G.R. No.

162994 September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners,

vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.

TINGA, J.:

Confronting the Court in this petition is a novel question, with constitutional overtones, involving the validity of the policy of a pharmaceutical company
prohibiting its employees from marrying employees of any competitor company.

This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and the Resolution dated March 26, 2004 of the Court of Appeals
in CA-G.R. SP No. 62434.2

Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as medical representative on October 24,
1995, after Tecson had undergone training and orientation.

Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees to study and abide by existing company rules; to
disclose to management any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies
and should management find that such relationship poses a possible conflict of interest, to resign from the company.

The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform management of any existing or future relationship
by consanguinity or affinity with co-employees or employees of competing drug companies. If management perceives a conflict of interest or a potential
conflict between such relationship and the employees employment with the company, the management and the employee will explore the possibility
of a "transfer to another department in a non-counterchecking position" or preparation for employment outside the company after six months.

Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines Norte sales area.

Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals 3(Astra), a competitor of Glaxo. Bettsy
was Astras Branch Coordinator in Albay. She supervised the district managers and medical representatives of her company and prepared marketing
strategies for Astra in that area.

Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of interest which his relationship
with Bettsy might engender. Still, love prevailed, and Tecson married Bettsy in September 1998.
In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict of interest. Tecsons superiors reminded him that
he and Bettsy should decide which one of them would resign from their jobs, although they told him that they wanted to retain him as much as possible
because he was performing his job well.

Tecson requested for time to comply with the company policy against entering into a relationship with an employee of a competitor company. He
explained that Astra, Bettsys employer, was planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the redundancy
package to be offered by Astra. With Bettsys separation from her company, the potential conflict of interest would be eliminated. At the same time,
they would be able to avail of the attractive redundancy package from Astra.

In August 1999, Tecson again requested for more time resolve the problem. In September 1999, Tecson applied for a transfer in Glaxos milk division,
thinking that since Astra did not have a milk division, the potential conflict of interest would be eliminated. His application was denied in view of
Glaxos "least-movement-possible" policy.

In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to reconsider its decision,
but his request was denied.

Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos Grievance Committee. Glaxo, however, remained firm
in its decision and gave Tescon until February 7, 2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as
medical representative in the Camarines Sur-Camarines Norte sales area.

During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued samples of products which were competing with
similar products manufactured by Astra. He was also not included in product conferences regarding such products.

Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for voluntary arbitration. Glaxo offered
Tecson a separation pay of one-half () month pay for every year of service, or a total of 50,000.00 but he declined the offer. On November 15, 2000,
the National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxos policy on relationships between its employees
and persons employed with competitor companies, and affirming Glaxos right to transfer Tecson to another sales territory.

Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision.

On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on the ground that the NCMB did not err in rendering
its Decision. The appellate court held that Glaxos policy prohibiting its employees from having personal relationships with employees of competitor
companies is a valid exercise of its management prerogatives.4

Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was denied by the appellate court in its Resolution dated
March 26, 2004.5
Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the NCMBs finding that the Glaxos policy
prohibiting its employees from marrying an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not finding that
Tecson was constructively dismissed when he was transferred to a new sales territory, and deprived of the opportunity to attend products seminars and
training sessions.6

Petitioners contend that Glaxos policy against employees marrying employees of competitor companies violates the equal protection clause of the
Constitution because it creates invalid distinctions among employees on account only of marriage. They claim that the policy restricts the employees
right to marry.7

They also argue that Tecson was constructively dismissed as shown by the following circumstances: (1) he was transferred from the Camarines Sur-
Camarines Norte sales area to the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from attending seminars
and training sessions for medical representatives, and (4) he was prohibited from promoting respondents products which were competing with Astras
products.8

In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from having a relationship with and/or marrying an
employee of a competitor company is a valid exercise of its management prerogatives and does not violate the equal protection clause; and that Tecsons
reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City and Agusan del Sur sales area does not amount to
constructive dismissal.9

Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it has a genuine interest in ensuring that its employees
avoid any activity, relationship or interest that may conflict with their responsibilities to the company. Thus, it expects its employees to avoid having
personal or family interests in any competitor company which may influence their actions and decisions and consequently deprive Glaxo of legitimate
profits. The policy is also aimed at preventing a competitor company from gaining access to its secrets, procedures and policies.10

It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or future relationships with employees of competitor
companies, and is therefore not violative of the equal protection clause. It maintains that considering the nature of its business, the prohibition is based
on valid grounds.11

According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and potential conflict of interest. Astras products were in direct
competition with 67% of the products sold by Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case was a valid exercise of its
management prerogatives.12 In any case, Tecson was given several months to remedy the situation, and was even encouraged not to resign but to ask
his wife to resign form Astra instead.13

Glaxo also points out that Tecson can no longer question the assailed company policy because when he signed his contract of employment, he was
aware that such policy was stipulated therein. In said contract, he also agreed to resign from respondent if the management finds that his relationship
with an employee of a competitor company would be detrimental to the interests of Glaxo. 14
Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from seminars regarding respondents new products did not
amount to constructive dismissal.

It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines Sur-Camarines Norte sales area to the Butuan City-Surigao
City and Agusan del Sur sales area. Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecsons family. Since Tecsons
hometown was in Agusan del Sur and his wife traces her roots to Butuan City, Glaxo assumed that his transfer from the Bicol region to the Butuan
City sales area would be favorable to him and his family as he would be relocating to a familiar territory and minimizing his travel expenses.15

In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new anti-asthma drug was due to the fact that said product was in
direct competition with a drug which was soon to be sold by Astra, and hence, would pose a potential conflict of interest for him. Lastly, the delay in
Tecsons receipt of his sales paraphernalia was due to the mix-up created by his refusal to transfer to the Butuan City sales area (his paraphernalia was
delivered to his new sales area instead of Naga City because the supplier thought he already transferred to Butuan).16

The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling that Glaxos policy against its employees marrying
employees from competitor companies is valid, and in not holding that said policy violates the equal protection clause of the Constitution; (2) Whether
Tecson was constructively dismissed.

The Court finds no merit in the petition.

The stipulation in Tecsons contract of employment with Glaxo being questioned by petitioners provides:

10. You agree to disclose to management any existing or future relationship you may have, either by consanguinity or affinity with
co-employees or employees of competing drug companies. Should it pose a possible conflict of interest in management discretion,
you agree to resign voluntarily from the Company as a matter of Company policy.

17

The same contract also stipulates that Tescon agrees to abide by the existing company rules of Glaxo, and to study and become acquainted with such
policies.18 In this regard, the Employee Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest:

1. Conflict of Interest

Employees should avoid any activity, investment relationship, or interest that may run counter to the responsibilities which they owe
Glaxo Wellcome.
 Specifically, this means that employees are expected:

a. To avoid having personal or family interest, financial or otherwise, in any competitor supplier or other businesses which
may consciously or unconsciously influence their actions or decisions and thus deprive Glaxo Wellcome of legitimate profit.

b. To refrain from using their position in Glaxo Wellcome or knowledge of Company plans to advance their outside personal
interests, that of their relatives, friends and other businesses.

c. To avoid outside employment or other interests for income which would impair their effective job performance.

d. To consult with Management on such activities or relationships that may lead to conflict of interest.

1.1. Employee Relationships

Employees with existing or future relationships either by consanguinity or affinity with co-employees of competing drug companies
are expected to disclose such relationship to the Management. If management perceives a conflict or potential conflict of interest,
every effort shall be made, together by management and the employee, to arrive at a solution within six (6) months, either by transfer
to another department in a non-counter checking position, or by career preparation toward outside employment after Glaxo Wellcome.
Employees must be prepared for possible resignation within six (6) months, if no other solution is feasible. 19

No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy prohibiting an employee from having a relationship with
an employee of a competitor company is a valid exercise of management prerogative.

Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from
competitors, especially so that it and Astra are rival companies in the highly competitive pharmaceutical industry.

The prohibition against personal or marital relationships with employees of competitor companies upon Glaxos employees is reasonable under the
circumstances because relationships of that nature might compromise the interests of the company. In laying down the assailed company policy, Glaxo
only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures.

That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes the right of enterprises to
adopt and enforce such a policy to protect its right to reasonable returns on investments and to expansion and growth.20 Indeed, while our laws endeavor
to give life to the constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will be decided in favor
of the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play. 21

As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business confidentiality and protect a competitive position by even-
handedly disqualifying from jobs male and female applicants or employees who are married to a competitor. Consequently, the court ruled than an
employer that discharged an employee who was married to an employee of an active competitor did not violate Title VII of the Civil Rights Act of
1964.23 The Court pointed out that the policy was applied to men and women equally, and noted that the employers business was highly competitive
and that gaining inside information would constitute a competitive advantage.

The challenged company policy does not violate the equal protection clause of the Constitution as petitioners erroneously suggest. It is a settled principle
that the commands of the equal protection clause are addressed only to the state or those acting under color of its authority.24 Corollarily, it has been
held in a long array of U.S. Supreme Court decisions that the equal protection clause erects no shield against merely private conduct, however,
discriminatory or wrongful.25 The only exception occurs when the state29 in any of its manifestations or actions has been found to have become entwined
or involved in the wrongful private conduct.27 Obviously, however, the exception is not present in this case. Significantly, the company actually
enforced the policy after repeated requests to the employee to comply with the policy. Indeed, the application of the policy was made in an impartial
and even-handed manner, with due regard for the lot of the employee.

In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that Glaxo does not impose an absolute
prohibition against relationships between its employees and those of competitor companies. Its employees are free to cultivate relationships with and
marry persons of their own choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the company that
may arise out of such relationships. As succinctly explained by the appellate court, thus:

The policy being questioned is not a policy against marriage. An employee of the company remains free to marry anyone of his or
her choosing. The policy is not aimed at restricting a personal prerogative that belongs only to the individual. However, an employees
personal decision does not detract the employer from exercising management prerogatives to ensure maximum profit and business
success. . .28

The Court of Appeals also correctly noted that the assailed company policy which forms part of respondents Employee Code of Conduct and of its
contracts with its employees, such as that signed by Tescon, was made known to him prior to his employment. Tecson, therefore, was aware of that
restriction when he signed his employment contract and when he entered into a relationship with Bettsy. Since Tecson knowingly and voluntarily
entered into a contract of employment with Glaxo, the stipulations therein have the force of law between them and, thus, should be complied with in
good faith."29 He is therefore estopped from questioning said policy.

The Court finds no merit in petitioners contention that Tescon was constructively dismissed when he was transferred from the Camarines Norte-
Camarines Sur sales area to the Butuan City-Surigao City-Agusan del Sur sales area, and when he was excluded from attending the companys seminar
on new products which were directly competing with similar products manufactured by Astra. Constructive dismissal is defined as a quitting, an
involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or
diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee. 30 None of these
conditions are present in the instant case. The record does not show that Tescon was demoted or unduly discriminated upon by reason of such transfer.
As found by the appellate court, Glaxo properly exercised its management prerogative in reassigning Tecson to the Butuan City sales area:

. . . In this case, petitioners transfer to another place of assignment was merely in keeping with the policy of the company in avoidance
of conflict of interest, and thus validNote that [Tecsons] wife holds a sensitive supervisory position as Branch Coordinator in her
employer-company which requires her to work in close coordination with District Managers and Medical Representatives. Her duties
include monitoring sales of Astra products, conducting sales drives, establishing and furthering relationship with customers,
 collection, monitoring and managing Astras inventoryshe therefore takes an active participation in the market war characterized
as it is by stiff competition among pharmaceutical companies. Moreover, and this is significant, petitioners sales territory covers
Camarines Sur and Camarines Norte while his wife is supervising a branch of her employer in Albay. The proximity of their areas
of responsibility, all in the same Bicol Region, renders the conflict of interest not only possible, but actual, as learning by one spouse
of the others market strategies in the region would be inevitable. [Managements] appreciation of a conflict of interest is therefore
not merely illusory and wanting in factual basis31

In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved a complaint filed by a medical representative against
his employer drug company for illegal dismissal for allegedly terminating his employment when he refused to accept his reassignment to a new area,
the Court upheld the right of the drug company to transfer or reassign its employee in accordance with its operational demands and requirements. The
ruling of the Court therein, quoted hereunder, also finds application in the instant case:

By the very nature of his employment, a drug salesman or medical representative is expected to travel. He should anticipate
reassignment according to the demands of their business. It would be a poor drug corporation which cannot even assign its
representatives or detail men to new markets calling for opening or expansion or to areas where the need for pushing its products is
great. More so if such reassignments are part of the employment contract.33

As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly for a long period of time. In the case at bar, the
record shows that Glaxo gave Tecson several chances to eliminate the conflict of interest brought about by his relationship with Bettsy. When their
relationship was still in its initial stage, Tecsons supervisors at Glaxo constantly reminded him about its effects on his employment with the company
and on the companys interests. After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the company or
asking his wife to resign from Astra. Glaxo even expressed its desire to retain Tecson in its employ because of his satisfactory performance and
suggested that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the conflict
of interest. When the problem could not be resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales area different
from that handled by his wife for Astra. Notably, the Court did not terminate Tecson from employment but only reassigned him to another area where
his home province, Agusan del Sur, was included. In effecting Tecsons transfer, Glaxo even considered the welfare of Tecsons family. Clearly, the
foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo. 34

WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.

SO ORDERED.
ATTY. ANDREA UY and G.R. No. 159119
FELIX YUSAY,
Petitioners, v. AMALIA A. BUENO, Promulgated:
Respondent. March 14, 2006

DECISION

PUNO, J.:

The finding of illegal dismissal against petitioner Atty. Andrea Uy made by the Court of Appeals is challenged in this petition for review on certiorari under Rule
45 of the Rules of Court.

The facts are as follows:

Countrywide Rural Bank of La Carlota, Inc. (Countrywide Rural Bank) in Marbel, Koronadal City, South Cotabato, is a private banking corporation duly
licensed and organized to engage in rural banking operations that offers a wide-range of deposit, financial and lending services through its network of branches
nationwide. In April 1998, Countrywide Rural Bank experienced liquidity problems. A group of its depositors, alarmed at the imminent prospect of not being able
to recover their deposits and other investments, organized themselves into a committee of depositors. The committee elected petitioner Felix Yusay as Chairman,
petitioner Andrea Uy as Secretary, Manu Gidwani as Vice-Chairman and Pompeyo Querubin as Treasurer.[1]

On January 18, 1999, the depositors of Countrywide Rural Bank (not the committee of depositors led by petitioner Yusay) met at the Marbel
Branch. Marlon V. Juesna, the Vice-Chairman of the Board of Countrywide Rural Bank, presided over the meeting. In the course of the meeting, respondent Amalia
A. Bueno stood up and announced that her services as Branch Manager of Marbel Branch were terminated by petitioner Uy. Petitioner Uy, who was in the meeting,
confirmed respondent Buenos declaration. She did not elaborate on the basis of the termination explaining that it involved internal problems that could not be
discussed with the depositors.[2]

The day after or on January 19, 1999, respondent Bueno filed a case for illegal dismissal and prayed for reinstatement with payment of full back wages,
damages and attorneys fees against Countrywide Rural Bank, Miguel Mendoza, Primo Esleyer, Marlon Juesna, and petitioners Uy and Felix Yusay before the
Labor Arbiter of the Sub-Regional Arbitration Branch No. XI of the National Labor Relations Commission (NLRC) in General Santos City. Petitioners Uy and
Yusay were sued in their capacity as Interim President and Corporate Secretary, and Interim Board Chairman, respectively. Miguel Mendoza, Primo Esleyer and
Marlon Juesna were sued as Chairman, Vice-Chairman and Executive Vice-President, respectively, of the Board of Countrywide Rural Bank.[3] Respondent Bueno
alleged that she was employed by Countrywide Rural Bank on November 12, 1996 until her termination on January 18, 1999.[4]

An amicable settlement of the case failed. On September 28, 1999, respondent Bueno filed a Manifestation for the early resolution of her complaint alleging that
Countrywide Rural Bank was already under receivership with the Philippine Deposit Insurance Commission (PDIC) and she wanted the favorable decision
submitted to the PDIC for consideration. On November 18, 1999, with only the position paper of respondent Bueno and without awaiting the reply of the Postmaster
of Bacolod City as to whether Countrywide Rural Bank and its co-respondents received the order to submit their respective position papers, [5] the Labor Arbiter
rendered a decision in favor of respondent Bueno. He found the verbal and summary termination of the services of respondent Bueno to be without valid cause and
in violation of Article 277(b) of the Labor Code. Also, the Labor Arbiter held that as a regular employee of Countrywide Rural Bank, respondent Bueno was
protected by the security of tenure provision or Article 279 of the Labor Code. He awarded separation pay in lieu of reinstatement and back wages. In addition, he
granted moral and exemplary damages for the bad faith and/or malice that attended the manner of termination of respondent Bueno. Finally, for being forced to
litigate, the
Labor Arbiter awarded attorneys fees of 10% in accordance with Article 111 of the Labor Code. He disposed, viz:[6]

WHEREFORE, premises considered, respondent Countrywide Rural Bank of La Carlota, Inc. and individual respondent Atty. Andrea
Uy are solidarily liable [to] complainant Amalia Bueno to pay the sum of PESOS EIGHT HUNDRED ELEVEN THOUSAND TWO HUNDRED
(P811,200.00) ONLY representing her monetary awards and attorneys fees.

All other claims are dismissed for lack of merit.

On May 24, 2000 petitioner Uy filed her Notice of Appeal and Memorandum of Appeal with the Fifth Division of the NLRC in Cagayan de Oro City. She assailed
the decision of the Labor Arbiter on the grounds of denial of due process and serious errors in the findings of fact.Finding that the appealed decision was received
on February 10, 2000 but only appealed on May 18, 2000, the NLRC in its resolution dated July 31, 2000, dismissed the appeal for being filed out of time. It ruled
that the decision had become final and executory.[7]

On August 28, 2000, petitioners Uy and Yusay[8] filed a Motion for Reconsideration alleging that they never held office where a copy of the decision was
served and that they only received their copy of the decision on May 9, 2000. On December 21, 2001, the NLRC granted their motion and absolved petitioner Uy
from liability as it found petitioners Uy and Yusay to be mere depositors of Countrywide Rural Bank on the basis of the evidence submitted by respondent Bueno
herself, i.e., the minutes of the meeting of the depositors of Countrywide Rural Banks Marbel Branch held on January 18, 1999. [9] It disposed, viz:

WHEREFORE, the above resolution is Reversed and Set Aside. In lieu thereof, a new judgment is rendered modifying the appealed
decision of the Labor Arbiter, dated November 18, 1999, in that the portion thereof directing individual Atty. Andrea Uy to personally pay
complainant Amalia Bueno her monetary award is deleted for lack of factual and legal basis.
On February 8, 2002, respondent Bueno filed a Motion for Reconsideration on grounds of serious errors in the findings of fact and in the application of
law. On March 22, 2002, the NLRC denied the motion for lack of merit as the issues raised had been extensively treated and discussed in the resolution sought to
be reconsidered.[10] Thus, respondent Bueno appealed to the Court of Appeals (CA) imputing on the part of the NLRC grave abuse of discretion amounting to lack
of or in excess of jurisdiction for (1) admitting the appeal and exculpating petitioner Uy from monetary liability, and (2) declaring that petitioner Uy was not an
officer of Countrywide Rural Bank.

The CA resolved both issues in favor of respondent Bueno. Anent the first, it held that petitioners Uy and Yusay filed their appeal out of time emphasizing
the rules on perfection of appeals, presumption of regularity in the performance of official duties and substantiation by competent evidence on allegation of non-
receipt of pleadings. It observed that Countrywide Rural Bank and its co-respondents received the initial processes relative to the case. Anent the second, the CA
found the individual respondents in the complaint that included petitioners Uy and Yusay to be officers of Countrywide Rural Bank. Its bases were (a) the categorical
admission in their appeal before the NLRC that they were officers of Countrywide Rural Bank, (b) the October 10, 2000 resolution of the NLRC in another
case,[11] which already settled the issue of their being officers of Countrywide Rural Bank, (c) the termination of respondent Bueno by petitioner Uy, which the
latter did not dispute, and (d) the issuance of a Memorandum of Termination in an attempt to legitimize the verbal dismissal of respondent Bueno. Thus, the CA
disposed on January 24, 2003,[12] viz:

WHEREFORE, premises considered, the instant petition is hereby GRANTED. The assailed resolutions of public respondent
Commission dated December 21, 2001 and March 22, 2002, are ordered SET ASIDE and NULLIFIED. The resolution of public respondent
Commission dated July 31, 2000[13] is AFFIRMED in its entirety.

Aggrieved, petitioners Uy and Yusay[14] filed their February 12, 2003 Motion for Reconsideration, which the CA denied on May 26, 2003. Hence, this
petition for review before the Court, which presents the following issues:
WHETHER OR NOT THE RESPONDENT HONORABLE COURT OF APPEALS ERRED IN ITS FINDINGS THAT THE NATIONAL
LABOR RELATIONS COMMISSION HAS GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
JURISDICTION IN ISSUING THE RESOLUTIONS DATED 21 DECEMBER 2001 AND 22 MARCH 2002.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN ITS FINDING THAT SUMMONS WAS PROPERLY SERVED ON THE
PETITIONERS.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN AFFIRMING THAT THE PETITIONERS ARE OFFICERS OF THE BANK.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE DISMISSAL OF PRIVATE
RESPONDENT WAS DONE IN BAD FAITH.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN ITS FINDING THAT PETITIONERS ARE SOLIDARILY
LIABLE WITH THE COUNTRYWIDE RURAL BANK OF LA CARLOTA INC.

We immediately note that the Countrywide Rural Bank failed to appeal its liability over the illegal dismissal of the respondent before the NLRC, the CA
and this Court. Such failure to perfect an appeal has the effect of rendering the judgment final and executory as to it. [15]

We now come to the liability of petitioner Uy. The findings of the Labor Arbiter, the NLRC and the CA as to the liability of petitioner Uy are conflicting,
thus, the application of the exception to the rule that only legal issues may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court. [16]

First, the Labor Arbiter found her solidarily liable with Countrywide Rural Bank, thus:

x x x Record reveals that she was verbally and summarily terminated on January 18, 1999 in an unconventional manner by individual
respondent ATTY. ANDREA UY (Interim President and Corporate Secretary) by announcing and confirming said termination during the
depositors meeting held at the Marbel Branch office, without valid cause and in violation of the procedures outlined in Art. 277(b) of the Labor
Code in terminating the services of an employee.

xxx
 Corporate directors and officers are solidarily liable with the corporation for the termination of employment of employees only if the
termination is done with malice or in bad faith (Progress Homes vs. NLRC, 269 SCRA 274). The dismissal of complainant was attended with
malice or bad faith when she was summarily terminated and announced during the depositors meeting by individual respondent Atty. Andrea Uy
(Interim President and Corporate Secretary).[17]

Second, the NLRC, after reconsidering its earlier pronouncement that petitioner Uy had lost her appeal for filing it beyond the mandatory reglementary
period, held her not liable with Countrywide Rural Bank, thus:

From her own evidence, the minutes of depositors meeting held on January 18, 1999 at the banks Marbel Branch (Annex C,
complainants position paper), it was shown clearly that individual respondents were mere depositors of respondent bank. They were only elected
as officers of the Interi[m] Board of Directors created by the group or association of depositors with the sole task to rehabilitate respondent
bank. The excerpts from the minutes of meeting are quoted hereunder, to wit:

xxx

Mr. Michael Viray asked Atty. Uy who are you by the way? What group do you belong to? You did not introduce
yourself to us.

Atty. Uy answered that she is also a depositor like them and they formed an association of depositors in Bacolod and
signified their intention to buy the bank thru equity swap as required by BSP. They formed the Interim Board and volunteered
to rehabilitate the bank. The Interi[m] Board elected her as the President.[18]

Finally, the CA reversed and found against petitioner Uy, where her liability was viewed, thus:

x x x It is crystal clear based on the facts and records of the case that individual private respondents were officers of co-private respondent
bank. In fact, they themselves have categorically admitted in their appeal before the public respondent Commission that they were corporate
officers of the co-respondent bank.

Significantly, the resolution made by the public respondent Commission in its decision in the case titled Arlene Villanueva vs.
Countrywide Rural Bank of La Carlota (Marbel Branch) and/or Atty. Andrea Uy (Corp. Sec.) and Felix Yusay (Board Chairman) docketed as
NLRC CA No. M-005740-2000 (RAB 11-01-50043-99) dated October 10, 2000, has already settled the issue that private respondent Uy was
indeed then the Corporate Secretary of respondent bank, and that respondent Uy has indicated her executive office address to the same address
where the summons was served to her in the illegal dismissal case filed against her by the petitioner.

The abovementioned admission made by the private respondents was further bolstered by the fact of private respondent Uy terminating
the services of petitioner as an employee of co-respondent bank which fact of termination was not disputed by private respondent Uy. [19]

Whether petitioner Uy[20] should be held solidarily liable with Countrywide Rural Bank in the illegal dismissal of respondent Bueno,depends on the
jurisdiction of the Labor Arbiter over the case at bar.
 The records show that petitioner Uy was a mere depositor of the bank who was elected Interim President and Corporate Secretary by a committee of
depositors to protect their interests given the bad state of Countrywide Rural Banks affairs. In his findings, the Labor Arbiter mentioned the meeting of the depositors
on January 18, 1999 but he failed to account for the exact personality of petitioner Uy whose statement relative to her role in the affairs of Countrywide Rural Bank
was related in the minutes of the same meeting. It was only through the NLRC that petitioner Uys role was established, i.e., that she was one of the depositors of
Countrywide Rural Bank who formed themselves into a group or association indicating their intention to help rehabilitate Countrywide Rural Bank. This part of
the minutes of the meeting is revealing:

Mr. Viray commented that they were not informed of this Interim Board. Atty. Uy glance[d] at ex-Manager Bueno to which Mrs.
Bueno announced that the Branch did not [receive] any written Memorandum as to the composition/members of this Interim Board.

Mrs. Viray requested Atty. Uy and Mr. Juesna to name the members of this Interim Board. Mr. Juesna enumerated the names of Mr.
Felix Yusay as the Chairman, Atty. Andrea Uy as the President and Corporate Secretary, etc.
[Mrs.] Bueno interrupted. Thats precisely why I questioned if the Interim Board is sanctioned by BSP or SEC to avoid confusion
on who to deal with.[21]

Clearly, even respondent Bueno was uncertain as to the exact role of the Interim Board that elected petitioner Uy as Interim President and Corporate Secretary. She
herself questioned the personality of the Interim Board in the management of Countrywide Rural Bank even while she alleged that petitioner Uy as its Interim
President and Corporate Secretary caused her dismissal. More significantly, there is no evidence that the committee of depositors that elected petitioner Uy as
Interim President and Corporate Secretary was recognized by the Bangko Sentral ng Pilipinas, and hence had the legal authority to act for the bank.

Lacking this evidence, the act of petitioner Uy in dismissing respondent cannot be deemed an act as an officer of the bank. Consequently, it cannot be held that
there existed an employer-employee relationship between petitioner Uy and respondent Bueno when the former allegedly dismissed the latter. This requirement
of employer-employer relationship is jurisdictional for the provisions of the Labor Code, specifically Book VI thereof, on Post-Employment, to apply. Since the
employer-employee relationship between petitioner Uy and respondent Bueno was not established, the labor arbiter never acquired jurisdiction over petitioner Uy.
Consequently, whether petitioner Uy was properly served with summons is immaterial. Likewise, that she terminated the services of respondent Bueno in bad faith
and with malice is of no moment. Her liability, if any, should be determined in another forum.
IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals Decision dated January 24, 2003 and Resolution dated May 26, 2003 in CA-G.R. SP
No. 70672, which found petitioner Atty. Andrea Uy solidarily liable with Countrywide Rural Bank of Carlota, Inc. in Marbel, Koronadal City, South Cotabato,
are REVERSED. No costs.

SO ORDERED.

REYNATO S. PUNO
Associate Justice
 G.R. No. 163782 March 24, 2006

LIGHT RAIL TRANSIT AUTHORITY, Petitioner,

vs.
PERFECTO H. VENUS, JR., BIENVENIDO P. SANTOS, JR., RAFAEL C. ROY, NANCY C. RAMOS, SALVADOR A. ALFON, NOEL
R. SANTOS, MANUEL A. FERRER, SALVADOR G. ALINAS, RAMON D. LOFRANCO, AMADOR H.POLICARPIO, REYNALDO B.
GENER, and BIENVENIDO G. ARPILLEDA, Respondents.

