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LABOR CASES (1-9)

1. PEDRO CHAVEZ, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, SUPREME


PACKAGING, INC. and ALVIN LEE, Plant Manager, respondents, G.R. No. 146530. January 17, 2005

DECISION
CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari of the Resolution[1] dated December 15, 2000 of the
Court of Appeals (CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485. The assailed
resolution reinstated the Decision dated July 10, 1998 of the National Labor Relations Commission (NLRC),
dismissing the complaint for illegal dismissal filed by herein petitioner Pedro Chavez. The said NLRC decision
similarly reversed its earlier Decision dated January 27, 1998 which, affirming that of the Labor Arbiter, ruled
that the petitioner had been illegally dismissed by respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons and other
packaging materials for export and distribution. It engaged the services of the petitioner, Pedro Chavez, as
truck driver on October 25, 1984. As such, the petitioner was tasked to deliver the respondent companys
products from its factory in Mariveles, Bataan, to its various customers, mostly in Metro Manila. The
respondent company furnished the petitioner with a truck. Most of the petitioners delivery trips were made at
nighttime, commencing at 6:00 p.m. from Mariveles, and returning thereto in the afternoon two or three days
after. The deliveries were made in accordance with the routing slips issued by respondent company indicating
the order, time and urgency of delivery. Initially, the petitioner was paid the sum of P350.00 per trip. This was
later adjusted to P480.00 per trip and, at the time of his alleged dismissal, the petitioner was receiving P900.00
per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent companys plant
manager, his (the petitioners) desire to avail himself of the benefits that the regular employees were receiving
such as overtime pay, nightshift differential pay, and 13th month pay, among others. Although he promised to
extend these benefits to the petitioner, respondent Lee failed to actually do so.
On February 20, 1995, the petitioner filed a complaint for regularization with the Regional Arbitration
Branch No. III of the NLRC in San Fernando, Pampanga. Before the case could be heard, respondent
company terminated the services of the petitioner. Consequently, on May 25, 1995, the petitioner filed an
amended complaint against the respondents for illegal dismissal, unfair labor practice and non-payment of
overtime pay, nightshift differential pay, 13th month pay, among others. The case was docketed as NLRC
Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-employee relationship between the
respondent company and the petitioner. They averred that the petitioner was an independent contractor as
evidenced by the contract of service which he and the respondent company entered into. The said contract
provided as follows:

That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and the Contractor
[referring to Pedro Chavez], by nature of their specialized line or service jobs, accepts the services to be
rendered to the Principal, under the following terms and covenants heretofore mentioned:

1. That the inland transport delivery/hauling activities to be performed by the contractor to the
principal, shall only cover travel route from Mariveles to Metro Manila. Otherwise, any change to
this travel route shall be subject to further agreement by the parties concerned.
2. That the payment to be made by the Principal for any hauling or delivery transport services fully
rendered by the Contractor shall be on a per trip basis depending on the size or classification of
the truck being used in the transport service, to wit:
a) If the hauling or delivery service shall require a truck of six wheeler, the payment on a per trip basis
from Mariveles to Metro Manila shall be THREE HUNDRED PESOS (P300.00) and EFFECTIVE
December 15, 1984.

b) If the hauling or delivery service require a truck of ten wheeler, the payment on a per trip basis,
following the same route mentioned, shall be THREE HUNDRED FIFTY (P350.00) Pesos and
Effective December 15, 1984.

3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least two (2) helpers;
4. The Contractor shall exercise direct control and shall be responsible to the Principal for the cost of
any damage to, loss of any goods, cargoes, finished products or the like, while the same are in
transit, or due to reckless [sic] of its men utilized for the purpose above mentioned;
5. That the Contractor shall have absolute control and disciplinary power over its men working for him
subject to this agreement, and that the Contractor shall hold the Principal free and harmless from
any liability or claim that may arise by virtue of the Contractors non-compliance to the existing
provisions of the Minimum Wage Law, the Employees Compensation Act, the Social Security
System Act, or any other such law or decree that may hereafter be enacted, it being clearly
understood that any truck drivers, helpers or men working with and for the Contractor, are not
employees who will be indemnified by the Principal for any such claim, including damages incurred
in connection therewith;
6. This contract shall take effect immediately upon the signing by the parties, subject to renewal on a
year-to-year basis.[2]
This contract of service was dated December 12, 1984. It was subsequently renewed twice, on July 10,
1989 and September 28, 1992. Except for the rates to be paid to the petitioner, the terms of the contracts were
substantially the same. The relationship of the respondent company and the petitioner was allegedly governed
by this contract of service.
The respondents insisted that the petitioner had the sole control over the means and methods by which
his work was accomplished. He paid the wages of his helpers and exercised control over them. As such, the
petitioner was not entitled to regularization because he was not an employee of the respondent company. The
respondents, likewise, maintained that they did not dismiss the petitioner. Rather, the severance of his
contractual relation with the respondent company was due to his violation of the terms and conditions of their
contract. The petitioner allegedly failed to observe the minimum degree of diligence in the proper maintenance
of the truck he was using, thereby exposing respondent company to unnecessary significant expenses of
overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision dated
February 3, 1997, finding the respondents guilty of illegal dismissal. The Labor Arbiter declared that the
petitioner was a regular employee of the respondent company as he was performing a service that was
necessary and desirable to the latters business. Moreover, it was noted that the petitioner had discharged his
duties as truck driver for the respondent company for a continuous and uninterrupted period of more than ten
years.
The contract of service invoked by the respondents was declared null and void as it constituted a
circumvention of the constitutional provision affording full protection to labor and security of tenure. The Labor
Arbiter found that the petitioners dismissal was anchored on his insistent demand to be regularized. Hence, for
lack of a valid and just cause therefor and for their failure to observe the due process requirements, the
respondents were found guilty of illegal dismissal. The dispositive portion of the Labor Arbiters decision states:

WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent SUPREME
PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with business address at BEPZ, Mariveles, Bataan
guilty of illegal dismissal, ordering said respondent to pay complainant his separation pay equivalent to one (1)
month pay per year of service based on the average monthly pay of P10,800.00 in lieu of reinstatement as his
reinstatement back to work will not do any good between the parties as the employment relationship has
already become strained and full backwages from the time his compensation was withheld on February 23,
1995 up to January 31, 1997 (cut-off date) until compliance, otherwise, his backwages shall continue to run.
Also to pay complainant his 13th month pay, night shift differential pay and service incentive leave pay
hereunder computed as follows:

a) Backwages .. P248,400.00
b) Separation Pay .... P140,400.00
c) 13th month pay .P 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL P401,640.00

Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorneys fees.

SO ORDERED.[3]

The respondents seasonably interposed an appeal with the NLRC. However, the appeal was dismissed by
the NLRC in its Decision[4] dated January 27, 1998, as it affirmed in toto the decision of the Labor Arbiter. In
the said decision, the NLRC characterized the contract of service between the respondent company and the
petitioner as a scheme that was resorted to by the respondents who, taking advantage of the petitioners
unfamiliarity with the English language and/or legal niceties, wanted to evade the effects and implications of his
becoming a regularized employee.[5]
The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting thereon,
the NLRC rendered another Decision[6] dated July 10, 1998, reversing its earlier decision and, this time,
holding that no employer-employee relationship existed between the respondent company and the petitioner.
In reconsidering its earlier decision, the NLRC stated that the respondents did not exercise control over the
means and methods by which the petitioner accomplished his delivery services. It upheld the validity of the
contract of service as it pointed out that said contract was silent as to the time by which the petitioner was to
make the deliveries and that the petitioner could hire his own helpers whose wages would be paid from his
own account. These factors indicated that the petitioner was an independent contractor, not an employee of
the respondent company.
The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the Labor Code
on the regularization of employees. Said contract, including the fixed period of employment contained therein,
having been knowingly and voluntarily entered into by the parties thereto was declared valid citing Brent
School, Inc. v. Zamora.[7] The NLRC, thus, dismissed the petitioners complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the NLRC in its
Resolution dated September 7, 1998. He then filed with this Court a petition for certiorari, which was referred to
the CA following the ruling in St. Martin Funeral Home v. NLRC.[8]
The appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998 Decision of
the NLRC and reinstating the decision of the Labor Arbiter. In the said decision, the CA ruled that the petitioner
was a regular employee of the respondent company because as its truck driver, he performed a service that
was indispensable to the latters business. Further, he had been the respondent companys truck driver for ten
continuous years. The CA also reasoned that the petitioner could not be considered an independent contractor
since he had no substantial capital in the form of tools and machinery. In fact, the truck that he drove belonged
to the respondent company. The CA also observed that the routing slips that the respondent company issued
to the petitioner showed that it exercised control over the latter. The routing slips indicated the chronological
order and priority of delivery, the urgency of certain deliveries and the time when the goods were to be
delivered to the customers.
The CA, likewise, disbelieved the respondents claim that the petitioner abandoned his job noting that he
just filed a complaint for regularization. This actuation of the petitioner negated the respondents allegation that
he abandoned his job. The CA held that the respondents failed to discharge their burden to show that the
petitioners dismissal was for a valid and just cause. Accordingly, the respondents were declared guilty of illegal
dismissal and the decision of the Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent company
and the petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent workers from attaining the
status of regular employment, it is but necessary for the courts to scrutinize with extreme caution their legality
and justness. Where from the circumstances it is apparent that a contract has been entered into to preclude
acquisition of tenurial security by the employee, they should be struck down and disregarded as contrary to
public policy and morals. In this case, the contract of service is just another attempt to exploit the unwitting
employee and deprive him of the protection of the Labor Code by making it appear that the stipulations of the
parties were governed by the Civil Code as in ordinary transactions.[9]

However, on motion for reconsideration by the respondents, the CA made a complete turn around as it
rendered the assailed Resolution dated December 15, 2000 upholding the contract of service between the
petitioner and the respondent company. In reconsidering its decision, the CA explained that the extent of
control exercised by the respondents over the petitioner was only with respect to the result but not to the
means and methods used by him. The CA cited the following circumstances: (1) the respondents had no say
on how the goods were to be delivered to the customers; (2) the petitioner had the right to employ workers who
would be under his direct control; and (3) the petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than ten years was, according
to the CA, of no moment because his status was determined not by the length of service but by the contract of
service. This contract, not being contrary to morals, good customs, public order or public policy, should be
given the force and effect of law as between the respondent company and the petitioner. Consequently, the CA
reinstated the July 10, 1998 Decision of the NLRC dismissing the petitioners complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution of the
appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO
EXCESS OF JURISDICTION IN GIVING MORE CONSIDERATION TO THE CONTRACT OF SERVICE
ENTERED INTO BY PETITIONER AND PRIVATE RESPONDENT THAN ARTICLE 280 OF THE LABOR
CODE OF THE PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT
NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND REGARDLESS OF THE
ORAL AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO
EXCESS OF JURISDICTION IN REVERSING ITS OWN FINDINGS THAT PETITIONER IS A REGULAR
EMPLOYEE AND IN HOLDING THAT THERE EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN PRIVATE RESPONDENT AND PETITIONER IN AS MUCH AS THE CONTROL TEST
WHICH IS CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE EXISTENCE OF
SAID RELATIONSHIP IS NOT PRESENT.[10]
The threshold issue that needs to be resolved is whether there existed an employer-employee relationship
between the respondent company and the petitioner. We rule in the affirmative.
The elements to determine the existence of an employment relationship are: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employers
power to control the employees conduct.[11] The most important element is the employers control of the
employees conduct, not only as to the result of the work to be done, but also as to the means and methods to
accomplish it.[12] All the four elements are present in this case.
First. Undeniably, it was the respondents who engaged the services of the petitioner without the
intervention of a third party.
Second. Wages are defined as remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for service rendered or to be rendered. [13] That the
petitioner was paid on a per trip basis is not significant. This is merely a method of computing compensation
and not a basis for determining the existence or absence of employer-employee relationship. One may be paid
on the basis of results or time expended on the work, and may or may not acquire an employment status,
depending on whether the elements of an employer-employee relationship are present or not.[14] In this case, it
cannot be gainsaid that the petitioner received compensation from the respondent company for the services
that he rendered to the latter.
Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his
employees by means of payroll.[15] The payroll should show, among other things, the employees rate of pay,
deductions made, and the amount actually paid to the employee. Interestingly, the respondents did not present
the payroll to support their claim that the petitioner was not their employee, raising speculations whether this
omission proves that its presentation would be adverse to their case.[16]
Third. The respondents power to dismiss the petitioner was inherent in the fact that they engaged the
services of the petitioner as truck driver. They exercised this power by terminating the petitioners services
albeit in the guise of severance of contractual relation due allegedly to the latters breach of his contractual
obligation.
Fourth. As earlier opined, of the four elements of the employer-employee relationship, the control test is
the most important. Compared to an employee, an independent contractor is one who carries on a distinct and
independent business and undertakes to perform the job, work, or service on its own account and under its
own responsibility according to its own manner and method, free from the control and direction of the principal
in all matters connected with the performance of the work except as to the results thereof. [17] Hence, while an
independent contractor enjoys independence and freedom from the control and supervision of his principal, an
employee is subject to the employers power to control the means and methods by which the employees work
is to be performed and accomplished.[18]
Although the respondents denied that they exercised control over the manner and methods by which the
petitioner accomplished his work, a careful review of the records shows that the latter performed his work as
truck driver under the respondents supervision and control. Their right of control was manifested by the
following attendant circumstances:

1. The truck driven by the petitioner belonged to respondent company;

2. There was an express instruction from the respondents that the truck shall be used exclusively to deliver
respondent companys goods; [19]

3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either of two
specific places only, to wit: at its office in Metro Manila at 2320 Osmea Street, Makati City or at BEPZ,
Mariveles, Bataan;[20] and

4. Respondents determined how, where and when the petitioner would perform his task by issuing to him gate
passes and routing slips. [21]

a. The routing slips indicated on the column REMARKS, the chronological order and priority of delivery such as
1st drop, 2nd drop, 3rd drop, etc. This meant that the petitioner had to deliver the same according to the order of
priority indicated therein.

b. The routing slips, likewise, showed whether the goods were to be delivered urgently or not by the word
RUSH printed thereon.

c. The routing slips also indicated the exact time as to when the goods were to be delivered to the customers
as, for example, the words tomorrow morning was written on slip no. 2776.

These circumstances, to the Courts mind, prove that the respondents exercised control over the means
and methods by which the petitioner accomplished his work as truck driver of the respondent company. On the
other hand, the Court is hard put to believe the respondents allegation that the petitioner was an independent
contractor engaged in providing delivery or hauling services when he did not even own the truck used for such
services. Evidently, he did not possess substantial capitalization or investment in the form of tools, machinery
and work premises. Moreover, the petitioner performed the delivery services exclusively for the respondent
company for a continuous and uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual circumstances earlier discussed
indubitably establish the existence of an employer-employee relationship between the respondent company
and the petitioner. It bears stressing that the existence of an employer-employee relationship cannot be
negated by expressly repudiating it in a contract and providing therein that the employee is an independent
contractor when, as in this case, the facts clearly show otherwise. Indeed, the employment status of a person
is defined and prescribed by law and not by what the parties say it should be.[22]
Having established that there existed an employer-employee relationship between the respondent
company and the petitioner, the Court shall now determine whether the respondents validly dismissed the
petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a valid and just cause.[23] In
this case, the respondents failed to prove any such cause for the petitioners dismissal. They insinuated that the
petitioner abandoned his job. To constitute abandonment, these two factors must concur: (1) the failure to
report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-
employee relationship.[24] Obviously, the petitioner did not intend to sever his relationship with the respondent
company for at the time that he allegedly abandoned his job, the petitioner just filed a complaint for
regularization, which was forthwith amended to one for illegal dismissal. A charge of abandonment is totally
inconsistent with the immediate filing of a complaint for illegal dismissal, more so when it includes a prayer for
reinstatement.[25]
Neither can the respondents claim that the petitioner was guilty of gross negligence in the proper
maintenance of the truck constitute a valid and just cause for his dismissal. Gross negligence implies a want or
absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any effort to avoid them. [26] The negligence, to warrant removal
from service, should not merely be gross but also habitual.[27] The single and isolated act of the petitioners
negligence in the proper maintenance of the truck alleged by the respondents does not amount to gross and
habitual neglect warranting his dismissal.
The Court agrees with the following findings and conclusion of the Labor Arbiter:

As against the gratuitous allegation of the respondent that complainant was not dismissed from the service but
due to complainants breach of their contractual relation, i.e., his violation of the terms and conditions of the
contract, we are very much inclined to believe complainants story that his dismissal from the service was
anchored on his insistent demand that he be considered a regular employee. Because complainant in his right
senses will not just abandon for that reason alone his work especially so that it is only his job where he
depends chiefly his existence and support for his family if he was not aggrieved by the respondent when he
was told that his services as driver will be terminated on February 23, 1995.[28]

Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his dismissal
illegal. Under Article 279 of the Labor Code, an employee who is unjustly dismissed is entitled to
reinstatement, without loss of seniority rights and other privileges, and to the payment of full backwages,
inclusive of allowances, and other benefits or their monetary equivalent, computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.[29] However, as found by the
Labor Arbiter, the circumstances obtaining in this case do not warrant the petitioners reinstatement. A more
equitable disposition, as held by the Labor Arbiter, would be an award of separation pay equivalent to one
month for every year of service from the time of his illegal dismissal up to the finality of this judgment in
addition to his full backwages, allowances and other benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of the Court of
Appeals reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is REVERSED and SET ASIDE.
The Decision dated February 3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding the
respondents guilty of illegally terminating the employment of petitioner Pedro Chavez, is REINSTATED.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.
2. JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent, G.R. No.
138051. June 10, 2004

Before this Court is a petition for review on certiorari[1] assailing the 26 March 1999 Decision[2] of the Court
of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza (SONZA). The Court of
Appeals affirmed the findings of the National Labor Relations Commission (NLRC), which affirmed the Labor
Arbiters dismissal of the case for lack of jurisdiction.

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an Agreement


(Agreement) with the Mel and Jay Management and Development Corporation (MJMDC). ABS-CBN was
represented by its corporate officers while MJMDC was represented by SONZA, as President and General
Manager, and Carmela Tiangco (TIANGCO), as EVP and Treasurer. Referred to in the Agreement as AGENT,
MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio and television. The
Agreement listed the services SONZA would render to ABS-CBN, as follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]

ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year
and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on the
10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf
of ABS-CBN with our company relative to our talent JOSE Y. SONZA.

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and
career. We consider these acts of the station violative of the Agreement and the station as in breach thereof. In
this connection, we hereby serve notice of rescission of said Agreement at our instance effective as of date.

Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said
Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and
Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his
salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel allowance and
amounts due under the Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee
relationship existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank,
Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank
where ABS-CBN deposited SONZAs talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to dismiss and directed the
parties to file their respective position papers. The Labor Arbiter ruled:

In this instant case, complainant for having invoked a claim that he was an employee of respondent company
until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over
the instant case in this Office. And as to whether or not such claim would entitle complainant to recover upon
the causes of action asserted is a matter to be resolved only after and as a result of a hearing. Thus, the
respondents plea of lack of employer-employee relationship may be pleaded only as a matter of defense. It
behooves upon it the duty to prove that there really is no employer-employee relationship between it and the
complainant.

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position
papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge
Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses
Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in
the television and broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of
jurisdiction.[6] The pertinent parts of the decision read as follows:

xxx

While Philippine jurisprudence has not yet, with certainty, touched on the true nature of the contract of a talent,
it stands to reason that a talent as above-described cannot be considered as an employee by reason of the
peculiar circumstances surrounding the engagement of his services.

It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent
as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services
he undertook to render in accordance with his own style. The benefits conferred to complainant under the
May 1994 Agreement are certainly very much higher than those generally given to employees. For one,
complainant Sonzas monthly talent fees amount to a staggering P317,000. Moreover, his engagement as a
talent was covered by a specific contract. Likewise, he was not bound to render eight (8) hours of work per day
as he worked only for such number of hours as may be necessary.

The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an
employee is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by
the parties and not by reason of employer-employee relationship. As correctly put by the respondent, All
these benefits are merely talent fees and other contractual benefits and should not be deemed as salaries,
wages and/or other remuneration accorded to an employee, notwithstanding the nomenclature appended to
these benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is not
controlling, but the intent of the parties to the Agreement conferring such benefit.

The fact that complainant was made subject to respondents Rules and Regulations, likewise, does not
detract from the absence of employer-employee relationship. As held by the Supreme Court, The line
should be drawn between rules that merely serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be employed in attaining it, and those that control or
fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which address both the result
and the means to achieve it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15,
1989).

x x x (Emphasis supplied)[7]

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor
Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3
July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing
the decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision
dismissing the case.[8]
Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between
SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted the following findings of the
NLRC:

x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of
complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the
principal itself. This fact is made particularly true in this case, as admittedly MJMDC is a management
company devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela
C. Tiangco. (Opposition to Motion to Dismiss)

Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not
between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which
specifically referred to MJMDC as the AGENT. As a matter of fact, when complainant herein unilaterally
rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr.
Sonza, who himself signed the same in his capacity as President.

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to
the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the
latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as
the agent of Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there exist[s]
employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that
MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the
latter and MJMDC in the May 1994 Agreement.

It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts,
the same being in the nature of an action for alleged breach of contractual obligation on the part of respondent-
appellee. As squarely apparent from complainant-appellants Position Paper, his claims for compensation for
services, 13th month pay, signing bonus and travel allowance against respondent-appellee are not based on
the Labor Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds under
Stock Purchase Agreement are based on the latter. A portion of the Position Paper of complainant-appellant
bears perusal:

Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay
complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED THOUSAND PESOS
(P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the
amount he was receiving prior to effectivity of (the) Agreement.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit
amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.

Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations
with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely
resigning from ABS-CBN, complainant-appellant served upon the latter a notice of rescission of Agreement
with the station, per his letter dated April 1, 1996, which asserted that instead of referring to unpaid employee
benefits, he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the
Agreement but reserves the right to such recovery of the other benefits under said Agreement. (Annex 3 of the
respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).

Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock
Purchase Agreement by respondent-appellee that complainant-appellant filed his complaint.Complainant-
appellants claims being anchored on the alleged breach of contract on the part of respondent-appellee, the
same can be resolved by reference to civil law and not to labor law. Consequently, they are within the realm of
civil law and, thus, lie with the regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs.
Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual obligation is
intrinsically a civil dispute.[9] (Emphasis supplied)

The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and
ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve. [10] A special civil action for
certiorari extends only to issues of want or excess of jurisdiction of the NLRC.[11] Such action cannot cover an
inquiry into the correctness of the evaluation of the evidence which served as basis of the NLRCs
conclusion.[12] The Court of Appeals added that it could not re-examine the parties evidence and substitute the
factual findings of the NLRC with its own.[13]

The Issue

In assailing the decision of the Court of Appeals, SONZA contends that:

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO
FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN,
DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT
SUCH A FINDING.[14]

The Courts Ruling

We affirm the assailed decision.


