DUMEZ COMPANY and TRANS-ORIENT ENGINEERS, INC., petitioners, vs.

NATIONAL LABOR RELATIONS

COMMISSION and VERONICO EBILANE, respondents.

DECISION

HERMOSISIMA, JR., J.:

Before us is a petition for certiorari assailing the Decision[1] of the National Labor Relations Commission
(hereafter, NLRC)[2] in an illegal dismissal case[3] involving an overseas contract worker who contracted
a debilitating illness while rendering services under a subsisting job contract in Riyadh, Saudi Arabia. The
assailed Decision affirmed the award[4] by the Workers' Assistance and Adjudication Office of the
Philippine Overseas Employment Administration (hereafter POEA) in favor of private respondent in the
amount of U.S.$1,110.00 or its peso equivalent as and for his medical compensation benefits.

The facts of the case are not in dispute:

On May 21, 1982, petitioner Dumez Company, a French company, through petitioner Trans-Orient
Engineers, Inc., a corporation organized and existing under the laws of the Philippines, engaged the
services of private respondent Veronico Ebilane as carpenter for one of its projects in the Middle East,
with Riyadh, Saudi Arabia, as his place of actual employment. The parties executed and signed a one-
year overseas employment agreement embodying the terms and conditions of private respondent's
employment.

Private respondent commenced performance of said contract on July 3, 1982. On August 31, 1982, while
at the job site, private respondent was suddenly seized by abdominal pain and rushed to the Riyadh
Central Hospital were appendectomy was performed on him. During his confinement, he developed
right-sided weakness and numbness and difficulty of speaking which was found to have been caused by
Atrial Fibrillation and CVA embolism.

In a letter dated September 22, 1982, petitioners formally terminated private respondent's employment
effective September 29, 1982, up to which time petitioners paid private respondent his salaries under
his employment contract. Thereafter, on October 13, 1982, private respondent was repatriated to
Manila.

On November 23, 1982, private respondent filed a complaint for illegal dismissal against petitioners.
Such complaint was filed with the Workers' Assistance and Adjudication Office of the POEA.

Private respondent asseverates that he bad been terminated pursuant to the provision of Section 1 (d)
of the employment agreement which refers to termination of an employee who is unqualified. He
maintains that such ground for termination did not exist in his case and, thus, his dismissal was without
cause.[5]
On January 24, 1984, the POEA Administrator rendered the assailed Decision ordering petitioners to pay
private respondent medical compensation benefits in the amount of U.S.$1,110.00 or its peso
equivalent. Notwithstanding an explicit finding made in the assailed Decision that "there can be no
dispute that complainant could be terminated for medical reasons," still petitioners were found to have
failed to perform its obligation to give private respondent his "daily allowance for each day of work
disability, including holidays."[6]

Believing that the POEA Administrator erred in finding them liable for private respondent's medical
compensation benefits, petitioners appealed to the NLRC. In a Resolution[7] promulgated on March 25,
1986, the NLRC affirmed in toto the assailed Decision and dismissed the appeal for lack of merit.

Petitioners thus came to this Court on a petition for certiorari[8] seeking the voiding of the Resolution of
the NLRC. In the meantime, petitioners prayed that a temporary restraining order be issued to enjoin
the POEA from enforcing the assailed Resolution.

As prayed for, we issued a temporary restraining order enjoining the POEA and the NLRC from enforcing
the assailed Resolution.[9]

On November 17, 1986, the Solicitor General filed a Comment "as his own, considering that he is unable
to agree with the position adopted by public respondent National Labor Relations Commission."[10] The
Solicitor General does not dispute private complainant's entitlement, under Saudi Arabia law, to medical
benefits corresponding to the period of his physical incapacity. It is his position, however, that while
payment of said medical benefits is explicitly mandated by the Social Insurance Law of Saudi Arabia,

x x x the same law x x x is equally explicit that the liability decreed therein devolves at the General
Organization's expense, and not on the employer of the private respondent.[11]

Significantly, neither the private nor the public respondent has filed any pleading to refute the
aforementioned postulate of the Solicitor General.

Understandably, the sole error attributed to the NLRC and the POEA is that there is no legal basis to
require petitioners to pay private respondent medical compensation benefits equal to 75% of his
salaries for four (4) months.

Petitioners are correct.

The POEA Administrator, in finding petitioners liable to private respondent for medical benefits accruing
to the latter under the Social Insurance Law of Saudi Arabia, took judicial notice of the said law. To this
extent, the POEA Administrator's actuations are legally defensible. We have earlier ruled in Norse
Management Co. (PTE) vs. National Seamen Board[12] that evidence is usually a matter of procedure of
which a mere quasi-judicial body is not strict about. Although in a long line of cases, we have ruled that a
foreign law, being a matter of evidence must be alleged and proved, in order to be recognized and
applied in a particular controversy involving conflicts of laws, jurisprudence on this matter was not
meant to apply to cases before administrative or quasi-judicial bodies in the light of the well-settled rule
that administrative and quasi-judicial bodies are not bound strictly by technical rules.[13] Nonetheless,
only to this extent were the acts of the POEA Administrator amply supported by the law. Her actual
application thereof, however, is starkly erroneous.

Section 6(a) of the Overseas Employment Agreement entered into and signed by the private parties
herein, provides that "Workmen's Compensation insurance benefits will be provided within the limits of
the compensation law of the host country."[14] That compensation for disability was to be provided in
accordance with the law of the host country, Saudi Arabia, is a necessary consequence of the
compulsory coverage under the General Organization for Social Insurance Law of Saudi Arabia
(hereafter, GOSI Law of Saudi Arabia), upon all workers, regardless of nationality, sex or age, who render
their services within the territory of Saudi Arabia by virtue of a labor contract.

Article 49 of the GOSI Law of Saudi Arabia provides that the General Organization shall pay to the
beneficiaries the insurance compensation, the employer being under no obligation to pay any allowance
to the insured or to his heirs unless the injury has been intentionally caused by the employer or the
injury has occurred by reason of the latter's gross error or failure to abide by the GOSI Law or the rules
relating to occupational health and safety.[15]

Under the GOSI Law of Saudi Arabia as pleaded by petitioners clearly the obligation to pay medical
benefits as compensation for work-related injury or illness, devolves upon the General Organization and
not upon petitioners. Furthermore, after taking judicial notice of the GOSI Law of Saudi Arabia, the POEA
Administrator considered the said law as one of a similar nature as that of our own compensation laws.
Thus, in awarding the medical benefits to private respondent, she rationalized the same by quoting
Article 166 of the Labor Code of the Philippines which provides that "the State shall promote and
develop a tax-exempt employees' compensation program whereby employees x x x in the event of
work-connected disability or death, may promptly secure adequate income benefit and medical or
related benefits." Indeed, we may postulate further that the policies underlying our compensation laws
and the GOSI Law of Saudi Arabia being similar, the nature thereof could not be so dissimilar. Suffice it
to say that our own compensation program imposes on the employer nothing more than the obligation
to remit monthly premiums to the State Insurance Fund and it is the latter, not the employer, on which
is laid the burden of compensating the employee for any disability; in fact, once the employer pays his
share to the fund, all obligation on his part to his employees is ended.[16] No showing at all has there
been that petitioners had failed to comply with its obligations as employer under the GOSI Law of Saudi
Arabia.

WHEREFORE, the petition for certiorari is GRANTED. The decisions of the POEA Administrator and of the
NLRC are hereby ANNULLED and SET ASIDE. No pronouncement as to costs.

SO ORDERED.
 NYK-FIL SHIP MANAGEMENT INC., and/or JOSEPHINE J. FRANCISCO and TMM CO. LTD, TOKYO, JAPAN,

Petitioners,

- versus -

ALFONSO T. TALAVERA,

Respondent.

G.R. No. 175894

Present:

QUISUMBING, Acting CJ.,

Chairperson,

CARPIO MORALES,

TINGA,

VELASCO, JR., and

BRION, JJ.

Promulgated:

November 14, 2008

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

DECISION

CARPIO MORALES, J.:

Alfonso T. Talavera (respondent) entered into a nine-month contract of employment with petitioner
NYK-Fil Ship Management, Inc. (NYK-Fil) and/or Josephine J. Francisco, acting for and in behalf of
petitioner TMM Co., Ltd. Tokyo, Japan, as a fitter on board the M.T. Tachiho vessel. As a fitter, he
performed repair and maintenance and welding works which called for him to move heavy equipment
and materials.

After respondent started working in June 2003, he, on several occasions, felt slight pains in his back and
other parts of his body. He thus had frequent consultations with the ship medical officer who gave him
analgesics. The pain persisted and became more severe as it radiated to his feet, hence, he consulted a
clinic in Oman on August 16, 2003 and was diagnosed to have ureteric colic with urinary tract infection.

The following day or on August 17, 2003, respondent was repatriated to the Philippines following which
he consulted the Sachly International Health Partners, Inc. (SHIP), a company-designated clinic, which
diagnosed him to have lumbar strain with plantar fascitis and urinary tract infection.

Respondent thus went through daily physical rehabilitation therapy. After undergoing a Magnetic
Resonance Imaging (MRI) and other tests, he was finally diagnosed to have chronic bilateral L6
radiculopathies probably secondary to a lumbar canal and motility-like dyspepsia. He was later deemed
fit to resume sea duties by specialists of the SHIP.[1]

Respondent sought a second opinion from an orthopedic expert who diagnosed him to have lumbar
spondylopathy, lumbar disk protrusion, L5-S1 and declared him unfit for further sea duties.[2] The
doctor recommended a partial permanent disability with Grade 8 impediment based on the Philippine
Overseas Employment Administration (POEA) Contract.[3]

Respondent thereupon sought to claim illness allowance and disability benefits from petitioners. His
claim was denied in view of the declaration by the company-designated physicians that he was fit to
work, drawing respondent to file a complaint[4] against petitioners, docketed as NLRC-NCR Case No. (M)
04-05-01242-00, for disability benefits, illness allowance, damages and attorneys fees, invoking Sections
1 and 3 of Article XXI of the Collective Bargaining Agreement (CBA) between the All Japan Seamens
Union/Associated Marine Officers and Seamens Union of the Philippines and Global Marine Co., Ltd. as
well as Sections 20 (B) (3) and 20 (B) (6) of the POEA Standard Employment Contract.[5]

By Decision[6] of June 28, 2005, the Labor Arbiter, finding that respondent was not yet fit to perform his
usual task as fitter and noting that he had been declared unfit for further sea duty, awarded him 100%
compensation as disability benefit in the amount of $88,000 inclusive of attorneys fees. It denied,
however, his prayer for illness allowance and damages, such allowance having already been paid and
the claim for damages not having been justified.[7]

Petitioners alleged to have received the Labor Arbiters decision on July 13, 2005 and thus had until July
23, 2005 to file their memorandum on appeal. July 23, 2005 being a Saturday and the following Monday,
July 25, 2005, being a special non-working holiday, petitioners filed their Memorandum on Appeal[8] on
July 26, 2005 before the National Labor Relations Commission (NLRC).
The NLRC dismissed petitioners appeal for having been filed out of time,[9] it finding that per Registry
Receipt address[ed] to [petitioners counsel], copy of the Labor Arbiters decision was received by them
on July 12, 2005, hence, the ten (10) day reglementary period within which to perfect an appeal was up
to July 22, 2005.

Petitioners filed a Motion for Reconsideration of the NLRC order, their counsel contending that:

x x x The aforementioned decision by the Labor Arbiter was received by the Makati Central Post Office
on 12 July 2005 but the same was not delivered to the undersigned law office until 13 July 2005 by
Letter Carrier JACOB ZETA. Attached hereto as Annex A is a certification issued by Ms. Emily A. Gianan,
Chief, Administrative Unit of the Makati Central Post Office stating that the records of their office reflect
the undersigneds manifestation that the decision was received by JANICE CANTALOPEZ [of the office of
petitioners counsel] on 13 July 2005, as stated in [petitioners] Memorandum on Appeal dated 26 July
2005.

As the Honorable Commission is well aware, 25 July 2005 was declared a special non-working holiday.
Thus, the filing by the Respondents-Appellants of their Memorandum on Appeal on the next working
day, 26 July 2005, was timely and indubitably within the reglementary period.[10] (Underscoring
supplied)

The NLRC denied petitioners Motion for Reconsideration by Resolution of January 31, 2006, declaring
that:

x x x [T]he appeal was filed out of time based on the Registry Return Receipt returned by the Post Office
to this Commission, which forms part of the records of the case showing that a copy of the decision was
received by respondents[] counsel on July 12, 2005, and not on July 13, 2005 as alleged in respondents
Motion for Reconsideration. The certification of Ms. Emily A. Gianan of the Makati Central Post office
cannot invalidate the same official Registry Return Receipt that the very same post office sent back to
this Commission showing the date of receipt by respondents[] counsel as July 12, 2005 on the face
thereof.[11] (Emphasis and underscoring supplied)

Petitioners thereupon filed a Petition for Certiorari before the Court of Appeals,[12] their counsel
alleging that:

x x x Upon being confronted with the registry return card after the denial of Petitioners Motion for
Reconsideration by Public Respondent, Ms. Cantalopez [of the office of petitioners counsel] realized that
she had inadvertently and mistakenly entered the date 12 and not 13. She had actually received the
decision of the Labor Arbiter on 13 July 2005 and had later that same day recorded that date accurately
on the undersigneds copy of the Decision and in an incoming logbook, along with other incoming
correspondences addressed to the undersigned law firm, before routing these to the appropriate
attorneys, as is the Firms standard practice and internal operating procedure. This may be considered as
akin to a mere typographical error and should not be given the extreme punishment of dismissal of
Petitioners Appeal. x x x[13] (Underscoring supplied)

Attached to the petition was the affidavit of Cantalopez of the office of petitioners counsel and a copy of
the pertinent page of the logbook of the same office[14] reflecting the receipt on July 13, 2005 of the
Labor Arbiters decision.

The Court of Appeals dismissed the petition for, inter alia, failure to show that Marcelo R. Raenes
(Raeses), Vice President of petitioner NYK-FIL Ship Management who signed the verification and
certification of non-forum shopping, was authorized to sign for and in behalf of the said company.[15]
Petitioners filed a Motion for Reconsideration,[16] attaching a copy of the Board Resolution of NYK-Fil
Ship Management, Inc. authorizing Raeses to sign the required verification and certification at any stage
of the subject case. Their motion was denied,[17] hence, the present Petition[18] raising the sole issue
of:

WHETHER A TOTALLY NEW BOARD RESOLUTION AUTHORIZING A CORPORATE OFFICER TO SIGN THE
VERIFICATION AND CERTIFICATION OF NON-FORUM SHOPPING IS SPECIFICALLY REQUIRED IN THE
FILING OF A PETITION FOR REVIEW ON CERTIORARI UNDER RULE 65, BEFORE THE COURT OF APPEALS,
EVEN IF A PREVIOUS BOARD RESOLUTION HAD ALREADY BEEN ISSUED IN FAVOR OF THE VERY SAME
CORPORATE OFFICER AUTHORIZING HIM TO SIGN FOR AND IN BEHALF OF THE COMPANY AT ANY STAGE
OF THE CASE.[19]

Annexed to the petition is a Secretarys Certificate attesting to the conduct of a special meeting of the
Board of Directors of petitioner NYK-Fil Ship Management, Inc. in which said petitioner is now ratifying
the actions of its Vice President Raeses and submit such ratification to this Honorable Supreme
Court.[20]

The law allows a corporation to ratify the unauthorized acts of its corporate officer.[21] With the
ratification by petitioner NYK-Fil of Raeses accomplishing of the verification and certification of non-
forum shopping which accompanied petitioners petition for certiorari before the Court of Appeals, said
petitioner had substantially complied with the requirements of the law. Any defect in the signing of the
verification and certification of non-forum shopping is thus deemed cured. If this Court had, in some
instances, allowed the belated filing of the certification against forum shopping, or even excused the
non-compliance therewith, this Court a fortiori should allow the timely submission of such
requirements, albeit the proof of the authority of the signatory was put forward only after.[22]

While the normal course of action would be to remand the case to the appellate court for decision on
the merits, it is well within the conscientious exercise of this Courts broad review powers to choose to
render judgment on the merits, all material facts having been duly laid before it as would buttress its
ultimate conclusion, in the public interest and for the expeditious administration of justice.
Petitioners insist that they received notice of the Labor Arbiters decision on July 13, 2005 and not on
July 12, 2005 as indicated by their counsels employee Cantalopez in the Registry Return Card. It is a
generally accepted rule that when service is made by registered mail, the service is deemed complete
and effective upon actual receipt by the addressee as shown by the Registry Return Card.[23] Between
the Registry Return Card on one hand, and the Certification issued by Ms. Emily A. Gianan, Chief,
Administrative Unit of the Makati Central Post Office that copy of the Labor Arbiters decision was served
on petitioners counsel on July 13, 2005 and the entry of petitioners counsels office logbook stating that
copy of the decision was received on July 13, 2005, on the other, the Registry Return Card commands
more weight.[24] The Registry Return Card is considered as the official record of the NLRC. It is
presumed to be accurate, unless proven otherwise, unlike a written record or note of a party which is
often self-serving and easily fabricated.[25]

Nevertheless, this Court deems it proper to relax procedural rules in the interest of substantial
justice[26] in view of the partial merit of petitioners appeal before the NLRC.

Before the NLRC petitioners raised the following issues:

WHETHER THE COMPLAINANT-APPELLEE IS ENTITLED TO DISABILITY BENEFITS, DESPITE THE FACT THAT
THE COMPANY-DESIGNATED PHYSICIAN HAD ASSESSED HIM AS FIT TO RESUME SEA DUTIES.

II

WHETHER THE COMPLAINANT-APPELLEE IS ENTITLED TO DISABILITY BENEFITS, DESPITE THE FACT THAT
HIS ILLNESS OR INJURY IS NOT WORK-RELATED.

III

WHETHER THE COMPLAINANT-APPELLEE IS ENTITLED TO DISABILITY BENEFITS, DESPITE THE FACT THAT
HIS ILLNESS OR INJURY WAS NOT CAUSED BY AN ACCIDENT.

IV

WHETHER COMPLAINANT-APPELLEE IS ENTITLED TO ATTORNEYS FEES.[27]

Respecting petitioners argument that a company-designated physician declared respondent fit to

resume sea duties, the right of a seafarer to seek a second opinion is recognized by the POEA Standard
Employment Contract of 2000, the CBA governing the relationship between petitioners and respondent,
and jurisprudence.

Section 20 (B) (3) of the POEA Standard Employment Contract of 2000 provides:

SECTION 20. COMPENSATION AND BENEFITS FOR INJURY AND ILLNESS

The liabilities of the employer when the seafarer suffers work-related injury or illness during the term of
his contract are as follows:

xxxx

3. Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness allowance
equivalent to his basic wage until he is declared fit to work or the degree of permanent disability has
been assessed by the company-designated physician but in no case shall this period exceed one hundred
twenty (120) days.

For this purpose, the seafarer shall submit himself to a post-employment medical examination by a
company-designated physician within three working days upon his return except when he is physically
incapacitated to do so, in which case, a written notice to the agency within the same period is deemed
as compliance. Failure of the seafarer to comply with the mandatory reporting requirement shall result
in his forfeiture of the right to claim the above benefits.

If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed
jointly between the Employer and the seafarer. The third doctors decision shall be final and binding on
both parties. (Emphasis and underscoring supplied)

This provision substantially incorporates the 1996 POEA Standard Employment Contract. Passing on the
1996 POEA Standard Employment Contract, this Court held that [w]hile it is the company-designated
physician who must declare that the seaman suffers a permanent disability during employment, it does
not deprive the seafarer of his right to seek a second opinion, hence, the Contract recognizes the
prerogative of the seafarer to request a second opinion and, for this purpose, to consult a physician of
his choice.[28]

The CBA governing the relationship between petitioners and respondent contains provisions similar to
the aforecited provision of the POEA Standard Employment Contract of 2000, thus:

SECTION 2. The disability suffered by the Seafarer shall be determined by a doctor appointed by the
Company, and the Company shall provide disability compensation to the Seafarer in accordance with
the percentage specified in the table below which is appropriate to this disability.

xxxx

SECTION 5. If a doctor appointed by the Union disagrees with the assessment of the Company doctor in
SECTION 2, 3, or 4, a third doctor shall be mutually agreed between the Company and the Union, and
the decision of this doctor shall be binding on both parties.[29]
From the following findings of respondents physician, respondent is entitled to the benefits under the
POEA Standard Employment Contract of 2000:

IMPRESSION:

Lumbar spondylopathy

Lumbar disc protrusion, L5-S1

Mr. Talaveras back pain has improved since his physical therapy. However, he still experiences pain and
discomfort with exertion. He also now has started to complain of numbness that radiates down his
thighs. His diagnostic tests are significant for degenerative changes and disc protrusion which are
conditions due to wear and tear. That is, with more exposure to activities producing back stress, more
injuries, and disability are to be expected. He has lost his pre-injury capacity, and I now recommend a
partial permanent disability with Grade 8 Impediment based on the POEA contract. He is UNFIT for
further sea duties.

xxxx

Degenerative disc disease is a wear and tear condition and is associated with degenerative changes in
the articular cartilage. In the vertebral column, the fact joints are involved. A single episode of trauma
may not initially be significant, but repeated trauma, such as excessive and strenuous physical activities
may play a role.

