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

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

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

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

2.

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

3.

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

4.

Conduct pre-employment physical check-up of prospective employees with no additional medical

fee;

5.

Conduct home visits whenever necessary;

6.

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

The parties agreed and formalized respondents proposal in a document denominated as RETAINERSHIP
CONTRACT[4] which will be for a period of one year subject to renewal, it being made clear therein that
respondent will cover the retainership the Company previously had with Dr. K. Eulau and that respondents
retainer fee will be at P4,000.00 a month. Said contract was renewed yearly.[5] The retainership arrangement
went on from 1981 to 1994 with changes in the retainers fee. However, for the years 1995 and 1996, renewal
of the contract was only made verbally.
The turning point in the parties relationship surfaced in December 1996 when Philcom, thru a
letter[6] bearing on the subject boldly written as TERMINATION RETAINERSHIP CONTRACT, informed De
Vera of its decision to discontinue the latters retainers contract with the Company effective at the close of

business hours of December 31, 1996 because management has decided that it would be more practical to
provide medical services to its employees through accredited hospitals near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal dismissal before the National Labor Relations
Commission (NLRC), alleging that that he had been actually employed by Philcom as its company physician
since 1981 and was dismissed without due process. He averred that he was designated as a company
physician on retainer basis for reasons allegedly known only to Philcom. He likewise professed that since he
was not conversant with labor laws, he did not give much attention to the designation as anyway he worked on
a full-time basis and was paid a basic monthly salary plus fringe benefits, like any other regular employees of
Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a decision [7] dismissing De
Veras complaint for lack of merit, on the rationale that as a retained physician under a valid contract mutually
agreed upon by the parties, De Vera was an independent contractor and that he was not dismissed but
rather his contract with [PHILCOM] ended when said contract was not renewed after December 31, 1996.
On De Veras appeal to the NLRC, the latter, in a decision [8] dated 23 October 2000, reversed (the word
used is modified) that of the Labor Arbiter, on a finding that De Vera is Philcoms regular employee and
accordingly directed the company to reinstate him to his former position without loss of seniority rights and
privileges and with full backwages from the date of his dismissal until actual reinstatement. We quote the
dispositive portion of the decision:
WHEREFORE, the assailed decision is modified in that respondent is ordered to reinstate complainant to his
former position without loss of seniority rights and privileges with full backwages from the date of his dismissal
until his actual reinstatement computed as follows:
Backwages:
a)

Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.
P44,400.00 x 39.33 mos.

b)

13th Month Pay:

1/12 of P1,750,185.00

c)

P1,750,185.00

145,848.75

Travelling allowance:
P1,000.00 x 39.33 mos.
GRAND TOTAL

39,330.00z
P1,935,363.75

The decision stands in other aspects.

SO ORDERED.

[9]

With its motion for reconsideration having been denied by the NLRC in its order of 27 February 2001,
Philcom then went to the Court of Appeals on a petition for certiorari, thereat docketed as CA-G.R. SP No.

65178, imputing grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC
when it reversed the findings of the labor arbiter and awarded thirteenth month pay and traveling allowance to
De Vera even as such award had no basis in fact and in law.
On 12 September 2002, the Court of Appeals rendered a decision, [10] modifying that of the NLRC by
deleting the award of traveling allowance, and ordering payment of separation pay to De Vera in lieu of
reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of public respondent, dated 23 October 2000,
is MODIFIED. The award of traveling allowance is deleted as the same is hereby DELETED. Instead of
reinstatement, private respondent shall be paid separation pay computed at one (1) month salary for every
year of service computed from the time private respondent commenced his employment in 1981 up to the
actual payment of the backwages and separation pay. The awards of backwages and 13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was denied by the appellate court in its resolution of
13 February 2003.[11]
Hence, Philcoms present recourse on its main submission that THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION AND RENDERING THE QUESTIONED DECISION AND RESOLUTION IN A WAY
THAT IS NOT IN ACCORD WITH THE FACTS AND APPLICABLE LAWS AND JURISPRUDENCE WHICH
DISTINGUISH LEGITIMATE JOB CONTRACTING AGREEMENTS FROM THE EMPLOYER-EMPLOYEE
RELATIONSHIP.
We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this Court in decisions
rendered by the Court of Appeals. There are instances, however, where the Court departs from this rule and
reviews findings of fact so that substantial justice may be served. The exceptional instances are where:
xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the
inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court of Appeals went beyond the
issues of the case and its findings are contrary to the admissions of both appellant and appellees; (7) the
findings of fact of the Court of Appeals are contrary to those of the trial court; (8) said findings of facts are
conclusions without citation of specific evidence on which they are based; (9) the facts set forth in the petition
as well as in the petitioners main and reply briefs are not disputed by the respondents; and (10) the findings of
fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the
evidence on record.[12]
As we see it, the parties respective submissions revolve on the primordial issue of whether an employeremployee relationship exists between petitioner and respondent, the existence of which is, in itself, a question
of fact[13] well within the province of the NLRC. Nonetheless, given the reality that the NLRCs findings are at
odds with those of the labor arbiter, the Court, consistent with its ruling in Jimenez vs. National Labor Relations
Commission,[14] is constrained to look deeper into the attendant circumstances obtaining in this case, as
appearing on record.

In a long line of decisions,[15] the Court, in determining the existence of an employer-employee relationship,
has invariably adhered to the four-fold test, to wit: [1] the selection and engagement of the employee; [2] the
payment of wages; [3] the power of dismissal; and [4] the power to control the employees conduct, or the socalled control test, considered to be the most important element.
Applying the four-fold test to this case, we initially find that it was respondent himself who sets the
parameters of what his duties would be in offering his services to petitioner. This is borne by no less than his
15 May 1981 letter[16] which, in full, reads:
May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company physician with your corporation if you deemed it
necessary. I have the necessary qualifications, training and experience required by such position and I am
confident that I can serve the best interests of your employees, medically.
My plan of works and targets shall cover the duties and responsibilities required of a practitioner in industrial
medicine which includes the following:
1. Application of preventive medicine including periodic check-up of employees;
2.

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

3.

Management and treatment of employees that may necessitate hospitalization including

emergency cases and accidents;

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

fee;
5. Conduct home visits whenever necessary;
6.

Attend to certain medical administrative functions such as accomplishing medical forms,

evaluating conditions of employees applying for sick leave of absence and subsequently issuing
proper certification, and all matters referred which are medical in nature.

On the subject of compensation for the services that I propose to render to the corporation, you may state an
offer based on your belief that I can very well qualify for the job having worked with your organization for
sometime now.