No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the
NLRC ruling which upheld the Labor Arbiters dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define
clearly the elements of an employer-employee relationship, this is the first time that the Court will resolve the
nature of the relationship between a television and radio station and one of its talents. There is no case law
stating that a radio and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay Sonza, a known
television and radio personality, and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of
ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was
an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts accord the
factual findings of the Labor Arbiter and the NLRC not only respect but also finality when supported by
substantial evidence.[15] Substantial evidence means such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.[16] A party cannot prove the absence of substantial evidence by
simply pointing out that there is contrary evidence on record, direct or circumstantial. The Court does not
substitute its own judgment for that of the tribunal in determining where the weight of evidence lies or what
evidence is credible.[17]
SONZA maintains that all essential elements of an employer-employee relationship are present in this
case. Case law has consistently held that the elements of an employer-employee relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee on the means and methods by which the work is
accomplished.[18] The last element, the so-called control test, is the most important element.[19]

A. Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs
peculiar skills, talent and celebrity status. SONZA contends that the discretion used by respondent in
specifically selecting and hiring complainant over other broadcasters of possibly similar experience and
qualification as complainant belies respondents claim of independent contractorship.
Independent contractors often present themselves to possess unique skills, expertise or talent to
distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of his
unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance
indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such
unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with SONZA
but would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his
status. We must consider all the circumstances of the relationship, with the control test being the most
important element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA
asserts that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out
that ABS-CBN granted him benefits and privileges which he would not have enjoyed if he were truly the subject
of a valid job contract.
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If
SONZA were ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as
SSS, Medicare, x x x and 13th month pay[20] which the law automatically incorporates into every employer-
employee contract.[21] Whatever benefits SONZA enjoyed arose from contract and not because of an
employer-employee relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of
the ordinary that they indicate more an independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZAs unique
skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone
possessed enough bargaining power to demand and receive such huge talent fees for his services. The power
to bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as
an independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement,
MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the
Agreement.

C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate their relationship. SONZA
failed to show that ABS-CBN could terminate his services on grounds other than breach of contract, such as
retrenchment to prevent losses as provided under labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as AGENT and Jay
Sonza shall faithfully and completely perform each condition of this Agreement.[24] Even if it suffered severe
business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZAs
talent fees during the life of the Agreement. This circumstance indicates an independent contractual
relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his
talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZAs talent
fees during the remaining life of the Agreement even if ABS-CBN cancelled SONZAs programs through no
fault of SONZA.[25]
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that
he is not an employee of ABS-CBN. The Labor Arbiter stated that if it were true that complainant was really an
employee, he would merely resign, instead. SONZA did actually resign from ABS-CBN but he also, as
president of MJMDC, rescinded the Agreement.SONZAs letter clearly bears this out. [26] However, the manner
by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the
Agreement or resigned from work does not determine his status as employee or independent contractor.

D. Power of Control

Since there is no local precedent on whether a radio and television program host is an employee or an
independent contractor, we refer to foreign case law in analyzing the present case. The United States Court of
Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica
(WIPR)[27] that a television program host is an independent contractor. We quote the following findings of
the U.S. court:

Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled
position requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a
masters degree in public communications and journalism; is trained in dance, singing, and modeling; taught
with the drama department at the University of Puerto Rico; and acted in several theater and television
productions prior to her affiliation with Desde Mi Pueblo. Second, Alberty provided the tools and
instrumentalities necessary for her to perform. Specifically, she provided, or obtained sponsors to provide,
the costumes, jewelry, and other image-related supplies and services necessary for her appearance. Alberty
disputes that this factor favors independent contractor status because WIPR provided the equipment
necessary to tape the show. Albertys argument is misplaced. The equipment necessary for Alberty to
conduct her job as host of Desde Mi Pueblo related to her appearance on the show. Others provided
equipment for filming and producing the show, but these were not the primary tools that Alberty used to
perform her particular function. If we accepted this argument, independent contractors could never work on
collaborative projects because other individuals often provide the equipment required for different aspects of
the collaboration. x x x

Third, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo. Albertys contracts
with WIPR specifically provided that WIPR hired her professional services as Hostess for the Program Desde
Mi Pueblo. There is no evidence that WIPR assigned Alberty tasks in addition to work related to these
tapings. x x x[28] (Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an employee but an independent
contractor. The control test is the most important test our courts apply in distinguishing an employee from an
independent contractor.[29] This test is based on the extent of control the hirer exercises over a worker. The
greater the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The
converse holds true as well the less control the hirer exercises, the more likely the worker is considered an
independent contractor.[30]
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the Mel &
Jay programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed
his skills and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were
outside ABS-CBNs control. SONZA did not have to render eight hours of work per day. The Agreement
required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and post-production staff
meetings.[31] ABS-CBN could not dictate the contents of SONZAs script. However, the Agreement prohibited
SONZA from criticizing in his shows ABS-CBN or its interests.[32] The clear implication is that SONZA had a
free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of
SONZAs work.[33] ABS-CBN did not instruct SONZA how to perform his job.ABS-CBN merely reserved the right
to modify the program format and airtime schedule for more effective programming.[34] ABS-CBNs sole concern
was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over
the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the
means and methods of the performance of his work. Although ABS-CBN did have the option not to broadcast
SONZAs show, ABS-CBN was still obligated to pay SONZAs talent fees. Thus, even if ABS-CBN was
completely dissatisfied with the means and methods of SONZAs performance of his work, or even with the
quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could
do is not to broadcast SONZAs show but ABS-CBN must still pay his talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue
paying in full SONZAs talent fees, did not amount to control over the means and methods of the performance
of SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of
performance of his work - how he delivered his lines and appeared on television - did not meet ABS-CBNs
approval. This proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to
broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the
expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals ruled that vaudeville
performers were independent contractors although the management reserved the right to delete objectionable
features in their shows. Since the management did not have control over the manner of performance of the
skills of the artists, it could only control the result of the work by deleting objectionable features. [37]
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and
crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the Mel & Jay
programs. However, the equipment, crew and airtime are not the tools and instrumentalities SONZA needed to
perform his job. What SONZA principally needed were his talent or skills and the costumes necessary for his
appearance. [38] Even though ABS-CBN provided SONZA with the place of work and the necessary equipment,
SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs
sole concern was for SONZA to display his talent during the airing of the programs.[39]
A radio broadcast specialist who works under minimal supervision is an independent
contractor.[40] SONZAs work as television and radio program host required special skills and talent, which
SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision and control
over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to
its rules and standards of performance. SONZA claims that this indicates ABS-CBNs control not only [over] his
manner of work but also the quality of his work.
The Agreement stipulates that SONZA shall abide with the rules and standards of performance covering
talents[41] of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under the
Agreement refers to the Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP),
which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics.[42] The KBP code applies to
broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of
radio and television stations. Clearly, the rules and standards of performance referred to in the Agreement are
those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former.[43] In this case, SONZA failed to show that these rules controlled his performance. We
find that these general rules are merely guidelines towards the achievement of the mutually desired result,
which are top-rating television and radio programs that comply with standards of the industry. We have ruled
that:

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation
to the services being rendered may be accorded the effect of establishing an employer-employee relationship.
The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we
held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which
aim only to promote the result, create no employer-employee relationship unlike the second, which address
both the result and the means used to achieve it.[44]

The Vaughan case also held that one could still be an independent contractor although the hirer reserved
certain supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one
hired from performing his services according to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme form of control
which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of
ABS-CBN. Even an independent contractor can validly provide his services exclusively to the hiring party. In
the broadcast industry, exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. [46] This
practice is not designed to control the means and methods of work of the talent, but simply to protect the
investment of the broadcast station. The broadcast station normally spends substantial amounts of money,
time and effort in building up its talents as well as the programs they appear in and thus expects that said
talents remain exclusive with the station for a commensurate period of time. [47] Normally, a much higher fee is
paid to talents who agree to work exclusively for a particular radio or television station. In short, the huge talent
fees partially compensates for exclusivity, as in the present case.

MJMDC as Agent of SONZA


SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services
to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-
CBN. SONZA insists that MJMDC is a labor-only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2) the employee
who is ostensibly under the employ of the labor-only contractor; and (3) the principal who is deemed the real
employer. Under this scheme, the labor-only contractor is the agent of the principal. The law makes the
principal responsible to the employees of the labor-only contractor as if the principal itself directly hired or
employed the employees.[48] These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN.
MJMDC merely acted as SONZAs agent. The Agreement expressly states that MJMDC acted as the AGENT
of SONZA. The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel
and Jay Management and Development Corporation, is a corporation organized and owned by SONZA and
TIANGCO. The President and General Manager of MJMDC is SONZA himself. It is absurd to hold that
MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering
into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent
of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of
SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job
contracting. MJMDC does not have any other function apart from acting as agent of SONZA or TIANGCO to
promote their careers in the broadcast and television industry.[49]

Policy Instruction No. 40

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

Affidavits of ABS-CBNs Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz
without giving his counsel the opportunity to cross-examine these witnesses.SONZA brands these witnesses
as incompetent to attest on the prevailing practice in the radio and television industry. SONZA views the
affidavits of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or
refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-
type) hearing after the submission of the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx

These verified position papers shall cover only those claims and causes of action raised in the complaint
excluding those that may have been amicably settled, and shall be accompanied by all supporting documents
including the affidavits of their respective witnesses which shall take the place of the latters direct testimony. x
xx

Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their
position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal
trial or hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask
clarificatory questions to further elicit facts or information, including but not limited to the subpoena of relevant
documentary evidence, if any from any party or witness.[50]

The Labor Arbiter can decide a case based solely on the position papers and the supporting documents
without a formal trial.[51] The holding of a formal hearing or trial is something that the parties cannot demand as
a matter of right.[52] If the Labor Arbiter is confident that he can rely on the documents before him, he cannot be
faulted for not conducting a formal trial, unless under the particular circumstances of the case, the documents
alone are insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the
requirements of due process, the technicalities of law and the rules obtaining in the courts of law do not strictly
apply in proceedings before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to
treat talents like SONZA as independent contractors. SONZA argues that if such practice exists, it is void for
violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution [53] arises only if there is an
employer-employee relationship under labor laws. Not every performance of services for a fee creates an
employer-employee relationship. To hold that every person who renders services to another for a fee is an
employee - to give meaning to the security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent
contractors. The right to life and livelihood guarantees this freedom to contract as independent
contractors. The right of labor to security of tenure cannot operate to deprive an individual, possessed with
special skills, expertise and talent, of his right to contract as an independent contractor. An individual like an
artist or talent has a right to render his services without any one controlling the means and methods by which
he performs his art or craft. This Court will not interpret the right of labor to security of tenure to compel artists
and talents to render their services only as employees. If radio and television program hosts can render their
services only as employees, the station owners and managers can dictate to the radio and television hosts
what they say in their shows. This is not conducive to freedom of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No. 7716,[55] as amended by
Republic Act No. 8241,[56] treats talents, television and radio broadcasters differently. Under the NIRC, these
professionals are subject to the 10% value-added tax (VAT) on services they render. Exempted from the VAT
are those under an employer-employee relationship.[57] This different tax treatment accorded to talents and
broadcasters bolters our conclusion that they are independent contractors, provided all the basic elements of a
contractual relationship are present as in this case.

Nature of SONZAs Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service
incentive leave, signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We
agree with the findings of the Labor Arbiter and the Court of Appeals that SONZAs claims are all based on the
May 1994 Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does
not call for an application of the Labor Code provisions but an interpretation and implementation of the May
1994 Agreement. In effect, SONZAs cause of action is for breach of contract which is intrinsically a civil dispute
cognizable by the regular courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March
1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
3. G.R. No. 182018 October 10, 2012

NORKIS TRADING CORPORATION, Petitioner,


vs.
JOAQUIN BUENA VISTA, HENRY FABROA, RICARDO CAPE, BERTULDO TULOD, WILLY DONDOY
ANO and GLEN VILLARASA, Respondents.

DECISION

REYES, J.:

Before us is a Petition for Review on Certiorari filed by petitioner Norkis Trading Corporation (Norkis Trading)
to assail the Decision1 dated May 7, 2007 and Resolution2 dated March 4, 2008 of the Court of Appeals (CA) in
CA-G.R. SP No. 84041.

The Facts

The petition stems from an amended complaint for illegal suspension, illegal dismissal, unfair labor practice
and other monetary claims filed with the National Labor Relations Commission (NLRC) by herein respondents
Joaquin Buenavista (Buenavista), Henry Fabroa (Fabroa), Ricardo Cape (Cape), Bertuldo Tulod (Tulod), Willy
Dondoyano (Dondoyano) and Glen Villariasa (Villariasa) against Norkis Trading and Panaghiusa sa
Kauswagan Multi-Purpose Cooperative (PASAKA). The complaint was docketed as NLRC-RAB-VII Case No.
09-1402-99.

During the proceedings a quo, herein respondents submitted the following averments:

The respondents were hired by Norkis Trading, a domestic corporation engaged in the business of
manufacturing and marketing of Yamaha motorcycles and multi-purpose vehicles, on separate dates and for
various positions, particularly:

Name Date of Hiring Position


Joaquin Buenavista March 14, 1994 Operator
Henry Fabroa January 5, 1993 Welder
Ricardo Cape January 1993 Welder/Operator
Bertuldo Tulod November 13, 1994 Welder/Assistant Operator
Willy Dondoyano January 1993 Welder
Glen Villariasa February 1993 Welder3

Although they worked for Norkis Trading as skilled workers assigned in the operation of industrial and welding
machines owned and used by Norkis Trading for its business, they were not treated as regular employees by
Norkis Trading. Instead, they were regarded by Norkis Trading as members of PASAKA, a cooperative
organized under the Cooperative Code of the Philippines, and which was deemed an independent contractor
that merely deployed the respondents to render services for Norkis Trading.4 The respondents nonetheless
believed that they were regular employees of Norkis Trading, citing in their Position Paper 5 the following
circumstances that allegedly characterized their employment with the company:

The work of the operators involves operating industrial machines, such as, press machine, hydraulic machine,
and spotweld machine. On the other hand, the welders used the welding machines. The machines used by
complainants herein respondents in their work are all owned by respondent Norkis Trading herein petitioner
and these are installed and located in the working area of the complainants inside the companys premises.
The complainants produced steel crates which are exported directly by respondent Norkis Trading to Japan.
These crates are used as containers of motorcycle machines and are shipped from Japan back to respondent
Norkis Trading.

The materials and supplies used by complainants in their work are supplied by respondent Norkis Trading
through Benjamin Gulbin, the companys Stockman, upon the request of Tirso Maslog, a Leadman also
employed by respondent Norkis Trading.

Respondent Norkis Trading gave instructions and supervised the work of complainants through Edwin Ponce
and Kiven Alilin, who are both Leadmen, and Rico Cabanas, who is the Production Supervisor, of the former.

The salaries of complainants are paid inside the premises of respondent Norkis Trading by Dalia Rojo and
Belen Rubio, who are also employees of the said company assigned at the accounting office.

Despite having served respondent Norkis Trading for many years and performing the same functions as
regular employees, complainants were not accorded regular status. It was made to appear that complainants
are not employees of said company but that of respondent PASAKA.6

Against the foregoing scenario, the respondents, together with several other complainants,7 filed on June 9,
1999 with the Department of Labor and Employment (DOLE) a complaint against Norkis Trading and PASAKA
for labor-only contracting and non-payment of minimum wage and overtime pay. The complaint was docketed
as LSED Case No. RO700-9906-CI-CS-168.

The filing of the complaint for labor-only contracting allegedly led to the suspension of the respondents
membership with PASAKA. On July 22, 1999, they were served by PASAKA with memoranda charging them
with a violation of the rule against commission of acts injurious or prejudicial to the interest or welfare of the
cooperative. The memoranda cited that the respondents filing of a case against Norkis Trading had greatly
prejudiced the interest and welfare of the cooperative.8 In their answer9 to the memoranda, the respondents
explained that they merely wanted to be recognized as regular employees of Norkis Trading. The case records
include copies of the memoranda sent to respondents Buenavista, Fabroa and Dondoyano.10

On August 16, 1999, the respondents received another set of memoranda from PASAKA, now charging them
with the following violations of the cooperatives rules and regulations: (1) serious misconduct or willful
disobedience of superiors instructions or orders; (2) gross and habitual neglect of duties by abandoning work
without permission; (3) absences without filing leave of absence; and (4) wasting time or loitering on
companys time or leaving their post temporarily without permission during office hours. 11 Copies of the
memoranda12 sent to Fabroa and Cape form part of the records.

On August 26, 1999, PASAKA informed the respondents of the cooperatives decision to suspend them for
fifteen (15) working days, to be effective from September 1 to 21, 1999, for violation of PASAKA rules.

The records include copies of the memoranda13 sent to Fabroa and Cape. The suspension prompted the
respondents to file with the NLRC the complaint for illegal suspension against Norkis Trading and PASAKA.

The 15-day suspension of the respondents was extended for another period of 15 days, from September 22,
1999 to October 12, 1999.14 Copies of PASAKAs separate letters15 to Buenavista, Fabroa, Cape and
Dondoyano on the cooperatives decision to extend the suspension form part of the records.

On October 13, 1999, the respondents were to report back to work but during the hearing in their NLRC case,
they were informed by PASAKA that they would be transferred to Norkis Tradings sister company, Porta Coeli
Industrial Corporation (Porta Coeli), as washers of Multicab vehicles.

The respondents opposed the transfer as it would allegedly result in a change of employers, from Norkis
Trading to Porta Coeli. The respondents also believed that the transfer would result in a demotion since from
being skilled workers in Norkis Trading, they would be reduced to being utility workers.These circumstances
made the respondents amend their complaint for illegal suspension, to include the charges of unfair labor
practice, illegal dismissal, damages and attorneys fees.

For their part, both Norkis Trading and PASAKA claimed that the respondents were not employees of Norkis
Trading. They insisted that the respondents were members of PASAKA, which served as an independent
contractor that merely supplied services to Norkis International Co., Inc. (Norkis International) pursuant to a job
contract16which PASAKA and Norkis International executed on January 14, 1999 for 121,500 pieces of F/GF-
Series Reinforcement Production. After PASAKA received reports from its coordinator at Norkis International of
the respondents low efficiency and violation of the cooperatives rules, and after giving said respondents the
chance to present their side, a penalty of suspension was imposed upon them by the cooperative. The illegal
suspension being complained of was then not linked to the respondents employment, but to their membership
with PASAKA.

Norkis Trading stressed that the respondents were deployed by PASAKA to Norkis International, a company
that is entirely separate and distinct from Norkis Trading.

The Ruling of the Labor Arbiter

On June 1, 2000, Labor Arbiter Jose G. Gutierrez (LA Gutierrez) dismissed the complaint via a Decision 17 with
decretal portion that reads:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered DISMISSING this case for
lack of merit. Complainants herein respondents are however directed to report back to respondent PASAKA for
work assignment within ten (10) days from receipt of this decision. Likewise, respondent PASAKA is directed to
accept the complainants back for work.

SO ORDERED.18

LA Gutierrez sustained the suspension imposed by PASAKA upon the respondents, taking into account the
offenses that the said respondents were found to have committed. He likewise rejected the respondents claim
of illegal dismissal. He ruled that to begin with, the respondents had failed to prove with convincing evidence
that they were dismissed from employment. The Decision reads in part:

Before the legality or illegality of a dismissal can be put in issue, the fact of dismissal itself must, first, be clearly
established. In the instant case, We find that complainants herein respondents failed to prove with convincing
evidence the fact that they were dismissed from employment. This observation is derived from their very own
allegation in their position paper. The first paragraph of page 5 of the complainants position paper clearly
shows that they were not yet dismissed from their employment. The said paragraph states:

"Convinced that the company is bent on terminating their services, complainants amended their complaint to
include the charges of unfair labor practice, illegal dismissal, damages and attorneys fees."

The truth, as the record would show is that, complainants were only offered another post in order to save the
contractual relations between their cooperative and Norkis Trading as the latter finds the complainants
performance not satisfactory. The complainants took this offer as a demotion amounting to dismissal. We do
not however, agree as their transfer to another post was only the best option available in order to save the
contractual relations between their cooperative (PASAKA) and Norkis Trading.19

The allegation of unfair labor practice and claim for monetary awards were likewise rejected by the LA. Feeling
aggrieved, the respondents appealed from the decision of the LA to the NLRC.

In the meantime, DOLE Regional Director Melencio Q. Balanag (Regional Director Balanag) issued on August
22, 2000 his Order20 in LSED Case No. RO700-9906-CI-CS-168. Regional Director Balanag ruled that
PASAKA was engaged in labor-only contracting.21 The other findings in his Order that are significant to this
case are as follows: (1) PASAKA had failed to prove that it had substantial capital; 22 (2) the machineries,
equipment and supplies used by the respondents in the performance of their duties were all owned by Norkis
Trading and not by PASAKA;23 (3) the respondents membership with PASAKA as a cooperative was
inconsequential to their employment with Norkis Trading;24 (4) Norkis Trading and PASAKA failed to prove that
their sub-contracting arrangements were covered by any of the conditions set forth in Section 6 of Department
Order No. 10, Series of 1997;25 (5) Norkis Trading and PASAKA failed to dispute the respondents claim that
their work was supervised by leadmen and production supervisors of Norkis Trading; 26 and (6) Norkis Trading
and PASAKA failed to dispute the respondents allegation that their salaries were paid by employees of Norkis
Trading.27 Norkis Trading and PASAKA were then declared solidarily liable for the monetary claims of therein
complainants, as provided in the dispositive portion of Regional Director Balanags Order, to wit:

WHEREFORE, respondent PANAGHIUSA SA KAUSWAGAN MULTIPURPOSE


COOPERATIVEand/or NORKIS TRADING CORPORATION are hereby ORDERED to pay solidarily the
amount of THREE HUNDRED THIRTEEN THOUSAND THREE HUNDRED FIFTY-FOUR AND 50/100
([P]313,354.50) PESOS, Philippine Currency, within ten (10) calendar days from receipt hereof to herein
complainants x x x:

xxxx

SO ORDERED.28

The respondents informed the NLRC of Regional Director Balanags Order by filing a Manifestation 29 dated
September 11, 2000, attaching thereto a copy of the Order dated August 22, 2000.

It bears mentioning that Regional Director Balanags Order was later affirmed by then DOLE Secretary Patricia
Sto. Tomas (Sec. Sto. Tomas) in her Orders dated February 7, 2002 and October 14, 2002. 30 When the rulings
of the DOLE Secretary were appealed before the CA via the petitions for certiorari docketed as CA-G.R. SP
No. 73880 and CA-G.R. SP No. 74619, the CA affirmed the Orders of the DOLE Secretary. 31 A motion for
reconsideration of the CA decision was denied in a Resolution32 dated October 9, 2007. The two petitions
docketed as G.R. Nos. 180078-79, which were brought before this Court to question the CAs rulings, were
later denied with finality by this Court in the Resolutions dated December 5, 200733 and April 14, 2008.34

The Ruling of the NLRC

On April 18, 2002, the NLRC rendered its Decision35 affirming with modification the decision of LA Gutierrez. It
held that the respondents were not illegally suspended from work, as it was their membership in the
cooperative that was suspended after they were found to have violated the cooperatives rules and regulations.
It also declared that the respondents dismissal was not established by substantial evidence. The NLRC
however declared that the LA had no jurisdiction over the dispute because the respondents were not
employees, but members of PASAKA. The suspension of the respondents as members of PASAKA for alleged
violation of the cooperatives rules and regulations was not a labor dispute, but an intra-corporate
dispute.36 The complaint was also declared to have been filed against the wrong party because the
respondents were found by the NLRC to have been deployed by PASAKA to Norkis International pursuant to a
job contract.

The dispositive portion of the NLRCs Decision reads:

WHEREFORE, the Decision dated June 1, 2000 of the Labor Arbiter is AFFIRMED, with respect to the
DISMISSAL of the complainants herein respondents for lack of merit [sic], but deleting the portion directing the
complainants to report back to respondent PASAKA for work assignment and to accept them back to work
being an internal concern of PASAKA.

