of their wages, the power of dismissal and control with
respect to the means and methods by which their work was accomplished, were
all done and exercised by Promm-Gem/SAPS. He further found that Promm-Gem
and SAPS were legitimate independent job contractors. The dispositive portion of
his Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered

Dismissing the above-entitled cases against respondent Procter &
Gamble (Phils.), Inc. for lack of merit.
SO ORDERED.[12]
Ruling of the NLRC

Page 247 of 260
Appealing to the NLRC, petitioners disputed the Labor Arbiters

findings. On July 27, 1998, the NLRC rendered a Decision[13] disposing as follows:
WHEREFORE, premises considered, the appeal of complainants is

hereby DISMISSED and the decision appealed from AFFIRMED.
SO ORDERED.[14]
Petitioners filed a motion for reconsideration but the motion was denied in
the November 19, 1998 Resolution.[15]
Ruling of the Court of Appeals
Petitioners then filed a petition for certiorari with the CA, alleging grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the
Labor Arbiter and the NLRC. However, said petition was also denied by the CA
which disposed as follows:
WHEREFORE, the decision of the National Labor Relations

Commission dated July 27, 1998 is AFFIRMED with the
MODIFICATION that respondent Procter & Gamble Phils., Inc. is
ordered to pay service incentive leave pay to petitioners.
SO ORDERED.[16]
Petitioners filed a motion for reconsideration but the motion was also
denied. Hence, this petition.
Issues
Petitioners now come before us raising the following issues:

I.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS
COMMITTED [A] REVERSIBLE ERROR WHEN IT DID NOT FIND THE
PUBLIC RESPONDENTS TO HAVE ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF
JURISDICTION IN RENDERING THE QUESTIONED JUDGMENT WHEN,
OBVIOUSLY, THE PETITIONERS WERE ABLE TO PROVE AND
ESTABLISH THAT RESPONDENT PROCTER & GAMBLE PHILS., INC. IS
THEIR EMPLOYER AND THAT THEY WERE ILLEGALLY DISMISSED BY
THE FORMER.

Page 248 of 260
II.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS
COMMITTED [A] REVERSIBLE ERROR WHEN IT DID NOT DECLARE
THAT THE PUBLIC RESPONDENTS HAD ACTED WITH GRAVE ABUSE
OF DISCRETION WHEN THE LATTER DID NOT FIND THE PRIVATE
RESPONDENTS LIABLE TO THE PETITIONERS FOR PAYMENT OF
ACTUAL, MORAL AND EXEMPLARY DAMAGES AS WELL AS
LITIGATION COSTS AND ATTORNEYS FEES.[17]
Simply stated, the issues are: (1) whether P&G is the employer of
petitioners; (2) whether petitioners were illegally dismissed; and (3) whether
petitioners are entitled for payment of actual, moral and exemplary damages as
well as litigation costs and attorneys fees.
Petitioners Arguments
Petitioners insist that they are employees of P&G. They claim that they
were recruited by the salesmen of P&G and were engaged to undertake
merchandising chores for P&G long before the existence of Promm-Gem and/or
SAPS. They further claim that when the latter had its so-called re-alignment
program, petitioners were instructed to fill up application forms and report to the
agencies which P&G created.[18]
Petitioners further claim that P&G instigated their dismissal from work as
can be gleaned from its letter[19] to SAPS dated February 24, 1993, informing the
latter that their Merchandising Services Contract will no longer be renewed.
Petitioners further assert that Promm-Gem and SAPS are labor-only
contractors providing services of manpower to their client. They claim that the
contractors have neither substantial capital nor tools and equipment to undertake
independent labor contracting. Petitioners insist that since they had been engaged
to perform activities which are necessary or desirable in the usual business or
trade of P&G, then they are its regular employees.[20]
Respondents Arguments

