PEOPLES BROADCASTING vs.

SOLE ET AL DIGEST

DECEMBER 21, 2016 ~ VBDI AZ

G.R. No. 179652 May 8, 2009

PEOPLES BROADCASTING (BOMBO RADYO PHILS., INC.), Petitioner,

vs.

THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE

REGION VII, and JANDELEON JUEZAN, Respondents.

FACTS: The instant petition for certiorari under Rule 65 assails the decision and the resolution of the Court of

Appeals.

The petition traces its origins to a complaint filed by Jandeleon Juezan (respondent) against Peoples Broadcasting

Service, Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal deduction, non-payment of service incentive leave,

13th month pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of

wages and non-coverage of SSS, PAG-IBIG and Philhealth (non-diminution of benefits in the amount allegedly

6K) before the Department of Labor and Employment (DOLE)Regional Office No. VII, Cebu City.2 On the

basis of the complaint, the DOLE conducted a plant level inspection on 23 September 2003. Labor Inspector wrote

under the heading Findings/Recommendations non-diminution of benefits and Note: Respondent deny

employer-employee relationship with the complainant- see Notice of Inspection results.

PETITIONERS POSITION: Management representative informed that complainant is a drama talent hired on a per

drama participation basis hence no employer-employeeship [sic] existed between them. As proof of this,

management presented photocopies of cash vouchers, billing statement, employments of specific undertaking (a

contract between the talent director & the complainant), summary of billing of drama production etc. They (mgt.)

has [sic] not control of the talent if he ventures into another contract w/ other broadcasting industries.

RULING OF DOLE REGIONAL DIRECTOR: respondent is an employee of petitioner, and that the former is entitled to

his money claims amounting toP203,726.30. MR denied; Appeal with the DOLE Secretary, dismissed the appeal on

the ground that petitioner did not post a cash or surety bond and instead submitted a Deed of Assignment of Bank

Deposit.

APPEAL WITH THE CA: claiming that it was denied due process when the DOLE Secretary disregarded the evidence

it presented and failed to give it the opportunity to refute the claims of respondent. Petitioner maintained that

there is no employer-employee relationship had ever existed between it and respondent because it was the drama

directors and producers who paid, supervised and disciplined respondent. It also added that the case was beyond
the jurisdiction of the DOLE and should have been considered by the labor arbiter because respondents claim

exceeded P5,000.00. CA denied.

WITH THE SC: petitioner argues that the National Labor Relations Commission (NLRC), and not the DOLE

Secretary, has jurisdiction over respondents claim, in view of Articles 217 and 128 of the Labor Code.

RESPONDENTS POSITION: respondent posits that the Court of Appeals did not abuse its discretion. He

invokes Republic Act No. 7730, which removes the jurisdiction of the Secretary of Labor and Employment or his

duly authorized representatives, from the effects of the restrictive provisions of Article 129 and 217 of the Labor

Code, regarding the confinement of jurisdiction based on the amount of claims.; and wrong mode of appeal.

ISSUE: WON the Secretary of Labor have the power to determine the existence of an employer-employee

relationship.

HELD: No

To resolve this pivotal issue, one must look into the extent of the visitorial and enforcement power of the DOLE

found in Article 128 (b) of the Labor Code, as amended by Republic Act 7730. It reads:

Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases

where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly

authorized representatives shall have the power to issue compliance orders to give effect to the labor standards

provisions of this Code and other labor legislation based on the findings of labor employment and enforcement

officers or industrial safety engineers made in the course of inspection xxx

The provision is quite explicit that the visitorial and enforcement power of the DOLE comes into play

only in cases when the relationship of employer-employee still exists. Of course, a persons entitlement

to labor standard benefits under the labor laws presupposes the existence of employer-employee relationship in the

first place.The clause signifies that the employer-employee relationship must have existed even before the

emergence of the controversy. Necessarily, the DOLEs power does not apply in two instances, namely: (a)

where the employer-employee relationship has ceased; and (b) where no such relationship has ever

existed.

The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of Labor Standards

Cases15 issued by the DOLE Secretary. It reads:

Rule II MONEY CLAIMS ARISING FROM COMPLAINT/ROUTINE INSPECTION

Sec. 3. Complaints where no employer-employee relationship actually exists. Where employer-employee

relationship no longer exists by reason of the fact that it has already been severed, claims for payment of
monetary benefits fall within the exclusive and original jurisdiction of the labor arbiters. Accordingly, if on the

face of the complaint, it can be ascertained that employer-employee relationship no longer exists, the

case, whether accompanied by an allegation of illegal dismissal, shall immediately be endorsed by the

Regional Director to the appropriate branch of the National Labor Relations Commission (NLRC).

Clearly the law accords a prerogative to the NLRC over the claim when the employer-employee relationship has

terminated or such relationship has not arisen at all. The reason is obvious. In the second situation especially, the

existence of an employer-employee relationship is a matter which is not easily determinable from an ordinary

inspection, necessarily so, because the elements of such a relationship are not verifiable from a mere ocular

examination. The determination of which should be comprehensive and intensive and therefore best left

to the specialized quasi-judicial body that is the NLRC.

It can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has to make a

determination of the existence of an employer-employee relationship. Such prerogatival determination, however,

cannot be coextensive with the visitorial and enforcement power itself. Indeed, such determination is merely

preliminary, incidental and collateral to the DOLEs primary function of enforcing labor standards provisions. The

determination of the existence of employer-employee relationship is still primarily lodged with the NLRC.

Thus, before the DOLE may exercise its powers under Article 128, two important questions must be resolved: (1)

Does the employer-employee relationship still exist, or alternatively, was there ever an employer-employee

relationship to speak of; and (2) Are there violations of the Labor Code or of any labor law?

A mere assertion of absence of employer-employee relationship does not deprive the DOLE of jurisdiction over the

claim under Article 128 of the Labor Code. At least a prima facie showing of such absence of relationship, as in this

case, is needed to preclude the DOLE from the exercise of its power.

Without a doubt, petitioner, since the inception of this case had been consistent in maintaining that

respondent is not its employee. Certainly, a preliminary determination, based on the evidence offered,

and noted by the Labor Inspector during the inspection as well as submitted during the proceedings

before the Regional Director puts in genuine doubt the existence of employer-employee relationship.

From that point on, the prudent recourse on the part of the DOLE should have been to refer respondent

to the NLRC for the proper dispensation of his claims.Furthermore, as discussed earlier, even the evidence

relied on by the Regional Director in his order are mere self-serving declarations of respondent, and hence cannot

be relied upon as proof of employer-employee relationship.

Petition GRANTED.
G.R. No. 186621 : March 12, 2014

SOUTH EAST INTERNATIONAL RATTAN, INC. and/or ESTANISLAO AGBAY, Petitioners, v. JESUS J.
COMING, Respondent.

VILLARAMA, JR., J.:

FACTS:

Petitioner South East International Rattan, Inc. (SEIRI) is a domestic corporation engaged in the business of
manufacturing and exporting furniture to various countries with principal place of business at Paknaan, Mandaue
City, while petitioner EstanislaoAgbay, as per records, is the President and General Manager of SEIRI.

Respondent Jesus J. Coming filed a complaint for illegal dismissal, underpayment of wages, non-payment of
holiday pay, 13th month pay and service incentive leave pay, with prayer for reinstatement, back wages, damages
and attorney fees against Petitioner.

Respondent alleged that on March 17, 1984, petitioners hired him as Sizing Machine Operator. He worked from
8:00 a.m. to 5:00 p.m. At first, his compensation was on span class="SpellE">pakiaobasis but sometime in June
1984, it was fixed at P150.00 per day paid to him on a weekly basis. In 1990, without any apparent reason, his
employment was interrupted as he was told by petitioners to resume work in two months time. Being an
uneducated person, respondent was persuaded by the management as well as his brother not to complain, as
otherwise petitioners might decide not to call him back for work. Fearing such consequence, respondent accepted
his fate. Nonetheless, after two months he reported back to work upon order of management.

Despite being an employee for many years with his work performance never questioned by petitioners, respondent
was dismissed on January 1, 2002 without lawful cause. He was told that he will be terminated because the
company is not doing well financially and that he would be called back to work only if they need his services again.
Respondent waited for almost a year but petitioners did not call him back to work. He filed the complaint before the
regional arbitration branch.

As their defense, petitioners denied having hired respondent asserting that SEIRI was incorporated only in 1986,
and that respondent actually worked for SEIRI furniture suppliers because when the company started in 1987 it
was engaged purely in buying and exporting furniture and its business operations were suspended from the last
quarter of 1989 to August 1992. They stressed that respondent was not included in the list of employees submitted
to the Social Security System (SSS). Moreover, respondent brother, Vicente Coming, executed an affidavit8 in
support of petitionersposition while Allan Mayol and Faustino Apondarissued notarized certifications9 that
respondent worked for them instead.

The Labor Arbiter ruled that respondent is a regular employee of SEIRI and that the termination of his employment
was illegal.

Petitioners appealed to the National Labor Relations Commission (NLRC)-Cebu City. The NLRC set aside the
decision of the LA compelling the respondent to file a petition for certiorari under Rule 65 before the Court of
Appeals. The CA ruled in favor of the respondent and declared that there existed an employer-employee
relationship between petitioners and respondent who was dismissed without just and valid cause. Petitioners
moved for reconsideration but the same was denied. Hence, the present petition for review on certiorari.

ISSUE: Whether or not there exists an employer-employee relationship between the petitioners and the
respondent?

HELD: The Court sustains that Decision of the Court of Appeals.

LABOR LAW: employer-employee relationship

In order to establish the existence of an employer-employee relationship, the four-fold test is used, to wit: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
power to control the employee conduct, or the so-called ontrol test.

In resolving the issue of whether such relationship exists in a given case, substantial evidence or that amount of
relevant evidence, which a reasonable mind might accept, as adequate to justify a conclusion is sufficient.
The petitioners presented the following to support their stance that respondent is not their employee: (1)
Employment Reports to the SSS from 1987 to 2002; (2) the Certifications issued by Mayol and Apondar; (3) two
affidavits of Vicente Coming; (4) payroll sheets (1999-2000); (5) individual pay envelopes and employee earnings
records (1999-2000); (6) and affidavit of Angelina Agbay(Treasurer and Human Resources Officer).

The respondent, on the other hand, submitted the affidavit executed by Eleoterio Brigoli, Pedro Brigoli, Napoleon
Coming, EfrenComing and Gil Coming who all attested that respondent was their co-worker at SEIRI.

The Court in Tan v. Lagrama, 436 Phil. 190, held that the fact that a worker was not reported as an employee to
the SSS is not conclusive proof of the absence of employer-employee relationship. Otherwise, an employer would
be rewarded for his failure or even neglect to perform his obligation. Nor does the fact that respondent name does
not appear in the payrolls and pay envelope records submitted by petitioners negate the existence of employer-
employee relationship.