SO ORDERED.37

The respondents motion for reconsideration was denied by the NLRC in a Resolution38 dated December 18,
2003. Undaunted, the respondents questioned the NLRCs rulings before the CA via a petition for certiorari.
The Ruling of the CA

Finding merit in the petition for certiorari, the CA rendered its decision reversing and setting aside the decision
and resolution of the NLRC. The dispositive portion of its Decision dated May 7, 2007 reads:

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the NLRC, are hereby
REVERSED and SET ASIDE, and a new judgment is hereby rendered ordering the private respondents to:

(1) Reinstate petitioners to their former positions without loss of seniority rights, and to pay full backwages
inclusive of allowances and their other benefits or their monetary equivalent computed from the time of illegal
dismissal to the time of actual reinstatement; and

(2) Alternatively, if reinstatement is not possible, to pay full backwages inclusive of other benefits or their
monetary equivalent from the time of illegal dismissal until the same is paid in full, and pay petitioners
separation pay equivalent to one months salary for every year of service.

SO ORDERED.39

The CA rejected the argument of PASAKA and Norkis Trading that by virtue of a job contract executed on
January 14, 1999, the respondents were deployed to Norkis International and not to Norkis Trading. The CA
held:

We are not convinced. Private respondents among them, herein petitioner own evidence belie their claim.

In its Comment, NORKIS TRADING attached the Payroll Registers for PANAGHIUSA SA KAUSWAGAN
(PASAKA) MULTIPURPOSE COOPERATIVE-NICI Tin Plate covering the payroll periods "12/28/98-01/07/99"
and "01/08/99-01/14/99". Included among the payees therein were the petitioners herein respondents. x x x
Why were petitioners included in said payrolls for said payroll periods when the supposed Contract with
NORKIS INTERNATIONAL was not yet executed? Apparently, private respondents slipped. Thus, we hold that
the much ballyhooed January 14, 1999 Contract between PASAKA and NORKIS INTERNATIONAL, is but a
mere afterthought, a concoction designed by private respondents to evade their obligations to
petitioners.40 (Citations omitted and emphasis supplied)

The CA also considered Regional Director Balanags finding in LSED Case No. RO700-9906-CI-CS-168 that
PASAKA was engaged in labor-only contracting. In ruling that the respondents were illegally dismissed, the CA
held that Norkis Tradings refusal to accept the respondents back to their former positions, offering them
instead to accept a new assignment as washers of vehicles in its sister company, was a demotion that
amounted to a constructive dismissal.

Norkis Tradings motion for reconsideration was denied by the CA in its Resolution41 dated March 4, 2008.
Hence, this petition.

The Present Petition

The petition is founded on the following grounds:

1) THE COURT OF APPEALS HAS DEPARTED FROM THE USUAL COURSE OF JUDICIAL
PROCEEDINGS WHEN IT MADE ITS OWN FACTUAL FINDINGS AND DISREGARDED THE UNIFORM
AND CONSISTENT FACTUAL FINDINGS OF THE LABOR ARBITER AND THE NLRC, WHICH MUST BE
ACCORDED GREAT WEIGHT, RESPECT AND EVEN FINALITY. IN SO DOING, THE COURT OF APPEALS
EXCEEDED ITS AUTHORITY ON CERTIORARI UNDER RULE 65 OF THE RULES OF COURT BECAUSE
SUCH FACTUAL FINDINGS WERE BASED ON SPECULATIONS AND NOT ON OTHER EVIDENCES [SIC]
ON RECORD.
2) THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH
LAW AND JURISPRUDENCE IN RULING THAT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION
IN ALLEGEDLY IGNORING THE RULING OF THE REGIONAL DIRECTOR.

3) THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH
LAW AND JURISPRUDENCE IN RULING THAT PETITIONER IS THE EMPLOYER OF RESPONDENTS.

4) THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH
LAW AND JURISPRUDENCE IN RULING THAT THE RESPONDENTS WERE CONSTRUCTIVELY
DISMISSED CONTRARY TO THE FACTUAL FINDINGS OF THE LABOR ARBITER AND THE NLRC AND
WITHOUT SHOWING ANY EVIDENCE TO OVERTURN SUCH FINDING OF FACT.42

The respondents oppose these grounds in their Comment.43 In support of their arguments, the respondents
submit with their Comment copies of the CAs Decision44 and Resolution45 in CA-G.R. SP No. 73880 and CA-
G.R. SP No. 74619, and this Courts Resolutions46 in G.R. Nos. 180078-79.

This Courts Ruling

The Court resolves to deny the petition.

Factual findings of labor officials


may be examined by the courts
when there is a showing that they
were arrived at arbitrarily or in
disregard of evidence on record.

As regards the first ground, the petitioner questions the CAs reversal of LA Gutierrezs and the NLRCs
rulings, and argues that said rulings should have been accorded great weight and finality by the appellate court
as these were allegedly supported by substantial evidence.

On this matter, the settled rule is that factual findings of labor officials, who are deemed to have acquired
expertise in matters within their jurisdiction, are generally accorded not only respect but even finality by the
courts when supported by substantial evidence, i.e., the amount of relevant evidence which a reasonable mind
might accept as adequate to support a conclusion. We emphasize, nonetheless, that these findings are not
infallible. When there is a showing that they were arrived at arbitrarily or in disregard of the evidence on record,
they may be examined by the courts. The CA can then grant a petition for certiorari if it finds that the NLRC, in
its assailed decision or resolution, has made a factual finding that is not supported by substantial evidence. It is
within the jurisdiction of the CA, whose jurisdiction over labor cases has been expanded to review the findings
of the NLRC.47

We have thus explained in Cocomangas Hotel Beach Resort v. Visca48 that the CA can take cognizance of a
petition for certiorari if it finds that the NLRC committed grave abuse of discretion by capriciously, whimsically,
or arbitrarily disregarding evidence which are material to or decisive of the controversy. The CA cannot make
this determination without looking into the evidence presented by the parties. The appellate court needs to
evaluate the materiality or significance of the evidence, which are alleged to have been capriciously,
whimsically, or arbitrarily disregarded by the NLRC, in relation to all other evidence on record.

This case falls within the exception to the general rule that findings of fact of labor officials are to be accorded
respect and finality on appeal. As our discussions in the other grounds that are raised in this petition will
demonstrate, the CA has correctly held that the NLRC has disregarded facts and evidence that are material to
the outcome of the respondents case. No error can be ascribed to the appellate court for making its own
assessment of the facts that are significant to the case to determine the presence or absence of grave abuse
of discretion on the part of the NLRC, even if the CAs findings turn out to be different from the factual findings
of both the LA and NLRC.
Norkis Trading is the principal
employer of the respondents,
considering that PASAKA is a mere
labor-only contractor.

The second and third grounds, being interrelated as they both pertain to the CAs finding that an employer-
employee relationship existed between the petitioner and the respondents, shall be discussed jointly. In its
decision, the CA cited the findings of the Regional Director in LSED Case No. RO700-9906-CI-CS-168 and
declared that the NLRC committed a grave abuse of discretion when it ignored said findings.

The issue of whether or not the respondents shall be regarded as employees of the petitioner hinges mainly on
the question of whether or not PASAKA is a labor-only contractor. Labor-only contracting, a prohibited act, is
an arrangement where the contractor or subcontractor merely recruits, supplies, or places workers to perform a
job, work, or service for a principal. In labor-only contracting, the following elements are present: (a) the
contractor or subcontractor does not have substantial capital or investment to actually perform the job, work, or
service under its own account and responsibility; and (b) the employees recruited, supplied or placed by such
contractor or subcontractor perform activities which are directly related to the main business of the principal.
These differentiate it from permissible or legitimate job contracting or subcontracting, which refers to an
arrangement whereby a principal agrees to put out or farm out with the contractor or subcontractor the
performance or completion of a specific job, work, or service within a definite or predetermined period,
regardless of whether such job, work, or service is to be performed or completed within or outside the premises
of the principal. A person is considered engaged in legitimate job contracting or subcontracting if the following
conditions concur: (a) the contractor carries on a distinct and independent business and partakes the contract
work on his account under his own responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters connected with the performance of his work
except as to the results thereof; (b) the contractor has substantial capital or investment; and (c) the agreement
between the principal and the contractor or subcontractor assures the contractual employees entitlement to all
labor and occupational safety and health standards, free exercise of the right to self-organization, security of
tenure, and social welfare benefits.49

We emphasize that the petitioners arguments against the respondents claim that PASAKA is a labor-only
contractor, which is thus to be regarded as a mere agent of Norkis Trading for which the respondents rendered
service, are already mooted by the finality of this Courts Resolutions dated December 5, 2007 and April 14,
2008 in G.R. Nos. 180078-79, which stems from the CAs and the DOLE Secretarys review of the DOLE
Regional Directors Order dated August 22, 2000 in LSED Case No. RO700-9906-CI-CS-168.

To recapitulate, Regional Director Balanag issued on August 22, 2000 its Order50 in LSED Case No. RO700-
9906-CI-CS-168 and declared PASAKA as a mere labor-only contractor, and Norkis Trading as the true
employer of herein respondents. He explained that PASAKA failed to prove during the conduct of a summary
investigation that the cooperative had substantial capital or investment sufficient to enable it to perform the
functions of an independent contractor. The respondents claim that the machinery, equipment and supplies
they used to perform their duties were owned by Norkis Trading, and not by PASAKA, was undisputed. While
PASAKA reflected in its Statement of Financial Condition for the year 1996 property and equipment net of
accumulated depreciation at P344,273.02, there was no showing that the properties covered thereby were
actually and directly used in the conduct of PASAKAs business.51 The DOLE Regional Director explained:

Herein respondents among them, herein petitioner failed to prove that their sub-contracting arrangements fall
under any of the conditions set forth in Sec. 6 of D.O. # 10 S. 1997 to qualify as permissible contracting or
subcontracting as provided for as follows:

Sec. 6. Permissible contracting or subcontracting. Subject to conditions set forth in Sec. 4 (d) and (e) and
Section 5 hereof, the principal may engage the services of a contractor or subcontractor for the performance of
any of the following:

a.) Works or services temporarily or occasionally needed to meet abnormal increase in the demand of products
or services...
b) Works or services temporarily or occasionally needed by the principal for undertakings requiring expert or
highly technical personnel to improve the management or operations of an enterprise;

c) Services temporarily needed for the introduction or promotion of new products...;

d) Works or services not directly related or not integral to main business or operation of the principal including
casual work, janitorial, security, landscaping and messengerial services and work not related to manufacturing
processes in manufacturing establishments.

e) Services involving the public display of manufacturers products...;

f) Specialized works involving the use of some particular, unusual or peculiar skills... and

g) Unless a reliever system is in place among the regular workforce, substitute services for absent regular
employees...

It is therefore evident that herein respondents are engaged in "labor-only" contracting as defined in Art. 106 of
the Labor Code. Furthermore, such contracting/sub-contracting arrangement not only falls under labor-only
contracting but also fails to qualify as legitimate subcontracting as defined under Sec. 4 par. e of D.O. #10 S.
1997, to wit:

"Sec. 4. Definition of terms.

d)

Subject to the provisions of Sections 6, 7 and 8 of this Rule, contracting or subcontracting shall be legitimate if
the following circumstances concur:

i) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform
the job, work or service on its own account and under its own responsibility, according to its own manner and
method, and free from the control and direction of the principal in all matters connected with the performance
of the work except to the results thereof;

ii) The contractor or subcontractor has substantial capital or investment; and

iii) The agreement between the principal and contractor or subcontractor assures the contractual employees
entitlement to all labor and occupational and safety and health standards, free exercise of the right to self-
organization, security of tenure and social and welfare benefits."52 (Emphasis supplied)

Together with his finding that PASAKA evidently lacked substantial capital or investment required from
legitimate job contractors, Regional Director Balanag ruled that the cooperative failed to dispute the
respondents allegation that officers of Norkis Trading supervised their work and paid their salaries. In
conclusion, PASAKA and Norkis Trading were declared solidarily liable for the monetary awards made in favor
of therein claimants-employees, which included herein respondents. A motion for reconsideration of the Order
was denied by the Regional Director.

Upon appeal, then DOLE Sec. Sto. Tomas affirmed the rulings of Regional Director Balanag. Both Norkis
Trading and PASAKA filed their separate appeals from the orders of the DOLE Secretary to the CA via the
petitions for certiorari docketed as CA-G.R. SP Nos. 73880 and 74619, but said petitions were dismissed for
lack of merit by the CA in its Decision dated May 7, 2007 and Resolution dated October 9, 2007. The CA held:

This Court agrees with the finding of the DOLE Regional Director, as affirmed by the Secretary of Labor in her
assailed Order, that petitioners among them, herein petitioner were engaged in labor-only contracting.
First. PASAKA failed to prove that it has substantial capitalization or investment in the form of tools, equipment,
machineries, work premises, among others, to qualify as an independent contractor. PASAKAs claim that it
has machineries and equipment worth P 344,273.02 as reflected in its Financial Statements and
Supplementary Schedules is belied by private respondents among them, herein respondents evidence which
consisted of pictures showing machineries and equipment which were owned by and located at the premises
of petitioner NORKIS TRADING (as earlier noted, some of the pictures showed some of the private
respondents operating said machines). Indeed it makes one wonder why, if PASAKA indeed had such
machineries and equipment worth P 344,273.02, private respondents were using machineries and equipment
owned by and located at the premises of NORKIS TRADING.

Even granting that indeed PASAKA had machineries and equipment worth P 344,273.02, it was not shown that
said machineries and equipment were actually used in the performance or completion of the job, work, or
service that it was contracted to render under its supposed job contract.

xxxx

Second. PASAKA likewise did not carry out an independent business from NORKIS TRADING. While PASAKA
was issued its Certificate of Registration on July 18, 1991, all it could show to prove that it carried out an
independent business as a job contractor were the Project Contract dated January 2, 1998 with NORKIS
TRADING, and the Project Contract dated December 18, 1998 with NORKIS INTERNATIONAL. However, as
earlier discussed, the Project Contract dated December 18, 1998 with NORKIS INTERNATIONAL is nothing
more than an afterthought by the petitioners to confuse its workers and defeat their rightful claims. The same
can be said of the Project Contract with WICKER and VINE, INC., considering that it was executed only on
February 1, 2000. Verily, said contract was submitted only to strengthen PASAKAs claim that it is a legitimate
job contractor.

Third. Private respondents performed activities directly related to the principal business of NORKIS TRADING.
They worked as welders and machine operators engaged in the production of steel crates which were sent to
Japan for use as containers of motorcycles that are then sent back to NORKIS TRADING. Private
respondents functions therefore are directly related and vital to NORKIS TRADINGs business of
manufacturing of Yamaha motorcycles.

All the foregoing considerations affirm by more than substantial evidence that NORKIS TRADING and
PASAKA engaged in labor-only contracting.53 (Citations omitted and emphasis supplied)

When the case was brought before this Court via the petitions for review on certiorari docketed as G.R. Nos.
180078-79, we resolved to issue on December 5, 2007 our Resolution dismissing the appeal for, among other
grounds, the failure of Norkis Trading to sufficiently show any reversible error in the the CA decision. In our
Resolution dated April 14, 2008, we denied with finality Norkis Tradings motion for reconsideration on the
ground that no substantial argument and compelling reason was adduced to warrant a reconsideration of our
dismissal of the petition. This Courts resolutions, affirming the findings of the CA, had then become final and
executory.

Applying the doctrine of res judicata, all matters that have been fully resolved with finality by this Courts
dismissal of the appeal that stemmed from Regional Director Balanags Order dated August 22, 2000 in LSED
Case No. RO700-9906-CI-CS-168 are already conclusive between the parties. Res judicata is defined as a
matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment. Under this
doctrine, an existing final judgment or decree rendered on the merits, and without fraud or collusion, by a court
of competent jurisdiction, upon any matter within its jurisdiction, is conclusive of the rights of the parties or their
privies, in all other actions or suits in the same or any other judicial tribunal of concurrent jurisdiction on the
points and matters in issue in the first suit.

To state simply, a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of
the rights of the parties or their privies in all later suits on all points and matters determined in the former suit. 54
Res judicata has two aspects: bar by prior judgment and conclusiveness of judgment as provided under
Section 47(b) and (c), Rule 39, respectively, of the Rules of Court.55 Under the doctrine of conclusiveness of
judgment, facts and issues actually and directly resolved in a former suit cannot be raised in any future case
between the same parties, even if the latter suit may involve a different cause of action. 56

Clearly, res judicata in the concept of conclusiveness of judgment has set in. In the proceedings before the
Regional Director and the LA, there were identity of parties and identity of issues, although the causes of
action in the two actions were different. First, herein respondents on the one hand, and Norkis Trading on the
other hand, were all parties in the two cases, being therein complainants and respondent, respectively. As to
the second requisite, the issue of whether PASAKA was a labor-only contractor which would make Norkis
Trading the true employer of the respondents was the main issue in the two cases, especially since Norkis
Trading had been arguing in both proceedings that it could not be regarded as the herein respondents
employer, harping on the defense that PASAKA was a legitimate job contractor.

Similarly, in Dole Philippines, Inc. v. Esteva,57 we held that the finding of the DOLE Regional Director, which
had been affirmed by the Undersecretary of Labor, by authority of the Secretary of Labor, in an Order that has
reached finality and which provided that the cooperative Cannery Multi-Purpose Cooperative (CAMPCO) was
engaged in labor-only contracting should bind the NLRC in a case for illegal dismissal. We ruled:

While the causes of action in the proceedings before the DOLE and the NLRC differ, they are, in fact, very
closely related. The DOLE Regional Office conducted an investigation to determine whether CAMPCO was
violating labor laws, particularly, those on labor-only contracting. Subsequently, it ruled that CAMPCO was
indeed engaging in labor-only contracting activities, and thereafter ordered to cease and desist from doing so.
x x x The matter of whether CAMPCO was a labor-only contractor was already settled and determined in the
DOLE proceedings, which should be conclusive and binding upon the NLRC. What were left for the
determination of the NLRC were the issues on whether there was illegal dismissal and whether respondents
should be regularized.

x x x For the NLRC to ignore the findings of DOLE Regional Director Parel and DOLE Undersecretary Trajano
is an unmistakable and serious undermining of the DOLE officials authority.58

The rule on conclusiveness of judgment then now precludes this Court from re-opening the issues that were
already settled with finality in G.R. Nos. 180078-79, which effectively affirmed the CAs findings that PASAKA
was engaged in labor-only contracting, and that Norkis Trading shall be treated as the employer of the
respondents.

In the present petition, Norkis Trading still argues that the NLRC committed no grave abuse of discretion in
ignoring the findings of Regional Director Balanag considering that his Order had not yet reached finality at the
time the NLRC resolved the appeal from the decision of the LA. This notwithstanding, this Court holds that the
CA still committed no error in finding grave abuse of discretion on the part of the NLRC by the latters utter
disregard of the findings of the Regional Director that Norkis Trading should be considered the employer of
herein respondents. As correctly observed by the CA in the assailed Decision dated May 7, 2007:

Surprisingly, the NLRC failed to consider or even make reference to the said August 22, 2000 Order of the
DOLE Regional Director. Considering the significance of the DOLE Regional Directors findings, the same
cannot just be perfunctorily rejected. For the NLRC to ignore the findings of DOLE Regional Director is to
undermine or disregard of [sic] the visitorial and enforcement power of the DOLE Secretary and his authorized
representatives under Article 128 of the Labor Code, as amended. It was grave abuse of discretion then on the
part of the NLRC to ignore or simply sweep under the rug the findings of the DOLE Regional
Director.59 (Citation omitted and emphasis ours)

A reading of the NLRCs Resolution60 dated December 18, 2003 indicates that while it was confronted with
opposing findings of the Regional Director and the LA on the material issue of labor-only contracting, it failed to
even attempt to review thoroughly the matter, look into the records, reconcile the differing judgments and make
its own appreciation of the evidence presented by the parties. Instead, it simply brushed aside the rulings of
the Regional Director, without due consideration of the circumstance that said labor official had the jurisdiction
to rule on the issue pursuant to the visitorial and enforcement powers of the DOLE Secretary and his duly
authorized representatives under Article 12861 of the Labor Code.

The rule in appeals in labor cases provides that the CA can grant a petition for certiorari if it finds that the
NLRC, in its assailed decision or resolution, committed grave abuse of discretion by capriciously, whimsically
or arbitrarily disregarding evidence which is material or decisive of the controversy.62 Significantly, the
Secretary of Labor had already affirmed Regional Director Balanags Order when the appeal from the LAs
rulings was resolved. In the NLRC Resolution dated December 18, 2003, the Commission nonetheless merely
held:

The photocopies of the Order of the Honorable Secretary of the Department of Labor and Employment dated
February 7, 2002 and the Order of the Regional Director of the Regional Office of the Department of Labor and
Employment finding the existence of labor-only contracting between respondent NORKIS [Trading] and
respondent PASAKA do not provide sufficient basis to disturb Our Decision. We are not convinced that the
facts and evidence, which are totally distinct from this case and which were presented in a separate
proceedings and before another Office, would be a sufficient and valid basis to divest the Labor Arbiter a quo
of his authority which undoubtedly the law vests upon him as his exclusive jurisdiction. The jurisdiction
conferred by Article 217 of the Labor Code upon the Labor Arbiter is "original and exclusive", and his authority
to hear and decide case[s] vested upon him is to the exclusion of any other court or quasi-judicial body. By
reason of their training, experience, and expertise, Labor Arbiters are in a better position to resolve
controversies, for which they are conferred original and exclusive jurisdiction by law. Even Article 218 of the
Labor Code does not empower the Regional Director of the Department of Labor and Employment to share
original and exclusive jurisdiction conferred on the Labor Arbiter by Article 217 x x x. 63

Such utter disregard by the NLRC of the findings of the Regional Director and DOLE Secretary amounts to
grave abuse of discretion amounting to lack or excess of jurisdiction. As this Courts review of the records
would confirm, a judicious study of the evidence presented by the parties would have supported the finding that
Norkis Trading should be treated as the respondents true employer, with PASAKA being merely an agent of
said employer. PASAKA failed to sufficiently show that it had substantial capital or investment in the form of
tools, equipment, machineries and work premises required from legitimate job contractors. The work required
from the respondents, being welders and/or operators of industrial machines, were also directly related to
Norkis Tradings principal business of manufacturing. The job contract supposedly executed by and between
PASAKA and Norkis International in 1999 deserved nil consideration given that the respondents had claimed
early on that they began working for Norkis Trading on various dates from 1993 to 1994. Moreover, the records
confirm that Norkis Trading was still among the clients of PASAKA as of July 1999, as clearly indicated in the
memoranda it sent to respondents Buenavista, Fabroa and Dondoyano on July 22, 1999, which provide:

Please take note that the recent action you have done in filing a case against one of our clients, Norkis Trading
Co., Inc., has greatly prejudiced the interest and welfare of the Cooperative.64 (Emphasis ours)

This categorical statement of PASAKA that Norkis Trading was among its clients at the time the memoranda
were issued only further bolsters the respondents claim, and Regional Director Balanags finding, that said
respondents were deployed by PASAKA to Norkis Trading. This also contradicts petitioners argument that its
contract with PASAKA had ended in 1998.65

Finally, contrary to the insinuations of Norkis Trading, the fact that PASAKA was a duly-registered cooperative
did not preclude the possibility that it was engaged in labor-only contracting, as confirmed by the findings of the
Regional Director. An entity is characterized as a labor-only contractor based on the elements and guidelines
established by law and jurisprudence, judging primarily on the relationship that the said entity has with the
company to which the workers are deployed, and not on any special arrangement that the entity has with said
workers.

Termination of an employment for


no just or authorized cause
amounts to an illegal dismissal.
As to the issue of whether the respondents were illegally dismissed by Norkis Trading, we answer in the
affirmative, although not by constructive dismissal as declared by the CA, but by actual dismissal.