Page 249 of 260
On the other hand, P&G points out that the instant petition raises only
questions of fact and should thus be thrown out as the Court is not a trier of
facts. It argues that findings of facts of the NLRC, particularly where the NLRC
and the Labor Arbiter are in agreement, are deemed binding and conclusive on
the Supreme Court.
P&G further argues that there is no employment relationship between it and

petitioners. It was Promm-Gem or SAPS that (1) selected petitioners and
engaged their services; (2) paid their salaries; (3) wielded the power of dismissal;
and (4) had the power of control over their conduct of work.
P&G also contends that the Labor Code neither defines nor limits which
services or activities may be validly outsourced.Thus, an employer can farm out
any of its activities to an independent contractor, regardless of whether such
activity is peripheral or core in nature. It insists that the determination of whether
to engage the services of a job contractor or to engage in direct hiring is within
the ambit of management prerogative.
At this juncture, it is worth mentioning that on January 29, 2007, we

deemed as waived the filing of the Comment of Promm-Gem on the petition.
[21]
Also, although SAPS was impleaded as a party in the proceedings before the
Labor Arbiter and the NLRC, it was no longer impleaded as a party in the
proceedings before the CA.[22] Hence, our pronouncements with regard to SAPS
are only for the purpose of determining the obligations of P&G, if any.
Our Ruling
The petition has merit.
As a rule, the Court refrains from reviewing factual assessments of lower

courts and agencies exercising adjudicative functions, such as the
NLRC. Occasionally, however, the Court is constrained to wade into factual
matters when there is insufficient or insubstantial evidence on record to support
those factual findings; or when too much is concluded, inferred or deduced from
the bare or incomplete facts appearing on record.[23] In the present case, we find
the need to review the records to ascertain the facts.
Page 250 of 260
Labor-only contracting and job contracting
In order to resolve the issue of whether P&G is the employer of petitioners, it is

necessary to first determine whether Promm-Gem and SAPS are labor-only
contractors or legitimate job contractors.
The pertinent Labor Code provision on the matter states:
ART. 106. Contractor or subcontractor. Whenever an employer

enters into a contract with another person for the performance of the
formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions
of this Code.
In the event that the contractor or subcontractor fails to pay

the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed
under the contract, in the same manner and extent that he is liable
to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations,

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

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

Page 251 of 260
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code,
as amended by Department Order No. 18-02,[24] distinguishes between legitimate
and labor-only contracting:
xxxx
Section 3. Trilateral Relationship in Contracting Arrangements.

In legitimate contracting, there exists a trilateral relationship under
which there is a contract for a specific job, work or service between
the principal and the contractor or subcontractor, and a contract of
employment between the contractor or subcontractor and its
workers. Hence, there are three parties involved in these
arrangements, the principal which decides to farm out a job or
service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake the
performance of the job, work or service, and the contractual workers
engaged by the contractor or subcontractor to accomplish the job[,]
work or service.
xxxx
Section 5. Prohibition against labor-only contracting. Labor-

only contracting is hereby declared prohibited. For this purpose,
labor-only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any of
the following elements are present:
i) The contractor or subcontractor does not have substantial

capital or investment which relates to the job, work or service to be
performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are
directly related to the main business of the principal; or
ii) [T]he contractor does not exercise the right to control over
the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the

application of Article 248 (c) of the Labor Code, as amended.
Substantial capital or investment refers to capital stocks and

subscribed capitalization in the case of corporations, tools, equipment,
implements, machineries and work premises, actually and directly used

Page 252 of 260
by the contractor or subcontractor in the performance or completion of

the job, work or service contracted out.
The right to control shall refer to the right reserved to the person
for whom the services of the contractual workers are performed, to
determine not only the end to be achieved, but also the manner and
means to be used in reaching that end.
x x x x (Underscoring supplied.)
Clearly, the law and its implementing rules allow contracting arrangements
for the performance of specific jobs, works or services. Indeed, it is management
prerogative to farm out any of its activities, regardless of whether such activity is
peripheral or core in nature. However, in order for such outsourcing to be valid, it
must be made to an independent contractor because the current labor rules
expressly prohibit labor-only contracting.
To emphasize, there is labor-only contracting when the contractor or sub-

contractor merely recruits, supplies or places workers to perform a job, work or
service for a principal[25] and any of the following elements are present:
i) The contractor or subcontractor does not have substantial

