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G.R. No.

L-48645 January 7, 1987

"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES,


ANTONIO CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON,
PATRICIO SERRANO, ANTONIO B. BOBIAS, VIRGILIO ECHAS,
DOMINGO PARINAS, NORBERTO GALANG, JUANITO NAVARRO,
NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO L. EGUIA,
CARLOS SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO,
DANILO B. MATIAR, ET AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR
LEGAL AFFAIRS, OFFICE OF THE PRESIDENT, HON. AMADO G.
INCIONG, UNDERSECRETARY OF LABOR, SAN MIGUEL
CORPORATION, GENARO OLIVES, ENRIQUE CAMAHORT,
FEDERICO OATE, ERNESTO VILLANUEVA, ANTONIO BOCALING
and GODOFREDO CUETO, respondents.

The elemental question in labor law of whether or not an employer-employee


relationship exists between petitioners-members of the "Brotherhood Labor
Unit Movement of the Philippines" (BLUM) and respondent San Miguel
Corporation, is the main issue in this petition. The disputed decision of public
respondent Ronaldo Zamora, Presidential Assistant for legal Affairs, contains
a brief summary of the facts involved:

1. The records disclose that on July 11, 1969, BLUM filed a


complaint with the now defunct Court of Industrial Relations,
charging San Miguel Corporation, and the following officers:
Enrique Camahort, Federico Ofiate Feliciano Arceo, Melencio
Eugenia Jr., Ernesto Villanueva, Antonio Bocaling and Godofredo
Cueto of unfair labor practice as set forth in Section 4 (a), sub-
sections (1) and (4) of Republic Act No. 875 and of Legal dismissal.
It was alleged that respondents ordered the individual
1
complainants to disaffiliate from the complainant union; and that
management dismissed the individual complainants when they
insisted on their union membership.

On their part, respondents moved for the dismissal of the complaint


on the grounds that the complainants are not and have never been
employees of respondent company but employees of the
independent contractor; that respondent company has never had
control over the means and methods followed by the independent
contractor who enjoyed full authority to hire and control said
employees; and that the individual complainants are barred by
estoppel from asserting that they are employees of respondent
company.

While pending with the Court of Industrial Relations CIR pleadings


and testimonial and documentary evidences were duly presented,
although the actual hearing was delayed by several
postponements. The dispute was taken over by the National Labor
Relations Commission (NLRC) with the decreed abolition of the CIR
and the hearing of the case intransferably commenced on
September 8, 1975.

On February 9, 1976, Labor Arbiter Nestor C. Lim found for


complainants which was concurred in by the NLRC in a decision
dated June 28, 1976. The amount of backwages awarded,
however, was reduced by NLRC to the equivalent of one (1) year
salary.

On appeal, the Secretary in a decision dated June 1, 1977, set aside


the NLRC ruling, stressing the absence of an employer-mployee
relationship as borne out by the records of the case. ...

2
The petitioners strongly argue that there exists an employer-employee
relationship between them and the respondent company and that they were
dismissed for unionism, an act constituting unfair labor practice "for which
respondents must be made to answer."

Unrebutted evidence and testimony on record establish that the petitioners


are workers who have been employed at the San Miguel Parola Glass Factory
since 1961, averaging about seven (7) years of service at the time of their
termination. They worked as "cargadores" or "pahinante" at the SMC Plant
loading, unloading, piling or palleting empty bottles and woosen shells to and
from company trucks and warehouses. At times, they accompanied the
company trucks on their delivery routes.

The petitioners first reported for work to Superintendent-in-Charge


Camahort. They were issued gate passes signed by Camahort and were
provided by the respondent company with the tools, equipment and
paraphernalia used in the loading, unloading, piling and hauling operation.

Job orders emanated from Camahort. The orders are then transmitted to an
assistant-officer-in-charge. In turn, the assistant informs the warehousemen
and checkers regarding the same. The latter, thereafter, relays said orders to
the capatazes or group leaders who then give orders to the workers as to
where, when and what to load, unload, pile, pallet or clean.

Work in the glass factory was neither regular nor continuous, depending
wholly on the volume of bottles manufactured to be loaded and unloaded, as
well as the business activity of the company. Work did not necessarily mean
a full eight (8) hour day for the petitioners. However, work,at times, exceeded
the eight (8) hour day and necessitated work on Sundays and holidays. For
this, they were neither paid overtime nor compensation for work on Sundays
and holidays.

3
Petitioners were paid every ten (10) days on a piece rate basis, that is,
according to the number of cartons and wooden shells they were able to load,
unload, or pile. The group leader notes down the number or volume of work
that each individual worker has accomplished. This is then made the basis of
a report or statement which is compared with the notes of the checker and
warehousemen as to whether or not they tally. Final approval of report is by
officer-in-charge Camahort. The pay check is given to the group leaders for
encashment, distribution, and payment to the petitioners in accordance with
payrolls prepared by said leaders. From the total earnings of the group, the
group leader gets a participation or share of ten (10%) percent plus an
additional amount from the earnings of each individual.

The petitioners worked exclusive at the SMC plant, never having been
assigned to other companies or departments of SMC plant, even when the
volume of work was at its minimum. When any of the glass furnaces suffered
a breakdown, making a shutdown necessary, the petitioners work was
temporarily suspended. Thereafter, the petitioners would return to work at
the glass plant.

Sometime in January, 1969, the petitioner workers numbering one


hundred and forty (140) organized and affiliated themselves with the
petitioner union and engaged in union activities. Believing themselves entitled
to overtime and holiday pay, the petitioners pressed management, airing
other grievances such as being paid below the minimum wage law, inhuman
treatment, being forced to borrow at usurious rates of interest and to buy
raffle tickets, coerced by withholding their salaries, and salary deductions
made without their consent. However, their gripes and grievances were not
heeded by the respondents.

On February 6, 1969, the petitioner union filed a notice of strike with the
Bureau of Labor Relations in connection with the dismissal of some of its
members who were allegedly castigated for their union membership and
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warned that should they persist in continuing with their union activities they
would be dismissed from their jobs. Several conciliation conferences were
scheduled in order to thresh out their differences, On February 12, 1969,
union member Rogelio Dipad was dismissed from work. At the scheduled
conference on February 19, 1969, the complainant union through its officers
headed by National President Artemio Portugal Sr., presented a letter to the
respondent company containing proposals and/or labor demands together
with a request for recognition and collective bargaining.

San Miguel refused to bargain with the petitioner union alleging that the
workers are not their employees.

On February 20, 1969, all the petitioners were dismissed from their jobs and,
thereafter, denied entrance to respondent company's glass factory despite
their regularly reporting for work. A complaint for illegal dismissal and unfair
labor practice was filed by the petitioners.

The case reaches us now with the same issues to be resolved as when it had
begun.

The question of whether an employer-employee relationship exists in a


certain situation continues to bedevil the courts. Some businessmen try to
avoid the bringing about of an employer-employee relationship in their
enterprises because that judicial relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage,
termination pay, and unionism. (Mafinco Trading Corporation v. Ople, 70
SCRA 139).

In determining the existence of an employer-employee relationship, the


elements that are generally considered are the following: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employer's power to control the employee with
respect to the means and methods by which the work is to be accomplished.
5
It. is the called "control test" that is the most important element (Investment
Planning Corp. of the Phils. v. The Social Security System, 21 SCRA 924;
Mafinco Trading Corp. v. Ople, supra, and Rosario Brothers, Inc. v. Ople, 131
SCRA 72).

Applying the above criteria, the evidence strongly indicates the existence of
an employer-employee relationship between petitioner workers and
respondent San Miguel Corporation. The respondent asserts that the
petitioners are employees of the Guaranteed Labor Contractor, an
independent labor contracting firm.

The facts and evidence on record negate respondent SMC's claim.

The existence of an independent contractor relationship is generally


established by the following criteria: "whether or not the contractor is
carrying on an independent business; the nature and extent of the work; the
skill required; the term and duration of the relationship; the right to assign
the performance of a specified piece of work; the control and supervision of
the work to another; the employer's power with respect to the hiring, firing
and payment of the contractor's workers; the control of the premises; the
duty to supply the premises tools, appliances, materials and labor; and the
mode, manner and terms of payment" (56 CJS Master and Servant, Sec. 3(2),
46; See also 27 AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75
ALR 7260727)

None of the above criteria exists in the case at bar.

Highly unusual and suspect is the absence of a written contract to specify the
performance of a specified piece of work, the nature and extent of the work
and the term and duration of the relationship. The records fail to show that
a large commercial outfit, such as the San Miguel Corporation, entered into
mere oral agreements of employment or labor contracting where the same
would involve considerable expenses and dealings with a large number of
6
workers over a long period of time. Despite respondent company's allegations
not an iota of evidence was offered to prove the same or its particulars. Such
failure makes respondent SMC's stand subject to serious doubts.

Uncontroverted is the fact that for an average of seven (7) years, each of the
petitioners had worked continuously and exclusively for the respondent
company's shipping and warehousing department. Considering the length of
time that the petitioners have worked with the respondent company, there is
justification to conclude that they were engaged to perform activities
necessary or desirable in the usual business or trade of the respondent, and
the petitioners are, therefore regular employees (Phil. Fishing Boat Officers
and Engineers Union v. Court of Industrial Relations, 112 SCRA 159 and RJL
Martinez Fishing Corporation v. National Labor Relations Commission, 127
SCRA 454).

As we have found in RJL Martinez Fishing Corporation v. National Labor


Relations Commission (supra):

... [T]he employer-employee relationship between the parties


herein is not coterminous with each loading and unloading job. As
earlier shown, respondents are engaged in the business of fishing.
For this purpose, they have a fleet of fishing vessels. Under this
situation, respondents' activity of catching fish is a continuous
process and could hardly be considered as seasonal in nature. So
that the activities performed by herein complainants, i.e. unloading
the catch of tuna fish from respondents' vessels and then loading
the same to refrigerated vans, are necessary or desirable in the
business of respondents. This circumstance makes the employment
of complainants a regular one, in the sense that it does not depend
on any specific project or seasonable activity. (NLRC Decision, p.
94, Rollo).lwphl@it

7
so as it with petitioners in the case at bar. In fact, despite past shutdowns of
the glass plant for repairs, the petitioners, thereafter, promptly returned to
their jobs, never having been replaced, or assigned elsewhere until the
present controversy arose. The term of the petitioners' employment appears
indefinite. The continuity and habituality of petitioners' work bolsters their
claim of employee status vis-a-vis respondent company,

Even under the assumption that a contract of employment had indeed been
executed between respondent SMC and the alleged labor contractor,
respondent's case will, nevertheless, fail.

Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code
provides:

Job contracting. There is job contracting permissible under the


Code if the following conditions are met:

(1) The contractor carries on an independent business and


undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the
results thereof; and

(2) The contractor has substantial capital or investment in the form


of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.

We find that Guaranteed and Reliable Labor contractors have neither


substantial capital nor investment to qualify as an independent contractor
under the law. The premises, tools, equipment and paraphernalia used by
the petitioners in their jobs are admittedly all supplied by respondent
company. It is only the manpower or labor force which the alleged contractors
8
supply, suggesting the existence of a "labor only" contracting scheme
prohibited by law (Article 106, 109 of the Labor Code; Section 9(b), Rule VIII,
Book III, Implementing Rules and Regulations of the Labor Code). In fact,
even the alleged contractor's office, which consists of a space at respondent
company's warehouse, table, chair, typewriter and cabinet, are provided for
by respondent SMC. It is therefore clear that the alleged contractors have no
capital outlay involved in the conduct of its business, in the maintenance
thereof or in the payment of its workers' salaries.

The payment of the workers' wages is a critical factor in determining the


actuality of an employer-employee relationship whether between respondent
company and petitioners or between the alleged independent contractor and
petitioners. It is important to emphasize that in a truly independent
contractor-contractee relationship, the fees are paid directly to the manpower
agency in lump sum without indicating or implying that the basis of such lump
sum is the salary per worker multiplied by the number of workers assigned
to the company. This is the rule in Social Security System v. Court of
Appeals (39 SCRA 629, 635).

The alleged independent contractors in the case at bar were paid a lump sum
representing only the salaries the workers were entitled to, arrived at by
adding the salaries of each worker which depend on the volume of work they.
had accomplished individually. These are based on payrolls, reports or
statements prepared by the workers' group leader, warehousemen and
checkers, where they note down the number of cartons, wooden shells and
bottles each worker was able to load, unload, pile or pallet and see whether
they tally. The amount paid by respondent company to the alleged
independent contractor considers no business expenses or capital outlay of
the latter. Nor is the profit or gain of the alleged contractor in the conduct of
its business provided for as an amount over and above the workers' wages.
Instead, the alleged contractor receives a percentage from the total earnings
of all the workers plus an additional amount corresponding to a percentage
9
of the earnings of each individual worker, which, perhaps, accounts for the
petitioners' charge of unauthorized deductions from their salaries by the
respondents.

Anent the argument that the petitioners are not employees as they worked
on piece basis, we merely have to cite our rulings in Dy Keh Beng v.
International Labor and Marine Union of the Philippines (90 SCRA 161), as
follows:

"[C]ircumstances must be construed to determine indeed if


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

Article 106 of the Labor Code provides the legal effect of a labor only
contracting scheme, to wit:

... the person or intermediary shall be considered merely as an


agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed
by him.

Firmly establishing respondent SMC's role as employer is the control exercised


by it over the petitioners that is, control in the means and methods/manner
by which petitioners are to go about their work, as well as in disciplinary
measures imposed by it.

10
Because of the nature of the petitioners' work as cargadores or pahinantes,
supervision as to the means and manner of performing the same is practically
nil. For, how many ways are there to load and unload bottles and wooden
shells? The mere concern of both respondent SMC and the alleged contractor
is that the job of having the bottles and wooden shells brought to and from
the warehouse be done. More evident and pronounced is respondent
company's right to control in the discipline of petitioners. Documentary
evidence presented by the petitioners establish respondent SMC's right to
impose disciplinary measures for violations or infractions of its rules and
regulations as well as its right to recommend transfers and dismissals of the
piece workers. The inter-office memoranda submitted in evidence prove the
company's control over the petitioners. That respondent SMC has the power
to recommend penalties or dismissal of the piece workers, even as to Abner
Bungay who is alleged by SMC to be a representative of the alleged labor
contractor, is the strongest indication of respondent company's right of
control over the petitioners as direct employer. There is no evidence to show
that the alleged labor contractor had such right of control or much less had
been there to supervise or deal with the petitioners.

The petitioners were dismissed allegedly because of the shutdown of the


glass manufacturing plant. Respondent company would have us believe that
this was a case of retrenchment due to the closure or cessation of operations
of the establishment or undertaking. But such is not the case here. The
respondent's shutdown was merely temporary, one of its furnaces needing
repair. Operations continued after such repairs, but the petitioners had
already been refused entry to the premises and dismissed from respondent's
service. New workers manned their positions. It is apparent that the closure
of respondent's warehouse was merely a ploy to get rid of the petitioners,
who were then agitating the respondent company for benefits, reforms and
collective bargaining as a union. There is no showing that petitioners had

11
been remiss in their obligations and inefficient in their jobs to warrant their
separation.

As to the charge of unfair labor practice because of SMC's refusal to bargain


with the petitioners, it is clear that the respondent company had an existing
collective bargaining agreement with the IBM union which is the recognized
collective bargaining representative at the respondent's glass plant.

There being a recognized bargaining representative of all employees at the


company's glass plant, the petitioners cannot merely form a union and
demand bargaining. The Labor Code provides the proper procedure for the
recognition of unions as sole bargaining representatives. This must be
followed.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The


San Miguel Corporation is hereby ordered to REINSTATE petitioners, with
three (3) years backwages. However, where reinstatement is no longer
possible, the respondent SMC is ordered to pay the petitioners separation pay
equivalent to one (1) month pay for every year of service.

SO ORDERED.

12
G.R. No. L-41182-3 April 16, 1988

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,


vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO
S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J.:

The petitioners invoke the provisions on human relations of the Civil Code in
this appeal by certiorari. The facts are beyond dispute:

xxx xxx xxx

On the strength of a contract (Exhibit A for the appellant Exhibit 2


for the appellees) entered into on Oct. 19, 1960 by and between
Mrs. Segundina Noguera, party of the first part; the Tourist World
Service, Inc., represented by Mr. Eliseo Canilao as party of the
second part, and hereinafter referred to as appellants, the Tourist
World Service, Inc. leased the premises belonging to the party of
the first part at Mabini St., Manila for the former-s use as a branch
office. In the said contract the party of the third part held herself
solidarily liable with the party of the part for the prompt payment
of the monthly rental agreed on. When the branch office was
opened, the same was run by the herein appellant Una 0. Sevilla
payable to Tourist World Service Inc. by any airline for any fare
brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina
Sevilla and 3% was to be withheld by the Tourist World Service,
Inc.

On or about November 24, 1961 (Exhibit 16) the Tourist World


Service, Inc. appears to have been informed that Lina Sevilla was
13
connected with a rival firm, the Philippine Travel Bureau, and, since
the branch office was anyhow losing, the Tourist World Service
considered closing down its office. This was firmed up by two
resolutions of the board of directors of Tourist World Service, Inc.
dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the
office of the manager and vice-president of the Tourist World
Service, Inc., Ermita Branch, and the second,authorizing the
corporate secretary to receive the properties of the Tourist World
Service then located at the said branch office. It further appears
that on Jan. 3, 1962, the contract with the appellees for the use of
the Branch Office premises was terminated and while the effectivity
thereof was Jan. 31, 1962, the appellees no longer used it. As a
matter of fact appellants used it since Nov. 1961. Because of this,
and to comply with the mandate of the Tourist World Service, the
corporate secretary Gabino Canilao went over to the branch office,
and, finding the premises locked, and, being unable to contact Lina
Sevilla, he padlocked the premises on June 4, 1962 to protect the
interests of the Tourist World Service. When neither the appellant
Lina Sevilla nor any of her employees could enter the locked
premises, a complaint wall filed by the herein appellants against
the appellees with a prayer for the issuance of mandatory
preliminary injunction. Both appellees answered with
counterclaims. For apparent lack of interest of the parties therein,
the trial court ordered the dismissal of the case without prejudice.

The appellee Segundina Noguera sought reconsideration of the


order dismissing her counterclaim which the court a quo, in an
order dated June 8, 1963, granted permitting her to present
evidence in support of her counterclaim.

On June 17,1963, appellant Lina Sevilla refiled her case against the
herein appellees and after the issues were joined, the reinstated
14
counterclaim of Segundina Noguera and the new complaint of
appellant Lina Sevilla were jointly heard following which the court
a quo ordered both cases dismiss for lack of merit, on the basis of
which was elevated the instant appeal on the following assignment
of errors:

I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE


NATURE OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S
COMPLAINT.

II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT


MRS. LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST
WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-
EMPLOYEE RELATION AND IN FAILING TO HOLD THAT THE SAID
ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.

III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-


APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING
THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE
TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT


APPELLEES HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O.
SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW INTO
THEIR OWN HANDS.

V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL


APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O.
SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI
PREMISES.

15
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT
APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS
GUARANTOR FOR RENTALS.

On the foregoing facts and in the light of the errors asigned the issues to be
resolved are:

1. Whether the appellee Tourist World Service unilaterally disco the telephone
line at the branch office on Ermita;

2. Whether or not the padlocking of the office by the Tourist World Service
was actionable or not; and

3. Whether or not the lessee to the office premises belonging to the appellee
Noguera was appellees TWS or TWS and the appellant.

In this appeal, appealant Lina Sevilla claims that a joint bussiness venture
was entered into by and between her and appellee TWS with offices at the
Ermita branch office and that she was not an employee of the TWS to the
end that her relationship with TWS was one of a joint business venture
appellant made declarations showing:

1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent


eye, ear and nose specialist as well as a imediately columnist had been in the
travel business prior to the establishment of the joint business venture with
appellee Tourist World Service, Inc. and appellee Eliseo Canilao, her
compadre, she being the godmother of one of his children, with her own
clientele, coming mostly from her own social circle (pp. 3-6 tsn. February
16,1965).

2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October


1960 (Exh. 'A') covering the premises at A. Mabini St., she expressly
warranting and holding [sic] herself 'solidarily' liable with appellee Tourist

16
World Service, Inc. for the prompt payment of the monthly rentals thereof to
other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).

3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist
World Service, Inc., which had its own, separate office located at the Trade
& Commerce Building; nor was she an employee thereof, having no
participation in nor connection with said business at the Trade & Commerce
Building (pp. 16-18 tsn Id.).

4. Appellant Mrs. Sevilla earned commissions for her own passengers, her
own bookings her own business (and not for any of the business of appellee
Tourist World Service, Inc.) obtained from the airline companies. She shared
the 7% commissions given by the airline companies giving appellee Tourist
World Service, Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn. Id.)

5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the


A. Mabini St. office, paying for the salary of an office secretary, Miss Obieta,
and other sundry expenses, aside from desicion the office furniture and
supplying some of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee
Tourist World Service, Inc. shouldering the rental and other expenses in
consideration for the 3% split in the co procured by appellant Mrs. Sevilla (p.
35 tsn Feb. 16,1965).

6. It was the understanding between them that appellant Mrs. Sevilla would
be given the title of branch manager for appearance's sake only (p. 31 tsn.
Id.), appellee Eliseo Canilao admit that it was just a title for dignity (p. 36
tsn. June 18, 1965- testimony of appellee Eliseo Canilao pp. 38-39 tsn April
61965-testimony of corporate secretary Gabino Canilao (pp- 2-5, Appellants'
Reply Brief)

Upon the other hand, appellee TWS contend that the appellant was an
employee of the appellee Tourist World Service, Inc. and as such was
designated manager.1
17
xxx xxx xxx

The trial court2 held for the private respondent on the premise that the
private respondent, Tourist World Service, Inc., being the true lessee, it was
within its prerogative to terminate the lease and padlock the premises. 3 It
likewise found the petitioner, Lina Sevilla, to be a mere employee of said
Tourist World Service, Inc. and as such, she was bound by the acts of her
employer. 4 The respondent Court of Appeal 5 rendered an affirmance.

The petitioners now claim that the respondent Court, in sustaining the lower
court, erred. Specifically, they state:

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY


ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE
PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE
AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING
MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT
INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY
BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE
CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE
PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY
SETTLE THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE
TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE
RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION
AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW.

II

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY


ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF
BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT
18
ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE
WITHDRAWN." (ANNEX "A" P. 8)

III

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY


ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND
RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON
ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.

IV

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY


ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF
YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH
TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH
AN INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED
UNILATERALLY BY TOURIST WORLD SERVICE INC.6

As a preliminary inquiry, the Court is asked to declare the true nature of the
relation between Lina Sevilla and Tourist World Service, Inc. The respondent
Court of see fit to rule on the question, the crucial issue, in its opinion being
"whether or not the padlocking of the premises by the Tourist World Service,
Inc. without the knowledge and consent of the appellant Lina Sevilla entitled
the latter to the relief of damages prayed for and whether or not the evidence
for the said appellant supports the contention that the appellee Tourist World
Service, Inc. unilaterally and without the consent of the appellant
disconnected the telephone lines of the Ermita branch office of the appellee
Tourist World Service, Inc.7 Tourist World Service, Inc., insists, on the other
hand, that Lina SEVILLA was a mere employee, being "branch manager" of
its Ermita "branch" office and that inferentially, she had no say on the lease
executed with the private respondent, Segundina Noguera. The petitioners
contend, however, that relation between the between parties was one of joint
19
venture, but concede that "whatever might have been the true relationship
between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist
World Service and Canilao from taking the law into their own hands, 8 in
reference to the padlocking now questioned.

The Court finds the resolution of the issue material, for if, as the private
respondent, Tourist World Service, Inc., maintains, that the relation between
the parties was in the character of employer and employee, the courts would
have been without jurisdiction to try the case, labor disputes being the
exclusive domain of the Court of Industrial Relations, later, the Bureau Of
Labor Relations, pursuant to statutes then in force. 9

In this jurisdiction, there has been no uniform test to determine the evidence
of an employer-employee relation. In general, we have relied on the so-called
right of control test, "where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also the
means to be used in reaching such end." 10Subsequently, however, we have
considered, in addition to the standard of right-of control, the existing
economic conditions prevailing between the parties, like the inclusion of the
employee in the payrolls, in determining the existence of an employer-
employee relationship.11

The records will show that the petitioner, Lina Sevilla, was not subject to
control by the private respondent Tourist World Service, Inc., either as to the
result of the enterprise or as to the means used in connection therewith. In
the first place, under the contract of lease covering the Tourist Worlds Ermita
office, she had bound herself in solidum as and for rental payments, an
arrangement that would be like claims of a master-servant relationship. True
the respondent Court would later minimize her participation in the lease as
one of mere guaranty, 12 that does not make her an employee of Tourist
World, since in any case, a true employee cannot be made to part with his
own money in pursuance of his employer's business, or otherwise, assume
20
any liability thereof. In that event, the parties must be bound by some other
relation, but certainly not employment.

In the second place, and as found by the Appellate Court, '[w]hen the branch
office was opened, the same was run by the herein appellant Lina O. Sevilla
payable to Tourist World Service, Inc. by any airline for any fare brought in
on the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be
said that Sevilla was under the control of Tourist World Service, Inc. "as to
the means used." Sevilla in pursuing the business, obviously relied on her
own gifts and capabilities.

It is further admitted that Sevilla was not in the company's payroll. For her
efforts, she retained 4% in commissions from airline bookings, the remaining
3% going to Tourist World. Unlike an employee then, who earns a fixed salary
usually, she earned compensation in fluctuating amounts depending on her
booking successes.

The fact that Sevilla had been designated 'branch manager" does not make
her, ergo, Tourist World's employee. As we said, employment is determined
by the right-of-control test and certain economic parameters. But titles are
weak indicators.

In rejecting Tourist World Service, Inc.'s arguments however, we are not, as


a consequence, accepting Lina Sevilla's own, that is, that the parties had
embarked on a joint venture or otherwise, a partnership. And apparently,
Sevilla herself did not recognize the existence of such a relation. In her letter
of November 28, 1961, she expressly 'concedes your [Tourist World Service,
Inc.'s] right to stop the operation of your branch office 14 in effect, accepting
Tourist World Service, Inc.'s control over the manner in which the business
was run. A joint venture, including a partnership, presupposes generally a of
standing between the joint co-venturers or partners, in which each party has
an equal proprietary interest in the capital or property contributed 15 and

21
where each party exercises equal rights in the conduct of the
business.16 furthermore, the parties did not hold themselves out as partners,
and the building itself was embellished with the electric sign "Tourist World
Service, Inc. 17in lieu of a distinct partnership name.

It is the Court's considered opinion, that when the petitioner, Lina Sevilla,
agreed to (wo)man the private respondent, Tourist World Service, Inc.'s
Ermita office, she must have done so pursuant to a contract of agency. It is
the essence of this contract that the agent renders services "in representation
or on behalf of another.18 In the case at bar, Sevilla solicited airline fares, but
she did so for and on behalf of her principal, Tourist World Service, Inc. As
compensation, she received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself based on her letter of November
28, 1961, pre-assumed her principal's authority as owner of the business
undertaking. We are convinced, considering the circumstances and from the
respondent Court's recital of facts, that the ties had contemplated a principal
agent relationship, rather than a joint managament or a partnership..

But unlike simple grants of a power of attorney, the agency that we hereby
declare to be compatible with the intent of the parties, cannot be revoked at
will. The reason is that it is one coupled with an interest, the agency having
been created for mutual interest, of the agent and the principal. 19 It appears
that Lina Sevilla is a bona fide travel agent herself, and as such, she had
acquired an interest in the business entrusted to her. Moreover, she had
assumed a personal obligation for the operation thereof, holding herself
solidarily liable for the payment of rentals. She continued the business, using
her own name, after Tourist World had stopped further operations. Her
interest, obviously, is not to the commissions she earned as a result of her
business transactions, but one that extends to the very subject matter of the
power of management delegated to her. It is an agency that, as we said,
cannot be revoked at the pleasure of the principal. Accordingly, the

22
revocation complained of should entitle the petitioner, Lina Sevilla, to
damages.

As we have stated, the respondent Court avoided this issue, confining itself
to the telephone disconnection and padlocking incidents. Anent the
disconnection issue, it is the holding of the Court of Appeals that there is 'no
evidence showing that the Tourist World Service, Inc. disconnected the
telephone lines at the branch office. 20 Yet, what cannot be denied is the fact
that Tourist World Service, Inc. did not take pains to have them reconnected.
Assuming, therefore, that it had no hand in the disconnection now
complained of, it had clearly condoned it, and as owner of the telephone
lines, it must shoulder responsibility therefor.

The Court of Appeals must likewise be held to be in error with respect to the
padlocking incident. For the fact that Tourist World Service, Inc. was the
lessee named in the lease con-tract did not accord it any authority to
terminate that contract without notice to its actual occupant, and to padlock
the premises in such fashion. As this Court has ruled, the petitioner, Lina
Sevilla, had acquired a personal stake in the business itself, and necessarily,
in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger
to that contract having been explicitly named therein as a third party in
charge of rental payments (solidarily with Tourist World, Inc.). She could not
be ousted from possession as summarily as one would eject an interloper.

The Court is satisfied that from the chronicle of events, there was indeed
some malevolent design to put the petitioner, Lina Sevilla, in a bad light
following disclosures that she had worked for a rival firm. To be sure, the
respondent court speaks of alleged business losses to justify the
closure '21 but there is no clear showing that Tourist World Ermita Branch
had in fact sustained such reverses, let alone, the fact that Sevilla had moonlit
for another company. What the evidence discloses, on the other hand, is that
following such an information (that Sevilla was working for another
23
company), Tourist World's board of directors adopted two resolutions
abolishing the office of 'manager" and authorizing the corporate secretary,
the respondent Eliseo Canilao, to effect the takeover of its branch office
properties. On January 3, 1962, the private respondents ended the lease over
the branch office premises, incidentally, without notice to her.

It was only on June 4, 1962, and after office hours significantly, that the
Ermita office was padlocked, personally by the respondent Canilao, on the
pretext that it was necessary to Protect the interests of the Tourist World
Service. " 22It is strange indeed that Tourist World Service, Inc. did not find
such a need when it cancelled the lease five months earlier. While Tourist
World Service, Inc. would not pretend that it sought to locate Sevilla to inform
her of the closure, but surely, it was aware that after office hours, she could
not have been anywhere near the premises. Capping these series of
"offensives," it cut the office's telephone lines, paralyzing completely its
business operations, and in the process, depriving Sevilla articipation therein.

This conduct on the part of Tourist World Service, Inc. betrays a sinister effort
to punish Sevillsa it had perceived to be disloyalty on her part. It is offensive,
in any event, to elementary norms of justice and fair play.

We rule therefore, that for its unwarranted revocation of the contract of


agency, the private respondent, Tourist World Service, Inc., should be
sentenced to pay damages. Under the Civil Code, moral damages may be
awarded for "breaches of contract where the defendant acted ... in bad
faith. 23

We likewise condemn Tourist World Service, Inc. to pay further damages for
the moral injury done to Lina Sevilla from its brazen conduct subsequent to
the cancellation of the power of attorney granted to her on the authority of
Article 21 of the Civil Code, in relation to Article 2219 (10) thereof

24
ART. 21. Any person who wilfully causes loss or injury to another
in a manner that is contrary to morals, good customs or public
policy shall compensate the latter for the damage.24

ART. 2219. Moral damages25 may be recovered in the following and


analogous cases:

xxx xxx xxx

(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32,
34, and 35.

The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby


ordered to respond for the same damages in a solidary capacity.

Insofar, however, as the private respondent, Segundina Noguera is


concerned, no evidence has been shown that she had connived with Tourist
World Service, Inc. in the disconnection and padlocking incidents. She cannot
therefore be held liable as a cotortfeasor.

The Court considers the sums of P25,000.00 as and for moral damages,24
P10,000.00 as exemplary damages, 25and P5,000.00 as nominal 26 and/or
temperate27 damages, to be just, fair, and reasonable under the
circumstances.

WHEREFORE, the Decision promulgated on January 23, 1975 as well as the


Resolution issued on July 31, 1975, by the respondent Court of Appeals is
hereby REVERSED and SET ASIDE. The private respondent, Tourist World
Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to
indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral
damages, the sum of P10,000.00, as and for exemplary damages, and the
sum of P5,000.00, as and for nominal and/or temperate damages.

Costs against said private respondents.


25
SO ORDERED.

26
[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.

DECISION
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.

27
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
28
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

29
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

30
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,

31
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]

32
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

33
G.R. No. L-66890 April 15, 1988

HERMINIO FLORES and HERMINIA FLORES, petitioners,


vs.
FUNERARIA NUESTRO and /or FORTUNATO NUESTRO and the
NATIONAL LABOR RELATIONS COMMISSION, respondents.

YAP, J.:

In this petition for certiorari, petitioners seek to annul and set aside the
decision of the National Labor Relations Commission (NLRC), dated December
6, 1983, dismissing their complaint for illegal dismissal but ordering
respondents to pay them their living allowances from October 1980 until
October 1982 when their employment was terminated. Petitioners pray that
judgment be rendered ordering the respondents (1) to reinstate them to their
former or equivalent positions, with full backwages from the time of their
illegal dismisss up to their actual reinstatement, or if reinstatement should
become impossible because of the strained relations between petitioners and
respondent, to pay them separation pay; and (b) to pay petitioners their
unpaid benefits provided for under all the labor standard laws invoked by
them.

It appears from the record that petitioner spouses Herminio and Herminia
Flores had worked for respondent Fortunato Nuestro in his funeral parlor
known as Funeraria Nuestro since June, 1976, respectively, as helper- utility
man and as bookkeeper, embalmer and cashier. On October 7, 1980,
respondent Fortunato Nuestro registered the petitioner spouses with the
Social Security System, as his employees with a monthly salary of P200.00
each. Thereafter, Herminio Flores was paid P750.00 a month, plus P200.00
monthly allowance, while Herminia's salary was increased to P500.00 a

34
month. The petitioners were given living quarters right inside the compound
of the funeral parlor.

On October 30,1982, Herminio Flores and respondent Fortunato Nuestro had


an altercation, during which the former was physically assaulted by the latter
and suffered a punctured wound on the lower and an abrasion in the scapular
region (L). Herminio was treated at the Bataan Provincial Hospital and
subsequently, he filed an action for slight physical injuries against the
respondent, which was docketed as Criminal Case No. 2249 of the Municipal
Court of Pilar, Bataan. Respondent, however, claimed that he merely shoved
the arm of Herminio when the latter pointed a finger at him and uttered
abusive remarks against him. As a result of the incident and fearing for his
safety, petitioner Herminio Flores, together with his family, was compelled to
vacate his living quarters at the funerall parlor and had to seek protection
from the Integrated National Police of Pilar, Bataan.

On November 15, 1982, petitioners filed a complaint against respondent for


illegal dismissal, underpayment of living allowances, non-payment of five (5)
days incentive leave and non-payment of overtime compensation. The
respondent denied the existence of employer-employee relation with the
petitioners and further alleged that in any event the petitioners had
abandoned their work on October 30, 1982.

On May 23,1983, Labor Arbiter Federico Bernardo rendered a decision finding


that no employer-employee relationship existed between the parties and
dismissing the complaint. He held that Herminio Flores was merely a
contractual worker paid on a piece-work basis, while Herminia Flores was a
domestic helper; and that on October 30, 1982, they abandoned their work.