Where an entity is declared to be a labor-only contractor, the employees supplied by said contractor to the
principal employer become regular employees of the latter. Having gained regular status, the employees are
entitled to security of tenure and can only be dismissed for just or authorized causes and after they had been
afforded due process.66 Termination of employment without just or authorized cause and without observing
procedural due process is illegal.1wphi1

In claiming that they were illegally dismissed from their employment, the respondents alleged having been
informed by PASAKA that they would be transferred, upon the behest of Norkis Trading, as Multicab washers
or utility workers to Porta Coeli, a sister company of Norkis Trading. Norkis Trading does not dispute that such
job transfer was relayed by PASAKA unto the respondents, although the company contends that the transfer
was merely an "offer" that did not constitute a dismissal. It bears mentioning, however, that the respondents
were not given any other option by PASAKA and Norkis Trading but to accede to said transfer. In fact, there is
no showing that Norkis Trading would still willingly accept the respondents to work for the company. Worse, it
still vehemently denies that the respondents had ever worked for it. Again, all defenses of Norkis Trading that
anchor on the alleged lack of employer-employee relationship between it and the respondents no longer merit
any consideration, given that this Courts findings in G.R. Nos. 180078-79 have become conclusive. Thus, the
respondents transfer to Porta Coeli, although relayed to the respondents by PASAKA was effectively an act of
Norkis Trading. Where labor-only contracting exists, the Labor Code itself establishes an employer-employee
relationship between the employer and the employees of the labor-only contractor. The statute establishes this
relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer and the latter is responsible to the employees of the
labor-only contractor as if such employees had been directly employed by the principal employer.67

No further evidence or document should then be required from the respondents to prove such fact of dismissal,
especially since Norkis Trading maintains that it has no duty to admit and treat said respondents as its
employees. Considering that Porta Coeli is an entity separate and distinct from Norkis Trading, the
respondents employment with Norkis Trading was necessarily severed by the change in work assignment. It
then did not even matter whether or not the transfer involved a demotion in the respondents rank and work
functions; the intention to dismiss, and the actual dismissal of the respondents were sufficiently established.

In the absence of a clear showing that the respondents dismissal was for just or authorized causes, the
termination of the respondents employment was illegal. What may be reasonably deduced from the records
was that Norkis Trading decided on the transfer, after the respondents had earlier filed their complaint for
labor-only contracting against the company. Even Norkis Tradings contention that the transfer may be deemed
a valid exercise of management prerogative is misplaced. First, the exercise of management prerogative
presupposes that the transfer is only for positions within the business establishment. Second, the exercise of
management prerogative by employers is not absolute, as it is limited by law and the general principles of fair
play and justice.

WHEREFORE, premises considered, the petition is DENIED.

SO ORDERED.
4. EPARWA SECURITY AND JANITORIAL SERVICES, INC. vs. LICEO DE CAGAYAN UNIVERSITY, G.R.
No. 150402, November 28, 2006

The Case

This is a petition for certiorari[1] of the Decision[2] dated 20 April 2001 and the Resolution dated 21 September
2001 of the Court of Appeals (appellate court) in CA-G.R. SP No. 59120, Liceo de Cagayan University v. The
Hon. National Labor Relations Commission, Fifth Division, Eparwa Security and Janitorial Services, Inc., et
al. The appellate court reinstated the 18 August 1999 decision[3] of the Labor Arbiter and remanded the case to
the Regional Arbitration Board, Branch No. 10 of Cagayan de Oro City to compute what is due
to Liceo de Cagayan University (LDCU) from Eparwa Security and Janitorial Services, Inc. (Eparwa).

The Facts

On 1 December 1997, Eparwa and LDCU, through their representatives, entered into a Contract for Security
Services. The pertinent portion of the contract provides that:

5. For and in consideration of this security, protective and safety services, [LDCU] agrees to pay
[Eparwa] FIVE THOUSAND PESOS ONLY (P5,000.00), Philippine Currency per guard a month
payable within fifteen (15) days after [Eparwa] presents its service invoice. [Eparwa] shall
furnish [LDCU] a monthly copy of SSS contribution of guards and monthly payroll of each guard
assigned at [LDCUs] premises on a monthly basis[.][4]

Eparwa allocated the contracted amount of P5,000 per security guard per month in the following manner:

Basic Pay (P104.50 x 391.5/12) P3,409.31


Night Diff. Pay 113.64
13th mo. Pay 284.10
5 day incentive leave 43.54
Uniform allowance 50.00
Employers SSS, Medicare, ECC contribution 224.80
Agency share 420.53
VAT 454.59
CONTRACT RATE P5,000.50
(rounded off to P5,000.00)[5]

On 21 December 1998, 11 security guards (security guards) whom Eparwa assigned to LDCU from 1
December 1997 to 30 November 1998 filed a complaint before the National Labor Relations Commissions
(NLRC) Regional Arbitration Branch No. 10 in Cagayan de Oro City. Docketed as NLRC-RABX Case No. 10-
01-00102-99, the complaint was filed against both Eparwa and LDCU for underpayment of salary, legal holiday
pay, 13th month pay, rest day, service incentive leave, night shift differential, overtime pay, and payment for
attorneys fees.
LDCU made a cross-claim and prayed that Eparwa should reimburse LDCU for any payment to the security
guards.

The Ruling of the Labor Arbiter

In its decision dated 18 August 1999, the Labor Arbiter found that the security guards are entitled to wage
differentials and premium for holiday and rest day work. The Labor Arbiter held Eparwa and
LDCU solidarily liable pursuant to Article 109 of the Labor Code. The dispositive portion of the Labor Arbiters
decision reads:

WHEREFORE, judgment is rendered[:]

1. Ordering respondents [LDCU] and [Eparwa] solidarily liable to pay [the security
guards] for underpayment, holiday and rest day, as follows:

Name Amount
1. Casiero , Jovencio P 46,819.95
2. Villarino , Leonardo 46,819.95
3. Lumbab , Adriano 46,819.95
4. Caballero , Gregorio, Jr. 46,819.95
5. Cajilla , Delfin, Jr. 37,918.95
6. Paduanga , Arnold 20,321.10
7. Dungog , Achimedes 46,819.95
8. Magallanes , Eduardo 46,819.95
9. Dungog , Luigi 46,819.95
10. Dungog , Telford 46,819.95
11. Bahian , Wilfredo 30,741.30
P 463,540.95

2. Denying the claim of unpaid 13th month pay, service incentive leave and night shift
premium pay for lack of merit;

3. Ordering respondent [Eparwa] to reimburse respondent [LDCU] for whatever


amount the latter may be required to pay [the security guards];

4. Ordering respondent [Eparwa] to pay respondent [LDCU] P20,000.00


and P5,000.00 each of the [security guards], moral and exemplary damages;

5. Ordering [Eparwa] to pay 10% of attorneys fee[s][;]

6. The rest of the claims are denied for lack of merit.

So Ordered.[6]
LDCU filed an appeal before the NLRC. LDCU agreed with the Labor Arbiters decision on the security guards
entitlement to salary differential but challenged the propriety of the amount of the award. LDCU alleged that
security guards not similarly situated were granted uniform monetary awards and that the decision did not
include the basis of the computation of the amount of the award.

Eparwa also filed an appeal before the NLRC. For its part, Eparwa questioned its liability for the security
guards claims and the awarded cross-claim amounts.

The Ruling of the NLRC

The Fifth Division of the NLRC resolved Eparwa and LDCUs separate appeals in its Resolution[7] dated 19
January 2000. The NLRC found that the security guards are entitled to wage differentials and premium for
holiday and rest day work. Although the NLRC held Eparwa and LDCU solidarily liable for the wage
differentials and premium for holiday and rest day work, the NLRC did not require Eparwa to reimburse LDCU
for its payments to the security guards. The NLRC also ordered the recomputation of the monetary awards
according to the dates actually worked by each security guard. The dispositive portion of the NLRC Resolution
reads thus:

WHEREFORE, the appealed decision is AFFIRMED, subject to the modification that the
portions thereof directing respondent EPARWA Security Agency and Janitorial Services, Inc. to
reimburse respondent Liceo de Cagayan University for whatever amount the latter may have
paid complainants and to pay respondent Liceo de Cagayan University the sum [sic]
[of] P20,000.00 and P5,000.00, representing moral and exemplary damages, respectively, of
each complainants [sic], are deleted for lack of legal basis. Further the monetary awards for
wage differential and premiums for holiday and rest day works shall be recomputed by the
Regional Arbitration Branch of origin at the execution stage of the proceedings.

Co[n]formably, the award of Attorneys fee[s] is equivalent to ten (10%) percent of the aggregate
monetary award as finally adjusted.

SO ORDERED.[8]

Eparwa and LDCU again filed separate motions for partial reconsideration of the 19 January 2000 NLRC
Resolution. LDCU questioned the NLRCs deletion of LDCUsentitlement to reimbursement by Eparwa. Eparwa,
on the other hand, prayed that LDCU be made to reimburse Eparwa for whatever amount it may pay to the
security guards.
In its Resolution dated 14 March 2000, the NLRC declared that although Eparwa and LDCU are solidarily liable
to the security guards for the monetary award, LDCU alone is ultimately liable. The NLRC resolved the issue
thus:

WHEREFORE, the assailed resolution, dated 19 January 2000, is MODIFIED in that


respondent Liceo de Cagayan University (LICEO) is ordered to reimburse
respondent Eparwa Security and Janitorial Services, Inc. (EPARWA) for whatever amount the
latter may have paid to complainants arising from this case.

SO ORDERED.[9]

LDCU filed a petition for certiorari[10] before the appellate court assailing the NLRCs decision. LDCU took issue
with the NLRCs order that LDCU should reimburse Eparwa.LDCU stated that this would free Eparwa from any
liability for payment of the security guards money claims.

The Ruling of the Appellate Court

In its Decision promulgated on 20 April 2001, the appellate court granted LDCUs petition and reinstated the
Labor Arbiters decision. The appellate court also allowed LDCU to claim reimbursement from Eparwa. The
appellate courts decision reads thus:

WHEREFORE, foregoing considered, the petition is hereby GRANTED. The decision


dated August 18, 1999 of Labor Arbiter Celenito N. Daing is REINSTATED. The case is
hereby REMANDED to the Regional Arbitration Board, Branch No. 10 of Cagayan de Oro City
to compute what is due to LDCU from EPARWA.

SO ORDERED.[11]

Eparwa filed a motion for reconsideration of the appellate courts decision. Eparwa stressed that jurisprudence
is consistent in ruling that the ultimate liability for the payment of the monetary award rests with LDCU alone.

The appellate court denied Eparwas motion for reconsideration for lack of merit.

Hence, this petition.

The Issue

The petition raises this sole legal issue: Is LDCU alone ultimately liable to the security guards for the wage
differentials and premium for holiday and rest day pay?
The Ruling of the Court

The petition has merit.

Eparwa and LDCUs Solidary Liability and


LDCUs Ultimate Liability

Articles 106, 107 and 109 of the Labor Code read:

Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the
latters subcontractor, if any, shall be paid in accordance with the provisions of this Code.

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

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting,
he may make appropriate distinctions between labor-only contracting and job contracting as well
as differentiations within these types of contracting and determine who among the parties
involved shall be considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such persons are performing
activities which are directly related to the principal business of the 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.

Article 107. Indirect employer. The provisions of the immediately preceding Article shall likewise
apply to any person, partnership, association or corporation which, not being an employer,
contracts with an independent contractor for the performance of any work, task, job or project.

Article 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding,
every employer or indirect employer shall be held responsible with his contractor or
subcontractor for any violation of any provision of this Code. For purposes of determining the
extent of their civil liability under this Chapter, they shall be considered as direct employers.

This Courts ruling in Eagle Security Agency, Inc. v. NLRC[12] squarely applies to the present case. In Eagle, we
ruled that:
This joint and several liability of the contractor and the principal is mandated by the Labor Code
to assure compliance of the provisions therein including the statutory minimum wage [Article 99,
Labor Code]. The contractor is made liable by virtue of his status as direct employer. The
principal, on the other hand, is made the indirect employer of the contractors employees for
purposes of paying the employees their wages should the contractor be unable to pay them.
This joint and several liability facilitates, if not guarantees, payment of the workers performance
of any work, task, job or project, thus giving the workers ample protection as mandated by the
1987 Constitution [See Article II Sec. 18 and Article XIII Sec. 3].

In the case at bar, it is beyond dispute that the security guards are the employees of EAGLE
[See Article VII Sec. 2 of the Contract for Security Services; G.R. No. 81447, Rollo, p. 34]. That
they were assigned to guard the premises of PTSI pursuant to the latters contract with EAGLE
and that neither of these two entities paid their wage and allowance increases under the subject
wage orders are also admitted [See Labor Arbiters Decision, p. 2; G.R. No. 81447, Rollo, p. 75].
Thus, the application of the aforecited provisions of the Labor Code on joint and several liability
of the principal and contractor is appropriate [See Del Rosario & Sons Logging Enterprises, Inc.
v. NLRC, G.R. No. 64204, May 31, 1985, 136 SCRA 669].

The solidary liability of PTSI and EAGLE, however, does not preclude the right of
reimbursement from his co-debtor by the one who paid [See Article 1217, Civil Code]. It is with
respect to this right of reimbursement that petitioners can find support in
the aforecited contractual stipulation and Wage Order provision.

The Wage Orders are explicit that payment of the increases are to be borne by the principal or
client. To be borne, however, does not mean that the principal, PTSI in this case, would directly
pay the security guards the wage and allowance increases because there is no privity of
contract between them. The security guards contractual relationship is with their immediate
employer, EAGLE. As an employer, EAGLE is tasked, among others, with the payment of their
wages [See Article VII Sec. 3 of the Contract for Security Services, supra and Bautista
v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 665].

On the other hand, there existed a contractual agreement between PTSI and EAGLE wherein
the former availed of the security services provided by the latter. In return, the security agency
collects from its client payment for its security services. This payment covers the wages for the
security guards and also expenses for their supervision and training, the guards bonds, firearms
with ammunitions, uniforms and other equipments, accessories, tools, materials and supplies
necessary for the maintenance of a security force.

Premises considered, the security guards immediate recourse for the payment of the
increases is with their direct employer, EAGLE. However, in order for the security agency to
comply with the new wage and allowance rates it has to pay the security guards, the Wage
Orders made specific provision to amend existing contracts for security services by allowing the
adjustment of the consideration paid by the principal to the security agency concerned. What
the Wage Orders require, therefore, is the amendment of the contract as to the consideration to
cover the service contractors payment of the increases mandated. In the end, therefore,
ultimate liability for the payment of the increases rests with the principal.

In view of the foregoing, the security guards should claim the amount of the increases from
EAGLE. Under the Labor Code, in case the agency fails to pay them the amounts claimed, PTSI
should be held solidarily liable with EAGLE [Articles 106,107 and 109]. Should EAGLE pay, it
can claim an adjustment from PTSI for an increase in consideration to cover the increases
payable to the security guards.

However, in the instant case, the contract for security services had already expired without
being amended consonant with the Wage Orders. It is also apparent from a reading of a record
that EAGLE does not now demand from PTSI any adjustment in the contract price and its main
concern is freeing itself from liability. Given these peculiar circumstances, if PTSI pays the
security guards, it cannot claim reimbursement from EAGLE. But in case it is EAGLE that
pays them, the latter can claim reimbursement from PTSI in lieu of an adjustment,
considering that the contract, [sic] had expired and had not been renewed.[13] (Emphasis
added)

We repeatedly upheld our ruling in Eagle regarding reimbursement in the subsequent cases of Spartan
Security & Detective Agency, Inc. v. NLRC,[14] Development Bank of the Philippines v. NLRC,[15] Alpha
Investigation and Security Agency, Inc. v. NLRC,[16] Helpmate, Inc. v. NLRC, et
al.,[17] and Lapanday Agricultural Development Corporation v. Court of Appeals.[18]

For the security guards, the actual source of the payment of their wage differentials and premium for holiday
and rest day work does not matter as long as they are paid. This is the import
of Eparwa and LDCUs solidary liability. Creditors, such as the security guards, may collect from anyone of
the solidary debtors. Solidary liability does not mean that, as between themselves, two solidary debtors are
liable for only half of the payment.

LDCUs ultimate liability comes into play because of the expiration of the Contract for Security Services. There
is no privity of contract between the security guards and LDCU, but LDCUs liability to the security guards
remains because of Articles 106, 107 and 109 of the Labor Code. Eparwa is already precluded from asking
LDCU for an adjustment in the contract price because of the expiration of the contract, but Eparwas liability to
the security guards remains because of their employer-employee relationship. In lieu of an adjustment in the
contract price, Eparwa may claim reimbursement from LDCU for any payment it may make to the security
guards. However, LDCU cannot claim any reimbursement from Eparwa for any payment it may make to the
security guards.
WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 20 April 2001 and the Resolution
dated 21 September 2001 of the Court of Appeals. We REINSTATE the Resolutions dated 19 January
2000 and 14 March 2000 of the National Labor Relations Commission.

SO ORDERED.
5. G.R. No. 192998 April 2, 2014

BERNARD A. TENAZAS, JAIME M. FRANCISCO and ISIDRO G. ENDRACA, Petitioners,


vs.
R. VILLEGAS TAXI TRANSPORT and ROMUALDO VILLEGAS, Respondents.

DECISION

REYES, J.:

This is a petition for review on certiorari1 filed under Rule 45 of the Rules of Court, assailing the
Decision2 dated March 11, 2010 and Resolution3 dated June 28, 2010 of the Court of Appeals (CA) in CA-G.R.
SP No. 111150, which affirmed with modification the Decision4 dated June 23, 2009 of the National Labor
Relations Commission (NLRC) in NLRC LAC Case No. 07-002648-08.

The Antecedent Facts

On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M. Francisco (Francisco) filed a complaint for
illegal dismissal against R. Villegas Taxi Transport and/or Romualdo Villegas (Romualdo) and Andy Villegas
(Andy) (respondents). At that time, a similar case had already been filed by Isidro G. Endraca (Endraca)
against the same respondents. The two (2) cases were subsequently consolidated.5

In their position paper,6 Tenazas, Francisco and Endraca (petitioners) alleged that they were hired and
dismissed by the respondents on the following dates:

Name Date of Hiring Date of Dismissal Salary


Bernard A. Tenazas 10/1997 07/03/07 Boundary System
Jaime M. Francisco 04/10/04 06/04/07 Boundary System
Isidro G. Endraca 04/2000 03/06/06 Boundary System7

Relaying the circumstances of his dismissal, Tenazas alleged that on July 1, 2007, the taxi unit assigned to
him was sideswiped by another vehicle, causing a dent on the left fender near the driver seat. The cost of
repair for the damage was estimated at P500.00. Upon reporting the incident to the company, he was scolded
by respondents Romualdo and Andy and was told to leave the garage for he is already fired. He was even
threatened with physical harm should he ever be seen in the companys premises again. Despite the warning,
Tenazas reported for work on the following day but was told that he can no longer drive any of the companys
units as he is already fired.8

Francisco, on the other hand, averred that his dismissal was brought about by the companys unfounded
suspicion that he was organizing a labor union. He was instantaneously terminated, without the benefit of
procedural due process, on June 4, 2007.9

Endraca, for his part, alleged that his dismissal was instigated by an occasion when he fell short of the required
boundary for his taxi unit. He related that before he was dismissed, he brought his taxi unit to an auto shop for
an urgent repair. He was charged the amount of P700.00 for the repair services and the replacement parts. As
a result, he was not able to meet his boundary for the day. Upon returning to the company garage and
informing the management of the incident, his drivers license was confiscated and was told to settle the
deficiency in his boundary first before his license will be returned to him. He was no longer allowed to drive a
taxi unit despite his persistent pleas.10
For their part, the respondents admitted that Tenazas and Endraca were employees of the company, the
former being a regular driver and the latter a spare driver. The respondents, however, denied that Francisco
was an employee of the company or that he was able to drive one of the companys units at any point in time. 11

The respondents further alleged that Tenazas was never terminated by the company. They claimed that on
July 3, 2007, Tenazas went to the company garage to get his taxi unit but was informed that it is due for
overhaul because of some mechanical defects reported by the other driver who takes turns with him in using
the same. He was thus advised to wait for further notice from the company if his unit has already been fixed.
On July 8, 2007, however, upon being informed that his unit is ready for release, Tenazas failed to report back
to work for no apparent reason.12

As regards Endraca, the respondents alleged that they hired him as a spare driver in February 2001. They
allow him to drive a taxi unit whenever their regular driver will not be able to report for work. In July 2003,
however, Endraca stopped reporting for work without informing the company of his reason. Subsequently, the
respondents learned that a complaint for illegal dismissal was filed by Endraca against them. They strongly
maintained, however, that they could never have terminated Endraca in March 2006 since he already stopped
reporting for work as early as July 2003. Even then, they expressed willingness to accommodate Endraca
should he wish to work as a spare driver for the company again since he was never really dismissed from
employment anyway.13

On May 29, 2008, the petitioners, by registered mail, filed a Motion to Admit Additional Evidence. 14 They
alleged that after diligent efforts, they were able to discover new pieces of evidence that will substantiate the
allegations in their position paper. Attached with the motion are the following: (a) Joint Affidavit of the
petitioners;15 (2) Affidavit of Good Faith of Aloney Rivera, a co-driver;16 (3) pictures of the petitioners wearing
company shirts;17 and (4) Tenazas Certification/Record of Social Security System (SSS) contributions.18

The Ruling of the Labor Arbiter

On May 30, 2008, the Labor Arbiter (LA) rendered a Decision,19 which pertinently states, thus:

In the case of complainant Jaime Francisco, respondents categorically denied the existence of an employer-
employee relationship. In this situation, the burden of proof shifts to the complainant to prove the existence of a
regular employment. Complainant Francisco failed to present evidence of regular employment available to all
regular employees, such as an employment contract, company ID, SSS, withholding tax certificates, SSS
membership and the like.

In the case of complainant Isidro Endraca, respondents claim that he was only an extra driver who stopped
reporting to queue for available taxi units which he could drive. In fact, respondents offered him in their Position
Paper on record, immediate reinstatement as extra taxi driver which offer he refused.

In case of Bernard Tenazas, he was told to wait while his taxi was under repair but he did not report for work
after the taxi was repaired. Respondents[,] in their Position Paper, on record likewise, offered him immediate
reinstatement, which offer he refused.

We must bear in mind that the complaint herein is one of actual dismissal. But there was no formal
investigations, no show cause memos, suspension memos or termination memos were never issued.
Otherwise stated, there is no proof of overt act of dismissal committed by herein respondents.

We are therefore constrained to rule that there was no illegal dismissal in the case at bar.

The situations contemplated by law for entitlement to separation pay does [sic] not apply.

WHEREFORE, premises considered, instant consolidated complaints are hereby dismissed for lack of merit.

SO ORDERED.20
The Ruling of the NLRC

Unyielding, the petitioners appealed the decision of the LA to the NLRC. Subsequently, on June 23, 2009, the
NLRC rendered a Decision,21 reversing the appealed decision of the LA, holding that the additional pieces of
evidence belatedly submitted by the petitioners sufficed to establish the existence of employer-employee
relationship and their illegal dismissal. It held, thus:

In the challenged decision, the Labor Arbiter found that it cannot be said that the complainants were illegally
dismissed, there being no showing, in the first place, that the respondent [sic] terminated their services. A
portion thereof reads:

"We must bear in mind that the complaint herein is one of actual dismissal. But there were no formal
investigations, no show cause memos, suspension memos or termination memos were never issued.
Otherwise stated, there is no proof of overt act of dismissal committed by herein respondents.

We are therefore constrained to rule that there was no illegal dismissal in the case at bar."

Issue: [W]hether or not the complainants were illegally dismissed from employment.