As a regular employee, respondent enjoys the right to security of tenure under Article 279 of the Labor Code and
may only be dismissed for just or authorized causes. Otherwise, the dismissal becomes illegal.

Since respondent dismissal was without valid cause, he is entitled to reinstatement without loss of seniority rights
and other privileges and to his full back wages, inclusive of allowances and other benefits of their monetary
equivalent, computed from the time his compensation was withheld from him up to the time of his actual
reinstatement.

However, where reinstatement is no long feasible as an option, back wages shall be computed from the time of the
illegal termination up to the finality of the decision. As an alternative to this, separation pay equivalent to one
month salary for every year of service should likewise be awarded in case reinstatement is not possible.

The present petition for review on certiorari is DENIED.

G.R. No. 186114, October 07, 2015

CHEVRON (PHILS.), INC., Petitioner, v. VITALIANO C GALIT, SJS AND SONS CONSTRUCTION
CORPORATION AND MR. REYNALDO SALOMON, Respondents.

DECISION

PERALTA J.:*

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal and
setting aside of the Decision1 and Resolution2 of the Court of Appeals (CA), dated December 8, 2008 and January
20, 2009, respectively, in CA-G.R. SP No. 104713. The assailed CA Decision reversed and set aside the Decision
dated January 31, 2008 and the Resolution dated May 27, 2008 of the National Labor Relations Commission
(NLRC), Second Division in NLRC NCR (Case No.) 00-03-02399-06 (CA No. 051468-07), while the questioned CA
Resolution denied petitioner's Motion for Reconsideration.

The factual and procedural antecedents of the case are as follows:chanRoblesvirtualLawlibrary

On March 20, 2006, herein respondent (Galit) filed against Caltex Philippines, Inc., now Chevron (Phils.), Inc., SJS
and Sons Construction Corporation (SJS), and its president, Reynaldo Salomon (Salomon),3 a Complaint4 for illegal
dismissal, underpayment/non-payment of 13th month pay, separation pay and emergency cost of living allowance.
The Complaint was filed with the NLRC National Capital Region, North Sector Branch in Quezon City.

In his Position Paper,5 Galit alleged that: he is a regular and permanent employee of Chevron since 1982, having
been assigned at the company's Pandacan depot; he is an "all-around employee" whose job consists of cleaning
the premises of the depot, changing malfunctioning oil gaskets, transferring oil from containers and other tasks
that management would assign to him; in the performance of his duties, he was directly under the control and
supervision of Chevron supervisors; on January 15, 2005, he was verbally informed that his employment is
terminated but was promised that he will be reinstated soon; for several months, he followed up his reinstatement
but was not given back his job.
In its Position Paper,6 SJS claimed that: it is a company which was established in 1993 and was engaged in the
business of providing manpower to its clients on a "per project/contract" basis; Galit was hired by SJS in 1993 as a
project employee and was assigned to Chevron, as a janitor, based on a contract between the two companies;
contrary to Galit's allegation, he started working for SJS only in 1993; the manpower contract between SJS and
Chevron eventually ended on November 30, 2004 which resulted in the severance of Galit's employment; SJS
finally closed its business operations in December 2004; it retired from doing business in Manila on January 21,
2005; Galit was paid separation pay of P11,000.00.

On the other hand, petitioner contended in its Position Paper with Motion to Dismiss7 that: it entered into two (2)
contracts for-janitorial services with SJS from May 1, 2001 to April 30, 2003 and from June 1, 2003 to June 1,
2004; under these contracts, SJS undertook to "assign such number of its employees, upon prior .agreement with
[petitioner], as would be sufficient to fully and effectively render the work and services undertaken" and to "supply
the equipment, tools and materials, which shall, by all means, be effective and efficient, at its own expense,
necessary for the performance" of janitorial services; Galit, who was employed by SJS, was assigned to petitioner's
Pandacan depot as a janitor; his wages and all employment benefits were paid by SJS; he was subject to the
supervision, discipline and control of SJS; on November 30, 2004, the extended contract between petitioner and
SJS expired; subsequently, a new contract for janitorial services was awarded by petitioner to another independent
contractor; petitioner was surprised that Galit filed an action impleading it; despite several conferences, the parties
were not able to arrive at an amicable settlement.

On October 31, 2006, the Labor Arbiter (LA) assigned to the case rendered a Decision,8 the dispositive portion of
which reads as follows:cralawlawlibrary

WHEREFORE, judgment is hereby rendered DISMISSING the Complaint against respondent Chevron for lack of
jurisdiction, and against respondents SJS and Reynaldo Salomon for lack of merit. For equity and compassionate
consideration, however, respondent SJS is hereby ordered to pay the complainant a separation pay at the rate of a
half-month salary for every year of service that the complainant had with respondent SJS.

SO ORDERED.9
chanrobleslaw

The LA found that SJS is a legitimate contractor and that it was Galit's employer, not petitioner. The LA dismissed
Galit's complaint for illegal dismissal against petitioner for lack of jurisdiction on the ground that there was no
employer-employee relationship between petitioner and Galit. The LA likewise dismissed the complaint against SJS
and Salomon for lack of merit on the basis of his finding that Galit's employment with SJS simply expired as a
result of the completion of the project for which he was engaged.

Aggrieved, herein respondent filed an appeal10 with the NLRC.

On January 31, 2008, the NLRC rendered its Decision11 and disposed as follows:cralawlawlibrary

WHEREFORE, premises considered, the decision under review is hereby, MODIFIED.

Respondent SJS and Sons Construction Corporation is ordered to pay the complainant, severance compensation, at
the rate of one (1) month salary for every year of service. In all other respects, the appealed decision so stands as
AFFIRMED.

SO ORDERED.12
chanrobleslaw

The NLRC affirmed the findings of the LA that SJS was a legitimate job contractor and that it was Galit's employer.
However,"the NLRC found that Gal it was a regular, and not a project employee, of SJS, whose employment was
effectively terminated when SJS ceased to operate.

Herein respondent tiled a Motion for Reconsideration,13 but the NLRC denied it in its Resolution14 dated May 27,
2008.

Respondent then filed a petition for certiorari with the CA assailing the above NLRC Decision and Resolution.

On December 8, 2008, the CA promulgated its assailed Decision, the dispositive portion of which reads,
thus:cralawlawlibrary

WHEREFORE, premises considered, the petition is GRANTED. The Decision dated January 31, 2008 and the
Resolution dated May 27, 2008 of the NLRC, Second Division in NLRC NCR [Cast No.] 00-03-02399-06 (CA No.
051468-07) are REVERSED and SET ASIDE. Judgment is rendered declaring private respondent Chevron Phils,
guilty of illegal dismissal and ordering petitioner Galit's reinstatement without loss of seniority rights and other
privileges and payment of his full backwages, inclusive of allowances and to other benefits or their monetary
equivalents computed from the time compensation was withheld up to the time of actual reinstatement. Private
respondent Chevron Phils, is also hereby ordered to pay 10% of the amount due petitioner Galit as attorney's fees.

SO ORDERED.15
chanrobleslaw

Contrary to the- findings of the LA and the NLRC, the CA held that SJS was a labor-only contractor, that petitioner
is Galit's actual employer and that the latter was unjustly dismissed from his employment.

Herein petitioner filed a motion for reconsideration, but the CA denied it in its Resolution dated January 20, 2009.

Hence, the present petition for review on certiorari based on the following grounds:cralawlawlibrary

I.

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT THE
DISMISSAL OF RESPONDENT WAS ILLEGAL CONSIDERING THAT:chanRoblesvirtualLawlibrary

A. THE FINDINGS OF FACT OF TFIE LABOR ARBITER A QUO AND THE NATIONAL LABOR RELATIONS COMMISSION
ARE ALREADY BINDING UPON THE HONORABLE COURT OF APPEALS.

B. THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE COMPANY AND RESPONDENT HEREIN.

C. PETITIONER SJS IS A. LEGITIMATE INDEPENDENT CONTRACTOR.

II.

CONSIDERING THAT THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE COMPANY AND

RESPONDENT HEREIN, THE HONORABLE COURT OF APPEALS' AWARD OF REINSTATEMENT, BACKWAGES, AND
ATTORNEY'S FEES AGAINST THE COMPANY HAS NO LEGAL BASIS.16chanrobleslaw

On September 19, 2012, this Court issued a Resolution17 directing petitioner to implead SJS as party-respondent
on the ground that it is an indispensable party without whom no final determination can be had of this case.

In a Motion18 dated November 21, 2012, petitioner manifested its compliance with this Court's September 19, 2012
Resolution. In addition, it prayed that Salomon be also impleaded as party-respondent

Acting on petitioner's above Motion, this Court issued another Resolution19 on June 19, 2013, stating that SJS and
Salomon are impleaded as parties-respondents and are required to comment on the petition for review
on certiorari.

However, despite due notice sent to SJS and Salomon at their last known addresses, copies of the above
Resolution were returned unserved. Hence, on October 20, 2014, the Court, acting on Galit's plea for early
resolution of the case, promulgated a Resolution20 resolving to dispense with the filing by SJS and Salomon of their
respective comments.

The Court will, thus, proceed to resolve the instant petition.

At the outset, the Court notes that the first ground raised by petitioner consists of factual issues. It is settled that
this Court is not a trier of facts, and this applies with greater force in labor cases.21 Corollary thereto, this Court
has held in a number of cases 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.22 However, it is equally settled that
the.foregoing principles admit of certain exceptions, to wit: (1) the findings are grounded entirely on speculation,
surmises or conjectures; (2) the inference made is manifestly mistaken, absurd or impossible; (3) there is grave
abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are
conflicting; (6) in making its findings, the Court of Appeals went beyond the issues of the case, or its findings are
contrary to the admissions of both appellant and appellee; (7) the findings are contrary to those of the trial court;
(8) the findings are conclusions without citation of specific evidence on which they are based; (9) the facts set
forth in the petition, as well as in petitioners main and reply briefs, are not disputed by respondent; (10) the
findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record;
and (11) the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion.23 In the instant case, the Court gives due course to the
instant petition considering that the findings of fact and conclusions of law of the LA and the NLRC differ from those
of the CA.

Thus, the primordial question that confronts the Court is whether there existed an employer-employee relationship
between petitioner and Galit, and whether the former is liable to the latter for the termination of his employment.
Corollary to this, is the issue of whether or not SJS is an independent contractor or a labor only contractor.