Through degeneration, wear and tear or trauma, the annulus fibrosus containing the soft disc material
(nucleus pulposus) may tear. This results in protrusion of the disc or even extrusion of disc material into
the spinal canal or neural foramen. In addition, the nerve fibers of the affected root are also compressed
and this situation leads to radiculopathy in the appropriate muscles. When the nerve roots become
compressed, the herniated disc becomes significant. The most common complaint in patients with a
herniated disc is that of severe low back pain developing immediately or within a few hours after an
injury.

The mainstay of therapy for a herniated lumbar disc is conservative treatment, that is, nonsurgical. The
mechanism of injury is often an episode of trauma or a continued mechanical stress of postural or
occupational type. Therefore, torsional stresses on the back, and activities such as lifting and repetitive
bending should be avoided. The more these patients do, the more they hurt.

Prolonged relief is less likely if no permanent modification in the patients activities is made. Over time,
as the patient resumes his normal work of increased loading, twisting, or bending and extension of the
back, the patient exposes himself to dangers of enhancing the herniated disc to a more severe form.

Mr. Talavera should therefore refrain from activities producing torsional stress on the back and those
that require repetitive bending and lifting. His symptoms are also heightened by prolonged sitting and
standing. His functional capacity has diminished making it unsafe for him to work at his previous
occupation. He is UNFIT to resume his sea duties.[30] (Emphasis in the original; underscoring supplied)
Petitioners argue, however, that respondents injury or illness is not work-related.[31] They rely on their
designated physicians Reply to Medical Query, stating that respondents conditions could also be
attributed to age, genetics, weight, bone diseases, infections, and unknown factors.[32] They also call
attention to Article XXI, Section 1 of the CBA which requires that disability be the result of an accident to
be compensable.[33]

Indeed, under Section 1 of the CBA which reads:

SECTION 1: A Seafarer who suffers permanent disability as a result of an accident, regardless of fault but
excluding injuries caused by a Seafarers willful act, whilst in the employment of the Company, including
accidents occurring while traveling to or from the Ship, and whose ability to work is reduced as a result
thereof, shall in addition to sick pay, be entitled to compensation according to the provisions of the
Agreement. The copy/ies of the medical certificate and other relevant medical reports shall be made
available by the Company to the Seafarer,[34]

disability must be the result of an accident to be compensable.

There is no proof that respondent incurred disability as a result of an accident. Neither is there proof,
however, that, following Section 3 of Article XXI of the CBA which reads:

xxxx

SECTION 3: Permanent Medical Unfitness A Seafarer whose disability, in accordance with SECTION 1, is
assessed at 50% or more under the attached APPENDIX B shall, for the purpose of this section be
regarded as permanently unfit for further sea service in any capacity and entitled to 100%
compensation, i.e. US$80,000 for officers and ratings above AB and US$60,000 for ratings, AB and
below. Furthermore, any Seafarer assessed at less than 50% disability under the Contract but certified as
permanently unfit for further sea service in any capacity by the Company doctor, shall also be entitled to
100% compensation[35] (Underscoring supplied), respondent had a rating above AB and that his
disability was assessed at 50% or more under Appendix B of the CBA to merit the award of 100%
compensation or $80,000 disability benefit and 10% thereof or $8,000 attorneys fees.

For disability to be compensable under Section 20 (B) of the 2000 POEA Standard Employment Contract,
it must be the result of a work-related injury or illness,[36] unlike the 1996 POEA Standard Employment
Contract in which it was sufficient that the seafarer suffered injury or illness during the term of his
employment.[37] The 2000 POEA Standard Employment Contract defines work-related injury as
injury(ies) resulting in disability or death arising out of and in the course of employment and work-
related illness as any sickness resulting to disability or death as a result of an occupational disease listed
under Section 32-A of this contract with the conditions set therein satisfied.

In More Maritime Agencies, Inc. v. NLRC,[38] this Court, noting that the therein private respondents job
required him to enter a manhole accessible only in a crouching position and carry a 20-liter canister to
collect carbon, mud, and oil deposited inside the cylinders of the ships air trunk,[39] found that his
chronic low back pain, which indicated a slipped disc, was work-related. This Court, addressing the
therein petitioners argument that the therein respondents chronic low back pain was due to a pre-
existing condition, expounded on the nature of a work-related injury or illness:

x x x Compensability of an ailment does not depend on whether the injury or disease was pre-existing at
the time of the employment but rather if the disease or injury is work-related or aggravated his
condition. It is indeed safe to presume that, at the very least, the arduous nature of Hormicilladas
employment had contributed to the aggravation of his injury, if indeed it was pre-existing at the time of
his employment. Therefore, it is but just that he be duly compensated for it. It is not necessary, in order
for an employee to recover compensation, that he must have been in perfect condition or health at the
time he received the injury, or that he be free from disease. Every workman brings with him to his
employment certain infirmities, and while the employer is not the insurer of the health of his
employees, he takes them as he finds them, and assumes the risk of having a weakened condition
aggravated by some injury which might not hurt or bother a perfectly normal, healthy person.[40]
(Underscoring, emphasis, and italics supplied)

In the case at bar, a reasonable connection between the respondents injuries and the nature of his job
has been established. Thus, as in the above cited case, it is safe to presume that the arduous nature of
the respondents job caused the respondents illness or at least aggravated any pre-existing condition he
might have had, and is thus work-related.

The earlier-quoted findings of respondents physician indicate that repeated trauma such as excessive
and strenuous physical activities may play a role in producing back stress, more injuries and disability,
hence, his advice for respondent to refrain from activities producing torsional stress on the back and
those that require repetitive bending and lifting as he is UNFIT to resume his sea duties.

Petitioners physician herself stated that among the causes of respondents conditions are trauma,
biomechanical stress, and repeated motion on a joint.[41] Her observation that there was no overt and
direct assault or physical injury that may have contributed to the MRI findings of Mr. Talaveras lumbar
spine[42] and petitioners argument that no record of an accident was presented[43] do not persuade.
As respondents physician explained, A single episode of trauma may not initially be significant, but
repeated trauma, such as excessive and strenuous physical activities may play a role.[44]

In their Reply[45] to respondents Position Paper, petitioners did not contest or disprove respondents
claim that prior to June 2003, he had concluded three contracts with them and that every time he was
scheduled for deployment, he was subjected to medical examination by petitioners designated
physician and had always been declared fit to work.[46] Petitioners failed too to refute, respondents
following claims:

Complainant Talavera as Fitter performed repair and maintenance works, like hydraulic line return and
other supply lines of the vessel; he did all the welding works and assist[ed] the First and Second
Engineer during overhauling works of generators, engines and others [sic] engineering works as directed
by lifting, carrying, pushing, pulling and moving heavy equipment and materials and constantly
performed overtime works because the ship was old and always repair jobs are almost anywhere inside
the vessel. He found himself with very few hours rest period.
 On several occasions due to his excessive arduous and stressful, both physical and mental works, he felt
slight pains in his back and other parts of his body, [b]ut ignored the same due to the demands of his
works and because his superiors are very strict with regards to [the] time table in a given task.[47]
(Underscoring supplied)

Undoubtedly then, respondent is, under the 2000 POEA Standard Employment Contract, entitled to
compensation. His disability benefit, on account of the priorly stated partial permanent disability with
Grade 8 Impediment based on the 2000 POEA Standard Employment Contract, computed in accordance
with Section 20 (B) (6)[48] vis a vis Section 32[49] of the 2000 Standard Employment Contract, thus:

US$50,000 x 33.59%

amounts to US$16,795. The attorneys fees awarded by the labor arbiter equivalent to ten percent
(10%) of the judgment award[50] is thus reduced to US$1,679.50.

WHEREFORE, the assailed Resolutions of the Court of Appeals dated May 19, 2006 and December 4,
2006 are SET ASIDE.

The Decision of the Labor Arbiter dated June 28, 2005 is AFFIRMED with MODIFICATION. The disability
benefit awarded to the respondent Alfonso T. Talavera is reduced to US$16,795 in accordance with
Section 20 (B) (6) vis a vis Section 32 of the 2000 Philippine Overseas Employment Administration
Standard Terms and Conditions Governing the Employment of Seafarers on Board Ocean Going Vessels,
as amended by Department Order No. 4 and Memorandum Circular No. 9, both series of 2000. The
award of attorneys fees is correspondingly reduced to US$1,679.50.
G.R. No. 113161 August 29, 1995

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.

LOMA GOCE y OLALIA, DAN GOCE and NELLY D. AGUSTIN, accused. NELLY D. AGUSTIN, accused-
appellant.

REGALADO, J.:

On January 12, 1988, an information for illegal recruitment committed by a syndicate and in large scale,
punishable under Articles 38 and 39 of the Labor Code (Presidential Decree No. 442) as amended by
Section 1(b) of Presidential Decree No. 2018, was filed against spouses Dan and Loma Goce and herein
accused-appellant Nelly Agustin in the Regional Trial Court of Manila, Branch 5, alleging —

That in or about and during the period comprised between May 1986 and June 25, 1987, both dates
inclusive, in the City of Manila, Philippines, the said accused, conspiring and confederating together and
helping one another, representing themselves to have the capacity to contract, enlist and transport
Filipino workers for employment abroad, did then and there willfully and unlawfully, for a fee, recruit
and promise employment/job placement abroad, to (1) Rolando Dalida y Piernas, (2) Ernesto Alvarez y
Lubangco, (3) Rogelio Salado y Savillo, (4) Ramona Salado y Alvarez, (5) Dionisio Masaya y de Guzman,
(6) Dave Rivera y de Leon, (7) Lorenzo Alvarez y Velayo, and (8) Nelson Trinidad y Santos, without first
having secured the required license or authority from the Department of Labor. 1

On January 21, 1987, a warrant of arrest was issued against the three accused but not one of them was
arrested. 2 Hence, on February 2, 1989, the trial court ordered the case archived but it issued a standing
warrant of arrest against the accused. 3

Thereafter, on learning of the whereabouts of the accused, one of the offended parties, Rogelio Salado,
requested on March 17, 1989 for a copy of the warrant of arrest. 4 Eventually, at around midday of
February 26, 1993, Nelly Agustin was apprehended by the Parañaque police. 5 On March 8, 1993, her
counsel filed a motion to revive the case and requested that it be set for hearing "for purposes of due
process and for the accused to immediately have her day in court" 6 Thus, on April 15, 1993, the trial
court reinstated the case and set the arraignment for May 3, 1993, 7 on which date of Agustin pleaded
not guilty 8 and the case subsequently went to trial.

Four of the complainants testified for the prosecution. Rogelio Salado was the first to take the witness
stand and he declared that sometime in March or April, 1987, he was introduced by Lorenzo Alvarez, his
brother-in-law and a co-applicant, to Nelly Agustin in the latter's residence at Factor, Dongalo,
Parañaque, Metro Manila. Representing herself as the manager of the Clover Placement Agency, Agustin
showed him a job order as proof that he could readily be deployed for overseas employment. Salado
learned that he had to pay P5,000.00 as processing fee, which amount he gave sometime in April or May
of the same year. He was issued the corresponding receipt. 9

Also in April or May, 1987, Salado, accompanied by five other applicants who were his relatives, went to
the office of the placement agency at Nakpil Street, Ermita, Manila where he saw Agustin and met the
spouses Dan and Loma Goce, owners of the agency. He submitted his bio-data and learned from Loma
Goce that he had to give P12,000.00, instead of the original amount of P5,000.00 for the placement fee.
Although surprised at the new and higher sum, they subsequently agreed as long as there was an
assurance that they could leave for abroad. 10

Thereafter, a receipt was issued in the name of the Clover Placement Agency showing that Salado and
his aforesaid co-applicants each paid P2,000.00, instead of the P5,000.00 which each of them actually
paid. Several months passed but Salado failed to leave for the promised overseas employment. Hence,
in October, 1987, along with the other recruits, he decided to go to the Philippine Overseas Employment
Administration (POEA) to verify the real status of Clover Placement Agency. They discovered that said
agency was not duly licensed to recruit job applicants. Later, upon learning that Agustin had been
arrested, Salado decided to see her and to demand the return of the money he had paid, but Agustin
could only give him P500.00. 11

Ramona Salado, the wife of Rogelio Salado, came to know through her brother, Lorenzo Alvarez, about
Nelly Agustin. Accompanied by her husband, Rogelio, Ramona went to see Agustin at the latter's
residence. Agustin persuaded her to apply as a cutter/sewer in Oman so that she could join her
husband. Encouraged by Agustin's promise that she and her husband could live together while working
in Oman, she instructed her husband to give Agustin P2,000.00 for each of them as placement fee, or
the total sum of P4,000.00. 12

Much later, the Salado couple received a telegram from the placement agency requiring them to report
to its office because the "NOC" (visa) had allegedly arrived. Again, around February, or March, 1987,
Rogelio gave P2,000.00 as payment for his and his wife's passports. Despite follow-up of their papers
twice a week from February to June, 1987, he and his wife failed to leave for abroad. 13

Complainant Dionisio Masaya, accompanied by his brother-in-law, Aquiles Ortega, applied for a job in
Oman with the Clover Placement Agency at Parañaque, the agency's former office address. There,
Masaya met Nelly Agustin, who introduced herself as the manager of the agency, and the Goce spouses,
Dan and Loma, as well as the latter's daughter. He submitted several pertinent documents, such as his
bio-data and school credentials. 14

In May, 1986, Masaya gave Dan Goce P1,900.00 as an initial downpayment for the placement fee, and in
September of that same year, he gave an additional P10,000.00. He was issued receipts for said amounts
and was advised to go to the placement office once in a while to follow up his application, which he
faithfully did. Much to his dismay and chagrin, he failed to leave for abroad as promised. Accordingly, he
was forced to demand that his money be refunded but Loma Goce could give him back only P4,000.00 in
installments. 15
As the prosecution's fourth and last witness, Ernesto Alvarez took the witness stand on June 7, 1993. He
testified that in February, 1987, he met appellant Agustin through his cousin, Larry Alvarez, at her
residence in Parañaque. She informed him that "madalas siyang nagpapalakad sa Oman" and offered
him a job as an ambulance driver at the Royal Hospital in Oman with a monthly salary of about $600.00
to $700.00. 16

On March 10, 1987, Alvarez gave an initial amount of P3,000.00 as processing fee to Agustin at the
latter's residence. In the same month, he gave another P3,000.00, this time in the office of the
placement agency. Agustin assured him that he could leave for abroad before the end of 1987. He
returned several times to the placement agency's office to follow up his application but to no avail.
Frustrated, he demanded the return of the money he had paid, but Agustin could only give back
P500.00. Thereafter, he looked for Agustin about eight times, but he could no longer find her. 17

Only herein appellant Agustin testified for the defense. She asserted that Dan and Loma Goce were her
neighbors at Tambo, Parañaque and that they were licensed recruiters and owners of the Clover
Placement Agency. Previously, the Goce couple was able to send her son, Reynaldo Agustin, to Saudi
Arabia. Agustin met the aforementioned complainants through Lorenzo Alvarez who requested her to
introduce them to the Goce couple, to which request she acceded. 18

Denying any participation in the illegal recruitment and maintaining that the recruitment was
perpetrated only by the Goce couple, Agustin denied any knowledge of the receipts presented by the
prosecution. She insisted that the complainants included her in the complaint thinking that this would
compel her to reveal the whereabouts of the Goce spouses. She failed to do so because in truth, so she
claims, she does not know the present address of the couple. All she knew was that they had left their
residence in 1987. 19

Although she admitted having given P500.00 each to Rogelio Salado and Alvarez, she explained that it
was entirely for different reasons. Salado had supposedly asked for a loan, while Alvarez needed money
because he was sick at that time. 20

On November 19, 1993, the trial court rendered judgment finding herein appellant guilty as a principal
in the crime of illegal recruitment in large scale, and sentencing her to serve the penalty of life
imprisonment, as well as to pay a fine of P100,000.00. 21

In her present appeal, appellant Agustin raises the following arguments: (1) her act of introducing
complainants to the Goce couple does not fall within the meaning of illegal recruitment and placement
under Article 13(b) in relation to Article 34 of the Labor Code; (2) there is no proof of conspiracy to
commit illegal recruitment among appellant and the Goce spouses; and (3) there is no proof that
appellant offered or promised overseas employment to the complainants. 22 These three arguments
being interrelated, they will be discussed together.
Herein appellant is accused of violating Articles 38 and 39 of the Labor Code. Article 38 of the Labor
Code, as amended by Presidential Decree No. 2018, provides that any recruitment activity, including the
prohibited practices enumerated in Article 34 of said Code, undertaken by non-licensees or non-holders
of authority shall be deemed illegal and punishable under Article 39 thereof. The same article further
provides that illegal recruitment shall be considered an offense involving economic sabotage if any of
these qualifying circumstances exist, namely, (a) when illegal recruitment is committed by a syndicate,
i.e., if it is carried out by a group of three or more persons conspiring and/or confederating with one
another; or (b) when illegal recruitment is committed in large scale, i.e., if it is committed against three
or more persons individually or as a group.

At the outset, it should be made clear that all the accused in this case were not authorized to engage in
any recruitment activity, as evidenced by a certification issued by Cecilia E. Curso, Chief of the Licensing
and Regulation Office of the Philippine Overseas Employment Administration, on November 10, 1987.
Said certification states that Dan and Loma Goce and Nelly Agustin are neither licensed nor authorized
to recruit workers for overseas

employment. 23 Appellant does not dispute this. As a matter of fact her counsel agreed to stipulate that
she was neither licensed nor authorized to recruit applicants for overseas employment. Appellant,
however, denies that she was in any way guilty of illegal recruitment. 24

It is appellant's defensive theory that all she did was to introduce complainants to the Goce spouses.
Being a neighbor of said couple, and owing to the fact that her son's overseas job application was
processed and facilitated by them, the complainants asked her to introduce them to said spouses.
Allegedly out of the goodness of her heart, she complied with their request. Such an act, appellant
argues, does not fall within the meaning of "referral" under the Labor Code to make her liable for illegal
recruitment.

Under said Code, recruitment and placement refers to any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or
advertising for employment, locally or abroad, whether for profit or not; provided, that any person or
entity which, in any manner, offers or promises for a fee employment to two or more persons shall be
deemed engaged in recruitment and placement. 25 On the other hand, referral is the act of passing
along or forwarding of an applicant for employment after an initial interview of a selected applicant for
employment to a selected employer, placement officer or bureau. 26

Hence, the inevitable query is whether or not appellant Agustin merely introduced complainants to the
Goce couple or her actions went beyond that. The testimonial evidence hereon show that she indeed
further committed acts constitutive of illegal recruitment. All four prosecution witnesses testified that it
was Agustin whom they initially approached regarding their plans of working overseas. It was from her
that they learned about the fees they had to pay, as well as the papers that they had to submit. It was
after they had talked to her that they met the accused spouses who owned the placement agency.
As correctly held by the trial court, being an employee of the Goces, it was therefore logical for
appellant to introduce the applicants to said spouses, they being the owners of the agency. As such,
appellant was actually making referrals to the agency of which she was a part. She was therefore
engaging in recruitment activity. 27

Despite Agustin's pretensions that she was but a neighbor of the Goce couple, the testimonies of the
prosecution witnesses paint a different picture. Rogelio Salado and Dionisio Masaya testified that
appellant represented herself as the manager of the Clover Placement Agency. Ramona Salado was
offered a job as a cutter/sewer by Agustin the first time they met, while Ernesto Alvarez remembered
that when he first met Agustin, the latter represented herself as "nagpapaalis papunta sa Oman." 28
Indeed, Agustin played a pivotal role in the operations of the recruitment agency, working together with
the Goce couple.

