G.R. No.

L-2009 April 30, 1949

SUNRIPE COCONUT PRODUCTS CO., INC petitioner,

vs.
THE COURT OF INDUSTRIAL RELATIONS and SUNSHINE COCONUT WORKERS' UNION
(CLO),respondents.

Paredes Diaz & Poblador for petitioner.

Juan R. Maralit for respondents.

PARAS, J.:

This is an appeal from a decision of the Court of Industrial Relation holding that the parers and
"shellers" of the petitioner Sunshine Coconut Products Co., Inc., are its laborers entitled to
twelve days sick leave (one day for each month of service), notwithstanding the fact that they
are piece-workers under the pakiao system. The contention of the petitioner is that said "parer"
and "shellers" are independent contractors and do not fall within the category of employees or
laborers.

The Court of Industrial Relation has relied upon the rule laid down in the case of Philadelphia
Record Company, 69 N.L.R.B., 1232 (1946), to the effect that when a worker possesses some
attributes of an employee and others off an independent contractor which make him fall within
an intermediate area he may be classified under the category off an employee when the
economic factsof the relation make it more nearly one of employment than one of independent
business enterprise with to the ends sought to be accomplished. Counsel for the petitioner does
not dispute the correctness or applicability of the rule but it is vigorously contended that in the
case at bar the economic facts characteristic of the independent contractor far outweigh the
economic facts indicative of an employee. We are not called upon to rule on the accuracyof
petitioner's contention since the conclusion of the Court of Industrial relation on the matter is
binding this Court. In other word the ruling that the "parers" and "shellers" have the status of
employee or laborers carries the factual verdict that economic facts showing such status
outweigh those indicative of an independent contractor. Some facts expressly invoked by the
Court of Industrial Relations are: That the "parers" and "shellers" work under some degree of
control or supervision of the company if not under its absolute direction; that said " parers" and
"shellers" form stable groups composed of matured men and women who regularly work at
shelling and paring nuts that for the most part they depend on their work in the Sunripe
Coconut Products Co., Inc. For their livelihood; that they are admittedly working in the factory
of said company alongside person who are indisputably employed by said company. As already
stated whether these specific facts are outweighed as contended by the petitioner by facts
demonstrative of the status of an independent contractor is a question decided adversely to the
petitioner when the Court of Industrial Relations held that the "parers" and "shellers" are
laborers or employees.

It is also pretended for the petitioner for the petitioner that the Court of Industrial Relations
departed from the definition of the word "employee" or "laborer" found in the Workmen's
Compensation Law namely: " 'Laborer' is used as a synonym off employee,' and it means every
person who has entered the employment of or works under a service or apprenticeship contract
for an employer. . . ." (Section 39 [b], Workmen's Compensation Law as amended.) The Court
of Industrial relation of course adverted to the following definition; "An employee is any person
in the service of another under a contract for hire express or implied oral or written. " (Section
7, Labor Union by Dangle and Scriber, p. 7, citing McDermott's Case, 283 Mass. 74; Werner vs.
Industrial Comm., 212 Wis., 76) In essence however the ruling of the Court of Industrial
Relation does not run counter to the definition given in the Workmen's Compensation Law.

Counsel for the petitioner have stressed the argument that the principal test in determining
whether a worker is an employee or an independent contractor is the employer's right of control
over the work and not merely the right to control the result it being intimated that the "parers"
and shellers" are controlled by the petitioner only to the extent "that the nut are pared whole or
that there is not much meat wasted." Even under the criterion adopted by the petitioner it
would not be amiss to state thatthe requirement imposed on the "parers" and "shellers" to the
effect that the nuts are pared whole or that there is not much meat wasted," in effect limits or
that there is not much meat wasted," in effect limits or controls the means or details by which
said workers are to accomplish their services.It is inconceivable that the "parers " and "shellers"
in order to meet the requirement of the petitioners would not follow a uniform standard in the
performance of their work.

Petitioner also insists that the "parers" and "shellers" are piece-workers under the "pakiao"
system. In answer, suffice it to observe that Commonwealth Act No. 103, as amended expressly
provides that "A minimum wage or share shall be determined and fixed for laborers working by
the hour day or month or by piece-work and for tenants sharing in the crop or paid by
measurement unit. . . ." (Section 5.) The organic law of the Court of Industrial Relation
therefore even orders that laborers may be paid by piece-work; and the facts that the "parers"
and shellers" are paid a fixed amount for a fixed number of nuts pared or shelled does not
certainly take them out of the purview of Commonwealth Act No. 103.

It is unnecessary to discuss at length the other facts pointed out by the petitioner in support of
the proposition that said "parers" and shellers" are independent contractors, because a ruling
on the matter would necessarily involve a factual inquiry which we are not authorized to
makeEven so we would undertake to advance the general remark that inn cases of this kind
wherein laborers are usually compelled to work under condition and term dictated by the
employer a reasonably wide latitude of action and judgment should be given to the Court of
Industrial Relations with a view to settling industrial disputes conformably to the intents and
purposes of its organic law. Without in the least intimating that the relation between the
"parers" and "shellers" on the one hand and the petitioner on the other as planned out by the
latter was conceived knowingly to deprive said workersof the benefits accruing to workers who
are admittedly employees or laborersunder Commonwealth Act No. 103 or the Workmen's
Compensation law it is not difficult to surmise that a contrary decision is likely to set a
precedent that may tend to encourage the adoption of a similar scheme by many other or even
all employers.

The appealed decision of the Court of Industrial Relations is therefore affirmed with costs
against the petitioner. So ordered.
G.R. No. 162401 January 31, 2006

CORAZON ALMIREZ, Petitioner,

vs.
INFINITE LOOP TECHNOLOGY CORPORATION, EDWIN R. RABINO and COURT OF
APPEALS, Respondents.

DECISION

CARPIO-MORALES, J.:

Corazon Almirez (petitioner) was hired as a Refinery Senior Process Design Engineer for a
specific project by respondent Infinite Loop Technology Corporation (Infinite Loop) through its
General Manager/President-co-respondent Edwin R. Rabino (Rabino) who, by letter1 dated
September 30, 1999 to petitioner, furnished the details of the employment of her services as
follows:

Subject: Acceptance of Professional Services

Refinery - Senior Process Design Engineer

Dear Ms. Almirez

This is to confirm acceptance of your services as per attached Terms and Conditions. Your
services will commence effective October 18, 1999 up to the completion of the scope of services
and continuation thereof with a guaranty of 12 continuous months as outlined in the attachment
or until a mutually agreed date.

We thank you for considering our company as a valued partner in the advancement of
Petroleum Processing Technology in our country.

x x x x (Emphasis and underscoring supplied)

As indicated in the above-quoted portion of Rabino’s letter, the terms and conditions attendant
to the acceptance of petitioner’s "Professional Services"2 were attached to it reading:

Scope of Professional Services

The Senior Process Design Engineer shall work together with the Process Design Consultant in
performing the scope of services below which includes but are not limited to the following:

1. Prepare the Process Design Terms of Reference or Basis of Designand other data required for
the proposed 1,200,000 BPSD Petroleum Refinery. These data are to be used in securing the
services of a Basic Design Engineering Company as well as part of Project Accomplishment of
Infinite Loop Technology Corp.

2. Review and revise/improve as necessary the existing conceptual process block diagram or
Process Flow Scheme of the proposed petroleum refinery. Various capacity combinations are to
be considered to develop process design modules of 1,200,000 BPSD total capacity.

3. Implement new process technologies that can meet the requirements of Japanese, Australian
and US petroleum product standard by the year 2004. As well as the Philippine Clean Air Act
provisions applicable to the proposed 1,200,000 BPSD petroleum refinery. Petroleum Product
Standards required shall be researched and be part of the Basis of Design or Term of Reference.
4. Participate in discussions during the solicitation of proposals from Basic Design Engineering
Companies.

5. Review the progress of work being done by the Basic Design Engineering Company and
coordinate with the company management team for an efficient and effective project
implementation.

6. Make reports and recommendations to the company management team regarding work
progress, revisions and improvement of process design on a regular basis as required by
company management team.

7. Represent the Company in technical meetings to be held locally or abroad.

8. Perform other related works that are necessary in completing the Engineering Procurement
and Construction (EPC) bid documents and progress reports relevant to schedules of deliveries
to the Project Proponent as required by the company.

9. Continue related works when the construction stage of this Proposed Refinery will push
through.

10. Serve as technical consultant to Infinite Loop Technology Corp. on other relevant works or
projects when required.

x x x x (Emphasis in the original; underscoring supplied)

Terms of Payments

Professional Fee: US$ 2,000.00 per month (net of tax)

To be paid 50/50 split in US Dollars or

equivalent Peso every 15th and 30th of the month

Length of Service: Guaranteed minimum of 12 continuous months

or up to completion of services, or until a

mutually agreed date.

Reimbursable Expenses:

Work related expenses which include but not

limited to the following:

- Communication Expenses (Cellular

phone, fax, tels)

- Representation Expenses

- Out of town travel expenses

Other Benefits:

- US$ 300.00 per month as transportation

allowance (Engineer to use her

personal car in the performance of

work) to be paid in equivalent pesos

every end of the month.

- Project Bonus at the end of the contract

to be mutually agreed upon by both parties.

Others:

Infinite Loop Technology Corporation to provide

the ff:

- Laptop Computer (Pentium III or best

available model with modems etc.)

- Printer/ Scanner

- Process Simulation Softwares to be identified later (Emphasis in the original; underscoring

supplied)

The letter, as well as the attached documents, bore the signature of petitioner and Rabino.

For her services, petitioner received the following amounts on the dates indicated:3

Voucher date Amount

11/23/99 Salary for Nov. 1-15, 1999 P20,000.00

12/02/99 Salary for Nov. 15-30, 1999 8,000.00

12/15/99 Full payment for Nov. 15-30 salary 2,000.00

Salary for Dec. 1-15, 1999 10,000.00

1/17/00 Salary for Jan. 1-15, 2000 12,000.00

1/16/00 Salary for Jan. 16-31, 2000 12,500.00

1/20/00 Salary for Jan. 1-15, 2000 12,500.00

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

Total P77,000.00

By letter4 dated February 2, 2000, petitioner conveyed to Infinite Loop through Rabino her
disappointment with the "salary" she was receiving in this wise:

x x x When I agreed with a salary of P30,000.00 monthly, my understanding is that, this

amount is already net of tax x x x. However, when I received my salary for the month of
January which is only partial, (P25,000) and even less because [of] SSS and tax deductions x x
x

I understand that tax should be deducted from my salary for your Accounting records but I
would like to ask you not to deduct it from the P30,000.00 salary I am supposed to be
receiving. Currently I am paying my SSS contributions voluntarily so there is no need for the
company to pay my monthly contributions.

I would like to render my service at Infinite Loop based on the contractthat I signed and I am
willing to serve as technical consultant to InfiniteLoop on other relevant works or
projects while we are waiting for the Masbate refinery project.

x x x x (Emphasis and underscoring supplied)

Responding,5 Rabino stated that petitioner’s letter "was totally different [from] what [they]
verbally agreed [upon]" in her house; that "like any other proposed project, [the Proposed
1,200,000 BPSD Petroleum Refinery] can be deferred like its present status;" and that since
"the financial side for the engineering design for the proposed [project] is not yet available x x x
it would be prudent to SUSPEND her professional services as Senior Process Design Engineer
effective February 7, 2000." Rabino assured petitioner that her professional services would be
resumed once they are provided with the initial payment requested from the project proponent.

By letter6 dated August 9, 2000, petitioner, through counsel, wrote Rabino "to compensate [her
with] the total amount of her contract," thus:

Our client MS. CORAZON S. ALMIREZ has referred to us for appropriate legal action concerning
her contract with your company as a refinery process design engineer.

In the said contract, which was accepted by our said client on September 30, 1999, you stated
that our client’s services "will commence effective October 18, 1999 up to the completion of the
scope of the services and continuation thereof with a guaranty of 12 continuous months as
outlined in the attachment or until a mutually agreed date". However, despite your guarantee of
at least 12 continuous months of service, you suspended her professional services effective
February 7, 2000. The same is a clear violation of the terms and conditions of the contract.
Moreover, you have paid her only a total amount of SEVENTY FOUR THOUSAND TWO HUNDRED
TWENTY NINE & 17/100 PESOS (P74,229.17), which is way below than the agreed professional
fee of US $2,000.00 a month net of tax. On account of your blatant violation of the terms and
conditions of the contract, our client suffered sleepless nights, anxiety and besmirched
reputation. She was constrained to resign from her job as an engineer at the Technoserve
International Co., Inc., in view of her contract with your company.

In view thereof, formal demand is hereby made on you to compensate our client the total
amount of her contract or the amount of US DOLLARS: twenty thousand ($ 20,000.00), MORE
OR LESS, within five (5) days from your receipt hereof, failing which we shall, much to our
regret, be constrained to file the necessary action in court.
x x x x (Underscoring supplied)

Rabino later wrote petitioner, by letter of November 15, 2000,7 as follows:

Thank you for reminding us about our agreement about this possible landmark project. You all
know that Infinite Loop Tech. Corp. is the lead company in this undertaking in association with
other companies forming a consortium to cope up with the huge financial and technical
requirement of this project. We all have invested a lot of group resources for this, but
unfortunately the Project Proponent, Arrox Resources Corp., have encountered re-organization
and have not yet paid us for this project.

At the moment, the former Chairman of Arrox Resources Corp. is still in contact with us. We all
hope that this project will push thru after our country would overcome all the peace and order,
economic and political crisis we are encountering now.

We all hope that you would bear with us. We would inform you soonest once any development
from the project proponent would be relayed to us.

On December 12, 2000, petitioner filed a complaint against Infinite Loop and Rabino before the
National Labor Relations Commission (NLRC) for "breach of contract of employment," praying
that judgment be rendered in her favor ordering Infinite Loop to pay:

(1) $22,000.00 or its peso equivalent representing salaries and wages;

(2) P300,000.00 as and for moral damages;

(3) P100,000.00 as and for exemplary damages; and

(4) 10% of the total claim as and for attorney’s fees.

Infinite Loop moved to dismiss8 petitioner’s complaint on the ground that the NLRC has no
jurisdiction over the parties and the subject matter, there being no employee-employer
relationship between them as the contract they entered into was one of services and not of
employment.

By Resolution of November 14, 2001, the Labor Arbiter, finding that paragraph No. 6 of the
Scope of Professional Services of petitioner showed that "the company’s management team
exercises control over the means and methods in the performance of [petitioner’s] duties as
Refinery Process Design Engineer," held that there existed an employer-employee relationship
between the parties.

The Labor Arbiter thus ordered Infinite Loop and Rabino to jointly and severally pay petitioner
the sum of US$ 24,000.00 in its peso equivalent at the date of payment less advances in the
amount of P77,000.00 plus 5% thereof by way of attorney’s fees. It dismissed petitioner’s claim
for damages, however.9

Infinite Loop and Rabino (hereafter respondents) appealed to the NLRC. By Resolution10 dated
September 19, 2002, the NLRC, finding that employer-employee relation between the parties
indeed existed, dismissed respondents’ appeal.

Before the Court of Appeals to which respondents elevated the case, they argued that the
NLRC:

I.

x x x ABUSED ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION AND ERRED IN NOT

FINDING THAT THE LABOR ARBITER HAS NO JURISDICTION OVER THE CAUSES OF ACTION
PLEADED IN THE COMPLAINT, I.E., NON PAYMENT OF PROFESSIONAL FEE AND BREACH OF
CONTRACT.

II.

x x x COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION AND

COMMITTED REVERSIBLE ERROR IN NOT FINDING THAT [PETITIONER] IS NOT AN
EMPLOYEE OF [INFINITE LOOP].

III.

x x x SERIOUSLY ERRED IN NOT FINDING THE ENVISIONED ENGAGEMENT OF [PETITIONER]

AS A REFINERY PROCESS ENGINEER IS CO-TERMINOUS WITH THE PROJECT, WHICH PROJECT
DID NOT MATERIALIZE.11 (Underscoring supplied)

The appellate court, finding that "[petitioner] was hired to render professional services for a
specific project" and her "primary cause of action is for a sum of money on account of [Infinite
Loop’s] alleged breach of contractual obligation to pay her agreed professional fee," held by
Decision12 dated October 20, 2003 that no employer-employee relationship existed between
the parties, hence, the NLRC and the Labor Arbiter have no jurisdiction over the complaint. It
accordingly reversed the NLRC decision and dismissed petitioner’s complaint.

Hence, the present petition, petitioner contending that the appellate court erred when it:

A.

x x x INCONSISTENTLY RULED THAT THERE WAS NO EMPLOYER-EMPLOYEE RELATIONSHIP

BETWEEN THE PARTIES BUT AT THE SAME TIME IT CITED THAT [PETITIONER] IS A PROJECT
EMPLOYEE. MOREOVER, THE ASSAILED JUDGMENT IS BASED ON MISAPPRECIATION OF FACTS.

B.

x x x FAILED TO CONSIDER THE RELIEF MENTIONED IN [PETITIONER’S] COMPLAINT FOR

PAYMENT OF SALARY x x x

C.

x x x RULED THAT THE SEPARATION FROM SERVICE OF [PETITIONER] BECAUSE OF THE

PROJECT’S DISCONTINUANCE DID NOT RESULT TO ILLEGAL DISMISSAL.13

To ascertain the existence of an employer-employee relationship, jurisprudence has invariably

applied the four-fold test, to wit: (1) the manner of selection and engagement; (2) the payment
of wages; (3) the presence or absence of the power of dismissal; and (4) the presence or
absence of the power of control. Of these four, the last one, the so called "control test" is
commonly regarded as the most crucial and determinative indicator of the presence or absence
of an employer-employee relationship.14

Under the control test, an employer-employee relationship exists where the person for whom
the services are performed reserves the right to control not only the end achieved, but also
the manner and means to be used in reaching that end.15

From the earlier-quoted scope of petitioner’s professional services, there is no showing of a

power of control over petitioner. The services to be performed by her specified what she needed
to achieve but not on how she was to go about it.

Contrary to the finding of the Labor Arbiter, as affirmed by the NLRC, above-quoted paragraph
No. 6 of the "Scope of [petitioner’s] Professional Services" requiring her to "[m]ake reports and
recommendations to the company management team regarding work progress, revisions and
improvement of process design on a regular basis as required by company management team"
does not "show that the company’s management team exercises control over the means and
methods in the performance of her duties as Refinery Process Design Engineer." Having hired
petitioner’s professional services on account of her "expertise and qualifications" as petitioner
herself proffers in her Position Paper,16 the company naturally expected to be updated regularly
of her "work progress," if any, on the project for which she was specifically hired.

In bolstering her contention that there was an employer-employee relationship, petitioner draws
attention to the pay slips and Infinite Loop’s deduction of her SSS, Philhealth, and withholding
tax, and to the designation of the payments to her as "salaries."

The deduction from petitioner’s remuneration of amounts representing SSS premiums,

Philhealth contributions and withholding tax, was made in the only payslip issued to petitioner,
that for the period of January 16-31, 2000,17 the other amounts of remuneration having been
documented by cash vouchers. Such payslip cannot prove the existence of an employer-
employee relationship between the parties.

The cases of Equitable Banking Corp. v. NLRC18 and Nagusara v. NLRC19should be

differentiated from the present case, as the employers in these two cases did not only regularly
make similar deductions from the therein complainants’ remuneration but also registered and
declared the complainants with the SSS and Medicare (Philhealth) as their employees.

As for the designation of the payments to petitioner as "salaries," it is not determinative of the
existence of an employer-employee relationship. "Salary" is a general term defined as "a
remuneration for services given." It is the above-quoted contract of engagement of services-
letter dated September 30, 1999, together with its attachments, which is the law between the
parties. Even petitioner concedes rendering service "based on the contract,"20 which, as
reflected earlier, is bereft of a showing of power of control, the most crucial and determinative
indicator of the presence of an employer-employee relationship.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioner. SO ORDERED.

G.R. No. L-46058 December 14, 1987

SOCIAL SECURITY SYSTEM, petitioner,

vs.
COURT OF APPEALS and the QUALITY TOBACCO CORPORATION, respondents.

PARAS, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals * dated March
16, 1977 in CA-G.R. No. 05087-SP entitled Romeo Carreon, petitioner-appellee vs. Quality
Tobacco Corporation, respondent-appellant and Social Security System, intervenor-appellee,
reversing the Resolution dated January 21, 1976 of the Social Security System and dismissing
the petition filed by Romeo Carreon.

The facts are found by the Court of Appeals are as follows:

QTC, formerly U.S. Tobacco Corporation, is a firm engaged in the manufacture and sale of
cigarettes. On August 12, 1972, QTC, as VENDOR, entered into an agreement with CARREON,
as VENDEE, the salient provisions of which are as follows:

2. The VENDEE shall purchase one or more brands of cigarettes of the VENDOR on cash basis
only, subject to the discretion of the VENDOR as to the brand and quantity thereof;

xxx xxx xxx

3. The VENDEE shall sell the cigarettes herein mentioned only within Quezon Province and or
such other places as may be designated and or limited thereafter by the VENDOR and only to
residents of, or retailers or jobbers doing, and having their place of business in, said assigned
territory, strictly, at such prices set by the VENDOR from time to time for the aforementioned
respective brands of cigarettes in the sale thereof by the VENDEE in said assigned territory. The
VENDEE is fully aware that a violation of this particular paragraph will cause grave and serious
consequences to the VENDOR and that he shall be liable for all damages caused by said
violation.

4. The VENDEE shall be solely responsible for the cigarettes delivered to him by the VENDOR as
well as for the aforementioned proceeds from the sale thereof, and any loss thereof due to any
cause shall be solely for his own risk and account.

xxx xxx xxx

6. The VENDOR may loan a delivery truck or trucks to the VENDEE, which truck or trucks shall
be used by the VENDEE exclusively in connection with this contract and at all time maintained
by the said VENDEE in good condition; and for as long as the VENDEE may be allowed the use
of the VENDOR's truck or trucks, the VENDEE shall pay all the expenses for gasoline, oil,
repairs, operating costs, maintenance, tires, spare parts, etc., but the VENDOR may at its
discretion assume the payment of major repair.

xxx xxx xxx

9. This contract, may, however, be terminated upon one (1) week's notice of either party at any
time.
10. In the event a court litigation should be necessary to recover from the VENDEE any amount
due to the VENDOR, the VENDEE shall pay to the VENDOR all such damages that the VENDOR
may suffer arising from the violation by the VENDEE of any of the terms and conditions of this
contract and/or implementation and/or instructions mentioned in Paragraph 7 hereof plus the
cost of suit and attorney's fees of at least 20% of the amount sought to be recovered, which in
no case shall be less than Five Hundred Pesos (P500.00) for the purposes of this paragraph,
venue of actions is hereby agreed to be in the City of Manila and the VENDEE hereby waives
any other proper venue in any action which may be brought by or against him in connection
with this contract or in connection with other actions which may be brought incident thereto.

The contract with CARREON was terminated by QTC on December 18,1972.

On April 29, 1974, CARREON filed a petition with the Social Security Commission alleging that
he was an employee of QTC, and asking that QTC be ordered to report him for coverage under
the Social Security Law QTC answered claiming that CARREON has not been an employee but
was an 'Independent businessman.' The Social Security System intervened and, taking the side
of CARREON, also asked that QTC be ordered to pay Social Security contributions in respect of
CARREON. On January 21, 1976, the Social Security Commission resolved CARREON's petition,
finding him to be an employee of QTC. The rulings in U.S. Tobacco Corporation vs. Benjamin
Serna, et al., CA-G.R. No. 32041, September 5, 1967, and The Shell Co. Phil. Ltd. vs. Fireman's
Insurance Co. of Newark, et al., 100 Phil. 757, were inter alia, relied upon.

Cognizant of the striking similarities obtaining in the case before it and the Mafinco vs.
Ople case decided by this Court on March 25, 1976, and relying solely on the doctrine laid down
in said case, the Court of Appeals issued the herein assailed decision dated March 16, 1977, the
dispositive part of which reads:

WHEREFORE, the Resolution of the Social Security Commission of January 21, 1976 in its Case
No. 2543 is hereby REVERSED and the petition filed in said case by Romeo Carreon is
dismissed.

In a Motion for Reconsideration dated March 25, 1977, the Social Security System sought the
reconsideration of the aforequoted decision (Rollo, pp. 43-49). However, finding no merit in said
motion, the Court of Appeals denied the same in its resolution dated April 14, 1977 (Rollo, pp.
50-51).

Hence this petition.

The First Division of this Court without giving due course to said petition resolved to require the
respondents to comment (Rollo, p. 64). Private respondent filed its Comment on August 9,
1977 (Rollo, p. 69).

Thereafter, this Court resolved to give due course to the petition and required the parties to
submit simultaneous memoranda (Rollo, p. 74). On September 23, 1977, private respondent
and petitioner filed their respective memoranda (Rollo, pp. 80-118).

The issue raised by the petitioner before this Court is the very same issue resolved by the Court
of Appeals-that is, whether or not Romeo Carreon is an employee or an independent contractor
under the contract aforequoted. Corollary thereto the question as to whether or not the Mafinco
case is applicable to this case was raised by the parties.

The Court took cognizance of the fact that the question of whether or not an employer-
employee relationship exists in a certain situation continues to bedevil the courts. Some
businessmen with the aid of lawyers have tried to avoid the bringing about of an employer-
employee relationship in some of their enterprises because that juridical relation spawns
obligations connected with workmen's compensation, social security, medicare, minimum wage,
termination pay and unionism.

For this reason, in order to put the issue at rest, this Court has laid down in a formidable line of
decisions the elements to be generally considered in determining the existence of an employer-
employee relationship, as follows: a) 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 method by-which the work is to be accomplished. The
last which is the so-called "control test" is the most important element (Brotherhood Labor
Unity Movement of the Phils. vs. Zamora, 147 SCRA 49 [1987]; Dy Ke Beng vs. International
Labor and Marine Union of the Phil., 90 SCRA 162 [1979]; Mafinco Trading Corp. vs. Ople, 70
SCRA 141 [1976]; Social Security System vs. Court of Appeals, 37 SCRA 579 [1971]).

Applying the control test, that is, whether the employer controls or has reserved the right to
control the employee not only as to the result of the work to be done but also as to the means
and method by which the same is to be accomplished, the question of whether or not there is
an employer-employee relationship for purposes of the Social Security Act has been settled in
this jurisdiction in the case of Investment Planning Corp. vs. SSS, 21 SCRA 924 (1967). In
other words, where the element of control is absent; where a person who works for another
does so more or less at his own pleasure and is not subject to definite hours or conditions of
work, and in turn is compensated according to the result of his effort, the relationship of
employer-employee does not exist. (SSS vs. Court of Appeals, 30 SCRA 210 [1969]).

It is the contention of petitioner that the Mafinco case which has been the sole basis of the
Court of Appeals' finding that Romeo Carreon is an independent contractor is not applicable in
the instant petition, there being no substantial parallelism between said contract and the
contract of purchase and sale in this case. It pointed out that there are in the Mafinco contract
provisions which by express implication point to the status of the peddler as an independent
contractor such as: a) that should the peddler employ a driver or helpers, the latter shall be his
employee/s and his/their compensation shall be for the peddler's account; that the peddler shall
comply with the provisions of the Social Security Act and all applicable laws (par. 2); b) peddler
is responsible for damage to property, death or injuries to persons covered by his own acts or
omissions or those of his driver or helpers (par. 3); c) peddler is required to secure at his own
expense all necessary licenses and permits and to bear all expenses which may be incurred in
the sale of soft drinks (par. 5); d) the peddler is to furnish a performance bond of P l,000.00 in
favor of Mafinco to assure performance by the peddler of his obligation to his employee under
the Social Security Act (par. 11), which provisions are notably absent in the contract in the case
at bar (Rollo, pp. 103-104).

It further contends that the Court of Appeals in an effort to justify its holding picked out only
paragraphs 1, 2, 4, 6 and 9 of the Mafinco contract and thereafter concluded that the two
contracts are similar.

Private respondent on the other hand, avers that the Mafinco contract is applicable to the case
at bar. The two contracts need not embody almost the same provisions in order that they may
be considered similar. It is enough that the aspect of similarity arising from the terms and
condition be considered because of their relevance to the issue, is relatively much stronger than
the dissimilarity.

Private respondent likewise maintains that the decision was correctly concluded not only on the
similarity of the two contracts but also on factual evidence adduced at the trial and since
respondent Court has already examined the facts and passed judgment on the basis thereof, its
decision is no longer subject to review. Stated otherwise, the Court of Appeals "looked behind
the contract" but found the evidence insufficient to justify a finding that the terms of the
contract were not followed. That the evidence for Carreon and SSS failed to pierce" the contract
(Rollo, p. 83).
Private respondent's contention is untenable.

The distinction between a question of law and a question of fact is explained in our
jurisprudence in Ramos vs. Pepsi Cola Bottling Co. (19 SCRA 289, 292 [1967]), to wit:

For a question to be one of law it must involve no examination of the probative value of the
evidence presented by the litigants or any of them and the distinction is well-known. There is a
question of law in a given case when the doubt or difference arises as to what the law is in a
certain state of facts; there is a question of fact when the doubt arises as to the truth or the
falsehood of alleged facts.

cited in G.R. No. L-39767, Lorenzo Hernandez vs. The Court of Appeals, March 31, 1987.

In the case at bar, it is evident that the basic contention is what the law is in the given state of
facts. More than that, the well-settled rule that the finding of facts of the Court of Appeals is
conclusive on the parties, admits of exceptions among which are: (1) when the findings of fact
of the Court of Appeals are contrary to those of the trial court and (2) when the findings of fact
of the Court of Appeals are premised on the supposed absence of evidence and are contradicted
by evidence on record (Sacay vs. Sandiganbayan, 142 SCRA 609 [1986]; Manlapaz vs. Court of
Appeals, 147 SCRA 239 [1987]).

In this case, the Court of Appeals ruled that there is not enough evidence to show that the
contract between Carreon and QTC was not reflective of their agreement to warrant
reformation. As earlier pointed out, the Court of Appeals did not consider the entirety of the
contract but only portions thereof which led to the conclusion that Carreon was an independent
contractor.

Thus, after a study of the records and applying the "control tests," there appears to be no
question that the existence of an employer-employee relationship between Romeo Carreon and
QTC has been established, based on the following "undisputed" facts as pointed out by the
Solicitor General, to wit: (a) QTC assigned a definite sales territory for Romeo Carreon; (b) QTC
provided Romeo Carreon with a delivery truck for the exclusive use of the latter in his sales
activities; (c) QTC dictated the price of the cigarettes sold by Romeo Carreon; (d) QTC
prescribed what brand of cigarettes Romeo Carreon could sell; (e) QTC determined the persons
to whom Romeo Carreon could sell, (f) QTC issued circulars and memoranda relative to Romeo
Carreon's sales activities; (g) QTC required Romeo Carreon to submit to it daily, weekly and
monthly reports; (h) QTC grounded Romeo Carreon for six months in 1966; (i) Romeo Carreon
was supervised by sales coordinators of QTC; (j) Romeo Carreon was subject to payment of
damages and loss even of accrued rights for any violation of instructions made by QTC in
relation to his sales activities; and (k) Romeo Carreon was paid an allowance by QTC. All these
indicate control and supervision over Carreon's work.

Moreover, it is elementary that findings of administrative agencies are generally accorded not
only. respect but also of finality (Rosario Bros, Inc. vs. Ople, 131 SCRA 72 [1984]).

PREMISES CONSIDERED, the decision of the Court of Appeals dated March 16, 1987 and its
resolution of April 14, 1977 are hereby REVERSED and SET ASIDE, and the resolution of the
Social Security Commission dated January 21,1976 is AFFIRMED and REINSTATED. SO
ORDERED.
G.R. No. 64948 September 27, 1994

MANILA GOLF & COUNTRY CLUB, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.

Bito, Misa & Lozada for petitioner.

Remberto Z. Evio for private respondent.

NARVASA, C.J.:

The question before the Court here is whether or not persons rendering caddying services for
members of golf clubs and their guests in said clubs' courses or premises are the employees of
such clubs and therefore within the compulsory coverage of the Social Security System (SSS).

That question appears to have been involved, either directly or peripherally, in three separate
proceedings, all initiated by or on behalf of herein private respondent and his fellow caddies.
That which gave rise to the present petition for review was originally filed with the Social
Security Commission (SSC) via petition of seventeen (17) persons who styled themselves
"Caddies of Manila Golf and Country Club-PTCCEA" for coverage and availment of benefits under
the Social Security Act as amended, "PTCCEA" being
the acronym of a labor organization, the "Philippine Technical, Clerical, Commercial Employees
Association," with which the petitioners claimed to be affiliated. The petition, docketed as SSC
Case No. 5443, alleged in essence that although the petitioners were employees of the Manila
Golf and Country Club, a domestic corporation, the latter had not registered them as such with
the SSS.

At about the same time, two other proceedings bearing on the same question were filed or were
pending; these were:

(1) a certification election case filed with the Labor Relations Division of the Ministry of Labor by
the PTCCEA on behalf of the same caddies of the Manila Golf and Country Club, the case being
titled "Philippine Technical, Clerical, Commercial Association vs. Manila Golf and Country Club"
and docketed as Case No. R4-LRDX-M-10-504-78; it appears to have been resolved in favor of
the petitioners therein by Med-Arbiter Orlando S. Rojo who was thereafter upheld by Director
Carmelo S. Noriel, denying the Club's motion for reconsideration; 1

(2) a compulsory arbitration case initiated before the Arbitration Branch of the Ministry of Labor
by the same labor organization, titled "Philippine Technical, Clerical, Commercial Employees
Association (PTCCEA), Fermin Lamar and Raymundo Jomok vs. Manila Golf and Country Club,
Inc., Miguel Celdran, Henry Lim and Geronimo Alejo;" it was dismissed for lack of merit by
Labor Arbiter Cornelio T. Linsangan, a decision later affirmed on appeal by the National Labor
Relations Commission on the ground that there was no employer-employee relationship
between the petitioning caddies and the respondent Club. 2

In the case before the SSC, the respondent Club filed answer praying for the dismissal of the
petition, alleging in substance that the petitioners, caddies by occupation, were allowed into the
Club premises to render services as such to the individual members and guests playing the
Club's golf course and who themselves paid for such services; that as such caddies, the
petitioners were not subject to the direction and control of the Club as regards the manner in
which they performed their work; and hence, they were not the Club's employees.

Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim
for social security coverage, avowedly coming to realize that indeed there was no employment
relationship between them and the Club. The case continued, and was eventually adjudicated
by the SSC after protracted proceedings only as regards the two holdouts, Fermin Llamar and
Raymundo Jomok. The Commission dismissed the petition for lack of merit, 3 ruling:

. . . that the caddy's fees were paid by the golf players themselves and not by respondent club.
For instance, petitioner Raymundo Jomok averred that for their services as caddies a caddy's
Claim Stub (Exh. "1-A") is issued by a player who will in turn hand over to management the
other portion of the stub known as Caddy Ticket (Exh. "1") so that by this arrangement
management will know how much a caddy will be paid (TSN, p. 80, July 23, 1980). Likewise,
petitioner Fermin Llamar admitted that caddy works on his own in accordance with the rules
and regulations (TSN, p. 24, February 26, 1980) but petitioner Jomok could not state any policy
of respondent that directs the manner of caddying (TSN, pp. 76-77, July 23, 1980). While
respondent club promulgates rules and regulations on the assignment, deportment and conduct
of caddies (Exh. "C") the same are designed to impose personal discipline among the caddies
but not to direct or conduct their actual work. In fact, a golf player is at liberty to choose a
caddy of his preference regardless of the respondent club's group rotation system and has the
discretion on whether or not to pay a caddy. As testified to by petitioner Llamar that their
income depends on the number of players engaging their services and liberality of the latter
(TSN, pp. 10-11, Feb. 26, 1980). This lends credence to respondent's assertion that the caddies
are never their employees in the absence of two elements, namely, (1) payment of wages and
(2) control or supervision over them. In this connection, our Supreme Court ruled that in the
determination of the existence of an employer-employee relationship, the "control test" shall be
considered decisive (Philippine Manufacturing Co. vs. Geronimo and Garcia, 96 Phil. 276;
Mansal vs. P.P. Coheco Lumber Co., 96 Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila Hotel Co., 101 Phil. 358, LVN
Pictures Inc. vs. Phil. Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being made also to Investment
Planning Corporation Phil. vs. SSS 21 SCRA 925).

Records show the respondent club had reported for SS coverage Graciano Awit and Daniel
Quijano, as bat unloader and helper, respectively, including their ground men, house and
administrative personnel, a situation indicative of the latter's concern with the rights and
welfare of its employees under the SS law, as amended. The unrebutted testimony of Col.
Generoso A. Alejo (Ret.) that the ID cards issued to the caddies merely intended to identify the
holders as accredited caddies of the club and privilege(d) to ply their trade or occupation within
its premises which could be withdrawn anytime for loss of confidence. This gives us a
reasonable ground to state that the defense posture of respondent that petitioners were never
its employees is well taken.4

From this Resolution appeal was taken to the Intermediate appellate Court by the union
representing Llamar and Jomok. After the appeal was docketed 5 and some months before
decision thereon was reached and promulgated, Raymundo Jomok's appeal was dismissed at his
instance, leaving Fermin Llamar the lone appellant. 6

The appeal ascribed two errors to the SSC:

(1) refusing to suspend the proceedings to await judgment by the Labor Relations Division of
National Capital Regional Office in the certification election case (R-4-LRD-M-10-504-78) supra,
on the precise issue of the existence of employer-employee relationship between the
respondent club and the appellants, it being contended that said issue was "a function of the
proper labor office"; and
(2) adjudicating that self same issue a manner contrary to the ruling of the Director of the
Bureau of Labor Relations, which "has not only become final but (has been) executed or
(become) res adjudicata." 7

The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of
the least importance. Nor, it would appear, did it find any greater merit in the second alleged
error. Although said Court reserved the appealed SSC decision and declared Fermin Llamar an
employee of the Manila Gold and Country Club, ordering that he be reported as such for social
security coverage and paid any corresponding benefits, 8 it conspicuously ignored the issue
of res adjudicata raised in said second assignment. Instead, it drew basis for the reversal from
this Court's ruling in Investment Planning Corporation of the Philippines vs. Social Security
System, supra 9 and declared that upon the evidence, the questioned employer-employee
relationship between the Club and Fermin Llamar passed the so-called "control test,"
establishment in the case — i.e., "whether the employer controls or has reserved the right to
control the employee not only as to the result of the work to be done but also as to the means
and methods by which the same is to be accomplished," — the Club's control over the caddies
encompassing:

(a) the promulgation of no less than twenty-four (24) rules and regulations just about every
aspect of the conduct that the caddy must observe, or avoid, when serving as such, any
violation of any which could subject him to disciplinary action, which may include suspending or
cutting off his access to the club premises;

(b) the devising and enforcement of a group rotation system whereby a caddy is assigned a
number which designates his turn to serve a player;

(c) the club's "suggesting" the rate of fees payable to the caddies.

Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid by
the players, not by the Club, that they observed no definite working hours and earned no fixed
income. It quoted with approval from an American decision 10 to the effect that: "whether the
club paid the caddies and afterward collected in the first instance, the caddies were still
employees of the club." This, no matter that the case which produced this ruling had a slightly
different factual cast, apparently having involved a claim for workmen's compensation made by
a caddy who, about to leave the premises of the club where he worked, was hit and injured by
an automobile then negotiating the club's private driveway.

That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as already
pointed out, is now among the mainways of the private respondent's defenses to the petition for
review. Considered in the perspective of the incidents just recounted, it illustrates as well as
anything can, why the practice of forum-shopping justly merits censure and punitive sanction.
Because the same question of employer-employee relationship has been dragged into three
different fora, willy-nilly and in quick succession, it has birthed controversy as to which of the
resulting adjudications must now be recognized as decisive. On the one hand, there is the
certification case [R4-LRDX-M-10-504-78), where the decision of the Med-Arbiter found for the
existence of employer-employee relationship between the parties, was affirmed by Director
Carmelo S. Noriel, who ordered a certification election held, a disposition never thereafter
appealed according to the private respondent; on the other, the compulsory arbitration case
(NCR Case No. AB-4-1771-79), instituted by or for the same respondent at about the same
time, which was dismissed for lack of merit by the Labor Arbiter, which was afterwards affirmed
by the NLRC itself on the ground that there existed no such relationship between the Club and
the private respondent. And, as if matters were not already complicated enough, the same
respondent, with the support and assistance of the PTCCEA, saw fit, also contemporaneously, to
initiate still a third proceeding for compulsory social security coverage with the Social Security
Commission (SSC Case No. 5443), with the result already mentioned.
Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the
certification case had never become final, being in fact the subject of three pending and
unresolved motions for reconsideration, as well as of a later motion for early
resolution. 11 Unfortunately, none of these motions is incorporated or reproduced in the record
before the Court. And, for his part, the private respondent contends, not only that said decision
had been appealed to and been affirmed by the Director of the BLR, but that a certification
election had in fact been held, which resulted in the PTCCEA being recognized as the sole
bargaining agent of the caddies of the Manila Golf and Country Club with respect to wages,
hours of work, terms of employment, etc. 12 Whatever the truth about these opposing
contentions, which the record before the Court does not adequately disclose, the more
controlling consideration would seem to be that, however, final it may become, the decision in a
certification case, by the
very nature of that proceedings, is not such as to foreclose all further dispute between the
parties as to the existence, or non-existence, of employer-employee relationship between them.

It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the
following essential requisites must concur: (1) there must be a final judgment or order; (2) said
judgment or order must be on the merits; (3) the court rendering the same must have
jurisdiction over the subject matter and the parties; and (4) there must be between the two
cases identity of parties, identity of subject matter and identity of cause of action. 13

Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior
Judgment" that would operate in bar of a subsequent action between the same parties for the
same cause, be adversarial, or contentious, "one having opposing parties; (is) contested, as
distinguished from an ex parte hearing or proceeding. . . . of which the party seeking relief has
given legal notice to the other party and afforded the latter an opportunity to contest it" 14 and a
certification case is not such a proceeding, as this Court already ruled:

A certification proceedings is not a "litigation" in the sense in which the term is commonly
understood, but mere investigation of a non-adversary, fact-finding character, in which the
investigating agency plays the part of a disinterested investigator seeking merely to ascertain
the desires of the employees as to the matter of their representation. The court enjoys a wide
discretion in determining the procedure necessary to insure the fair and free choice of
bargaining representatives by the employees.15

Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested
issue of employer-employee relationship between present petitioner and the private
respondent, it would logically be that rendered in the compulsory arbitration case (NCR Case
No. AB-4-771-79, supra), petitioner having asserted, without dispute from the private
respondent, that said issue was there squarely raised and litigated, resulting in a ruling of the
Arbitration Branch (of the same Ministry of Labor) that such relationship did not exist, and
which ruling was thereafter affirmed by the National Labor Relations Commission in an appeal
taken by said respondent. 16

In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to
which of the conflicting ruling just adverted to should be accorded primacy, given the fact that it
was he who actively sought them simultaneously, as it were, from separate fora, and even if
the graver sanctions more lately imposed by the Court for forum-shopping may not be applied
to him retroactively.

Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res
adjudicata; on contrary, it acted correctly in doing so.

Said Court’s holding that upon the facts, there exists (or existed) a relationship of employer and
employee between petitioner and private respondent is, however, another matter. The Court
does not agree that said facts necessarily or logically point to such a relationship, and to the
exclusion of any form of arrangements, other than of employment, that would make the
respondent's services available to the members and guest of the petitioner.

As long as it is, the list made in the appealed decision detailing the various matters of conduct,
dress, language, etc. covered by the petitioner's regulations, does not, in the mind of the Court,
so circumscribe the actions or judgment of the caddies concerned as to leave them little or no
freedom of choice whatsoever in the manner of carrying out their services. In the very nature of
things, caddies must submit to some supervision of their conduct while enjoying the privilege of
pursuing their occupation within the premises and grounds of whatever club they do their work
in. For all that is made to appear, they work for the club to which they attach themselves on
sufference but, on the other hand, also without having to observe any working hours, free to
leave anytime they please, to stay away for as long they like. It is not pretended that if found
remiss in the observance of said rules, any discipline may be meted them beyond barring them
from the premises which, it may be supposed, the Club may do in any case even absent any
breach of the rules, and without violating any right to work on their part. All these
considerations clash frontally with the concept of employment.

The IAC would point to the fact that the Club suggests the rate of fees payable by the players to
the caddies as still another indication of the latter's status as employees. It seems to the Court,
however, that the intendment of such fact is to the contrary, showing that the Club has not the
measure of control over the incidents of the caddies' work and compensation that an employer
would possess.

The Court agrees with petitioner that the group rotation system so-called, is less a measure of
employer control than an assurance that the work is fairly distributed, a caddy who is absent
when his turn number is called simply losing his turn to serve and being assigned instead the
last number for the day. 17

By and large, there appears nothing in the record to refute the petitioner's claim that:

(Petitioner) has no means of compelling the presence of a caddy. A caddy is not required to
exercise his occupation in the premises of petitioner. He may work with any other golf club or
he may seek employment a caddy or otherwise with any entity or individual without restriction
by petitioner. . . .

. . . In the final analysis, petitioner has no was of compelling the presence of the caddies as
they are not required to render a definite number of hours of work on a single day. Even the
group rotation of caddies is not absolute because a player is at liberty to choose a caddy of his
preference regardless of the caddy's order in the rotation.

It can happen that a caddy who has rendered services to a player on one day may still find
sufficient time to work elsewhere. Under such circumstances, he may then leave the premises
of petitioner and go to such other place of work that he wishes (sic). Or a caddy who is on call
for a particular day may deliberately absent himself if he has more profitable caddying, or
another, engagement in some other place. These are things beyond petitioner's control and for
which it imposes no direct sanctions on the caddies. . . . 18

WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is
reversed and set aside, it being hereby declared that the private respondent, Fermin Llamar, is
not an employee of petitioner Manila Golf and Country Club and that petitioner is under no
obligation to report him for compulsory coverage to the Social Security System. No
pronouncement as to costs. SO ORDERED.
G.R. No. 155207 August 13, 2008

WILHELMINA S. OROZCO, petitioner,

vs.
THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS, PHILIPPINE DAILY
INQUIRER, and LETICIA JIMENEZ MAGSANOC, respondents.

DECISION

NACHURA, J.:

The case before this Court raises a novel question never before decided in our jurisdiction –
whether a newspaper columnist is an employee of the newspaper which publishes the column.

In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure, petitioner
Wilhelmina S. Orozco assails the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No.
50970 dated June 11, 2002 and its Resolution 2 dated September 11, 2002 denying her Motion
for Reconsideration. The CA reversed and set aside the Decision 3 of the National Labor Relations
Commission (NLRC), which in turn had affirmed the Decision 4 of the Labor Arbiter finding that
Orozco was an employee of private respondent Philippine Daily Inquirer (PDI) and was illegally
dismissed as columnist of said newspaper.

In March 1990, PDI engaged the services of petitioner to write a weekly column for its Lifestyle
section. She religiously submitted her articles every week, except for a six-month stint in New
York City when she, nonetheless, sent several articles through mail. She received compensation
of P250.00 – later increased to P300.00 – for every column published.5

On November 7, 1992, petitioner’s column appeared in the PDI for the last time. Petitioner
claims that her then editor, Ms. Lita T. Logarta, 6 told her that respondent Leticia Jimenez
Magsanoc, PDI Editor in Chief, wanted to stop publishing her column for no reason at all and
advised petitioner to talk to Magsanoc herself. Petitioner narrates that when she talked to
Magsanoc, the latter informed her that it was PDI Chairperson Eugenia Apostol who had asked
to stop publication of her column, but that in a telephone conversation with Apostol, the latter
said that Magsanoc informed her (Apostol) that the Lifestyle section already had many
columnists.7

On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle section editor
to discuss how to improve said section. They agreed to cut down the number of columnists by
keeping only those whose columns were well-written, with regular feedback and following. In
their judgment, petitioner’s column failed to improve, continued to be superficially and poorly
written, and failed to meet the high standards of the newspaper. Hence, they decided to
terminate petitioner’s column.8

Aggrieved by the newspaper’s action, petitioner filed a complaint for illegal dismissal,
backwages, moral and exemplary damages, and other money claims before the NLRC.

On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in favor of petitioner,
the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered, finding complainant to be an employee of

respondent company; ordering respondent company to reinstate her to her former or equivalent
position, with backwages.
Respondent company is also ordered to pay her 13th month pay and service incentive leave pay.

Other claims are hereby dismissed for lack of merit.

SO ORDERED.9

The Labor Arbiter found that:

[R]espondent company exercised full and complete control over the means and method by
which complainant’s work – that of a regular columnist – had to be accomplished. This control
might not be found in an instruction, verbal or oral, given to complainant defining the means
and method she should write her column. Rather, this control is manifested and certained (sic)
in respondents’ admitted prerogative to reject any article submitted by complainant for
publication.

By virtue of this power, complainant was helplessly constrained to adopt her subjects and style
of writing to suit the editorial taste of her editor. Otherwise, off to the trash can went her
articles.

Moreover, this control is already manifested in column title, "Feminist Reflection" allotted
complainant. Under this title, complainant’s writing was controlled and limited to a woman’s
perspective on matters of feminine interests. That respondent had no control over the subject
matter written by complainant is strongly belied by this observation. Even the length of
complainant’s articles were set by respondents.

Inevitably, respondents would have no control over when or where complainant wrote her
articles as she was a columnist who could produce an article in thirty (3) (sic) months or three
(3) days, depending on her mood or the amount of research required for an article but her
actions were controlled by her obligation to produce an article a week. If complainant did not
have to report for work eight (8) hours a day, six (6) days a week, it is because her task was
mainly mental. Lastly, the fact that her articles were (sic) published weekly for three (3) years
show that she was respondents’ regular employee, not a once-in-a-blue-moon contributor who
was not under any pressure or obligation to produce regular articles and who wrote at his own
whim and leisure.10

PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the NLRC Second
Division dismissed the appeal thereby affirming the Labor Arbiter’s Decision. The NLRC initially
noted that PDI failed to perfect its appeal, under Article 223 of the Labor Code, due to non-filing
of a cash or surety bond. The NLRC said that the reason proffered by PDI for not filing the bond
– that it was difficult or impossible to determine the amount of the bond since the Labor Arbiter
did not specify the amount of the judgment award – was not persuasive. It said that all PDI had
to do was compute based on the amount it was paying petitioner, counting the number of
weeks from November 7, 1992 up to promulgation of the Labor Arbiter’s decision.11

The NLRC also resolved the appeal on its merits. It found no error in the Labor Arbiter’s findings
of fact and law. It sustained the Labor Arbiter’s reasoning that respondent PDI exercised control
over petitioner’s work.

PDI then filed a Petition for Review 12 before this Court seeking the reversal of the NLRC
Decision. However, in a Resolution13dated December 2, 1998, this Court referred the case to the
Court of Appeals, pursuant to our ruling in St. Martin Funeral Homes v. National Labor Relations
Commission.14
The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC Decision and
dismissed petitioner’s Complaint. It held that the NLRC misappreciated the facts and rendered a
ruling wanting in substantial evidence. The CA said:

The Court does not agree with public respondent NLRC’s conclusion. First, private respondent
admitted that she was and [had] never been considered by petitioner PDI as its employee.
Second, it is not disputed that private respondent had no employment contract with petitioner
PDI. In fact, her engagement to contribute articles for publication was based on a verbal
agreement between her and the petitioner’s Lifestyle Section Editor. Moreover, it was evident
that private respondent was not required to report to the office eight (8) hours a day. Further, it
is not disputed that she stayed in New York for six (6) months without petitioner’s permission
as to her leave of absence nor was she given any disciplinary action for the same. These
undisputed facts negate private respondent’s claim that she is an employee of petitioner.

Moreover, with regards (sic) to the control test, the public respondent NLRC’s ruling that the
guidelines given by petitioner PDI for private respondent to follow, e.g. in terms of space
allocation and length of article, is not the form of control envisioned by the guidelines set by the
Supreme Court. The length of the article is obviously limited so that all the articles to be
featured in the paper can be accommodated. As to the topic of the article to be published, it is
but logical that private respondent should not write morbid topics such as death because she is
contributing to the lifestyle section. Other than said given limitations, if the same could be
considered limitations, the topics of the articles submitted by private respondent were all her
choices. Thus, the petitioner PDI in deciding to publish private respondent’s articles only
controls the result of the work and not the means by which said articles were written.

As such, the above facts failed to measure up to the control test necessary for an employer-
employee relationship to exist.15

Petitioner’s Motion for Reconsideration was denied in a Resolution dated September 11, 2002.
She then filed the present Petition for Review.

In a Resolution dated April 29, 2005, the Court, without giving due course to the petition,
ordered the Labor Arbiter to clarify the amount of the award due petitioner and, thereafter,
ordered PDI to post the requisite bond. Upon compliance therewith, the petition would be given
due course. Labor Arbiter Amansec clarified that the award under the Decision amounted
to P15,350.00. Thus, PDI posted the requisite bond on January 25, 2007.16

We shall initially dispose of the procedural issue raised in the Petition.

Petitioner argues that the CA erred in not dismissing outright PDI’s Petition for Certiorari for
PDI’s failure to post a cash or surety bond in violation of Article 223 of the Labor Code.

This issue was settled by this Court in its Resolution dated April 29, 2005. 17 There, the Court
held:

But while the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to
the perfection of an appeal, there is a plethora of jurisprudence recognizing exceptional
instances wherein the Court relaxed the bond requirement as a condition for posting the appeal.

xxxx

In the case of Taberrah v. NLRC, the Court made note of the fact that the assailed decision of
the Labor Arbiter concerned did not contain a computation of the monetary award due the
employees, a circumstance which is likewise present in this case. In said case, the Court stated,
As a rule, compliance with the requirements for the perfection of an appeal within the
reglamentary (sic) period is mandatory and jurisdictional. However, in National Federation of
Labor Unions v. Ladrido as well as in several other cases, this Court relaxed the requirement of
the posting of an appeal bond within the reglementary period as a condition for perfecting the
appeal. This is in line with the principle that substantial justice is better served by allowing the
appeal to be resolved on the merits rather than dismissing it based on a technicality.

The judgment of the Labor Arbiter in this case merely stated that petitioner was entitled to
backwages, 13th month pay and service incentive leave pay without however including a
computation of the alleged amounts.

xxxx

In the case of NFLU v. Ladrido III, this Court postulated that "private respondents cannot be
expected to post such appeal bond equivalent to the amount of the monetary award when the
amount thereof was not included in the decision of the labor arbiter." The computation of the
amount awarded to petitioner not having been clearly stated in the decision of the labor arbiter,
private respondents had no basis for determining the amount of the bond to be posted.

Thus, while the requirements for perfecting an appeal must be strictly followed as they are
considered indispensable interdictions against needless delays and for orderly discharge of
judicial business, the law does admit of exceptions when warranted by the circumstances.
Technicality should not be allowed to stand in the way of equitably and completely resolving the
rights and obligations of the parties. But while this Court may relax the observance of
reglementary periods and technical rules to achieve substantial justice, it is not prepared to give
due course to this petition and make a pronouncement on the weighty issue obtaining in this
case until the law has been duly complied with and the requisite appeal bond duly paid by
private respondents.18

Records show that PDI has complied with the Court’s directive for the posting of the
bond;19 thus, that issue has been laid to rest.

We now proceed to rule on the merits of this case.

The main issue we must resolve is whether petitioner is an employee of PDI, and if the answer
be in the affirmative, whether she was illegally dismissed.

We rule for the respondents.

The existence of an employer-employee relationship is essentially a question of fact. 20 Factual

findings of quasi-judicial agencies like the NLRC are generally accorded respect and finality if
supported by substantial evidence.21

Considering, however, that the CA’s findings are in direct conflict with those of the Labor Arbiter
and NLRC, this Court must now make its own examination and evaluation of the facts of this
case.

It is true that petitioner herself admitted that she "was not, and [had] never been considered
respondent’s employee because the terms of works were arbitrarily decided upon by the
respondent."22 However, the employment status of a person is defined and prescribed by law
and not by what the parties say it should be.23

This Court has constantly adhered to the "four-fold test" to determine whether there exists an
employer-employee relationship between parties. 24 The four elements of an employment
relationship are: (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’s conduct. 25

Of these four elements, it is the power of control which is the most crucial 26 and most
determinative factor,27 so important, in fact, that the other elements may even be
disregarded.28 As this Court has previously held:

the significant factor in determining the relationship of the parties is the presence or absence of
supervisory authority to control the method and the details of performance of the service being
rendered, and the degree to which the principal may intervene to exercise such control. 29

In other words, the test is whether the employer controls or has reserved the right to control
the employee, not only as to the work done, but also as to the means and methods by which
the same is accomplished.30

Petitioner argues that several factors exist to prove that respondents exercised control over her
and her work, namely:

a. As to the Contents of her Column – The PETITIONER had to insure that the contents of her
column hewed closely to the objectives of its Lifestyle Section and the over-all principles that
the newspaper projects itself to stand for. As admitted, she wanted to write about death in
relation to All Souls Day but was advised not to.

b. As to Time Control – The PETITIONER, as a columnist, had to observe the deadlines of the
newspaper for her articles to be published. These deadlines were usually that time period when
the Section Editor has to "close the pages" of the Lifestyle Section where the column in located.
"To close the pages" means to prepare them for printing and publication.

As a columnist, the PETITIONER’s writings had a definite day on which it was going to appear.
So she submitted her articles two days before the designated day on which the column would
come out.

This is the usual routine of newspaper work. Deadlines are set to fulfill the newspapers’
obligations to the readers with regard to timeliness and freshness of ideas.

c. As to Control of Space – The PETITIONER was told to submit only two or three pages of
article for the column, (sic) "Feminist Reflections" per week. To go beyond that, the Lifestyle
editor would already chop off the article and publish the rest for the next week. This shows that
PRIVATE RESPONDENTS had control over the space that the PETITIONER was assigned to fill.

d. As to Discipline – Over time, the newspaper readers’ eyes are trained or habituated to look
for and read the works of their favorite regular writers and columnists. They are conditioned,
based on their daily purchase of the newspaper, to look for specific spaces in the newspapers
for their favorite write-ups/or opinions on matters relevant and significant issues aside from not
being late or amiss in the responsibility of timely submission of their articles.

The PETITIONER was disciplined to submit her articles on highly relevant and significant issues
on time by the PRIVATE RESPONDENTS who have a say on whether the topics belong to those
considered as highly relevant and significant, through the Lifestyle Section Editor. The
PETITIONER had to discuss the topics first and submit the articles two days before publication
date to keep her column in the newspaper space regularly as expected or without miss by its
readers.31
Given this discussion by petitioner, we then ask the question: Is this the form of control that
our labor laws contemplate such as to establish an employer-employee relationship between
petitioner and respondent PDI?

It is not.

Petitioner has misconstrued the "control test," as did the Labor Arbiter and the NLRC.

Not all rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former. Rules which serve as general guidelines towards the achievement of
the mutually desired result are not indicative of the power of control. 32 Thus, this Court has
explained:

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. x x x.33

The main determinant therefore is whether the rules set by the employer are meant to control
not just the results of the work but also the means and method to be used by the hired party in
order to achieve such results. Thus, in this case, we are to examine the factors enumerated by
petitioner to see if these are merely guidelines or if they indeed fulfill the requirements of the
control test.

Petitioner believes that respondents’ acts are meant to control how she executes her work. We
do not agree. A careful examination reveals that the factors enumerated by the petitioner are
inherent conditions in running a newspaper. In other words, the so-called control as to time,
space, and discipline are dictated by the very nature of the newspaper business itself.

We agree with the observations of the Office of the Solicitor General that:

The Inquirer is the publisher of a newspaper of general circulation which is widely read
throughout the country. As such, public interest dictates that every article appearing in the
newspaper should subscribe to the standards set by the Inquirer, with its thousands of readers
in mind. It is not, therefore, unusual for the Inquirer to control what would be published in the
newspaper. What is important is the fact that such control pertains only to the end result, i.e.,
the submitted articles. The Inquirer has no control over [petitioner] as to the means or method
used by her in the preparation of her articles. The articles are done by [petitioner] herself
without any intervention from the Inquirer.34

Petitioner has not shown that PDI, acting through its editors, dictated how she was to write or
produce her articles each week. Aside from the constraints presented by the space allocation of
her column, there were no restraints on her creativity; petitioner was free to write her column
in the manner and style she was accustomed to and to use whatever research method she
deemed suitable for her purpose. The apparent limitation that she had to write only on subjects
that befitted the Lifestyle section did not translate to control, but was simply a logical
consequence of the fact that her column appeared in that section and therefore had to cater to
the preference of the readers of that section.

The perceived constraint on petitioner’s column was dictated by her own choice of her column’s
perspective. The column title "Feminist Reflections" was of her own choosing, as she herself
admitted, since she had been known as a feminist writer. 35 Thus, respondent PDI, as well as her
readers, could reasonably expect her columns to speak from such perspective.

Contrary to petitioner’s protestations, it does not appear that there was any actual restraint or
limitation on the subject matter – within the Lifestyle section – that she could write about.
Respondent PDI did not dictate how she wrote or what she wrote in her column. Neither did
PDI’s guidelines dictate the kind of research, time, and effort she put into each column. In fact,
petitioner herself said that she received "no comments on her articles…except for her to shorten
them to fit into the box allotted to her column." Therefore, the control that PDI exercised over
petitioner was only as to the finished product of her efforts, i.e., the column itself, by way of
either shortening or outright rejection of the column.

The newspaper’s power to approve or reject publication of any specific article she wrote for her
column cannot be the control contemplated in the "control test," as it is but logical that one who
commissions another to do a piece of work should have the right to accept or reject the
product. The important factor to consider in the "control test" is still the element of control over
how the work itself is done, not just the end result thereof.

In contrast, a regular reporter is not as independent in doing his or her work for the newspaper.
We note the common practice in the newspaper business of assigning its regular reporters to
cover specific subjects, geographical locations, government agencies, or areas of concern, more
commonly referred to as "beats." A reporter must produce stories within his or her particular
beat and cannot switch to another beat without permission from the editor. In most newspapers
also, a reporter must inform the editor about the story that he or she is working on for the day.
The story or article must also be submitted to the editor at a specified time. Moreover, the
editor can easily pull out a reporter from one beat and ask him or her to cover another beat, if
the need arises.

This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she was
not precluded from submitting her column ahead of time or from submitting columns to be
published at a later time. More importantly, respondents did not dictate upon petitioner the
subject matter of her columns, but only imposed the general guideline that the article should
conform to the standards of the newspaper and the general tone of the particular section.

Where a person who works for another performs his job more or less at his own pleasure, in the
manner he sees fit, not subject to definite hours or conditions of work, and is compensated
according to the result of his efforts and not the amount thereof, no employer-employee
relationship exists.36

Aside from the control test, this Court has also used the economic reality test. The economic
realities prevailing within the activity or between the parties are examined, taking into
consideration the totality of circumstances surrounding the true nature of the relationship
between the parties.37 This is especially appropriate when, as in this case, there is no written
agreement or contract on which to base the relationship. In our jurisdiction, the benchmark of
economic reality in analyzing possible employment relationships for purposes of applying the
Labor Code ought to be the economic dependence of the worker on his employer. 38

Petitioner’s main occupation is not as a columnist for respondent but as a women’s rights
advocate working in various women’s organizations. 39 Likewise, she herself admits that she also
contributes articles to other publications. 40 Thus, it cannot be said that petitioner was dependent
on respondent PDI for her continued employment in respondent’s line of business. 41

The inevitable conclusion is that petitioner was not respondent PDI’s employee but an
independent contractor, engaged to do independent work.

There is no inflexible rule to determine if a person is an employee or an independent contractor;

thus, the characterization of the relationship must be made based on the particular
circumstances of each case.42 There are several factors43 that may be considered by the courts,
but as we already said, the right to control is the dominant factor in determining whether one is
an employee or an independent contractor.44

In our jurisdiction, the Court has held that an independent contractor is one who carries on a
distinct and independent business and undertakes to perform the job, work, or service on one’s
own account and under one’s own responsibility according to one’s own manner and method,
free from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof.45

On this point, Sonza v. ABS-CBN Broadcasting Corporation 46 is enlightening. In that case, the
Court found, using the four-fold test, that petitioner, Jose Y. Sonza, was not an employee of
ABS-CBN, but an independent contractor. Sonza was hired by ABS-CBN due to his "unique
skills, talent and celebrity status not possessed by ordinary employees," a circumstance that,
the Court said, was indicative, though not conclusive, of an independent contractual
relationship. Independent contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary employees. 47 The Court also found that, as
to payment of wages, Sonza’s talent fees were the result of negotiations between him and ABS-
CBN.48 As to the power of dismissal, the Court found that the terms of Sonza’s engagement
were dictated by the contract he entered into with ABS-CBN, and the same contract provided
that either party may terminate the contract in case of breach by the other of the terms
thereof.49 However, the Court held that the foregoing are not determinative of an employer-
employee relationship. Instead, it is still the power of control that is most important.

On the power of control, the Court found that in performing his work, Sonza only needed his
skills and talent – how he delivered his lines, appeared on television, and sounded on radio
were outside ABS-CBN’s control.50 Thus:

We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZA’s work. ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN
merely reserved the right to modify the program format and airtime schedule "for more
effective programming." ABS-CBN’s sole concern was the quality of the shows and their
standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods
of performance of SONZA’s work.

SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over
the means and methods of the performance of his work. Although ABS-CBN did have the option
not to broadcast SONZA’s show, ABS-CBN was still obligated to pay SONZA’s talent fees...
Thus, even if ABS-CBN was completely dissatisfied with the means and methods of SONZA’s
performance of his work, or even with the quality or product of his work, ABS-CBN could not
dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show
but ABS-CBN must still pay his talent fees in full.

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation
to continue paying in full SONZA’s talent fees, did not amount to control over the means and
methods of the performance of SONZA’s work. ABS-CBN could not terminate or discipline
SONZA even if the means and methods of performance of his work - how he delivered his lines
and appeared on television - did not meet ABS-CBN’s approval. This proves that ABS-CBN’s
control was limited only to the result of SONZA’s work, whether to broadcast the final product
or not. In either case, ABS-CBN must still pay SONZA’s talent fees in full until the expiry of the
Agreement.

In Vaughan, et al. v. Warner, et al., the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the
right to delete objectionable features in their shows. Since the management did not have
control over the manner of performance of the skills of the artists, it could only control the
result of the work by deleting objectionable features.

SONZA further contends that ABS-CBN exercised control over his work by supplying all
equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to
broadcast the "Mel & Jay" programs. However, the equipment, crew and airtime are not the
"tools and instrumentalities" SONZA needed to perform his job. What SONZA principally needed
were his talent or skills and the costumes necessary for his appearance. Even though ABS-CBN
provided SONZA with the place of work and the necessary equipment, SONZA was still an
independent contractor since ABS-CBN did not supervise and control his work. ABS-CBN’s sole
concern was for SONZA to display his talent during the airing of the programs.

A radio broadcast specialist who works under minimal supervision is an independent contractor.
SONZA’s work as television and radio program host required special skills and talent, which
SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision
and control over how SONZA utilized his skills and talent in his shows. 51

The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her
talent, skill, experience, and her unique viewpoint as a feminist advocate. How she utilized all
these in writing her column was not subject to dictation by respondent. As in Sonza, respondent
PDI was not involved in the actual performance that produced the finished product. It only
reserved the right to shorten petitioner’s articles based on the newspaper’s capacity to
accommodate the same. This fact, we note, was not unique to petitioner’s column. It is a reality
in the newspaper business that space constraints often dictate the length of articles and
columns, even those that regularly appear therein.

Furthermore, respondent PDI did not supply petitioner with the tools and instrumentalities she
needed to perform her work. Petitioner only needed her talent and skill to come up with a
column every week. As such, she had all the tools she needed to perform her work.

Considering that respondent PDI was not petitioner’s employer, it cannot be held guilty of illegal
dismissal.

WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The Decision
and Resolution of the Court of Appeals in CA-G.R. SP No. 50970 are hereby AFFIRMED. SO
ORDERED.
G.R. No. 138051 June 10, 2004

JOSE Y. SONZA, petitioner,

vs.
ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION

CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari 1 assailing the 26 March 1999 Decision2 of
the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza
("SONZA"). The Court of Appeals affirmed the findings of the National Labor Relations
Commission ("NLRC"), which affirmed the Labor Arbiter’s dismissal of the case for lack of
jurisdiction.

The Facts

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

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

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

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

ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for the first year
and ₱317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent
fees on the 10th and 25th days of the month.

On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

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

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

Mr. Sonza informed us that he is waiving and renouncing recovery of the

remaining amount stipulated in paragraph 7 of the Agreement but reserves the
right to seek recovery of the other benefits under said Agreement.
 Thank you for your attention.

Very truly yours,

(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor
and Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did
not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing
bonus, travel allowance and amounts due under the Employees Stock Option Plan ("ESOP").

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee
relationship existed between the parties. SONZA filed an Opposition to the motion on 19 July
1996.

Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his account at
PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account
with the same bank where ABS-CBN deposited SONZA’s talent fees and other payments due
him under the Agreement.

In his Order dated 2 December 1996, the Labor Arbiter 5 denied the motion to dismiss and
directed the parties to file their respective position papers. The Labor Arbiter ruled:

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

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their
position papers on 24 February 1997.

On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper with Motion to Expunge
Respondent’s Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-
CBN’s witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits
that the prevailing practice in the television and broadcast industry is to treat talents like
SONZA as independent contractors.

The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of
jurisdiction.6 The pertinent parts of the decision read as follows:

xxx

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

It must be noted that complainant was engaged by respondent by reason of his peculiar
skills and talent as a TV host and a radio broadcaster. Unlike an ordinary employee,
he was free to perform the services he undertook to render in accordance with his
own style. The benefits conferred to complainant under the May 1994 Agreement are certainly
very much higher than those generally given to employees. For one, complainant Sonza’s
monthly talent fees amount to a staggering ₱317,000. Moreover, his engagement as a talent
was covered by a specific contract. Likewise, he was not bound to render eight (8) hours of
work per day as he worked only for such number of hours as may be necessary.

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

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

x x x (Emphasis supplied)7

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming
the Labor Arbiter’s decision. SONZA filed a motion for reconsideration, which the NLRC denied in
its Resolution dated 3 July 1998.

On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals
assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals
rendered a Decision dismissing the case.8

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

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

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

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

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

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

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

‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound
itself to pay complainant a signing bonus consisting of shares of stocks…with FIVE HUNDRED
THOUSAND PESOS (₱500,000.00).

Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower
than the amount he was receiving prior to effectivity of (the) Agreement’.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable

travel benefit amounting to at least One Hundred Fifty Thousand Pesos (₱150,000.00) per year.’

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

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

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

The Issue

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

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

The Court’s Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of Appeals
affirming the NLRC ruling which upheld the Labor Arbiter’s dismissal of the case for lack of
jurisdiction.

The present controversy is one of first impression. Although Philippine labor laws and
jurisprudence define clearly the elements of an employer-employee relationship, this is the first
time that the Court will resolve the nature of the relationship between a television and radio
station and one of its "talents." There is no case law stating that a radio and television program
host is an employee of the broadcast station.

The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a
known television and radio personality, and ABS-CBN, one of the biggest television and radio
networks in the country.

SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an
employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no
jurisdiction because SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts

accord the factual findings of the Labor Arbiter and the NLRC not only respect but also finality
when supported by substantial evidence.15 Substantial evidence means such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion. 16 A party cannot prove
the absence of substantial evidence by simply pointing out that there is contrary evidence on
record, direct or circumstantial. The Court does not substitute its own judgment for that of the
tribunal in determining where the weight of evidence lies or what evidence is credible. 17

SONZA maintains that all essential elements of an employer-employee relationship are present
in this case. Case law has consistently held that the elements of an employer-employee
relationship are: (a) the selection and engagement of the employee; (b) the payment of wages;
(c) the power of dismissal; and (d) the employer’s power to control the employee on the means
and methods by which the work is accomplished. 18 The last element, the so-called "control
test", is the most important element.19

A. Selection and Engagement of Employee

ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of
SONZA’s peculiar skills, talent and celebrity status. SONZA contends that the "discretion used
by respondent in specifically selecting and hiring complainant over other broadcasters of
possibly similar experience and qualification as complainant belies respondent’s claim of
independent contractorship."

Independent contractors often present themselves to possess unique skills, expertise or talent
to distinguish them from ordinary employees. The specific selection and hiring of
SONZA, because of his unique skills, talent and celebrity status not possessed by
ordinary employees, is a circumstance indicative, but not conclusive, of an independent
contractual relationship. If SONZA did not possess such unique skills, talent and celebrity
status, ABS-CBN would not have entered into the Agreement with SONZA but would have hired
him through its personnel department just like any other employee.

In any event, the method of selecting and engaging SONZA does not conclusively determine his
status. We must consider all the circumstances of the relationship, with the control test being
the most important element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC.
SONZA asserts that this mode of fee payment shows that he was an employee of ABS-CBN.
SONZA also points out that ABS-CBN granted him benefits and privileges "which he would not
have enjoyed if he were truly the subject of a valid job contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBN’s employee, there would be no need for the parties to
stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay" 20 which the law
automatically incorporates into every employer-employee contract. 21 Whatever benefits SONZA
enjoyed arose from contract and not because of an employer-employee relationship.22

SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year, are so huge
and out of the ordinary that they indicate more an independent contractual relationship rather
than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees
precisely because of SONZA’s unique skills, talent and celebrity status not possessed by
ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to
demand and receive such huge talent fees for his services. The power to bargain talent fees
way above the salary scales of ordinary employees is a circumstance indicative, but not
conclusive, of an independent contractual relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of
SONZA as an independent contractor. The parties expressly agreed on such mode of payment.
Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn
over any talent fee accruing under the Agreement.

C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate their relationship.
SONZA failed to show that ABS-CBN could terminate his services on grounds other than breach
of contract, such as retrenchment to prevent losses as provided under labor laws. 23

During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long as
"AGENT and Jay Sonza shall faithfully and completely perform each condition of this
Agreement."24 Even if it suffered severe business losses, ABS-CBN could not retrench SONZA
because ABS-CBN remained obligated to pay SONZA’s talent fees during the life of the
Agreement. This circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid
him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue
paying SONZA’s talent fees during the remaining life of the Agreement even if ABS-CBN
cancelled SONZA’s programs through no fault of SONZA.25

SONZA assails the Labor Arbiter’s interpretation of his rescission of the Agreement as an
admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that "if it were true
that complainant was really an employee, he would merely resign, instead." SONZA did actually
resign from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZA’s
letter clearly bears this out. 26 However, the manner by which SONZA terminated his relationship
with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work
does not determine his status as employee or independent contractor.

D. Power of Control

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

Several factors favor classifying Alberty as an independent contractor. First, a television

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

Third, WIPR could not assign Alberty work in addition to filming "Desde Mi
Pueblo." Alberty’s contracts with WIPR specifically provided that WIPR hired her "professional
services as Hostess for the Program Desde Mi Pueblo." There is no evidence that WIPR assigned
Alberty tasks in addition to work related to these tapings. x x x28 (Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an employee but an
independent contractor. The control test is the most important test our courts apply in
distinguishing an employee from an independent contractor.29 This test is based on the extent of
control the hirer exercises over a worker. The greater the supervision and control the hirer
exercises, the more likely the worker is deemed an employee. The converse holds true as well –
the less control the hirer exercises, the more likely the worker is considered an independent
contractor.30

First, SONZA contends that ABS-CBN exercised control over the means and methods of his
work.

SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically to co-host the
"Mel & Jay" programs. ABS-CBN did not assign any other work to SONZA. To perform his work,
SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on
television, and sounded on radio were outside ABS-CBN’s control. SONZA did not have to render
eight hours of work per day. The Agreement required SONZA to attend only rehearsals and
tapings of the shows, as well as pre- and post-production staff meetings. 31 ABS-CBN could not
dictate the contents of SONZA’s script. However, the Agreement prohibited SONZA from
criticizing in his shows ABS-CBN or its interests.32 The clear implication is that SONZA had a free
hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZA’s work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN
merely reserved the right to modify the program format and airtime schedule "for more
effective programming."34 ABS-CBN’s sole concern was the quality of the shows and their
standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods
of performance of SONZA’s work.

SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over
the means and methods of the performance of his work. Although ABS-CBN did have the option
not to broadcast SONZA’s show, ABS-CBN was still obligated to pay SONZA’s talent fees...
Thus, even if ABS-CBN was completely dissatisfied with the means and methods of SONZA’s
performance of his work, or even with the quality or product of his work, ABS-CBN could not
dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show
but ABS-CBN must still pay his talent fees in full.35

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation
to continue paying in full SONZA’s talent fees, did not amount to control over the means and
methods of the performance of SONZA’s work. ABS-CBN could not terminate or discipline
SONZA even if the means and methods of performance of his work - how he delivered his lines
and appeared on television - did not meet ABS-CBN’s approval. This proves that ABS-CBN’s
control was limited only to the result of SONZA’s work, whether to broadcast the final product
or not. In either case, ABS-CBN must still pay SONZA’s talent fees in full until the expiry of the
Agreement.

In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the
right to delete objectionable features in their shows. Since the management did not have
control over the manner of performance of the skills of the artists, it could only control the
result of the work by deleting objectionable features.37

SONZA further contends that ABS-CBN exercised control over his work by supplying all
equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to
broadcast the "Mel & Jay" programs. However, the equipment, crew and airtime are not the
"tools and instrumentalities" SONZA needed to perform his job. What SONZA principally needed
were his talent or skills and the costumes necessary for his appearance. 38Even though ABS-CBN
provided SONZA with the place of work and the necessary equipment, SONZA was still an
independent contractor since ABS-CBN did not supervise and control his work. ABS-CBN’s sole
concern was for SONZA to display his talent during the airing of the programs.39

A radio broadcast specialist who works under minimal supervision is an independent

contractor.40 SONZA’s work as television and radio program host required special skills and
talent, which SONZA admittedly possesses. The records do not show that ABS-CBN exercised
any supervision and control over how SONZA utilized his skills and talent in his shows.

Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected
him to its rules and standards of performance. SONZA claims that this indicates ABS-CBN’s
control "not only [over] his manner of work but also the quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance
"covering talents"41 of ABS-CBN. The Agreement does not require SONZA to comply with the
rules and standards of performance prescribed for employees of ABS-CBN. The code of conduct
imposed on SONZA under the Agreement refers to the "Television and Radio Code of the
Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY
(ABS-CBN) as its Code of Ethics." 42 The KBP code applies to broadcasters, not to employees of
radio and television stations. Broadcasters are not necessarily employees of radio and television
stations. Clearly, the rules and standards of performance referred to in the Agreement are those
applicable to talents and not to employees of ABS-CBN.

In any event, not all rules imposed by the hiring party on the hired party indicate that the latter
is an employee of the former. 43 In this case, SONZA failed to show that these rules controlled
his performance. We find that these general rules are merely guidelines towards the
achievement of the mutually desired result, which are top-rating television and radio programs
that comply with standards of the industry. We have ruled that:

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

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

The Vaughan case also held that one could still be an independent contractor although the
hirer reserved certain supervision to insure the attainment of the desired result. The hirer,
however, must not deprive the one hired from performing his services according to his own
initiative.45

Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of
control which ABS-CBN exercised over him.

This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an
employee of ABS-CBN. Even an independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the same
as control.

The hiring of exclusive talents is a widespread and accepted practice in the entertainment
industry.46 This practice is not designed to control the means and methods of work of the talent,
but simply to protect the investment of the broadcast station. The broadcast station normally
spends substantial amounts of money, time and effort "in building up its talents as well as the
programs they appear in and thus expects that said talents remain exclusive with the station for
a commensurate period of time."47 Normally, a much higher fee is paid to talents who agree to
work exclusively for a particular radio or television station. In short, the huge talent fees
partially compensates for exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which contracted out
his services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an
employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is
his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2)
the employee who is ostensibly under the employ of the "labor-only" contractor; and (3) the
principal who is deemed the real employer. Under this scheme, the "labor-only" contractor
is the agent of the principal. The law makes the principal responsible to the employees of the
"labor-only contractor" as if the principal itself directly hired or employed the
employees.48 These circumstances are not present in this case.

There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-
CBN. MJMDC merely acted as SONZA’s agent. The Agreement expressly states that MJMDC
acted as the "AGENT" of SONZA. The records do not show that MJMDC acted as ABS-CBN’s
agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by SONZA and TIANGCO. The President and General Manager
of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled,
headed and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement
with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both
ABS-CBN and SONZA.

As SONZA admits, MJMDC is a management company devoted exclusively to managing the

careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other function apart from acting
as agent of SONZA or TIANGCO to promote their careers in the broadcast and television
industry.49

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8
January 1979 finally settled the status of workers in the broadcast industry. Under this policy,
the types of employees in the broadcast industry are the station and program employees.

Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect
of law. There is no legal presumption that Policy Instruction No. 40 determines SONZA’s status.
A mere executive issuance cannot exclude independent contractors from the class of service
providers to the broadcast industry. The classification of workers in the broadcast industry into
only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the
classification has no basis either in law or in fact.

Affidavits of ABS-CBN’s Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando
Cruz without giving his counsel the

opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent

to attest on the prevailing practice in the radio and television industry. SONZA views the
affidavits of these witnesses as misleading and irrelevant.

While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never prevented from
denying or refuting the allegations in the affidavits. The Labor Arbiter has the discretion
whether to conduct a formal (trial-type) hearing after the submission of the position papers of
the parties, thus:

Section 3. Submission of Position Papers/Memorandum

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

Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the

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

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

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment
industries to treat talents like SONZA as independent contractors. SONZA argues that if such
practice exists, it is void for violating the right of labor to security of tenure.

The right of labor to security of tenure as guaranteed in the Constitution 53 arises only if there is
an employer-employee relationship under labor laws. Not every performance of services for a
fee creates an employer-employee relationship. To hold that every person who renders services
to another for a fee is an employee - to give meaning to the security of tenure clause - will lead
to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer their services as
independent contractors. The right to life and livelihood guarantees this freedom to contract as
independent contractors. The right of labor to security of tenure cannot operate to deprive an
individual, possessed with special skills, expertise and talent, of his right to contract as an
independent contractor. An individual like an artist or talent has a right to render his services
without any one controlling the means and methods by which he performs his art or craft. This
Court will not interpret the right of labor to security of tenure to compel artists and talents to
render their services only as employees. If radio and television program hosts can render their
services only as employees, the station owners and managers can dictate to the radio and
television hosts what they say in their shows. This is not conducive to freedom of the press.

Different Tax Treatment of Talents and Broadcasters

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

Nature of SONZA’s Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay,
service incentive leave, signing bonus, travel allowance, and amounts due under the Employee
Stock Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that
SONZA’s claims are all based on the May 1994 Agreement and stock option plan, and
not on the Labor Code. Clearly, the present case does not call for an application of the Labor
Code provisions but an interpretation and implementation of the May 1994 Agreement. In
effect, SONZA’s cause of action is for breach of contract which is intrinsically a civil dispute
cognizable by the regular courts.58

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26
March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner. SO ORDERED.
G.R. No. 75112 August 17, 1992

FILAMER CHRISTIAN INSTITUTE, petitioner,

vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity
as Judge of the Regional Trial Court, Branch XIV, Roxas City and POTENCIANO
KAPUNAN, SR., respondents.

Bedona & Bedona Law Office for petitioner.

Rhodora G. Kapunan for private respondents.

GUTIERREZ, JR., J.:

The private respondents, heirs of the late Potenciano Kapunan, seek reconsideration of the
decision rendered by this Court on October 16, 1990 (Filamer Christian Institute v. Court of
Appeals, 190 SCRA 477) reviewing the appellate court's conclusion that there exists an
employer-employee relationship between the petitioner and its co-defendant Funtecha. The
Court ruled that the petitioner is not liable for the injuries caused by Funtecha on the grounds
that the latter was not an authorized driver for whose acts the petitioner shall be directly and
primarily answerable, and that Funtecha was merely a working scholar who, under Section 14,
Rule X, Book III of the Rules and Regulations Implementing the Labor Code is not considered an
employee of the petitioner.

The private respondents assert that the circumstances obtaining in the present case call for the
application of Article 2180 of the Civil Code since Funtecha is no doubt an employee of the
petitioner. The private respondents maintain that under Article 2180 an injured party shall have
recourse against the servant as well as the petitioner for whom, at the time of the incident, the
servant was performing an act in furtherance of the interest and for the benefit of the
petitioner. Funtecha allegedly did not steal the school jeep nor use it for a joy ride without the
knowledge of the school authorities.

After a re-examination of the laws relevant to the facts found by the trial court and the
appellate court, the Court reconsiders its decision. We reinstate the Court of Appeals' decision
penned by the late Justice Desiderio Jurado and concurred in by Justices Jose C. Campos, Jr.
and Serafin E. Camilon. Applying Civil Code provisions, the appellate court affirmed the trial
court decision which ordered the payment of the P20,000.00 liability in the Zenith Insurance
Corporation policy, P10,000.00 moral damages, P4,000.00 litigation and actual expenses, and
P3,000.00 attorney's fees.

It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar of
petitioner Filamer. He was, in relation to the school, an employee even if he was assigned to
clean the school premises for only two (2) hours in the morning of each school day.

Having a student driver's license, Funtecha requested the driver, Allan Masa, and was allowed,
to take over the vehicle while the latter was on his way home one late afternoon. It is
significant to note that the place where Allan lives is also the house of his father, the school
president, Agustin Masa. Moreover, it is also the house where Funtecha was allowed free board
while he was a student of Filamer Christian Institute.
Allan Masa turned over the vehicle to Funtecha only after driving down a road, negotiating a
sharp dangerous curb, and viewing that the road was clear. (TSN, April 4, 1983, pp. 78-79)
According to Allan's testimony, a fast moving truck with glaring lights nearly hit them so that
they had to swerve to the right to avoid a collision. Upon swerving, they heard a sound as if
something had bumped against the vehicle, but they did not stop to check. Actually, the Pinoy
jeep swerved towards the pedestrian, Potenciano Kapunan who was walking in his lane in the
direction against vehicular traffic, and hit him. Allan affirmed that Funtecha followed his advise
to swerve to the right. (Ibid., p. 79) At the time of the incident (6:30 P.M.) in Roxas City, the
jeep had only one functioning headlight.

Allan testified that he was the driver and at the same time a security guard of the petitioner-
school. He further said that there was no specific time for him to be off-duty and that after
driving the students home at 5:00 in the afternoon, he still had to go back to school and then
drive home using the same vehicle.

Driving the vehicle to and from the house of the school president where both Allan and
Funtecha reside is an act in furtherance of the interest of the petitioner-school. Allan's job
demands that he drive home the school jeep so he can use it to fetch students in the morning
of the next school day.

It is indubitable under the circumstances that the school president had knowledge that the jeep
was routinely driven home for the said purpose. Moreover, it is not improbable that the school
president also had knowledge of Funtecha's possession of a student driver's license and his
desire to undergo driving lessons during the time that he was not in his classrooms.

In learning how to drive while taking the vehicle home in the direction of Allan's house,
Funtecha definitely was not having a joy ride. Funtecha was not driving for the purpose of his
enjoyment or for a "frolic of his own" but ultimately, for the service for which the jeep was
intended by the petitioner school. (See L. Battistoni v. Thomas, Can SC 144, 1 D.L.R. 577, 80
ALR 722 [1932]; See also Association of Baptists for World Evangelism, Inc. v. Fieldmen's
Insurance Co., Inc. 124 SCRA 618 [1983]). Therefore, the Court is constrained to conclude that
the act of Funtecha in taking over the steering wheel was one done for and in behalf of his
employer for which act the petitioner-school cannot deny any responsibility by arguing that it
was done beyond the scope of his janitorial duties. The clause "within the scope of their
assigned tasks" for purposes of raising the presumption of liability of an employer, includes any
act done by an employee, in furtherance of the interests of the employer or for the account of
the employer at the time of the infliction of the injury or damage. (Manuel Casada, 190 Va 906,
59 SE 2d 47 [1950]) Even if somehow, the employee driving the vehicle derived some benefit
from the act, the existence of a presumptive liability of the employer is determined by
answering the question of whether or not the servant was at the time of the accident
performing any act in furtherance of his master's business. (Kohlman v. Hyland, 210 NW 643,
50 ALR 1437 [1926]; Jameson v. Gavett, 71 P 2d 937 [1937])

Section 14, Rule X, Book III of the Rules implementing the Labor Code, on which the petitioner
anchors its defense, was promulgated by the Secretary of Labor and Employment only for the
purpose of administering and enforcing the provisions of the Labor Code on conditions of
employment. Particularly, Rule X of Book III provides guidelines on the manner by which the
powers of the Labor Secretary shall be exercised; on what records should be kept; maintained
and preserved; on payroll; and on the exclusion of working scholars from, and inclusion of
resident physicians in the employment coverage as far as compliance with the substantive labor
provisions on working conditions, rest periods, and wages, is concerned.

In other words, Rule X is merely a guide to the enforcement of the substantive law on labor.
The Court, thus, makes the distinction and so holds that Section 14, Rule X, Book III of the
Rules is not the decisive law in a civil suit for damages instituted by an injured person during a
vehicular accident against a working student of a school and against the school itself.
The present case does not deal with a labor dispute on conditions of employment between an
alleged employee and an alleged employer. It invokes a claim brought by one for damages for
injury caused by the patently negligent acts of a person, against both doer-employee and his
employer. Hence, the reliance on the implementing rule on labor to disregard the primary
liability of an employer under Article 2180 of the Civil Code is misplaced. An implementing rule
on labor cannot be used by an employer as a shield to avoid liability under the substantive
provisions of the Civil Code.

There is evidence to show that there exists in the present case an extra-contractual obligation
arising from the negligence or reckless imprudence of a person "whose acts or omissions are
imputable, by a legal fiction, to other(s) who are in a position to exercise an absolute or limited
control over (him)." (Bahia v. Litonjua and Leynes, 30 Phil. 624 [1915])

Funtecha is an employee of petitioner Filamer. He need not have an official appointment for a
driver's position in order that the petitioner may be held responsible for his grossly negligent
act, it being sufficient that the act of driving at the time of the incident was for the benefit of
the petitioner. Hence, the fact that Funtecha was not the school driver or was not acting within
the scope of his janitorial duties does not relieve the petitioner of the burden of rebutting the
presumption juris tantum that there was negligence on its part either in the selection of a
servant or employee, or in the supervision over him. The petitioner has failed to show proof of
its having exercised the required diligence of a good father of a family over its employees
Funtecha and Allan.

The Court reiterates that supervision includes the formulation of suitable rules and regulations
for the guidance of its employees and the issuance of proper instructions intended for the
protection of the public and persons with whom the employer has relations through his
employees. (Bahia v. Litonjua and Leynes, supra, at p. 628; Phoenix Construction, v.
Intermediate Appellate Court, 148 SCRA 353 [1987])

An employer is expected to impose upon its employees the necessary discipline called for in the
performance of any act indispensable to the business and beneficial to their employer.

In the present case, the petitioner has not shown that it has set forth such rules and guidelines
as would prohibit any one of its employees from taking control over its vehicles if one is not the
official driver or prohibiting the driver and son of the Filamer president from authorizing another
employee to drive the school vehicle. Furthermore, the petitioner has failed to prove that it had
imposed sanctions or warned its employees against the use of its vehicles by persons other than
the driver.

The petitioner, thus, has an obligation to pay damages for injury arising from the unskilled
manner by which Funtecha drove the vehicle. (Cangco v. Manila Railroad Co., 38 Phil. 768, 772
[1918]). In the absence of evidence that the petitioner had exercised the diligence of a good
father of a family in the supervision of its employees, the law imposes upon it the vicarious
liability for acts or omissions of its employees. (Umali v. Bacani, 69 SCRA 263 [1976]; Poblete
v. Fabros, 93 SCRA 200 [1979]; Kapalaran Bus Liner v. Coronado, 176 SCRA 792 [1989];
Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989]; Pantranco North Express, Inc. v.
Baesa, 179 SCRA 384 [1989]) The liability of the employer is, under Article 2180, primary and
solidary. However, the employer shall have recourse against the negligent employee for
whatever damages are paid to the heirs of the plaintiff.

It is an admitted fact that the actual driver of the school jeep, Allan Masa, was not made a
party defendant in the civil case for damages. This is quite understandable considering that as
far as the injured pedestrian, plaintiff Potenciano Kapunan, was concerned, it was Funtecha who
was the one driving the vehicle and presumably was one authorized by the school to drive. The
plaintiff and his heirs should not now be left to suffer without simultaneous recourse against the
petitioner for the consequent injury caused by a janitor doing a driving chore for the petitioner
even for a short while. For the purpose of recovering damages under the prevailing
circumstances, it is enough that the plaintiff and the private respondent heirs were able to
establish the existence of employer-employee relationship between Funtecha and petitioner
Filamer and the fact that Funtecha was engaged in an act not for an independent purpose of his
own but in furtherance of the business of his employer. A position of responsibility on the part
of the petitioner has thus been satisfactorily demonstrated.

WHEREFORE, the motion for reconsideration of the decision dated October 16, 1990 is hereby
GRANTED. The decision of the respondent appellate court affirming the trial court decision is
REINSTATED. SO ORDERED.
 March 6, 2017

G.R. No. 197899

JOAQUIN LU, Petitioner

vs
TIRSO ENOPIA, ROBERTO ABANES, ALEJANDRE BAGAS, SALVADOR BERNAL, SAMUEL
CAHAYAG, ALEJANDRO CAMPUGAN, RUPERTO CERNA, JR., REYNALDO CERNA, PETER
CERVANTES, LEONARDO CO ND ES TABLE, ROLANDO ESLOPOR, ROLLY FERNANDEZ,
EDDIE FLORES, ROLANDO FLORES, JUDITO FUDOLIN, LEO GRAPANI, FELIX HUBAHIB,
JERRY JUAGPAO, MARCIANO LANUTAN, JOVENTINO MATOBATO, ALFREDO MONIVA,
VICTORIANO ORTIZ, JR., RENALDO PIALAN, ALFREDO PRUCIA, PONCIANO REANDO,
HERMENIO REMEGIO, DEMETRIO RUAYA, EDGARDO RUSIANA, NESTOR SALILI,
VICENTE SASTRELLAS, ROMEO SUMAYANG, and DESIDERIO TABAY, Respondents

DECISION

PERALTA, J.:

Before us is a petition for review on certiorari filed by Joaquin Lu which seeks to reverse and set
aside the Decision1 dated October 22, 2010 and the Resolution 2 dated May 12, 2011,
respectively, of the Court of Appeals issued in CA-G.R. SP No. 55486-MIN.

The facts of the case, as stated by the Court of Appeals, are as follows:

Petitioners (now herein respondents) were hired from January 20, 1994 to March
20, 1996 as crew members of the fishing mother boat F/B MG-28 owned by
respondent Joaquin "Jake" Lu (herein petitioner Lu) who is the sole proprietor of
Mommy Gina Tuna Resources [MGTR] based in General Santos City. Petitioners
and Lu had an income-sharing arrangement wherein 55% goes to Lu, 45% to the
crew members, with an additional 4% as "backing incentive." They also equally
share the expenses for the maintenance and repair of the mother boat, and for
the purchase of nets, ropes and payaos.

Sometime in August 1997, Lu proposed the signing of a Joint Venture Fishing

Agreement between them, but petitioners refused to sign the same as they
opposed the one-year term provided in the agreement. According to petitioners,
during their dialogue on August 18, 1997, Lu terminated their services right there
and then because of their refusal to sign the agreement. On the other hand, Lu
alleged that the master fisherman (piado) Ruben Salili informed him that
petitioners still refused to sign the agreement and have decided to return the
vessel F/B MG-28.

On August 25, 1997, petitioners filed their complaint for illegal dismissal,
monetary claims and damages. Despite serious efforts made by Labor Arbiter
(LA) Arturo P. Aponesto, the case was not amicably settled, except for the
following matters: (1) Balansi 8 and 9; (2) 10% piado share; (3) sud-
anon refund; and (4) refund of payment of motorcycle in the amount of
₱15,000.00. LA Aponesto further inhibited himself from the case out of
"delicadeza," and the case was raffled to LA Amado M. Solamo.

In their Position Paper, petitioners alleged that their refusal to sign the Joint
Venture Fishing Agreement is not a just cause for their termination. Petitioners
 also asked for a refund of the amount of ₱8,700,407.70 that was taken out of
their 50% income share for the repair and maintenance of boat as well as the
purchase of fishing materials, as Lu should not benefit from such deduction.

On the other hand, Lu denied having dismissed petitioners, claiming that their
relationship was one of joint venture where he provided the vessel and other
fishing paraphernalia, while petitioners, as industrial partners, provided labor by
fishing in the high seas. Lu alleged that there was no employer-employee
relationship as its elements were not present, viz.: it was the piado who hired
petitioners; they were not paid wages but shares in the catch, which they
themselves determine; they were not subject to his discipline; and respondent
had no control over the day-to-day fishing operations, although they stayed in
contact through respondent's radio operator or checker. Lu also claimed that
petitioners should not be reimbursed for their share in the expenses since it was
their joint venture that shouldered these expenses.3

On June 30, 1998, the LA rendered a Decision4 dismissing the case for lack of merit finding that
there was no employer-employee relationship existing between petitioner and the respondents
but a joint venture.

In so ruling, the LA found that: (1) respondents were not hired by petitioner as the hiring was
done by the piado or master fisherman; (2) the earnings of the fishermen from the labor were
in the form of wages they earned based on their respective shares; (3) they were never
disciplined nor sanctioned by the petitioner; and, (4) the income-sharing and expense-splitting
was no doubt a working set up in the nature of an industrial partnership. While petitioner issued
memos, orders and directions, however, those who were related more on the aspect of
management and supervision of activities after the actual work was already done for purposes
of order in hauling and sorting of fishes, and thus, not in the nature of control as to the means
and method by which the actual fishing operations were conducted as the same was left to the
hands of the master fisherman.

The LA also ruled that the checker and the use of radio were for the purpose of monitoring and
supplying the logistics requirements of the fishermen while in the sea; and that the checkers
were also tasked to monitor the recording of catches and ensure that the proper sharing system
was implemented; thus, all these did not mean supervision on how, when and where to fish.

Respondents appealed to the National Labor Relations Commission (NLRC), which affirmed the
LA Decision in its Resolution5 dated March 12, 1999. Respondents' motion for reconsideration
was denied in a Resolution6dated July 9, 1999.

Respondents filed a petition for certiorari with the CA which dismissed 7 the same for having
been filed beyond the 60-day reglementary period as provided under Rule 65 of the Rules of
Court, and that the sworn certification of non-forum shopping was signed only by two (2) of the
respondents who had not shown any authority to sign in behalf of the other respondents. As
their motion for reconsideration was denied, they went to Us via a petition
for certiorari assailing the dismissal which We granted in a Resolution 8 dated July 31, 2006 and
remanded the case to the CA for further proceedings.

Petitioner filed its Comment to the petition. The parties submitted their respective memoranda
as required by the CA.

On October 22, 2010, the CA rendered its assailed Decision reversing the NLRC, the decretal
portion of which reads as follows:

WHEREFORE, premises considered, the assailed March 12, 1999 Resolution of

public respondent National Labor Relations Commission (NLRC), Fifth Division,
 Cagayan de Oro City, is hereby REVERSED and SET ASIDE, and a new one is
entered.

Thus, private respondent Mommy Gina Tuna Resources (MGTR) thru its sole
proprietor/general manager, Joaquin T. Lu (Lu), is hereby ORDERED to pay each
of the petitioners, namely, TIRSO ENOPIA, ROBERTO ABANES, ALEJANDRE
BAGAS, SALVADOR BERNAL,

SAMUEL CAHAYAG, ALEJANDRO CAMPUNGAN, RUPERTO CERNA, JR., REYNALDO

CERNA, PETER CERVANTES, LEONARDO CONDESTABLE, ROLANDO ESLOPOR,
ROLLY FERNANDEZ, EDDIE FLORES, ROLANDO FLORES, JUDITO FUDOLIN, LEO
GRAPANI, FELIX HUBAHIB, JERRY JUAGPAO, MARCIANO LANUTAN, JOVENTINO
MATOBATO, ALFREDO MONIVA, VICTORIANO ORTIZ, JR., RENALDO PIALAN,
SEVERO PIALAN, ALFREDO PRUCIA, POCIANO REANDO, HERMENIO REMEGIO,
DEMETRIO RUAYA, EDGARDO RUSIANA, NESTOR SALILI, RICHARD SALILI,
SAMUEL SALILI, VICENTE SASTRELLAS, ROMEO SUMAYANG and DESIDERIO
TABAY the following:

(1) SEPARATION PAY (in lieu of the supposed reinstatement)

equivalent to one (1) month pay for every year of service reckoned
from the very moment each petitioner was hired as fishermen-crew
member of FIB MG-28 by MGTR until the finality of this judgment.
A fraction of at least six (6) months shall be considered one (l)
whole year. Any fraction below six months shall be paid pro rata;

(2) FULL BACKWAGES (inclusive of all allowances and other

benefits required by law or their monetary equivalent) computed
from the time they were dismissed from employment on August 18,
1997 until finality of this Judgment;

(3) EXEMPLARY DAMAGES in the sum of Fifty Thousand Pesos

(₱50,000.00);

(4) ATTORNEY'S FEES equivalent to 10% of the total monetary

award.

Considering that a person's income or earning is his "lifeblood," so to

speak, i.e., equivalent to life itself, this Decision is deemed immediately
executory pending appeal should MGTR decide to elevate this case to the
Supreme Court.

Let this case be referred back to the Office of the Labor Arbiter for proper
computation of the awards.9

The CA found that petitioner exercised control over respondents based on the following: (1)
respondents were the fishermen crew members of petitioner's fishing vessel, thus, their
services to the latter were so indispensable and necessary that without them, petitioner's deep-
sea fishing industry would not have come to existence much less fruition; (2) he had control
over the entire fishing operations undertaken by the respondents through the master
fisherman (piado) and the assistant master fisherman (assistant piado) employed by him; (3)
respondents were paid based on a percentage share of the fish catch did not in any way affect
their regular employment status; and (4) petitioner had already invested millions of pesos in its
deep-sea fishing industry, hence, it is highly improbable that he had no control over
respondents' fishing operations.
Petitioner's motion for reconsideration was denied by the CA in its Resolution dated May 12,
2011.

Aggrieved, petitioner filed the instant petition for review on certiorari citing the following as
reasons for granting the same, to wit:

THE HONORABLE COURT OF APPEALS RENDERED THE ASSAILED DECISION

CONTRARY TO LAW AND LOGIC BY CITING THE ABSENCE OF PROOF OF
REQUISITES OF A VALID DISMISSAL AS BASIS FOR CONCLUDING THAT THE
NLRC GRAVELY ABUSED ITS DISCRETION.

II

THE HONORABLE COURT OF APPEALS EXCEEDED ITS JURISDICTION BY

TREATING RESPONDENTS' PETITION FOR CERTIORARI UNDER RULE 65 AS AN
ORDINARY APPEAL, AND BY INSISTING ON ITS OWN EVALUATION OF THE
EVIDENCE.

III

THE HONORABLE COURT OF APPEALS RENDERED THE DECISION DATED 22

OCTOBER 2010 CONTRARY TO LAW AND THE EVIDENCE ON RECORD.

IV

THE HONORABLE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED AND
USUAL COURSE OF JUDICIAL PROCEEDINGS BY MAKING ITS ASSAILED
DECISION IMMEDIATELY EXECUTORY PENDING APPEAL IN SPITE OF THE FACT
THAT RESPONDENTS DID NOT ASK FOR IMMEDIATE PAYMENT OF SEPARATION
PAY AND OTHER CLAIMS, AND DESPITE THE CLAIM OF RESPONDENTS THAT
MOST OF THEM ARE CURRENTLY EMPLOYED IN OTHER DEEP-SEA FISHING
COMPANIES.10

Petitioner contends that no grave abuse of discretion can be attributed to the NLRC's finding
affirming that of the LA that the arrangement between petitioner and respondents was a joint
venture partnership; and that the CA, in assuming the role of an appellate body, had re-
examined the facts and re-evaluated the evidence thereby treating the case as an appeal
instead of an original action for certiorari under Rule 65.

We are not persuaded.

In Prince Transport, Inc. v. Garcia,11 We held:

The power of the CA to review NLRC decisions via a petition for certiorari under
Rule 65 of the Rules of Court has been settled as early as this Court's decision
in St. Martin Funeral Homes v. NLRC. In said case, the Court held that the proper
vehicle for such review is a special civil action for certiorari under Rule 65 of the
said Rules, and that the case should be filed with the CA in strict observance of
the doctrine of hierarchy of courts. Moreover, it is already settled that under
Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, the
CA, pursuant to the exercise of its original jurisdiction over petitions
for certiorari, is specifically given the power to pass upon the evidence, if and
when necessary, to resolve factual issues. Section 9 clearly states:
 xxxx

The Court of Appeals shall have the power to try cases and conduct
hearings, receive evidence and perform any and all acts necessary
to resolve factual issues raised in cases falling within its original
and appellate jurisdiction, including the power to grant and conduct
new trials or further proceedings.x x x.

However, equally settled is the rule that factual findings of labor officials, who are
deemed to have acquired expertise in matters within their jurisdiction, are
generally accorded not only respect but even finality by the courts when
supported by substantial evidence, i.e., the amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion. But these
findings are not infallible. When there is a showing that they were arrived at
arbitrarily or in disregard of the evidence on record, they may be examined by
the courts. The CA can grant the petition for certiorari if it finds that the NLRC, in
its assailed decision or resolution, made a factual finding not supported by
substantial evidence. It is within the jurisdiction of the CA, whose jurisdiction over
labor cases has been expanded to review the findings of the NLRC.12

Here, the LA's factual findings was affirmed by the NLRC, however, the CA found that the
latter's resolution did not critically examine the facts and rationally assess the evidence on
hand, and thus found that the NLRC gravely abused its discretion when it sustained the LA's
decision dismissing respondents' complaint for illegal dismissal on the ground of lack of merit.

The judicial function of the CA in the exercise of its certiorari jurisdiction over the NLRC extends
to the careful review of the NLRC's evaluation of the evidence because the factual findings of
the NLRC are accorded great respect and finality only when they rest on substantial
evidence.13 Accordingly, the CA is not to be restrained from revising or correcting such factual
findings whenever warranted by the circumstances simply because the NLRC is not infallible.
Indeed, to deny to the CA this power is to diminish its corrective jurisdiction through the writ
of certiorari.14

The main issue for resolution is whether or not an employer-employee relationship existed
between petitioner and respondents.

At the outset, We reiterate the doctrine that the existence of an employer-employee

relationship is ultimately a question of fact. Generally, We do not review errors that raise factual
questions. However, when there is a conflict among the factual findings of the antecedent
deciding bodies like the LA, the NLRC and the CA, it is proper, in the exercise of Our equity
jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case
and re-examine the questioned findings. In dealing with factual issues in labor cases,
substantial evidence or that amount of relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion is sufficient.15

In determining the existence of an employer-employee relationship, the following elements are

considered: (1) the selection and engagement of the workers; (2) the power to control the
worker's conduct; (3) the payment of wages by whatever means; and (4) the power of
dismissal.16 We find all these elements present in this case.

It is settled that no particular form of evidence is required to prove the existence of an

employer-employee relationship. Any competent and relevant evidence to prove the relationship
may be admitted.17

In this case, petitioner contends that it was the piado who hired respondents, however, it was
shown by the latter's evidence that the employer stated in their Social Security System (SSS)
online inquiry system printouts was MGTR, which is owned by petitioner. We have gone over
these printouts and found that the date of the SSS remitted contributions coincided with the
date of respondents' employment with petitioner. Petitioner failed to rebut such evidence. Thus,
the fact that petitioner had registered the respondents with SSS is proof that they were indeed
his employees. The coverage of the Social Security Law is predicated on the existence of an
employer-employee relationship.18

Moreover, the records show that the 4% backing incentive fee which was divided among the
fishermen engaged in the fishing operations approved by petitioner was paid to respondents
after deducting the latter's respective vale or cash advance.19 Notably, even the piado's name
was written in the backing incentive fee sheet with the corresponding vale which was deducted
from his incentive fee. If indeed a joint venture was agreed upon between petitioner and
respondents, why would these fishermen obtain vale or cash advance from petitioner and not
from the piado who allegedly hired and had control over them.

It was established that petitioner exercised control over respondents. It should be remembered
that the control test merely calls for the existence of the right to control, and not necessarily
the exercise thereof. It is not essential that the employer actually supervises the performance
of duties by the employee. It is enough that the former has a right to wield the power. 20

Petitioner admitted in his pleadings that he had contact with respondents at sea via the former's
radio operator and their checker. He claimed that the use of the radio was only for the purpose
of receiving requisitions for the needs of the fishermen in the high seas and to receive reports
of fish catch so that they can then send service boats to haul the same. However, such
communication would establish that he was constantly monitoring or checking the progress of
respondents' fishing operations throughout the duration thereof, which showed their control and
supervision over respondents' activities. Consequently, We give more credence to respondents'
allegations in their petition filed with the CA on how such control was exercised, to wit:

The private respondent (petitioner) controls the entire fishing operations. For
each mother fishing boat, private respondent assigned a master fisherman (pi
ado) and assistant master fisherman (assistant pi ado), who every now and then
supervise the fishing operations. Private respondent also assigned a checker and
assistant checker based on the office to monitor and contact every now and then
the crew at sea through radio. The checker and assistant checker advised then
the private respondent of the condition. Based on the report of the checker, the
private respondent, through radio, will then instruct the "piado" how to conduct
the fishing operations.21

Such allegations are more in consonance with the fact that, as the CA found, MGTR had already
invested millions of pesos in its deep-sea fishing industry.

The payment of respondents' wages based on the percentage share of the fish catch would not
be sufficient to negate the employer-employee relationship existing between them. As held
in Ruga v. NLRC:22

x x x [I]t 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. x x x23

Petitioner wielded the power of dismissal over respondents when he dismissed them after they
refused to sign the joint fishing venture agreement.

The primary standard for determining regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual trade or
business of the employer.24 Respondents' jobs as fishermen-crew members of FIB MG 28 were
directly related and necessary to petitioner's deep-sea fishing business and they had been
performing their job for more than one year. We quote with approval what the CA said, to wit:

Indeed, it is not difficult to see the direct linkage or causal connection between
the nature of petitioners' (now respondents) work visa- vis MGTR's line of
business. In fact, MGTR's line of business could not possibly exist, let alone
flourish without people like the fishermen crew members of its fishing vessels
who actually undertook the fishing activities in the high seas.1âwphi1 Petitioners'
services to MGTR are so indispensable and necessary that without them MGTR's
deep-sea fishing industry would not have come to existence, much less fruition.
Thus, We do not see any reason why the ruling of the Supreme Court in Ruga v.
National Labor Relations Commission should not apply squarely to the instant
case, viz.:

x x x The hiring of petitioners to perform work which is necessary

or desirable in the usual business or trade of private respondent x x
x [qualifies] them as regular employees within the meaning of
Article 28025 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.26

As respondents were petitioner's regular employees, they are entitled to security of tenure
under Section 3,27Article XIII of the 1987 Constitution. It is also provided under Article 279 of
the Labor Code, that the right to security of tenure guarantees the right of employees to
continue in their employment absent a just or authorized cause for termination. Considering
that respondents were petitioner's regular employees, the latter's act of asking them to sign the
joint fishing venture agreement which provides that the venture shall be for a period of one
year from the date of the agreement, subject to renewal upon mutual agreement of the parties,
and may be pre-terminated by any of the parties before the expiration of the one-year period,
is violative of the former's security of tenure. And respondents' termination based on their
refusal to sign the same, not being shown to be one of those just causes for termination under
Article 282,28 is, therefore, illegal.

An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to
his other benefits or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.29

Respondents who were unjustly dismissed from work are entitled to reinstatement and
backwages, among others. However, We agree with the CA that since most (if not all) of the
respondents are already employed in different deep-sea fishing companies, and considering the
strained relations between MGTR and the respondents, reinstatement is no longer viable. Thus,
the CA correctly ordered the payment to each respondent his separation pay equivalent to one
month for every year of service reckoned from the time he was hired as fishermen-crew
member of FIB MG-28 by MGTR until the finality of this judgment.

The CA correctly found that respondents are entitled to the payment of backwages from the
time they were dismissed until the finality of this decision.

The CA's award of exemplary damages to each respondent is likewise affirmed. Exemplary
damages are granted by way of example or correction for the public good if the employer acted
in a wanton, fraudulent, reckless, oppressive or malevolent manners. 30

We also agree with the CA that respondents are entitled to attorney's fees in the amount of
10% of the total monetary award.1âwphi1 It is settled that where an employee was forced to
litigate and, thus, incur expenses to protect his rights and interest, the award of attorney's fees
is legally and morally justifiable.31

The legal interest shall be imposed on the monetary awards herein granted at the rate of six
percent (6%) per annum from the finality of this judgment until fully paid.32

Petitioner's contention that there is no justification to incorporate in the CA decision the

immediate execution pending appeal of its decision is not persuasive. The petition
for certiorari filed with the CA contained a general prayer for such other relief and remedies just
and equitable under the premises. And this general prayer is broad enough to justify extension
of a remedy different from or together with the specific remedy sought. 33 Indeed, a court may
grant relief to a party, even if the party awarded did not pray for it in his pleadings. 34

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated October 22,
2010 and the Resolution dated May 12, 2011 of the Court of Appeals in CA-G.R. SP No. 55486-
MIN are hereby AFFIRMED. The monetary awards which are herein granted shall earn legal
interest at the rate of six percent (6%) per annum from the date of the finality of this Decision
until fully paid. SO ORDERED.
 FIRST DIVISION

G.R. No. 228671, December 14, 2017

EXPEDITION CONSTRUCTION CORPORATION, SIMON LEE PAZ, AND JORDAN

JIMENEZ,*Petitioners, v. ALEXANDER M. AFRICA, MARDY MALAPIT, JESUS ESER, JACOB
RONGCALES, JONAMEL CARO, ALFREDO RILES,* REYNALDO GARCIA, FREDDIE DELA
CRUZ, JUNIE AQUIBAN, CRISINCIO GARCIA,* DINO AQUIBAN, SAMUEL PILLOS,
JEFFREY A.VALENZUELA, ERWIN VELASQUEZ HALLARE AND WILLIAM RAMOS
DAGDAG, Respondents.