capital or investment which relates to the job, work or service to be
performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are
directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over
the performance of the work of the contractual employee.
(Underscoring supplied)
In the instant case, the financial statements[26] of Promm-Gem show that it

has authorized capital stock of P1 million and a paid-in capital, or capital available
for operations, of P500,000.00 as of 1990.[27] It also has long term assets
worth P432,895.28 and current assets of P719,042.32. Promm-Gem has also
proven that it maintained its own warehouse and office space with a floor area of
870 square meters.[28] It also had under its name three registered vehicles which
were used for its promotional/merchandising business.[29] Promm-Gem also has
other clients[30] aside from P&G.[31]Under the circumstances, we find that Promm-
Gem has substantial investment which relates to the work to be performed. These

Page 253 of 260
factors negate the existence of the element specified in Section 5(i) of DOLE
Department Order No. 18-02.
The records also show that Promm-Gem supplied its complainant-workers

with the relevant materials, such as markers, tapes, liners and cutters, necessary
for them to perform their work. Promm-Gem also issued uniforms to them. It is
also relevant to mention that Promm-Gem already considered the complainants
working under it as its regular, not merely contractual or project, employees.
[32]
This circumstance negates the existence of element (ii) as stated in Section 5
of DOLE Department Order No. 18-02, which speaks of contractual employees.
This, furthermore, negates on the part of Promm-Gem bad faith and intent to
circumvent labor laws which factors have often been tipping points that lead the
Court to strike down the employment practice or agreement concerned as
contrary to public policy, morals, good customs or public order.[33]
Under the circumstances, Promm-Gem cannot be considered as a labor-

only contractor. We find that it is a legitimate independent contractor.
On the other hand, the Articles of Incorporation of SAPS shows that it has a
paid-in capital of only P31,250.00. There is no other evidence presented to show
how much its working capital and assets are. Furthermore, there is no showing of
substantial investment in tools, equipment or other assets.
In Vinoya v. National Labor Relations Commission,[34] the Court held that

[w]ith the current economic atmosphere in the country, the paid-in capitalization
of PMCI amounting to P75,000.00 cannot be considered as substantial capital
and, as such, PMCI cannot qualify as an independent contractor. [35] Applying the
same rationale to the present case, it is clear that SAPS having a paid-in capital of
only P31,250 - has no substantial capital. SAPS lack of substantial capital is
underlined by the records[36] which show that its payroll for its merchandisers
alone for one month would already total P44,561.00. It had 6-month contracts
with P&G.[37]Yet SAPS failed to show that it could complete the 6-month contracts
using its own capital and investment. Its capital is not even sufficient for one
months payroll. SAPS failed to show that its paid-in capital of P31,250.00 is
sufficient for the period required for it to generate its needed revenue to sustain
its operations independently. Substantial capital refers to capitalization used in
Page 254 of 260
the performance or completion of the job, work or service contracted out. In the
present case, SAPS has failed to show substantial capital.
Furthermore, the petitioners have been charged with the merchandising

and promotion of the products of P&G, an activity that has already been
considered by the Court as doubtlessly directly related to the manufacturing
business,[38] which is the principal business of P&G. Considering that SAPS has no
substantial capital or investment and the workers it recruited are performing
activities which are directly related to the principal business of P&G, we find that
the former is engaged in labor-only contracting.
Where labor-only contracting exists, the Labor Code itself establishes an
employer-employee relationship between the employer and the employees of the
labor-only contractor.[39] The statute establishes this relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor
is considered merely an agent of the principal employer and the latter is
responsible to the employees of the labor-only contractor as if such employees
had been directly employed by the principal employer.[40]
Consequently, the following petitioners, having been recruited and supplied