On appeal, the National Labor Relations Commission, while holding that an


employer-employee relationship existed between the parties, found that the
petitioners had abandoned their work, thus precluding them from seeking

35
reinstatement with backwages. However, the Commission ordered
respondent to pay the petitioners their living allowances from October 1980
until October 1982 when the employment relations were severed.

In finding the distance of an employer-employee relationship between


respondent and petitioners, the NLRC committed no grave abuse of
discretion. That the respondent had registered the petitioners with the Social
Security System is proof that they were indeed his employees. The coverage
of Social Security Law is predicated on the existence of an employer-
employee relationship. 1

On the issue of abandonment, however, we find the ruling of the NLRC that
petitioners had abandoned their employment to be contrary to the evidence.
To constitute abandonment, there must be a clear and deliberate intent to
discontinue one's employment without any intention of returning back .2 The
record shows that petitioners were only compelled to leave the premises,
which they regarded as their home, when the respondent inflicted physical
injuries upon petitioner Herminio Flores. Apparently, what they had given up
was only their place of residence but not their jobs. The immediate filing of
a complaint for illegal dismissal against respondent with a prayer for
reinstatement shows that petitioners were not abandoning their work .3 As
aptly observed by the Solicitor General, to uphold the ruling of the respondent
Commission that the petitioners abandoned their job "is to put a premium on
the commission of a crime by an employer against an employee to force the
latter to leave his employment so as to preclude said employee from seeking
reinstatement with backwages."

Where there is a finding of illegal dismiss, the general principle is that an


employee is entitled to reinstatement and to receive backwages from the date
of his dismissal up to the time of his reinstatement. However, the
circumstances in this case make the reinstatement of petitioners no longer
feasible; any possible confrontation between the parties in view of their
36
already strained relationship should be avoided. An award of six (6) months
backwages based on their latest is a reasonable alternative to reinstatement
under the circumstances.4 As found by the respondent Commission,
respondent should also pay the petitioners their living allowances from
October 1980 until October 1982 when their employment relations were
severed. As to petitioners' other money claims, we find no reason to disturb
the Commission's ruling disallowing them for insufficiency of evidence.

WHEREFORE, the decision appealed from is modified, and respondent is


hereby ordered to pay each petitioner 1) backwages equivalent to six (6)
months pay, and 2) cost of living allowances from October 1980 until October
1982.

SO ORDERED.

37
[G.R. No. 102467. June 13, 1997]
EQUITABLE BANKING CORPORATION, Chairman MANUEL L.
MORALES, President & Director GEORGE L. GO, Vice-Chairman
& Director RICARDO J. ROMULO, Vice-Chairman & Director
JOHN C.B. GO, Director HERMINIO B. BANICO, Director
FRANCISCO C. CHUA, Director PETER GO PAILIAN, Director
RICARDO C. LEONG, Director JULIUS T. LIMPE and Director
PEDRO A. ORTIZ, petitioners, vs. HON. NATIONAL LABOR
RELATIONS COMMISSION, First Division, and RICARDO L.
SADAC, respondents.

DECISION
VITUG, J.:

In the special civil action of certiorari, the petitioners, in order to have a


reasonable chance of success, must be able to come up with proof that the
tribunal, board or officer against whom the petition is brought has, in the
exercise of judicial or quasi-judicial function, acted without or in excess of
jurisdiction or with grave abuse of discretion amounting to lack or excess of
jurisdiction. In the instant petition, the Court is asked to rule against the
National Labor Relations Commission (NLRC) in holding private respondent
Ricardo L. Sadac, Vice-President for the Legal Department and General
Counsel of petitioner Equitable Banking Corporation, to have been a regular
employee of the bank whose services could only be terminated in accordance
with the Labor Code. Petitioner bank submits that the services of private
respondent, its legal counsel, could be dispensed with at anytime pursuant
to the provision on the cessation of lawyer-client relationship under Rule 138
of the Rules of Court.
The facts, essentially, do not appear to be in dispute.

38
Private respondent Sadac was appointed, effective 01 August 1981, Vice-
President for the Legal Department of petitioner bank by its then President,
Manuel L. Morales, with a monthly salary of P8,000.00, plus an allowance
of P4,500.00 and a Christmas bonus equivalent to a two-month salary.[1] On
08 December 1981, private respondent was also designated as the banks
General Counsel. Private respondent had these functions:

"Duties & Responsibilities

- Provides legal advice to the Board of Directors and Management of the


Bank.

- Takes charge of all Bank cases arising from bank transactions and
rendering opinions on legal questions in connection therewith.
- Insures effective conduct of litigation, collection of past due accounts,
and investigation of irregularities and other legal matters affecting
the interest of the Bank.
- Participates in action of major character, financing, amendments to
the Articles of Incorporation and By-laws of the Bank, changes in
corporate structures acquisition and disposal of important
segments of enterprises or real estate, determination of action to
comply with statutory and other government requirements.
- Directs, plans, coordinates and maintains supervision and control over
the staff of the Legal Department.
- Provides for and insures proper documentation and notarization of all
Bank transactions.
- Assumes primary responsibility in the account of continuing research
and studies on questions of law affecting the Bank and its
subsidiary corporations and the formulation and development of
legal opinions.
- Recommends appointments, promotions, transfers and disciplinary
actions involving Legal Department personnel.
39
- Establishes and maintains effective discipline, work performances,
high level of morale and cooperation among the staff.

- Performs such other duties as may be assigned from time to time by


the President and the Board of Directors."[2]

The turning point in the relationship among the parties surfaced, when,
on 26 June 1989, nine lawyers[3] of the banks Legal Department, who were
all under private respondent, addressed a letter-petition to the Chairman of
the Board of Directors, accusing private respondent of abusive conduct,
inefficiency, mismanagement, ineffectiveness and indecisiveness.[4] The
individual written complaints of each of the nine lawyers were attached to
the letter-petition. Private respondent was furnished with a copy of the letter.
Private respondent promptly responded and manifested an intention to file
criminal, civil and administrative charges against the nine lawyers.Petitioner
Morales, by now Chairman of the Board of Directors, called the contending
lawyers to a conference in his office in an attempt to resolve their
differences. The meeting held on 29 June 1989, in the presence of Vice-
President for Personnel and Human Relations Dean Alejandro C. Reyes,
apparently did not amount to much and only resulted, it would seem, in a
broad commitment of the parties to implement the existing procedures and
practices in the Legal Department.[5] The dialogue was marked, in fact, by
rancorous and very heated altercation between private respondent and his
subordinates. Mr. Morales considered the problem serious enough to merit
the Boards attention. In its meeting on 11 July 1989, the Board of Directors,
apprised of the situation, adopted a resolution directing one of its directors,
petitioner Herminio B. Banico, to look further into the matter and to determine
a course of action for the best interest of the bank.
Petitioner Banico met with the complaining nine lawyers on 17 July
1989. He was warned that if private respondent were to be retained in his
position, the lawyers would resign en masse. The following day, Mr. Banico
40
saw private respondent. The latter denied the charges leveled against
him.Although the two would appear to have explored various alternatives and
avenues to solve the crisis, nothing positive, however, came out of their
meeting. Convinced that reconciliation was out of the question, Mr. Banico,
on 08 August 1989, submitted a report to the Board of Directors with these
findings:

a. ABUSIVE CONDUCT

There is no doubt at all, in my mind that the charge of `abusive conduct


against Atty. Sadac, in his treatment in varying degrees, of the complaining
lawyers, is true, as this is supported by overwhelming evidence. Atty. Sadac
himself, in effect, admitted this when he proferred his apologies in the
presence of the Chairman in the `confrontation held in the latters office.

b. MISMANAGEMENT

In my study and investigation, I found abundant evidence to support a finding


of mismanagement of the Legal Department by Atty. Sadac.

c. INEFFICIENCY, INEFFECTIVENESS, AND INDECISIVENESS

The above specific charges are each proven and/or established by the same
nature of evidence.[6]

Two days later, or on 10 August 1989, Mr. Morales issued a memorandum


to private respondent which, among other things, pertinently stated:

"x x x. The Board, however, feels that because during all its existence of
almost forty (40) years, the Bank never had in its employ any senior officer
who had compelled it to resort to the unfortunate, sorry and nasty spectacle
of conducting a formal hearing (which of course is distasteful to all parties
concerned) of whatever charge such as the one lodged against you just to
terminate your services, consonant with the due process requirements of the
41
Constitution, the Labor Code, the Implementing Regulations thereof and
other pertinent laws, it has chosen the more compassionate option of waiting
for your voluntary resignation from your employ with the Bank.

In the meantime, since all the lawyers under you, by petitioning for a change
in leadership of the department despite the fact that all these lawyers have
all been hired and promoted to their positions upon your recommendation,
have thus shown lack of confidence in you, the Board feels it has no reason
to continue reposing confidence in you and therefore elected to exercise its
prerogative as your client, under the rules of client and lawyer relationship to
direct Atty. William R. Veto, Legal Counsel of the Bank these many years to
appear in substitution of you in all the cases in which you are presently
appearing as counsel of record for the Bank. For this purpose, the Bank as
your client, therefore, instructs you to deliver the folders of pleadings and
documents of all cases you are now personally handling and submit a list of
all the cases where you appear as the counsel of record for the bank and the
corresponding titles thereof not later than the close of office hours on
Tuesday, August 15, 1989 so that the Legal Counsel of the Bank, Atty. William
R. Veto, could file his substitution of appearance in all said cases where you
are counsel of record. Atty. Veto has already been instructed and authorized
by the Board to take over from you the functions that you are now performing
in the Legal Department."[7]

Reacting to the above memorandum, private respondent, on 14 August


1989 addressed a letter to Board Chairman Morales, furnishing the other
members of the Board, to the effect that the report of Mr. Banico contained
libelous statements and that the implementation of the chairmans
memorandum would lead to an illegal dismissal. Pointing out that he could
not now in conscience resign in the face of Mr. Banicos baseless and libelous
findings, private respondent requested for a full hearing by the Board of
Directors so that he could clear his name.[8]

42
On 17 August 1989, petitioner Ricardo J. Romulo, Board Vice-Chairman,
answered private respondent. Mr. Romulo stressed that private respondents
services were not terminated by the Board which, instead, was merely
exercising its managerial prerogative to control, conduct (its) business in the
manner (it) deems fit and to regulate the same. In reply to private
respondents request for a formal hearing, Mr. Romulo reiterated the Boards
decision that it would be to the best interest of all concerned if the distasteful
spectacle" of a hearing would not be resorted to "in order to adhere to (the
bank's) long standing compassionate policy."[9] Mr. Romulo also said:

"We would like to emphasize that our decision as a Board did not dismiss you
from the service of the Bank. All that the Board is saying to you is that it has
lost its confidence in you and therefore it is patiently awaiting your resignation
of course with your right of retirement pay in accordance with the policy
adopted by the Bank under these situations. Trust or confidence like love are
feelings which emanate from the heart and, as the song goes, `once a heart
is torn apart it is never the same again.' So also, confidence like a tooth once
pulled can never be restored."[10]

In his memorandum of 28 August 1989 to the members of the Board,


private respondent again made a request for a full hearing and cautioned
that, under Section 31 of the Corporation Code, individual members of the
Board could be held accountable for voting or assenting to patently unlawful
acts of the corporation.
On 31 August 1989, Mr. Romulo wrote back expressing, in part, as follows:

"7. The charge that you have been constructively dismissed is likewise
without basis because as we said before, you are free to remain in the employ
of the bank if you so wish, even if the bank were to incur the tremendous
expense of continuing to pay your high salary just so it can continue to adhere
to its compassionate policy of avoiding ruining the future of any of its officers
by a possible dismissal for cause which is certainly bound to leak to the public.
43
It is believed, however, that there is no law which can compel an employer
to give any of his employees any particular work at all."[11]

Mr. Romulo stated that the banks confidence on private respondent had been
lost most especially in the light of (his) threats and that the latter could bring
the matter up in the appropriate forum.[12]
Undaunted, private respondent, in his memorandum of 07 September
1989 to the individual members of the Board of Directors, persisted in his
request for a formal investigation.[13] Having been unheeded, private
respondent, on 09 November 1989, filed with the Manila arbitration branch
of the NLRC, a complaint, docketed NLRC Case No. 00-11-05252-89, against
herein petitioners for illegal dismissal and damages.[14]
After learning of the filing of the complaint, the Board of Directors, on 21
November 1989, adopted Resolution No. 5803 terminating the services of
private respondent in view of his belligerence" and the Board's "honest belief
that the relationship" between private respondent and petitioner bank was
one of "client and lawyer." Private respondent was removed from his office
occupancy in the bank and ordered disentitled, starting 10 August 1989, to
any compensation and other benefits. The Board instructed management to
take the necessary steps to "defend itself and all the members of the Board
of Directors" from private respondent's complaint.[15]
Pursuing their stand that the association between the bank and private
respondent was one of a client-lawyer relationship, herein petitioners filed a
motion to dismiss the complaint with the NLRC on the ground of lack of
jurisdiction.[16] Private respondent, opposing the motion, insisted on the
existence of an employer-employee relationship between them.[17] In their
reply, petitioners added another ground for seeking a dismissal of the
complaint, i.e., that under the ruling in Besa vs. PNB,[18] the rule governing
the duration of private respondents term was provided for by the Rules
ofCourt and not by the Labor Code.[19]
44
Following an exchange of position papers and other pleadings, Labor
Arbiter Jovencio Ll. Mayor, Jr., on 02 October 1990, rendered a decision
dismissing the complaint for lack of merit.[20] The Labor Arbiter was convinced
that the relationship between petitioner bank and private respondent was one
of lawyer-client based on the functions of the latter which only a lawyer with
highly trained legal mind, can effectively discharge.[21] He distinguished the
instant controversy from the situation in Hydro Resources Contractors
Corporation vs. Pagalilauan[22] in that herein private respondent, he said,
only performed functions encompassed by the practice of law while in Hydro
Resources, the involved lawyer was a mere legal assistant tasked with
certain duties not all that related to the practice of law. The Labor Arbiter
concluded that the complaint stated no cause of action because a lawyer-
client relationship should instead be governed by Section 26, Rule 138, of the
Rules of Court. On whether or not there were valid grounds to terminate the
services of private respondent, the Labor Arbiter, noting the letter-petition of
the nine subordinate lawyers of private respondent, said:

"x x x. The truth and veracity of these complaints were respectively affirmed
under oath by each and every one of these nine subordinate lawyers in their
individual affidavits (Annexes `1-J' to `1-R', inclusive), (Ibid). From these
individual statements, it can be culled that complainant has been charged,
among others, with committing such acts as shouting and insulting lawyers
even in the presence of clients, having frequent outbursts of temper, being
indecisive even on simple and fundamental questions, of devoting time to
private and personal matters such that he is always out of the office, of being
closed and narrow minded to the ideas of subordinates, and other similar
acts. These charges were never refuted by herein complainant and instead
narrated a general refutation x x x."[23]

The Labor Arbiter brushed aside private respondents claim that he was denied
due process, holding that private respondent was heard exhaustively on the
matter of the charge lodged against him and that, for valid practical reasons,
45
petitioners were not in a position to accede to the demand for a formal
hearing.[24]
On appeal, the NLRC concluded differently. On 24 September 1991, the
First Division of the NLRC rendered a resolution[25] reversing the decision of
the Labor Arbiter. It held that private respondent was an employee of
petitioner bank which never stated that complainant was an outside counsel
for he was never so[26] as against the pronouncement of the Court in Hydro
Resources that distinguished between an in-house counsel and
an outside counsel hired on a retainer basis. Certain other circumstances
that likewise did not escape NLRCs attention were that petitioner George L.
Go, the banks president, had enjoined private respondent to attend a bank-
sponsored symposium on Japanese investment on 08 September 1989 at the
Hotel Intercontinental; that in petitioners letter of 31 August 1989, private
respondent was referred to as an employee; that in another letter, dated 24
November 1989, petitioner admitted having terminated private
respondents employment and requested the return of the 1988 Mitsubishi
Galant 1800 which he had acquired through the banks car plan; and that,
through a communication of 02 January 1990 of the Personnel and HRD
Department, the bank announced that private respondents employment had
been terminated effective 21 November 1989.
Turning to the issue of whether or not the employment of private
respondent was terminated for cause, the NLRC held that because he had
not been afforded a hearing in accordance with law, there was no factual
basis to support the allegation of loss of confidence made by petitioners who,
instead, had relied on the doctrine of res ipsa loquitor.
The NLRC ruled that private respondent was denied the right to due
process with the banks failure to observe the twin requirements of notice and
hearing. The 10th August 1989 memorandum could not have been a
substitute for notice because it did not manifest petitioners intention to
dismiss him from employment, and neither the meeting between private
46
respondent and the complaining lawyers nor those held between private
respondent and petitioner Banico could be considered the investigations
which private respondent had consistently sought.
For having been made to undergo unnecessary embarrassment by being
stripped of his functions and made to undergo the sad and painful experience
of reporting to office every day doing nothing, the NLRC, citing Sibal vs.
Notre Dame of Greater Manila,[27] awarded damages.
The NLRC, thereby concluded:

"WHEREFORE, in view of all the foregoing considerations, let the Decision of


October 2, 1990 be, as it is hereby, SET ASIDE and a new one ENTERED
declaring the dismissal of the complainant as illegal, and consequently
ordering the respondents jointly and severally to reinstate him to his former
position as bank Vice-President and General Counsel without loss of seniority
rights and other privileges, and to pay him full backwages and other benefits
from the time his compensation was withheld to his actual reinstatement, as
well as moral damages of P100,000.00, exemplary damages of P50,000.00,
and attorney's fees equivalent to Ten Percent (10%) of the monetary award.
Should reinstatement be no longer possible due to strained relations, the
respondents are ordered likewise jointly and severally to grant separation pay
at one (1) month per year of service in the total sum of P293,650.00 with
backwages and other benefits from November 16, 1989 to September 15,
1991 (cut-off date subject to adjustment) computed at P1,055,740.48, plus
damages of P100,000.00 (moral damages), P50,000.00 (exemplary
damages) and attorney's fees equal to Ten Percent (10%) of all the monetary
award, or a grand total of P1,649,329.53.

SO ORDERED."[28]

Petitioners filed a motion,[29] opposed by private respondent,[30] for a


reconsideration of the resolution.

47
The motion for reconsideration was still pending when private respondent,
following an exchange of yet additional pleadings, filed an urgent ex-
parte motion for immediate reinstatement grounded on Article 223 of the
Labor Code.[31] On 07 November 1991, NLRC Executive Clerk Pascual Y.
Reyes addressed a communication, with the letterhead of the First Division
of the NLRC, to Attys. Vicente Abad Santos and William R. Veto, counsel for
petitioners, which read:

"G R E E T I N G S :

Consistent with the NLRC New Rules and Procedure on Appeal under Republic
Act 6715, amending Article 223 of the Labor Code, RESPONDENT(s) is/are
hereby directed within ten (10) calendar days from receipt of this Order:

To immediately reinstate complainant under the same terms and conditions


prevailing prior to his dismissal or separation or, at RESPONDENT(s) option
to reinstate him in the payroll, and to submit proof of compliance thereof,
otherwise, a Writ of Execution shall issue."[32]

Petitioners filed a motion to quash the "untitled document" which was claimed
to be "highly irregular." Private respondent countered, on the strength of the
ruling in Aris (Phil.) Inc. vs. NLRC,[33] that even before its amendment by
Section 12 of R.A. 6715, Article 223 of the Labor Code already allowed
execution of decisions of the NLRC pending their appeal to the Secretary of
Labor and Employment, and that, under Section 2, Rule XII, of the New Rules
of Procedure of the NLRC, Executive Clerk Reyes could be said to be
performing a function similar or equivalent to that discharged by the Clerk of
Court of the Court of Appeals.
Petitioners, on their part filed an urgent motion for immediate resolution
of their motion for reconsideration,[34] on account of what was felt to be the
"dubious legality" of the directive for reinstatement.

48
Pending the above incidents, particularly the motion for reconsideration of
NLRCs resolution that has reversed the Labor Arbiters decision, petitioners
have filed the instant petition for certiorari, with prayer for the issuance of a
writ of preliminary injunction, before this Court. The petition questions the
resolution of the NLRC finding that an employer-employee relationship
existed between petitioner bank and private respondent invoking the rulings
in Besa vs. PNB[35] and Asis vs. Minister of Labor and
Employment,[36] against that of Hydro Resources Contractors vs.
Pagalilauan;[37] that the facts on record do support valid grounds for
terminating the employment of private respondent; and that due process has
been duly observed. The petition likewise assails the NLRC for its monetary
awards and in omitting to resolve the allegation of forum-shopping committed
by private respondent.
This Court required petitioners to post a cash bond in the amount
of P500,000.00 for the issuance of a temporary restraining order.[38]
Prefatorily, the Court must state that the filing of a motion for
reconsideration of a decision of the NLRC is prerequisite to the elevation of
the case to this Court on a petition for certiorari. The rule is aimed at enabling
the commission to look into and correct its error or mistake, if any has been
committed, without the precipitate intervention of this Court.[39] The failure
to allow that opportunity for whatever reason is ordinarily a fatal procedural
defect that could warrant the dismissal of the petition.[40]
In this case, petitioners, instead of waiting for the resolution by the NLRC
of their motion for reconsideration, posthaste filed the instant petition. Its
prematurity notwithstanding, the instant petition for certiorari was given due
course in order not to unduly delay the final disposition of the case
considering that the issues involved[41] have heretofore been ventilated
practically to the limit by the parties.
While the Court agrees with private respondent that execution pending
appeal may be ordered by the NLRC,[42] it is equally true, however, that where
49
the dismissed employee's reinstatement would lead to a strained relation
between the employer and the employee or to an atmosphere of antipathy
and antagonism, the exception to the twin remedies of reinstatement and
payment of backwages can be invoked and reinstatement, which might
become anathema to industrial peace, could be held back pending
appeal.[43] Nevertheless, the Court is not prepared to preempt the NLRC and
conclude that the directive for reinstatement is of dubious character.[44] It can
be assumed that had petitioners waited for NLRCs resolution on the motion
for reconsideration, the question on the regularity in the issuance of the
directive for reinstatement could have perhaps properly been delved into.
The existence of an employer-employee relationship is, itself, a factual
question[45] well within the province of the NLRC. Considering, nevertheless,
that its findings are at odds with the Labor Arbiter, the Court sees it fit to
dwell a bit into the issue.[46]
In determining the existence of an employer-employee relationship, the
following elements are considered: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal, and (4) the
power to control the employee's conduct, with the control test generally
assuming primacy in the overall consideration. The power of control refers to
the existence of the power and not necessarily to the actual exercise
thereof. It is not essential, in other words, for the employer to actually
supervise the performance of duties of the employee; it is enough that the
former has the right to wield the power.[47]
The NLRC, in the instant case, based its finding that there existed an
employer-employee relationship between petitioner bank and private
respondent on these factual settings:

"It was complainant's understanding with respondent Morales that he would


be appointed and assigned to the Legal Department as vice President with
the same salary, privileges and benefits granted by the respondent bank to
50
its ranking senior officers. He was not hired as lawyer on a retainership basis
but as an officer of the bank.

Thus, the complainant was given an appointment as Vice President, Legal


Department, effective August 1, 1981, with a monthly salary of P8,000.00,
monthly allowance of P4,500.00, and the usual two months Christmas bonus
based on basic salary likewise enjoyed by the other officers of the bank.

Then, as part of the ongoing organization of the Legal Department, the


position of General Counsel of the bank was created and extended to the
complainant. In addition to his duties as Vice President of the bank, the
complainant's duties and responsibilities were so defined as to prove that he
was a bank officer working under the supervision of the President and the
Board of Directors of the respondent bank.

In his more than eight years employment with the respondent bank, the
complainant was given the usual payslips to evidence his monthly gross
compensation. The respondent bank, as employer, withheld taxes due to the
Bureau of Internal Revenue from the complainant's salary as employee.
Moreover, the bank enrolled the complainant as its employee under the Social
Security System and Medicare programs. The complainant contributed to the
bank Employees' Provident Fund.

When the respondent bank changed its payroll accounting system in


September 1988 by appointing SGV & Co. to handle it and Far East Bank &
Trust Company to pay the salaries and other benefits of Equitable Banking
Corporation officers, the complainant was included as one of corporate
officers. Specifically, that there were eleven Far East Bank and Trust
Company credit memos starting October 13, 1988 up to September 13, 1989
received by the complainant from FBTC crediting his salary and Christmas
bonus to his account with FBTC per instruction of the respondent bank.

51
In as much as the complainant and the lawyers in the Legal Department were
receiving salaries and other benefits as other bank officers and employees,
the attorney's fees, documentary and notarial fees earned in the exercise of
their profession as in-house lawyers were not given to or even shared with
them, instead all were credited to the income of the bank. In 1987 and 1988,
the complainant and his subordinate lawyers were able to generate by way
of attorney's fees, documentary and notarial fees a total income
of P973,028.00 for the bank('s) benefit. In turn, the respondent bank
shouldered the professional tax and Integrated Bar of the Philippines dues of
the complainant and his subordinate lawyers. Further proofs that there
existed employer-employee relationship between the respondent bank and
the complainant are the following, to wit:

(1) Complainant's monthly attendance, like those of other bank officers, was
recorded by the Chief Security Officer and reported to the Office of the
President with copy of the report furnished to the bank Personnel and HRD
Department.

(2) Complainant was authorized by the President to sign for and in behalf of
the bank contracts covering legal services of lawyers to be retained by the
respondent bank for its branches on periodical retainership basis.

(3) Complainant participated as part of management in annual Management


Planning Conferences which started in 1986 on objective-setting and long-
range planning in response to the requirement of the rapidly changing
environment.

(4) Respondent bank extended to complainant the benefit (of) a car plan like
any other qualified senior officer of the bank.

(5) Respondent bank since 1982 continuously reported and included the
complainant as one of its senior officers in its statements of financial condition
holding the position of Vice President. These bank statements have been
52
distributed and circularized to the public, including bank clients and
government entities.

(6) Complainant, like other bank officers, prepared his biographical data for
submission to the Central Bank after his assumption of duties in 1981.
Thereafter, and pursuant to the regulations of the Central Bank, he has been
required to update annually his biographical data."[48]

It would virtually be foolhardy to so challenge the NLRC as having


committed grave abuse of discretion in coming up with its above
findings. Just to the contrary, NLRC appears to have been rather exhaustive
in its examination of this particular question (existence or absence of an
employer-employee relationship between the parties). Substantial evidence,
which is the quantum of evidence required to establish a fact in cases before
administrative and quasi-judicial bodies, connotes merely that amount of
relevant evidence which a reasonable mind might accept to be adequate in
justifying a conclusion.[49]
The rulings in Besa and Asis, cited by petitioners, could not be all that
controlling in this instance. In both cases, the question of whether or not the
parties had an employer-employee relationship was not the focal point of
controversy. In Besa, the Court said:

Petitioners reliance on the constitutional provision against removal without


cause is misplaced. It is appropriate to invoke it when an officer or employee
in the civil service enjoying a fixed term is made to lose his position without
warrant or justification. It certainly finds no application when the duration of
ones term depends on the will of the appointing power. That is so where the
position held is highly confidential in character. Such is the case of the Chief
Legal Counsel of respondent Philippine National Bank. That is our answer to
the specific question before us. Our decision is limited to the validity of the
action taken by respondent Bank. We do not by any means intimate an
opinion as to the legal consequences attaching to an action similar in
53
character taken by any other office or agency of the government concerning
a lawyer in its staff, especially one who was not employed precisely because
of the marked degree of confidence reposed in him, but rather because of
his technical competence.

As far as the petitioner is concerned, however, it is our conclusion that he


could not plausibly contend that there was a removal in the constitutional
sense as what did take place was a termination of official relation. Accepting
as he did the position of chief legal adviser, the essence of which is the utmost
degree of confidence involving such `close intimacy which insures freedom
of intercourse without embarrassment or freedom from misgivings of
betrayals whether of personal trust or official matters, he could not have been
unaware that his term could be cut short any time without giving rise to any
alleged infringement of the above constitutional safeguard. There was no
removal which according to such a mandate is only allowable for
cause. Hence the lack of persuasive character of petitioners plea.[50]

And in Asis, the Court held:

The Deputy Minister found that the evidence satisfactorily established that
the Centrals suspension of the petitioners and others monthly ration of
gasoline and LPG, had been caused by unavoidable financial constraints; that
such a suspension, in line with its conservation and cost-saving policy, did
not in truth effect any significant diminution of said benefits, since the
petitioner was nevertheless entitled to reimbursement of the actual amount
of gas consumed; that petitioner had encouraged his co-employees to file
complaints against the Central over the rations issue, and this, as well as his
institution of his own actions, had created an atmosphere of enmity in the
Central, and caused the loss by the Central of that trust and confidence in
him so essential in a lawyer-client relationship as that theretofore existing
between them; and that under the circumstances, petitioners discharge as
the Centrals Legal Counsel and Head of the Manpower & Services Department
54
was justified. The Deputy Ministers order of dismissal was however
subsequently modified, at the petitioners instance, by decreeing the payment
to the latter of separation pay equivalent to one months salary for every year
of service rendered.[51]

It was, in fact, Hydro Resources which directly confronted the issue;


there, the Court ruled:

"A lawyer, like any other professional, may very well be an employee of a
private corporation or even of the government. It is not unusual for a big
corporation to hire a staff of lawyers as its in-house counsel, pay them regular
salaries, rank them in its table of organization, and otherwise treat them like
its other officers and employees. At the same time, it may also contract with
a law firm to act as outside counsel on a retainer basis. The two classes of
lawyers often work closely together but one group is made up of employees
while the other is not. A similar arrangement may exist as to doctors, nurses,
dentists, public relations practitioners, and other professionals."[52]

The existence of an employer-employee relationship, between the bank


and private respondent brings the case within the coverage of the Labor
Code. Under the Code, an employee may be validly dismissed if these
requisites are attendant: (1) the dismissal is grounded on any of the causes
stated in Article 282 of the Labor Code, and (2) the employee has been
notified in writing and given the opportunity to be heard and to defend
himself as so required by Section 2 and Section 5, Rule XIV, Book V, of the
Implementing Rules of the Labor Code.[53]
Article 282(c) of the Labor Code provides that "willful breach by the
employee of the trust reposed in him by his employer" is a cause for the
termination of employment by an employer. Ordinary breach of trust will not
suffice, it must be willful and without justifiable excuse.[54] This ground must
be founded on facts established by the employer who must clearly and
convincingly prove by substantial evidence[55] the facts and incidents upon
55
which loss of confidence in the employee may fairly be made to rest;
otherwise, the dismissal will be rendered illegal.[56]
Petitioners' stated loss of trust and confidence on private respondent was
spawned by the complaints leveled against him by the lawyers in his
department. The letter-complaint signed by the nine lawyers read:

June 26, 1989

Mr. Manuel L. Morales


Chairman, Board of Directors
Equitable Banking Corporation

Sir:

With utmost respect, we have taken the liberty of seeking your intercession
on the problems besetting the Legal Department.

For a long time, we have kept silent, containing within us the abusive conduct
and inefficiency of our department head, Atty. Ricardo L. Sadac, if only to
preserve cohesion among us. But we have reached the breaking point where
we could endure no more except to speak out. We realize the gravity of our
action and its possible repercussions but we only have ourselves to blame if
we remained silent.

Atty. Sadac's insults to the lawyers which are totally uncalled for and made
even in the presence of clients are simply too much for a fellow lawyer. His
outburst of temper on inconsequential matters have now become
commonplace in the department. His mismanagement, ineffectiveness as a
head and indecisiveness on basic legal questions have adversely affected the
smooth operation of the department and the output of the lawyers. He
berates rather than inspires, delays rather than facilitates. Each lawyer's
complaint are (sic) attached hereto attached (sic) as Annexes `A', `A-1' to
`A-8'.
56
At present, we are disgruntled on how he runs the department and our
morale is at its ebb. While our only desire is to work under an auspicious
environment and under an effective head, we could not do so because of the
General Counsel.

We, therefore, respectfully pray for an immediate change in the department


leadership in order to pave the way for a more effective system, a new image
for the department, and restore professionalism and the dignity of the
lawyers.

Please accept our assurances that the interest of the bank is primordial to us
as we pledge our total commitment and unflinching loyalty to this institution.

Thank you."[57]

Concededly, a wide latitude of discretion is given an employer in


terminating the employment of managerial employees on the ground of
breach of trust and confidence.[58] In order to constitute a just cause for
dismissal, however, the act complained of must be related to the performance
of the duties of the employee such as would show him to be thereby unfit to
continue working for the employer.[59] Here, the grievances of the lawyers, in
main, refer to what are perceived to be certain objectionable character traits
of private respondent. Although petitioners have charged private respondent
with allegedly mishandling two cases in his long service with the bank, it is
quite apparent that private respondent would not have been asked to resign
had it not been for the letter-complaint of his associates in the Legal
Department.
Confident that no employer-employee existed between the bank and
private respondent, petitioners have put aside the procedural requirements
for terminating ones employment, i.e., (a) a notice apprising the employee
of the particular acts or omissions for which his dismissal is sought, and (b)
another notice informing the employee of the employer's decision to dismiss
57
him.[60] Failure to comply with these requirements taints the dismissal with
illegality. This procedure is mandatory, any judgment reached by
management without that compliance can be considered void and
inexistent.[61] While it is true that the essence of due process is simply an
opportunity to be heard or, as applied in administrative proceedings, an
opportunity to explain one's side,[62] meetings in the nature of consultation
and conferences such as the case here, however, may not be valid substitutes
for the proper observance of notice and hearing.[63]
Moral damages are recoverable when the dismissal of an employee is
attended by bad faith or fraud or constitutes an act oppressive to labor, or is
done in a manner contrary to good morals, good customs or public policy.
Exemplary damages may be awarded if the dismissal is effected in a wanton,
oppressive or malevolent manner.[64]
The Court has deliberated closely on this case and, after reviewing all the
facts and circumstances heretofore described, it is its considered view that
petitioners have not been motivated by malice or bad faith nor have they
acted in wanton, oppressive or malevolent manner such as to warrant a
judgment against them for moral and exemplary damages. Malice or bad
faith, the lesser evil of the two, the Court has once said, implies a conscious
and intentional design to do a wrongful act for a dishonest purpose or moral
obliquity; it is different from the negative idea of negligence in that malice or
bad faith contemplates a state of mind affirmatively operating with furtive
design or ill will.[65]
It, too, then follows that the individual petitioners may not be held
solidarily liable with the bank. In Santos vs. NLRC,[66] the Court has
explained the rule quite elaborately; thus:

"A corporation is a juridical entity with legal personality separate and distinct
from those acting for and in its behalf and, in general, from the people
comprising it.The rule is that obligations incurred by the corporation, acting
58
through its directors, officers and employees, are its sole
liabilities. Nevertheless, being a mere fiction of law, peculiar situations or
valid grounds can exist to warrant, albeit done sparingly, the disregard of its
independent being and the lifting of the corporate veil. As a rule, this situation
might arise when a corporation is used to evade a just and due obligation or
to justify a wrong, to shield or perpetrate fraud, to carry out similar other
unjustifiable aims or intentions, or as a subterfuge to commit injustice and so
circumvent the law. In Tramat Mercantile, Inc., vs. Court of Appeals [238
SCRA 14, 19], the Court has collated the settled instances when, without
necessarily piercing the veil of corporate fiction, personal civil liability can also
be said to lawfully attach to a corporate director, trustee or officer; to
wit: When -

"`(1) He assents (a) to a patently unlawful act of the corporation, or (b) for
bad faith or gross negligence in directing its affairs, or (c) for conflict of
interest, resulting in damages to the corporation, its stockholders or other
persons;

"`(2) He consents to the issuance of watered stocks or who, having


knowledge thereof, does not forthwith file with the corporate secretary his
written objection thereto;

"`(3) He agrees to hold himself personally and solidarily liable with the
corporation; or

"`(4) He is made, by a specific provision of law, to personally answer for his


corporate action.