DECISION

DEL CASTILLO, J.:

Before us is a Petition for Review on Certiorari with Application for Temporary Restraining Order
and/or Writ of Preliminary Injunction1 seeking to set aside the March 31, 2016 Decision 2 of the
Court of Appeals (CA) in CA G.R. SP No. 142007, which dismissed the Petition
for Certiorari3 filed therewith and affirmed with modification the April 30, 2015 Resolution 4 of
the National Labor Relations Commission (NLRC) by ordering the reinstatement and the
payment of full back wages of respondents Alexander M. Africa, Mardy Malapit, Jesus Eser,
Jacob Rongcales, Jonamel Caro, Alfredo Riles, Reynaldo Garcia, Freddie Dela Cruz, Junie
Aquiban, Crisincio Garcia, Dino Aquiban, Samuel Pillos, Jeffrey A. Valenzuela, Erwin Velasquez
Hallare, and William Ramos Dagdag (respondents) for having been illegally dismissed. Likewise
assailed is the December 9, 2016 Resolution 5 of the CA denying petitioners' Motion for
Reconsideration.6

Factual Antecedents

Petitioner Expedition Construction Corporation (Expedition), with petitioners Simon Lee Paz and
Jordan Jimenez as its Chief Executive Officer and Operations Manager, respectively, is a
domestic corporation engaged in garbage collection/hauling. It engaged the services of
respondents as garbage truck drivers to collect garbage from different cities and transport the
same to the designated dumping site.

Respondents filed separate cases7 (which were later on consolidated) against Expedition for
illegal dismissal; underpayment and non-payment of salaries/wages, holiday pay, holiday
premium, rest day premium, service incentive leave pay, 13 th month pay, separation pay, and
Emergency Cost of Living Allowance (ECOLA); illegal deduction; moral and exemplary damages
and attorney's fees. In their Position Paper, 8 respondents alleged that in August 2013, they
were illegally terminated from employment when they were prevented from entering the
premises of Expedition without cause or due process. They claimed that they were regular
employees of Expedition; were required to work a minimum of 12 hours a day, seven days a
week, even on holidays, without rest or vacation; and, were not paid the minimum wage,
holiday or premium pay, overtime pay, service incentive leave pay and 13 th month pay. They
also averred that the costs of repair and maintenance of the garbage trucks were illegally
deducted from their salaries.
Expedition, in its Position Paper, 9 countered that respondents were not illegally dismissed. It
averred that it entered into separate contracts with the cities of Quezon, Mandaluyong,
Caloocan, and Muntinlupa for the col1ection and transport of their garbage to the dump site;
that it engaged the services of respondents, as dump truck drivers, who were oftentimes
dispatched in Quezon City and Caloocan City; that the need for respondents' services
significantly decreased sometime in 2013 after its contracts with Quezon City and Caloocan City
were not renewed; and, that it nonetheless tried to accommodate respondents by giving them
intermittent trips whenever the need arose.

Expedition denied that respondents were its employees. It claimed that respondents were not
part of the company's payroll but were being paid on a per trip basis. Respondents were not
under Expedition's direct control and supervision as they worked on their own, were not
subjected to company rules nor were required to observe regular/fixed working hours, and that
respondents hired/paid their respective garbage collectors. As such, respondents' money claims
had no legal basis.

In their Reply,10 respondents insisted that they worked under Expedition's control and
supervision considering that: (1) Expedition owned the dump trucks; (2) Expedition expressly
instructed that the trucks should be used exclusively to collect garbage in their assigned areas
and transport the garbage to the dump site; (3) Expedition directed them to park the dump
trucks in the garage located at Group 5 Area Payatas, Quezon, City after completion of each
delivery; and (4) Expedition determined how, where, and when they would perform their tasks.

Respondents also adverted to petitioners' counsel's manifestation during the mandatory

conciliation proceedings,11 regarding Expedition's willingness to accept them back to work, as
proof of their status as Expedition's regular employees. To further support their claim,
respondents attached in their Rejoinder12affidavits of Eric Rosales13 (Rosales) and Roger A.
Godoy14 (Godoy), both claiming to be former employees of Dodge Corporation/Expedition
Construction Corporation and attesting that respondents were regular employees of Expedition.

Ruling of the Labor Arbiter

In a Decision15 dated June 26, 2014, the LA dismissed respondents' complaints and held that
there was no employer-employee relationship between Expedition and respondents. The LA did
not find any substantial proof that respondents were regular employees of Expedition. First,
respondents had no fixed salary and were compensated based on the total number of trips
made. Next, Expedition had no power to terminate respondents. More importantly, respondents
performed their work independent of Expedition's control. The LA ruled that respondents were
independent contractors, contracted to do a piece of work according to their own method and
without being subjected to the control of Expedition except as to the results of their work.

Respondents appealed to the NLRC where they insisted that they were under Expedition's
control and supervision and that they were regular employees who worked continuously and
exclusively for an uninterrupted period ranging from four to 15 years and whose tasks were
necessary and desirable in the usual business of Expedition.

Ruling of the National Labor Relations Commission

In a Resolution16 dated September 30, 2014, the NLRC dismissed respondents' appeal and
affirmed the ruling of the LA. The NLRC similarly found no evidence of an employer-employee
relationship between Expedition and respondents. The NLRC did not consider as evidence the
alleged admission of petitioners during the mandatory conciliation conference since statements
made in these proceedings are regarded as privileged communication. Likewise, the affidavits of
Rosales and Godoy did not help respondents' cause as the affiants were not employees of
Expedition but of some other company.
The NLRC opined that respondents were project employees hired for a specific undertaking of
driving garbage trucks, the completion and termination of which was coterminous with
Expedition’s contracts with the Local Government Units (LGUs). As project employees,
respondents were not dismissed from work but their employment simultaneously ended when
Expedition's contracts with Quezon City and Caloocan City expired. There being no illegal
dismissal, the NLRC found no basis in awarding respondents their money claims.

Undaunted, respondents filed a Motion for Reconsideration 17 arguing that they were not project
employees because the nature of their work was necessary and desirable to Expedition's line of
business and that their continuous and uninterrupted employment reaffirmed their status as
regular employees. They averred further that there was no written contract evidencing project
employment nor were they informed of their status as project employees. They stressed that
Expedition's right of control over the performance of their work was apparent when: (1) they
were made to report everyday at the premises owned by Expedition; (2) there was an express
instruction to report from Monday to Sunday; (3) they were not allowed to engage in any other
project; (4) they. were mandated to return the hauling truck and park the same at Expedition's
premises after the garbage collection was completed; (5) Expedition determined how, where,
and when they would perform their tasks; and, (6) they were not allowed to collect garbage
beyond the area indicated by Expedition.

In a Resolution18 dated April 30, 2015, the NLRC partly granted respondents' motion for
reconsideration and modified its earlier Resolution of September 30, 2014. This time, the NLRC
ruled that respondents were employees of Expedition in view of Expedition's admission that it
hired and paid respondents for their services. The NLRC was also persuaded that Expedition
exercised control on when and how respondents would collect garbage.

The NLRC, however, sustained its earlier finding that there was no illegal dismissal ratiocinating
that respondents were merely placed on a floating status when the contract with Quezon City
and Caloocan City expired and thus were merely waiting to be re-assigned to other similar
work. As there was no dismissal to speak of, the NLRC ordered respondents’ reinstatement but
without the payment of back wages. However, due to lack of clients where respondents could
be re-assigned, the NLRC opted to award separation pay in lieu of reinstatement. The
dispositive portion of the Resolution reads:

WHEREFORE, complainants-appellants' Motion for Reconsideration is hereby

PARTLY GRANTED. Our Resolution dated 30 September 2014 is MODIFIED finding
employer-employee relationship between complainants and the respondents and
concomitantly the latter is hereby ordered to pay complainants' separation pay at
the rate of ½ month salary for every year of service a fraction of at least 6
months to be considered as one (1) whole year in the following computed
amounts:

1. Alexander M. Africa 426 x 13 x 12 = 66,456

2. Jesus Eser 426 x 13 x 10 = 55,380
3. Jonamel Caro 426 x 13 x 12 = 66,456
4. Reynaldo Garcia 426 x 13 x 15 = 83,070
5. Mardy Malapit 426 x 13 x 14 = 77,532
6. Jacob Rongcales 426 x 13 x 14 = 77,532
7. Alfredo Rilles 426 x 13 x 15 = 83,070
8. Freddie Dela Cruz 426 x 13 x 5 = 27,690
9. Junie Aquiban 426 x 13 x 5 = 27,690
10. Dino Aquiban 426 x 13 x 4 = 22,152
11. Samuel G. Pillos 426 x 13 x 5 = 27,690
12. William Dagdag 426 x 13 x 14 = 77,532
13. Crisincio Garcia 426 x 13 x 12 = 66,456
14. Jeffrey A. Valenzuela 426 x 13 x 5 = 27,690
 15. Erwin V. Hallare 426 x 13 x 9 = 49,842

The rest of Our resolution is hereby AFFIRMED.

SO ORDERED.19

Expedition filed a Motion for Reconsideration 20 attributing error on the NLRC in ruling that there
was an employer-employee relationship and in awarding separation pay despite the finding that
there was no illegal dismissal. Expedition also questioned the NLRC's computation of separation
pay and sought the remand of the case to the LA for proper determination of the correct
amount. This motion, however, was denied by the NLRC in its Resolution21 of June 30, 2015.

Expedition sought recourse to the CA via a Petition for Certiorari.22

Ruling of the Court of Appeals

On March 31, 2016, the CA rendered a Decision 23 dismissing Expeditions Petition

for Certiorari and ruling in favor of respondents. The CA affirmed the April 30, 2015 Resolution
of the NLRC insofar as the existence of an employer-employee relationship between the parties.
The CA noted that respondents were hired and paid by Expedition. Further, Expedition exercised
the power to provide and withhold work from respondents. Most importantly, the power of
control was evident since Expedition determined how, where and when respondents would
perform their tasks. The CA held that the respondents needed Expedition's instruction and
supervision in the performance of their duties. The CA likewise ruled that respondents were
regular employees entitled to security of tenure because they continuously worked for several
years for the company, an indication that their duties were necessary and desirable in the usual
business of Expedition.

The CA, however, did not agree with the NLRC that respondents were on floating status since
petitioners did not adduce proof of any dire exigency justifying failure to give respondents any
further assignments. The CA observed that the irregular dispatch of respondents due allegedly
to the decrease in the need for drivers led to the eventual discontinuance of respondents'
services and ultimately, their illegal termination. Accordingly, the CA ruled that respondents
were illegally dismissed when Expedition prevented them from working, and consequently,
ordered their reinstatement with full back wages. The dispositive portion of the Decision reads:

FOR THESE REASONS, the petition is DISMISSED. The Decision of the National
Labor Relations Commission dated April 30, 2015 is hereby AFFIRMED with
MODIFICATIONS. The respondents were illegally dismissed, and are thus entitled
to reinstatement with full backwages from the time of illegal dismissal up to the
finality of this Decision and attorney's fee equivalent to ten percent (10%) of the
total monetary award. The monetary awards herein granted shall earn legal
interest at the rate of six percent (6%) per annum from the date of the finality of
this Decision until fully paid. The case is remanded to the Labor Arbiter for the
computation of respondents' monetary awards.

SO ORDERED.24

Expedition filed a Motion for Reconsideration 25 on the ground that the CA erred in finding that
respondents were its employees and that respondents were illegally dismissed. It impugned the
award of reinstatement and back wages in favor of respondents, submitting that an amount of
financial assistance would be the more equitable remedy for respondents' cause. It, then,
manifested its willingness to offer financial assistance to respondents in the amounts equivalent
to the separation pay awarded to respondents in the April 30, 2015 NLRC Resolution.
Expedition's motion was, however, denied by the CA in its Resolution 26 dated December 9,
2016.

Issues

Hence, Expedition filed this instant Petition presenting the following grounds for review:

[1.] THE COURT OF APPEALS GRAVELY ERRED WHEN IT UPHELD THE NLRC'S
FINDING THAT THERE WAS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
PETITIONER CORPORATION AND RESPONDENTS.

[2.] EVEN ASSUMING ARGUENDO THAT THERE WAS EMPLOYER-EMPLOYEE

RELATIONSHIP, THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT
RESPONDENTS WERE REGULAR EMPLOYEES.

[3.] THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT RESPONDENTS

WERE ILLEGALLY DISMISSED.

[4.] AGAIN, EVEN ASSUMING THAT RESPONDENTS WERE REGULAR EMPLOYEES

AND THAT THEY HAD BEEN ILLEGALLY DISMISSED, THE COURT OF APPEALS
GRAVELY ERRED WHEN IT AWARDED REINSTATEMENT WITH FULL BACKWAGES
INSTEAD OF SEPARATION PAY ONLY.27

Expedition maintains that it did not exercise the power of selection or engagement, payment of
wages, dismissal, and control over respondents. The CA, thus, had no legal basis in finding that
respondents were its employees, much less had regular employment status with it. Expedition
likewise insists that there was no illegal dismissal and that the CA erred in awarding
reinstatement and backwages instead of separation pay, which was prayed for by respondents.

Our Ruling

The Petition is partly granted.

Respondents were regular employees of Expedition.

At the outset, it bears emphasis that the question of whether or not respondents were
employees of Expedition is a factual issue. It is settled that only questions of law may be raised
in a petition for review on certiorari filed under Rule 45.28 However, there are also recognized
exceptions to this rule, one of which is when the factual findings of the labor tribunals are
contradictory to each other,29 such as obtaining in the case at bar.

Jurisprudence has adhered to the four-fold test in determining the existence of an employer-
employee relationship, to wit: "(1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employee's
conduct, or the so-called 'control test'".30

In ruling that respondents were employees of Expedition, the CA found all the elements of
employer-employee relationship to be present. As shown in the records, Expedition hired
respondents as dump truck drivers and paid them the amount of P620.00 per trip. The CA held
that Expedition wielded the power to dismiss respondents based on Expedition's admission that
when the dispatch of drivers became irregular, it tried to accommodate them by giving trips
when the need arose. The control test was likewise established because Expedition determined
how, where, and when respondents would perform their tasks.
Expedition, however, proffers that the actual findings of the CA on this matter had no legal
basis. It claims that respondents were never hired but were merely engaged as drivers; that
they worked on their own and were not subjected to its control and supervision; that they were
compensated based on output or number of trips made in a day; that they selected their own
garbage collectors, chose their own route and determined the manner by which they would
collect the garbage; and, that they performed their work at their own pleasure without fear of
being sanctioned if they chose not to report for work.

The Court finds Expedition's position untenable. First, as clearly admitted, respondents were
engaged/hired by Expedition as garbage truck drivers. Second, it is undeniable that
respondents received compensation from Expedition for the services that they rendered to the
latter. The fact that respondents were paid on a per trip basis is irrelevant in determining the
existence of an employer-employee relationship because this was merely the method of
computing the proper compensation due to respondents. 31 Third, Expedition's power to dismiss
was apparent when work was withheld from respondents as a result of the termination of the
contracts with Quezon City and Caloocan City. Finally, Expedition has the power of control over
respondents in the performance of their work. It was held that "the power of control refers
merely to the existence of the power and not to the actual exercise thereof.” 32 As aptly
observed by the CA, the agreements for the collection of garbage were between Expedition and
the various LGUs, and respondents needed the instruction and supervision of Expedition to
effectively perform their work in accordance with the stipulations of the agreements.

Moreover, the trucks driven by respondents were owned by Expedition. There was an express
instruction that these trucks were to be exclusively used to collect and transport garbage.
Respondents were mandated to return the trucks to the premises of Expedition after the
collection of garbage. Expedition determined the clients to be served, the location where the
garbage is to be collected and when it is to be collected. Indeed, Expedition determined how,
where, and when respondents would perform their tasks.

Respondents were neither independent contractors nor project employees. There was no
showing that respondents have substantial capital or investment and that they were performing
activities which were not directly related to Expedition's business to be qualified as independent
contractors.33 There was likewise no written contract that can prove that respondents were
project employees and that the duration and scope of such employment were specified at the
time respondents were engaged. Therefore, respondents should be accorded the presumption of
regular employment pursuant to Article 280 of the Labor Code which provides that "employees
who have rendered at least one year of service, whether such service is continuous or broken x
x x shall be considered [as] regular employees with respect to the activity in which they are
employed and their employment shall continue while such activity exists." 34Furthermore, the
fact that respondents were performing activities which were directly related to the business of
Expedition confirms the conclusion that respondents were indeed regular employees.35

Having gained regular status, respondents were entitled to security of tenure and could only be
dismissed for just or authorized cause after they had been accorded due process. Thus, the
queries: Were respondents dismissed? Were they dismissed in accordance with law?

There was no illegal dismissal.

In illegal dismissal cases, the employer has the burden of proving that the termination was for a
valid or authorized cause. However, it is likewise incumbent upon an employee to first establish
by substantial evidence the fact of his dismissal from employment 36 by positive and overt acts
of an employer indicating the intention to dismiss. 37 It must also be stressed that the evidence
must be clear, positive and convincing.38 Mere allegation is not proof or evidence.39

In this case, there was no positive or direct evidence to substantiate respondents' claim that
they were dismissed from employment. Aside from mere assertions, the record is bereft of any
indication that respondents were barred from Expedition's premises. If at all, the evidence on
record showed that Expedition intended to give respondents new assignments as a result of the
termination of the garbage hauling contracts with Quezon City and Caloocan City where
respondents were regularly dispatched. Despite the loss of some clients, Expedition tried to
accommodate respondents and offered to engage them in other garbage hauling projects with
other LGUs, a fact which respondents did not refute. However, instead of returning and waiting
for their next assignments, respondents instituted an illegal dismissal case against Expedition.
Note that even during the mandatory conciliation and mediation conference between the
parties, Expedition manifested its willingness to accept respondents back to work.
Unfortunately, it was respondents who no longer wanted to return to work. In fact, in their
complaints, respondents prayed for the payment of separation pay instead of reinstatement.

Here, there was no sufficient proof that respondents were actually laid off from work. Thus, the
CA had no basis in ruling that respondents' employment was illegally terminated since the fact
of dismissal was not adequately supported by substantial evidence. There being no dismissal,
the status quo between respondents and Expedition should be maintained. However, it cannot
be denied that their relationship has already been ruptured in that respondents are no longer
willing to be reinstated anymore. Under the circumstances, the Court finds that the grant of
separation pay as a form of financial assistance is deemed equitable.

As a measure of social justice, the award of separation pay/financial assistance has been upheld
in some cases40 even if there is no finding of illegal dismissal. The Court, in Eastern Shipping
Lines, Inc. v. Sedan,41 had this to say:

x x x We are not unmindful of the rule that financial assistance is allowed only in
instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Neither are we unmindful
of this Court's pronouncements in Arc-Men Food Industries Corporation v. NLRC,
and Lemery Savings and Loan Bank v. NLRC, where the Court ruled that when
there is no dismissal to speak of, an award of financial assistance is not in order.

But we must stress that this Court did allow, in several instances, the grant of
financial assistance. In the words of Justice Sabino de Leon, Jr., now deceased,
financial assistance may be allowed as a measure of social justice [under]
exceptional circumstances, and as an equitable concession. The instant case
equally calls for balancing the interests of the employer with those of the worker,
if only to approximate what Justice Laurel calls justice in its secular sense.

In a Manifestation42 submitted before the CA, Expedition expressed willingness to extend

gratuitous assistance to respondents and to pay them the amounts equivalent to the separation
pay awarded to each respondent in the April 30, 2015 NLRC Resolution. In view of this and
taking into account respondents' long years of service ranging from four to 15 years, the Court
finds that the grant of separation pay at the rate of one-half (½) month's salary for every year
of service, as adjudged in the April 30, 2015 Resolution of the NLRC, is proper.

WHEREFORE, the Petition for Review on Certiorari is PARTLY GRANTED. The assailed
Decision dated March 31, 2016 and Resolution dated December 9, 2016 of the Court of Appeals
in CA-G.R. SP No. 142007 are AFFIRMED with MODIFICATION that the awards of
reinstatement, back wages, attorney's fees and legal interest are DELETED there being no
illegal dismissal. The award of separation pay, as a form of financial assistance, in the National
Labor Relations Commission's Resolution dated April 30, 2015 is REINSTATED.

SO ORDERED.
 FIRST DIVISION

June 7, 2017

G.R. No. 202091

SUMIFRU (PHILIPPINES) CORP. (surviving entity of a merger with Fresh Banana

Agricultural Corporation and other corporations), Petitioner
vs.
NAGKAHIUSANG MAMUMUO SA SUYAPA FARM1 (NAMASUFA-NAFLU-KMU), Respondent

DECISION

CAGUIOA, J.:

Before the Court is a Petition for Review on Certiorari 2 under Rule 45 of the Rules of Court filed
by petitioner Sumifru (Philippines) Corp. (Sumifru), assailing the Decision 3 dated February 8,
2012 and Resolution 4 dated May 18, 2012 of the Court of Appeals (CA) in CA-G.R. SP No.
03574. The CA affirmed the Resolution dated February 8, 2010 5 of the Secretary of the
Department of Labor and Employment (DOLE) which, in turn, affirmed the Order dated July 28,
2008 6 of DOLE Regional Office No. XI Circuit Mediator-Arbiter (Med-Arbiter), which ordered the
conduct of certification election of the rank-and-file employees of Sumifru in P-1 Upper Siocon,
Compostela, Comval Province.

Facts

Sumifru is a domestic corporation and is the surviving corporation after its merger with Fresh
Banana Agricultural Corporation (FBAC) in 2008. 7 FBAC was engaged in the buying, marketing,
and exportation of Cavendish bananas. 8

Respondent Nagkahiusang Mamumuo sa Suyapa Farm (NAMASUF ANAFLU-KMU) (NAMASUFA)

is a labor organization affiliated with the National Federation of Labor Unions and Kilusang Mayo
Uno. 9

The CA summarized the start of the proceedings with the Med-Arbiter as follows:

On March 14, 2008, the private respondent Nagkahiusang Mamumuo sa Suyapa

Farm (NAMASUF A-NAFLU-KMU), a legitimate labor organization, filed a Petition
for Certification Election before the Department of Labor and Employment,
Regional Office No. XI in Davao City. NAMASUFA sought to represent all rank-
and-file employees, numbering around one hundred forty, of packing plant 90 (PP
90) of Fresh Banana Agricultural Corporation (FBAC). NAMASUF A claimed that
there was no existing union in the aforementioned establishment.
 On May 9, 2008 FBAC filed an Opposition to the Petition. It argued that there
exists no employer-employee relationship between it and the workers involved. It
alleged that members of NAMASUF A are actually employees of A2Y Contracting
Services (A2Y), a duly licensed independent contractor, as evidenced by the
payroll records of the latter.

NAMASUFA, in its Comment to Opposition countered, among others, that its

members were former workers of Stanfilco before FBAC took over its operations
sometime in 2002. The said former employees were then required to join the
Compostela Banana Packing Plant Workers' Cooperative (CBPPWC) before they
were hired and allowed to work at the Packing Plant of FBAC. It further alleged
that the members of NAMASUF A were working at PP 90 long before A2Y came.

In June 20, 2008, pending resolution of the petition, FBAC was merged with
SUMIFRU, the latter being the surviving corporation. 10

On July 28, 2008, the DOLE Med-Arbiter issued an Order granting the Petition for Certification
Election of NAMASUF A and declared that Sumifru was the employer of the workers concerned.
The dispositive portion of the Order states:

WHEREFORE, premises considered, the petition for certification election filed by Nagkahiusang
Mamumuo sa Suyapa Farm (NAMASUFA) - NAFLU - KMU is hereby GRANTED. Let a certification
election among the rank-and-file workers of Fresh Banana Agricultural Corporation be
conducted at the company premises located at P-1 Upper Siocon, Compostela, Comval Province
with the following as choices:

1. Nagkahiusang Mamumuo sa Suyapa Farm (NAMASUF A) - NAFLU -KMU; and

2. No Union

Let the entire records of this case be forwarded to Comval Field Office, this Department, for the
usual pre-election conference.

The employer Fresh Banana Agricultural Corporation is hereby DIRECTED to submit within five
(5) days from receipt of this Order, a certified list of the rank-and-file employees in the
establishment or the payrolls covering the members of the bargaining unit for the last three (3)
months prior to the issuance of this Order.

11
SO ORDERED.

In ruling that an employer-employee relationship existed, the MedArbiter stated:

The "four-fold test" will show that respondent FBAC is the employer of petitioner's
members. The elements to determine the existence of an employment
relationship are: (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's conduct. The most important element is the employer's
control of the employee's conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it.

On the first factor, (selection and engagement of the employer), it is apparent

that the staff of respondent FBAC advised those who are interested to be hired in
the Packing Plant to become members first of CBPPWC and get a
recommendation from it.
 On the second factor (payment of wages), while the respondent tried to impress
upon us that workers are paid by A2Y Contracting Services, this at best is but an
administrative arrangement. We agree with petitioner that the payroll summary
submitted does not contain the relevant information such as the employee's rate
of pay, deductions made and the amount actually paid to the employee.

On the third factor, (the power of dismissal), it is very clear that respondent FBAC
is the authority that imposes disciplinary measures against erring workers. This
alone proves that it wields disciplinary authority over them.

Finally, on the fourth factor which is the control test, the fact that the respondent
FBAC gives instructions to the workers on how to go about their work is sufficient
indication that it exercises control over their movements. The workers are
instructed as to what time they are supposed to report and what time they are
supposed to return. They were required to fill up monitoring sheets as they go
about their jobs and even the materials which they used in the packing plant
were supplied by FBAC.

Viewed from the above circumstances, it is clear that respondent FBAC is the real
employer of the workers of Packing Plant 90. They are in truth and in fact the
employees of the respondent and its attempt to seek refuge on A2Y Contracting
Services as the ostensible employer was nothing but an elaborate scheme to
deprive them their right to self-organization. 12

Sumifru appealed to the DOLE Secretary and in a Resolution dated February 8, 2010, the DOLE
Secretary dismissed the appeal, the dispositive portion of which states:

WHEREFORE, considering the foregoing, the appeal is hereby PISMISSED for

lack of merit and the assailed Order dated 28 July 2008 of DOLE Regional Office
No. XI Circuit Mediator-Arbiter Gerardine A. Jamora is AFFIRMED.

Let the entire records of this case be remanded to the Regional Office of origin for
the immediate conduct of a certification election subject to the usual pre-election
conference.

SO RESOLVED.13

The DOLE Secretary ruled that Sumifru is the true employer of the workers, as follows:

In the present case, it is undisputed that CBPPWC is supplying workers to FBAC

(now Sumifru). In fact, FBAC required its applicants to become members of the
cooperative first and seek recommendation from it before hiring them. Appellant
Sumifru failed to proffer evidence to prove that CBPPWC is duly registered under
Department Order No. 18-02. Also, it does not appear on record that CBPPWC
possesses substantial capital or investment in relation with the work or services
that are being performed by its members and that the employees placed by
CBPPWC in Sumifru are performing activities distinct and independent from that
of the main business of Sumifru. As such, this Office is inclined to believe that
CBPPWC is engaged in labor-only contracting and the true employer of the
subject workers is Sumifru.

The alleged partnership agreement between CBPPWC and A2Y is of no moment. It

is well-settled that mere allegation without evidence to prove the same is self-
serving that should not be given weight in any proceedings. Nonetheless, even if
the alleged agreement indeed took place, the four-fold test in determining the
 existence of an employer-employee relationship still points to Sumifru as the
employer.

xxxx

In this case, Sumifru's control over the subject employees is evident. The fact
that the subject workers are required by Sumifru to fill up monitoring sheets as
they go about their jobs and the imposition of disciplinary actions for non-
compliance with the "No Helmet - No Entry and No ID - No Entry" policies prove
that it is indeed Sumifru, and not A2Y Contracting Services, that exercises control
over the conduct of the subject workers. 14

Sumifru then filed a Petition for Certiorari with the CA raising the issue of whether the DOLE
Secretary committed grave abuse of discretion in declaring it as the employer of the workers at
PP 90.15 But the CA dismissed the petition. The dispositive portion of the CA Decision states:

WHEREFORE, finding no grave abuse of discretion on the part of the public

respondent, the petition is DENIED. The Resolution dated February 8, 2010
issued by the public respondent Honorable Secretary of the Department of Labor
and Employment is hereby AFFIRMED.

16
SO ORDERED.

The CA ruled that the DOLE Secretary did not commit grave abuse of discretion because the
latter's ruling that Sumifru was the employer of the workers was anchored on substantial
evidence, thus:

SUMIFRU raises the same issue of non-existence of employeremployee

relationship, which had been squarely resolved in the negative by the Med-Arbiter
and the DOLE Secretary. We find no traces of abuse in discretion in the ruling of
the DOLE Secretary anchored as it is on substantial evidence.

The Court has consistently applied the "four-fold test" to determine the existence
of an employer-employee relationship: the employer (a) selects and engages the
employee; (b) pays his wages; (c) has power to dismiss him; and (d) has control
over his work. Of these, the most crucial is the element of control. Control refers
to the right of the employer, whether actually exercised or reserved, to control
the work of the employee as well as the means and methods by which he
accomplishes the same.

In this case, the records are replete with evidence which would show that
SUMIFRU has control over the concerned workers, to wit:

1. FBAC memorandum on "Standardized Packing Plant Breaktime";

2. Material Requisition for PP 90;

3. Memorandum dated February 9, 2008 on "no helmet, no entry" policy posted

at the packing plant;

4. Memorandum dated October 15, 2007 on "no ID, no entry policy";

5. Attendance Sheet for General Assembly Meeting called by FBAC on February

18[,] 2004;
 6. Attendance Sheet for Packers ISO awareness seminar on February 11, 2004
called by FBAC;

7. FBAC Traypan Fruit Inspection Packer's Checklist issued by FBAC for the use of
workers in the Packing Plant;

8. FBAC KD Gluing Pattern Survey.

The above orders issued by SUMIFRU/FBAC would show that not only does it have
control over the results of the workers in PP 90 but also in the manners and
methods of its accomplishment. 17

The CA, after reviewing the records, accorded respect to the findings of facts of the DOLE
Secretary, which affirmed the Med-Arbiter, as they have special knowledge and expertise over
matters under their jurisdiction. The CA ruled:

As stated beforehand, there is no cogent reason to set aside the ruling of the
DOLE Secretary which affirmed the findings of the Med-Arbiter.1âwphi1 By reason
of their special knowledge and expertise over matters falling under their
jurisdiction, they are in a better position to pass judgment thereon and their
findings of fact in that regard are generally accorded respect and even finality by
the courts when supported by substantial evidence, as in this case. 18

Sumifru moved for reconsideration but the CA denied this in its Resolution dated May 18, 2012.

Hence, this Petition.

Issues

As stated in its Petition, Sumifru raised the following:

THE COURT OF APPEALS COMMITTED PALPABLE MISTAKE AND RULED CONTRARY

TO LAW AND SETTLED JURISPRUDENCE WHEN IT AFFIRMED THE FINDINGS OF
THE DOLE SECRETARY AND CONCLUDED THAT HEREIN PETITIONER, SUMIFRU,
IS THE EMPLOYER OF THE WORKERS ENGAGED BY THE COOPERATIVE AND/OR
A2Y FOR THE UPPER SIOCON GROWERS' PACKAGING OPERATIONS IN PACKING
PLANT 90.

A. A2Y Contracting Services was engaged either by the Upper Siocon Growers or
the Cooperative for the packing operations at PP 90.

B. Even assuming, for the sake of argument, that the Cooperative and/or A2Y are
not legitimate labor contractors, only the Upper Siocon Growers, and not
SUMIFRU, may be deemed the employer of the workers at PP 90.

C. The Department of Labor and Employment committed grave and palpable

mistake when it grossly misapprehended the facts and evidence on record, that if
properly appreciated will clearly establish that SUMIFRU is not the employer of
the members of NAMASUFA working at PP 90.

D. The reliance on the alleged inconsistencies in the pleadings submitted by

SUMIFRU is misplaced as there are no inconsistencies at all. 19 (Emphasis
omitted)

The Court's Ruling

The Petition is denied.

Sumifru's arguments raise questions of facts. Indeed, it even submitted to this Court, as
annexes to its Petition, the very same evidence it had presented before the Med-Arbiter, the
DOLE Secretary, and the CA in its attempt to try to convince the Court that the members of
NAMASUFA are not its employees.

It is fundamental that in a petition for review on certiorari, the Court is limited to only questions
of law.1âwphi1 As specifically applied in a labor case, the Court is limited to reviewing only
whether the CA was correct in determining the presence or absence of grave abuse of discretion
on the part of the DOLE Secretary. Thus, in Holy Child Catholic School v. Sta. Tomas, 20 the
Court ruled:

Our review is, therefore, limited to the determination of whether the CA correctly
resolved the presence or absence of grave abuse of discretion in the decision of
the [Secretary of Labor and Employment (SOLE)], not on the basis of whether the
latter's decision on the merits of the case was strictly correct. Whether the CA
committed grave abuse of discretion is not what is ruled upon but whether it
correctly determined the existence or want of grave abuse of discretion on the
part of the SOLE. 21

FFW v. Court of Appeals, 22 findings of fact of quasi-judicial agencies are entitled to great
respect when they are supported by substantial evidence and, in the absence of any showing of
a whimsical or capricious exercise of judgment, the factual findings bind the Court:

We take this occasion to emphasize that the office of a petition for review
on certiorari under Rule 45 of the Rules of Court requires that it shall raise only
questions of law. The factual findings by quasi-judicial agencies, such as the
Department of Labor and Employment, when supported by substantial evidence,
are entitled to great respect in view of their expertise in their respective fields.
Judicial review of labor cases does not go so far as to evaluate the sufficiency of
evidence on which the labor official's findings rest. It is not our function to assess
and evaluate all over again the evidence, testimonial and documentary, adduced
by the parties to an appeal, particularly where the findings of both the trial court
(here, the DOLE Secretary) and the appellate court on the matter coincide, as in
this case at bar. The Rule limits that function of the Court to the review or
revision of errors of law and not to a second analysis of the evidence. Here,
petitioners would have us re-calibrate all over again the factual basis and the
probative value of the pieces of evidence submitted by the Company to the DOLE,
contrary to the provisions of Rule 45. Thus, absent any showing of whimsical or
capricious exercise of judgment, and unless lack of any basis for the conclusions
made by the appellate court be amply demonstrated, we may not disturb such
factual findings. 23 (Emphasis supplied.)1âwphi1

Here, the CA was correct in finding that the DOLE Secretary did not commit any whimsical or
capricious exercise of judgment when it found substantial evidence to support the DOLE
Secretary's ruling that Sumifru was the employer of the members of NAMASUFA.

As defined, substantial evidence is "that amount of relevant evidence as a reasonable mind

might accept as adequate to support a conclusion, even if other minds, equally reasonable,
might conceivably opine otherwise."24Here, the Med-Arbiter found, based on documents
submitted by the parties, that Sumifru gave instructions to the workers on how to go about
their work, what time they were supposed to report for work, required monitoring sheets as
they went about their jobs, and provided the materials used in the packing plant. 25
In affirming the Med-Arbiter, the DOLE Secretary relied on the documents submitted by the
parties and ascertained that Sumifru indeed exercised control over the workers in PP 90. The
DOLE Secretary found that the element of control was present because Sumifru required
monitoring sheets and imposed disciplinary actions for non-compliance with "No Helmet - No
Entry" "No ID - No Entry" policies. 26

In turn, the CA, even as it recognized that the findings of facts of the DOLE Secretary and the
Med-Arbiter were binding on it because they were supported by substantial evidence, even went
further and itself reviewed the records - to arrive, as it did arrive, at the same conclusion
reached by the DOLE Secretary and Med-Arbiter: that is, that Sumifru exercised control over
the workers in PP 90. 27

In light of the foregoing, the Court cannot re-calibrate the factual bases of the Med-Arbiter,
DOLE Secretary, and the CA, contrary to the provisions of Rule 45, especially where, as here,
the Petition fails to show any whimsicality or capriciousness in the exercise of judgment of the
Med-Arbiter or the DOLE Secretary in finding the existence of an employer-employee
relationship.

WHEREFORE, premises considered, the petition for review is hereby DENIED. The Decision of
the Court of Appeals dated February 8, 2012 and Resolution dated May 18, 2012 are
hereby AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 169510 August 8, 2011

ATOK BIG WEDGE COMPANY, INC., Petitioner,

vs.
JESUS P. GISON, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision 1 dated
May 31, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 87846, and the Resolution 2 dated
August 23, 2005 denying petitioner’s motion for reconsideration.

The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on
retainer basis by petitioner Atok Big Wedge Company, Inc. through its then Asst. Vice-President
and Acting Resident Manager, Rutillo A. Torres. As a consultant on retainer basis, respondent
assisted petitioner's retained legal counsel with matters pertaining to the prosecution of cases
against illegal surface occupants within the area covered by the company's mineral claims.
Respondent was likewise tasked to perform liaison work with several government agencies,
which he said was his expertise.

Petitioner did not require respondent to report to its office on a regular basis, except when
occasionally requested by the management to discuss matters needing his expertise as a
consultant. As payment for his services, respondent received a retainer fee of ₱3,000.00 a
month,3 which was delivered to him either at his residence or in a local restaurant. The parties
executed a retainer agreement, but such agreement was misplaced and can no longer be found.

The said arrangement continued for the next eleven years.

Sometime thereafter, since respondent was getting old, he requested that petitioner cause his
registration with the Social Security System (SSS), but petitioner did not accede to his request.
He later reiterated his request but it was ignored by respondent considering that he was only a
retainer/consultant. On February 4, 2003, respondent filed a Complaint 4 with the SSS against
petitioner for the latter's refusal to cause his registration with the SSS.

On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a
Memorandum5advising respondent that within 30 days from receipt thereof, petitioner is
terminating his retainer contract with the company since his services are no longer necessary.

