BOTH LABOR AND SOCLEG CASES:
citing the Sonza case. She was hired because of her skills.
1) FUJI TELEVISION NETWORK, INC. VS.
ARLENE S. ESPIRITU
G.R. NO. 204944-45 DECEMBER 3, 2014
FACTS:
Arlene S. Espiritu (Arlene) was engaged by Fuji
Television Network, Inc. (Fuji) as a news
correspondent/producer tasked to report Philippine news
to Fuji through its Manila Bureau field office. The
employment contract was initially for one year, but was
successively renewed on a yearly basis with salary
adjustments upon every renewal.
In January 2009, Arlene was diagnosed with lung cancer.
She informed Fuji about her condition, and the Chief of
News Agency of Fuji, Yoshiki Aoki, informed the former
that the company had a problem with renewing her
contract considering her condition. Arlene insisted she
was still fit to work as certified by her attending physician.
After a series of verbal and written communications,
Arlene and Fuji signed a non-renewal contract. In
consideration thereof, Arlene acknowledged the receipt of
the total amount of her salary from March-May 2009,
year-end bonus, mid-year bonus and separation pay.
However, Arlene executed the non-renewal contract
under protest.
Arlene filed a complaint for illegal dismissal with the
NCR Arbitration Branch of the NLRC, alleging that she
was forced to sign the non-renewal contract after Fuji
came to know of her illness. She also alleged that Fuji
withheld her salaries and other benefits when she refused
to sign, and that she was left with no other recourse but to
sign the non-renewal contract to get her salaries.
ISSUES:
1. Was Arlene an independent contractor?
2. Was Arlene a regular employee?
3. Was Arlene illegally dismissed? (discussion on
security of tenure)
4. Did the Court of Appeals correctly awarded
reinstatement, damages and attorney’s fees?
RULING:
1. Arlene was not an independent contractor.
Fuji alleged that Arlene was an independent contractor
Her salary was higher than the normal rate. She had the
power to bargain with her employer. Her contract was for
a fixed term. It also stated that Arlene was not forced to
sign the non-renewal agreement, considering that she sent
an email with another version of her non-renewal
agreement.
Arlene argued (1) that she was a regular employee
because Fuji had control and supervision over her work;
(2) that she based her work on instructions from Fuji; (3)
that the successive renewal of her contracts for four years
indicated that her work was necessary and desirable; (4)
that the payment of separation pay indicated that she was
a regular employee; (5) that the Sonza case is not
applicable because she was a plain reporter for Fuji; (6)
that her illness was not a ground for her dismissal; (7) that
she signed the non-renewal agreement because she was
not in a position to reject the same.
Distinctions among fixed-term employees,
independent contractors, and regular employees
I. Fixed Term Employment
1) The fixed period of employment was knowingly and
voluntarily agreed upon by the parties without any force,
duress, or improper pressure being brought to bear upon
the employee and absent any other circumstances
vitiating his consent; or
2) It satisfactorily appears that the employer and the
employee dealt with each other on more or less equal
terms with no moral dominance exercised by the former
or the latter.
These indications, which must be read together, make the
Brent doctrine applicable only in a few special cases
wherein the employer and employee are on more or less
in equal footing in entering into the contract. The reason
for this is evident: when a prospective employee, on
account of special skills or market forces, is in a position
to make demands upon the prospective employer, such
prospective employee needs less protection than the
ordinary worker. Lesser limitations on the parties’
freedom of contract are thus required for the protection of
the employee.155 (Citations omitted)
For as long as the guidelines laid down in Brent are
satisfied, this court will recognize the validity of the
fixed-term contract. (GMA Network, Inc. vs. Pabriga)
II. Independent Contractor
One who carries on a distinct and independent business
and undertakes to perform the job, work, or service on its
own account and under one’s own responsibility
according to one’s own manner and method, free from the
control and direction of the principal in all matters
connected with the performance of the work except as to
the results thereof.
No employer-employee relationship exists between the
independent contractors and their principals.
Art. 106. Contractor or subcontractor. Whenever an
employer enters into a contract with another person for
the performance of the former’s work, the employees of
the contractor and of the latter’s subcontractor, if any,
shall be paid in accordance with the provisions of this
Code.
XXX
The Secretary of Labor and Employment may, by
appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of workers
established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between
labor-only contracting and job contracting as well as
differentiations within these types of contracting and
determine who among the parties involved shall be
considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision
of this Code.
There is “labor-only” contracting where the person
supplying workers to an employer does not have
substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others,
and the workers recruited and placed by such person are
performing activities which are directly related to the
principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were
directly employed by him.
Department Order No. 18-A, Series of 2011, Section 3
© . . . an arrangement whereby a principal agrees to put
out or farm out with a contractor the performance or
completion of a specific job, work or service within a
definite or predetermined period, regardless of whether
such job, work or service is to be performed or completed
within or outside the premises of the principal.
This department order also states that there is a trilateral
relationship in legitimate job contracting and
subcontracting arrangements among the principal,
contractor, and employees of the contractor. There is no
employer-employee relationship between the contractor
and principal who engages the contractor’s services, but
there is an employer-employee relationship between the
contractor and workers hired to accomplish the work for
the principal.162chanRoblesvirtualLawlibrary
Jurisprudence has recognized another kind of independent
contractor: individuals with unique skills and talents that
set them apart from ordinary employees. There is no
trilateral relationship in this case because the independent
contractor himself or herself performs the work for the
principal. In other words, the relationship is bilateral.
XXX
There are different kinds of independent contractors:
those engaged in legitimate job contracting and those who
have unique skills and talents that set them apart from
ordinary employees.
Since no employer-employee relationship exists between
independent contractors and their principals, their
contracts are governed by the Civil Code provisions on
contracts and other applicable laws.
III. Regular Employees
Contracts of employment are different and have a higher
level of regulation because they are impressed with public
interest. Article 13, Section 3 of the 1987 Constitution
provides full protection to labor.
Apart from the Constitutional guarantee, Article 1700 of
the Civil Code states that: The relations between capital
and labor are not merely contractual. They are so
impressed with public interest that labor contracts must
yield to the common good. Therefore, such contracts are
subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages,
working conditions, hours of labor and similar subjects.
The level of protection to labor should vary from case to
caese. When a prospective employee, on account of
special skills or market forces, is in a position to make
demands upon the prospective employer, such
prospective employee needs less protection than the
ordinary worker.
The level of protection to labor must be determined on the
basis of the nature of the work, qualifications of the
employee, and other relevant circumstances such as but
not limited to educational attainment and other special
qualifications.
Fuji’s argument that Arlene was an independent
contractor under a fixed-term contract is contradictory.
Employees under fixed-term contracts cannot be
independent contractors because in fixed-term contracts,
an employer-employee relationship exists. The test in this
kind of contract is not the necessity and desirability of the
employee’s activities, “but the day certain agreed upon by
the parties for the commencement and termination of the
employment relationship.” For regular employees, the
necessity and desirability of their work in the usual course
of the employer’s business are the determining factors.
On the other hand, independent contractors do not have
employer-employee relationships with their principals.
To determine the status of employment, the existence of
employer-employee relationship must first be settled with
the use of the four-fold test, especially the qualifications
for the power to control.
The distinction is in this guise:
Rules that merely serve as guidelines towards the
achievement of a mutually desired result without dictating
the means or methods to be employed creates no
employer-employee relationship; whereas those that
control or fix the methodology and bind or restrict the
party hired to the use of such means creates the
relationship.
In appliacation, Arlene was hired by Fuji as a news
producer, but there was no evidence that she was hired for
her unique skills that would distinguish her from ordinary
employees. Her monthly salary appeared to be a
substantial sum. Fuji had the power to dismiss Arlene, as
provided for in her employment contract. The contract
also indicated that Fuji had control over her work as she
was rquired to report for 8 hours from Monday to Friday.
Fuji gave her instructions on what to report and even her
mode of transportation in carrying out her functions was
controlled.
Therefore, Arlene could not be an independent contractor.
2. Arlene was a regular employee with a fixed-
term contract.
In determining whether an employment should be
considered regular or non-regular, the applicable test is
the reasonable connection between the particular activity
performed by the employee in relation to the usual
business or trade of the employer. The standard, supplied
by the law itself, is whether the work undertaken is
necessary or desirable in the usual business or trade of the
employer, a fact that can be assessed by looking into the
nature of the services rendered and its relation to the
general scheme under which the business or trade is
pursued in the usual course.
However, there may be a situation where an employee’s