I shall be very grateful for whatever kind attention you may extend on this matter and hoping that it will merit
acceptance, I remain
Very truly yours,
(signed)
RICARDO V. DE VERA, M.D.
Significantly, the foregoing letter was substantially the basis of the labor arbiters finding that there existed
no employer-employee relationship between petitioner and respondent, in addition to the following factual
settings:
The fact that the complainant was not considered an employee was recognized by the complainant himself in a
signed letter to the respondent dated April 21, 1982 attached as Annex G to the respondents Reply and
Rejoinder. Quoting the pertinent portion of said letter:
To carry out your memo effectively and to provide a systematic and workable time schedule which will serve
the best interests of both the present and absent employee, may I propose an extended two-hour service
(1:00-3:00 P.M.) during which period I can devote ample time to both groups depending upon the urgency of
the situation. I shall readjust my private schedule to be available for the herein proposed extended hours,
should you consider this proposal.
As regards compensation for the additional time and services that I shall render to the employees, it is
dependent on your evaluation of the merit of my proposal and your confidence on my ability to carry out
efficiently said proposal.
The tenor of this letter indicates that the complainant was proposing to extend his time with the respondent and
seeking additional compensation for said extension. This shows that the respondent PHILCOM did not have
control over the schedule of the complainant as it [is] the complainant who is proposing his own schedule and
asking to be paid for the same. This is proof that the complainant understood that his relationship with the
respondent PHILCOM was a retained physician and not as an employee. If he were an employee he could not
negotiate as to his hours of work.
The complainant is a Doctor of Medicine, and presumably, a well-educated person. Yet, the complainant, in his
position paper, is claiming that he is not conversant with the law and did not give much attention to his job titleon a retainer basis. But the same complainant admits in his affidavit that his service for the respondent was
covered by a retainership contract [which] was renewed every year from 1982 to 1994. Upon reading the
contract dated September 6, 1982, signed by the complainant himself (Annex C of Respondents Position
Paper), it clearly states that is a retainership contract. The retainer fee is indicated thereon and the duration of
the contract for one year is also clearly indicated in paragraph 5 of the Retainership Contract. The complainant
cannot claim that he was unaware that the contract was good only for one year, as he signed the same
without any objections. The complainant also accepted its renewal every year thereafter until 1994. As a
literate person and educated person, the complainant cannot claim that he does not know what contract he
signed and that it was renewed on a year to year basis.[17]
The labor arbiter added the indicia, not disputed by respondent, that from the time he started to work with
petitioner, he never was included in its payroll; was never deducted any contribution for remittance to the
Social Security System (SSS); and was in fact subjected by petitioner to the ten (10%) percent withholding tax

for his professional fee, in accordance with the National Internal Revenue Code, matters which are simply
inconsistent with an employer-employee relationship. In the precise words of the labor arbiter:
xxx xxx xxx After more than ten years of services to PHILCOM, the complainant would have noticed that no
SSS deductions were made on his remuneration or that the respondent was deducting the 10% tax for his fees
and he surely would have complained about them if he had considered himself an employee of PHILCOM. But
he never raised those issues. An ordinary employee would consider the SSS payments important and thus
make sure they would be paid. The complainant never bothered to ask the respondent to remit his SSS
contributions. This clearly shows that the complainant never considered himself an employee of PHILCOM
and thus, respondent need not remit anything to the SSS in favor of the complainant.[18]
Clearly, the elements of an employer-employee relationship are wanting in this case. We may add that the
records are replete with evidence showing that respondent had to bill petitioner for his monthly professional
fees.[19] It simply runs against the grain of common experience to imagine that an ordinary employee has yet to
bill his employer to receive his salary.
We note, too, that the power to terminate the parties relationship was mutually vested on both. Either
may terminate the arrangement at will, with or without cause.[20]
Finally, remarkably absent from the parties arrangement is the element of control, whereby the
employer has reserved the right to control the employee not only as to the result of the work done but also as
to the means and methods by which the same is to be accomplished.[21]
Here, petitioner had no control over the means and methods by which respondent went about performing
his work at the company premises. He could even embark in the private practice of his profession, not to
mention the fact that respondents work hours and the additional compensation therefor were negotiated upon
by the parties.[22] In fine, the parties themselves practically agreed on every terms and conditions of
respondents engagement, which thereby negates the element of control in their relationship. For sure,
respondent has never cited even a single instance when petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the NLRC and the Court of Appeals ruled
that respondent is petitioners regular employee at the time of his separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondents written retainer contract was renewed annually from
1981 to 1994 and the alleged renewal for 1995 and 1996, when it was allegedly terminated, was verbal.
Article 280 of the Labor code (sic) provides:
The provisions of written agreement to the contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to be regular where the employee has been
engaged to perform in the usual business or trade of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or termination of which has been determined at the
time of the engagement of the employee or where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph:
Provided, That, any employee who has rendered at least one (1) year of service, whether such is

continuous or broken, shall be considered a regular with respect to the activity in which he is
employed and his employment shall continue while such activity exists.
Parenthetically, the position of company physician, in the case of petitioner, is usually necessary and desirable
because the need for medical attention of employees cannot be foreseen, hence, it is necessary to have a
physician at hand. In fact, the importance and desirability of a physician in a company premises is recognized
by Art. 157 of the Labor Code, which requires the presence of a physician depending on the number of
employees and in the case at bench, in petitioners case, as found by public respondent, petitioner employs
more than 500 employees.
Going back to Art. 280 of the Labor Code, it was made therein clear that the provisions of a written agreement
to the contrary notwithstanding or the existence of a mere oral agreement, if the employee is engaged in the
usual business or trade of the employer, more so, that he rendered service for at least one year, such
employee shall be considered as a regular employee. Private respondent herein has been with petitioner
since 1981 and his employment was not for a specific project or undertaking, the period of which was predetermined and neither the work or service of private respondent seasonal. (Emphasis by the CA itself).
We disagree to the foregoing ratiocination.
The appellate courts premise that regular employees are those who perform activities which are desirable
and necessary for the business of the employer is not determinative in this case. For, we take it that any
agreement may provide that one party shall render services for and in behalf of another, no matter how
necessary for the latters business, even without being hired as an employee. This set-up is precisely true
in the case of an independent contractorship as well as in an agency agreement. Indeed, Article 280 of the
Labor Code, quoted by the appellate court, is not the yardstick for determining the existence of an employment
relationship. As it is, the provision merely distinguishes between two (2) kinds of employees, i.e., regular and
casual. It does not apply where, as here, the very existence of an employment relationship is in dispute.[23]
Buttressing his contention that he is a regular employee of petitioner, respondent invokes Article 157 of the
Labor Code, and argues that he satisfies all the requirements thereunder. The provision relied upon reads:
ART. 157. Emergency medical and dental services. It shall be the duty of every employer to furnish his
employees in any locality with free medical and dental attendance and facilities consisting of:
(a)

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

(b)

The services of a full-time registered nurse, a part-time physician and dentist, and an
emergency clinic, when the number of employees exceeds two hundred (200) but not more than
three hundred (300); and

(c)

The services of a full-time physician, dentist and full-time registered nurse as well as a dental
clinic, and an infirmary or emergency hospital with one bed capacity for every one hundred
(100) employees when the number of employees exceeds three hundred (300).