The case of petitioner is way off these exceptional instances. It is not even
shown that petitioner has had a direct hand in the dismissal of private
respondent enough to attribute to him (petitioner) a patently unlawful act
while acting for the corporation. Neither can Article 289 of the Labor Code be

59
applied since this law specifically refers only to the imposition
of penalties under the Code. x x x.

It is true, there were various cases when corporate officers were themselves
held by the Court to be personally accountable for the payment of wages and
money claims to its employees. In A.C. Ransom Labor Union-
CCLU vs. NLRC [142 SCRA 269], for instance, the Court ruled that under the
Minimum Wage Law, the responsible officer of an employer corporation could
be held personally liable for nonpayment of backwages for (i)f the policy of
the law were otherwise, the corporation employer (would) have devious ways
for evading payment of back wages." In the absence of a clear identification
of the officer directly responsible for failure to pay the backwages, the Court
considered the President of the corporation as such officer. The case was
cited in Chua vs. NLRC [182 SCRA 353] in holding personally liable the vice-
president of the company, being the highest and most ranking official of the
corporation next to the President who was dismissed, for the latter's claim for
unpaid wages.

A review of the above exceptional cases would readily disclose the attendance
of facts and circumstances that could rightly sanction personal liability on the
part of the company officer. In A.C. Ransom, the corporate entity was a
family corporation and execution against it could not be implemented
because of the disposition posthaste of its leviable assets evidently in order
to evade its just and due obligations. The doctrine of piercing the veil of
corporate fiction was thus clearly appropriate. Chua likewise involved another
family corporation, and this time the conflict was between two brothers
occupying the highest ranking positions in the company. There were
incontrovertible facts which pointed to extreme personal animosity that
resulted, evidently in bad faith, in the easing out from the company of one of
the brothers by the other.

60
The basic rule is still that which can be deduced from the Courts
pronouncement in Sunio vs. National Labor Relations Commission [127 SCRA
390]; thus:

`We come now to the personal liability of petitioner, Sunio, who was made
jointly and severally responsible with petitioner company and CIPI for the
payment of the backwages of private respondents. This is reversible
error. The Assistant Regional Directors Decision failed to disclose the reason
why he was made personally liable. Respondents, however, alleged as
grounds thereof, his the being owner of one-half (1/2) interest of said
corporation, and his alleged arbitrary dismissal of private respondents.

`Petitioner Sunio was impleaded in the Complaint in his capacity as General


Manager of petitioner corporation. There appears to be no evidence on record
that he acted maliciously or in bad faith in terminating the services of private
respondents. His act, therefore, was within the scope of his authority and
was a corporate act.

`It is basic that a corporation is invested by law with a personality separate


and distinct from those of the persons composing it as well as from that of
any other legal entity to which it may be related. Mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock
of a corporation is not of itself sufficient ground for disregarding the separate
corporate personality. Petitioner Sunio, therefore, should not have been
made personally answerable for the payment of private respondents back
salaries.

The Court, to be sure, did appear to have deviated somewhat


in Gudez vs. NLRC [183 SCRA 644]; however, it should be clear from our
recent pronouncement in Mam Realty Development Corporation and Manuel
Centeno vs. NLRC [244 SCRA 797] that the Sunio doctrine still prevails.[67]

61
For having violated private respondents right to due process private
respondent shall, considering the attendant circumstances particularly his
repeated, but unheeded, request for a hearing, be entitled to an amount
of P5,000.00.
The allegation that private respondent was guilty of forum-shopping
deserves scant consideration. Suffice it said that, for forum-shopping to exist,
both actions should involve a common transaction with essentially the same
facts and circumstances and raise identical causes of action, subject matter
and issues.[68] Certainly, the filing by private respondent of a criminal action
for libel during the pendency of this illegal dismissal case could not constitute
forum-shopping.
The controversy spawning this case has generated not too little personal
animosities.[69] Reinstatement, which is the consequence of illegal dismissal,
has markedly been rendered undesirable. Private respondent shall, instead,
be entitled to backwages from the time of his dismissal until reaching sixty
(60) years of age (1995)[70] and, thereupon, to retirement benefits in
accordance with Article 287 of the Labor Code and Section 14,[71]Rule 1, Book
VI, of the Implementing Rules of the Labor Code.[72]
WHEREFORE, the herein questioned Resolution of the NLRC is
AFFIRMED with the following MODIFICATIONS: That private respondent shall
be entitled to backwages from termination of employment until turning sixty
(60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional
amount of P5,000.00; that the award of moral and exemplary damages
are deleted; and that the liability herein pronounced shall be due from
petitioner bank alone, the other petitioners being absolved from solidary
liability. No costs.
SO ORDERED.

62
[G.R. No. 111501. March 5, 1996]
PHILIPPINE FUJI XEROX CORPORATION, JENNIFER A. BERNARDO,
and ATTY. VICTORINO LUIS, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION (First Division), PAMBANSANG
KILUSAN NG PAGGAWA, (KILUSAN)-TUCP, PHILIPPINE XEROX
EMPLOYEES UNION-KILUSAN and PEDRO
GARADO, respondents.

DECISION
MENDOZA, J:

This is a petition for certiorari to set aside the decision of the NLRC, finding
petitioner Philippine Fuji Xerox Corporation (Fuji Xerox) guilty of illegally
dismissing private respondent Pedro Garado and ordering him reinstated. The
NLRC decision reverses on appeal a decision of the Labor Arbiter finding
private respondent to be an employee of another firm, the Skillpower, Inc.,
and not of petitioner Fuji Xerox.
The question raised in this case is whether private respondent is an
employee of ,Fuji Xerox (as the NLRC found) or of Skillpower, Inc. (as the
Labor Arbiter found). For reasons to be hereafter explained, we hold that
private respondent is an employee of Fuji Xerox and accordingly dismiss the
petition for certiorari of Fuji Xerox.
The following are the facts.
On May 6, 1977, petitioner Fuji Xerox entered into an agreement under
which Skillpower, Inc. supplied workers to operate copier machines of Fuji
Xerox as part of the latters Xerox Copier Project in its sales offices. Private
respondent Pedro Garado was assigned as key operator at Fuji Xeroxs branch
at Buendia, Makati, Metro Manila, in February of 1980.
In February of 1983, Garado went on leave and his place was taken over
by a substitute. Upon his return in March, he discovered that there was a
63
spoilage of over 600 copies. Afraid that he might be blamed for the spoilage,
he tried to talk to a service technician of Fuji Xerox into stopping the meter
of the machine.
The technician refused Garados request, but this incident came to the
knowledge of Fuji Xerox which, on May 31, 1983, reported the matter to
Skillpower, Inc. The next day, Skillpower, Inc. wrote Garado, ordering him to
explain. In the meantime, it suspended him from work. Garado filed a
complaint for illegal dismissal.
The Labor Arbiter found that Garado applied for work to Skillpower, Inc.;
that in 1980 he was employed and made to sign a contract; that although he
received his salaries regularly from Fuji Xerox, it was Skillpower, Inc. which
exercised control and supervision over his work; that Skillpower, Inc. had
substantial capital and investments in machinery, equipment, and service
vehicles, and assets totalling P5,008,812.43. On the basis of these findings
the Labor Arbiter held in a decision rendered on October 30, 1986 that
Garado was an employee of Skillpower, Inc., and that he had merely been
assigned by Skillpower, Inc. to Fuji Xerox. Hence, the Labor Arbiter dismissed
Garados complaint.
On the other hand, the NLRC found Garado to be in fact an employee of
petitioner Fuji Xerox and by it to have been illegally dismissed. The NLRC
found that although Garados request was wrongful, dismissal would be a
disproportionate penalty. The NLRC held that although Skillpower, Inc. had
substantial capital assets, the fact was that the copier machines, which
Garado operated, belonged to petitioner Fuji Xerox, and that although it was
Skillpower, Inc. which had suspended Garado, the latter merely acted at the
behest of Fuji Xerox. The NLRC found that Garado worked under the control
and supervision of Fuji Xerox, which paid his salaries, and that Skilipower,
Inc. merely acted as paymaster-agent of Fuji Xerox. The NLRC held that
Skilipower, Inc. was a labor-only contractor and Garado should be deemed

64
to have been directly employed by Fuji Xerox, regardless of the agreement
between it and Skillpower, Inc. Accordingly, the NLRC ordered:

WHEREFORE, premises considered, the respondents are hereby ordered to


immediately reinstate complainant Pedro Garado to his former position as
key operator with three (3) years backwages, without qualification or
reduction whatsoever x x x. Except as herein above MODIFIED, the
appealed decision is hereby Affirmed.

Hence the present petition. Fuji Xerox argues that Skillpower, Inc. is an
independent contractor and that Garado is its employee for the following
reasons:
(1) Garado was recruited by Skillpower, Inc.;
(2) The work done by Garado was not necessary to the conduct of the
business of Fuji Xerox;
(3) Garados salaries and benefits were paid directly by Skillpower, Inc.;
(4) Garado worked under the control of Skillpower, Inc.; and
(5) Skillpower, Inc. is a highly-capitalized business venture.
The contentions are without merit.
Fuji Xerox contends that Garado was actually recruited by Skillpower, Inc.
as part of its personnel pool and later merely assigned to it (petitioner). It is
undisputed, however, that since 1980,[1] when Garado was first assigned to
work at Fuji Xerox, he had never been assigned to any other company so
much so that by 1984, he was already a member of the union which
petitioned the company for his regularization.[2] From 1980 to 1984 he
worked exclusively for petitioner. Indeed, he was recruited by Skillpower, Inc.
solely for assignment to Fuji Xerox to work in the latters Xerox Copier
Project.[3]

65
Petitioners claim that Skillpower, Inc. has other clients to whom it provided
temporary services. That, however, is irrelevant. What is important is that
once employed, Garado was never assigned to any other client of Skillpower,
Inc. In fact, although under the agreement Skillpower, Inc. was supposed to
provide only temporary services, Skilipower, Inc. actually supplied Fuji Xerox
the labor which the latter needed for its Xerox Copier Project for seven (7)
years, from 1977 to 1984.
On January 1, 1983, private respondent signed a contract entitled
Appointment as Contract Worker, in which it was stated that private
respondents status was that of a contract worker for a definite period
from January 1, 1983 to June 30, 1983. As such, private respondents
employment was considered temporary, to terminate automatically six (6)
months afterwards, without necessity of any notice and without entitling
private respondent to separation or termination pay. Private respondent was
made to understand that he was an employee of Skillpower, Inc., and not of
the client to which he was assigned. Therefore, the termination of the
contract or any renewal or extension thereof did not entitle him to become
an employee of the client and the latter was not under any obligation to
appoint him as such, notwithstanding the total duration of the contract or any
extension or renewal thereof.
This is nothing but a crude attempt to circumvent the law and undermine
the security of tenure of private respondent by employing workers under six-
month contracts which are later extended indefinitely through renewals. As
this Court held in the Philippine Bank of Communications v. NLRC:[4]
It is not difficult to see that to uphold the contractual arrangement
between the bank and CESI would in effect be to permit employers to avoid
the necessity of hiring regular or permanent employees and to enable them
to keep their employees indefinitely on a temporary or casual status, thus to
deny them security of tenure in their jobs. Article 106 of the Labor Code is
precisely designed to prevent such a result.
66
Second. Petitioner contends that the service provided by Skillpower, Inc.,
namely, operating petitioners xerox machine, is not directly related nor
necessary to the business of selling and leasing copier machines of petitioner.
Petitioners claim that their Xerox Copier Project is just for public service and
is purely incidental to its business. What petitioners earn from the project is
not even sufficient to defray their expenses, let alone bring profits to them.
As such, the project is no different from other services which can legally be
contracted out, such as security and janitorial services. Petitioners contend
that the copier service can be considered as part of their housekeeping tasks
which can be let to independent contractors.[5]
We disagree. As correctly held by the NLRC, at the very least, the Xerox
Copier Project of petitioners promotes goodwill for the company. It may not
generate income for the company but there are activities which a company
may find necessary to engage in because they ultimately redound to its
benefit. Operating the companys copiers at its branches advertises the quality
of their products and promotes the companys reputation and public image.
It also advertises the utility and convenience of having a copier machine. It
is noteworthy that while not operated for profit the copying service is not
intended either to be promotional, as, indeed, petitioner charged a fee for
the copies made.
It is wrong to say that if a task is not directly related to the employers
business, or it falls under what may be considered housekeeping activities,
the one performing the task is a job contractor. The determination of the
existence of an employer-employee relationship is defined by law according
to the facts of each case, regardless of the nature of the activities involved.
Third. Petitioners contend that it never exercised control over the conduct
of private respondent. Petitioners allege that the salaries paid to Garado, as
well as his employment records, vouchers and loan checks from the SSS were
coursed through Skillpower, Inc. In addition private respondent applied for
vacation leaves to Skilipower, Inc.
67
It is also contended that it was Skillpower, Inc. which twice required
private respondent to explain why he should not be dismissed for the spoilage
in Fuji Xeroxs Buendia branch and suspended him pending the result of the
investigation. According to petitioners, although they conducted an
administrative investigation, the purpose was only to determine the
complicity of their own employees in the incident, if any, and any criminal
liability of private respondent.
This claim is belied by two letters written by Atty. Victorino H. Luis, Legal
and Industrial Relations Officer of the company, to the union president, Nick
Macaraig. The first letter, dated July 6, 1983, stated:

This has reference to your various letters dated today on administrative


case concerning Messrs. Crisostomo Cruz, Pedro Garado and Ms. Evelyn
Abenes. In connection with the above and in the case likewise of Mr.
Dionisio Guyala, please be advised that the proceedings against them are
being carried out under the terms, and in accordance with the provisions of
our Policy and Procedure on Employment Termination as well as Policy on
Disciplinary Actions dated October 1, 1982, and not under the Grievance
Machinery under our CBA.

Your action apparently is premised on the assumption that we are now in


the Grievance Stage, which is premature. If we have allowed the Union to
participate in our Investigation and Administrative panels, it is only a
concession on managements part in accordance with No. IV, Section B,
Paragraph 3 of the abovecited policy on the investigation, the
Personnel/Administrative Department may consult the Union whenever
necessary.

We shall entertain grievances under our CBA Machinery only after decisions
have been made on the foregoing cases and should you find the penalties
imposed, if any, as unjust, unduly harsh, discriminating otherwise fit subject
for grievance by the Union itself under the terms of our CBA.
68
Accordingly, we are proceeding with our investigations on the administrative
charges with or without your presence or that of the respondents if it is the
latters preference, as in the case of Crisostomo Cruz, to ignore the same.
(Italics ours)

The second letter, dated July 13, 1983,[6] read:

You obviously persist in pursuing the misconception that our allowing your
presence in the administrative proceedings against Messrs. Guyala, Cruz, et
al. has set the Grievance Machinery under our CBA into play. We can only
reiterate our statement in our letter of July 6 that we were implementing
Policy and Procedures on Termination dated October 1, 1982 and that your
presence in helping bolster the defense for the respondents was only with
our forbearance in the spirit of cooperation in order to better ferret out the
truth.

The power or authority to impose discipline and disciplinary measures upon


employees is a basic prerogative of Management, something that cannot be
abdicated, much less ceded to a CBA Grievance Committee which is limited
to settling disputes and misunderstanding as to interpretation, application,
or violation of any provisions of the CBA agreement x x x. As likewise
pointed out in our letter of July 6 recourse to Grievance may possibly be
resorted to if in the Unions opinion a penalty imposed upon a respondent
Union member is discriminating to the member or otherwise illegal, unduly
harsh, and the like. Ultimately, the remedy lies in appeal to the NLRC, as in
similar cases in the past. (Italics ours)

These letters reveal the role which Fuji Xerox played in the dismissal of
the private respondent. They dispel any doubt that Fuji Xerox exercised
disciplinary authority over Garado and that Skillpower, Inc. issued the order
of dismissal merely in obedience to the decision of petitioner.

69
Fourth. Petitioner avers that Skillpower, Inc. is a highly-capitalized
business venture, registered as an independent employer with the Securities
and Exchange Commission as well as the Department of Labor and
Employment. Skillpower, Inc. is a member of the Social Security System. In
1984 it had assets exceeding P5 million pesos and at least 20 typewriters,
office equipment and service vehicles. It had employees of its own and a pool
of 25 clerks assigned to clients on a temporary basis.
Petitioners cite the case of Neri v. NLRC,[7] in which it was held that the
Building Care Corporation (BCC) was an independent contractor on the basis
of finding that it had substantial capital, although there was no evidence that
it had investments in the form of tools, equipment, machineries and work
premises. But the Court in that case considered not only the capitalization of
the BCC but also the fact that BCC was providing specific special services
(radio/telex operator and janitor) to the employer; that in another case[8] the
Court had already found that the BCC was an independent contractor; that
BCC retained control over the employees and the employer was actually just
concerned with the end-result; that BCC had the power to reassign the
employees and their deployment was not subject to the approval of the
employer; and that BCC was paid in lump sum for the services it rendered.
These features of that case make it distinguishable from the present one.
Here, the service being rendered by private respondent was not a specific
or special skill that Skillpower, Inc. was in the business of providing. Although
in the Neri case the telex machine operated by the employee belonged to the
employer, the service was deemed permissible because it was specific and
technical. This cannot be said of the service rendered by private respondent
Garado.
The Rules to Implement of the Labor Code, Book III, Rule VIII, 8, provide
that there is job contracting when the following conditions are fulfilled:

70
(1) The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to
his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the
work except as to the results thereof; and

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

Otherwise, according to Art. 106 of the Labor Code,

There is labor-only contracting where the person supplying workers to an


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

Petitioner Fuji Xerox argues that Skillpower, Inc. had typewriters and
service vehicles for the conduct of its business independently of the
petitioner. But typewriters and vehicles bear no direct relationship to the job
for which Skillpower, Inc. contracted its service of operating copier machines
and offering copying services to the public. The fact is that Skillpower, Inc.
did not have copying machines of its own. What it did was simply to supply
manpower to Fuji Xerox. The phrase substantial capital and investment in the
form of tools, equipment, machineries, work premises, and other materials
which are necessary in the conduct of his business, in the Implementing Rules
clearly contemplates tools, equipment, etc., which are directly related to the
service it is being contracted to render. One who does not have an

71
independent business for undertaking the job contracted for is just an agent
of the employer.
Fifth. The Agreement between petitioner Fuji Xerox and Skillpower, Inc.
provides that Skillpower, Inc. is an independent contractor and that the
workers hired by it shall not, in any manner and under any circumstances, be
considered employees of [the] Company, and that the Company has no
control or supervision whatsoever over the conduct of the Contractor or any
of its workers in respect to how they accomplish their work or perform the
Contractors obligations under this AGREEMENT.
In Tabas v. California Manufacturing Company, Inc.,[9] this Court held on
facts similar to those in the case at bar:

There is no doubt that in the case at bar, Livi performs manpower services,
meaning to say, it contracts out labor in favor of clients. We hold that it is
one notwithstanding its vehement claims to the contrary, and
notwithstanding the provision of the contract that it is an independent
contractor. The nature of ones business is not determined by self-serving
appellations one attaches thereto but by the tests provided by statute and
prevailing case law. The bare fact that Livi maintains a separate line of
business does not extinguish the equal fact that it has
provided California with workers to pursue the latters own business. In this
connection, we do not agree that the petitioners had been made to perform
activities which are not directly related to the general business of
manufacturing, Californias purported principal operation activity. The
petitioners had been charged with merchandising [sic] promotion or sale of
the products of [California] in the different sales outlets in Metro Manila
including task and occasional [sic] price tagging, an activity that is
doubtless, an integral part of the manufacturing business. It is not, then, as
if Livi had served as its (Californias) promotions or sales arm or agents, or
otherwise, rendered a piece of work it (California) could not have itself
done; Livi as a placement agency, had simply supplied it with the
72
manpower necessary to carry out its (Californias) merchandising activities,
using its (Californias) premises and equipment.

xxx xxx xxx

The fact that the petitioners have allegedly admitted being Livis direct
employees in their complaints is nothing conclusive. For one thing, the fact
that the petitioners were (are), will not absolve California since liability has
been imposed by legal operation. For another, and as we indicated, the
relations of parties must be judged from case to case and the decree of
law, and not by declaration of parties.

Skilipower, Inc. is, therefore, a labor-only contractor and Garado is not its
employee. No grave abuse of discretion can thus be imputed to the NLRC for
declaring petitioner Fuji Xerox guilty of illegal dismissal of private respondent.
ACCORDINGLY, the petition for certiorari is DISMISSED for lack of merit.
SO ORDERED.

73
G.R. No. 73887 December 21, 1989

GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,


vs.
HONORATO JUDICO and NATIONAL LABOR RELATIONS
COMMISSION, respondents.

G.A. Fortun and Associates for petitioner.

Corsino B. Soco for private respondent.

PARAS J.:

Before us is a Petition for certiorari to review the decision of the National


Labor Relations Commission (NLRC, for brevity) dated September 9, 1985
reversing the decision of Labor Arbiter Vito J. Minoria, dated June 9, 1983,
by 1) ordering petitioner insurance company, Great Pacific Life Assurance
Corporation (Grepalife, for brevity) to recognize private respondent Honorato
Judico, as its regular employee as defined under Art. 281 of the Labor Code
and 2) remanding the case to its origin for the determination of private
respondent Judico's money claims.

The records of the case show that Honorato Judico filed a complaint for illegal
dismissal against Grepalife, a duly organized insurance firm, before the NLRC
Regional Arbitration Branch No. VII, Cebu City on August 27, 1982. Said
complaint prayed for award of money claims consisting of separation pay,
unpaid salary and 13th month pay, refund of cash bond, moral and exemplary
damages and attorney's fees.

Both parties appealed to the NLRC when a decision was rendered by the
Labor Arbiter dismissing the complaint on the ground that the employer-
employee relations did not exist between the parties but ordered Grepalife to
pay complainant the sum of Pl,000.00 by reason of Christian Charity.

74
On appeal, said decision was reversed by the NLRC ruling that complainant
is a regular employee as defined under Art. 281 of the Labor Code and
declaring the appeal of Grepalife questioning the legality of the payment of
Pl,000.00 to complainant moot and academic. Nevertheless, for the purpose
of revoking the supersedeas bond of said company it ruled that the Labor
Arbiter erred in awarding Pl,000.00 to complainant in the absence of any legal
or factual basis to support its payment.

Petitioner company moved to reconsider, which was denied, hence this


petition for review raising four legal issues to wit:

I. Whether the relationship between insurance agents and their


principal, the insurance company, is that of agent and principal to
be governed by the Insurance Code and the Civil Code provisions
on agency, or one of employer-employee, to be governed by the
Labor Code.

II. Whether insurance agents are entitled to the employee benefits


prescribed by the Labor Code.

III. Whether the public respondent NLRC has jurisdiction to take


cognizance of a controversy between insurance agent and the
insurance company, arising from their agency relations.

IV. Whether the public respondent acted correctly in setting aside


the decision of Labor Arbiter Vito J. Minoria and in ordering the
case remanded to said Labor Arbiter for further proceedings.(p.
159, Rollo)

The crux of these issues boil down to the question of whether or not
employer-employee relationship existed between petitioner and private
respondent.

75
Petitioner admits that on June 9, 1976, private respondent Judico entered
into an agreement of agency with petitioner Grepalife to become a debit
agent attached to the industrial life agency in Cebu City. Petitioner defines a
debit agent as "an insurance agent selling/servicing industrial life plans and
policy holders. Industrial life plans are those whose premiums are payable
either daily, weekly or monthly and which are collectible by the debit agents
at the home or any place designated by the policy holder" (p. 156, Rollo).
Such admission is in line with the findings of public respondent that as such
debit agent, private respondent Judico had definite work assignments
including but not limited to collection of premiums from policy holders and
selling insurance to prospective clients. Public respondent NLRC also found
out that complainant was initially paid P 200. 00 as allowance for thirteen
(13) weeks regardless of production and later a certain percentage
denominated as sales reserve of his total collections but not lesser than P
200.00. Sometime in September 1981, complainant was promoted to the
position of Zone Supervisor and was given additional (supervisor's) allowance
fixed at P110.00 per week. During the third week of November 1981, he was
reverted to his former position as debit agent but, for unknown reasons, not
paid so-called weekly sales reserve of at least P 200.00. Finally on June 28,
1982, complainant was dismissed by way of termination of his agency
contract.

Petitioner assails the findings of the NLRC that private respondent is an


employee of the former. Petitioner argues that Judico's compensation was
not based on any fixed number of hours he was required to devote to the
service of petitioner company but rather it was the production or result of his
efforts or his work that was being compensated and that the so-called
allowance for the first thirteen weeks that Judico worked as debit agent,
cannot be construed as salary but as a subsidy or a way of assistance for
transportation and meal expenses of a new debit agent during the initial
period of his training which was fixed for thirteen (13) weeks. Stated
76
otherwise, petitioner contends that Judico's compensation, in the form of
commissions and bonuses, was based on actual production, (insurance plans
sold and premium collections).

Said contentions of petitioner are strongly rejected by private respondent. He


maintains that he received a definite amount as his Wage known as "sales
reserve" the failure to maintain the same would bring him back to a beginner's
employment with a fixed weekly wage of P 200.00 regardless of production.
He was assigned a definite place in the office to work on when he is not in
the field; and in addition to canvassing and making regular reports, he was
burdened with the job of collection and to make regular weekly report thereto
for which an anemic performance would mean dismissal. He earned out of
his faithful and productive service, a promotion to Zone Supervisor with
additional supervisor's allowance, (a definite or fixed amount of P110.00) that
he was dismissed primarily because of anemic performance and not because
of the termination of the contract of agency substantiate the fact that he was
indeed an employee of the petitioner and not an insurance agent in the
ordinary meaning of the term.

That private respondent Judico was an agent of the petitioner is


unquestionable. But, as We have held in Investment Planning Corp. vs. SSS,
21 SCRA 294, an insurance company may have two classes of agents who
sell its insurance policies: (1) salaried employees who keep definite hours and
work under the control and supervision of the company; and (2) registered
representatives who work on commission basis. The agents who belong to
the second category are not required to report for work at anytime, they do
not have to devote their time exclusively to or work solely for the company
since the time and the effort they spend in their work depend entirely upon
their own will and initiative; they are not required to account for their time
nor submit a report of their activities; they shoulder their own selling
expenses as well as transportation; and they are paid their commission based
on a certain percentage of their sales. One salient point in the determination
77
of employer-employee relationship which cannot be easily ignored is the fact
that the compensation that these agents on commission received is not paid
by the insurance company but by the investor (or the person insured). After
determining the commission earned by an agent on his sales the agent
directly deducts it from the amount he received from the investor or the
person insured and turns over to the insurance company the amount invested
after such deduction is made. The test therefore is 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.

Applying the aforementioned test to the case at bar, We can readily see that
the element of control by the petitioner on Judico was very much present.
The record shows that petitioner Judico received a definite minimum amount
per week as his wage known as "sales reserve" wherein the failure to
maintain the same would bring him back to a beginner's employment with a
fixed weekly wage of P 200.00 for thirteen weeks regardless of production.
He was assigned a definite place in the office to work on when he is not in
the field; and in addition to his canvassing work he was burdened with the
job of collection. In both cases he was required to make regular report to the
company regarding these duties, and for which an anemic performance would
mean a dismissal. Conversely faithful and productive service earned him a
promotion to Zone Supervisor with additional supervisor's allowance, a
definite amount of P110.00 aside from the regular P 200.00 weekly
"allowance". Furthermore, his contract of services with petitioner is not for a
piece of work nor for a definite period.

On the other hand, an ordinary commission insurance agent works at his own
volition or at his own leisure without fear of dismissal from the company and
short of committing acts detrimental to the business interest of the company
or against the latter, whether he produces or not is of no moment as his
salary is based on his production, his anemic performance or even dead result
78
does not become a ground for dismissal. Whereas, in private respondent's
case, the undisputed facts show that he was controlled by petitioner
insurance company not only as to the kind of work; the amount of results,
the kind of performance but also the power of dismissal. Undoubtedly, private
respondent, by nature of his position and work, had been a regular employee
of petitioner and is therefore entitled to the protection of the law and could
not just be terminated without valid and justifiable cause.

Premises considered, the appealed decision is hereby AFFIRMED in toto.

SO ORDERED.

79
G.R. No. L-21278 December 27, 1966

FEATI UNIVERSITY, petitioner,


vs.
HON. JOSE S. BAUTISTA, Presiding Judge of the Court of Industrial
Relations and FEATI UNIVERSITY FACULTY CLUB-
PAFLU, respondents.

----------------------------------------

G.R. No. L-21462 December 27, 1966

FEATI UNIVERSITY, petitioner-appellant,


vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.

----------------------------------------

G.R. No. L-21500 December 27, 1966

FEATI UNIVERSITY, petitioner-appellant,


vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.

Rafael Dinglasan for petitioner.


Cipriano Cid and Associates for respondents.

ZALDIVAR, J.:

This Court, by resolution, ordered that these three cases be considered


together, and the parties were allowed to file only one brief for the three
cases.

On January 14, 1963, the President of the respondent Feati University Faculty
Club-PAFLU hereinafter referred to as Faculty Club wrote a letter to Mrs.
80
Victoria L. Araneta, President of petitioner Feati University hereinafter
referred to as University informing her of the organization of the Faculty
Club into a registered labor union. The Faculty Club is composed of members
who are professors and/or instructors of the University. On January 22, 1963,
the President of the Faculty Club sent another letter containing twenty-six
demands that have connection with the employment of the members of the
Faculty Club by the University, and requesting an answer within ten days
from receipt thereof. The President of the University answered the two
letters, requesting that she be given at least thirty days to study thoroughly
the different phases of the demands. Meanwhile counsel for the University,
to whom the demands were referred, wrote a letter to the President of the
Faculty Club demanding proof of its majority status and designation as a
bargaining representative. On February 1, 1963, the President of the Faculty
Club again wrote the President of the University rejecting the latter's request
for extension of time, and on the same day he filed a notice of strike with the
Bureau of Labor alleging as reason therefor the refusal of the University to
bargain collectively. The parties were called to conferences at the Conciliation
Division of the Bureau of Labor but efforts to conciliate them failed. On
February 18, 1963, the members of the Faculty Club declared a strike and
established picket lines in the premises of the University, resulting in the
disruption of classes in the University. Despite further efforts of the officials
from the Department of Labor to effect a settlement of the differences
between the management of the University and the striking faculty members
no satisfactory agreement was arrived at. On March 21, 1963, the President
of the Philippines certified to the Court of Industrial Relations the dispute
between the management of the University and the Faculty Club pursuant to
the provisions of Section 10 of Republic Act No. 875.

In connection with the dispute between the University and the Faculty Club
and certain incidents related to said dispute, various cases were filed with the
Court of Industrial Relations hereinafter referred to as CIR. The three cases
81
now before this Court stemmed from those cases that were filed with the
CIR.

CASE NO. G.R. NO. L-21278

On May 10, 1963, the University filed before this Court a "petition
for certiorari and prohibition with writ of preliminary injunction", docketed as
G.R. No. L-21278, praying: (1) for the issuance of the writ of preliminary
injunction enjoining respondent Judge Jose S. Bautista of the CIR to desist
from proceeding in CIR Cases Nos. 41-IPA, 1183-MC, and V-30; (2) that the
proceedings in Cases Nos. 41-IPA and 1183-MC be annulled; (3) that the
orders dated March 30, 1963 and April 6, 1963 in Case No. 41-IPA, the order
dated April 6, 1963 in Case No. 1183-MC, and the order dated April 29, 1963
in Case No. V-30, all be annulled; and (4) that the respondent Judge be
ordered to dismiss said cases Nos. 41-IPA, 1183-MC and V-30 of the CIR.

On May 10, 1963, this Court issued a writ of preliminary injunction, upon the
University's filing a bond of P1,000.00, ordering respondent Judge Jose S.
Bautista as Presiding Judge of the CIR, until further order from this Court, "to
desist and refrain from further proceeding in the premises (Cases Nos. 41-
IPA, 1183-MC and V-30 of the Court of Industrial Relations)."1 On December
4, 1963, this Court ordered the injunction bond increased to P100,000.00;
but on January 23, 1964, upon a motion for reconsideration by the University,
this Court reduced the bond to P50,000.00.

A brief statement of the three cases CIR Cases 41-IPA, 1183-MC and V-30
involved in the Case G.R. No. L-21278, is here necessary.

CIR Case No. 41-IPA, relates to the case in connection with the strike staged
by the members of the Faculty Club. As we have stated, the dispute between
the University and the Faculty Club was certified on March 21, 1963 by the
President of the Philippines to the CIR. On the strength of the presidential
certification, respondent Judge Bautista set the case for hearing on March 23,
82
1963. During the hearing, the Judge endeavored to reconcile the part and it
was agreed upon that the striking faculty members would return to work and
the University would readmit them under a status quo arrangement. On that
very same day, however, the University, thru counsel filed a motion to dismiss
the case upon the ground that the CIR has no jurisdiction over the case,
because (1) the Industrial Peace Act is not applicable to the University, it
being an educational institution, nor to the members of the Faculty Club, they
being independent contractors; and (2) the presidential certification is
violative of Section 10 of the Industrial Peace Act, as the University is not an
industrial establishment and there was no industrial dispute which could be
certified to the CIR. On March 30, 1963 the respondent Judge issued an order
denying the motion to dismiss and declaring that the Industrial Peace Act is
applicable to both parties in the case and that the CIR had acquired
jurisdiction over the case by virtue of the presidential certification. In the
same order, the respondent Judge, believing that the dispute could not be
decided promptly, ordered the strikers to return immediately to work and the
University to take them back under the last terms and conditions existing
before the dispute arose, as per agreement had during the hearing on March
23, 1963; and likewise enjoined the University, pending adjudication of the
case, from dismissing any employee or laborer without previous authorization
from the CIR. The University filed on April 1, 1963 a motion for
reconsideration of the order of March 30, 1963 by the CIR en banc, and at
the same time asking that the motion for reconsideration be first heard by
the CIR en banc. Without the motion for reconsideration having been acted
upon by the CIR en banc, respondent Judge set the case for hearing on the
merits for May 8, 1963. The University moved for the cancellation of said
hearing upon the ground that the court en banc should first hear the motion
for reconsideration and resolve the issues raised therein before the case is
heard on the merits. This motion for cancellation of the hearing was denied.
The respondent Judge, however, cancelled the scheduled hearing when
counsel for the University manifested that he would take up before the
83
Supreme Court, by a petition for certiorari, the matter regarding the
actuations of the respondent Judge and the issues raised in the motion for
reconsideration, specially the issue relating to the jurisdiction of the CIR. The
order of March 30, 1963 in Case 41-IPA is one of the orders sought to be
annulled in the case, G.R. No. L-21278.