work is necessary but is not always desirable in the usual
course of business of the employer. In this situation, there
is no regular employment.
Fuji’s Manila Bureau Office is a small unit213 and has a
few employees. Arlene had to do all activities related to
news gathering.
The successive renewals of her contract indicated the
necessity and desirability of her work in the usual course
of Fuji’s business. Because of this, Arlene had become a
regular employee with the right to security of tenure.
Arlene’s contract indicating a fixed term did not
automatically mean that she could never be a regular
employee. For as long as it was the employee who
requested, or bargained, that the contract have a “definite
date of termination,” or that the fixed-term contract be
freely entered into by the employer and the employee,
then the validity of the fixed-term contract will be upheld.
3. Arlene was illegally dismissed.
As a regular employee, Arlene was entitled to security of
tenure under Article 279 of the Labor Code and could be
dismissed only for just or authorized causaes and after
observance of due process.
The expiration of the contract does not negate the finding
of illegal dismissal. The manner by which Fuji informed
Arlene of non-renewal through email a month after she
informed Fuji of her illness is tantamount to constructive
dismissal. Further, Arlene was asked to sign a letter of
resignation prepared by Fuji. The existence of a fixed-
term contract should not mean that there can be no illegal
dismissal. Due process must still be observed.
Moreoever, disease as a ground for termination under
Article 284 of the Labor Code and Book VI, Rule 1,
Section 8 of the Omnibus Rules Implementing the Labor
Code require two requirements to be complied with: (1)
the employee’s disease cannot be cured within six months
and his continued employment is prohibited by law or
prejudicial to his health as well as to the health of his co-
employees; and (2) certification issued by a competent
public health authority that even with proper medical
treatment, the disease cannot be cured within six months.
The burden of proving compliance with these requisites is
on the employer. Non-compliance leads to illegal
dismissal. blesvirtualLawlibrary
Arlene was not accorded due process. After informing her
employer of her lung cancer, she was not given the chance
to present medical certificates. Fuji immediately
concluded that Arlene could no longer perform her duties
because of chemotherapy. Neither did it suggest for her to
take a leave. It did not present any certificate from a
competent public health authority.
2) JOSE SONZA vs. ABS-CBN BROADCASTING
CORPORATION
G.R. No. 138051
June 10, 2004
Facts: In May 1994, ABS-CBN signed an agreement
with the Mel and Jay Management and Development
Corporation (MJMDC). ABS-CBN was represented by its
corporate officers while MJMDC was represented by
Sonza, as President and general manager, and Tiangco as
its EVP and treasurer. Referred to in the agreement as
agent, MJMDC agreed to provide Sonza’s services
exclusively to ABS-CBN as talent for radio and
television. ABS-CBN agreed to pay Sonza a monthly
talent fee of P310, 000 for the first year and P317, 000 for
the second and third year.
On April 1996, Sonza wrote a letter to ABS-CBN where
he irrevocably resigned in view of the recent events
concerning his program and career. After the said letter,
Sonza filed with the Department of Labor and
Employment a complaint alleging that ABS-CBN did not
pay his salaries, separation pay, service incentive
pay,13th month pay, signing bonus, travel allowance and
amounts under the Employees Stock Option Plan (ESOP).
ABS-CBN contended that no employee-employer
relationship existed between the parties. However, ABS-
CBN continued to remit Sonza’s monthly talent fees but
opened another account for the same purpose.
The Labor Arbiter dismissed the complaint and found that
there is no employee-employer relationship. NLRC
affirmed the decision of the Labor Arbiter. CA also
affirmed the decision of NLRC.
Issue: Whether Sonza was an employee or independent
contractor.
Ruling:
Applying the control test to the present case, we find that
SONZA is not an employee but an independent
contractor.
Case law has consistently held that the elements of an
employee-employer relationship are selection and
engagement of the employee, the payment of wages, the
power of dismissal and the employer’s power to control
the employee on the means and methods by which the
work is accomplished. The last element, the so-called
"control test", is the most important element.
Sonza’s services to co-host its television and radio
programs are because of his peculiar talents, skills and
celebrity status. Independent contractors often present
themselves to possess unique skills, expertise or talent to
distinguish them from ordinary employees. The specific
selection and hiring of SONZA, because of his unique
skills, talent and celebrity status not possessed by
ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
All the talent fees and benefits paid to SONZA were the
result of negotiations that led to the Agreement. For
violation of any provision of the Agreement, either party
may terminate their relationship. Applying the control test
to the present case, we find that SONZA is not an
employee but an independent contractor.
The control test is the most important test our courts apply
in distinguishing an employee from an independent
contractor. This test is based on the extent of control the
hirer exercises over a worker. The greater the supervision
and control the hirer exercises, the more likely the worker
is deemed an employee. The converse holds true as well
– the less control the hirer exercises, the more likely the
worker is considered an independent contractor. To
perform his work, SONZA only needed his skills and
talent. How SONZA delivered his lines, appeared on
television, and sounded on radio were outside ABS-
CBN’s control. ABS-CBN did not instruct SONZA how
to perform his job. ABS-CBN merely reserved the right
to modify the program format and airtime schedule "for
more effective programming." ABS-CBN’s sole concern
was the quality of the shows and their standing in the
ratings.
Clearly, ABS-CBN did not exercise control over the
means and methods of performance of Sonza’s work. A
radio broadcast specialist who works under minimal
supervision is an independent contractor. Sonza’s work as
television and radio program host required special skills
and talent, which SONZA admittedly possesses.
ABS-CBN claims that there exists a prevailing practice in
the broadcast and entertainment industries to treat talents
like Sonza as independent contractors. The right of labor
to security of tenure as guaranteed in the Constitution
arises only if there is an employer-employee relationship
under labor laws. Individuals with special skills, expertise
or talent enjoy the freedom to offer their services as
independent contractors. The right to life and livelihood
guarantees this freedom to contract as independent
contractors. The right of labor to security of tenure cannot
operate to deprive an individual, possessed with special
skills, expertise and talent, of his right to contract as an
independent contractor.
3) DUMPIT-MURILLO VS. CA, ABC 5
524 SCRA 290 – Labor Law – Labor Standards – Fixed-
Term Employee vs Regular Employee
Thelma Dumpit-Murillo was hired by ABC as a
newscaster in 1995. Her contract with the TV station was
repeatedly renewed until 1999. She then wrote Jose Javier
(VP for News and Public Affairs of ABC) advising him
of her intention to renew the contract.
Javier did not respond.
Dumpit then demanded reinstatement as well as her
backwages, service incentive leave pays and other
monetary benefits.
ABC said they could only pay her backwages but her
other claims had no basis as she was not entitled thereto
because she is considered as a talent and not a regular
employee.
Dumpit sued ABC. The Labor Arbiter ruled against
Dumpit. The National Labor Relations Commission
reversed the LA. The Court of Appeals reversed the
NLRC and ruled that as per the contract between ABC
and Dumpit, Dumpit is a fixed term employee.
ISSUE: Whether or not Dumpit is a regular employee.
HELD: Yes. Dumpit was a regular employee under
contemplation of law. The practice of having fixed-term
contracts in the industry does not automatically make all
talent contracts valid and compliant with labor law. The
assertion that a talent contract exists does not necessarily
prevent a regular employment status.
The duties of Dumpit as enumerated in her employment
contract indicate that ABC had control over the work of
Dumpit. Aside from control, ABC also dictated the work
assignments and payment of petitioner’s wages. ABC
also had power to dismiss her. All these being present,
clearly, there existed an employment relationship
between Dumpit and ABC.
In addition, her work was continuous for a period of four
years. This repeated engagement under contract of hire is
indicative of the necessity and desirability of the
Dumpit’s work in ABC’s business.
4) NELSON V. BEGINO, GENER DEL VALLE,
MONINA A VILA-LLORIN AND MA. CRISTINA
SUMAYAO, Petitioners, vs. ABS-CBN
CORPORATION (FORMERLY, ABS-CBN
BROADCASTING CORPORATION) AND
AMALIA VILLAFUERTE, Respondents.
G.R. No. 199166, 20 April 2015.
PEREZ, J.:
Respondent ABS-CBN, through Respondent Villafuerte,
engaged the services of Petitioners as cameramen, editors
or reporters for TV Broadcasting. Petitioners signed
regularly renewed Talent Contracts (3 months - 1 year)
and Project Assignment Forms which detailed the
duration, budget and daily technical requirements of a
particular project. Petitioners were tasked with coverage
of news items for subsequent daily airings in
Respondents’ TV Patrol Bicol Program.
The Talent Contract has an exclusivity clause and
provides that nothing therein shall be deemed or
construed to establish an employer-employee relationship
between the parties.
Petitioners filed against Respondents a complaint for
regularization before the NLRC's Arbitration branch.
In support of their complaint, Petitioners claimed that
they worked under the direct control of Respondent
Villafuerte - they were mandated to wear company IDs,
they were provided the necessary equipment, they were
informed about the news to be covered the following day,
and they were bound by the company’s policy on
attendance and punctuality.
Respondents countered that, pursuant to their Talent
Contracts and Project Assignment Forms, Petitioners
were hired as talents to act as reporters, editors and/or
cameramen. Respondents further claimed they never
imposed control as to how Petitioners discharged their
duties. At most, they were briefed regarding the general
requirements of the project to be executed.
While the case was pending, Petitioners contracts were
terminated, prompting the latter to file a second complaint
for illegal dismissal.