by SAPS[41] -- which engaged in labor-only contracting -- are considered as the
employees of P&G: Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham
Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope
Salonga, Franz David, Nestor Ignacio, Jr., Rolando Romasanta, Roehl Agoo,
Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo
Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador,
Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan
Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert V. Miranda, Rodolfo
C. Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P.
Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres,
Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S. Balangue,
Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela
Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin.
The following petitioners, having worked under, and been dismissed by
Promm-Gem, are considered the employees of Promm-Gem, not of P&G: Wilfredo
Torres, John Sumergido, Edwin Garcia, Mario P. Liongson, Jr., Ferdinand Salvo,
Alejandrino Abaton, Emmanuel A. Laban, Ernesto Soyosa, Aladino Gregore, Jr.,
Page 255 of 260
Ramil Reyes, Ruben Vasquez, Jr., Maximino Pascual, Willie Ortiz, Armando Villar,
Jose Fernando Gutierrez, Ramiro Pita, Fernando Macabenta, Nestor Esquila, Julio
Rey, Albert Leynes, Ernesto Calanao, Roberto Rosales, Antonio Dacuma, Tadeo
Durano, Raul Dulay, Marino Maranion, Joseph Banico, Melchor Cardano, Reynaldo
Jacaban, and Joeb Aliviado.[42]
Termination of services
We now discuss the issue of whether petitioners were illegally dismissed. In

cases of regular employment, the employer shall not terminate the services of an
employee except for a just[43] or authorized[44] cause.
In the instant case, the termination letters given by Promm-Gem to its employees
uniformly specified the cause of dismissal as grave misconduct and breach of
trust, as follows:
xxxx
This informs you that effective May 5, 1992, your employment

with our company, Promm-Gem, Inc. has been terminated. We find
your expressed admission, that you considered yourself as an
employee of Procter & Gamble Phils., Inc. and assailing the integrity
of the Company as legitimate and independent promotion firm, is
deemed as an act of disloyalty prejudicial to the interests of our
Company: serious misconduct and breach of trust reposed upon you
as employee of our Company which [co]nstitute just cause for the
termination of your employment.
x x x x[45]
Misconduct has been defined as improper or wrong conduct; the transgression of

some established and definite rule of action, a forbidden act, a dereliction of duty,
unlawful in character implying wrongful intent and not mere error of
judgment. The misconduct to be serious must be of such grave and aggravated
character and not merely trivial and unimportant.[46] To be a just cause for
dismissal, such misconduct (a) must be serious; (b) must relate to the
performance of the employees duties; and (c) must show that the employee has
become unfit to continue working for the employer.[47]

Page 256 of 260
In other words, in order to constitute serious misconduct which will warrant the
dismissal of an employee under paragraph (a) of Article 282 of the Labor Code, it
is not sufficient that the act or conduct complained of has violated some
established rules or policies. It is equally important and required that the act or
conduct must have been performed with wrongful intent.[48] In the instant case,
petitioners-employees of Promm-Gem may have committed an error of judgment
in claiming to be employees of P&G, but it cannot be said that they were
motivated by any wrongful intent in doing so. As such, we find them guilty of only
simple misconduct for assailing the integrity of Promm-Gem as a legitimate and
independent promotion firm. A misconduct which is not serious or grave, as that
existing in the instant case, cannot be a valid basis for dismissing an employee.
Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based
on the willful breach of the trust reposed in the employee by his
employer. Ordinary breach will not suffice. A breach of trust is willful if it is done
intentionally, knowingly and purposely, without justifiable excuse, as distinguished
from an act done carelessly, thoughtlessly, heedlessly or inadvertently.[49]
Loss of trust and confidence, as a cause for termination of employment, is

premised on the fact that the employee concerned holds a position of
responsibility or of trust and confidence. As such, he must be invested with
confidence on delicate matters, such as custody, handling or care and protection
of the property and assets of the employer. And, in order to constitute a just
cause for dismissal, the act complained of must be work-related and must show
that the employee is unfit to continue to work for the employer. [50] In the instant
case, the petitioners-employees of Promm-Gem have not been shown to be
occupying positions of responsibility or of trust and confidence. Neither is there
any evidence to show that they are unfit to continue to work as merchandisers for
Promm-Gem.
All told, we find no valid cause for the dismissal of petitioners-employees of