Before the above-mentioned order of March 30, 1963 was issued by


respondent Judge, the University had employed professors and/or instructors
to take the places of those professors and/or instructors who had struck. On
April 1, 1963, the Faculty Club filed with the CIR in Case 41-IPA a petition to
declare in contempt of court certain parties, alleging that the University
refused to accept back to work the returning strikers, in violation of the
return-to-work order of March 30, 1963. The University filed, on April 5,1963,
its opposition to the petition for contempt, denying the allegations of the
Faculty Club and alleging by way of special defense that there was still the
motion for reconsideration of the order of March 30, 1963 which had not yet
been acted upon by the CIR en banc. On April 6, 1963, the respondent Judge
issued an order stating that "said replacements are hereby warned and
cautioned, for the time being, not to disturb nor in any manner commit any
act tending to disrupt the effectivity of the order of March 30,1963, pending
the final resolution of the same."2 On April 8, 1963, there placing professors
and/or instructors concerned filed, thru counsel, a motion for reconsideration
by the CIR en banc of the order of respondent Judge of April 6, 1963. This
order of April 6, 1963 is one of the orders that are sought to be annulled in
case G.R. No. L-21278.

CIR Case No. 1183-MC relates to a petition for certification election filed by
the Faculty Club on March 8, 1963 before the CIR, praying that it be certified
as the sole and exclusive bargaining representative of all the employees of
the University. The University filed an opposition to the petition for
certification election and at the same time a motion to dismiss said petition,
raising the very same issues raised in Case No. 41-IPA, claiming that the
84
petition did not comply with the rules promulgated by the CIR; that the
Faculty Club is not a legitimate labor union; that the members of the Faculty
Club cannot unionize for collective bargaining purposes; that the terms of the
individual contracts of the professors, instructors, and teachers, who are
members of the Faculty Club, would expire on March 25 or 31, 1963; and
that the CIR has no jurisdiction to take cognizance of the petition because
the Industrial Peace Act is not applicable to the members of the Faculty Club
nor to the University. This case was assigned to Judge Baltazar Villanueva of
the CIR. Before Judge Villanueva could act on the motion to dismiss, however,
the Faculty Club filed on April 3, 1963 a motion to withdraw the petition on
the ground that the labor dispute (Case No. 41-IPA) had already been
certified by the President to the CIR and the issues raised in Case No. 1183-
MC were absorbed by Case No. 41-IPA. The University opposed the
withdrawal, alleging that the issues raised in Case No. 1183-MC were
separate and distinct from the issues raised in Case No. 41-IPA; that the
questions of recognition and majority status in Case No. 1183-MC were not
absorbed by Case No. 41-IPA; and that the CIR could not exercise its power
of compulsory arbitration unless the legal issue regarding the existence of
employer-employee relationship was first resolved. The University prayed
that the motion of the Faculty Club to withdraw the petition for certification
election be denied, and that its motion to dismiss the petition be heard. Judge
Baltazar Villanueva, finding that the reasons stated by the Faculty Club in the
motion to withdraw were well taken, on April 6, 1963, issued an order
granting the withdrawal. The University filed, on April 24, 1963, a motion for
reconsideration of that order of April 6, 1963 by the CIR en banc. This order
of April 6, 1963 in Case No. 1183-MC is one of the orders sought to be
annulled in the case, G.R. No. L-21278, now before Us.

CIR Case No. V-30 relates to a complaint for indirect contempt of court filed
against the administrative officials of the University. The Faculty Club,
through the Acting Chief Prosecutor of the CIR, filed with the CIR a complaint
85
docketed as Case No. V-30, charging President Victoria L. Araneta, Dean
Daniel Salcedo, Executive Vice-President Rodolfo Maslog, and Assistant to the
President Jose Segovia, as officials of the University, with indirect contempt
of court, reiterating the same charges filed in Case No. 41-IPA for alleged
violation of the order dated March 30, 1963. Based on the complaint thus
filed by the Acting Chief Prosecutor of the CIR, respondent Judge Bautista
issued on April 29, 1963 an order commanding any officer of the law to arrest
the above named officials of the University so that they may be dealt with in
accordance with law, and the same time fixed the bond for their release at
P500.00 each. This order of April 29, 1963 is also one of the orders sought
to be annulled in the case, G.R. No. L-2l278.

The principal allegation of the University in its petition for certiorari and
prohibition with preliminary injunction in Case G.R. No. L-21278, now before
Us, is that respondent Judge Jose S. Bautista acted without, or in excess of,
jurisdiction, or with grave abuse of discretion, in taking cognizance of, and in
issuing the questioned orders in, CIR Cases Nos. 41-IPA 1183-MC and V-30.
Let it be noted that when the petition for certiorari and prohibition with
preliminary injunction was filed on May 10, 1963 in this case, the questioned
order in CIR Cases Nos. 41-IPA, 1183-MC and V-30 were still pending action
by the CIR en banc upon motions for reconsideration filed by the University.

On June 10, 1963, the Faculty Club filed its answer to the petition
for certiorari and prohibition with preliminary injunction, admitting some
allegations contained in the petition and denying others, and alleging special
defenses which boil down to the contentions that (1) the CIR had acquired
jurisdiction to take cognizance of Case No. 41-IPA by virtue of the presidential
certification, so that it had jurisdiction to issue the questioned orders in said
Case No. 41-IPA; (2) that the Industrial Peace Act (Republic Act 875) is
applicable to the University as an employer and to the members of the Faculty
Club as employees who are affiliated with a duly registered labor union, so
that the Court of Industrial Relations had jurisdiction to take cognizance of
86
Cases Nos. 1183-MC and V-30 and to issue the questioned orders in those
two cases; and (3) that the petition for certiorari and prohibition with
preliminary injunction was prematurely filed because the orders of the CIR
sought to be annulled were still the subjects of pending motions for
reconsideration before the CIR en banc when said petition for certiorari and
prohibition with preliminary injunction was filed before this Court.

CASE G.R. NO. L-21462

This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As already
stated Case No. 1183-MC relates to a petition for certification election filed
by the Faculty Club as a labor union, praying that it be certified as the sole
and exclusive bargaining representative of all employees of the University.
This petition was opposed by the University, and at the same time it filed a
motion to dismiss said petition. But before Judge Baltazar Villanueva could
act on the petition for certification election and the motion to dismiss the
same, Faculty Club filed a motion to withdraw said petition upon the ground
that the issue raised in Case No. 1183-MC were absorbed by Case No. 41-IPA
which was certified by the President of the Philippines. Judge Baltazar
Villanueva, by order April 6, 1963, granted the motion to withdraw. The
University filed a motion for reconsideration of that order of April 6, 1963 by
the CIR en banc. That motion for reconsideration was pending action by the
CIR en banc when the petition for certiorariand prohibition with preliminary
injunction in Case G.R. no. L-21278 was filed on May 10, 1963. As earlier
stated this Court, in Case G.R. No. L-21278, issued a writ of preliminary
injunction on May 10, 1963, ordering respondent Judge Bautista, until further
order from this Court, to desist and refrain from further proceeding in the
premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial
Relations).

On June 5, 1963, that is, after this Court has issued the writ of preliminary
injunction in Case G.R. No. L-21278, the CIR en banc issued a resolution
87
denying the motion for reconsideration of the order of April 6, 1963 in Case
No. 1183-MC.

On July 8, 1963, the University filed before this Court a petition for certiorari,
by way of an appeal from the resolution of the CIR en banc, dated June 5,
1963, denying the motion for reconsideration of the order of April 6, 1963 in
Case No. 1183-MC. This petition was docketed as G.R. No. L-21462. In its
petition for certiorari, the University alleges (1) that the resolution of the
Court of Industrial Relations of June 5, 1963 was null and void because it was
issued in violation of the writ of preliminary injunction issued in Case G.R. No.
L-21278; (2) that the issues of employer-employee relationship, the alleged
status as a labor union, majority representation and designation as bargaining
representative in an appropriate unit of the Faculty Club should have been
resolved first in Case No. 1183-MC prior to the determination of the issues in
Case No. 41-IPA and therefore the motion to withdraw the petition for
certification election should not have been granted upon the ground that the
issues in the first case have been absorbed in the second case; and (3) the
lower court acted without or in excess of jurisdiction in taking cognizance of
the petition for certification election and that the same should have been
dismissed instead of having been ordered withdrawn. The University prayed
that the proceedings in Case No. 1183-MC and the order of April 6, 1963 and
the resolution of June 5, 1963 issued therein be annulled, and that the CIR
be ordered to dismiss Case No. 1183-MC on the ground of lack of jurisdiction.

The Faculty Club filed its answer, admitting some, and denying other,
allegations in the petition for certiorari; and specially alleging that the lower
court's order granting the withdrawal of the petition for certification election
was in accordance with law, and that the resolution of the court en banc on
June 5, 1963 was not a violation of the writ of preliminary injunction issued
in Case G.R. No. L-21278 because said writ of injunction was issued against
Judge Jose S. Bautista and not against the Court of Industrial Relations, much

88
less against Judge Baltazar Villanueva who was the trial judge of Case No.
1183-MC.

CASE G.R. NO. L-21500

This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier
stated, Case No. 41-IPA relates to the strike staged by the members of the
Faculty Club and the dispute was certified by the President of the Philippines
to the CIR. The University filed a motion to dismiss that case upon the ground
that the CIR has no jurisdiction over the case, and on March 30, 1963 Judge
Jose S. Bautista issued an order denying the motion to dismiss and declaring
that the Industrial Peace Act is applicable to both parties in the case and that
the CIR had acquired jurisdiction over the case by virtue of the presidential
certification; and in that same order Judge Bautista ordered the strikers to
return to work and the University to take them back under the last terms and
conditions existing before the dispute arose; and enjoined the University from
dismissing any employee or laborer without previous authority from the court.
On April 1, 1963, the University filed a motion for reconsideration of the order
of March 30, 1963 by the CIR en banc. That motion for reconsideration was
pending action by the CIR en banc when the petition for certiorari and
prohibition with preliminary injunction in Case G.R. No. L-21278 was filed on
May 10, 1963. As we have already stated, this Court in said case G.R. No. L-
21278, issued a writ of preliminary injunction on May 10, 1963 ordering
respondent Judge Jose S. Bautista, until further order from this Court, to
desist and refrain from further proceeding in the premises (Cases Nos. 41-
IPA, 1183-MC and V-30 of the Court of Industrial Relations).

On July 2, 1963, the University received a copy of the resolution of the CIR en
banc, dated May 7, 1963 but actually received and stamped at the Office of
the Clerk of the CIR on June 28, 1963, denying the motion for reconsideration
of the order dated March 30, 1963 in Case No. 41-IPA.

89
On July 23, 1963, the University filed before this Court a petition for certiorari,
by way of an appeal from the resolution of the Court of Industrial Relations en
banc dated May 7, 1963 (but actually received by said petitioner on July 2,
1963) denying the motion for reconsideration of the order of March 30, 1963
in Case No. 41-IPA. This petition was docketed as G.R. No. L-21500. In its
petition for certiorari the University alleges (1) that the resolution of the
CIR en banc, dated May 7, 1963 but filed with the Clerk of the CIR on June
28, 1963, in Case No. 41-IPA, is null and void because it was issued in
violation of the writ of preliminary injunction issued by this Court in G.R. No.
L-21278; (2) that the CIR, through its Presiding Judge, had no jurisdiction to
take cognizance of Case No. 41-IPA and the order of March 30, 1963 and the
resolution dated May 7, 1963 issued therein are null and void; (3) that the
certification made by the President of the Philippines is not authorized by
Section 10 of Republic Act 875, but is violative thereof; (4) that the Faculty
Club has no right to unionize or organize as a labor union for collective
bargaining purposes and to be certified as a collective bargaining agent within
the purview of the Industrial Peace Act, and consequently it has no right to
strike and picket on the ground of petitioner's alleged refusal to bargain
collectively where such duty does not exist in law and is not enforceable
against an educational institution; and (5) that the return-to-work order of
March 30, 1963 is improper and illegal. The petition prayed that the
proceedings in Case No. 41-IPA be annulled, that the order dated March 30,
1963 and the resolution dated May 7, 1963 be revoked, and that the lower
court be ordered to dismiss Case 41-IPA on the ground of lack of jurisdiction.

On September 10, 1963, the Faculty Club, through counsel, filed a motion to
dismiss the petition for certiorari on the ground that the petition being filed
by way of an appeal from the orders of the Court of Industrial Relations
denying the motion to dismiss in Case No. 41-IPA, the petition for certiorari is
not proper because the orders appealed from are interlocutory in nature.

90
This Court, by resolution of September 26, 1963, ordered that these three
cases (G.R. Nos. L-21278, L-21462 and L-21500) be considered together and
the motion to dismiss in Case G.R. No. L-21500 be taken up when the cases
are decided on the merits after the hearing.

Brushing aside certain technical questions raised by the parties in their


pleadings, We proceed to decide these three cases on the merits of the issues
raised.

The University has raised several issues in the present cases, the pivotal one
being its claim that the Court of Industrial Relations has no jurisdiction over
the parties and the subject matter in CIR Cases 41-IPA, 1183-MC and V-30,
brought before it, upon the ground that Republic Act No. 875 is not applicable
to the University because it is an educational institution and not an industrial
establishment and hence not an "employer" in contemplation of said Act; and
neither is Republic Act No. 875 applicable to the members of the Faculty Club
because the latter are independent contractors and, therefore, not employees
within the purview of the said Act.

In support of the contention that being an educational institution it is beyond


the scope of Republic Act No. 875, the University cites cases decided by this
Court: Boy Scouts of the Philippines vs. Juliana Araos, L-10091, Jan. 29,
1958; University of San Agustin vs. CIR, et al., L-12222, May 28, 1958; Cebu
Chinese High School vs. Philippine Land-Air-Sea Labor Union, PLASLU, L-
12015, April 22, 1959; La Consolacion College, et al. vs. CIR, et al., L-13282,
April 22, 1960; University of the Philippines, et al. vs. CIR, et al., L-15416,
April 8, 1960; Far Eastern University vs. CIR, L-17620, August 31, 1962. We
have reviewed these cases, and also related cases subsequent thereto, and
We find that they do not sustain the contention of the University. It is true
that this Court has ruled that certain educational institutions, like the
University of Santo Tomas, University of San Agustin, La Consolacion College,
and other juridical entities, like the Boy Scouts of the Philippines and Manila
91
Sanitarium, are beyond the purview of Republic Act No. 875 in the sense that
the Court of Industrial Relations has no jurisdiction to take cognizance of
charges of unfair labor practice filed against them, but it is nonetheless true
that the principal reason of this Court in ruling in those cases that those
institutions are excluded from the operation of Republic Act 875 is that those
entities are not organized, maintained and operated for profit and do not
declare dividends to stockholders. The decision in the case of University of
San Agustin vs. Court of Industrial Relations, G.R. No. L-12222, May 28, 1958,
is very pertinent. We quote a portion of the decision:

It appears that the University of San Agustin, petitioner herein, is an


educational institution conducted and managed by a "religious non-stock
corporation duly organized and existing under the laws of the
Philippines." It was organized not for profit or gain or division of the
dividends among its stockholders, but solely for religious and
educational purposes. It likewise appears that the Philippine Association
of College and University Professors, respondent herein, is a non-stock
association composed of professors and teachers in different colleges
and universities and that since its organization two years ago, the
university has adopted a hostile attitude to its formation and has tried
to discriminate, harass and intimidate its members for which reason the
association and the members affected filed the unfair labor practice
complaint which initiated this proceeding. To the complaint of unfair
labor practice, petitioner filed an answer wherein it disputed the
jurisdiction of the Court of Industrial Relations over the controversy on
the following grounds:

"(a) That complainants therein being college and/or university


professors were not "industrial" laborers or employees, and the
Philippine Association of College and University Professors being
composed of persons engaged in the teaching profession, is not
and cannot be a legitimate labor organization within the meaning
92
of the laws creating the Court of Industrial Relations and defining
its powers and functions;

"(b) That the University of San Agustin, respondent therein,


is not an institution established for the purpose of gain or division
of profits, and consequently, it is not an "industrial" enterprise and
the members of its teaching staff are not engaged in "industrial"
employment (U.S.T. Hospital Employees Association vs. Sto.
Tomas University Hospital, G.R. No. L-6988, 24 May 1954; and San
Beda College vs. Court of Industrial Relations and National Labor
Union, G.R. No. L-7649, 29 October 1955; 51 O.G. (Nov. 1955)
5636-5640);

"(c) That, as a necessary consequence, alleged controversy


between therein complainants and respondent is not an "industrial"
dispute, and the Court of Industrial Relations has no
jurisdiction, not only on the parties but also over the subject matter
of the complaint."

The issue now before us is: Since the University of San Agustin is not
an institution established for profit or gain, nor an industrial enterprise,
but one established exclusively for educational purposes, can it be said
that its relation with its professors is one of employer and employee that
comes under the jurisdiction of the Court of Industrial Relations? In
other words, do the provisions of the Magna Carta on unfair labor
practice apply to the relation between petitioner and members of
respondent association?

The issue is not new. Thus, in the case of Boy Scouts of the Philippines
v. Juliana V. Araos, G.R. No. L-10091, promulgated on January 29, 1958,
this Court, speaking thru Mr. Justice Montemayor, answered the query
in the negative in the following wise:

93
"The main issue involved in the present case is whether or not a
charitable institution or one organized not for profit but for more
elevated purposes, charitable, humanitarian, etc., like the Boy
Scouts of the Philippines, is included in the definition of "employer"
contained in Republic Act 875, and whether the employees of said
institution fall under the definition of "employee" also contained in
the same Republic Act. If they are included, then any act which
may be considered unfair labor practice, within the meaning of said
Republic Act, would come under the jurisdiction of the Court of
Industrial Relations; but if they do not fall within the scope of said
Republic Act, particularly, its definitions of employer and employee,
then the Industrial Court would have no jurisdiction at all.

xxx xxx xxx

"On the basis of the foregoing considerations, there is every reason


to believe that our labor legislation from Commonwealth Act No.
103, creating the Court of Industrial Relations, down through the
Eight-Hour Labor Law, to the Industrial Peace Act, was intended
by the Legislature to apply only to industrial employment and to
govern the relations between employers engaged in industry and
occupations for purposes of profit and gain, and their industrial
employees, but not to organizations and entities which are
organized, operated and maintained not for profit or gain, but for
elevated and lofty purposes, such as, charity, social service,
education and instruction, hospital and medical service, the
encouragement and promotion of character, patriotism and kindred
virtues in youth of the nation, etc.

"In conclusion, we find and hold that Republic Act No. 875,
particularly, that portion thereof regarding labor disputes and
unfair labor practice, does not apply to the Boy Scouts of the
94
Philippines, and consequently, the Court of Industrial Relations had
no jurisdiction to entertain and decide the action or petition filed
by respondent Araos. Wherefore, the appealed decision and
resolution of the CIR are hereby set aside, with costs against
respondent."

There being a close analogy between the relation and facts involved in
the two cases, we cannot but conclude that the Court of Industrial
Relations has no jurisdiction to entertain the complaint for unfair labor
practice lodged by respondent association against petitioner and,
therefore, we hereby set aside the order and resolution subject to the
present petition, with costs against respondent association.

The same doctrine was confirmed in the case of University of Santo Tomas
v. Hon. Baltazar Villanueva, et al., G.R. No. L-13748, October 30, 1959, where
this Court ruled that:

In the present case, the record reveals that the petitioner University of
Santo Tomas is not an industry organized for profit but an institution of
learning devoted exclusively to the education of the youth. The Court of
First Instance of Manila in its decision in Civil Case No. 28870, which has
long become final and consequently the settled law in the case, found
as established by the evidence adduced by the parties therein (herein
petitioner and respondent labor union) that while the University collects
fees from its students, all its income is used for the improvement and
enlargement of the institution. The University declares no dividend, and
the members of the corporation who founded it, as ordained in its
articles of incorporation, receive no material compensation for the time
and sacrifice they render to the University and its students. The
respondent union itself in a case before the Industrial Court (Case No.
314-MC) has averred that "the University of Santo Tomas, like the San
Beda College, is an educational institution operated not for profit but for
95
the sole purpose of educating young men." (See Annex "B" to
petitioner's motion to dismiss.). It is apparent, therefore, that on the
face of the record the University of Santo Tomas is not a corporation
created for profit but an educational institution and therefore not an
industrial or business organization.

In the case of La Consolacion College, et al. vs. CIR, et al., G.R. No. L-13282,
April 22, 1960, this Court repeated the same ruling when it said:

The main issue in this appeal by petitioner is that the industry trial court
committed an error in holding that it has jurisdiction to act in this case
even if it involves unfair labor practice considering that the La
Consolacion College is not a business enterprise but an educational
institution not organized for profit.

If the claim that petitioner is an educational institution not operated for


profit is true, which apparently is the case, because the very court a
quo found that it has no stockholder, nor capital . . . then we are of the
opinion that the same does not come under the jurisdiction of the Court
of Industrial Relations in view of the ruling in the case of Boy Scouts of
the Philippines v. Juliana V. Araos, G.R. No. L-10091, decided on January
29, 1958.

It is noteworthy that the cases of the University of San Agustin, the University
of Santo Tomas, and La Consolacion College, cited above, all involve charges
of unfair labor practice under Republic Act No. 875, and the uniform rulings
of this Court are that the Court of Industrial Relations has no jurisdiction over
the charges because said Act does not apply to educational institutions that
are not operated or maintained for profit and do not declare dividends. On
the other hand, in the cases of Far Eastern University v. CIR, et al., G.R. No.
L-17620, August 31, 1962, this Court upheld the decision of the Court of
Industrial Relations finding the Far Eastern University, also an educational

96
institution, guilty of unfair labor practice. Among the findings of fact in said
case was that the Far Eastern University made profits from the school year
1952-1953 to 1958-1959. In affirming the decision of the lower court, this
Court had thereby ratified the ruling of the Court of Industrial Relations which
applied the Industrial Peace Act to educational institutions that are organized,
operated and maintained for profit.

It is also noteworthy that in the decisions in the cases of the Boy Scouts of
the Philippines, the University of San Agustin, the University of Sto. Tomas,
and La Consolacion College, this Court was not unanimous in the view that
the Industrial Peace Act (Republic Act No. 875) is not applicable to charitable,
eleemosynary or non-profit organizations which include educational
institutions not operated for profit. There are members of this Court who hold
the view that the Industrial Peace Act would apply also to non-profit
organizations or entities the only exception being the Government,
including any political subdivision or instrumentality thereof, in so far as
governmental functions are concerned. However, in the Far Eastern
University case this Court is unanimous in supporting the view that an
educational institution that is operated for profit comes within the scope of
the Industrial Peace Act. We consider it a settled doctrine of this Court,
therefore, that the Industrial Peace Act is applicable to any organization or
entity whatever may be its purpose when it was created that is operated
for profit or gain.

Does the University operate as an educational institution for profit? Does it


declare dividends for its stockholders? If it does not, it must be declared
beyond the purview of Republic Act No. 875; but if it does, Republic Act No.
875 must apply to it. The University itself admits that it has declared
dividends.3 The CIR in its order dated March 30, 1963 in CIR Case No. 41-
IPA which order was issued after evidence was heard also found that
the University is not for strictly educational purposes and that "It realizes
profits and parts of such earning is distributed as dividends to private
97
stockholders or individuals (Exh. A and also 1 to 1-F, 2-x 3-x and 4-x)"4 Under
this circumstance, and in consonance with the rulings in the decisions of this
Court, above cited, it is obvious that Republic Act No. 875 is applicable to
herein petitioner Feati University.

But the University claims that it is not an employer within the contemplation
of Republic Act No. 875, because it is not an industrial establishment. At most,
it says, it is only a lessee of the services of its professors and/or instructors
pursuant to a contract of services entered into between them. We find no
merit in this claim. Let us clarify who is an "employer" under the Act. Section
2(c) of said Act provides:

Sec. 2. Definitions.As used in this Act

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

It will be noted that in defining the term "employer" the Act uses the word
"includes", which it also used in defining "employee". [Sec. 2 (d)], and
"representative" [Sec. 2(h)]; and not the word "means" which the Act uses
in defining the terms "court" [Sec. 2(a)], "labor organization" [Sec. 2(e)],
"legitimate labor organization [Sec. 2(f)], "company union" [Sec. 2(g)],
"unfair labor practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)], "strike" [Sec. 2(l)]
and "lock-out" [Sec. 2(m)]. A methodical variation in terminology is manifest.
This variation and distinction in terminology and phraseology cannot be
presumed to have been the inconsequential product of an oversight; rather,
it must have been the result of a deliberate and purposeful act, more so when
we consider that as legislative records show, Republic Act No. 875 had been
meticulously and painstakingly drafted and deliberated upon. In using the
word "includes" and not "means", Congress did not intend to give a complete

98
definition of "employer", but rather that such definition should be
complementary to what is commonly understood as employer. Congress
intended the term to be understood in a broad meaning because, firstly, the
statutory definition includes not only "a principal employer but also a person
acting in the interest of the employer"; and, secondly, the Act itself
specifically enumerated those who are not included in the term "employer",
namely: (1) a labor organization (otherwise than when acting as an
employer), (2) anyone acting in the capacity of officer or agent of such labor
organization [Sec. 2(c)], and (3) the Government and any political subdivision
or instrumentality thereof insofar as the right to strike for the purpose of
securing changes or modifications in the terms and conditions of employment
is concerned (Section 11). Among these statutory exemptions, educational
institutions are not included; hence, they can be included in the term
"employer". This Court, however, has ruled that those educational institutions
that are not operated for profit are not within the purview of Republic Act No.
875.5

As stated above, Republic Act No. 875 does not give a comprehensive but
only a complementary definition of the term "employer". The term
encompasses those that are in ordinary parlance "employers." What is
commonly meant by "employer"? The term "employer" has been given
several acceptations. The lexical definition is "one who employs; one who
uses; one who engages or keeps in service;" and "to employ" is "to provide
work and pay for; to engage one's service; to hire." (Webster's New
Twentieth Century Dictionary, 2nd ed., 1960, p. 595). The Workmen's
Compensation Act defines employer as including "every person or association
of persons, incorporated or not, public or private, and the legal representative
of the deceased employer" and "includes the owner or lessee of a factory or
establishment or place of work or any other person who is virtually the owner
or manager of the business carried on in the establishment or place of work
but who, for reason that there is an independent contractor in the same, or
99
for any other reason, is not the direct employer of laborers employed there."
[Sec. 39(a) of Act No. 3428.] The Minimum Wage Law states that "employer
includes any person acting directly or indirectly in the interest of the employer
in relation to an employee and shall include the Government and the
government corporations". [Rep. Act No. 602, Sec. 2(b)]. The Social Security
Act defines employer as "any person, natural or juridical, domestic or foreign,
who carries in the Philippines any trade, business, industry, undertaking, or
activity of any kind and uses the services of another person who is under his
orders as regards the employment, except the Government and any of its
political subdivisions, branches or instrumentalities, including corporations
owned or controlled by the Government." (Rep. Act No. 1161, Sec. 8[c]).

This Court, in the cases of the The Angat River Irrigation System, et al. vs.
Angat River Workers' Union (PLUM), et al., G.R. Nos. L-10934 and L-10944,
December 28, 1957, which cases involve unfair labor practices and hence
within the purview of Republic Act No. 875, defined the term employer as
follows:

An employer is one who employs the services of others; one for whom
employees work and who pays their wages or salaries (Black Law
Dictionary, 4th ed., p. 618).

An employer includes any person acting in the interest of an employer,


directly or indirectly (Sec. 2-c, Rep. Act 875).

Under none of the above definitions may the University be excluded,


especially so if it is considered that every professor, instructor or teacher in
the teaching staff of the University, as per allegation of the University itself,
has a contract with the latter for teaching services, albeit for one semester
only. The University engaged the services of the professors, provided them
work, and paid them compensation or salary for their services. Even if the
University may be considered as a lessee of services under a contract

100
between it and the members of its Faculty, still it is included in the term
"employer". "Running through the word `employ' is the thought that there
has been an agreement on the part of one person to perform a certain service
in return for compensation to be paid by an employer. When you ask how a
man is employed, or what is his employment, the thought that he is under
agreement to perform some service or services for another is predominant
and paramount." (Ballentine Law Dictionary, Philippine ed., p. 430, citing
Pinkerton National Detective Agency v. Walker, 157 Ga. 548, 35 A. L. R. 557,
560, 122 S.E. Rep. 202).

To bolster its claim of exception from the application of Republic Act No. 875,
the University contends that it is not state that the employers included in the
definition of 2 (c) of the Act. This contention can not be sustained. In the first
place, Sec. 2 (c) of Republic Act No. 875 does not state that the employers
included in the definition of the term "employer" are only and exclusively
"industrial establishments"; on the contrary, as stated above, the term
"employer" encompasses all employers except those specifically excluded by
the Act. In the second place, even the Act itself does not refer exclusively to
industrial establishments and does not confine its application thereto. This is
patent inasmuch as several provisions of the Act are applicable to non-
industrial workers, such as Sec. 3, which deals with "employees' right to self-
organization"; Sections 4 and 5 which enumerate unfair labor practices;
Section 8 which nullifies private contracts contravening employee's rights;
Section 9 which relates to injunctions in any case involving a labor dispute;
Section 11 which prohibits strikes in the government; Section 12 which
provides for the exclusive collective bargaining representation for labor
organizations; Section 14 which deals with the procedure for collective
bargaining; Section 17 which treats of the rights and conditions of
membership in labor organizations; Sections 18, 19, 20 and 21 which provide
respectively for the establishment of conciliation service, compilation of
collective bargaining contracts, advisory labor-management relations; Section
101
22 which empowers the Secretary of Labor to make a study of labor relations;
and Section 24 which enumerates the rights of labor organizations. (See
Dissenting Opinion of Justice Concepcion in Boy Scouts of the Philippines v.
Juliana Araos, G.R. No. L-10091, January 29, 1958.)

This Court, in the case of Boy Scouts of the Philippines v. Araos, supra, had
occasion to state that the Industrial Peace Act "refers only to organizations
and entities created and operated for profits, engaged in a profitable trade,
occupation or industry". It cannot be denied that running a university
engages time and attention; that it is an occupation or a business from which
the one engaged in it may derive profit or gain. The University is not an
industrial establishment in the sense that an industrial establishment is one
that is engaged in manufacture or trade where raw materials are changed or
fashioned into finished products for use. But for the purposes of the Industrial
Peace Act the University is an industrial establishment because it is operated
for profit and it employs persons who work to earn a living. The term
"industry", for the purposes of the application of our labor laws should be
given a broad meaning so as to cover all enterprises which are operated for
profit and which engage the services of persons who work to earn a living.

The word "industry" within State Labor Relations Act controlling labor
relations in industry, cover labor conditions in any field of employment
where the objective is earning a livelihood on the one side and gaining
of a profit on the other. Labor Law Sec. 700 et seq. State Labor Relations
Board vs. McChesney, 27 N.Y.S. 2d 866, 868." (Words and Phrases,
Permanent Edition, Vol. 21, 1960 edition p. 510).

The University urges that even if it were an employer, still there would be no
employer-employee relationship between it and the striking members of the
Faculty Club because the latter are not employees within the purview of Sec.
2(d) of Republic Act No. 875 but are independent contractors. This claim is
untenable.
102
Section 2 (d) of Republic Act No. 875 provides:

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

This definition is again, like the definition of the term "employer" [Sec. 2(c)],
by the use of the term "include", complementary. It embraces not only those
who are usually and ordinarily considered employees, but also those who
have ceased as employees as a consequence of a labor dispute. The term
"employee", furthermore, is not limited to those of a particular employer. As
already stated, this Court in the cases of The Angat River Irrigation System,
et al. v. Angat River Workers' Union (PLUM), et al., supra, has defined the
term "employer" as "one who employs the services of others; one for whom
employees work and who pays their wages or salaries. "Correlatively, an
employee must be one who is engaged in the service of another; who
performs services for another; who works for salary or wages. It is admitted
by the University that the striking professors and/or instructors are under
contract to teach particular courses and that they are paid for their services.
They are, therefore, employees of the University.

In support of its claim that the members of the Faculty Club are not
employees of the University, the latter cites as authority Francisco's Labor
Laws, 2nd ed., p. 3, which states:

While the term "workers" as used in a particular statute, has been


regarded as limited to those performing physical labor, it has been held
to embrace stenographers and bookkeepers. Teachers are not included,
however.

103
It is evident from the above-quoted authority that "teachers" are not to be
included among those who perform "physical labor", but it does not mean
that they are not employees. We have checked the source of the authority,
which is 31 Am. Jur., Sec. 3, p. 835, and the latter cites Huntworth v. Tanner,
87 Wash 670, 152 P. 523, Ann Cas 1917 D 676. A reading of the last case
confirms Our view.

That teachers are "employees' has been held in a number of cases (Aebli v.
Board of Education of City and County of San Francisco, 145 P. 2d 601, 62
Col. App 2.d 706; Lowe & Campbell Sporting Goods Co. v. Tangipahoa Parish
School Board, La. App., 15 So. 2d 98, 100; Sister Odelia v. Church of St.
Andrew, 263 N. W. 111, 112, 195 Minn. 357, cited in Words and Phrases,
Permanent ed., Vol. 14, pp. 806-807). This Court in the Far Eastern University
case, supra, considered university instructors as employees and declared
Republic Act No. 875 applicable to them in their employment relations with
their school. The professors and/or instructors of the University neither
ceased to be employees when they struck, for Section 2 of Rep. Act 875
includes among employees any individual whose work has ceased as
consequence of, or in connection with a current labor dispute. Striking
employees maintain their status as employees of the employer. (Western
Cartridge Co. v. NLRB, C.C.A. 7, 139 F2d 855, 858).

The contention of the University that the professors and/or instructors are
independent contractors, because the University does not exercise control
over their work, is likewise untenable. This Court takes judicial notice that a
university controls the work of the members of its faculty; that a university
prescribes the courses or subjects that professors teach, and when and where
to teach; that the professors' work is characterized by regularity and
continuity for a fixed duration; that professors are compensated for their
services by wages and salaries, rather than by profits; that the professors
and/or instructors cannot substitute others to do their work without the
consent of the university; and that the professors can be laid off if their work
104
is found not satisfactory. All these indicate that the university has control over
their work; and professors are, therefore, employees and not independent
contractors. There are authorities in support of this view.

The principal consideration in determining whether a workman is an


employee or an independent contractor is the right to control the
manner of doing the work, and it is not the actual exercise of the right
by interfering with the work, but the right to control, which constitutes
the test. (Amalgamated Roofing Co. v. Travelers' Ins. Co., 133 N.E. 259,
261, 300 Ill. 487, quoted in Words and Phrases, Permanent ed., Vol. 14,
p. 576).

Where, under Employers' Liability Act, A was instructed when and where
to work . . . he is an employee, and not a contractor, though paid
specified sum per square. (Heine v. Hill, Harris & Co., 2 La. App. 384,
390, in Words and Phrases, loc, cit.) .

Employees are those who are compensated for their labor or services
by wages rather than by profits. (People vs. Distributors Division,
Smoked Fish Workers Union Local No. 20377, Sup. 7 N. Y. S. 2d 185,
187 in Words and Phrases, loc, cit.)

Services of employee or servant, as distinguished from those of a


contractor, are usually characterized by regularity and continuity of work
for a fixed period or one of indefinite duration, as contrasted with
employment to do a single act or a series of isolated acts; by
compensation on a fixed salary rather than one regulated by value or
amount of work; . . . (Underwood v. Commissioner of Internal Revenue,
C.C.A., 56 F. 2d 67, 71 in Words and Phrases, op. cit., p. 579.)

Independent contractors can employ others to work and accomplish


contemplated result without consent of contractee, while "employee"
cannot substitute another in his place without consent of his employer.
105
(Luker Sand & Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82
Utah, 188, in Words and Phrases, Vol. 14, p. 576).