The Arbitration Branch ruled that Petitioners were regular

employees, and ordered Respondents to reinstate the
Petitioners.

The NLRC affirmed the ruling, but the CA overturned the

decision.

ISSUE: W/N Petitioners are regular employees of

Respondents.

RULING: Yes.

Of the criteria to determine whether there is an employer-

employee relationship, the so-called "control test" is
generally regarded as the most crucial and determinative
indicator of the said relationship.

Under this test, an employer-employee relationship is said

to exist where the person for whom the services are
performed reserves the right to control not only the end
result but also the manner and means utilized to achieve
the same.

Notwithstanding the nomenclature of their Talent

Contracts and/or Project Assignment Forms and the terms
and condition embodied therein, petitioners are regular
employees of ABS-CBN.

As cameramen, editors and reporters, it appears that

Petitioners were subject to the control and supervision of
Respondents which provided them with the equipment
essential for the discharge of their functions. The
exclusivity clause and prohibitions in their Talent
Contract were likewise indicative of Respondents' control
over them, however obliquely worded.

Also,the presumption is that when the work done is an

integral part of the regular business of the employer and
when the worker does not furnish an independent business
or professional service, such work is a regular
employment of such employee and not an independent
contractor.
5) ABS-CBN VS. COLACHE
LABOR CASES
1. TONGKO VS. MANUFACTURERS LIFE
INSURANCE (2010)
FACTS:
Petitioner Gregorio Tongko entered into a Career Agent’s
Agreement with respondent Manulife. As an agent, his
duties consisted of, among others, canvassing for
applications for group policies and other products of the
company. Subsequently, Tongko was named unit
manager, branch manager, and regional sales manager.
But when he failed to comply with policies of Manulife,
his Agency Agreement was terminated. Tongko filed a
complaint with the NLRC Arbitration Branch. He
essentially alleged–despite the clear terms ofthe letter
terminating his Agency Agreement–that he was
Manulife’s employee before he was illegally dismissed.
The labor arbiter decreed that no employer-employee
relationship existed between the parties.
However, the NLRC reversed the labor arbiter’s decision
on appeal. When the case went to the CA, it
sustained the labor Arbiter’s decision. Manulife asserts
that the labor tribunals have no jurisdiction over Tongko’s
claim as he was not its employee as characterized in the
four-fold test.
ISSUE:
Has the labor arbiter jurisdiction over his complaint for
illegal dismissal?
HELD:
No. Given the anemic state of the evidence, particularly
on the requisite confluence of the factors that would show
an employer-employee relationship, the court cannot
conclusively find that the relationship exists in the present
case, even if such relationship only refers to Tongko’s
additional functions. While a rough deduction can be
made, the answer will not be fully supported by the
substantial evidence needed.
Under this legal situation, the only conclusion that can be
made is that the absence of evidence showing Manulife’s
control over Tongko’s contractual duties points to the
absence of any employer-employee relationship between
Tongko and Manulife. In the context of the established
evidence, Tongko remained an agent all along; although
his subsequent duties made him a lead agent with
leadership role, he was nevertheless only an agent whose
basic contract yields no evidence of means-and-manner
control. In the case, it is a matter that the labor tribunals
cannot rule upon in the absence of an employer-employee
relationship. Jurisdiction over the matter belongs to the
courts applying the laws of insurance, agency and
contracts
2. ALCATEL VS. RELOS
FACTS:
Alcatel is a domestic corporation primarily engaged in the
business of installation and supply of telecommunications
equipment. The company offered respondent Relos
“temporary employment as Estimator/Draftsman – Civil
Works to assist in the preparation of manholes and
conduit design for the proposal preparation” for a project
for a period of approximately 1 month. When Alcatel
undertook the same project in the Eastern Visayas and
Eastern Mindanao for PLDT, Relos was again given
temporary employment as Civil Works Inspector for
another period of more than one month. Upon the
expiration of his contract, Relos was again offered
temporary employment this time as Civil Works Engineer
for a certain period. He was offered temporary
employment in the same capacity for 5 more times and
the company renewed respondent’s contract 2 more times.
Thereafter, Alcatel informed respondent through a letter
that the civil works portion of the project was near
completion; however, the remaining works encountered
certain delays and had not been completed as scheduled.
Alcatel then extended respondent’s employment for
another 3 months.
Alcatel informed Relos that the project was nearing
completion and that his contract with Alcatel would
expire on the same day. He was also asked to settle all his
accountabilities with the company and advised him that
he would be called if it has future projects that require his
expertise. Relos filed a complaint for illegal dismissal,
separation pay, unpaid wages, unpaid overtime pay,
damages, and attorney’s fees against Alcatel, alleging that
he was a regular employee and that he was dismissed
during the existence of the project.
The LA declared that respondent was a regular employee
of Alcatel and that he was illegally dismissed. The NLRC
reversed the LA’s decision. The CA set aside the NLRC’s
decision and held that Relos was a regular employee of
Alcatel.
ISSUE: Whether or not respondent was a regular
employee of Alcatel.
RULING:
Relos is not a regular employee. He is only a project
employee. The specific projects for which respondent was
hired and the periods of employment were specified in his
employment contracts. The services he rendered, the
duration and scope of each employment are clear
indications that respondent was hired as a project
employee.
The principal test for determining whether a particular
employee is a project employee or a regular employee is
whether the project employee was assigned to carry out a
specific project or undertaking, the duration and scope of
which were specified at the time the employee is engaged
for the project. “Project” may refer to a particular job or
undertaking that is within the regular or usual business of
the employer, but which is distinct and separate and
identifiable as such from the undertakings of the
company. Such job or undertaking begins and ends at
determined or determinable times. The specific projects
for which respondent was hired and the periods of
employment were specified in his employment contracts.
The services he rendered, the duration and scope of each
employment are clear indications that respondent was
hired as a project employee. Relos’ contention that he
became a regular employee because he was continuously
rehired by Alcatel every termination of his contract is
untenable.
In Maraguinot, Jr. v. NLRC, 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 the
cessation of a project; (2) The tasks performed by the
alleged “project employee” are vital, necessary and
indispensable to the usual business or trade of the
employer.
While respondent performed tasks that were clearly vital,
necessary and indispensable to the usual business or trade
of Alcatel, respondent was not continuously rehired by
Alcatel after the cessation of every project. Alcatel’s
continuous rehiring of respondent in various capacities
from February 1991 to December 1995 was done entirely
within the framework of one and the same project ― the
PLDT 1342 project The employment of a project
employee ends on the date specified in the employment
contract. Therefore, respondent was not illegally
dismissed but his employment terminated upon the
expiration of his employment contract.
3. MILAN VS. NLRC
An employer is allowed to withhold terminal pay and
benefits pending the employee's return of its properties.
FACTS:
Milan, et al. are employees of Solid Mills, Inc. (Solid
Mills). They are represented by the National Federation
of Labor Unions (NAFLU), their collective bargaining
agent. As Solid Mills’ employees, Milan, et al. and their
families were allowed to occupy SMI Village, a property
owned by Solid Mills out of liberality and for the
convenience of its employees and on the condition that
the employees would vacate the premises anytime the
Company deems fit.Milan, et al. were informed that Solid
Mills would cease its operations due to serious business
losses.
NAFLU recognized Solid Mills’ closure due to serious
business losses in the Memorandum of Agreement
(MOA). The MOA provided for Solid Mills’ grant of
separation pay less accountabilities, accrued sick leave
benefits, vacation leave benefits, and 13th month pay to
the employees. Solid Mills sent to Milan, et al. individual
notices to vacate SMI Village.
They were required to sign a MOA with release and
quitclaim before their vacation and sick leave benefits,
13th month pay, and separation pay would be released.
Employees who signed MOA were considered to have
agreed to vacate SMI Village, and to the demolition of the
constructed houses inside as condition for the release of
their termination benefits and separation pay. Milan, et al.
refused to sign the documents and demanded to be paid
their benefits and separation pay. Milan, et al. filed
complaints before the Labor Arbiter (LA) for alleged
nonpayment of separation pay, accrued sick and vacation
leaves, and 13th month pay.
They argued that their accrued benefits and separation pay
should not be withheld because their payment is based on
company policy and practice. The LA ruled in favor of
Milan, et al. However, the National Labor Relations
Commission (NLRC) ruled that the monetary claims of
Milan, et al. are held in abeyance pending compliance of
their accountabilities to the company by turning over the
subject lots they respectively occupy at SMI Village since
Solid Mills granted as a privilege and is, thus, justified to
terminate such privilege. The Court of Appeals (CA)
dismissed Milan, et al.’ petition for certiorari.
ISSUE: May Solid Mills withhold the termination
benefits of Milan, et al. who are in possession of its
property despite signing of a MOA to vacate SMI Village
for the release of such benefits?
RULING:
Yes. Requiring clearance before the release of last
payments to the employee is a standard procedure among
employers, whether public or private. Clearance
procedures are instituted to ensure that the properties, real
or personal, belonging to the employer but are in the
possession of the separated employee, are returned to the
employer before the employee’s departure.
However, our law supports the employers’ institution of
clearance procedures before the release of wages as an
exception to the general rule that wages may not be
withheld and benefits may not be diminished.
The Civil Code provides that the employer is authorized
to withhold wages for debts due. “Debt” in this case refers
to any obligation due from the employee to the employer.
It includes any accountability that the employee may have
to the employer.
More importantly, respondent Solid Mills and NAFLU,
the union representing Milan, et al., agreed that the release
of Milan, et al.’ benefits shall be “less accountabilities.”
“Accountability,” in its ordinary sense, means obligation
or debt. The ordinary meaning of the term
“accountability” does not limit the definition of
accountability to those incurred in the worksite. As long