It is possible that the complainants Motion to Admit Additional Evidence did not reach the Labor Arbiters
attention because he had drafted the challenged decision even before they submitted it, and thereafter, his
staff attended only to clerical matters, and failed to bring the motion in question to his attention. It is now up to
this Commission to consider the complainants additional evidence. Anyway, if this Commission must consider
evidence submitted for the first time on appeal (Andaya vs. NLRC, G.R. No. 157371, July 15, 2005), much
more so must it consider evidence that was simply overlooked by the Labor Arbiter.

Among the additional pieces of evidence submitted by the complainants are the following: (1) joint affidavit
(records, p. 51-52) of the three (3) complainants; (2) affidavit (records, p. 53) of Aloney Rivera y Aldo; and (3)
three (3) pictures (records, p. 54) referred to by the complainant in their joint affidavit showing them wearing t-
shirts bearing the name and logo of the respondents company.

xxxx

WHEREFORE, the decision appealed from is hereby REVERSED. Respondent Rom[u]aldo Villegas doing
business under the name and style Villegas Taxi Transport is hereby ordered to pay the complainants the
following (1) full backwages from the date of their dismissal (July 3, 2007 for Tena[z]as, June 4, 2004 for
Francisco, and March 6, 2006 for Endraca[)] up to the date of the finality of this decision[;] (2) separation pay
equivalent to one month for every year of service; and (3) attorneys fees equivalent to ten percent (10%) of the
total judgment awards.

SO ORDERED.22

On July 24, 2009, the respondents filed a motion for reconsideration but the NLRC denied the same in its
Resolution23 dated September 23, 2009.

The Ruling of the CA

Unperturbed, the respondents filed a petition for certiorari with the CA. On March 11, 2010, the CA rendered a
Decision,24 affirming with modification the Decision dated June 23, 2009 of the NLRC. The CA agreed with the
NLRCs finding that Tenazas and Endraca were employees of the company, but ruled otherwise in the case of
Francisco for failing to establish his relationship with the company. It also deleted the award of separation pay
and ordered for reinstatement of Tenazas and Endraca. The pertinent portions of the decision read as follows:

At the outset, We declare that respondent Francisco failed to prove that an employer-employee relationship
exists between him and R. Transport. If there is no employer-employee relationship in the first place, the duty
of R. Transport to adhere to the labor standards provisions of the Labor Code with respect to Francisco is
questionable.

xxxx

Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental
circumstances of the instant case demand that something more should have been proffered. Had there been
other proofs of employment, such as Franciscos inclusion in R.R.

Transports payroll, this Court would have affirmed the finding of employer-employee relationship.1wphi1 The
NLRC, therefore, committed grievous error in ordering R. Transport to answer for Franciscos claims.

We now tackle R. Transports petition with respect to Tenazas and Endraca, who are both admitted to be R.
Transports employees. In its petition, R. Transport puts forth the theory that it did not terminate the services of
respondents but that the latter deliberately abandoned their work. We cannot subscribe to this theory.

xxxx

Considering that the complaints for illegal dismissal were filed soon after the alleged dates of dismissal, it
cannot be inferred that respondents Tenazas and Endraca intended to abandon their employment. The
complainants for dismissal are, in themselves, pleas for the continuance of employment. They are incompatible
with the allegation of abandonment. x x x.

For R. Transports failure to discharge the burden of proving that the dismissal of respondents Tenazas and
Endraca was for a just cause, We are constrained to uphold the NLRCs conclusion that their dismissal was
not justified and that they are entitled to back wages. Because they were illegally dismissed, private
respondents Tenazas and Endraca are entitled to reinstatement and back wages x x x.

xxxx

However, R. Transport is correct in its contention that separation pay should not be awarded because
reinstatement is still possible and has been offered. It is well[-]settled that separation pay is granted only in
instances where reinstatement is no longer feasible or appropriate, which is not the case here.

xxxx

WHEREFORE, the Decision of the National Labor Relations Commission dated 23 June 2009, in NLRC LAC
Case No. 07-002648-08, and its Resolution dated 23 September 2009 denying reconsideration thereof are
AFFIRMED with MODIFICATION in that the award of Jaime Franciscos claims is DELETED. The separation
pay granted in favor of Bernard Tenazas and Isidro Endraca is, likewise, DELETED and their reinstatement is
ordered instead.

SO ORDERED.25 (Citations omitted)

On March 19, 2010, the petitioners filed a motion for reconsideration but the same was denied by the CA in its
Resolution26 dated June 28, 2010.

Undeterred, the petitioners filed the instant petition for review on certiorari before this Court on July 15, 2010.

The Ruling of this Court

The petition lacks merit.

Pivotal to the resolution of the instant case is the determination of the existence of employer-employee
relationship and whether there was an illegal dismissal. Remarkably, the LA, NLRC and the CA had varying
assessment on the matters at hand. The LA believed that, with the admission of the respondents, there is no
longer any question regarding the status of both Tenazas and Endraca being employees of the company.
However, he ruled that the same conclusion does not hold with respect to Francisco whom the respondents
denied to have ever employed or known. With the respondents denial, the burden of proof shifts to Francisco
to establish his regular employment. Unfortunately, the LA found that Francisco failed to present sufficient
evidence to prove regular employment such as company ID, SSS membership, withholding tax certificates or
similar articles. Thus, he was not considered an employee of the company. Even then, the LA held that
Tenazas and Endraca could not have been illegally dismissed since there was no overt act of dismissal
committed by the respondents.27

On appeal, the NLRC reversed the ruling of the LA and ruled that the petitioners were all employees of the
company. The NLRC premised its conclusion on the additional pieces of evidence belatedly submitted by the
petitioners, which it supposed, have been overlooked by the LA owing to the time when it was received by the
said office. It opined that the said pieces of evidence are sufficient to establish the circumstances of their illegal
termination. In particular, it noted that in the affidavit of the petitioners, there were allegations about the
companys practice of not issuing employment records and this was not rebutted by the respondents. It
underscored that in a situation where doubt exists between evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the employee. It awarded the petitioners with: (1) full
backwages from the date of their dismissal up to the finality of the decision; (2) separation pay equivalent to
one month of salary for every year of service; and (3) attorneys fees.

On petition for certiorari, the CA affirmed with modification the decision of the NLRC, holding that there was
indeed an illegal dismissal on the part of Tenazas and Endraca but not with respect to Francisco who failed to
present substantial evidence, proving that he was an employee of the respondents. The CA likewise dismissed
the respondents claim that Tenazas and Endraca abandoned their work, asseverating that immediate filing of
a complaint for illegal dismissal and persistent pleas for continuance of employment are incompatible with
abandonment. It also deleted the NLRCs award of separation pay and instead ordered that Tenazas and
Endraca be reinstated.28

"Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari under Rule 45 of
the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings
complained of are completely devoid of support from the evidence on record, or the assailed judgment is
based on a gross misapprehension of facts."29 The Court finds that none of the mentioned circumstances is
present in this case.

In reviewing the decision of the NLRC, the CA found that no substantial evidence was presented to support the
conclusion that Francisco was an employee of the respondents and accordingly modified the NLRC decision. It
stressed that with the respondents denial of employer-employee relationship, it behooved Francisco to present
substantial evidence to prove that he is an employee before any question on the legality of his supposed
dismissal becomes appropriate for discussion. Francisco, however, did not offer evidence to substantiate his
claim of employment with the respondents. Short of the required quantum of proof, the CA correctly ruled that
the NLRCs finding of illegal dismissal and the monetary awards which necessarily follow such ruling lacked
factual and legal basis and must therefore be deleted.

The action of the CA finds support in Anonas Construction and Industrial Supply Corp., et al. v. NLRC, et
al.,30where the Court reiterated:

[J]udicial review of decisions of the NLRC via petition for certiorari under Rule 65, as a general rule, is confined
only to issues of lack or excess of jurisdiction and grave abuse of discretion on the part of the NLRC. The CA
does not assess and weigh the sufficiency of evidence upon which the LA and the NLRC based their
conclusions. The issue is limited to the determination of whether or not the NLRC acted without or in excess of
its jurisdiction, or with grave abuse of discretion in rendering the resolution, except if the findings of the NLRC
are not supported by substantial evidence.31 (Citation omitted and emphasis ours)

It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial proceedings, "the
quantum of proof necessary is substantial evidence, or such amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion."32 "[T]he burden of proof rests upon the party who
asserts the affirmative of an issue."33 Corollarily, as Francisco was claiming to be an employee of the
respondents, it is incumbent upon him to proffer evidence to prove the existence of said relationship.

"[I]n determining the presence or absence of an employer-employee relationship, the Court has consistently
looked for the following incidents, to wit: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means and
methods by which the work is accomplished. The last element, the so-called control test, is the most important
element."34

There is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant
evidence to prove the relationship may be admitted. Identification cards, cash vouchers, social security
registration, appointment letters or employment contracts, payrolls, organization charts, and personnel lists,
serve as evidence of employee status.35

In this case, however, Francisco failed to present any proof substantial enough to establish his relationship
with the respondents. He failed to present documentary evidence like attendance logbook, payroll, SSS record
or any personnel file that could somehow depict his status as an employee. Anent his claim that he was not
issued with employment records, he could have, at least, produced his social security records which state his
contributions, name and address of his employer, as his co-petitioner Tenazas did. He could have also
presented testimonial evidence showing the respondents exercise of control over the means and methods by
which he undertakes his work. This is imperative in light of the respondents denial of his employment and the
claim of another taxi operator, Emmanuel Villegas (Emmanuel), that he was his employer. Specifically, in his
Affidavit,36 Emmanuel alleged that Francisco was employed as a spare driver in his taxi garage from January
2006 to December 2006, a fact that the latter failed to deny or question in any of the pleadings attached to the
records of this case. The utter lack of evidence is fatal to Franciscos case especially in cases like his present
predicament when the law has been very lenient in not requiring any particular form of evidence or manner of
proving the presence of employer-employee relationship.

In Opulencia Ice Plant and Storage v. NLRC,37 this Court emphasized, thus:

No particular form of evidence is required to prove the existence of an employer-employee relationship. Any
competent and relevant evidence to prove the relationship may be admitted. For, if only documentary evidence
would be required to show that relationship, no scheming employer would ever be brought before the bar of
justice, as no employer would wish to come out with any trace of the illegality he has authored considering that
it should take much weightier proof to invalidate a written instrument.38

Here, Francisco simply relied on his allegation that he was an employee of the company without any other
evidence supporting his claim. Unfortunately for him, a mere allegation in the position paper is not tantamount
to evidence.39Bereft of any evidence, the CA correctly ruled that Francisco could not be considered an
employee of the respondents.

The CAs order of reinstatement of Tenazas and Endraca, instead of the payment of separation pay, is also
well in accordance with prevailing jurisprudence. In Macasero v. Southern Industrial Gases Philippines,40 the
Court reiterated, thus:

[A]n illegally dismissed employee is entitled to two reliefs: backwages and reinstatement.1wphi1 The two
reliefs provided are separate and distinct. In instances where reinstatement is no longer feasible because of
strained relations between the employee and the employer, separation pay is granted. In effect, an illegally
dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer
viable, and backwages.

The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of seniority
rights, and payment of backwages computed from the time compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as an option, separation pay equivalent to one (1)
month salary for every year of service should be awarded as an alternative. The payment of separation pay is
in addition to payment of backwages.41 (Emphasis supplied)

Clearly, it is only when reinstatement is no longer feasible that the payment of separation pay is ordered in lieu
thereof. For instance, if reinstatement would only exacerbate the tension and strained relations between the
parties, or where the relationship between the employer and the employee has been unduly strained by reason
of their irreconcilable differences, it would be more prudent to order payment of separation pay instead of
reinstatement.42

This doctrine of strained relations, however, should not be used recklessly or applied loosely43 nor be based on
impression alone. "It bears to stress that reinstatement is the rule and, for the exception of strained relations to
apply, it should be proved that it is likely that if reinstated, an atmosphere of antipathy and antagonism would
be generated as to adversely affect the efficiency and productivity of the employee concerned."44

Moreover, the existence of strained relations, it must be emphasized, is a question of fact. In Golden Ace
Builders v. Talde,45 the Court underscored:

Strained relations must be demonstrated as a fact, however, to be adequately supported by evidence


substantial evidence to show that the relationship between the employer and the employee is indeed strained
as a necessary consequence of the judicial controversy.46 (Citations omitted and emphasis ours)

After a perusal of the NLRC decision, this Court failed to find the factual basis of the award of separation pay to
the petitioners. The NLRC decision did not state the facts which demonstrate that reinstatement is no longer a
feasible option that could have justified the alternative relief of granting separation pay instead.

The petitioners themselves likewise overlooked to allege circumstances which may have rendered their
reinstatement unlikely or unwise and even prayed for reinstatement alongside the payment of separation pay in
their position paper.47 A bare claim of strained relations by reason of termination is insufficient to warrant the
granting of separation pay. Likewise, the filing of the complaint by the petitioners does not necessarily translate
to strained relations between the parties. As a rule, no strained relations should arise from a valid and legal act
asserting ones right.48 Although litigation may also engender a certain degree of hostility, the understandable
strain in the parties relation would not necessarily rule out reinstatement which would, otherwise, become the
rule rather the exception in illegal dismissal cases.49 Thus, it was a prudent call for the CA to delete the award
of separation pay and order for reinstatement instead, in accordance with the general rule stated in Article
27950 of the Labor Code.

Finally, the Court finds the computation of the petitioners' backwages at the rate of P800.00 daily reasonable
and just under the circumstances. The said rate is consistent with the ruling of this Court in Hyatt Taxi
Services, Inc. v. Catinoy,51 which dealt with the same matter.

WHEREFORE, in view of the foregoing disquisition, the petition for review on certiorari is DENIED. The
Decision dated March 11, 2010 and Resolution dated June 28, 2010 of the Court of Appeals in CA-G.R. SP
No. 111150 are AFFIRMED.

SO ORDERED.
6. BITOY JAVIER vs. FLY ACE CORPORATION/
FLORDELYN CASTILLO, G.R. No. 192558, February 15, 2012

This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010
Decision[1] of the Court of Appeals (CA) and its June 7, 2010 Resolution,[2]in CA-G.R. SP No. 109975, which
reversed the May 28, 2009 Decision[3] of the National Labor Relations Commission (NLRC) in the case
entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,[4] holding that petitioner Bitoy Javier (Javier) was illegally
dismissed from employment and ordering Fly Ace Corporation (Fly Ace) to pay backwages and separation pay
in lieu of reinstatement.

Antecedent Facts

On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and other
labor standard benefits. He alleged that he was an employee of Fly Ace since September 2007, performing
various tasks at the respondents warehouse such as cleaning and arranging the canned items before their
delivery to certain locations, except in instances when he would be ordered to accompany the companys
delivery vehicles, as pahinante; that he reported for work from Monday to Saturday from 7:00 oclock in the
morning to 5:00 oclock in the afternoon; that during his employment, he was not issued an identification card
and payslips by the company; that on May 6, 2008, he reported for work but he was no longer allowed to enter
the company premises by the security guard upon the instruction of Ruben Ong (Mr. Ong), his superior;[5] that
after several minutes of begging to the guard to allow him to enter, he saw Ong whom he approached and
asked why he was being barred from entering the premises; that Ong replied by saying, Tanungin mo anak
mo; [6] that he then went home and discussed the matter with his family; that he discovered that Ong had been
courting his daughter Annalyn after the two met at a fiesta celebration in Malabon City; that Annalyn tried to
talk to Ong and convince him to spare her father from trouble but he refused to accede; that thereafter, Javier
was terminated from his employment without notice; and that he was neither given the opportunity to refute the
cause/s of his dismissal from work.

To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who alleged that
Javier was a stevedore or pahinante of Fly Ace from September 2007 to January 2008. The said affidavit was
subscribed before the Labor Arbiter (LA).[7]

For its part, Fly Ace averred that it was engaged in the business of importation and sales of groceries.
Sometime in December 2007, Javier was contracted by its employee, Mr. Ong, as extra helper on
a pakyaw basis at an agreed rate of 300.00 per trip, which was later increased to 325.00 in January
2008. Mr. Ong contracted Javier roughly 5 to 6 times only in a month whenever the vehicle of its contracted
hauler, Milmar Hauling Services, was not available. On April 30, 2008, Fly Ace no longer needed the services
of Javier. Denying that he was their employee, Fly Ace insisted that there was no illegal dismissal.[8] Fly
Ace submitted a copy of its agreement with Milmar Hauling Services and copies of acknowledgment receipts
evidencing payment to Javier for his contracted services bearing the words, daily manpower (pakyaw/piece
rate pay) and the latters signatures/initials.

Ruling of the Labor Arbiter

On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that Javier
failed to present proof that he was a regular employee of Fly Ace. He wrote:

Complainant has no employee ID showing his employment with the Respondent nor any
document showing that he received the benefits accorded to regular employees of the
Respondents. His contention that Respondent failed to give him said ID and payslips implies
that indeed he was not a regular employee of Fly Ace considering that complainant was a
helper and that Respondent company has contracted a regular trucking for the delivery of its
products.

Respondent Fly Ace is not engaged in trucking business but in the importation and sales
of groceries. Since there is a regular hauler to deliver its products, we give credence to
Respondents claim that complainant was contracted on pakiao basis.

As to the claim for underpayment of salaries, the payroll presented by the Respondents
showing salaries of workers on pakiao basis has evidentiary weight because although the
signature of the complainant appearing thereon are not uniform, they appeared to be his true
signature.

xxxx

Hence, as complainant received the rightful salary as shown by the above described
payrolls, Respondents are not liable for salary differentials. [9]

Ruling of the NLRC

On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of Javier and
immediately concluded that he was not a regular employee simply because he failed to present proof. It was of
the view that a pakyaw-basis arrangement did not preclude the existence of employer-employee relationship.
Payment by result x x x is a method of compensation and does not define the essence of the relation. It is a
mere method of computing compensation, not a basis for determining the existence or absence of an
employer-employee relationship.[10] The NLRC further averred that it did not follow that a worker was a job
contractor and not an employee, just because the work he was doing was not directly related to the employers
trade or business or the work may be considered as extra helper as in this case; and that the relationship of an
employer and an employee was determined by law and the same would prevail whatever the parties may call
it. In this case, the NLRC held that substantial evidence was sufficient basis for judgment on the existence of
the employer-employee relationship. Javier was a regular employee of Fly Ace because there was reasonable
connection between the particular activity performed by the employee (as a pahinante) in relation to the usual
business or trade of the employer (importation, sales and delivery of groceries). He may not be considered as
an independent contractor because he could not exercise any judgment in the delivery of company
products. He was only engaged as a helper.

Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of tenure.
For failing to present proof of a valid cause for his termination, Fly Ace was found to be liable for illegal
dismissal of Javier who was likewise entitled to backwages and separation pay in lieu of reinstatement. The
NLRC thus ordered:

WHEREFORE, premises considered, complainants appeal is partially GRANTED. The


assailed Decision of the labor arbiter is VACATED and a new one is hereby entered holding
respondent FLY ACE CORPORATION guilty of illegal dismissal and non-payment of 13th month
pay. Consequently, it is hereby ordered to pay complainant DANILO Bitoy JAVIER the
following:

1. Backwages -45,770.83

2. Separation pay, in lieu of reinstatement - 8,450.00

3. Unpaid 13th month pay (proportionate) - 5,633.33

TOTAL -59,854.16

All other claims are dismissed for lack of merit.

SO ORDERED.[11]

Ruling of the Court of Appeals

On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former employee of
Fly Ace and reinstated the dismissal of Javiers complaint as ordered by the LA. The CA exercised its authority
to make its own factual determination anent the issue of the existence of an employer-employee relationship
between the parties.According to the CA:

xxx

In an illegal dismissal case the onus probandi rests on the employer to prove that its
dismissal was for a valid cause. However, before a case for illegal dismissal can prosper, an
employer-employee relationship must first be established. x x x it is incumbent upon private
respondent to prove the employee-employer relationship by substantial evidence.

xxx
It is incumbent upon private respondent to prove, by substantial evidence, that he is an
employee of petitioners, but he failed to discharge his burden. The non-issuance of a company-
issued identification card to private respondent supports petitioners contention that private
respondent was not its employee.[12]

The CA likewise added that Javiers failure to present salary vouchers, payslips, or other pieces of evidence to
bolster his contention, pointed to the inescapable conclusion that he was not an employee of Fly Ace. Further,
it found that Javiers work was not necessary and desirable to the business or trade of the company, as it was
only when there were scheduled deliveries, which a regular hauling service could not deliver, that Fly Ace
would contract the services of Javier as an extra helper. Lastly, the CA declared that the facts alleged by
Javier did not pass the control test.

He contracted work outside the company premises; he was not required to observe definite hours of work; he
was not required to report daily; and he was free to accept other work elsewhere as there was no exclusivity of
his contracted service to the company, the same being co-terminous with the trip only.[13] Since no substantial
evidence was presented to establish an employer-employee relationship, the case for illegal dismissal could
not prosper.

The petitioners moved for reconsideration, but to no avail.

Hence, this appeal anchored on the following grounds:

I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
PETITIONER WAS NOT A REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
PETITIONER IS NOT ENTITLED TO HIS MONETARY CLAIMS.[14]

The petitioner contends that other than its bare allegations and self-serving affidavits of the other
employees, Fly Ace has nothing to substantiate its claim that Javier was engaged on a pakyaw basis.
Assuming that Javier was indeed hired on a pakyaw basis, it does not preclude his regular employment with
the company. Even the acknowledgment receipts bearing his signature and the confirming receipt of his
salaries will not show the true nature of his employment as they do not reflect the necessary details of the
commissioned task. Besides, Javiers tasks as pahinante are related, necessary and desirable to the line of
business by Fly Ace which is engaged in the importation and sale of grocery items. On days when there were
no scheduled deliveries, he worked in petitioners warehouse, arranging and cleaning the stored cans for
delivery to clients.[15] More importantly, Javier was subject to the control and supervision of the company, as he
was made to report to the office from Monday to Saturday, from 7:00 oclock in the morning until 5:00 oclock in
the afternoon. The list of deliverable goods, together with the corresponding clients and their respective
purchases and addresses, would necessarily have been prepared by Fly Ace. Clearly, he was subjected to
compliance with company rules and regulations as regards working hours, delivery schedule and output, and
his other duties in the warehouse.[16]

The petitioner chiefly relied on Chavez v. NLRC,[17] where the Court ruled that payment to a worker on a
per trip basis is not significant because this is merely a method of computing compensation and not a basis for
determining the existence of employer-employee relationship. Javier likewise invokes the rule that, in
controversies between a laborer and his master, x x x doubts reasonably arising from the evidence should be
resolved in the formers favour. The policy is reflected is no less than the Constitution, Labor Code and Civil
Code.[18]

Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by the latters
failure to observe substantive and procedural due process. Since his dismissal was not based on any of the
causes recognized by law, and was implemented without notice, Javier is entitled to separation pay and
backwages.