There is illegal recruitment when one gives the impression of having the ability to send a worker
abroad." 29 It is undisputed that appellant gave complainants the distinct impression that she had the
power or ability to send people abroad for work such that the latter were convinced to give her the
money she demanded in order to be so employed. 30

It cannot be denied that Agustin received from complainants various sums for purpose of their
applications. Her act of collecting from each of the complainants payment for their respective passports,
training fees, placement fees, medical tests and other sundry expenses unquestionably constitutes an
act of recruitment within the meaning of the law. In fact, appellant demanded and received from
complainants amounts beyond the allowable limit of P5,000.00 under government regulations. It is true
that the mere act of a cashier in receiving money far exceeding the amount allowed by law was not
considered per se as "recruitment and placement" in contemplation of law, but that was because the
recipient had no other participation in the transactions and did not conspire with her co-accused in
defrauding the victims. 31 That is not the case here.

Appellant further argues that "there is no evidence of receipts of collections/payments from

complainants to appellant." On the contrary, xerox copies of said receipts/vouchers were presented by
the prosecution. For instance, a cash voucher marked as Exhibit D, 32 showing the receipt of P10,000.00
for placement fee and duly signed by appellant, was presented by the prosecution. Another receipt,
identified as Exhibit E, 33 was issued and signed by appellant on February 5, 1987 to acknowledge
receipt of P4,000.00 from Rogelio and Ramona Salado for "processing of documents for Oman." Still
another receipt dated March 10, 1987 and presented in evidence as Exhibit F, shows that appellant
received from Ernesto Alvarez P2,000.00 for "processing of documents for Oman." 34

Apparently, the original copies of said receipts/vouchers were lost, hence only xerox copies thereof
were presented and which, under the circumstances, were admissible in evidence. When the original
writing has been lost or destroyed or cannot be produced in court, upon proof of its execution and loss
or destruction, or unavailability, its contents may be proved by a copy or a recital of its contents in some
authentic document, or by the recollection of witnesses. 35
Even assuming arguendo that the xerox copies presented by the prosecution as secondary evidence are
not allowable in court, still the absence thereof does not warrant the acquittal of appellant. In People vs.
Comia, 36 where this particular issue was involved, the Court held that the complainants' failure to ask
for receipts for the fees they paid to the accused therein, as well as their consequent failure to present
receipts before the trial court as proof of the said payments, is not fatal to their case. The complainants
duly proved by their respective testimonies that said accused was involved in the entire recruitment
process. Their testimonies in this regard, being clear and positive, were declared sufficient to establish
that factum probandum.

Indeed, the trial court was justified and correct in accepting the version of the prosecution witnesses,
their statements being positive and affirmative in nature. This is more worthy of credit than the mere
uncorroborated and self-serving denials of appellant. The lame defense consisting of such bare denials
by appellant cannot overcome the evidence presented by the prosecution proving her guilt beyond
reasonable doubt. 37

The presence of documentary evidence notwithstanding, this case essentially involves the credibility of
witnesses which is best left to the judgment of the trial court, in the absence of abuse of discretion
therein. The findings of fact of a trial court, arrived at only after a hearing and evaluation of what can
usually be expected to be conflicting testimonies of witnesses, certainly deserve respect by an appellate
court. 38 Generally, the findings of fact of the trial court on the matter of credibility of witnesses will not
be disturbed on appeal. 39

In a last-ditch effort to exculpate herself from conviction, appellant argues that there is no proof of
conspiracy between her and the Goce couple as to make her liable for illegal recruitment. We do not
agree. The evidence presented by the prosecution clearly establish that appellant confabulated with the
Goces in their plan to deceive the complainants. Although said accused couple have not been tried and
convicted, nonetheless there is sufficient basis for appellant's conviction as discussed above.

In People vs. Sendon, 40 we held that the non-prosecution of another suspect therein provided no
ground for the appellant concerned to fault the decision of the trial court convicting her. The
prosecution of other persons, equally or more culpable than herein appellant, may come later after their
true identities and addresses shall have been ascertained and said malefactors duly taken into custody.
We see no reason why the same doctrinal rule and course of procedure should not apply in this case.

WHEREFORE, the appealed judgment of the court a quo is hereby AFFIRMED in toto, with costs against
accused-appellant Nelly D. Agustin.

SO ORDERED.
G.R. No. 167622 June 29, 2010

GREGORIO V. TONGKO, Petitioner,

vs.

THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS,
Respondents.

RESOLUTION

BRION, J.:

This resolves the Motion for Reconsideration1 dated December 3, 2008 filed by respondent The
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) to set aside our Decision of November 7, 2008.
In the assailed decision, we found that an employer-employee relationship existed between Manulife
and petitioner Gregorio Tongko and ordered Manulife to pay Tongko backwages and separation pay for
illegal dismissal.

The following facts have been stated in our Decision of November 7, 2008, now under reconsideration,
but are repeated, simply for purposes of clarity.

The contractual relationship between Tongko and Manulife had two basic phases. The first or initial
phase began on July 1, 1977, under a Career Agent’s Agreement (Agreement) that provided:

It is understood and agreed that the Agent is an independent contractor and nothing contained herein
shall be construed or interpreted as creating an employer-employee relationship between the Company
and the Agent.

xxxx

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other
products offered by the Company, and collect, in exchange for provisional receipts issued by the Agent,
money due to or become due to the Company in respect of applications or policies obtained by or
through the Agent or from policyholders allotted by the Company to the Agent for servicing, subject to
subsequent confirmation of receipt of payment by the Company as evidenced by an Official Receipt
issued by the Company directly to the policyholder.

xxxx

The Company may terminate this Agreement for any breach or violation of any of the provisions hereof
by the Agent by giving written notice to the Agent within fifteen (15) days from the time of the discovery
of the breach. No waiver, extinguishment, abandonment, withdrawal or cancellation of the right to
terminate this Agreement by the Company shall be construed for any previous failure to exercise its
right under any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving
to the other party fifteen (15) days notice in writing.2

Tongko additionally agreed (1) to comply with all regulations and requirements of Manulife, and (2) to
maintain a standard of knowledge and competency in the sale of Manulife’s products, satisfactory to
Manulife and sufficient to meet the volume of the new business, required by his Production Club
membership.3

The second phase started in 1983 when Tongko was named Unit Manager in Manulife’s Sales Agency
Organization. In 1990, he became a Branch Manager. Six years later (or in 1996), Tongko became a
Regional Sales Manager.4

Tongko’s gross earnings consisted of commissions, persistency income, and management overrides.
Since the beginning, Tongko consistently declared himself self-employed in his income tax returns. Thus,
under oath, he declared his gross business income and deducted his business expenses to arrive at his
taxable business income. Manulife withheld the corresponding 10% tax on Tongko’s earnings.5

In 2001, Manulife instituted manpower development programs at the regional sales management level.
Respondent Renato Vergel de Dios wrote Tongko a letter dated November 6, 2001 on concerns that
were brought up during the October 18, 2001 Metro North Sales Managers Meeting. De Dios wrote:

The first step to transforming Manulife into a big league player has been very clear – to increase the
number of agents to at least 1,000 strong for a start. This may seem diametrically opposed to the way
Manulife was run when you first joined the organization. Since then, however, substantial changes have
taken place in the organization, as these have been influenced by developments both from within and
without the company.

xxxx

The issues around agent recruiting are central to the intended objectives hence the need for a Senior
Managers’ meeting earlier last month when Kevin O’Connor, SVP-Agency, took to the floor to determine
from our senior agency leaders what more could be done to bolster manpower development. At earlier
meetings, Kevin had presented information where evidently, your Region was the lowest performer (on
a per Manager basis) in terms of recruiting in 2000 and, as of today, continues to remain one of the
laggards in this area.

While discussions, in general, were positive other than for certain comments from your end which were
perceived to be uncalled for, it became clear that a one-on-one meeting with you was necessary to
ensure that you and management, were on the same plane. As gleaned from some of your previous
comments in prior meetings (both in group and one-on-one), it was not clear that we were proceeding
in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those
subsequent meetings you reiterated certain views, the validity of which we challenged and subsequently
found as having no basis.

With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may
be a bit confused as to the directions the company was taking. For this reason, I sought a meeting with
everyone in your management team, including you, to clear the air, so to speak.

This note is intended to confirm the items that were discussed at the said Metro North Region’s Sales
Managers meeting held at the 7/F Conference room last 18 October.

xxxx

Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of
agents."

This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the
issue on the table before the rest of your Region’s Sales Managers to verify its validity. As you must have
noted, no Sales Manager came forward on their own to confirm your statement and it took you to name
Malou Samson as a source of the same, an allegation that Malou herself denied at our meeting and in
your very presence.

This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had
thought all along, that these allegations were simply meant to muddle the issues surrounding the
inability of your Region to meet its agency development objectives!

Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn
less."

xxxx

All the above notwithstanding, we had your own records checked and we found that you made a lot
more money in the Year 2000 versus 1999. In addition, you also volunteered the information to Kevin
when you said that you probably will make more money in the Year 2001 compared to Year 2000.
Obviously, your above statement about making "less money" did not refer to you but the way you
argued this point had us almost believing that you were spouting the gospel of truth when you were not.
xxx

xxxx

All of a sudden, Greg, I have become much more worried about your ability to lead this group towards
the new direction that we have been discussing these past few weeks, i.e., Manulife’s goal to become a
major agency-led distribution company in the Philippines. While as you claim, you have not stopped
anyone from recruiting, I have never heard you proactively push for greater agency recruiting. You have
not been proactive all these years when it comes to agency growth.
xxxx

I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are
making the following changes in the interim:

1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks
which can be easily delegated. This assistant should be so chosen as to complement your skills and help
you in the areas where you feel "may not be your cup of tea."

You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for
your health. The above could solve this problem.

xxxx

2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star
Branch (NSB) in autonomous fashion. x x x

I have decided to make this change so as to reduce your span of control and allow you to concentrate
more fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the
Sales Managers in Metro North. I will hold you solely responsible for meeting the objectives of these
remaining groups.

xxxx

The above changes can end at this point and they need not go any further. This, however, is entirely
dependent upon you. But you have to understand that meeting corporate objectives by everyone is
primary and will not be compromised. We are meeting tough challenges next year, and I would want
everybody on board. Any resistance or holding back by anyone will be dealt with accordingly.6

Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminating Tongko’s
services:

It would appear, however, that despite the series of meetings and communications, both one-on-one
meetings between yourself and SVP Kevin O’Connor, some of them with me, as well as group meetings
with your Sales Managers, all these efforts have failed in helping you align your directions with
Management’s avowed agency growth policy.

xxxx

On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract
as we are now issuing this notice of termination of your Agency Agreement with us effective fifteen days
from the date of this letter.7
Tongko responded by filing an illegal dismissal complaint with the National Labor Relations Commission
(NLRC) Arbitration Branch. He essentially alleged – despite the clear terms of the letter terminating his
Agency Agreement – that he was Manulife’s employee before he was illegally dismissed.8

Thus, the threshold issue is the existence of an employment relationship. A finding that none exists
renders the question of illegal dismissal moot; a finding that an employment relationship exists, on the
other hand, necessarily leads to the need to determine the validity of the termination of the
relationship.

A. Tongko’s Case for Employment Relationship

Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding P50,000.00,
regardless of production levels attained and exclusive of commissions and bonuses. He also claimed that
as Regional Sales Manager, he was given a travel and entertainment allowance of P36,000.00 per year in
addition to his overriding commissions; he was tasked with numerous administrative functions and
supervisory authority over Manulife’s employees, aside from merely selling policies and recruiting
agents for Manulife; and he recommended and recruited insurance agents subject to vetting and
approval by Manulife. He further alleges that he was assigned a definite place in the Manulife offices
when he was not in the field – at the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts.,
Salcedo Village, Makati City – for which he never paid any rental. Manulife provided the office
equipment he used, including tables, chairs, computers and printers (and even office stationery), and
paid for the electricity, water and telephone bills. As Regional Sales Manager, Tongko additionally
asserts that he was required to follow at least three codes of conduct.9

B. Manulife’s Case – Agency Relationship with Tongko

Manulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko was paid
commissions of varying amounts, computed based on the premium paid in full and actually received by
Manulife on policies obtained through an agent. As sales manager, Tongko was paid overriding sales
commission derived from sales made by agents under his unit/structure/branch/region. Manulife also
points out that it deducted and withheld a 10% tax from all commissions Tongko received; Tongko even
declared himself to be self-employed and consistently paid taxes as such—i.e., he availed of tax
deductions such as ordinary and necessary trade, business and professional expenses to which a
business is entitled.

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 and our ruling in Carungcong v. National Labor Relations
Commission.10

The Conflicting Rulings of the Lower Tribunals

The labor arbiter decreed that no employer-employee relationship existed between the parties.
However, the NLRC reversed the labor arbiter’s decision on appeal; it found the existence of an
employer-employee relationship and concluded that Tongko had been illegally dismissed. In the petition
for certiorari with the Court of Appeals (CA), the appellate court found that the NLRC gravely abused its
discretion in its ruling and reverted to the labor arbiter’s decision that no employer-employee
relationship existed between Tongko and Manulife.

Our Decision of November 7, 2008

In our Decision of November 7, 2008, we reversed the CA ruling and found that an employment
relationship existed between Tongko and Manulife. We concluded that Tongko is Manulife’s employee
for the following reasons:

1. Our ruling in the first Insular11 case did not foreclose the possibility of an insurance agent becoming
an employee of an insurance company; if evidence exists showing that the company promulgated rules
or regulations that effectively controlled or restricted an insurance agent’s choice of methods or the
methods themselves in selling insurance, an employer-employee relationship would be present. The
determination of the existence of an employer-employee relationship is thus on a case-to-case basis
depending on the evidence on record.

2. Manulife had the power of control over Tongko, sufficient to characterize him as an employee, as
shown by the following indicators:

2.1 Tongko undertook to comply with Manulife’s rules, regulations and other requirements, i.e., the
different codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct,
and the Financial Code of Conduct Agreement;

2.2 The various affidavits of Manulife’s insurance agents and managers, who occupied similar positions
as Tongko, showed that they performed administrative duties that established employment with
Manulife;12 and

2.3 Tongko was tasked to recruit some agents in addition to his other administrative functions. De Dios’
letter harped on the direction Manulife intended to take, viz., greater agency recruitment as the primary
means to sell more policies; Tongko’s alleged failure to follow this directive led to the termination of his
employment with Manulife.

The Motion for Reconsideration

Manulife disagreed with our Decision and filed the present motion for reconsideration on the following
GROUNDS:

1. The November 7[, 2008] Decision violates Manulife’s right to due process by: (a) confining the review
only to the issue of "control" and utterly disregarding all the other issues that had been joined in this
case; (b) mischaracterizing the divergence of conclusions between the CA and the NLRC decisions as
confined only to that on "control"; (c) grossly failing to consider the findings and conclusions of the CA
on the majority of the material evidence, especially [Tongko’s] declaration in his income tax returns that
he was a "business person" or "self-employed"; and (d) allowing [Tongko] to repudiate his sworn
statement in a public document.
2. The November 7[, 2008] Decision contravenes settled rules in contract law and agency, distorts not
only the legal relationships of agencies to sell but also distributorship and franchising, and ignores the
constitutional and policy context of contract law vis-à-vis labor law.

3. The November 7[, 2008] Decision ignores the findings of the CA on the three elements of the four-fold
test other than the "control" test, reverses well-settled doctrines of law on employer-employee
relationships, and grossly misapplies the "control test," by selecting, without basis, a few items of
evidence to the exclusion of more material evidence to support its conclusion that there is "control."

4. The November 7[, 2008] Decision is judicial legislation, beyond the scope authorized by Articles 8 and
9 of the Civil Code, beyond the powers granted to this Court under Article VIII, Section 1 of the
Constitution and contravenes through judicial legislation, the constitutional prohibition against
impairment of contracts under Article III, Section 10 of the Constitution.

5. For all the above reasons, the November 7[, 2008] Decision made unsustainable and reversible errors,
which should be corrected, in concluding that Respondent Manulife and Petitioner had an employer-
employee relationship, that Respondent Manulife illegally dismissed Petitioner, and for consequently
ordering Respondent Manulife to pay Petitioner backwages, separation pay, nominal damages and
attorney’s fees.13

THE COURT’S RULING

A. The Insurance and the Civil Codes;

the Parties’ Intent and Established

Industry Practices

We cannot consider the present case purely from a labor law perspective, oblivious that the factual
antecedents were set in the insurance industry so that the Insurance Code primarily governs. Chapter IV,
Title 1 of this Code is wholly devoted to "Insurance Agents and Brokers" and specifically defines the
agents and brokers relationship with the insurance company and how they are governed by the Code
and regulated by the Insurance Commission.

The Insurance Code, of course, does not wholly regulate the "agency" that it speaks of, as agency is a
civil law matter governed by the Civil Code. Thus, at the very least, three sets of laws – namely, the
Insurance Code, the Labor Code and the Civil Code – have to be considered in looking at the present
case. Not to be forgotten, too, is the Agreement (partly reproduced on page 2 of this Dissent and which
no one disputes) that the parties adopted to govern their relationship for purposes of selling the
insurance the company offers. To forget these other laws is to take a myopic view of the present case
and to add to the uncertainties that now exist in considering the legal relationship between the
insurance company and its "agents."
The main issue of whether an agency or an employment relationship exists depends on the incidents of
the relationship. The Labor Code concept of "control" has to be compared and distinguished with the
"control" that must necessarily exist in a principal-agent relationship. The principal cannot but also have
his or her say in directing the course of the principal-agent relationship, especially in cases where the
company-representative relationship in the insurance industry is an agency.

a. The laws on insurance and agency

The business of insurance is a highly regulated commercial activity in the country, in terms particularly
of who can be in the insurance business, who can act for and in behalf of an insurer, and how these
parties shall conduct themselves in the insurance business. Section 186 of the Insurance Code provides
that "No person, partnership, or association of persons shall transact any insurance business in the
Philippines except as agent of a person or corporation authorized to do the business of insurance in the
Philippines." Sections 299 and 300 of the Insurance Code on Insurance Agents and Brokers, among other
provisions, provide:

Section 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay
any commission or other compensation to any person for services in obtaining insurance, unless such
person shall have first procured from the Commissioner a license to act as an insurance agent of such
company or as an insurance broker as hereinafter provided.

No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of
applications for insurance, or receive for services in obtaining insurance, any commission or other
compensation from any insurance company doing business in the Philippines or any agent thereof,
without first procuring a license so to act from the Commissioner x x x The Commissioner shall satisfy
himself as to the competence and trustworthiness of the applicant and shall have the right to refuse to
issue or renew and to suspend or revoke any such license in his discretion.1avvphi1.net

Section 300. Any person who for compensation solicits or obtains insurance on behalf of any insurance
company or transmits for a person other than himself an application for a policy or contract of insurance
to or from such company or offers or assumes to act in the negotiating of such insurance shall be an
insurance agent within the intent of this section and shall thereby become liable to all the duties,
requirements, liabilities and penalties to which an insurance agent is subject.

The application for an insurance agent’s license requires a written examination, and the applicant must
be of good moral character and must not have been convicted of a crime involving moral turpitude.14
The insurance agent who collects premiums from an insured person for remittance to the insurance
company does so in a fiduciary capacity, and an insurance company which delivers an insurance policy
or contract to an authorized agent is deemed to have authorized the agent to receive payment on the
company’s behalf.15 Section 361 further prohibits the offer, negotiation, or collection of any amount
other than that specified in the policy and this covers any rebate from the premium or any special favor
or advantage in the dividends or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed and must also
act within the parameters of the authority granted under the license and under the contract with the
principal. Other than the need for a license, the agent is limited in the way he offers and negotiates for
the sale of the company’s insurance products, in his collection activities, and in the delivery of the
insurance contract or policy. Rules regarding the desired results (e.g., the required volume to continue
to qualify as a company agent, rules to check on the parameters on the authority given to the agent, and
rules to ensure that industry, legal and ethical rules are followed) are built-in elements of control
specific to an insurance agency and should not and cannot be read as elements of control that attend an
employment relationship governed by the Labor Code.

On the other hand, the Civil Code defines an agent as a "person [who] binds himself to render some
service or to do something in representation or on behalf of another, with the consent or authority of
the latter."16 While this is a very broad definition that on its face may even encompass an employment
relationship, the distinctions between agency and employment are sufficiently established by law and
jurisprudence.

Generally, the determinative element is the control exercised over the one rendering service. The
employer controls the employee both in the results and in the means and manner of achieving this
result. The principal in an agency relationship, on the other hand, also has the prerogative to exercise
control over the agent in undertaking the assigned task based on the parameters outlined in the
pertinent laws.

Under the general law on agency as applied to insurance, an agency must be express in light of the need
for a license and for the designation by the insurance company. In the present case, the Agreement fully
serves as grant of authority to Tongko as Manulife’s insurance agent.17 This agreement is supplemented
by the company’s agency practices and usages, duly accepted by the agent in carrying out the agency.18
By authority of the Insurance Code, an insurance agency is for compensation,19 a matter the Civil Code
Rules on Agency presumes in the absence of proof to the contrary.20 Other than the compensation, the
principal is bound to advance to, or to reimburse, the agent the agreed sums necessary for the
execution of the agency.21 By implication at least under Article 1994 of the Civil Code, the principal can
appoint two or more agents to carry out the same assigned tasks,22 based necessarily on the specific
instructions and directives given to them.