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

G.R. No. 163881 March 24, 2006

METRO TRANSIT ORGANIZATION, INC., Petitioner,

vs.
COURT OF APPEALS, PERFECTO H. VENUS, JR., BIENVENIDO P. SANTOS, JR., RAFAEL C. ROY, NANCY C. RAMOS,
SALVADOR A. ALFON, NOEL R. SANTOS, MANUEL A. FERRER, SALVADOR G. ALINAS, RAMON D. LOFRANCO, AMADOR H.
POLICARPIO, and REYNALDO B. GENER, Respondents.

DECISION

PUNO, J.:

Before us are the consolidated petitions of Light Rail Transit Authority (LRTA) and Metro Transit Organization, Inc. (METRO), seeking the reversal
of the Decision of the Court of Appeals directing them to reinstate private respondent workers to their former positions without loss of seniority and
other rights and privileges, and ordering them to jointly and severally pay the latter their full back wages, benefits, and moral damages. The LRTA
and METRO were also ordered to jointly and severally pay attorneys fees equivalent to ten percent (10%) of the total money judgment.

Petitioner LRTA is a government-owned and controlled corporation created by Executive Order No. 603, Series of 1980, as amended, to construct
and maintain a light rail transit system and provide the commuting public with an efficient, economical, dependable and safe transportation.
Petitioner METRO, formerly Meralco Transit Organization, Inc., was a qualified transportation corporation duly organized in accordance with the
provisions of the Corporation Code, registered with the Securities and Exchange Commission, and existing under Philippine laws.

It appears that petitioner LRTA constructed a light rail transit system from Monumento in Kalookan City to Baclaran in Paraaque, Metro Manila.
To provide the commuting public with an efficient and dependable light rail transit system, petitioner LRTA, after a bidding process, entered into a
ten (10)-year Agreement for the Management and Operation of the Metro Manila Light Rail Transit System from June 8, 1984 until June 8, 1994
with petitioner METRO.1The Agreement provided, among others, that
 1. Effective on the COMMENCEMENT DATE, METRO shall accept and take over from the AUTHORITY [LRTA] the management,
maintenance and operation of the commissioned and tested portion of the [Light Rail Transit] System x x x [par. 2.02];

2. The AUTHORITY [LRTA] shall pay METRO the MANAGEMENT FEE as follows x x x [par. 5.01];

3. In rendering these services, METRO shall apply its best skills and judgment, in attaining the objectives of the [Light Rail Transit] System
in accordance with accepted professional standards. It shall exercise the required care, diligence and efficiency in the discharge of its duties
and responsibilities and shall work for the best interest of the [Light Rail Transit] System and the AUTHORITY [LRTA] [par. 2.03];

4. METRO shall be free to employ such employees and officers as it shall deem necessary in order to carry out the requirements of [the]
Agreement. Such employees and officers shall be the employees of METRO and not of the AUTHORITY [LRTA]. METRO shall prepare a
compensation schedule and the corresponding salaries and fringe benefits of [its] personnel in consultation with the AUTHORITY [LRTA]
[par. 3.05];

5. METRO shall likewise hold the AUTHORITY [LRTA] free and harmless from any and all fines, penalties, losses and liabilities and litigation
expenses incurred or suffered on account of and by reason of death, injury, loss or damage to passengers and third persons, including the
employees and representatives of the AUTHORITY [LRTA], except where such death, injury, loss or damage is attributable to a defect or
deficiency in the design of the system or its equipment [par. 3.06].

Pursuant to the above Agreement, petitioner METRO hired its own employees, including herein private respondents. Petitioner METRO thereafter
entered into a collective bargaining agreement with Pinag-isang Lakas ng Manggagawa sa METRO, Inc. National Federation of Labor, otherwise
known as PIGLAS-METRO, INC. NFL KMU (Union), the certified exclusive collective bargaining representative of the rank-and-file employees
of petitioner METRO.

Meanwhile, on June 9, 1989, petitioners LRTA and METRO executed a Deed of Sale where petitioner LRTA purchased the shares of stocks in
petitioner METRO.2However, petitioners LRTA and METRO continued with their distinct and separate juridical personalities. Hence, when the
above ten (10)-year Agreement expired on June 8, 1994, they renewed the same, initially on a yearly basis, and subsequently on a monthly basis.

On July 25, 2000, the Union filed a Notice of Strike with the National Conciliation and Mediation Board National Capital Region against petitioner
METRO on account of a deadlock in the collective bargaining negotiation. On the same day, the Union struck. The power supply switches in the
different light rail transit substations were turned off. The members of the Union picketed the various substations. They completely paralyzed the
operations of the entire light rail transit system. As the strike adversely affected the mobility of the commuting public, then Secretary of Labor
Bienvenido E. Laguesma issued on that same day an assumption of jurisdiction order3directing all the striking employees "to return to work
immediately upon receipt of this Order and for the Company to accept them back under the same terms and conditions of employment prevailing
prior to the strike."4

In their memorandum,5Department of Labor and Employment Sheriffs Feliciano R. Orihuela, Jr., and Romeo P. Lemi reported to Sec. Laguesma
that they tried to personally serve the Order of assumption of jurisdiction to the Union through its officials and members on July 26, 2000, but the
latter refused to receive the same. The sheriffs thus posted the Order in the different stations/terminals of the light rail transit system. Further, the
Order of assumption of jurisdiction was published on the July 27, 2000 issues of the Philippine Daily Inquirer6and the Philippine Star.7

Despite the issuance, posting, and publication of the assumption of jurisdiction and return to work order, the Union officers and members, including
herein private respondent workers, failed to return to work. Thus, effective July 27, 2000, private respondents, Perfecto Venus, Jr., Bienvenido P.
Santos, Jr., Rafael C. Roy, Nancy C. Ramos, Salvador A. Alfon, Noel R. Santos, Manuel A. Ferrer, Salvador G. Alinas, Ramon D. Lofranco, Amador
H. Policarpio, Reynaldo B. Gener, and Bienvenido G. Arpilleda, were considered dismissed from employment.

In the meantime, on July 31, 2000, the Agreement for the Management and Operation of the Metro Manila Light Rail Transit System between
petitioners LRTA and METRO expired. The Board of Directors of petitioner LRTA decided not to renew the contract with petitioner METRO and
directed the LRTA management instead to immediately take over the management and operation of the light rail transit system to avert the mass
transportation crisis.

On October 10, 2000, private respondents Venus, Jr., Santos, Jr., and Roy filed a complaint for illegal dismissal before the National Labor Relations
Commission (NLRC) and impleaded both petitioners LRTA and METRO. Private respondents Ramos, Alfon, Santos, Ferrer, Alinas, Lofranco,
Policarpio, Gener, and Arpilleda follwed suit on December 1, 2000.

On October 1, 2001, Labor Arbiter Luis D. Flores rendered a consolidated judgment in favor of the private respondent workers 8

WHEREFORE, judgment is hereby rendered in favor of the complainants and against the respondents, as follows:

1. Declaring that the complainants were illegally dismissed from employment and ordering their reinstatement to their former positions
without loss of seniority and other rights and privileges.

2. Ordering respondents Metro Transit Organization, Inc. and Light Rail Transit Authority to jointly and severally pay the complainants
their other benefits and full backwages, which as of June 30, 2001 are as follows:

1. Perfecto H. Venus, Jr. P247,724.36

2. Bienvenido P. Santos, Jr. 247,724.36

3. Rafael C. Roy 247,724.36

4. Nancy [C.] Ramos 254,282.62

5. Salvador A. Alfon 257,764.62

6. Noel R. Santos 221,897.58

 7. Manuel A. Ferrer 250,534.78

8. Salvador G. [Alinas] 253,454.88

9. Ramon D. Lofranco 253,642.18

10. Amador H. Policarpio 256,609.22

11. Reynaldo B. Gener 255,094.56

TOTAL P2,746,453.52

3. Ordering respondents Metro Transit Organization, Inc. and Light Rail Transit Authority to jointly and severally pay each of the
complainants the amount of P50,000.00 as moral damages.

4. Ordering respondents Metro Transit Organization, Inc. and Light Rail Transit Authority to jointly and severally pay the complainants
attorneys fees equivalent to ten percent (10%) of the total money judgment.

SO ORDERED.

The complaint filed by Bienvenido G. Arpilleda, although initially consolidated with the main case, was eventually dropped for his failure to appear
and submit any document and position paper.9

On May 29, 2002, on appeal, the NLRC found that the striking workers failed to heed the return to work order and reversed and set aside the decision
of the labor arbiter. The suit against LRTA was dismissed since "LRTA is a government-owned and controlled corporation created by virtue of
Executive Order No. 603 with an original charter"10and "it ha[d] no participation whatsoever with the termination of complainants employment." 11In
fine, the cases against the LRTA and METRO were dismissed, respectively, for lack of jurisdiction and for lack of merit.

On December 3, 2002, the NLRC denied the workers Motion for Reconsideration "[t]here being no showing that the Commission committed, (and
that) the Motion for Reconsideration was based on, palpable or patent errors, and the fact that (the) said motion is not under oath."

On a petition for certiorari however, the Court of Appeals reversed the NLRC and reinstated the Decision rendered by the Labor Arbiter. Public
respondent appellate court declared the workers dismissal as illegal, pierced the veil of separate corporate personality and held the LRTA and
METRO as jointly liable for back wages.

Hence, these twin petitions for review on certiorari of the decision of public respondent appellate court filed by LRTA and METRO which this Court
eventually consolidated.
In the main, petitioner LRTA argues that it has no employer-employee relationship with private respondent workers as they were hired by petitioner
METRO alone pursuant to its ten (10)-year Agreement for the Management and Operation of the Metro Manila Light Rail Transit System with
petitioner METRO. Private respondent workers recognized that their employer was not petitioner LRTA when their certified exclusive collective
bargaining representative, the Pinag-isang Lakas ng Manggagawa sa METRO, Inc. National Federation of Labor, otherwise known as PIGLAS-
METRO, INC. NFL KMU, entered into a collective bargaining agreement with petitioner METRO. Piercing the corporate veil of METRO was
unwarranted, as there was no competent and convincing evidence of any wrongful, fraudulent or unlawful act on the part of METRO, and, more so,
on the part of LRTA.

Petitioner LRTA further contends that it is a government-owned and controlled corporation with an original charter, Executive Order No. 603, Series
of 1980, as amended, and thus under the exclusive jurisdiction only of the Civil Service Commission, not the NLRC.

Private respondent workers, however, submit that petitioner METRO was not only fully-owned by petitioner LRTA, but all aspects of its operations
and administration were also strictly controlled, conducted and directed by petitioner LRTA. And since petitioner METRO is a mere adjunct, business
conduit, and alter ego of petitioner LRTA, their respective corporate veils must be pierced to satisfy the money claims of the illegally dismissed
private respondent employees.

We agree with petitioner LRTA. Section 2 (1), Article IX B, 1987 Constitution, expressly provides that "[t]he civil service embraces all branches,
subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters."
Corporations with original charters are those which have been created by special law and not through the general corporation law. Thus,
in Philippine National Oil Company Energy Development Corporation v. Hon. Leogrado, we held that "under the present state of the
law, the test in determining whether a government-owned or controlled corporation is subject to the Civil Service Law is the manner of its creation
such that government corporations created by special charter are subject to its provisions while those incorporated under the general Corporation
Law are not within its coverage."12There should be no dispute then that employment in petitioner LRTA should be governed only by civil service
rules, and not the Labor Code and beyond the reach of the Department of Labor and Employment, since petitioner LRTA is a government-owned
and controlled corporation with an original charter, Executive Order No. 603, Series of 1980, as amended.

In contrast, petitioner METRO is covered by the Labor Code despite its later acquisition by petitioner LRTA. In Lumanta v. National Labor
Relations Commission,13this Court ruled that labor law claims against government-owned and controlled corporations without original charter
fall within the jurisdiction of the Department of Labor and Employment and not the Civil Service Commission. Petitioner METRO was originally
organized under the Corporation Code, and only became a government-owned and controlled corporation after it was acquired by petitioner LRTA.
Even then, petitioner METRO has no original charter, hence, it is the Department of Labor and Employment, and not the Civil Service Commission,
which has jurisdiction over disputes arising from the employment of its workers. Consequently, the terms and conditions of such employment are
governed by the Labor Code and not by the Civil Service Rules and Regulations.

We therefore hold that the employees of petitioner METRO cannot be considered as employees of petitioner LRTA. The employees hired by METRO
are covered by the Labor Code and are under the jurisdiction of the Department of Labor and Employment, whereas the employees of petitioner
LRTA, a government-owned and controlled corporation with original charter, are covered by civil service rules. Herein private respondent workers
cannot have the best of two worlds, e.g., be considered government employees of petitioner LRTA, yet allowed to strike as private employees under
our labor laws. Department of Justice Opinion No. 108, Series of 1999, issued by then Secretary of Justice Serafin R. Cuevas on whether or not
employees of petitioner METRO could go on strike is persuasive
We believe that METRO employees are not covered by the prohibition against strikes applicable to employees embraced in the Civil Service. It is not
disputed, but in fact conceded, that METRO employees are not covered by the Civil Service. This being so, METRO employees are not covered by the
Civil Service law, rules and regulations but are covered by the Labor Code and, therefore, the rights and prerogatives granted to private employees
thereunder, including the right to strike, are available to them.

Moreover, as noted by Secretary Benjamin E. Diokno, of the Department of Budget and Management, in his letter dated February 22, 1999, the
employees of METRO are not entitled to the government amelioration assistance authorized by the President pursuant to Administrative Order No.
37 for government employees, because the employees of METRO are not government employees since Metro, Inc. "could not be considered as GOCC
as defined under Section 3 (b) of E.O. 518 x x x x"14

Indeed, there was never an intention to consider the employees of petitioner METRO as government employees of petitioner LRTA as well neither
from the beginning, nor until the end. Otherwise, they could have been easily converted from being employees in the private sector and absorbed as
government employees covered by the civil service when petitioner LRTA acquired petitioner METRO in 1989. The stubborn fact is that they
remained private employees with rights and prerogatives granted to them under the Labor Code, including the right to strike, which they exercised
and from which the instant dispute arose.

We likewise hold that it is inappropriate to pierce the corporate veil of petitioner METRO. In Del Rosario v. National Labor Relations
Commission, we ruled that "[u]nder the law a corporation is bestowed juridical personality, separate and distinct from its stockholders. But when
the juridical personality of the corporation is used to defeat public convenience, justify wrong, protect fraud or defend crime, the corporation shall
be considered as a mere association of persons, and its responsible officers and/or stockholders shall be held individually liable. For the same reasons,
a corporation shall be liable for the obligations of a stockholder, or a corporation and its successor-in-interest shall be considered as one and the
liability of the former shall attach to the latter. But for the separate juridical personality of a corporation to be disregarded, the wrongdoing must be
clearly and convincingly established. It cannot be presumed." 15In Del Rosario, we also held that the "substantial identity of the incorporators of
the two corporations does not necessarily imply fraud." 16

In the instant case, petitioner METRO, formerly Meralco Transit Organization, Inc., was originally owned by the Manila Electric Company and
registered with the Securities and Exchange Commission more than a decade before the labor dispute. It then entered into a ten-year agreement
with petitioner LRTA in 1984. And, even if petitioner LRTA eventually purchased METRO in 1989, both parties maintained their separate and
distinct juridical personality and allowed the agreement to proceed. In 1990, this Court, in Light Rail Transit Authority v. Commission on
Audit, even upheld the validity of the said agreement. 17Consequently, the agreement was extended beyond its ten-year period. In 1995, METROs
separate juridical identity was again recognized when it entered into a collective bargaining agreement with the workers union. All these years,
METROs distinct corporate personality continued quiescently, separate and apart from the juridical personality of petitioner LRTA.

The labor dispute only arose in 2000, after a deadlock occurred during the collective bargaining between petitioner METRO and the workers union.
This alone is not a justification to pierce the corporate veil of petitioner METRO and make petitioner LRTA liable to private respondent workers.
There are no badges of fraud or any wrongdoing to pierce the corporate veil of petitioner METRO.

On this point, the Department of Justice Opinion No. 108, Series of 1999, issued by then Secretary of Justice Serafin R. Cuevas is once again apropos:
Anent the issue of piercing the corporate veil, it was held in Concept Builders, Inc. v. NLRC (G.R. No. 108734, May 29, 1996, 257 SCRA 149, 159)
that the test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows:

"1. Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice
in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of
its own;

2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive
legal duty, or dishonest and unjust act in contravention of plaintiffs legal rights; and

3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.

The absence of any one of these elements prevents piercing the corporate veil. In applying the instrumentality or alter ego doctrine, the courts are
concerned with reality and not form, with how the corporation operated and the individual defendants relationship to that operation."

Here, the records do not show that control was used to commit a fraud or wrong. In fact, it appears that piercing the corporate veil for the purpose
of delivery of public service, would lead to a confusing situation since the outcome would be that Metro will be treated as a mere alter ego of LRTA,
not having a separate corporate personality from LRTA, when dealing with the issue of strike, and a separate juridical entity not covered by the Civil
Service when it comes to other matters. Under the Constitution, a government corporation is either one with original charter or one without original
charter, but never both.18

In sum, petitioner LRTA cannot be held liable to the employees of petitioner METRO.

With regard the issue of illegal dismissal, petitioner METRO maintains that private respondent workers were not illegally dismissed but should be
deemed to have abandoned their jobs after defying the assumption of jurisdiction and return-to-work order issued by the Labor Secretary. Private
respondent workers, on the other hand, submit that they could not immediately return to work as the light rail transit system had ceased its
operations.

We find for the private respondent workers. In Batangas Laguna Tayabas Bus Co. v. National Labor Relations Commission, 19 we said that the five-
day period for the strikers to obey the Order of the Secretary of Justice and return to work was not sufficient as "some of them may have left Metro
Manila and did not have enough time to return during the period given by petitioner, which was only five days." 20 In Batangas Laguna Tayabas Bus
Co.,21we further held

The contention of the petitioner that the private respondents abandoned their position is also not acceptable. An employee who forthwith takes steps
to protest his lay-off cannot by any logic be said to have abandoned his work.
For abandonment to constitute a valid cause for termination of employment, there must be a deliberate, unjustified refusal of the employee to resume
his employment. This refusal must be clearly established. As we stressed in a recent case, mere absence is not sufficient; it must be accompanied by
overt acts unerringly pointing to the fact that the employee simply does not want to work anymore.

In the instant case, private respondent workers could not have defied the return-to-work order of the Secretary of Labor simply because they were
dismissed immediately, even before they could obey the said order. The records show that the assumption of jurisdiction and return-to-work order
was issued by Secretary of Labor Bienvenido E. Laguesma on July 25, 2000. The said order was served and posted by the sheriffs of the Department
of Labor and Employment the following day, on July 26, 2000. Further, the said order of assumption of jurisdiction was duly published on July 27,
2000, in the Philippine Daily Inquirer and the Philippine Star. On the same day also, on July 27, 2000, private respondent workers were
dismissed. Neither could they be considered as having abandoned their work. If petitioner METRO did not dismiss the strikers right away, and
instead accepted them back to work, the management agreement between petitioners LRTA and METRO could still have been extended and the
workers would still have had work to return to.

IN VIEW WHEREOF, the Decision of public respondent Court of Appeals is AFFIRMED insofar as it holds Metro Transit Organization, Inc. liable
for the illegal dismissal of private respondents and orders it to pay them their benefits and full back wages and moral damages. Further, Metro
Transit Organization, Inc. is ordered to pay attorneys fees equivalent to ten percent (10%) of the total money judgment. The petition of the Light
Rail Transit Authority is GRANTED, and the complaint filed against it for illegal dismissal is DISMISSED for lack of merit.

SO ORDERED.

REYNATO S. PUNO
Associate Justice
 [G.R. No. 110187. September 4, 1996]

JOSE G. EBRO III, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, INTERNATIONAL CATHOLIC MIGRATION
COMMISSION, JON DARRAH, ALEX DY-REYES, CARRIE WILSON, and MARIVIC SOLIVEN, respondents.

1. POLITICAL LAW; PUBLIC INTERNATIONAL LAW; CONVENTION ON THE PRIVILEGES AND IMMUNITY OF SPECIALIZED AGENCIES OF THE UNITED NATIONS; GRANT
OF IMMUNITY FROM SUIT TO INTERNATIONAL CATHOLIC MIGRATION COMMISSION (ICMC); THUS, BOTH THE LABOR ARBITER AND THE NLRC HAD NO
JURISDICTION OVER THE CASE. The basic issue in this case is whether the Memorandum of Agreement executed on July 15, 1988 gave ICMC immunity from suit. The Court
holds it did. Consequently, both the Labor Arbiter and the NLRC had no jurisdiction over the case. Petitioners contention that the Memorandum of Agreement is not an act of
Congress which is needed to repeal or supersede the provision of the Labor Code on the jurisdiction of the NLRC and of the Labor Arbiter is untenable. The grant of immunity to
ICMC is in virtue of the Convention on the Privileges and Immunities of Specialized Agencies of the United Nations, adopted by the UN General Assemby on November 21, 1947,
and concurred in by the Philippine Senate on May 17, 1949. This Convention has the force and effect of law, considering that under the Constitution, the Philippines adopts the
generally accepted principles of international law as part of the law of the land. The Memorandum of Agreement in question merely carries out Philippine governments obligation
under the Convention.

2. ID.; THIS COURT DID NOT REJECT ICMCS INVOCATION OF IMMUNITY FOR CAUSES OF ACTION ACCRUING PRIOR TO THE EXECUTION OF THE
MEMORANDUM. Petitioner argues that in any case ICMCs immunity cannot apply because this case was filed below before the signing of the Memorandum on July 15, 1988.
Petitioner cites in support the statement of this Court in the aforesaid case of International Catholic Migration Commission v. Calleja, distinguishing that case from an earlier case
also involving ICMC, wherein the NLRC, as well as the Court, took cognizance of a complaint against ICMC for payment of salary for the unexpired portion of a six-month
probationary employment. This Court did not really reject ICMCs invocation of immunity for causes of action accruing prior to the execution of the Memorandum. It left open the
possibility that ICMC may have been tacitly enjoying diplomatic immunity beforehand. It is important to note that in the 1989 case ICMC did not invoke its immunity
notwithstanding the fact that the Memorandum took effect while the case was pending before the Court.

3. ID.; SCOPE OF IMMUNITY OF THE ICMC; IMMUNITY FROM EVERY FORM OF LEGAL PROCESS. The scope of immunity of the ICMC contained in the convention on the privileges
and immunities of the Specialized Agencies of the United Nations is instructive. Art. III, Section 4 of the Convention provides for immunity from every form of legal process. Thus,
even if private respondents had been served summons and subpoenas prior to the execution of the Memorandum, they, as officers of ICMC, can claim immunity under the same in
order to prevent enforcement of an adverse judgment, since a writ of execution is a legal process within the meaning of Article III, Section 4.

4. ID.; WAIVER OF IMMUNITY MUST BE EXPRESS; ESTOPPEL DOES NOT OPERATE TO CONFER JURISDICTION TO A TRIBUNAL THAT HAS NONE OVER A CAUSE OF
ACTION. - Another question is whether ICMC can invoke its immunity because it only did so in its memorandum before the Labor Arbiter. It is contended that ICMC waived its
immunity in any event. Art. III, Section 4 of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations requires, however, that the waiver
of the privilege must be express. There was no such waiver of immunity in this case. Nor can ICMC be estopped from claiming diplomatic immunity since estoppel does not operate
to confer jurisdiction to a tribunal that has none over a cause of action.

5. ID.; RECOGNITION OF ICMCS IMMUNITY FROM SUIT DOES NOT DEPRIVE PETITIONER OF DUE PROCESS. Finally, neither can it be said that recognition of ICMCs immunity
from suit deprives petitioner of due process. As pointed out in International Catholic Migration Commission v. Calleja, petitioner is not exactly without remedy for whatever
violation of rights it may have suffered for the following reason: Article IV. Cooperation with Government Authorities. - 1. The Commission shall cooperate at all times with the
appropriate authorities of the Government to ensure the observance of Philippine laws, rules and regulations, facilitate the proper administration of justice and prevent the
occurrences of any abuse of the privileges and immunities granted its officials and alien employees in Article III of this Agreement to the Commission. 2. In the event that the
Government determines that there has been an abuse of the privileges and immunities granted under this Agreement, consultations shall be held between the Government and the
Commission to determine whether any such abuse has occurred and, if so, the Government shall withdraw the privileges and immunities granted the Commission and its officials.
APPEARANCES OF COUNSEL

Jose R. Ebro, Jr. for petitioner.

The Solicitor General for public respondent.
The Law Firm of Araullo & Raymundo for International Catholic Migration Commission.

DECISION
MENDOZA, J.:

This is a petition for certiorari to set aside the order dated October 13, 1992 and the resolution dated March 3, 1993 of the National Labor
Relations Commission (NLRC).[1]
The antecedent facts are as follows:
Private respondent International Catholic Migration Commission (ICMC) is a non-profit agency engaged in international humanitarian and
voluntary work. It is duly registered with the United Nations Economic and Social Council (ECOSOC) and enjoys Consultative Status, Category II. It
was one of the agencies accredited by the Philippine government to operate the refugee processing center at Sabang, Morong, Bataan.
On June 24, 1985, private respondent ICMC employed petitioner Jose G. Ebro III to teach English as a Second Language and Cultural
Orientation Training Program at the refugee processing center. The employment contract provided in pertinent part:

Salary: Your monthly salary for the first 6 months probationary period is P3,155.00 inclusive of cost of living allowance. Upon being made regular
after successful completion of the six (6) months probationary period your monthly salary will be adjusted to P3,445.00 inclusive of cost of living
allowance.

....

Termination of Employment: Employment may be terminated by ICMC in any of the following situations:

a. A cessation or reduction in program operation, by Department of State order,

b. Unsuccessful completion of probationary period, at any time during that period,

c. For due cause, in cases of violation of provisions detailed in ICMC Personnel Policies and administrative regulations,

d. For just and authorized causes expressly provided for or authorized by law,

e. For reasons of inadequate or deficient professional performance based on relevant guidelines and procedures relating to the position,
 f. In cases where, as a member of the PRPC community, ICMC is directed to take action.

If either party wishes to terminate employment, a notice of two (2) weeks should be given in writing to the other party.