In its Comment,[19] Fly Ace insists that there was no substantial evidence to prove employer-employee
relationship. Having a service contract with Milmar Hauling Services for the purpose of transporting and
delivering company products to customers, Fly Ace contracted Javier as an extra helper or pahinante on a
mere per trip basis. Javier, who was actually a loiterer in the area, only accompanied and assisted the
company driver when Milmar could not deliver or when the exigency of extra deliveries arises for roughly five to
six times a month. Before making a delivery, Fly Ace would turn over to the driver and Javier the delivery
vehicle with its loaded company products. With the vehicle and products in their custody, the driver and Javier
would leave the company premises using their own means, method, best judgment and discretion on how to
deliver, time to deliver, where and [when] to start, and manner of delivering the products.[20]

Fly Ace dismisses Javiers claims of employment as baseless assertions. Aside from his bare
allegations, he presented nothing to substantiate his status as an employee. It is a basic rule of evidence that
each party must prove his affirmative allegation. If he claims a right granted by law, he must prove his claim by
competent evidence, relying on the strength of his own evidence and not upon the weakness of his
opponent.[21] Invoking the case of Lopez v. Bodega City,[22] Fly Ace insists that in an illegal dismissal case, the
burden of proof is upon the complainant who claims to be an employee. It is essential that an employer-
employee relationship be proved by substantial evidence. Thus, it cites:

In an illegal dismissal case, the onus probandi rests on the employer to prove that its
dismissal of an employee was for a valid cause. However, before a case for illegal dismissal
can prosper, an employer-employee relationship must first be established.
Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly Ace,
which are unfortunately not supported by proof, documentary or otherwise.[23] Javier simply assumed that he
was an employee of Fly Ace, absent any competent or relevant evidence to support it. He performed his
contracted work outside the premises of the respondent; he was not even required to report to work at regular
hours; he was not made to register his time in and time out every time he was contracted to work; he was not
subjected to any disciplinary sanction imposed to other employees for company violations; he was not issued a
company I.D.; he was not accorded the same benefits given to other employees; he was not registered with the
Social Security System (SSS) as petitioners employee; and, he was free to leave, accept and engage in other
means of livelihood as there is no exclusivity of his contracted services with the petitioner, his services being
co-terminus with the trip only. All these lead to the conclusion that petitioner is not an employee of the
respondents.[24]
Moreover, Fly Ace claims that it had no right to control the result, means, manner and methods by which
Javier would perform his work or by which the same is to be accomplished.[25] In other words, Javier and the
company driver were given a free hand as to how they would perform their contracted services and neither
were they subjected to definite hours or condition of work.

Fly Ace likewise claims that Javiers function as a pahinante was not directly related or necessary to its
principal business of importation and sales of groceries. Even without Javier, the business could operate its
usual course as it did not involve the business of inland transportation. Lastly, the acknowledgment receipts
bearing Javiers signature and words pakiao rate, referring to his earned salaries on a per trip basis, have
evidentiary weight that the LA correctly considered in arriving at the conclusion that Javier was not an
employee of the company.

The Court affirms the assailed CA decision.

It must be noted that the issue of Javiers alleged illegal dismissal is anchored on the existence of an
employer-employee relationship between him and Fly Ace. This is essentially a question of fact. Generally, the
Court does not review errors that raise factual questions. However, when there is conflict among the factual
findings of the antecedent deciding bodies like the LA, the NLRC and the CA, it is proper, in the exercise of
Our equity jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case and
re-examine the questioned findings.[26] In dealing with factual issues in labor cases, substantial evidence that
amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion is
sufficient.[27]

As the records bear out, the LA and the CA found Javiers claim of employment with Fly Ace as wanting
and deficient. The Court is constrained to agree. Although Section 10, Rule VII of the New Rules of Procedure
of the NLRC[28] allows a relaxation of the rules of procedure and evidence in labor cases, this rule of liberality
does not mean a complete dispensation of proof. Labor officials are enjoined to use reasonable means to
ascertain the facts speedily and objectively with little regard to technicalities or formalities but nowhere in the
rules are they provided a license to completely discount evidence, or the lack of it. The quantum of proof
required, however, must still be satisfied. Hence, when confronted with conflicting versions on factual matters,
it is for them in the exercise of discretion to determine which party deserves credence on the basis of evidence
received, subject only to the requirement that their decision must be supported by substantial
evidence.[29] Accordingly, the petitioner needs to show by substantial evidence that he was indeed an
employee of the company against which he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart and proffer allegations as different as chalk and
cheese. It is, therefore, incumbent upon the Court to determine whether the party on whom the burden to prove
lies was able to hurdle the same. No particular form of evidence is required to prove the existence of such
employer-employee relationship. Any competent and relevant evidence to prove the relationship may be
admitted. Hence, while no particular form of evidence is required, a finding that such relationship exists must
still rest on some substantial evidence. Moreover, the substantiality of the evidence depends on its quantitative
as well as its qualitative aspects.[30]Although substantial evidence is not a function of quantity but rather of
quality, the x x x circumstances of the instant case demand that something more should have been proffered.
Had there been other proofs of employment, such as x x x inclusion in petitioners payroll, or a clear exercise of
control, the Court would have affirmed the finding of employer-employee relationship.[31]

In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate
such claim by the requisite quantum of evidence.[32] Whoever claims entitlement to the benefits provided by law
should establish his or her right thereto x x x.[33] Sadly, Javier failed to adduce substantial evidence as basis for
the grant of relief.

In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly
Ace. By way of evidence on this point, all that Javier presented were his self-serving statements purportedly
showing his activities as an employee of Fly Ace. Clearly, Javier failed to pass the substantiality requirement to
support his claim. Hence, the Court sees no reason to depart from the findings of the CA.

While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was made to
work in the company premises during weekdays arranging and cleaning grocery items for delivery to clients, no
other proof was submitted to fortify his claim. The lone affidavit executed by one Bengie Valenzuela was
unsuccessful in strengthening Javiers cause. In said document, all Valenzuela attested to was that he would
frequently see Javier at the workplace where the latter was also hired as stevedore.[34] Certainly, in gauging the
evidence presented by Javier, the Court cannot ignore the inescapable conclusion that his mere presence at
the workplace falls short in proving employment therein. The supporting affidavit could have, to an extent,
bolstered Javiers claim of being tasked to clean grocery items when there were no scheduled delivery trips, but
no information was offered in this subject simply because the witness had no personal knowledge of Javiers
employment status in the company. Verily, the Court cannot accept Javiers statements, hook, line and sinker.

The Court is of the considerable view that on Javier lies the burden to pass the well-settled tests to
determine the existence of an employer-employee relationship, viz: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees
conduct. Of these elements, the most important criterion is whether the employer controls or has reserved the
right to control the employee not only as to the result of the work but also as to the means and methods by
which the result is to be accomplished.[35]

In this case, Javier was not able to persuade the Court that the above elements exist in his case. He
could not submit competent proof that Fly Ace engaged his services as a regular employee; that Fly Ace paid
his wages as an employee, or that Fly Ace could dictate what his conduct should be while at work. In other
words, Javiers allegations did not establish that his relationship with Fly Ace had the attributes of an employer-
employee relationship on the basis of the above-mentioned four-fold test. Worse, Javier was not able to refute
Fly Aces assertion that it had an agreement with a hauling company to undertake the delivery of its goods. It
was also baffling to realize that Javier did not dispute Fly Aces denial of his services exclusivity to the
company. In short, all that Javier laid down were bare allegations without corroborative proof.

Fly Ace does not dispute having contracted Javier and paid him on a per trip rate as a stevedore, albeit
on a pakyaw basis. The Court cannot fail to note that Fly Ace presented documentary proof that Javier was
indeed paid on a pakyaw basis per the acknowledgment receipts admitted as competent evidence by the
LA. Unfortunately for Javier, his mere denial of the signatures affixed therein cannot automatically sway us to
ignore the documents because forgery cannot be presumed and must be proved by clear, positive and
convincing evidence and the burden of proof lies on the party alleging forgery.[36]

Considering the above findings, the Court does not see the necessity to resolve the second issue
presented.

One final note. The Courts decision does not contradict the settled rule that payment by the piece is just
a method of compensation and does not define the essence of the relation.[37] Payment on a piece-rate basis
does not negate regular employment. The term wage is broadly defined in Article 97 of the Labor Code as
remuneration or earnings, capable of being expressed in terms of money whether fixed or ascertained on a
time, task, piece or commission basis. Payment by the piece is just a method of compensation and does not
define the essence of the relations. Nor does the fact that the petitioner is not covered by the SSS affect the
employer-employee relationship. However, in determining whether the relationship is that of employer and
employee or one of an independent contractor, each case must be determined on its own facts and all the
features of the relationship are to be considered.[38] Unfortunately for Javier, the attendant facts and
circumstances of the instant case do not provide the Court with sufficient reason to uphold his claimed status
as employee of Fly Ace.

While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will be automatically decided in favor of labor.
Management also has its rights which are entitled to respect and enforcement in the interest of simple fair play.
Out of its concern for the less privileged in life, the Court has inclined, more often than not, toward the worker
and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded the Court to
the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and
the applicable law and doctrine.[39]

WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals and
its June 7, 2010 Resolution, in CA-G.R. SP No. 109975, are hereby AFFIRMED.
SO ORDERED.
7. G.R. No. 202961 February 4, 2015

EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO DAVID, BONIFACIO MATUNDAN,
NORA MENDOZA, et al., Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, SOLID MILLS, INC., and/or PHILIP ANG, Respondents.

DECISION

LEONEN, J.:

An employer is allowed to withhold terminal pay and benefits pending the employee's return of its properties.

Petitioners are respondent Solid Mills, Inc.' s (Solid Mills) employees. 1 They are represented by the National
Federation of Labor Unions (NAFLU), their collective bargaining agent.2

As Solid Mills employees, petitionersand their families were allowed to occupy SMI Village, a property owned
by Solid Mills.3 According to Solid Mills, this was "[o]ut of liberality and for the convenience of its employees . . .
[and] on the condition that the employees . . . would vacate the premises anytime the Company deems fit."4

In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills would cease its
operations due to serious business losses.5 NAFLU recognized Solid Mills closure due to serious business
losses in the memorandum of agreement dated September 1, 2003.6 The memorandum of agreement
provided for Solid Mills grant of separation pay less accountabilities, accrued sick leave benefits, vacation
leave benefits, and 13th month pay to the employees.7 Pertinent portions of the agreement provide:

WHEREAS, the COMPANYhas incurred substantial financial losses and is currently experiencing further
severe financial losses;

WHEREAS, in view of such irreversible financial losses, the COMPANY will cease its operations on October
10, 2003;

WHEREAS, all employees of the COMPANY on account of irreversible financial losses, will bedismissed from
employment effective October 10, 2003;

In view thereof, the parties agree as follows:

1. That UNION acknowledges that the COMPANY is experiencing severe financial losses and as a
consequence of which, management is constrained to cease the companys operations.

2. The UNION acknowledges that under Article 283 of the Labor Code, separation pay is granted to
employees who are dismissed due to closures or cessation of operations NOT DUE to serious business
losses.

3. The UNION acknowledges that in view of the serious business losses the Company has been
experiencing as seen in their audited financial statements, employees ARE NOT granted separation
benefits under the law.

4. The COMPANY, by way of goodwill and in the spirit of generosity agrees to grant financial
assistance less accountabilities to members of the Union based on length of service to be computed as
follows: (Italics in this paragraph supplied)

Number of days - 12.625 for every year of service


5. In view of the above, the members of the UNION will receive such financial assistance on an equal
monthly installments basis based on the following schedule:

First Check due on January 5, 2004 and every 5th of the month thereafter until December 5, 2004.

6. The COMPANY commits to pay any accrued benefits the Union members are entitled to, specifically
those arising from sick and vacation leave benefits and 13th month pay, less accountabilities based on
the following schedule:

One Time Cash Payment to bedistributed anywhere from. . . .

....

8. The foregoing agreement is entered into with full knowledge by the parties of their rights under the
law and they hereby bind themselves not to conduct any concerted action of whatsoever kind,
otherwise the grant of financial assistance as discussed above will be withheld.8 (Emphasis in the
original)

Solid Mills filed its Department of Labor and Employment termination report on September 2, 2003. 9

Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate SMI Village. 10

Petitioners were no longer allowed to report for work by October 10, 2003.11 They were required to sign a
memorandum of agreement with release and quitclaim before their vacation and sick leave benefits, 13th
month pay, and separation pay would be released.12 Employees who signed the memorandum of agreement
were considered to have agreed to vacate SMI Village, and to the demolition of the constructed houses inside
as condition for the release of their termination benefits and separation pay. 13 Petitioners refused to sign the
documents and demanded to be paid their benefits and separation pay.14

Hence, petitioners filed complaintsbefore the Labor Arbiter for alleged non-payment of separation pay, accrued
sick and vacation leaves, and 13th month pay.15 They argued that their accrued benefits and separation pay
should not be withheld becausetheir payment is based on company policy and practice.16 Moreover, the 13th
month pay is based on law, specifically, Presidential Decree No. 851.17 Their possession of Solid Mills property
is not an accountability that is subject to clearance procedures. 18 They had already turned over to SolidMills
their uniforms and equipment when Solid Mills ceased operations.19

On the other hand, Solid Mills argued that petitioners complaint was premature because they had not vacated
its property.20

The Labor Arbiter ruled in favor of petitioners.21 According to the Labor Arbiter, Solid Mills illegallywithheld
petitioners benefits and separation pay.22 Petitioners right to the payment of their benefits and separation pay
was vestedby law and contract.23 The memorandum of agreement dated September 1, 2003 stated no
condition to the effect that petitioners must vacate SolidMills property before their benefits could be given to
them.24 Petitioners possession should not be construed as petitioners "accountabilities" that must be cleared
first before the release of benefits.25 Their possession "is not by virtue of any employer-employee
relationship."26 It is a civil issue, which isoutside the jurisdiction of the Labor Arbiter.27

The dispositive portion of the Labor Arbiters decision reads:

WHEREFORE, premises considered, judgment is entered ORDERING respondents SOLID MILLS, INC.
and/or PHILIP ANG (President), in solido to pay the remaining 21 complainants:

1) 19 of which, namely EMER MILAN, RAMON MASANGKAY, ALFREDO JAVIER, RONALDO DAVID,
BONIFACIO MATUNDAN, NORA MENDOZA, MYRNA IGCAS, RAUL DE LAS ALAS, RENATO
ESTOLANO, REX S. DIMAFELIX, MAURA MILAN, JESSICA BAYBAYON, ALFREDO MENDOZA,
ROBERTO IGCAS, ISMAEL MATA, CARLITO DAMIAN, TEODORA MAHILOM, MARILOU LINGA,
RENATO LINGA their separation pay of 12.625 days pay per year of service, pro-rated 13th month pay
for 2003 and accrued vacation and sick leaves, plus 12% interest p.a. from date of filing of the
leadcase/judicial demand on 12/08/03 until actual payment and/or finality;

2) the remaining 2 of which, complainants CLEOPATRA ZACARIAS, as she already received on


12/19/03 her accrued 13th month pay for 2003, accrued VL/SL total amount of P15,435.16, likewise,
complainant Jerry L. Sesma as he already received his accrued 13th month pay for 2003, SL/VL in the
total amount of P10,974.97, shall be paid only their separation pay of 12.625 days pay per year of
service but also with 12% interest p.a. from date of filing of the lead case/judicial demand on 12/08/03
until actual payment and/or finality, which computation as of date, amount to as shown in the attached
computation sheet.

3) Nine (9) individual complaintsviz., of Maria Agojo, Joey Suarez, Ronaldo Vergara, Ronnie Vergara,
Antonio R. Dulo, Sr., Bryan D. Durano, Silverio P. Durano, Sr., Elizabeth Duarte and Purificacion
Malabanan are DISMISSED WITH PREJUDICE due to amicable settlement, whereas, that of [RONIE
ARANAS], [EMILITO NAVARRO], [NONILON PASCO], [GENOVEVA PASCO], [OLIMPIO A. PASCO]
are DISMISSED WITHOUT PREJUDICE, for lack of interest and/or failure to prosecute.

The Computation and Examination unit is directed to cause the computation of the award in Pars. 2 and 3
above.28(Emphasis in the original)

Solid Mills appealed to the National Labor Relations Commission.29 It prayed for, among others, the dismissal
of the complaints against it and the reversal of the Labor Arbiters decision.30

The National Labor Relations Commission affirmed paragraph 3 of the Labor Arbiters dispositive portion, but
reversed paragraphs 1 and 2. Thus:

WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated 10/17/05 is AFFIRMED in so far as
par. 3 thereof is concerned but modified in that paragraphs 1 and 2 thereof are REVERSED and SET ASIDE.
Accordingly, the following complainants, namely: Emir Milan, Ramon Masangkay, Alfredo Javier, Ronaldo
David, Bonifacio Matundan, Nora Mendoza, Myrna Igcas, Raul De Las Alas, Renato Estolano, Rex S.
Dimaf[e]lix, Maura Milan, Jessica Baybayon, Alfredo Mendoza, Roberto Igcas, Cleopatra Zacarias and Jerry L.
Sesmas monetary claims in the form of separation pay, accrued 13th month pay for 2003, accrued vacation
and sick leave pays are held in abeyance pending compliance of their accountabilities to respondent company
by turning over the subject lots they respectively occupy at SMI Village Sucat

Muntinlupa City, Metro Manila to herein respondent company.31

The National Labor Relations Commission noted that complainants Marilou Linga, Renato Linga, IsmaelMata,
and Carlito Damian were already paid their respective separation pays and benefits.32 Meanwhile, Teodora
Mahilom already retired longbefore Solid Mills closure.33 She was already given her retirement benefits.34

The National Labor Relations Commission ruled that because of petitioners failure to vacate Solid Mills
property, Solid Mills was justified in withholding their benefits and separation pay. 35 Solid Mills granted the
petitioners the privilege to occupy its property on accountof petitioners employment. 36 It had the prerogative
toterminate such privilege.37 The termination of Solid Mills and petitioners employer-employee relationship
made it incumbent upon petitioners to turn over the property to Solid Mills.38

Petitioners filed a motion for partial reconsideration on October 18, 2010, 39 but this was denied in the
November 30, 2010 resolution.40

Petitioners, thus, filed a petition for certiorari41 before the Court of Appeals to assail the National
LaborRelations Commission decision of August 31, 2010 and resolution of November 30, 2010.42
On January 31, 2012, the Court of Appeals issued a decision dismissing petitioners petition, 43 thus:

WHEREFORE, the petition is hereby ordered DISMISSED.44

The Court of Appeals ruled thatSolid Mills act of allowing its employees to make temporary dwellingsin its
property was a liberality on its part. It may be revoked any time at its discretion. 45 As a consequence of Solid
Mills closure and the resulting termination of petitioners, the employer-employee relationship between them
ceased to exist. There was no more reason for them to stay in Solid Mills property. 46 Moreover, the
memorandum of agreement between Solid Mills and the union representing petitioners provided that Solid
Mills payment of employees benefits should be "less accountabilities."47

On petitioners claim that there was no evidence that Teodora Mahilom already received her retirement pay,
the Court of Appeals ruled that her complaint filed before the Labor Arbiter did not include a claim for
retirement pay. The issue was also raised for the first time on appeal, which is not allowed. 48 In any case, she
already retired before Solid Mills ceased its operations.49

The Court of Appeals agreed with the National Labor Relations Commissions deletion of interest since it found
that Solid Mills act of withholding payment of benefits and separation pay was proper. Petitioners terminal
benefits and pay were withheld because of petitioners failure to vacate Solid Mills property. 50

Finally, the Court of Appeals noted that Carlito Damian already received his separation pay and
benefits.51 Hence, he should no longer be awarded these claims.52

In the resolution promulgated on July 16, 2012, the Court of Appeals denied petitioners motion for
reconsideration.53

Petitioners raise in this petition the following errors:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR


WHEN IT RULED THAT PAYMENT OF THE MONETARY CLAIMS OF PETITIONERS SHOULD BE
HELD IN ABEYANCE PENDING COMPLIANCE OF THEIR ACCOUNTABILITIES TO RESPONDENT
SOLID MILLS BY TURNING OVER THE SUBJECT LOTS THEY RESPECTIVELY OCCUPY AT SMI
VILLAGE, SUCAT, MUNTINLUPA CITY.

II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR


WHEN IT UPHELD THE RULING OF THE NLRC DELETING THE INTEREST OF 12% PER ANNUM
IMPOSED BY THE HONORABLE LABOR ARBITER HERNANDEZ ON THE AMOUNTDUE FROM
THE DATE OF FILING OF THE LEAD CASE/JUDICIAL DEMAND ON DECEMBER 8, 2003 UNTIL
ACTUAL PAYMENT AND/OR FINALITY.

III

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR


WHEN IT UPHELD THE RULING OF THE NLRC DENYING THE CLAIM OF TEODORA MAHILOM
FOR PAYMENT OF RETIREMENT BENEFITS DESPITE LACK OF ANY EVIDENCE THAT SHE
RECEIVED THE SAME.

IV

WHETHER OR NOT PETITIONER CARLITO DAMIAN IS ENTITLED TO HIS MONETARY BENEFITS


FROM RESPONDENT SOLID MILLS.54
Petitioners argue that respondent Solid Mills and NAFLUs memorandum of agreement has no provision
stating that benefits shall be paid only upon return of the possession of respondent Solid Mills property.55 It
only provides that the benefits shall be "less accountabilities," which should not be interpreted to include such
possession.56 The fact that majority of NAFLUs members were not occupants of respondent Solid Mills
property is evidence that possession of the property was not contemplated in the
agreement.57 "Accountabilities" should be interpreted to refer only to accountabilities that wereincurred by
petitioners while they were performing their duties asemployees at the worksite.58 Moreover, applicable laws,
company practice, or policies do not provide that 13th month pay, and sick and vacation leave pay benefits,
may be withheld pending satisfaction of liabilities by the employee.59

Petitioners also point out thatthe National Labor Relations Commission and the Court of Appeals have no
jurisdiction to declare that petitioners act of withholding possession of respondent Solid Mills property is
illegal.60The regular courts have jurisdiction over this issue.61 It is independent from the issue of payment of
petitioners monetary benefits.62

For these reasons, and because, according to petitioners, the amount of monetary award is no longer in
question, petitioners are entitled to 12% interest per annum.63

Petitioners also argue that Teodora Mahilom and Carlito Damian are entitled to their claims. They insistthat
Teodora Mahilom did not receive her retirement benefits and that Carlito Damian did not receive his separation
benefits.64

Respondents Solid Mills and Philip Ang,in their joint comment, argue that petitioners failure to turn over
respondentSolid Mills property "constituted an unsatisfied accountability" for which reason "petitioners
benefits could rightfully be withheld."65 The term "accountability" should be given its natural and ordinary
meaning.66 Thus, it should be interpreted as "a state of being liable or responsible," or
"obligation."67 Petitioners differentiation between accountabilities incurred while performing jobs at the worksite
and accountabilities incurred outside the worksite is baseless because the agreement with NAFLUmerely
stated "accountabilities," without qualification.68

On the removal of the award of 12% interest per annum, respondents argue that such removal was proper
since respondent Solid Mills was justified in withholding the monetary claims. 69 Respondents argue that
Teodora Mahilom had no more cause of action for retirement benefits claim. 70 She had already retired more
than a decade before Solid Mills closure. She also already received her retirement benefits in 1991. 71 Teodora
Mahiloms claim was also not included in the complaint filed before the Labor Arbiter.It was improper to raise
this claim for the first time on appeal. In any case, Teodora Mahiloms claim was asserted long after the three-
year prescriptive period provided in Article 291 of the Labor Code.72

Lastly, according to respondents, it would be unjust if Carlito Damian would be allowed to receive monetary
benefits again, which he, admittedly, already received from Solid Mills.73

The National Labor Relations Commission may preliminarily determine issues related to rights arising from an
employer-employee relationship

The National Labor Relations Commission has jurisdiction to determine, preliminarily, the partiesrights over a
property, when it is necessary to determine an issue related to rights or claims arising from an employer-
employee relationship.

Article 217 provides that the Labor Arbiter, in his or her original jurisdiction, and the National Labor Relations
Commission, in its appellate jurisdiction, may determine issues involving claims arising from
employeremployee relations. Thus:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. (1) Except as otherwise
provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide
within thirty (30) calendar days after the submission of the case by the parties for decision without extension,
even in the absence of stenographic notes, the following cases involving workers, whether agricultural or non-
agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

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

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

5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality
of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims, arising from employer-employee relations including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos (P5,000.00), regardless of
whether accompanied with a claim for reinstatement.