With particular relevance to the present case is the provision that "In the execution of the agency, the
agent shall act in accordance with the instructions of the principal."23 This provision is pertinent for
purposes of the necessary control that the principal exercises over the agent in undertaking the assigned
task, and is an area where the instructions can intrude into the labor law concept of control so that
minute consideration of the facts is necessary. A related article is Article 1891 of the Civil Code which
binds the agent to render an account of his transactions to the principal.

B. The Cited Case

The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to establish that the
company rules and regulations that an agent has to comply with are indicative of an employer-employee
relationship.24 The Dissenting Opinions of Justice Presbitero Velasco, Jr. and Justice Conchita Carpio
Morales also cite Insular Life Assurance Co. v. National Labor Relations Commission (second Insular
case)25 to support the view that Tongko is Manulife’s employee. On the other hand, Manulife cites the
Carungcong case and AFP Mutual Benefit Association, Inc. v. National Labor Relations Commission
(AFPMBAI case)26 to support its allegation that Tongko was not its employee.

A caveat has been given above with respect to the use of the rulings in the cited cases because none of
them is on all fours with the present case; the uniqueness of the factual situation of the present case
prevents it from being directly and readily cast in the mold of the cited cases. These cited cases are
themselves different from one another; this difference underscores the need to read and quote them in
the context of their own factual situations.

The present case at first glance appears aligned with the facts in the Carungcong, the Grepalife, and the
second Insular Life cases. A critical difference, however, exists as these cited cases dealt with the proper
legal characterization of a subsequent management contract that superseded the original agency
contract between the insurance company and its agent. Carungcong dealt with a subsequent Agreement
making Carungcong a New Business Manager that clearly superseded the Agreement designating
Carungcong as an agent empowered to solicit applications for insurance. The Grepalife case, on the
other hand, dealt with the proper legal characterization of the appointment of the Ruiz brothers to
positions higher than their original position as insurance agents. Thus, after analyzing the duties and
functions of the Ruiz brothers, as these were enumerated in their contracts, we concluded that the
company practically dictated the manner by which the Ruiz brothers were to carry out their jobs. Finally,
the second Insular Life case dealt with the implications of de los Reyes’ appointment as acting unit
manager which, like the subsequent contracts in the Carungcong and the Grepalife cases, was clearly
defined under a subsequent contract. In all these cited cases, a determination of the presence of the
Labor Code element of control was made on the basis of the stipulations of the subsequent contracts.

In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases, the only contract
or document extant and submitted as evidence in the present case is the Agreement – a pure agency
agreement in the Civil Code context similar to the original contract in the first Insular Life case and the
contract in the AFPMBAI case. And while Tongko was later on designated unit manager in 1983, Branch
Manager in 1990, and Regional Sales Manager in 1996, no formal contract regarding these undertakings
appears in the records of the case. Any such contract or agreement, had there been any, could have at
the very least provided the bases for properly ascertaining the juridical relationship established between
the parties.

These critical differences, particularly between the present case and the Grepalife and the second
Insular Life cases, should therefore immediately drive us to be more prudent and cautious in applying
the rulings in these cases.
C. Analysis of the Evidence

c.1. The Agreement

The primary evidence in the present case is the July 1, 1977 Agreement that governed and defined the
parties’ relations until the Agreement’s termination in 2001. This Agreement stood for more than two
decades and, based on the records of the case, was never modified or novated. It assumes primacy
because it directly dealt with the nature of the parties’ relationship up to the very end; moreover, both
parties never disputed its authenticity or the accuracy of its terms.

By the Agreement’s express terms, Tongko served as an "insurance agent" for Manulife, not as an
employee. To be sure, the Agreement’s legal characterization of the nature of the relationship cannot be
conclusive and binding on the courts; as the dissent clearly stated, the characterization of the juridical
relationship the Agreement embodied is a matter of law that is for the courts to determine. At the same
time, though, the characterization the parties gave to their relationship in the Agreement cannot simply
be brushed aside because it embodies their intent at the time they entered the Agreement, and they
were governed by this understanding throughout their relationship. At the very least, the provision on
the absence of employer-employee relationship between the parties can be an aid in considering the
Agreement and its implementation, and in appreciating the other evidence on record.

The parties’ legal characterization of their intent, although not conclusive, is critical in this case because
this intent is not illegal or outside the contemplation of law, particularly of the Insurance and the Civil
Codes. From this perspective, the provisions of the Insurance Code cannot be disregarded as this Code
(as heretofore already noted) expressly envisions a principal-agent relationship between the insurance
company and the insurance agent in the sale of insurance to the public.1awph!1 For this reason, we can
take judicial notice that as a matter of Insurance Code-based business practice, an agency relationship
prevails in the insurance industry for the purpose of selling insurance. The Agreement, by its express
terms, is in accordance with the Insurance Code model when it provided for a principal-agent
relationship, and thus cannot lightly be set aside nor simply be considered as an agreement that does
not reflect the parties’ true intent. This intent, incidentally, is reinforced by the system of compensation
the Agreement provides, which likewise is in accordance with the production-based sales commissions
the Insurance Code provides.

Significantly, evidence shows that Tongko’s role as an insurance agent never changed during his
relationship with Manulife. If changes occurred at all, the changes did not appear to be in the nature of
their core relationship. Tongko essentially remained an agent, but moved up in this role through
Manulife’s recognition that he could use other agents approved by Manulife, but operating under his
guidance and in whose commissions he had a share. For want of a better term, Tongko perhaps could be
labeled as a "lead agent" who guided under his wing other Manulife agents similarly tasked with the
selling of Manulife insurance.
Like Tongko, the evidence suggests that these other agents operated under their own agency
agreements. Thus, if Tongko’s compensation scheme changed at all during his relationship with
Manulife, the change was solely for purposes of crediting him with his share in the commissions the
agents under his wing generated. As an agent who was recruiting and guiding other insurance agents,
Tongko likewise moved up in terms of the reimbursement of expenses he incurred in the course of his
lead agency, a prerogative he enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko received
greater reimbursements for his expenses and was even allowed to use Manulife facilities in his
interactions with the agents, all of whom were, in the strict sense, Manulife agents approved and
certified as such by Manulife with the Insurance Commission.

That Tongko assumed a leadership role but nevertheless wholly remained an agent is the inevitable
conclusion that results from the reading of the Agreement (the only agreement on record in this case)
and his continuing role thereunder as sales agent, from the perspective of the Insurance and the Civil
Codes and in light of what Tongko himself attested to as his role as Regional Sales Manager. To be sure,
this interpretation could have been contradicted if other agreements had been submitted as evidence of
the relationship between Manulife and Tongko on the latter’s expanded undertakings. In the absence of
any such evidence, however, this reading – based on the available evidence and the applicable insurance
and civil law provisions – must stand, subject only to objective and evidentiary Labor Code tests on the
existence of an employer-employee relationship.

In applying such Labor Code tests, however, the enforcement of the Agreement during the course of the
parties’ relationship should be noted. From 1977 until the termination of the Agreement, Tongko’s
occupation was to sell Manulife’s insurance policies and products. Both parties acquiesced with the
terms and conditions of the Agreement. Tongko, for his part, accepted all the benefits flowing from the
Agreement, particularly the generous commissions.

Evidence indicates that Tongko consistently clung to the view that he was an independent agent selling
Manulife insurance products since he invariably declared himself a business or self-employed person in
his income tax returns. This consistency with, and action made pursuant to the Agreement were pieces
of evidence that were never mentioned nor considered in our Decision of November 7, 2008. Had they
been considered, they could, at the very least, serve as Tongko’s admissions against his interest. Strictly
speaking, Tongko’s tax returns cannot but be legally significant because he certified under oath the
amount he earned as gross business income, claimed business deductions, leading to his net taxable
income. This should be evidence of the first order that cannot be brushed aside by a mere denial. Even
on a layman’s view that is devoid of legal considerations, the extent of his annual income alone renders
his claimed employment status doubtful.27

Hand in hand with the concept of admission against interest in considering the tax returns, the concept
of estoppel – a legal and equitable concept28 – necessarily must come into play. Tongko’s previous
admissions in several years of tax returns as an independent agent, as against his belated claim that he
was all along an employee, are too diametrically opposed to be simply dismissed or ignored.
Interestingly, Justice Velasco’s dissenting opinion states that Tongko was forced to declare himself a
business or self-employed person by Manulife’s persistent refusal to recognize him as its employee.29
Regrettably, the dissent has shown no basis for this conclusion, an understandable omission since no
evidence in fact exists on this point in the records of the case. In fact, what the evidence shows is
Tongko’s full conformity with, and action as, an independent agent until his relationship with Manulife
took a bad turn.

Another interesting point the dissent raised with respect to the Agreement is its conclusion that the
Agreement negated any employment relationship between Tongko and Manulife so that the
commissions he earned as a sales agent should not be considered in the determination of the
backwages and separation pay that should be given to him. This part of the dissent is correct although it
went on to twist this conclusion by asserting that Tongko had dual roles in his relationship with
Manulife; he was an agent, not an employee, in so far as he sold insurance for Manulife, but was an
employee in his capacity as a manager. Thus, the dissent concluded that Tongko’s backwages should
only be with respect to his role as Manulife’s manager.

The conclusion with respect to Tongko’s employment as a manager is, of course, unacceptable for the
legal, factual and practical reasons discussed in this Resolution. In brief, the factual reason is grounded
on the lack of evidentiary support of the conclusion that Manulife exercised control over Tongko in the
sense understood in the Labor Code. The legal reason, partly based on the lack of factual basis, is the
erroneous legal conclusion that Manulife controlled Tongko and was thus its employee. The practical
reason, on the other hand, is the havoc that the dissent’s unwarranted conclusion would cause the
insurance industry that, by the law’s own design, operated along the lines of principal-agent relationship
in the sale of insurance.

c.2. Other Evidence of Alleged Control

A glaring evidentiary gap for Tongko in this case is the lack of evidence on record showing that Manulife
ever exercised means-and-manner control, even to a limited extent, over Tongko during his ascent in
Manulife’s sales ladder. In 1983, Tongko was appointed unit manager. Inexplicably, Tongko never
bothered to present any evidence at all on what this designation meant. This also holds true for
Tongko’s appointment as branch manager in 1990, and as Regional Sales Manager in 1996. The best
evidence of control – the agreement or directive relating to Tongko’s duties and responsibilities – was
never introduced as part of the records of the case. The reality is, prior to de Dios’ letter, Manulife had
practically left Tongko alone not only in doing the business of selling insurance, but also in guiding the
agents under his wing. As discussed below, the alleged directives covered by de Dios’ letter, heretofore
quoted in full, were policy directions and targeted results that the company wanted Tongko and the
other sales groups to realign with in their own selling activities. This is the reality that the parties’
presented evidence consistently tells us.

What, to Tongko, serve as evidence of labor law control are the codes of conduct that Manulife imposes
on its agents in the sale of insurance. The mere presentation of codes or of rules and regulations,
however, is not per se indicative of labor law control as the law and jurisprudence teach us.
As already recited above, the Insurance Code imposes obligations on both the insurance company and
its agents in the performance of their respective obligations under the Code, particularly on licenses and
their renewals, on the representations to be made to potential customers, the collection of premiums,
on the delivery of insurance policies, on the matter of compensation, and on measures to ensure ethical
business practice in the industry.

The general law on agency, on the other hand, expressly allows the principal an element of control over
the agent in a manner consistent with an agency relationship. In this sense, these control measures
cannot be read as indicative of labor law control. Foremost among these are the directives that the
principal may impose on the agent to achieve the assigned tasks, to the extent that they do not involve
the means and manner of undertaking these tasks. The law likewise obligates the agent to render an
account; in this sense, the principal may impose on the agent specific instructions on how an account
shall be made, particularly on the matter of expenses and reimbursements. To these extents, control
can be imposed through rules and regulations without intruding into the labor law concept of control for
purposes of employment.

From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment
to abide by the rules and regulations of an insurance company does not ipso facto make the insurance
agent an employee. Neither do guidelines somehow restrictive of the insurance agent’s conduct
necessarily indicate "control" as this term is defined in jurisprudence. Guidelines indicative of labor law
"control," as the first Insular Life case tells us, should not merely relate to the mutually desirable result
intended by the contractual relationship; they must have the nature of dictating the means or methods
to be employed in attaining the result, or of fixing the methodology and of binding or restricting the
party hired to the use of these means. In fact, results-wise, the principal can impose production quotas
and can determine how many agents, with specific territories, ought to be employed to achieve the
company’s objectives. These are management policy decisions that the labor law element of control
cannot reach. Our ruling in these respects in the first Insular Life case was practically reiterated in
Carungcong. Thus, as will be shown more fully below, Manulife’s codes of conduct,30 all of which do not
intrude into the insurance agents’ means and manner of conducting their sales and only control them as
to the desired results and Insurance Code norms, cannot be used as basis for a finding that the labor law
concept of control existed between Manulife and Tongko.

The dissent considers the imposition of administrative and managerial functions on Tongko as indicative
of labor law control; thus, Tongko as manager, but not as insurance agent, became Manulife’s
employee. It drew this conclusion from what the other Manulife managers disclosed in their affidavits
(i.e., their enumerated administrative and managerial functions) and after comparing these statements
with the managers in Grepalife. The dissent compared the control exercised by Manulife over its
managers in the present case with the control the managers in the Grepalife case exercised over their
employees by presenting the following matrix:31

Duties of Manulife’s Manager Duties of Grepalife’s Managers/Supervisors

- to render or recommend prospective agents to be licensed, trained and contracted to sell Manulife
products and who will be part of my Unit

- train understudies for the position of district manager

- to coordinate activities of the agents under [the managers’] Unit in [the agents’] daily, weekly and
monthly selling activities, making sure that their respective sales targets are met;

- to conduct periodic training sessions for [the] agents to further enhance their sales skill; and

- to assist [the] agents with their sales activities by way of joint fieldwork, consultations and one-on-one
evaluation and analysis of particular accounts

- properly account, record and document the company’s funds, spot-check and audit the work of the
zone supervisors, x x x follow up the submission of weekly remittance reports of the debit agents and
zone supervisors

- direct and supervise the sales activities of the debit agents under him, x x x undertake and discharge
the functions of absentee debit agents, spot-check the record of debit agents, and insure proper
documentation of sales and collections of debit agents.

Aside from these affidavits however, no other evidence exists regarding the effects of Tongko’s
additional roles in Manulife’s sales operations on the contractual relationship between them.

To the dissent, Tongko’s administrative functions as recruiter, trainer, or supervisor of other sales agents
constituted a substantive alteration of Manulife’s authority over Tongko and the performance of his end
of the relationship with Manulife. We could not deny though that Tongko remained, first and foremost,
an insurance agent, and that his additional role as Branch Manager did not lessen his main and
dominant role as insurance agent; this role continued to dominate the relations between Tongko and
Manulife even after Tongko assumed his leadership role among agents. This conclusion cannot be
denied because it proceeds from the undisputed fact that Tongko and Manulife never altered their July
1, 1977 Agreement, a distinction the present case has with the contractual changes made in the second
Insular Life case. Tongko’s results-based commissions, too, attest to the primacy he gave to his role as
insurance sales agent.

The dissent apparently did not also properly analyze and appreciate the great qualitative difference that
exists between:

the Manulife managers’ role is to coordinate activities of the agents under the managers’ Unit in the
agents’ daily, weekly, and monthly selling activities, making sure that their respective sales targets are
met.

the District Manager’s duty in Grepalife is to properly account, record, and document the company's
funds, spot-check and audit the work of the zone supervisors, conserve the company's business in the
district through "reinstatements," follow up the submission of weekly remittance reports of the debit
agents and zone supervisors, preserve company property in good condition, train understudies for the
position of district managers, and maintain his quota of sales (the failure of which is a ground for
termination).

the Zone Supervisor’s (also in Grepalife) has the duty to direct and supervise the sales activities of the
debit agents under him, conserve company property through "reinstatements," undertake and
discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure
proper documentation of sales and collections by the debit agents.

These job contents are worlds apart in terms of "control." In Grepalife, the details of how to do the job
are specified and pre-determined; in the present case, the operative words are the "sales target," the
methodology being left undefined except to the extent of being "coordinative." To be sure, a
"coordinative" standard for a manager cannot be indicative of control; the standard only essentially
describes what a Branch Manager is – the person in the lead who orchestrates activities within the
group. To "coordinate," and thereby to lead and to orchestrate, is not so much a matter of control by
Manulife; it is simply a statement of a branch manager’s role in relation with his agents from the point
of view of Manulife whose business Tongko’s sales group carries.

A disturbing note, with respect to the presented affidavits and Tongko’s alleged administrative
functions, is the selective citation of the portions supportive of an employment relationship and the
consequent omission of portions leading to the contrary conclusion. For example, the following portions
of the affidavit of Regional Sales Manager John Chua, with counterparts in the other affidavits, were not
brought out in the Decision of November 7, 2008, while the other portions suggesting labor law control
were highlighted. Specifically, the following portions of the affidavits were not brought out:32

1.a. I have no fixed wages or salary since my services are compensated by way of commissions based on
the computed premiums paid in full on the policies obtained thereat;

1.b. I have no fixed working hours and employ my own method in soliticing insurance at a time and
place I see fit;

1.c. I have my own assistant and messenger who handle my daily work load;

1.d. I use my own facilities, tools, materials and supplies in carrying out my business of selling insurance;

xxxx

6. I have my own staff that handles the day to day operations of my office;

7. My staff are my own employees and received salaries from me;

xxxx
9. My commission and incentives are all reported to the Bureau of Internal Revenue (BIR) as income by a
self-employed individual or professional with a ten (10) percent creditable withholding tax. I also remit
monthly for professionals.

These statements, read with the above comparative analysis of the Manulife and the Grepalife cases,
would have readily yielded the conclusion that no employer-employee relationship existed between
Manulife and Tongko.

Even de Dios’ letter is not determinative of control as it indicates the least amount of intrusion into
Tongko’s exercise of his role as manager in guiding the sales agents. Strictly viewed, de Dios’ directives
are merely operational guidelines on how Tongko could align his operations with Manulife’s re-directed
goal of being a "big league player." The method is to expand coverage through the use of more agents.
This requirement for the recruitment of more agents is not a means-and-method control as it relates,
more than anything else, and is directly relevant, to Manulife’s objective of expanded business
operations through the use of a bigger sales force whose members are all on a principal-agent
relationship. An important point to note here is that Tongko was not supervising regular full-time
employees of Manulife engaged in the running of the insurance business; Tongko was effectively guiding
his corps of sales agents, who are bound to Manulife through the same Agreement that he had with
Manulife, all the while sharing in these agents’ commissions through his overrides. This is the lead agent
concept mentioned above for want of a more appropriate term, since the title of Branch Manager used
by the parties is really a misnomer given that what is involved is not a specific regular branch of the
company but a corps of non-employed agents, defined in terms of covered territory, through which the
company sells insurance. Still another point to consider is that Tongko was not even setting policies in
the way a regular company manager does; company aims and objectives were simply relayed to him
with suggestions on how these objectives can be reached through the expansion of a non-employee
sales force.

Interestingly, a large part of de Dios’ letter focused on income, which Manulife demonstrated, in
Tongko’s case, to be unaffected by the new goal and direction the company had set. Income in
insurance agency, of course, is dependent on results, not on the means and manner of selling – a matter
for Tongko and his agents to determine and an area into which Manulife had not waded. Undeniably, de
Dios’ letter contained a directive to secure a competent assistant at Tongko’s own expense. While
couched in terms of a directive, it cannot strictly be understood as an intrusion into Tongko’s method of
operating and supervising the group of agents within his delineated territory. More than anything else,
the "directive" was a signal to Tongko that his results were unsatisfactory, and was a suggestion on how
Tongko’s perceived weakness in delivering results could be remedied. It was a solution, with an eye on
results, for a consistently underperforming group; its obvious intent was to save Tongko from the result
that he then failed to grasp – that he could lose even his own status as an agent, as he in fact eventually
did.

The present case must be distinguished from the second Insular Life case that showed the hallmarks of
an employer-employee relationship in the management system established. These were: exclusivity of
service, control of assignments and removal of agents under the private respondent’s unit, and
furnishing of company facilities and materials as well as capital described as Unit Development Fund. All
these are obviously absent in the present case. If there is a commonality in these cases, it is in the
collection of premiums which is a basic authority that can be delegated to agents under the Insurance
Code.