After six months, ICMC notified petitioner that effective December 21, 1985, the latters services were terminated for his failure to meet the
requirements of 1. classroom performance . . . up to the standards set in the Guide for Instruction; 2. regular attendance in the mandated teacher
training, and in the scheduled team meetings, one-on-one conferences with the supervisor, etc.; 3. compliance with ICMC and PRPC policies and
procedures.
On February 4, 1986, petitioner filed a complaint for illegal dismissal, unfair labor practice, underpayment of wages, accrued leave pay, 14th
month pay, damages, attorneys fees, and expenses of litigation. The complaint was filed against private respondents ICMC and its Project Director
Jon Darrah, Personnel Officer Alex Dy-Reyes, Program Officer of the Cultural Orientation Program Carrie Wilson, and Supervisor of the Cultural
Orientation Program Marivic Soliven. Petitioner alleged that there was no objective evaluation of his performance to warrant his dismissal and that
he should have been considered a regular employee from the start because ICMC failed to acquaint him with the standards under which he must
qualify as such. He prayed for reinstatement with backwages; P3,155.00 for probationary and P3,445.00 for regular salary adjustments; value of
lodging or dormitory privileges; cost of insurance coverage for group life, medical, death, dismemberment and disability benefits; moral, and
exemplary, and nominal damages plus interest on the above claims with attorneys fees.
Answering the complaint, ICMC claimed that petitioner failed to qualify for regular employment because he showed no interest in improving
his professional performance both in and out of the classroom after he had been periodically evaluated (observation summary from August 20 to
October 2, 1985 and evaluation summary of December 14, 1985); that petitioner was paid his salary up to December 31, 1985, two weeks pay in lieu
of notice, and 14th month pay pro-rata; and that his accrued leave balance had already been converted to cash.
After the parties had formally offered their evidence, private respondents submitted their memorandum on July 31, 1989 in which, among other
things, they invoked ICMCs diplomatic immunity on the basis of the Memorandum of Agreement signed on July 15, 1988 between the Philippine
government and ICMC.
The Labor Arbiter held that petitioners legal immunity under the Memorandum could not be given retroactive effect since [that would] deprive
complainants property right without due process and impair the obligation of contract of employment. In addition, he expressed doubt about
petitioners legal immunity on the ground that it was provided for by agreement and not through an act of Congress. Accordingly, the Labor Arbiter
ordered ICMC to reinstate petitioner as regular teacher without loss of seniority rights and to pay him one year backwages, other benefits, and ten
percent attorneys fees for a total sum of P70,944.85.
Both parties appealed to the NLRC. On August 13, 1990, petitioner moved to dismiss private respondents appeal because of the latters failure
to post a cash/surety bond. In its order of October 13, 1992, however, the NLRC ordered the case dismissed on the ground that, under the
Memorandum of Agreement between the Philippine government and ICMC, the latter was immune from suit.
Petitioner moved for reconsideration, arguing among other things, that the Memorandum of Agreement could not be given retroactive effect
and that in any case ICMC had waived its immunity by consenting to be sued.
However, petitioners motion was denied by the NLRC in its resolution dated March 4, 1993.[2] Hence this petition presenting the following
issues:
 a) Whether private respondents have perfected their appeal and whether public respondent may, on appeal, entertain or review private
respondents claim of immunity;

b) Whether a mere Memorandum of Agreement entered into by the Secretary of Foreign Affairs with respondent International Catholic
Migration Commission, which is not a law, can divest the Labor Arbiter and the National Labor Relations Commission of their jurisdiction
over the subject matter and over the persons of respondents in the pending case;

c) Whether the Memorandum of Agreement may be given retroactive effect;

d) Whether the dismissal of the case based on the claim of immunity will deprive petitioner of his property without due process of law;

e) Whether the dismissal of the case based on the claim of immunity will result in the impairment of the obligations assumed by respondent
International Catholic Migration Commission under its contract of employment with petitioner;

f) Assuming for the sake of argument that the Memorandum of Agreement has validly conferred immunity on private respondents, whether
they may be considered as having waived such immunity;

g) Upon the same consideration, whether private respondents may be considered estopped from claiming immunity. The basic issue in this case
is whether the Memorandum of Agreement executed on July 15, 1988 gave ICMC immunity from suit. The Court holds it did. Consequently,
both the Labor Arbiter and the NLRC had no jurisdiction over the case.

First. Petitioners contention that the Memorandum of Agreement is not an act of Congress which is needed to repeal or supersede the provision
of the Labor Code on the jurisdiction of the NLRC and of the Labor Arbiter is untenable. The grant of immunity to ICMC is in virtue of the Convention
on the Privileges and Immunities of Specialized Agencies of the United Nations, adopted by the UN General Assembly on November 21, 1947, and
concurred in by the Philippine Senate on May 17, 1949. This Convention has the force and effect of law, considering that under the Constitution,
the Philippines adopts the generally accepted principles of international law as part of the law of the land. [3] The Memorandum of Agreement in
question merely carries out the Philippine governments obligation under the Convention. In International Catholic Migration Commission v.
Calleja,[4] this Court explained the grant of immunity to ICMC in this wise:

The grant of immunity from local jurisdiction to ICMC . . . is clearly necessitated by their international character and respective purposes. The
objective is to avoid the danger of partiality and interference by the host country in their internal workings. The exercise of jurisdiction by the
Department of Labor in these instances would defeat the very purpose of immunity, which is to shield the affairs of international organizations, in
accordance with international practice, from political pressure or control by the host country to the prejudice of member States of the organization,
and to ensure the unhampered performance of their functions.

Second. Petitioner argues that in any case ICMCs immunity can not apply because this case was filed below before the signing of the
Memorandum on July 15, 1988. Petitioner cites in support the statement of this Court in the aforesaid case of International Catholic Migration
Commission v. Calleja,[5] distinguishing that case from an earlier case [6] also involving ICMC, wherein the NLRC, as well as the Court, took
cognizance of a complaint against ICMC for payment of salary for the unexpired portion of a six-month probationary employment. The Court held:[7]
[N]ot only did the facts of said controversy [ICMC v. NLRC, 169 SCRA 606 (1989)] occur between 1983-1985, or before the grant to ICMC on 15 July
1988 of the status of a specialized agency with corresponding immunities, but also because ICMC in that case did not invoke its immunity and,
therefore, may be deemed to have waived it, assuming that during that period (1983-1985) it was tacitly recognized as enjoying such immunity.

Here, according to petitioner, his employment and subsequent dismissal by ICMC took place in 1985, prior to the execution of the Memorandum
of Agreement on July 15, 1988 and, therefore, like in the 1989 ICMC case, the Memorandum should not be made to apply to him.
This Court did not really reject ICMCs invocation of immunity for causes of action accruing prior to the execution of the Memorandum. It left
open the possibility that ICMC may have been tacitly enjoying diplomatic immunity beforehand. It is important to note that in the 1989 case ICMC
did not invoke its immunity notwithstanding the fact that the Memorandum took effect while the case was pending before the Court.[8]
Moreover, in the 1990 ICMC case, ICMCs immunity was in fact upheld despite the fact that at the time the case arose, the Memorandum
recognizing ICMCs status as a specialized agency had not yet been signed. In that case, the petition for certification election among its rank and file
employees was filed on July 14, 1986 and the order directing a certification election was made when ICMCs request for recognition as a specialized
agency was still pending in the Department of Foreign Affairs. Yet this Court held that the subsequent execution of the Memorandum was a bar to
the granting of the petition for certification election.
The scope of immunity of the ICMC contained in the Convention on the Privileges and Immunities of the Specialized Agencies of the United
Nations is instructive. Art. III, 4 of the Convention provides for immunity from every form of legal process. Thus, even if private respondents had
been served summons and subpoenas prior to the execution of the Memorandum, they, as officers of ICMC, can claim immunity under the same in
order to prevent enforcement of an adverse judgment, since a writ of execution is a legal process within the meaning of Article III, 4.[9]
Third. Another question is whether ICMC can invoke its immunity because it only did so in its memorandum before the Labor Arbiter. It is
contended that ICMC waived its immunity in any event. Art. III, 4 of the Convention on the Privileges and Immunities of the Specialized Agencies
of the United Nations requires, however, that the waiver of the privilege must be express. There was no such waiver of immunity in this case. Nor
can ICMC be estopped from claiming diplomatic immunity since estoppel does not operate to confer jurisdiction to a tribunal that has none over a
cause of action.[10]
Fourth. Finally, neither can it be said that recognition of ICMCs immunity from suit deprives petitioner of due process. As pointed out
in International Catholic Migration Commission v. Calleja,[11] petitioner is not exactly without remedy for whatever violation of rights it may have
suffered for the following reason:

Section 31 of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations provides that each specialized
agency shall make provision for appropriate modes of settlement of: (a) disputes arising out of contracts or other disputes of private character to
which the specialized agency is a party. Moreover, pursuant to Article IV of the Memorandum of Agreement between ICMC and the Philippine
Government, whenever there is any abuse of privilege by ICMC, the Government is free to withdraw the privileges and immunities accorded. Thus:

Article IV. Cooperation with Government Authorities. 1. The Commission shall cooperate at all times with the appropriate authorities of the
Government to ensure the observance of Philippine laws, rules and regulations, facilitate the proper administration of justice and prevent the
occurrences of any abuse of the privileges and immunities granted its officials and alien employees in Article III of this Agreement to the Commission.
2. In the event that the Government determines that there has been an abuse of the privileges and immunities granted under this Agreement,
consultations shall be held between the Government and the Commission to determine whether any such abuse has occurred and, if so, the
Government shall withdraw the privileges and immunities granted the Commission and its officials.

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.
 [G.R. No. 125039. November 20, 1998]

NATIONAL MINES AND ALLIED WORKERS UNION (NAMAWU), JULIETA ARROYO, AGNES DE GUZMAN, CARMELITA
RAYMUNDO, SAMMY ISRAEL, GUILLERMO DELA CRUZ, NESTOR VALLESTEROS, NOEL ARANDA, DANIEL
RESTORIA, TEODORO CATUIRA, MARCELITA SIERVO, CECILIA OLDAN, LEO RIO, MELINDA ODISTE, EMERITA
DELA CRUZ, ARMINA DAGAR, CORAZON GALVEZ, BELEN BUAN, REMEDIOS VASQUEZ, MORENA VELGADO, MA.
LUISA AMICAN, MARILOU CANELAS, ANALYN JESUSA, and DIVINA BERNARDO, petitioners, vs.SAN ILDEFONSO
COLLEGE-RVM SISTERS ADMINISTRATION; SISTER MARIA AURORA LLOREN, (RVMDirectress); and THE
NATIONAL LABOR RELATIONS COMMISSION (NLRC), respondent.

DECISION
DAVIDE, JR., J.:

In this petition for certiorari under Rule 65 of the Rules of Court, petitioners seek to set aside the decision [1] of the National Labor Relations
Commission (NLRC) in NLRC Case No. RAB-IV-4-3710-91-RI and its resolution[2] denying the motion for reconsideration.
Petitioner National Mines and Allied Workers Union (NAMAWU) is the certified bargaining agent of the rank and file employees of private
respondent San Ildefonso College (hereafter COLLEGE). Petitioner Juliet Arroyo (hereafter ARROYO) was the president of the San Ildefonso College
Association of Faculty and Personnel (SICAFP), an affiliate of NAMAWU. The remaining petitioners were teachers and employees of the
COLLEGE. Private respondent Sister Maria Aurora Lloren is the directress of the COLLEGE.
In February 1991, ARROYO, a tenured teacher who later became a part-time teacher, asked that she be allowed to teach on a full-time
basis.[3] The COLLEGE, however, denied her request for her failure to make use of the privilege of her study leave in the two years she was allowed
to do so.[4] The following month, the other individual petitioners, who were issued yearly appointments, were informed of the non-renewal of their
respective contracts.
In April 1991, the SICAFP was formalized into a labor union and affiliated with NAMAWU.
On 11 April 1991, the individual petitioners and NAMAWU filed a complaint [5] for illegal dismissal, unfair labor practice, forced resignation,
harassment, underpayment of wages, non-payment of service incentive leave pay, and violation of Wage Order No. IV-1. They demanded
reinstatement and payment of back wages and other monetary claims. The complaint was subsequently amended to include tenure pay as an
additional claim.[6]
On 15 April 1991, NAMAWU filed a petition for certification election. [7] The COLLEGE did not oppose the petition. A certification election was
held, and NAMAWU was chosen as the bargaining agent of the rank and file employees.
Later, or on 27 May 1991, the individual petitioners wrote private respondents indicating their desire to return to work, but private respondents
refused to take them back.
 No amicable settlement having been reached by the parties, they filed the required position papers, and the labor arbiter conducted trial on the
merits. Three of the complainants testified on their behalf: ARROYO, Teodoro Catuira, and Agnes de Guzman. Private respondents presented their
sole witness, Dolores Matienzo.
The individual petitioners asserted that they were regular employees for having rendered service for more than a year. They were thus entitled
to security of tenure notwithstanding the annual renewal of their contract with the COLLEGE.
The COLLEGE maintained otherwise, claiming that the individual petitioners, with the exception of ARROYO, were either part-time or
probationary employees who had each rendered less than three years of service. Their contracts of employment were for a fixed period, the renewal
of which were always subject to their respective performance. Their last employment contract indicated the expiration in March 1991. For the school
year 1991-1992, the COLLEGE chose not to renew their contract, and petitioners were individually notified thereof. In the case of ARROYO, the
COLLEGE maintained that while she had served for more than three years and was thus a permanent employee, she lost that status when she
requested to teach on a part-time basis to enable her to complete her masters degree.The COLLEGE acted within its rights when it refused to renew
the fixed year-to-year contracts of the individual petitioners; it cannot, therefore, be held guilty of illegal dismissal or unfair labor practice.
The COLLEGE further asserted that all money claims due the individual petitioners had been paid even beyond the amount prescribed by law.
The minimum daily wage was then P89.00 or an aggregate of P1,943.16 a month. Petitioners were receiving a monthly pay of at least P1,994.00 for
a regular five-day-work week, with the exclusion of Saturdays and Sundays. Upon the effectivity of Wage Order No. IV-01, they were entitled to an
increase of P327.50, which the COLLEGE could not then afford. Nonetheless, each individual petitioner was eventually paid P2,229.25, an amount
higher than what was due them, through the Government Assistance to Private Education. Anent the tenure pay, the COLLEGE contended that the
individual petitioners were not entitled to such pay because they were not tenured teachers. It refused payment for the service incentive leave pay,
since all the individual petitioners had availed of their service incentive leave.
In his decision of 12 April 1994,[8] Labor Arbiter Pedro Ramos made the following findings of fact:

Complainants used to be the part-time or probationary employees teaching in the different departments of the respondent school, whose names,
date hired, date terminated and salary received are, as follows:

1. AGNES DE GUZMAN
- Appointed as college teacher on a part-time basis effective June 1988 to October 1988 with monthly basic salary and LA integrated
- P520.65;
- appointed as college teacher on part-time basis effective November 1988 to March 1989 with a monthly basic salary of P1,041.24;
- appointed as college teacher on part-time basis effective June 1989 to October 1989 with a monthly basic pay of P1,205.04;
- appointed as college teacher on a part-time basis effective November 1989 to March 1990 with a monthly basic pay of P1,506.40;
- appointed as college teacher on part-time basis effective June 1990 to October 1990 with a monthly basic pay of P1,542.10;
appointed as college teacher on a part-time basis effective Nov. 5, 1990 to March 31, 1991, with a monthly basic pay of P1,233.68;
2. JULIETA ARROYO
 - from June 1, 1965 worked on permanent status up to March 1988;
- appointed as college teacher on a part-time basis effective June 1988 up to March 27, 1991.
3. TEODORO CATUIRA
- appointed as High School Teacher on a probationary status effective June 1989 to March 1990 with a monthly basic pay of P1,944.00;
- appointed as classroom teacher on a probationary status effective June 1990 to March 1991 with a monthly basic pay of P1,9[9]4.00
with additional load or part of SAC paid in the amount of P315.10 or a total of P2,309.10;
4. SAMMY ISRAEL
- appointed as a college teacher on a part-time basis effective June 1989 to October 1989 with a basic pay of P308.00 per subject;
- appointed as a college teacher on a part-time status effective Nov. 1989 to March 1990 with a basic pay of P895.71;
- appointed as a college [teacher] on a part-time basis effective November 5, 1990 to March 31, 1991 with a basic pay of P1,222.84 with
additional load paid in the amount of P611.42 or a total of P1,834.26;
5. CARMELITA RAYMUNDO
- appointed as a college teacher on a part-time basis effective June 1988 to October 1988 with a basic pay and LA integrated
[of] P776.60;
- appointed as a college teacher on a part-time status effective Nov. 1989 to March 1990 with a basic pay of P1,434.25;
- appointed as a college teacher on a part-time basis effective November 5, 1990 to March 31, 1991 with a basic pay of P1,542.86 with
additional load;
6. [MARCELITA] SIERVO
- appointed as H.E. teacher on a part-time basis effective June 1990 to March 1991 with a basic pay of P864.84;
7. NESTOR VALLESTERO
- appointed as H.E. teacher on a part-time basis effective June 1990 to March 1991 with a basic pay of P875.13;
8. REMEDIOS VASQUEZ
- appointed as a Grade School Teacher on a probationary status effective March 1989 to June 1990 with a basic pay of P1,974.00;
- appointed as classroom teacher on a probationary status effective June 1990 to March 1991 with a basic pay of P1,994.00 plus P30.00
for advisory;
9. CORAZON GALVEZ
 - appointed as grade school teacher on a probationary status effective June 1989 to March 1990 with a basic pay of P1,944.00
plus P30.00 as advisory;
- appointed as classroom teacher on a probationary status effective June 1990 to March 1991 with a basic pay of P1,9[9]4.00
plus P30.00 as advisory;
10. LUISA AMICAN
- appointed as classroom teacher on a probationary status effective June 1990 to March 1991 with a basic pay of P1,994.00
plus P30.00 as advisory;
11. MARILOU CANELAS
- appointed as Grade School Teacher on a probationary status effective June 1989 to March 1990 with basic pay of P1,944.00
plus P30.00 for advisory;
- appointed as classroom teacher on a probationary status effective June 1990 to March 1991 with a basic pay of P1,994.00 plus P30.00
for advisory;
12. MORENA VELGADO
- appointed as classroom teacher on a probationary status effective June 1990 to March 1991 with a basic pay of P1,994.00 plus P30.00
for advisory;
13. EMERITA DE LA CRUZ
- appointed as classroom teacher on a probationary status effective June 1990 to March 1991 with a basic pay of P1,994.00
plus P115.00 for advisory, and P284.70 for additional load;
14. LEO RIO
- appointed as classroom teacher on a probationary status effective June 1990 to March 1991 with a basic pay of P1,994.00
plus P115.00 as advisory and P284.70 as additional load;
15. CECILIA OLDAN
- appointed as classroom teacher on a probationary status effective June 1990 to March 1991 with a basic pay of P1,994.00
plus P115.00 as advisory;
16. MELINDA ODISTE
- appointed as a classroom teacher on a full-time basis effective June 1988 to March 1989 with a basic pay with LA integrated
[of] P1,398.00 plus P30.00 as advisory pay and P222.72 for additional load or a total of P1,650.72;
- appointed as High School Teacher on a probationary status effective June 1989 to March 1990 with a basic pay of P1,958.00
plus P30.00 as advisory pay and P70.00 as catechral in-charge or a total of P2,058.00;
 - appointed as High School Teacher on a probationary status effective June 1990 to March 1991 with a basic pay of P2,008.00
plus P115.00 for advisory, P47.71 for additional load and P200.00 [for] other assignments;
17. GUILLERMO DE LA CRUZ
- appointed as college teacher on a part-time basis effective June 1990 to March 1991 with a basic pay of P308.00 per subject;
18. BELEN BUAN
- appointed as classroom teacher on a probationary status from June 1, 1988 up to March 11, 1991, with the last basic pay
of P2,006.00/mo.;
19. ANALYN JESUSA
- appointed as classroom teacher on a probationary status from June 1, 1988 up to March 11, 1991, with latest basic pay
of P1,994.00/mo.

The other five [sic] individual complainants, namely: Nel Aranda, Daniel Retoria, Armina Dagar and Divina Bernando did not sign the complaint
and [are] therefore not included as complainants.

The Labor Arbiter held that private respondents were guilty of illegal dismissal, as well as unfair labor practice in interfering with the
organization of the individual petitioners labor union. The contracts of employment in question were not bilateral agreements, but rather letters of
appointment. When the COLLEGE opted not to renew the appointments it merely invoked the expiration of the period fixed in the appointments
without giving any other reason or granting the teachers concerned an opportunity to explain their side. The probationary employees were not even
informed of their performance rating when they were denied renewal of their appointments. The non-renewal of the appointments was timely made
while the individual petitioners were in the process of organizing themselves into a union, affiliating with NAMAWU, and preparing a petition for
certification election. These acts of the COLLEGE amounted to union busting.
As to the underpayment of the minimum wage and the corresponding salary adjustments under Wage Order No. IV-01, the Labor Arbiter found
the computation of the COLLEGE erroneous, since it was based on the compensation of an employee paid on a daily basis. The individual petitioners
were all paid monthly, which required a different computation. With the proper computation, i.e., by considering the number of days in a month and
not the actual number of working days, they were entitled to a differential pay.
But, as to the incentive leave pay, the Labor Arbiter agreed with the COLLEGE that the individual petitioners were no longer entitled to such
pay, it being a common practice in educational institutions that teachers were given a Christmas vacation beyond five days with pay. This was
sufficient compliance with the law.
The labor arbiter then decreed as follows:

WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered, as follows:

1. Declaring the respondents guilty of unfair labor practice and/or illegal dismissal, as charged;
 2. Ordering the criminal prosecution of respondent Directress S. Ma. Aurora Lloren for having committed unfair labor practice;
3. Ordering the respondents to cease and desist from further committing the unfair labor practice complained of;
4. Ordering the respondents to reinstate all the complainants to their former positions without loss of seniority rights and other privileges,
under the same terms and conditions obtaining at the time of their separation from the service, either physically or in the payroll, at
the option of the respondents, immediately upon receipt of this decision;
5. Ordering the respondents to pay the full back wages of all the complainants from date of illegal separation from the service and up to
actual reinstatement, computed partially from School Year 1991-1992 up to School Year 1993-1994, in the amounts indicated below;
6. Ordering the respondents to pay the complainants their salary differentials under R.A. 6727 and Wage Order No. IV-01 in the amount
computed below:

COMPUTATION OF AWARDS

A. PART-TIME TEACHERS: BACK WAGES R.A. 6727 & W.O.

IV -01 SALARY

DIFFERENTIALS

1. Agnes de Guzman P37,010.40 -

2. Julieta Arroyo 9,630.00 -

3. Sammy Israel 36,685.20 -

4. Carmelita Raymundo 46,285.80 -

5. M[a]rcelita Siervo 25,945.20 -

6. Nestor Vallesteros 26,253.90 -

7. Guillermo de la Cruz 9,240.00 -

T O T A L P191,050.50

PROBATIONARY BACK WAGES R.A. 6727 & W.0.

 TEACHERS: IV-01 SALARY

DIFFERENTIALS

1. Teodoro Catuira P103,344.00 P15,094.00

2. Remedios Vasquez 103,344.00 15,094.00

3. Corazon Galvez 103,344.00 15,094.00

4. Marilou Canelas 103,344.00 15,094.00

5. Belen [Buan] 103,344.00 15,094.00

6. Analyn Jesusa 103,344.00 15,094.00

7. Luisa Amican 103,344.00 8,560.00

8. Morena Velgado 103,344.00 8,560.00

9. Emerita de la Cruz 103,344.00 8,560.00

10. Leo Rio 103,344.00 8,560.00

11. [Cecilia] Oldan 103,344.00 8,560.00

12. [Melinda] Odiste 103,344.00 21,135.00

T O T A L P1,240,128.00 P154,499.00

or a Grand Total of ONE MILLION FOUR HUNDRED THIRTY-ONE THOUSAND ONE HUNDRED SEVENTY EIGHT & 50/100 PESOS
(P1,431,178.50).
NOTE: Computation of salary differentials under R.A. 6727 and W.O. No. IV-01 refers only to Probationary Teachers who were paid on
monthly basis.
Part-Time Teachers paid per subject are not included in the computation for lack of sufficient datas [sic], like rate per subject and hours of
work, etc.
 7. Dismissing the claim for incentive leave pay for lack of merit.
On appeal, the NLRC reversed the decision of the Labor Arbiter and dismissed the complaint. It declared that the individual petitioners, with
the exception of ARROYO, were not regular employees and, therefore, not protected by the law on security of tenure. It cited our decision in
University of Sto. Tomas v. NLRC,[9]where we referred to the Manual of Regulations for Private Schools in determining when a private school teacher
could be deemed a permanent employee and therefore be entitled to security of tenure. We ruled that a permanent status can only be acquired by a
full-time teacher who has rendered three consecutive years of satisfactory service. In the instant case, the individual petitioners, except ARROYO,
were hired either on a part-time or probationary basis. Their contract was for a fixed period. Besides, they were not able to render service for three
consecutive years. As to petitioner Analyn Jesusa, the NLRC held that she was not a proper party, since she was not hired as a teacher but as a
secretary; moreover, she had already received her separation pay.[10]
As to ARROYO, while the NLRC clarified that she did not abandon her permanent status when she requested to teach on a part-time basis, she
was terminated from work for cause. Her failure to prove that she actually pursued a masters degree during her two-year study leave was a breach
of the trust and confidence reposed upon her by the COLLEGE. Under the rules and regulations of the Manila Archdiocese and Parochial School
Association, of which the COLLEGE was a member, her lack of a masters degree was a valid ground for dismissal.
The NLRC upheld the COLLEGEs computation of the basic salary which was based on the actual number of working days. It cited the case of
Philippine Air Lines Employees Association (PALEA) v. Philippine Air Lines, Inc. (PAL), [11] where we ruled that the number of off days are not to be
counted because the employees are not required to work on said days.
Finally, the NLRC absolved the COLLEGE and Sister Lloren of unfair labor practice, for it was not clearly established that the individual
petitioners were dismissed because of their union activities. On the contrary, the COLLEGE did not even oppose the petition for certification election.
Their motion for reconsideration having been denied,[12] petitioners filed the instant petition. They claim that the NLRC committed grave abuse
of discretion in finding that the COLLEGE and Sister Lloren were not guilty of illegal dismissal and unfair labor practice, and in not awarding them
salary differentials.
The private respondents fully agree with the NLRC. They also clarify that petitioners Noel Aranda, Daniel Restoria, Armina Dagar, Divina
Bernardo, and Analyn Jesusa are no longer proper parties. In the Labor Arbiters decision, the first four petitioners were dropped as complainants
for their failure to sign the complaint. Petitioners never questioned this ruling, which therefore became final. As to Jesusa, the NLRC excluded her
as a complainant after a finding that she was hired as a secretary, and not as a teacher of the COLLEGE, and that she had already received her
separation pay.
The Office of the Solicitor General (OSG) moves for the dismissal of the petition except as to ARROYO. It maintains that all the individual
petitioners, except ARROYO, were legally dismissed. As to ARROYO, it submits that the reason why she failed to complete her masters degree could
not be solely attributed to her.She initially requested a leave of absence, but the COLLEGE suggested that she teach on a part-time basis because it
was in need of teachers at that time. The evidence also indicate that her dismissal was without due process. With regard to the individual petitioners
claim for salary differential, the same is not warranted, as the computation adopted by the COLLEGE which excluded Saturdays and Sundays was
correct.
In its own comment, the NLRC moves for the dismissal of the petition and asserts that its challenged decision is supported by the applicable
laws and jurisprudence. Anent the contrary position taken by the OSG with respect to ARROYO, it alleges that ARROYO was afforded an opportunity
to prove that she actually completed her masters degree; she, however, chose not to. It underscores the fact that a masters degree was a prerequisite
before she could be considered a regular teacher.
 It must be noted at the outset that, as pointed out by the private respondents, five of the named petitioners - Noel Arandia, Daniel Restoria,
Armina Dagar, Divina Bernardo, and Analyn Jesusa - are no longer proper parties in this petition because their exclusion as complainants below had
never been questioned and had therefore become final.
We agree with the OSG that the individual petitioners, with the exception of ARROYO, were legally dismissed.
The charge of unfair labor practice was not substantiated by sufficient evidence. Other than the allegations that the non-renewal of petitioners
appointment coincided with the period they were campaigning for the transformation of their association into a union and that among those
dismissed were the president, vice president, and secretary of the union, no substantial evidence was offered to clearly show that the COLLEGE
committed acts to prevent the exercise of the employees right to self-organization.
It is not disputed that the individual petitioners appointments were not renewed after the expiration thereof in March 1991. It was only in the
following month that the union was formally formed and affiliated with NAMAWU, and the petition for certification election was filed. The record
shows that the notices of non-renewal were received on March 27 and April 3, 1991.[13] Besides, petitioners failed to controvert the COLLEGEs claim
that the appointments of other teachers who were union members were renewed. Likewise, the COLLEGE did not oppose the petition for certification
election.
On the issue of whether the individual petitioners were permanent employees, it is the Manual of Regulations for Private Schools, and not the
Labor Code, which is applicable. This was settled in University of Sto. Tomas v. NLRC, [14] where we explicitly ruled that for a private school teacher
to acquire permanent status in employment and, therefore, be entitled to security of tenure, the following requisites must concur: (1) the teacher is
a full-time teacher; (2) the teacher must have rendered three (3) consecutive years of service; and (3) such service must have been satisfactory. [15]
Eleven of the individual petitioners were full-time teachers during the school year 1990-1991,[16] but only two, namely, Odiste and Buan had
rendered three consecutive years of service. There is no showing, however, that the two were on a full-time basis during those three years and that
their services were satisfactory.Evidently, not one of the said teachers can be considered to have acquired a permanent status.
As to ARROYO, it is undisputed that she had been teaching in the COLLEGE since 1965 and had obtained a permanent status; she became a
part-time teacher, however, from June 1988 to March 1991.
We are not persuaded by private respondents argument that ARROYO lost her permanent status when she requested to teach on a part-time
basis. The reason for the request was that she wanted to pursue a masters degree. The COLLEGE approved the request, and the study leave was
extended for another year. It would have been unjust and unreasonable to allow ARROYO to pursue her masters degree, from which the COLLEGE
would have also benefited in terms of her higher learning and experience, and at the same time penalize her with the loss of permanent status. It
would as well be absurd and illogical to maintain that by teaching on a part-time basis after obtaining the permission to take up a masters degree,
ARROYO relinquished her permanent status.
When ARROYO subsequently requested that she continue teaching on a full-time basis, private respondents in its letter of 27 March 1991
refused, citing as reason her failure to make use of the privilege granted [her] by the administration regarding [her] study leave in the past four
semesters. This letter served as notice of ARROYOs termination from employment. No further notice was served. It must be emphasized that the
letter did not indicate that a masters degree was necessary for ARROYO to continue her service, as now claimed by the COLLEGE. In fact, apart from
its mere allegation, the COLLEGE failed to prove that a masters degree was a prerequisite for ARROYOs teaching position. ARROYO, a permanent
teacher, could only be dismissed for just cause and only after being afforded due process, [17] in light of paragraph (b), Article 277 of the Labor Code.[18]
 It is well-settled that the due process contemplated by the law requires twin notices. The first notice apprises the employee of the particular acts
or omissions for which his dismissal is sought, which may be loosely considered as the proper charge; while the second informs the employee of the
employer's decision to dismiss him. The latter must come only after the employee is given a reasonable period from receipt of the first notice within
which to answer the charge, and ample opportunity to be heard and defend himself with the assistance of his representative, if he so desires.[19]
ARROYOs dismissal was substantively and procedurally flawed. It was effected without just cause and due process. Consequently, her
termination from employment was void. She is, therefore, entitled to reinstatement to her former position without loss of seniority rights and other
privileges, full back wages inclusive of allowances, and other benefits or their monetary equivalent computed from the date of her actual dismissal
to the date of actual reinstatement.[20]
As to the issue of minimum wage under R.A. No. 6727 and Wage Order No. IV-01, we see no reason to depart from the ruling of the NLRC. This
case is analogous to that of PALEA v. PAL.[21] One of the issues involved therein was the computation of the basic daily wage of the airlines monthly-
salaried employees. In resolving this issue, we ruled that off-days are rest days for the worker. Since he is not required to work on such days, he
cannot demand corresponding pay.Should he work on an off-day, our labor laws reward him with a premium higher than what he receives when he
works on his regular working day. It follows that the divisor in computing his basic daily wage should be the actual working days in a year. The
number of off-days is not to be counted precisely because he is not required to work on said days.[22]
Section 6 of the Rules Implementing R.A. No. 6727 prescribes the formula in computing the monthly minimum wage. The individual petitioners
belong to the category of paragraph (d) thereof, which states:

For those who do not work and are not considered paid on Saturdays and Sundays or rest days:

EMR [Equivalent Monthly Rate] = ADR [Average Daily Wage Rate] x 262 days

12

Where 262 days =

250 days - ordinary working days

10 days - Regular holidays

2 days - Special days (If considered paid; If actually worked, this is equivalent to 2.6 days)

________

262 days - Total equivalent number of days

Applied to the individual petitioners who were on a full-time basis and were receiving a monthly salary of P1,994 as against the then applicable
minimum wage of P1,943.16, we see no violation of R.A. No. 6727.
Neither was there a violation of Wage Order No. IV-01, which increased the daily minimum wage by P15.00. The delayed adjustment given by
the COLLEGE to comply with that Wage Order was sufficient compliance with the law. Applying the formula prescribed in paragraph (d), Section 6
of the Implementing Rules of R.A. No. 6727, the individual petitioners who were full-time teachers were entitled to a salary increase of P327.50,
starting 7 November 1990 when Wage Order No. IV-01 took effect until March 1991 when their respective contracts of employment expired. When
computed, the salary differential due each of them amounts to P1,637.50. The record shows that each full-time teacher was belatedly paid a lump
sum of P2,011.14,[23] higher than what was due them.
The record further shows that the petitioners who were part-time teachers were paid certain amounts. However, as held by the Labor Arbiter,
they cannot be awarded salary differentials for lack of sufficient data, like rate per subject and hours of work.
WHEREFORE, the decision of the National Labor Relations Commission in NLRC Case No. RAB-IV-4-3710-91-RI is AFFIRMED, subject to
the modification that private respondent San Ildefonso College is DIRECTED to (1) reinstate petitioner JULIETA ARROYO to her former position
at the time of her dismissal, or to any equivalent position if reinstatement to such position is no longer feasible, without loss of seniority rights and
benefits that may be due her; and (2) pay her back wages from the date of her actual dismissal to the date of her actual reinstatement.
No pronouncement as to costs.
SO ORDERED.
Bellosillo, Vitug, and Quisumbing JJ., concur
Panganiban, J., No part. As a former practicing lawyer, was consulted in matters relevant to this case.
 [G.R. No. 119930. March 12, 1998]

INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division, Cebu
City), LABOR ARBITER NICASIO P. ANINON and PANTALEON DE LOS REYES, respondents.

DECISION
BELLOSILLO, J.:

On 17 June 1994 respondent Labor Arbiter dismissed for lack of jurisdiction NLRC RAB-VII Case No. 03-0309-94 filed by private respondent
Pantaleon de los Reyes against petitioner Insular Life Assurance Co., Ltd. (INSULAR LIFE), for illegal dismissal and nonpayment of salaries and
back wages after findings no employer-employee relationship between De los Reyes and petitioner INSULAR LIFE. [1] On appeal by private
respondent, the order of dismissal was reversed by the National Labor Relations Commission (NLRC) which ruled that respondent De los Reyes was
an employee of petitioner.[2] Petitioners motion for reconsideration having been denied, the NLRC remanded the case to the Labor Arbiter for
hearing on the merits.
Seeking relief through this special civil action for certiorari with prayer for a restraining order and/or preliminary injunction, petitioner now
comes to us praying for annulment of the decision of respondent NLRC dated 3 March 1995 and its Order dated 6 April 1995 denying the motion for
reconsideration of the decision. It faults NLRC for acting without jurisdiction and/or with grave abuse of discretion when, contrary to established
facts and pertinent law and jurisprudence, it reversed the decision of the Labor Arbiter and held instead that the complaint was properly filed as an
employer-employee relationship existed between petitioner and private respondent.
Petitioner reprises the stand it assumed below that it never had any employer-employee relationship with private respondent, this being an
express agreement between them in the agency contracts, particularly reinforced by the stipulation therein de los Reyes was allowed discretion to
devise ways and means to fulfill his obligations as agent and would be paid commission fees based on his actual output. It fu rther insists that the
nature of this work status as described in the contracts had already been squarely resolved by the Court in the earlier case of Insular Life Assurance
Co., Ltd. v. NLRC and Basiao [3]where the complainant therein, Melecio Basiao, was similarly situated as respondent De los Reyes in that he was
appointed first as an agent and then promoted as agency manager, and the contracts under which he was appointed contained terms and conditions
Identical to those of De los Reyes. Petitioner concludes that since Basiao was declared by the Court to be an independent contractor and not an
employee of petitioner, there should be no reason why the status of De los Reyes herein vis--vis petitioner should not be similarly determined.
We reject the submissions of petitioner and hold that respondent NLRC acted appropriately within the bounds of the law. The records of the
case are replete with telltale indicators of an existing employer-employee relationship between the two parties despite written contractual disavowals.
These facts are undisputed: on 21 August 1992 petitioner entered into an agency contract with respondent Pantaleon de los Reyes[4] authorizing
the latter to solicit within the Philippines applications for life insurance and annuities for which he would be paid compensation in the form of
commissions. The contract was prepared by petitioner in its entirety and De los Reyes merely signed his conformity thereto. It contained the
stipulation that no employer-employee relationship shall be created between the parties and that the agent shall be free to exercise his own judgment
as to time, place and means of soliciting insurance. De los Reyes however was prohibited by petitioner from working for any other life insurance
company, and violation of this stipulation was sufficient ground for termination of the contract. Aside from soliciting insurance for the petitioner,
private respondent was required to submit to the former all completed applications for insurance within ninety (90) consecutive days, deliver
policies, receive and collect initial premiums and balances of first year premiums, renewal premiums, deposits on applications and payments on
policy loans. Private respondent was also bound to turn over to the company immediately any and all sums of money collected by him. In a written
communication by petitioner to respondent De los Reyes, the latter was urged to register with the Social Security System as a self-
employed individual as provided under PD No. 1636.[5]
On 1 March 1993 petitioner and private respondent entered into another contract[6]where the latter was appointed as Acting Unit Manager
under its office the Cebu DSO V (157). As such, the duties and responsibilities of De los Reyes included the recruitment, training, organization and
development within his designated territory of a sufficient number of qualified, competent and trustworthy underwriters, and to supervise and
coordinate the sales efforts of the underwriters in the active solicitation of new business and in the furtherance of the agencys assigned goals. It was
similarly provIded in the management contract that the relation of the acting unit manager and/or the agents of his unit to the company shall be
that of independent contractor. If the appointment was terminated for any reason other than for cause, the acting unit manager would be reverted
to agent status and assigned to any unit. As in the previous agency contract, De los Reyes together with his unit force was granted freedom to exercise
judgment as to time, place and means of soliciting insurance. Aside from being granted override commissions, the acting unit manager was given
production bonus, development allowance and a unit development financing scheme euphemistically termed financial assistance consisting of
payment to him of a free portion of P300.00 per month and a valIdate portion of P1,200.00. While the latter amount was deemed as an advance
against expected commissions, the former was not and would be freely given to the unit manager by the company only upon fulfillment by him of
certain manpower and premium quota requirements. The agents and underwriters recruited and trained by the acting unit manager would be
attached to the unit but petitioner reserved the right to determine if such assignment would be made or, for any reason, to reassign them elsewhere.
Aside from soliciting insurance, De los Reyes was also expressly obliged to participate in the companys conservation program, i.e., preservation
and maintenance of existing insurance policies, and to accept moneys duly receipted on agents receipts provided the same were turned over to the
company. As long as he was unit manager in an acting capacity, De los Reyes was prohibited from working for other life insurance companies or with
the government. He could not also accept a managerial or supervisory position in any firm doing business in the Philippines without the written
consent of petitioner.
Private respondent worked concurrently as agent and Acting Unit Manager until he was notified by petitioner on 18 November 1993 that his
services were terminated effective 18 December 1993. On 7 March 1994 he filed a complaint before the Labor Arbiter on the ground that he was
illegally dismissed and that he was not paid his salaries and separation pay.
Petitioner filed a motion to dismiss the complaint of De los Reyes for lack of jurisdiction, citing the absence of employer-employee relationship.
it reasoned out that based on the criteria for determining the existence of such relationship or the so-called four-fold test, i.e., (a) selection and
engagement of employee, (b) payment of wages, (c) power of dismissal, and, (d) power of control, De los Reyes was not an employee but an
independent contractor.
On 17 June 1994 the motion of petitioner was granted by the Labor Arbiter and the case was dismissed on the ground that the element of control
was not sufficiently established since the rules and guidelines set by petitioner in its agency agreement with respondent De los Reyes were
formulated only to achieve the desired result without dictating the means or methods of attaining it.
Respondent NLRC however appreciated the evidence from a different perspective. It determined that respondent De los Reyes was under the
effective control of petitioner in the critical and most important aspects of his work as Unit Manager. This conclusion was derived from the
provisions in the contract which appointed private respondent as Acting Unit Manager, to wit: (a) De los Reyes was to serve exclusively the company,
therefore, he was not an independent contractor; (b) he was required to meet certain manpower and production quota; and, (c) petitioner controlled
the assignment to and removal of soliciting agents from his unit.
The NLRC also took into account other circumstances showing that petitioner exercised employers prerogatives over De los Reyes, e.g., (a)
limiting the work of respondent De los Reyes to selling a life insurance policy known as Salary Deduction Insurance only to members of the Philippine
National Police, public and private school teachers and other employees of private companies; (b) assigning private respondent to a particular place
and table where he worked whenever he has not in the field; (c) paying private respondent during the period of twelve (12) months of his appointment
as Acting Unit Manager the amount of P1,500.00 as Unit Development Financing of which 20% formed his salary and the rest, i.e., 80%, as advance
of his expected commissions; and (d) promising that upon completion of certain requirements, he would be promoted to Unit Manager with the
right of petitioner to revert him to agent status when warranted.
Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management contract entered into between
petitioner and De los Reyes as contracts of agency. We however hold otherwise. Unquestionably there exist major distinctions between the two
agreements. While the first has the earmarks of an agency contract, the second is far removed from the concept of agency in that provided therein
are conditionalities that indicate an employer-employee relationship. the NLRC therefore was correct in finding that private respondent was an
employee of petitioner, but this holds true only insofar as the management contract is concerned. In view thereof, he Labor Arbiter has jurisdiction
over the case.
It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in the management
contract and providing therein that the employee is an independent contractor when the terms of agreement clearly show otherwise. For, the
employment status of a person is defined and prescribed by law and not by what the parties say it should be. [7] In determining the status of the
management contract, the four-fold test on employment earlier mentioned has to be applied.
Petitioner contends that De los Reyes was never required to go through the pre-employment procedures and that the probationary employment
status was reserved only to employees of petitioner. On this score, it insists that the first requirement of selection and engagement of the employee
was not met.
A look at the provisions of the contract shows that private respondent was appointed as Acting Unit Manager only upon recommendation of the
District Manager.[8] This indicates that private respondent was hired by petitioner because of the favorable endorsement of its duly authorized
officer. But, this approbation could only have been based on the performance of De los Reyes with petitioner was nothing more than a trial or
probationary period for his eventual appointment as Acting Unit Manager of petitioner. Then, again, the very designation of the appointment of
private respondent as acting unit manager obviously implies a temporary employment status which may be made permanent only upon compliance
with company standards such as those enumerated under Sec. 6 of the management contract. [9]
On the matter of payment of wages, petitioner points out that respondent was compensated strictly on commission basis, the amount of which
was totally dependent on his total output. But, the managers contract speaks differently. Thus
4. Performance Requirements.- To maintain your appointment as Acting Unit Manager you must meet the following manpower and
production requirements:

Quarter Active Calendar Year

Production Agents Cumulative FYP
Production
 1ST 2 P125,000
2ND 3 250,000
3RD 4 375,000
4TH 5 500,000

5.4 Unit Development Financing (UDF). As an Acting Unit Manager you shall be given during the first 12 months of your appointment a
financial assistance which is composed of two parts:

5.4.1 Free Portion amounting to P300 per month, subject to your meeting prescribed minimum performance requirement on
manpower and premium production. The free portion is not payable by you.

5.4.2 Validate Portion amounting to P1,200 per month, also subject to meeting the same prescribed minimum performance
requirements on manpower and premium production. The valIdated portion is an advance against expected compensation during the
UDF period and thereafter as may be necessary.

The above provisions unquestionably demonstrate that the performance requirement imposed on De los Reyes was applicable quarterly while
his entitlement to the free portion (P300) and the validated portion (P1,200) was monthly starting on the first month of the twelve (12) months of
the appointment. Thus, it has to be admitted that even before the end of the first quarter and prior to the so-called quarterly performance evaluation,
private respondent was already entitled to be paid both the free and validated portions of the UDF every month because his production performance
could not be determined until after the lapse of the quarter involved. This indicates quite clearly that the unit managers quarterly performance had
no bearing at all on his entitlement at least to the free portion of the UDF which for all intents and purposes comprised the salary regularly paid to
him by petitioner. Thus it cannot be validly claimed that the financial assistance consisting of the free portion of the UDF was purely dependent on
the premium production of the agent. Be that as it may, it is worth considering that the payment of compensation by way of commission does not
militate against the conclusion that private respondent was an employee of petitioner. Under Art. 97 of the Labor Code, wage shall mean however
designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, price or commission basis x x x x [10]
As to the matter involving the power of dismissal and control by the employer, the latter of which is the most important of the test, petitioner
asserts that its termination of De los Reyes was but an exercise of its inherent right as principal under the contracts and that the rules and guIdelines
it set forth in the contract cannot, by any stretch of imagination, be deemed as an exercise of control over the private respondent as these were merely
directives that fixed the desired result without dictating the means or method to be employed in attaining it. The following factual findings of the
NLRC[11] however contradict such claims:

A perusal of the appointment of complainant as Acting Unit Manager reveals that:

1. Complainant was to exclusively serve respondent company. Thus it is provIded: x x x 7..7 Other causes of Termination: This
Appointment may likewise be terminated for any of the following causes: x x x 7..7..2. Your entering the service of the government or another
life insurance company; 7..7..3. Your accepting a managerial or supervisory position in any firm doing business in the Philippines without the
written consent of the Company; x x x
 2. Complainant was required to meet certain manpower and production quotas.

3. Respondent (herein petitioner) controlled the assignment and removal of soliciting agents to and from complainants unit, thus: x x x
7..2. Assignment of Agents: Agents recruited and trained by you shall be attached to your unit unless for reasons of Company policy, no such
assignment should be made. The Company retains the exclusive right to assign new soliciting agents appointed and assigned to the saId unit
xxxx

It would not be amiss to state the respondents duty to collect the companys premiums using company receipts under Sec. 7.4 of the management
contract is further evIdence of petitioners control over respondent, thus:
xxxx

7.4 Acceptance and Remittance of Premiums. x x x x the Company hereby authorizes you to accept and receive sums of money in payment of
premiums, loans, deposits on applications, with or without interest, due from policy holders and applicants for insurance, and the like, specially
from policyholders of business solicited and sold by the agents attached to your unit provIded however, that all such payments shall be duly receipted
by you on the corresponding Companys Agents Receipt to be provIded you for this purpose and to be covered by such rules and accounting
regulations the Company may issue from time to time on the matter. Payments received by you shall be turned over to the Companys designated
District or Service Office clerk or directly to the Home Office not later than the next working day from receipt thereof x x x x

Petitioner would have us apply our ruling in Insular Life Assurance Co., Ltd. v. NLRC and Basiao [12] to the instant case under the doctrine
of stare decisis, postulating that both cases involve parties similarly situated and facts which are almost Identical.
But we are not convinced that the cited case is on all fours with the case at bar. In Basiao, the agent was appointed Agency Manager under an
Agency Manager Contract. To implement his end of the agreement, Melecio Basiao organized an agency office to which he gave the name M. Basiao
and Associates. The Agency Manager Contract practically contained the same terms and conditions as the Agency Contract earlier entered into, and
the Court observed that drawn from the terms of the contract they had entered into, (which) either expressly or by necessary implication, Basiao
(was) made the master of his own time and selling methods, left to his own judgment the time, place and means of soliciting insurance, set no
accomplishment quotas and compensated him on the bases of results obtained. He was not bound to observe any schedule of working hours or
report to any regular station; he could seek and work on his prospects anywhere and anytime he chose to and was free to adopt the selling methods
he deemed most effective. Upon these premises, Basiao was considered as agent an independent contractor of petitioner INSULAR LIFE.
Unlike Basiao, herein respondent De los Reyes was appointed Acting Unit Manager, not agency manager. There is not evidence that to
implement his obligations under the management contract, De los Reyes had organized an office. Petitioner in fact has admitted that it provIded De
los Reyes a place and a table at its office where he reported for and worked whenever he was not out in the field. Placed under petitioners Cebu
District Service Office, the unit was given a name by petitioner De los Reyes and Associates and assigned Code No. 11753 and Recruitment No.
109398. Under the managership contract, De los Reyes was obliged to work exclusively for petitioner in life insurance solicitation and was imposed
premium production quotas. Of course, the acting unit manager could not underwrite other lines of insurance because his Permanent Certificate of
Authority was for life insurance only and for no other. He was proscribed from accepting a managerial or supervisory position in any other office
including the government without the written consent of petitioner. De los Reyes could only be promoted to permanent unit manager if he met
certain requirements and his promotion was recommended by the petitioners District Manager and Regional Manager and approved by its Division
Manager. As Acting Unit Manager, De los Reyes performed functions beyond mere solicitation of insurance business for petitioner. As found by the
NLRC, he exercised administrative functions which were necessary and beneficial to the business of INSULAR LIFE.
In Great Pacific Life Insurance Company v. NLRC[13] which is closer in application that Basiao to this present controversy, we found that the
relationships of the Ruiz brothers and Grepalife were those of employer-employee. First, their work at the time of their dismissal as zone supervisor
and district manager was necessary and desirable to the usual business of the insurance company. They were entrusted with supervisory, sales and
other functions to guard Grepalifes business interests and to bring in more clients to the company, and even with administrative functions to ensure
that all collections, reports and data are faithfully brought to the company x x x x A cursory reading of their respective functions as enumerated in
their contracts reveals that the company practically dictates the manner by which their jobs are to be carried out x x x x We need elaborate no further.
Exclusivity of service, control of assignments and removal of agents under private respondents unit, collection of premiums, furnishing of
company facilities and materials as well as capital described as Unit Development Fund are but hallmarks of the management system in which herein
private respondent worked. This obtaining, there is no escaping the conclusion that private respondent Pantaleon de los Reyes was an employee of
herein petitioner.
WHEREFORE, the petition of Insular Life Assurance Company, Ltd., is DENIED and the Decision of the National Labor Relations
Commission dated 3 March 1995 and its Order of 6 April 1996 sustaining it are AFFIRMED. Let this case be REMANDED to the Labor Arbiter a
quo who is directed to hear and dispose of this case with deliberate dispatch in light of the views expressed herein.
SO ORDERED.
Davide, Jr. (Chairman), Vitug, Panganiban and Quisumbing, JJ., concur.
ANGELITO L. LAZARO, G.R. No. 138254
Proprietor of Royal Star
Marketing, Present:
Petitioner,
PUNO,
Chairman,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO,
SOCIAL SECURITY COMMISSION, Members. ROSALINA LAUDATO, SOCIAL
SECURITY SYSTEM and THE
HONORABLE COURT OF
APPEALS,
Respondents. Promulgated:

July 30, 2004

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

DECISION

TINGA, J.:

Before us is a Petition for Review under Rule 45, assailing the Decision[1] of the Court of Appeals Fifteenth Division [2] in CA-G.R. Sp. No. 40956,
promulgated on 20 November 1998, which affirmed two rulings of the Social Security Commission (SSC) dated 8 November 1995 and 24 April 1996.

Private respondent Rosalina M. Laudato (Laudato) filed a petition before the SSC for social security coverage and remittance of unpaid monthly
social security contributions against her three (3) employers. Among the respondents was herein petitioner Angelito L. Lazaro (Lazaro), proprietor
of Royal Star Marketing (Royal Star), which is engaged in the business of selling home appliances. [3] Laudato alleged that despite her employment
as sales supervisor of the sales agents for Royal Star from April of 1979 to March of 1986, Lazaro had failed during the said period, to report her to
the SSC for compulsory coverage or remit Laudatos social security contributions. [4]

Lazaro denied that Laudato was a sales supervisor of Royal Star, averring instead that she was a mere sales agent whom he paid purely on commission
basis. Lazaro also maintained that Laudato was not subjected to
definite hours and conditions of work. As such, Laudato could not be deemed an employee of Royal Star. [5]

After the parties submitted their respective position papers, the SSC promulgated a Resolution[6] dated 8 November 1995 ruling in favor of
Laudato.[7] Applying the control test, it held that Laudato was an employee of Royal Star, and ordered Royal Star to pay the unremitted social security
contributions of Laudato in the amount of Five Thousand Seven Pesos and Thirty Five Centavos (P5,007.35), together with the penalties totaling
Twenty Two Thousand Two Hundred Eighteen Pesos and Fifty Four Centavos (P22,218.54). In addition, Royal Star was made liable to pay damages
to the SSC in the amount of Fifteen Thousand Six Hundred Eighty Pesos and Seven Centavos (P15,680.07) for not reporting Laudato for social
security coverage, pursuant to Section 24 of the Social Security Law. [8]

After Lazaros Motion for Reconsideration before the SSC was denied,[9] Lazaro filed a Petition for Review with the Court of Appeals. Lazaro
reiterated that Laudato was merely a sales agent who was paid purely on commission basis, not included in the company payroll, and who neither
observed regular working hours nor accomplished time cards.

In its assailed Decision, the Court of Appeals noted that Lazaros arguments were a reprise of those already presented before the SSC. [10] Moreover,
Lazaro had not come forward with particulars and specifics in his petition to show that the Commissions ruling is not supported by substantial
evidence.[11] Thus, the appellate court affirmed the finding that Laudato was an employee of Royal Star, and hence entitled to coverage under the
Social Security Law.

Before this Court, Lazaro again insists that Laudato was not qualified for social security coverage, as she was not an employee of Royal Star, her
income dependent on a generation of sales and based on commissions. [12] It is argued that Royal Star had no control over Laudatos activities, and
that under the so-called control test, Laudato could not be deemed an employee. [13]

It is an accepted doctrine that for the purposes of coverage under the Social Security Act, the determination of employer-employee
relationship warrants the application of the control test, that is, whether the employer controls or has reserved the right to control the employee, not
only as to the result of the work done, but also as to the means and methods by which the same is accomplished.[14] The SSC, as sustained by the
Court of Appeals, applying the control test found that Laudato was an employee of Royal Star. We find no reversible error.

Lazaros arguments are nothing more but a mere reiteration of arguments unsuccessfully posed before two bodies: the SSC and the Court of
Appeals. They likewise put to issue factual questions already passed upon twice below, rather than questions of law appropriate for review under a
Rule 45 petition. The determination of an employer-employee relationship depends heavily on the particular factual circumstances attending the
professional interaction of the parties. The Court is not a trier of facts[15] and accords great weight to the factual
findings of lower courts or agencies whose function is to resolve factual matters.[16]

Lazaros arguments may be dispensed with by applying precedents. Suffice it to say, the fact that Laudato was paid by way of commission
does not preclude the establishment of an employer-employee relationship. In Grepalife v. Judico,[17] the Court upheld the existence of an employer-
employee relationship between the insurance company and its agents, despite the fact that the compensation that the agents on commission received
was not paid by the company but by the investor or the person insured. [18] The relevant factor remains, as stated earlier, whether the "employer"
controls or has reserved the right to control the "employee" not only as to the result of the work to be done but also as to the means and methods by
which the same is to be accomplished.[19]

Neither does it follow that a person who does not observe normal hours of work cannot be deemed an employee. In Cosmopolitan Funeral Homes,
Inc. v. Maalat,[20] the employer similarly denied the existence of an employer-employee relationship, as the claimant according to it, was a supervisor
on commission basis who did not observe normal hours of work. This Court declared that there was an employer-employee relationship, noting that
[the] supervisor, although compensated on commission basis, [is] exempt from the observance of normal hours of work for his compensation is
measured by the number of sales he makes.[21]
It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato was a sales supervisor and not a mere
agent.[22] As such, Laudato oversaw and supervised the sales agents of the company, and thus was subject to the control of management as to how
she implements its policies and its end results. We are disinclined to reverse this finding, in the absence of countervailing evidence from Lazaro and
also in light of the fact that Laudatos calling cards from Royal Star indicate that she is indeed a sales supervisor.

The finding of the SSC that Laudato was an employee of Royal Star is supported by substantial

evidence. The SSC examined the cash vouchers issued by Royal Star to Laudato, [23] calling cards of Royal Star denominating Laudato as a Sales
Supervisor of the company,[24] and Certificates of Appreciation issued by Royal Star to Laudato in recognition of her unselfish and loyal efforts in
promoting the company.[25] On the other hand, Lazaro has failed to present any convincing contrary evidence, relying instead on his bare assertions.
The Court of Appeals correctly ruled that petitioner has not sufficiently shown that the SSCs ruling was not supported by substantial evidence.

A piece of documentary evidence appreciated by the SSC is Memorandum dated 3 May 1980 of Teresita Lazaro, General Manager of Royal
Star, directing that no commissions were to be given on all main office sales from walk-in customers and enjoining salesmen and sales supervisors
to observe this new policy.[26] The Memorandum evinces the fact that, contrary to Lazaros claim, Royal Star exercised control over its sales
supervisors or agents such as Laudato as to the means and methods through which these personnel performed their work.