To ascertain the existence of an employer-employee relationship, jurisprudence has invariably adhered to the four-
fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employee's conduct, or the so-called "control test."24 Of these four, the
last one is the most important.25 The so-called "control test" is commonly regarded as the most crucial and
determinative indicator of the presence or absence of an employer-employee relationship.26 Under the control test,
an employer-employee relationship exists where the person for whom the services are performed reserves the
right to control not only the end achieved, but also the manner and means to be used in reaching that end.27

In the instant case, the true nature of Galit's employment is evident from the Job Contract between petitioner and
SJS, pertinent portions of which are reproduced hereunder:cralawlawlibrary

xxxx

1.1 The CONTRACTOR [SJS] shall provide the following specific services to the COMPANY [petitioner]:
xxxx

1. Scooping of slop of oil water separator

2. Cleaning of truck parking area/drum storage area and pier

xxxx
4.1 In the fulfillment of its obligations to the COMPANY, the CONTRACTOR shall select and hire its workers. The
CONTRACTOR alone shall be responsible for the payment of their wages and other employment benefits and
likewise for the safeguarding of their health and safety in accordance with existing laws- and regulations. Likewise,
the CONTRACTOR shall be responsible for the discipline and/or dismissal of these workers.

4.2 The CONTRACTOR shall retain the right to control the manner and the means of performing the work, with the
COMPANY having the control or direction only as to the results to be accomplished.

xxxx

4.4 It is understood that, for the above reasons, these workers shall be considered as the employees of the
CONTRACTOR. Under no circumstances, shall these workers be deemed directly or indirectly as the employees of
the COMPANY.

xxxx

5.1 The CONTRACTOR shall maintain efficient and effective discipline over any and all employees it may utilize in
performing its obligations under this CONTRACT, x x x

5.2 The COMPANY shall in no manner be answerable or accountable for any incident or injury which may occur to
any worker or personnel of .the CONTRACTOR during the time and consequent upon the performance of the work
and services under this Agreement, nor for any injury, loss or damage arising from fault, negligence or
carelessness of the CONTRACTOR or anyone of its workers to any person or persons or to his or their property; and
the CONTRACTOR covenants and agrees to assume, as it does hereby assume, all liabilities for any such injury,
loss or damage and to make the COMPANY free and blameless therefrom, x x x

5.3. The CONTRACTOR shall be responsible for any loss or damage that may be incurred upon the products,
properties and installations of the COMPANY during the effectivity of this Contract which are due to the
unreasonable or negligent act of the CONTRACTOR, its agents or its workers.

xxxx

6.1 The CONTRACTOR shall at its own expense maintain with a reputable insurance company, acceptable to the
CQMPANY, a comprehensive liability insurance in the amount required by the COMPANY to cover claims for bodily
injury, death or property damage caused to any person or persons by an act or omission of the CONTRACTOR or
any of its employees, agents or representatives.
xxxx

x x x [T]he CONTRACTOR agrees and undertakes:chanRoblesvirtualLawlibrary

xxxx

b. To submit satisfactory proof to the COMPANY that it has registered its personnel/workers assigned to perform
the work and services herein required with the Social Security System, Medicare and other appropriate agencies for
purposes of the Labor Code as well as other laws, decrees, rules and regulations.

c. To pay the wages or salaries of its personnel/workers as well as benefits, premia and protection in accordance
with the provisions of the Labor Code and other applicable laws, decrees, rules and regulations promulgated by
competent authority, xxx

d. To assign such number of its employees, upon prior agreement with the COMPANY, as would be sufficient to fully
and effectively render the work and services herein undertaken, xxx

e. To supply the equipment, tools and materials, which shall, by all means, be effective and efficient, at its own
expense, necessary for the performance of the services under this Contract.28chanrobleslaw

The foregoing provisions of the Job Contract between petitioner and SJS demonstrate that the latter possessed the
following earmarks of an employer, to wit: (1) the power of selection and engagement of employees,
under.Sections 4.1 and 6.1(d); (2) the payment of wages, under Sections 4.1 and 6.1(c); (3) the power to
discipline and dismiss, under Section 4.1; and, (4) the power to control the employee's conduct, under Sections
4.1, 4.2, and 5.1.

As to SJS' power of selection and engagement, Galit himself admitted in his own affidavit that it was SJS which
assigned him to work at Chevron's Pandacan depot.29 As such, there is no question that it was SJS which selected
and engaged Galit as its employee.

With respect to the payment of wages, the Court finds no error in the findings of the LA that Galit admitted that it
was SJS which paid his wages. While Galit claims that petitioner was the one which actually paid his wages and
that SJS was merely used as a conduit, Galit failed to present evidence to this effect. Galit, likewise, failed to
present sufficient proof to back up his claim that it was petitioner, and not SJS, which actually paid his SSS,
Philhealth and Pag-IBIG premiums. On the contrary, it is .unlikely that SJS would report Galit as its worker, pay his
SSS, Philhealth and Pag-IBIG premiums, as well as his wages, if it were not true that he was indeed its
employee.30 In the same manner, the Quitclaim and Release,31 which was undisputedly signed by Galit,
acknowledging receipt of his separation pay from SJS, is an indirect admission or recognition of the fact that the
latter was indeed his employer. Again, it would be unlikely for SJS to pay Galit his separation pay if it is not the
latter's employer.

Galit also did not dispute the fact that he was dismissed from employment by reason of the termination of the
service contract between SJS and petitioner. In other words, it was not petitioner which ended his employment. He
was dismissed therefrom because petitioner no longer renewed its contract with SJS and that the latter
subsequently ceased to operate.

Anent the power of control, the Court again finds no cogent reason to depart from the findings of the NLRC that in
case of matters that needed to be addressed with respect to employee performance, petitioner dealt directly with
SJS and not with the employee concerned. In any event, it is settled that such power merely calls for the existence
of the right to control and not necessarily the exercise thereof. In the' present case, the Job Contract between
petitioner and SJS clearly provided that SJS "shall retain the right to control the manner and the means of
performing the work, with [petitioner] having the control or direction only as to the results to be accomplished." 32

In addition, it would bear to point out that contrary to the ruling of the CA, the work performed by Galit, which is
the "scooping of slop of oil water separator,"33 has no direct relation to petitioner's business, which is the
importation, refining and manufacture of petroleum products. The Court defers to the findings of both the LA and
the NLRC that the job performed by Galit, which essentially consists of janitorial services, may be incidental or
desirable to petitioner's main activity but it is not necessary and directly related to it.

As to whether or not SJS is an independent contractor, jurisprudence has invariably ruled that an independent
contractor carries on an independent business and undertakes the contract work on his own account, under his
own responsibility, according to his own manner and method, and free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results
thereof.34 This embodies what has long been jurisprudentially recognized as the control test, as discussed above. In
the instant case, SJS presented evidence to show that it had an independent business by paying business taxes
and fees and that it was registered as an employer with the Social Security System. Moreover, there was no
evidence to show that SJS and its employees were ever subject to the control of petitioner. On the contrary, as
shown above, SJS possessed the right to control its employees' manner and means of performing their work ,
including herein respondent Galit.

As to its capital, there is no dispute that SJS generated an income of P1,523,575.81 for the year 2004. 35In Neri v.
National Labor Relations Commission,36 this Court held that a business venture which had a capitalization of
P1,000,000.00 was considered as highly capitalized and cannot be deemed engaged in labor-only contracting. In
the present case, while SJS' income of more than P1,500,000.00 was not shown to be equivalent to its authorized
capital stock, such income is an indication of how much capital was put into its business to generate such amount
of revenue. Thus, the Court finds no sufficient reason to disturb the findings of the LA and the NLRC that SJS had
substantial capital.

WHEREFORE, the instant petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals,
dated December 8, 2008 and January 20, 2009, respectively, are REVERSED and SET ASIDE. The Decision of the
National Labor Relations Commission, dated January 31, 2008 in NLRC NCR' [Case No.] 00-03-02399-06 (CA No.
051468-07) is REINSTATED.

SO ORDERED.chanroblesvirtuallaw

G.R. No. 208451, February 03, 2016

MANILA MEMORIAL PARK CEMETERY, INC., Petitioner, v. EZARD D. LLUZ, NORMAN CORRAL, ERWIN
FUGABAN, VALDIMAR BALISI, EMILIO FABON, JOHN MARK APLICADOR, MICHAEL CURIOSO, JUNLIN
ESPARES, GAVINO FARINAS, AND WARD TRADING AND SERVICES, Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari1 assailing the Decision2 dated 21 January 2013 and the Resolution3 dated
17 July 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 119237.chanRoblesvirtualLawlibrary

The Facts

On 23 February 2006, petitioner Manila Memorial Park Cemetery, Inc. (Manila Memorial) entered into a Contract of
Services with respondent Ward Trading and Services (Ward Trading). The Contract of Services provided that Ward
Trading, as an independent contractor, will render interment and exhumation services and other related work to
Manila Memorial in order to supplement operations at Manila Memorial Park, Paranaque City.

Among those assigned by Ward Trading to perform services at the Manila Memorial Park were respondents Ezard
Lluz, Norman Corral, Erwm Fugaban, Valdimar Balisi, Emilio Fabon, John Mark Aplicador, Michael Curioso, Junlin
Espares, and Gavino Farinas (respondents). They worked six days a week for eight hours daily and were paid P250
per day.

On 26 June 2007, respondents filed a Complaint4 for regularization and Collective Bargaining Agreement benefits
against Manila Memorial; Enrique B. Lagdameo, Manila Memorial's Executive Vice-President and Director in Charge
for Overall Operations, and Ward Trading. On 6 August 2007, respondents filed an amended complaint to include
illegal dismissal, underpayment of 13th month pay, and payment of attorney's fees.

Respondents alleged that they asked Manila Memorial to consider them as regular workers within the appropriate
bargaining unit established in the collective bargaining agreement by Manila Memorial and its union, the Manila
Memorial Park Free Workers Union (MMP Union). Manila Memorial refused the request since respondents were
employed by Ward Trading, an independent labor contractor. Thereafter, respondents joined the MMP Union. The
MMP Union, on behalf of respondents, sought their regularization which Manila Memorial again declined.
Respondents then filed the complaint. Subsequently, respondents were dismissed by Manila Memorial. Thus,
respondents amended the complaint to include the prayer for their reinstatement and payment of back wages.

Meanwhile, Manila Memorial sought the dismissal of the complaint for lack of jurisdiction since there was no
employer-employee relationship. Manila Memorial argued that respondents were the employees of Ward Trading.
In a Decision5 dated 29 March 2010, the Labor Arbiter dismissed the complaint for failing to prove the existence of
an employer-employee relationship. The dispositive portion of the Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-entitled case for
complainants' lack of employer-employee relationship with respondent Manila Memorial Park Cemetery, Inc.

SO ORDERED.6chanroblesvirtuallawlibrary
Respondents appealed7 to the NLRC. In a Decision8 dated 30 September 2010, the NLRC reversed the Labor
Arbiter's findings. The NLRC ruled that Ward Trading was a labor-only contractor and an agent of Manila Memorial.
The dispositive portion of the Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, complainants' appeal is GRANTED. The assailed Decision of Labor Arbiter
Geobel A. Bartolabac dated March 29, 2010 is MODIFIED. It is hereby declared that complainants were regular
employees of respondent Manila Memorial Park Cemetery, Inc. and entitled to the benefits provided for under the
CBA between the latter and the Manila Memorial Park Free Workers Union.