Promm-Gem.
While Promm-Gem had complied with the procedural aspect of due process
in terminating the employment of petitioners-employees, i.e., giving two notices
Page 257 of 260
and in between such notices, an opportunity for the employees to answer and
rebut the charges against them, it failed to comply with the substantive aspect of
due process as the acts complained of neither constitute serious misconduct nor
breach of trust. Hence, the dismissal is illegal.
With regard to the petitioners placed with P&G by SAPS, they were given no
written notice of dismissal. The records show that upon receipt by SAPS of P&Gs
letter terminating their Merchandising Services Contact effective March 11, 1993,
they in turn verbally informed the concerned petitioners not to report for work
anymore. The concerned petitioners related their dismissal as follows:
xxxx
5. On March 11, 1993, we were called to a meeting at SAPS

office. We were told by Mr. Saturnino A. Ponce that we should
already stop working immediately because that was the order of
Procter and Gamble. According to him he could not do otherwise
because Procter and Gamble was the one paying us. To prove that
Procter and Gamble was the one responsible in our dismissal, he
showed to us the letter[51]dated February 24, 1993, x x x
February 24, 1993
Sales and Promotions Services

Armons Bldg., 142 Kamias Road,
Quezon City
Attention: Mr. Saturnino A. Ponce
President & General Manager
Gentlemen:
Based on our discussions last 5 and 19 February 1993, this

formally informs you that we will not be renewing our
Merchandising Services Contract with your agency.
Please immediately undertake efforts to ensure that your

services to the Company will terminate effective close of
business hours of 11 March 1993.
This is without prejudice to whatever obligations you may

have to the company under the abovementioned
contract.
Page 258 of 260
Very truly yours,
(Sgd.)
EMMANUEL M. NON
Sales Merchandising III
6. On March 12, 1993, we reported to our respective outlet

assignments. But, we were no longer allowed to work and we were
refused entrance by the security guards posted. According to the
security guards, all merchandisers of Procter and Gamble under
S[APS] who filed a case in the Dept. of Labor are already dismissed
as per letter of Procter and Gamble dated February 25, 1993. x x x[52]
Neither SAPS nor P&G dispute the existence of these

circumstances. Parenthetically, unlike Promm-Gem which dismissed its employees
for grave misconduct and breach of trust due to disloyalty, SAPS dismissed its
employees upon the initiation of P&G. It is evident that SAPS does not carry on its
own business because the termination of its contract with P&G automatically
meant for it also the termination of its employees services. It is obvious from its
act that SAPS had no other clients and had no intention of seeking other clients in
order to further its merchandising business. From all indications SAPS, existed to
cater solely to the need of P&G for the supply of employees in the latters
merchandising concerns only. Under the circumstances prevailing in the instant
case, we cannot consider SAPS as an independent contractor.
Going back to the matter of dismissal, it must be emphasized that the onus
probandi to prove the lawfulness of the dismissal rests with the employer.[53] In
termination cases, the burden of proof rests upon the employer to show that the
dismissal is for just and valid cause.[54] In the instant case, P&G failed to discharge
the burden of proving the legality and validity of the dismissals of those
petitioners who are considered its employees. Hence, the dismissals necessarily
were not justified and are therefore illegal.
Damages
We now go to the issue of whether petitioners are entitled to damages. Moral

Page 259 of 260
and exemplary damages are recoverable where the dismissal of an employee was
attended by bad faith or fraud or constituted an act oppressive to labor or was
done in a manner contrary to morals, good customs or public policy.[55]
With regard to the employees of Promm-Gem, there being no evidence of bad

faith, fraud or any oppressive act on the part of the latter, we find no support for
the award of damages.
As for P&G, the records show that it dismissed its employees through SAPS in a
manner oppressive to labor. The sudden and peremptory barring of the concerned
petitioners from work, and from admission to the work place, after just a one-day
verbal notice, and for no valid cause bellows oppression and utter disregard of the
right to due process of the concerned petitioners. Hence, an award of moral
damages is called for.
Attorneys fees may likewise be awarded to the concerned petitioners who