as the debt or obligation was incurred by virtue of the
employer-employee relationship, generally, it shall be
included in the employee’s accountabilities that are
subject to clearance procedures.
The return of the property’s possession became an
obligation or liability on the part of the employees when
the employer-employee relationship ceased. Thus, Solid
Mills has the right to withhold Milan, et al.’ wages and
benefits because of this existing debt or liability.
Withholding of payment by the employer does not mean
that the employer may renege on its obligation to pay
employees their wages, termination payments, and due
benefits. The employees’ benefits are also not being
reduced. It is only subjected to the condition that the
employees return properties properly belonging to the
employer. This is only consistent with the equitable
principle that “no one shall be unjustly enriched or
benefited at the expense of another.”
4. GAA VS. CA
Facts
• Europhil Industries Corporation was formerly one of the
tenants in Trinity Building while Gaa was then
the building administrator.
• December 12, 1973 - Europhil Industries commenced an
action in the CFI of Manila for damages against Gaa for
trespassing upon its rights, namely, cutting of
its electricity, and removing its name from the building
directory and gate passes of its officials and employees.
• June 28, 1974 – CFI ruled in favor of Europhil ordering
Gaa to pay the former actual damages, moral damages,
exemplary damages and to pay the costs.
• August 1, 1975 - A writ of garnishment was issued
pursuant to which Deputy Sheriff Roxas served a Notice
of Garnishment upon El Grande Hotel, where Gaa was
then employed, garnishing her "salary, commission
and/or remuneration."
• Gaa then filed with the CFI of Manila a motion to lift
said garnishment on the ground that her "salaries,
commission and, or remuneration are exempted from
execution under Article 1708 of the New Civil Code.
• CFI: denied Gaa’s motion and her subsequent MR.
• CA: dismissed Gaa’s petition on the ground that Gaa is
not a mere laborer as contemplated under Article 1708 as
the term laborer does not apply to one who holds a
managerial or supervisory position like that of petitioner,
but only to those "laborers occupying the lower strata."
• It also held that the term "wages" means the pay given"
as hire or reward to artisans, mechanics, domestics or
menial servants, and laborers employed in manufactories,
agriculture, mines, and other manual occupation and
usually employed to distinguish the sums paid to persons
hired to perform manual labor, skilled or unskilled, paid
at stated times, and measured by the day, week, month, or
season.
Issue:
WON Gaa may be considered a laborer as contemplated
under Article 1708 of the CC.
Held/Ratio
NO. Gaa is not an ordinary or rank and file laborer but a
responsibly placed employee of El Grande Hotel.
Considering the importance of Gaa's function in El
Grande Hotel, it is undeniable that Gaa is occupying a
position equivalent to that of a managerial or supervisory
position.
• The word "laborer" includes everyone who performs any
kind of mental or physical labor, but as commonly and
customarily used and understood, it only applies to
one engaged in some form of manual or physical labor
• In Kline vs. Russell it was held that a laborer, within the
statute exempting from garnishment the wages of a
"laborer," is one whose work depends on mere physical
power to perform ordinary manual labor, and not one
engaged in services consisting mainly of work requiring
mental skill or business capacity, and involving
the exercise of intellectual faculties.
• incentive leave.
Article 1708 used the word "wages" and not "salary" in
relation to "laborer" when it declared what are to be
exempted from attachment and execution. The
term "wages" as distinguished from "salary", applies to
the compensation for manual labor, skilled or unskilled,
paid at stated times, and measured by the day, week,
month, or season, while "salary" denotes a higher degree
of employment, or a superior grade of services, and
implies a position of office: by contrast, the term wages "
indicates considerable pay for a lower and less
responsible character of employment, while "salary" is
suggestive of a larger and more important service.
• Bell vs. Indian Livestock Co it was held that salary is
understood to relate to position of office, to be the
compensation given for official or other service,
as distinguished from 'wages', the compensation for
labor."
• Persons belonging to this class usually look to
the reward of a day's labor for immediate or present
support, and such persons are more in need of the
exemption than any others.
5. DAVID VS MACASIO
For: overtime pay, holiday pay, 13th month pay and
payment for service incentive leave.
Facts:
In January 2009, Macasio filed before the LA a complaint
against petitioner Ariel L. David, doing business under
the name and style “Yiels Hog Dealer,” for non-payment
of overtime pay, holiday pay and 13th month pay. He also
claimed payment for moral and exemplary damages and
attorney’s fees. Macasio also claimed payment for service
incentive leave (SIL) David claimed that he started his hog
dealer business in 2005 and that he only has ten
employees. The LA concluded that as Macasio was
engaged on “pakyaw” or task basis, he is not entitled to
overtime, holiday, SIL and 13th month pay. The NLRC
affirmed the LA decision, thus this case reach the CA
which says that Macasio is entitled to his monetary claims
following the doctrine laid down in Serrano v. Severino
Santos Transit.The CA explained that as a task basis
employee, Macasio is excluded from the coverage of
holiday, SIL and 13th month pay only if he is likewise a
“field personnel.”Thus this case reached the SC.
Issue: Whether or not Macasio is entitled of overtime pay,
holiday pay, 13th month pay and payment for service
Ruling: Yes, in so far as the Holiday and SIL pay is
concern. To determine whether workers engaged on
“pakyaw” ortask basis” is entitled to holiday and SIL pay,
the presence (or absence) of employer supervision as
regards the worker’s time and performance is the key: if
the worker is simply engaged on pakyaw or task basis,
then the general rule is that he is entitled to a holiday pay
and SIL pay unless exempted from the exceptions
specifically provided under Article 94 (holiday pay) and
Article 95 (SIL pay) of the Labor Code. However, if the
worker engaged on pakyaw or task basis also falls within
the meaning of “field personnel” under the law, then he is
not entitled to these monetary benefits. CA that Macasio
does not fall under the definition of “field personnel.” The
CA’s finding in this regard is supported by the established
facts of this case: first, Macasio regularly performed his
duties at David’s principal place of business; second, his
actual hours of work could be determined with reasonable
certainty; and, third, David supervised his time and
performance of duties. Since Macasio cannot be
considered a “field personnel,” then he is not exempted
from the grant of holiday, SIL pay even as he was engaged
on “pakyaw” or task basis.
However, the governing law on 13th month pay is PD No.
851. As with holiday and SIL pay, 13th month pay
benefits generally cover all employees; an employee must
be one of those expressly enumerated to be exempted.
Section 3 of the Rules and Regulations Implementing
P.D. No. 851 enumerates the exemptions from the
coverage of 13th month pay benefits. Under Section 3(e),
“employers of those who are paid on task basis, and those
who are paid a fixed amount for performing a specific
work, irrespective of the time consumed in the
performance thereof are exempted. Note that unlike the
IRR of the Labor Code on holiday and SIL pay, Section
3(e) of the Rules and Regulations Implementing PD No.
851exempts employees "paid on task basis" without any
reference to "field personnel." This could only mean that
insofar as payment of the 13th month pay is concerned,
the law did not intend to qualify the exemption from its
coverage with the requirement that the task worker be a
"field personnel" at the same time. Thus Macasio is not
entitled to 13th month pay.
Wherefore, the petition was partially granted the petition
insofar as the payment of 13th month pay to respondent is
concerned. But all other aspect of the CA’s decision was
affirmed.
6. JACULBE VS. SILIMAN UNIVERSITY
Facts:
Jaculbe began working in 1958 for Silliman’s medical
center as a nurse. In 1992, Silliman informed her that she
was approaching her 35th year of service with the
university and was due for automatic retirement on
November 18, 1993. Silliman’s retirement plan provided
that members could be automatically retired “upon
reaching the age of 65 or after 35 years of uninterrupted
service to the university.” On November 18, 1993,
respondent compulsorily retired petitioner. She sued for
illegal dismissal.
Issues:
1) Did respondent’s retirement plan imposing automatic
retirement after 35 years of service contravene the
security of tenure clause in the 1987 Constitution and the
Labor Code?
2) Did respondent commit illegal dismissal by retiring
petitioner solely by reason of such provision in its
retirement plan?
Held: A perusal of the rules and regulations of the
retirement plan showed that participation of Jaculbe in
said plan was not voluntary.
Rule III of the plan states that all full-time Filipino
employees of the University will automatically become
members of the plan and that a member who continues to
serve the university cannot withdraw from the plan. The
compulsory nature of the plan debunked the theory that
petitioner’s voluntary contributions were evidence of her
willing participation in the said plan.
The retirement plan only came into being in 1970, 12
years after the she starting working for Silliman
University. This means that it was not part of the terms of
employment to which Jaculbe agreed when she started
working.
Jaculbe was still a good eight years away from the
compulsory retirement age and that she was also still fully
capable of discharging her duties as a nurse when she was
dismissed. An employer is only free to impose a
retirement age less than 65 when it has the employees’
consent. However she cannot be reinstated anymore at
this time when she is already 71 years of age.
7. REPUBLIC VS. PERALTA
FACTS:
- The Republic of the Philippines seeks the review on
certiorari of the Order of the CFI of Manila in its Civil
Case No. 108395 entitled "In the Matter of Voluntary
Insolvency of Quality Tobacco Corporation, Quality
Tobacco.”
- In its questioned Order, the trial court held that the above
enumerated claims of USTC and FOITAF (hereafter
collectively referred to as the "Unions") for separation
pay of their respective members embodied in final awards
of the NLRC were to be preferred over the claims of the
Bureau of Customs and the BIR. The trial court, in so
ruling, relied primarily upon Article 110 of the Labor
Code.
- The Solicitor General, in seeking the reversal of the
questioned Orders, argues that Article 110 of the Labor
Code is not applicable as it speaks of "wages," a term
which he asserts does not include the separation pay
claimed by the Unions.
"Separation pay," the Solicitor General contends: is given
to a laborer for a separation from employment computed
on the basis of the number of years the laborer was
employed by the 7 SEC. 1. Requirements for Issuance of
License. Every applicant for license to operate a private
employment agency or manning agency shall submit a
written application together with the following
requirements:
xxx xxx
f. A verified undertaking stating that the applicant:
xxx xxx xxx
(3) Shall assume joint and solidary liability with the
employer for all claims and liabilities which may arise in