In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot
stay in the premises of the establishment for at least two (2) hours, in the case of those engaged on part-time
basis, and not less than eight (8) hours in the case of those employed on full-time basis. Where the
undertaking is nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject to
such regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and dental
treatment and attendance in case of emergency.
Had only respondent read carefully the very statutory provision invoked by him, he would have noticed
that in non-hazardous workplaces, the employer may engage the services of a physician on retained basis.
As correctly observed by the petitioner, while it is true that the provision requires employers to engage the
services of medical practitioners in certain establishments depending on the number of their employees,
nothing is there in the law which says that medical practitioners so engaged be actually hired as employees,
[24]
adding that the law, as written, only requires the employer to retain, not employ, a part-time physician who
needed to stay in the premises of the non-hazardous workplace for two (2) hours.[25]
Respondent takes no issue on the fact that petitioners business of telecommunications is not hazardous
in nature. As such, what applies here is the last paragraph of Article 157 which, to stress, provides that the
employer may engage the services of a physician and dentist on retained basis, subject to such regulations
as the Secretary of Labor may prescribe. The successive retainership agreements of the parties definitely
hue to the very statutory provision relied upon by respondent.
Deeply embedded in our jurisprudence is the rule that courts may not construe a statute that is free from
doubt. Where the law is clear and unambiguous, it must be taken to mean exactly what it says, and courts
have no choice but to see to it that the mandate is obeyed. [26] As it is, Article 157 of the Labor Code clearly and
unequivocally allows employers in non-hazardous establishments to engage on retained basis the service of
a dentist or physician. Nowhere does the law provide that the physician or dentist so engaged thereby
becomes a regular employee. The very phrase that they may be engaged on retained basis, revolts against
the idea that this engagement gives rise to an employer-employee relationship.
With the recognition of the fact that petitioner consistently engaged the services of respondent on a
retainer basis, as shown by their various retainership contracts, so can petitioner put an end, with or without
cause, to their retainership agreement as therein provided.[27]
We note, however, that even as the contracts entered into by the parties invariably provide for a 60-day
notice requirement prior to termination, the same was not complied with by petitioner when it terminated on 17
December 1996 the verbally-renewed retainership agreement, effective at the close of business hours of 31
December 1996.
Be that as it may, the record shows, and this is admitted by both parties, [28] that execution of the NLRC
decision had already been made at the NLRC despite the pendency of the present recourse. For sure,
accounts of petitioner had already been garnished and released to respondent despite the previous Status
Quo Order[29] issued by this Court. To all intents and purposes, therefore, the 60-day notice requirement has
become moot and academic if not waived by the respondent himself.
WHEREFORE, the petition is GRANTED and the challenged decision of the Court of Appeals REVERSED
and SET ASIDE. The 21 December 1998 decision of the labor arbiter is REINSTATED.
No pronouncement as to costs.
SO ORDERED.

2. G.R. No. 111501 March 5, 1996

PHILIPPINE FUJI XEROX CORPORATION, JENNIFER A. BERNARDO, and ATTY. VICTORINO
LUIS,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (First Division), PAMBANSANG KILUSAN NG PAGGAWA, (KILUSAN)-TUCP, PHILIPPINE XEROX EMPLOYEES UNION-KILUSAN and PEDRO
GARADO, respondents.
MENDOZA, J.:p
This is a petition for certiorari to set aside the decision of the NLRC, finding petitioner Philippine Fuji Xerox
Corporation (Fuji Xerox) guilty of illegally dismissing private respondent Pedro Garado and ordering him
reinstated. The NLRC decision reverses on appeal a decision of the Labor Arbiter finding private respondent to
be an employee of another firm, the Skillpower, Inc., and not of petitioner Fuji Xerox.
The question raised in this case is whether private respondent is an employee of Fuji Xerox (as the NLRC
found) or of Skillpower, Inc. (as the Labor Arbiter found). For reasons to be hereafter explained, we hold that
private respondent is an employee of Fuji Xerox and accordingly dismiss the petition for review of Fuji Xerox.
The following are the facts.
On May 6, 1977, petitioner Fuji Xerox entered into an agreement under which Skillpower, Inc. supplied workers
to operate copier machines of Fuji Xerox as part of the latter's "Xerox Copier Project" in its sales offices.
Private respondent Pedro Garado was assigned as key operator at Fuji Xerox's branch. at Buendia, Makati,
Metro Manila, in February of 1980.

In February of 1983, Garado went on leave and his place was taken over by a substitute. Upon his return in
March, he discovered that there was a spoilage of over 600 copies. Afraid that he might be blamed for the
spoilage, he tried to talk a service technician of Fuji Xerox into stopping the meter of the machine.
The technician refused Garado's request, but this incident came to the knowledge of Fuji Xerox which, on May
31, 1983, reported the matter to Skillpower, Inc. The next day, Skillpower, Inc. wrote Garado, ordering him to
explain. In the meantime, it suspended him from work. Garado filed a complaint for illegal dismissal.
The Labor Arbiter found that Garado applied for work to Skillpower, Inc.; that in 1980 he was employed and
made to sign a contract; that although he received his salaries regularly from Fuji Xerox, it was Skillpower, Inc.
which exercised control and supervision over his work; that Skillpower, Inc. had substantial capital and
investments in machinery, equipment, and service vehicles, and assets totalling P5,008,812.43. On the basis
of these findings the Labor Arbiter held in a decision rendered on October 30, 1986 that Garado was an
employee of Skillpower, Inc., and that he had merely been assigned by Skillpower, Inc. to Fuji Xerox. Hence,
the Labor Arbiter dismissed Garado's complaint.
On the other hand, the NLRC found Garado to be infact an employee of petitioner Fuji Xerox and by it to have
been illegally dismissed. The NLRC found that although Garado's request was wrongful, dismissal would be a
disproportionate penalty. The NLRC held that although Skillpower, Inc. had substantial capital assets, the fact
was that the copier machines, which Garado operated, belonged to petitioner Fuji Xerox, and that although it
was Skillpower, Inc. which had suspended Garado, the latter merely acted at the behest of Fuji Xerox. The
NLRC found that Garado worked under the control and supervision of Fuji Xerox, which paid his salaries, and
that Skillpower, Inc. merely acted as paymaster-agent of Fuji Xerox. The NLRC held that Skillpower, Inc. was a
labor-only contractor and Garado should be deemed to have been directly employed by Fuji Xerox, regardless
of the agreement between it and Skillpower, Inc. Accordingly, the NLRC ordered:
WHEREFORE, premises considered, the respondents are hereby ordered to immediately
reinstate complainant Pedro Garado to his former position as key operator with three (3) years
backwages, without qualification or reduction whatsoever . . . . Except as herein above
MODIFIED, the appealed decision is hereby Affirmed.
Hence the present petition. Fuji Xerox argues that Skillpower, Inc. is an independent contractor and that
Garado is its employee for the following reasons:
(1) Garado was recruited by Skillpower, Inc.;
(2) The work done by Garado was not necessary to the conduct of the business of Fuji Xerox;
(3) Garado's salaries and benefits were paid directly by Skillpower, Inc.;
(4) Garado worked under the control of Skillpower, Inc.; and
(5) Skillpower, Inc. is a highly-capitalized business venture.
The contentions are without merit.
Fuji Xerox contends that Garado was actually recruited by Skillpower, Inc. as part of its personnel pool and
later merely assigned to it (petitioner) . It is undisputed, however, that since 1980, 1 when Garado was first
assigned to work at Fuji Xerox, he had never been assigned to any other company so much so that by 1984,
he was already a member of the union which petitioned the company for his regularization. 2 From 1980 to