Moreover, even if university professors are considered independent


contractors, still they would be covered by Rep. Act No. 875. In the case of
the Boy Scouts of the Philippines v. Juliana Araos, supra, this Court observed
that Republic Act No. 875 was modelled after the Wagner Act, or the National
Labor Relations Act, of the United States, and this Act did not exclude
"independent contractors" from the orbit of "employees". It was in the
subsequent legislation the Labor Management Relation Act (Taft-Harley
Act) that "independent contractors" together with agricultural laborers,
individuals in domestic service of the home, supervisors, and others were
excluded. (See Rothenberg on Labor Relations, 1949, pp. 330-331).

It having been shown that the members of the Faculty Club are employees,
it follows that they have a right to unionize in accordance with the provisions
of Section 3 of the Magna Carta of Labor (Republic Act No. 875) which
provides as follows:

Sec. 3. Employees' right to self-organization.Employees shall have the


right to self-organization and to form, join or assist labor organizations
of their own choosing for the purpose of collective bargaining through
representatives of their own choosing and to engage in concerted
activities for the purpose of collective bargaining and other mutual aid
or protection. . . .

We agree with the statement of the lower court, in its order of March 30,
1963 which is sought to be set aside in the instant case, that the right of
employees to self-organization is guaranteed by the Constitution, that said
right would exist even if Republic Act No. 875 is repealed, and that regardless
of whether their employers are engaged in commerce or not. Indeed, it is
Our considered view that the members of the faculty or teaching staff of

106
private universities, colleges, and schools in the Philippines, regardless of
whether the university, college or school is run for profit or not, are included
in the term "employees" as contemplated in Republic Act No. 875 and as such
they may organize themselves pursuant to the above-quoted provision of
Section 3 of said Act. Certainly, professors, instructors or teachers of private
educational institutions who teach to earn a living are entitled to the
protection of our labor laws and one such law is Republic Act No. 875.

The contention of the University in the instant case that the members of the
Faculty Club can not unionize and the Faculty Club can not exist as a valid
labor organization is, therefore, without merit. The record shows that the
Faculty Club is a duly registered labor organization and this fact is admitted
by counsel for the University.5a

The other issue raised by the University is the validity of the Presidential
certification. The University contends that under Section 10 of Republic Act
No. 875 the power of the President of the Philippines to certify is subject to
the following conditions, namely: (1) that here is a labor dispute, and (2) that
said labor dispute exists in an industry that is vital to the national interest.
The University maintains that those conditions do not obtain in the instant
case. This contention has also no merit.

We have previously stated that the University is an establishment or


enterprise that is included in the term "industry" and is covered by the
provisions of Republic Act No. 875. Now, was there a labor dispute between
the University and the Faculty Club?

Republic Act No. 875 defines a labor dispute as follows:

The term "labor dispute" includes any controversy concerning terms,


tenure or conditions of employment, or concerning the association or
representation of persons in negotiating, fixing, maintaining, changing,
or seeking to arrange terms or conditions of employment regardless of
107
whether the disputants stand in proximate relation of employer and
employees.

The test of whether a controversy comes within the definition of "labor


dispute" depends on whether the controversy involves or concerns "terms,
tenure or condition of employment" or "representation." It is admitted by the
University, in the instant case, that on January 14, 1963 the President of the
Faculty Club wrote to the President of the University a letter informing the
latter of the organization of the Faculty Club as a labor union, duly registered
with the Bureau of Labor Relations; that again on January 22, 1963 another
letter was sent, to which was attached a list of demands consisting of 26
items, and asking the President of the University to answer within ten days
from date of receipt thereof; that the University questioned the right of the
Faculty Club to be the exclusive representative of the majority of the
employees and asked proof that the Faculty Club had been designated or
selected as exclusive representative by the vote of the majority of said
employees; that on February 1, 1963 the Faculty Club filed with the Bureau
of Labor Relations a notice of strike alleging as reason therefor the refusal of
the University to bargain collectively with the representative of the faculty
members; that on February 18, 1963 the members of the Faculty Club went
on strike and established picket lines in the premises of the University,
thereby disrupting the schedule of classes; that on March 1, 1963 the Faculty
Club filed Case No. 3666-ULP for unfair labor practice against the University,
but which was later dismissed (on April 2, 1963 after Case 41-IPA was
certified to the CIR); and that on March 7, 1963 a petition for certification
election, Case No. 1183-MC, was filed by the Faculty Club in the CIR.6 All
these admitted facts show that the controversy between the University and
the Faculty Club involved terms and conditions of employment, and the
question of representation. Hence, there was a labor dispute between the
University and the Faculty Club, as contemplated by Republic Act No. 875. It
having been shown that the University is an institution operated for profit,
108
that is an employer, and that there is an employer-employee relationship,
between the University and the members of the Faculty Club, and it having
been shown that a labor dispute existed between the University and the
Faculty Club, the contention of the University, that the certification made by
the President is not only not authorized by Section 10 of Republic Act 875 but
is violative thereof, is groundless.

Section 10 of Republic Act No. 875 provides:

When in the opinion of the President of the Philippines there exists a


labor dispute in an industry indispensable to the national interest and
when such labor dispute is certified by the President to the Court of
Industrial Relations, said Court may cause to be issued a restraining
order forbidding the employees to strike or the employer to lockout the
employees, and if no other solution to the dispute is found, the Court
may issue an order fixing the terms and conditions of employment.

This Court had occasion to rule on the application of the above-quoted


provision of Section 10 of Republic Act No. 875. In the case of Pampanga
Sugar Development Co. v. CIR, et al., G.R. No. L-13178, March 24, 1961, it
was held:

It thus appears that when in the opinion of the President a labor dispute
exists in an industry indispensable to national interest and he certifies it
to the Court of Industrial Relations the latter acquires jurisdiction to act
thereon in the manner provided by law. Thus the court may take either
of the following courses: it may issue an order forbidding the employees
to strike or the employer to lockout its employees, or, failing in this, it
may issue an order fixing the terms and conditions of employment. It
has no other alternative. It can not throw the case out in the assumption
that the certification was erroneous.

xxx xxx xxx


109
. . . The fact, however, is that because of the strike declared by the
members of the minority union which threatens a major industry the
President deemed it wise to certify the controversy to the Court of
Industrial Relations for adjudication. This is the power that the law gives
to the President the propriety of its exercise being a matter that only
devolves upon him. The same is not the concern of the industrial court.
What matters is that by virtue of the certification made by the President
the case was placed under the jurisdiction of said court. (Emphasis
supplied)

To certify a labor dispute to the CIR is the prerogative of the President under
the law, and this Court will not interfere in, much less curtail, the exercise of
that prerogative. The jurisdiction of the CIR in a certified case is exclusive
(Rizal Cement Co., Inc. v. Rizal Cement Workers Union (FFW), et al., G.R. No.
L-12747, July 30, 1960). Once the jurisdiction is acquired pursuant to the
presidential certification, the CIR may exercise its broad powers as provided
in Commonwealth Act 103. All phases of the labor dispute and the employer-
employee relationship may be threshed out before the CIR, and the CIR may
issue such order or orders as may be necessary to make effective the exercise
of its jurisdiction. The parties involved in the case may appeal to the Supreme
Court from the order or orders thus issued by the CIR.

And so, in the instant case, when the President took into consideration that
the University "has some 18,000 students and employed approximately 500
faculty members", that `the continued disruption in the operation of the
University will necessarily prejudice the thousand of students", and that "the
dispute affects the national interest",7and certified the dispute to the CIR, it
is not for the CIR nor this Court to pass upon the correctness of the reasons
of the President in certifying the labor dispute to the CIR.

The third issue raised by the University refers to the question of the legality
of the return-to-work order (of March 30, 1963 in Case 41-IPA) and the order
110
implementing the same (of April 6, 1963). It alleges that the orders are illegal
upon the grounds: (1) that Republic Act No. 875, supplementing
Commonwealth Act No. 103, has withdrawn from the CIR the power to issue
a return-to-work order; (2) that the only power granted by Section 10 of
Republic Act No. 875 to the CIR is to issue an order forbidding the employees
to strike or forbidding the employer to lockout the employees, as the case
may be, before either contingency had become a fait accompli; (3) that the
taking in by the University of replacement professors was valid, and the
return-to-work order of March 30, 1963 constituted impairment of the
obligation of contracts; and (4) the CIR could not issue said order without
having previously determined the legality or illegality of the strike.

The contention of the University that Republic Act No. 875 has withdrawn the
power of the Court of Industrial Relations to issue a return-to-work order
exercised by it under Commonwealth Act No. 103 can not be sustained. When
a case is certified by the President to the Court of Industrial Relations, the
case thereby comes under the operation of Commonwealth Act No. 103, and
the Court may exercise the broad powers and jurisdiction granted to it by
said Act. Section 10 of Republic Act No. 875 empowers the Court of Industrial
Relations to issue an order "fixing the terms of employment." This clause is
broad enough to authorize the Court to order the strikers to return to work
and the employer to readmit them. This Court, in the cases of the Philippine
Marine Officers Association vs. The Court of Industrial Relations, Compania
Maritima, et al.; and Compaia Martima, et al. vs. Philippine Marine Radio
Officers Association and CIR, et al., G.R. Nos. L-10095 and L-10115, October
31, 1957, declared:

We cannot subscribe to the above contention. We agree with counsel


for the Philippine Radio Officers' Association that upon certification by
the President under Section 10 of Republic Act 875, the case comes
under the operation of Commonwealth Act 103, which enforces
compulsory arbitration in cases of labor disputes in industries
111
indispensable to the national interest when the President certifies the
case to the Court of Industrial Relations. The evident intention of the
law is to empower the Court of Industrial Relations to act in such cases,
not only in the manner prescribed under Commonwealth Act 103, but
with the same broad powers and jurisdiction granted by that act. If the
Court of Industrial Relations is granted authority to find a solution to an
industrial dispute and such solution consists in the ordering of
employees to return back to work, it cannot be contended that the Court
of Industrial Relations does not have the power or jurisdiction to carry
that solution into effect. And of what use is its power of conciliation and
arbitration if it does not have the power and jurisdiction to carry into
effect the solution it has adopted? Lastly, if the said court has the power
to fix the terms and conditions of employment, it certainly can order the
return of the workers with or without backpay as a term or condition of
employment.

The foregoing ruling was reiterated by this Court in the case of Hind Sugar
Co. v. CIR, et al., G.R. No. L-13364, July 26, 1960.

When a case is certified to the CIR by the President of the Philippines


pursuant to Section 10 of Republic Act No. 875, the CIR is granted authority
to find a solution to the industrial dispute; and the solution which the CIR has
found under the authority of the presidential certification and conformable
thereto cannot be questioned (Radio Operators Association of the Philippines
vs. Philippine Marine Radio Officers Association, et al., L-10112, Nov. 29,
1957, 54 O.G. 3218).

Untenable also is the claim of the University that the CIR cannot issue a
return-to-work order after strike has been declared, it being contended that
under Section 10 of Republic Act No. 875 the CIR can only prevent a strike
or a lockout when either of this situation had not yet occurred. But in the

112
case of Bisaya Land Transportation Co., Inc. vs. Court of Industrial Relations,
et al., No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this Court declared:

There is no reason or ground for the contention that Presidential


certification of labor dispute to the CIR is limited to the prevention of
strikes and lockouts. Even after a strike has been declared where the
President believes that public interest demands arbitration and
conciliation, the President may certify the ease for that purpose. The
practice has been for the Court of Industrial Relations to order the
strikers to work, pending the determination of the union demands that
impelled the strike. There is nothing in the law to indicate that this
practice is abolished." (Emphasis supplied)

Likewise untenable is the contention of the University that the taking in by it


of replacements was valid and the return-to-work order would be an
impairment of its contract with the replacements. As stated by the CIR in its
order of March 30, 1963, it was agreed before the hearing of Case 41-IPA on
March 23, 1963 that the strikers would return to work under the status
quo arrangement and the University would readmit them, and the return-to-
work order was a confirmation of that agreement. This is a declaration of fact
by the CIR which we cannot disregard. The faculty members, by striking,
have not abandoned their employment but, rather, they have only ceased
from their labor (Keith Theatre v. Vachon et al., 187 A. 692). The striking
faculty members have not lost their right to go back to their positions,
because the declaration of a strike is not a renunciation of their employment
and their employee relationship with the University (Rex Taxicab Co. vs. CIR,
et al., 40 O.G., No. 13, 138). The employment of replacements was not
authorized by the CIR. At most, that was a temporary expedient resorted to
by the University, which was subject to the power of the CIR to allow to
continue or not. The employment of replacements by the University prior to
the issuance of the order of March 30, 1963 did not vest in the replacements

113
a permanent right to the positions they held. Neither could such temporary
employment bind the University to retain permanently the replacements.

Striking employees maintained their status as employees of the


employer (Western Castridge Co. v. National Labor Relations Board,
C.C.A. 139 F. 2d 855, 858) ; that employees who took the place of
strikers do not displace them as `employees." ' (National Labor Relations
Board v. A. Sartorius & Co., C.C.A. 2, 140 F. 2d 203, 206, 207.)

It is clear from what has been said that the return-to-work order cannot be
considered as an impairment of the contract entered into by petitioner with
the replacements. Besides, labor contracts must yield to the common good
and such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and similar subjects (Article 1700, Civil Code).

Likewise unsustainable is the contention of the University that the Court of


Industrial Relations could not issue the return-to-work order without having
resolved previously the issue of the legality or illegality of the strike, citing as
authority therefor the case of Philippine Can Company v. Court of Industrial
Relations, G.R. No. L-3021, July 13, 1950. The ruling in said case is not
applicable to the case at bar, the facts and circumstances being very different.
The Philippine Can Company case, unlike the instant case, did not involve the
national interest and it was not certified by the President. In that case the
company no longer needed the services of the strikers, nor did it need
substitutes for the strikers, because the company was losing, and it was
imperative that it lay off such laborers as were not necessary for its operation
in order to save the company from bankruptcy. This was the reason of this
Court in ruling, in that case, that the legality or illegality of the strike should
have been decided first before the issuance of the return-to-work order. The
University, in the case before Us, does not claim that it no longer needs the
services of professors and/or instructors; neither does it claim that it was
imperative for it to lay off the striking professors and instructors because of
114
impending bankruptcy. On the contrary, it was imperative for the University
to hire replacements for the strikers. Therefore, the ruling in the Philippine
Can case that the legality of the strike should be decided first before the
issuance of the return-to-work order does not apply to the case at bar.
Besides, as We have adverted to, the return-to-work order of March 30, 1963,
now in question, was a confirmation of an agreement between the University
and the Faculty Club during a prehearing conference on March 23, 1963.

The University also maintains that there was no more basis for the claim of
the members of the Faculty Club to return to their work, as their individual
contracts for teaching had expired on March 25 or 31, 1963, as the case may
be, and consequently, there was also no basis for the return-to-work order
of the CIR because the contractual relationships having ceased there were
no positions to which the members of the Faculty Club could return to. This
contention is not well taken. This argument loses sight of the fact that when
the professors and instructors struck on February 18, 1963, they continued
to be employees of the University for the purposes of the labor controversy
notwithstanding the subsequent termination of their teaching contracts, for
Section 2(d) of the Industrial Peace Act includes among employees "any
individual whose work has ceased a consequence of, or in connection with,
any current labor dispute or of any unfair labor practice and who has not
obtained any other substantially equivalent and regular employment."

The question raised by the University was resolved in a similar case in the
United States. In the case of Rapid Roller Co. v. NLRB 126 F. 2d 452, we
read:

On May 9, 1939 the striking employees, eighty-four in number, offered


to the company to return to their employment. The company believing
it had not committed any unfair labor practice, refused the employees'
offer and claimed the right to employ others to take the place of the
strikers, as it might see fit. This constituted discrimination in the hiring
115
and tenure of the striking employees. When the employees went out on
a strike because of the unfair labor practice of the company, their status
as employees for the purpose of any controversy growing out of that
unfair labor practice was fixed. Sec. 2 (3) of the Act. Phelps Dodge Corp.
v. National Labor Relations Board, 313 U.S. 177, 61 S. Ct. 845, 85. L.
ed. 1271, 133 A.L.R. 1217.

For the purpose of such controversy they remained employees of the


company. The company contended that they could not be their
employees in any event since the "contract of their employment expired
by its own terms on April 23, 1939."

In this we think the company is mistaken for the reason we have just
pointed out, that the status of the employees on strike became fixed
under Sec. 2 (3) of the Act because of the unfair labor practice of the
company which caused the strike.

The University, furthermore, claims that the information for indirect contempt
filed against the officers of the University (Case No. V-30) as well as the order
of April 29, 1963 for their arrest were improper, irregular and illegal because
(1) the officers of the University had complied in good faith with the return-
to-work order and in those cases that they did not, it was due to circumstance
beyond their control; (2) the return-to-work order and the order
implementing the same were illegal; and (3) even assuming that the order
was legal, the same was not Yet final because there was a motion to
reconsider it.

Again We find no merit in this claim of Petitioner. We have already ruled that
the CIR had jurisdiction to issue the order of March 30, 1963 in CIR Case 41-
IPA, and the return-to-work provision of that order is valid and legal.
Necessarily the order of April 6, 1963 implementing that order of March 30,
1963 was also valid and legal.

116
Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial
Relations of any Judge thereof to punish direct and indirect contempts as
provided in Rule 64 (now Rule 71) of the Rules of Court, under the same
procedure and penalties provided therein. Section 3 of Rule 71 enumerates
the acts which would constitute indirect contempt, among which is
"disobedience or resistance to lawful writ, process, order, judgment, or
command of a court," and the person guilty thereof can be punished after a
written charge has been filed and the accused has been given an opportunity
to be heard. The last paragraph of said section provides:

But nothing in this section shall be so construed as to prevent the court


from issuing process to bring the accused party into court, or from
holding him in custody pending such proceedings.

The provision authorizes the judge to order the arrest of an alleged


contemner (Francisco, et al. v. Enriquez, L-7058, March 20, 1954, 94 Phil.,
603) and this, apparently, is the provision upon which respondent Judge
Bautista relied when he issued the questioned order of arrest.

The contention of petitioner that the order of arrest is illegal is unwarranted.


The return-to-work order allegedly violated was within the court's jurisdiction
to issue.

Section 14 of Commonwealth Act No. 103 provides that in cases brought


before the Court of Industrial Relations under Section 4 of the Act (referring
to strikes and lockouts) the appeal to the Supreme Court from any award,
order or decision shall not stay the execution of said award, order or decision
sought to be reviewed unless for special reason the court shall order that
execution be stayed. Any award, order or decision that is appealed is
necessarily not final. Yet under Section 14 of Commonwealth Act No. 103 that
award, order or decision, even if not yet final, is executory, and the stay of
execution is discretionary with the Court of Industrial Relations. In other

117
words, the Court of Industrial Relations, in cases involving strikes and
lockouts, may compel compliance or obedience of its award, order or decision
even if the award, order or decision is not yet final because it is appealed,
and it follows that any disobedience or non-compliance of the award, order
or decision would constitute contempt against the Court of Industrial
Relations which the court may punish as provided in the Rules of Court. This
power of the Court of Industrial Relations to punish for contempt an act of
non-compliance or disobedience of an award, order or decision, even if not
yet final, is a special one and is exercised only in cases involving strikes and
lockouts. And there is reason for this special power of the industrial court
because in the exercise of its jurisdiction over cases involving strikes and
lockouts the court has to issue orders or make decisions that are necessary
to effect a prompt solution of the labor dispute that caused the strike or the
lockout, or to effect the prompt creation of a situation that would be most
beneficial to the management and the employees, and also to the public
even if the solution may be temporary, pending the final determination of the
case. Otherwise, if the effectiveness of any order, award, or decision of the
industrial court in cases involving strikes and lockouts would be suspended
pending appeal then it can happen that the coercive powers of the industrial
court in the settlement of the labor disputes in those cases would be rendered
useless and nugatory.

The University points to Section 6 of Commonwealth Act No. 103 which


provides that "Any violation of any order, award, or decision of the Court of
Industrial Relations shall after such order, award or decision has become
final, conclusive and executory constitute contempt of court," and contends
that only the disobedience of orders that are final (meaning one that is not
appealed) may be the subject of contempt proceedings. We believe that there
is no inconsistency between the above-quoted provision of Section 6 and the
provision of Section 14 of Commonwealth Act No. 103. It will be noted that
Section 6 speaks of order, award or decision that is executory. By the
118
provision of Section 14 an order, award or decision of the Court of Industrial
Relations in cases involving strikes and lockouts are immediately executory,
so that a violation of that order would constitute an indirect contempt of
court.

We believe that the action of the CIR in issuing the order of arrest of April
29, 1963 is also authorized under Section 19 of Commonwealth Act No. 103
which provides as follows:

SEC. 19. Implied condition in every contract of employment.In every


contract of employment whether verbal or written, it is an implied
condition that when any dispute between the employer and the
employee or laborer has been submitted to the Court of Industrial
Relations for settlement or arbitration pursuant to the provisions of this
Act . . . and pending award, or decision by the Court of such dispute . .
. the employee or laborer shall not strike or walk out of his employment
when so enjoined by the Court after hearing and when public interest
so requires, and if he has already done so, that he shall forthwith return
to it, upon order of the Court, which shall be issued only after hearing
when public interest so requires or when the dispute cannot, in its
opinion, be promptly decided or settled; and if the employees or laborers
fail to return to work, the Court may authorize the employer to accept
other employees or laborers. A condition shall further be implied that
while such dispute . . . is pending, the employer shall refrain from
accepting other employees or laborers, unless with the express authority
of the Court, and shall permit the continuation in the service of his
employees or laborers under the last terms and conditions existing
before the dispute arose. . . . A violation by the employer or by the
employee or laborer of such an order or the implied contractual
condition set forth in this section shall constitute contempt of the Court
of Industrial Relations and shall be punished by the Court itself in the

119
same manner with the same penalties as in the case of contempt of a
Court of First Instance. . . .

We hold that the CIR acted within its jurisdiction when it ordered the arrest
of the officers of the University upon a complaint for indirect contempt filed
by the Acting Special Prosecutor of the CIR in CIR Case V-30, and that order
was valid. Besides those ordered arrested were not yet being punished for
contempt; but, having been charged, they were simply ordered arrested to
be brought before the Judge to be dealt with according to law. Whether they
are guilty of the charge or not is yet to be determined in a proper hearing.

Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-30
is being questioned in Case G.R. No. L-21278 before this Court in a special
civil action for certiorari. The University did not appeal from that order. In
other words, the only question to be resolved in connection with that order
in CIR Case V-30 is whether the CIR had jurisdiction, or had abused its
discretion, in issuing that order. We hold that the CIR had jurisdiction to issue
that order, and neither did it abuse its discretion when it issued that order.

In Case G.R. No. L-21462 the University appealed from the order of Judge
Villanueva of the CIR in Case No. 1183-MC, dated April 6, 1963, granting the
motion of the Faculty Club to withdraw its petition for certification election,
and from the resolution of the CIR en banc, dated June 5, 1963, denying the
motion to reconsider said order of April 6, 1963. The ground of the Faculty
Club in asking for the withdrawal of that petition for certification election was
because the issues involved in that petition were absorbed by the issues in
Case 41-IPA. The University opposed the petition for withdrawal, but at the
same time it moved for the dismissal of the petition for certification election.

It is contended by the University before this Court, in G.R. L-21462, that the
issues of employer-employee relationship between the University and the
Faculty Club, the alleged status of the Faculty Club as a labor union, its

120
majority representation and designation as bargaining representative in an
appropriate unit of the Faculty Club should have been resolved first in Case
No. 1183-MC prior to the determination of the issues in Case No. 41-IPA, and,
therefore, the motion to withdraw the petition for certification election should
not have been granted upon the ground that the issues in the first case were
absorbed in the second case.

We believe that these contentions of the University in Case G.R. No. L-21462
have been sufficiently covered by the discussion in this decision of the main
issues raised in the principal case, which is Case G.R. No. L-21278. After all,
the University wanted CIR Case 1183-MC dismissed, and the withdrawal of
the petition for certification election had in a way produced the situation
desired by the University. After considering the arguments adduced by the
University in support of its petition for certiorari by way of appeal in Case
G.R. No. L-21278, We hold that the CIR did not commit any error when it
granted the withdrawal of the petition for certification election in Case No.
1183-MC. The principal case before the CIR is Case No. 41-IPA and all the
questions relating to the labor disputes between the University and the
Faculty Club may be threshed out, and decided, in that case.

In Case G.R. No. L-21500 the University appealed from the order of the CIR
of March 30, 1963, issued by Judge Bautista, and from the resolution of the
CIR en banc promulgated on June 28, 1963, denying the motion for the
reconsideration of that order of March 30, 1963, in CIR Case No. 41-IPA. We
have already ruled that the CIR has jurisdiction to issue that order of March
30, 1963, and that order is valid, and We, therefore, hold that the CIR did
not err in issuing that order of March 30, 1963 and in issuing the resolution
promulgated on June 28, 1963 (although dated May 7, 1963) denying the
motion to reconsider that order of March 30, 1963.

IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition with
preliminary injunction in Case G.R. No. L-21278 is dismissed and the writs
121
prayed for therein are denied. The writ of preliminary injunction issued in
Case G.R. No. L-21278 is dissolved. The orders and resolutions appealed
from, in Cases Nos. L-21462 and L-21500, are affirmed, with costs in these
three cases against the petitioner-appellant Feati University. It is so ordered.

122
G.R. No. L-21212 September 23, 1966

CITIZENS' LEAGUE OF FREEWORKERS AND/OR BALBINO EPIS,


NICOLAS ROJO, ET AL., petitioners,
vs.
HON. MACAPANTON ABBAS, Judge of the Court of First Instance of
Davao and TEOFILO GERONIMO and EMERITA
MENDEZ, respondents.

Carlos Dominguez, Jr. for petitioners.


C. S. Nitorreda for respondents.

DIZON, J.:

Petition for certiorari with a prayer for the issuance of a writ of preliminary
injunction filed by the Citizens' League of Freeworkers, a legitimate labor
organization, hereinafter referred to as the Union and its members
against the spouses Teofilo Geronimo and Emerita Mendez, and the Hon.
Macapanton Abbas, as judge of the Court of First Instance of Davao. Its
purpose is to set aside the writ of preliminary injunction issued by the latter
in Civil Case No. 3966 and restrain him from proceeding with the case, on the
ground that the controversy involves a labor dispute and is, therefore, within
the exclusive jurisdiction of the Court of Industrial Relations.

It appears that on March 11, 1963, respondents-spouses owners and


operators of auto-calesas in Davao City, filed a complaint with the Court of
First Instance of Davao (Civil Case No. 3966) to restrain the Union and its
members, who were drivers of the spouses in said business, from interfering
with its operation, from committing certain acts complained of in connection
therewith, and to recover damages. The complaint alleged that the
defendants named therein used to lease the auto-calesas of the spouses on
a daily rental basis; that, unable to get the spouses to recognize said
defendants as employees instead of lessees and to bargain with it on that
123
basis, the Union declared a strike on February 20, 1963 and since then had
paralyzed plaintiffs' business operations through threats, intimidation and
violence. The complaint also prayed for the issuance of a writ of preliminary
injunction ex-parte restraining defendants therein from committing said acts
of violence and intimidation during the pendency of the case.

On March 11, 1963 the respondent judge granted the writ prayed for, while
deferring action on petitioners' motion to dissolve said writ to March 20 of
the same year.

Meanwhile, on March 12, 1963, petitioners filed a complaint for unfair labor
practice against the respondents-spouses with the Court of Industrial
Relations on the ground, among others, of the latter's refusal to bargain with
them. 1awphl.nt

On March 18, 1963, petitioners filed a motion to declare the writ of


preliminary injunction void on the ground that the same had expired by virtue
of Section 9 (d) of Republic Act 875. In his order of March 21, 1963, however,
the respondent judge denied said motion on the ground that there was no
employer-employee relationship between respondents-spouses and the
individual petitioners herein and that, consequently, the Rules of Court and
not Republic Act No. 875 applied to the matter of injunction. Thereupon the
petition under consideration was filed.

In the case of Isabelo Doce vs. Workmen's Compensation Commission, et


al. (G.R. No. L-9417, December 22, 1958), upon a similar if not an altogether
identical set of facts, We held:

This case falls squarely within our ruling in National Labor Union v.
Dinglasan, 52 O.G., No. 4, 1933, wherein this Court held that a driver of
a jeep who operates the same under the boundary system is considered
an employee within the meaning of the law and as such the case comes
under the jurisdiction of the Court of Industrial Relations. In that case,
124
Benedicto Dinglasan was the owner and operator of TPU jeepneys which
were driven by petitioner under verbal contracts that they will pay P7.50
for 10 hours use under the so called "boundary system." The drivers did
not receive salaries or wages from the owner. Their day's earnings were
the excess over the P7.50 they paid for the use of the jeepneys. In the
event that they did not earn more, the owner did not have to pay them
anything. In holding that the employer-employee relationship existed
between the owner of the jeepneys and the drivers even if the latter
worked under the boundary system, this Court said:

"The only features that would make the relationship of lessor and
lessee between the respondent, owner of the jeeps, and the
drivers, members of the petitioner union, are the fact that he does
not pay them any fixed wage but their compensation is the excess
of the total amount of fares earned or collected by them over and
above the amount of P7.50 which they agreed to pay to the
respondent, and the fact that the gasoline burned by the jeeps is
for the account of the drivers. These two features are not,
however, sufficient to withdraw the relationship, between them
from that of employer-employee, because the estimated earnings
for fares must be over and above the amount they agreed to pay
to the respondent for a ten-hour shift or ten-hour a day operation
of the jeeps. Not having any interest in the business because they
did not invest anything in the acquisition of the jeeps and did not
participate in the management thereof, their service as drivers of
the jeeps being their only contribution to the business, the
relationship of lessor and lessee cannot be sustained."

Even assuming, arguendo, that the respondent court had jurisdiction to issue
the abovementioned writ of preliminary injunction in Civil Case No. 3966 at
the time it was issued, We are of the opinion, and so hold, that it erred in
denying petitioners' motion to set aside said writ upon expiration of the period
125
of thirty days from its issuance, upon the wrong ground that there was no
labor dispute between the parties and that, therefore, the provisions of
Republic Act No. 875 did not apply to the case. As stated heretofore, there
was a labor dispute between the parties from the beginning.

Moreover, upon the filing of the unfair labor practice case on March 12, 1963,
the Court of Industrial Relations acquired complete jurisdiction over the labor
dispute and the least that could be done in Civil Case No. 3966 is either to
dismiss it or suspend proceedings therein until the final resolution of the
former.

Wherefore, judgment is hereby rendered setting aside the writ of preliminary


injunction issued by the respondent judge in Civil Case No. 3966 of the Court
of First Instance of Davao, with costs.

126
G.R. Nos. 83380-81 November 15, 1989

MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G.


INOCENCIO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J.
DIOSANA (Labor Arbiter, Department of Labor and Employment,
National Capital Region), SANDIGAN NG MANGGAGAWANG
PILIPINO (SANDIGAN)-TUCP and its members, JACINTO
GARCIANO, ALFREDO C. BASCO, VICTORIO Y. LAURETO, ESTER
NARVAEZ, EUGENIO L. ROBLES, BELEN N. VISTA, ALEJANDRO A.
ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA ESTRABO,
LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY,
LILY OPINA, JANET SANGDANG, JOSEFINA ALCOCEBA and MARIA
ANGELES, respondents.

Ledesma, Saludo & Associates for petitioners.

Pablo S. Bernardo for private respondents.

FERNAN, C.J.:

This petition for certiorari involving two separate cases filed by private
respondents against herein petitioners assails the decision of respondent
National Labor Relations Commission in NLRC CASE No. 7-2603-84 entitled
"Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Makati
Haberdashery and/or Toppers Makati, et al." and NLRC CASE No. 2-428-85
entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al.
v. Toppers Makati, et al.", affirming the decision of the Labor Arbiter who
jointly heard and decided aforesaid cases, finding: (a) petitioners guilty of
illegal dismissal and ordering them to reinstate the dismissed workers and (b)

127
the existence of employer-employee relationship and granting respondent
workers by reason thereof their various monetary claims.

The undisputed facts are as follows:

Individual complainants, private respondents herein, have been working for


petitioner Makati Haberdashery, Inc. as tailors, seamstress, sewers, basters
(manlililip) and "plantsadoras". They are paid on a piece-rate basis except
Maria Angeles and Leonila Serafina who are paid on a monthly basis. In
addition to their piece-rate, they are given a daily allowance of three (P 3.00)
pesos provided they report for work before 9:30 a.m. everyday.

Private respondents are required to work from or before 9:30 a.m. up to 6:00
or 7:00 p.m. from Monday to Saturday and during peak periods even on
Sundays and holidays.

On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor


organization of the respondent workers, filed a complaint docketed as NLRC
NCR Case No. 7-2603-84 for (a) underpayment of the basic wage; (b)
underpayment of living allowance; (c) non-payment of overtime work; (d)
non-payment of holiday pay; (e) non-payment of service incentive pay; (f)
13th month pay; and (g) benefits provided for under Wage Orders Nos. 1, 2,
3, 4 and 5.1

During the pendency of NLRC NCR Case No. 7-2603-84, private respondent
Dioscoro Pelobello left with Salvador Rivera, a salesman of petitioner
Haberdashery, an open package which was discovered to contain a "jusi"
barong tagalog. When confronted, Pelobello replied that the same was
ordered by respondent Casimiro Zapata for his customer. Zapata allegedly
admitted that he copied the design of petitioner Haberdashery. But in the
afternoon, when again questioned about said barong, Pelobello and Zapata
denied ownership of the same. Consequently a memorandum was issued to
each of them to explain on or before February 4, 1985 why no action should
128
be taken against them for accepting a job order which is prejudicial and in
direct competition with the business of the company. 2 Both respondents
allegedly did not submit their explanation and did not report for
work. 3 Hence, they were dismissed by petitioners on February 4, 1985. They
countered by filing a complaint for illegal dismissal docketed as NLRC NCR
Case No. 2-428-85 on February 5, 1985. 4

On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the
dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in NLRC NCR Case No.


2-428-85 finding respondents guilty of illegal dismissal and
ordering them to reinstate Dioscoro Pelobello and Casimiro Zapata
to their respective or similar positions without loss of seniority
rights, with full backwages from July 4, 1985 up to actual
reinstatement. The charge of unfair labor practice is dismissed for
lack of merit.

In NLRC NCR Case No. 7-26030-84, the complainants' claims for


underpayment re violation of the minimum wage law is hereby
ordered dismissed for lack of merit.

Respondents are hereby found to have violated the decrees on the


cost of living allowance, service incentive leave pay and the 13th
Month Pay. In view thereof, the economic analyst of the
Commission is directed to compute the monetary awards due each
complainant based on the available records of the respondents
retroactive as of three years prior to the filing of the instant case.
5
SO ORDERED.

129
From the foregoing decision, petitioners appealed to the NLRC. The latter on
March 30, 1988 affirmed said decision but limited the backwages awarded
the Dioscoro Pelobello and Casimiro Zapata to only one (1) year. 6

After their motion for reconsideration was denied, petitioners filed the instant
petition raising the following issues:

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN


EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER
HABERDASHERY AND RESPONDENTS WORKERS.

II

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT


RESPONDENTS WORKERS ARE ENTITLED TO MONETARY CLAIMS DESPITE
THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUM WAGE.