connection with the implementation of the contract;
including but not limited to payment of wages, health and
disability compensation and reparation. employer; it is a
form of penalty or damage against the employer in favor
of the employee for the latter's dismissal or separation
from service
ISSUE
WON separation pay of their respective members
embodied in final awards of the NLRC were to be
preferred over the claims of the Bureau of Customs and
the BIR (WON separation pay is included in the term
“wages”8)
HELD
1. YES
Ratio
For the specific purposes of Article 1109 and in the
context of insolvency termination or separation pay is
reasonably regarded as forming part of the remuneration
or other money benefits accruing to employees or workers
by reason of their having previously rendered services to
their employer; as such, they fall within the scope of
"remuneration or earnings — for services rendered or to
be rendered — ."
Liability for separation pay might indeed have the effect
of a penalty, so far as the employer is concerned. So far
as concerns the employees, however, separation pay is
additional remuneration to which they become entitled
because, having previously rendered services, they are
separated from the employer's service.
Reasoning
- We note, in this connection, that in Philippine
Commercial and Industrial Bank (PCIB) us. National
Mines and Allied Workers Union, the Solicitor General
took a different view and there urged that the term
"wages" under Article 110 of the Labor Code may be
regarded as embracing within its scope severance pay or
termination or separation pay. In PCIB, this Court agreed
with the position advanced by the Solicitor General. We
see no reason for overturning this particular position.
- The resolution of the issue of priority among the several
claims filed in the insolvency proceedings instituted by
the Insolvent cannot, however, rest on a reading of Article
110 of the labor Code alone.
- Article 110 of the Labor Code, in determining the reach
of its terms, cannot be viewed in isolation. Rather, Article
110 must be read in relation to the provisions of the Civil
Code concerning the classification, concurrence and
preference of credits, which provisions find particular
application in insolvency proceedings where the claims of
all creditors, preferred or non-preferred, may be
adjudicated in a binding manner.
Disposition MODIFIED and REMANDED to the trial
court for further proceedings in insolvency.
Article 97 (f) of the Labor Code defines "wages" in the
following terms:
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 includes 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. 'Fair and
reasonable value' shall not include any profit to the
employer or to any person affiliated with the
employer.(emphasis supplied)
Article 110. Worker preference in case of bankruptcy —
In the event of bankruptcy or liquidation of an employer's
business, his workers shall enjoy first preference as
regards wages due them for services rendered during the
period prior to the bankruptcy or liquidation, any
provision of law to the contrary notwithstanding. Union
paid wages shall be paid in full before other creditors may
establish any claim to a share in the assets of the
employer. (emphasis supplied).
8. DBP VS. LABOR ARBITER
FACTS:
November 14, 1986, private respondents filed with
DOLE- Daet, Camarines Norte, 17 individual complaints
against Republic Hardwood Inc. (RHI) for unpaid wages
and separation pay. These complaints were thereafter
endorsed to Regional Arbitration Branch of the NLRC
since the petitioners had already been terminated from
employment.
RHI alleged that it had ceased to operate in 1983 due to
the government ban against tree-cutting and that in May
24, 1981, its sawmill was totally burned resulting in
enormous losses and that due to its financial setbacks,
RHI failed to pay its loan with the DBP. RHI contended
that since DBP foreclosed its mortgaged assets on
September 24,1985, then any adjudication of monetary
claims in favor of its former employees must be satisfied
against DBP. Private respondent impleaded DBP.
Labor Arbiter favored private respondents and held RHI
and DBP jointly and severally liable to private
respondents. DBP appealed to the NLRC. NLRC affirmed
LA’s judgment. DBP filed M.R. but it was dismissed.
Thus, this petition for certiorari.
ISSUE:
(1) Whether the private respondents are entitled to
separation pay.
(2) Whether the private respondents’ separation pay
should be preferred than the DBP’s lien over the RHI’s
mortgaged assets.
RULING:
Yes. Despite the enormous losses incurred by RHI due to
the fire that gutted the sawmill in 1981 and despite the
logging ban in 1953, the uncontroverted claims for
separation pay show that most of the private respondents
still worked up to the end of 1985. RHI would still have
continued its business had not the petitioner foreclosed all
of its assets and properties on September 24, 1985. Thus,
the closure of RHI’s business was not primarily brought
about by serious business losses. Such closure was a
consequence of DBP’s foreclosure of RHI’s assets. The
Supreme Court applied Article 283 which provides:
“. . . in cases of closures or cessation of operations of
establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be
equivalent to 1 month pay or at least 1/2 month pay for
every year of service, whichever is higher. . . .”
(2) No. Because of the petitioner’s assertion that LA and
NLRC incorrectly applied the provisions of Article 110 of
the Labor Code, the Supreme Court was constrained to
grant the petition for certiorari.
Article 110 must be read in relation to the Civil Code
concerning the classification, concurrence and preference
of credits, which is application in insolvency proceedings
where the claims of all creditors, preferred or non-
preferred, may be adjudicated in a binding manner.
Before the workers’ preference provided by Article 110
may be invoked, there must first be a declaration of
bankruptcy or a judicial liquidation of the employer’s
business.
NLRC committed grave abuse of discretion when it
affirmed the LA’s ruling. DBP’s lien on RHI’s
mortgaged assets, being a mortgage credit, is a special
preferred credit under Article 2242 of the Civil Code
while the workers’ preference is an ordinary preferred
credit under Article 2244.
A distinction should be made between a preference of
credit and a lien. A preference applies only to claims
which do not attach to specific properties. A lien creates
a charge on a particular property. The right of first
preference as regards unpaid wages recognized by Article
110 does not constitute a lien on the property of the
insolvent debtor in favor of workers. It is but a preference
of credit in their favor, a preference in application. It is a
method adopted to determine and specify the order in
which credits should be paid in the final distribution of
the proceeds of the insolvent’s assets. It is a right to a first
preference in the discharge of the funds of the judgment
debtor.
Article 110 of the Labor Code does not create a lien in
favor of workers or employees for unpaid wages either
upon all of the properties or upon any particular property
owned by their employer. Claims for unpaid wages do not
therefore fall at all within the category of specially
preferred claims established under Articles 2241 and
2242 of the Civil Code, except to the extent that such
claims for unpaid wages are already covered by Article
2241, (6)- (claims for laborers’ wages, on the goods
manufactured or the work done); or by Article 2242,(3)-
(claims of laborers and other workers engaged in the
construction, reconstruction or repair of buildings,
canals and other works, upon said buildings, canals and
other works.
Since claims for unpaid wages fall outside the scope of
Article 2241 (6) and 2242 (3), and not attached to any
specific property, they would come within the category of
ordinary preferred credits under Article 2244.
(Note: SC favored DBP kasi yung mortgage nila against
RHI was executed prior to the amendment of Article 110.
The amendment can’t be given retroactive effect daw.
Pero sa present, 1st priority na talaga ang laborer’s
unpaid wages regardless kung may mortgage or wala ang
ibang creditors ng employer)
Article 110 of the Labor Code has been amended by R.A.
No. 6715 and nowreads:
“Article 110. Worker preference in case of bankruptcy. –
In the event of bankruptcy or liquidation of an employers
business, his workers shall enjoy first preference as
regards their unpaid wages and other monetary claims,
any provision of law to the contrary notwithstanding.
Such unpaid wages, and monetary claims shall be paid in
full before the claims of the Government and other
creditors may be paid.”
The amendment “expands worker preference to cover not
only unpaid wages but also other monetary claims to
which even claims of the Government must be deemed
subordinate.” Hence, under the new law, even mortgage
credits are subordinate to workers’ claims.
R.A. No. 6715, however, took effect only on March 21,
1989. The amendment cannot therefore be retroactively
applied to, nor can it affect, the mortgage credit which
was secured by the petitioner several years prior to its
effectivity.
Even if Article 110 and its Implementing Rule, as
amended, should be interpreted to mean `absolute
preference,’ the same should be given only prospective
effect in line with the cardinal rule that laws shall have no
retroactive effect, unless the contrary is provided. To give
Article 110 retroactive effect would be to wipe out the
mortgage in DBP’s favor and expose it to a risk which it
sought to protect itself against by requiring a collateral in
the form of real property.
The public respondent, therefore, committed grave abuse
of discretion when it retroactively applied the amendment
introduced by R.A. No. 6715 to the case at bar.
9. DBP VS. SEC. OF LABOR
Facts:
Private respondents won a case for illegal dismissal,
unfair labor practice, illegal deductions from salaries and
violation of the minimum wage law against Riverside
Mills Corporation. Consequently, a writ of execution was
issued, on October 22, 1985 , against the goods and chattel
of RMC. Said assets however had already been foreclosed
by petitioner Development Bank of the Philippines (DBP)
through an extra-judicial proceedings as early as 1983.
Private respondents, in a motion, moved for the delivery
of RMC properties in possession of DBP, relying on the
provisions of Article 110 of the Labor Code giving them
first preference over the mortgaged properties of RMC for
the satisfaction of the judgment rendered in their favor.
Which motion was granted. On appeal, the decision was
affirmed.
Issue:
Whether or not Article 110 of the Labor Code finds
application on the instant case. Article 110 provides that
in case of bankruptcy or liquidation of an employer's
business, his workers enjoy first preference as regards
wages due them for services rendered during the period
prior to the bankruptcy or liquidation.
Ruling:
The Supreme Court held that Article 110 cannot be
applied in the instant case because the important requisite
that employer's business must be bankrupt is lacking. The
Supreme Court ruled that in the Philippine jurisdiction,
bankruptcy, insolvency and general judicial liquidation
proceedings are the only means to establish that a business
is bankrupt or insolvent. Absent of such judicial
declaration, the business cannot be considered bankrupt
for the purpose of applying the provisions of Article 110.
10. BARAYOGA VS. APT
FACTS:
Petitioner Bisudeco-Philsucor Corfarm Workers Union is
composed of workers of Bicolandia Sugar Development
Corporation (BISUDECO), a sugar plantation mill
located in Camarines Sur.Respondent Asset Privatization