On February 21, 2003, respondent filed a Complaint 6 for illegal dismissal, unfair labor practice,
underpayment of wages, non-payment of 13th month pay, vacation pay, and sick leave pay
with the National Labor Relations Commission (NLRC), Regional Arbitration Branch (RAB),
Cordillera Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr.
The case was docketed as NLRC Case No. RAB-CAR-02-0098-03.
Respondent alleged that:

x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent
Atok Big Wedge Co., Inc., or Atok for brevity, approached him and asked him if he can help the
company’s problem involving the 700 million pesos crop damage claims of the residents living
at the minesite of Atok. He participated in a series of dialogues conducted with the residents.
Mr. Torres offered to pay him ₱3,000.00 per month plus representation expenses. It was also
agreed upon by him and Torres that his participation in resolving the problem was temporary
and there will be no employer-employee relationship between him and Atok. It was also agreed
upon that his compensation, allowances and other expenses will be paid through disbursement
vouchers.

On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop damage
claimants barricaded the only passage to and from the minesite. In the early morning of
February 1, 1992, a dialogue was made by Atok and the crop damage claimants. Unfortunately,
Atok’s representatives, including him, were virtually held hostage by the irate claimants who
demanded on the spot payment of their claims. He was able to convince the claimants to
release the company representatives pending referral of the issue to higher management.

A case was filed in court for the lifting of the barricades and the court ordered the lifting of the
barricade. While Atok was prosecuting its case with the claimants, another case erupted
involving its partner, Benguet Corporation. After Atok parted ways with Benguet Corporation,
some properties acquired by the partnership and some receivables by Benguet Corporation was
the problem. He was again entangled with documentation, conferences, meetings, planning,
execution and clerical works. After two years, the controversy was resolved and Atok received
its share of the properties of the partnership, which is about 5 million pesos worth of equipment
and condonation of Atok’s accountabilities with Benguet Corporation in the amount of
₱900,000.00.

In the meantime, crop damage claimants lost interest in pursuing their claims against Atok and
Atok was relieved of the burden of paying 700 million pesos. In between attending the problems
of the crop damage issue, he was also assigned to do liaison works with the SEC, Bureau of
Mines, municipal government of Itogon, Benguet, the Courts and other government offices.

After the crop damage claims and the controversy were resolved, he was permanently assigned
by Atok to take charge of some liaison matters and public relations in Baguio and Benguet
Province, and to report regularly to Atok’s office in Manila to attend meetings and so he had to
stay in Manila at least one week a month.

Because of his length of service, he invited the attention of the top officers of the company that
he is already entitled to the benefits due an employee under the law, but management ignored
his requests. However, he continued to avail of his representation expenses and reimbursement
of company-related expenses. He also enjoyed the privilege of securing interest free salary
loans payable in one year through salary deduction.

In the succeeding years of his employment, he was designated as liaison officer, public relation
officer and legal assistant, and to assist in the ejection of illegal occupants in the mining claims
of Atok.

Since he was getting older, being already 56 years old, he reiterated his request to the
company to cause his registration with the SSS. His request was again ignored and so he filed a
complaint with the SSS. After filing his complaint with the SSS, respondents terminated his
services.7

On September 26, 2003, after the parties have submitted their respective pleadings, Labor
Arbiter Rolando D. Gambito rendered a Decision 8 ruling in favor of the petitioner. Finding no
employer-employee relationship between petitioner and respondent, the Labor Arbiter
dismissed the complaint for lack of merit.

Respondent then appealed the decision to the NLRC.

On July 30, 2004, the NLRC, Second Division, issued a Resolution 9 affirming the decision of the
Labor Arbiter. Respondent filed a Motion for Reconsideration, but it was denied in the
Resolution10 dated September 30, 2004.

Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the
CA questioning the decision and resolution of the NLRC, which was later docketed as CA-G.R. SP
No. 87846. In support of his petition, respondent raised the following issues:

a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent Resolutions
of the Honorable Public Respondent affirming the same, are in harmony with the law and the
facts of the case;

b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of Discretion in
Dismissing the Complaint of Petitioner and whether or not the Honorable Public Respondent
Committed a Grave Abuse of Discretion when it affirmed the said Decision.11

On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the
decision of the NLRC, the decretal portion of which reads:

WHEREFORE, the petition is GRANTED. The assailed Resolution of the National Labor
Relations Commission dismissing petitioner's complaint for illegal dismissal
is ANNULLED and SET ASIDE. Private respondent Atok Big Wedge Company Incorporated
is ORDERED to reinstate petitioner Jesus P. Gison to his former or equivalent position without
loss of seniority rights and to pay him full backwages, inclusive of allowances and other benefits
or their monetary equivalent computed from the time these were withheld from him up to the
time of his actual and effective reinstatement. This case is ordered REMANDED to the Labor
Arbiter for the proper computation of backwages, allowances and other benefits due to
petitioner. Costs against private respondent Atok Big Wedge Company Incorporated.

SO ORDERED.12

In ruling in favor of the respondent, the CA opined, among other things, that both the Labor
Arbiter and the NLRC may have overlooked Article 280 of the Labor Code, 13 or the provision
which distinguishes between two kinds of employees, i.e., regular and casual employees.
Applying the provision to the respondent's case, he is deemed a regular employee of the
petitioner after the lapse of one year from his employment. Considering also that respondent
had been performing services for the petitioner for eleven years, respondent is entitled to the
rights and privileges of a regular employee.

The CA added that although there was an agreement between the parties that respondent's
employment would only be temporary, it clearly appears that petitioner disregarded the same
by repeatedly giving petitioner several tasks to perform. Moreover, although respondent may
have waived his right to attain a regular status of employment when he agreed to perform
these tasks on a temporary employment status, still, it was the law that recognized and
considered him a regular employee after his first year of rendering service to petitioner. As
such, the waiver was ineffective.

Hence, the petition assigning the following errors:

 I. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF
SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS
HONORABLE COURT WHEN IT GAVE DUE COURSE TO THE PETITION FOR
CERTIORARI DESPITE THE FACT THAT THERE WAS NO SHOWING THAT THE
NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF
DISCRETION.

II. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF

SUBSTANCE CONTRARY TO THE LAW AND APPLICABLE RULINGS OF THIS
HONORABLE COURT WHEN IT BASED ITS FINDING THAT RESPONDENT IS
ENTITLED TO REGULAR EMPLOYMENT ON A PROVISION OF LAW THAT THIS
HONORABLE COURT HAS DECLARED TO BE INAPPLICABLE IN CASE THE
EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP IS IN DISPUTE OR IS
THE FACT IN ISSUE.

III. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF

SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS
HONORABLE COURT WHEN IT ERRONEOUSLY FOUND THAT RESPONDENT IS A
REGULAR EMPLOYEE OF THE COMPANY.

IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF

SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS
HONORABLE COURT WHEN IT ERRONEOUSLY DIRECTED RESPONDENT'S
REINSTATEMENT DESPITE THE FACT THAT THE NATURE OF THE SERVICES HE
PROVIDED TO THE COMPANY WAS SENSITIVE AND CONFIDENTIAL.14

Petitioner argues that since the petition filed by the respondent before the CA was a petition
for certiorari under Rule 65 of the Rules of Court, the CA should have limited the issue on
whether or not there was grave abuse of discretion on the part of the NLRC in rendering the
resolution affirming the decision of the Labor Arbiter.

Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining
whether there was an employer-employee relationship between the petitioner and the
respondent. Petitioner contends that where the existence of an employer-employee relationship
is in dispute, Article 280 of the Labor Code is inapplicable. The said article only set the
distinction between a casual employee from a regular employee for purposes of determining the
rights of an employee to be entitled to certain benefits.

Petitioner insists that respondent is not a regular employee and not entitled to reinstatement.

On his part, respondent maintains that he is an employee of the petitioner and that the CA did
not err in ruling in his favor.

The petition is meritorious.

At the outset, respondent's recourse to the CA was the proper remedy to question the
resolution of the NLRC. It bears stressing that there is no appeal from the decision or resolution
of the NLRC. As this Court enunciated in the case of St. Martin Funeral Home v. NLRC,15 the
special civil action of certiorari under Rule 65 of the Rules of Civil Procedure, which is filed
before the CA, is the proper vehicle for judicial review of decisions of the NLRC. The petition
should be initially filed before the Court of Appeals in strict observance of the doctrine on
hierarchy of courts as the appropriate forum for the relief desired. 16 This Court not being a trier
of facts, the resolution of unclear or ambiguous factual findings should be left to the CA as it is
procedurally equipped for that purpose. From the decision of the Court of Appeals, an ordinary
appeal under Rule 45 of the Rules of Civil Procedure before the Supreme Court may be resorted
to by the parties. Hence, respondent's resort to the CA was appropriate under the
circumstances.

Anent the primordial issue of whether or not an employer-employee relationship exists between
petitioner and respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is

ultimately a question of fact and that the findings thereon by the Labor Arbiter and the NLRC
shall be accorded not only respect but even finality when supported by substantial
evidence.17 Being a question of fact, the determination whether such a relationship exists
between petitioner and respondent was well within the province of the Labor Arbiter and the
NLRC. Being supported by substantial evidence, such determination should have been accorded
great weight by the CA in resolving the issue.

To ascertain the existence of an employer-employee relationship jurisprudence has invariably

adhered to the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employee's
conduct, or the so-called "control test."18 Of these four, the last one is the most important.19 The
so-called "control test" is commonly regarded as the most crucial and determinative indicator of
the presence or absence of an employer-employee relationship. Under the control test, an
employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end achieved, but also the manner and means to be
used in reaching that end.20

Applying the aforementioned test, an employer-employee relationship is apparently absent in

the case at bar. Among other things, respondent was not required to report everyday during
regular office hours of petitioner. Respondent's monthly retainer fees were paid to him either at
his residence or a local restaurant. More importantly, petitioner did not prescribe the manner in
which respondent would accomplish any of the tasks in which his expertise as a liaison officer
was needed; respondent was left alone and given the freedom to accomplish the tasks using his
own means and method. Respondent was assigned tasks to perform, but petitioner did not
control the manner and methods by which respondent performed these tasks. Verily, the
absence of the element of control on the part of the petitioner engenders a conclusion that he is
not an employee of the petitioner.

Moreover, the absence of the parties' retainership agreement notwithstanding, respondent

clearly admitted that petitioner hired him in a limited capacity only and that there will be no
employer-employee relationship between them. As averred in respondent's Position Paper: 21

2. For the participation of complainant regarding this particular problem of Atok, Mr. Torres
offered him a pay in the amount of Php3,000.00 per month plus representation expenses. It
was also agreed by Mr. Torres and the complainant that his participation on this particular
problem of Atok will be temporary since the problem was then contemplated to be limited in
nature, hence, there will be no employer-employee relationship between him and Atok.
Complainant agreed on this arrangement. It was also agreed that complainant's compensations,
allowances, representation expenses and reimbursement of company- related expenses will be
processed and paid through disbursement vouchers;22

Respondent was well aware of the agreement that he was hired merely as a liaison or
consultant of the petitioner and he agreed to perform tasks for the petitioner on a temporary
employment status only. However, respondent anchors his claim that he became a regular
employee of the petitioner based on his contention that the "temporary" aspect of his job and
its "limited" nature could not have lasted for eleven years unless some time during that period,
he became a regular employee of the petitioner by continually performing services for the
company.
Contrary to the conclusion of the CA, respondent is not an employee, much more a regular
employee of petitioner. The appellate court's premise that regular employees are those who
perform activities which are desirable and necessary for the business of the employer is not
determinative in this case. In fact, any agreement may provide that one party shall render
services for and in behalf of another, no matter how necessary for the latter's business, even
without being hired as an employee.23 Hence, respondent's length of service and petitioner's
repeated act of assigning respondent some tasks to be performed did not result to respondent's
entitlement to the rights and privileges of a regular employee.

Furthermore, despite the fact that petitioner made use of the services of respondent for eleven
years, he still cannot be considered as a regular employee of petitioner. Article 280 of the Labor
Code, in which the lower court used to buttress its findings that respondent became a regular
employee of the petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that
said provision is not the yardstick for determining the existence of an employment relationship
because it merely distinguishes between two kinds of employees, i.e., regular employees and
casual employees, for purposes of determining the right of an employee to certain benefits, to
join or form a union, or to security of tenure; it does not apply where the existence of an
employment relationship is in dispute. 24 It is, therefore, erroneous on the part of the Court of
Appeals to rely on Article 280 in determining whether an employer-employee relationship exists
between respondent and the petitioner

Considering that there is no employer-employee relationship between the parties, the

termination of respondent's services by the petitioner after due notice did not constitute illegal
dismissal warranting his reinstatement and the payment of full backwages, allowances and
other benefits.

WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of
the Court of Appeals in CA-G.R. SP No. 87846, are REVERSED and SET ASIDE. The Resolutions
dated July 30, 2004 and September 30, 2004 of the National Labor Relations Commission are
REINSTATED.

SO ORDERED.
 FIRST DIVISION

G.R. No. 194765, April 23, 2018

MARSMAN & COMPANY, INC., Petitioner, v. RODIL C. STA. RITA, Respondent.

DECISION

LEONARDO-DE CASTRO,[*] J.:

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by
Marsman & Company, Inc. (Marsman), now Metro Alliance Holdings & Equities Corporation,
seeking the annulment and reversal of the Decision 1 dated June 25, 2010 and the
Resolution2 dated December 9, 2010 of the Court of Appeals in CA-G.R. SP No. 106516. The
appellate court's issuances reversed the Decision 3 dated July 31, 2008 of the National Labor
Relations Commission (NLRC) in NLRC NCR Case No. 30-01-00362-00 (NLRC CA No. 032892-
02) dismissing respondent Rodil C. Sta. Rita's (Sta. Rita's) complaint and the
Resolution4 denying his motion for reconsideration. The Court of Appeals instead found
Marsman guilty of illegal dismissal and ordered the company to pay for backwages, separation
pay, moral damages, exemplary damages and attorney's fees.

Marsman, a domestic corporation, was formerly engaged in the business of distribution and sale
of pharmaceutical and consumer products for different manufacturers within the
country.5 Marsman purchased Metro Drug Distribution, Inc. (Metro Drug), now Consumer
Products Distribution Services, Inc. (CPDSI), which later became its business successor-in-
interest. The business transition from Marsman to CPDSI generated confusion as to the actual
employer of Sta. Rita at the time of his dismissal.

Marsman temporarily hired Sta. Rita on November 16, 1993 as a warehouse helper with a
contract that was set to expire on April 16, 1994, and paid him a monthly wage of P2,577.00.
After the contract expired, Marsman rehired Sta. Rita as a warehouseman and placed him on
probationary status on April 18, 1994 with a monthly salary of P3,166.00. 6 Marsman then
confirmed Sta. Rita's status as a regular employee on September 18, 1994 and adjusted his
monthly wage to P3,796.00. Later, Sta. Rita joined Marsman Employees Union (MEU), the
recognized sole and exclusive bargaining representative of Marsman's employees. 7

Marsman administered Sta. Rita's warehouse assignments. Initially, Marsman assigned Sta. Rita
to work in its GMA warehouse. Marsman then transferred Sta. Rita to Warehouses C and E of
Kraft General Foods, Inc. on September 5, 1995. Thereafter, Marsman reassigned Sta. Rita to
Marsman Consumer Product Division Warehouse D in ACSIE, Parañaque.8

Sometime in July 1995, Marsman purchased Metro Drug, a company that was also engaged in
the distribution and sale of pharmaceutical and consumer products, from Metro Pacific, Inc. The
similarity in Marsman's and Metro Drug's business led to the integration of their employees
which was formalized in a Memorandum of Agreement,9 dated June 1996, which provides:
 MARSMAN & COMPANY, INC.
City of Makati

MEMORANDUM OF AGREEMENT

MARSMAN AND CO., INC. hereinafter referred to as the MANAGEMENT,

represented by MR. JOVEN D. REYES, Group President and Chief Executive Officer
and the MARSMAN EMPLOYEES UNION-PSMM/DFA as the Union, represented
hereinafter by MR. BONIFACIO M. PANALIGAN, PSMM President,

WITNESSETH, THAT:

WHEREAS, Marsman Employees Union-PSMM/DFA is the recognized sole and

exclusive bargaining representative of Marsman & Co., Inc. regular employees in
the rank and file and non-managerial category except those excluded in Article I,
Section 2 of their existing CBA signed last June 1995;

WHEREAS, Marsman & Co. Inc. bought Metro Drug Distribution, Inc. from Metro
Pacific Inc. last July, 1995;

WHEREAS, the Management of Marsman & Co., Inc. decided to limit

Marsman & Co. Inc.'s, functions to those of a holding company and run
Metro Drug Distribution, Inc. as the main operating company;

WHEREAS, in view of this, Management decided to integrate the

employees of Marsman & Co. Inc. and Metro Drug Distribution, Inc.
effective July 1, 1996 under the Metro Drug legal entity;

THEREFORE, Management and Marsman Employees Union PSMM/DFA agree: .

1. That, the Union acknowledges Management's decision to transfer all

employees of Marsman, including members of MEU-PSMM/DFA, to Metro
Drug Distribution, Inc.

2. That, the Management recognizes the Marsman Employees Union-PSMM/DFA

as the exclusive bargaining representative of all the rank and file employees
transferred from Marsman & Co. Inc. to Metro Drug Distribution, Inc. and the
other employees who may join the Union later.

3. That, the name of Marsman Employees Union-PSMM/DFA is retained.

4. That, the tenure or service years of all employees transferred shall be

recognized and carried over and will be included in the computation/consideration
of their retirement and other benefits.

5. That, the provisions of the existing Collective Bargaining Agreement signed last
June 1995 and the Memorandum of Agreement signed also last June 1995 will be
respected, honored and continue to be implemented until expiry or until
superseded as per item 8 below.

6. That, there will be no diminution of present salaries and benefits being enjoyed
even after the transfer.

7. That, upon transfer of MCI employees to Metro Drug Distribution, Inc. all
employees covered by the CBA or otherwise shall enjoy the same terms and
conditions of employment prior to transfer and shall continue to enjoy the same
including company practice until a new CBA is concluded.

8. That, all of the above rights and obligations of the parties pertaining to the
recognition of the union as exclusive bargaining representative, the effectivity,
coverage and validity of the CBA and all other issues relative to the
representation of the former Marsman employees are subject to and be
superseded by the result of a Certification Election between Marsman Employees
Union-PSMM/DFA and Metro Drug Corp. Employees Association-FFW in 1996 or at
a date to be agreed upon by MEU and MDCEA as coordinated by the DOLE, and
by any agreement that may be entered into by management and the winner in
said certification election.

9. That, upon transfer, the Management agrees to address all pending/unresolved

grievances and issues lodged by Marsman Employees Union-PSMM/DFA.

10. That, also upon transfer, the Management agrees to continue negotiation of
Truckers and Forwarders issue as stipulated in the MOA signed last June, 1995.

11. That, Management and Union may continue to negotiate/discuss other

concerns/issues with regard to the transfer and integration.

IN WITNESS WHEREOF, the parties have caused this document to be executed by

their authorized representatives this ______day of June, 1996 at Makati City.
[Emphases supplied.]

MARSMAN & COMPANY, INC.

(signed)
JOVEN D. REYES
President & Chief Exec. Officer

MARSMAN EMPLOYEES UNION-PSSM/DFA

(signed)
BONIFACIO M. PANALIGAN
President

Witnessed by:
(signed)
JOSE MILO M. GILLESANIA
LUISITO N. REYES
1st Vice-President
Vice-President
MEU-PSMM/DFA
Finance & Administration

Attested by:
(signed)
ABNER M. PADILLA
Conciliator-Mediator
NCMB, DOLE
Concomitant to the integration of employees is the transfer of all office, sales and warehouse
personnel of Marsman to Metro Drug and the latter's assumption of obligation with regard to the
affected employees' labor contracts and Collective Bargaining Agreement. The integration and
transfer of employees ensued out of the transitions of Marsman and CPDSI into, respectively, a
holding company and an operating company. Thereafter, on November 7, 1997, Metro Drug
amended its Articles of Incorporation by changing its name to "Consumer Products Distribution
Services, Inc." (CPDSI) which was approved by the Securities and Exchange Commission.10

In the meantime, on an unspecified date, CPDSI contracted its logistic services to EAC
Distributors (EAC). CPDSI and EAC agreed that CPDSI would provide warehousemen to EAC's
tobacco business which operated in EAC-Libis Warehouse. A letter issued by Marsman confirmed
Sta. Rita's appointment as one of the warehousemen for EAC-Libis Warehouse, effective
October 13, 1997, which also stated that the assignment was a "transfer that is part of our
cross-training program."11

Parenthetically, EAC's use of the EAC-Libis Warehouse was dependent upon the lease contract
between EAC and Valiant Distribution (Valiant), owner of the EAC-Libis Warehouse. Hence,
EAC's operations were affected when Valiant decided to terminate their contract of lease on
January 31, 2000. In response to the cessation of the contract of lease, EAC transferred their
stocks into their own warehouse and decided to operate the business by themselves, thereby
ending their logistic service agreement with CPDSI.12

This sequence of events left CPDSI with no other option but to terminate the employment of
those assigned to EAC-Libis Warehouse, including Sta. Rita. A letter 13 dated January 14, 2000,
issued by Michael Leo T. Luna, CPDSI's Vice-President and General Manager, notified Sta. Rita
that his services would be terminated on February 28, 2000 due to redundancy. CPDSI
rationalised that they could no longer accommodate Sta. Rita to another work or position.
CPDSI however guaranteed Sta. Rita's separation pay and other employment benefits. The
letter is reproduced in full as follows:

a MARSMAN company
CONSUMER PRODUCTS DISTRIBUTION SERVICES, INC.
January 14, 2000

MR. RODIL STA. RITA

Warehouse Supervisor
EAC Libis Operation
Libis, Quezon City

Dear Rodil,

As we have earlier informed you, EAC Distributors, Inc. has advised us that their
Lessor, Valiant Distribution has terminated their lease contract effective January
31, 2000.

Accordingly, we were informed by EAC Distributors, Inc., that they will no longer
need our services effective on the same date. As a result thereof, your position as
warehouseman will become redundant thereafter.

We have exerted efforts to find other work for you to do or other positions where
you could be accommodated. Unfortunately, our efforts proved futile.

In view thereof, we regret to inform you that your services will be terminated
effective upon the close of business hours on the 28th of February, 2000.
 You will be paid separation pay and other employment benefits in accordance
with the company policies and the law, the details of which shall be discussed
with you by your immediate superior.

In order to cushion the impact of your separation from the service and to give
you ample time to look for other employment elsewhere, you need not report for
work from the 18th of January up the end of February, 2000, although you will
remain in the payroll of the company and will be paid the salary corresponding to
this period.

We thank you for your contribution to this organization and we wish you well in
your future endeavors.

Sincerely,

(signed)
MICHAEL LEO T. LUNA
Vice President & General Manager14

CPDSI thereafter reported the matter of redundancy to the Department of Labor and
Employment in a letter15 dated January 17, 2000, conveying therein Sta. Rita's impending
termination. The letter stated:

The Regional Director

Department of Labor & Employment
National Capital Region
Palacio De Gobernador
Intramuros, Manila

Dear Sir:

In compliance with the provisions of Article 283 of the Labor Code, as amended,
Consumer Products Distribution Services, Inc. (CPDSI) "Company" hereby gives
notice that our company is implementing a comprehensive streamlining program
affecting levels of employment with the objective of further reducing operating
expenses and to cope with the current economic difficulties. The employment of
the employees occupying such positions and whose names are enumerated in the
attachment list of (Annex "A") will be terminated.

In accordance with law, the above enumerated employees will be paid their
separation pay in due course. Individual notices of the termination of employment
of said employees have already been served upon them.

Very truly yours,

CONSUMER PRODUCTS DISTRIBUTION SERVICES, INC.

BY:
(signed)

MICHAEL LEO T. LUNA

Vice President and General Manager

xxxx
 LIST OF TERMINATED WORKERS
Names of Workers
Occupation/Skills Salary
Terminated
xx
RION L. V. RUZGAL WHSE SUPERVISOR P16,000.00
x
xx
GLENN V. VISTO WHSE SUPERVISOR P15,600.00
x
CONRADO C. TIUSINGCO, xx
SR. WHSEMAN P7,200.0016
JR. x
xx
LOLITA D. JAMERO WHSE SUPERVISOR P14,500.00
x
xx
ARTURO G. CASTRO, JR. WHSEMAN P7,616.00
x
xx
RODIL C. STA. RITA WHSEMAN P7,746.00
x
xx
EMILIO MADRIAGA WHSEMAN P7,616.00
x

Aggrieved, Sta. Rita filed a complaint in the NLRC, National Capital Region-Quezon City against
Marsman on January 25, 2000 for illegal dismissal with damages in the form of moral,
exemplary, and actual damages and attorney's fees. Sta. Rita alleged that his dismissal was
without just or authorized cause and without compliance with procedural due process. His
affidavit-complaint reads:

RODIL C. STA RITA, of legal age, single, Filipino citizen, with residence and postal
address at 1128 R. Papa Street, Bo. Obrero, Tondo, Manila being under oath
hereby deposes and says:

1. He was employed with Marsman on November 16, 1993, with offices and
address at Manalac Avenue, Taguig, Metro Manila, as warehouseman with
a basic salary P3,790.00 more (sic);

2. As a regular employee, his salary was increased by P1,600.00 in 1995; in

1996 was increased by P1,300.00; in 1997 was increased by P1,050.00,
making a total of P7,740.00 up to his separation from employment on
January 18, 2000 x x x;
3. He cannot fathom to know why he was terminated from employment, save
the better (sic) of Mr. Michael Leo T. Luna, Vice President and General
Manager of Marsman Company (Consumer Products Distribution Services,
Inc.) on January 14, 2000;
4. His termination from employment is in diametric opposition to Art VI. Sec.
3(d) of the CBA and to Art. 282 of the Labor Code, as amended, i.e., he
was no[t] given the 30-day period prior to his termination, making his
dismissal as illegal per se;
5. In the absence of any derogatory record of Mr. Rodil Sta. Rita for six (6)
years, he is entitled to moral and exemplary damages, in addition to back
wages and separation pay, short of reinstatement and without loss of
seniority rights.17
Marsman filed a Motion to Dismiss18 on March 16, 2000 on the premise that the Labor Arbiter
had no jurisdiction over the complaint for illegal dismissal because Marsman is not Sta. Rita's
employer. Marsman averred that the Memorandum of Agreement effectively transferred Sta.
Rita's employment from Marsman and Company, Inc. to CPDSI. Said transfer was further
verified by Sta. Rita's: 1) continued work in CPDSI's premises; 2) adherence to CPDSI's rules
and regulations; and 3) receipt of salaries from CPDSI. Moreover, Marsman asserted that CPDSI
terminated Sta. Rita.

Labor Arbiter Gaudencio P. Demaisip, Jr. (Demaisip) rendered his Decision 19 on April 10, 2002
finding Marsman guilty of illegal dismissal, thus:

This Office finds in favor of the complainant.

Article 167 of the Labor Code defines employer, to wit:

"Employer means any person, natural or juridical, employing the

services of the employee."

Likewise, Article 212 of the Labor Code defines employer in this wise:

"Employer includes any person acting in the interest of an employer

directly or indirectly."

Consumer did not perform any act, thru its responsible officer, to show that it had
employed the complainant. Nevertheless, Marsman acted in the interest of
Consumer because "sometime in 1996, for purposes of efficiency and economy
Marsman integrated its distribution business with the business operations of
Consumer Products Distribution Services, Inc. xxx" and "in line with the
integration of the distribution businesses of Marsman and CPDSI, the employment
of all Marsman office, sales, and warehouse personnel was transferred to CPDSI.
x x x"

Thusly, Marsman qualifies as the employer of the complainant under the

aforequoted provisions of the Labor Code.

The MOA was concluded between Marsman and. Co. Inc. and Marsman
Employees Union-PSMM/DFA. A perusal of its contents show that matters,
concerning terms and conditions of employment, were contracted and concluded.

On the contrary, the MOA is a piece of evidence that Marsman is the employer of
complainant because it is solely the employer who can negotiate and conclude the
terms and conditions of employment of the workers.

Ironically, the MOA does not establish the contention that Consumer is the
employer of the complainant.

Rule XVI of Department Order No. 9, Series of 1997, which took effect on June
21, 1997, requires among others, the ratification by the majority of all workers in
the Collective Bargaining Unit of the Agreement. The non-compliance of the
requirement, under said Department Order, renders the MOA ineffective.

Further, it may be concluded that the Consumer is an agent of respondent

Marsman, because the former does "[t]he employment of all Marsman office
sales, and warehouse personnel x x x."
 Nevertheless, the employer of the complainant is Marsman and Company, Inc.

In illegal dismissal, the burden, to establish the just cause of termination, rest on
the employer. The records of this case [are] devoid of the existence of such
cause. Indeed, the respondent Marsman and Company, Inc. failed to show the
cause of complainant's dismissal, warranting the twin remedies of reinstatement
and backwages. However, insofar as reinstatement is concerned, this remedy
appears to be impractical because, as gleaned from the position paper of [Sta.
Rita], there is uncertainty in the availability of assignment for the complainant.
Instead, the payment of separation pay equivalent to one half month for every
year or a fraction of at least six (6) months be considered as one year, would be
equitable.

The rest of the claims are dismissed for lack of merit.

WHEREFORE, premises considered, the complainant is herein declared to have

been illegally dismissed. Marsman and Company, Inc. is directed to pay the
complainant backwages and separation pay on the total amount of
P152,757.55.20

Marsman appealed the foregoing Decision arguing that the Labor Arbiter had no jurisdiction
over the complaint because an employer-employee relationship did not exist between the party-
litigants at the time of Sta. Rita's termination. Furthermore, Marsman stated that the ratification
requirement under Rule XVI of Department Order No. 9, Series of 1997 21 applied only to
Collective Bargaining Agreements, and the Memorandum of Agreement was certainly not a
replacement for the Collective Bargaining Agreement which Marsman and MEU entered into in
the immediately succeeding year prior to the ratification of the Memorandum of Agreement.
Marsman also maintained that it had a personality that was separate and distinct from CPDSI
thus it may not be made liable to answer for acts or liabilities of CPDSI and vice-versa. Finally,
Marsman claimed that Sta. Rita was validly declared redundant when CPDSI's logistics
agreement with EAC was not renewed.22

Sta. Rita filed his own appeal, contesting the failure of the Labor Arbiter to award him moral
and exemplary damages, and attorney's fees.

The NLRC in its Decision dated July 31, 2008, reversed Labor Arbiter Demaisip's Decision and
found that there was no employer-employee relationship between Marsman and Sta. Rita. The
NLRC held:

Applying the four-fold test in determining the existence of employer-employee

relationship fails to convince Us that complainant is respondent Marsman's
employee.

On selection and engagement, by complainant's transfer to CPDSI, he had

become the employee of CPDSI. It should be emphasized that respondent
Marsman and CPDSI are corporate entities which are separate and distinct from
one another.

On payment of wages, it was CPDSI which paid complainant's salaries and

benefits. Complainant never claimed that it was still respondent Marsman which
paid his salaries.

On the power of dismissal, after EAC's lease contract expired deciding to transfer
its stock to its own warehouse and handle its warehousing operations,
 complainant was left without any work. CPDSI decided to terminate his services
by issuing him a termination notice on January 14, 2000.

On the employer's power to control the employee with respect to the means and
methods by which his work is to be accomplished, complainant was under the
control and supervision of CPDSI concomitant to the logistic services which
respondent Marsman had integrated to that of CPDSI. CPDSI saw to it that its
obligation to provide logistic services to its client EAC is carried out with
complainant working as warehouseman in the warehouse rented by EAC. The
power of control is the most decisive factor in determining the existence of an
employer-employee relationship. x x x.

Having determined that employer-employee relationship does not exist between

complainant and respondent Marsman, complainant has no cause of action for
illegal dismissal against the latter. There is no necessity to resolve the [other]
issues.

WHEREFORE, premises considered, the Decision of the Labor Arbiter is VACATED

and SET ASIDE. A NEW decision is entered dismissing the complaint for lack of
employer-employee relationship.23

In a Resolution dated November 11, 2008, the NLRC denied Sta. Rita's motion for
reconsideration because his motion "raised no new matters of substance which would warrant
reconsideration of the Decision of [the] Commission."24

Sta. Rita filed before the Court of Appeals a Petition for Certiorari25 imputing grave abuse of
discretion on the part of the NLRC for 1) finding a lack of employer-employee relationship
between the party-litigants; and 2) not awarding backwages, separation pay, damages and
attorney's fees.

The Court of Appeals promulgated its Decision on June 25, 2010, reversing the NLRC Decision.
The Court of Appeals held that Marsman was Sta. Rita's employer because Sta. Rita was
allegedly not part of the integration of employees between Marsman and CPDSI. The Court gave
credence to Sta. Rita's contention that he purposely refused to sign the Memorandum of
Agreement because such indicated his willingness to be transferred to CPDSI. In addition, the
appellate court considered Sta. Rita's assignment to the EAC-Libis Warehouse as part of
Marsman's cross-training program, concluding that only Sta. Rita's work assignment was
transferred and not his employment.

The appellate court also found no merit in the NLRC's contention that CPDSI paid Sta. Rita's
salaries and that it exercised control over the means and methods by which Sta. Rita performed
his tasks. On the contrary, the Court of Appeals observed that Sta. Rita filed his applications for
leave of absence with Marsman. Finally, the Court of Appeals adjudged that CPDSI, on the
assumption that it had the authority to dismiss Sta. Rita, did not comply with the requirements
for the valid implementation of the redundancy program.

The dispositive portion of the Court of Appeals Decision reads:

WHEREFORE, the instant petition for certiorari is GRANTED. The assailed

Decision and Resolution of the public respondent National Labor Relations
Commission are ANNULLEDand SET ASIDE. Judgment is rendered declaring
petitioner Rodil C. [Sta. Rita's] dismissal from work as illegal and accordingly,
private respondent Marsman and Company, Inc. is ordered to pay said
[respondent] the following:
 1. backwages computed from 18 January 2000 up to the finality of this
Decision;

2. separation pay in lieu of reinstatement computed at the rate of one (1)

month pay for every year of service from 16 November 1993 up to the
finality of this Decision;
3. the amount of P15,000.00 as moral damages;
4. the amount of P15,000.00 as exemplary damages; and
5. the amount equivalent to 10% of his total monetary award, as and for
attorney's fees.

Let this case be REMANDED to the Labor Arbiter for the purpose of computing,
with reasonable dispatch, petitioner's monetary awards as above discussed.26

Hence, Marsman lodged the petition before us raising the lone issue:

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY

ERRED IN DECIDING A QUESTION OF SUBSTANCE IN A MANNER NOT IN ACCORD
WITH THE LAW, APPLICABLE DECISIONS OF THIS HONORABLE COURT AND
EVIDENCE ON RECORD WHEN IT ANNULLED AND SET ASIDE THE NLRC'S
DECISION AND RESOLUTION EFFECTIVELY RULING THAT [STA. RITA] WAS
ILLEGALLY DISMISSED FROM SERVICE WHEN THE LATTER COULD NOT HAVE
BEEN DISMISSED AT ALL ON ACCOUNT OF THE ABSENCE OF EMPLOYER-
EMPLOYEE RELATIONSHIP BETWEEN SAID [STA. RITA] AND THE COMPANY27

Simply stated, the issue to be resolved is whether or not an employer-employee relationship

existed between Marsman and Sta. Rita at the time of Sta. Rita's dismissal.

This petition is impressed with merit.

The issue of whether or not an employer-employee relationship exists in a given case is

essentially a question of fact. As a rule, this Court is not a trier of facts and this applies with
greater force in labor cases.28 This petition however falls under the exception because of
variance in the factual findings of the Labor Arbiter, the NLRC and the Court of Appeals. Indeed,
on occasion, the Court is constrained to wade into factual matters when there is insufficient or
insubstantial evidence on record to support those factual findings; or when too much is
concluded, inferred or deduced from the bare or incomplete facts appearing on record. 29 The
Court in the case of South Cotabato Communications Corporation v. Sto. Tomas 30 held that:

The findings of fact should, however, be supported by substantial evidence from

which the said tribunals can make their own independent evaluation of the facts.
In labor cases, as in other administrative and quasi-judicial proceedings, the
quantum of proof necessary is substantial evidence, or such amount of relevant
evidence which a reasonable mind might accept as adequate to justify a
conclusion. Although no particular form of evidence is required to prove the
existence of an employer-employee relationship, and any competent and relevant
evidence to prove the relationship may be admitted, a finding that the
relationship exists must nonetheless rest on substantial evidence. (Citations
omitted)

Settled is the tenet that allegations in the complaint must be duly proven by competent
evidence and the burden of proof is on the party making the allegation. 31 In an illegal dismissal
case, the onus probandirests on the employer to prove that its dismissal of an employee was for
a valid cause. However, before a case for illegal dismissal can prosper, an employer-employee
relationship must first be established.32 In this instance, it was incumbent upon Sta. Rita as the
complainant to prove the employer-employee relationship by substantial evidence.
Unfortunately, Sta. Rita failed to discharge the burden to prove his allegations.

To reiterate the facts, undisputed and relevant to the disposition of this case, Marsman hired
Sta. Rita as a warehouseman when it was still engaged in the business of distribution and sale
of pharmaceutical and consumer products. Marsman paid Sta. Rita's wages and controlled his
warehouse assignments, acts which can only be attributed to a bona fide employer. Marsman
thereafter purchased Metro Drug, now CPDSI, which at that time, was engaged in a similar
business. Marsman then entered into a Memorandum of Agreement with MEU, its bargaining
representative, integrating its employees with CPDSI and transferring its employees, their
respective employment contracts and the attendant employment obligation to CPDSI. The
planned integration was then carried out sometime in 1996, as admitted by Sta. Rita in his
pleading.33

It is imperative to point out that the integration and transfer was a necessary consequence of
the business transition or corporate reorganization that Marsman and CPDSI had undertaken,
which had the characteristics of a corporate spin-off. To recall, a proviso in the Memorandum of
Agreement limited Marsman's function into that of a holding company and transformed CPDSI
as its main operating company. In business parlance, a corporate spin-off occurs when a
department, division or portions of the corporate business enterprise is sold-off or assigned to a
new corporation that will arise by the process which may constitute it into a subsidiary of the
original corporation.34

The spin-off and the attendant transfer of employees are legitimate business interests of
Marsman. The transfer of employees through the Memorandum of Agreement was proper and
did not violate any existing law or jurisprudence.