1984 he worked exclusively for petitioner. Indeed, he was recruited by Skillpower, Inc. solely for assignment to
Fuji Xerox to work in the latter's Xerox Copier Project.3
Petitioners claim that Skillpower, Inc. has other clients to whom it provided "temporary" services. That,
however, is irrelevant. What is important is that once employed, Garado was never assigned to any other client
of Skillpower, Inc. In fact, although under the agreement Skillpower, Inc. was supposed to provide only
"temporary" services, Skillpower, Inc. actually supplied Fuji Xerox the labor which the latter needed for its
Xerox Copier Project for seven (7) years, from 1977 to 1984.
On January 1, 1983, private respondent signed a contract entitled "Appointment as Contract Worker," in which
it was stated that private respondent's status was that of a contract worker for a definite period from January 1,
1983 to June 30, 1983. As such, private respondent's employment was considered temporary, to terminate
automatically six (6) months afterwards, without necessity of any notice and without entitling private
respondent to separation or termination pay. Private respondent was made to understand that he was an
employee of Skillpower, Inc., and not of the client to which he was assigned. Therefore, the termination of the
contract or any renewal or extension thereof did not entitle him to become an employee of the client and the
latter was not under any obligation to appoint him as such, "notwithstanding the total duration of the contract or
any extension or renewal thereof."
This is nothing but a crude attempt to circumvent the law and undermine the security of tenure of private
respondent by employing workers under six-month contracts which are later extended indefinitely through
renewals. As this Court held in the Philippine Bank of Communications v. NLRC: 4
It is not difficult to see that to uphold the contractual arrangement between the bank and CESI
would in effect be to permit employers to avoid the necessity of hiring regular or permanent
employees and to enable them to keep their employees indefinitely on a temporary or casual
status, thus to deny them security of tenure in their jobs. Article 106 of the Labor Code is
precisely designed to prevent such a result.
Second. Petitioner contends that the service provided by Skillpower, Inc., namely, operating petitioners' xerox
machine, is not directly related nor necessary to the business of selling and leasing copier machines of
petitioner. Petitioners claim that their Xerox Copier Project is just for public service and is purely incidental to its
business. What petitioners earn from the project is not even sufficient to defray their expenses, let alone bring
profits to them. As such, the project is no different from other services which can legally be contracted out,
such as security and janitorial services. Petitioners contend that the copier service can be considered as part
of their "housekeeping" tasks which can be let to independent contractors. 5
We disagree. As correctly held by the NLRC, at the very least, the Xerox Copier Project of petitioners promotes
goodwill for the company . It may not generate income for the company but there are activities which a
company may find necessary to engage in because they ultimately redound to its benefit. Operating the
company's copiers at its branches advertises the quality of their products and promotes the company's
reputation and public image. It also advertises the utility and convenience of having a copier machine. It is
noteworthy that while not operated for profit the copying service is not intended either to be "promotional," as,
indeed, petitioner charged a fee for the copies made.
It is wrong to say that if a task is not directly related to the employer's business, or it falls under what may be
considered "housekeeping activities," the one performing the task is a job contractor. The determination of the
existence of an employer-employee relationship is defined by law according to the facts of each case,
regardless of the nature of the activities involved.

Third. Petitioners contend that it never exercised control over the conduct of private respondent. Petitioners
allege that the salaries paid to Garado, as well as his employment records, vouchers and loanchecks from the
SSS were coursed through Skillpower, Inc. In addition private respondent applied for vacation leaves to
Skillpower, Inc.
It is also contended that it was Skillpower, Inc. which twice required private respondent to explain why he
should not be dismissed for the spoilage in Fuji Xerox's Buendia branch and suspended him pending the result
of the investigation. According to petitioners, although they conducted an administrative investigation, the
purpose was only to determine the complicity of their own employees in the incident, if any, and any criminal
liability of private respondent.
This claim is belied by two letters written by Atty. Victorino H. Luis, Legal and Industrial Relations Officer of the
company, to the union president, Nick Macaraig. The first letter, dated July 6, 1983, stated:
This has reference to your various letters dated today on administrative case concerning
Messrs. Crisostomo Cruz, Pedro Garado and Ms. Evelyn Abenes.
In connection with the above and in the case likewise of Mr. Dionisio Guyala, please be advised
that the proceedings against them are being carried out under the terms, and in accordance
with the provisions of our Policy and Procedure on Employment Termination as well as Policy
on Disciplinary Actions dated October 1, 1982, and not under the Grievance Machinery under
our CBA.
Your action apparently is premised on the assumption that we are now in the Grievance Stage,
which is premature. If we have allowed the Union to participate in our Investigation and
Administrative panels, it is only a concession on management's part in accordance with No. IV,
Section B, Paragraph 3 of the abovecited policy on the investigation, the
Personnel/Administrative Department may consult the Union whenever necessary.
We shall entertain grievances under our CBA Machinery only after decisions have been made
on the foregoing cases and should you find the penalties imposed, if any, as unjust, unduly
harsh, discriminating otherwise fit subject for grievance by the Union itself under the terms of
our CBA.
Accordingly, we are proceeding with our investigations on the administrative charges with or
without your presence or that of the respondents if it is the latter's preference, as in the case of
Crisostomo Cruz, to ignore the same. (Emphasis ours)
The second letter, dated July 13, 1983, 6 read:
You obviously persist in pursuing the misconception that our allowing your presence in the
administrative proceedings against Messrs. Guyala, Cruz, et al. has set the Grievance
Machinery under our CBA into play. We can only reiterate our statement in our letter of July 6
that we were implementing Policy and Procedures on Termination dated October 1, 1982 and
that your presence in helping bolster the defense for the respondents was only with our
forbearance in the spirit of cooperation in order to better ferret out the truth.
The power or authority to impose discipline and disciplinary measures upon employees is a
basic prerogative of Management, something that cannot be abdicated, much less ceded to a
CBA Grievance Committee which is limited to settling disputes and misunderstanding as to

interpretation, application, or violation of any provisions of the CBA agreement . . . As likewise

pointed out in our letter of July 6 recourse to Grievance may possibly be resorted to if in the
Union's opinion a penalty imposed upon a respondent Union member is discriminating to the
member or otherwise illegal, unduly harsh, and the like. Ultimately, the remedy lies in appeal to
the NLRC, as in similar cases in the past. (Emphasis ours)
These letters reveal the role which Fuji Xerox played in the dismissal of the private respondent. They dispel
any doubt that Fuji Xerox exercised disciplinary authority over Garado and that Skillpower, Inc. issued the
order of dismissal merely in obedience to the decision of petitioner.
Fourth. Petitioner avers that Skillpower, Inc. is a highly-capitalized business venture, registered as an
"independent employer" with the Securities and Exchange Commission as well as the Department of Labor
and Employment. Skillpower, Inc. is a member of the Social Security System. In 1984 it had assets exceeding
P5 million pesos and at least 20 typewriters, office equipment and service vehicles. It had employees of its own
and a pool of 25 clerks assigned to clients on a temporary basis.
Petitioners cite the case of Neri v. NLRC, 7 in which it was held that the Building Care Corporation (BCC) was
an independent contractor on the basis of finding that it had substantial capital, although there was no
evidence that it had investments in the form of tools, equipment, machineries and work premises. But the Court
in that case considered not only the capitalization of the BCC but also the fact that BCC was providing specific
special services (radio/telex operator and janitor) to the employer; that in another case 8 the Court had already
found that the BCC was an independent contractor; that BCC retained control over the employees and the
employer was actually just concerned with the end-result; that BCC had the power to reassign the employees
and their deployment was not subject to the approval of the employer; and that BCC was paid in lump sum for
the services it rendered. These features of that case make it distinguishable from the present one.
Here, the service being rendered by private respondent was not a specific or special skill that Skillpower, Inc.
was in the business of providing. Although in the Neri case the telex machine operated by the employee
belonged to the employer, the service was deemed permissible because it was specific and technical. This
cannot be said of the service rendered by private respondent Garado.
The Rules to Implement of the Labor Code, Book III, Rule VIII, 8, provide that there is job contracting when
the following conditions are fulfilled:
(1) The contractor carries on an independent business and undertakes the contract work on his
own account under his own responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools equipment,
machineries, work premises, and other materials which are necessary in the conduct of his
business.
Otherwise, according to Art. 106 of the Labor code,
There is "labor-only" contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such persons are performing
activities which are directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the employer who shall be