Trust (APT), a public trust was created under
Proclamation No. 50,mandated to conserve, provisionally
manage and dispose of non-performing assets of the
Philippine government identified for privatization or
disposition. Thus, pursuant to Proclamation No. 50,
then President Corazon Aquino issued Administrative
Order No. 14, where the financial claim of the
Philippine National Bank against BISUDECO in the
form of a loan secured by a chattel, was transferred to
APT as a trustee of the government.
Sometime later, Philippine Sugar Corporation(Philsucor)
took over the management of the sugar plantation and
milling
operations. Meanwhile, because of BISUDECO’s contin
ued failure of to pay its outstanding loan with PNB, its m
ortgaged properties were foreclosed and subsequently
sold in a public auction to APT, as the sole bidder.
The union filed a labor case against BISUDECO-
Phisucor for unfair labor practice and illegal dismissal
when, the management, conditioned their re-hiring upon
their resignation from the union but,
nonetheless employed the services of outsiders under the
pakyaw system. Now, the APT's Board of Trustees sold
the plantation to Peñafrancia Sugar Mill (Pensumil). The
board, however, passed another resolution authorizing
the payment of separation benefits to BISUDECO's
employees in the event of the company's privatization.
Not included in the Resolution, though, were petition
er-union'smembers who had not been recalled to
work.
Thus, petitioners impleaded respondents APT andPensu
mil in the labor case, all respondents interposed the defe
nse of lack of employer-employee relationship.The
Labor Arbiter and the NLRC thereafter, ordered APT to
pay herein complainants. It was ruled that while no
employer-employee relationship existed between
members of the petitioner union and APT, at the time of
the employees' illegal dismissal, the assets of BISUDECO
had been transferred to the national government through
APT. On appeal, the appellate court, under Rule 65 of the
Rules of Court, held that the APT liable for petitioners'
claims for unfair labor practice because the petitioners'
claims could not be enforced against APT as mortgagee
of the foreclosed properties of BISUDECO. Hence, under
Rule 45 of the Rules of Court, petitioner-union's members
who were not recalled to work by Philsucor, seek to hold
APT liable for their monetary claims and allegedly illegal
dismissal.
ISSUE:
Whether APT is liable for the claims of petitioners against
their former employer.
HELD: NO.
Workers' claims for unpaid wages and monetary benefits
cannot be paid outside of a bankruptcy or judicial
liquidation proceedings against the employer. It is
settled that the application of
Article 110 of the Labor Code is contingent upon the
institution of those proceedings, during which all
creditors are convened,
their claims ascertained and inventoried, and their prefer
ences determined.
Assured thereby is an orderly determination of the
preference given to creditors' claims; and preserved in
harmony is the legal scheme of classification,
concurrence and preference of credits in the Civil
Code, the Insolvency Law, and the Labor Code.
Responsibility for the liabilities of a mortgagor towards
its employees cannot be transferred via an auction sale to
a purchaser who is also the mortgagee-creditor of the
foreclosed assets and chattels. Clearly, the mortgagee-
creditor has no employer-employee relations with the
mortgagor’s workers. The mortgage constitutes a lien on
the determinate properties of the employer-debtor,
because it is a specially preferred credit to which the
worker’s monetary claims is deemed subordinate
Article 110.
Worker’s preference in case of bankruptcy.– In the event
of bankruptcy or liquidation of the employer’s business,
his workers shall enjoy first preference as regards their
unpaid wages and other monetary claims shall be paid in
full before the claims of the Government and other
creditors may be paid.
11. PHIL. GLOBAL VS. DE VERA
FACTS: De Vera and petitioner company entered into a
contract where respondent was to attend to the medical
needs of petitioner’s employees while being paid a
retainer fee of P4,000 per month. Later, De Vera was
informed y petitioner that the retainership will be
discontinued. Respondent filed a case for illegal
dismissal.
ISSUE: Whether or not de Vera is an employee of
PhilComm or an independent contractor.
HELD: Applying the four fold test, de Vera is not an
employee. There are several indicators apart from the fact
that the power to terminate the arrangement lay on both
parties:
from the time he started to work with petitioner, he
never was included in its payroll; was never deducted any
contribution for remittance to the Social Security System
(SSS);
he was subjected by petitioner to the ten (10%) percent
withholding tax for his professional fee, in accordance
with the National Internal Revenue Code, matters which
are simply inconsistent with an employer-employee
relationship;
the records are replete with evidence showing that
respondent had to bill petitioner for his monthly
professional fees. It simply runs against the grain of
common experience to imagine that an ordinary employee
has yet to bill his employer to receive his salary. Finally,
the element of control is absent. Petition granted.
12. COCA-COLA VS. QUINTANAR contract of service between the respondent and the
manpower services showed that the former indeed
FACTS: exercised the power of control over the complainants
Petitioners were directly-hired employees of respondent therein.
as Route Helpers. After working for quite some time, they
were allegedly transferred as agency workers to several
manpower agencies. When DOLE conducted an
inspection to determine if labor standards were being
complied with, petitioners were declared to be regular
employees and that respondent is liable to pay. Petitioners
were thereafter dismissed on various dates, and their
claims settled later. However, the settlement did
not include the issues on reinstatement and payment of
CBA benefits. Hence, petitioners filed a complaint for
illegal dismissal. Respondent alleged that there was no
ER-EE relationship between them.LA declared that
petitioners were illegally dismissed, and ordered
respondent to reinstate them and to pay full backwages.
NLRC affirmed the LA decision.CA reversed & set aside
NLRC decision. The appellate court held that the
manpower agency is an independent contractor that
exercises control over the petitioners.
ISSUE:
1) Whether or not an ER-EE relationship exists between
the petitioners and respondent.
(2) Whether the manpower agencies are labor-only
contractors.
RULING:
YES. The Court held that petitioners still enjoyed an ER-
EE relationship with respondent since becoming
employees of manpower agencies. To determine whether
an employment should be considered regular or casual,
the applicable test is the reasonable connection between
the particular activity performed by the employee in
relation to the usual business or trade of the employer. It
has been established in jurisprudence that Route Helpers
are regular employees of respondent. The repeated
rehiring of respondent workers and the continuing need
for their services clearly attest to the necessity or
desirability of their services in the regular conduct of the
business or trade of petitioner company. Furthermore, it
has already been established in jurisprudence that the
manpower services were a labor-only contractor since the
work performed by the “supplied” employees were
indispensable to the principal business of respondent. In
fact, the manpower agencies were found to not have
substantial capital or investment or tool to engage in job
contracting. Finally, the Court determined the existence
of an ER-EE relationship between the parties since the
SOC LEG CASES: indicates otherwise, have the following
meanings:
1) SIGNEY v. SSS GR No. 173582, January 28, 2008
xxx
Facts:
Rodolfo Signey Jr. a member of the SSS, died on May 21,
(e) Dependents — The dependent shall be the
2001. In his member’s records, he had designated
following:
petitioner Yolanda Signey as primary beneficiary and his
four children with her as secondary beneficiaries.
(1) The legal spouse entitled by law to receive
Petitioner filed a claim for death benefits with the public
support from the member;
respondent SSS. She revealed in her SSS claim that the
deceased had a common-law wife, Gina Servano, with
2) The legitimate, legitimated, or legally
whom he had two minor children.
adopted, and illegitimate child who is
unmarried, not gainfully employed and has
Petitioner’s declaration was confirmed when Gina herself
not reached twenty-one years (21) of age, or if
filed a claim for the same death benefits which she also
over twenty-one (21) years of age, he is
declared that both she and petitioner were common-law
congenitally or while still a minor has been
wives of the deceased and that Editha Espinosa was the
permanently incapacitated and incapable of self-
legal wife. In addition, in October 2001, Editha also filed
support, physically or mentally; and
an application for death benefits with the SSS stating that
she was the legal wife of the deceased.
Whoever claims entitlement to the benefits provided by
law should establish his or her right thereto by substantial
SSS denied the death benefit claim of the petitioner and
evidence. Since petitioner is disqualified to be a
found that the marriage between the deceased and the
beneficiary and because the deceased has no legitimate
petitioner is null and void because of a prior subsisting
child, it follows that the dependent illegitimate minor
marriage contracted between the deceased and Editha as
children of the deceased shall be entitled to the death
confirmed by the local civil registry of Cebu. However,
benefits as primary beneficiaries. The SSS Law is clear
it recognized Ginalyn and Rodelyn, the minor children of
that for a minor child to qualify as a “dependent” the only
the deceased with Gina, as the primary beneficiaries under
requirements are that he/she must be below 21 years of
the SSS Law.
age, not married nor gainfully employed.
Thereafter, petitioner filed a petition with the SSC in
In this case, the minor illegitimate
which she attached a waiver of rights executed
children Ginalyn and Rodelyn were born on 13 April
by Editha whereby the latter waived any/all claims from
1996 and 20 April 2000, respectively. Had the legitimate
Social Security System (SSS), among others due to the
child of the deceased and Editha survived and qualified as
deceased RodolfoSigney Sr. SSC affirmed the decision
a dependent under the SSS
of the SSS. The SSC gave more weight to the SSS field
Law, Ginalyn and Rodelyn would have been entitled to a
investigation and the confirmed certification of marriage
share equivalent to only 50% of the share of the said
showing that the deceased was married to Editha, than to
legitimate child. Since the legitimate child of the deceased
the aforestated declarations of Editha in her waiver of
predeceased him, Ginalyn and Rodelyn, as the only
rights.
qualified primary beneficiaries of the deceased, are
entitled to 100% of the benefits.
Issue:
Whether or not petitioner has a superior legal right over
2) BERNARDINA P. BARTOLOME, Petitioner, vs.
the SSS benefits as against the illegitimate minor children
SOCIAL SECURITY SYSTEM and
of the deceased?
SCANMAR MARITIME SERVICES, INC.,
Respondents.
Held:
As to the issue of who has the better right over the SSS
death benefits, Section 8(e) and (k) of R. A. No. 8282 is PONENTE: Velasco, Jr.
very clear. Hence, we need only apply the law.
TOPIC: Civil status of adopted upon death of adopter,
Section 8(e) and (k) of R.A. No. 8282 provides: biological parent of adoptee as beneficiary