III

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT


RESPONDENTS PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED. 7

The first issue which is the pivotal issue in this case is resolved in favor of
private respondents. We have repeatedly held in countless decisions that the
test of employer-employee relationship is four-fold: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employee's conduct. It is the so
called "control test" that is the most important element. 8 This simply means
the determination of whether the employer controls or has reserved the right
to control the employee not only as to the result of the work but also as to
the means and method by which the same is to be accomplished. 9

130
The facts at bar indubitably reveal that the most important requisite of control
is present. As gleaned from the operations of petitioner, when a customer
enters into a contract with the haberdashery or its proprietor, the latter
directs an employee who may be a tailor, pattern maker, sewer or
"plantsadora" to take the customer's measurements, and to sew the pants,
coat or shirt as specified by the customer. Supervision is actively manifested
in all these aspects the manner and quality of cutting, sewing and ironing.

Furthermore, the presence of control is immediately evident in this


memorandum issued by Assistant Manager Cecilio B. Inocencio, Jr. dated May
30, 1981 addressed to Topper's Makati Tailors which reads in part:

4. Effective immediately, new procedures shall be followed:

A. To follow instruction and orders from the undersigned Roger


Valderama, Ruben Delos Reyes and Ofel Bautista. Other than this
person (sic) must ask permission to the above mentioned before
giving orders or instructions to the tailors.

B. Before accepting the job orders tailors must check the materials,
job orders, due dates and other things to maximize the efficiency
of our production. The materials should be checked (sic) if it is
matched (sic) with the sample, together with the number of the
job order.

C. Effective immediately all job orders must be finished one day


before the due date. This can be done by proper scheduling of job
order and if you will cooperate with your supervisors. If you have
many due dates for certain day, advise Ruben or Ofel at once so
that they can make necessary adjustment on due dates.

131
D. Alteration-Before accepting alteration person attending on
customs (sic) must ask first or must advise the tailors regarding
the due dates so that we can eliminate what we call 'Bitin'.

E. If there is any problem regarding supervisors or co-tailor inside


our shop, consult with me at once settle the problem. Fighting
inside the shop is strictly prohibited. Any tailor violating this
memorandum will be subject to disciplinary action.
10
For strict compliance.

From this memorandum alone, it is evident that petitioner has reserved the
right to control its employees not only as to the result but also the means
and methods by which the same are to be accomplished. That private
respondents are regular employees is further proven by the fact that they
have to report for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and
are paid an additional allowance of P 3.00 daily if they report for work before
9:30 a.m. and which is forfeited when they arrive at or after 9:30 a.m. 11

Since private respondents are regular employees, necessarily the argument


that they are independent contractors must fail. As established in the
preceding paragraphs, private respondents did not exercise independence in
their own methods, but on the contrary were subject to the control of
petitioners from the beginning of their tasks to their completion. Unlike
independent contractors who generally rely on their own resources, the
equipment, tools, accessories, and paraphernalia used by private respondents
are supplied and owned by petitioners. Private respondents are totally
dependent on petitioners in all these aspects.

Coming now to the second issue, there is no dispute that private respondents
are entitled to the Minimum Wage as mandated by Section 2(g) of Letter of
Instruction No. 829, Rules Implementing Presidential Decree No. 1614 and
reiterated in Section 3(f), Rules Implementing Presidential Decree 1713 which
132
explicitly states that, "All employees paid by the result shall receive not less
than the applicable new minimum wage rates for eight (8) hours work a day,
except where a payment by result rate has been established by the Secretary
of Labor. ..." 12 No such rate has been established in this case.

But all these notwithstanding, the question as to whether or not there is in


fact an underpayment of minimum wages to private respondents has already
been resolved in the decision of the Labor Arbiter where he stated: "Hence,
for lack of sufficient evidence to support the claims of the complainants for
alleged violation of the minimum wage, their claims for underpayment re
violation of the Minimum Wage Law under Wage Orders Nos. 1, 2, 3, 4, and
5 must perforce fall." 13

The records show that private respondents did not appeal the above ruling
of the Labor Arbiter to the NLRC; neither did they file any petition raising that
issue in the Supreme Court. Accordingly, insofar as this case is concerned,
that issue has been laid to rest. As to private respondents, the judgment may
be said to have attained finality. For it is a well-settled rule in this jurisdiction
that "an appellee who has not himself appealed cannot obtain from the
appellate court-, any affirmative relief other than the ones granted in the
decision of the court below. " 14

As a consequence of their status as regular employees of the petitioners, they


can claim cost of living allowance. This is apparent from the provision defining
the employees entitled to said allowance, thus: "... All workers in the private
sector, regardless of their position, designation or status, and irrespective of
the method by which their wages are paid. " 15

Private respondents are also entitled to claim their 13th Month Pay under
Section 3(e) of the Rules and Regulations Implementing P.D. No. 851 which
provides:

133
Section 3. Employers covered. The Decree shall apply to all
employers except to:

xxx xxx xxx

(e) Employers of those who are paid on purely commission,


boundary, or task basis, and those who are paid a fixed amount for
performing a specific work, irrespective of the time consumed in
the performance thereof, except where the workers are paid on
piece-rate basis in which case the employer shall be covered by
this issuance insofar as such workers are concerned. (Emphasis
supplied.)

On the other hand, while private respondents are entitled to Minimum Wage,
COLA and 13th Month Pay, they are not entitled to service incentive leave
pay because as piece-rate workers being paid at a fixed amount for
performing work irrespective of time consumed in the performance thereof,
they fall under one of the exceptions stated in Section 1(d), Rule V,
Implementing Regulations, Book III, Labor Code. For the same reason private
respondents cannot also claim holiday pay (Section 1(e), Rule IV,
Implementing Regulations, Book III, Labor Code).

With respect to the last issue, it is apparent that public respondents have
misread the evidence, for it does show that a violation of the employer's rules
has been committed and the evidence of such transgression, the copied
barong tagalog, was in the possession of Pelobello who pointed to Zapata as
the owner. When required by their employer to explain in a memorandum
issued to each of them, they not only failed to do so but instead went on
AWOL (absence without official leave), waited for the period to explain to
expire and for petitioner to dismiss them. They thereafter filed an action for
illegal dismissal on the far-fetched ground that they were dismissed because
of union activities. Assuming that such acts do not constitute abandonment

134
of their jobs as insisted by private respondents, their blatant disregard of their
employer's memorandum is undoubtedly an open defiance to the lawful
orders of the latter, a justifiable ground for termination of employment by the
employer expressly provided for in Article 283(a) of the Labor Code as well
as a clear indication of guilt for the commission of acts inimical to the interests
of the employer, another justifiable ground for dismissal under the same
Article of the Labor Code, paragraph (c). Well established in our jurisprudence
is the right of an employer to dismiss an employee whose continuance in the
service is inimical to the employer's interest. 16

In fact the Labor Arbiter himself to whom the explanation of private


respondents was submitted gave no credence to their version and found their
excuses that said barong tagalog was the one they got from the embroiderer
for the Assistant Manager who was investigating them, unbelievable.

Under the circumstances, it is evident that there is no illegal dismissal of said


employees. Thus, We have ruled that:

No employer may rationally be expected to continue in employment


a person whose lack of morals, respect and loyalty to his employer,
regard for his employer's rules, and appreciation of the dignity and
responsibility of his office, has so plainly and completely been
bared.

That there should be concern, sympathy, and solicitude for the


rights and welfare of the working class, is meet and proper. That
in controversies between a laborer and his master, doubts
reasonably arising from the evidence, or in the interpretation of
agreements and writings should be resolved in the former's favor,
is not an unreasonable or unfair rule. But that disregard of the
employer's own rights and interests can be justified by that concern

135
and solicitude is unjust and unacceptable. (Stanford Microsystems,
Inc. v. NLRC, 157 SCRA 414-415 [1988] ).

The law is protecting the rights of the laborer authorizes neither oppression
nor self-destruction of the employer. 17More importantly, while the
Constitution is committed to the policy of social justice and the protection of
the working class, it should not be supposed that every labor dispute will
automatically be decided in favor of labor. 18

Finally, it has been established that the right to dismiss or otherwise impose
discriplinary sanctions upon an employee for just and valid cause, pertains in
the first place to the employer, as well as the authority to determine the
existence of said cause in accordance with the norms of due process. 19

There is no evidence that the employer violated said norms. On the contrary,
private respondents who vigorously insist on the existence of employer-
employee relationship, because of the supervision and control of their
employer over them, were the very ones who exhibited their lack of respect
and regard for their employer's rules.

Under the foregoing facts, it is evident that petitioner Haberdashery had valid
grounds to terminate the services of private respondents.

WHEREFORE, the decision of the National Labor Relations Commission dated


March 30, 1988 and that of the Labor Arbiter dated June 10, 1986 are hereby
modified. The complaint filed by Pelobello and Zapata for illegal dismissal
docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack of factual and
legal bases. Award of service incentive leave pay to private respondents is
deleted.

SO ORDERED.

136
137
[G.R. No. 113542. February 24, 1998]
CAURDANETAAN PIECE WORKERS UNION, represented by JUANITO
P. COSTALES, JR. in his capacity as union president, petitioner,
vs. UNDERSECRETARY BIENVENIDO E. LAGUESMA and
CORFARM GRAINS, INC., respondents.

[G.R. No. 114911. February 24, 1998]


CAURDANETAAN PIECE WORKERS ASSOCIATION as represented by
JUANITO P. COSTALES, JR., president, petitioner,
vs. NATIONAL LABOR RELATIONS COMMISSION, CORFARM
GRAINS, INC. and/or TEODY C. RAPISORA and HERMINIO
RABANG, respondents.

DECISION
PANGANIBAN, J.:

The Court reiterates some fundamental labor doctrines: (1) this Court may
review factual determinations where the findings of the med-arbiter conflict
with those of the undersecretary of labor; (2) an employer-
employee relationship may be established by substantial evidence; (3)
procedural due process is satisfied by the grant of an opportunity to be heard
and an actual adversarial-type trial is not required; (4) the NLRC commits
grave abuse of discretion when it remands a case to the labor arbiter in spite
of ample pieces of evidence on record which are sufficient to decide the case
directly; and (5) where illegal dismissal is proven, the workers are entitled to
back wages and other similar benefits without deductions or conditions.

Statement of the Case

138
These doctrines are used by the Court in resolving these consolidated
petitions for certiorari under Rule 65, challenging the resolutions of
Undersecretary Bienvenido Laguesma and the National Labor Relations
Commission.

First Case

In G.R. No. 113542, hereafter referred to as the First Case, Petitioner


Caurdanetaan Piece Workers Union/Association (CPWU) prays for the
nullification and reversal of Undersecretary Laguesmas Order dated January
4, 1994 in OS-MA-A-8-119-93 (RO100-9207-RU-001), which granted
Respondent Corfarms motion for reconsideration and dismissed petitioners
prayer for certification election. The dispositive portion of the assailed Order
reads as follows:[1]
WHEREFORE, the questioned Order is hereby set aside and a new one
issued dismissing the petition for certification election for lack of merit.
In his earlier Order dated September 7, 1993, Laguesma affirmed Med-
Arbiter Sinamar E. Limos order of March 18, 1993 which disposed as
follows:[2]
IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, the above-
entitled petition is hereby granted. Consequently, the motion to dismiss
filed by Corfarm Grains, Inc. is denied.
Let a certification election be conducted among the rank-and-file
employees of Corfarm Grains, Inc., within ten (10) days from receipt
hereof, with the following choices:

1. Caurdanetaan Piece Workers Union;

2. No Union

139
A pre-election conference is hereby set on March 29, 1993 at 2:00 o
clock in the afternoon at the DOLE, Dagupan District Office, Mayombo
District, Dagupan City to thresh out the mechanics of the Certification
Election. Employer Corfarm Grains, Inc. is hereby directed to present
its employment records for the period covering January to June 1992
evidencing payment of salaries of its employees.
Let the parties be notified accordingly.
Aggrieved by Respondent Laguesmas subsequent Order dated January 27,
1994[3] denying its motion for reconsideration, petitioner filed this recourse
before this Court.

Second Case

In G.R. No. 114911, hereafter referred to as the Second Case, petitioner


assails the Resolution promulgated on February 16, 1994 in NLRC CA No. L-
001109[4] by the National Labor Relations Commission (Respondent
NLRC),[5] the dispositive portion of which reads:[6]
WHEREFORE, the Decision of the Labor Arbiter dated 14 September
1993 is hereby SET ASIDE. Let the records of the case be REMANDED
to the Arbitration Branch of origin for immediate appropriate
proceedings.
The labor arbiters decision that was reversed by Respondent NLRC
disposed as follows:[7]
WHEREFORE, judgment is hereby rendered as follows:
1. Declaring individual complainants dismissal illegal;
2. Declaring respondent guilty of unfair labor practice;
3. Ordering respondent to pay the 92[8] complainants the
following:

140
a) 13th month pay limited to three years in the amount of
P4,788.00 each;

b) service incentive leave pay in the amount of P855.00 each for


three years;

c) underpaid wages covering the period June 1989 to June 1992


which amount to P47,040.00 each;

d) backwages reckoned from June 1992, the date of dismissal[,]


to September 1993, the date of promulgation of the decision
or a period of 14 months, in the amount of P22,344.00 each;

e) refund of P12.00/day deduction limited to three years which


amounts to P12,096 each; and

f) to pay the complainants P1,000.00 each as damages.

4. To reinstate the complainants to their former position[s] immediately.

All other claims are hereby dismissed for lack of merit.

In a Resolution promulgated on March 28, 1994, Respondent NLRC denied


petitioners motion for reconsideration.[9]

The Facts

In his Consolidated Memorandum, the solicitor general recited the


following pertinent facts, which we find amply supported by the records:[10]
Petitioner union has ninety-two (92) members who worked as cargador
at the warehouse and ricemills of private respondent [referring to
Respondent Corfarm] at Umingan, Pangasinan since 1982. As
cargadores, they loaded, unloaded and piled sacks of palay from the
141
warehouse to the cargo trucks and those brought by cargo trucks for
delivery to different places. They were paid by private respondent on a
piece rate basis. When private respondent denied some benefits to
these cargadores, the latter organized petitioner union. Upon learning
of its formation, private respondent barred its members from working
with them and replaced [them] with non-members of the union
sometime in the middle of 1992.
On July 9, 1992, petitioner filed [a petition] for certification election
before the Regional Office No. I of the Department of Labor and
Employment, San Fernando, La Union docketed as RO100-9207-RU-
001.
While this petition for certification election was pending, petitioner also
filed on November 16, 1992, a complaint for illegal dismissal, unfair
labor practice, refund of illegal deductions, payment of wage
differentials, various pecuniary benefits provided by laws, damages,
legal interest, reinstatement and attorneys fees, against private
respondent before the Regional Arbitration Branch No. 1 of Dagupan
City, docketed as NLRC RAB Case No. 01-117-0184-92.
On November 24, 1992, Labor Arbiter Ricardo Olairez in NLRC Case No.
Sub-Rab 01-117-0184-92, directed the parties to submit position paper
on or before December 14, 1992, and to appear for hearing on the said
date. Only the complainant petitioner submitted its position paper on
December 3, 1992.
Likewise in the scheduled hearing on December 14, 1992, private
respondent did not appear[;] thus Labor Arbiter Olairez allowed the
president of petitioner union Juanito Costales to testify and present its
evidence ex-parte.
On December 16 1992, another notice was sent to the parties to appear
on [the] January 7, 1993 hearing by Labor Arbiter Emiliano de Asis.
142
Before the scheduled hearing on January 7, 1993, complainant
petitioner filed a motion to amend complaint and to admit amended
complaint.It also filed the following:
1. Affidavit of Juanito Costales, Jr., dated November 24, 1992;
2. Joint affidavit of Ricardo Aban, Armando Casing, Benjamin
Corpuz, Danny Margadejas, Fidel Fortunato, Henry de los
Reyes, Anthony de Luna, Warlito Arguilles, Dominador Aguda,
Marcelino Cayuda, Jr., Jaime Costales and Juanito Mendenilla
dated December 30, 1992;
3. Joint affidavit of Juanito Costales and Armando Casing dated
January 7, 1993;
4. Affidavit signed by individual union members.
On March 18, 1993, Med-Arbiter Sinamar E. Limos issued an Order
granting the petition for certification election earlier filed.
Meanwhile, Labor Arbiter Rolando D. Gambito in the illegal dismissal
case issued the May 20, 1993 Order, the dispositive portion [of] which
reads:
WHEREFORE, respondents are hereby ordered to submit their
position paper, together with their documentary evidence, if any,
within TEN (10) days from receipt of the order, otherwise we will
be constrained to resolve this case based on available evidence
on record.
On September 7, 1993, public respondent Laguesma issued a
Resolution denying the appeal filed by private respondent against the
order of Med-Arbiter Limos granting the petition for certification
election.
Acting on said denial, private respondent filed a motion for
reconsideration which was granted in an Order dated January 4, 1994
143
by public respondent Laguesma dismissing the petition for certification
election for lack of employer-employee relationship.
Petitioner in turn filed a motion for reconsideration of the January 4,
1994, Order but it was denied by public respondent Laguesma in his
January 27, 1994 Order which reaffirmed the dismissal of petition for
certification election.
Thus, the union filed its first petition for certiorari assailing the Orders
of January 4 and 27, 1994 of public respondent Laguesma dismissing
the petition for certification election. The said petition is captioned as
Caurdanetaan Piece Workers Union, petitioner, vs. Hon. Bienvenido
Laguesma, et al., respondents, docketed as G.R. No. 113542 and
raffled to the Second Division of this Honorable Court.
On September 14, 1993, Labor Arbiter Rolando D. Gambito issued his
decision finding the dismissal of petitioners members illegal. On appeal by
both parties, Respondent NLRC -- as earlier stated -- set aside the appealed
decision and remanded the case to the labor arbiter for further
proceedings. Petitioners motion for reconsideration was later denied.
The solicitor general, who was supposed to represent both public
respondents, joined petitioner and filed a Manifestation and Motion (In Lieu
of Comment) dated July 25, 1994, praying that the petition in the First Case
be granted and that judgment be rendered annulling[11] the assailed Orders
of Respondent Laguesma. The Republics counsel likewise filed another
Manifestation and Motion (In Lieu of Comment) dated October 4, 1994 in the
Second Case, praying that judgment be rendered annulling the resolution of
Public Respondent NLRC dated February 16, 1994 and March 28, 1994 and
order[ing] public respondent to proceed with the case instead of remanding
the same to the labor arbiter of origin.[12]
In a Resolution dated March 29, 1995,[13] this Court ordered the
consolidation of the two cases.[14]
144
Public Respondents Rulings

In the First Case

Public Respondent Laguesma premised the dismissal of the petition for


certification election on the absence of an employer-employee relationship
between petitioners members and private respondent. Professing reliance on
the control test in determining employer-employee relationship, his Order
dated January 4, 1994[15] explained:
It is settled in this jurisdiction that the most important factor in
determining the existence of employer-employee relationship is the
control test or the question of whether or not the supposed employer
exercises control over the means and methods by which the work is to
be done. In the instant case, it is not disputed that movant does not
exercise any degree of control over how the loading or unloading of
cavans of palays to or from the trucks, to or from the rice mills. Movants
only concern is that said cavans of palay are loaded/unloaded. Absent
therefore, the power to control not only the end to be achieved but
also the means to be used in reaching such end, no employer-employee
relationship could be said to have been established. We also noted that
some of petitioners members including its president, Juanito Costales,
Jr., admitted in separate sworn statements that they offer and actually
perform loading and unloading work for various rice mills in Pangasinan
and that the performance of said work depends on the availability of
work in said mills. They also categorically stated that there is no
employer-employee relationship between petitioner and movant. To
our mind, said declarations being made against interest deserve much
evidentiary weight. Considering therefore, the foregoing, we have no
alternative but to dismiss the petition for lack of employer-employee
relationship.
145
In the Second Case

On the other hand, Respondent NLRC ordered the remand of the case to
the arbitration branch for further proceedings because the issues at hand
need further threshing out. Stressing the principle that allegations must be
proved by competent and credible evidence, it held:[16]
There is no question that under the Rules of the Commission,
complaints may be resolved on the basis of the Position Papers
submitted by the parties and that the parties may be deemed to have
waived their right to present evidence after they have been given an
opportunity to do so. These procedural rules, however should be read
in conjunction with the time[-]honored principle that allegations must
be proved and established by competent and credible evidence. In
other words, mere allegations would not suffice despite the absence of
evidence to the contrary.
In subject case, complainants-appellants allegations that they are
laborers of respondents-appellants receiving P45.00 per days work of
eight hours (p. 2, Amended Position Paper dated December 14, 1992,
p. 31 Records; p. 2 Amended Complaint dated 16 December 1992, p.
70, Records) appears to be in conflict with their earlier assertions that
they are paid on the basis of the number of cavans of palay moved,
piled, hauled and unloaded from trucks or haulers multiplied by P0.12
[per] sack or cavan. And for the days earning respondents used to be
obliged to pay P57.00 per days earning -- (p. 2, Position Paper dated
24 November 1992; p. 17, Records).
Similarly attached to the records is a narrative report of [the] DOLE
inspector where it was mentioned that Juanito Costales, Jr., is the
owner of Carcado Contracting Services and is not an employee of
Corefarm [sic] Grains (Narrative Report dated August 4, 1992, p. 10
Records).
146
Another reason why subject case should be remanded to the Labor
Arbiter below is the fact that the personality of complainant union has
been raised in issue before the proper forum and adverse decision on
the matter will definitely affect the whole proceedings.
Furthermore, records show that an Amended Complaint was filed on
December 23, 1992. This amended complaint made no mention of the
affidavits of Juanito Costales, Jr. and the 92 other workers which
documents were filed in January 1993. Likewise, the amended
complaint contains but a general statement that the 92 workers of
Corefarm [sic] Grains have been employed since 1982 which was
adopted by the Labor Arbiter below in his decision notwithstanding the
fact that a number of these workers started working with respondent
after 1982. Some of whom worked with the company in 1990 (Joint
Affidavit dated 7 January 1993, pp. 96-98, Records). Notwithstanding
this fact, the Labor Arbiter in the decision under consideration allowed
refund of alleged deduction for a period of three years. In the same
manner, payment of salary differential was also granted.
Indeed the issues at hand need further threshing out. Under the Rules,
the Labor Arbiter is authorized to thresh out issues (sec. 4, Rule V). As
it is, we are not convinced by the conclusions of the Labor Arbiter.
The ends of justice would better be served if all parties are granted
further opportunity to ventilate their respective positions.

The Issues

In its Consolidated Memorandum dated September 19, 1995 filed before


us, petitioner raises the following grounds in support of its petition:[17]
1. Grave abuse of discretion or acting in excess of jurisdiction, which
is equivalent to lack of jurisdiction on the part of public
147
respondent in setting aside the labor arbiters decision and in
remanding this case to the office of origin for further
proceedings is not necessary when in fact the mandatory
requirements of due process have been observed by the labor
arbiter in rendering decision on the case;
2. Remand of the case to office of origin for further proceedings on
matters already passed upon properly by the labor arbiter is
contrary to the rule of speedy labor justice and the [sic] social
justice and to afford protection to labor policy of the Philippine
Constitution, which is a command that should not be
disregarded by the courts in resolving labor cases;
3. Remand of the case to the labor arbiter would only prolong social
unrest and the suffering of injurious effects of illegal dismissal
by the 92 illegally dismissed workers[;] hence, said remand of
the case without justification constitutes an oppressive act
committed by public respondent.
Simply put, the issues are as follows:
1. Whether Respondent Laguesma acted with grave abuse of discretion
in ordering the dismissal of the petition for certification election
2 Whether Respondent NLRC acted with grave abuse of discretion in
remanding the illegal dismissal case to the labor arbiter for further
proceedings.
The present controversy hinges on whether an employer-employee
relationship between the CPWU members and Respondent Corfarm has been
established by substantial evidence.

The Courts Ruling

The two petitions are meritorious.


148
Main Issue: Employer-Employee Relationship

First Case: Certification Election


Petitioner contends that Respondent Laguesma committed grave abuse of
discretion in dismissing the petition for certification election by relying on
private respondents bare allegation, in its motion for reconsideration, of lack
of employer-employee relationship.[18] According to petitioner, Respondent
Laguesma cannot reverse his Decision in the absence of a concomitant
change in his factual findings.[19] Petitioner insists that all its members were
employees of private respondent, viz.:[20]
The 92 workers, who are all union members of petitioner herein, have
been rendering actual manual services as cargadores in the warehouse
and rice mills of private respondent, performing activities usually
related to or desirable by [sic] the business or trade of private
respondent who is engaged in the buy and sell of palay as well as
warehousing of said commodity and milling the same for sale to
customers in the form of milled rice. The 92 workers have performed
their activities for the last ten (10) years prior to their having been
illegally dismissed from employment on June 18, 1992 or thereabouts.
Petitioner adds that many of its members received Christmas bonuses
from private respondent.[21]
On the other hand, Respondent Corfarm describes the contentions of
petitioner as
off-tangent, if not irrelevant. --
First, the authority of the DOLE Secretary to decide appeals in
representation cases is undeniable (see e.g., Sections 9 and 10 of Rule
V, Book V, of the Implementing Rules and Regulations of the Labor
Code; also Art. 259, appeal from certification election orders, labor
code).Second, petitioner completely misses the point that the granting
149
and denial of a motion for reconsideration involves the exercise of
discretion.As submitted by the Public Respondent in its Comment,
among the ends to which a Motion for Reconsideration is addressed,
one is precisely to convince the court that its ruling is erroneous and
improper, contrary to law or the evidence, x x x (Emphasis found in the
original.)
Corfarm insists that the challenged Order of Respondent Laguesma dated
January 4, 1994 rests on solid findings of fact which should be accorded
respect and finality.[22] It attacks the petitioners allegation -- that it has 92
workers who worked as cargador at its warehouses -- as gratuitous and not
supported by any evidence x x x [because] as late as this time of day in the
litigation of this case, who exactly are those 92 workers cannot be known
from the records.[23] (Emphasis in original.)
Private respondent further argues that RJL Martinez Fishing Corp. vs.
NLRC,[24] cited by the solicitor general, has a factual situation different from
the case at bar. Waiting time, unlike that in RJL Martinez Fishing Corp., does
not obtain here.[25] Likewise allegedly inapplicable are the rulings in Villavilla
vs. Court of Appeals[26] and in Brotherhood Labor Unity Movement vs.
Zamora.[27]
Respondent Corfarm denies that it had the power of control, rationalizing
that petitioners members were street-hired workers engaged from time to
time to do loading and unloading work x x x[;] [t]here [was] no
superintendent-in-charge x x x to give orders x x x[;] [and] there [were] no
gate passes issued, nor tools, equipment and paraphernalia issued by
Corfarm for loading/unloading x x x.[28] It attributes error to the solicitor
generals reliance on Article 280[29] of the Labor Code. Citing Brent School,
Inc. vs. Zamora,[30] private respondent asserts that a literal application of
such article will result in absurdity, where petitioners members will be regular
employees not only of respondents but also of several other rice mills, where
they were allegedly also under service. Finally, Corfarm submits that the
150
OSGs position is negated by the fact that petitioners members contracted for
loading and unloading services with respondent company when such work
was available and when they felt like it x x x.[31]
We rule for petitioners. Section 5, Rule 133 of the Rules of Court mandates
that in cases filed before administrative or quasi-judicial bodies, like the
Department of Labor, a fact may be established by substantial
evidence, i.e. that amount of evidence which a reasonable mind might accept
as adequate to justify a conclusion.[32] Also fundamental is the rule granting
not only respect but even finality to factual findings of the Department of
Labor, if supported by substantial evidence. Such findings are binding upon
this Court, unless petitioner is able to show that the secretary of labor (or the
undersecretary acting in his place) has arbitrarily disregarded or
misapprehended evidence before him to such an extent as to compel a
contrary conclusion if such evidence were properly appreciated. This is rooted
in the principle that this Court is not a trier of facts, and that the
determinations made by administrative bodies on matters falling within their
respective fields of specialization or expertise are accorded respect.[33] Also
well-settled is the doctrine that the existence of an employer-employee
relationship is ultimately a question of fact and that the findings thereon by
the labor authorities shall be accorded not only respect but even finality when
supported by substantial evidence.[34] Finally, in certiorari proceedings under
Rule 65, this Court does not, as a rule, evaluate the sufficiency of evidence
upon which the labor officials based their determinations. The inquiry is
essentially limited to whether they acted without or in excess of jurisdiction
or with grave abuse of discretion.[35] However, this doctrine is not
absolute.Where the labor officers findings are contrary to those of the med-
arbiter, the Court -- in the exercise of its equity jurisdiction -- may wade into
and reevaluate such findings,[36] which we now embark on in this case.[37]
To determine the existence of an employer-employee relation, this Court
has consistently applied the four-fold test which has the following elements:
151
(1) the power to hire, (2) the payment of wages, (3) the power to dismiss,
and (4) the power to control -- the last being the most important element.[38]
Our examination of the case records indubitably shows the presence of an
employer-employee relationship. Relying on the evidence adduced by the
petitioners, Respondent Laguesma himself affirmed the presence of such
connection. Thus, in his Order dated September 7, 1993, he astutely held:[39]
Anent the first issue, we find the annexes submitted by the respondent
company not enough to prove that herein petitioner is indeed an
independent contractor. The existence of an independent contractor
relationship is generally established by the following criteria. The
contractor is carrying on an independent business; [the] nature and
extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of a specified piece of
work; the control and supervision over the workers; payment of the
contractors workers; the control and the supervision over the workers;
the control of the premises; the duty to supply the premises, tools,
appliances, materials and laborers, and the mode, manner and terms
of payment. [Brotherhood Labor Unity Movement of the Philippines vs.
Zamora, 147 SCRA 49 (198) [sic] ].
None of the above criteria exists in the case at bar. The absence of a
written contract which specifies the performance of a specified piece of
work, the nature and extent of the work and the term and duration of
the relationship between herein petitioner and respondent company
belies the latters [sic] allegation that the former is indeed and [sic]
independent contractor.
Also, respondent failed to show by clear and convincing proof that
herein respondent has the substantial capital or investment to qualify
as an independent contractor under the law. The premises, tools,
equipments [sic] and paraphernalia are all supplied by respondent
company. It is only the manpower or labor force which the alleged
152
contractor supplies, suggesting the existence of a labor only contracting
scheme which is prohibited by law. Further, if herein petitioner is
indeed an independent contractor, it should have offered its services to
other companies and not to work [sic] exclusively for the respondent
company. It is therefore, clear that the alleged J.P. Costales, Jr.
Cargador Services cannot be considered as an independent contractor
as defined by law.
In his subsequent order, Respondent Laguesma inexplicably reversed his
above ruling and held that there was no employer-employee relationship on
the ground that Respondent Corfarm exercised no power of control over the
alleged employees.
It may be asked, why the sudden change of mind on the part of
Respondent Laguesma? No additional pieces of evidence were adduced and
no existing ones were identified by Laguesma to support such strange
reversal. The unblemished fact is that private respondent was the recruiter
and employer of petitioners members.
Shoppers Gain Supermart vs. NLRC[40] provides the standard to determine
whether a worker is an independent contractor:
The applicable law is not Article 280 of the Labor Code which is cited
by petitioners, but Art. 106, which provides:
Art. 106. Contractor or subcontractor. -- Whenever an employer
enters into a contract with another person for the performance
of the formers work, the employees of the contractor and of the
latters subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
xxxxxxxxx
xxxxxxxxx

153
There is labor-only contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed
by such persons are performing activities which are directly
related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent
of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed
by him. (emphasis supplied)

In accordance with the above provision, petitioner corporation is deemed the


direct employer of the private respondents and thus liable for all benefits to
which such workers are entitled, like wages, separation benefits and so
forth. There is no denying the fact that private respondents work as
merchandisers, cashiers, baggers, check-out personnel, sales ladies,
warehousemen and so forth were directly related, necessary and vital to the
day-to-day operations of the supermarket; their jobs involved normal and
regular functions in the ordinary business of the petitioner corporation. Given
the nature of their functions and responsibilities, it is improbable that
petitioner did not exercise direct control over their work. Moreover, there is
no evidence--as in fact, petitioners do not even allege--that aside from
supplying the manpower, the labor agencies have substantial capital or
investment in the form of tools, equipment, machineries, work premises,
among others.

It is undeniable that petitioners members worked as cargadores for


private respondent. They loaded, unloaded and piled sacks of palay from the
warehouses to the cargo trucks and from the cargo trucks to the buyers. This
work is directly related, necessary and vital to the operations of
Corfarm.Moreover, Corfarm did not even allege, much less prove, that
petitioners members have substantial capital or investment in the form of
154
tools, equipment, machineries, [and] work premises, among
others. Furthermore, said respondent did not contradict petitioners allegation
that it paid wages directly to these workers without the intervention of any
third-party independent contractor. It also wielded the power of dismissal
over petitioners; in fact, its exercise of this power was the progenitor of the
Second Case. Clearly, the workers are not independent contractors.
Applying Article 280[41] of the Labor Code, we hold that the CPWU
members were regular employees of private respondent. Their tasks were
essential in the usual business of private respondent.
As we have ruled in an earlier case, the question of whether an employer-
employee relationship exists in a certain situation has bedevilled the
courts. Businessmen, with the aid of lawyers, have tried to avoid or sidestep
such relationship, because that juridical vinculum engenders obligations
connected with workmens compensation, social security, medicare, minimum
wage, termination pay and unionism.[42] All too familiarly, Respondent
Corfarm sought refuge from these obligations. However, the records of this
case clearly support the existence of the juridical vinculum.
RJL Martinez Fishing Corporation,[43] cited by the solicitor general, is
relevant because petitioners members were also made to wait for loading and
unloading of cavans of palay to and from the storage areas and to and from
the milling areas.[44] This waiting time does not denigrate the regular
employment of petitioners members. As ruled in that case:[45]
x x x Besides, the continuity of employment is not the determining
factor, but rather whether the work of the laborer is part of the regular
business or occupation of the employer.(fn: Article 281, Labor Code, as
amended; Philippine Fishing Boat Officers and Engineer[s] Union vs.
Court of Industrial Relations, 112 SCRA 159 (1982). We are thus in
accord with the findings of respondent NLRC in this regard.