responsible to the workers in the same manner and extent as if the latter were directly employed
by him.
Petitioner Fuji Xerox argues that Skillpower, Inc. had typewriters and service vehicles for the conduct of its
business independently of the petitioner. But typewriters and vehicles bear no direct relationship to the job for
which Skillpower, Inc. contracted its service of operating copier machines and offering copying services to the
public. The fact is that Skillpower, Inc. did not have copying machines of its own. What it did was simply to
supply manpower to Fuji Xerox. The phrase "substantial capital and investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his business," in the
Implementing Rules clearly contemplates tools, equipment, etc., which are directly related to the service it is
being contracted to render. One who does not have an independent business for undertaking the job
contracted for is just an agent of the employer.
Fifth. The Agreement between petitioner Fuji Xerox and Skillpower, Inc. provides that Skillpower, Inc. is an
independent contractor and that the workers hired by it "shall not, in any manner and under any circumstances,
be considered employees of [the] Company, and that the Company has no control or supervision whatsoever
over the conduct of the Contractor or any of its workers in respect to how they accomplish their work or
perform the Contractor's obligations under this AGREEMENT."
In Tabas v. California Manufacturing Company, Inc., 9 this Court held on facts similar to those in case at bar:
There is no doubt that in the case at bar, Livi performs "manpower services," meaning to say, it
contracts out labor in favor of clients. We hold that it is one notwithstanding its vehement claims
to the contrary, and notwithstanding the provision of the contract that it is "an independent
contractor." The nature of one's business is not determined by self-serving appellations one
attaches thereto but by the tests provided by statute and prevailing case law. The bare fact that
Livi maintains a separate line of business does not extinguish the equal fact that it has provided
California with workers to pursue the latter's own business. In this connection, we do not agree
that the petitioners had been made to perform activities "which are not directly related to the
general business of manufacturing," California's purported "principal operation activity." The
petitioners had been charged with "merchandising [sic] promotion or sale of the products of
[California] in the different sales outlets in Metro Manila including task and occasional [sic] price
tagging," an activity that is doubtless, an integral part of the manufacturing business. It is not,
then, as if Livi had served as its (California's promotions or sales arm or agents, or otherwise,
rendered a piece of work it (California) could not have itself done; Livi as a placement agency,
had simply supplied it with the manpower necessary to carry out its (California's) merchandising
activities, using its (California's) premises and equipment.
xxx xxx xxx
The fact that the petitioners have allegedly admitted being Livi's "direct employees" in their
complaints is nothing conclusive. For one thing, the fact that the petitioners were (are), will not
absolve California since liability has been imposed by legal operation. For another, and as we
indicated, the relations of parties must be judged from case to case and the decree of law, and
not by declaration of parties.
Skillpower, Inc. is, therefore, a "labor-only" contractor and Garado is not its employee. No grave abuse of
discretion can thus be imputed to the NLRC for declaring petitioner Fuji Xerox guilty of illegal dismissal of
private respondent.

ACCORDINGLY, the petition for certiorari is DISMISSED for lack of merit.

SO ORDERED.

3. G.R. No. L-43825 May 9, 1988

CONTINENTAL MARBLE CORP. and FELIPE DAVID, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC); ARBITRATOR JOSE T. COLLADO and RODITO
NASAYAO, respondents.
Benito P. Fabie for petitioners.
Narciso C. Parayno, Jr. for respondents.
PADILLA, J.:
In this petition for mandamus, prohibition and certiorari with preliminary injunction, petitioners seek to annul
and set aside the decision rendered by the respondent Arbitrator Jose T. Collado, dated 29 December 1975, in
NLRC Case No. LR-6151, entitled: "Rodito Nasayao, complainant, versus Continental Marble Corp. and Felipe
David, respondents," and the resolution issued by the respondent Commission, dated 7 May 1976, which
dismissed herein petitioners' appeal from said decision.
In his complaint before the NLRC, herein private respondent Rodito Nasayao claimed that sometime in May
1974, he was appointed plant manager of the petitioner corporation, with an alleged compensation of
P3,000.00, a month, or 25% of the monthly net income of the company, whichever is greater, and when the
company failed to pay his salary for the months of May, June, and July 1974, Rodito Nasayao filed a complaint
with the National Labor Relations Commission, Branch IV, for the recovery of said unpaid varies. The case was
docketed therein as NLRC Case No. LR-6151.

Answering, the herein petitioners denied that Rodito Nasayao was employed in the company as plant manager
with a fixed monthly salary of P3,000.00. They claimed that the undertaking agreed upon by the parties was a
joint venture, a sort of partnership, wherein Rodito Nasayao was to keep the machinery in good working
condition and, in return, he would get the contracts from end-users for the installation of marble products, in
which the company would not interfere. In addition, private respondent Nasayao was to receive an amount
equivalent to 25% of the net profits that the petitioner corporation would realize, should there be any.
Petitioners alleged that since there had been no profits during said period, private respondent was not entitled
to any amount.
The case was submitted for voluntary arbitration and the parties selected the herein respondent Jose T.
Collado as voluntary arbitrator. In the course of the proceedings, however, the herein petitioners challenged the
arbitrator's capacity to try and decide the case fairly and judiciously and asked him to desist from further
hearing the case. But, the respondent arbitrator refused. In due time, or on 29 December 1975, he rendered
judgment in favor of the complainant, ordering the herein petitioners to pay Rodito Nasayao the amount of
P9,000.00, within 10 days from notice. 1
Upon receipt of the decision, the herein petitioners appealed to the National Labor Relations Commission on
grounds that the labor arbiter gravely abused his discretion in persisting to hear and decide the case
notwithstanding petitioners' request for him to desist therefrom: and that the appealed decision is not
supported by evidence. 2
On 18 March 1976, Rodito Nasayao filed a motion to dismiss the appeal on the ground that the decision of the
voluntary arbitrator is final, unappealable, and immediately executory; 3 and, on 23 March 1976, he filed a
motion for the issuance of a writ of execution. 4
Acting on the motions, the respondent Commission, in a resolution dated 7 May 1976, dismissed the appeal on
the ground that the decision appealed from is final, unappealable and immediately executory, and ordered the
herein petitioners to comply with the decision of the voluntary arbitrator within 10 days from receipt of the
resolution. 5
The petitioners are before the Court in the present recourse. As prayed for, the Court issued a temporary
restraining order, restraining herein respondents from enforcing and/or carrying out the questioned decision
and resolution. 6
The issue for resolution is whether or not the private respondent Rodito Nasayao was employed as plant
manager of petitioner Continental Marble Corporation with a monthly salary of P3,000.00 or 25% of its monthly
income, whichever is greater, as claimed by said respondent, or entitled to receive only an amount equivalent
to 25% of net profits, if any, that the company would realize, as contended by the petitioners.
The respondent arbitrator found that the agreement between the parties was for the petitioner company to pay
the private respondent, Rodito Nasayao, a monthly salary of P3,000.00, and, consequently, ordered the
company to pay Rodito Nasayao the amount of P9,000.00 covering a period of three (3) months, that is, May,
June and July 1974.
The respondent Rodito Nasayao now contends that the judgment or award of the voluntary arbitrator is final,
unappealable and immediately executory, and may not be reviewed by the Court. His contention is based upon
the provisions of Art. 262 of the Labor Code, as amended.
The petitioners, upon the other hand, maintain that "where there is patent and manifest abuse of discretion, the
rule on unappealability of awards of a voluntary arbitrator becomes flexible and it is the inherent power of the