As previously discussed, what simply happened in Tongko’s case was the grant of an expanded sales
agency role that recognized him as leader amongst agents in an area that Manulife defined. Whether
this consequently resulted in the establishment of an employment relationship can be answered by
concrete evidence that corresponds to the following questions:

as lead agent, what were Tongko’s specific functions and the terms of his additional engagement;

was he paid additional compensation as a so-called Area Sales Manager, apart from the commissions he
received from the insurance sales he generated;

what can be Manulife’s basis to terminate his status as lead agent;

can Manulife terminate his role as lead agent separately from his agency contract; and

to what extent does Manulife control the means and methods of Tongko’s role as lead agent?

The answers to these questions may, to some extent, be deduced from the evidence at hand, as partly
discussed above. But strictly speaking, the questions cannot definitively and concretely be answered
through the evidence on record. The concrete evidence required to settle these questions is simply not
there, since only the Agreement and the anecdotal affidavits have been marked and submitted as
evidence.

Given this anemic state of the evidence, particularly on the requisite confluence of the factors
determinative of the existence of 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.

This conclusion renders unnecessary any further discussion of the question of whether an agent may
simultaneously assume conflicting dual personalities. But to set the record straight, the concept of a
single person having the dual role of agent and employee while doing the same task is a novel one in our
jurisprudence, which must be viewed with caution especially when it is devoid of any jurisprudential
support or precedent. The quoted portions in Justice Carpio-Morales’ dissent,33 borrowed from both
the Grepalife and the second Insular Life cases, to support the duality approach of the Decision of
November 7, 2008, are regrettably far removed from their context – i.e., the cases’ factual situations,
the issues they decided and the totality of the rulings in these cases – and cannot yield the conclusions
that the dissenting opinions drew.

The Grepalife case dealt with the sole issue of whether the Ruiz brothers’ appointment as zone
supervisor and district manager made them employees of Grepalife. Indeed, because of the presence of
the element of control in their contract of engagements, they were considered Grepalife’s employees.
This did not mean, however, that they were simultaneously considered agents as well as employees of
Grepalife; the Court’s ruling never implied that this situation existed insofar as the Ruiz brothers were
concerned. The Court’s statement – the Insurance Code may govern the licensing requirements and
other particular duties of insurance agents, but it does not bar the application of the Labor Code with
regard to labor standards and labor relations – simply means that when an insurance company has
exercised control over its agents so as to make them their employees, the relationship between the
parties, which was otherwise one for agency governed by the Civil Code and the Insurance Code, will
now be governed by the Labor Code. The reason for this is simple – the contract of agency has been
transformed into an employer-employee relationship.

The second Insular Life case, on the other hand, involved the issue of whether the labor bodies have
jurisdiction over an illegal termination dispute involving parties who had two contracts – first, an original
contract (agency contract), which was undoubtedly one for agency, and another subsequent contract
that in turn designated the agent acting unit manager (a management contract). Both the Insular Life
and the labor arbiter were one in the position that both were agency contracts. The Court disagreed
with this conclusion and held that insofar as the management contract is concerned, the labor arbiter
has jurisdiction. It is in this light that we remanded the case to the labor arbiter for further proceedings.
We never said in this case though that the insurance agent had effectively assumed dual personalities
for the simple reason that the agency contract has been effectively superseded by the management
contract. The management contract provided that if the appointment was terminated for any reason
other than for cause, the acting unit manager would be reverted to agent status and assigned to any
unit.

The dissent pointed out, as an argument to support its employment relationship conclusion, that any
doubt in the existence of an employer-employee relationship should be resolved in favor of the
existence of the relationship.34 This observation, apparently drawn from Article 4 of the Labor Code, is
misplaced, as Article 4 applies only when a doubt exists in the "implementation and application" of the
Labor Code and its implementing rules; it does not apply where no doubt exists as in a situation where
the claimant clearly failed to substantiate his claim of employment relationship by the quantum of
evidence the Labor Code requires.

On the dissent’s last point regarding the lack of jurisprudential value of our November 7, 2008 Decision,
suffice it to state that, as discussed above, the Decision was not supported by the evidence adduced and
was not in accordance with controlling jurisprudence. It should, therefore, be reconsidered and
abandoned, but not in the manner the dissent suggests as the dissenting opinions are as factually and as
legally erroneous as the Decision under reconsideration.

In light of these conclusions, the sufficiency of Tongko’s failure to comply with the guidelines of de Dios’
letter, as a ground for termination of Tongko’s agency, 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.

WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7, 2008,
GRANT Manulife’s motion for reconsideration and, accordingly, DISMISS Tongko’s petition. No costs.

SO ORDERED.

ARTURO D. BRION

Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

ANTONIO T. CARPIO

Associate Justice CONCHITA CARPIO MORALES

Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice ANTONIO EDUARDO B. NACHURA

Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice DIOSDADO M. PERALTA

Associate Justice

LUCAS P. BERSAMIN

Associate Justice MARIANO C. DEL CASTILLO

Associate Justice
ROBERTO A. ABAD

Associate Justice MARTIN S. VILLARAMA, JR.

Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice JOSE CATRAL MENDOZA

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
above Resolution had been reached in consultation before the case was assigned to the writer of the
opinion of the Court.

RENATO C. CORONA

Chief Justice

Footnotes

1 Rollo, pp. 772-819.

2 Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc., G.R. No. 167622, November 7, 2008, 570
SCRA 503, 506-507.

3 Rollo, p. 52.

4 Id. at 53.
5 Ibid.

6 Supra note 2, at 508-510.

7 Id. at 511.

8 Rollo, pp. 57-58.

9 Tongko’s Petition for Review, id. at 3-46; and Summary of Tongko’s Position in the September 27, 2004
decision of the NLRC (id. at 349-351) and the CA decision (id. at 57-58).

10 347 Phil. 587 (1997); see Summary of Manulife’s Position in the September 27, 2004 decision of the
NLRC (rollo, pp. 351-353) and the CA decision (rollo, pp. 58-59).

11 Insular Life Assurance Co., Ltd. v. NLRC, G.R. No. 84484, November 15, 1989, 179 SCRA 459.

12 In an Affidavit dated April 28, 2003, John D. Chua, a Regional Sales Manager of Manulife, stated:

4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional Sales Manager
("RSM") for Metro South Region pursuant to an Agency Contract. As such RSM, I have the following
functions:

1. Refer and recommend prospective agents to Manulife

2. Coach agents to become productive

3. Regularly meet with, and coordinate activities of agents affiliated to my region.

While Amanda Toledo, a Branch Manager of Manulife, stated in her Affidavit, dated April 29, 2003, that:

3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for the Metro North Sector;

4. As such BM, I render the following services:

a. Refer and recommend prospective agents to Manulife;

b. Train and coordinate activities of other commission agents;

c. Coordinate activities of Agency Managers who, in turn, train and coordinate activities of other
commission agents;

d. Achieve agreed production objectives in terms of Net Annualized Commissions and Case Count and
recruitment goals; and

e. Sell the various products of Manulife to my personal clients.

While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit, dated April 28, 2003,
that:

3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks Unit, North Star Branch, Metro
North Region;

4. As such UM, I render the following services:

a. To render or recommend prospective agents to be licensed, trained and contracted to sell Manulife
products and who will be part of my Unit.

b. To coordinate activities of the agents under my Unit in their daily, weekly and monthly selling
activities, making sure that their respective sales targets are met.

c. To conduct periodic training sessions for my agents to further enhance their sales skills.

d. To assist my agents with their sales activities by way of joint fieldwork, consultations and one-on-one
evaluation and analysis of particular accounts.

e. To provide opportunities to motivate my agents to succeed like conducting promos to increase sales
activities and encouraging them to be involved in company and industry activities.

f. To provide opportunities for professional growth to my agents by encouraging them to be a member

of the LUCAP (Life Underwriters Association of the Philippines).

13 Rollo, pp. 776-777.

14 Sections 303 and 304, Insurance Code.

15 Section 306, Insurance Code.

16 Article 1868, Civil Code.

17 Article 1869, Civil Code.

18 Article 1870, Civil Code.

19 Section 299, Insurance Code.

20 Article 1875, Civil Code.

21 Articles 1886 and 1918, Civil Code.

22 Article 1894, Civil Code.

23 Article 1887, Civil Code.

24 Supra note 2, at 519-520.

25 G.R. No. 119930, March 12, 1998, 287 SCRA 476.

26 G.R. No. 102199, January 28, 1997, 267 SCRA 47.

27 In 1997, his income was P2,822.620.00; in 1998 – P4,805,166.34; in 1999, P6,797,814.05; in 2001,
P6,214,737.11; and in 2002, P8,003,180.38.

28 Articles 1431 to 1439 of the Civil Code.

29 Justice Velasco’s Dissenting Opinion, p. 10. Justice Velasco maintains that Tongko’s declaration in his
tax returns that he was self-employed was forced upon him by Manulife, which refused and still refuses
to consider him as its employee, and withheld 10% of Tongko’s income as an agent for taxes. Tongko
therefore had no choice but to use the withholding tax certificates issued to Manulife in connection with
the taxes it paid on his income as an agent and he could not have been faulted for declaring himself as
self-employed.

30 These include the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the Manulife
Code of Conduct Agreement.

31 Justice Velasco’s Dissenting Opinion, pp. 3-4.

32 Motion for Reconsideration dated December 3, 2008; quoting the Affidavit of John Chua (Regional
Sales Manager) dated April 28, 2003, Affidavit of Amanda Tolentino (Branch Manager) dated April 29,
2003, and Affidavit of Lourdes Samson (Unit Manager) dated April 28, 2003. Rollo, p. 803.

33Separate Dissenting Opinion of Justice Conchita Carpio Morales, pp. 1-2. Justice Carpio Morales
asserts that an agent may, at the same time, be an employee of a life insurance company and quotes the
Grepalife case:

True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code
some of the functions performed by private respondents were those of insurance agents. Nevertheless,
it does not follow that they are not employees of Grepalife. The Insurance Code may govern the
licensing requirements and other particular duties of insurance agents, but it does not bar the
application of the Labor Code with regard to labor standards and labor relations.

She additionally posits that the hybrid model is not novel—the second Insular Life case purportedly held
that Pantaleon delos Reyes, acting unit manager, was an employee of Insular Life only insofar as the
management contract is concerned, quoting in support of this assertion the following discussion in the
second Insular Life case:

Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management
contract entered into between petitioner and De los Reyes as contracts of agency. We, however, hold
otherwise. Unquestionably there exist major distinctions between the two agreements. While the first
has the earmarks of an agency contract, the second is far removed from the concept of agency in that
provided therein are conditionalities that indicate an employer-employee relationship. The NLRC
therefore was correct in finding that private respondent was an employee of petitioner, but this holds
true only insofar as the management contract is concerned. In view thereof, the Labor Arbiter has
jurisdiction over the case.

34 Justice Presbitero Velasco, Jr.’s Dissenting Opinion, p. 12.

The Lawphil Project - Arellano Law Foundation

SEPARATE DISSENTING OPINION

CARPIO MORALES, J.:

Writing for the Court, Justice Arturo Brion grants the Motion for Reconsideration (Motion) filed by
respondent Manufacturer’s Life Insurance Co. (Phils.). The ponente, who concurred in the Court’s
November 7, 2008 Decision,1 this time reverses the finding of employer-employee relationship. The
ponencia states that petitioner cannot simultaneously assume the dual or hybrid role of employee and
agent.

I dissent.

I submit this Separate Dissenting Opinion, after taking a closer look at the juxtaposition of five pertinent
labor cases bearing on the insurance industry, three of which ruled in favor of the existence of an
employer-employee relationship.

An agent may, at the same time, be an employee of a life insurance company

In Great Pacific Life Assurance Corp. v. NLRC2 (second Grepalife case), the Court found that an
employer-employee relationship existed between Grepalife and the Ruiz brothers in their capacities as
zone supervisor and district manager. On the relevant point, it elucidated:

True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code
some of the functions performed by private respondents were those of insurance agents. Nevertheless,
it does not follow that they are not employees of Grepalife. The Insurance Code may govern the
licensing requirements and other particular duties of insurance agents, but it does not bar the
application of the Labor Code with regard to labor standards and labor relations.3 (Citations omitted;
emphasis and underscoring supplied)

This type of hybrid role is not novel. In Insular Life Assurance Co., Ltd. v. NLRC (4th Division)4 (second
Insular Life case), the Court ruled that the therein respondent Pantaleon de los Reyes, acting unit
manager, was an employee of Insular Life only insofar as the management contract is concerned.

Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management
contract entered into between petitioner and De los Reyes as contracts of agency. We[,] however[,] hold
otherwise. Unquestionably there exist major distinctions between the two agreements. While the first
has the earmarks of an agency contract, the second is far removed from the concept of agency in that
provided therein are conditionalities that indicate an employer-employee relationship. The NLRC
therefore was correct in finding that private respondent was an employee of petitioner, but this holds
true only insofar as the management contract is concerned. In view thereof, the Labor Arbiter has
jurisdiction over the case.5 (Emphasis and underscoring supplied)
In the present case, the employer-employee relationship is extant from petitioner’s management
functions as Unit Manager in 1983, later as Branch Manager in 1990, and finally as Regional Sales
Manager in 1996, notwithstanding the absence of written management contracts. Even assuming that
management contracts were executed, the law is deemed written into them and its application cannot
be disavowed by the parties.

Admittedly, petitioner was allowed to continue selling as an agent simultaneously with his management
functions. Insofar as the termination of his agency agreement6 is concerned, the trial court has
jurisdiction over such controversy.

The ponencia finds it "conflicting" for petitioner to assume the dual roles of agent and employer. It
agrees, however, that petitioner’s "additional role as Branch Manager did not lessen his main and
dominant role as insurance agent," without explaining how to weigh the dominance of one function
over another.

In the present Motion, there is no reiteration of the invocation of Insurance Commission (IC)
Memorandum Circular 3-93 (June 28, 1993) which provides that "[n]o official or employee of an
insurance brokerage or an adjustment company and no individual adjuster, shall be licensed to act as an
insurance agent or general agent" and that "[n]o employee with the rank of manager and above of an
insurance company shall be licensed to act as its insurance agent or general agent."7

There is no conflict between the 1993 IC Circular and the Court’s 1998 Decision in the second Insular Life
case. That the regulation says that things should run in a certain manner does not mean that any
determination of facts should not be contrary to that manner. "He should not" is different from "he did
not." Respondent may assert that the parties herein could not have violated the Circular, but it does not
bar the Court to determine otherwise when facts glaringly point to the existence of an employer-
employee relationship.

Whatever infraction or tolerance committed or exhibited by the parties in defiance of the Circular or any
other regulation or Code, it is for the IC or the appropriate body to determine. The same holds true with
the corollary tax implications which respondent invites the Court to explore. Reconcilability of tax
returns has never been decisive of the issue of employer-employee relationship. It never became the
business of this Court to thresh out for the parties the tax consequences arising from every labor dispute
where an alleged "independent contractor" was declared by the Court to be an employee. Suffice it to
state that a party would have to face the consequences, if any, of his or her actions before the proper
forum.

On one hand, respondent proffers petitioner’s income tax returns and documents8 as an admission that
it did not employ petitioner, to which petitioner replies that the withholding and remittance of taxes
were done by respondent as payor and withholding agent, as indicated in the Certificates of Creditable
Income Tax Withheld at Source.
On the other, petitioner relies as respondent’s implied admission that he is an employee respondent’s
having offered him a Stock Option that could only be exercised by "active employees" and would be
terminated upon "termination of employment,"9 respondent’s disclaimer to this exceptional grant
solely decided by its Head Office in Canada notwithstanding.

As the conflicting claims effectively cancel each other, a review of the other array of evidence is in order.

Control over the means and methods

in the attainment of the result

It bears noting that the NLRC Decision of September 27, 2004 judiciously explained why the resolution of
the employment status of petitioner hinges on the "control test" after discussing the three other
components of the four-fold test.10

Delving into jurisprudence, no employer-employee relationship was found in Insular Life Assurance Co.,
Ltd. v. NLRC11 (first Insular Life case) because the Court, applying the control test, found that Insular Life
neither controlled nor restricted the choice of methods – or the methods themselves – of selling
insurance by agency manager Melecio Basiao, leaving him free to exercise his own judgment as to the
time, place and means of soliciting insurance.

In declaring the type of "control" that is necessary for one to be deemed an employee, the Court
explained in the first Insular Life case, viz:

x x x It should, however, be obvious that not every form of control that the hiring party reserves to
himself over the conduct of the party hired in relation to the services rendered may be accorded the
effect of establishing an employer-employee relationship between them in the legal or technical sense
of the term. A line must be drawn somewhere, if the recognized distinction between an employee and
an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service
that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his
performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use
of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. The
distinction acquires particular relevance in the case of an enterprise affected with public interest, as is
the business of insurance, and is on that account subject to regulation by the State with respect, not
only to the relations between insurer and insured but also to the internal affairs of the insurance
company. Rules and regulations governing the conduct of the business are provided for in the Insurance
Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance
company to promulgate a set of rules to guide its commission agents in selling its policies that they may
not run afoul of the law and what it requires or prohibits. Of such a character are the rules which
prescribe the qualifications of persons who may be insured, subject insurance applications to processing
and approval by the Company, and also reserve to the Company the determination of the premiums to
be paid and the schedules of payment. None of these really invades the agent's contractual prerogative
to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot
justifiably be said to establish an employer-employee relationship between him and the company.12
(Emphasis and underscoring supplied)

I thus concur with the conclusion that the imposition of the codes of conduct is not indicative of control
on the part of an insurance company.

In Great Pacific Life Assurance Corporation v. Judico13 (first Grepalife case), however, the therein
respondent Honorato Judico was found to be an employee because

x x x 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 P200.00 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 P200.00 weekly "allowance".
Furthermore, his contract of services with petitioner is not for a piece of work nor for a definite
period.14 (Underscoring supplied)

The question on the presence of "control over the means and methods" must always be taken in
relation to the attainment of the result or goal. The proper query is thus not whether respondent
exercised means-and-method control but whether such control was directed in attaining which result.

Although the bottomline of any commercial enterprise has always been sales, the identification of the
specific "result or goal" in a particular case can only be gathered from the nature of one’s functions. It is
thus imperative to identify the functions appurtenant to the goal before administering the control test.

In the first Insular Life case, it was clear that selling or soliciting insurance was the goal, the attainment
of which Insular Life did not exercise control over the methodology of the agency manager. Insular Life
set no accomplishment quotas and compensated him on the basis of results obtained. He was not
bound to observe any schedule of working hours or report to any regular station. He could seek and
work on his prospects anywhere and at anytime he chooses.

In the first Grepalife case, however, although the debit agent’s goal of selling was basically identical,
Grepalife retained control over the means in achieving sales. Grepalife assigned him a definite place in
the office to work on when he is not in the field, gave him collection and canvassing jobs, required him
to make regular report regarding these duties, and, in fact, exercised the power of dismissal for his
dismal performance.
There is no element of control with respect to petitioner’s function of selling insurance as an agent. His
managerial function, however, takes another form.

In the second Insular Life and Grepalife cases, the goal expected from the managers was different from
the first set of cases. The "result or goal" (in how to accomplish it the company was found to have
exercised control) were specifically aligned to the coordination and supervision of the whole marketing
effort or strategy.

In the second Insular Life case, the acting unit manager was assigned the task of supervising and
coordinating the sales efforts of the underwriters who were to be recruited and trained within his
designated territory.

In the second Grepalife case, the zone supervisor and the district manager were entrusted with
supervisory, sales and administrative functions to guard Grepalife's business interests, to bring in more
clients to the company, and to ensure that all collections and reports are faithfully brought to the
company.

In both cases, the manner by which those goals were carried out was dictated by their respective
employers. Similarly, in the present case, the nature of petitioner’s job as such called for the exercise of
supervisory and administrative functions, including recruitment and training of agents, which, when
examined in the light of the two cases, were discharged within the close range of control wielded by
respondent. Tersely stated, petitioner’s duty of supervision was under the "control" of respondent.