Respondent Manila Memorial Park Cemetery, Inc. is ordered to pay wage differentials to complainants as
follows:ChanRoblesVirtualawlibrary

1. Ezard D. Lluz - P43,982.79

2. Norman Corral - P29,765.67

3. Erwin Fugaban - P28,634.67

4. Valdimar Balisi - P20,310.33

5. Emilio Fabon - P43,982.79

6. John Mark Aplicador

P43,982.79
-

7. Michael Curioso - P43,982.79

8. Ju[n]lin Espares - P43,982.79

9. Gavino Farinas - P43,982.79

SO ORDERED.9chanroblesvirtuallawlibrary
Manila Memorial filed a Motion for Reconsideration which was denied in a Resolution10 dated 31 January 2011.

Thereafter, Manila Memorial filed an appeal with the CA. In a Decision dated 21 January 2013, the CA affirmed the
ruling of the NLRC. The CA found the existence of an employer-employee relationship between Manila Memorial
and respondents. The dispositive portion of the Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, in view of the foregoing, the instant Petition for Certiorari is DENIED. The Decision, dated September
30, 2010 and the Resolution, dated January 31, 2011, rendered by the National Labor Relations Commission
(NLRC) in NLRC LAC No. 06-001267-10 are AFFIRMED.

SO ORDERED.11chanroblesvirtuallawlibrary
Manila Memorial then filed a Motion for Reconsideration which was denied by the CA in a Resolution dated 17 July
2013.

Hence, the instant petition.chanRoblesvirtualLawlibrary

The Issue

The main issue for our resolution is whether or not an employer-employee relationship exists between Manila
Memorial and respondents for the latter to be entitled to their claim for wages and other
benefits.chanRoblesvirtualLawlibrary

The Court's Ruling

The petition lacks merit.

Manila Memorial contends that Ward Trading has total assets in excess of P1.4 million, according to Ward Trading's
financial statements for the year 2006, proving that it has sufficient capitalization to qualify as a legitimate
independent contractor. Manila Memorial insists that nowhere is it provided in the Contract of Services that Manila
Memorial controls the manner and means by which respondents accomplish the results of their work. Manila
Memorial states that the company only wants its contractors and the latter's employees to abide by company rules
and regulations.

Respondents, on the other hand, assert that they are regular employees of Manila Memorial since Ward Trading
cannot qualify as an independent contractor but should be treated as a mere labor-only contractor. Respondents
state that (1) there is enough proof that Ward Trading does not have substantial capital, investment, tools and the
like; (2) the workers recruited and placed by the alleged contractors performed activities that were related to
Manila Memorial's business; and (3) Ward Trading does not exercise the right to control the performance of the
work of the contractual employees.

As a general rule, factual findings of the CA are binding upon this Court. One exception to this rule is when the
factual findings of the former are contrary to those of the trial court, or the lower administrative body, as the case
may be. This Court is obliged to resolve an issue of fact due to the conflicting findings of the Labor Arbiter on one
hand, and the NLRC and the CA on the other.

In order to determine whether there exists an employer-employee relationship between Manila Memorial and
respondents, relevant provisions of the labor law and rules must first be reviewed. Article 106 of the Labor Code
states:ChanRoblesVirtualawlibrary
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to
the extent of the work performed under the contract, in the same manner and extent that he is liable to employees
directly employed by him.

The Secretary of Labor 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 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 supplied)
Sections 3, 5 and 7 of Department Order No. 18-0212 distinguish between legitimate and labor-only contracting and
assume the existence of an employer-employee relationship if found to be engaged in labor-only contracting. The
provisions state:ChanRoblesVirtualawlibrary
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) The contractor does not exercise the right to control over the performance of the work of the contractual
employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as
amended.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual
workers are performed, to determine not only the end to be achieved, but also the manner and means to be used
in reaching that end.

xxxx

Section 7. Existence of an employer-employee relationship. - The contractor or subcontractor shall be considered

the employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other
social legislation. The principal, however, shall be solidarity liable with the contractor in the event of any violation
of any provision of the Labor Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual employee in any of the following cases as declared
by a competent authority:ChanRoblesVirtualawlibrary
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.
(Emphasis supplied)
It is clear from these provisions that contracting arrangements for the performance of specific jobs or services
under the law and its implementing rules are allowed. However, contracting must be made to a legitimate and
independent job contractor since labor rules expressly prohibit labor-only contracting.

Labor-only contracting exists when 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:

1) 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

2) The contractor does not exercise the right to control the performance of the work of the contractual
employee.13

In the present case, Manila Memorial entered into a Contract of Services with Ward Trading, a single proprietorship
owned by Emmanuel Mayor Ward with business address in Las Pias City on 23 February 2006. In the Contract of
Services, it was provided that Ward Trading, as the contractor, had adequate workers and substantial capital or
investment in the form of tools, equipment, machinery, work premises and other materials which were necessary
in the conduct of its business.

However, a closer look at the Contract of Services reveals that Ward Trading does not have substantial capital or
investment in the form of tools, equipment, machinery, work premises and other materials since it is Manila
Memorial which owns the equipment used in the performance of work needed for interment and exhumation
services. The pertinent provision in the Contract of Services which shows that Manila Memorial owns the equipment
states:ChanRoblesVirtualawlibrary
The COMPANY shall [sell] to the contractor the COMPANY owned equipment in the amount of ONE MILLION FOUR
HUNDRED THOUSAND PESOS ONLY (Php 1,400,000.00) payable in two (2) years or a monthly payment of FIFTY
EIGHT THOUSAND THREE HUNDRED THIRTY FIVE PESOS ONLY (Php 58,335.00) to be deducted from the
CONTRACTOR'S billing.14chanroblesvirtuallawlibrary
Just by looking at the provision, it seems that the sale was a regular business transaction between two parties.
However, Manila Memorial did not present any evidence to show that the sale actually pushed through or that
payments were made by Ward Trading to prove an ordinary arms length transaction. We agree with the NLRC in its
findings:ChanRoblesVirtualawlibrary
While the above-cited provision of the Contract of Service implies that respondent MMPCI would sell subject
equipment to Ward at some future time, the former failed to present any contract of sale as proof that, indeed, it
actually sold said equipment to Ward. Likewise, respondent MMPCI failed to present any "CONTRACTOR'S billing"
wherein the purported monthly installment of P58,335.00 had been deducted, to prove that Ward truly paid the
same as they fell due. In a contract to sell, title is retained by the vendor until full payment of the price.
Moreover, the Contract of Service provides that:ChanRoblesVirtualawlibrary
"5. The COMPANY reserves the right to rent all or any of the CONTRACTOR'S equipment in the event the COMPANY
requires the use of said equipment, x x x."
This provision is clear proof that Ward does not have an absolute right to use or enjoy subject equipment,
considering that its right to do so is subject to respondent MMPCI's use thereof at any time the latter requires it.
Such provision is contrary to Article 428 of the Civil Code, which provides that "The owner has the right to enjoy
and dispose of a thing, without other limitation than those established by law." It is plain to see that Ward is not
the owner of the equipment worth P1,400,000.00 that is being actually and directly used in the performance of the
services contracted out.

Further, the Service Contract states that:ChanRoblesVirtualawlibrary

"For its part, the COMPANY agrees to provide the following:

a) Area to store CONTRACTOR'S equipment and materials

b) Office space for CONTRACTOR'S staff and personnel"
This provision is clear proof that even the work premises actually and directly used by Ward in the performance of
the services contracted out is owned by respondent MMPCI.15chanroblesvirtuallawlibrary
Also, the difference in the value of the equipment in the total amount of P1,400,000.00 can be glaringly seen in
Ward Trading's financial statements for the year 2006 when compared to its 2005 financial statements. It is
significant to note that these financial statements were submitted by Manila Memorial without any certification that
these financial statements were actually audited by an independent certified public accountant. Ward Trading's
Balance Sheet16 as of 31 December 2005 showed that it had assets in the amount of P441,178.50 and property
and equipment with a net book value of P86,026.50 totaling P534,705. A year later, Ward Trading's Balance
Sheet17 ending in 31 December 2006 showed that it had assets in the amount of P57,084.70 and property and
equipment with a net book value of Pl,426,468 totaling P1,491,052.70. Ward Trading, in its Income
Statements18 for the years 2005 and 2006, only earned a net income of P53,800 in the year ending 2005 and
P68,141.50 in 2006. Obviously, Ward Trading could not have raised a substantial capital of P1,400,000.00 from its
income alone without the inclusion of the equipment owned and allegedly sold by Manila Memorial to Ward Trading
after they signed the Contract of Services on 23 February 2006.

Further, the records show that Manila Memorial and Enrique B. Lagdameo admitted that respondents performed
various interment services at its Sucat, Paranaque branch which were directly related to Manila Memorial's business
of developing, selling and maintaining memorial parks and interment functions. Manila Memorial even retained the
right to control the performance of the work of the employees concerned. As correctly observed by the
CA:ChanRoblesVirtualawlibrary
A perusal of the Service Contract would reveal that respondent Ward is still subject to petitioner's control as it
specifically provides that although Ward shall be in charge of the supervision over individual respondents, the
exercise of its supervisory function is heavily dependent upon the needs of petitioner Memorial Park,
particularly:ChanRoblesVirtualawlibrary
"It is also agreed that:

a) The CONTRACTOR'S supervisor will conduct a regular inspection of grave sites/areas being dug to ensure
compliance with the COMPANY'S interment schedules and other related ceremonies.
b) The CONTRACTOR will provide enough manpower during peak interment days including Sundays and Holidays.
c) The CONTRACTOR shall schedule off-days for its workers in coordination with the COMPANY'S schedule of
interment operation.
d) The CONTRACTOR shall be responsible for any damage done to lawn/s and/or structure/s resulting from its
operation, which must be restored to its/their original condition without delay and at the expense of
CONTRACTOR."
The contract further provides that petitioner has the option to take over the functions of Ward's personnel if it finds
any part or aspect of the work or service provided to be unsatisfactory, thus:ChanRoblesVirtualawlibrary
"6.1 It is hereby expressly agreed and understood that, at any time during the effectivity of this CONTRACT and its
sole determination, the COMPANY may take over the performance of any of the functions mentioned in Paragraph I
above, in any of the following cases:chanRoblesvirtualLawlibrary

xxx

c. If the COMPANY finds the performance of the CONTRACTOR in any part or aspect of the grave digging works or
other services provided by it to be unsatisfactory."
It is obvious that the aforementioned provision leaves respondent Ward at the mercy of petitioner Memorial Park as
the contract states that the latter may take over if it finds any part of the services to be below its expectations,
including the manner of its performance. x x x.19chanroblesvirtuallawlibrary
The NLRC also found that Ward Trading's business documents fell short of sound business practices. The relevant
portion in the NLRC's Decision states:ChanRoblesVirtualawlibrary
It is also worth noting that while Ward has a Certificate of Business Name Registration issued by the Department of
Trade and Industry on October 24, 2003 and valid up to October 24, 2008, the same expressly states that it is not
a license to engage in any kind of business, and that it is valid only at the place indicated therein, which is Las
Pias City. Hence, the same is not valid in Paranaque City, where Ward assigned complainants to perform
interment services it contracted with respondent MMPCI. It is also noted that the Permit, which was issued to Ward
by the Office of the Mayor of Las Pias City on October 28, 2003, was valid only up to December 31, 2003.
Likewise, the Sanitary Permit to Operate, which was issued to Ward by the Office of the City Health Officer of the
Las Pias City Health Office on October 28, 2003, expired on December 31, 2003. While respondents MMPCI and
Lagdameo were able to present copies of the above-mentioned documents, they failed to present any proof that
Ward is duly registered as [a] contractor with the Department of Labor and
Employment.20chanroblesvirtuallawlibrary
Section 11 of Department Order No. 18-02, which mandates registration of contractors or subcontractors with the
DOLE, states:ChanRoblesVirtualawlibrary
Section 11. Registration of Contractors or Subcontractors. - Consistent with authority of the Secretary of Labor and
Employment to restrict or prohibit the contracting out of labor through appropriate regulations, a registration
system to govern contracting arrangements and to be implemented by the Regional Office is hereby established.