Jurisprudence has long recognized what are termed as "management prerogatives." In SCA
Hygiene Products Corporation Employees Association-FFW v. SCA Hygiene Products
Corporation,35 we held that:

The hiring, firing, transfer, demotion, and promotion of employees have been
traditionally identified as a management prerogative subject to limitations found
in the law, a collective bargaining agreement, or in general principles of fair play
and justice. This is a function associated with the employer's inherent right to
control and manage effectively its enterprise. Even as the law is solicitous of the
welfare of employees, it must also protect the right of an employer to exercise
what are clearly management prerogatives. The free will of management to
conduct its own business affairs to achieve its purpose cannot be denied. x x x.

Tinio v. Court of Appeals36 also acknowledged management's prerogative to transfer its

employees within the same business establishment, to wit:

This Court has consistently recognized and upheld the prerogative of

management to transfer an employee from one office to another within the
business establishment, provided there is no demotion in rank or a diminution of
salary, benefits and other privileges. As a rule, the Court will not interfere with an
employer's prerogative to regulate all aspects of employment which include
among others, work assignment, working methods and place and manner of
work. Labor laws discourage interference with an employer's judgment in the
conduct of his business.

xxxx

But, like other rights, there are limits thereto. The managerial prerogative to
transfer personnel must be exercised without grave abuse of discretion, bearing
 in mind the basic elements of justice and fair play. Having the right should not be
confused with the manner in which the right is exercised. Thus, it cannot be used
as a subterfuge by the employer to rid himself of an undesirable worker. The
employer must be able to show that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee; nor does it involve a demotion in
rank or a diminution of his salaries, privileges, and other benefits. x x x.
(Citations omitted.)

Analogously, the Court has upheld the transfer/absorption of employees from one company to
another, as successor employer, as long as the transferor was not in bad faith 37 and the
employees absorbed by a successor-employer enjoy the continuity of their employment status
and their rights and privileges with their former employer. 38

Sta. Rita's contention that the absence of his signature on the Memorandum of Agreement
meant that his employment remained with Marsman is merely an allegation that is neither proof
nor evidence. It cannot prevail over Marsman's evident intention to transfer its employees.

To assert that Marsman remained as Sta. Rita's employer even after the corporate spin-off
disregards the separate personality of Marsman and CPDSI. It is a fundamental principle of law
that a corporation has a personality that is separate and distinct from that composing it as well
as from that of any other legal entity to which it may be related. 39 Other than Sta. Rita's bare
allegation that Michael Leo T. Luna was Marsman's and CPDSI's Vice-President and General
Manager, Sta. Rita failed to support his claim that both companies were managed and operated
by the same persons, or that Marsman still had complete control over CPDSI's operations.
Moreover, the existence of interlocking directors, corporate officers and shareholders without
more, is not enough justification to pierce the veil of corporate fiction in the absence of fraud or
other public policy considerations.40

Verily, the doctrine of piercing the corporate veil also finds no application in this case because
bad faith cannot be imputed to Marsman. 41 On the contrary, the Memorandum of Agreement
guaranteed the tenure of the employees, the honoring of the Collective Bargaining Agreement
signed in June 1995, the preservation of salaries and benefits, and the enjoyment of the same
terms and conditions of employment by the affected employees.

Sta. Rita also failed to satisfy the four-fold test which determines the existence of an employer-
employee relationship. The elements of the four-fold test are: 1) the selection and engagement
of the employees; 2) the payment of wages; 3) the power of dismissal; and 4) the power to
control the employee's conduct.42 There is no hard and fast rule designed to establish the
aforesaid elements. Any competent and relevant evidence to prove the relationship may be
admitted. Identification cards, cash vouchers, social security registration, appointment letters or
employment contracts, payrolls, organization charts, and personnel lists, serve as evidence of
employee status.43

The Memorandum of Agreement effectively transferred Marsman's employees to CPDSI.

However, there was nothing in the agreement to negate CPDSI's power to select its employees
and to decide when to engage them. This is in line with Article 1700 of the Civil Code which
provides that:

Art. 1700. The relations between capital and labor are not merely contractual.
They are so impressed with public interest that labor contracts must yield to the
common good. Therefore, such contracts are subject to the special laws on labor
unions, collective bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects.

A labor contract merely creates an action in personam and does not create any real right which
should be respected by third parties. 44 This conclusion draws its force from the right of an
employer to select his/her employees and equally, the right of the employee to refuse or
voluntarily terminate his/her employment with his/her new employer by resigning or retiring.
That CPDSI took Sta. Rita into its employ and assigned him to one of its clients signified the
former's acquiescence to the transfer.

Marsman's letter45 to Sta. Rita dated September 29, 1997 neither assumed nor disturbed
CPDSI's power of selection. The letter reads:

MARSMAN & COMPANY, INC.

TO: MR. RODIL STA. RITA

RE: TRANSFER OF ASSIGNMENT

This is to confirm in writing your appointment as warehouseman for EAC-Libis
Warehouse and Mercury Drug effective 13 October 1997. This transfer is part of
our cross-training program.

Prior to the effectivity of your appointment, you may be instructed to proceed to

EAC-Libis Warehouse for work familiarization and other operational matters
related to the job.

You will directly report to Mr. Eusebio Paisaje, warehouse supervisor.

Good luck.
(signed)
Irene C. Nagrampa

cc: EDB/QRI
LRP/Noynoy Paisaje
HRG-201 file
file

It would be amiss to read this letter independent of the Memorandum of Agreement because
the Memorandum of Agreement clearly reflected Marsman's intention to transfer all employees
to CPDSI. When read in isolation, the use of "cross-training program" may be subject to a
different interpretation but reading it together with the MOA indicates that the "cross training
program" was in relation to the transition phase that Marsman and CPDSI were then
undergoing. It is clear under the terms of the Memorandum of Agreement that Marsman may
continue to negotiate and address issues with the Union even after the signing and execution of
said agreement in the course of fully implementing the transfer to, and the integration of
operations with, CPDSI.

To prove the element on the payment of wages, Sta. Rita submitted forms for leave application,
with either Marsman's logo or CPDSI's logo. Significantly, the earlier leave forms bore
Marsman's logo but the latest leave application of Sta. Rita already had CPDSI's logo. In any
event, the forms for leave application did not sufficiently establish that Marsman paid Sta. Rita's
wages. Sta. Rita could have presented pay slips, salary vouchers, payrolls, certificates of
withholding tax on compensation income or testimonies of his witnesses. 46 The submission of
his Social Security System (SSS) identification card (ID) only proved his membership in the
social insurance program. Sta. Rita should have instead presented his SSS records which could
have reflected his contributions, and the name and address of his employer. 47 Thus, Sta. Rita
fell short in his claim that Marsman still had him in its payroll at the time of his dismissal.

As to the power of dismissal, the letter dated January 14, 2000 clearly indicated that CPDSI,
and not Marsman, terminated Sta. Rita's services by reason of redundancy.
Finally, Sta. Rita failed to prove that Marsman had the power of control over his employment at
the time of his dismissal. The power of an employer to control the work of the employee is
considered the most significant determinant of the existence of an employer-employee
relationship.48 Control in such relationships addresses the details of day to day work like
assigning the particular task that has to be done, monitoring the way tasks are done and their
results, and determining the time during which the employee must report for work or
accomplish his/her assigned task.49 The Court likewise takes notice of the company IDs attached
in Sta. Rita's pleading. The "old" ID bore Marsman's logo while the "new" ID carried Metro
Drug's logo. The Court has held that in a business establishment, an identification card is
usually provided not only as a security measure but mainly to identify the holder thereof as
a bona fideemployee of the firm that issues it.50 Thus the "new" ID confirmed that Sta. Rita was
an employee of Metro Drug, which, to reiterate, later changed its name to CPDSI.

Having established that an employer-employee relationship did not exist between Marsman and
Sta. Rita at the time of his dismissal, Sta. Rita's original complaint must be dismissed for want
of jurisdiction on the part of the Labor Arbiter to take cognizance of the case. For this reason,
there is no need for the Court to pass upon the other issues raised.

WHEREFORE, premises considered, the petition is GRANTED. The Court of Appeals' assailed
Decision dated June 25, 2010 and Resolution dated December 9, 2010 in CA-G.R. SP No.
106516 are, accordingly, REVERSED and SET ASIDE. The NLRC Decision dated July 31, 2008
in NLRC NCR Case No. 30-01-00362-00 (NLRC CA No. 032892-02) is REINSTATED.

SO ORDERED.
 THIRD DIVISION

G.R. No. 209085, June 06, 2018

NICANOR F. MALCABA, CHRISTIAN C. NEPOMUCENO, AND LAURA MAE FATIMA F.

PALIT-ANG, Petitioners, v. PROHEALTH PHARMA PHILIPPINES, INC., GENEROSO R. DEL
CASTILLO, JR., AND DANTE M. BUSTO, Respondents.

DECISION

LEONEN, J.:

This case involves fundamental principles in labor cases.

First, in appeals of illegal dismissal cases, employers are strictly mandated to file an appeal
bond to perfect their appeals. Substantial compliance, however, may merit liberality in its
application.

Second, before any labor tribunal takes cognizance of termination disputes, it must first have
jurisdiction over the action. The Labor Arbiter and the National Labor Relations Commission only
exercise jurisdiction over termination disputes between an employer and an employee. They do
not exercise jurisdiction over termination disputes between a corporation and a corporate
officer.

Third, while this Court recognizes the inherent right of employers to discipline their employees,
the penalties imposed must be commensurate to the infractions committed. Dismissal of
employees for minor and negligible offenses may be considered as illegal dismissal.

This is a Petition for Review on Certiorari 1 assailing the Court of Appeals February 19, 2013
Decision2 and September 10, 2013 Resolution3 in CA-G.R. SP No. 119093, which reversed the
judgments of the Labor Arbiter and of the National Labor Relations Commission. The Court of
Appeals found that Nicanor F. Malcaba (Malcaba), a corporate officer, should have questioned
his dismissal before the Regional Trial Court, not before the Labor Arbiter. It likewise held that
Christian C. Nepomuceno (Nepomuceno) and Laura Mae Fatima F. Palit-Ang (Palit-Ang) were
validly dismissed from service for loss of trust and confidence, and insubordination,
respective1y.

ProHealth Pharma Philippines, Inc. (ProHealth) is a corporation engaged in the sale of

pharmaceutical products and health food on a wholesale and retail basis. Generoso Del Castillo
(Del Castillo) is the Chair of the Board of Directors and Chief Executive Officer while Dante
Busto (Busto) is the Executive Vice President. Malcaba, Tomas Adona, Jr. (Adona),
Nepomuceno, and Palit-Ang were employed as its President, Marketing Manager, Business
Manager, and Finance Officer, respectively. 4

Malcaba had been employed with ProHealth since it started in 1997. He was one of its
incorporators together with Del Castillo and Busto, and they were all members of the Board of
Directors in 2004. He held 1,000,000 shares in the corporation. He was initially the Vice
President for Sales then became President in 2005.5

Malcaba alleged that Del Castillo did acts that made his job difficult. He asked to take a leave on
October 23, 2007. When he attempted to return on November 5, 2007, Del Castillo insisted that
he had already resigned and had his things removed from his office. He attested that he was
paid a lower salary in December 2007 and his benefits were withheld. 6 On January 7, 2008,
Malcaba tendered his resignation effective February 1, 2008.7

Nepomuceno, for his part, alleged that he was initially hired as a medical representative in 1999
but was eventually promoted to District Business Manager for South Luzon. On March 24, 2008,
he applied for vacation leave for the dates April 24, 25, and 28, 2008, which Busto approved.
When he left for Malaysia on April 23, 2008, ProHealth sent him a Memorandum dated April 24,
2008 asking him to explain his absence. He replied through email that he tried to call ProHealth
to inform them that his flight was on April 22, 2008 at 9:00p.m. and not on April 23, 2008 but
was unable to connect on the phone. He tried to explain again on May 2, 2008 and requested
for a personal dialogue with Del Castillo.8

On May 7, 2008, Nepomuceno was given a notice of termination, which was effective May 5,
2008, on the ground of fraud and willful breach of trust.9

Palit-Ang, on the other hand, was hired to join ProHealth's audit team in 2007. She was later
promoted to Finance Officer.10 On November 26, 2007, Del Castillo instructed Palit-Ang to give
P3,000.00 from the training funds to Johnmer Gamboa (Gamboa), a District Business Manager,
to serve as cash advance. 11

On November 27, 2007, Busto issued a show cause memorandum for Palit-Ang's failure to
release the cash advance. Palit-Ang was also relieved of her duties and reassigned to the Office
of the Personnel and Administration Manager. 12

In her explanation, Palit-Ang alleged that when Gamboa saw that she was busy receiving cash
sales from another District Business Manager, he told her that he would just return the next day
to collect his cash advance.13 When he told her that the cash advance was for car repairs, Palit-
Ang told him to get the cash from his revolving fund, which she would reimburse after the
repairs were done. Del Castillo was dissatisfied with her explanation and transferred her to
another office.14

On December 3, 2007, Palit-Ang was invited to a fact-finding investigation, 15 which was held on
December 10, 2007, where Palit-Ang was again asked to explain her actions.16

On December 17, 2007, she was handed a notice of termination effective December 31, 2007,
for disobeying the order of ProHealth's highest official.17

Malcaba, Nepomuceno, Palit-Ang, and Adona separately filed Complaints 18 before the Labor
Arbiter for illegal dismissal, nonpayment of salaries and 13th month pay, damages, and
attorney's fees.

The Labor Arbiter found that Malcaba was constructively dismissed. He found that ProHealth
never controverted the allegation that Del Castillo made it difficult for Malcaba to effectively
fulfill his duties. He likewise ruled that ProHealth's insistence that Malcaba's leave of absence in
October 2007 was an act of resignation was false since Malcaba continued to perform his duties
as President through December 2007.19

The Labor Arbiter declared that Nepomuceno's failure to state the actual date of his flight was
an excusable mistake on his part, considering that this was his first infraction in his nine (9)
years of service. He noted that no administrative proceedings were conducted before
Nepomuceno's dismissal, thereby violating his right to due process. 20

Palit-Ang's dismissal was also found to have been illegal as delay in complying with a lawful
order was not tantamount to disobedience. The Labor Arbiter further noted that delay in giving
a cash advance for car maintenance would not have affected the company's operations. He
declared that Palit-Ang's dismissal was too harsh of a penalty.21

The dispositive portion of the Labor Arbiter's April 5, 2009 Decision 22 read:

WHEREFORE, premises considered, judgment is hereby rendered declaring that

complainants were illegally dismissed by respondents. Accordingly, respondents
are directed solidarily to pay complainants the following:

1. Complainant Nicanor F. Malcaba:

1. Separation pay of P1,800,000.00;

2. Full backwages from the time of his illegal dismissal [o]n 11
November 2007 until the finality of this decision, which as of
this date amounts to P2,810,795.40;
3. 13th month pay for the years 2007 and 2008 amounting to
P126,625.00;

2. Complainant Christian C. Nepomuceno:

1. Separation pay of P190,000.00;

2. Full backwages from the time of his illegal dismissal [i]n May
2007 until the finality of this decision, which as of this date
amounts to P568,827.45;
3. 13th month pay for 2008 amounting to P6,333.33;

3. Complainant Laura Mae Fatima F. Palit-Ang:

1. Separation pay of P30,000.00;

2. Full backwages from the time of her illegal dismissal on 1
January 2008 until the finality of this decision, which as of
[t]his date amounts to P266,694.63;
3. 13th month pay for 2008 of P18,000.00; and

4. Complainant Tomas C. Adona, Jr.:

1. Separation pay of P75,000.00;

2. Full backwages from time of his illegal dismissal [i]n June
2007 until the finality of this decision, which as of this date
amounts to P609,832.37;
3. 13th month pay for 2008 of P10,416.66.

Complainants are further awarded moral damages of Php100,000.00 each and

exemplary damages of Php100,000.00 each.

Finally, respondents are assessed the sum equivalent to ten percent (10%) of the
total monetary award as and for attorney's fees.
 All other claims are dismissed for lack of merit.

SO ORDERED.23

ProHealth appealed to the National Labor Relations Commission. 24 On September 29, 2010, the
National Labor Relations Commission rendered its Decision,25 affirming the Labor Arbiter's April
5, 2009 Decision with modifications. The dispositive portion of this Decision read:

WHEREFORE, premises considered, the appeal is partially granted. The assailed

Decision is modified in that: a) complainant Adona is declared to have voluntarily
resigned and is entitled only to his 13 th month pay; b) the award of moral and,
exemplary damages in favor of complainants Nepomuceno and Palit-Ang are
deleted; and c) respondents del Castillo and Busto are held jointly and severally
liable with ProHealth for the claims of complainant Malcaba.

All dispositions not affected by the modifications stay.

SO ORDERED.26

ProHealth moved for reconsideration27 but was denied by the National Labor Relations
Commission in its January 31, 2011 Resolution. 28 Thus, ProHealth, Del Castillo, and Busto filed a
Petition for Certiorari29before the Court of Appeals.

On February 19, 2013, the Court of Appeals rendered its Decision 30 reversing and setting aside
the National Labor Relations Commission September 29, 2010 Decision.

On the procedural issues, the Court of Appeals found that ProHealth substantially complied with
the requirement of an appeal bond despite it not appearing in the records of the surety
company since ProHealth believed in good faith that the bond it secured was genuine.31

On the substantive issues, the Court of Appeals held that there was no employer-employee
relationship between Malcaba and ProHealth since he was a corporate officer. Thus, he should
have filed his complaint with the Regional Trial Court, not with the Labor Arbiter, since his
dismissal from service was an intra-corporate dispute.32

The Court of Appeals likewise concluded that ProHealth was justified in dismissing Nepomuceno
and Palit-Ang since both were given opportunities to fully explain their sides. 33 It found that
Nepomuceno's failure to diligently check the true schedule of his flight abroad and his
subsequent lack of effort to inform his superiors were enough for his employer to lose its trust
and confidence in him.34 It likewise found that Palit-Ang displayed "arrogance and hostility"
when she defied the lawful orders of the company's highest ranking officer; thus, her
insubordination was just cause to terminate her services.35

While the Court of Appeals ordered the return of the amounts given to Malcaba, it allowed
Nepomuceno and Palit-Ang to keep the amounts given considering that even if the finding of
illegal dismissal were reversed on appeal, the employer was still obliged to reinstate and pay
the wages of a dismissed employee during the period of appeal. 36 The dispositive portion of the
Court of Appeals February 19, 2013 Decision read:

WHEREFORE, premises considered, it is hereby ruled:

that the September 29, 2010 Decision and January 31, 2011
(a) Resolution of the National Labor Relations Commission are REVERSED
and SET ASIDE for being issued with grave abuse of discretion;
 that Our Decision is without prejudice to Mr. Nicanor F. Malcaba's
(b) available recourse for relief through the appropriate remedy in the
proper forum;

that all the amounts released in favor of Mr. Nicanor F. Malcaba

amounting to Four Million Nine Hundred Thirty[-]Seven Thousand
(c)
Four Hundred Twenty pesos and 40/100 (P4,937,420.[40]) be
RETURNED to herein petitioners;

that NO REFUND will be ordered by this Court against Mr. Christian

(d)
Nepomuceno and Ms. Laura Mae Fatima Palit-Ang.

SO ORDERED.37

Malcaba, Nepomuceno, and Palit-Ang moved for reconsideration but were denied in a
Resolution38 dated September 10, 2013. Hence, this Petition39 was filed before this Court.

Petitioners argue that the Court of Appeals should have dismissed outright the Petition for
Certiorari since respondents failed to post a genuine appeal bond before the National Labor
Relations Commission. They allege that when Sheriff Ramon Nonato P. Dayao attempted to
enforce the judgment award against the appeal bond, he was informed that the appeal bond
procured by respondents did not appear in the records of Alpha Insurance and Surety Company,
Inc. (Alpha Insurance). They also claim that respondents were notified by the National Labor
Relations Commission four (4) times that their appeal bond was not genuine, showing that
respondents did not comply with the requirement in good faith. 40

Petitioners contend that petitioner Malcaba properly filed his Complaint before the Labor Arbiter
since he was an employee of respondent ProHealth, albeit a high-ranking one. They argue that
respondents merely alleged that petitioner Malcaba is a corporate officer but failed to
substantiate this allegation.41They maintain that petitioner Malcaba did not resign on September
24, 2007 considering that the General Information Sheet for 2007 submitted on October 11,
2007 listed him as respondent ProHealth's President. They submit that respondent Del Castillo's
action took a toll on petitioner Malcaba's well-being; hence, the latter merely took a leave of
absence and returned to work in November 2007. They claim that respondents made it difficult
for petitioner Malcaba to continue his work upon his return, resulting in his resignation in
January 2008. Thus, they argue that petitioner Malcaba was constructively dismissed. 42

Petitioners likewise argue that petitioners Nepomuceno and Palit-Ang were illegally dismissed.
They claim that petitioner Nepomuceno committed an "honest and negligible mistake" 43 that
should not have warranted dismissal considering his loyal service for nine (9) years. They
contend that petitioner Nepomuceno's absence did not injure respondent ProHealth's business
since he turned over all pending work to a reliever before he left and even surpassed his sales
quota for the month.44 They likewise claim that his dismissal was done in violation of his right to
due process since he was not given any opportunity to explain his side and was only given a
notice of termination two (2) days after he was actually dismissed.45

Petitioners maintain that petitioner Palit-Ang believed in good faith that Gamboa would just
claim his cash advance the day after he tried to claim it and that there was nothing in her
actions that would prove that she intended to disobey or defy respondent Del Castillo's
instructions. They insist that delay in complying with orders is not tantamount to disobedience
and would not constitute just cause for petitioner Palit-Ang's dismissal. They likewise submit
that while petitioner Palit-Ang was subjected to a fact-finding investigation, respondents failed
to inform her of her right to be assisted by counsel.46

Respondents, on the other hand, counter that a liberal application of the procedural rules was
necessary in their case since they acted in good faith in posting their appeal bond. 47 They
likewise contend that the issue should have already been considered moot since petitioners
"were able to garnish and collect the amounts allegedly due to them."48

Respondents likewise insist that petitioner Malcaba was a corporate officer considering that he
was not only an incorporator and stockholder, but also an elected Director and President of
respondent ProHealth.49 They also point out that he filed his labor complaint seven (7) months
after his resignation and that his voluntary resignation already disproves his claim of
constructive dismissal.50

Respondents argue that they were justified in dismissing petitioners Nepomuceno and Palit-Ang.
They contend that petitioner Nepomuceno's abandonment of his duties at a critical sales period
and his failure to immediately advise his superiors of his whereabouts was ground for
respondents to lose their trust and confidence in him. 51 They likewise maintain that petitioner
Palit-Ang was correctly found by the Court of Appeals to have defied the lawful instructions of
respondent Del Castillo and illustrated her "grave disrespect towards authority." 52

From the arguments and allegations of the parties, it is clear that this case involves three (3)
different illegal dismissal complaints, with three (3) different complainants in three (3) different
factual situations during three (3) different time periods. The only commonality is that they
involve the same respondents.

While this Court commends the economy by which the National Labor Relations Commission
resolved these cases, the three (3) complaints should have been resolved separately since the
three (3) petitioners raise vastly different substantive issues. This leaves this Court with the
predicament of having to resolve three (3) different cases of illegal dismissal in one (1) Petition
for Review. Thus, each petitioner's case will have to be resolved separately within this Decision.
This Court's ruling over one (1) petitioner may not necessarily affect the other co-petitioners.
The National Labor Relations Commission's zeal for economy and convenience should never
prejudice the individual rights of each party. The National Labor Relations Commission should
know the rule that joinder of parties 53 or causes of action54 applies suppletorily in appeals 55 and
for good reason.56

Petitioners raise the common procedural issue of whether or not respondents failed to perfect
their appeal when it was discovered that their appeal bond was a forged bond, which this Court
will address before proceeding with the substantive issues. The substantive issues raised,
however, are dependent on the factual circumstances applicable to each petitioner. This Court
tackles these substantive issues in order:

First, whether or not the Labor Arbiter and National Labor Relations Commission had jurisdiction
over petitioner Nicanor F. Malcaba's termination dispute considering the allegation that he was a
corporate officer, and not a mere employee;

Second, whether or not petitioner Christian C. Nepomuceno was validly dismissed for willful
breach of trust when he failed to inform respondents ProHealth Pharma Philippines, Inc.,
Generoso R. Del Castillo, Jr., and Dante M. Busto of the actual dates of his vacation leave; and

Finally, whether or not petitioner Laura Mae Fatima F. Palit-Ang was validly dismissed for willful
disobedience when she failed to immediately comply with an order of her superior.

I
Appeal is not a matter of right.57 Courts and tribunals have the discretion whether to give due
course to an appeal or to dismiss it outright. The perfection of an appeal is, thus, jurisdictional.
Non-compliance with the manner in which to file an appeal renders the judgment final and
executory.58

In labor cases, an appeal by an employer is perfected only by filing a bond equivalent to the
monetary award. Thus, Article 229 [223]59 of the Labor Code provides:

Article 229. [223] Appeal.

...

In case of a judgment involving a monetary award, an appeal by the employer

may be perfected only upon the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the Commission in the amount
equivalent to the monetary award in the judgment appealed from.

This requirement is again repeated m the 2011 National Labor Relations Commission Rules of
Procedure:

Section 4. Requisites for Perfection of Appeal. — (a) The appeal shall be:
....
(5) accompanied by:
....
(ii) posting of a cash or surety bond as provided in Section 6 of this Rule[.]

....

Section 6. Bond. — In case the decision of the Labor Arbiter or the Regional
Director involves a monetary award, an appeal by the employer may be perfected
only upon the posting of a bond, which shall either be in the form of cash deposit
or surety bond equivalent in the amount to the monetary award, exclusive of
damages and attorney's fees.

In case of surety bond, the same shall be issued by a reputable bonding company
duly accredited by the Commission and shall be accompanied by original or
certified true copies of the following:

(a) a joint declaration under oath by the employer, his/her counsel,

and the bonding company, attesting that the bond posted is
genuine, and shall be in effect until final disposition of the case;

(b) an indemnity agreement between the employer appellant and

bonding company;

(c) proof of security deposit or collateral securing the bond:

provided, that a check shall not be considered as an acceptable
security; and,

(d) notarized board resolution or secretary's certificate from the

bonding company showing its authorized signatories and their
specimen signatures.

The Commission through the Chairman may on justifiable grounds blacklist an

accredited bonding company.
 A cash or surety bond shall be valid and effective from the date of deposit or
posting, until the case is finally decided, resolved or terminated, or the award
satisfied. This condition shall be deemed incorporated in the terms and conditions
of the surety bond, and shall be binding on the appellants and the bonding
company.

The appellant shall furnish the appellee with a certified true copy of the said
surety bond with all the above-mentioned supporting documents. The appellee
shall verify the regularity and genuineness thereof and immediately report any
irregularity to the Commission.

Upon verification by the Commission that the bond is irregular or not genuine, the
Commission shall cause the immediate dismissal of the appeal, and censure the
responsible parties and their counsels, or subject them to reasonable fine or
penalty, and the bonding company may be blacklisted.

No motion to reduce bond shall be entertained except on meritorious grounds,

and only upon the posting of a bond in a reasonable amount in relation to the
monetary award.

The mere filing of a motion to reduce bond without complying with the requisites
in the preceding paragraphs shall not stop the running of the period to perfect an
appeal.60

The purpose of requiring an appeal bond is "to guarantee the payment of valid and legal claims
against the employer."61 It is a measure of financial security granted to an illegally dismissed
employee since the resolution of the employer's appeal may take an indeterminable amount of
time. In particular:

The requirement that the employer post a cash or surety bond to perfect its/his
appeal is apparently intended to assure the workers that if they prevail in the
case, they will receive the money judgment in their favor upon the dismissal of
the employer's appeal. It was intended to discourage employers from using an
appeal to delay, or even evade, their obligation to satisfy their employees' just
and lawful claims.62

Procedural rules require that the appeal bond filed be "genuine." An appeal bond determined by
the National Labor Relations Commission to be "irregular or not genuine" shall cause the
immediate dismissal of the appeal.63

In this case, petitioners allege that respondents' appeal should not have been given due course
by the National Labor Relations Commission since the appeal bond they filed "[did] not appear
in the records of [Alpha Insurance]" 64 and was, therefore, not genuine. As evidence, they
presented a certification from Alpha Insurance, which read:

This is to certify that the bond being presented by MR. JOSEPH D. DE JESUS is
allegedly a Surety Bond filed with the NATIONAL LABOR RELATIONS
COMMISSION, identified as Bond No. G(16)00358/2009 on an alleged case NLRC
NCR Case No. 08-12090-08, is a faked and forged bond, and it was not issued by
ALPHA INSURANCE & SURETY COMPANY, INC.65

This Court in Navarro v. National Labor Relations Commission 66 found that an employer failed to
perfect its appeal as it submitted an appeal bond that was "bogus[,] having been issued by an
officer no longer connected for a long time with the bonding company." 67 The mere
fictitiousness of the bond, however, was not the only factor taken into consideration. This Court
likewise took note of the employer's failure to sufficiently explain this irregularity and its failure
to file the bond within the reglementary period.

In Quiambao v. National Labor Relations Commission,68 this Court held that the mandatory and
jurisdictional requirement of the filing of an appeal bond could be relaxed if there was
substantial compliance. Quiambao proceeded to outline situations that could be considered as
substantial compliance, such as late payment, failure of the Labor Arbiter to state the exact
amount of money judgment due, and reliance on a notice of judgment that failed to state that a
bond must first be filed in order to appeal. 69Rosewood Processing v. National Labor Relations
Commission70 likewise enumerated other instances where there would be a liberal application of
the procedural rules:

Some of these cases include: (a) counsel's reliance on the footnote of the notice
of the decision of the labor arbiter that the aggrieved party may appeal . . .
within ten (10) working days; (b) fundamental consideration of substantial
justice; (c) prevention of miscarriage of justice or of unjust enrichment, as where
the tardy appeal is from a decision granting separation pay which was already
granted in an earlier final decision; and (d) special circumstances of the case
combined with its legal merits or the amount and the issue involved.71

Thus, while the procedural rules strictly require the employer to submit a genuine bond, an
appeal could still be perfected if there was substantial compliance with the requirement.

In this instance, the National Labor Relations Commission certified that respondents filed a
security deposit in the amount of P6,512,524.84 under Security Bank check no.
0000045245,72 showing that the premium for the appeal bond was duly paid and that there was
willingness to post it.73 Respondents likewise attached documents proving that Alpha Insurance
was a legitimate and accredited bonding company.74

Despite their failure to collect on the appeal bond, petitioners do not deny that they were
eventually able to garnish the amount from respondents' bank deposits. 75 This fulfills the
purpose of the bond, that is, "to guarantee the payment of valid and legal claims against the
employer[.]"76 Respondents are considered to have substantially complied with the
requirements on the posting of an appeal bond.

II

Under the Labor Code, the Labor Arbiter exercises original and exclusive jurisdiction over
termination disputes between an employer and an employee while the National Labor Relations
Commission exercises exclusive appellate jurisdiction over these cases:

Article 224. 217 Jurisdiction of the Labor Arbiters and the Commission. — (a)
Except as otherwise provided under this Code, the Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide, within thirty (30) calendar
days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:
...

(2) Termination disputes;

...

(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.77
The presumption under this provision is that the parties have an employer-employee
relationship. Otherwise, the case would be cognizable in different tribunals even if the action
involves a termination dispute.

Petitioner Malcaba alleges that the Court of Appeals erred m dismissing his complaint for lack of
jurisdiction, insisting that he was an employee of respondent, not a corporate officer.

At the time of his alleged dismissal, petitioner Malcaba was the President of respondent
corporation. Strangely, this same petitioner disputes this position as respondents' bare
assertion,78 yet he also insists that his name appears as President in the corporation's General
Information Sheet for 2007.79

Under Section 25 of the Corporation Code, 80 the President of a corporation is considered a

corporate officer. The dismissal of a corporate officer is considered an intra-corporate dispute,
not a labor dispute. Thus, in Tabang v. National Labor Relations Commission:81

A corporate officer's dismissal is always a corporate act, or an intra-corporate

controversy, and the nature is not altered by the reason or wisdom with which
the Board of Directors may have in taking such action. Also, an intra-corporate
controversy is one which arises between a stockholder and. the corporation.
There is no distinction, qualification, nor any exemption whatsoever. The
provision is broad and covers all kinds of controversies between stockholders and
corporations.82

Further, in Matling Industrial and Commercial Corporation v. Coros,83 this Court stated that
jurisdiction over intra-corporate disputes involving the illegal dismissal of corporate officers was
with the Regional Trial Court, not with the Labor Arbiter:

Where the complaint for illegal dismissal concerns a corporate officer, however,
the controversy falls under the jurisdiction of the Securities and Exchange
Commission (SEC), because the controversy arises out of intra-corporate or
partnership relations between and among stockholders, members, or associates,
or between any or all of them and the corporation, partnership, or association of
which they are stockholders, members, or associates, respectively; and between
such corporation, partnership, or association and the State insofar as the
controversy concerns their individual franchise or right to exist as such entity; or
because the controversy involves the election or appointment of a director,
trustee, officer, or manager of such corporation, partnership, or association. Such
controversy, among others, is known as an intra-corporate dispute.

Effective on August 8, 2000, upon the passage of Republic Act No. 8799,
otherwise known as The Securities Regulation Code, the SEC's jurisdiction over all
intra-corporate disputes was transferred to the RTC, pursuant to Section 5.2 of
RA No. 8799, to wit:

5.2. The Commission's jurisdiction over all cases enumerated under

Section 5 of Presidential Decree No. 902-A is hereby transferred to
the Courts of general jurisdiction or the appropriate Regional Trial
Court: Provided, that the Supreme Court in the exercise of its
authority may designate the Regional Trial Court branches that
shall exercise jurisdiction over these cases. The Commission shall
retain jurisdiction over pending cases involving intra-corporate
disputes submitted for final resolution which should be resolved
within one (1) year from the enactment of this Code. The
Commission shall retain jurisdiction over pending suspension of
 payments/rehabilitation cases filed as of 30 June 2000 until finally
disposed.84

The mere designation as a high-ranking employee, however, is not enough to consider one as a
corporate officer. In Tabang, this Court discussed the distinction between an employee and a
corporate officer, regardless of designation:

The president, vice-president, secretary and treasurer are commonly regarded as

the principal or executive officers of a corporation, and modern corporation
statutes usually designate them as the officers of the corporation. However, other
offices are sometimes created by the charter or by-laws of a corporation, or the
board of directors may be empowered under the by-laws of a corporation to
create additional offices as may be necessary.

It has been held that an "office" is created by the charter of the corporation and
the officer is elected by the directors or stockholders. On the other hand, an
"employee" usually occupies no office and generally is employed not by action of
the directors or stockholders but by the managing officer of the corporation who
also determines the compensation to be paid to such employee.85

The clear weight of jurisprudence clarifies that to be considered a corporate officer, first, the
office must be created by the charter of the corporation, and second, the officer must be
elected by the board of directors or by the stockholders.

Petitioner Malcaba was an incorporator of the corporation and a member of the Board of
Directors.86Respondent corporation's By-Laws creates the office of the President. That
foundational document also states that the President is elected by the Board of Directors:

ARTICLE IV
OFFICER

Section 1. Election/Appointment — Immediately after their election, the Board of

Directors shall formally organize by electing the President, the Vice President, the
Treasurer, and the Secretary at said meeting.87

This case is similar to Locsin v. Nissan Lease Philippines:88

Locsin was undeniably Chairman and President, and was elected to these
positions by the Nissan board pursuant to its By-laws. As such, he was a
corporate officer, not an employee. The CA reached this conclusion by relying on
the submitted facts and on Presidential Decree 902-A, which defines corporate
officers as "those officers of a corporation who are given that character either by
the Corporation Code or by the corporation's by-laws." Likewise, Section 25 of
Batas Pambansa Blg. 69, or the Corporation Code of the Philippines (Corporation
Code) provides that corporate officers are the president,
secretary, treasurer and such other officers as may be provided for in the
by-laws.89 (Emphasis in the original)

Petitioners cite Prudential Bank and Trust Company v. Reyes 90 as basis that even high-ranking
officers may be considered regular employees, not corporate officers. 91Prudential Bank,
however, is not applicable to this case.

In Prudential Bank, an employer was considered estopped from raising the argument of an
intra-corporate dispute since this was only raised when the case was filed with this Court. This
Court also noted that an employee rose from the ranks and was regularly performing tasks
integral to the business of the employer throughout the length of her tenure, thus:

It appears that private respondent was appointed Accounting Clerk by the Bank
on July 14, 1963. From that position she rose to become supervisor. Then in
1982, she was appointed Assistant Vice-President which she occupied until her
illegal dismissal on July 19, 1991. The bank's contention that she merely holds an
elective position and that in effect she is not a regular employee is belied by the
nature of her work and her length of service with the Bank. As earlier stated, she
rose from the ranks and has been employed with the Bank since 1963 until the
termination of her employment in 1991. As Assistant Vice President of the foreign
department of the Bank, she is tasked, among others, to collect checks drawn
against overseas banks payable in foreign currency and to ensure the collection of
foreign bills or checks purchased, including the signing of transmittal letters
covering the same. It has been stated that "the primary standard of determining
regular employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual trade or business of the
employer.["] Additionally, "an employee is regular because of the nature of work
and the length of service, not because of the mode or even the reason for hiring
them." As Assistant Vice-President of the Foreign Department of the Bank she
performs tasks integral to the operations of the bank and her length of service
with the bank totaling 28 years speaks volumes of her status as a regular
employee of the bank. In fine, as a regular employee, she is entitled to security
of tenure; that is, her services may be terminated only for a just or authorized
cause. This being in truth a case of illegal dismissal, it is no wonder then that the
Bank endeavored to the very end to establish loss of trust and confidence and
serious misconduct on the part of private respondent but, as will be discussed
later, to no avail.92

An "Assistant Vice President" is not among the officers stated in Section 25 of the Corporation
Code.93 A corporation's President, however, is explicitly stated as a corporate officer.

Finding that petitioner Malcaba is the President of respondent corporation and a corporate
officer, any issue on his alleged dismissal is beyond the jurisdiction of the Labor Arbiter or the
National Labor Relations Commission. Their adjudication on his money claims is void for lack of
jurisdiction. As a matter of equity, petitioner Malcaba must, therefore, return all amounts
received as judgment award pending final adjudication of his claims. This Court's dismissal of
petitioner Malcaba's claims, however, is without prejudice to his filing of the appropriate case in
the proper forum.