A comparison of functions with that obtaining in the second Grepalife case illustrates an intimate
similarity:

Furthermore, it cannot be gainsaid that Grepalife had control over private respondents' performance as
well as the result of their efforts. A cursory reading of their respective functions as enumerated in their
contracts reveals that the company practically dictates the manner by which their jobs are to be carried
out. For instance, the District Manager must properly account, record and document the company's
funds spot-check and audit the work of the zone supervisors, conserve the company's business in the
district through 'reinstatements', follow up the submission of weekly remittance reports of the debit
agents and zone supervisors, preserve company property in good condition, train understudies for the
position of district manager, and maintain his quota of sales (the failure of which is a ground for
termination). On the other hand, a zone supervisor must direct and supervise the sales activities of the
debit agents under him, conserve company property through "reinstatements", undertake and
discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure
proper documentation of sales and collections by the debit agents.15 (Underscoring supplied)

In contradistinction with Carungcong v. NLRC,16 which also involves an insurance manager, the Court
found the therein petitioner Susan Carungcong, a new business manager of Sun Life Assurance
Company, to be an independent contractor. In the absence of restrictive or interfering company
regulations that effectively and actually controlled her choice of methods in performing her
management duties, the Court gave weight to the contractual disavowals in the management contracts
and her admission that she alone judges the element of time and place and means in the performance
of duties. She patently admitted that she performed "monitoring, training, recruitment and sales, at her
own time and convenience, at however she deemed convenient, and with whomever she chose."17

More significantly, in the succeeding Insular Life case, the Court found the following indicators material
in finding the presence of control in cases involving insurance managers:

Exclusivity of service, control of assignments and removal of agents under private respondent's unit,
collection of premiums, furnishing of company facilities and materials as well as capital described as Unit
Development Fund are but hallmarks of the management system in which herein private respondent
worked. This obtaining, there is no escaping the conclusion that private respondent Pantaleon de los
Reyes was an employee of herein petitioner.18 (Underscoring supplied)

The ponencia concludes that "[a]ll these are obviously absent" in petitioner’s case. The facts show
otherwise, however. On top of the exclusive service rendered to respondent, which AFP Mutual Benefit
Association, Inc. v. NLRC19 instructs to be not controlling, other factors were present. Petitioner
established no agency of his own as the Metro North Region to which he was assigned remained intact
even after his ties with respondent were severed.20 Respondent provided and furnished company
facilities, equipments and materials for petitioner at respondent’s Makati office.21 Respondent’s control
of assignments was evident from its act of removing the North Star Branch from petitioner’s scope of
the Metro North Region, on which a "memo to spell this matter out in greater detail" was advised to be
issued shortly thereafter.22 Respondent reserved to impose other improvements in the region after
manifesting its intention to closely follow the region.23 Respondent’s managers, like petitioner, could
only refer and recommend to respondent prospective agents who would be part of their respective
units.24 In other words, respondent had the last say on the composition and structure of the sales unit
or region of petitioner. Respondent, in fact, even devised the deployment of an Agency Development
Officer in the region to "contribute towards the manpower development work x x x as part of our
agency growth campaign."

Such an arrangement leads to no other conclusion than that respondent exercised the type of control of
an employer, thereby wiping away the perception that petitioner was only a "lead agent" as viewed by
the ponencia. Even respondent sees otherwise when it rebuked petitioner that "[y]ou (petitioner) may
have excelled in the past as an agent but, to this date, you still carry the mindset of a senior agent."25
Insofar as his management functions were concerned, petitioner was no longer considered a senior
agent.

I vote to DENY respondent’s Motion but MODIFY the dispositive portion of the Court’s November 7,
2008 Decision to (a) clarify that petitioner, Gregorio Tongko, became respondent’s employee not when
he started as an agent in 1977 but when he was appointed as unit manager in 1983, thus moving the
reckoning of the computation of separation pay; and (b) remand the case to the NLRC for the purpose of
computing petitioner’s proper backwages as manager.
 [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.

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.

- 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 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 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]

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. 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 of Court and not by
the Labor Code.[19]

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, 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 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.

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.
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 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 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.

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 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 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 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 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'.

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 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 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
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.

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]

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.
 G.R. No. 78382 December 14, 1987

BROADWAY MOTORS, INC., petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION and VICENTE APOLINARIO, respondents.

FELICIANO, J.:

By virtue of a written undated "Work Contract," 1 private respondent Vicente Apolinario, sometime in
March 1967, began work as an auto painter in the premises of petitioner Broadway Motors, Inc. located
at 1232 United Nations Avenue, Metro Manila. The contract was signed by Vicente Apolinario as
"Contractor"and Mr. Johnny L. Chieng, Parts and Service Operations Manager of petitioner Corporation.
Apolinario worked as an auto painter for a period of eighteen (18) years, until 23 January 1985 when he
was barred from entering the premises of the petitioner Corporation, and his alleged involvement in a
fist-fight with the shop superintendent of Broadway Motors the day before.

On 21 February 1985, Apolinario commenced an action for illegal dismissal with the National Capital
Region Arbitration Branch of the National Labor Relations Commission (NLRC). In his Complaint, which
was docketed as NLRC Case No. 2587-85, Apolinario sought recovery from petitioner Corporation of (1)
separation pay in the amount of P66,676.95, on the basis of an alleged monthly income of P7,408.55, (2)
moral damages of P50,000.00, and (3) attorney's fees of P10,000.00.

In a Decision dated 2 January 1986, the Labor Arbiter dismissed the complaint upon the ground that
under the Work Contract and an "Addendum to Work Contract" dated 28 April 1984, 3 Apolinario,
having supplied the workers himself included who performed the auto painting jobs for petitioner
Corporation, was a mere contractor and could not, therefore, be considered as the latter's employee.
From this decision, Apolinario interposed an appeal to the NLRC.

On 4 February 1987, public respondent NLRC rendered a Decision, 4 the dispositive portion of which
reads:

WHEREFORE, the Decision appealed from is reversed and a new judgment entered ordering the
respondent to pay complainant separation pay in the sum of FORTY FIVE THOUSAND (P45,000-00)
PESOS plus 10% thereof as and for attorney's fees.

SO ORDERED.

In reversing the decision of the Labor Arbiter, public respondent NLRC found that a valid and binding
employer-employee relationship had existed between petitioner Corporation and Apolinario. Since
Apolinario was dismissed without any investigation having been previously conducted by petitioner
Corporation to ascertain his participation in the fistfight within company premises, his dismissal was,
accordingly, declared illegal by public respondent NLRC for non-compliance with the requirements of
procedural due process.

After a careful scrutiny of the records of this case, the Court considers that petitioner Corporation has
not sufficiently shown that respondent NLRC had acted with grave abuse of discretion, or without or in
excess of jurisdiction in rendering its decision dated 4 February 1987.

Four factors are generally considered in determining the existence of an employer-employee

relationship, namely: (a) the manner of selection and engagement of the putative employee; (b) the
mode of payment of wages; (c) the presence or absence of a power of dismissal; and (d) the presence or
absence of a power to control the putative employee's conduct. It is this latter factor, the so-called
"control test," which is the most important criterion in such determination. 5 The record shows that
Apolinario was hired directly by petitioner Corporation to work in the latter's auto repair shop as an
auto painter, which fact is evidenced by the undated Work Contract executed between Apolinario and
petitioner Corporation through its authorized representative. That petitioner corporation reserved unto
itself the power of dismissal is evident from the fact that petitioner Corporation unilaterally undertook
to terminate Apolinario's relationships with itself.

Upon the other hand, it appears that Apolinario and his men (designated in the Work Contract as
"Contract Workers") were compensated for the jobs they performed in lump sum payments described
as "payment for sub-contract painting" or other repair job, from which amounts an unexplained "three
percent (3 %) of fifteen percent (I 5 %) withholding tax " was deducted. It further appears that
Apolinario invoiced, under the designation of "VM Automotive Repair Service, " to petitioner
Corporation the salaries of his "Contract Workers" on which amounts, a three percent (3%) "sales tax"
was added. The "Work Contract" also provided that Broadway Motors would negotiate only with
Apolinario on any work order, and would refrain from dealing with any member of Apolinario's group of
"Contract Workers. 6

Turning to the power to control Apolinario's conduct appears from the stipulations of the Work Contract
that Apolinario and his "Contract Workers" were required not only to keep regular working hours, but to
render overtime service as well, when such as necessitated either by the volume or immediacy of the
work. 7 They were not allowed to negotiate with customers regarding the performance of any additional
work beyond that which had been authorized by petitioner Corporation. 8 Any defect in the
workmanship of their jobs was subject to correction by petitioner Corporation's designated supervisors
and inspectors even as the work was still in progress, and not just after the same had already been
completed. 9 Furthermore, Apolinario and his men were expressly required to abide by petitioner
Corporation's regulations and policies, "particularly on the wearing of uniforms and Identification cards,
" which Id cards had to be worn at all times while within the work premises. Apolinario's "casual
workers" were additionally required to deposit their Id cards with petitioner Corporation's security
guard at the end of the working day. 10 In other words, Apolinario and his "Contract Workers" were
under the direct control and supervision of the supervisors and managers of petitioner Corporation from
the very moment they entered the work premises at the beginning of the working day, all throughout
the performance of their duties for the day, until shop closing time.

Petitioner Corporation urges that Apolinario was not its own employee but, rather, an independent
contractor who conducted his own separate business under the trade name of "VM Automotive Repair
Service" and had his own "Contract Workers."

The indices of an owner-independent contractor relationship are set out in Section 8 of Rule VIII, Book Ill
of the Omnibus Rules Implementing the Labor Code. Section 8 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.
(Emphasis supplied.)

"Job contracting" must be distinguished from "labor-only" contracting. "Labor-only" contracting is

defined in Section 9 of Rule VIII, Book Ill of the Omnibus Rules Implementing the Labor Code, in the
following terms:

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.

(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

xxx xxx xxx (Emphasis supplied.)

The legal effect of a finding that a contractor was not a true independent contractor or "job contractor"
but, rather, merely a "labor-only" contractor was explained in Philippine Bank of Communications v.
National Labor Relations Commission et al. 11

... The "labor-only" contractor i.e., "the person or intermediary is considered "merely as an agent of the
employer." The employer is made by the statute responsible to the employees of the "labor only"
contractor as if such employee had been directly employed by the employer. Thus, where "labor only
contracting exists in a given case, the statute itself implies or establishes an employer-employee
relationship between the employer (the owner of the project) and the employees of the "labor only
contractor, this time for a comprehensive purpose: "employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code. The law in effect holds both the employer and
the "labor-only" contractor responsible to the latter's employees for the more effective safeguarding of
the employees' rights under the labor Code. (Emphasis supplied.)

Thus, a finding that a contractor was a "labor-only" contractor is equivalent to a finding that an
employer-employee relationship existed between the owner and the "labor-only" contractor including
the latter"s "Contract Workers," that relationship being attributed by the law itself. Petitioner
Corporation"s defense thus compels us to examine still further the relationship between itself and
private respondent Apolinario in terms of the above indices of contracting — "job" or "labor-only. "

We note firstly that, under the Work Contract, Apolinario supplied only "labor and supervision (over his
"Contract Workers") in the performance of automotive body painting work which the company (i.e.,
Broadway Motors) may from time to time, award to him under (the) contract." 12 Apolinario also
undertook to "hire and bring in additional workers as may be required by the company, to handle
additional work load or to accelerate or facilitate completion of work in process. 13 Petitioner
Corporation supplied all the tools, equipment, machinery and materials necessary for Apolinario to carry
out his assigned painting jobs, which painting jobs were executed by Apolinario and his men within the
premises owned and maintained by petitioner Corporation. The control and direction exercised by
petitioner Corporation over the work done by Apolinario and his "Contract Workers" was well- nigh
complete, as indicated earlier. There was, furthermore, no evidence adduced by petitioner Corporation
to show that Apolinario had substantial capital investment in "VM Automotive Repair Service" or that
"VM Automotive Repair Service" carried on, in its own premises, a car repair business operation
separate and distinct from that engaged in by petitioner Corporation, an operation the tools or
equipment of which were owned by Apolinario and the customers of which were not customers of
Broadway Motors. What the evidence of record reveals is that the alleged "Contract Work" carried out
by Apolinario and his "Contract Workers," excepting overtime work, was performed during regular
working hours six (6) days in a week, which circumstance must have made it virtually impossible for
them to carry on any additional and independent auto painting business outside the premises of
Broadway Motors. Finally, Apolinario and his men were engaged in the performance of a line of work —
automobile painting — which was directly related to, if not an integral part altogether of the regular
business operations of petitioner Corporation i.e., that of an automotive repair shop.
We conclude that while there is present in the relationship between petitioner Corporation and private
respondent some factors suggestive of an owner- independent contractor relationship (e.g., the manner
of payment of compensation to Apolinario and his "Contract Workers"), many other factors are present
which demonstrate that that relationship is properly characterized as one of employer-employee. We
conclude, further, that the same factors indicate the existence of a "labor-only" contracting
arrangement between petitioner Corporation on the one hand as owner, and upon the other hand,
Apolinario as "labor-only" contractor and his "Contract Workers." Thus, an employer-employee
relationship must be held to have existed between petitioner Corporation and private respondent,
whether considered as a result of the contractual arrangements between them or as a result of the
operation of the Labor Code (at least from 1974 onwards) and its Implementing Rules. It follows, finally,
that the ruling of public respondent NLRC that petitioner Corporation and private respondent were
employer and employee, respectively, cannot be regarded as constituting a grave abuse of discretion or
as rendered without or in excess of jurisdiction.

In respect of public respondent NLRC"s finding that Apolinario was dismissed without any opportunity to
present his side on the charge against him of participating in the fistfight with petitioner Corporation"s
shop superintendent, no compelling reason has been shown by the petitioner Corporation why we
should overturn such finding of fact.

WHEREFORE, the Petition for certiorari is DISMISSED. The decision of the public respondent National
Labor Relations Commission dated 4 February 1987 is hereby AFFIRMED. Costs against the petitioner.

SO ORDERED.
 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 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-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 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 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 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 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.

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 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 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.
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 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.
 [G.R. No. 128845. June 1, 2000]

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner,

vs.

HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and Employment; HON.
CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN
MACCAULEY in his capacity as the Superintendent of International School-Manila; and INTERNATIONAL
SCHOOL, INC., respondents.

DECISION

KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent
School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their
colleagues in other schools is, of course, beside the point. The point is that employees should be given
equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a principle
that rests on fundamental notions of justice. That is the principle we uphold today.

Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree
732, is a domestic educational institution established primarily for dependents of foreign diplomatic
personnel and other temporary residents.[1] To enable the School to continue carrying out its
educational program and improve its standard of instruction, Section 2(c) of the same decree authorizes
the School to

employ its own teaching and management personnel selected by it either locally or abroad, from
Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for the
protection of employees.

Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the
same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine whether
a faculty member should be classified as a foreign-hire or a local hire:

a.....What is one's domicile?

b.....Where is one's home economy?

c.....To which country does one owe economic allegiance?

d.....Was the individual hired abroad specifically to work in the School and was the School responsible
for bringing that individual to the Philippines?[2]

Should the answer to any of these queries point to the Philippines, the faculty member is classified as a
local hire; otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local-hires. These include housing,
transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a
salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor"
and (b) limited tenure. The School explains:

A foreign-hire would necessarily have to uproot himself from his home country, leave his family and
friends, and take the risk of deviating from a promising career path-all for the purpose of pursuing his
profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic
realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance
for the education of one's children, adequate insurance against illness and death, and of course the
primary benefit of a basic salary/retirement compensation.

Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his
term: that he will eventually and inevitably return to his home country where he will have to confront
the uncertainty of obtaining suitable employment after a long period in a foreign land.

The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international
education.[3]

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective bargaining
representative of all faculty members"[4] of the School, contested the difference in salary rates between
foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included in
the appropriate bargaining unit, eventually caused a deadlock between the parties.

On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a compromise prompted the Department of Labor and
Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues in
favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's
motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.

Petitioner claims that the point-of-hire classification employed by the School is discriminatory to
Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination.

The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all,
with nationalities other than Filipino, who have been hired locally and classified as local hires.[5]The
Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits as the
Filipino local-hires: The compensation package given to local-hires has been shown to apply to all,
regardless of race. Truth to tell, there are foreigners who have been hired locally and who are paid
equally as Filipino local hires.[6]
The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:

The principle "equal pay for equal work" does not find application in the present case. The international
character of the School requires the hiring of foreign personnel to deal with different nationalities and
different cultures, among the student population.

We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired
personnel which system is universally recognized. We agree that certain amenities have to be provided
to these people in order to entice them to render their services in the Philippines and in the process
remain competitive in the international market.

Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the
local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits would
also require parity in other terms and conditions of employment which include the employment
contract.

A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:

All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof
provided that the Superintendent of the School has the discretion to recruit and hire expatriate teachers
from abroad, under terms and conditions that are consistent with accepted international practice.

Appendix C of said CBA further provides:

The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary schedule.
The 25% differential is reflective of the agreed value of system displacement and contracted status of
the OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS).

To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two
types of employees, hence, the difference in their salaries.

The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established
principle of constitutional law that the guarantee of equal protection of the laws is not violated by
legislation or private covenants based on reasonable classification. A classification is reasonable if it is
based on substantial distinctions and apply to all members of the same class. Verily, there is a
substantial distinction between foreign hires and local hires, the former enjoying only a limited tenure,
having no amenities of their own in the Philippines and have to be given a good compensation package
in order to attract them to join the teaching faculty of the School.[7]

We cannot agree.

That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws
reflect the policy against these evils. The Constitution[8] in the Article on Social Justice and Human
Rights exhorts Congress to "give highest priority to the enactment of measures that protect and
enhance the right of all people to human dignity, reduce social, economic, and political inequalities."
The very broad Article 19 of the Civil Code requires every person, "in the exercise of his rights and in the
performance of his duties, [to] act with justice, give everyone his due, and observe honesty and good
faith."

International law, which springs from general principles of law,[9] likewise proscribes discrimination.
General principles of law include principles of equity,[10] i.e., the general principles of fairness and
justice, based on the test of what is reasonable.[11] The Universal Declaration of Human Rights,[12] the
International Covenant on Economic, Social, and Cultural Rights,[13] the International Convention on
the Elimination of All Forms of Racial Discrimination,[14] the Convention against Discrimination in
Education,[15] the Convention (No. 111) Concerning Discrimination in Respect of Employment and
Occupation[16] - all embody the general principle against discrimination, the very antithesis of fairness
and justice. The Philippines, through its Constitution, has incorporated this principle as part of its
national laws.

In the workplace, where the relations between capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all the more reprehensible.

The Constitution[17] specifically provides that labor is entitled to "humane conditions of work." These
conditions are not restricted to the physical workplace - the factory, the office or the field - but include
as well the manner by which employers treat their employees.

The Constitution[18] also directs the State to promote "equality of employment opportunities for all."
Similarly, the Labor Code[19] provides that the State shall "ensure equal work opportunities regardless
of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State,
in spite of its primordial obligation to promote and ensure equal employment opportunities, closes its
eyes to unequal and discriminatory terms and conditions of employment.[20]

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes[21] the payment of lesser compensation to a female employee as
against a male employee for work of equal value. Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order to encourage or discourage membership in any
labor organization.

Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof,
provides:

The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and
favourable conditions of work, which ensure, in particular:

a.....Remuneration which provides all workers, as a minimum, with:

i.....Fair wages and equal remuneration for work of equal value without distinction of any kind, in
particular women being guaranteed conditions of work not inferior to those enjoyed by men, with equal
pay for equal work;
x x x.

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of
"equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort and
responsibility, under similar conditions, should be paid similar salaries.[22] This rule applies to the
School, its "international character" notwithstanding.

The School contends that petitioner has not adduced evidence that local-hires perform work equal to
that of foreign-hires.[23] The Court finds this argument a little cavalier. If an employer accords
employees the same position and rank, the presumption is that these employees perform equal work.
This presumption is borne by logic and human experience. If the employer pays one employee less than
the rest, it is not for that employee to explain why he receives less or why the others receive more. That
would be adding insult to injury. The employer has discriminated against that employee; it is for the
employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that foreign-
hires perform 25% more efficiently or effectively than the local-hires. Both groups have similar functions
and responsibilities, which they perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.

"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid
at regular intervals for the rendering of services." In Songco v. National Labor Relations Commission,[24]
we said that:

"salary" means a recompense or consideration made to a person for his pains or industry in another
man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the
Roman soldier, it carries with it the fundamental idea of compensation for services rendered. (Emphasis
supplied.)

While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and
they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor" and
the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates. The
dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain
benefits accorded them which are not enjoyed by local-hires, such as housing, transportation, shipping
costs, taxes and home leave travel allowances.

The Constitution enjoins the State to "protect the rights of workers and promote their welfare,"[25] "to
afford labor full protection."[26] The State, therefore, has the right and duty to regulate the relations
between labor and capital.[27] These relations are not merely contractual but are so impressed with
public interest that labor contracts, collective bargaining agreements included, must yield to the
common good.[28] Should such contracts contain stipulations that are contrary to public policy, courts
will not hesitate to strike down these stipulations.

In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no
reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of
the School of according higher salaries to foreign-hires contravenes public policy and, certainly, does not
deserve the sympathy of this Court.