Courts to maintain the people's faith in the administration of justice." The question of the finality and
unappealability of a decision and/or award of a voluntary arbitrator had been laid to rest in Oceanic Bic
Division (FFW) vs. Romero, 7 and reiterated in Mantrade FMMC Division Employees and Workers Union vs.
Bacungan. 8 The Court therein ruled that it can review the decisions of voluntary arbitrators, thusWe agree with the petitioner that the decisions of voluntary arbitrators must be given the highest
respect and as a general rule must be accorded a certain measure of finality. This is especially
true where the arbitrator chosen by the parties enjoys the first rate credentials of Professor
Flerida Ruth Pineda Romero, Director of the U.P. Law Center and an academician of
unquestioned expertise in the field of Labor Law. It is not correct, however, that this respect
precludes the exercise of judicial review over their decisions. Article 262 of the Labor Code
making voluntary arbitration awards final, inappealable, and executory except where the money
claims exceed P l 00,000.00 or 40% of paid-up capital of the employer or where there is abuse
of discretion or gross incompetence refers to appeals to the National Labor Relations
Commission and not to judicial review.
Inspite of statutory provisions making 'final' the decisions of certain administrative agencies, we
have taken cognizance of petitions questioning these decisions where want of jurisdiction, grave
abuse of discretion, violation of due process, denial of substantial justice, or erroneous
interpretation of the law were brought to our attention. There is no provision for appeal in the
statute creating the Sandiganbayan but this has not precluded us from examining decisions of
this special court brought to us in proper petitions. ...
The Court further said:
A voluntary arbitrator by the nature of her fucntions acts in quasi-judicial capacity. There is no
reason why herdecisions involving interpretation of law should be beyond this Court's review.
Administrative officials are presumed to act in accordance with law and yet we do hesitate to
pass upon their work where a question of law is involved or where a showing of abuse of
authority or discretion in their official acts is properly raised in petitions for certiorari.
The foregoing pronouncements find support in Section 29 of Republic Act No. 876, otherwise known as the
Arbitration Law, which provides:
Sec. 29. Appeals An appeal may be taken from an order made in a proceeding under this
Act, or from a judgment entered upon an award through certiorari proceedings, but such
appeals shall be limited to questions of law. The proceedings upon such an appeal, including
the judgment thereon shall be governed by the Rules of Court in so far as they are applicable.
The private respondent, Rodito Nasayao, in his Answer to the petition, 9 also claims that the case is premature
for non-exhaustion of administrative remedies. He contends that the decision of the respondent Commission
should have been first appealed by petitioners to the Secretary of Labor, and, if they are not satisfied with his
decision, to appeal to the President of the Philippines, before resort is made to the Court.
The contention is without merit. The doctrine of exhaustion of administrative remedies cannot be invoked in
this case, as contended. In the recent case of John Clement Consultants, Inc. versus National Labor Relations
Commission, 10 the Court said:
As is well known, no law provides for an appeal from decisions of the National Labor Relations
Commission; hence, there can be no review and reversal on appeal by higher authority of its

factual or legal conclusions. When, however, it decides a case without or in excess of its
jurisdiction, or with grave abuse of discretion, the party thereby adversely affected may obtain a
review and nullification of that decision by this Court through the extraordinary writ of certiorari.
Since, in this case, it appears that the Commission has indeed acted without jurisdiction and
with grave abuse of discretion in taking cognizance of a belated appeal sought to be taken from
a decision of Labor Arbiter and thereafter reversing it, the writ of certiorari will issue to undo
those acts, and do justice to the aggrieved party.
We also find no merit in the contention of Rodito Nasayao that only questions of law, and not findings of fact of
a voluntary arbitrator may be reviewed by the Court, since the findings of fact of the voluntary arbitrator are
conclusive upon the Court.
While the Court has accorded great respect for, and finality to, findings of fact of a voluntary arbitrator 11 and
administrative agencies which have acquired expertise in their respective fields, like the Labor Department and
the National Labor Relations Commission, 12 their findings of fact and the conclusions drawn therefrom have to
be supported by substantial evidence. ln that instant case, the finding of the voluntary arbitrator that Rodito
Nasayao was an employee of the petitioner corporation is not supported by the evidence or by the law.
On the other hand, we find the version of the petitioners to be more plausible and in accord with human nature
and the ordinary course of things. As pointed out by the petitioners, it was illogical for them to hire the private
respondent Rodito Nasayao as plant manager with a monthly salary of P3,000.00, an amount which they could
ill-afford to pay, considering that the business was losing, at the time he was hired, and that they were about to
close shop in a few months' time.
Besides, there is nothing in the record which would support the claim of Rodito Nasayao that he was an
employee of the petitioner corporation. He was not included in the company payroll, nor in the list of company
employees furnished the Social Security System.
Most of all, the element of control is lacking. In Brotherhood Labor Unity Movement in the Philippines vs.
Zamora,13 the Court enumerated the factors in determining whether or not an employer-employee relationship
exists, to wit:
In determining the existence of an employer-employee relationship, the elements that are
generally considered are the following: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the
employee with respect to the means and methods by which the work is to be accomplished. It is
the so-called "control test" that is the most important element (Investment Planning Corp. of the
Phils. vs. The Social Security System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and
Rosario Brothers, Inc. v. Ople, 131 SCRA 72).<re||an1w>
In the instant case, it appears that the petitioners had no control over the conduct of Rodito Nasayao in the
performance of his work. He decided for himself on what was to be done and worked at his own pleasure. He
was not subject to definite hours or conditions of work and, in turn, was compensated according to the results
of his own effort. He had a free hand in running the company and its business, so much so, that the petitioner
Felipe David did not know, until very much later, that Rodito Nasayao had collected old accounts receivables,
not covered by their agreement, which he converted to his own personal use. It was only after Rodito Nasayao
had abandoned the plant following discovery of his wrong- doings, that Felipe David assumed management of
the plant.

Absent the power to control the employee with respect to the means and methods by which his work was to be
accomplished, there was no employer-employee relationship between the parties. Hence, there is no basis for
an award of unpaid salaries or wages to Rodito Nasayao.
WHEREFORE, the decision rendered by the respondent Jose T. Collado in NLRC Case No. LR-6151, entitled:
"Rodito Nasayao, complainant, versus Continental Marble Corp. and Felipe David, respondents," on 29
December 1975, and the resolution issued by the respondent National Labor Relations Commission in said
case on 7 May 1976, are REVERSED and SET ASIDE and another one entered DISMISSING private
respondent's complaints. The temporary restraning order heretofore isued by the Court is made permanent.
Without costs.
SO ORDERED.