Finally, Lazaro invokes our ruling in the 1987 case of Social Security System v. Court of Appeals[27] that a person who works for another at
his own pleasure, subject to definite hours or conditions of work, and is compensated according to the result of his effort is not an employee.[28] The
citation is odd for Lazaro to rely upon, considering that in the cited case, the Court affirmed the employee-employer relationship between a sales
agent and the cigarette firm whose products he sold. [29] Perhaps Lazaro meant instead to cite our 1969 ruling in the similarly-titled case of Social
Security System v. Court of Appeals,[30] also cited in the later eponymous ruling, whose disposition is more in accord with Lazaros argument.

Yet, the circumstances in the 1969 case are very different from those at bar. Ruling on the question whether jockeys were considered
employees of the Manila Jockey Club, the Court noted that the jockeys were actually subjected to the control of the racing steward, whose authority
in turn was defined by the Games and Amusements Board.[31] Moreover, the jockeys choice as to which horse to mount was subject to mutual
agreement between the horse owner and the jockey, and beyond the control of the race club. [32] In the case at bar, there is no showing that Royal Star
was similarly precluded from exerting control or interference over the manner by which Laudato performed her duties. On the contrary, substantial
evidence as found by the SSC and the Court of Appeals have established the element of control determinative of an employer-employee relationship.
We affirm without hesitation.

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals dated 20 November 1998 is AFFIRMED. Costs
against petitioner.

SO ORDERED.

DANTE O. TINGA
Associate Justice
 [G.R. No. 118101. September 16, 1996]

EDDIE DOMASIG, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), CATA GARMENTS
CORPORATION and/or OTTO ONG and CATALINA CO, respondents.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; SUBSTANTIAL EVIDENCE; SUFFICIENT BASIS FOR JUDGMENT IN CASES FILED BEFORE ADMINISTRATIVE AND QUASI-
JUDICIAL BODIES. It has long been established that in administrative and quasi-judicial proceedings, substantial evidence is sufficient as a basis for judgment
on the existence of employer-employee relationship. 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. Substantial evidence has been defined to be such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion, and its absence is not shown by stressing that there is contrary evidence on
record, direct or circumstantial, for the appellate court cannot substitute its own judgment or criterion for that of the trial court in determining wherein lies the
weight of evidence or what evidence is entitled to belief.
2. ID.; ID.; ID.; AN IDENTIFICATION CARD TOGETHER WITH THE CASH VOUCHERS COVERING EMPLOYEES SALARIES FOR THE MONTH STATED
THEREIN CONSTITUTE SUBSTANTIAL EVIDENCE SUFFICIENT TO SUPPORT A CONCLUSION THAT THERE EXIST AN EMPLOYER-EMPLOYEE
RELATIONSHIP. In a business establishment, an identification card is usually provided not only as security measure but mainly to identify the holder thereof
as a bona fide employee of the firm that issues it. Together with the cash vouchers covering petitioners salaries for the months stated therein, we agree with the
labor arbiter that these matters constitute substantial evidence adequate to support a conclusion that petitioner was indeed an employee of private respondent.
3. LABOR AND SOCIAL LEGISLATION; LABOR CASES; SIMPLIFICATION OF PROCEDURES TO ENSURE SPEEDY ADMINISTRATION OF JUSTICE;
MANDATED. It was error and grave abuse of discretion for the NLRC to remand the case for further proceedings to determine whether or not petitioner was
private respondents employee. This would only prolong the final disposition of the complaint. It is stressed that, in labor cases, simplification of procedures,
without regard to technicalities and without sacrificing the fundamental requisites of due process, is mandated to ensure the speedy administration of
justice. After all, Article 218 of the Labor Code grants the Commission and the labor arbiter broad powers, including issuance of subpoena, requiring the
attendance and testimony of witnesses or the production of such documentary evidence as may be material to a just determination of the matter under
investigation. Additionally, the National Labor Relations Commission and the labor arbiter have authority under the Labor Code to decide a case based on the
position papers and documents submitted without resorting to the technical rules of evidence.

APPEARANCES OF COUNSEL

The Law Firm of Ross B. Bautista for petitioner.

The Solicitor General for public respondent
Tristan Zoleta for private respondent.
PADILLA, J.:
 This petition for certiorari under Rule 65 of the Rules of Court seeks to nullify and set aside the Resolution [1] of respondent National Labor
Relations Commission (NLRC) rendered on 20 September 1994 remanding the records of the case to the arbitration branch of origin for further
proceedings.
The antecedent facts as narrated by public respondent in the assailed resolution are as follows:

The complaint was instituted by Eddie Domasig against respondents Cata Garments Corporation, a company engaged in garments business and its
owner/manager Otto Ong and Catalina Co for illegal dismissal, unpaid commission and other monetary claim[s]. Complainant alleged that he started
working with the respondent on July 6, 1986 as Salesman when the company was still named Cato Garments Corporation; that three (3) years ago,
because of a complaint against respondent by its workers, it changed its name to Cata Garments Corporation; and that on August 29, 1992, he was
dismissed when respondent learned that he was being pirated by a rival corporation which offer he refused. Prior to his dismissal, complainant
alleged that he was receiving a salary of P1,500.00 a month plus commission. On September 3, 1992 he filed the instant complaint.

Respondent denied complainants claim that he is a regular employee contending that he is a mere commission agent who receives a commission
of P5.00 per piece of article sold at regular price and P2.50 per piece sold in [sic] bargain price; that in addition to commission, complainant received
a fixed allowance of P1,500.00 a month; that he had no regular time schedule; and that the company come [sic] into existence only on September
17, 1991. In support of its claim that complainant is a commission agent, respondent submitted as Annexes B and B-1 the List of Sales Collections,
Computation of Commission due, expenses incurred, cash advances received for the month of January and March 1992 (Rollo pp. 22-
27). Respondent further contends that complainant failed to turn over to the respondent his collection from two (2) buyers as per affidavit executed
by these buyers (Rollo pp. 28-29) and for which, according to respondent it initiated criminal proceedings against the complainant.

The Labor Arbiter held that complainant was illegally dismissed and entitled to reinstatement and backwages as well as underpayment of salary;
13th month pay; service incentive leave and legal holiday. The Arbiter also awarded complainant his claim for unpaid commission in the amount
of P143,955.00.[2]

Private respondents appealed the decision of the labor arbiter to public respondent. As aforesaid, the NLRC resolved to remand the case to the
labor arbiter for further proceeding. It declared as follows:

We find the decision of the Labor Arbiter not supported by evidence on record. The issue of whether or not complainant was a commission agent
was not fully resolved in the assailed decision. It appears that the Labor Arbiter failed to appreciate the evidences submitted by respondent as
Annexes B and B-1 (Rollo pp. 22-27) in support of its allegation as regard[s] the nature of complainants employment. Neither is there a showing that
the parties were required to adduce further evidence to support their respective claim. The resolution of the nature of complainants employment is
vital to the case at bar considering that it would be determinative to his entitlement of monetary benefits. The same is similarly true as regard the
claim [sic] for unpaid commission. The amount being claim [sic] for unpaid commission as big as it is requires substantial proof to establish the
entitlement of the complainant to the same. We take note of the respondents claim that while they admit that complainant has an unpaid commission
due him, the same is only for his additional sale of 4,027 pieces at regular price and 1,047 pieces at bargain price for a total sum of (P20,135.00 +
2,655.00) or P22,820.00 as appearing in the list of Sales and unpaid commission (Annex C and C-1' Appeal, Rollo pp. 100-102). Said amount
according to respondent is being withheld by them pending the accounting of money collected by complainant from his two (2) buyers which was
not remitted to them. Considering the conflicting version of the parties regarding the issues on hand, it was incumbent on the Labor Arbiter to
conduct further proceedings thereon. The ends of justice would better be served if both parties are given the opportunity to ventilate further their
positions.[3]

In their comment on the petition at bar, private respondents agree with the finding of the NLRC that the nature of petitioners employment with
private respondents is vital to the case as it will determine the monetary benefits to which he is entitled. They further aver that the evidence presented
upon which the labor arbiter based her decision is insufficient, so that the NLRC did not commit grave abuse of discretion in remanding the case to
the arbitration branch of origin for further proceedings.
The comment of the Solicitor General is substantially the same as that of private respondents, i.e., there is no sufficient evidence to prove
employer-employee relationship between the parties. Furthermore, he avers that the order of the NLRC to the labor arbiter for further proceedings
does not automatically translate to a protracted trial on the merits for such can be faithfully complied with through the submission of additional
documents or pleadings only.
The only issue to be resolved in this petition is whether or not the NLRC gravely abused its discretion in vacating and setting aside the decision
of the labor arbiter and remanding the case to the arbitration branch of origin for further proceedings.
In essence, respondent NLRC was not convinced that the evidence presented by the petitioner, consisting of the identification card issued to
him by private respondent corporation and the cash vouchers reflecting his monthly salaries covering the months stated therein, settled the issue of
employer-employee relationship between private respondents and petitioner.
It has long been established that in administrative and quasi-judicial proceedings, substantial evidence is sufficient as a basis for judgment on
the existence of employer-employee relationship. 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.[4]
Substantial evidence has been defined to be such relevant evidence as a reasonable mind might accept as adequate to support a conclusion, and
its absence is not shown by stressing that there is contrary evidence on record, direct or circumstantial, for the appellate court cannot substitute its
own judgment or criterion for that of the trial court in determining wherein lies the weight of evidence or what evidence is entitled to belief.[5]
In a business establishment, an identification card is usually provided not only as a security measure but mainly to identify the holder thereof
as a bona fide employee of the firm that issues it. Together with the cash vouchers covering petitioners salaries for the months stated therein, we
agree with the labor arbiter that these matters constitute substantial evidence adequate to support a conclusion that petitioner was indeed an
employee of private respondent.
Section 4, Rule V of the Rules of Procedure of the National Labor Relations Commission provides thus:

Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their position papers/memoranda, 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.

It is clear from the law that it is the arbiters who are authorized to determine whether or not there is a necessity for conducting formal hearings in
cases brought before them for adjudication. Such determination is entitled to great respect in the absence of arbitrariness. [6]
 In the case at bar, we do not believe that the labor arbiter acted arbitrarily. Contrary to the finding of the NLRC, her decision at least on the
existence of an employer-employee relationship between private respondents and petitioner, is supported by substantial evidence on record.
The list of sales collection including computation of commissions due, expenses incurred and cash advances received (Exhibits B and B-1) which,
according to public respondent, the labor arbiter failed to appreciate in support of private respondents allegation as regards the nature of petitioners
employment as a commission agent, cannot overcome the evidence of the ID card and salary vouchers presented by petitioner which private
respondents have not denied. The list presented by private respondents would even support petitioners allegation that, aside from a monthly salary
of P1,500.00, he also received commissions for his work as a salesman of private respondents.
Having been in the employ of private respondents continuously for more than one year, under the law, petitioner is considered a regular
employee. Proof beyond reasonable doubt is not required as a basis for judgment on the legality of an employers dismissal of an employee, nor even
preponderance of evidence for that matter, substantial evidence being sufficient. [7] Petitioners contention that private respondents terminated his
employment due to their suspicion that he was being enticed by another firm to work for it was not refuted by private respondents. The labor arbiters
conclusion that petitioners dismissal is therefore illegal, is not necessarily arbitrary or erroneous. It is entitled to great weight and respect.
It was error and grave abuse of discretion for the NLRC to remand the case for further proceedings to determine whether or not petitioner was
private respondents employee. This would only prolong the final disposition of the complaint. It is stressed that, in labor cases, simplification of
procedures, without regard to technicalities and without sacrificing the fundamental requisites of due process, is mandated to ensure the speedy
administration of justice.[8]
After all, Article 218 of the Labor Code grants the Commission and the labor arbiter broad powers, including issuance of subpoena, requiring
the attendance and testimony of witnesses or the production of such documentary evidence as may be material to a just determination of the matter
under investigation.
Additionally, the National Labor Relations Commission and the labor arbiter have authority under the Labor Code to decide a case based on
the position papers and documents submitted without resorting to the technical rules of evidence. [9]
However, in view of the need for further and correct computation of the petitioners commissions in the light of the exhibits presented and the
dismissal of the criminal cases filed against petitioner, the labor arbiter is required to undertake a new computation of the commissions to which
petitioner may be entitled, within thirty (30) days from submission by the parties of all necessary documents.
WHEREFORE, the resolutions of the public respondent dated 20 September 1994 and 9 November 1994 are SET ASIDE. The decision of the
labor arbiter dated 19 May 1993 is REINSTATED and AFFIRMED subject to the modification above-stated as regards a re-computation by the labor
arbiter of the commissions to which petitioner maybe actually entitled.
SO ORDERED.

Bellosillo, Vitug, Kapunan, and Hermosisima, Jr., JJ., concur.

 [G.R. No. 157214. June 7, 2005]

PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner, vs. RICARDO DE VERA, respondent.

DECISION
GARCIA, J.:

Before us is this appeal by way of a petition for review on certiorari from the 12 September 2002 Decision[1] and the 13 February 2003
Resolution[2] of the Court of Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal dismissal by the National Labor Relations Commission
against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation engaged in the business of communication services and allied
activities, while respondent Ricardo De Vera is a physician by profession whom petitioner enlisted to attend to the medical needs of its employees.
At the crux of the controversy is Dr. De Veras status vis a vis petitioner when the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May 1981,[3] offered his services to the petitioner, therein proposing his plan of
works required of a practitioner in industrial medicine, to include the following:

1. Application of preventive medicine including periodic check-up of employees;

2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation services to employees;

3. Management and treatment of employees that may necessitate hospitalization including emergency cases and accidents;

4. Conduct pre-employment physical check-up of prospective employees with no additional medical fee;

5. Conduct home visits whenever necessary;

6. Attend to certain medical administrative function such as accomplishing medical forms, evaluating conditions of employees applying for
sick leave of absence and subsequently issuing proper certification, and all matters referred which are medical in nature.

The parties agreed and formalized respondents proposal in a document denominated as RETAINERSHIP CONTRACT[4] which will be for a
period of one year subject to renewal, it being made clear therein that respondent will cover the retainership the Company previously had with Dr.
K. Eulau and that respondents retainer fee will be at P4,000.00 a month. Said contract was renewed yearly. [5] The retainership arrangement went
on from 1981 to 1994 with changes in the retainers fee. However, for the years 1995 and 1996, renewal of the contract was only made verbally.
 The turning point in the parties relationship surfaced in December 1996 when Philcom, thru a letter [6] bearing on the subject boldly written as
TERMINATION RETAINERSHIP CONTRACT, informed De Vera of its decision to discontinue the latters retainers contract with the Company
effective at the close of business hours of December 31, 1996 because management has decided that it would be more practical to provide medical
services to its employees through accredited hospitals near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal dismissal before the National Labor Relations Commission (NLRC), alleging that that
he had been actually employed by Philcom as its company physician since 1981 and was dismissed without due process. He averred that he was
designated as a company physician on retainer basis for reasons allegedly known only to Philcom. He likewise professed that since he was not
conversant with labor laws, he did not give much attention to the designation as anyway he worked on a full-time basis and was paid a basic monthly
salary plus fringe benefits, like any other regular employees of Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a decision [7] dismissing De Veras complaint for lack of merit, on
the rationale that as a retained physician under a valid contract mutually agreed upon by the parties, De Vera was an independent contractor and
that he was not dismissed but rather his contract with [PHILCOM] ended when said contract was not renewed after December 31, 1996.
On De Veras appeal to the NLRC, the latter, in a decision [8] dated 23 October 2000, reversed (the word used is modified) that of the Labor
Arbiter, on a finding that De Vera is Philcoms regular employee and accordingly directed the company to reinstate him to his former position without
loss of seniority rights and privileges and with full backwages from the date of his dismissal until actual reinstatement. We quote the dispositive
portion of the decision:

WHEREFORE, the assailed decision is modified in that respondent is ordered to reinstate complainant to his former position without loss of seniority
rights and privileges with full backwages from the date of his dismissal until his actual reinstatement computed as follows:

Backwages:

a) Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.
P44,400.00 x 39.33 mos. P1,750,185.00
b) 13th Month Pay:
1/12 of P1,750,185.00 145,848.75
c) Travelling allowance:
P1,000.00 x 39.33 mos. 39,330.00

GRAND TOTAL P1,935,363.75

The decision stands in other aspects.

SO ORDERED.
 With its motion for reconsideration having been denied by the NLRC in its order of 27 February 2001, [9] Philcom then went to the Court of
Appeals on a petition for certiorari, thereat docketed as CA-G.R. SP No. 65178, imputing grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the NLRC when it reversed the findings of the labor arbiter and awarded thirteenth month pay and traveling allowance to
De Vera even as such award had no basis in fact and in law.
On 12 September 2002, the Court of Appeals rendered a decision,[10] modifying that of the NLRC by deleting the award of traveling allowance,
and ordering payment of separation pay to De Vera in lieu of reinstatement, thus:

WHEREFORE, premises considered, the assailed judgment of public respondent, dated 23 October 2000, is MODIFIED. The award of traveling
allowance is deleted as the same is hereby DELETED. Instead of reinstatement, private respondent shall be paid separation pay computed at one (1)
month salary for every year of service computed from the time private respondent commenced his employment in 1981 up to the actual payment of
the backwages and separation pay. The awards of backwages and 13th month pay STAND.

SO ORDERED.

In time, Philcom filed a motion for reconsideration but was denied by the appellate court in its resolution of 13 February 2003.[11]
Hence, Philcoms present recourse on its main submission that -

THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION AND RENDERING
THE QUESTIONED DECISION AND RESOLUTION IN A WAY THAT IS NOT IN ACCORD WITH THE FACTS AND APPLICABLE LAWS AND
JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB CONTRACTING AGREEMENTS FROM THE EMPLOYER-EMPLOYEE
RELATIONSHIP.

We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this Court in decisions rendered by the Court of Appeals. There
are instances, however, where the Court departs from this rule and reviews findings of fact so that substantial justice may be served. The exceptional
instances are where:

xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the inference made is manifestly mistaken;
(3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court
of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both appellant and appellees; (7) the findings of fact
of the Court of Appeals are contrary to those of the trial court; (8) said findings of facts are conclusions without citation of specific evidence on which
they are based; (9) the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondents; and (10)
the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record. [12]

As we see it, the parties respective submissions revolve on the primordial issue of whether an employer-employee relationship exists between
petitioner and respondent, the existence of which is, in itself, a question of fact [13] well within the province of the NLRC. Nonetheless, given the reality
that the NLRCs findings are at odds with those of the labor arbiter, the Court, consistent with its ruling in Jimenez vs. National Labor Relations
Commission,[14] is constrained to look deeper into the attendant circumstances obtaining in this case, as appearing on record.
In a long line of decisions,[15] the Court, in determining the existence of an employer-employee relationship, has invariably adhered to the four-
fold test, to wit: [1] the selection and engagement of the employee; [2] the payment of wages; [3] the power of dismissal; and [4] the power to control
the employees conduct, or the so-called control test, considered to be the most important element.
Applying the four-fold test to this case, we initially find that it was respondent himself who sets the parameters of what his duties would be in
offering his services to petitioner. This is borne by no less than his 15 May 1981 letter [16] which, in full, reads:

May 15, 1981

Mrs. Adela L. Vicente

Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila

Madam:

I shall have the time and effort for the position of Company physician with your corporation if you deemed it necessary. I have the necessary
qualifications, training and experience required by such position and I am confident that I can serve the best interests of your employees, medically.

My plan of works and targets shall cover the duties and responsibilities required of a practitioner in industrial medicine which includes the following:

1. Application of preventive medicine including periodic check-up of employees;

2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation services to employees;

3. Management and treatment of employees that may necessitate hospitalization including emergency cases and accidents;

4. Conduct pre-employment physical check-up of prospective employees with no additional medical fee;

5. Conduct home visits whenever necessary;

6. Attend to certain medical administrative functions such as accomplishing medical forms, evaluating conditions of employees applying
for sick leave of absence and subsequently issuing proper certification, and all matters referred which are medical in nature.

On the subject of compensation for the services that I propose to render to the corporation, you may state an offer based on your belief that I can
very well qualify for the job having worked with your organization for sometime now.
I shall be very grateful for whatever kind attention you may extend on this matter and hoping that it will merit acceptance, I remain

Very truly yours,

(signed)
RICARDO V. DE VERA, M.D.

Significantly, the foregoing letter was substantially the basis of the labor arbiters finding that there existed no employer-employee relationship
between petitioner and respondent, in addition to the following factual settings:

The fact that the complainant was not considered an employee was recognized by the complainant himself in a signed letter to the respondent dated
April 21, 1982 attached as Annex G to the respondents Reply and Rejoinder. Quoting the pertinent portion of said letter:

To carry out your memo effectively and to provide a systematic and workable time schedule which will serve the best interests of both the present
and absent employee, may I propose an extended two-hour service (1:00-3:00 P.M.) during which period I can devote ample time to both groups
depending upon the urgency of the situation. I shall readjust my private schedule to be available for the herein proposed extended hours, should you
consider this proposal.

As regards compensation for the additional time and services that I shall render to the employees, it is dependent on your evaluation of the merit of
my proposal and your confidence on my ability to carry out efficiently said proposal.

The tenor of this letter indicates that the complainant was proposing to extend his time with the respondent and seeking additional compensation
for said extension. This shows that the respondent PHILCOM did not have control over the schedule of the complainant as it [is] the complainant
who is proposing his own schedule and asking to be paid for the same. This is proof that the complainant understood that his relationship with the
respondent PHILCOM was a retained physician and not as an employee. If he were an employee he could not negotiate as to his hours of work.

The complainant is a Doctor of Medicine, and presumably, a well-educated person. Yet, the complainant, in his position paper, is claiming that he is
not conversant with the law and did not give much attention to his job title- on a retainer basis. But the same complainant admits in his affidavit that
his service for the respondent was covered by a retainership contract [which] was renewed every year from 1982 to 1994. Upon reading the contract
dated September 6, 1982, signed by the complainant himself (Annex C of Respondents Position Paper), it clearly states that is a retainership contract.
The retainer fee is indicated thereon and the duration of the contract for one year is also clearly indicated in paragraph 5 of the Retainership Contract.
The complainant cannot claim that he was unaware that the contract was good only for one year, as he signed the same without any objections. The
complainant also accepted its renewal every year thereafter until 1994. As a literate person and educated person, the complainant cannot claim that
he does not know what contract he signed and that it was renewed on a year to year basis. [17]

The labor arbiter added the indicia, not disputed by respondent, that from the time he started to work with petitioner, he never was included in
its payroll; was never deducted any contribution for remittance to the Social Security System (SSS); and was in fact subjected by petitioner to the ten
(10%) percent withholding tax for his professional fee, in accordance with the National Internal Revenue Code, matters which are simply inconsistent
with an employer-employee relationship. In the precise words of the labor arbiter:
xxx xxx xxx After more than ten years of services to PHILCOM, the complainant would have noticed that no SSS deductions were made on his
remuneration or that the respondent was deducting the 10% tax for his fees and he surely would have complained about them if he had considered
himself an employee of PHILCOM. But he never raised those issues. An ordinary employee would consider the SSS payments important and thus
make sure they would be paid. The complainant never bothered to ask the respondent to remit his SSS contributions. This clearly shows that the
complainant never considered himself an employee of PHILCOM and thus, respondent need not remit anything to the SSS in favor of the
complainant.[18]

Clearly, the elements of an employer-employee relationship are wanting in this case. We may add that the records are replete with evidence
showing that respondent had to bill petitioner for his monthly professional fees. [19] It simply runs against the grain of common experience to imagine
that an ordinary employee has yet to bill his employer to receive his salary.
We note, too, that the power to terminate the parties relationship was mutually vested on both. Either may terminate the arrangement at will,
with or without cause.[20]
Finally, remarkably absent from the parties arrangement is the element of control, whereby the employer has reserved the right to control the
employee not only as to the result of the work done but also as to the means and methods by which the same is to be accomplished.[21]
Here, petitioner had no control over the means and methods by which respondent went about performing his work at the company premises.
He could even embark in the private practice of his profession, not to mention the fact that respondents work hours and the additional compensation
therefor were negotiated upon by the parties.[22] In fine, the parties themselves practically agreed on every terms and conditions of respondents
engagement, which thereby negates the element of control in their relationship. For sure, respondent has never cited even a single instance when
petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the NLRC and the Court of Appeals ruled that respondent is petitioners regular
employee at the time of his separation.
Partly says the appellate court in its assailed decision:

Be that as it may, it is admitted that private respondents written retainer contract was renewed annually from 1981 to 1994 and the alleged renewal
for 1995 and 1996, when it was allegedly terminated, was verbal.

Article 280 of the Labor code (sic) provides:

The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an employment
shall be deemed to be regular where the employee has been engaged to perform in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the
season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who
has rendered at least one (1) year of service, whether such is continuous or broken, shall be considered a regular with respect to the
activity in which he is employed and his employment shall continue while such activity exists.

Parenthetically, the position of company physician, in the case of petitioner, is usually necessary and desirable because the need for medical attention
of employees cannot be foreseen, hence, it is necessary to have a physician at hand. In fact, the importance and desirability of a physician in a
company premises is recognized by Art. 157 of the Labor Code, which requires the presence of a physician depending on the number of employees
and in the case at bench, in petitioners case, as found by public respondent, petitioner employs more than 500 employees.

Going back to Art. 280 of the Labor Code, it was made therein clear that the provisions of a written agreement to the contrary notwithstanding or
the existence of a mere oral agreement, if the employee is engaged in the usual business or trade of the employer, more so, that he rendered service
for at least one year, such employee shall be considered as a regular employee. Private respondent herein has been with petitioner since 1981 and
his employment was not for a specific project or undertaking, the period of which was pre-determined and neither the work or service of private
respondent seasonal. (Emphasis by the CA itself).

We disagree to the foregoing ratiocination.

The appellate courts premise that regular employees are those who perform activities which are desirable and necessary for the business of the
employer is not determinative in this case. For, we take it that any agreement may provide that one party shall render services for and in behalf of
another, no matter how necessary for the latters business, even without being hired as an employee. This set-up is precisely true in the case
of an independent contractorship as well as in an agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not the
yardstick for determining the existence of an employment relationship. As it is, the provision merely distinguishes between two (2) kinds of
employees, i.e., regular and casual. It does not apply where, as here, the very existence of an employment relationship is in dispute. [23]
Buttressing his contention that he is a regular employee of petitioner, respondent invokes Article 157 of the Labor Code, and argues that he
satisfies all the requirements thereunder. The provision relied upon reads:

ART. 157. Emergency medical and dental services. It shall be the duty of every employer to furnish his employees in any locality with free medical
and dental attendance and facilities consisting of:

(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more than two hundred (200)
except when the employer does not maintain hazardous workplaces, in which case the services of a graduate first-aider shall be
provided for the protection of the workers, where no registered nurse is available. The Secretary of Labor shall provide by appropriate
regulations the services that shall be required where the number of employees does not exceed fifty (50) and shall determine by
appropriate order hazardous workplaces for purposes of this Article;

(b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when the number of employees
exceeds two hundred (200) but not more than three hundred (300); and
 (c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic, and an infirmary or emergency
hospital with one bed capacity for every one hundred (100) employees when the number of employees exceeds three hundred (300).

In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot stay in the premises of the establishment
for at least two (2) hours, in the case of those engaged on part-time basis, and not less than eight (8) hours in the case of those employed on full-time
basis. Where the undertaking is nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject to such regulations as
the Secretary of Labor may prescribe to insure immediate availability of medical and dental treatment and attendance in case of emergency.