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

Petitioners claim that they have the right to the immediate release of their benefits as employees separated
from respondent Solid Mills is a question arising from the employer-employee relationship between the parties.

Claims arising from an employer-employee relationship are not limited to claims by an employee. Employers
may also have claims against the employee, which arise from the same relationship. In Baez v.
Valdevilla,74 this court ruled that Article 217 of the Labor Code also applies to employers claim for damages,
which arises from or is connected with the labor issue. Thus: Whereas this Court in a number of occasions had
applied the jurisdictional provisions of Article 217 to claims for damages filed by employees, we hold that by
the designating clause "arising from the employer-employee relations" Article 217 should apply with equal
force to the claim of an employer for actual damages against its dismissed employee, where the basis for the
claim arises from or is necessarily connected with the factof termination, and should be entered as a
counterclaim in the illegal dismissal case.75

Baez was cited in Domondon v. National Labor Relations Commission.76 One of the issues in Domondonis
whether the Labor Arbiter has jurisdiction to decide an issue on the transfer of ownership of a vehicle assigned
to the employee. It was argued that only regular courts have jurisdiction to decide the issue. 77

This court ruled that since the transfer of ownership of the vehicle to the employee was connected to his
separation from the employer and arose from the employer-employee relationship of the parties, the
employers claim fell within the LaborArbiters jurisdiction.78

As a general rule, therefore, a claim only needs to be sufficiently connected to the labor issue raisedand must
arise from an employeremployee relationship for the labortribunals to have jurisdiction.

In this case, respondent Solid Mills claims that its properties are in petitioners possession by virtue of their
status as its employees. Respondent Solid Mills allowed petitioners to use its property as an act of liberality.
Put in other words, it would not have allowed petitioners to use its property had they not been its employees.
The return of its properties in petitioners possession by virtue of their status as employees is an issue that
must be resolved to determine whether benefits can be released immediately. The issue raised by the
employer is, therefore, connected to petitioners claim for benefits and is sufficiently intertwined with the
parties employeremployee relationship. Thus, it is properly within the labor tribunals jurisdiction.

II

Institution of clearance procedures has legal bases

Requiring clearance before the release of last payments to the employee is a standard procedure among
employers, whether public or private. Clearance procedures are instituted to ensure that the properties, real or
personal, belonging to the employer but are in the possession of the separated employee, are returned tothe
employer before the employees departure.

As a general rule, employers are prohibited from withholding wages from employees. The Labor Code
provides:

Art. 116. Withholding of wages and kickbacks prohibited.It shall be unlawful for any person, directly or
indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of his wages by
force, stealth, intimidation, threat or by any other means whatsoever without the workers consent.

The Labor Code also prohibits the elimination or diminution of benefits. Thus:

Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to
eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.

However, our law supports the employers institution of clearance procedures before the release of wages. As
an exception to the general rule that wages may not be withheld and benefits may not be diminished, the Labor
Code provides:

Art. 113. Wage deduction.No employer, in his own behalf or in behalf of any person, shall make any deduction
from the wages of his employees, except:

1. In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;

2. For union dues, in cases where the right of the worker or his union to check-off has been recognized
by the employer or authorized in writing by the individual worker concerned; and

3. In cases where the employer is authorized by law or regulations issued by the Secretary of Labor
and Employment. (Emphasis supplied)

The Civil Code provides that the employer is authorized to withhold wages for debts due:

Article 1706. Withholding of the wages, except for a debt due, shall not be made by the employer.

"Debt" in this case refers to any obligation due from the employee to the employer. It includes any
accountability that the employee may have to the employer. There is no reason to limit its scope to uniforms
and equipment, as petitioners would argue.

More importantly, respondent Solid Mills and NAFLU, the union representing petitioners, agreed that the
release of petitioners benefits shall be "less accountabilities."

"Accountability," in its ordinary sense, means obligation or debt. The ordinary meaning of the term
"accountability" does not limit the definition of accountability to those incurred in the worksite. As long as the
debt or obligation was incurred by virtue of the employer-employee relationship, generally, it shall be included
in the employees accountabilities that are subject to clearance procedures.

It may be true that not all employees enjoyed the privilege of staying in respondent Solid Mills property.
However, this alone does not imply that this privilege when enjoyed was not a result of the employer-employee
relationship. Those who did avail of the privilege were employees of respondent Solid Mills. Petitioners
possession should, therefore, be included in the term "accountability."

Accountabilities of employees are personal. They need not be uniform among all employees in order to be
included in accountabilities incurred by virtue of an employer-employee relationship. Petitioners do not
categorically deny respondent Solid Mills ownership of the property, and they do not claim superior right to it.
What can be gathered from the findings ofthe Labor Arbiter, National Labor Relations Commission, and the
Court ofAppeals is that respondent Solid Mills allowed the use of its property for the benefit of petitioners as its
employees. Petitioners were merely allowed to possess and use it out of respondent Solid Mills liberality. The
employer may, therefore, demand the property at will.79

The return of the propertys possession became an obligation or liability on the part of the employees when the
employer-employee relationship ceased. Thus, respondent Solid Mills has the right to withhold petitioners
wages and benefitsbecause of this existing debt or liability. In Solas v. Power and Telephone Supply Phils.,
Inc., et al., this court recognized this right of the employer when it ruled that the employee in that case was not
constructively dismissed.80 Thus:

There was valid reason for respondents withholding of petitioners salary for the month of February 2000.
Petitioner does not deny that he is indebted to his employer in the amount of around 95,000.00. Respondents
explained that petitioners salary for the period of February 1-15, 2000 was applied as partial payment for his
debt and for withholding taxes on his income; while for the period of February 15-28, 2000, petitioner was
already on absence without leave, hence, was not entitled to any pay.81

The law does not sanction a situation where employees who do not even assert any claim over the employers
property are allowed to take all the benefits out of their employment while they simultaneously withhold
possession of their employers property for no rightful reason. Withholding of payment by the employer does
not mean that the employer may renege on its obligation to pay employees their wages, termination payments,
and due benefits. The employees benefits are also not being reduced. It is only subjectedto the condition that
the employees return properties properly belonging to the employer. This is only consistent with the equitable
principle that "no one shall be unjustly enriched or benefited at the expense of another."82

For these reasons, we cannot hold that petitioners are entitled to interest of their withheldseparation benefits.
These benefits were properly withheld by respondent Solid Mills because of their refusal to return its property.

III

Mahilom and Damian are not entitled to the benefits claimed

Teodora Mahilom is not entitled to separation benefits.

Both the National Labor Relations Commission and the Court of Appeals found that Teodora Mahilom already
retired long before respondent Solid Mills closure. They found that she already received her retirement
benefits. We have no reason to disturb this finding. This court is not a trier of facts. Findings of the National
Labor Relations Commission, especially when affirmed by the Court of Appeals, are binding upon this court.83

Moreover, Teodora Mahiloms claim for retirement benefits was not included in her complaint filed before the
Labor Arbiter. Hence, it may not be raised in the appeal.

Similarly, the National Labor Relations Commission and the Court of Appeals found that Carlito Damian
already received his terminal benefits. Hence, he may no longer claim terminal benefits. The fact that
respondent Solid Mills has not yet demolished Carlito Damians house in SMI Village is not evidence that he
did not receive his benefits. Both the National Labor Relations Commission and the Court of Appeals found
that he executed an affidavit stating that he already received the benefits.

A bsent any showing that the National Labor Relations Commission and the Court of Appeals misconstrued
these facts, we will not reverse these findings.

Our laws provide for a clear preference for labor. This is in recognition of the asymmetrical power of those with
capital when they are left to negotiate with their workers without the standards and protection of law. In cases
such as these, the collective bargaining unit of workers are able to get more benefits and in exchange, the
owners are able to continue with the program of cutting their losses or wind down their operations due to
serious business losses. The company in this case did all that was required by law.

The preferential treatment given by our law to labor, however, is not a license for abuse. 84 It is not a signal to
commit acts of unfairness that will unreasonably infringe on the property rights of the company. Both labor and
employer have social utility, and the law is not so biased that it does not find a middle ground to give each their
due.

Clearly, in this case, it is for the workers to return their housing in exchange for the release of their
benefits.1wphi1 This is what they agreed upon. It is what is fair in the premises.

WHEREFORE, the petition is DENIED. The Court of Appeals' decision is AFFIRMED.


8. G.R. No. 189255, June 17, 2015

JESUS G. REYES, Petitioner, v. GLAUCOMA RESEARCH FOUNDATION, INC., EYE REFERRAL CENTER
AND MANUEL B. AGULTO, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari seeking to reverse and set aside the Decision1and
Resolution2 of the Court of Appeals (CA), dated April 20, 2009 and August 25, 2009, respectively, in CA-G.R.
SP No. 104261. The assailed CA Decision annulled the Decision of the National Labor Relations Commission
(NLRC) in NLRC NCR Case No. 05-0441-05 and reinstated the Decision of the Labor Arbiter (LA) in the same
case, while the CA Resolution denied petitioner's motion for reconsideration.

The instant petition arose from a complaint for illegal dismissal filed by petitioner against respondents with the
NLRC, National Capital Region, Quezon City. Petitioner alleged that: on August 1, 2003, he was hired by
respondent corporation as administrator of the latter's Eye Referral Center (ERC); he performed his duties as
administrator and continuously received his monthly salary of P20,000.00 until the end of January 2005;
beginning February 2005, respondent withheld petitioner's salary without notice but he still continued to report
for work; on April 11, 2005, petitioner wrote a letter to respondent Manuel Agulto (Agulto), who is the Executive
Director of respondent corporation, informing the latter that he has not been receiving his salaries since
February 2005 as well as his 14th month pay for 2004; petitioner did not receive any response from Agulto; on
April 21, 2005, petitioner was informed by the Assistant to the Executive Director as well as the Assistant
Administrative Officer, that he is no longer the Administrator of the ERC; subsequently, petitioner's office was
padlocked and closed without notice; he still continued to report for work but on April 29, 2005 he was no
longer allowed by the security guard on duty to enter the premises of the ERC.

On their part, respondents contended that: upon petitioner's representation that he is an expert in corporate
organizational structure and management affairs, they engaged his services as a consultant or adviser in the
formulation of an updated organizational set-up and employees' manual which is compatible with their present
condition; based on his claim that there is a need for an administrator for the ERC, he later designated himself
as such on a trial basis; there is no employer-employee relationship between them because respondents had
no control over petitioner in terms of working hours as he reports for work at anytime of the day and leaves as
he pleases; respondents also had no control as to the manner in which he performs his alleged duties as
consultant; he became overbearing and his relationship with the employees and officers of the company
soured leading to the filing of three complaints against him; petitioner was not dismissed as he was the one
who voluntarily severed his relations with respondents.

On January 20, 2006, the LA assigned to the case rendered a Decision3 dismissing petitioner's complaint. The
LA held, among others, that petitioner failed to establish that the elements of an employer-employee
relationship existed between him and respondents because he was unable to show that he was, in fact,
appointed as administrator of the ERC and received salaries as such; he also failed to deny that during his stint
with respondents, he was, at the same time, a consultant of various government agencies such as the Manila
International Airport Authority, Manila Intercontinental Port Authority, Anti-Terrorist Task Force for Aviation and
Air Transportation Sector; his actions were neither supervised nor controlled by the management of the ERC;
petitioner, likewise, did not observe working hours by reporting for work and leaving therefrom as he pleased;
and, he was receiving allowances, not salaries, as a consultant.

On appeal, the NLRC reversed and set aside the Decision of the LA. The NLRC declared petitioner as
respondents' employee, that he was illegally dismissed and ordered respondents to reinstate him to his former
position without loss of seniority rights and privileges with full backwages. The NLRC held that the basis upon
which the conclusion of the LA was drawn lacked support; that it was incumbent for respondents to discharge
the burden of proving that petitioner's dismissal was for cause and effected after due process was observed;
and, that respondents failed to discharge this burden.4
Respondents filed a motion for reconsideration, but it was denied by the NLRC in its Resolution5 dated May 30,
2008.

Respondents then filed a Petition for Certiorari6 with the CA.

In its assailed Decision, the CA annulled and set aside the judgment of the NLRC and reinstated the Decision
of the LA. The CA held that the LA was correct in ruling that, under the control test and the economic reality
test, no employer-employee relationship existed between respondents and petitioner.

Petitioner filed a motion for reconsideration, but the CA denied it in its Resolution dated August 25, 2009.

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

THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN NOT DISMISSING
RESPONDENTS' PETITION FOR CERTIORARI ON THE GROUND THAT RESPONDENTS SUBMITTED A
VERIFICATION THAT FAILS TO COMPLY WITH THE 2004 RULES ON NOTARIAL
PRACTICE.cralawlawlibrary

II

THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN RULING THAT NO
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN RESPONDENTS AND
7
PETITIONER. cralawlawlibrary
As to the first ground, petitioner contends that respondents' petition for certiorari filed with the CA should have
been dismissed on the ground that it was improperly verified because the jurat portion of the verification states
only the community tax certificate number of the affiant as evidence of her identity. Petitioner argues that under
the 2004 Rules on Notarial Practice, as amended by a Resolution8 of this Court, dated February 19, 2008, a
community tax certificate is not among those considered as competent evidence of identity.

The Court does not agree.

This Court has already ruled that competent evidence of identity is not required in cases where the affiant is
personally known to the notary public.9

Thus, in Jandoquile v. Revilla, Jr.,10 this Court held that:chanroblesvirtuallawlibrary


If the notary public knows the affiants personally, he need not require them to show their valid
identification cards. This rule is supported by the definition of a "jurat" under Section 6, Rule II of the 2004
Rules on Notarial Practice. A "jurat" refers to an act in which an individual on a single occasion: (a) appears in
person before the notary public and presents an instrument or document; (b) is personally known to the notary
public or identified by the notary public through competent evidence of identity; (c) signs the instrument or
document in the presence of the notary; and (d) takes an oath or affirmation before the notary public as to such
instrument or document.11cralawlawlibrary
Also, Section 2(b), Rule IV of the 2004 Rules on Notarial Practice provides as
follows:chanroblesvirtuallawlibrary
SEC. 2. Prohibitions -

(a) x x x

(b) A person shall not perform a notarial act if the person involved as signatory to the instrument or document -
(1) is not in the notary's presence personally at the time of the notarization; and

(2) is not personally known to the notary public or otherwise identified by the notary public through competent
evidence of identity as defined by these Rules.
Moreover, Rule II, Section 6 of the same Rules states that:

SEC 6. Jurat. - "Jurat" refers to an act in which an individual on a single occasion:chanroblesvirtuallawlibrary


(a) appears in person before the notary public and presents an instrument or document;

(b) is personally known to the notary public or identified by the notary public through competent evidence of
identity as defined by these Rules;

(c) signs the instrument or document in the presence of the notary; and

(d) takes an oath or affirmation before the notary public as to such instrument or document.
In legal hermeneutics, "or" is a disjunctive that expresses an alternative or gives a choice of one among two or
more things.12 The word signifies disassociation and independence of one thing from another thing in an
enumeration.13

Thus, as earlier stated, if the affiant is personally known to the notary public, the latter need not require the
former to show evidence of identity as required under the 2004 Rules on Notarial Practice, as amended.

Applying the above rule to the instant case, it is undisputed that the attorney-in-fact of respondents who
executed the verification and certificate against forum shopping, which was attached to respondents' petition
filed with the CA, is personally known to the notary public before whom the documents were acknowledged.
Both attorney-in-fact and the notary public hold office at respondents' place of business and the latter is also
the legal counsel of respondents.

In any event, this Court's disquisition in the fairly recent case of Heirs of Amada Zaulda v. Isaac
Zaulda14 regarding the import of procedural rules vis-a-vis the substantive rights of the parties, is instructive, to
wit:chanroblesvirtuallawlibrary
[G]ranting, arguendo, that there was non-compliance with the verification requirement, the rule is that courts
should not be so strict about procedural lapses which do not really impair the proper administration of justice.
After all, the higher objective of procedural rule is to ensure that the substantive rights of the parties are
protected. Litigations should, as much as possible, be decided on the merits and not on technicalities. Every
party-litigant must be afforded ample opportunity for the proper and just determination of his case, free from
the unacceptable plea of technicalities.

In Coca-Cola Bottlers v. De la Cruz, where the verification was marred only by a glitch in the evidence of the
identity of the affiant, the Court was of the considered view that, in the interest of justice, the minor defect can
be overlooked and should not defeat the petition.

The reduction in the number of pending cases is laudable, but if it would be attained by precipitate, if not
preposterous, application of technicalities, justice would not be served. The law abhors technicalities that
impede the cause of justice. The court's primary duty is to render or dispense justice. "It is a more prudent
course of action for the court to excuse a technical lapse and afford the parties a review of the case on appeal
rather than dispose of the case on technicality and cause a grave injustice to the parties, giving a false
impression of speedy disposal of cases while actually resulting in more delay, if not miscarriage of justice."

What should guide judicial action is the principle that a party-litigant should be given the fullest opportunity to
establish the merits of his complaint or defense rather than for him to lose life, liberty, honor, or property on
technicalities. The rules of procedure should be viewed as mere tools designed to facilitate the attainment of
justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than
promote substantial justice, must always be eschewed. At this juncture, the Court reminds all members of the
bench and bar of the admonition in the often-cited case of Alonso v. Villamor:chanroblesvirtuallawlibrary
Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as
an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts.
There should be no vested rights in technicalities.15cralawlawlibrary
Anent the second ground, petitioner insists that, based on evidence on record, an employer-employee
relationship exists between him and respondents.
The Court is not persuaded.

It is a basic rule of evidence that each party must prove his affirmative allegation. 16 If he claims a right granted
by law, he must prove his claim by competent evidence, relying on the strength of his own evidence and not
upon the weakness of that of his opponent.17 The test for determining on whom the burden of proof lies is
found in the result of an inquiry as to which party would be successful if no evidence of such matters were
given.18 In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an
employee was for a valid cause.19However, before a case for illegal dismissal can prosper, an employer-
employee relationship must first be established.20 Thus, in filing a complaint before the LA for illegal dismissal,
based on the premise that he was an employee of respondents, it is incumbent upon petitioner to prove the
employer-employee relationship by substantial evidence.21

In regard to the above discussion, the issue of whether or not an employer-employee relationship existed
between petitioner and respondents is essentially a question of fact.22 The factors that determine the issue
include who has the power to select the employee, who pays the employee's wages, who has the power to
dismiss the employee, and who exercises control of the methods and results by which the work of the
employee is accomplished.23 Although no particular form of evidence is required to prove the existence of the
relationship, and any competent and relevant evidence to prove the relationship may be admitted, a finding
that the relationship exists must nonetheless rest on substantial evidence, which is that amount of relevant
evidence that a reasonable mind might accept as adequate to justify a conclusion. 24

Generally, the Court does not review factual questions, primarily because the Court is not a trier of
facts.25 However, where, like here, there is a conflict between the factual findings of the LA and the CA, on one
hand, and those of the NLRC, on the other, it becomes proper for the Court, in the exercise of its equity
jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case and re-
examine the questioned findings.26

Etched in an unending stream of cases are four standards in determining the existence of an employer-
employee relationship, namely: (a) the manner of selection and engagement of the putative employee; (b) the
mode of payment of wages; (c) the presence or absence of power of dismissal; and, (d) the presence or
absence of control of the putative employee's conduct. Most determinative among these factors is the so-
called "control test."27

Indeed, the power of the employer to control the work of the employee is considered the most significant
determinant of the existence of an employer-employee relationship.28 This test is premised on whether the
person for whom the services are performed reserves the right to control both the end achieved and the
manner and means used to achieve that end.29

In the present case, petitioner contends that, as evidence of respondents' supposed control over him, the
organizational plans he has drawn were subject to the approval of respondent corporation's Board of Trustees.
However, the Court agrees with the disquisition of the CA on this matter, to wit:chanroblesvirtuallawlibrary
[Respondents'] power to approve or reject the organizational plans drawn by [petitioner] cannot be the control
contemplated in the "control test." It is but logical that one who commissions another to do a piece of work
should have the right to accept or reject the product. The important factor to consider in the "control test" is still
the element of control over how the work itself is done, not just the end result thereof.

Well settled is the rule that where a person who works for another performs his job more or less at his own
pleasure, in the manner he sees fit, not subject to definite hours or conditions of work, and is compensated
according to the result of his efforts and not the amount thereof, no employer-employee relationship
exists.30cralawlawlibrary
What was glaring in the present case is the undisputed fact that petitioner was never subject to definite working
hours. He never denied that he goes to work and leaves therefrom as he pleases. 31In fact, on December 1-31,
2004, he went on leave without seeking approval from the officers of respondent company. On the contrary, his
letter32 simply informed respondents that he will be away for a month and even advised them that they have
the option of appointing his replacement during his absence. This Court has held that there is no employer-
employee relationship where the supposed employee is not subject to a set of rules and regulations governing
the performance of his duties under the agreement with the company and is not required to report for work at
any time, nor to devote his time exclusively to working for the company. 33

In this regard, this Court also agrees with the ruling of the CA that:chanroblesvirtuallawlibrary
Aside from the control test, the Supreme Court has also used the economic reality test in determining whether
an employer-employee relationship exists between the parties. Under this test, the economic realities
prevailing within the activity or between the parties are examined, taking into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially
appropriate when, as in this case, there is no written agreement or contract on which to base the relationship.
In our jurisdiction, the benchmark of economic reality in analyzing possible employment relationships for
purposes of applying the Labor Code ought to be the economic dependence of the worker on his employer.

In the instant case, as shown by the resume of [petitioner], he concurrently held consultancy positions with the
Manila International Airport Authority (from 04 March 2001 to September 2003 and from 01 November 2004 up
to the present) and the Anti-Terrorist Task Force for Aviation and Air Transportation Sector (from 16 April 2004
to 30 June 2004) during his stint with the Eye Referral Center (from 01 August 2003 to 29 April 2005).
Accordingly, it cannot be said that the [petitioner] was wholly dependent on [respondent]
company.34cralawlawlibrary

In bolstering his contention that there was an employer-employee relationship, petitioner draws attention to the
pay slips he supposedly received from respondent corporation. However, he does not dispute the findings of
the CA that there are no deductions for SSS and withholding tax from his compensation, which are the usual
deductions from employees' salaries. Thus, the alleged pay slips may not be treated as competent evidence of
petitioner's claim that he is respondents' employee.

In addition, the designation of the payments to petitioner as salaries, is not determinative of the existence of an
employer-employee relationship.35 Salary is a general term defined as a remuneration for services
given.36 Evidence of this fact, in the instant case, was the cash voucher issued in favor of petitioner where it
was stated therein that the amount of P20,000.00 was given as petitioner's allowance for the month of
December 2004, although it appears from the pay slip that the said amount was his salary for the same period.

Additional evidence of the fact that petitioner was hired as a consultant and not as an employee of respondent
corporation are affidavits to this effect which were executed by Roy Oliveres 37 and Aurea Luz Esteva,38 who
are Medical Records Custodian and Administrative Officer, respectively, of respondent corporation. Petitioner
insists in its objection of the use of these affidavits on the ground that they are, essentially, hearsay. However,
this Court has ruled that although the affiants had not been presented to affirm the contents of their affidavits
and be cross-examined, their affidavits may be given evidentiary value; the argument that such affidavits were
hearsay was not persuasive.39Likewise, this Court ruled that it was not necessary for the affiants to appear and
testify and be cross-examined by counsel for the adverse party.40 To require otherwise would be to negate the
rationale and purpose of the summary nature of the proceedings mandated by the Rules and to make
mandatory the application of the technical rules of evidence.41

These affidavits are corroborated by evidence, as discussed above, showing that petitioner has no definite
working hours and is not subject to the control of respondents.