4. G.R. No. L-48645 January 7, 1987

"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO CASBADILLO,
PROSPERO TABLADA, ERNESTO BENGSON, PATRICIO SERRANO, ANTONIO B. BOBIAS, VIRGILIO
ECHAS, DOMINGO PARINAS, NORBERTO GALANG, JUANITO NAVARRO, NESTORIO MARCELLANA,
TEOFILO B. CACATIAN, RUFO L. EGUIA, CARLOS SUMOYAN, LAMBERTO RONQUILLO, ANGELITO
AMANCIO, DANILO B. MATIAR, ET AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, OFFICE OF THE
PRESIDENT, HON. AMADO G. INCIONG, UNDERSECRETARY OF LABOR, SAN MIGUEL CORPORATION,
GENARO OLIVES, ENRIQUE CAMAHORT, FEDERICO OATE, ERNESTO VILLANUEVA, ANTONIO
BOCALING and GODOFREDO CUETO, respondents.
Armando V. Ampil for petitioners.
Siguion Reyna, Montecillo and Ongsiako Law Office for private respondents.
GUTIERREZ, JR., J.:
The elemental question in labor law of whether or not an employer-employee relationship exists between
petitioners-members of the "Brotherhood Labor Unit Movement of the Philippines" (BLUM) and respondent
San Miguel Corporation, is the main issue in this petition. The disputed decision of public respondent Ronaldo
Zamora, Presidential Assistant for legal Affairs, contains a brief summary of the facts involved:
1. The records disclose that on July 11, 1969, BLUM filed a complaint with the now defunct
Court of Industrial Relations, charging San Miguel Corporation, and the following officers:
Enrique Camahort, Federico Ofiate Feliciano Arceo, Melencio Eugenia Jr., Ernesto Villanueva,
Antonio Bocaling and Godofredo Cueto of unfair labor practice as set forth in Section 4 (a), subsections (1) and (4) of Republic Act No. 875 and of Legal dismissal. It was alleged that

respondents ordered the individual complainants to disaffiliate from the complainant union; and
that management dismissed the individual complainants when they insisted on their union
membership.
On their part, respondents moved for the dismissal of the complaint on the grounds that the
complainants are not and have never been employees of respondent company but employees
of the independent contractor; that respondent company has never had control over the means
and methods followed by the independent contractor who enjoyed full authority to hire and
control said employees; and that the individual complainants are barred by estoppel from
asserting that they are employees of respondent company.
While pending with the Court of Industrial Relations CIR pleadings and testimonial and
documentary evidences were duly presented, although the actual hearing was delayed by
several postponements. The dispute was taken over by the National Labor Relations
Commission (NLRC) with the decreed abolition of the CIR and the hearing of the case
intransferably commenced on September 8, 1975.
On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which was concurred
in by the NLRC in a decision dated June 28, 1976. The amount of backwages awarded,
however, was reduced by NLRC to the equivalent of one (1) year salary.
On appeal, the Secretary in a decision dated June 1, 1977, set aside the NLRC ruling, stressing
the absence of an employer-mployee relationship as borne out by the records of the case. ...
The petitioners strongly argue that there exists an employer-employee relationship between them and the
respondent company and that they were dismissed for unionism, an act constituting unfair labor practice "for
which respondents must be made to answer."
Unrebutted evidence and testimony on record establish that the petitioners are workers who have been
employed at the San Miguel Parola Glass Factory since 1961, averaging about seven (7) years of service at
the time of their termination. They worked as "cargadores" or "pahinante" at the SMC Plant loading, unloading,
piling or palleting empty bottles and woosen shells to and from company trucks and warehouses. At times, they
accompanied the company trucks on their delivery routes.
The petitioners first reported for work to Superintendent-in-Charge Camahort. They were issued gate passes
signed by Camahort and were provided by the respondent company with the tools, equipment and
paraphernalia used in the loading, unloading, piling and hauling operation.
Job orders emanated from Camahort. The orders are then transmitted to an assistant-officer-in-charge. In turn,
the assistant informs the warehousemen and checkers regarding the same. The latter, thereafter, relays said
orders to the capatazes or group leaders who then give orders to the workers as to where, when and what to
load, unload, pile, pallet or clean.
Work in the glass factory was neither regular nor continuous, depending wholly on the volume of bottles
manufactured to be loaded and unloaded, as well as the business activity of the company. Work did not
necessarily mean a full eight (8) hour day for the petitioners. However, work,at times, exceeded the eight (8)
hour day and necessitated work on Sundays and holidays. For this, they were neither paid overtime nor
compensation for work on Sundays and holidays.

Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the number of cartons and
wooden shells they were able to load, unload, or pile. The group leader notes down the number or volume of
work that each individual worker has accomplished. This is then made the basis of a report or statement which
is compared with the notes of the checker and warehousemen as to whether or not they tally. Final approval of
report is by officer-in-charge Camahort. The pay check is given to the group leaders for encashment,
distribution, and payment to the petitioners in accordance with payrolls prepared by said leaders. From the
total earnings of the group, the group leader gets a participation or share of ten (10%) percent plus an
additional amount from the earnings of each individual.
The petitioners worked exclusive at the SMC plant, never having been assigned to other companies or
departments of SMC plant, even when the volume of work was at its minimum. When any of the glass furnaces
suffered a breakdown, making a shutdown necessary, the petitioners work was temporarily suspended.
Thereafter, the petitioners would return to work at the glass plant.
Sometime in January, 1969, the petitioner workers numbering one hundred and forty (140) organized and
affiliated themselves with the petitioner union and engaged in union activities. Believing themselves entitled to
overtime and holiday pay, the petitioners pressed management, airing other grievances such as being paid
below the minimum wage law, inhuman treatment, being forced to borrow at usurious rates of interest and to
buy raffle tickets, coerced by withholding their salaries, and salary deductions made without their consent.
However, their gripes and grievances were not heeded by the respondents.
On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor Relations in
connection with the dismissal of some of its members who were allegedly castigated for their union
membership and warned that should they persist in continuing with their union activities they would be
dismissed from their jobs. Several conciliation conferences were scheduled in order to thresh out their
differences, On February 12, 1969, union member Rogelio Dipad was dismissed from work. At the scheduled
conference on February 19, 1969, the complainant union through its officers headed by National President
Artemio Portugal Sr., presented a letter to the respondent company containing proposals and/or labor
demands together with a request for recognition and collective bargaining.
San Miguel refused to bargain with the petitioner union alleging that the workers are not their employees.
On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter, denied entrance to
respondent company's glass factory despite their regularly reporting for work. A complaint for illegal dismissal
and unfair labor practice was filed by the petitioners.
The case reaches us now with the same issues to be resolved as when it had begun.
The question of whether an employer-employee relationship exists in a certain situation continues to bedevil
the courts. Some businessmen try to avoid the bringing about of an employer-employee relationship in their
enterprises because that judicial relation spawns obligations connected with workmen's compensation, social
security, medicare, minimum wage, termination pay, and unionism. (Mafinco Trading Corporation v. Ople, 70
SCRA 139).
In determining the existence of an employer-employee relationship, the elements that are generally considered
are the following: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employer's power to control the employee with respect to the means and methods by
which the work is to be accomplished. It. is the called "control test" that is the most important element
(Investment Planning Corp. of the Phils. v. The Social Security System, 21 SCRA 924; Mafinco Trading Corp. v.
Ople, supra,and Rosario Brothers, Inc. v. Ople, 131 SCRA 72).