Had only respondent read carefully the very statutory provision invoked by him, he would have noticed that in non-hazardous workplaces, the
employer may engage the services of a physician on retained basis. As correctly observed by the petitioner, while it is true that the provision requires
employers to engage the services of medical practitioners in certain establishments depending on the number of their employees, nothing is there in
the law which says that medical practitioners so engaged be actually hired as employees, [24] adding that the law, as written, only requires the employer
to retain, not employ, a part-time physician who needed to stay in the premises of the non-hazardous workplace for two (2) hours.[25]
Respondent takes no issue on the fact that petitioners business of telecommunications is not hazardous in nature. As such, what applies here is
the last paragraph of Article 157 which, to stress, provides that the employer may engage the services of a physician and dentist on retained basis,
subject to such regulations as the Secretary of Labor may prescribe. The successive retainership agreements of the parties definitely hue to the very
statutory provision relied upon by respondent.
Deeply embedded in our jurisprudence is the rule that courts may not construe a statute that is free from doubt. Where the law is clear and
unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to it that the mandate is obeyed.[26] As it is, Article
157 of the Labor Code clearly and unequivocally allows employers in non-hazardous establishments to engage on retained basis the service of a
dentist or physician. Nowhere does the law provide that the physician or dentist so engaged thereby becomes a regular employee. The very phrase
that they may be engaged on retained basis, revolts against the idea that this engagement gives rise to an employer-employee relationship.
With the recognition of the fact that petitioner consistently engaged the services of respondent on a retainer basis, as shown by their various
retainership contracts, so can petitioner put an end, with or without cause, to their retainership agreement as therein provided.[27]
We note, however, that even as the contracts entered into by the parties invariably provide for a 60-day notice requirement prior to termination,
the same was not complied with by petitioner when it terminated on 17 December 1996 the verbally-renewed retainership agreement, effective at
the close of business hours of 31 December 1996.
Be that as it may, the record shows, and this is admitted by both parties,[28] that execution of the NLRC decision had already been made at the
NLRC despite the pendency of the present recourse. For sure, accounts of petitioner had already been garnished and released to respondent despite
the previous Status Quo Order[29] issued by this Court. To all intents and purposes, therefore, the 60-day notice requirement has become moot and
academic if not waived by the respondent himself.
WHEREFORE, the petition is GRANTED and the challenged decision of the Court of Appeals REVERSED and SET ASIDE. The 21 December
1998 decision of the labor arbiter is REINSTATED.
No pronouncement as to costs.
SO ORDERED.
 [G.R. No. 127598. January 27, 1999]

MANILA ELECTRIC COMPANY, petitioner, vs. THE HONORABLE SECRETARY OF LABOR LEONARDO QUISUMBING AND MERALCO
EMPLOYEES AND WORKERS ASSOCIATION (MEWA), respondents.
SYNOPSIS
This is petition for certiorari filed by petitioner Manila Electric Company (MERALCO) seeking to annul the orders of the Secretary of Labor dated August 19
1996 and December 28, 1996 wherein the Secretary, after assuming jurisdiction, required MERALCO and its rank and file union - the Meralco Workers Association
(MEWA) to execute a collective bargaining agreement (CBA) for the remainder of the parties, 1992-1997 CBA cycle, and to incorporate in this new CBA the Secretarys
dispositions in the disputed economic and non-economic issues.
The Court ruled that, after considering the parties position and the evidence on record, the Secretary of Labor disregarded and misappreciated evidence,
particularly with respect to the wage award. The Secretary of Labor apparently also acted arbitrarily and even whimsically in ordering the inclusion of benefits, terms
and conditions that the law and the parties did not intended to be reflected in thier CBA; even the Solicitor General himself considered that the Secretary gravely
abused his discretion on at least three major points: (a) on the signing bonus; (b) on the inclusion of confidential employees in the rank and file bargaining unit; and
(c) in mandating a union security closed shop regime in the bargaining agreement. The petition is granted and the orders of the public respondent Secretary of Labor
dated August 19 1996 and December 28, 1996 were set aside. The parties were directed to execute a Collective Bargaining Agreement incorporating the terms and
conditions contained in the unaffected portions of the Secretary of Labors orders and the modifications set forth in the instant case. The retirement issue is remanded
to the Secretary of Labor for reception of evidence and determination of the legal personality of the MERALCO retirement fund.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; CONDITIONS OF EMPLOYMENT; BONUS; NOT A DEMANDABLE AND ENFORCEABLE
OBLIGATION. As a rule, a bonus is not a demandable and enforceable obligation; it may nevertheless be granted on equitable considerations as when the
giving of such bonus has been the companys long and regular practice. To be considered a regular practice, the giving of the bonus should have been done over
a long period of time, and must be shown to have been consistent and deliberate. Thus we have ruled in National Sugar Refineries Corporation vs. NLRC: The
test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowing fully well that
said employees are not covered by the law requiring payment thereof. In the case at bar, the record shows that MERALCO, aside from complying with the
regular 13th month bonus, has further been giving its employees an additional Christmas bonus at the tail-end of the year since 1988. While the special bonuses
differed in amount and bore different titles, it can not be denied that these were given voluntarily and continuously on or about Christmas time. The
considerable length of time MERALCO has been giving the special grants to its employees indicates a unilateral and voluntary act on its part, to continue giving
said benefits knowing that such act was not required by law. Indeed, a company practice favorable to the employees has been established and the payments
made by MERALCO pursuant thereto ripened into benefits enjoyed by the employees. Consequently, the giving of the special bonus can no longer be withdrawn
by the company as this would amount to a diminution of the employees existing benefits.
2. ID.; ID.; THE COOPERATIVE LAW DOES NOT REQUIRE THE EMPLOYERS TO PROVIDE FUNDS THAT EMPLOYEES CAN USE TO FORM
COOPERATIVE. The Secretarys disputed ruling requires MERALCO to provide the employees covered by the bargaining unit with a loan of 1.5 Million as
seed money for the employees formation of a cooperative under the Cooperative Law, R.A. 6938. We see nothing in this law whether expressed or implied that
requires employers to provide funds, by loan or otherwise, that employees can use to form a cooperative. The formation of a cooperative is a purely voluntary
act under this law, and no party in any context or relationship is required by law to set up a cooperative or to provide the funds therefor. In the absence of such
legal requirement, the Secretary has no basis to order the grant of a 1.5 million loan to MERALCO employees for the formation of a cooperative, Furthermore,
we do not see the formation of an employees cooperative, in the absence of an agreement by the collective bargaining parties that this is a bargainable term or
condition of employment, to be a term or condition of employment that can be imposed on the parties on compulsory arbitration.
3. ID.; ID.; SIGNING BONUS; DEFINED; WITHOUT THE GOODWILL, THE SIGNING BONUS CANNOT BE JUSTIFIED. On the signing bonus
issue, we agree with the positions commonly taken by MERALCO and by the Office of the Solicitor General that the signing bonus is a grant motivated by the
goodwill generated when a CBA is successfully negotiated and signed between the employer and the union. In the present case, this goodwill does not exist. In
the words of the Solicitor General: When negotiations for the last two years of the 1992-1997 CBA broke down and the parties sought the assistance of the
NCMB, but which failed to reconcile their differences, and when petitioner MERALCO bluntly invoked the jurisdiction of the Secretary of Labor in the resolution
of the labor dispute, whatever goodwill existed between petitioner MERALCO and respondent union disappeared. xxx. In contractual terms, a signing bonus
is justified by and is the consideration paid for the goodwill that existed in the negotiations that culminated in the signing of a CBA. Without the goodwill, the
payment of a signing bonus cannot be justified and any order for such payment, to our mind, constitutes grave abuse of discretion. This is more so where the
signing bonus is in the not insignificant total amount of P16 million.
4. ID.; LABOR RELATIONS; CONFIDENTIAL EMPLOYEES; EXCLUDED FROM RANK AND FILE BARGAINING UNIT. We have established on the
exclusion of confidential employees from the rank and file bargaining unit. In Pier 8 Arrastre vs. Confesor and General Maritime and Stevedore Union, we ruled
that: Put another way, the confidential employee does not share in the same community of interests that might otherwise make him eligible to join his rank and
file co-workers, precisely because of a conflict in those interest. Thus, in Metrolab Industries vs. Roldan-Confesor, We ruled: ...that the Secretarys order should
exclude the confidential employees from the regular rank and file employees qualified to become members of the MEWA bargaining unit. From the foregoing
disquisition, it is clear that employees holding a confidential position are prohibited from joining the union of the rank and file employees.
5. ID.; ID.; CONTRACTING OUT OF WORK IS A PROPRIETARY RIGHT OF THE EMPLOYER IN THE EXERCISE OF AN INHERENT
MANAGEMENT PREROGATIVE. This issue is limited to the validity of the requirement that the union be consulted before the implementation of any
contracting out that would last for 6 months or more. Proceeding from our ruling in San Miguel Employees Union-PTGWO vs. Bersamira,(where we recognized
that contracting out of work is a propriety right of the employer in the exercise of an inherent management prerogative) the issue we see is whether the Secretarys
consultation requirement is reasonable or unduly restrictive of the companys management prerogative. We note that the Secretary himself has considered that
management should not be hampered in the operations of its business when he said that: We feel that the limitations imposed by the union advocates are too
specific and may not be applicable to the situations that the company and the union may face in the future. To our mind, the greater risk with this type of
limitation is that it will tend to curtail rather than allow the business growth that the company and the union must aspire for. Hence, we are for the general
limitations we have stated above because they will allow a calibrated response to specific future situations the company and the union may face.
6. ID.; ID.; THE SECRETARY OF LABOR ACTED IN EXCESS OF ITS JURISDICTION WHEN HE ORDERED THE INCLUSION OF BENEFITS,
TERMS AND CONDITIONS THAT THE LAW AND THE PARTIES DID NOT INTEND TO BE REFLECTED IN THE CBA. The Secretary acted in
excess of the discretion allowed him by law when he ordered the inclusion of benefits, terms and conditions that the law and the parties did not intend to be
reflected in their CBA. To avoid the possible problems that the disputed orders may bring, we are constrained to rule that only the terms and conditions already
existing in the current CBA and was granted by the Secretary (subject to the modifications decreed in this decision) should be incorporated in the CBA, and that
the Secretarys disputed orders should accordingly be modified.
APPEARANCES OF COUNSEL
Siguion Reyna Montecillo Ongsingco for petitioner.
Rolando R. Arbues, Atilano S. Guevarra, Jr. and Marianito D. Miranda for petitioner.
Perfecto V. Fernandez, Jose P. Fernancez and Cristobal P. Fernandez for private respondents.

DECISION
MARTINEZ, J.:

In this petition for certiorari, the Manila Electric Company (MERALCO) seeks to annul the orders of the Secretary of labor dated August 19, 1996 and December
28, 1996, wherein the Secretary required MERALCO and its rank and file union- the Meralco Workers Association (MEWA) to execute a collective bargaining
agreement (CBA) for the remainder of the parties 1992-1997 CBA cycle, and to incorporate in this new CBA the Secretarys dispositions on the disputed economic and
non-economic issues.
MEWA is the duly recognized labor organization of the rank-and-file employees of MERALCO.
On September 7, 1995, MEWA informed MERALCO of its intention to re-negotiate the terms and conditions of their existing 1992-1997 Collective Bargaining
Agreement (CBA) covering the remaining period of two years starting from December 1, 1995 to November 30, 1997. [1] MERALCO signified its willingness to re-
negotiate through its letter dated October 17, 1995[2] and formed a CBA negotiating panel for the purpose. On November 10, 1995, MEWA submitted its proposal[3] to
MERALCO, which, in turn, presented a counter-proposal. Thereafter, collective bargaining negotiations proceeded. However, despite the series of meetings between
the negotiating panels of MERALCO and MEWA, the parties failed to arrive at terms and conditions acceptable to both of them.
On April 23, 1996, MEWA filed a Notice of Strike with the National Capital Region Branch of the National Conciliation and Mediation Board (NCMB) of the
Department of Labor and Employment (DOLE) which was docketed as NCMB-NCR-NS-04-152-96, on the grounds of bargaining deadlock and unfair labor
practices. The NCMB then conducted a series of conciliation meetings but the parties failed to reach an amicable settlement. Faced with the imminence of a strike,
MERALCO on May 2, 1996, filed an Urgent Petition[4] with the Department of Labor and Employment which was docketed as OS-AJ No. 0503[1]96 praying that the
Secretary assume jurisdiction over the labor dispute and to enjoin the striking employees to go back to work.
The Labor Secretary granted the petition through its Order[5] of May 8, 1996, the dispositive portion of which reads:

WHEREFORE, premises considered, this Office now assumes jurisdiction over the labor dispute obtaining between the parties pursuant to Article 263 (g) of the
Labor Code. Accordingly, the parties are here enjoined from committing any act that may exacerbate the situation. To speed up the resolution of the dispute, the
parties are also directed to submit their respective Position Papers within ten (10) days from receipt.

Undersecretary Jose M. Espanol, Jr. is deputized to conduct conciliation conferences between the parties to bridge their differences and eventually hammer out a
solution that is mutually acceptable. He shall be assisted by the Legal Service.

SO ORDERED.

Thereafter, the parties submitted their respective memoranda and on August 19, 1996, the Secretary resolved the labor dispute through an Order,[6] containing
the following awards:

ECONOMIC DEMANDS

Wage increase - P2,300.00 for the first year covering the

period from December 1, 1995 to November 30, 1996
- P2,200.00 for the second year covering
the period December 1, 1996 to November 30, 1997.

Red Circle Rate (RCR) Allowance- all RCR allowances (promotional increases that go beyond the maximum range of a job classification salary) shall be integrated
into the basic salary of employees effective December 1, 1995.

Longevity Allowance- the integration of the longevity allowance into the basic wage is denied; the present policy is maintained.
Longevity Increase- the present longevity bonus is maintained but the bonus shall be incorporated into the new CBA.

Sick Leave- MEWAs demand for upgrading is denied; the companys present policy is maintained. However, those who have not used the sick leave benefit during a
particular year shall be entitled to a one-day sick leave incentive.

Sick leave reserve- the present reserve of 25 days shall be reduced to 15 days; the employee has the option either to convert the excess of 10 days to cash or let it
remain as long as he wants. In case he opts to let it remain, he may later on convert it to cash at his retirement or separation.

Vacation Leave - MEWAs demand for upgrading denied & the companys present policy is maintained which must be incorporated into the new CBA but scheduled
vacation leave may be rounded off to one full day at a time in case of a benefit involving a fraction of a day.

Union Leave- of MEWAs officers, directors or stewards assigned to perform union duties or legitimate union activity is increased from 30 to 40 Mondays per
month.

Maternity, Paternity and Funeral leaves- the existing policy is to be maintained and must be incorporated in the new CBA unless a new law granting paternity leave
benefit is enacted which is superior to what the company has already granted.

Birthday Leave - unions demand is granted. If birthday falls on the employees rest day or on a non-working holiday, the worker shall be entitled to go on leave with
pay on the next working day.

Group Hospitalization & Surgical Insurance Plan (GHSIP) and Health Maintenance Plan (HMP)- present policy is maintained insofar as the cost sharing is
concerned- 70% for the Company and 30% for MEWA.

Health Maintenance Plan (HMP) for dependents - subsidized dependents increased from three to five dependents.

Longevity Bonus- is increased from P140.00 to P200.00 for every year of service to be received by the employee after serving the Company for 5 years.

Christmas Bonus and Special Christmas Grant- MEWAs demand of one month salary as Christmas Bonus and two months salary as Special Christmas Grant is
granted and to be incorporated in the new CBA.

Midyear Bonus- one months pay to be included in the CBA.

Anniversary Bonus - unions demand is denied.

Christmas Gift Certificate - company has the discretion as to whether it will give it to its employees.

Retirement Benefits:

a. Full retirement-present policy is maintained;

b. one cavan of rice per month is granted to retirees;

c. special retirement leave and allowance-present policy is maintained;

d. HMP coverage for retirees- HMP coverage is granted to retirees who have not reached the age of 70, with MERALCO subsidizing 100% of the monthly
premium; those over 70 are entitled to not more than 30 days of hospitalization at the J.F. Cotton Hospital with the company shouldering the
entire cost.

e. HMP coverage for retirees dependents is denied

f. Monthly pension of P3,000.00 for each retiree is denied.

g. Death benefit for retirees beneficiaries is denied.

Optional retirement - unions demand is denied; present policy is maintained; employee is eligible for optional retirement if he has rendered at least 18 years of
service.

Dental, Medical and Hospitalization Benefits- grant of all the allowable medical, surgical, dental and annual physical examination benefits, including free
medicine whenever the same is not available at the JFCH.

Resignation benefits- unions demand is denied.

Night work- union demand is denied but present policy must be incorporated in CBA.

Shortswing- work in another shift within the same day shall be considered as the employees work for the following day and the employee shall be given additional
four (4) hours straight time and the applicable excess time premium if he works beyond 8 hours in the other shift.

High Voltage allowance- is increased from P45.00 to P55.00 to be given to any employee authorized by the Safety Division to perform work on or near energized
bare lines & bus including stockman drivers & crane operators and other crew members on ground.

High Pole Allowance- is increased from P30.00 to P40.00 to be given to those authorized to climb poles up to at least 60 ft. from the ground. Members of the team
including stockman drivers, crane operators and other crew members on the ground, are entitled to this benefit.

Towing Allowance- where stockmen drive tow trailers with long poles and equipment on board, they shall be entitled to a towing allowance of P20.00 whether they
perform the job on regular shift or on overtime.

Employees Cooperative- a loan of P3 M seed money is granted to the proposed establishment of a cooperative, payable in twenty (20) years starting one year from
the start of operations.

Holdup Allowance- the union demand is denied; the present policy shall be maintained.
Meal and Lodging Allowance- shall be increased effective December 1, 1995 as follows:

Breakfast - from P25.00 to P35.00

Lunch - from P35.00 to P45.00
Dinner - from P35.00 to P45.00
Lodging - from P135.00 to P180.00 a night in all MERALCO franchise areas

Payroll Treatment for Accident while on Duty- an employee shall be paid his salary and allowance if any is due plus average excess time for the past 12 months
from the time of the accident up to the time of full recovery and placing of the employee back to normal duty or an allowance of P2,000.00, whichever is higher.

Housing and Equity Assistance Loan- is increased to P60,000.00; those who have already availed of the privilege shall be allowed to get the difference.

Benefits for Collectors:

a. Company shall reduce proportionately the quota and monthly average product level (MAPL) in terms of equivalent bill assignment when an employee
is on sick leave and paid vacation leave.

b. When required to work on Saturdays, Sundays and holidays, an employee shall receive P60.00 lunch allowance and applicable transportation
allowance as determined by the Company and shall also receive an additional compensation to one day fixed portion in addition to lunch and
transportation allowance.

c. The collector shall be entitled to an incentive pay of P25.00 for every delinquent account disconnected.

d. When a collector voluntarily performs other work on regular shift or overtime, he shall be entitled to remuneration based on his computed hourly
compensation and the reimbursement of actually incurred transportation expenses.

e. Collectors shall be provided with bobcat belt bags every year

f. Collectors cash bond shall be deposited under his capital contribution to MESALA.

g. Collectors quota and MAPL shall be proportionately reduced during typhoons, floods, earthquakes and other similar force majeure events when it is
impossible for a collector to perform collection work.

Political Demands:

a. Scope of the collective bargaining unit- the collective bargaining unit shall be composed of all regular rank-and-file employees hired by the company
in all its offices and operative centers throughout its franchise area and those it may employ by reason of expansion, reorganization or as a result
of operational exigencies.

b. Union recognition and security -

 i. The union shall be recognized by the Company as sole and exclusive bargaining representative of the rank-and-file employees included in the
bargaining unit. The Company shall agree to meet only with Union officers and its authorized representatives on all matters involving the
Union and all issues arising from the implementation and interpretation of the new CBA.

ii. The union shall meet with the newly regularized employees for a period not to exceed four (4) hours, on company time, to acquaint the new
regular employees of the rights, duties and benefits of Union membership.

iii. The right of all rank-and-file employees to join the union shall be recognized in accordance with the maintenance of membership principle as a
form of union security.

c. Transfer of assignment and job security-

i. No transfer of an employee from one position to another shall be made if motivated by considerations of sex, race, creed, political and religious
belief, seniority or union activity.

ii. If the transfer is due to the reorganization or decentralization, the distance from the employees residence shall be considered unless the transfer
is accepted by the employee. If the transfer is extremely necessary, the transfer shall be made within the offices in the same district.

iii. Personnel hired through agencies or contractors to perform the work done by covered employees shall not exceed one month. If extension is
necessary, the union shall be informed. But the Company shall not permanently contract out regular or permanent positions that are necessary
in the normal operation of the Company.

d. Check off Union Dues- where the union increases its dues as approved by the Board of Directors, the Company shall check off such increase from the
salaries of union members after the union submits check off authorizations signed by majority of the members. The Company shall honor only
those individual authorizations signed by the majority of the union members and collectively submitted by the union to the Companys Salary
Administration.

e. Payroll Reinstatement- shall be in accordance with Article 223, p. 3 of the Labor Code.

f. Union Representation in Committees- the union is allowed to participate in policy formulation and in the decision-making process on matters
affecting their rights and welfare, particularly in the Uniform Committee, the Safety Committee and other committees that may be formed in the
future.

Signing Bonus- P4,000.00 per member of the bargaining unit for the conclusion of the CBA

Existing benefits already granted by the Company but which are not expressly or impliedly repealed in the new agreement shall remain subsisting and shall be
included in the new agreement to be signed by the parties effective December 1, 1995.

On August 30, 1996, MERALCO filed a motion for reconsideration[7] alleging that the Secretary of Labor committed grave abuse of discretion amounting to lack
or excess of jurisdiction:
 1. in awarding to MEWA a package that would cost at least P1.142 billion, a package that is grossly excessive and exorbitant, would not be affordable to
MERALCO and would imperil its viability as a public utility affected with national interest.

2. in ordering the grant of a P4,500.00 wage increase, as well as a new and improved fringe benefits, under the remaining two (2) years of the CBA for the
rank-and-file employees.

3. in ordering the incorporation into the CBA of all existing employee benefits, on the one hand, and those that MERALCO has unilaterally granted to its
employees by virtue of voluntary company policy or practice, on the other hand.

4. in granting certain political demands presented by the union.

5. in ordering the CBA to be effective December 1995 instead of August 19, 1996 when he resolved the dispute.

MERALCO filed a supplement to the motion for reconsideration on September 18, 1995, alleging that the Secretary of Labor did not properly appreciate the
effect of the awarded wages and benefits on MERALCOs financial viability.
MEWA likewise filed a motion asking the Secretary of Labor to reconsider its Order on the wage increase, leaves, decentralized filing of paternity and maternity
leaves, bonuses, retirement benefits, optional retirement, medical, dental and hospitalization benefits, short swing and payroll treatment. On its political demands,
MEWA asked the Secretary to rule its proposal to institute a Code of Discipline for its members and the unions representation in the administration of the Pension
Fund.
On December 28, 1996, the Secretary issued an Order[8] resolving the parties separate motions, the modifications of the August 19, 1996 Order being highlighted
hereunder:

1) Effectivity of Agreement - December 1, 1995 to November 30, 1997.

Economic Demands

2) Wage Increase:

First year - P2,200.00 per month;

Second year - P2,200.00 per month.

3) Integration of Red Circle Rate (RCR) and Longevity Allowance into Basic Salary -the RCR allowance shall be integrated into the basic salary of employees as of
August 19, 1996 (the date of the disputed Order).

4) Longevity Bonus - P170 per year of service starting from 10 years of continuous service.

5) Vacation Leave - The status quo shall be maintained as to the number of vacation leave but employees scheduled vacation may be taken one day at a
time in the manner that this has been provided in the supervisory CBA.
6) Sick Leave Reserve - is reduced to 15 days, with any excess payable at the end of the year. The employee has the option to avail of this cash conversion or to
accumulate his sick leave credits up to 25 days for conversion to cash at retirement or separation from the service.

7) Birthday Leave - the grant of a day off when an employees birthday falls on a non-working day is deleted.

8) Retirement Benefits for Retirees - The benefits granted shall be effective on August 19, 1996, the date of the disputed order up to November 30, 1997, which is
the date the CBA expires and shall apply to those who are members of the bargaining unit at the time the award is made.

One sack of rice per quarter of the year shall be given to those retiring between August 19, 1996 and November 30, 1997.

On HMP Coverage for Retirees- The parties maintain the status quo, that is, with the Company complying with the present arrangement and the obligations to
retirees as is.

9) Medical, Dental and Hospitalization Benefits - The cost of medicine unavailable at the J.F. Cotton Hospital shall be in accordance with MERALCOs
Memorandum dated September 14, 1976.

10) GHSIP and HMP for Dependents - The number of dependents to be subsidized shall be reduced from 5 to 4 provided that their premiums are
proportionately increased.

11) Employees Cooperative - The original award of P3 million pesos as seed money for the proposed Cooperative is reduced to P1.5 million pesos.

12) Shortswing - the original award is deleted.

13) Payroll Treatment for Accident on Duty - Company ordered to continue its present practice on payroll treatment for accident on duty without need to pay the
excess time the Union demanded.

Political Demands:

14) Scope of the collective bargaining unit - The bargaining unit shall be composed of all rank and file employees hired by the Company in accordance with the
original Order.

15) Union recognition and security - The incorporation of a closed shop form of union security in the CBA; the Company is prohibited from
entertaining individuals or groups of individuals only on matters that are exclusively within the domain of the union; the Company shall furnish the union with a
complete list of newly regularized employees within a week from regularization so that the Union can meet these employees on the Unions and the employees own
time.

16) Transfer of assignment and job security - Transfer is a prerogative of the Company but the transfer must be for a valid business reason, made in good
faith and must be reasonably exercised. The CBA shall provide that No transfer of an employee from one position to another, without the employees written
consent, shall be made if motivated by considerations of sex, race, creed, political and religious belief, age or union activity.
17) Contracting Out - The Company has the prerogative to contract out services provided that this move is based on valid business reasons in accordance with
law, is made in good faith, is reasonably exercised and, provided further that if the contracting out involves more than six months, the Union must be consulted
before its implementation.

18) Check off of union dues

In any increase of union dues or contributions for mandatory activities, the union must submit to the Company a copy of its board resolution increasing the union
dues or authorizing such contributions;

If a board resolution is submitted, the Company shall deduct union dues from all union members after a majority of the union members have submitted their
individual written authorizations. Only those check-off authorizations submitted by the union shall be honored by the Company.

With respect to special assessments, attorneys fees, negotiation fees or any other extraordinary fees, individual authorizations shall be necessary before the
company may so deduct the same.

19) Union Representation in Committees - The union is granted representation in the Safety Committee, the Uniform Committee and other committees of a similar
nature and purpose involving personnel welfare, rights and benefits as well as duties.

Dissatisfied, petitioner filed this petition contending that the Secretary of Labor gravely abused his discretion:

1). . . in awarding wage increases of P2,200.00 for 1996 and P2,200.00 for 1997;

2) . . . in awarding the following economic benefits:

a. Two months Christmas bonus;

b. Rice Subsidy and retirement benefits for retirees;
c. Loan for the employees cooperative;
d. Social benefits such as GHSIP and HMP for dependents, employees cooperative and housing equity assistance loan;
e. Signing bonus;
f. Integration of the Red Circle Rate Allowance
g. Sick leave reserve of 15 days
h. The 40-day union leave;
i. High pole/high voltage and towing allowance;
and
j. Benefits for collectors

3) . . . in expanding the scope of the bargaining unit to all regular rank and file employees hired by the company in all its offices and operating centers and those it
may employ by reason of expansion, reorganization or as a result of operational exigencies;

4) . . . in ordering for a closed shop when his original order for a maintenance of membership arrangement was not questioned by the parties;
5) . . . in ordering that Meralco should consult the union before any contracting out for more than six months;

6) . . . in decreeing that the union be allowed to have representation in policy and decision making into matters affecting personnel welfare, rights and benefits as
well as duties;

7) . . . in ruling for the inclusion of all terms and conditions of employment in the collective bargaining agreement;

8) . . . in exercising discretion in determining the retroactivity of the CBA;

Both MEWA and the Solicitor General; on behalf of the Secretary of Labor, filed their comments to the petition. While the case was also set for oral argument
on Feb 10, 1997, this hearing was cancelled due to MERALCO not having received the comment of the opposing parties. The parties were instead required to submit
written memoranda, which they did. Subsequently, both petitioner and private respondent MEWA also filed replies to the opposing parties Memoranda, all of which
We took into account in the resolution of this case.
The union disputes the allegation of MERALCO that the Secretary abused his discretion in issuing the assailed orders arguing that he acted within the scope of
the powers granted him by law and by the Constitution. The union contends that any judicial review is limited to an examination of the Secretarys decision-
making/discretion - exercising process to determine if this process was attended by some capricious or whimsical act that constitutes grave abuse; in the absence of
such abuse, his findings - considering that he has both jurisdiction and expertise to make them - are valid.
The unions position is anchored on two premises:
First, no reviewable abuse of discretion could have attended the Secretarys arbitral award because the Secretary complied with constitutional norms in rendering
the dispute award. The union posits that the yardstick for comparison and for the determination of the validity of the Secretarys actions should be the specific
standards laid down by the Constitution itself. To the union, these standards include the State policy on the promotion of workers welfare,[9] the principle of
distributive justice,[10] the right of the State to regulate the use of property, [11] the obligation of the State to protect workers, both organized and unorganized, and
insure their enjoyment of humane conditions of work and a living wage, and the right of labor to a just share in the fruits of production.[12]
Second, no reversible abuse of discretion attended the Secretarys decision because the Secretary took all the relevant evidence into account, judiciously weighed
them, and rendered a decision based on the facts and law. Also, the arbitral award should not be reversed given the Secretarys expertise in his field and the general
rule that findings of fact based on such expertise is generally binding on this Court.
To put matters in proper perspective, we go back to basic principles. The Secretary of Labors statutory power under Art. 263 (g) of the Labor Code to assume
jurisdiction over a labor dispute in an industry indispensable to the national interest, and, to render an award on compulsory arbitration, does not exempt the exercise
of this power from the judicial review that Sec. 1, Art. 8 of the Constitution mandates. This constitutional provision states:

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
government.