Lastly, the Court does not agree with petitioner's insistence that his being hired as respondent corporation's
administrator and his designation as such in intra-company correspondence proves that he is an employee of
the corporation. The fact alone that petitioner was designated as an administrator does not necessarily mean
that he is an employee of respondents. Mere title or designation in a corporation will not, by itself, determine
the existence of an employer-employee relationship.42 In this regard, even the identification card which was
issued to petitioner is not an adequate proof of petitioner's claim that he is respondents' employee. In addition,
petitioner's designation as an administrator neither disproves respondents' contention that he was engaged
only as a consultant.

As a final point, it bears to reiterate that while the Constitution is committed to the policy of social justice and
the protection of the working class, it should not be supposed that every labor dispute will be automatically
decided in favor of labor.43 Management also has its rights which are entitled to respect and enforcement in the
interest of simple fair play.44 Out of its concern for the less privileged in life, the Court has inclined, more often
than not, toward the worker and upheld his cause in his conflicts with the employer. 45 Such favoritism,
however, has not blinded the Court to the rule that justice is in every case for the deserving, to be dispensed in
the light of the established facts and the applicable law and doctrine. 46

WHEREFORE, the instant petition is DENIED. The Decision and Resolution of the Court of Appeals, dated
April 20, 2009 and August 25, 2009, respectively, in CA-G.R. SPNo. 104261, are AFFIRMED.

SO ORDERED.chanroblesvirtuallawlibrary
9. G.R. No. 182255, June 15, 2015

PETRON CORPORATION, Petitioner, v. ARMZ CABERTE, ANTONIO CABERTE, JR., MICHAEL


SERVICIO,* ARIEL DEVELOS, ADOLFO GESTUPA, ARCHIE PONTERAS, ARNOLD BLANCO, DANTE
MARIANO,* VIRGILIO GALOROSA, AND CAMILO TE,* Respondents.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the November 14, 2007 Decision2 of the Court of Appeals (CA) in
CA-G.R. SP No. 82356 which reversed the May 14, 2003 Decision3 and November 27, 2003 Resolution4 of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-000329-2002. The NLRC affirmed the
March 7, 2002 Decision5 of the Labor Arbiter dismissing the Complaints for illegal dismissal and payment of
monetary claims filed by respondents Armz Caberte (Caberte), Antonio Caberte, Jr. (Caberte Jr.),
MichaeServicio (Servicio), Ariel Develos (Develos), Adolfo Gestupa (Gestupa), Archie Ponteras (Ponteras),
Arnold Blanco (Blanco), Dante Mariano (Mariano), Virgilio Galorosa (Galorosa) and Camilo Te (Te) against
petitioner Petron Corporation (Petron), ABC Contracting Services (ABC), and its owner Antonio B. Caberte, Sr.
(Caberte Sr.). Likewise assailed is the CA Resolution6 dated March 4, 2008 which denied Perron's Motion for
Reconsideration.

Factual Antecedents

Petron is a domestic corporation engaged in the manufacture and distribution to the general public of various
petroleum products. In pursuance of its business, Petron owns and operates several bulk plants in the country
for receiving, storing and distributing its products.

On various dates from 1979 to 1998, respondents were hired to work at Petron's Bacolod Bulk Plant in San
Patrick, Bacolod City, Negros Occidental as LPG/Gasul fillers, maintenance crew, warehousemen, utility
workers and tanker receiving crew.

For the periods from March 1, 1996 to February 28, 1999 and November 1, 1996 to June 30, 1999, Petron and
ABC, a labor contracting business owned and operated by Caberte Sr., entered into a Contract for
Services7 and a Contract for LPG Assistance Services.8 Under both service contracts, ABC undertook to
provide utility and maintenance services to Petron in its Bacolod Bulk Plant.

Proceedings before the Labor Arbiter

On July 2, 1999, respondents Caberte, Caberte Jr., Servicio, Develos, Gestupa, Ponteras, Blanco and Mariano
filed before the Labor Arbiter a Complaint9 for illegal dismissal, underpayment of wages and non-payment of
allowances, 13th month pay, overtime pay, holiday pay, service incentive leave pay, moral and exemplary
damages and attorney's fees against Petron, ABC and Caberte Sr., docketed as NLRC RAB VI Case No. 06-
07-10588-99. Subsequently, respondents Galorosa and Te separately filed similar Complaints10 docketed as
NLRC RAB VI Case No. 06-07-10675-99 and RAB Case No. 06-09-10785-99, respectively. The three
Complaints were consolidated in an Order11 dated October 25, 1999 of the Labor Arbiter.

Respondents averred that even before Petron engaged ABC as contractor in 1996, most of them had already
been working for Petron for years. However, every time Petron engages a new contractor, it would designate
such new contractor as their employer. Despite such arrangement, Petron exercised control and supervision
over their work, the performance of which is necessary and desirable in its usual trade and business.
Respondents added that ABC is a mere labor-only contractor which had no substantial capital and investment,
and had no control over the manner and method on how they accomplished their work. Thus, Petron is their
true employer. On July 1, 1999, however, Petron no longer allowed them to enter and work in the premises of
its Bacolod Bulk Plant. Hence, the complaints for illegal dismissal.

On the other hand, Petron asserted that ABC is an independent contractor which supplied the needed
manpower for the maintenance of its bulk handling premises and offices, as well as for tanker assistance in the
receiving and re-filling of its LPG products; that among the workers supplied by ABC were respondents, except
Caberte Jr., who does not appear to be one of those assigned by ABC to work for it; that it has no direct control
and supervision over respondents who were tasked to perform work required by the service contracts it
entered into with ABC; and, that it cannot allow the continuous employment of respondents beyond the
expiration of the contracts with ABC. To prove the legitimacy and capacity of ABC as an independent
contractor, Petron submitted the following documents: (1) Contractor's Pre-Qualification Statement;12 (2)
Petron's Conflict of Interest Policy signed by Caberte Sr., as proprietor of ABC; 13 (3) ABC's Certificate of
Registration issued by the Bureau of Internal Revenue (BIR);14 (4) Value-Added Tax Return for the year
1995;15 (5) BIR Confirmation Receipt;16 (6) Caberte Sr.'s Tax Identification Number (TIN) issued by the
BIR;17 (7) Caberte Sr.'s Individual Income Tax Return for the years 199318 and 1994;19 (8) ABC's Audited
Financial Statements for the years 1992,20 199321 and 1994;22 (9) ABC's Mayor's Permit for the year
1995;23 and, (10) ABC's Certificate of Registration of Business Name issued by the Department of Trade and
Industry (DTI).24 In addition, it averred that ABC, as a contractor, had duly posted a performance bond25 and
took out insurance policies26 against liabilities. Petron likewise presented affidavits27 of two Petron employees
stating that respondents do not perform activities related to Petron's business operation but only tasks which
are intermittent and which can be contracted out. Also submitted were affidavits28 of three former employees of
ABC attesting to the fact that during their stint in Petron, they used materials such as floor polisher, floor wax,
broom, dustpan, cleaning rags and other equipment owned by ABC to accomplish their tasks and that they
worked under the supervision of Caberte Sr., through the latter's designated overall supervisor, respondent
Caberte. Petron further revealed that ABC/Caberte Sr. has the power to hire and fire respondents and was the
one paying their wages.

In a Decision29 dated March 7, 2002, Executive Labor Arbiter Danilo C. Acosta (LA Acosta) held that ABC is an
independent contractor that has substantial capital and that respondents were its employees. He likewise ruled
that ABC's cessation of operation is a force majeure that justifies respondents' dismissal. Nonetheless, LA
Acosta awarded respondents separation pay based on the applicable minimum wage rate at the time of
expiration of the contracts of service. He, however, denied the claims for overtime pay and night shift
differential pay for lack of merit. The dispositive portion of the Decision reads:chanroblesvirtuallawlibrary
Conformably with the foregoing, respondent ABC is hereby ORDERED TO PAY EACH COMPLAINANT,
namely, complainants Antonio Caberte, Jr., Armz M. Caberte, Michael Servicio, Ariel Develos, Adolfo Gestupa,
Archie Ponteras, Arnold Blanco, Dante Mirano, Virgilio Galorosa and Camilo Te, separation pay of one month
for every year of service.

All other claims and the claims against respondent PETRON are hereby ORDERED DISMISSED for lack of
merit.

SO ORDERED.30cralawlawlibrary
Proceedings before the National Labor Relations Commission

Respondents appealed to the NLRC where they insisted that they are regular employees of Petron since ABC
is a labor-only contractor.

In a Decision31 dated May 14, 2003, the NLRC affirmed the ruling of the Labor Arbiter after it found that ABC is
not a mere labor contractor but a legitimate independent contractor. In so ruling, the NLRC took into account
the following: (1) ABC/Caberte Sr. has the power of control over respondents as Caberte Sr. was the one
controlling and supervising respondents in their work. While Petron intervened at times, the same was limited
to safety precautions due to the hazardous nature of the products the workers were dealing with; (2) ABC
possessed sufficient capital and equipment per the various documents that Petron submitted showing the
former's financial capability to maintain its status as an accredited contractor of the latter. In fact, Caberte Sr.
was even able to establish ABC's Bacolod City Office; and, (3) ABC/Caberte Sr. has the power to hire and
dismiss respondents. Hence, the dispositive portion of the Decision, viz:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, this appeal is DISMISSED and the decision of the Executive Labor
Arbiter is AFFIRMED.

SO ORDERED.32cralawlawlibrary
Respondents filed a Motion for Reconsideration which was, however, denied in the NLRC Resolution33dated
November 27, 2003.

Proceedings before the Court of Appeals

Aggrieved, respondents filed a Petition for Certiorari34 before the CA ascribing upon the NLRC grave abuse of
discretion amounting to lack or in excess of jurisdiction in holding that they are not employees of Petron.

The CA, in a Decision35 dated November 14, 2007, found merit in respondents' Petition. It ruled that ABC is
engaged in labor-only contracting because: first, it did not have substantial capital or investment in the form of
tools, equipment, implements, machineries and work premises, actually and directly used in the performance
or completion of the job it contracted out from Petron; second, the work assigned to respondents were directly
related to Petron's business; and, third, the nature of Petron's business requires it to exercise control over the
performance of respondents' work. Consequently, the CA declared respondents as Petron's regular
employees. And since Petron did not comply with the requirements under the Labor Code when it terminated
their employment, respondents were illegally dismissed and therefore entitled to reinstatement without loss of
seniority rights and other privileges, with the alternative relief of separation pay in lieu of reinstatement, and to
full backwages, inclusive of allowances, and to other benefits or their monetary equivalent computed from the
time compensation was withheld up to the time of actual reinstatement. The CA, however, denied respondents'
claims for moral and exemplary damages in the absence of bad faith in Petron's act of dismissing them but
awarded respondents 10% attorney's fees for having to litigate to protect their interests. The dispositive portion
of the Decision reads:chanroblesvirtuallawlibrary
WHEREFORE, in view of the foregoing, the decision of the National Labor Relations Commission dated May
14, 2003, in NLRC Case No. V-000329-2002, affirming the March 7, 2002 Decision of Executive Labor Arbiter
Danilo C. Acosta of the Sub-Regional Arbitration Branch VI, Bacolod City, is hereby REVERSED.

Respondent Petron Corporation is ordered to reinstate Armz Caberte, Antonio Caberte, Jr., Michael Servicio,
Ariel Develos, Adolfo Gestupa, Archie Ponteras, Arnold Blanco, Dante Mirano, Virgilio Galorosa and Camilo Te
to their former positions with the same rights and benefits and the same salary rates as its regular employees.

Respondent Petron Corporation is likewise ordered to pay petitioner's attorney's fees equivalent to ten percent
(10%) of the monetary award.

All other claims are dismissed for lack of merit.

Costs against private respondent Petron.

SO ORDERED.36cralawlawlibrary
Petron's Motion for Reconsideration37 was denied by the CA in its Resolution38 dated March 4, 2008. Hence,
this present recourse.chanRoblesvirtualLawlibrary

Issues

Petron presents the following grounds for review:chanroblesvirtuallawlibrary


XXX THE COURT OF APPEALS SERIOUSLY ERRED AND DECIDED A QUESTION OF SUBSTANCE IN A
MANNER NOT IN ACCORD WITH LAW AND WITH APPLICABLE JURISPRUDENCE IN FINDING THAT
ABC CONTRACTING SERVICES IS A MERE LABOR-ONLY CONTRACTOR AND IN HOLDING THAT
RESPONDENTS ARE THUS REGULAR EMPLOYEES OF THE COMPANY CONSIDERING THAT:

A. THERE IS A LEGITIMATE SERVICE CONTRACTING AGREEMENT BETWEEN THE COMPANY


AND ABC CONTRACTING SERVICES;

B. THE CONTRACTED SERVICES THAT RESPONDENTS PERFORMED ARE NOT DIRECTLY


RELATED AND NECESSARY OR DESIRABLE TO THE COMPANY'S PRINCIPAL BUSINESS;
C. ABC CONTRACTING SERVICES CARRIES ON AN INDEPENDENT BUSINESS AND POSSESSES
SUBSTANTIAL CAPITAL AND INVESTMENT;

D. RESPONDENTS ARE EMPLOYEES OF ABC CONTRACTING SERVICES.39

Petron asserts that ABC, as an independent contractor, rendered janitorial, utility and LPG assistance services
by virtue of legitimate contracts entered into by and between them. As such, the services rendered by
respondents were purely maintenance and utility works which are not directly related, necessary and desirable
to Petron's main business.

Petron likewise insists that ABC is not a labor-only contractor as it carries on an independent business and
uses its own equipment, tools, materials and supplies in the performance of its contracted services. Further, it
asserts that ABC wielded and exercised the power of selection or engagement, payment of wages, discipline
or dismissal, and of control over respondents.chanRoblesvirtualLawlibrary

Our Ruling

The Petition has no merit.

Labor-only contracting and permissible job contracting, defined; a contractor is presumed by law to be a labor-
only contractor; anyone claiming the supposed status of an independent contractor bears the burden of proving
the same.

As defined under Article 106 of the Labor Code, labor-only contracting, a prohibited act, is an arrangement
where the contractor, who does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, supplies workers to an employer and the workers recruited are
performing activities which are directly related to the principal business of such employer.

Permissible or legitimate job contracting or subcontracting, on the other hand, "refers to an arrangement
whereby a principal agrees to put out or farm out with the contractor or subcontractor the performance or
completion of a specific job, work, or service within a definite or predetermined period, regardless of whether
such job, work, or service is to be performed or completed within or outside the premises of the principal. A
person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:
(a) the contractor carries on a distinct and independent business and partakes the contract work on his
account under his own responsibility according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with the performance of his work except as to the
results thereof; (b) the contractor has substantial capital or investment; and (c) the agreement between the
principal and the contractor or subcontractor assures the contractual employees' entitlement to all labor and
occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and
social welfare benefits."40

To determine whether a contractor is engaged in labor-only contracting or permissible job contracting, "the
totality of the facts and the surrounding circumstances of the case are to be considered." 41

Petron contends that the CA erred in ruling that ABC is a labor-only contractor since respondents failed to
prove that ABC is not an independent contractor. The contention, however, is incorrect. The law presumes a
contractor to be a labor-only contractor and the employees are not expected to prove the negative fact that the
contractor is a labor-only contractor.42 Thus, it is not respondents but Petron which bears the burden of
establishing that ABC is not a labor-only contractor but a legitimate independent contractor. As held in Alilin v.
Petron Corporation,43 "where the principal is the one claiming that the contractor is a legitimate contractor, the
burden of proving the supposed status of the contractor rests on the principal."

Petron failed to overcome the presumption that ABC is a labor-only contractor.

Foremost, Petron banks on the contracts of services it entered into with ABC. It contends that the said
contracts were legitimate business transactions and were not only for the purpose of ABC providing manpower
or labor-only to Petron, but rather for specific services pertaining to janitorial, utility and LPG assistance.

Suffice it to state, however, that Petron cannot place reliance on the contracts it entered into with ABC since
these are not determinative of the true nature of the parties' relationship. As held in Babas v. Lorenzo Shipping
Corporation,44 the character of the business, whether as labor-only contractor or as a job contractor, should be
determined by the criteria set by statute and the parties cannot dictate by the mere expedience of a unilateral
declaration in a contract the character of their business.

Next, Petron endeavours to prove that ABC is a legitimate independent contractor.

To restate, a contractor is deemed to be a labor-only contractor if the following elements are present: (i) the
contractor does not have substantial capital or investment to actually perform the job, work or service under its
own account and responsibility; and (ii) the employees recruited, supplied or placed by such contractor are
performing activities which are directly related to the main business of the principal.45 Conversely, in proving
that ABC is not a labor-only contractor, it is incumbent upon Petron to show that ABC has substantial capital or
investment and that respondents were performing activities which were not directly related to Petron's principal
business.

To show that ABC has substantial capital or investment, Petron submitted, among others, ABC's BIR
Certificate of Registration, VAT Return, BIR Confirmation Receipt, TIN, Individual Income Tax Return, Mayor's
Permit and DTI Certificate of Registration. However, the Court observes that these documents are not
conclusive evidence of ABC's financial capability. At most, they merely show that ABC is engaged in business
and licensed by the appropriate government agencies.

As for the financial statements presented, it appears that only the audited financial statements of ABC for the
years 1992, 1993 and 1994 were submitted. As aptly observed by the CA, these documents cannot be given
much credence considering that the service contracts between Petron and ABC commenced in 1996 and
ended in 1999. However, no audited financial statements for the years material to this case (1996, 1997, 1998
and 1999) were submitted. Also, as per record, ABC was obligated to submit to Petron at least once every two
years its latest audited financial statements, among others, as a requirement for the retention of its status as
an accredited contractor of Petron.46 If it is true that ABC continued to possess its financial qualification after
1994, Petron should have presented ABC's financial statements for the said years which are presumed to be in
Petron's possession considering that they are part of the requirements that it itself set for its accredited
contractors.

Neither does the performance bond taken out by ABC serve as significant evidence of its substantial capital.
As aptly explained by the CA:chanroblesvirtuallawlibrary
The performance bond posted by ABC Contracting Services likewise fails to convince us that the former has
substantial capital or investment inasmuch as it was not shown that the performance bond in the amount of
P596,799.51 was enough to cover not only payrolls, rentals and equipment but also possible damages to the
equipment and to third parties and other contingent liabilities. Moreover, this Court takes judicial notice that
bonds of this nature are issued upon payment of a small percentage as premium without necessarily requiring
any guarantee.

If at all, the bond was a convenient smoke screen to disguise the real nature of ABC's employment as an agent
of Petron.47cralawlawlibrary
Anent substantial investment in the form of equipment, tools, implements, machineries and work premises,
Petron likewise failed to show that ABC possessed the same. Instead, what is evident in the records was that
ABC had been renting a forklift from Petron in order to carry out the job of respondents. 48 This only shows that
ABC does not own basic equipment needed in the performance of respondents' job. Similarly and again as
correctly held by the CA, the fact that ABC leased a property for the establishment of its Bacolod office is
immaterial since it was not shown that it was used in the performance or completion of the job contracted out.
"Substantial capital or investment," under Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing
the Labor Code (Implementing Rules), as amended by Department Order No. 18-02,49 does not include those
which are not actually and directly used in the performance of the job contracted out.
Going now to the activities performed by respondents, Petron avers that the same were not necessary or
desirable to its principal business. In fact, the service contracts it entered into with ABC clearly referred to
respondents' functions as maintenance and utility works only which are remote to its principal business of
manufacturing and distributing petroleum products.

The Court finds otherwise. Gestupa, Ponteras, Develos, Blanco and Mariano were LPG fillers and
maintenance crew; Caberte was an LPG operator supervisor; Te was a warehouseman and utility worker; and
Servicio and Galorosa were tanker receiving crew and utility workers. Undoubtedly, the work they rendered
were directly related to Petron's main business, vital as they are in the manufacture and distribution of
petroleum products. Besides, some of the respondents were already working for Petron even before it
engaged ABC as a contractor in 1996. Albeit it was made to appear that they were under the different
contractors that Petron engaged over the years, respondents have been regularly performing the same tasks
within the premises of Petron. This "the repeated and continuing need for the performance of the job is
sufficient evidence of the necessity, if not indispensability of the activity to the business."50

What further militates against Perron's claim that ABC, as an alleged independent contractor, is the true
employer of respondents, is the fact that Petron has the power of control over respondents in the performance
of their work. It bears stressing that the power of control merely calls for the existence of the right to control
and not necessarily the exercise thereof.51 Here, Petron admitted in its Position Paper that the supervision of a
Petron employee is required over LPG and tanker assistance jobs for inventory control and safety checking
purposes. It explained that due to the hazardous nature of its products, constant checking of the procedures in
their handling is essential considering the high possibility of fatal accidents. It also admitted that it was the one
supplying the needed materials and equipment in discharging these functions to better insure the integrity,
quality and safety of its products.

From the foregoing, it is clear that Petron failed to discharge its burden of proving that ABC is not a labor-only
contractor. Consequently, and as warranted by the facts, the Court declares ABC as a mere labor-only
contractor. "A finding that a contractor is a 'labor-only' contractor is equivalent to declaring that there is an
employer-employee relationship between the principal and the employees of the supposed contractor, and the
'labor-only' contractor is considered as a mere agent of the principal, the real employer." 52 Accordingly in this
case, Petron is declared to be the true employer of respondents who are considered regular employees in view
of the fact that they have been regularly performing activities which are necessary and desirable to the usual
business of Petron for a number of years.

Respondents, except Antonio Caberte, Jr., were illegally dismissed.

With respect to respondents' dismissal, Petron claimed that the same sprang from the termination or
conclusion of the service contracts it entered into with ABC. As earlier held, respondents are considered
regular employees. In cases of regular employment, an employer may only terminate the services of an
employee for just or authorized causes under the law.53 As the reason given by Petron dismissing respondents
does not constitute a just or authorized cause for termination,54 the latter are declared to have been illegally
dismissed. Respondents are thus entitled to all the remedies of an illegally dismissed employee, i.e.,
backwages and reinstatement, or if no longer feasible, separation pay. The CA is thus correct in ruling that
respondents are entitled to reinstatement without loss of seniority rights and other privileges. However, if
reinstatement is no longer feasible, respondents are entitled to receive separation pay equivalent to one month
salary for every year of service. In addition, respondents are entitled to full backwages from the time they were
not allowed to work on July 1, 1999 up to actual reinstatement or finality of this Decision as the case may be.

An exception must be taken, however, with respect to Caberte Jr. From the beginning, Petron disputes the fact
he ever worked for Petron. Therefore, before his case against Petron can prosper, Caberte Jr. must first
establish that an employer-employee relationship existed between them since it is basic that the issue of illegal
dismissal is premised on the existence of such relationship between the parties.55 Unfortunately, nowhere in
the records does it show that he indeed worked for Petron. Consequently, his complaint should be dismissed.

WHEREFORE, the petition is DENIED. The November 14, 2007 Decision and the March 4, 2008 Resolution of
the Court of Appeals in CA-G.R. SP No. 82356 are MODIFIED in that: (1) the Complaint of respondent Antonio
Caberte, Jr. against petitioner Petron Corporation is dismissed; and (2) petitioner Petron Corporation is
ordered to reinstate all of the respondents, except for Antonio Caberte, Jr., to their former positions with the
same rights and benefits and the same salary rates as its regular employees, or if reinstatement is no longer
feasible, to separation pay equivalent to one month salary for every year of service and to pay them their full
backwages from July 1, 1999 until actual reinstatement or upon finality of this Decision as the case may be, as
well as attorney's fees equivalent to 10% of the monetary award, with costs against Petron Corporation.

SO ORDERED.chanroblesvirtuallawlibrar