SEC. 8. Terms Defined.—For the purposes of this FACTS:

Act, the following terms shall, unless the context
 John Colcol was employed as electrician by
Scanmar Maritime Services, Inc. He was enrolled under
the government’s Employees’ Compensation Program
(ECP). He died due to an accident while on board the
vessel. John was, at the time of his death, childless and
unmarried. Thus, petitioner Bernardina P. Bartolome,
John’s biological mother and, allegedly, sole remaining
beneficiary, filed a claim for death benefits.
SSS denied the claim on the ground that
Bernardina was no longer considered as the parent of John
since the latter was legally adopted by Cornelio Colcol.
As such, it is Cornelio who qualifies as John’s primary
beneficiary, not petitioner.
According to the records, Cornelio died during
John’s minority.
ISSUES:
1. Whether or not the death of the adopter during the
adoptee’s minority results to the restoration of the
parental authority to the biological parents of the latter.
2. Whether or not Bernardina is considered as a legal
beneficiary of John.
HELD:
FIRST ISSUE: Yes.
The Court ruled that John’s minority at the time
of his adopter’s death is a significant factor in the case at
bar. Under such circumstance, parental authority should
be deemed to have reverted in favor of the biological
parents. Otherwise, taking into account Our consistent
ruling that adoption is a personal relationship and that
there are no collateral relatives by virtue of adoption, who
was then left to care for the minoradopted child if
the adopter passed away?
The Court also applied by analogy, insofar as
the restoration of custody is concerned, the provisions of
law on rescission of adoption wherein if said petition is
granted, the parental authority of the adoptee’s biological
parents shall be restored if the adoptee is still a minor or
incapacitated.
The manner herein of terminating the adopter’s
parental authority, unlike the grounds for rescission,
justifies the retention of vested rights and obligations
between the adopter and the adoptee, while the
consequent restoration of parental authority in favor of
the biological parents, simultaneously, ensures that
the adoptee, who is still a minor, is not left to fend for
himself at such a tender age.
From the foregoing, it is apparent that
the biological parents retain their rights of succession
tothe estate of their child who was the subject of adoption.
While the benefits arising from the death of an SSS
covered employee do not form part of the estate of the
adopted child, the pertinent provision on legal or intestate
succession at least reveals the policy on the rights of
the biological parents and those by adoption vis-à-vis the
right to receive benefits from the adopted. In the same
way that certain rights still attach by virtue of the blood
relation, so too should certain obligations, which, the
Court ruled, include the exercise of parental authority, in
the event of the untimely passing of
their minor offspring’s adoptive parent.
SECOND ISSUE: Yes.
The Court held that Cornelio’s adoption of
John, without more, does not deprive petitioner of the
right to receive the benefits stemming from John’s death
as a dependent parent given Cornelio’s untimely demise
during John’s minority. Since the parent by adoption
already died, then the death benefits under the
Employees’ Compensation Program shall accrue solely
to herein petitioner, John’s sole remaining beneficiary
3) PASCUAL (BAR QUESTION)
1988 bar question:
Pascual Pasacao was employed as a plumber by the
Colossal Construction Corp. in 1965. He was the single.
When he was registered with the SSS, he designated his
father Juan and his mother Maria, who were over 60 and
dependent on him for support, as his beneficiaries.
Colossal religiously remitted all employee and company
contributions required by the SSS law.
He married Damiana de Juan in 1967, and also declared
her as a beneficiary. Even if he was married and because
he was making a lot of money on overtime, he continued
supporting his parents. A son, Pedrito was born to the
couple in 1968 and a daughter Marita in 1970.
He declared both to the SSS as his beneficiaries. In 1975,
he was promoted as foreman to a project in Mt. Province.
He stayed there for 2 yrs and during that time, he had
relationship with Juliana Abay, by whom he had a child,
Pascualito in 1976. He signed Pascualito’s birth
certificate.
Unknown to him, Damiana had an affair while he was
away and bore a daughter, Ariadne in 1977. She
represented to his employer that Ariadne was her child by
Pascual and to the personnel clerk of the company
reported the child to the sss as another beneficiary. When
Pascual returned to Manila, he found out about Ariadne
and sent damiana away from the conjugal home with the
child. She left and lived with ariadne’s natural father.
However, Pascual did not file legal separation
proceedings against damiana.
Pascual did not know about the registration of Ariadne as
an sss beneficiary, he then bought Juliana to his home in
manila wit their child pascualito. She was mother to all
his children.
In 1979 the then ministry of labor issued regulations on
occupation health and safety requiring construction
workers to bear safety helmets on an approved design,
while they worked in job sites. Pascual, being macho,
would put on his helmet only when executives of the
company were on the job site. In 1987, Pascual was
supervising the raising of a pallet filled with PVC pipes to
the 12th floor of the building they were working on.
A cable snapped and whiplashed. It smashed into
pascual’s helmet. Pascual lost his balance and fell to the
ground. The helmet flew off and he hit his head on the
pavement. As a result of the injuries that he sustained, he
was paralyzed.
You are the counsel of the company. The president of the
firm asks you to help the personnel clerk file a claim for
pascual’s benefits so it could augment the disability pay
that the company was paying him. In filling out, you find
blank for beneficiaries.
(a) whom should you write down as beneficiaries? Why?
(b) to what benefits would pascual be entitled? Explain
your answer/
(c) under what conditions may the sss suspend the grant
of these benefits to pascual?
ANSWER
(a) The disability suffered by pascual is work-connected.
Thus the applicable law are the provisions in the labor
code on employees compensation and the state insurance
fund. (arts. 166-208). In one of these provisions (art.
167(8)) “beneficiaries” means the dependent children,
(legitimate, legitimated, or legally adopted or
acknowledged child) who are primary beneficiaries. In
their absence, the dependent parents and subject to the
restriction imposed on dependent children, the
illegitimate children and legitimate descendants who are
secondary beneficiaries.
Applying the above definition, damiana, the legal spouse
of pascual could have been a primary beneficiary but
since she is not living with pascual, damiana is not a
dependent spouse.
Pedrito and marita are primary beneficiary as dependent
children if they are not over 21 yrs old but they are
unmarried and not gainfully employed.
Pascualito, the illegitimate child is a secondary
beneficiary. Also secondary beneficiaries are the
dependent parents juan and maria.
(b) he would be entitled to permanent disability benefit in
the form of employees compensation. His paralysis of at
least 2 limbs is considered permanent total disability and
it is employees compensation that will be given because
the disability is work-connected.
It arose out of and in the course of employment. But he
could not be entitled to this benefit if he has been
notoriously neglected. There could be basis for notorious
negligence. As a foreman he should be a model to his co-
employees. He should follow very well about wearing a
helmet while at work.
c) The grant of permanent total disability may be
suspended if pascual is again gainfully employed or
recovers from his permanent total disability or fails to
present himself for examination at least once a year upon
notice by the sss.
4) VILLAMARIA V CA & BUSTAMANTE GR No.
165881 April 19, 2006
FACTS:
- Oscar Villamaria, Jr. was the owner of Villamaria
Motors, a sole proprietorship engaged in assembling
passenger jeepneys with a public utility franchise to
operate along the Baclaran-Sucat route. By 1995,
Villamaria stopped assembling jeepneys and retained
only nine, four of which operated by employing drivers
on a “boundary basis.” One of those drivers was
respondent Bustamante.
- Bustamante remitted 450 a day to Villamaria as
boundary and kept the residue of his daily earnings as
compensation for driving the vehicle. In August 1997,
Villamaria verbally agreed to sell the jeepney to
Bustamante under a “boundary-hulog scheme”, where
Bustamante would remit to Villamaria P550 a day for a
period of 4 years; Bustamane would then become the
owner of the vehicle and continue to drive the same under
Villamaria’s franchise, but with Php 10,000
downpayment.