The Registration of contractors and subcontractors shall be necessary for purposes of establishing an effective labor
market information and monitoring.

Failure to register shall give rise to the presumption that the contractor is engaged in labor-only contracting.
For failing to register as a contractor, a presumption arises that one is engaged in labor-only contracting unless the
contractor overcomes the burden of proving that it has substantial capital, investment, tools and the
like.21chanroblesvirtuallawlibrary

In this case, however, Manila Memorial failed to adduce evidence to prove that Ward Trading had any substantial
capital, investment or assets to perform the work contracted for. Thus, the presumption that Ward Trading is a
labor-only contractor stands. Consequently, Manila Memorial is deemed the employer of respondents. As regular
employees of Manila Memorial, respondents are entitled to their claims for wages and other benefits as awarded by
the NLRC and affirmed by the CA.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21 January 2013 and the Resolution dated
17 July 2013 of the Court of Appeals in CA-G.R. SP No. 119237.

SO ORDERED.

G.R. No. 220617, January 30, 2017

NESTLE PHILIPPINES, INC., Petitioner, v. BENNY A. PUEDAN, JR., JAYFER D. LIMBO, BRODNEY N. AVILA,
ARTHUR C. AQUINO, RYAN A. MIRANDA, RONALD R. ALAVE, JOHNNY A. DIMAYA, MARLON B. DELOS
REYES, ANGELITO R. CORDOVA, EDGAR S. BARRUGA, CAMILO B. CORDOVA, JR., JEFFRY B. LANGUISAN,
EDISON U. VILLAPANDO, JHEIRNEY S. REMOLIN, MARY LUZ A. MACATALAD,* JENALYN M. GAMUROT,
DENNIS G. BAWAG, RAQUEL A. ABELLERA, AND RICANDRO G. GUATNO, JR., Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated March 26, 2015 and the Resolution3 dated
September 17, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132686, which affirmed the Decision4 dated
May 30, 2013 and the Resolution5 dated August 30, 2013 of the National Labor Relations Commission (NLRC) in
LAC No. 02-000699-13/ NCR-03-04761-12, declaring petitioner Nestle Philippines, Inc. (NPI), jointly and severally
liable with Ocho de Septiembre, Inc. (ODSI) to respondents Benny A. Puedan, Jr., Jayfer D. Limbo, Bradney N.
Avila, Arthur C. Aquino, Ryan A. Miranda, Ronald R. Alave, Johnny A. Dimaya, Marlon B. Delos Reyes, Angelita R.
Cordova, Edgar S. Barruga, Camilo B. Cordova, Jr., Jeffry B. Languisan, Edison U. Villapando, Jheirney S. Remolin,
Mary Luz A. Macatalad, Jenalyn M. Gamurot, Dennis G. Bawag, Raquel A. Abellera, and Ricandro G. Guatno, Jr.
(respondents) for separation pay, nominal damages, and attorney's fees.

The Facts
The instant case arose from an amended6 complaint7 dated July 6, 2012 for illegal dismissal, damages, and
attorney's fees filed by respondents against, inter alia, ODSI and NPI. Respondents alleged that on various dates,
ODSI and NPI hired them to sell various NPI products in the assigned covered area. After some time, respondents
demanded that they be considered regular employees of NPI, but they were directed to sign contracts of
employment with ODSI instead. When respondents refused to comply with such directives, NPI and ODSI
terminated them from their position.8 Thus, they were constrained to file the complaint, claiming that: (a) ODSI is
a labor-only contractor and, thus, they should be deemed regular employees of NPI; and (b) there was no just or
authorized cause for their dismissal.9

For its part, ODSI averred that it is a company engaged in the business of buying, selling, distributing, and
marketing of goods and commodities of every kind and it enters into all kinds of contracts for the acquisition
thereof. ODSI admitted that on various dates, it hired respondents as its employees and assigned them to execute
the Distributorship Agreement10 it entered with NPI,11 the relevant portions of which
state:ChanRoblesVirtualawlibrary

3.1 DISTRIBUTOR (ODSI) shall assign a sales force in his/her regular employ, dedicated solely to the
handling of NPI Grocery Retail Products under this Agreement, and who shall exclusively cover assigned
areas/channels of distribution.

3.2 DISTRIBUTOR shall service the outlets within the Territory by re-selling Products obtained exclusively
from Nestle Philippines, Inc. and not from any other source.

3.3 DISTRIBUTOR shall utilize booking and distribution salesmen to undertake territory development.
Booking done by DISTRIBUTOR shall be delivered by its personnel. Collection of accounts shall be taken
cared (sic) of by DISTRIBUTOR, without prejudice to the provisions of Clause 13 hereof.

3.4 DISTRIBUTOR's route salesmen shall exclusively cover assigned ex-truck areas/channels of distribution.

3.5 DISTRIBUTOR shall also provide training to its staff or personnel where necessary, to improve
operations in servicing the requirements of DISTRIBUTOR's customers. From time to time, NESTLE shall
offer to DISTRIBUTOR suggestions and recommendations to improve sales and to further develop the
market.

3.6 DISTRIBUTOR shall meet the sales, reach and distribution targets agreed upon by NESTLE and
DISTRIBUTOR. For purposes of this clause, reach targets refer to the number of stores, dealers and/or
outlets which DISTRIBUTOR should cover or service within a particular period. Distribution targets refer
to the number of stock keeping units and/or product lines covered by this Agreement.

In the event of DISTRIBUTOR's failure to meet NESTLE's sales targets, NESTLE has the sole discretion of
assigning another distributor of the Products and/or reducing the Territory covered by DISTRIBUTOR.

3.7 DISTRIBUTOR agrees to provide at its own cost and expense facilities and other resources necessary for
the distribution and sale of the Products.

3.8 NESTLE's sales personnel may get orders for the Products distributed by DISTRIBUTOR and pass on the
said orders to DISTRIBUTOR.
 3.9 NESTLE shall provide the necessary promotional and marketing support for the Products through
promotional materials, product information literature, participation in trade fairs, and other market
development activities.

3.10 Should NESTLE manufacture and/or distribute other products not subject of this Agreement, which, in
NESTLE's opinion, should likewise be extended to DISTRIBUTOR's outlets, such additional products shall
be included among those listed in Annex "A" hereof.

NESTLE shall deliver the Products to DISTRIBUTOR's warehouse(s) at its own expenses. Immediately
upon receipt of the Products, DISTRIBUTOR shall carry out a visual inspection thereof. In the event any
quantity of the Products is found to be defective upon such visual inspection, NESTLE shall replace such
quantity of the Products at no cost to DISTRIBUTOR.

3.11 All costs for transportation and/or shipment of the Products from DISTRIBUTOR's warehouse(s) to its
outlets/customers shall be the account of the DISTRIBUTOR.12

However, the business relationship between NPI and ODSI turned sour when the former's sales department
badgered the latter regarding the sales targets. Eventually, NPI downsized its marketing and promotional support
from ODSI which resulted to business reverses and in the latter's filing of a petition for corporate rehabilitation
and, subsequently, the closure of its Nestle unit due to the termination of the Distributorship Agreement and the
failure of rehabilitation. Under the foregoing circumstances, ODSI argued that respondents were not dismissed but
merely put in floating status.13

On the other hand, NPI did not file any position paper or appear in the scheduled conferences. 14

The Labor Arbiter Ruling

In a Decision15 dated December 28, 2012, the Labor Arbiter (LA) dismissed the complaint for lack of merit, but
nevertheless, ordered, inter alia, ODSI and NPI to pay respondents nominal damages in the aggregate amount of
P235,728.00 plus attorney's fees amounting to ten percent (10%) of the total monetary awards.16 The LA found
that: (a) respondents were unable to prove that they were NPI employees; and (b) respondents were not illegally
dismissed as ODSI had indeed closed down its operations due to business losses.17 As to the issue on the failure to
give respondents a thirty (30)-day notice prior to such closure, the LA concluded that all the impleaded
respondents therein (i.e., including NPI) should be held liable for the payment of nominal damages plus attorney's
fees.18

Aggrieved, respondents appealed to the NLRC.19

The NLRC Ruling

In a Decision20 dated May 30, 2013, the NLRC reversed and set aside the LA ruling and, accordingly, ordered ODSI
and NPI to pay each of the respondents: (a) separation pay amounting to 1/2 month pay for every year of service
reckoned from the time they were employed until the finality of the Decision; and (b) nominal damages in the
amount of P30,000.00. The NLRC likewise ordered NPI and ODSI to pay respondents attorney's fees amounting to
ten percent (10%) of the monetary awards.21

Contrary to the LA's findings, the NLRC found that while ODSI indeed shut down its operations, it failed to prove
that such closure was due to serious business losses as it did not present evidence, e.g., financial statements, to
corroborate its claims. As such, it ruled that respondents are entitled to separation pay. In this relation, the NLRC
also found that since ODSI failed to notify respondents of such closure, the latter are likewise entitled to nominal
damages.22

Further, the NLRC found ODSI to be a labor-only contractor of NPI, considering that: (a) ODSI had no substantial
capitalization or investment; (b) respondents performed activities directly related to NPI's principal business; and
(c) the fact that respondents' employment depended on the continuous supply of NPI products shows that ODSI
had not been carrying an independent business according to its own manner and method.23 Consequently, the
NLRC deemed NPI to be respondents' true employer, and thus, ordered it jointly and severally liable with ODSI to
pay the monetary claims of respondents.24

Respondents moved for a partial reconsideration,25 arguing that since it was only ODSI that closed down operations
and not NPI and, considering the finding that the latter was deemed to be their true employer, NPI should reinstate
them, or if not practicable, to pay them separation pay equivalent to one (1) month pay for every year of service.
NPI also moved for reconsideration,26 contending that: (a) it was deprived of its right to participate in the
proceedings before the LA and the NLRC; and (b) it had no employer-employee relationship with respondents as
ODSI was never its contractor, whether independent or labor-only.27 However, the NLRC denied both motions in a
Resolution28 dated August 30, 2013, holding that: (a) respondents' termination was due to the closure of ODSI's
Nestle unit, an authorized cause and, thus, the monetary awards in their favor were proper; (b) NPI was not
deprived of its right to participate in the proceedings as it was duly served with copies of the parties' respective
pleadings, as well as the rulings of both the LA and the NLRC; (c) assuming arguendo that NPI was indeed deprived
of due process, its subsequent filing of a motion for reconsideration before the NLRC cured the defect as it was able
to argue its position in the said motion; and (d) the circumstances surrounding the Distributorship Agreement
between ODSI and NPI showed that the former is indeed a labor-only contractor of the latter.29

Dissatisfied, NPI filed a petition for certiorari30 before the CA, essentially insisting that: (a) it was deprived of due
process before the tribunals a quo; and (b) there was no employer-employee relationship between NPI and
respondents.31 Records reveal that no other party elevated the matter before the CA.