III

Article 294 [279] of the Labor Code provides that an employer may terminate the services of an
employee only upon just or authorized causes. 94 Article 297 [282] enumerates the just causes
for termination, among which is "[f]raud or willful breach by the employee of the trust reposed
in him by his employer or duly authorized representative[.]"

Loss of trust and confidence is a just cause to terminate either managerial employees or rank-
and-file employees who regularly handle large amounts of money or property in the regular
exercise of their functions.95

For an act to be considered a loss of trust and confidence, it must be first, work-related,
and second, founded on clearly established facts:

The complained act must be work related such as would show the employee
concerned to be unfit to continue working for the employer and it must be based
 on a willful breach of trust and founded on clearly established facts. The basis for
the dismissal must be clearly and convincingly established but proof beyond
reasonable doubt is not necessary.96

The breach of trust must likewise be willful, that is, "it is done intentionally, knowingly and
purposely, without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently."97

Petitioner Nepomuceno alleges that he was illegally dismissed merely for his failure to inform
his superiors of the actual dates of his vacation leave. Respondents, however, contend that as
District Business Manager, petitioner Nepomuceno lost the corporation's trust and confidence by
failing to report for work during a crucial sales period.

As found by the National Labor Relations Commission, petitioner Nepomuceno had filed for
leave, which was approved, for April 24, 25, and 28, 2008 to go on vacation in Malaysia.
However, he left for Malaysia on the evening of April 22, 2008, and thus, failed to report for
work on April 23, 2008.

Petitioner Nepomuceno claims that he only knew that his flight was for the evening of April 22,
2008 on the day of his flight. Respondents, however, insist that he "deliberately concealed the
actual date of departure as he knows that he would be out of the country on a crucial period of
sales generation and bookings . . . [and] therefore knew that his application for leave would be
denied."98 Otherwise stated, respondents contend that his dismissal was a valid exercise of their
management prerogative to discipline and dismiss managerial employees unworthy of their
trust and confidence.

The concept of a management prerogative was already passed upon by this Court in San Miguel
Brewery Sales Force Union v. Ople:99

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

according to his own discretion and judgment, all aspects of
employment, including hiring, work assignments, working methods,
time, place and manner of work, tools to be used, processes to be
followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of work. . . .

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

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

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

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

the advancement of the employer's interest and not for the purpose of defeating
or circumventing the rights of the employees under special laws or under valid
agreements, this Court will uphold them.100

While an employer is free to regulate all aspects of employment, the exercise of management
prerogatives must be in good faith and must not defeat or circumvent the rights of its
employees.
In industries that mainly rely on sales, employers are free to discipline errant employees who
deliberately fail to report for work during a crucial sales period. It would have been reasonable
for respondents to discipline petitioner Nepomuceno had he been a problematic employee who
unceremoniously refused to do his work.

However, as found by the Labor Arbiter and the National Labor Relations Commission, petitioner
Nepomuceno turned over all of his pending work to a reliever before he left for Malaysia. He
was able to reach his sales quota and surpass his sales target even before taking his vacation
leave. Respondents did not suffer any financial damage as a result of his absence. This was also
petitioner Nepomuceno's first infraction in his nine (9) years of service with
respondents.101 None of these circumstances constitutes a willful breach of trust on his part. The
penalty of dismissal, thus, was too severe for this kind of infraction.

The manner of petitioner Nepomuceno's dismissal was likewise suspicious. In all cases of
employment termination, the employee must be granted due process. The manner by which
this is accomplished is stated in Book V, Rule XXIII, Section 2 of the Rules Implementing the
Labor Code:

Section 2. Standard of due process: requirements of notice.

— In all cases of termination of employment, the following standards of due

process shall be substantially observed.

I. For termination of employment based on just causes as defined in Article 282

of the Code:

(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to
explain his side;

(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to respond
to the charge, present his evidence or rebut the evidence presented against him;
and

(c) A written notice of termination served on the employee indicating that upon
due consideration of all the circumstance, grounds have been established to
justify his termination.

Here, petitioner Nepomuceno received a memorandum on April 23, 2008, asking him to explain
why no administrative investigation should be held against him. He submitted an explanation on
the same day and another explanation on May 2, 2008. On May 7, 2008, he was given his
notice of termination, which had already taken effect two (2) days earlier, or on May 5, 2008. 102

It is true that "[t]he essence of due process is simply an opportunity to be heard." 103 Petitioner
Nepomuceno had two (2) opportunities within which to explain his actions. This would have
been sufficient to satisfy the requirement. The delay in handing him his notice of termination,
however, appears to have been an afterthought. While strictly not a violation of procedural due
process, respondents should have been more circumspect in complying with the due process
requirements under the law.

Considering that petitioner Nepomuceno's dismissal was done without just cause, he is entitled
to reinstatement and full backwages.104 If reinstatement is not possible due to strained relations
between the parties, he shall be awarded separation pay at the rate of one (1) month for every
year of service. 105
 IV

Under Article 297 [282] of the Labor Code, an employer may terminate the services of an
employee who commits willful disobedience of the lawful orders of the employer:

Article 297. [282] Termination by Employer. — An employer may terminate an

employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful

orders of his employer or representative in connection with his work[.]

For disobedience to be considered as just cause for termination, two (2) requisites must
concur: first, "the employee's assailed conduct must have been wilful or intentional,"
and second, "the order violated must have been reasonable, lawful, made known to the
employee and must pertain to the duties which he [or she] had been engaged to
discharge."106 For disobedience to be willful, it must be "characterized by a wrongful and
perverse mental attitude rendering the employee's act inconsistent with proper
subordination."107

The conduct complained of must also constitute "harmful behavior against the business interest
or person of his [or her] employer." 108 Thus, it is implied in every case of willful disobedience
that "the erring employee obtains undue advantage detrimental to the business interest of the
employer."109

Petitioner Palit-Ang, as Finance Officer, was instructed by respondent Del Castillo to give a cash
advance of P3,000.00 to District Branch Manager Gamboa on November 26, 2007. This order
was reasonable, lawful, made known to petitioner Palit-Ang, and pertains to her duties. 110 What
is left to be determined, therefore, is whether petitioner Palit-Ang intentionally and willfully
violated it as to amount to insubordination.

When Gamboa went to collect the money from petitioner Palit-Ang, he was told to return the
next day as she was still busy. When petitioner Palit-Ang found out that the money was to be
used for a car tune-up, she suggested to Gamboa to just get the money from his mobilization
fund and that she just would reimburse it after. 111 The Court of Appeals found that these
circumstances characterized petitioner Palit-Ang's "arrogance and hostility," 112 in failing to
comply with respondent Del Castillo's order, and thus, warranted her dismissal.

On the contrary, there was no ill will between Gamboa and petitioner Palit-Ang. Petitioner Palit-
Ang's failure to immediately give the money to Gamboa was not the result of a perverse mental
attitude but was merely because she was busy at the time. Neither did she profit from her
failure to immediately give the cash advance for the car tune-up nor did respondents suffer
financial damage by her failure to comply. The severe penalty of dismissal was not
commensurate to her infraction. In Dongon v. Rapid Movers and Forwarders:113

To us, dismissal should only be a last resort, a penalty to be meted only after all
the relevant circumstances have been appreciated and evaluated with the goal of
ensuring that the ground for dismissal was not only serious but true. The cause of
termination, to be lawful, must be a serious and grave malfeasance to justify the
deprivation of a means of livelihood. This requirement is in keeping with the spirit
of our Constitution and laws to lean over backwards in favor of the working class,
and with the mandate that every doubt must be resolved in their favor.

Although we recognize the inherent right of the employer to discipline its

employees, we should still ensure that the employer exercises the prerogative to
discipline humanely and considerately, and that the sanction imposed is
 commensurate to the offense involved and to the degree of the infraction. The
discipline exacted by the employer should further consider the employee's length
of service and the number of infractions during his employment. The employer
should never forget that always at stake in disciplining its employee are not only
his position but also his livelihood, and that he may also have a family entirely
dependent on his earnings.114

Petitioner Palit-Ang likewise assails the failure of respondents to inform her of her right to
counsel when she was being investigated for her infraction. As previously discussed, "[t]he
essence of due process is simply an opportunity to be heard," 115 not that the employee must be
accompanied by counsel at all times. A hearing was conducted and she was furnished a notice
of termination explaining the grounds for her dismissa1.116 She was not denied due process.

Petitioner Palit-Ang, nonetheless, is considered to have been illegally dismissed, her penalty not
having been proportionate to the infraction committed. Thus, she is entitled to reinstatement
and full backwages.117 If reinstatement is not possible due to strained relations between the
parties, she shall be awarded separation pay at the rate of one (1) month for every year of
service.118

WHEREFORE, the Petition is PARTIALLY GRANTED. Petitioner Christian C. Nepomuceno and

petitioner Laura Mae Fatima F. Palit-Ang are DECLARED to have been illegally dismissed. They
are, therefore, entitled to reinstatement without loss of seniority rights, or in lieu thereof,
separation pay; and the payment of backwages from the filing of their Complaints until finality
of this Decision.

The Court of Appeals February 19, 2013 Decision and September 10, 2013 Resolution in CA-
G.R. SP No. 119093, finding that the National Labor Relations Commission had no jurisdiction to
adjudicate petitioner Nicanor F. Malcaba's claims is SUSTAINED. Petitioner Malcaba is further
ordered to RETURN the amount of P4,937,420.40 to respondents for having been erroneously
awarded. This shall be without prejudice to the filing of petitioner Malcaba's claims in the proper
forum.

This case is hereby REMANDED to the Labor Arbiter for the proper computation of petitioners
Christian C. Nepomuceno's and Laura Mae Fatima F. Palit-Ang's money claims.

SO ORDERED.
 THIRD DIVISION

G.R. No. 196650, June 07, 2017

SPECTRUM SECURITY SERVICES, INC., Petitioner, v. DAVID GRAVE, ARIEL V. AROA,

TOMASINO R. DE CHAVEZ, JR., LUCITO P. SAMARITA, SAIDOMAR M. MAROHOM, LITO
V. MAHILOM AND OLIVER N. MARTIN, Respondents.

DECISION

BERSAMIN, J.:

A security guard placed on reserved or off-detail status is deemed constructively dismissed only
if the status should last more than six months. Any claim of constructive dismissal must be
established by clear and positive evidence.

The Case

The petitioner seeks the reversal of the decision promulgated March 1, 2011,1 whereby the
Court of Appeals (CA) dismissed its petition for certiorari and affirmed the decision of the
National Labor Relations Commission (NLRC) dated March 16, 2010 finding it liable for the
illegal dismissal of respondent security guards.2

Antecedents

The petitioner – a domestic corporation engaged in the business of providing security services –
employed and posted the respondents at the premises of Ibiden Philippines, Inc. (Ibiden)
located in the First Philippine Industrial Park in Sto. Tomas, Batangas. The controversy started
when the petitioner implemented an action plan as part of its operational and manpower
supervision enhancement program geared towards the gradual replacement of security guards
at Ibiden.3 Pursuant to the action plan, it issued separate "Notice(s) to Return to Unit" to the
respondents in July and August 2008 directing them to report to its head office and to update
their documents for re-assignment.4

On August 14, 2008, the respondents filed their complaint against the petitioner for
constructive dismissal in Regional Arbitration Branch No. IV of the NLRC, claiming that the
implementation of the action plan was a retaliatory measure against them for bringing several
complaints5 along with other employees of the petitioner to recover unpaid holiday pay and 13th
month pay.6 The complaints were consolidated, and a decision was later on rendered ordering
the petitioner to pay to the respondents and their co-employees their unpaid entitlements
corresponding to the period from October 16, 2007 to June 30, 2008.7

Decision of the Labor Arbiter

On May 22, 2009, Labor Arbiter Enrico Angelo C. Portillo dismissed the complaint for
constructive dismissal upon finding that "there is no evidence adduced by complainants in the
form of a termination letter and the like to substantiate their claim that they were indeed
unceremoniously terminated by [petitioner] Spectrum." 8 He declared that the return to work
notices issued by the petitioner belied the respondents' charge of illegal dismissal, opining that
a security guard could be considered as having been constructively dismissed only when he had
been placed on floating status for a period of more than six months.9

Ruling of the NLRC

Aggrieved, the respondents appealed to the NLRC.

On March 16, 2010, the NLRC reversed the Labor Arbiter's dismissal, and ordered the petitioner
to reinstate the respondents with backwages. It noted that had the petitioner really intended to
re-assign the respondents to new posts, the petitioner should have indicated in the notices the
new postings or re-assignments, to wit:

It is too much coincidence that the complainants were relieved from their posts at
Ibiden Phils., Inc. just sixteen days after the six of them filed a complaint for
recovery of certain money claims against the respondents, and eight days after
three of them filed a similar complaint against the respondents.

Moreover, if, as contended by the respondents, their intention in relieving the

complainants from their posts was simply to implement a "long standing policy of
re-assignment/rotation", their "Action Plan", which has the appearance of having
been carefully laid out, should have provided for new assignments for the
complainants. The fact [is] that it does not indicate that the respondents never
intended to give the complainants new assignments. It is also too much of a
coincidence that the only security guards who were affected by the respondents'
"Action Plan" were the complainants.

Ordinarily, where the security guards are relieved from their posts, they are given
notices informing them of their new assignments, or requiring them to explain
certain charges against them. A notice directing a security guard who had just
been relieved from his post to simply report to the office of the security agency is
a badge of bad faith because it usually means that the security agency has no
intention of giving him a new assignment Otherwise stated, the security agency
has the burden of proving that the security guard who was relieved from his post
for other than disciplinary reasons was actually given a new assignment Failing in
this, it could only be concluded that there was an unjustified dismissal.

WHEREFORE, the decision appealed from is hereby REVERSED. The respondent

Spectrum Security Services, Inc. is hereby ordered to REINSTATE the
complainants, and to pay them FULL BACKWAGES from the dates they were
relieved from their last posts up to the dates of their actual reinstatement. In
addition, the said respondent is ordered to pay them ten (10%) percent of the
total monetary award as attorney's fees.

For lack of employer-employee relationship, Ibiden Philippines, Inc. is hereby

dropped as party-respondent herein.

SO ORDERED.10

The NLRC denied the motion for reconsideration of the petitioner on May 17, 2010.

Decision of the CA
The petitioner assailed the adverse ruling of the NLRC in the CA on certiorari, contending that
the NLRC gravely abused its discretion amounting to lack or excess of its jurisdiction in
arbitrarily ruling that the respondents had been illegally dismissed by the petitioner.

On March 1, 2011, the CA promulgated its assailed decision upholding the NLRC, viz.:

WHEREFORE, upon the foregoing, the petition is DISMISSED. The assailed

Decision dated 17 May 2010 of the NLRC is hereby AFFIRMED.

SO ORDERED.11

The CA concluded that although the complaint for illegal dismissal was prematurely filed
because six months had not yet elapsed to warrant considering the dismissal as constructive
dismissal, the continued failure to give the respondents new assignments during the
proceedings before the Labor Arbiter that exceeded the reasonable six-month period rendered
the petitioner liable for constructive dismissal of the respondents; that the petitioner's
insistence that the respondents had abandoned their employment was bereft of basis; and that
abandonment as a just ground for dismissal required clear, willful, deliberate and unjustified
refusal on the part of the employees to resume their employment; hence, their mere absence
from work or failure to report for work even after the notice to return was not tantamount to
abandonment.

Issue

The petitioner submits that the CA erred in finding that the petitioner was guilty of illegally
dismissing the respondents despite the fact that the totality of the circumstances negated such
finding.

Ruling of the Court

The appeal has merit.

The NLRC and the CA concluded that there was illegal or constructive dismissal in this case as
the private respondents were not given new assignments immediately after being placed on
reserved status; that the lack of any indication from the "Notices to Return to Unit" of their re-
assignments was a badge of bad faith; and that the timing was off because the action plan was
implemented by the petitioner after the respondents had filed the complaints for their monetary
claims against the petitioner and received a favorable decision thereon.

The CA also pointed out that the petitioner's failure to provide the re-assignments or new posts
for the respondents during the proceedings exceeded the reasonable six-month period of being
on reserved status; hence, their off-detail became permanent.

We cannot uphold the CA.

Security guards, like other employees in the private sector, are entitled to security of tenure.
However, their situation should be differentiated from that of other employees or workers. The
employment of security guards generally depends on their employers' contracts with clients who
are third parties to the employment relationship, and the requirements of the latter for security
services and what will be beneficial to them dictate the posting of the security guards. It is also
relevant to mention that their employers retain the management prerogative to change their
assignments and postings, and to decide to temporarily relieve them of their assignments. In
other words, their security of tenure, though it shields them from demotions in rank or
diminutions of salaries, benefits and other privileges, does not vest them with the right to their
positions or assignments that will prevent their transfers or re-assignments (unless the
transfers or re-assignments are motivated by discrimination or bad faith, or effected as a form
of punishment or demotion without sufficient cause). Such peculiar conditions of their
employment render inevitable that some of them just have to undergo periods of reserved or
off-detail status that should not by any means equate to their dismissal. Only when the period
of their reserved or off-detail status exceeds the reasonable period of six months without re-
assignment should the affected security guards be regarded as dismissed.12

Indeed, there should be no indefinite lay-offs. After the period of six months, the employers
should either recall the affected security guards to work or consider them permanently
retrenched pursuant to the requirements of the law; otherwise, the employers would be held to
have dismissed them, and would be liable for such dismissals.13

On December 18, 2001, the Department of Labor and Employment (DOLE), through Secretary
Patricia A. Sto. Tomas, adopted and promulgated DOLE Department Order No. 014-
01 (Guidelines Governing the Employment and Working Conditions of Security Guards and
Similar Personnel in the Private Security Industry) precisely to address the peculiarities of the
situation of the security guards. Under DOLE Department Order No. 014-01, the tenure of
security guards in their employment is ensured by guaranteeing that their services are to be
terminated only for just or authorized causes expressly recognized by the Labor Code after due
process.

Of specific relevance is that Subsection 9.3 of DOLE Department Order No. 014-01 constitutes
guidelines to be followed when the security guards are placed on reserved status, to wit:

9.3 Reserved Status — A security guard or similar personnel may be placed in a

workpool or on reserved status due to lack of service assignments after expiration
or termination of the service contract with the principal where he/she is assigned,
or due to the temporary suspension of agency operations.

No security guard or personnel can be placed in a workpool or on reserved status

in any of the following situations: a) after expiration of a service contract if there
are other principals where he/she can be assigned; b) as a measure to
constructively dismiss the security guard; and c) as an act of retaliation for filing
complaints against the employer on violations of labor laws, among others.

If, after a period of 6 months, the security agency/employer cannot provide work
or give an assignment to the reserved security guard, the latter can be dismissed
from service and shall be entitled to separation pay as prescribed in subsection
5.6.

Security guards on reserved status who accept employment in other security

agencies or employers before the end of the above six-month period may not be
given separation pay.14

The respondents insist that they were constructively dismissed when they were relieved from
their posts at Ibiden. However, the Labor Arbiter found that such insistence was unsupported by
any factual foundation because there was no evidence showing that they had been dismissed.
The finding of the Labor Arbiter is correct. The notices sent to them contained nothing from
which to justly infer their having been terminated from their employment. Moreover, their
complaint for illegal dismissal was even prematurely filed on August 14, 2008 because the
notices15 were sent to each of them only in the period from July 3, 2008 to August 2, 2008.

Nor was the CA justified to simply dismiss the right of the petitioner to implement the action
plan and thereby effect the rotation and replacement of the respondents as their security
guards posted at Ibiden. We have already recognized the management prerogative of the
petitioner as their employer to change their postings and assignments without severing their
employment relationship.16 Although the CA might have regarded the implementation of the
action plan as dubious because the petitioner had relieved the respondents from their posts at
Ibiden just 16 days after they had brought their complaint for the recovery of certain money
claims from the former, thereby imputing bad faith to the petitioner would be bereft of factual
or legal basis considering the failure of the respondents to sufficiently establish the fact of their
dismissal from their employment. In illegal dismissal cases, the general rule is that the
employer has the burden of proving that the dismissal was legal. To discharge this burden, the
employee must first prove, by substantial evidence, that he had been dismissed from
employment.17 In this case, We find otherwise. Respondents failed to properly establish that
they were dismissed by the petitioner. Aside from the respondents' plain allegation that they
were illegally dismissed by the petitioner, no other evidence was presented by the respondents
to support their contentions.

We can only uphold the Labor Arbiter's conclusion that the respondents had actually abandoned
their employment and had severed their employment relationship with the petitioner
themselves. Despite having been notified of the need for them to appear before the petitioner's
head office to update their documents for purposes of reposting, the respondents, except Lucito
P. Samarita18 and Saidomar M. Marohom,19 refused to receive the notices, and did not sign the
same,20 without first knowing the contents of the memo.

The petitioner sufficiently established, too, that it did not ignore the respondents, contrary to
their claims. As the records bear out, one of the respondents reported to the head office but
only to claim his salary and to avail himself of a loan from the Social Security System
(SSS);21 and that another respondent, Oliver Martin, albeit notified of his endorsement to a new
posting with a different client company,22 did not report to the new posting.

Furthermore, assuming arguendo that when respondents reported to the human resource office
and the company did not provide them with new assignments at that time, the six-month period
had not yet lapsed. Note that the position paper submitted by the respondents to the NLRC was
only received by the NLRC on December 11,2008. The reckoning of the end of the six-month
period from the supposed termination (i.e., July and August 2008, the period when they were
each given the "Notice to Return to Unit") would only be in January or February 2009.

Lastly, the CA erred in holding that the petitioner was guilty of providing the respondents with
new assignments during the pendency of the proceedings. It appears, indeed, that by the time
the respondents appealed their case in the NLRC, some of them had already gained regular
employment as security guards elsewhere during their reserved status with the petitioner and
prior to the lapse of the six-month period.

The new employments were indicated m their SSS employment history,23 thusly:

Employee Name Employment Employer Name

Date
Ariel Aroa 01-2009 Commander Security
Services Inc.
Lucito Samarita 08-2008 Phoenix Security & Allied
Services
Lito Mahilom 09-2008 Emirate Security
Specialists
Tomasino De Chavez 09-2008 Commander Security
Services Inc.
Oliver Martin Saidomar 09-2008 Sentinel Integrated
 Marohom Services Inc.

The act of some of the respondents of gaining employment as security guards elsewhere
constituted abandonment of their employment with the petitioner. Abandonment requires the
concurrence of two elements, namely: one, the employee must have failed to report for work or
must have been absent without valid or justifiable reason; and, two, there must have been a
clear intention on the part of the employee to sever the employer-employee relationship
manifested by some overt act.24 Although mere absence or failure to report for work, even after
notice to return, does not necessarily amount to abandonment, the law requires that there be
clear proof of deliberate and unjustified intent on the part of the employee to sever the
employer-employee relationship. Abandonment is a matter of intention and cannot be lightly
presumed from certain equivocal acts. In other words, the operative act is still the employee's
ultimate act of putting an end to his employment.25

Contrary to the findings of the CA, the respondents intended to sever their employer-employee
relationship with the petitioner because they applied for and obtained employment with other
security agencies while they were on reserved status. Their having done so constituted a clear
and unequivocal intent to abandon and sever their employment with the petitioner. Thereby,
the filing of their complaint for illegal dismissal was inconsistent with the established fact of
their abandonment.

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS
ASIDE the decision promulgated on March 1, 2011; and REINSTATES the decision of the
Labor Arbiter dismissing the complaint for illegal dismissal.

No pronouncement on costs of suit.

SO ORDERED.
 SECOND DIVISION

[G.R. NO. 176484 : November 25, 2008]

CALAMBA MEDICAL CENTER, INC., Petitioner v. NATIONAL LABOR RELATIONS

COMMISSION, RONALDO LANZANAS AND MERCEDITHA*LANZANAS, Respondents.

DECISION

CARPIO MORALES, J.:

The Calamba Medical Center (petitioner), a privately-owned hospital, engaged the services of
medical doctors-spouses Ronaldo Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas (Dr.
Merceditha) in March 1992 and August 1995, respectively, as part of its team of resident
physicians. Reporting at the hospital twice-a-week on twenty-four-hour shifts, respondents
were paid a monthly "retainer" of P4,800.00 each.1 It appears that resident physicians were
also given a percentage share out of fees charged for out-patient treatments, operating room
assistance and discharge billings, in addition to their fixed monthly retainer. 2

The work schedules of the members of the team of resident physicians were fixed by
petitioner's medical director Dr. Raul Desipeda (Dr. Desipeda). And they were issued
identification cards3 by petitioner and were enrolled in the Social Security System
(SSS).4 Income taxes were withheld from them.5

On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician at the hospital,
inadvertently overheard a telephone conversation of respondent Dr. Lanzanas with a fellow
employee, Diosdado Miscala, through an extension telephone line. Apparently, Dr. Lanzanas and
Miscala were discussing the low "census" or admission of patients to the hospital. 6

Dr. Desipeda whose attention was called to the above-said telephone conversation issued to Dr.
Lanzanas a Memorandum of March 7, 1998 reading:

As a Licensed Resident Physician employed in Calamba Medical Center

since several years ago, the hospital management has committed upon you
utmost confidence in the performance of duties pursuant thereto. This is the
reason why you were awarded the privilege to practice in the hospital and were
entrusted hospital functions to serve the interest of both the hospital and our
patients using your capability for independent judgment.

Very recently though and unfortunately, you have committed acts inimical to the
interest of the hospital, the details of which are contained in the hereto attached
affidavit of witness.

You are therefore given 24 hours to explain why no disciplinary action

should be taken against you.

Pending investigation of your case, you are hereby placed under 30-days
[sic] preventive suspension effective upon receipt hereof.7 (Emphasis,
italics and underscoring supplied)

Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not involved in the
said incident, any work schedule after sending her husband Dr. Lanzanas the
memorandum,8 nor inform her the reason therefor, albeit she was later informed by the Human
Resource Department (HRD) officer that that was part of petitioner's cost-cutting measures. 9

Responding to the memorandum, Dr. Lanzanas, by letter of March 9, 1998, 10admitted that he
spoke with Miscala over the phone but that their conversation was taken out of context by Dr.
Trinidad.

On March 14, 1998,11 the rank-and-file employees union of petitioner went on strike due to
unresolved grievances over terms and conditions of employment.12

On March 20, 1998, Dr. Lanzanas filed a complaint for illegal suspension 13 before the National
Labor Relations Commission (NLRC)-Regional Arbitration Board (RAB) IV. Dr. Merceditha
subsequently filed a complaint for illegal dismissal.14

In the meantime, then Sec. Cresenciano Trajano of the Department of Labor and Employment
(DOLE) certified the labor dispute to the NLRC for compulsory arbitration and issued on April 21,
1998 return-to-work Order to the striking union officers and employees of petitioner pending
resolution of the labor dispute.15

In a memorandum16 of April 22, 1998, Dr. Desipeda echoed the April 22, 1998 order of the
Secretary of Labor directing all union officers and members to return-to-work "on or April 23,
1998, except those employees that were already terminated or are serving disciplinary actions."
Dr. Desipeda thus ordered the officers and members of the union to "report for work as soon as
possible" to the hospital's personnel officer and administrator for "work scheduling, assignments
and/or re-assignments."

Petitioner later sent Dr. Lanzanas a notice of termination which he received on April 25, 1998,
indicating as grounds therefor his failure to report back to work despite the DOLE order and his
supposed role in the striking union, thus:

On April 23, 1998, you still did not report for work despite memorandum issued
by the CMC Medical Director implementing the Labor Secretary's ORDER. The
same is true on April 24, 1998 and April 25, 1998, - -you still did not report for
work [sic].

You are likewise aware that you were observed (re: signatories [sic] to
the Saligang Batas of BMCMC-UWP) to be unlawfully participating as member in
the rank-and-file union's concerted activities despite knowledge that your position
in the hospital is managerial in nature (Nurses, Orderlies, and staff of the
Emergency Room carry out your orders using your independent judgment) which
participation is expressly prohibited by the New Labor Code and which prohibition
was sustained by the Med-Arbiter's ORDER dated February 24, 1998. (Emphasis
and italics in the original; underscoring partly in the original and partly supplied)

For these reasons as grounds for termination, you are hereby terminated
for cause from employment effective today, April 25, 1998 , without
prejudice to further action for revocation of your license before the Philippine [sic]
Regulations [sic] Commission.17(Emphasis and underscoring
supplied)cralawlibrary

Dr. Lanzanas thus amended his original complaint to include illegal dismissal. 18His and Dr.
Merceditha's complaints were consolidated and docketed as NLRC CASE NO. RAB-IV-3-9879-98-
L.
By Decision19 of March 23, 1999, Labor Arbiter Antonio R. Macam dismissed the spouses'
complaints for want of jurisdiction upon a finding that there was no employer-employee
relationship between the parties, the fourth requisite or the "control test" in the determination
of an employment bond being absent.

On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the Labor Arbiter's findings,
disposing as follows:

WHEREFORE, the assailed decision is set aside. The respondents are ordered to
pay the complainants their full backwages; separation pay of one month salary
for every year of service in lieu of reinstatement; moral damages of P500,000.00
each; exemplary damages of P250,000.00 each plus ten percent (10%) of the
total award as attorney's fees.

SO ORDERED.21

Petitioner's motion for reconsideration having been denied, it brought the case to the Court of
Appeals on certiorari .

The appellate court, by June 30, 2004 Decision, 22 initially granted petitioner's petition and set
aside the NLRC ruling. However, upon a subsequent motion for reconsideration filed by
respondents, it reinstated the NLRC decision in an Amended Decision23 dated September 26,
2006 but tempered the award to each of the spouses of moral and exemplary damages
to P100,000.00 and P50,000.00, respectively and omitted the award of attorney's fees.

In finding the existence of an employer-employee relationship between the parties, the

appellate court held:

x x x. While it may be true that the respondents are given the discretion to decide
on how to treat the petitioner's patients, the petitioner has not denied nor
explained why its Medical Director still has the direct supervision and control
over the respondents. The fact is the petitioner's Medical Director still has
to approve the schedule of duties of the respondents . The respondents
stressed that the petitioner's Medical Director also issues instructions or orders
to the respondents relating to the means and methods of performing
their duties, i.e. admission of patients, manner of characterizing cases,
treatment of cases, etc., and may even overrule, review or revise the
decisions of the resident physicians. This was not controverted by the
petitioner. The foregoing factors taken together are sufficient to constitute the
fourth element, i.e. control test, hence, the existence of the employer-employee
relationship. In denying that it had control over the respondents, the petitioner
alleged that the respondents were free to put up their own clinics or to accept
other retainership agreement with the other hospitals. But, the petitioner failed to
substantiate the allegation with substantial evidence. (Emphasis and underscoring
supplied)24

The appellate court thus declared that respondents were illegally dismissed.

x x x. The petitioner's ground for dismissing respondent Ronaldo Lanzanas was

based on his alleged participation in union activities, specifically in joining the
strike and failing to observe the return-to-work order issued by the Secretary of
Labor. Yet, the petitioner did not adduce any piece of evidence to show that
respondent Ronaldo indeed participated in the strike. x x x.
 In the case of respondent Merceditha Lanzanas, the petitioner's explanation that
"her marriage to complainant Ronaldo has given rise to the presumption that her
sympat[hies] are likewise with her husband" as a ground for her dismissal is
unacceptable. Such is not one of the grounds to justify the termination of her
employment.25(Underscoring supplied)cralawlibrary

The fallo of the appellate court's decision reads:

WHEREFORE, the instant Motion for Reconsideration is GRANTED, and the

Court's decision dated June 30, 2004, is SET ASIDE. In lieu thereof, a new
judgment is entered, as follows:

WHEREFORE, the petition is DISMISSED. The assailed decision

dated May 3, 2002 and order dated September 24, 2002 of the
NLRC in NLRC NCR CA No. 019823-99 are AFFIRMED with the
MODIFICATION that the moral and exemplary damages are
reduced to P100,000.00 each and P50,000.00 each, respectively.

SO ORDERED.26 (Emphasis and italics in the original; underscoring supplied)

Preliminarily, the present petition calls for a determination of whether there exists an employer-
employee relationship27 between petitioner and the spouses-respondents.

Denying the existence of such relationship, petitioner argues that the appellate court, as well as
the NLRC, overlooked its twice-a-week reporting arrangement with respondents who are free to
practice their profession elsewhere the rest of the week. And it invites attention to the
uncontroverted allegation that respondents, aside from their monthly retainers, were entitled to
one-half of all suturing, admitting, consultation, medico-legal and operating room assistance
fees.28 These circumstances, it stresses, are clear badges of the absence of any employment
relationship between them.

This Court is unimpressed.

Under the "control test," an employment relationship exists between a physician and a hospital
if the hospital controls both the means and the details of the process by which the physician is
to accomplish his task.29

Where a person who works for another does so more or less at his own pleasure and is not
subject to definite hours or conditions of work, and is compensated according to the result of his
efforts and not the amount thereof, the element of control is absent. 30

As priorly stated, private respondents maintained specific work-schedules, as determined by

petitioner through its medical director, which consisted of 24-hour shifts totaling forty-eight
hours each week and which were strictly to be observed under pain of administrative sanctions.

That petitioner exercised control over respondents gains light from the undisputed fact that in
the emergency room, the operating room, or any department or ward for that matter,
respondents' work is monitored through its nursing supervisors, charge nurses and orderlies.
Without the approval or consent of petitioner or its medical director, no operations can be
undertaken in those areas. For control test to apply, it is not essential for the employer to
actually supervise the performance of duties of the employee, it being enough that it has the
right to wield the power.31

With respect to respondents' sharing in some hospital fees, this scheme does not sever the
employment tie between them and petitioner as this merely mirrors additional form or another
form of compensation or incentive similar to what commission-based employees receive as
contemplated in Article 97 (f) of the Labor Code, thus:

"Wage" paid to any employee shall mean the remuneration or earning, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other method
of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to be done,
or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee. x x x (Emphasis
and underscoring supplied),

Respondents were in fact made subject to petitioner-hospital's Code of Ethics, 32the provisions of
which cover administrative and disciplinary measures on negligence of duties, personnel
conduct and behavior, and offenses against persons, property and the hospital's interest.

More importantly, petitioner itself provided incontrovertible proof of the employment status of
respondents, namely, the identification cards it issued them, the payslips 33 and BIR W-2 (now
2316) Forms which reflect their status as employees, and the classification as "salary" of their
remuneration. Moreover, it enrolled respondents in the SSS and Medicare (Philhealth) program.
It bears noting at this juncture that mandatory coverage under the SSS Law 34 is premised on
the existence of an employer-employee relationship,35 except in cases of compulsory coverage
of the self-employed. It would be preposterous for an employer to report certain persons as
employees and pay their SSS premiums as well as their wages if they are not its employees. 36

And if respondents were not petitioner's employees, how does it account for its issuance of the
earlier-quoted March 7, 1998 memorandum explicitly stating that respondent is "employed" in it
and of the subsequent termination letter indicating respondent Lanzanas' employment status.

Finally, under Section 15, Rule X of Book III of the Implementing Rules of the Labor Code, an
employer-employee relationship exists between the resident physicians and the training
hospitals, unless there is a training agreement between them, and the training program is duly
accredited or approved by the appropriate government agency. In respondents' case, they were
not undergoing any specialization training. They were considered non-training general
practitioners,37 assigned at the emergency rooms and ward sections.

Turning now to the issue of dismissal, the Court upholds the appellate court's conclusion that
private respondents were illegally dismissed.

Dr. Lanzanas was neither a managerial nor supervisory employee but part of the rank-and-file.
This is the import of the Secretary of Labor's Resolution of May 22, 1998 in OS A-05-15-98
which reads:

xxx

In the motion to dismiss it filed before the Med-Arbiter, the employer (CMC)
alleged that 24 members of petitioner are supervisors, namely x x x Rolando
Lanzonas [sic] x x x.

A close scrutiny of the job descriptions of the alleged supervisors narrated by the
employer only proves that except for the contention that these employees
allegedly supervise, they do not however recommend any managerial action. At
most, their job is merely routinary in nature and consequently, they cannot be
considered supervisory employees.
 They are not therefore barred from membership in the union of
rank[-]and[-]file, which the petitioner [the union] is seeking to represent in the
instant case.38 (Emphasis and underscoring supplied)cralawlibrary

xxx

Admittedly, Dr. Lanzanas was a union member in the hospital, which is considered
indispensable to the national interest. In labor disputes adversely affecting the continued
operation of a hospital, Article 263(g) of the Labor Code provides:

ART. 263. STRIKES, PICKETING, AND LOCKOUTS.–

xxx

(g) x x x x

x x x x. In labor disputes adversely affecting the continued operation of

such hospitals, clinics or medical institutions, it shall be the duty of the
striking union or locking-out employer to provide and maintain an effective
skeletal workforce of medical and other health personnel, whose movement and
services shall be unhampered and unrestricted, as are necessary to insure the
proper and adequate protection of the life and health of its patients, most
especially emergency cases, for the duration of the strike or lockout. In such
cases, the Secretary of Labor and Employment is mandated to immediately
assume, within twenty-four hours from knowledge of the occurrence of such
strike or lockout, jurisdiction over the same or certify to the Commission for
compulsory arbitration. For this purpose, the contending parties are strictly
enjoined to comply with such orders, prohibitions and/or injunctions as
are issued by the Secretary of Labor and Employment or the Commission,
under pain of immediate disciplinary action, including dismissal or loss of
employment status or payment by the locking-out employer of
backwages, damages and other affirmative relief, even criminal
prosecution against either or both of them.

x x x x (Emphasis and underscoring supplied)cralawlibrary

An assumption or certification order of the DOLE Secretary automatically results in a return-to-

work of all striking workers, whether a corresponding return-to-work order had been
issued.39 The DOLE Secretary in fact issued a return-to-work Order, failing to comply with which
is punishable by dismissal or loss of employment status.40

Participation in a strike and intransigence to a return-to-work order must, however, be duly

proved in order to justify immediate dismissal in a "national interest" case. As the appellate
court as well as the NLRC observed, however, there is nothing in the records that would bear
out Dr. Lanzanas' actual participation in the strike. And the medical director's Memorandum 41 of
April 22, 1998 contains nothing more than a general directive to all union officers and members
to return-to-work. Mere membership in a labor union does not ipso facto mean participation in a
strike.