Under this constitutional mandate, every legal power of the Secretary of Labor under the Labor Code, or, for that matter, any act of the Executive, that is
attended by grave abuse of discretion is subject to review by this Court in an appropriate proceeding. To be sure, the existence of an executive power alone - whether
granted by statute or by the Constitution - cannot exempt the executive action from judicial oversight, interference or reversal when grave abuse of discretion is, or
is alleged to be, present. This is particularly true when constitutional norms are cited as the applicable yardsticks since this Court is the final interpreter of the
meaning and intent of the Constitution.[13]
 The extent of judicial review over the Secretary of Labors arbitral award is not limited to a determination of grave abuse in the manner of the secretarys exercise
of his statutory powers. This Court is entitled to, and must - in the exercise of its judicial power - review the substance of the Secretarys award when grave abuse of
discretion is alleged to exist in the award, i.e., in the appreciation of and the conclusions the Secretary drew from the evidence presented.
The natural and ever present limitation on the Secretarys acts is, of course, the Constitution. And we recognize that indeed the constitutional provisions the
union cited are State policies on labor and social justice that can serve as standards in assessing the validity of a Secretary of Labors actions. However, we note that
these provisions do not provide clear, precise and objective standards of conduct that lend themselves to easy application. We likewise recognize that the Constitution
is not a lopsided document that only recognizes the interests of the working man; it too protects the interests of the property owner and employer as well.[14]
For these reasons - and more importantly because a ruling on the breadth and scope of the suggested constitutional yardsticks is not absolutely necessary in
the disposition of this case - we shall not use these yardsticks in accordance with the time-honored practice of avoiding constitutional interpretations when a decision
can be reached using non-constitutional standards. We have repeatedly held that one of the essential requisites for a successful judicial inquiry into constitutional
questions is that the resolution of the constitutional question must be necessary in deciding the case.[15]
In this case we believe that the more appropriate and available standard - and one does not require a constitutional interpretation - is simply the standard of
reasonableness. In laymans terms, reasonableness implies the absence of arbitrariness;[16] in legal parlance, this translates into the exercise of proper discretion and
to the observance of due process. Thus, the question we have to answer in deciding this case is whether the Secretarys actions have been reasonable in light of the
parties positions and the evidence they presented.
MEWAs second premise - i.e., that the Secretary duly considered the evidence presented - is the main issue that we shall discuss at length below. Additionally,
MEWA implied that we should take great care before reading an abuse of discretion on the part of the Secretary because of his expertise on labor issues and because
his findings of fact deserve the highest respect from this Court.
This Court has recognized the Secretary of Labors distinct expertise in the study and settlement of labor disputes falling under his power of compulsory
arbitration.[17] It is also well-settled that factual findings of labor administrative officials, if supported by substantial evidence, are entitled not only to great respect
but even to finality.[18] We, therefore, have no difficulty in accepting the unions caveat on how to handle a Secretary of Labors arbitral award.
But at the same time, we also recognize the possibility that abuse of discretion may attend the exercise of the Secretarys arbitral functions; his findings in an
arbitration case are usually based on position papers and their supporting documents (as they are in the present case), and not on the thorough examination of the
parties contending claims that may be present in a court trial and in the face-to-face adversarial process that better insures the proper presentation and appreciation
of evidence.[19] There may also be grave abuse of discretion where the board, tribunal or officer exercising judicial function fails to consider evidence adduced by the
parties.[20] Given the parties positions on the justiciability of the issues before us, the question we have to answer is one that goes into the substance of the Secretarys
disputed orders: Did the Secretary properly consider and appreciate the evidence presented before him?
We find, based on our consideration of the parties positions and the evidence on record, that the Secretary of Labor disregarded and misappreciated evidence,
particularly with respect to the wage award. The Secretary of Labor apparently also acted arbitrarily and even whimsically in considering a number of legal points;
even the Solicitor General himself considered that the Secretary gravely abused his discretion on at least three major points: (a) on the signing bonus issue; (b) on
the inclusion of confidential employees in the rank and file bargaining unit, and (c) in mandating a union security closed-shop regime in the bargaining unit.
We begin with a discussion on the wages issue. The focal point in the consideration of the wage award is the projected net income for 1996 which became the
basis for the 1996 wage award, which in turn - by extrapolation - became the basis for the (2nd Year) 1997 award. MERALCO projected that the net operating income
for 1996 was 14.7% above the 1999 level or a total net operating income of 4.171 Billion, while the union placed the 1996 net operating income at 5.795 Billion.
MERALCO based its projection on the increase of the income for the first 6 months of 1996 over the same period in 1995. The union, on the other hand, projected
that the 1996 income would increase by 29% to 35% because the consumption of electric power is at its highest during the last two quarters with the advent of the
Yuletide season. The union likewise relied heavily on a newspaper report citing an estimate by an all Asia capital financial analyst that the net operating income
would amount to 5.795 Billion.[21]
 Based essentially on these considerations, the Secretary made the following computations and ordered his disputed wage award:
Projected net operating
Income for 1996 5,795,000,000
Principals and interests 1,426,571,703
Dividends at 1995 rate 1,636,949,000
Net amount left with the Company 2,729,479,297
Add: Tax credit equivalent to 35% of labor cost 231,804,940
Companys net operating income 2,961,284,237

For 1997, the projected income is P7,613,612 which can easily absorb the incremental increase of P2,200 per month or a total of P4,500 during the last year of the
CBA period.

xxxxxxxxx

An overriding aim is to estimate the amount that is left with the Company after the awarded wages and benefits and the companys customary obligations are
paid.This amount can be the source of an item not found in the above computations but which the Company must provide for, that is - the amount the company
can use for expansion.

Considering the expansion plans stated in the Companys Supplement that calls for capital expenditures of 6 billion, 6.263 billion and 5.802 billion for 1996, 1997
and 1998 respectively, We conclude that our original award of P2,300 per month for the first year and P2,200 for the second year will still leave much by way of
retained income that can be used for expansion.[22] (Underscoring ours.)

We find after considering the records that the Secretary gravely abused his discretion in making this wage award because he disregarded evidence on
record.Where he considered MERALCOs evidence at all, he apparently misappreciated this evidence in favor of claims that do not have evidentiary support. To our
mind, the MERALCO projection had every reason to be reliable because it was based on actual and undisputed figures for the first six months of 1996.[23] On the
other hand, the union projection was based on a speculation of Yuletide consumption that the union failed to substantiate. In fact, as against the unions
unsubstantiated Yuletide consumption claim, MERALCO adduced evidence in the form of historical consumption data showing that a lengthy consumption does not
tend to rise during the Christmas period.[24] Additionally, the All-Asia Capital Report was nothing more than a newspaper report that did not show any specific
breakdown or computations. While the union claimed that its cited figure is based on MERALCOs 10-year income stream,[25] no data or computation of this 10-year
stream appear in the record.
While the Secretary is not expected to accept the company-offered figures wholesale in determining a wage award, we find it a grave abuse of discretion to
completely disregard data that is based on actual and undisputed record of financial performance in favor of the third-hand and unfounded claims the Secretary
eventually relied upon. At the very least, the Secretary should have properly justified his disregard of the company figures. The Secretary should have also reasonably
insured that the figure that served as the starting point for his computation had some substantial basis.
Both parties extensely discussed the factors that the decision maker should consider in making a wage award. While We do not seek to enumerate in this
decision the factors that should affect wage determination, we must emphasize that a collective bargaining dispute such as this one requires due consideration
and proper balancing of the interests of the parties to the dispute and of those who might be affected by the dispute. To our mind, the best way in
approaching this task holistically is to consider the available objective facts, including, where applicable, factors such as the bargaining history of the company, the
trends and amounts of arbitrated and agreed wage awards and the companys previous CBAs, and industry trends in general. As a rule, affordability or capacity to
pay should be taken into account but cannot be the sole yardstick in determining the wage award, especially in a public utility like MERALCO. In considering a public
utility, the decision maker must always take into account the public interest aspects of the case; MERALCOs income and the amount of money available for operating
expenses - including labor costs - are subject to State regulation. We must also keep in mind that high operating costs will certainly and eventually be passed on to
the consuming public as MERALCO has bluntly warned in its pleadings.
We take note of the middle ground approach employed by the Secretary in this case which we do not necessarily find to be the best method of resolving a wage
dispute. Merely finding the midway point between the demands of the company and the union, and splitting the difference is a simplistic solution that fails to
recognize that the parties may already be at the limits of the wage levels they can afford. It may lead to the danger too that neither of the parties will engage in
principled bargaining; the company may keep its position artificially low while the union presents an artificially high position, on the fear that a Solomonic solution
cannot be avoided. Thus, rather than encourage agreement, a middle ground approach instead promotes a play safe attitude that leads to more deadlocks than to
successfully negotiated CBAs.
After considering the various factors the parties cited, we believe that the interests of both labor and management are best served by a wage increase
of P1,900.00 per month for the first year and another P1,900.00 per month for the second year of the two-year CBA term. Our reason for this is that these increases
sufficiently protects the interest of the worker as they are roughly 15% of the monthly average salary of P11,600.00.[26] They likewise sufficiently consider the
employers costs and its overall wage structure, while at the same time, being within the range that will not disrupt the wage trends in Philippine industries.
The records shows that MERALCO, throughout its long years of existence, was never remiss in its obligation towards its employees. In fact, as a manifestation
of its strong commitment to the promotion of the welfare and well-being of its employees, it has consistently improved their compensation package. For instance,
MERALCO has granted salary increases[27] through the collective bargaining agreement the amount of which since 1980 for both rank-and-file and supervisory
employees were as follows:

AMOUNT OF CBA INCREASES DIFFERENCE

CBA COVERAGE RANK-AND-FILE SUPERVISORY AMOUNT PERCENT
1980 230.00 342.50 112.50 48.91%
1981 210.00 322.50 112.50 53.57
1982 200.00 312.50 112.50 56.25
TOTAL 640.00 977.50 337.50 52.73
1983 320.00 432.50 112.50 35.16
1984 350.00 462.50 112.50 32.14
1985 370.00 482.50 112.50 30.41
TOTAL 1,040.00 1,377.50 337.50 32.45
1986 860.00 972.50 112.50 13.08
1987 640.00 752.50 112.50 17.58
1988 600.00 712.50 112.50 18.75
TOTAL 2,100.00 2,437.50 337.50 16.07
1989 1,100.00 1,212.50 112.50 10.23
1990 1,200.00 1,312.50 112.50 9.38
1991 1,300.00 1,412.50 112.50 8.65
TOTAL 3,600.00 3,937.50 337.50 9.38
1992 1,400.00 1,742.50 342.50 24.46
1993 1,350.00 1,682.50 332.50 24.63
1994 1,150.00 1,442.50 292.50 25.43
TOTAL 3,900.00 4,867.50 967.50 24.81
 Based on the above-quoted table, specifically under the column RANK-AND-FILE, it is easily discernible that the total wage increase of P3,800.00 for 1996 to
1997 which we are granting in the instant case is significantly higher than the total increases given in 1992 to 1994, or a span of three (3) years, which is only P3,900.00
a month. Thus, the Secretarys grant of P2,200.00 monthly wage increase in the assailed order is unreasonably high a burden for MERALCO to shoulder.
We now go to the economic issues.
1. CHRISTMAS BONUS
MERALCO questions the Secretarys award of Christmas bonuses on the ground that what it had given its employees were special bonuses to mark or celebrate
special occasions, such as when the Asia Money Magazine recognized MERALCO as the best managed company in Asia. These grants were given on or about
Christmas time, and the timing of the grant apparently led the Secretary to the conclusion that what were given were Christmas bonuses given by way of a company
practice on top of the legally required 13th month pay.
The Secretary in granting the two-month bonus, considered the following factual finding, to wit:

We note that each of the grant mentioned in the commonly adopted table of grants has a special description. Christmas bonuses were given in 1988 and
1989.However, the amounts of bonuses given differed. In 1988, it was P1,500. In 1989, it was month salary. The use of Christmas bonus title stopped after 1989. In
1990, what was given was a cash gift of months salary. The grants thereafter bore different titles and were for varying amounts. Significantly, the Company
explained the reason for the 1995 bonuses and this explanation was not substantially contradicted by the Union.

What comes out from all these is that while the Company has consistently given some amount by way of bonuses since 1988, these awards were not given
uniformly as Christmas bonuses or special Christmas grants although they may have been given at or about Christmas time.

xxxxxxxxx

The Company is not therefore correct in its position that there is not established practice of giving Christmas bonuses that has ripened to the status of being a term
and condition of employment. Regardless of its nomenclature and purpose, the act of giving this bonus in the spirit of Christmas has ripened into a Company
practice.[28]

It is MERALCOs position that the Secretary erred when he recognized that there was an established practice of giving a two-month Christmas bonus based on
the fact that bonuses were given on or about Christmas time. It points out that the established practice attributed to MERALCO was neither for a considerable period
of time nor identical in either amount or purpose. The purpose and title of the grants were never the same except for the Christmas bonuses of 1988 and 1989, and
were not in the same amounts.
We do not agree.
As a rule, a bonus is not a demandable and enforceable obligation;[29] it may nevertheless be granted on equitable consideration[30] as when the giving
of such bonus has been the companys long and regular practice.[31] To be considered a regular practice, the giving of the bonus should have been done over
a long period of time, and must be shown to have been consistent and deliberate.[32] Thus we have ruled in National Sugar Refineries Corporation vs.
NLRC:[33]

The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowing fully well that
said employees are not covered by the law requiring payment thereof.
 In the case at bar, the record shows the MERALCO, aside from complying with the regular 13th month bonus, has further been giving its employees an additional
Christmas bonus at the tail-end of the year since 1988. While the special bonuses differed in amount and bore different titles, it can not be denied that these were
given voluntarily and continuously on or about Christmas time. The considerable length of time MERALCO has been giving the special grants to its employees
indicates a unilateral and voluntary act on its part, to continue giving said benefits knowing that such act was not required by law.
Indeed, a company practice favorable to the employees has been established and the payments made by MERALCO pursuant thereto ripened into benefits
enjoyed by the employees. Consequently, the giving of the special bonus can no longer be withdrawn by the company as this would amount to a diminution of the
employees existing benefits.[34]
We can not, however, affirm the Secretarys award of a two-month special Christmas bonus to the employees since there was no recognized company practice
of giving a two-month special grant. The two-month special bonus was given only in 1995 in recognition of the employees prompt and efficient response during the
calamities. Instead, a one-month special bonus, We believe, is sufficient, this being merely a generous act on the part of MERALCO.
2. RICE SUBSIDY and RETIREMENT BENEFITS for RETIREES
It appears that the Secretary of Labor originally ordered the increase of the retirement pay, rice subsidy and medical benefits of MERALCO retirees. This ruling
was reconsidered based on the position that retirees are no longer employees of the company and therefore are no longer bargaining members who can benefit from
a compulsory arbitration award. The Secretary, however, ruled that all members of the bargaining unit who retire between August 19, 1996 and November 30, 1997
(i.e., the term of the disputed CBA under the Secretarys disputed orders) are entitled to receive an additional rice subsidy.
The question squarely brought in this petition is whether the Secretary can issue an order that binds the retirement fund. The company alleges that a separate
and independent trust fund is the source of retirement benefits for MERALCO retirees, while the union maintains that MERALCO controls these funds and may
therefore be compelled to improve this benefit in an arbitral award.
The issue requires a finding of fact on the legal personality of the retirement fund. In the absence of any evidence on record indicating the nature of the
retirement funds legal personality, we rule that the issue should be remanded to the Secretary for reception of evidence as whether or not the MERALCO retirement
fund is a separate and independent trust fund. The existence of a separate and independent juridical entity which controls an irrevocable retirement trust fund means
that these retirement funds are beyond the scope of collective bargaining: they are administered by an entity not a party to the collective bargaining and the funds
may not be touched without the trustees conformity.
On the other hand, MERALCO control over these funds means that MERALCO may be compelled in the compulsory arbitration of a CBA deadlock where it is
the employer, to improve retirement benefits since retirement is a term or condition of employment that is a mandatory subject of bargaining.
3. EMPLOYEES COOPERATIVE
The Secretarys disputed ruling requires MERALCO to provide the employees covered by the bargaining unit with a loan of 1.5 Million as seed money for the
employees formation of a cooperative under the Cooperative Law, R.A. 6938. We see nothing in this law - whether expressed or implied - that requires employers to
provide funds, by loan or otherwise, that employees can use to form a cooperative. The formation of a cooperative is a purely voluntary act under this law, and no
party in any context or relationship is required by law to set up a cooperative or to provide the funds therefor. In the absence of such legal requirement, the Secretary
has no basis to order the grant of a 1.5 million loan to MERALCO employees for the formation of a cooperative. Furthermore, we do not see the formation of an
employees cooperative, in the absence of an agreement by the collective bargaining parties that this is a bargainable term or condition of employment, to be a term
or condition of employment that can be imposed on the parties on compulsory arbitration.
4. GHSIP, HMP BENEFITS FOR DEPENDENTS and HOUSING EQUITY LOAN
MERALCO contends that it is not bound to bargain on these benefits because these do not relate to wages, hours of work and other terms and conditions of
employment hence, the denial of these demands cannot result in a bargaining impasse.
 The GHSIP, HMP benefits for dependents and the housing equity loan have been the subject of bargaining and arbitral awards in the past. We do not see any
reason why MERALCO should not now bargain on these benefits. Thus, we agree with the Secretarys ruling:

x x x Additionally and more importantly, GHSIP and HMP, aside from being contributory plans, have been the subject of previous rulings from this Office as
bargainable matters. At this point, we cannot do any less and must recognize that GHSIP and HMP are matters where the union can demand and negotiate for
improvements within the framework of the collective bargaining system.[35]

Moreover, MERALCO have long been extending these benefits to the employees and their dependents that they now become part of the terms and conditions
of employment. In fact, MERALCO even pledged to continue giving these benefits. Hence, these benefits should be incorporated in the new CBA.
With regard to the increase of the housing equity grant, we find P60,000.00 reasonable considering the prevailing economic crisis.
5. SIGNING BONUS
On the signing bonus issue, we agree with the positions commonly taken by MERALCO and by the Office of the Solicitor General that the signing bonus is a
grant motivated by the goodwill generated when a CBA is successfully negotiated and signed between the employer and the union. In the present case, this goodwill
does not exist. In the words of the Solicitor General:

When negotiations for the last two years of the 1992-1997 CBA broke down and the parties sought the assistance of the NCMB, but which failed to reconcile their
differences, and when petitioner MERALCO bluntly invoked the jurisdiction of the Secretary of Labor in the resolution of the labor dispute, whatever goodwill
existed between petitioner MERALCO and respondent union disappeared. xxx.[36]

In contractual terms, a signing bonus is justified by and is the consideration paid for the goodwill that existed in the negotiations that culminated in the signing
of a CBA. Without the goodwill, the payment of a signing bonus cannot be justified and any order for such payment, to our mind, constitutes grave abuse of
discretion. This is more so where the signing bonus is in the not insignificant total amount of P16 Million.
6. RED-CIRCLE-RATE ALLOWANCE
An RCR allowance is an amount, not included in the basic salary, that is granted by the company to an employee who is promoted to a higher position grade
but whose actual basic salary at the time of the promotion already exceeds the maximum salary for the position to which he or she is promoted. As an allowance, it
applies only to specifics individuals whose salary levels are unique with respect to their new and higher positions. It is for these reasons that MERALCO prays that it
be allowed to maintain the RCR allowance as a separate benefit and not be integrated in the basic salary.
The integration of the RCR allowance in the basic salary of the employees had consistently been raised in the past CBAs (1989 and 1992) and in those cases, the
Secretary decreed the integration of the RCR allowance in the basic salary. We do not see any reason why it should not be included in the present CBA. In fact, in the
1995 CBA between MERALCO and the supervisory union (FLAMES), the integration of the RCR allowance was recognized. Thus, Sec. 4 of the CBA provides:

All Red-Circle-Rate Allowance as of December 1, 1995 shall be integrated in the basic salary of the covered employees who as of such date are receiving such
allowance. Thereafter, the company rules on RCR allowance shall continue to be observed/applied.[37]

For purposes of uniformity, we affirm the Secretarys order on the integration of the RCR allowance in the basic salary of the employees.
7. SICK LEAVE RESERVE OF 15 DAYS
 MERALCO assails the Secretarys reduction of the sick leave reserve benefit from 25 days to 15 days, contending that the sick leave reserve of 15 days has reached
the lowest safe level that should be maintained to give employees sufficient buffer in the event they fall ill.
We find no compelling reason to deviate from the Secretarys ruling that the sick leave reserve is reduced to 15 days, with any excess convertible to cash at the
end of the year. The employee has the option to avail of this cash conversion or to accumulate his sick leave credits up to 25 days for conversion to cash at his
retirement or separation from the service. This arrangement is, in fact, beneficial to MERALCO. The latter admits that the diminution of this reserve does not
seriously affect MERALCO because whatever is in reserve are sick leave credits that are payable to the employee upon separation from service. In fact, it may be to
MERALCOs financial interest to pay these leave credits now under present salary levels than pay them at future higher salary levels.[38]
8. 40-DAY UNION LEAVE
MERALCO objects to the demand increase in union leave because the union leave granted to the union is already substantial. It argues that the union has not
demonstrated any real need for additional union leave.
The thirty (30) days union leave granted by the Secretary, to our mind, constitute sufficient time within which the union can carry out its union activities such
as but not limited to the election of union officers, selection or election of appropriate bargaining agents, conduct referendum on union matters and other union-
related matters in furtherance of union objectives. Furthermore, the union already enjoys a special union leave with pay for union authorized representatives to
attend work education seminars, meetings, conventions and conferences where union representation is required or necessary, and Paid-Time-off for union officers,
stewards and representatives for purpose of handling or processing grievances.
9. HIGH VOLTAGE/HIGH POLE/TOWING ALLOWANCE
MERALCO argues that there is no justification for the increase of these allowances. The personnel concerned will not receive any additional risk during the life
of the current CBA that would justify the increase demanded by the union. In the absence of such risk, then these personnel deserve only the same salary increase
that all other members of the bargaining unit will get as a result of the disputed CBA. MERALCO likewise assails the grant of the high voltage/high pole allowance to
members of the team who are not exposed to the high voltage/high pole risks. The risks that justify the higher salary and the added allowance are personal to those
who are exposed to those risks. They are not granted to a team because some members of the team are exposed to the given risks.
The increase in the high-voltage allowance (from P45.00 to P55.00), high-pole allowance (from P30.00 to P40.00), and towing allowance is justified
considering the heavy risk the employees concerned are exposed to. The high-voltage allowance is granted to an employee who is authorized by the company to
actually perform work on or near energized bare lines and bus, while the high-pole allowance is given to those authorized to climb poles on a height of at least 60 feet
from the ground to work thereat. The towing allowance, on the other hand, is granted to the stockman drivers who tow trailers with long poles and equipment on
board. Based on the nature of the job of these concerned employees, it is imperative to give them these additional allowances for taking additional risks. These
increases are not even commensurate to the danger the employees concerned are subjected to. Besides, no increase has been given by the company since 1992.[39]
We do not, however, subscribe to the Secretarys order granting these allowances to the members of the team who are not exposed to the given risks. The reason
is obvious- no risk, no pay. To award them the said allowances would be manifestly unfair for the company and even to those who are exposed to the risks, as well as
to the other members of the bargaining unit who do not receive the said allowances.
10. BENEFITS FOR COLLECTORS
MERALCO opposes the Secretarys grant of benefits for collectors on the ground that this is grossly unreasonable both in scope and on the premise it is founded.
We have considered the arguments of the opposing parties regarding these benefits and find the Secretarys ruling on the (a) lunch allowance; (b) disconnection
fee for delinquent accounts; (c) voluntary performance of other work at the instance of the Company; (d) bobcat belt bags; and (e) reduction of quota and MAPL
during typhoons and other force majeure events, reasonable considering the risks taken by the company personnel involved, the nature of the employees functions
and responsibilities and the prevailing standard of living. We do not however subscribe to the Secretarys award on the following:
 (a) Reduction of quota and MAPL when the collector is on sick leave because the previous CBA has already provided for a reduction of this demand. There is
no need to further reduce this.

(b) Deposit of cash bond at MESALA because this is no longer necessary in view of the fact that collectors are no longer required to post a bond.

We shall now resolve the non-economic issues.

1. SCOPE OF THE BARGAINING UNIT
The Secretarys ruling on this issue states that:

a. Scope of the collective bargaining unit. The union is demanding that the collective bargaining unit shall be composed of all regular rank and file employees hired
by the company in all its offices and operating centers through its franchise and those it may employ by reason of expansion, reorganization or as a result of
operational exigencies. The law is that only managerial employees are excluded from any collective bargaining unit and supervisors are now allowed to form their
own union (Art. 254 of the Labor Code as amended by R.A. 6715). We grant the union demand.

Both MERALCO and the Office of the Solicitor General dispute this ruling because if disregards the rule We have established on the exclusion of confidential
employee from the rank and file bargaining unit.
In Pier 8 Arrastre vs. Confesor and General Maritime and Stevedores Union,[40] we ruled that:

Put another way, the confidential employee does not share in the same community of interest that might otherwise make him eligible to join his rank and file co-
workers, precisely because of a conflict in those interests.

Thus, in Metrolab Industries vs. Roldan-Confesor,[41] We ruled:

..that the Secretarys order should exclude the confidential employees from the regular rank and file employees qualified to become members of the MEWA
bargaining unit.

From the foregoing disquisition, it is clear that employees holding a confidential position are prohibited from joining the union of the rank and file employees.
2. ISSUE OF UNION SECURITY
The Secretary in his Order of August 19, 1996,[42] ruled that:

b. Union recognition and security. The union is proposing that it be recognized by the Company as sole and exclusive bargaining representative of the rank and file
employees included in the bargaining unit for the purpose of collective bargaining regarding rates of pay, wages, hours of work and other terms and conditions of
employment. For this reason, the Company shall agree to meet only with the Union officers and its authorized representatives on all matters involving the Union as
an organization and all issues arising from the implementation and interpretation of the new CBA. Towards this end, the Company shall not entertain any
individual or group of individuals on matters within the exclusive domain of the Union.

Additionally, the Union is demanding that the right of all rank and file employees to join the Union shall be recognized by the Company. Accordingly, all rank and
file employees shall join the union.
xxxxxxxxx

These demands are fairly reasonable. We grant the same in accordance with the maintenance of membership principle as a form of union security."

The Secretary reconsidered this portion of his original order when he said in his December 28, 1996 order that:

x x x. when we decreed that all rank and file employees shall join the Union, we were actually decreeing the incorporation of a closed shop form of union security in
the CBA between the parties. In Ferrer v. NLRC, 224 SCRA 410, the Supreme Court ruled that a CBA provision for a closed shop is a valid form of union security
and is not a restriction on the right or freedom of association guaranteed by the Constitution, citing Lirag v. Blanco, 109 SCRA 87.