The CA Ruling

In a Decision32 dated March 26, 2015, the CA affirmed the NLRC ruling. Anent the issue on due process, the CA
held that NPI was not deprived of its opportunity to be heard as it was able to receive a copy of the complaint and
other pleadings, albeit it failed to respond thereto.33 As regards the substantive issue, the CA ruled that despite
ODSI and NPI's contract being denominated as a "Distributorship Agreement," it contained provisions
demonstrating a labor-only contracting arrangement between them, as well as NPI's exercise of control over the
business of ODSI. Moreover, the CA pointed out that: (a) there was nothing in the records which showed that ODSI
had substantial capital to undertake an independent business; and (b) respondents performed tasks essential to
NPI's business.34

Undaunted, NPI moved for reconsideration,35 which was, however, denied in a Resolution36 dated September 17,
2015; hence, this petition.

The Issues Before the Court

The essential issues for the Court's resolution are whether or not the CA correctly ruled that: (a) NPI was accorded
due process by the tribunals a quo; and (b) ODSI is a labor-only contractor of NPI, and consequently, NPI is
respondents' true employer and, thus, deemed jointly and severally liable with ODSI for respondents' monetary
claims.

The Court's Ruling

To justify the grant of the extraordinary remedy of certiorari, the petitioner must satisfactorily show that the court
or quasi-judicial authority gravely abused the discretion conferred upon it. Grave abuse of discretion connotes a
capricious and whimsical exercise of judgment, done in a despotic manner by reason of passion or personal
hostility, the character of which being 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. 37

In labor disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia, its findings and
conclusions are not supported by substantial evidence, or that amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion.38

Guided by the foregoing considerations, the Court finds that the CA was correct in ruling that the labor tribunals a
quo gave NPI an opportunity to be heard. However, it erred in not ascribing grave abuse of discretion on the
NLRC's finding that ODSI is a labor-only contractor of NPI and, thus, the latter is the respondents' true employer,
and jointly and severally liable with ODSI for respondents' monetary claims. As will be explained hereunder, such
finding by the NLRC is not supported by substantial evidence.

I.

The observance of fairness in the conduct of any investigation is at the very heart of procedural due process. The
essence of due process is to be heard, and, as applied to administrative proceedings, this means a fair and
reasonable opportunity to explain one's side, or an opportunity to seek a reconsideration of the action or ruling
complained of. Administrative due process cannot be fully equated with due process in its strict judicial sense, for
in the former a formal or trial-type hearing is not always necessary, and technical rules of procedure are not strictly
applied.39 The Court's disquisition in Ledesma v. CA40 is instructive on this matter, to
wit:ChanRoblesVirtualawlibrary
Due process, as a constitutional precept, does not always and in all situations require a trial-type proceeding. Due
process is satisfied when a person is notified of the charge against him and given an opportunity to explain or
defend himself. In administrative proceedings, the filing of charges and giving reasonable opportunity for the
person so charged to answer the accusations against him constitute the minimum requirements of due
process. The essence of due process is simply to be heard, or as applied to administrative proceedings,
an opportunity to explain ones side, or an opportunity to seek a reconsideration of the action or ruling
complained of.41 (Emphasis and underscoring supplied)
In this case, NPI essentially claims that it was deprived of its right to due process when it was not notified of the
proceedings before the LA and did not receive copies and issuances from the other parties and the LA,
respectively.42 However, as correctly pointed out by the CA, NPI was furnished via courier of a copy of the
amended complaint filed by the respondents against it as shown by LBC Receipt No. 125158910840.43It is also
apparent that NPI was also furnished with the respondents' Position Paper, Reply, and Rejoinder.44 Verily, NPI was
indeed accorded due process, but as the LA mentioned, the former chose not to file any position paper or appear in
the scheduled conferences.45

Assuming arguendo that NPI was somehow deprived of due process by either of the labor tribunals, such defect
was cured by: (a) NPI's filing of its motion for reconsideration before the NLRC; (b) the NLRC's subsequent
issuance of its Resolution dated August 30, 2013 wherein the tribunal considered all ofNPI's arguments as
contained in its motion; and (c) NPI's subsequent elevation of the case to the CA. In Gonzales v. Civil Service
Commission,46 the Court reiterated the rule that "[a]ny seeming defect in [the] observance [of due process] is
cured by the filing of a motion for reconsideration," and that "denial of due process cannot be successfully invoked
by a party who [was] afforded the opportunity to be heard x x x."47 Similarly, in Autencio v. Manara,48 it was held
that defects in procedural due process may be cured when the party has been afforded the opportunity to appeal or
to seek reconsideration of the action or ruling complained of.49

Evidently, the foregoing shows that NPI was not denied due process of law as it was afforded the fair and
reasonable opportunity to explain its side.

II.

In holding NPI jointly and severally liable with ODSI for the monetary awards in favor of respondents, both the
NLRC and the CA held that based on the provisions of the Distributorship Agreement between them, ODSI is
merely a labor-only contractor of NPI.50 In this regard, the CA opined that the following stipulations of the said
Agreement evinces that NPI had control over the business of ODSI, namely, that: (a) NPI shall offer to ODSI
suggestions and recommendations to improve sales and to further develop the market; (b) NPI prohibits ODSI
from exporting its products (the No-Export provision); (c) NPI provided standard requirements to ODSI for the
warehousing and inventory management of the sold goods; and (d) prohibition imposed on ODSI to sell any other
products that directly compete with those of NPI.51

However, a closer examination of the Distributorship Agreement reveals that the relationship of NPI and ODSI is
not that of a principal and a contractor (regardless of whether labor-only or independent), but that of a seller and a
buyer/re-seller. As stipulated in the Distributorship Agreement, NPI agreed to sell its products to ODSI at
discounted prices,52 which in turn will be re-sold to identified customers, ensuring in the process the integrity and
quality of the said products based on the standards agreed upon by the parties. 53 As aptly explained by NPI, the
goods it manufactures are distributed to the market through various distributors, e.g., ODSI, that in turn, re-sell
the same to designated outlets through its own employees such as the respondents. Therefore, the reselling
activities allegedly performed by the respondents properly pertain to ODSI, whose principal business consists of the
"buying, selling, distributing, and marketing goods and commodities of every kind" and "[entering] into all kinds of
contracts for the acquisition of such goods [and commodities]."54

Thus, contrary to the CA's findings, the aforementioned stipulations in the Distributorship Agreement hardly
demonstrate control on the part of NPI over the means and methods by which ODSI performs its business, nor
were they intended to dictate how ODSI shall conduct its business as a distributor. Otherwise stated, the
stipulations in the Distributorship Agreement do not operate to control or fix the methodology on how ODSI should
do its business as a distributor of NPI products, but merely provide rules of conduct or guidelines towards the
achievement of a mutually desired result55 - which in this case is the sale of NPI products to the end consumer.
In Steelcase, Inc. v. Design International Selections, Inc.,56 the Court held that the imposition of minimum
standards concerning sales, marketing, finance and operations are nothing more than an exercise of sound
business practice to increase sales and maximize profits, to wit:ChanRoblesVirtualawlibrary
Finally, both the CA and DISI rely heavily on the Dealer Performance Expectation required by Steelcase of its
distributors to prove that DISI was not functioning independently from Steelcase because the same imposed
certain conditions pertaining to business planning, organizational structure, operational effectiveness and
efficiency, and financial stability. It is actually logical to expect that Steelcase, being one of the major
manufacturers of office systems furniture, would require its dealers to meet several conditions for the grant and
continuation of a distributorship agreement. The imposition of minimum standards concerning sales,
marketing, finance and operations is nothing more than an exercise of sound business practice to
increase sales and maximize profits for the benefit of both Steelcase and its distributors. For as long as
these requirements do not impinge on a distributor's independence, then there is nothing wrong with
placing reasonable expectations on them.57 (Emphasis and underscoring supplied)
Verily, it was only reasonable for NPI - it being a local arm of one of the largest manufacturers of foods and grocery
products worldwide - to require its distributors, such as ODSI, to meet various conditions for the grant and
continuation of a distributorship agreement for as long as these conditions do not control the means and methods
on how ODSI does its distributorship business, as shown in this case. This is to ensure the integrity and quality of
the products which will ultimately fall into the hands of the end consumer.

Thus, the foregoing circumstances show that ODSI was not a labor only contractor of NPI; hence, the latter cannot
be deemed the true employer of respondents. As a consequence, NPI cannot be held jointly and severally liable to
ODSI's monetary obligations towards respondents.

WHEREFORE, the petition is GRANTED. The Decision dated March 26, 2015 and the Resolution dated September
17, 2015 of the Court of Appeals in CA-G.R. SP No. 132686 are hereby REVERSED and SET ASIDE. Accordingly,
the Decision dated May 30, 2013 and the Resolution dated August 30, 2013 of the National Labor Relations
Commission in LAC No. 02-000699-13/NCR-03-04761-12 are MODIFIED, DELETING petitioner Nestle Philippines,
Inc.'s solidary liability with Ocho de Septiembre, Inc. (ODSI) for the latter's monetary obligations to respondents
Benny A. Puedan, Jr., Jayfer D. Limbo, Brodney N. Avila, Arthur C. Aquino, Ryan A. Miranda, Ronald R. Alave,
Johnny A. Dimaya, Marlon B. Delos Reyes, Angelito R. Cordova, Edgar S. Barruga, Camilo B. Cordova, Jr., Jeffry B.
Languisan, Edison U. Villapando, Jheimey S. Remolin, Mary Luz A. Macatalad, Jenalyn M. Gamurot, Dennis G.
Bawag, Raquel A. Abellera, and Ricandro G. Guatno, Jr.