- August 7, 1997, Villamaria executed a contract entitled
“Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng
Boundary Hulog”. The parties agreed that if Bustamante
failed to pay the boundary- hulog for 3 days, Villamaria
Motors would hold on to the vehicle until Bustamante
paid his arrears, including a penalty of 50 a day; in case
Bustamante failed to remit the daily boundary-hulog for a
period of one week, the Kasunduan would cease to have
the legal effect and Bustamante would have to return the
vehicle to Villamaria motors.
- In 1999, Bustamante and other drivers who also had the
same arrangement failed to pay their respective boundary-
hulog. The prompted Villamaria to serve a “Paalala”. On
July 24, 2000. Villamaria took back the jeepney driven by
Bustamante and barred the latter from driving the vehicle.
- Bustamante filed a complaint for Illegal Dismissal.
DECISION OF LOWER COURTS:
*Labor Arbiter: petition dismissed.
*NLRC: dismissed appeal.
*CA: reversed NLRC, awarded Bustamante separation
pay and backwages.
Hence, this petition for review on certiorari.
ISSUES:
(1) WON the existence of a boundary-hulog agreement
negates the employer-employee relationship between the
vendor and vendee
(2) WON the Labor Arbiter has jurisdiction over a
complaint for illegal dismissal in such a case.
HELD:
(1) NO. Under the boundary-hulog scheme, a dual
juridical relationship is created; that of employer-
employee and vendor-vendee. The Kasanduan did not
extinguish the employer employee relationship of the
parties existing before the execution of said deed.
a. Under this system the owner/operator exercises control
and supervision over the driver. It is unlike in lease of
chattels where the lessor loses complete control over the
chattel leased but the lessee is still ultimately responsible
for the consequences of its use. The management of the
business is still in the hands of the owner/operator, who,
being the holder of the certificate of public convenience,
must see to it that the driver follows the route prescribed
by the franchising and regulatory authority, and the rules
promulgated with regard to the business operations.
b. The driver performs activities which are usually
necessary or desirable in the usual business or trade of the
owner/operator. Under the Kasunduan, respondent was
required to remit Php 550 daily to petitioner, an amount
which represented the boundary of petitioner as well as
respondent’s partial payment (hulog) of the purchase
price of the jeepney. Thus, the daily remittances also had
a dual purpose: that of petitioner’s boundary
and respondent’s partial payment (hulog) for the vehicle.
c. The obligation is not novated by an instrument that
expressly recognizes the old one, changes only the terms
of payment and adds other obligations not incompatible
with the old provisions or where the contract merely
supplements the previous one.
d. The existence of an employment relation is not
dependent on how the worker is paid but on the presence
or absence of control over the means and method of the
work. The amount earned in excess of the “boundary
hulog” is equivalent to wages and the fact that the power
of dismissal was not mentioned in the Kasunduan did not
mean that private respondent never exercised such power,
or could not exercise such power.
(2) YES. The Labor Arbiter and the NLRC has
jurisdiction under Article 217 of the Labor Code is limited
to disputes arising from an employer-employee
relationship which can only be resolved by reference to
the Labor Code, other labor statues of their collective
bargaining agreement.
OTHER NOTES:
(1) The rule is that the nature of an action and subject
matter thereof, as well as, which court or agency of the
government has jurisdiction and the character of the
reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such
reliefs.
(2) Not every dispute between an employer and employee
involves matters that only the Labor Arbiter and the
NLRC can resolve in the exercise of their adjudicatory or
quasi-judicial powers. Actions between employers and
employees where the employer-employee relationship is
merely incidental is within the exclusive original
jurisdiction of the regular courts.
5) ABS-CBN BROADCASTING CORPORATION vs.
MARLYN NAZARENO et al.
G.R. No. 164156
September 26, 2006
FACTS:
Petitioner ABS-CBN Broadcasting Corporation (ABS-
CBN) is engaged in the broadcasting business and owns a
network of television and radio stations, whose operations
revolve around the broadcast, transmission, and relay of
telecommunication signals. It sells and deals in or
otherwise utilizes the airtime it generates from its radio
and television operations. It has a franchise as a
broadcasting company, and was likewise issued a license
and authority to operate by the National
Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon,
Deiparine, and Lerasan as production assistants (PAs) on
different dates. They were assigned at the news and public
affairs, for various radio programs in the Cebu
Broadcasting Station. On December 19, 1996, petitioner
and the ABS-CBN Rank-and-File Employees executed a
Collective Bargaining Agreement (CBA) to be effective
during the period from December 11, 1996 to December
11, 1999. However, since petitioner refused to recognize
PAs as part of the bargaining unit, respondents were not
included to the CBA.
On October 12, 2000, respondents filed a Complaint for
Recognition of Regular Employment Status,
Underpayment of Overtime Pay, Holiday Pay, Premium
Pay, Service Incentive Pay, Sick Leave Pay, and 13th
Month Pay with Damages against the petitioner before the
NLRC. The Labor Arbiter rendered judgment in favor of
the respondents, and declared that they were regular
employees of petitioner as such, they were awarded
monetary benefits. NLRC affirmed the decision of the
Labor Arbiter. Petitioner filed a motion for
reconsideration but CA dismissed it.
ISSUE: Whether or not the respondents were considered
regular employees of ABS-CBN.
RULING: The respondents are regular employees of
ABS-CBN. It was held that where a person has rendered
at least one year of service, regardless of the nature of the
activity performed, or where the work is continuous or
intermittent, the employment is considered regular as long
as the activity exists, the reason being that a customary
appointment is not indispensable before one may be
formally declared as having attained regular status.
In Universal Robina Corporation v. Catapang, the Court
states that the primary standard, therefore, of determining
regular employment is the reasonable connection between
the particular activity performed by the employee in
relation to the usual trade or business of the employer. The
test is whether the former is usually necessary or desirable
in the usual business or trade of the employer. The
connection can be determined by considering the nature
of work performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if the
employee has been performing the job for at least a year,
even if the performance is not continuous and merely
intermittent, the law deems repeated and continuing need
for its performance as sufficient evidence of the necessity
if not indispensability of that activity to the business.
Hence, the employment is considered regular, but only
with respect to such activity and while such activity
exists.
Additionally, respondents cannot be considered as project
or program employees because no evidence was
presented to show that the duration and scope of the
project were determined or specified at the time of their
engagement. In the case at bar, however, the employer-
employee relationship between petitioner and
respondents has been proven. In the selection and
engagement of respondents, no peculiar or unique skill,
talent or celebrity status was required from them because
they were merely hired through petitioner’s personnel
department just like any ordinary employee. Respondents
did not have the power to bargain for huge talent fees, a
circumstance negating independent contractual
relationship. Respondents are highly dependent on the
petitioner for continued work. The degree of control and
supervision exercised by petitioner over respondents
through its supervisors negates the allegation that
respondents are independent contractors.
The presumption is that when the work done is an integral
part of the regular business of the employer and when the
worker, relative to the employer, does not furnish an
independent business or professional service, such work
is a regular employment of such employee and not an
independent contractor. As regular employees,
respondents are entitled to the benefits granted to all other
regular employees of petitioner under the CBA . Besides,
only talent-artists were excluded from the CBA and not
production assistants who are regular employees of the
respondents. Moreover, under Article 1702 of the New
Civil Code: “In case of doubt, all labor legislation and all
labor contracts shall be construed in favor of the safety
and decent living of the laborer.”