We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.

A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the
entire body of employees, consistent with equity to the employer indicate to be the best suited to serve
the reciprocal rights and duties of the parties under the collective bargaining provisions of the law."[29]
The factors in determining the appropriate collective bargaining unit are (1) the will of the employees
(Globe Doctrine); (2) affinity and unity of the employees' interest, such as substantial similarity of work
and duties, or similarity of compensation and working conditions (Substantial Mutual Interests Rule); (3)
prior collective bargaining history; and (4) similarity of employment status.[30] The basic test of an
asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which will
best assure to all employees the exercise of their collective bargaining rights.[31]

It does not appear that foreign-hires have indicated their intention to be grouped together with local-
hires for purposes of collective bargaining. The collective bargaining history in the School also shows
that these groups were always treated separately. Foreign-hires have limited tenure; local-hires enjoy
security of tenure. Although foreign-hires perform similar functions under the same working conditions
as the local-hires, foreign-hires are accorded certain benefits not granted to local-hires. These benefits,
such as housing, transportation, shipping costs, taxes, and home leave travel allowance, are reasonably
related to their status as foreign-hires, and justify the exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires would not assure either group the exercise of their
respective collective bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders
of the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby
REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of according foreign-
hires higher salaries than local-hires.

SO ORDERED.
 [G.R. No. 118506. April 18, 1997]

NORMA MABEZA, petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL SUPREME, respondents.

DECISION

KAPUNAN, J.:

This petition seeking the nullification of a resolution of public respondent National Labor Relations
Commission dated April 28, 1994 vividly illustrates why courts should be ever vigilant in the preservation
of the constitutionally enshrined rights of the working class. Without the protection accorded by our
laws and the tempering of courts, the natural and historical inclination of capital to ride roughshod over
the rights of labor would run unabated.

The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent,
are illustrative.

Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-employees
at the Hotel Supreme in Baguio City were asked by the hotel's management to sign an instrument
attesting to the latter's compliance with minimum wage and other labor standard provisions of law.[1]
The instrument provides:[2]

JOINT AFFIDAVIT

We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA JUGUETA, ADELAIDA NONOG,
NORMA MABEZA, JONATHAN PICART and JOSE DIZON, all of legal ages (sic), Filipinos and residents of
Baguio City, under oath, depose and say:

1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No. 416 Magsaysay Ave.,
Baguio City;

2. That the said Hotel is separately operated from the Ivy's Grill and Restaurant;

3. That we are all (8) employees in the hotel and assigned in each respective shifts;

4. That we have no complaints against the management of the Hotel Supreme as we are paid
accordingly and that we are treated well.

5. That we are executing this affidavit voluntarily without any force or intimidation and for the purpose
of informing the authorities concerned and to dispute the alleged report of the Labor Inspector of the
Department of Labor and Employment conducted on the said establishment on February 2, 1991.
IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991 at Baguio City,
Philippines.

(Sgd.) (Sgd.) (Sgd.)

SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY

(Sgd) (Sgd.) (Sgd.)

MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA

(Sgd) (Sgd.)

JONATHAN PICART JOSE DIZON

SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.

Asst. City Prosecutor

Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear to the veracity
and contents of the affidavit as instructed by management. The affidavit was nevertheless submitted on
the same day to the Regional Office of the Department of Labor and Employment in Baguio City.

As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting
findings of the Labor Inspector of DOLE (in an inspection of respondent's establishment on February 2,
1991) apparently adverse to the private respondent.[3]

After she refused to proceed to the City Prosecutor's Office - on the same day the affidavit was
submitted to the Cordillera Regional Office of DOLE - petitioner avers that she was ordered by the hotel
management to turn over the keys to her living quarters and to remove her belongings from the hotel
premises.[4] According to her, respondent strongly chided her for refusing to proceed to the City
Prosecutor's Office to attest to the affidavit.[5] She thereafter reluctantly filed a leave of absence from
her job which was denied by management. When she attempted to return to work on May 10, 1991, the
hotel's cashier, Margarita Choy, informed her that she should not report to work and, instead, continue
with her unofficial leave of absence. Consequently, on May 13, 1991, three days after her attempt to
return to work, petitioner filed a complaint for illegal dismissal before the Arbitration Branch of the
National Labor Relations Commission - CAR Baguio City. In addition to her complaint for illegal dismissal,
she alleged underpayment of wages, non-payment of holiday pay, service incentive leave pay, 13th
month pay, night differential and other benefits. The complaint was docketed as NLRC Case No. RAB-
CAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati.

Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private
respondent Peter Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job)
without notice to the management"[6] and that she actually abandoned her work. He maintained that
there was no basis for the money claims for underpayment and other benefits as these were paid in the
form of facilities to petitioner and the hotel's other employees.[7] Pointing to the Affidavit of May 7,
1991, the private respondent asserted that his employees actually have no problems with management.
In a supplemental answer submitted eleven (11) months after the original complaint for illegal dismissal
was filed, private respondent raised a new ground, loss of confidence, which was supported by a
criminal complaint for Qualified Theft he filed before the prosecutor's office of the City of Baguio against
petitioner on July 4, 1991.[8]

On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's complaint on the ground
of loss of confidence. His disquisitions in support of his conclusion read as follows:

It appears from the evidence of respondent that complainant carted away or stole one (1) blanket, 1
piece bedsheet, 1 piece thermos, 2 pieces towel (Exhibits '9', '9-A,' '9-B,' '9-C' and '10' pages 12-14 TSN,
December 1, 1992).

In fact, this was the reason why respondent Peter Ng lodged a criminal complaint against complainant
for qualified theft and perjury. The fiscal's office finding a prima facie evidence that complainant
committed the crime of qualified theft issued a resolution for its filing in court but dismissing the charge
of perjury (Exhibit '4' for respondent and Exhibit 'B-7' for complainant). As a consequence, complainant
was charged in court for the said crime (Exhibit '5' for respondent and Exhibit 'B-6' for the complainant).

With these pieces of evidence, complainant committed serious misconduct against her employer which
is one of the just and valid grounds for an employer to terminate an employee (Article 282 of the Labor
Code as amended).[9]

On April 28, 1994, respondent NLRC promulgated its assailed Resolution[10] affirming the Labor
Arbiter's decision. The resolution substantially incorporated the findings of the Labor Arbiter.[11]
Unsatisfied, petitioner instituted the instant special civil action for certiorari under Rule 65 of the Rules
of Court on the following grounds:[12]

1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ITS FAILURE TO
CONSIDER THAT THE ALLEGED LOSS OF CONFIDENCE IS A FALSE CAUSE AND AN AFTERTHOUGHT ON THE
PART OF THE RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL OF THE
COMPLAINANT FROM HER EMPLOYMENT;

2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ADOPTING THE
RULING OF THE LABOR ARBITER THAT THERE WAS NO UNDERPAYMENT OF WAGES AND BENEFITS ON
THE BASIS OF EXHIBIT "8" (AN UNDATED SUMMARY OF COMPUTATION PREPARED BY ALLEGEDLY BY
RESPONDENT'S EXTERNAL ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN EVIDENCE TO PROVE
PAYMENT OF WAGES AND BENEFITS;

3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN FAILING TO CONSIDER
THE EVIDENCE ADDUCED BEFORE THE LABOR ARBITER AS CONSTITUTING UNFAIR LABOR PRACTICE
COMMITTED BY THE RESPONDENT.

The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private
respondent's principal claims and defenses and urges this Court to set aside the public respondent's
assailed resolution.[13]

We agree.

It is settled that in termination cases the employer bears the burden of proof to show that the dismissal
is for just cause, the failure of which would mean that the dismissal is not justified and the employee is
entitled to reinstatement.[14]

In the case at bar, the private respondent initially claimed that petitioner abandoned her job when she
failed to return to work on May 8, 1991. Additionally, in order to strengthen his contention that there
existed sufficient cause for the termination of petitioner, he belatedly included a complaint for loss of
confidence, supporting this with charges that petitioner had stolen a blanket, a bedsheet and two
towels from the hotel.[15] Appended to his last complaint was a suit for qualified theft filed with the
Baguio City prosecutor's office.

From the evidence on record, it is crystal clear that the circumstances upon which private respondent
anchored his claim that petitioner "abandoned" her job were not enough to constitute just cause to
sanction the termination of her services under Article 283 of the Labor Code. For abandonment to arise,
there must be concurrence of two things: 1) lack of intention to work;[16] and 2) the presence of overt
acts signifying the employee's intention not to work.[17]

In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of absence
when she learned that the hotel management was displeased with her refusal to attest to the affidavit.
The fact that she made this attempt clearly indicates not an intention to abandon but an intention to
return to work after the period of her leave of absence, had it been granted, shall have expired.

Furthermore, while absence from work for a prolonged period may suggest abandonment in certain
instances, mere absence of one or two days would not be enough to sustain such a claim. The overt act
(absence) ought to unerringly point to the fact that the employee has no intention to return to
work,[18] which is patently not the case here. In fact, several days after she had been advised to take an
informal leave, petitioner tried to resume working with the hotel, to no avail. It was only after she had
been repeatedly rebuffed that she filed a case for illegal dismissal. These acts militate against the private
respondent's claim that petitioner abandoned her job. As the Solicitor General in his manifestation
observed:

Petitioner's absence on that day should not be construed as abandonment of her job. She did not report
because the cashier told her not to report anymore, and that private respondent Ng did not want to see
her in the hotel premises. But two days later or on the 10th of May, after realizing that she had to clarify
her employment status, she again reported for work. However, she was prevented from working by
private respondents.[19]

We now come to the second cause raised by private respondent to support his contention that
petitioner was validly dismissed from her job.

Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank
check for terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if
unqualifiedly given the seal of approval by this Court, could readily reduce to barren form the words of
the constitutional guarantee of security of tenure. Having this in mind, loss of confidence should ideally
apply only to cases involving employees occupying positions of trust and confidence or to those
situations where the employee is routinely charged with the care and custody of the employer's money
or property. To the first class belong managerial employees, i.e., those vested with the powers or
prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees or effectively recommend such managerial actions; and to the
second class belong cashiers, auditors, property custodians, etc., or those who, in the normal and
routine exercise of their functions, regularly handle significant amounts of money or property. Evidently,
an ordinary chambermaid who has to sign out for linen and other hotel property from the property
custodian each day and who has to account for each and every towel or bedsheet utilized by the hotel's
guests at the end of her shift would not fall under any of these two classes of employees for which loss
of confidence, if ably supported by evidence, would normally apply. Illustrating this distinction, this
Court, in Marina Port Services, Inc. vs. NLRC,[20] has stated that:

To be sure, every employee must enjoy some degree of trust and confidence from the employer as that
is one reason why he was employed in the first place. One certainly does not employ a person he
distrusts. Indeed, even the lowly janitor must enjoy that trust and confidence in some measure if only
because he is the one who opens the office in the morning and closes it at night and in this sense is
entrusted with the care or protection of the employer's property. The keys he holds are the symbol of
that trust and confidence.

By the same token, the security guard must also be considered as enjoying the trust and confidence of
his employer, whose property he is safeguarding. Like the janitor, he has access to this property. He too,
is charged with its care and protection.

Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting
that property. The employer's trust and confidence in him is limited to that ministerial function. He is
not entrusted, in the Labor Arbiter's words, 'with the duties of safekeeping and safeguarding company
policies, management instructions, and company secrets such as operation devices.' He is not privy to
these confidential matters, which are shared only in the higher echelons of management. It is the
persons on such levels who, because they discharge these sensitive duties, may be considered holding
positions of trust and confidence. The security guard does not belong in such category.[21]
More importantly, we have repeatedly held that loss of confidence should not be simulated in order to
justify what would otherwise be, under the provisions of law, an illegal dismissal. "It should not be used
as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a mere
afterthought to justify an earlier action taken in bad faith."[22]

In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges against
petitioner long after the latter exposed the hotel's scheme (to avoid its obligations as employer under
the Labor Code) by her act of filing illegal dismissal charges against the private respondent would hardly
warrant serious consideration of loss of confidence as a valid ground for dismissal. Notably, the Solicitor
General has himself taken a position opposite the public respondent and has observed that:

If petitioner had really committed the acts charged against her by private respondents (stealing supplies
of respondent hotel), private respondents should have confronted her before dismissing her on that
ground. Private respondents did not do so. In fact, private respondent Ng did not raise the matter when
petitioner went to see him on May 9, 1991, and handed him her application for leave. It took private
respondents 52 days or up to July 4, 1991 before finally deciding to file a criminal complaint against
petitioner, in an obvious attempt to build a case against her.

The manipulations of private respondents should not be countenanced.[23]

Clearly, the efforts to justify petitioner's dismissal - on top of the private respondent's scheme of
inducing his employees to sign an affidavit absolving him from possible violations of the Labor Code -
taints with evident bad faith and deliberate malice petitioner's summary termination from employment.

Having said this, we turn to the important question of whether or not the dismissal by the private
respondent of petitioner constitutes an unfair labor practice.

The answer in this case must inevitably be in the affirmative.

The pivotal question in any case where unfair labor practice on the part of the employer is alleged is
whether or not the employer has exerted pressure, in the form of restraint, interference or coercion,
against his employee's right to institute concerted action for better terms and conditions of
employment. Without doubt, the act of compelling employees to sign an instrument indicating that the
employer observed labor standards provisions of law when he might have not, together with the act of
terminating or coercing those who refuse to cooperate with the employer's scheme constitutes unfair
labor practice. The first act clearly preempts the right of the hotel's workers to seek better terms and
conditions of employment through concerted action.

We agree with the Solicitor General's observation in his manifestation that "[t]his actuation... is
analogous to the situation envisaged in paragraph (f) of Article 248 of the Labor Code"[24] which
distinctly makes it an unfair labor practice "to dismiss, discharge or otherwise prejudice or discriminate
against an employee for having given or being about to give testimony"[25] under the Labor Code. For in
not giving positive testimony in favor of her employer, petitioner had reserved not only her right to
dispute the claim and proffer evidence in support thereof but also to work for better terms and
conditions of employment.

For refusing to cooperate with the private respondent's scheme, petitioner was obviously held up as an
example to all of the hotel's employees, that they could only cause trouble to management at great
personal inconvenience. Implicit in the act of petitioner's termination and the subsequent filing of
charges against her was the warning that they would not only be deprived of their means of livelihood,
but also possibly, their personal liberty.

This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the same
are ably supported by the evidence on record. However, where such conclusions are based on a
misperception of facts or where they patently fly in the face of reason and logic, we will not hesitate to
set aside those conclusions. Going into the issue of petitioner's money claims, we find one more salient
reason in this case to set things right: the labor arbiter's evaluation of the money claims in this case
incredibly ignores existing law and jurisprudence on the matter. Its blatant one-sidedness simply raises
the suspicion that something more than the facts, the law and jurisprudence may have influenced the
decision at the level of the Arbiter.

Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason the
monetary benefits received by petitioner between 1981 to 1987 were less than minimum wage was
because petitioner did not factor in the meals, lodging, electric consumption and water she received
during the period in her computations.[26] Granting that meals and lodging were provided and indeed
constituted facilities, such facilities could not be deducted without the employer complying first with
certain legal requirements. Without satisfying these requirements, the employer simply cannot deduct
the value from the employee's wages. First, proof must be shown that such facilities are customarily
furnished by the trade. Second, the provision of deductible facilities must be voluntarily accepted in
writing by the employee. Finally, facilities must be charged at fair and reasonable value.[27]

These requirements were not met in the instant case. Private respondent "failed to present any
company policy or guideline to show that the meal and lodging . . . (are) part of the salary;"[28] he failed
to provide proof of the employee's written authorization; and, he failed to show how he arrived at the
valuations.[29]

Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were
figures furnished by the private respondent's own accountant, without corroborative evidence. On the
pretext that records prior to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he could have, as has been
pointed out in the Solicitor General's manifestation, "secured certified copies thereof from the nearest
regional office of the Department of Labor, the SSS or the BIR."[30]

More significantly, the food and lodging, or the electricity and water consumed by the petitioner were
not facilities but supplements. A benefit or privilege granted to an employee for the convenience of the
employer is not a facility. The criterion in making a distinction between the two not so much lies in the
kind (food, lodging) but the purpose.[31] Considering, therefore, that hotel workers are required to
work different shifts and are expected to be available at various odd hours, their ready availability is a
necessary matter in the operations of a small hotel, such as the private respondent's hotel.

It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages
equivalent to the full wage applicable from May 13, 1988 up to the date of her illegal dismissal.

Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living
allowance, night differential pay, and 13th month pay for the periods alleged by the petitioner as the
private respondent has never been able to adduce proof that petitioner was paid the aforestated
benefits.

However, the claims covering the period of October 1987 up to the time of filing the case on May 13,
1988 are barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money
claims arising out of employer-employee relationship to three (3) years from the time the cause of
action accrues.[32]

We depart from the settled rule that an employee who is unjustly dismissed from work normally should
be reinstated without loss of seniority rights and other privileges. Owing to the strained relations
between petitioner and private respondent, allowing the former to return to her job would only subject
her to possible harassment and future embarrassment. In the instant case, separation pay equivalent to
one month's salary for every year of continuous service with the private respondent would be proper,
starting with her job at the Belfront Hotel.

In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in Osmalik
Bustamante, et al. vs. National Labor Relations Commission,[33] petitioner is entitled to full backwages
from the time of her illegal dismissal up to the date of promulgation of this decision without
qualification or deduction.

Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to be
terminated from employment with two written notices before the same may be legally effected. The
first is a written notice containing a statement of the cause(s) for dismissal; the second is a notice
informing the employee of the employer's decision to terminate him stating the basis of the dismissal.
During the process leading to the second notice, the employer must give the employee ample
opportunity to be heard and defend himself, with the assistance of counsel if he so desires.

Given the seriousness of the second cause (qualified theft) of the petitioner's dismissal, it is noteworthy
that the private respondent never even bothered to inform petitioner of the charges against her.
Neither was petitioner given the opportunity to explain the loss of the articles. It was only almost two
months after petitioner had filed a complaint for illegal dismissal, as an afterthought, that the loss was
reported to the police and added as a supplemental answer to petitioner's complaint. Clearly, the
dismissal of petitioner without the benefit of notice and hearing prior to her termination violated her
constitutional right to due process. Under the circumstances, an award of One Thousand Pesos
(P1,000.00) on top of payment of the deficiency in wages and benefits for the period aforestated would
be proper.
WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations Commission dated
April 24, 1994 is REVERSED and SET ASIDE, with costs. For clarity, the economic benefits due the
petitioner are hereby summarized as follows:

1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner's illegal
dismissal;

2) Service incentive leave pay; night differential pay and 13th month pay for the same period;

3) Separation pay equal to one month's salary for every year of petitioner's continuous service with the
private respondent starting with her job at the Belfront Hotel;

4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal up to
the date of promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC.[34]

5) P1.000.00.

SO ORDERED.
 G.R. No. 102636 September 10, 1993

METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP and ANTONIO V. BALINANG,
petitioners,

vs.

NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and METROPOLITAN BANK and TRUST
COMPANY, respondents.

Gilbert P. Lorenzo for petitioners.

Marcial G. dela Fuente for private respondents.

VITUG, J.:

In this petition for certiorari, the Metropolitan Bank & Trust Company Employees Union-ALU-TUCP
(MBTCEU) and its president, Antonio V. Balinang, raise the issue of whether or not the implementation
by the Metropolitan Bank and Trust Company of Republic Act No. 6727, mandating an increase in pay of
P25 per day for certain employees in the private sector, created a distortion that would require an
adjustment under said law in the wages of the latter's other various groups of employees.

On 25 May 1989, the bank entered into a collective bargaining agreement with the MBTCEU, granting a
monthly P900 wage increase effective 01 January 1989, P600 wage increase 01 January 1990, and P200
wage increase effective 01 January 1991. The MBTCEU had also bargained for the inclusion of
probationary employees in the list of employees who would benefit from the first P900 increase but the
bank had adamantly refused to accede thereto. Consequently, only regular employees as of 01 January
1989 were given the increase to the exclusion of probationary employees.

Barely a month later, or on 01 January 1989, Republic Act 6727, "an act to rationalize wage policy
determination be establishing the mechanism and proper standards thereof, . . . fixing new wage rates,
providing wage incentives for industrial dispersal to the countryside, and for other purposes," took
effect. Its provisions, pertinent to this case, state:

Sec. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates of all workers and
employees in the private sector, whether agricultural or non-agricultural, shall be increased by twenty-
five pesos (P25) per day, . . .: Provided, That those already receiving above the minimum wage rates up
to one hundred pesos(P100.00) shall also receive an increase of twenty-five pesos (P25.00) per day, . . .
xxx xxx xxx

(d) If expressly provided for and agreed upon in the collective bargaining agreements, all increase in
the daily basic wage rates granted by the employers three (3) months before the effectivity of this Act
shall be credited as compliance with the increases in the wage rates prescribed herein, provided that,
where such increases are less than the prescribed increases in the wage rates under this Act, the
employer shall pay the difference. Such increase shall not include anniversary wage increases, merit
wage increase and those resulting from the regularization or promotion of employees.