SO ORDERED.chanroblesvirtuallawlibrary

G.R. Nos. 190015 & 190019, September 14, 2016

GERALDINE MICHELLE B. FALLARME AND ANDREA MARTINEZ-GACOS, Petitioners, v. SAN JUAN DE DIOS
EDUCATIONAL FOUNDATION, INC., CHONA M. HERNANDEZ, VALERIANO ALEJANDRO III, SISTER
CONCEPTION GABATINO, D.C., AND SISTER JOSEFINA QUIACHON, D.C., Respondent.

DECISION

SERENO, C.J.:

Before this Court is a Petition for Review on Certiorari under Rule 45, assailing the Decision1 and the Resolution2 of
the Court of Appeals (CA) in CA-G.R. SP Nos. 105355 and 105361. The CA affirmed the Decision3 and the
Resolution4 of the National Labor Relations Commission (NLRC), which had ruled in favor of the validity of the
termination of Geraldine Michelle B. Fallarme and Andrea Martinez-Gacos (petitioners) by San Juan de Dios
Educational Foundation, Inc., Chona M. Hernandez, Valeriano Alejandro III, Sr., Concepcion Gabatino, D.C., and
Sr. Josefina Quiachon, D.C. (respondents).

THE FACTS

Petitioners were hired by San Juan de Dios Educational Foundation, Inc. (respondent college), for full-time teaching
positions.5chanrobleslaw

The appointment of petitioner Fallarme was effective at the start of the first semester of School Year (SY) 2003-
20046 as signified by a memorandum7 issued by the school informing her that she had been hired. The
memorandum did not specify whether she was being employed on a regular or a probationary status. Aside from
being appointed to a faculty position, she was also appointed to perform administrative work for the school as
personnel officer8 and to serve as head of the Human Development Counseling Services.9chanrobleslaw

Despite having served as a faculty member since SY 2003-2004, Fallarme was asked only on 1 March 2006 to sign
and submit to respondent Chona M. Hernandez, dean of general education, a written contract on the nature of the
former's employment and corresponding obligations.10 The contract was denominated as "Appointment and
Contract for Faculty on Probation" (appointment contract),11 and its effectivity period covered the second semester
of SY 2005-2006 - specifically from 4 November 2005 to 18 March 2006.12 The appointment contract specified the
status of Fallarme as a probationary faculty member.

After the expiration of the contract, respondent college informed her that it would not be renewed for the first
semester of SY 2006-2007.13 When she asked on what basis her contract would not be renewed, she was informed
that it was the school's "administrative prerogative."14chanrobleslaw

Petitioner Martinez-Gacos taught at respondent college from the start of SY 2003-2004 and continued to do so for
a total of six semesters and one summer.15 Her engagement as a faculty member was signified by a
memorandum16 issued by the school, which informed her that she had been hired. The memorandum, which was
similar to that issued to Fallarme, did not specify whether Martinez-Gacos was being employed on a regular or a
probationary status.

Like Fallarme, even though Martinez-Gacos had been employed as a faculty member since SY 2003-2004, it was
only on 1 March 2006 that the latter was ordered by respondent Valeriano Alejandro III to sign and submit a
written contract on the nature of her employment and corresponding obligations.17 The terms of the contract were
similar to those in the contract signed by Fallarme. It was also denominated as "Appointment and Contract for
Faculty on Probation,"18 and its effectivity period also covered the second semester of SY 2005-2006 - specifically
from 4 November 2005 to 18 March 2006.19 Under the appointment contract, the probationary status of Martinez-
Gacos was likewise specified for the first time.

After the lapse of the contract's effectivity, she was similarly informed that her contract would not be renewed for
the first semester of SY 2006-2007. She was also told that the nonrenewal of her contract was made on the basis
of "administrative prerogative."20chanrobleslaw

Petitioners submitted a letter to respondent Hernandez,21 questioning the nonrenewal of their respective
employment contracts. Not satisfied with the reply,22 they filed a Complaint against respondents for illegal
dismissal, reinstatement, back wages, and damages before the labor arbiter.23chanrobleslaw

In their defense, respondents claimed that petitioners had been remiss in their duties. Specifically, both of them
reportedly sold computerized final examination sheets to their students without prior school approval. Allegedly,
Fallarme also sold sociology books to students, while Martinez-Gacos served as part-time faculty in another school
and organized out-of-campus activities, all without the permission of respondent college.24 These infractions
supposedly prevented it from considering their services satisfactory.

THE LABOR ARBITER'S DECISION

The labor arbiter ruled that petitioners were regular employees who were entitled to security of
tenure.25cralawred The former cited the 1992 Manual of Regulations for Private Schools (1992 Manual), which
provides that regularization must be given to a teacher who (i) is employed as a full-time teacher; (ii) has rendered
three consecutive years of service; and (iii) has performed satisfactorily within that period.26 The labor arbiter held
that petitioners had complied with these requisites for their regularization and, contrary to respondents' contention,
performed satisfactorily within the years of their probationary employment. Thus, the labor arbiter ordered
respondent college to reinstate petitioners and pay them their back wages as well as their 13th month
pay.27chanrobleslaw

THE NLRC'S RULING

Upon respondents' appeal, the NLRC reversed the Decision of the labor arbiter.28 It held that petitioners had failed
to meet the third requirement for regularization as prescribed by the 1992 Manual; that is, they had not served
respondent college satisfactorily. The NLRC found that certain actions they had done without the requisite approval
of respondent college brought about their unsatisfactory performance during their probationary period. However,
given the failure of respondent to observe due process, the NLRC ordered it to pay them P20,000 each as
indemnity. Upon the denial of their Motion for Reconsideration,29 petitioners proceeded to the CA.

THE CA RULING

The CA affirmed the NLRC Decision.30 It upheld respondent college's administrative prerogative to determine
whether or not petitioners were entitled to regularization on the basis of respondents' academic
freedom.31 Furthermore, the award of P20,000 as indemnity to each of the petitioners was upheld.

Upon the denial by the CA of their Motion for Reconsideration,32 petitioners have now come before this Court via
this Petition.
 THE ISSUES

We cull the issues as follows:ChanRoblesVirtualawlibrary

1. Were petitioners regular employees of respondent college?

2. Was petitioners' dismissal for a valid cause?

3. If the dismissal of petitioners was for a valid cause, was the proper dismissal procedure
observed?

OUR RULING

We deny the Petition. While we agree with petitioners that they were regular employees of the college, we differ on
the basis they invoke for their regularization. Nevertheless, we agree with respondents that as regular employees,
petitioners were dismissed for a valid cause. But due to respondents' failure to observe the proper procedure,
petitioners are entitled to nominal damages.

The case calls for a review of questions of fact.

At the outset, we note the general rule that a petition for review on certiorari under Rule 45 is limited to questions
of law. However, an exception to this rule arises when the findings of the CA conflict with those of the labor
authorities, in which case this Court will not hesitate to review the evidence on record.33chanrobleslaw

In this case, the labor arbiter's factual findings differ from those of the NLRC and the CA. The labor arbiter found
that the satisfactory service rendered by petitioners during their probationary period warranted their regularization,
while the NLRC and the CA found otherwise. These conflicting findings of fact provide sufficient justification for our
review of the facts involved.

We now proceed to the merits of the case.

Petitioners are deemed regular employees.

While the parties did not contest the allegation that petitioners were employed as probationary employees, a
review of the records will show that they were considered regular employees since Day One of their employment.

It is established that while the Labor Code provides general rules as to probationary employment, these rules are
supplemented by the Manual of Regulations for Private Schools with respect to the period of probationary
employment of private school teachers.34chanrobleslaw

As prescribed by the 1992 Manual, a teacher must satisfy the following requisites to be entitled to regular faculty
status: (1) must be a full-time teacher; (2) must have rendered three years of service (or six consecutive
semesters of service for teachers on the tertiary level); and (3) that service must have been
satisfactory.35chanrobleslaw

In this case, the first two requisites for regularization under the 1992 Manual - full-time faculty status and
completion of the probationary period - are conceded in favor of petitioners. However, the parties disagree on the
fulfillment of the third requisite:36 whether petitioners' performance within the probationary period was satisfactory.

It is with respect to the determination of whether petitioners' performance was satisfactory that respondent college
invokes its "administrative prerogative." As argued by respondents in their Comment before this Court, the
exercise of their administrative prerogative not to renew the contracts was prompted by their dissatisfaction with
the way petitioners conducted themselves in school.37 Specifically, respondent college asserts that appellants were
remiss in their fiduciary duty to the school when they engaged in various acts like selling books and exam
materials, as well as organizing extracurricular activities with students without its permission.38 It contends that its
administrative prerogative is part of its academic freedom under the Constitution.39chanrobleslaw

These contentions are misplaced.

Indeed, the determination of whether the performance of probationary teaching personnel has been sufficiently
satisfactory as to warrant their regularization lies in the hands of the school40 pursuant to its administrative
prerogative, which is an extension of its academic freedom under Section 5(2), Article XIV41 of the Constitution.
Academic freedom gives the school the discretion and the prerogative to impose standards on its teachers and to
determine whether these have been met upon the conclusion of the probationary period.42chanrobleslaw
It must be pointed out that the school's exercise of administrative prerogative in this respect is not plenary as
respondents would like us to believe. The exercise of that prerogative is still subject to the limitations imposed by
the Labor Code and jurisprudence on valid probationary employment.43chanrobleslaw

In Abbott Laboratories v. Alcaraz,44 this Court explained that valid probationary employment under Art. 281
presupposes the concurrence of two requirements: (1) the employer must have made known to the probationary
employee the reasonable standard that the latter must comply with to qualify as a regular employee; and (2) the
employer must have informed the probationary employee of the applicable performance standard at the time of the
latter's engagement. Failing in one or both, the employee, even if initially hired as a probationary employee, shall
be considered a regular employee.45chanrobleslaw

With respect to the regularization of probationary teachers, the standards laid down in Abbott Laboratories apply to
the third requisite under the 1992 Manual: that they must have rendered satisfactory service. As observed by this
Court in Colegio del Santisimo Rosario v. Rojo,46 the use of the term satisfactory "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?" Therefore, applying Article 281 of the Labor Code, a school must not only set
reasonable standards that will determine whether a probationary teacher rendered satisfactory service and is
qualified for regular status; it must also communicate these standards to the teacher at the start of the
probationary period. Should it fail to do so, the teacher shall be deemed a regular employee from Day
One.47chanrobleslaw

However, the records lack evidence that respondent college clearly and directly communicated to petitioners, at the
time they were hired, what reasonable standards they must meet for the school to consider their performance
satisfactory and for it to grant them regularization as a result.