Dr. Lanzanas' claim that, after his 30-day preventive suspension ended on or before April 9,
1998, he was never given any work schedule 42 was not refuted by petitioner. Petitioner in fact
never released any findings of its supposed investigation into Dr. Lanzanas' alleged "inimical
acts."
Petitioner thus failed to observe the two requirements,before dismissal can be effected ─ notice
and hearing ─ which constitute essential elements of the statutory process; the first to apprise
the employee of the particular acts or omissions for which his dismissal is sought, and the
second to inform the employee of the employer's decision to dismiss him. 43 Non-observance of
these requirements runs afoul of the procedural mandate.44

The termination notice sent to and received by Dr. Lanzanas on April 25, 1998 was the first and
only time that he was apprised of the reason for his dismissal. He was not afforded, however,
even the slightest opportunity to explain his side. His was a "termination upon receipt"
situation. While he was priorly made to explain on his telephone conversation with Miscala, 45 he
was not with respect to his supposed participation in the strike and failure to heed the return-
to-work order.

As for the case of Dr. Merceditha, her dismissal was worse, it having been effected without any
just or authorized cause and without observance of due process. In fact, petitioner never
proferred any valid cause for her dismissal except its view that "her marriage to [Dr. Lanzanas]
has given rise to the presumption that her sympath[y] [is] with her husband; [and that when
[Dr. Lanzanas] declared that he was going to boycott the scheduling of their workload by the
medical doctor, he was presumed to be speaking for himself [and] for his wife Merceditha." 46

Petitioner's contention that Dr. Merceditha was a member of the union or was a participant in
the strike remained just that. Its termination of her employment on the basis of her conjugal
relationship is not analogous to

any of the causes enumerated in Article 28247 of the Labor Code. Mere suspicion or belief, no
matter how strong, cannot substitute for factual findings carefully established through orderly
procedure.48

The Court even notes that after the proceedings at the NLRC, petitioner never even mentioned
Dr. Merceditha's case. There is thus no gainsaying that her dismissal was both substantively
and procedurally infirm.

Adding insult to injury was the circulation by petitioner of a "watchlist" or "watch out
list"49 including therein the names of respondents. Consider the following portions of Dr.
Merceditha's Memorandum of Appeal:

3. Moreover, to top it all, respondents have circulated a so called "Watch List" to

other hospitals, one of which [was] procured from Foothills Hospital in Sto.
Tomas, Batangas [that] contains her name. The object of the said list is precisely
to harass Complainant and malign her good name and reputation. This is not only
unprofessional, but runs smack of oppression as CMC is trying permanently
deprived [sic] Complainant of her livelihood by ensuring that she is barred from
practicing in other hospitals.

4. Other co-professionals and brothers in the profession are fully aware of these
"watch out" lists and as such, her reputation was not only besmirched, but was
damaged, and she suffered social humiliation as it is of public knowledge that she
was dismissed from work. Complainant came from a reputable and respected
family, her father being a retired full Colonel in the Army, Col. Romeo A. Vente,
and her brothers and sisters are all professionals, her brothers, Arnold and
Romeo Jr., being engineers. The Complainant has a family protection [sic] to
protect. She likewise has a professional reputation to protect, being a licensed
physician. Both her personal and professional reputation were damaged as a
result of the unlawful acts of the respondents.50
While petitioner does not deny the existence of such list, it pointed to the lack of any board
action on its part to initiate such listing and to circulate the same, viz:

20. x x x. The alleged watchlist or "watch out list," as termed by complainants,

were merely lists obtained by one Dr. Ernesto Naval of PAMANA Hospital. Said
list was given by a stockholder of respondent who was at the same time
a stockholder of PAMAN[A] Hospital. The giving of the list was not a Board
action.51(Emphasis and underscoring supplied)cralawlibrary

The circulation of such list containing names of alleged union members intended to prevent
employment of workers for union activities similarly constitutes unfair labor practice, thereby
giving a right of action for damages by the employees prejudiced.52

A word on the appellate court's deletion of the award of attorney's fees. There being no basis
advanced in deleting it, as exemplary damages were correctly awarded, 53 the award of
attorney's fees should be reinstated.

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871

is AFFIRMED with MODIFICATION in that the award by the National Labor Relations
Commission of 10% of the total judgment award as attorney's fees is reinstated. In all other
aspects, the decision of the appellate court is affirmed.

SO ORDERED.
 FIRST DIVISION

[G.R. NO. 165881 : April 19, 2006]

OSCAR VILLAMARIA, JR. Petitioner, v. COURT OF APPEALS and JERRY V.

BUSTAMANTE, Respondents.

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of Court
assailing the Decision1 and Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 78720
which set aside the Resolution3 of the National Labor Relations Commission (NLRC) in NCR-30-
08-03247-00, which in turn affirmed the Decision 4 of the Labor Arbiter dismissing the complaint
filed by respondent Jerry V. Bustamante.

Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship
engaged in assembling passenger jeepneys with a public utility franchise to operate along the
Baclaran-Sucat route. By 1995, Villamaria stopped assembling jeepneys and retained only nine,
four of which he operated by employing drivers on a "boundary basis." One of those drivers was
respondent Bustamante who drove the jeepney with Plate No. PVU-660. Bustamante remitted
P450.00 a day to Villamaria as boundary and kept the residue of his daily earnings as
compensation for driving the vehicle. In August 1997, Villamaria verbally agreed to sell the
jeepney to Bustamante under the "boundary-hulog scheme," where Bustamante would remit to
Villarama P550.00 a day for a period of four years; Bustamante would then become the owner
of the vehicle and continue to drive the same under Villamaria's franchise. It was also agreed
that Bustamante would make a downpayment of P10,000.00.

On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng Bilihan ng Sasakyan

sa Pamamagitan ng Boundary-Hulog"5 over the passenger jeepney with Plate No. PVU-660,
Chassis No. EVER95-38168-C and Motor No. SL-26647. The parties agreed that if Bustamante
failed to pay the boundary-hulog for three days, Villamaria Motors would hold on to the vehicle
until Bustamante paid his arrears, including a penalty of P50.00 a day; in case Bustamante
failed to remit the daily boundary-hulog for a period of one week, the Kasunduan would cease
to have legal effect and Bustamante would have to return the vehicle to Villamaria Motors.

Under the Kasunduan, Bustamante was prohibited from driving the vehicle without prior
authority from Villamaria Motors. Thus, Bustamante was authorized to operate the vehicle to
transport passengers only and not for other purposes. He was also required to display an
identification card in front of the windshield of the vehicle; in case of failure to do so, any fine
that may be imposed by government authorities would be charged against his account.
Bustamante further obliged himself to pay for the cost of replacing any parts of the vehicle that
would be lost or damaged due to his negligence. In case the vehicle sustained serious damage,
Bustamante was obliged to notify Villamaria Motors before commencing repairs. Bustamante
was not allowed to wear slippers, short pants or undershirts while driving. He was required to
be polite and respectful towards the passengers. He was also obliged to notify Villamaria Motors
in case the vehicle was leased for two or more days and was required to attend any meetings
which may be called from time to time. Aside from the boundary-hulog, Bustamante was also
obliged to pay for the annual registration fees of the vehicle and the premium for the vehicle's
comprehensive insurance. Bustamante promised to strictly comply with the rules and
regulations imposed by Villamaria for the upkeep and maintenance of the jeepney.
Bustamante continued driving the jeepney under the supervision and control of Villamaria. As
agreed upon, he made daily remittances of P550.00 in payment of the purchase price of the
vehicle. Bustamante failed to pay for the annual registration fees of the vehicle, but Villamaria
allowed him to continue driving the jeepney.

In 1999, Bustamante and other drivers who also had the same arrangement with Villamaria
Motors failed to pay their respective boundary-hulog. This prompted Villamaria to serve a
"Paalala,"6 reminding them that under the Kasunduan, failure to pay the daily boundary-hulog
for one week, would mean their respective jeepneys would be returned to him without any
complaints. He warned the drivers that the Kasunduan would henceforth be strictly enforced
and urged them to comply with their obligation to avoid litigation.

On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and barred the latter
from driving the vehicle.

On August 15, 2000, Bustamante filed a Complaint 7 for Illegal Dismissal against Villamaria and
his wife Teresita. In his Position Paper, 8 Bustamante alleged that he was employed by Villamaria
in July 1996 under the boundary system, where he was required to remit P450.00 a day. After
one year of continuously working for them, the spouses Villamaria presented the Kasunduan for
his signature, with the assurance that he (Bustamante) would own the jeepney by March 2001
after paying P550.00 in daily installments and that he would thereafter continue driving the
vehicle along the same route under the same franchise. He further narrated that in July 2000,
he informed the Villamaria spouses that the surplus engine of the jeepney needed to be
replaced, and was assured that it would be done. However, he was later arrested and his
driver's license was confiscated because apparently, the replacement engine that was installed
was taken from a stolen vehicle. Due to negotiations with the apprehending authorities, the
jeepney was not impounded. The Villamaria spouses took the jeepney from him on July 24,
2000, and he was no longer allowed to drive the vehicle since then unless he paid them
P70,000.00.

Bustamante prayed that judgment be rendered in his favor, thus:

WHEREFORE, in the light of the foregoing, it is most respectfully prayed that judgment be
rendered ordering the respondents, jointly and severally, the following:

1. Reinstate complainant to his former position without loss of seniority rights and
execute a Deed of Sale in favor of the complainant relative to the PUJ with Plate
No. PVU-660;

2. Ordering the respondents to pay backwages in the amount of P400.00 a day

and other benefits computed from July 24, 2000 up to the time of his actual
reinstatement;

3. Ordering respondents to return the amount of P10,000.00 and P180,000.00 for

the expenses incurred by the complainant in the repair and maintenance of the
subject jeep;

4. Ordering the respondents to refund the amount of One Hundred (P100.00)

Pesos per day counted from August 7, 1997 up to June 2000 or a total of
P91,200.00;

5. To pay moral and exemplary damages of not less than P200,000.00;

6. Attorney's fee[s] of not less than 10% of the monetary award.

Other just and equitable reliefs under the premises are also being prayed for.9

In their Position Paper,10 the spouses Villamaria admitted the existence of the Kasunduan, but
alleged that Bustamante failed to pay the P10,000.00 downpayment and the vehicle's annual
registration fees. They further alleged that Bustamante eventually failed to remit the requisite
boundary-hulog of P550.00 a day, which prompted them to issue the Paalaala. Instead of
complying with his obligations, Bustamante stopped making his remittances despite his daily
trips and even brought the jeepney to the province without permission. Worse, the jeepney
figured in an accident and its license plate was confiscated; Bustamante even abandoned the
vehicle in a gasoline station in Sucat, Parañaque City for two weeks. When the security guard at
the gasoline station requested that the vehicle be retrieved and Teresita Villamaria asked
Bustamante for the keys, Bustamante told her: "Di kunin ninyo." When the vehicle was finally
retrieved, the tires were worn, the alternator was gone, and the battery was no longer working.

Citing the cases of Cathedral School of Technology v. NLRC 11 and Canlubang Security Agency
Corporation v. NLRC,12 the spouses Villamaria argued that Bustamante was not illegally
dismissed since the Kasunduan executed on August 7, 1997 transformed the employer-
employee relationship into that of vendor-vendee. Hence, the spouses concluded, there was no
legal basis to hold them liable for illegal dismissal. They prayed that the case be dismissed for
lack of jurisdiction and patent lack of merit.

In his Reply,13 Bustamante claimed that Villamaria exercised control and supervision over the
conduct of his employment. He maintained that the rulings of the Court in National Labor Union
v. Dinglasan,14 Magboo v. Bernardo,15 and Citizen's League of Free Workers v. Abbas16 are
germane to the issue as they define the nature of the owner/operator-driver relationship under
the boundary system. He further reiterated that it was the Villamaria spouses who presented
the Kasunduan to him and that he conformed thereto only upon their representation that he
would own the vehicle after four years. Moreover, it appeared that the Paalala was duly
received by him, as he, together with other drivers, was made to affix his signature on a blank
piece of paper purporting to be an "attendance sheet."

On March 15, 2002, the Labor Arbiter rendered judgment17 in favor of the spouses Villamaria
and ordered the complaint dismissed on the following ratiocination:

Respondents presented the contract of Boundary-Hulog, as well as the PAALALA, to prove their
claim that complainant violated the terms of their contract and afterwards abandoned the
vehicle assigned to him. As against the foregoing, [the] complaint's (sic) mere allegations to the
contrary cannot prevail.

Not having been illegally dismissed, complainant is not entitled to damages and attorney's
fees.18

Bustamante appealed the decision to the NLRC, 19 insisting that the Kasunduan did not
extinguish the employer-employee relationship between him and Villamaria. While he did not
receive fixed wages, he kept only the excess of the boundary-hulog which he was required to
remit daily to Villamaria under the agreement. Bustamante maintained that he remained an
employee because he was engaged to perform activities which were necessary or desirable to
Villamaria's trade or business.

The NLRC rendered judgment20 dismissing the appeal for lack of merit, thus:

WHEREFORE, premises considered, complainant's appeal is hereby DISMISSED for reasons not
stated in the Labor Arbiter's decision but mainly on a jurisdictional issue, there being none over
the subject matter of the controversy.21
The NLRC ruled that under the Kasunduan, the juridical relationship between Bustamante and
Villamaria was that of vendor and vendee, hence, the Labor Arbiter had no jurisdiction over the
complaint. Bustamante filed a Motion for Reconsideration, which the NLRC resolved to deny on
May 30, 2003.22

Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that the NLRC
erred

IN DISMISSING PETITIONER'S APPEAL "FOR REASON NOT STATED IN THE LABOR

ARBITER'S DECISION, BUT MAINLY ON JURISDICTIONAL ISSUE;"

II

IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT

DECLARED THAT THE RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN
PETITIONER AND THE PRIVATE RESPONDENT WAS DEFINITELY A MATTER WHICH
IS BEYOND THE PROTECTIVE MANTLE OF OUR LABOR LAWS.23

Bustamante insisted that despite the Kasunduan, the relationship between him and Villamaria
continued to be that of employer-employee and as such, the Labor Arbiter had jurisdiction over
his complaint. He further alleged that it is common knowledge that operators of passenger
jeepneys (including taxis) pay their drivers not on a regular monthly basis but on commission or
boundary basis, or even the boundary-hulog system. Bustamante asserted that he was
dismissed from employment without any lawful or just cause and without due notice.

For his part, Villamaria averred that Bustamante failed to adduce proof of their employer-
employee relationship. He further pointed out that the Dinglasan case pertains to the boundary
system and not the boundary-hulog system, hence inapplicable in the instant case. He argued
that upon the execution of the Kasunduan, the juridical tie between him and Bustamante was
transformed into a vendor-vendee relationship. Noting that he was engaged in the manufacture
and sale of jeepneys and not in the business of transporting passengers for consideration,
Villamaria contended that the daily fees which Bustmante paid were actually periodic
installments for the the vehicle and were not the same fees as understood in the boundary
system. He added that the boundary-hulog plan was basically a scheme to help the driver-buyer
earn money and eventually pay for the unit in full, and for the owner to profit not from the daily
earnings of the driver-buyer but from the purchase price of the unit sold. Villamaria further
asserted that the apparently restrictive conditions in the Kasunduan did not mean that the
means and method of driver-buyer's conduct was controlled, but were mere ways to preserve
the vehicle for the benefit of both parties: Villamaria would be able to collect the agreed
purchase price, while Bustamante would be assured that the vehicle would still be in good
running condition even after four years. Moreover, the right of vendor to impose certain
conditions on the buyer should be respected until full ownership of the property is vested on the
latter. Villamaria insisted that the parallel circumstances obtaining in Singer Sewing Machine
Company v. Drilon24 has analogous application to the instant issue.

In its Decision25 dated August 30, 2004, the CA reversed and set aside the NLRC decision. The
fallo of the decision reads:

UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions of the NLRC must
be, as they are hereby are, REVERSED AND SET ASIDE, and judgment entered in favor of
petitioner:
 1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry
Bustamante separation pay computed from the time of his employment up to the
time of termination based on the prevailing minimum wage at the time of
termination; and,

2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner Jerry

Bustamante back wages computed from the time of his dismissal up to March
2001 based on the prevailing minimum wage at the time of his dismissal.

Without Costs.

SO ORDERED.26

The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamante's complaint.
Under the Kasunduan, the relationship between him and Villamaria was dual: that of vendor-
vendee and employer-employee. The CA ratiocinated that Villamaria's exercise of control over
Bustamante's conduct in operating the jeepney is inconsistent with the former's claim that he
was not engaged in the transportation business. There was no evidence that petitioner was
allowed to let some other person drive the jeepney.

The CA further held that, while the power to dismiss was not mentioned in the Kasunduan, it did
not mean that Villamaria could not exercise it. It explained that the existence of an employment
relationship did not depend on how the worker was paid but on the presence or absence of
control over the means and method of the employee's work. In this case, Villamaria's directives
(to drive carefully, wear an identification card, don decent attire, park the vehicle in his garage,
and to inform him about provincial trips, etc.) was a means to control the way in which
Bustamante was to go about his work. In view of Villamaria's supervision and control as
employer, the fact that the "boundary" represented installment payments of the purchase price
on the jeepney did not remove the parties' employer-employee relationship.

While the appellate court recognized that a week's default in paying the boundary-hulog
constituted an additional cause for terminating Bustamante's employment, it held that the latter
was illegally dismissed. According to the CA, assuming that Bustamante failed to make the
required payments as claimed by Villamaria, the latter nevertheless failed to take steps to
recover the unit and waited for Bustamante to abandon it. It also pointed out that Villamaria
neither submitted any police report to support his claim that the vehicle figured in a mishap nor
presented the affidavit of the gas station guard to substantiate the claim that Bustamante
abandoned the unit.

Villamaria received a copy of the decision on September 8, 2004, and filed, on September 17,
2004, a motion for reconsideration thereof. The CA denied the motion in a Resolution 27 dated
November 2, 2004, and Villamaria received a copy thereof on November 8, 2004.

Villamaria, now petitioner, seeks relief from this Court via Petition for Review
on Certiorari under Rule 65 of the Rules of Court, alleging that the CA committed grave abuse
of its discretion amounting to excess or lack of jurisdiction in reversing the decision of the Labor
Arbiter and the NLRC. He claims that the CA erred in ruling that the juridical relationship
between him and respondent under the Kasunduan was a combination of employer-employee
and vendor-vendee relationships. The terms and conditions of the Kasunduan clearly state that
he and respondent Bustamante had entered into a conditional deed of sale over the jeepney; as
such, their employer-employee relationship had been transformed into that of vendor-vendee.
Petitioner insists that he had the right to reserve his title on the jeepney until after the purchase
price thereof had been paid in full.

In his Comment on the petition, respondent avers that the appropriate remedy of petitioner was
an appeal via a Petition for Review on Certiorari under Rule 45 of the Rules of Court and not a
special civil action of certiorari under Rule 65. He argues that petitioner failed to establish that
the CA committed grave abuse of its discretion amounting to excess or lack of jurisdiction in its
decision, as the said ruling is in accord with law and the evidence on record.

Respondent further asserts that the Kasunduan presented to him by petitioner which provides
for a boundary-hulog scheme was a devious circumvention of the Labor Code of the Philippines.
Respondent insists that his juridical relationship with petitioner is that of employer-employee
because he was engaged to perform activities which were necessary or desirable in the usual
business of petitioner, his employer.

In his Reply, petitioner avers that the Rules of Procedure should be liberally construed in his
favor; hence, it behooves the Court to resolve the merits of his petition.

We agree with respondent's contention that the remedy of petitioner from the CA decision was
to file a Petition for Review on Certiorari under Rule 45 of the Rules of Court and not the
independent action of certiorari under Rule 65. Petitioner had 15 days from receipt of the CA
resolution denying his motion for the reconsideration within which to file the petition under Rule
45.28 But instead of doing so, he filed a petition for certiorari under Rule 65 on November 22,
2004, which did not, however, suspend the running of the 15-day reglementary period;
consequently, the CA decision became final and executory upon the lapse of the reglementary
period for appeal. Thus, on this procedural lapse, the instant petition stands to be dismissed. 29

It must be stressed that the recourse to a special civil action under Rule 65 of the Rules of
Court is proscribed by the remedy of appeal under Rule 45. As the Court elaborated in Tomas
Claudio Memorial College, Inc. v. Court of Appeals:30

We agree that the remedy of the aggrieved party from a decision or final resolution of the CA is
to file a Petition for Review on Certiorari under Rule 45 of the Rules of Court, as amended, on
questions of facts or issues of law within fifteen days from notice of the said resolution.
Otherwise, the decision of the CA shall become final and executory. The remedy under Rule 45
of the Rules of Court is a mode of appeal to this Court from the decision of the CA. It is a
continuation of the appellate process over the original case. A review is not a matter of right but
is a matter of judicial discretion. The aggrieved party may, however, assail the decision of the
CA via a petition for certiorari under Rule 65 of the Rules of Court within sixty days from notice
of the decision of the CA or its resolution denying the motion for reconsideration of the same.
This is based on the premise that in issuing the assailed decision and resolution, the CA acted
with grave abuse of discretion, amounting to excess or lack of jurisdiction and there is no plain,
speedy and adequate remedy in the ordinary course of law. A remedy is considered plain,
speedy and adequate if it will promptly relieve the petitioner from the injurious effect of the
judgment and the acts of the lower court.

The aggrieved party is proscribed from filing a petition for certiorari if appeal is available, for
the remedies of appeal and certiorari are mutually exclusive and not alternative or successive.
The aggrieved party is, likewise, barred from filing a petition for certiorari if the remedy of
appeal is lost through his negligence. A petition for certiorari is an original action and does not
interrupt the course of the principal case unless a temporary restraining order or a writ of
preliminary injunction has been issued against the public respondent from further proceeding. A
petition for certiorari must be based on jurisdictional grounds because, as long as the
respondent court acted within its jurisdiction, any error committed by it will amount to nothing
more than an error of judgment which may be corrected or reviewed only by appeal.31

However, we have also ruled that a petition for certiorari under Rule 65 may be considered as
filed under Rule 45, conformably with the principle that rules of procedure are to be construed
liberally, provided that the petition is filed within the reglementary period under Section 2, Rule
45 of the Rules of Court, and where valid and compelling circumstances warrant that the
petition be resolved on its merits. 32 In this case, the petition was filed within the reglementary
period and petitioner has raised an issue of substance: whether the existence of a boundary-
hulog agreement negates the employer-employee relationship between the vendor and vendee,
and, as a corollary, whether the Labor Arbiter has jurisdiction over a complaint for illegal
dismissal in such case.

We resolve these issues in the affirmative.

The rule is that, the nature of an action and the subject matter thereof, as well as, which court
or agency of the government has jurisdiction over the same, are determined by the material
allegations of the complaint in relation to the law involved and the character of the reliefs
prayed for, whether or not the complainant/plaintiff is entitled to any or all of such reliefs. 33 A
prayer or demand for relief is not part of the petition of the cause of action; nor does it enlarge
the cause of action stated or change the legal effect of what is alleged. 34In determining which
body has jurisdiction over a case, the better policy is to consider not only the status or
relationship of the parties but also the nature of the action that is the subject of their
controversy.35

Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive original
jurisdiction only over the following:

x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without extension, even in the absence of
stenographic notes, the following cases involving all workers, whether agricultural or non-
agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

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

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

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

6. Except claims for Employees Compensation, Social Security, Medicare and

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

(b) The Commission shall have exclusive appellate jurisdiction over

all cases decided by Labor Arbiters.

(c) Cases arising from the interpretation or implementation of

collective bargaining agreements, and those arising from the
interpretation or enforcement of company personnel policies shall
be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided
in said agreements.
In the foregoing cases, an employer-employee relationship is an indispensable jurisdictional
requisite.36 The jurisdiction of Labor Arbiters and the NLRC under Article 217 of the Labor Code
is limited to disputes arising from an employer-employee relationship which can only be
resolved by reference to the Labor Code, other labor statutes or their collective bargaining
agreement.37 Not every dispute between an employer and employee involves matters that only
the Labor Arbiter and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial
powers. Actions between employers and employees where the employer-employee relationship
is merely incidental is within the exclusive original jurisdiction of the regular courts. 38 When the
principal relief is to be granted under labor legislation or a collective bargaining agreement, the
case falls within the exclusive jurisdiction of the Labor Arbiter and the NLRC even though a
claim for damages might be asserted as an incident to such claim.39

We agree with the ruling of the CA that, under the boundary-hulog scheme incorporated in the
Kasunduan, a dual juridical relationship was created between petitioner and respondent: that of
employer-employee and vendor-vendee. The Kasunduan did not extinguish the employer-
employee relationship of the parties extant before the execution of said deed.

As early as 1956, the Court ruled in National Labor Union v. Dinglasan 40 that the jeepney
owner/operator-driver relationship under the boundary system is that of employer-employee
and not lessor-lessee. This doctrine was affirmed, under similar factual settings, in Magboo v.
Bernardo41 and Lantaco, Sr. v. Llamas,42and was analogously applied to govern the relationships
between auto-calesa owner/operator and driver, 43 bus owner/operator and conductor,44 and taxi
owner/operator and driver.45

The boundary system is a scheme by an owner/operator engaged in transporting passengers as

a common carrier to primarily govern the compensation of the driver, that is, the latter's daily
earnings are remitted to the owner/operator less the excess of the boundary which represents
the driver's compensation. Under this system, the owner/operator exercises control and
supervision over the driver. It is unlike in lease of chattels where the lessor loses complete
control over the chattel leased but the lessee is still ultimately responsible for the consequences
of its use. The management of the business is still in the hands of the owner/operator, who,
being the holder of the certificate of public convenience, must see to it that the driver follows
the route prescribed by the franchising and regulatory authority, and the rules promulgated
with regard to the business operations. The fact that the driver does not receive fixed wages
but only the excess of the "boundary" given to the owner/operator is not sufficient to change
the relationship between them. Indubitably, the driver performs activities which are usually
necessary or desirable in the usual business or trade of the owner/operator.46

Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount
which represented the boundary of petitioner as well as respondent's partial payment (hulog) of
the purchase price of the jeepney.

Respondent was entitled to keep the excess of his daily earnings as his daily wage. Thus, the
daily remittances also had a dual purpose: that of petitioner's boundary and respondent's
partial payment (hulog) for the vehicle. This dual purpose was expressly stated in the
Kasunduan. The well-settled rule is that an obligation is not novated by an instrument that
expressly recognizes the old one, changes only the terms of payment, and adds other
obligations not incompatible with the old provisions or where the new contract merely
supplements the previous one.47 The two obligations of the respondent to remit to petitioner the
boundary-hulog can stand together.

In resolving an issue based on contract, this Court must first examine the contract itself,
keeping in mind that when the terms of the agreement are clear and leave no doubt as to the
intention of the contracting parties, the literal meaning of its stipulations shall prevail. 48 The
intention of the contracting parties should be ascertained by looking at the words used to
project their intention, that is, all the words, not just a particular word or two or more words
standing alone. The various stipulations of a contract shall be interpreted together, attributing
to the doubtful ones that sense which may result from all of them taken jointly. 49 The parts and
clauses must be interpreted in relation to one another to give effect to the whole. The legal
effect of a contract is to be determined from the whole read together. 50

Under the Kasunduan, petitioner retained supervision and control over the conduct of the
respondent as driver of the jeepney, thus:

Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary hulog ay ang mga
sumusunod:

1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang

sasakyan ipinagkatiwala sa kanya ng TAUHAN NG UNANG PANIG.

2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG IKALAWANG

PANIG sa paghahanapbuhay bilang pampasada o pangangalakal sa malinis at
maayos na pamamaraan.

3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG IKALAWANG

PANIG sa mga bagay na makapagdudulot ng kahihiyan, kasiraan o pananagutan
sa TAUHAN NG UNANG PANIG.

4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG PANIG.

5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay ng ID

Card sa harap ng windshield upang sa pamamagitan nito ay madaliang malaman
kung ang nagmamaneho ay awtorisado ng VILLAMARIA MOTORS o hindi.

6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa kung

sakaling mahuli ang sasakyang ito na hindi nakakabit ang ID card sa wastong
lugar o anuman kasalanan o kapabayaan.

7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o piyesa

na papalitan ng nasira o nawala ito dahil sa kanyang kapabayaan.

8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang hinuhulugan pa

rin ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan.

9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob ng

TAUHAN NG UNANG PANIG, ang TAUHAN NG IKALAWANG PANIG ay obligadong
itawag ito muna sa VILLAMARIA MOTORS bago ipagawa sa alin mang Motor Shop
na awtorisado ng VILLAMARIA MOTORS.

10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon ng

pamamasada na ang nagmamaneho ay naka-tsinelas, naka short pants at
nakasando lamang. Dapat ang nagmamaneho ay laging nasa maayos ang
kasuotan upang igalang ng mga pasahero.

11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver ay

magpapakita ng magandang asal sa mga pasaheros at hindi dapat magsasalita ng
masama kung sakali man may pasaherong pilosopo upang maiwasan ang
anumang kaguluhan na maaaring kasangkutan.

12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang TAUHAN NG

IKALAWANG PANIG sa loob ng tatlong (3) araw ay ang opisina ng VILLAMARIA
 MOTORS ang may karapatang mangasiwa ng nasabing sasakyan hanggang
matugunan ang lahat ng responsibilidad. Ang halagang dapat bayaran sa opisina
ay may karagdagang multa ng P50.00 sa araw-araw na ito ay nasa pangangasiwa
ng VILLAMARIA MOTORS.

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng

BOUNDARY HULOG sa loob ng isang linggo ay nangangahulugan na ang
kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG
PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG.

14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro,

comprehensive insurance taon-taon at kahit anong uri ng aksidente habang ito ay
hinuhulugan pa sa TAUHAN NG UNANG PANIG.

15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa

pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa tuwing tatawag ang
mga tagapangasiwa nito upang maipaabot ang anumang mungkahi sa
ikasusulong ng samahan.

16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga

patakaran na magkakaroon ng pagbabago o karagdagan sa mga darating na
panahon at hindi magiging hadlang sa lahat ng mga balakin ng VILLAMARIA
MOTORS sa lalo pang ipagtatagumpay at ikakatibay ng Samahan.

17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa

pasahero upang hindi kainisan ng kapwa driver at maiwasan ang pagkakasangkot
sa anumang gulo.

18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan lalo na
sa umaga bago pumasada, at sa hapon o gabi naman ay sisikapin mapanatili ang
kalinisan nito.

19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng dalawa o

higit pang araw sa lalawigan ay dapat lamang na ipagbigay alam muna ito sa
VILLAMARIA MOTORS upang maiwasan ang mga anumang suliranin.

20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-unahan sa

kaninumang sasakyan upang maiwasan ang aksidente.

21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa

VILLAMARIA MOTORS mabuti man or masama ay iparating agad ito sa
kinauukulan at iwasan na iparating ito kung [kani-kanino] lamang upang
maiwasan ang anumang usapin. Magsadya agad sa opisina ng VILLAMARIA
MOTORS.

22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong
sinasang-ayunan at buong sikap na pangangalagaan ng TAUHAN NG IKALAWANG
PANIG ang nasabing sasakyan at gagamitin lamang ito sa paghahanapbuhay at
wala nang iba pa.51

The parties expressly agreed that petitioner, as vendor, and respondent, as vendee, entered
into a contract to sell the jeepney on a daily installment basis of P550.00 payable in four years
and that petitioner would thereafter become its owner. A contract is one of conditional sale,
oftentimes referred to as contract to sell, if the ownership or title over the
property sold is retained by the vendor, and is not passed to the vendee unless and until there
is full payment of the purchase price and/or upon faithful compliance with the other terms and
conditions that may lawfully be stipulated.52 Such payment or satisfaction of other
preconditions, as the case may be, is a positive suspensive condition, the failure of which is not
a breach of contract, casual or serious, but simply an event that would prevent the obligation of
the vendor to convey title from acquiring binding force. 53 Stated differently, the efficacy or
obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a
future and uncertain event so that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed. 54 The vendor may extrajudicially
terminate the operation of the contract, refuse conveyance, and retain the sums or installments
already received, where such rights are expressly provided for.55

Under the boundary-hulog scheme, petitioner retained ownership of the jeepney although its
material possession was vested in respondent as its driver. In case respondent failed to make
his P550.00 daily installment payment for a week, the agreement would be of no force and
effect and respondent would have to return the jeepney to petitioner; the employer-employee
relationship would likewise be terminated unless petitioner would allow respondent to continue
driving the jeepney on a boundary basis of P550.00 daily despite the termination of their
vendor-vendee relationship.

The juridical relationship of employer-employee between petitioner and respondent was not
negated by the foregoing stipulation in the Kasunduan, considering that petitioner retained
control of respondent's conduct as driver of the vehicle. As correctly ruled by the CA:

The exercise of control by private respondent over petitioner's conduct in operating the jeepney
he was driving is inconsistent with private respondent's claim that he is, or was, not engaged in
the transportation business; that, even if petitioner was allowed to let some other person drive
the unit, it was not shown that he did so; that the existence of an employment relation is not
dependent on how the worker is paid but on the presence or absence of control over the means
and method of the work; that the amount earned in excess of the "boundary hulog" is
equivalent to wages; and that the fact that the power of dismissal was not mentioned in the
Kasunduan did not mean that private respondent never exercised such power, or could not
exercise such power.

Moreover, requiring petitioner to drive the unit for commercial use, or to wear an identification
card, or to don a decent attire, or to park the vehicle in Villamaria Motors garage, or to inform
Villamaria Motors about the fact that the unit would be going out to the province for two days of
more, or to drive the unit carefully, etc. necessarily related to control over the means by which
the petitioner was to go about his work; that the ruling applicable here is not Singer Sewing
Machine but National Labor Union since the latter case involved jeepney owners/operators and
jeepney drivers, and that the fact that the "boundary" here represented installment payment of
the purchase price on the jeepney did not withdraw the relationship from that of employer-
employee, in view of the overt presence of supervision and control by the employer.56

Neither is such juridical relationship negated by petitioner's claim that the terms and conditions
in the Kasunduan relative to respondent's behavior and deportment as driver was for his and
respondent's benefit: to insure that respondent would be able to pay the requisite daily
installment of P550.00, and that the vehicle would still be in good condition despite the lapse of
four years. What is primordial is that petitioner retained control over the conduct of the
respondent as driver of the jeepney.

Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is entitled to
exercise supervision and control over the respondent, by seeing to it that the route provided in
his franchise, and the rules and regulations of the Land Transportation Regulatory Board are
duly complied with. Moreover, in a business establishment, an identification card is usually
provided not just as a security measure but to mainly identify the holder thereof as a bona fide
employee of the firm who issues it.57

As respondent's employer, it was the burden of petitioner to prove that respondent's

termination from employment was for a lawful or just cause, or, at the very least, that
respondent failed to make his daily remittances of P550.00 as boundary. However, petitioner
failed to do so. As correctly ruled by the appellate court:

It is basic of course that termination of employment must be effected in accordance with law.
The just and authorized causes for termination of employment are enumerated under Articles
282, 283 and 284 of the Labor Code.

Parenthetically, given the peculiarity of the situation of the parties here, the default in the
remittance of the boundary hulog for one week or longer may be considered an additional cause
for termination of employment. The reason is because the Kasunduan would be of no force and
effect in the event that the purchaser failed to remit the boundary hulog for one week. The
Kasunduan in this case pertinently stipulates:

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG
sa loob ng isang linggo ay NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at
kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG
UNANG PANIG na wala ng paghahabol pa.

Moreover, well-settled is the rule that, the employer has the burden of proving that the
dismissal of an employee is for a just cause. The failure of the employer to discharge this
burden means that the dismissal is not justified and that the employee is entitled to
reinstatement and back wages.

In the case at bench, private respondent in his position paper before the Labor Arbiter, alleged
that petitioner failed to pay the miscellaneous fee of P10,000.00 and the yearly registration of
the unit; that petitioner also stopped remitting the "boundary hulog," prompting him (private
respondent) to issue a "Paalala," which petitioner however ignored; that petitioner even brought
the unit to his (petitioner's) province without informing him (private respondent) about it; and
that petitioner eventually abandoned the vehicle at a gasoline station after figuring in an
accident. But private respondent failed to substantiate these allegations with solid, sufficient
proof. Notably, private respondent's allegation viz, that he retrieved the vehicle from the gas
station, where petitioner abandoned it, contradicted his statement in the Paalala that he would
enforce the provision (in the Kasunduan) to the effect that default in the remittance of the
boundary hulog for one week would result in the forfeiture of the unit. The Paalala reads as
follows:

"Sa lahat ng mga kumukuha ng sasakyan

"Sa pamamagitan ng 'BOUNDARY HULOG'

"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na ang
paragrapo 13 na nagsasaad na kung hindi kayo makapagbigay ng Boundary Hulog sa loob ng
isang linggo ay kusa ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng wala ng
paghahabol pa.

"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong ipatutupad ang
nasabing Kasunduan kaya't aking pinaaalala sa inyong lahat na tuparin natin ang nakalagay sa
kasunduan upang maiwasan natin ito.
"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo makaabot pa
sa korte kung sakaling hindi ninyo isasauli ang inyong sasakyan na hinuhulugan na ang mga
magagastos ay kayo pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan ang
naging dahilan ng pagsampa ng kaso.

"Sumasainyo

"Attendance: 8/27/99

"(The Signatures appearing herein

include (sic) that of petitioner's) (Sgd.)

OSCAR VILLAMARIA, JR."

If it were true that petitioner did not remit the boundary hulog for one week or more, why did
private respondent not forthwith take steps to recover the unit, and why did he have to wait for
petitioner to abandon it?ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

On another point, private respondent did not submit any police report to support his claim that
petitioner really figured in a vehicular mishap. Neither did he present the affidavit of the guard
from the gas station to substantiate his claim that petitioner abandoned the unit there.58

Petitioner's claim that he opted not to terminate the employment of respondent because of
magnanimity is negated by his (petitioner's) own evidence that he took the jeepney from the
respondent only on July 24, 2000.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals
in CA-G.R. SP No. 78720 is AFFIRMED. Costs against petitioner.

SO ORDERED.