155
Although it may be that private respondents alternated their
employment on different vessels when they were not assigned to
petitioners boats, that did not affect their employee status. The
evidence also establishes that petitioners had a fleet of fishing vessels
with about 65 ship captains, and as private respondents contended,
when they finished with one vessel they were instructed to wait for the
next. As respondent NLRC had found:
We further find that the employer-employee relationship between
the parties herein is not co-terminous with each loading and
unloading job. As earlier shown, respondents are engaged in the
business of fishing. For this purpose, they have a fleet of fishing
vessels. Under this situation, respondents activity of catching fish
is a continuous process and could hardly be considered as
seasonal in nature. So that the activities performed by herein
complainants, i.e. unloading the catch of tuna fish from
respondents vessels and then loading the same to refrigerated
vans, are necessary or desirable in the business of
respondents. This circumstance makes the employment of
complainants a regular one, in the sense that it does not depend
on any specific project or seasonal activity. (fn: NLRC Decision,
p. 94, Rollo.)
Alleged Admission of Lack of
Employer-Employee Relationship

Respondent Corfarm argues that some of petitioners members including


its president, Juanito P. Costales, Jr.[,] admitted that they work for various
rice mills in Pangasinan and that there is no employer-employee relations
between them and private respondents. It adds that the solicitor general, by
arguing that there was an employer-employee relationship, attempts to
substitute [his] judgment [with] that of public respondentundersecretary x x
156
x who found such admissions against self-interest on the part of petitioners
members x x x.[46]
These arguments are negligible. The alleged admissions cannot be taken
against petitioners cause. First, the contents of the admissions are highly
suspect. The records reveal that the admissions of Juanito Costales,
Jr.,[47] Carlito Costales[48] and Juanito Medenilla[49] were in the form of
affidavits[50] of adhesion which were identical in content, differentiated only
by the typewritten names and the signatures of the workers. Second, only
three of the workers executed such affidavits. Clearly, the admissions in such
affidavits cannot work against petitioner unions cause. Such pro forma and
identical affidavits do not prove lack of employer-employee relationship
against all members of petitioner. Third, the employer-employee relationship
is clearly proven by substantial evidence. Corfarm sorely failed to show that
petitioners members were independent contractors. We rule that no
particular form of proof is required to prove the existence of an employer-
employee relationship. Any competent and relevant evidence may show the
relationship. If only documentary evidence would be required to demonstrate
that relationship, no scheming employer would ever be brought before the
bar of justice.[51] Fourth, and in any event, the alleged admissions of the three
workers that they worked with other rice mills do not work against
them. Assuming arguendo that they did work with other rice mills, this was
required by the imperative of meeting their basic needs.[52]
The employer-employee relationship having been duly established, the
holding of a certification election necessarily follows. It bears stressing that
there should be no unnecessary obstacle to the holding of such
election,[53] for it is a statutory policy that should not be circumvented.[54] We
have held that, in the absence of a legal impediment, the holding of a
certification election is the most democratic method of determining the
employees choice of their bargaining representative. It is the best means to

157
settle controversies and disputes involving union representation. Indeed, it is
the keystone of industrial democracy.[55]

Second Case: Illegal Dismissal


Petitioner assails the NLRC for setting aside the labor arbiters decision and
remanding the case for further proceedings. Petitioner argues that the order
of remand will only prolong the agony of the 92 union members and their
families for living or existing without jobs and earnings to give them
support. Further, petitioner contends:[56]
The Labor Arbiter had rendered a decision (Annex D, Petition) on
September 14, 1993 in favor of petitioner based on the available
records of the case after giving more than ample opportunities to
private respondents herein to submit their position paper and other
pleadings alleging their evidences [sic] against the causes of action of
petitioner alleged in the complaint for illegal dismissal, unfair labor
practice, non-payment of various benefits granted by existing laws
during their employment, illegal deductions or diminution of their
underpaid daily wages, non-payment of wage increases and other
causes of action pleaded by the complainant or herein petitioner.
In short, Labor Arbiter Rolando Gambito rendered his decision based
on the records of the case including evidence available on record and
after observing due process of law.
To support his opposition against the remand of the case, petitioner recites
the chronological events of the case, viz::[57]
In the case at bar, private respondents were notified earlier in the latter
part of 1992 regarding the pendency of the complaint for illegal
dismissal, unfair labor practice, damages, etc., but said respondents
did not appear during the initial hearing of the case [before] Labor
Arbiter Ricardo Olairez, then the Arbiter handling the case. The case
158
was re-set for hearing at some other dates. On April 22, 1993, Atty.
Alfonso C. Bince, Jr. appeared as counsel for respondents at Dagupan
City. Atty. Bince committed to the Labor Arbiter that the former will file
the position paper for his clients (Corfarm Grains, Inc., et al.) within
ten (10) days from April 22, 1993, but still private respondents Position
Paper was not filed.
On May 20, 1993, Labor Arbiter Rolando Gambito, who took over the
case for illegal dismissal, etc. filed by petitioner, issued an order to
private respondents directing the latter (respondents) to submit their
Position Paper together with THEIR DOCUMENTARY EXHIBITS, if any,
within 10 days from receipt of the order. Still, private respondents
counsel failed to submit private respondents Position Paper relative to
the petitioners complaint for illegal dismissal, unfair labor practice, etc.
which is involved in G.R. No. 114911 pending action by this Honorable
Court.
Thus, the Labor Arbiter rendered his decision on the case in favor of
petitioner and/or the 92 illegally dismissed workers based on the
position paper filed by the latter and available records of the
case. (Emphasis in original.)
On the other hand, Respondent Corfarm submits that the labor arbiters
decision should be set aside not only for lack of competent and credible
evidence but also for lack of procedural due process. Corfarm further
contends that in spite of the pendency of its motions to cross-examine
petitioners witnesses and to suspend proceedings, the labor arbiter ordered
the submission of its position paper and documentary evidence within ten
(10) days.[58] Respondent Corfarm insists:[59]
Indeed, although proceedings before a Labor Arbiter are supposed to
be non-litigious and the technicalities in the courts of law need not be
strictly applied, the proceedings should nevertheless be subject to the
requirements of due process as provided in Section 7, Rule 7 of the
159
NLRC Rules of Procedure. (See also Phil. Telegraph and Telephone
Corp. vs. NLRC, 183 SCRA 451).
We agree with petitioner. Private respondent was not denied procedural
due process, and the labor arbiters decision was based on competent,
credible and substantial evidence.

Procedural Due Process Observed


Private respondent had been duly informed of the pendency of the illegal
dismissal case, but it chose not to participate therein without any known
justifiable cause. The labor arbiter sent notices of hearing or arbitration to
the parties, requiring them to submit position papers at 1:30 p.m. on
November 14, 1992.[60] Respondent Corfarm did not attend the
hearing. According to Respondent NLRC, there was no proof that Respondent
Corfarm received such notice. In any case, petitioner filed a Motion to Admit
Amended Complaint on December 23, 1992. Again, another notice for
hearing or arbitration on January 7, 1993 was sent to the parties.[61] This was
received by petitioners counsel as evidenced by the registry return receipt
duly signed by private respondents counsel, Atty. Alfonso Bince, Jr. It was
only on January 28, 1993, however, that Atty. Bince entered his appearance
as counsel for Respondent Corfarm.[62] On May 10, 1993, Corfarm was again
given a new period of ten (10) days within which to submit its position paper
and documentary evidence; otherwise, [the labor arbiter] will be constrained
to resolve this case based on available evidence on record.[63] As evidenced
by a registry return receipt, a copy of said directive was received by
respondents counsel on May 25, 1993. Still and all, Corfarm failed to file its
position paper. Clearly, private respondent was given an opportunity to
present its evidence, but it failed or refused to avail itself of this opportunity
without any legal reason. Due process is not violated where a person is given
the opportunity to be heard, but chooses not to give his side of the case.[64]

160
Labor Arbiters Decision Based
on Credible, Competent and Substantial Evidence
Contrary to the conclusions of the NLRC and the arguments of private
respondent, the findings of the labor arbiter on the question of illegal
dismissal were based on credible, competent and substantial evidence.
It is to be borne in mind that proceedings before labor agencies merely
require the parties to submit their respective affidavits and position
papers.Adversarial trial is addressed to the sound discretion of the labor
arbiter. To establish a cause of action, only substantial evidence is
necessary, i.e., such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds equally reasonable
might conceivably opine otherwise.[65] As ruled in Manalo vs. Roldan-
Confesor:[66]
Clear and convincing proof is x x x more than mere preponderance, but
not to extent of such certainty as is required beyond reasonable doubt
as in criminal cases x x x (fn: Blacks Law Dictionary, 5th Ed., p. 227,
citing Fred C. Walker Agency, Inc. v. Lucas, 215 Va. 535, 211 S.E. 2d
88, 92) while substantial evidence x x x consists of more than a mere
scintilla of evidence but may be somewhat less than a preponderance
x x x x (fn: Ibid., p. 1281, citing Marker v. Finch, D.C. Del., 322 F. Supp.
905, 910) Consequently, in the hierarchy of evidentiary values, We find
proof beyond reasonable doubt at the highest level, followed by clear
and convincing evidence, preponderance of evidence, and substantial
evidence, in that order.
Evidence to determine the validity of petitioners claims, which the labor
arbiter relied upon, was available to Respondent NLRC. These pieces of
evidence are in the case records, as aptly pointed out by the solicitor
general:[67]

161
[Regarding] the quoted second sentence of public respondent NLRCs
Resolution that allegations must be proved and established by
competent evidence, and that mere allegations would not suffice
despite the absence of evidence to the contrary, suffice it to say that
there is ample evidence on record to support the Labor Arbiters
decision, to wit: 1) Narrative report of DOLE inspector Crisanto Rey
Dingle noting some violation of underpayment of minimum wage and
underpayment of 13th month pay (page 10, record); 2) affidavit of
union officers and individual union members, stating their various
claims (page 80-195, Record). Despite such evidence and an
opportunity afforded to private respondent to present its evidence and
position paper as borne out by the notice of hearing issued by Labor
Arbiter Olairez dated November 14, 1992, with advice to the parties to
submit their position paper (p. 14 Record) and the Order issued by
Labor Arbiter Gambito dated May 20, 1993; requiring private
respondents to submit their position paper, together with their
documentary evidence (p. 247, record), private respondent failed to
submit its position paper and countervailing evidence which should
have met squarely the allegations and evidence adduced by the
petitioner. Thus, in the absence of private respondents position paper
and countervailing evidence, the Labor Arbiter cannot be faulted in
deciding the case based on the available evidence on record.
It must be stressed that labor laws mandate the speedy administration of
justice, with least attention to technicalities but without sacrificing the
fundamental requisites of due process. In this light, the NLRC, like the labor
arbiter, is authorized to decide cases based on the position papers and other
documents submitted, without resorting to the technical rules of
evidence.[68] Verily, Respondent NLRC noted several documentary evidence
sufficient to arrive at a just decision. Indeed, the evidence on record clearly
supports the conclusion of the labor arbiter that the petitioners were
employees of respondent, and that they were illegally dismissed.[69]
162
The NLRC points to conflicts and inconsistencies in the evidence on
record. We are not convinced. These alleged inconsistencies are too flimsy
and too tenuous to preclude a just decision. The finding that Juanito Costales,
Jr. was an employee of respondent was allegedly inconsistent with his
admission that he was the owner of Carcado Contracting Services. As earlier
observed, the inconsistency is irrelevant. Juan Costales, Jr. was an employee
of Corfarm. Owning this alleged outfit is not inconsistent with such
employment. The NLRC also questioned the amount of the employees
compensation. In one instance, the workers stated that they were
receiving P45.00 per days work of eight hours. In another, they claimed that
they were paid P0.12 per sack or cavan. These allegedly differ from their
allegation that Corfarm used to be obliged to pay P57.00 per days
earning. The alleged inconsistencies are more apparent than real. Records
reveal that the P57 was the promised compensation; however, there was an
unauthorized deduction of P12; thus, the amount of P45 per day.[70] The
claim of P0.12 per sack or cavan is the basic computation of how workers or
haulers earn their wage for the day.[71] In any event, the alleged
inconsistencies do not affect or diminish the established fact that petitioners
members were regular employees who were illegally dismissed.
Why Respondent NLRC refused to rule directly on the appeal escapes us.
The remand of a case or an issue to the labor arbiter for further proceedings
is unnecessary, considering that the NLRC was in a position to resolve the
dispute based on the records before it and particularly where the ends of
justice would be served thereby.[72] Remanding the case would needlessly
delay the resolution of the case which has been pending since 1992.[73] As
already observed, the evidence on record clearly supports the findings of the
labor arbiter.
Pursuant to the doctrine that this Court has a duty to settle, whenever
possible, the entire controversy in a single proceeding, leaving no root or
branch to bear the seeds of future litigation, we now resolve all issues.[74]
163
It is axiomatic that in illegal dismissal cases, the employer always has the
burden of proof,[75] and his failure to discharge this duty results in a finding
that the dismissal was unjustified.[76] Having defaulted from filing its position
paper, Respondent Corfarm is deemed to have waived its right to present
evidence and counter the allegations of petitioners members.
In the same light, we sustain the labor arbiters holding in respect of unfair
labor practice.[77] As ruled by Labor Arbiter Rolando D. Gambito:[78]
The last issue: Instead of sitting down with the individual complainants
or the union officers to discuss their demands, respondents resorted to
mass lay-off of all the members of the union and replaced them with
outsiders. This is clearly a case of union busting which Art. 248 of the
Labor Code prohibits. Art. 248 provides that It shall be unlawful for an
employer to commit any of the following unfair labor practice (a) To
interfere with, restrain or coerce employees in the exercise of their right
to self-organization; (b) x x x (c) To contract out service or functions
being performed by union members when such will interfere with,
restrain or coerce employees in the exercise of their rights to self-
organization.
In view of recent jurisprudence,[79] we are correcting some items in the
labor arbiters decision. The thirteenth month pay awarded should be
computed for each year of service from the time each employee was hired
up to the date of his actual reinstatement. The same computation applies to
the award of the service incentive leave[80] and underpaid wages. Each
employee is to be paid the remaining underpaid wages from the date of his
or her hiring in accordance with the then prevailing wage
legislations. Likewise, a refund of P12 shall be computed for each day of
service of each employee, to be reckoned from the date such employee was
hired. The damages awarded should be sustained because the employer
acted in bad faith.[81] Back wages are to be computed from the date of
dismissal up to the date of actual reinstatement without any deductions or
164
conditions. This is in consonance with Fernandez, et al. vs. National Labor
Relations Commission:[82]
x x x Accordingly, the award to petitioners of backwages for three years
should be modified in accordance with Article 279 of the Labor Code,
as amended by R.A. 6715, by giving them full backwages without
conditions and limitations, the dismissals having occurred after the
effectivity of the amendatory law on March 21, 1989. Thus, the Court
held in Bustamante:
The clear legislative intent of the amendment in Rep. Act No.
6715 is to give more benefits to workers than was previously
given them under the Mercury Drug rule or the deduction of
earnings elsewhere rule. Thus, a closer adherence to the
legislative policy behind Rep. Act No. 6715 points to full
backwages as meaning exactly that, i.e., without deducting from
backwages the earnings derived elsewhere by the concerned
employee during the period of his illegal dismissal.
WHEREFORE, both petitions are GRANTED. In G.R. No. 113542,
Respondent Laguesmas Orders dated January 4, 1994 and January 27, 1994
are REVERSED and SET ASIDE; whereas his Order dated September 7, 1993
is REINSTATED. In G.R. No. 114911, Respondent NLRCs Resolutions
promulgated on February 16, 1994 and March 28, 1994 are
likewise REVERSED AND SET ASIDE. The Labor Arbiters decision dated
September 14, 1993 is reinstated with MODIFICATIONS as set out in this
Decision. Respondent NLRC is ORDERED to COMPUTE the monetary benefits
awarded in accordance with this Decision and to submit its compliance
thereon within thirty days from notice of this Decision.
SO ORDERED.

165
G.R. No. L-72654-61 January 22, 1990

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE


BAUTU, JAIME BARBIN, NICANOR FRANCISCO, PHILIP
CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN
FISHING ENTERPRISES and/or ARSENIO DE GUZMAN, respondents.

J.C. Espinas & Associates for petitioners.


Tomas A. Reyes for private respondent.

FERNAN, C.J.:

The issue to be resolved in the instant case is whether or not the fishermen-
crew members of the trawl fishing vessel 7/B Sandyman II are employees of
its owner-operator, De Guzman Fishing Enterprises, and if so, whether or not
they were illegally dismissed from their employment.

Records show that the petitioners were the fishermen-crew members of 7/B
Sandyman II, one of several fishing vessels owned and operated by private
respondent De Guzman Fishing Enterprises which is primarily engaged in the
fishing business with port and office at Camaligan, Camarines Sur. Petitioners
rendered service aboard said fishing vessel in various capacities, as follows:
Alipio Ruga and Jose Parma patron/pilot; Eladio Calderon, chief engineer;
Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor
Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin,
fishermen.

For services rendered in the conduct of private respondent's regular business


of "trawl" fishing, petitioners were paid on percentage commission basis in
cash by one Mrs. Pilar de Guzman, cashier of private respondent. As agreed
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upon, they received thirteen percent (13%) of the proceeds of the sale of the
fish-catch if the total proceeds exceeded the cost of crude oil consumed
during the fishing trip, otherwise, they received ten percent (10%) of the
total proceeds of the sale. The patron/pilot, chief engineer and master
fisherman received a minimum income of P350.00 per week while the
assistant engineer, second fisherman, and fisherman-winchman received a
minimum income of P260.00 per week. 1

On September 11, 1983 upon arrival at the fishing port, petitioners were told
by Jorge de Guzman, president of private respondent, to proceed to the police
station at Camaligan, Camarines Sur, for investigation on the report that they
sold some of their fish-catch at midsea to the prejudice of private respondent.
Petitioners denied the charge claiming that the same was a countermove to
their having formed a labor union and becoming members of Defender of
Industrial Agricultural Labor Organizations and General Workers Union
(DIALOGWU) on September 3, 1983.

During the investigation, no witnesses were presented to prove the charge


against petitioners, and no criminal charges were formally filed against them.
Notwithstanding, private respondent refused to allow petitioners to return to
the fishing vessel to resume their work on the same day, September 11, 1983.

On September 22, 1983, petitioners individually filed their complaints for


illegal dismissal and non-payment of 13th month pay, emergency cost of
living allowance and service incentive pay, with the then Ministry (now
Department) of Labor and Employment, Regional Arbitration Branch No. V,
Legaspi City, Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They
uniformly contended that they were arbitrarily dismissed without being given
ample time to look for a new job.

On October 24, 1983, private respondent, thru its operations manager,


Conrado S. de Guzman, submitted its position paper denying the employer-

167
employee relationship between private respondent and petitioners on the
theory that private respondent and petitioners were engaged in a joint
venture. 3

After the parties failed to reach an amicable settlement, the Labor Arbiter
scheduled the case for joint hearing furnishing the parties with notice and
summons. On December 27, 1983, after two (2) previously scheduled joint
hearings were postponed due to the absence of private respondent, one of
the petitioners herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman II,
testified, among others, on the manner the fishing operations were
conducted, mode of payment of compensation for services rendered by the
fishermen-crew members, and the circumstances leading to their dismissal. 4

On March 31, 1984, after the case was submitted for resolution, Labor Arbiter
Asisclo S. Coralde rendered a joint decision 5 dismissing all the complaints of
petitioners on a finding that a "joint fishing venture" and not one of employer-
employee relationship existed between private respondent and petitioners.

From the adverse decision against them, petitioners appealed to the National
Labor Relations Commission.

On May 30, 1985, the National Labor Relations Commission promulgated its
resolution 6 affirming the decision of the labor arbiter that a "joint fishing
venture" relationship existed between private respondent and petitioners.

Hence, the instant petition.

Petitioners assail the ruling of the public respondent NLRC that what exists
between private respondent and petitioners is a joint venture arrangement
and not an employer-employee relationship. To stress that there is an
employer-employee relationship between them and private respondent,
petitioners invite attention to the following: that they were directly hired by
private respondent through its general manager, Arsenio de Guzman, and its
168
operations manager, Conrado de Guzman; that, except for Laurente Bautu,
they had been employed by private respondent from 8 to 15 years in various
capacities; that private respondent, through its operations manager,
supervised and controlled the conduct of their fishing operations as to the
fixing of the schedule of the fishing trips, the direction of the fishing vessel,
the volume or number of tubes of the fish-catch the time to return to the
fishing port, which were communicated to the patron/pilot by radio (single
side band); that they were not allowed to join other outfits even the other
vessels owned by private respondent without the permission of the
operations manager; that they were compensated on percentage commission
basis of the gross sales of the fish-catch which were delivered to them in cash
by private respondent's cashier, Mrs. Pilar de Guzman; and that they have to
follow company policies, rules and regulations imposed on them by private
respondent.

Disputing the finding of public respondent that a "joint fishing venture" exists
between private respondent and petitioners, petitioners claim that public
respondent exceeded its jurisdiction and/or abused its discretion when it
added facts not contained in the records when it stated that the pilot-crew
members do not receive compensation from the boat-owners except their
share in the catch produced by their own efforts; that public respondent
ignored the evidence of petitioners that private respondent controlled the
fishing operations; that public respondent did not take into account
established jurisprudence that the relationship between the fishing boat
operators and their crew is one of direct employer and employee.

Aside from seeking the dismissal of the petition on the ground that the
decision of the labor arbiter is now final and executory for failure of petitioners
to file their appeal with the NLRC within 10 calendar days from receipt of said
decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine
Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor General claims
that the ruling of public respondent that a "joint fishing venture" exists
169
between private respondent and petitioners rests on the resolution of the
Social Security System (SSS) in a 1968 case, Case No. 708 (De Guzman
Fishing Enterprises vs. SSS), exempting De Guzman Fishing Enterprises,
private respondent herein, from compulsory coverage of the SSS on the
ground that there is no employer-employee relations between the boat-owner
and the fishermen-crew members following the doctrine laid down in Pajarillo
vs. SSS, 17 SCRA 1014 (1966). In applying to the case at bar the doctrine
in Pajarillo vs. SSS, supra, that there is no employer-employee relationship
between the boat-owner and the pilot and crew members when the boat-
owner supplies the boat and equipment while the pilot and crew members
contribute the corresponding labor and the parties get specific shares in the
catch for their respective contribution to the venture, the Solicitor General
pointed out that the boat-owners in the Pajarillo case, as in the case at bar,
did not control the conduct of the fishing operations and the pilot and crew
members shared in the catch.

We rule in favor of petitioners.

Fundamental considerations of substantial justice persuade Us to decide the


instant case on the merits rather than to dismiss it on a mere technicality. In
so doing, we exercise the prerogative accorded to this Court enunciated
in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and
Rubber Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the well-
settled doctrine is that in labor cases before this Tribunal, no undue sympathy
is to be accorded to any claim of a procedural misstep, the idea being that its
power be exercised according to justice and equity and substantial merits of
the controversy."

Circumstances peculiar to some extent to fishermen-crew members of a


fishing vessel regularly engaged in trawl fishing, as in the case of petitioners
herein, who spend one (1) whole week or more 7 in the open sea performing
their job to earn a living to support their families, convince Us to adopt a
170
more liberal attitude in applying to petitioners the 10-calendar day rule in the
filing of appeals with the NLRC from the decision of the labor arbiter.

Records reveal that petitioners were informed of the labor arbiter's decision
of March 31, 1984 only on July 3,1984 by their non-lawyer representative
during the arbitration proceedings, Jose Dialogo who received the decision
eight (8) days earlier, or on June 25, 1984. As adverted to earlier, the
circumstances peculiar to petitioners' occupation as fishermen-crew
members, who during the pendency of the case understandably have to earn
a living by seeking employment elsewhere, impress upon Us that in the
ordinary course of events, the information as to the adverse decision against
them would not reach them within such time frame as would allow them to
faithfully abide by the 10-calendar day appeal period. This peculiar
circumstance and the fact that their representative is a non-lawyer provide
equitable justification to conclude that there is substantial compliance with
the ten-calendar day rule of filing of appeals with the NLRC when petitioners
filed on July 10, 1984, or seven (7) days after receipt of the decision, their
appeal with the NLRC through registered mail.

We have consistently ruled that in determining the existence of an employer-


employee relationship, the elements that are generally considered are the
following (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employer's power to control
the employee with respect to the means and methods by which the work is
to be accomplished. 8 The employment relation arises from contract of hire,
express or implied. 9 In the absence of hiring, no actual employer-employee
relation could exist.

From the four (4) elements mentioned, We have generally relied on the so-
called right-of-control test 10 where the person for whom the services are
performed reserves a right to control not only the end to be achieved but also
the means to be used in reaching such end. The test calls merely for the
171
existence of the right to control the manner of doing the work, not the actual
exercise of the right. 11

The case of Pajarillo vs. SSS, supra, invoked by the public respondent as
authority for the ruling that a "joint fishing venture" existed between private
respondent and petitioners is not applicable in the instant case. There is
neither light of control nor actual exercise of such right on the part of the
boat-owners in the Pajarillo case, where the Court found that the pilots
therein are not under the order of the boat-owners as regards their
employment; that they go out to sea not upon directions of the boat-owners,
but upon their own volition as to when, how long and where to go fishing;
that the boat-owners do not in any way control the crew-members with whom
the former have no relationship whatsoever; that they simply join every trip
for which the pilots allow them, without any reference to the owners of the
vessel; and that they only share in their own catch produced by their own
efforts.

The aforementioned circumstances obtaining in Pajarillo case do not exist in


the instant case. The conduct of the fishing operations was undisputably
shown by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II,
to be under the control and supervision of private respondent's operations
manager. Matters dealing on the fixing of the schedule of the fishing trip and
the time to return to the fishing port were shown to be the prerogative of
private respondent. 12 While performing the fishing operations, petitioners
received instructions via a single-side band radio from private respondent's
operations manager who called the patron/pilot in the morning. They are told
to report their activities, their position, and the number of tubes of fish-catch
in one day. 13 Clearly thus, the conduct of the fishing operations was
monitored by private respondent thru the patron/pilot of 7/B Sandyman II
who is responsible for disseminating the instructions to the crew members.

172
The conclusion of public respondent that there had been no change in the
situation of the parties since 1968 when De Guzman Fishing Enterprises,
private respondent herein, obtained a favorable judgment in Case No. 708
exempting it from compulsory coverage of the SSS law is not supported by
evidence on record. It was erroneous for public respondent to apply the
factual situation of the parties in the 1968 case to the instant case in the light
of the changes in the conditions of employment agreed upon by the private
respondent and petitioners as discussed earlier.

Records show that in the instant case, as distinguished from the Pajarillo case
where the crew members are under no obligation to remain in the outfit for
any definite period as one can be the crew member of an outfit for one day
and be the member of the crew of another vessel the next day, the herein
petitioners, on the other hand, were directly hired by private respondent,
through its general manager, Arsenio de Guzman, and its operations
manager, Conrado de Guzman and have been under the employ of private
respondent for a period of 8-15 years in various capacities, except for
Laurente Bautu who was hired on August 3, 1983 as assistant engineer.
Petitioner Alipio Ruga was hired on September 29, 1974 as patron/captain of
the fishing vessel; Eladio Calderon started as a mechanic on April 16, 1968
until he was promoted as chief engineer of the fishing vessel; Jose Parma
was employed on September 29, 1974 as assistant engineer; Jaime Barbin
started as a pilot of the motor boat until he was transferred as a master
fisherman to the fishing vessel 7/B Sandyman II; Philip Cervantes was hired
as winchman on August 1, 1972 while Eleuterio Barbin was hired as
winchman on April 15, 1976.

While tenure or length of employment is not considered as the test of


employment, nevertheless the hiring of petitioners to perform work which is
necessary or desirable in the usual business or trade of private respondent
for a period of 8-15 years since 1968 qualify them as regular employees
within the meaning of Article 281 of the Labor Code as they were indeed
173
engaged to perform activities usually necessary or desirable in the usual
fishing business or occupation of private respondent. 14

Aside from performing activities usually necessary and desirable in the


business of private respondent, it must be noted that petitioners received
compensation on a percentage commission based on the gross sale of the
fish-catch i.e. 13% of the proceeds of the sale if the total proceeds exceeded
the cost of the crude oil consumed during the fishing trip, otherwise only 10%
of the proceeds of the sale. Such compensation falls within the scope and
meaning of the term "wage" as defined under Article 97(f) of the Labor Code,
thus:

(f) "Wage" paid to any employee shall mean the remuneration or


earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece or
commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services
rendered or to be rendered, and included the fair and reasonable value,
as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee. . . .

The claim of private respondent, which was given credence by public


respondent, that petitioners get paid in the form of share in the fish-catch
which the patron/pilot as head of the team distributes to his crew members
in accordance with their own understanding 15 is not supported by recorded
evidence. Except that such claim appears as an allegation in private
respondent's position paper, there is nothing in the records showing such a
sharing scheme as preferred by private respondent.

Furthermore, the fact that on mere suspicion based on the reports that
petitioners allegedly sold their fish-catch at midsea without the knowledge

174
and consent of private respondent, petitioners were unjustifiably not allowed
to board the fishing vessel on September 11, 1983 to resume their activities
without giving them the opportunity to air their side on the accusation against
them unmistakably reveals the disciplinary power exercised by private
respondent over them and the corresponding sanction imposed in case of
violation of any of its rules and regulations. The virtual dismissal of petitioners
from their employment was characterized by undue haste when less extreme
measures consistent with the requirements of due process should have been
first exhausted. In that sense, the dismissal of petitioners was tainted with
illegality.

Even on the assumption that petitioners indeed sold the fish-catch at midsea
the act of private respondent virtually resulting in their dismissal evidently
contradicts private respondent's theory of "joint fishing venture" between the
parties herein. A joint venture, including partnership, presupposes generally
a parity of standing between the joint co-venturers or partners, in which each
party has an equal proprietary interest in the capital or property
contributed 16 and where each party exercises equal lights in the conduct of
the business. 17 It would be inconsistent with the principle of parity of
standing between the joint co-venturers as regards the conduct of business,
if private respondent would outrightly exclude petitioners from the conduct
of the business without first resorting to other measures consistent with the
nature of a joint venture undertaking, Instead of arbitrary unilateral action,
private respondent should have discussed with an open mind the advantages
and disadvantages of petitioners' action with its joint co-venturers if indeed
there is a "joint fishing venture" between the parties. But this was not done
in the instant case. Petitioners were arbitrarily dismissed notwithstanding that
no criminal complaints were filed against them. The lame excuse of private
respondent that the non-filing of the criminal complaints against petitioners
was for humanitarian reasons will not help its cause either.

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We have examined the jurisprudence on the matter and find the same to be
supportive of petitioners' stand. In Negre vs. WCC 135 SCRA 653 (1985), we
held that fishermen crew members who were recruited by one master
fisherman locally known as "maestro" in charge of recruiting others to
complete the crew members are considered employees, not industrial
partners, of the boat-owners. In an earlier case of Abong vs. WCC, 54 SCRA
379 (1973) where petitioner therein, Dr. Agustin Abong, owner of the fishing
boat, claimed that he was not the employer of the fishermen crew members
because of an alleged partnership agreement between him, as financier, and
Simplicio Panganiban, as his team leader in charge of recruiting said
fishermen to work for him, we affirmed the finding of the WCC that there
existed an employer-employee relationship between the boat-owner and the
fishermen crew members not only because they worked for and in the interest
of the business of the boat-owner but also because they were subject to the
control, supervision and dismissal of the boat-owner, thru its agent, Simplicio
Panganiban, the alleged "partner" of Dr. Abong; that while these fishermen
crew members were paid in kind, or by "pakiao basis" still that fact did not
alter the character of their relationship with Dr. Abong as employees of the
latter.

In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial
Relations, 112 SCRA 159 (1982), we held that the employer-employee
relationship between the crew members and the owners of the fishing vessels
engaged in deep sea fishing is merely suspended during the time the vessels
are drydocked or undergoing repairs or being loaded with the necessary
provisions for the next fishing trip. The said ruling is premised on the principle
that all these activities i.e., drydock, repairs, loading of necessary provisions,
form part of the regular operation of the company fishing business.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The


questioned resolution of the National Labor Relations Commission dated May
30,1985 is hereby REVERSED and SET ASIDE. Private respondent is ordered
176
to reinstate petitioners to their former positions or any equivalent positions
with 3-year backwages and other monetary benefits under the law. No
pronouncement as to costs.

SO ORDERED.

177
G.R. Nos. 82823-24 July 31, 1989

AGRO COMMERCIAL SECURITY SERVICES AGENCY, INC., petitioner,


vs.
THE NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR
ARBITER BIENVENIDO V. HERMOGENES and MANUEL JIMENEZ. ET
AL., respondents.

San Juan, Gonzalez, San Agustin & Sinense for petitioner.

Mauricio Law Office for private respondents.

GANCAYCO, J.:

Is there an employer-employee relationship between a security agency and


its security guards? Is the so-called "floating status" of a security guard lawful
and could such prolonged status amount to illegal dismissal? These are the
issues raised in this petition for certiorari and prohibition with preliminary
injunction questioning the resolution dated January 20, 1988 of public
respondent National Labor Relations Commission (NLRC) affirming the
decision of public respondent labor arbiter Bienvenido V. Hermogenes dated
March 19, 1987 finding private respondents to have been illegally dismissed
and ordering petitioner to pay them separation pay of one-half (1/2) month
salary for every year of service, 13th month pay for the year 1986 and the
money value of their respective service incentive leave amounting to fifteen
(15) days salary each with allowances. The petition also assails the resolution
of the respondent NLRC dated April 18, 1988 denying the motion for
reconsideration filed by petitioner.

Private respondents, numbering forty-six (46) in all, worked as security


guards and/or janitors under individual contracts with petitioner. They were
assigned to firms and offices where petitioner had contracts providing
178
security and janitorial services. Their service period and last rates of salary
are stated in the decision of the labor arbiter.1Their individual contracts of
employment provide, among others, as follows:

3.d. That the security guard, agrees to temporary suspension of


his employment completely to include such changes in his
employment status with the Agency, in case of termination of
contract between the Agency and its Client, or reduction in force
of same;

In the early part of 1986, petitioner's service contracts with various


corporations and government agencies to which private respondents were
previously assigned had been terminated generally due to the sequestration
of the said offices by the Presidential Commission on Good Government.
Accordingly, many of the private respondents were placed on "floating status"
on September 16, 1986. A number of them had been put on that status even
earlier. "Floating status" means an indefinite period of time when private
respondents do not receive any salary or financial benefit provided by law. A
number of them later obtained employment in other security agencies.

On account of the uncertainty of their employment with the petitioner, on


July 25, 1986, private respondents filed a complaint for illegal dismissal in the
Arbitration Branch of the Department of Labor and Employment against
petitioner. They sought the payment of their respective separation pay, 13th
month pay for 1986 and service incentive leave pay. After due' proceedings
where the parties were required to submit their position papers and
stipulation of facts, the respondent labor arbiter ruled in favor of the private
respondents whose decision as above-related was affirmed by the NLRC.

Hence, the herein petition alleging that the petitioner was denied due process
of law by the NLRC and it committed a grave abuse of discretion in
considering private respondents as employees of petitioner, in ruling that the

179
"floating status" of private respondents amounted to an illegal dismissal, and
in causing the execution of the judgment pending a complete and full
adjudication of the issues.

Forthwith, the allegation of denial of due process is without basis. Petitioner


was afforded the opportunity to file its position paper. It even entered into a
stipulation of facts with private respondent.