MERALCO objected to this ruling on the grounds that: (a) it was never questioned by the parties; (b) there is no evidence presented that would justify the
restriction on employee's union membership; and (c) the Secretary cannot rule on the union security demand because this is not a mandatory subject for collective
bargaining agreement.
We agree with MERALCOs contention.
An examination of the records of the case shows that the union did not ask for a closed shop security regime; the Secretary in the first instance expressly stated
that a maintenance of membership clause should govern; neither MERALCO nor MEWA raised the issue of union security in their respective motions for
reconsideration of the Secretarys first disputed order; and that despite the parties clear acceptance of the Secretarys first ruling, the Secretary motu
proprioreconsidered his maintenance of membership ruling in favor of the more stringent union shop regime.
Under these circumstances, it is indubitably clear that the Secretary gravely abused his discretion when he ordered a union shop in his order of December 28,
1996. The distinctions between a maintenance of membership regime from a closed shop and their consequences in the relationship between the union and the
company are well established and need no further elaboration.
Consequently, We rule that the maintenance of membership regime should govern at MERALCO in accordance with the Secretarys order of August 19, 1996
which neither party disputed.
3. THE CONTRACTING OUT ISSUE
This issue is limited to the validity of the requirement that the union be consulted before the implementation of any contracting out that would last for 6 months
or more. Proceeding from our ruling in San Miguel Employees Union-PTGWO vs Bersamina,[43] (where we recognized that contracting out of work is a
proprietary right of the employer in the exercise of an inherent management prerogative) the issue we see is whether the Secretarys consultation requirement is
reasonable or unduly restrictive of the companys management prerogative. We note that the Secretary himself has considered that management should not be
hampered in the operations of its business when he said that:

We feel that the limitations imposed by the union advocates are too specific and may not be applicable to the situations that the company and the union may face in
the future. To our mind, the greater risk with this type of limitation is that it will tend to curtail rather than allow the business growth that the company and the
union must aspire for. Hence, we are for the general limitations we have stated above because they will allow a calibrated response to specific future situations the
company and the union may face.[44]

Additionally, We recognize that contracting out is not unlimited; rather, it is a prerogative that management enjoys subject to well-defined legal limitations. As
we have previously held, the company can determine in its best business judgment whether it should contract out the performance of some of its work for as long as
the employer is motivated by good faith, and the contracting out must not have been resorted to circumvent the law or must not have been the result of malicious or
arbitrary action.[45] The Labor Code and its implementing rules also contain specific rules governing contracting out (Department of Labor Order No. 10, May 30,
1997, Sections. 1-25).
Given these realities, we recognize that a balance already exist in the parties relationship with respect to contracting out; MERALCO has its legally defined and
protected management prerogatives while workers are guaranteed their own protection through specific labor provisions and the recognition of limits to the exercise
of management prerogatives. From these premises, we can only conclude that the Secretarys added requirement only introduces an imbalance in the parties collective
bargaining relationship on a matter that the law already sufficiently regulates. Hence, we rule that the Secretarys added requirement, being unreasonable, restrictive
and potentially disruptive should be struck down.
4. UNION REPRESENTATION IN COMMITTEES
As regards this issue, We quote with approval the holding of the Secretary in his Order of December 28, 1996, to wit:

We see no convincing reason to modify our original Order on union representation in committees. It reiterates what the Article 211 (A)(g) of the Labor Codes
provides: To ensure the participation of workers in decision and policy-making processes affecting their rights, duties and welfare. Denying this opportunity to the
Union is to lay the claim that only management has the monopoly of ideas that may improve management strategies in enhancing the Companys growth. What
every company should remember is that there might be one among the Union members who may offer productive and viable ideas on expanding the Companys
business horizons. The unions participation in such committees might just be the opportune time for dormant ideas to come forward. So, the Company must
welcome this development (see also PAL v. NLRC, et. al., G.R. 85985, August 13, 1995). It must be understood, however, that the committees referred to here are
the Safety Committee, the Uniform Committee and other committees of a similar nature and purpose involving personnel welfare, rights and benefits as well as
duties.

We do not find merit in MERALCOs contention that the above-quoted ruling of the Secretary is an intrusion into the management prerogatives of MERALCO.It
is worthwhile to note that all the Union demands and what the Secretarys order granted is that the Union be allowed to participate in policy formulation and decision-
making process on matters affecting the Union members right, duties and welfare as required in Article 211 (A)(g) of the Labor Code. And this can
only be done when the Union is allowed to have representatives in the Safety Committee, Uniform Committee and other committees of a similar nature. Certainly,
such participation by the Union in the said committees is not in the nature of a co-management control of the business of MERALCO. What is granted by the Secretary
is participation and representation. Thus, there is no impairment of management prerogatives.
5. INCLUSION OF ALL TERMS AND CONDITIONS IN THE CBA
MERALCO also decries the Secretarys ruling in both the assailed Orders that-

All other benefits being enjoyed by the companys employees but which are not expressly or impliedly repealed in this new agreement shall remain subsisting and
shall likewise be included in the new collective bargaining agreement to be signed by the parties effective December 1, 1995.[46]

claiming that the above-quoted ruling intruded into the employers freedom to contract by ordering the inclusion in the new CBA all other benefits presently enjoyed
by the employees even if they are not incorporated in the new CBA. This matter of inclusion, MERALCO argues, was never discussed and agreed upon in the
negotiations; nor presented as issues before the Secretary; nor were part of the previous CBAs between the parties.
We agree with MERALCO.
The Secretary acted in excess of the discretion allowed him by law when he ordered the inclusion of benefits, terms and conditions that the law and the parties
did not intend to be reflected in their CBA.
 To avoid the possible problems that the disputed orders may bring, we are constrained to rule that only the terms and conditions already existing in the current
CBA and was granted by the Secretary (subject to the modifications decreed in this decision) should be incorporated in the CBA, and that the Secretarys disputed
orders should accordingly be modified.
6. RETROACTIVITY OF THE CBA
Finally, MERALCO also assails the Secretarys order that the effectivity of the new CBA shall retroact to December 1, 1995, the date of the commencement of the
last two years of the effectivity of the existing CBA. This retroactive date, MERALCO argues, is contrary to the ruling of this Court in Pier 8 Arrastre and
Stevedoring Services, Inc. vs. Roldan-Confessor[47] which mandates that the effective date of the new CBA should be the date the Secretary of Labor has
resolved the labor disputes.
On the other hand, MEWA supports the ruling of the Secretary on the theory that he has plenary power and discretion to fix the date of effectivity of his arbitral
award citing our ruling in St. Lukes Medical Center, Inc. vs. Torres.[48] MEWA also contends that if the arbitral award takes effect on the date of the Secretary
Labors ruling on the parties motion for reconsideration (i.e., on December 28, 1996), an anomaly situation will result when CBA would be more than the 5-year term
mandated by Article 253-A of the Labor Code.
However, neither party took into account the factors necessary for a proper resolution of this aspect. Pier 8, for instance, does not involve a mid-term
negotiation similar to this case, while St. Lukes does not take the hold over principle into account, i.e., the rule that although a CBA has expired, it continues to have
legal effects as between the parties until a new CBA has been entered into.[49]
Article 253-A serves as the guide in determining when the effectivity of the CBA at bar is to take effect. It provides that the representation aspect of the CBA is
to be for a term of 5 years, while

x x x [A]ll other provisions of the Collective Bargaining Agreement shall be re-negotiated not later than 3 years after its execution. Any agreement on such other
provisions of the Collective Bargaining Agreement entered into within 6 months from the date of expiry of the term of such other provisions as fixed in such
Collective Bargaining Agreement shall retroact to the day immediately following such date. If such agreement is entered into beyond 6 months, the parties shall
agree on the duration of the effectivity thereof. x x x.

Under these terms, it is clear that the 5-year term requirement is specific to the representation aspect. What the law additionally requires is that a CBA must be
re-negotiated within 3 years after its execution. It is in this re-negotiation that gives rise to the present CBA deadlock.
If no agreement is reached within 6 months from the expiry date of the 3 years that follow the CBA execution, the law expressly gives the parties - not anybody
else - the discretion to fix the effectivity of the agreement.
Significantly, the law does not specifically cover the situation where 6 months have elapsed but no agreement has been reached with respect to effectivity. In
this eventuality, we hold that any provision of law should then apply for the law abhors a vacuum.[50]
One such provision is the principle of hold over, i.e., that in the absence of a new CBA, the parties must maintain the status quo and must continue in full force
and effect the terms and conditions of the existing agreement until a new agreement is reached.[51] In this manner, the law prevents the existence of a gap in the
relationship between the collective bargaining parties. Another legal principle that should apply is that in the absence of an agreement between the parties, then, an
arbitrated CBA takes on the nature of any judicial or quasi-judicial award; it operates and may be executed only respectively unless there are legal justifications for
its retroactive application.
Consequently, we find no sufficient legal ground on the other justification for the retroactive application of the disputed CBA, and therefore hold that the CBA
should be effective for a term of 2 years counted from December 28, 1996 (the date of the Secretary of Labors disputed order on the parties motion for reconsideration)
up to December 27, 1999.
 WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor dated August 19, 1996 and December 28, 1996 are set aside to
the extent set forth above. The parties are directed to execute a Collective Bargaining Agreement incorporating the terms and conditions contained in the unaffected
portions of the Secretary of Labors order of August 19, 1996 and December 28, 1996, and the modifications set forth above. The retirement fund issue is remanded
to the Secretary of Labor for reception of evidence and determination of the legal personality of the MERALCO retirement fund.
SO ORDERED.
 [G.R. No. 120466. May 17, 1999]

COCA COLA BOTTLERS PHILS., INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and RAMON B.
CANONICATO, respondents.
SYNOPSIS
Private respondent Ramon Canonicato was hired as a janitor by the Bacolod Janitorial Services (BJS). He was assigned at the Coca Cola Bottlers,
Inc. considering his familiarity with its premises, having been previous casual employee there. On July 23, 1993, respondent filed with the Labor
Arbiter a complaint for illegal dismissal and underpayment of wages. He included BJS therein as a co-respondent. The Labor Arbiter dismissed the
complaint and ruled that there was employer-employee relationship between Canonicato and Coca Cola. The NLRC rejected the decision of the
Labor Arbiter on the ground that the janitorial services of Canonicato were found to be necessary in the usual trade of Coca Cola. Its motion for
reconsideration having been denied, Coca Cola filed this petition. Petition granted. Although janitorial services may be considered directly related
to the principal business of an employer, the Court deemed them unnecessary in the conduct of the employers principal business. This judicial notice
however rests on the assumption that the independent contractor is a legitimate job contractor so that there can be no doubt as to the existence of
an employer-employee relationship between the contractor and the worker. It is an altogether different matter when the very existence of an
employment relationship is in question, as in the case at bar. As the Court ruled in Singer Sewing Machine Company vs. Drilon; Art. 280 is not the
yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular
employees and casual employees
In determining the existence of an employer-employee relationship, the presence of the following factors are considered: a) selection and
engagement of the employee; b) payment of wages; c) power to dismiss; and, d) power to control the employees conduct. These are all found in the
relationship between BJS and Canonicato.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; EMPLOYER-EMPLOYEE RELATIONSHIP; JANITORIAL SERVICES UNNECESSARY IN
CONDUCT OF EMPLOYERS BUSINESS.We perceive at the outset the disposition of the NLRC that janitorial services are necessary and
desirable to the trade or business of petitioner COCA COLA. But this is inconsistent with our pronouncement in Kimberly Independent Labor
Union v. Drilon where the Court took judicial notice of the practice adopted in several government and private institutions and industries of
hiring janitorial services on an independent contractor basis. In this respect, although janitorial services may be considered directly related to
the principal business of an employer, as with every business, we deemed them unnecessary in the conduct of the employers principal business.
2. ID.; ID.; ARTICLE 280 OF THE LABOR CODE DOES NOT APPLY WHERE EXISTENCE OF EMPLOYMENT RELATIONSHIP
IS IN DISPUTE. It is an altogether different matter when the very existence of an employment relationship is in question. This was the issue
generated by Canonicatos application for regularization of his employment with COCA COLA and the subsequent denial by the latter of an
employer-employee relationship with the applicant. It was error therefore for the NLRC to apply Art. 280 of the Labor Code in determining the
existence of an employment relationship of the parties herein, especially in light of our explicit holding in Singer Sewing Machine Company v.
Drilon that x x x [t]he definition that regular employees are those who perform activities which are desirable and necessary for business of the
employer is not determative in this case. Any agreement may provide that one party shall render services for and in behalf of another for a
consideration ( no matter how necessary for the latters business ) even without being hired as an employee. This is precisely true in the case of
 an independent contractorship as well as in an agency agreement. The Court agrees with the petitioners argument that Article 280 is not the
yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of
employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or
form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute.
3. ID.; ID.; FACTORS IN DETERMINING EMPLOYER-EMPLOYEE RELATIONSHIP; ABSENT IN CASE AT BAR. In determining the
existence of an employer-employee relationship it is necessary to determine whether the following factors are present: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power to dismiss; and, (d) the power to control the employees conduct. Notably,
these are all found in the relationship between BJS and Canonicato and not between Canonicato and petitioner COCA COLA. As the Solicitor-
General manifested In the instant case, the selection and engagement of the janitors for petitioner were done by BJS. The application form and
letter submitted by private respondent (Canonicato) to BJS show that he acknowledged the fact that it was BJS who did the hiring and not
petitioner x x x BJS paid the wages of private respondent, as evidenced by the fact that on July 15, 1993, private respondent sent his sister to
BJS with a note authorizing her to receive his pay. Power of dismissal is also exercised by BJS and not petitioner. BJS is the one that assigns
the janitors to its clients and transfers them when it sees fit. Since BJS is the one who engages their services, then it only follows that it also has
the power to dismiss them when justified under the circumstances. Lastly, BJS has the power to control the conduct of the janitors. x x x.
4. ID.; ID.; POWER OF CONTROL; UNAVAILING IN CASE AT BAR. The power of the employer to control the work of the employee is said
to be the most significant determinant. Canonicato disputed this power of BJS over him by asserting that his employment with COCA COLA
was not interrupted by his application with BJS since his duties before and after he applied for regularization were the same, involving as they
did, working in the maintenance department and doing painting tasks within its facilities. Canonicato cited the Labor Utilization Reports of
COCA COLA showing his painting assignments. These reports, however, are not expressive of the true nature of the relationship between
Canonicato and COCA COLA; neither do they detract from the fact that BJS exercised real authority over Canonicato as its employee.
5. ID.; ID.; JOB CONTRACTOR; REQUIREMENTS; DULY ESTABLISHED IN CASE AT BAR. It is clear from these established
circumstances that NLRC should have recognized BJS as the employer of Canonicato and not COCA COLA. This is demanded by the fact that
it did not disturb, and therefore it upheld, the finding of the Labor Arbiter that BJS was truly a legitimate job-contractor and could by itself hire
its own employees. The Commission could not have reached any other legitimate conclusion considering that BJS satisfied all the requirements
of a job-contractor under the law, namely, (a) the ability to carry on an independent business and undertake the contract work on its own
account under its own responsibility according to its own manner and method, free from the control and direction of its principal or client in
all matters connected with the performance of the work except as to the restrlts thereof; and, (b) the substantial capital or investment in the
form of tools, equipment, machinery, work premises, and other materials which are necessary in the conduct of its business.
APPEARANCES OF COUNSEL
Valencia, Ciocon, Dabao, Valencia, De la Paz, Dionela, Ravina, and Pandan Law Office for petitioner.
The Solicitor General for respondents.

DECISION
BELLOSILLO, J.:
 This petition for certiorari under Rule 65 of the Revised Rules of Court assails the 3 January 1995 decision[1] of the National Labor Relations
Commission (NLRC) holding that private respondent Ramon B. Canonicato is a regular employee of petitioner Coca Cola Bottlers Phils. Inc. (COCA
COLA) entitled to reinstatement and back wages. The NLRC reversed the decision of the Labor Arbiter of 28 April 1994 [2] which declared that no
employer-employee relationship existed between COCA COLA and Canonicato thereby foreclosing entitlement to reinstatement and back wages.
On 7 April 1986 COCA COLA entered into a contract of janitorial services with Bacolod Janitorial Services (BJS) stipulating[3] among others -

That the First Party (COCA COLA) desires to engage the services of the Second Party (BJS), as an Independent Contractor, to perform and provide
for the maintenance, sanitation and cleaning services for the areas hereinbelow mentioned, all located within the aforesaid building of the First
Party x x x x

1. The scope of work of the Second Party includes all floors, walls, doors, vertical and horizontal areas, ceiling, all windows, glass surfaces,
partitions, furniture, fixtures and other interiors within the aforestated covered areas.

2. Except holidays which are rest days, the Second Party will undertake daily the following: 1) Sweeping, damp-mopping, spot scrubbing and
polishing of floors; 2) Cleaning, sanitizing and disinfecting agents to be used on commodes, urinals and washbasins, water spots on chrome and
other fixtures to be checked; 3) Cleaning of glass surfaces, windows and glass partitions that require daily attention; 4) Cleaning and dusting of
horizontal and vertical surfaces; 5) Cleaning of fixtures, counters, panels and sills; 6) Clean, pick-up cigarette butts from sandburns and ashtrays
and trash receptacles; 7) Trash and rubbish disposal and burning.

In addition, the Second Party will also do the following once a week, to wit: 1) Cleaning, waxing and polishing of lobbies and offices; 2) Washing of
windows, glasses that require cleaning; 3) Thorough disinfecting and cleaning of toilets and washrooms.

3. The Second Party shall supply the necessary utensils, equipment and supervision, and it shall only employ the services of fifteen (15) honest,
reliable, carefully screened, cooperative and trained personnel, who are in good faith, in the performance of its herein undertaking x x x x

4. The Second Party hereby guarantees against unsatisfactory workmanship. Minor repair of comfort rooms are free of charge provided the First
Party will supply the necessary materials for such repairs at its expense. As may be necessary, the Second Party shall also report on such part or
areas of the premises covered by this contract which may require repairs from time to time x x x (italics supplied).

Every year thereafter a service contract was entered into between the parties under similar terms and conditions until about May 1994. [4]
On 26 October 1989 COCA COLA hired private respondent Ramon Canonicato as a casual employee and assigned him to the bottling crew as a
substitute for absent employees. In April 1990 COCA COLA terminated Canonicato's casual employment. Later that year COCA COLA availed of
Canonicato's services, this time as a painter in contractual projects which lasted from fifteen (15) to thirty (30) days.[5]
On 1 April 1991 Canonicato was hired as a janitor by BJS[6] which assigned him to COCA COLA considering his familiarity with its premises. On
5 and 7 March 1992 Canonicato started painting the facilities of COCA COLA and continued doing so several months thereafter or so for a few days
every time until 6 to 25 June 1993.[7]
 Goaded by information that COCA COLA employed previous BJS employees who filed a complaint against the company for regularization
pursuant to a compromise agreement,[8] Canonicato submitted a similar complaint against COCA COLA to the Labor Arbiter on 8 June 1993. [9] The
complaint was docketed as RAB Case No. 06-06-10337-93.
Without notifying BJS, Canonicato no longer reported to his COCA COLA assignment starting 29 June 1993. On 15 July 1993 he sent his sister
Rowena to collect his salary from BJS.[10] BJS released his salary but advised Rowena to tell Canonicato to report for work. Claiming that he was
barred from entering the premises of COCA COLA on either 14 or 15 July 1993, Canonicato met with the proprietress of BJS, Gloria Lacson, who
offered him assignments in other firms which he however refused.[11]
On 23 July 1993 Canonicato amended his complaint against COCA COLA by citing instead as grounds therefor illegal dismissal and
underpayment of wages.He included BJS therein as a co-respondent.[12] On 28 September 1993 BJS sent him a letter advising him to report for work
within three (3) days from receipt, otherwise, he would be considered to have abandoned his job. [13]
On 28 April 1994 the Labor Arbiter ruled that: (a) there was no employer-employee relationship between COCA COLA and Ramon Canonicato
because BJS was Canonicato's real employer; (b) BJS was a legitimate job contractor, hence, any liability of COCA COLA as to Canonicato's salary or
wage differentials was solidary with BJS in accordance with pars. 1 and 2 of Art. 106, Labor Code; (c) COCA COLA and BJS must jointly and severally
pay Canonicato his wage differentials amounting to P2,776.80 and his 13th month salary of P1,068.00, including ten (10%) percent attorney's fees
in the sum of P384.48. The Labor Arbiter also ordered that all other claims by Canonicato against COCA COLA be dismissed for lack of employer-
employee relationship; that the complaint for illegal dismissal as well as all the other claims be likewise dismissed for lack of merit; and that COCA
COLA and BJS deposit P4,429.28 with the Department of Labor Regional Arbitration Branch Office within ten (10) days from receipt of the
decision.[14]
The NLRC rejected on appeal the decision of the Labor Arbiter on the ground that the janitorial services of Canonicato were found to be
necessary or desirable in the usual business or trade of COCA COLA. The NLRC accepted Canonicato's proposition that his work with the BJS was
the same as what he did while still a casual employee of COCA COLA. In so holding the NLRC applied Art. 280 of the Labor Code and declared that
Canonicato was a regular employee of COCA COLA and entitled to reinstatement and payment of P18,105.10 in back wages.[15]
On 26 May 1995 the NLRC denied COCA COLA's motion for reconsideration for lack of merit. [16] Hence, this petition, assigning as errors: (a)
NLRC's finding that janitorial services were necessary and desirable in COCA COLA's trade and business; (b) NLRC's application of Art. 280 of the
Labor Code in resolving the issue of whether an employment relationship existed between the parties; (c) NLRC's ruling that there was an employer-
employee relationship between petitioner and Canonicato despite its virtual affirmance that BJS was a legitimate job contractor; (d) NLRC's
declaration that Canonicato was a regular employee of petitioner although he had rendered the company only five (5) months of casual employment;
and, (e) NLRC's order directing the reinstatement of Canonicato and the payment to him of six (6) months back wages. [17]
We find good cause to sustain petitioner. Findings of fact of administrative offices are generally accorded respect by us and no longer reviewed
for the reason that such factual findings are considered to be within their field of expertise. Exception however is made, as in this case, when the
NLRC and the Labor Arbiter made contradictory findings.
We perceive at the outset the disposition of the NLRC that janitorial services are necessary and desirable to the trade or business of petitioner
COCA COLA.But this is inconsistent with our pronouncement in Kimberly Independent Labor Union v. Drilon[18] where the Court took judicial
notice of the practice adopted in several government and private institutions and industries of hiring janitorial services on an "independent
contractor basis." In this respect, although janitorial services may be considered directly related to the principal business of an employer, as with
every business, we deemed them unnecessary in the conduct of the employer's principal business. [19]
 This judicial notice, of course, rests on the assumption that the independent contractor is a legitimate job contractor so that there can be no
doubt as to the existence of an employer-employee relationship between contractor and the worker. In this situation, the only pertinent question
that may arise will no longer deal with whether there exists an employment bond but whether the employee may be considered regular or casual as
to deserve the application of Art. 280 of the Labor Code.
It is an altogether different matter when the very existence of an employment relationship is in question. This was the issue generated by
Canonicato's application for regularization of his employment with COCA COLA and the subsequent denial by the latter of an employer-employee
relationship with the applicant. It was error therefore for the NLRC to apply Art. 280 of the Labor Code in determining the existence of an
employment relationship of the parties herein, especially in light of our explicit holding in Singer Sewing Machine Company v. Drilon[20] that -

x x x x [t]he definition that regular employees are those who perform activities which are desirable and necessary for the business of the employer
is not determinative in this case. Any agreement may provide that one party shall render services for and in behalf of another for a consideration
(no matter how necessary for the latter's business) even without being hired as an employee. This is precisely true in the case of an independent
contractorship as well as in an agency agreement. The Court agrees with the petitioner's argument that Article 280 is not the yardstick for
determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees
and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of
tenure. Article 280 does not apply where the existence of an employment relationship is in dispute.

In determining the existence of an employer-employee relationship it is necessary to determine whether the following factors are present: (a)
the selection and engagement of the employee; (b) the payment of wages; (c) the power to dismiss; and, (d) the power to control the employee's
conduct.[21] Notably, these are all found in the relationship between BJS and Canonicato and not between Canonicato and petitioner COCA COLA. As
the Solicitor-General manifested[22]-

In the instant case, the selection and engagement of the janitors for petitioner were done by BJS. The application form and letter submitted by
private respondent (Canonicato) to BJS show that he acknowledged the fact that it was BJS who did the hiring and not petitioner x x x x

BJS paid the wages of private respondent, as evidenced by the fact that on July 15, 1993, private respondent sent his sister to BJS with a note
authorizing her to receive his pay.

Power of dismissal is also exercised by BJS and not petitioner. BJS is the one that assigns the janitors to its clients and transfers them when it sees
fit. Since BJS is the one who engages their services, then it only follows that it also has the power to dismiss them when justified under the
circumstances.

Lastly, BJS has the power to control the conduct of the janitors. The supervisors of petitioner, being interested in the result of the work of the
janitors, also gives suggestions as to the performance of the janitors, but this does not mean that BJS has no control over them. The interest of
petitioner is only with respect to the result of their work. On the other hand, BJS oversees the totality of their performance.

The power of the employer to control the work of the employee is said to be the most the most significant determinant. Canonicato disputed
this power of BJS over him by asserting that his employment with COCA COLA was not interrupted by his application with BJS since his duties
before and after he applied for regularization were the same, involving as they did, working in the maintenance department and doing painting tasks
within its facilities. Canonicato cited the Labor Utilization Reports of COCA COLA showing his painting assignments. These reports, however, are
not expressive of the true nature of the relationship between Canonicato and COCA COLA; neither do they detract from the fact that BJS exercised
real authority over Canonicato as its employee.
Moreover, a closer scrutiny of the reports reveals that the painting jobs were performed by Canonicato sporadically, either in a few days within
a month and only for a few months in a year.[23] This infrequency or irregularity of assignments countervails Canonicatos submission that he was
assigned specifically to undertake the task of painting the whole year round. If anything, it hews closely to the assertion of BJS that it assigned
Canonicato to these jobs to maintain and sanitize the premises of petitioner COCA COLA pursuant to its contract of services with the company.[24]
It is clear from these established circumstances that NLRC should have recognized BJS as the employer of Canonicato and not COCA COLA. This
is demanded by the fact that it did not disturb, and therefore it upheld, the finding of the Labor Arbiter that BJS was truly a legitimate job-contractor
and could by itself hire its own employees. The Commission could not have reached any other legitimate conclusion considering that BJS satisfied
all the requirements of a job-contractor under the law, namely, (a) the ability to carry on an independent business and undertake the contract work
on its own account under its own responsibility according to its manner and method, free from the control and direction of its principal or client in
all matters connected with the performance of the work except as to the results thereof; and, (b) the substantial capital or investment in the form of
tools, equipment, machinery, work premises, and other materials which are necessary in the conduct of its business.[25]
It is to be noted that COCA COLA is not the only client of BJS which has its roster of clients like San Miguel Corporation, Distileria Bago
Incorporated, University of Negros Occidental-Recolletos, University of St. La Salle, Riverside College, College Assurance Plan Phil., Inc., and Negros
Consolidated Farmers Association, Inc.[26] This is proof enough that BJS has the capability to carry on its business of janitorial services with big
establishments aside from petitioner and has sufficient capital or materials necessary therefor. [27] All told, there being no employer-employee
relationship between Canonicato and COCA COLA, the latter cannot be validly ordered to reinstate the former and pay him back wages.
WHEREFORE, the petition is GRANTED. The NLRC decision of 3 January 1995 declaring Ramon B. Canonicato a regular employee of
petitioner Coca Cola Bottlers Phils., Inc., entitled to reinstatement and back wages is REVERSED and SET ASIDE. The decision of the Labor Arbiter
of 28 April 1994 finding no employer-employee relationship between petitioner and private respondent but directing petitioner Coca Cola Bottlers
Phils., Inc., instead and Bacolod Janitorial Services to pay jointly and severally Ramon B. Canonicato P2,776.80 as wage differentials, P1,068.00 as
13th month pay and P384.48 as attorney's fees, is REINSTATED.
SO ORDERED.