Respondents claim that the standards were provided in the appointment contracts signed by petitioners. Each of
the contracts supposedly provided that it "incorporates by reference the school policies, regulations, operational
procedures and guidelines provided for in the Manual of Operations of the School xxx."48 However, this claim
defeats respondents' own defense, because the appointment contracts invoked were signed by petitioners only at
the start of the second semester of SY 2005-2006.49chanrobleslaw

Nonetheless, it is clear and undisputed that petitioners were hired by respondent college as early as 2003, but
were required to sign appointment contracts for the first time only in 2005. An examination of the records will show
that when they were hired in 2003, they each signed a mere memorandum informing them that they had passed
the qualifying examinations for faculty members, and that they were being hired effective first semester of SY
2003-2004.50 The memorandum did not indicate their status as probationary employees, the specific period of
effectivity of their status as such, and the reasonable standards they needed to comply with to be granted regular
status. The failure to inform them of these matters was in violation of the requirements of valid probationary
employment. It also violated Section 91 of the 1992 Manual, which provides as follows:ChanRoblesVirtualawlibrary
Every contract of employment shall specify the designation, qualification, salary rate, the period and nature of
service and its date of effectivity, and such other terms and conditions of employment as may be consistent
with laws and the rules, regulations and standards of the school. A copy of the contract shall be furnished the
personnel concerned. (Emphasis supplied)
The appointment contracts invoked by respondents appear to be an afterthought, as they asked petitioners to sign
the contracts only when the latter's three-year probationary period was about to expire. Apparently, this act was
an effort to put a stamp of validity on respondents' refusal to renew petitioners' contracts.

Respondents were clearly remiss in their duty under the Labor Code to inform petitioners of the standards for the
latter's regularization. Consequently, petitioners ought to be considered as regular employees of respondent
college right from the start.

Petitioners' dismissal was for a valid cause.

Now that petitioners' regular status has been settled, it is time to examine whether their contracts' nonrenewal,
which was effectively their dismissal, was valid.

Dismissals have two facets: the legality of the act of dismissal, which constitutes substantive due process; and the
legality of the manner of dismissal, which constitutes procedural due process.51chanrobleslaw

With respect to substantive due process, insubordination or willful disobedience is one of the just causes of
dismissal under Article 282 of the Labor Code. For there to be a valid cause, two elements must concur: (1) the
employee's assailed conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and
(2) the order violated must have been reasonable, lawful, made known to the employee, and pertinent to the
duties that the employee has been engaged to discharge.52chanrobleslaw
Moreover, to be considered as a valid cause analogous to that specified in the law, it is simply required that the
cause must be due to the voluntary or willful act or omission of the employee.53chanrobleslaw

Furthermore, under the 1992 Manual, the following has also been enumerated as one of the valid causes for
termination, in addition to those found in the Labor Code:ChanRoblesVirtualawlibrary
(f) The sale of tickets or the collection of any contributions in any form or for any purpose of project whatsoever,
whether voluntary or otherwise, from pupils, students and school personnel xxx.
In this case, the records bear out the following misdemeanors of petitioners:

chanRoblesvirtualLawlibrary

(1) Both petitioners were remiss in their obligation to secure respondent college's consent before they sold
computerized final examination sheets to their students.54 They failed to do so despite the prior advice of
their subject area coordinator that the dean's approval must first be secured before examination sheets
could be sold.55

(2) Petitioner Fallarme failed to secure respondent college's consent before selling sociology textbooks to her
students during the second semester of SY 2005-2006.56 This rule was violated even after it had been
clearly discussed during their department's general meeting held at the opening of SY 2005-2006. The
teachers were then told that they were prohibited from transacting business with any publishing house or
collecting any payment without informing their respective area chairs.57

(3) Petitioner Martinez-Gacos organized out-of-campus activities with students, again without respondent
college's permission and in violation of the school's Student Handbook.58

The above infractions imputed by respondent college to petitioners were admitted by the latter in their letters to
respondents59 and in their Petition before this Court.60 They made that admission in conjunction with their defense
that the supposed infractions did not cause serious damage to respondents and were but a part of their academic
freedom and freedom of expression, among others.

We find that these infractions committed by petitioners in connection with their jobs have been established by
substantial evidence61 and constitute willful disobedience or conduct analogous thereto.

First, the act of selling computerized final examination sheets to students without respondent college's permission,
despite the prior advice of their subject area coordinator, indicated a knowing disregard by petitioners of their
superior's express order not to do so. We find that order to be lawful as well as reasonable. Clearly, the school was
not prohibiting the sale of those sheets per se, but was only requiring that its permission be secured first. This
order was made in consideration of the supervision and control that the school was expected to exercise over all
matters relevant to its students and personnel.62 The order was also pertinent to their duties as teachers, as the
sheets were used in examinations administered in their classes.

Furthermore, it is significant that petitioners' act of collecting money from their students falls under one of the valid
causes for termination under the 1992 Manual as enumerated above.

There is no merit in the defense that petitioners were not aware of the policy regarding the examination
sheets.63 In their letters to respondent college, they in fact apologized and recognized the fault they committed
when they did not inform school authorities before selling the computerized sheets.64 The apologies of petitioners
indicate their awareness of this requirement.

Second, when petitioner Fallarme sold textbooks to her students without permission, even after the act had been
clearly prohibited in a general meeting, her act also indicated her willful disregard of a school policy. That policy,
which was made known to her beforehand, was lawful in light of the recognized authority exercised by schools over
their students and personnel.65chanrobleslaw

Moreover, we consider that policy to be in line with the fiduciary relationship between the school and its professors,
teachers, and instructors. They are merely the school's agents in providing the education it has contracted to
deliver to its students.66 As such, they have an obligation to avoid any conflict of interest with the school as their
principal.67 Here, by selling textbooks without the school's authorization, petitioners were harboring a conflict of
interest, inasmuch as it was commonplace for a school itself - not its individual teachers - to sell the textbooks, to
its students.
Furthermore, the order was reasonable. As with the sale of examination sheets, the sale of books was not being
prohibited by the school, as it was only requiring teachers to first secure its authorization. That such order was
related to the duties of petitioner Fallarmeas a teacher can be easily discerned from the fact that the focus of the
policy was the textbooks used in the classroom.

It is noteworthy that this misdemeanor was substantiated by the letters of Fallarme's students attesting to the fact
before the school authorities.68 While she raised before the labor arbiter the defense that some of the students had
confided to her that they had written the letters involuntarily, she failed to substantiate this self-serving claim with
any proof.69chanrobleslaw

Third, petitioner Martinez-Gacos' act of organizing out-of-campus activities without the consent of respondent
college and in violation of its Student Handbook likewise shows traces of insubordination or acts analogous thereto.
Martinez-Gacos undertook the activities complained of in 2005,70 or two years after she was hired. Her awareness
of the Student Handbook's provisions, which she cavalierly disregarded, can therefore be reasonable expected. It is
notable that she never disputed or debunked the existence of the Student Handbook provisions invoked by the
Dean of Student Services.

We find the defense invoked by petitioner that the questioned activity was a personal trip71 - insufficient to
dispute an established fact. Specifically, while she was the publications adviser of the school paper, she went on
two out-of-town trips with several students, whose stories later on appeared in that publication.72chanrobleslaw

It must be stressed that the rules and policies that were disobeyed by petitioners are necessary incidents of the
supervision and control schools exercise over teachers as well as students.73 The exercise of such supervision has
been declared to be an obligation of schools.74 In Miriam College Foundation v. Court of Appeals,75 this Court
recognized that the establishment of an educational institution requires rules and regulations necessary for the
maintenance of an orderly educational program and the creation of an educational environment conducive to
learning. These rules and regulations are also necessary for the protection of the students, faculty, and property.
Therefore, to disobey school rules and regulations, as petitioners did in this case, is to go against this recognized
mandate.

All told, not just one but three infractions show that the continued service of petitioners in respondent college was
inimical to its interest, as their actions indicated lack of respect for the school authorities. It is settled that an
employer has the right to dismiss its erring employees as a measure of self-protection against acts inimical to its
interest.76 With respect to schools, this right must be seen in light of their recognized prerogative to set high
standards of efficiency for its teachers. The exercise of that prerogative is pursuant to the mandate of the
Constitution for schools to provide quality education77 and its recognition of their academic freedom to choose who
should teach pursuant to reasonable standards.78 We find those standards to be present in this case.

Therefore, respondent college cannot be faulted for finding the performance of petitioners inimical to its interest as
a school after the cited infractions. As correctly pointed out by the NLRC, petitioners were teachers who handled in
their classrooms women and men at an impressionable age, not mere inanimate and repeatable objects as in the
manufacturing sector. Therefore, teachers stand as role models for living out basic values, which include respect
for authority.79 Because of the failure of petitioners to live up to that standard, this Court finds that their dismissal
was for a valid cause.

Respondents failed to observe the proper procedure in petitioners' dismissal.

Although the dismissal of petitioner was for a valid cause, we nevertheless find that respondent college failed to
comply with the proper procedure for their dismissal in violation of procedural due process.

For termination based on a just cause, as in this case, the law requires two written notices before the termination
of employment: (1) a written notice served by the employer on the employee specifying the ground for termination
and giving a reasonable opportunity for that employee to explain the latter's side; and (2) a written notice of
termination served by the employer on the employee indicating that upon due consideration of all the
circumstances, grounds have been established to justify the latter's termination.80chanrobleslaw

We find a complete deviation from the two-notice rule in this case. The records show that respondent college
effectively dismissed petitioners by sending them a written notice informing them that the school would no longer
renew their contracts for the forthcoming semester.81 We find that the letters were abruptly sent and lacked any
specification of the grounds for their termination. Neither did the letters give petitioners the opportunity to explain
their side. To aggravate the matter, upon their inquiry into the reason behind their termination, all that respondent
college cited was its supposed "administrative prerogative," which was misplaced as discussed earlier.

In Agabon v. National Labor Relations Commission,82 this Court held that if the dismissal was for a valid cause,
failure to comply with the proper procedural requirements shall not nullify the dismissal, but shall only warrant the
payment of indemnity in the form of nominal damages. The amount of damages is addressed to the sound
discretion of the Court, taking into account the relevant circumstances. Since Agabon, this Court has consistently
pegged the award of nominal damages at P30,000 in cases where the employee's right to procedural due process
has been violated.83 It was held that the amount of nominal damages awarded is not intended to enrich the
employee, but to deter the employer from future violations of the procedural due process rights of the
former.84 Considering the circumstances in the present case and in compliance with prevailing jurisprudence,85 we
deem it appropriate for respondent college to pay petitioners P30,000 each. This amount is in lieu of the P20,000
awarded to each petitioner by the NLRC and the CA.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The Court of Appeals Decision dated 31 July 2009
and Resolution dated 20 October 2009 in CA-G.R. SP Nos. 105355 and 105361 are hereby AFFIRMED with
MODIFICATIONS, in that petitioners are each awarded nominal damages of P30,000 for the violation of their
right to procedural due process. Legal interest at the rate of 6% per annum is imposed on the award of damages
from the finality of this Decision until full payment.

SO ORDERED.chanRoblesvirtualLawlibrary