As to the issue of employer-employee relationship, an examination of the


records shows that private respondents are regular employees of petitioner.
Their individual length of service ranges from four (4) to more than ten (10)
years. In accordance with the stipulation of facts, it appears that private
respondents worked with petitioner as security guards/janitors Their
employment contracts provide, among others:

1. That the AGENCY hereby undertakes to look for, procure, and/or furnish
the services of the SECURITY GUARD, with any individual, business
establishment, residential houses or any entity whatsoever, and the
SECURITY GUARD agrees to supply his services, assignments, position and
undertaking, subject to the following conditions:

a) That the SECURITY GUARD upon acceptance of his position or undertaking


for employment, shall observe, follow and obey all rules, regulations, code of
conduct required by the AGENCY and any of its contracted client, in
accordance with the provisions of RA 5487 and its implement Rules and
Regulations;

b) That the AGENCY shall pay the SECURITY GUARD a monthly salary of P
_______/day payable on the 5th and 20th of the month;

c) That the AGENCY shall have the exclusive right to withdraw or re-assign
the SECURITY GUARD;

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d) That the SECURITY GUARD, agrees to temporary suspension of his
employment completely to include such changes; in bis employment status
with the AGENCY, in case of termination of contract between the AGENCY
and its client, or reduction in force of same;

e) That the AGENCY may terminate or dismiss the SECURITY GUARD, if, after
proper and due investigation it is shown that the SECURITY GUARD has
violated any rule, regulation, code of conduct and discipline, imposed by the
AGENCY;

f) That the terms and conditions pertinent to service and discipline embodied
in the Agreement executed between the AGENCY and any person,
establishment, or entity with whom the SECURITY GUARD is going to serve
or is assigned shall be considered part of this Agreement and therefore
binding on SECURITY GUARD. 2

It was petitioner who determined how much private respondents received as


their monthly salary, overtime/night differential pay, mid-year and Christmas
bonus and 13th month pay, uniforms and meal allowances and other benefits
mandated by law. Private respondents were reported by the petitioner as its
employees for purposes of social security coverage. Petitioner remitted their
withholding taxes to the Bureau of Internal Revenue and made monthly
contributions to the Pag-ibig fund for their benefit. It was petitioner who
determined and decided on the assignments, promotions and salary increases
of private respondents, their working hours, the firearms to be issued to them
and janitorial devices and tools to be used. Likewise, it was petitioner who
imposed the appropriate disciplinary measures on private respondents by way
of reprimand, suspension and dismissal.

In determining the existence of an employee-employer relationship, the


following elements are generally considered:

1) the selection and engagement of the employees;


181
2) payment of wages;

3) the power of dismissal and


3
4) the power to control the employees' conduct .

It is clear, therefore, that private respondents are petitioner's regular


employees who enjoy security of tenure and who cannot be dismissed except
for cause . 4

As to the alleged illegal dismissal of private respondents, the records show


that they filed their complaint against petitioner on July 25, 1986. At the time
they filed their complaint, most of them were still on the job or on
assignments and it was only in September 1986 when most of them were
placed on "floating status."

Obviously, the filing of the complaint was premature. Apparently, this issue
was not raised at all and so it is deemed waived. Thus, when the labor arbiter
rendered his decision, he considered those who have been out of work or
"floating status" for a period exceeding six (6) months to have been
terminated from the service without just cause thus entitling them to the
corresponding benefits for such separation. We agree.

Under Article 286 of the Labor Code it is provided as follows:

ART. 286. When employment not deemed terminated.


The bonafide suspension of the operation of a business or
undertaking for a period not exceeding six months, or the
fulfillment by the employee of a military or civic duty shall not
terminate employment. In all such cases, the employer shall
reinstate the employee to his former position without loss of
seniority rights if he indicates his desire to resume his work not
later than one month from the resumption of operations of his
employer or from his relief from the military or civic duty.
182
From the foregoing it is clear that when the bonafide suspension
of the operation of a business or undertaking exceeds six (6)
months then the employment of the employee shall be deemed
terminated. By the same token and applying the said rule by
analogy to security guards, if they remained without work or
assignment that is in "floating status" for a period exceeding six (6)
months, then they are in effect constructively dismissed.

The labor arbiter disagreed with the representations of petitioner that the
private respondents who accepted assignments in other security agencies
without previously resigning should be considered to have been dismissed
with just cause. In the stipulation of facts, the parties admitted that the
disciplinary rules promulgated by petitioner for its employees provide that
acceptance by an employee of other employment without first resigning from
the agency is a cause for dismissal.

In this case, it appears that twenty-seven (27) of the private respondents


violated this rule by accepting employment in other security agencies without
previously resigning from employment with petitioner. No doubt, this is a just
cause for termination of their services and as such they are not entitled to
any separation pay. 5

As regards the other seventeen (17) private respondents, they admittedly


remained in "floating status" for more than six (6) months. Such a 'floating
status" is not unusual for security guards employed in security agencies as
their assignments primarily depend on the contracts entered into by the
agency with third parties. Such a stipulated status is, therefore, lawful.

The "floating status" of such an employee should last only for a reasonable
time. In this case, respondent labor arbiter correctly held that when the
"floating status" of said employees lasts for more than six (6) months, they

183
may be considered to have been illegally dismissed from the service. Thus,
they are entitled to the corresponding benefits for their separation.

WHEREFORE, the petition is GRANTED insofar as the twenty- seven (27)


private respondents are concerned who have accepted employment
elsewhere. The questioned resolutions of the NLRC dated January 29, 1988
and April 18, 1988 are hereby modified as to said twenty-seven (27) private
respondents in that their complaint is hereby dismissed for lack of merit. The
questioned resolutions are hereby affirmed in all other respects as to the
other private respondents. No pronouncement as to costs.

SO ORDERED.

184
[G.R. No. 120969. January 22, 1998]
ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND
DIVISION) composed of Presiding Commissioner RAUL T.
AQUINO, Commissioner ROGELIO I. RAYALA and Commissioner
VICTORIANO R. CALAYCAY (Ponente), VIC DEL ROSARIO and
VIVA FILMS, respondents.

DECISION
DAVIDE, JR., J.:

By way of this special civil action for certiorari under Rule 65 of the Rules
of Court, petitioners seek to annul the 10 February 1995 Decision[1] of the
National Labor Relations Commission (hereafter NLRC), and its 6 April 1995
Resolution[2] denying the motion to reconsider the former in NLRC-NCR-CA
No. 006195-94. The decision reversed that of the Labor Arbiter in NLRC-NCR-
Case No. 00-07-03994-92.
The parties present conflicting sets of facts.
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by
private respondents on 18 July 1989 as part of the filming crew with a salary
of P375.00 per week. About four months later, he was designated Assistant
Electrician with a weekly salary of P400.00, which was increased to P450.00
in May 1990. In June 1991, he was promoted to the rank of Electrician with
a weekly salary of P475.00, which was increased to P593.00 in September
1991.
Petitioner Paulino Enero, on his part, claims that private respondents
employed him in June 1990 as a member of the shooting crew with a weekly
salary of P375.00, which was increased to P425.00 in May 1991, then
to P475.00 on 21 December 1991.[3]

185
Petitioners tasks consisted of loading, unloading and arranging movie
equipment in the shooting area as instructed by the cameraman, returning
the equipment to Viva Films warehouse, assisting in the fixing of the lighting
system, and performing other tasks that the cameraman and/or director may
assign.[4]
Sometime in May 1992, petitioners sought the assistance of their
supervisor, Mrs. Alejandria Cesario, to facilitate their request that private
respondents adjust their salary in accordance with the minimum wage law. In
June 1992, Mrs. Cesario informed petitioners that Mr. Vic del Rosario would
agree to increase their salary only if they signed a blank employment
contract. As petitioners refused to sign, private respondents forced Enero to
go on leave in June 1992, then refused to take him back when he reported
for work on 20 July 1992. Meanwhile, Maraguinot was dropped from the
company payroll from 8 to 21 June 1992, but was returned on 22 June
1992. He was again asked to sign a blank employment contract, and when
he still refused, private respondents terminated his services on 20 July
1992.[5] Petitioners thus sued for illegal dismissal[6] before the Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter
VIVA) is the trade name of Viva Productions, Inc., and that it is primarily
engaged in the distribution and exhibition of movies -- but not in the business
of making movies; in the same vein, private respondent Vic del Rosario is
merely an executive producer, i.e., the financier who invests a certain sum of
money for the production of movies distributed and exhibited by VIVA.[7]
Private respondents assert that they contract persons called producers --
also referred to as associate producers[8] -- to produce or make movies for
private respondents; and contend that petitioners are project employees of
the associate producers who, in turn, act as independent contractors.As such,
there is no employer-employee relationship between petitioners and private
respondents.

186
Private respondents further contend that it was the associate producer of
the film Mahirap Maging Pogi, who hired petitioner Maraguinot. The movie
shot from 2 July up to 22 July 1992, and it was only then that Maraguinot
was released upon payment of his last salary, as his services were no longer
needed. Anent petitioner Enero, he was hired for the movie entitled Sigaw ng
Puso, later re-titled Narito ang Puso. He went on vacation on 8 June 1992,
and by the time he reported for work on 20 July 1992, shooting for the movie
had already been completed.[9]
After considering both versions of the facts, the Labor Arbiter found as
follows:

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

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

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


as follows:

WHEREFORE, judgment is hereby rendered declaring that complainants were


illegally dismissed.

Respondents are hereby ordered to reinstate complainants to their former


positions without loss [of] seniority rights and pay their backwages starting
187
July 21, 1992 to December 31, 1993 temporarily computed in the amount
of P38,000.00 for complainant Paulino Enero and P46,000.00 for complainant
Alejandro Maraguinot, Jr. and thereafter until actually reinstated.

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

Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No.


006195-94). In its decision[12] of 10 February 1995, the NLRC found the
following circumstances of petitioners work clearly established:

1. Complainants [petitioners herein] were hired for specific movie projects


and their employment was co-terminus with each movie project the
completion/termination of which are pre-determined, such fact being made
known to complainants at the time of their engagement.

xxx

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

3. As a consequence of the non-continuous work of the shooting units, the


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

4. Further shown by respondents is the irregular work schedule of


complainants on a daily basis. Complainant Maraguinot was supposed to
report on 05 August 1991 but reported only on 30 August 1991, or a gap of
25 days. Complainant Enero worked on 10 September 1991 and his next
scheduled working day was 28 September 1991, a gap of 18 days.
188
5. The extremely irregular working days and hours of complainants work
explain the lump sum payment for complainants services for each movie
project. Hence, complainants were paid a standard weekly salary regardless
of the number of working days and hours they logged in. Otherwise, if the
principle of no work no pay was strictly applied, complainants earnings for
certain weeks would be very negligible.

6. Respondents also alleged that complainants were not prohibited from


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

The NLRC, in reversing the Labor Arbiter, then concluded that these
circumstances, taken together, indicated that complainants (herein
petitioners) were project employees.
After their motion for reconsideration was denied by the NLRC in its
Resolution[13] of 6 April 1995, petitioners filed the instant petition, claiming
that the NLRC committed grave abuse of discretion amounting to lack or
excess of jurisdiction in: (1) finding that petitioners were project employees;
(2) ruling that petitioners were not illegally dismissed; and (3) reversing the
decision of the Labor Arbiter.
To support their claim that they were regular (and not project) employees
of private respondents, petitioners cited their performance of activities that
were necessary or desirable in the usual trade or business of private
respondents and added that their work was continuous, i.e., after one project
was completed they were assigned to another project. Petitioners thus
considered themselves part of a work pool from which private respondents
drew workers for assignment to different projects. Petitioners lamented that
there was no basis for the NLRCs conclusion that they were project
employees, while the associate producers were independent contractors; and
189
thus reasoned that as regular employees, their dismissal was illegal since the
same was premised on a false cause, namely, the completion of a project,
which was not among the causes for dismissal allowed by the Labor Code.
Private respondents reiterate their version of the facts and stress that their
evidence supports the view that petitioners are project employees; point to
petitioners irregular work load and work schedule; emphasize the NLRCs
finding that petitioners never controverted the allegation that they were not
prohibited from working with other movie companies; and ask that the facts
be viewed in the context of the peculiar characteristics of the movie industry.
The Office of the Solicitor General (OSG) is convinced that this petition is
improper since petitioners raise questions of fact, particularly, the NLRCs
finding that petitioners were project employees, a finding supported by
substantial evidence; and submits that petitioners reliance on Article 280 of
the Labor Code to support their contention that they should be deemed
regular employees is misplaced, as said section merely distinguishes between
two types of employees, i.e., regular employees and casual employees, for
purposes of determining the right of an employee to certain benefits.
The OSG likewise rejects petitioners contention that since they were hired
not for one project, but for a series of projects, they should be deemed
regular employees. Citing Mamansag v. NLRC,[14] the OSG asserts that what
matters is that there was a time-frame for each movie project made known
to petitioners at the time of their hiring. In closing, the OSG disagrees with
petitioners claim that the NLRCs classification of the movie producers as
independent contractors had no basis in fact and in law, since, on the
contrary, the NLRC took pains in explaining its basis for its decision.
As regards the propriety of this action, which the Office of the Solicitor
General takes issue with, we rule that a special civil action for certiorariunder
Rule 65 of the Rules of Court is the proper remedy for one who complains
that the NLRC acted in total disregard of evidence material to or decisive of
the controversy.[15] In the instant case, petitioners allege that the NLRCs
190
conclusions have no basis in fact and in law, hence the petition may not be
dismissed on procedural or jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the determination
of whether an employer-employee relationship existed between petitioners
and private respondents or any one of private respondents. If there was
none, then this petition has no merit; conversely, if the relationship existed,
then petitioners could have been unjustly dismissed.
A related question is whether private respondents are engaged in the
business of making motion pictures. Del Rosario is necessarily engaged in
such business as he finances the production of movies. VIVA, on the other
hand, alleges that it does not make movies, but merely distributes and
exhibits motion pictures. There being no further proof to this effect, we
cannot rely on this self-serving denial. At any rate, and as will be discussed
below, private respondents evidence even supports the view that VIVA is
engaged in the business of making movies.
We now turn to the critical issues. Private respondents insist that
petitioners are project employees of associate producers who, in turn, act as
independent contractors. It is settled that the contracting out of labor is
allowed only in case of job contracting. Section 8, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code describes permissible job
contracting in this wise:

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

(1) The contractor carries on an independent business and undertakes


the contract work on his own account under his own responsibility
according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected
with the performance of the work except as to the results thereof;
and
191
(2) The contractor has substantial capital or investment in the form of
tools, equipment, machineries, work premises, and other materials
which are necessary in the conduct of his business.

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

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

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

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

Private respondents further narrated that VIVAs generators broke down


during petitioners last movie project, which forced the associate producer
concerned to rent generators, equipment and crew from another
company.[23] This only shows that the associate producer did not have
substantial capital nor investment in the form of tools, equipment and other
192
materials necessary for making a movie. Private respondents in effect admit
that their producers, especially petitioners last producer, are not engaged in
permissible job contracting.
If private respondents insist that their associate producers are labor
contractors, then these producers can only be labor-only contractors, defined
by the Labor Code as follows:

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

There is labor-only contracting where the person supplying workers to an


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

A more detailed description is provided by Section 9, Rule VIII, Book III


of the Omnibus Rules Implementing the Labor Code:

Sec. 9. Labor-only contracting. -- (a) Any person who undertakes to supply


workers to an employer shall be deemed to be engaged in labor-only
contracting where such person:

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

(2) The workers recruited and placed by such person are performing
activities which are directly related to the principal business or
operations of the employer in which workers are habitually employed.

193
(b) Labor-only contracting as defined herein is hereby prohibited and
the person acting as contractor shall be considered merely as an
agent or intermediary of the employer who shall be responsible to
the workers in the same manner and extent as if the latter were
directly employed by him.

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

As labor-only contracting is prohibited, the law considers the person or


entity engaged in the same a mere agent or intermediary of the direct
employer. But even by the preceding standards, the associate producers of
VIVA cannot be considered labor-only contractors as they did not supply,
recruit nor hire the workers. In the instant case, it was Juanita Cesario,
Shooting Unit Supervisor and an employee of VIVA, who recruited crew
members from an available group of free-lance workers which includes the
complainants Maraguinot and Enero.[24] And in their Memorandum, private
respondents declared that the associate producer hires the services of... 6)
camera crew which includes (a) cameraman; (b) the utility crew; (c) the
technical staff; (d) generator man and electrician; (e) clapper; etc....[25] This
clearly showed that the associate producers did not supply the workers
required by the movie project.
The relationship between VIVA and its producers or associate producers
seems to be that of agency,[26] as the latter make movies on behalf of VIVA,
whose business is to make movies. As such, the employment relationship

194
between petitioners and producers is actually one between petitioners and
VIVA, with the latter being the direct employer.
The employer-employee relationship between petitioners and VIVA can
further be established by the control test. While four elements are usually
considered in determining the existence of an employment relationship,
namely: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employers power to control
the employees conduct, the most important element is the employers control
of the employees conduct, not only as to the result of the work to be done
but also as to the means and methods to accomplish the same.[27]These four
elements are present here. In their position paper submitted to the Labor
Arbiter, private respondents narrated the following circumstances:

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

To ensure that quality films are produced by the PRODUCER who is an


independent contractor, the company likewise employs a Supervising
PRODUCER, a Project accountant and a Shooting unit supervisor. The
Companys Supervising PRODUCER is Mr. Eric Cuatico, the Project accountant
varies from time to time, and the Shooting Unit Supervisor is Ms. Alejandria
Cesario.

The Supervising PRODUCER acts as the eyes and ears of the company and
of the Executive Producer to monitor the progress of the PRODUCERs work
accomplishment. He is there usually in the field doing the rounds of
inspection to see if there is any problem that the PRODUCER is encountering
and to assist in threshing out the same so that the film project will be finished
on schedule. He supervises about 3 to 7 movie projects simultaneously [at]
any given time by coordinating with each film PRODUCER. The Project
Accountant on the other hand assists the PRODUCER in monitoring the actual
195
expenses incurred because the company wants to insure that any additional
budget requested by the PRODUCER is really justified and warranted
especially when there is a change of original plans to suit the tast[e] of the
company on how a certain scene must be presented to make the film more
interesting and more commercially viable. (emphasis ours)

VIVAs control is evident in its mandate that the end result must be a
quality film acceptable to the company. The means and methods to
accomplish the result are likewise controlled by VIVA, viz., the movie project
must be finished within schedule without exceeding the budget, and
additional expenses must be justified; certain scenes are subject to change
to suit the taste of the company; and the Supervising Producer, the eyes and
ears of VIVA and del Rosario, intervenes in the movie-making process by
assisting the associate producer in solving problems encountered in making
the film.
It may not be validly argued then that petitioners are actually subject to
the movie directors control, and not VIVAs direction. The director merely
instructs petitioners on how to better comply with VIVAs requirements to
ensure that a quality film is completed within schedule and without exceeding
the budget. At bottom, the director is akin to a supervisor who merely
oversees the activities of rank-and-file employees with control ultimately
resting on the employer.
[28]
Moreover, appointment slips issued to all crew members state:

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

The words superiors and Top Management can only refer to the superiors
and Top Management of VIVA. By commanding crew members to observe

196
the rules and regulations promulgated by VIVA, the appointment slips only
emphasize VIVAs control over petitioners.
Aside from control, the element of selection and engagement is likewise
present in the instant case and exercised by VIVA. A sample appointment slip
offered by private respondents to prove that members of the shooting crew
except the driver are project employees of the Independent
Producers[29] reads as follows:

VIVA PRODUCTIONS, INC.

16 Sct. Albano St.

Diliman, Quezon City

PEDRO NICOLAS Date: June 15, 1992

__________________

APPOINTMENT SLIP

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

For your services you shall receive the daily/weekly/monthly compensation


of P812.50.

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

Very truly yours,

(an illegible signature)


197
CONFORME:

___________________

Name of appointee

Signed in the presence of:

_____________________

Notably, nowhere in the appointment slip does it appear that it was the
producer or associate producer who hired the crew members; moreover, it is
VIVAs corporate name which appears on the heading of the appointment
slip. What likewise tells against VIVA is that it paid petitioners salaries as
evidenced by vouchers, containing VIVAs letterhead, for that purpose.[30]
All the circumstances indicate an employment relationship between
petitioners and VIVA alone, thus the inevitable conclusion is that petitioners
are employees only of VIVA.
The next issue is whether petitioners were illegally dismissed. Private
respondents contend that petitioners were project employees whose
employment was automatically terminated with the completion of their
respective projects. Petitioners assert that they were regular employees who
were illegally dismissed.
It may not be ignored, however, that private respondents expressly
admitted that petitioners were part of a work pool;[31] and, while petitioners
were initially hired possibly as project employees, they had attained the status
of regular employees in view of VIVAs conduct.
A project employee or a member of a work pool may acquire the status of
a regular employee when the following concur:

1) There is a continuous rehiring of project employees even after cessation


of a project;[32] and
198
2) The tasks performed by the alleged project employee are vital, necessary
and indispensable to the usual business or trade of the employer.[33]

However, the length of time during which the employee was continuously
re-hired is not controlling, but merely serves as a badge of regular
employment.[34]
In the instant case, the evidence on record shows that petitioner Enero
was employed for a total of two (2) years and engaged in at least eighteen
(18) projects, while petitioner Maraguinot was employed for some three (3)
years and worked on at least twenty-three (23) projects.[35] Moreover, as
petitioners tasks involved, among other chores, the loading, unloading and
arranging of movie equipment in the shooting area as instructed by the
cameramen, returning the equipment to the Viva Films warehouse, and
assisting in the fixing of the lighting system, it may not be gainsaid that these
tasks were vital, necessary and indispensable to the usual business or trade
of the employer. As regards the underscored phrase, it has been held that
this is ascertained by considering the nature of the work performed and its
relation to the scheme of the particular business or trade in its entirety.[36]
A recent pronouncement of this Court anent project or work pool
employees who had attained the status of regular employees proves most
instructive:

The denial by petitioners of the existence of a work pool in the company


because their projects were not continuous is amply belied by petitioners
themselves who admit that: xxx

A work pool may exist although the workers in the pool do not receive salaries
and are free to seek other employment during temporary breaks in the
business, provided that the worker shall be available when called to report
for a project. Although primarily applicable to regular seasonal workers, this
set-up can likewise be applied to project workers insofar as the effect of

199
temporary cessation of work is concerned. This is beneficial to both the
employer and employee for it prevents the unjust situation of coddling labor
at the expense of capital and at the same time enables the workers to attain
the status of regular employees. Clearly, the continuous rehiring of the same
set of employees within the framework of the Lao Group of Companies is
strongly indicative that private respondents were an integral part of a work
pool from which petitioners drew its workers for its various projects.

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

Truly, the cessation of construction activities at the end of every project is a


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

While Lao admittedly involved the construction industry, to which Policy


Instruction No. 20/Department Order No. 19[38] regarding work pools
200
specifically applies, there seems to be no impediment to applying the
underlying principles to industries other than the construction
industry.[39] Neither may it be argued that a substantial distinction exists
between the projects undertaken in the construction industry and the motion
picture industry. On the contrary, the raison d' etre of both industries concern
projects with a foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly burdens
an employer by imposing a duty to re-hire a project employee even after
completion of the project for which he was hired. The import of this decision
is not to impose a positive and sweeping obligation upon the employer to re-
hire project employees. What this decision merely accomplishes is a judicial
recognition of the employment status of a project or work pool employee in
accordance with what is fait accompli, i.e., the continuous re-hiring by the
employer of project or work pool employees who perform tasks necessary or
desirable to the employers usual business or trade. Let it not be said that this
decision coddles labor, for as Lao has ruled, project or work pool employees
who have gained the status of regular employees are subject to the no work-
no pay principle, to repeat:

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

The Courts ruling here is meant precisely to give life to the constitutional
policy of strengthening the labor sector,[40] but, we stress, not at the expense
201
of management. Lest it be misunderstood, this ruling does not mean that
simply because an employee is a project or work pool employee even outside
the construction industry, he is deemed, ipso jure, a regular employee. All
that we hold today is that once a project or work pool employee has been: (1)
continuously, as opposed to intermittently, re-hired by the same employer for
the same tasks or nature of tasks; and (2) these tasks are vital, necessary
and indispensable to the usual business or trade of the employer, then the
employee must be deemed a regular employee, pursuant to Article 280 of
the Labor Code and jurisprudence. To rule otherwise would allow
circumvention of labor laws in industries not falling within the ambit of Policy
Instruction No. 20/Department Order No. 19, hence allowing the prevention
of acquisition of tenurial security by project or work pool employees who have
already gained the status of regular employees by the employers conduct.
In closing then, as petitioners had already gained the status of regular
employees, their dismissal was unwarranted, for the cause invoked by private
respondents for petitioners dismissal, viz., completion of project, was not, as
to them, a valid cause for dismissal under Article 282 of the Labor Code. As
such, petitioners are now entitled to back wages and reinstatement, without
loss of seniority rights and other benefits that may have
accrued.[41] Nevertheless, following the principles of suspension of work and
no pay between the end of one project and the start of a new one, in
computing petitioners back wages, the amounts corresponding to what could
have been earned during the periods from the date petitioners were
dismissed until their reinstatement when petitioners respective Shooting Units
were not undertaking any movie projects, should be deducted.
Petitioners were dismissed on 20 July 1992, at a time when Republic Act
No. 6715 was already in effect. Pursuant to Section 34 thereof which
amended Section 279 of the Labor Code of the Philippines and Bustamante
v. NLRC,[42] petitioners are entitled to receive full back wages from the date
of their dismissal up to the time of their reinstatement, without deducting
202
whatever earnings derived elsewhere during the period of illegal dismissal,
subject, however, to the above observations.
WHEREFORE, the instant petition is GRANTED. The assailed decision of
the National Labor Relations Commission in NLRC NCR CA No. 006195-94
dated 10 February 1995, as well as its Resolution dated 6 April 1995, are
hereby ANNULLED and SET ASIDE for having been rendered with grave abuse
of discretion, and the decision of the Labor Arbiter in NLRC NCR Case No. 00-
07-03994-92 is REINSTATED, subject, however, to the modification above
mentioned in the computation of back wages.
No pronouncement as to costs.

203
G.R. No. L-52824 March 16, 88

REYNALDO BAUTISTA, petitioner,


vs.
HON. AMADO C. INCIONG, in his capacity as Deputy Minister of
Labor and ASSOCIATED LABOR UNIONS (ALU), respondents.

GUTIERREZ, JR., J.:

This is an illegal dismissal case. The respondent Deputy Minister dismissed


the complaint of herein petitioner principally on the ground that no employer-
employee relationship existed between the petitioner and respondent
Associated Labor Unions (ALU).

The facts as found by the National Capital Region Director of the then ministry
of Labor (MOL) Region IV are as follows:

Complainant (petitioner) was employed by ALU as 'Organizer' in


1972 with a starting salary of P250.00 a month. As such he paid
his monthly SSS contributions, with the respondent as his
employer. On March 15, 1979, He was left in the office of ALU while
his other co-organizers were in Cainta, Rizal attending a
certification election at Chrysler Philippines, as he was not the
organizer assigned in said company. On March 16, 1979, he went
on sick leave for ten (10) days. His SSS sickness benefit application
form signed by ALU's physician was given to ALU for submission to
the SSS. On March 16, 1979, complainant reported back for work
upon expiration of his leave but was informed by ALU's Area Vice-
President for Luzon of his termination effective March 15, 1979.
Hence, this complaint filed on March 28, 1979. On April 18, 1979,
however, ALU filed a clearance application to terminate
204
complainant's services effective March 16, 1979 on the ground of
abandonment of work. (p. 48, Rollo)

Based on these findings, the Director ruled in favor of the petitioner and
ordered the respondent Union to reinstate the petitioner to his former position
with full backwages and to pay him emergency allowance, 13th month pay
and to refund his Mutual Aid Fund Deposit in the amount of P 370.00

Respondent ALU appealed to the Ministry of Labor. On October 23,1979, the


respondent Deputy Minister set aside the order of the Director and dismissed
the petitioner's complaint for lack of merit. In his order, the Deputy Minister
found that the petitioner was merely accomodated by the respondent union
after he was dismissed by his former employer sometime in 1972 and that
his membership coverage with the SSS which shows that respondent ALU is
the one paying the employer's share in the premiums is not conclusive proof
that respondent is the petitioner's employer because such payments were
performed by the respondent as a favor for all those who were performing
full time union activities with it to entitle them to SSS benefits. The Deputy
Minister further ruled that the non-existence of an employer-employee
relationship between the parties is bolstered by the fact that respondent ALU
is not an entity for profit but a duly registered labor union whose sole purpose
is the representation of its bona fide organization units where it is certified as
such.

In this petition, the petitioner contends that the respondent Deputy minister
committed grave abuse of discretion in holding that there was no employer-
employee relationship between him and the respondent union so much so
that he is not entitled to the benefits that he is praying for.

We agree with the petitioner.

There is nothing in the records which support the Deputy minister's


conclusion that the petitioner is not an employee of respondent ALU. The
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mere fact that the respondent is a labor union does not mean that it cannot
be considered an employer of the persons who work for it. Much less should
it be exempted from the very labor laws which it espouses as labor
organization. In case of es v. Brotherhood Labor Unity Movement in the
Phillipines Zamora, ,(147 SCRA 49, 54), we outlined the factors in ascertaining
an employer-employee realtionship:

In determining the existence of an employer-employee


relationship, the elements that are generally considered are the
following : (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee with respect to the
means and methods by which the work is to be accomplished. It is
the so-called 'control test' that is the most important element
(Investment Planning Corp. of the Phils. v. The Social Security
System, 21 SCRA 492; Mafinco Trading Corp. v. Ople, supra, and
Rosario Brothers, Inc. v. Ople, 131 SCRA 72)

In the case at bar, the Regional director correctly found that the petitioner
was an employee of the respondent union as reflected in the latter's individual
payroll sheets and shown by the petitioner's membership with the Social
Security System (SSS) and the respondent union's share of remittances in the
petitioner's favor. Even more significant, is the respondent union's act of filing
a clearance application with the MOL to terminate the petitioner's services.
Bautista was selected and hired by the Union. He was paid wages by the
Union. ALU had the power to dismiss him as indeed it dismissed him. And
definitely, the Union tightly controlled the work of Bautista as one of its
organizers. There is absolutely no factual or legal basis got deputy Minister
Inciong's decision.

We are, thus, constrained to reverse the findings of the respondent Deputy


Minister. However, the records show that antipathy and antagonism between
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the petitioner and the respondent union militate against the former's
reinstatement. ALU would not want to have a union organizer whom it does
not trust and who could sabotage its efforts to unionize commercial and
industrial establishments. Severance pay, therefore, is more proper in order.
As we have ruled in the case of Asiaworld Publishing House, Inc. v. Hon. Blas
Ople, et al., (G.R. No. 56398, July 23, 1987) quoting the cast of Balaquezon
EWTU v. Zamora, (97 SCRA 5,8):

It should be underscored that the backwages are being awarded


on the basis of equity or in the nature of severance pay. This means
that a monetary award is to be paid to the employees as an
alternative to reinstatement which can no longer be effected in
view of the long passage of time or because of the realities of the
situation. (Emphasis supplied)

WHEREFORE, the petition is hereby GRANTED and the decision of the


respondent Deputy Minister is ANNULLED and SET ASIDE. The Order of
Regional Director Francisco L. Estrella is REINSTATED and ordered executed
but instead of returning the petitioner to his former position, the private
respondent is ordered to pay him an amount equal to his backwages for only
three years and the separation pay to which he may be entitled as of the end
of the three year period under the applicable law or collective bargaining
agreement.

SO ORDERED.

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G.R. No. L-53515 February 8, 1989

SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner,


vs.
HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL
CORPORATION, respondents.

Lorenzo F. Miravite for petitioner.


Isidro D. Amoroso for New San Miguel Corp. Sales Force Union.
Siguion Reyna, Montecillo & Ongsiako for private respondent.

GRIO-AQUINO, J.:
This is a petition for review of the Order dated February 28, 1980 of the
Minister of Labor in Labor Case No. AJML-069-79, approving the private
respondent's marketing scheme, known as the "Complementary Distribution
System" (CDS) and dismissing the petitioner labor union's complaint for unfair
labor practice.

On April 17, 1978, a collective bargaining agreement (effective on May 1,


1978 until January 31, 1981) was entered into by petitioner San Miguel
Corporation Sales Force Union (PTGWO), and the private respondent, San
Miguel Corporation, Section 1, of Article IV of which provided as follows:

Art. IV, Section 1. Employees within the appropriate bargaining unit


shall be entitled to a basic monthly compensation plus commission
based on their respective sales. (p. 6, Annex A; p. 113, Rollo.)

In September 1979, the company introduced a marketing scheme known as


the "Complementary Distribution System" (CDS) whereby its beer products
were offered for sale directly to wholesalers through San Miguel's sales
offices.

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The labor union (herein petitioner) filed a complaint for unfair labor practice
in the Ministry of Labor, with a notice of strike on the ground that the CDS
was contrary to the existing marketing scheme whereby the Route Salesmen
were assigned specific territories within which to sell their stocks of beer, and
wholesalers had to buy beer products from them, not from the company. It
was alleged that the new marketing scheme violates Section 1, Article IV of
the collective bargaining agreement because the introduction of the CDS
would reduce the take-home pay of the salesmen and their truck helpers for
the company would be unfairly competing with them.

The complaint filed by the petitioner against the respondent company raised
two issues: (1) whether the CDS violates the collective bargaining agreement,
and (2) whether it is an indirect way of busting the union.

In its order of February 28, 1980, the Minister of Labor found:

... We see nothing in the record as to suggest that the unilateral


action of the employer in inaugurating the new sales scheme was
designed to discourage union organization or diminish its influence,
but rather it is undisputable that the establishment of such scheme
was part of its overall plan to improve efficiency and economy and
at the same time gain profit to the highest. While it may be
admitted that the introduction of new sales plan somewhat
disturbed the present set-up, the change however was too
insignificant as to convince this Office to interpret that the
innovation interferred with the worker's right to self-organization.

Petitioner's conjecture that the new plan will sow dissatisfaction


from its ranks is already a prejudgment of the plan's viability and
effectiveness. It is like saying that the plan will not work out to the
workers' [benefit] and therefore management must adopt a new
system of marketing. But what the petitioner failed to consider is

209
the fact that corollary to the adoption of the assailed marketing
technique is the effort of the company to compensate whatever
loss the workers may suffer because of the new plan over and
above than what has been provided in the collective bargaining
agreement. To us, this is one indication that the action of the
management is devoid of any anti-union hues. (pp. 24-25, Rollo.)

The dispositive part of the Minister's Order reads:

WHEREFORE, premises considered, the notice of strike filed by the


petitioner, San Miguel Brewery Sales Force Union-PTGWO is hereby
dismissed. Management however is hereby ordered to pay an
additional three (3) months back adjustment commissions over and
above the adjusted commission under the complementary
distribution system. (p. 26, Rollo.)

The petition has no merit.

Public respondent was correct in holding that the CDS is a valid exercise of
management prerogatives:

Except as limited by special laws, an employer is free to regulate,


according to his own discretion and judgment, all aspects of
employment, including hiring, work assignments, working
methods, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay-off of
workers and the discipline, dismissal and recall of work. ... (NLU
vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank vs.
CIR 21 SCRA 226, 235.) (Perfecto V. Hernandez, Labor Relations
Law, 1985 Ed., p. 44.) (Emphasis ours.)

210
Every business enterprise endeavors to increase its profits. In the process, it
may adopt or devise means designed towards that goal. In Abbott
Laboratories vs. NLRC, 154 SCRA 713, We ruled:

... Even as the law is solicitous of the welfare of the employees, it


must also protect the right of an employer to exercise what are
clearly management prerogatives. The free will of management to
conduct its own business affairs to achieve its purpose cannot be
denied.

So long as a company's management prerogatives are exercised in good faith


for the advancement of the employer's interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or
under valid agreements, this Court will uphold them (LVN Pictures Workers
vs. LVN, 35 SCRA 147; Phil. American Embroideries vs. Embroidery and
Garment Workers, 26 SCRA 634; Phil. Refining Co. vs. Garcia, 18 SCRA 110).
San Miguel Corporation's offer to compensate the members of its sales force
who will be adversely affected by the implementation of the CDS by paying
them a so-called "back adjustment commission" to make up for the
commissions they might lose as a result of the CDS proves the company's
good faith and lack of intention to bust their union.

WHEREFORE, the petition for certiorari is dismissed for lack of merit.

211