Where the application of the increases in the wage rates under this Section results in distortions as
defined under existing laws in the wage structure within an establishment and gives rise to a dispute
therein, such dispute shall first be settled voluntarily between the parties and in the event of a deadlock,
the same shall be finally resolved through compulsory arbitration by the regional branches of the
National Labor Relations Commission (NLRC) having jurisdiction over the workplace.

It shall be mandatory for the NLRC to conduct continous hearings and decide any dispute arising under
this Section within twenty (20) calendar days from the time said dispute is formally submitted to it for
arbitration. The pendency of a dispute arising from a wage distortion shall not in any way delay the
applicability of the increase in the wage rates prescribed under this Section.

Pursuant to the above provisions, the bank gave the P25 increase per day, or P750 a month, to its
probationary employees and to those who had been promoted to regular or permanent status before
01 July 1989 but whose daily rate was P100 and below. The bank refused to give the same increase to its
regular employees who were receiving more than P100 per day and recipients of the P900 CBA increase.

Contending that the bank's implementation of Republic Act 6727 resulted in the categorization of the
employees into (a) the probationary employees as of 30 June 1989 and regular employees receiving
P100 or less a day who had been promoted to permanent or regular status before 01 July 1989, and (b)
the regular employees as of 01 July 1989, whose pay was over P100 a day, and that, between the two
groups, there emerged a substantially reduced salary gap, the MBTCEU sought from the bank the
correction of the alleged distortion in pay. In order to avert an impeding strike, the bank petitioned the
Secretary of Labor to assume jurisdiction over the case or to certify the same to the National Labor
Relations Commission (NLRC) under Article 263 (g) of the Labor Code. 1 The parties ultimately agreed to
refer the issue for compulsory arbitration to the NLRC.

The case was assigned to Labor Arbiter Eduardo J. Carpio. In his decision of 05 February 1991, the labor
arbiter disregard with the bank's contention that the increase in its implementation of Republic Act 6727
did not constitute a distortion because "only 143 employees or 6.8% of the bank's population of a total
of 2,108 regular employees" benefited. He stressed that "it is not necessary that a big number of wage
earners within a company be benefited by the mandatory increase before a wage distortion may be
considered to have taken place," it being enough, he said, that such increase "result(s) in the severe
contraction of an intentional quantitative difference in wage between employee groups."
The labor arbiter concluded that since the "intentional quantitative difference" in wage or salary rates
between and among groups of employees is not based purely on skills or length of service but also on
"other logical bases of differentiation, a P900.00 wage gap intentionally provided in a collective
bargaining agreement as a quantitative difference in wage between those who WERE regular employees
as of January 1, 1989 and those who WERE NOT as of that date, is definitely a logical basis of
differentiation (that) deserves protection from any distorting statutory wage increase." Otherwise, he
added, "a minimum wage statute that seek to uplift the economic condition of labor would itself destroy
the mechanism of collective bargaining which, with perceived stability, has been labor's constitutional
and regular source of wage increase for so long a time now." Thus, since the "subjective quantitative
difference" between wage rates had been reduced from P900.00 to barely P150.00, correction of the
wage distortion pursuant to Section 4(c) of the Rules Implementing Republic Act 6727 should be made.

The labor arbiter disposed of the case, thus:

WHEREFORE, premises considered, the respondent is hereby directed to restore to complainants and
their members the Nine Hundred (P900.00) Pesos CBA wage gap they used to enjoy over non-regular
employees as of January 1, 1989 by granting them a Seven Hundred Fifty (P750.00) Pesos monthly
increase effective July 1, 1989.

SO ORDERED. 2

The bank appealed to the NLRC. On 31 May 1991, the NLRC Second Division, by a vote of 2 to 1,
reversed the decision of the Labor Arbiter. Speaking, through Commissioners Rustico L. Diokno and
Domingo H. Zapanta, the NLRC said:

. . . a wage distortion can arise only in a situation where the salary structure is characterized by
intentional quantitative differences among employee groups determined or fixed on the basis of skills,
length of service, or other logical basis of differentiation and such differences or distinction are
obliterated (In Re: Labor Dispute at the Bank of the Philippine Islands, NCMB-RB-7-11-096-89, Secretary
of Labor and Employment, February 18, 1991).

As applied in this case, We noted that in the new wage salary structure, the wage gaps between Level 6
and 7 levels 5 and 6, and levels 6 and 7 (sic) were maintained. While there is a noticeable decrease in
the wage gap between levels 2 and 3, Levels 3 and 4, and Levels 4 and 5, the reduction in the wage gaps
between said levels is not significant as to obliterate or result in severe contraction of the intentional
quantitative differences in salary rates between the employees groups. For this reason, the basis
requirement for a wage in this case. Moreover, there is nothing in the law which would justify an across-
the-board adjustment of P750.00 as ordered by the labor Arbiter.

WHEREFORE, premises considered, the appealed decision is hereby set aside and a new judgment is
hereby entered, dismissing the complaint for lack of merit.

SO ORDERED. 3
In her dissent, Presiding Commissioner Edna Bonto-Perez opined:

There may not be an obliteration nor elimination of said quantitative distinction/difference aforecited
but clearly there is a contraction. Would such contraction be severe as to warrant the necessary
correction sanctioned by the law in point, RA 6727? It is may considered view that the quantitative
intended distinction in pay between the two groups of workers in respondent company was contracted
by more than fifty (50%) per cent or in particular by more or less eighty-three (83%) per cent hence,
there is no doubt that there is an evident severe contraction resulting in the complained of wage
distortion.

Nonetheless, the award of P750.00 per month to all of herein individual complainants as ordered by the
Labor Arbiter below, to my mind is not the most equitable remedy at bar, for the same would be an
across the board increase which is not the intention of RA 6727. For that matter, herein complainants
cannot by right claim for the whole amount of P750.00 a month or P25.00 per day granted to the
workers covered by the said law in the sense that they are not covered by the said increase mandated
by RA 6727. They are only entitled to the relief granted by said law by way of correction of the pay scale
in case of distortion in wages by reason thereof.

Hence, the formula offered and incorporated in Wage Order No. IV-02 issued on 21 May 1991 by the
Regional Tripartite Wages and Productivity Commission for correction of pay scale structures in case of
wage distortion as in the case at bar which is:

Minimum Wage= % x Prescribed = Distortion

—————— Increased Adjustment

Actual Salary

would be the most equitable and fair under the circumstances obtaining in this case.

For this very reason, I register my dissent from the majority opinion and opt for the modification of the
Labor Arbiter's decision as afore-discussed. 4

The MBTCEU filed a motion for reconsideration of the decision of the NLRC; having been denied, the
MBTCEU and its president filed the instant petition for certiorari, charging the NLRC with gave abuse of
discretion by its refusal (a) "to acknowledge the existence of a wage distortion in the wage or salary
rates between and among the employee groups of the respondent bank as a result of the bank's partial
implementation" of Republic Act 6727 and (b) to give due course to its claim for an across-the-board P25
increase under Republic Act No. 6727. 5

We agree with the Solicitor General that the petition is impressed with merit. 6

The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:

(p) Wage Distortion means a situation where an increase in prescribed wage rates results in the
elimination or severe contradiction of intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of service, or other logical bases of
differentiation.

The issue of whether or not a wage distortion exists as a consequence of the grant of a wage increase to
certain employees, we agree, is, by and large, a question of fact the determination of which is the
statutory function of the NLRC. 7 Judicial review of labor cases, we may add, does not go beyond the
evaluation of the sufficiency of the evidence upon which the labor official's findings rest. 8 As such,
factual findings of the NLRC are generally accorded not only respect but also finality provided that its
decision are supported by substantial evidence and devoid of any taint of unfairness of arbitrariness. 9
When, however, the members of the same labor tribunal are not in accord on those aspects of a case, as
in this case, this Court is well cautioned not to be as so conscious in passing upon the sufficiency of the
evidence, let alone the conclusions derived therefrom.

In this case, the majority of the members of the NLRC, as well as its dissenting member, agree that there
is a wage distortion arising from the bank's implementation of the P25 wage increase; they do differ,
however, on the extent of the distortion that can warrant the adoption of corrective measures required
by law.

The definition of "wage distortion," 10 aforequoted, shows that such distortion can so exist when, as a
result of an increase in the prescribed wage rate, an "elimination or severe contraction of intentional
quantitative differences in wage or salary rates" would occur "between and among employee groups in
an establishment as to effectively obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation." In mandating an adjustment, the law
did not require that there be an elimination or total abrogation of quantitative wage or salary
differences; a severe contraction thereof is enough. As has been aptly observed by Presiding
Commissioner Edna Bonto-Perez in her dissenting opinion, the contraction between personnel
groupings comes close to eighty-three (83%), which cannot, by any stretch of imagination, be
considered less than severe.

The "intentional quantitative differences" in wage among employees of the bank has been set by the
CBA to about P900 per month as of 01 January 1989. It is intentional as it has been arrived at through
the collective bargaining process to which the parties are thereby concluded. 11 The Solicitor General, in
recommending the grant of due course to the petition, has correctly emphasized that the intention of
the parties, whether the benefits under a collective bargaining agreement should be equated with those
granted by law or not, unless there are compelling reasons otherwise, must prevail and be given effect.
12

In keeping then with the intendment of the law and the agreement of the parties themselves, along with
the often repeated rule that all doubts in the interpretation and implementation of labor laws should be
resolved in favor of labor, 13 we must approximate an acceptable quantitative difference between and
among the CBA agreed work levels. We, however, do not subscribe to the labor arbiter's exacting
prescription in correcting the wage distortion. Like the majority of the members of the NLRC, we are also
of the view that giving the employees an across-the-board increase of P750 may not be conducive to the
policy of encouraging "employers to grant wage and allowance increases to their employees higher than
the minimum rates of increases prescribed by statute or administrative regulation," particularly in this
case where both Republic Act 6727 and the CBA allow a credit for voluntary compliance. As the Court,
through Associate Justice Florentino Feliciano, also pointed out in Apex Mining Company, Inc. v. NLRC:
14

. . . . (T)o compel employers simply to add on legislated increases in salaries or allowances without
regard to what is already being paid, would be to penalize employers who grant their workers more
than the statutorily prescribed minimum rates of increases. Clearly, this would be counter-productive so
far as securing the interests of labor is concerned. . . .

We find the formula suggested then by Commissioner Bonto-Perez, which has also been the standard
considered by the regional Tripartite Wages and Productivity Commission for the correction of pay scale
structures in cases of wage distortion, 15 to well be the appropriate measure to balance the respective
contentions of the parties in this instance. We also view it as being just and equitable.

WHEREFORE, finding merit in the instant petition for certiorari, the same is GRANTED DUE PROCESS, the
questioned NLRC decision is hereby SET ASIDE and the decision of the labor arbiter is REINSTATED
subject to the MODIFICATION that the wage distortion in question be corrected in accordance with the
formula expressed in the dissenting opinion of Presiding Commissioner Edna Bonto-Perez. This decision
is immediately executory.

SO ORDERED.
 [G.R. No. 162994. September 17, 2004]

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

vs.

GLAXO WELLCOME PHILIPPINES, INC. respondent.

RESOLUTION

TINGA, J.:

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

This is a Petition for Review on Certiorari assailing the Decision[1] dated May 19, 2003 and the
Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.[2]

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

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

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

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

Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra
Pharmaceuticals[3] (Astra), a competitor of Glaxo. Bettsy was Astras Branch Coordinator in Albay. She
supervised the district managers and medical representatives of her company and prepared marketing
strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District Manager regarding
the conflict of interest which his relationship with Bettsy might engender. Still, love prevailed, and
Tecson married Bettsy in September 1998.

In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict of
interest. Tecsons superiors reminded him that he and Bettsy should decide which one of them would
resign from their jobs, although they told him that they wanted to retain him as much as possible
because he was performing his job well.

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

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

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

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

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

Because the parties failed to resolve the issue at the grievance machinery level, they submitted the
matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half () month pay for
every year of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the
National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxos policy
on relationships between its employees and persons employed with competitor companies, and
affirming Glaxos right to transfer Tecson to another sales territory.

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

Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was denied
by the appellate court in its Resolution dated March 26, 2004.[5]

Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the
NCMBs finding that the Glaxos policy prohibiting its employees from marrying an employee of a
competitor company is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was
constructively dismissed when he was transferred to a new sales territory, and deprived of the
opportunity to attend products seminars and training sessions.[6]

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

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

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

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

It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or future
relationships with employees of competitor companies, and is therefore not violative of the equal
protection clause. It maintains that considering the nature of its business, the prohibition is based on
valid grounds.[11]
According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and potential
conflict of interest. Astras products were in direct competition with 67% of the products sold by Glaxo.
Hence, Glaxos enforcement of the foregoing policy in Tecsons case was a valid exercise of its
management prerogatives.[12] In any case, Tecson was given several months to remedy the situation,
and was even encouraged not to resign but to ask his wife to resign from Astra instead.[13]

Glaxo also points out that Tecson can no longer question the assailed company policy because when he
signed his contract of employment, he was aware that such policy was stipulated therein. In said
contract, he also agreed to resign from respondent if the management finds that his relationship with an
employee of a competitor company would be detrimental to the interests of Glaxo.[14]

Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from seminars
regarding respondents new products did not amount to constructive dismissal.

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

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

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

The Court finds no merit in the petition.

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

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

[17]
The same contract also stipulates that Tecson agrees to abide by the existing company rules of Glaxo,
and to study and become acquainted with such policies.[18] In this regard, the Employee Handbook of
Glaxo expressly informs its employees of its rules regarding conflict of interest:

1. Conflict of Interest

Employees should avoid any activity, investment relationship, or interest that may run counter to the
responsibilities which they owe Glaxo Wellcome.

Specifically, this means that employees are expected:

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

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

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

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

1.1. Employee Relationships

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

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

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

The prohibition against personal or marital relationships with employees of competitor companies upon
Glaxos employees is reasonable under the circumstances because relationships of that nature might
compromise the interests of the company. In laying down the assailed company policy, Glaxo only aims
to protect its interests against the possibility that a competitor company will gain access to its secrets
and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the
Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to
reasonable returns on investments and to expansion and growth.[20] Indeed, while our laws endeavor
to give life to the constitutional policy on social justice and the protection of labor, it does not mean that
every labor dispute will be decided in favor of the workers. The law also recognizes that management
has rights which are also entitled to respect and enforcement in the interest of fair play.[21]

As held in a Georgia, U.S.A case,[22] it is a legitimate business practice to guard business confidentiality
and protect a competitive position by even-handedly disqualifying from jobs male and female applicants
or employees who are married to a competitor. Consequently, the court ruled than an employer that
discharged an employee who was married to an employee of an active competitor did not violate Title
VII of the Civil Rights Act of 1964.[23] The Court pointed out that the policy was applied to men and
women equally, and noted that the employers business was highly competitive and that gaining inside
information would constitute a competitive advantage.

The challenged company policy does not violate the equal protection clause of the Constitution as
petitioners erroneously suggest. It is a settled principle that the commands of the equal protection
clause are addressed only to the state or those acting under color of its authority.[24] Corollarily, it has
been held in a long array of U.S. Supreme Court decisions that the equal protection clause erects no
shield against merely private conduct, however, discriminatory or wrongful.[25] The only exception
occurs when the state[26] in any of its manifestations or actions has been found to have become
entwined or involved in the wrongful private conduct.[27] Obviously, however, the exception is not
present in this case. Significantly, the company actually enforced the policy after repeated requests to
the employee to comply with the policy. Indeed, the application of the policy was made in an impartial
and even-handed manner, with due regard for the lot of the employee.

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

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

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

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

. . . In this case, petitioners transfer to another place of assignment was merely in keeping with the
policy of the company in avoidance of conflict of interest, and thus validNote that [Tecsons] wife holds a
sensitive supervisory position as Branch Coordinator in her employer-company which requires her to
work in close coordination with District Managers and Medical Representatives. Her duties include
monitoring sales of Astra products, conducting sales drives, establishing and furthering relationship with
customers, collection, monitoring and managing Astras inventoryshe therefore takes an active
participation in the market war characterized as it is by stiff competition among pharmaceutical
companies. Moreover, and this is significant, petitioners sales territory covers Camarines Sur and
Camarines Norte while his wife is supervising a branch of her employer in Albay. The proximity of their
areas of responsibility, all in the same Bicol Region, renders the conflict of interest not only possible, but
actual, as learning by one spouse of the others market strategies in the region would be inevitable.
[Managements] appreciation of a conflict of interest is therefore not merely illusory and wanting in
factual basis[31]

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

By the very nature of his employment, a drug salesman or medical representative is expected to travel.
He should anticipate reassignment according to the demands of their business. It would be a poor drug
corporation which cannot even assign its representatives or detail men to new markets calling for
opening or expansion or to areas where the need for pushing its products is great. More so if such
reassignments are part of the employment contract.[33]
As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly
for a long period of time. In the case at bar, the record shows that Glaxo gave Tecson several chances to
eliminate the conflict of interest brought about by his relationship with Bettsy. When their relationship
was still in its initial stage, Tecsons supervisors at Glaxo constantly reminded him about its effects on his
employment with the company and on the companys interests. After Tecson married Bettsy, Glaxo gave
him time to resolve the conflict by either resigning from the company or asking his wife to resign from
Astra. Glaxo even expressed its desire to retain Tecson in its employ because of his satisfactory
performance and suggested that he ask Bettsy to resign from her company instead. Glaxo likewise
acceded to his repeated requests for more time to resolve the conflict of interest. When the problem
could not be resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales
area different from that handled by his wife for Astra. Notably, the Court did not terminate Tecson from
employment but only reassigned him to another area where his home province, Agusan del Sur, was
included. In effecting Tecsons transfer, Glaxo even considered the welfare of Tecsons family. Clearly, the
foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo.[34]

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

SO ORDERED.
 Dee C. Chuan and Sons

vs.

Court of Industrial Relations

85 Phil 431, January 31, 1950

Facts:

Dee C. Chuan & Sons, Inc. assails the validity of an order of the Court of Industrial Relations. The order
made upon petitioner's request for authority to hire" about twelve(12) more laborers from time to time
and on a temporary basis," contains the proviso that "the majority of the laborers to be employed
should be native." The petition was filed pending settlement by the court of a labor dispute between the
petitioner and Kaisahan Ng Mga Manggagawa sa Kahoy sa Pilipinas.At the outset, the appellant takes
exception to the finding of the court below that Dee C. Chuan& Sons, Inc. is capitalized with foreign
descent.

Issue:

Can the Court of Industrial Relations intervene in questions of selection of employees and workers so as
to impose unconstitutional restrictions?

Decision:

The employer's right to hire labor is not absolute has to be admitted. "This privilege of hiring and firing
ad libitum is, of course, being subjected to restraints today." Statutes are cutting in on it. And so does
Commonwealth Act No. 103. The regulations of the hours of labor of employees and of the employment
of women and children are familiar examples of the limitation of the employer's right in this
regard. The petitioner's request for permission to employ additional; laborers is an implicit
recognition of the correctness of the proposition. The power of the legislature to make regulations is
subject only to the condition that they should be affected with public interest and reasonable under the
circumstances. The power may be exercised directly by the law-making body or delegated by
appropriate rules to the courts or administrative agencies. We are of the opinion that the order under
consideration meets the test of reasonableness and public interest. The passage of Commonwealth
Act No. 103 was "in conformity with the constitutional objective and . . . the historical fact that
industrial and agricultural disputes have given rise to disquietude, bloodshed and revolution in our
country." (Antamok GoldfieldsMining Co. vs. Court of Industrial Relations, 40 Off. Gaz., 8th Supp.,
173.)1 "Commonwealth Act No. 103 has precisely vested the Court of Industrial Relations with authority
to intervene in all disputes between employees or strikes arising from the difference as
regards wages, compensation, and other labor conditions which it may take cognizance of." (Central
Azucarerade Tarlac vs. Court of Industrial Relations, 40 Off. Gaz., 3rd Supp., 319, 324.)2

Thus it has jurisdiction to determine the number of men to be laid off during off-seasons. By the same
token, the court may specify that a certain proportion of the additional laborers to be employed should
be Filipinos, if such condition, in the court's opinion, "is necessary or expedient for the purpose of
settling disputes or doing justice to the parties."316