were illegally dismissed in bad faith and werecompelled to litigate or incur
expenses to protect their rights by reason of the oppressive acts[56] of P&G.
Lastly, under Article 279 of the Labor Code, an employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of seniority
rights and other privileges, inclusive of allowances, and other benefits or their
monetary equivalent from the time the compensation was withheld up to the time
of actual reinstatement.[57] Hence, all the petitioners, having been illegally
dismissed are entitled to reinstatement without loss of seniority rights and with
full back wages and other benefits from the time of their illegal dismissal up to the
time of their actual reinstatement.
WHEREFORE, the petition is GRANTED. The Decision dated March 21, 2003 of
the Court of Appeals in CA-G.R. SP No. 52082 and the Resolution dated October
20, 2003 are REVERSED and SET ASIDE. Procter & Gamble Phils., Inc. and
Promm-Gem, Inc. are ORDERED to reinstate their respective employees
immediately without loss of seniority rights and with full backwages and other
benefits from the time of their illegal dismissal up to the time of their actual
reinstatement. Procter & Gamble Phils., Inc. is further ORDERED to pay each of
those petitioners considered as its employees, namely Arthur Corpuz, Eric
Page 260 of 260
Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo

Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Ignacio,
Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel
Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco,
Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique
F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German
Guevara, Gilbert Y. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M.
Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C.
Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz,
Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio
Casapao, Romeo Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and
Dennis Dacasin, P25,000.00 as moral damages plus ten percent of the total sum
as and for attorneys fees.
Let this case be REMANDED to the Labor Arbiter for the computation, within 30
days from receipt of this Decision, of petitioners backwages and other benefits;
and ten percent of the total sum as and for attorneys fees as stated above; and
for immediate execution.
SO ORDERED.

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Page 1 of 260

1 Insular life vs basiao

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

G.R. No. 84484 November 15, 1989

INSULAR LIFE ASSURANCE CO., LTD., petitioner,

Tirol & Tirol for petitioner.

1. Basiao was "authorized to solicit within the Philippines

2. he would receive "compensation, in the form of

The contract also contained, among others, provisions governing the

RELATION WITH THE COMPANY. The Agent shall be free to

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited

TERMINATION. The Company may terminate the contract at will,

Either party may terminate this contract by giving to the other

ASSIGNMENT. No Assignment of the Agency herein created or of

In May, 1979, the Company terminated the Agency Manager's Contract.

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

first contract, the complaint sought to recover commissions allegedly unpaid

This decision was, on appeal by the Company, affirmed by the National

The chief issue here is one of jurisdiction: whether, as Basiao asserts, he

The Company's thesis, that no employer-employee relation in the legal and

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

distinguishing the status of an employee from that of an independent

It is true that the "control test" expressed in the following pronouncement of

... In determining the existence of employer-employee

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

There is no dearth of authority holding persons similarly placed as

In Investment Planning Corporation of the Philippines us. Social Security

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

The Labor Arbiter's decision makes reference to Basiao's claim of having

WHEREFORE, the appealed Resolution of the National Labor Relations

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

- versus - LEONARDO-DE CASTRO,

THE MANUFACTURERS LIFE MENDOZA, and

January 25, 2011

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

We resolve petitioner Gregorio V. Tongkos bid, through his Motion for

In his Motion for Reconsideration, petitioner reiterates the arguments

We find no basis or any error to merit the reconsideration of

A. Labor Law Control = Employment Relationship

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

All these, read without any clear understanding of fine legal

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

invariably characterizes an employment relationship as defined by labor

To reiterate, guidelines indicative of labor law control do not merely

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

The petitioner also questions Manulifes act of investing him with

Based on the evidence on record, the petitioners occupation was to sell

As our assailed Resolution concluded and as we now similarly

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

In sum, we find absolutely no evidence of labor law control, as

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

The Dissent likewise alluded to an ambiguity in the true relationship of

[o]ther evidence was adduced to show such duties and

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

To support its arguments on equity, the Dissent uses the Constitution

C. Earnings were Commissions

D. The Dissents Solution:

Unwieldy and Legally Infirm

The Dissent proposes that Tongko should be considered as part

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

The compromise solution of declaring Tongko both an employee and

Labrador Notes Labor Review Set Cases 1 Atty. Beciera

As already pointed out, there is no legal basis (be it statutory or