Applying the above criteria, the evidence strongly indicates the existence of an employer-employee
relationship between petitioner workers and respondent San Miguel Corporation. The respondent asserts that
the petitioners are employees of the Guaranteed Labor Contractor, an independent labor contracting firm.
The facts and evidence on record negate respondent SMC's claim.
The existence of an independent contractor relationship is generally established by the following criteria:
"whether or not the contractor is carrying on an independent business; the nature and extent of the work; the
skill required; the term and duration of the relationship; the right to assign the performance of a specified piece
of work; the control and supervision of the work to another; the employer's power with respect to the hiring,
firing and payment of the contractor's workers; the control of the premises; the duty to supply the premises
tools, appliances, materials and labor; and the mode, manner and terms of payment" (56 CJS Master and
Servant, Sec. 3(2), 46; See also 27 AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75 ALR 7260727)
None of the above criteria exists in the case at bar.
Highly unusual and suspect is the absence of a written contract to specify the performance of a specified piece
of work, the nature and extent of the work and the term and duration of the relationship. The records fail to
show that a large commercial outfit, such as the San Miguel Corporation, entered into mere oral agreements of
employment or labor contracting where the same would involve considerable expenses and dealings with a
large number of workers over a long period of time. Despite respondent company's allegations not an iota of
evidence was offered to prove the same or its particulars. Such failure makes respondent SMC's stand subject
to serious doubts.
Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners had worked
continuously and exclusively for the respondent company's shipping and warehousing department.
Considering the length of time that the petitioners have worked with the respondent company, there is
justification to conclude that they were engaged to perform activities necessary or desirable in the usual
business or trade of the respondent, and the petitioners are, therefore regular employees (Phil. Fishing Boat
Officers and Engineers Union v. Court of Industrial Relations, 112 SCRA 159 and RJL Martinez Fishing
Corporation v. National Labor Relations Commission, 127 SCRA 454).
As we have found in RJL Martinez Fishing Corporation v. National Labor Relations Commission (supra):
... [T]he employer-employee relationship between the parties herein is not coterminous with
each loading and unloading job. As earlier shown, respondents are engaged in the business of
fishing. For this purpose, they have a fleet of fishing vessels. Under this situation, respondents'
activity of catching fish is a continuous process and could hardly be considered as seasonal in
nature. So that the activities performed by herein complainants, i.e. unloading the catch of tuna
fish from respondents' vessels and then loading the same to refrigerated vans, are necessary or
desirable in the business of respondents. This circumstance makes the employment of
complainants a regular one, in the sense that it does not depend on any specific project or
seasonable activity. (NLRC Decision, p. 94, Rollo).lwphl@it
so as it with petitioners in the case at bar. In fact, despite past shutdowns of the glass plant for repairs, the
petitioners, thereafter, promptly returned to their jobs, never having been replaced, or assigned elsewhere until
the present controversy arose. The term of the petitioners' employment appears indefinite. The continuity and
habituality of petitioners' work bolsters their claim of employee status vis-a-vis respondent company,

Even under the assumption that a contract of employment had indeed been executed between respondent
SMC and the alleged labor contractor, respondent's case will, nevertheless, fail.
Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:
Job contracting. There is job contracting permissible under the Code if the following
conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his
own account under his own responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his
business.
We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor investment to
qualify as an independent contractor under the law. The premises, tools, equipment and paraphernalia used by
the petitioners in their jobs are admittedly all supplied by respondent company. It is only the manpower or labor
force which the alleged contractors supply, suggesting the existence of a "labor only" contracting scheme
prohibited by law (Article 106, 109 of the Labor Code; Section 9(b), Rule VIII, Book III, Implementing Rules and
Regulations of the Labor Code). In fact, even the alleged contractor's office, which consists of a space at
respondent company's warehouse, table, chair, typewriter and cabinet, are provided for by respondent SMC. It
is therefore clear that the alleged contractors have no capital outlay involved in the conduct of its business, in
the maintenance thereof or in the payment of its workers' salaries.
The payment of the workers' wages is a critical factor in determining the actuality of an employer-employee
relationship whether between respondent company and petitioners or between the alleged independent
contractor and petitioners. It is important to emphasize that in a truly independent contractor-contractee
relationship, the fees are paid directly to the manpower agency in lump sum without indicating or implying that
the basis of such lump sum is the salary per worker multiplied by the number of workers assigned to the
company. This is the rule in Social Security System v. Court of Appeals (39 SCRA 629, 635).
The alleged independent contractors in the case at bar were paid a lump sum representing only the salaries
the workers were entitled to, arrived at by adding the salaries of each worker which depend on the volume of
work they. had accomplished individually. These are based on payrolls, reports or statements prepared by the
workers' group leader, warehousemen and checkers, where they note down the number of cartons, wooden
shells and bottles each worker was able to load, unload, pile or pallet and see whether they tally. The amount
paid by respondent company to the alleged independent contractor considers no business expenses or capital
outlay of the latter. Nor is the profit or gain of the alleged contractor in the conduct of its business provided for
as an amount over and above the workers' wages. Instead, the alleged contractor receives a percentage from
the total earnings of all the workers plus an additional amount corresponding to a percentage of the earnings of
each individual worker, which, perhaps, accounts for the petitioners' charge of unauthorized deductions from
their salaries by the respondents.
Anent the argument that the petitioners are not employees as they worked on piece basis, we merely have to
cite our rulings in Dy Keh Beng v. International Labor and Marine Union of the Philippines (90 SCRA 161), as
follows:

"[C]ircumstances must be construed to determine indeed if payment by the piece is just a

method of compensation and does not define the essence of the relation. Units of time . . . and
units of work are in establishments like respondent (sic) just yardsticks whereby to determine
rate of compensation, to be applied whenever agreed upon. We cannot construe payment by
the piece where work is done in such an establishment so as to put the worker completely at
liberty to turn him out and take in another at pleasure."
Article 106 of the Labor Code provides the legal effect of a labor only contracting scheme, to wit:
... the person or intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly
employed by him.
Firmly establishing respondent SMC's role as employer is the control exercised by it over the petitioners that is,
control in the means and methods/manner by which petitioners are to go about their work, as well as in
disciplinary measures imposed by it.
Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as to the means and
manner of performing the same is practically nil. For, how many ways are there to load and unload bottles and
wooden shells? The mere concern of both respondent SMC and the alleged contractor is that the job of having
the bottles and wooden shells brought to and from the warehouse be done. More evident and pronounced is
respondent company's right to control in the discipline of petitioners. Documentary evidence presented by the
petitioners establish respondent SMC's right to impose disciplinary measures for violations or infractions of its
rules and regulations as well as its right to recommend transfers and dismissals of the piece workers. The
inter-office memoranda submitted in evidence prove the company's control over the petitioners. That
respondent SMC has the power to recommend penalties or dismissal of the piece workers, even as to Abner
Bungay who is alleged by SMC to be a representative of the alleged labor contractor, is the strongest indication
of respondent company's right of control over the petitioners as direct employer. There is no evidence to show
that the alleged labor contractor had such right of control or much less had been there to supervise or deal with
the petitioners.
The petitioners were dismissed allegedly because of the shutdown of the glass manufacturing plant.
Respondent company would have us believe that this was a case of retrenchment due to the closure or
cessation of operations of the establishment or undertaking. But such is not the case here. The respondent's
shutdown was merely temporary, one of its furnaces needing repair. Operations continued after such repairs,
but the petitioners had already been refused entry to the premises and dismissed from respondent's service.
New workers manned their positions. It is apparent that the closure of respondent's warehouse was merely a
ploy to get rid of the petitioners, who were then agitating the respondent company for benefits, reforms and
collective bargaining as a union. There is no showing that petitioners had been remiss in their obligations and
inefficient in their jobs to warrant their separation.
As to the charge of unfair labor practice because of SMC's refusal to bargain with the petitioners, it is clear that
the respondent company had an existing collective bargaining agreement with the IBM union which is the
recognized collective bargaining representative at the respondent's glass plant.
There being a recognized bargaining representative of all employees at the company's glass plant, the
petitioners cannot merely form a union and demand bargaining. The Labor Code provides the proper
procedure for the recognition of unions as sole bargaining representatives. This must be followed.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel Corporation is
hereby ordered to REINSTATE petitioners, with three (3) years backwages. However, where reinstatement is
no longer possible, the respondent SMC is ordered to pay the petitioners separation pay equivalent to one (1)
month pay for every year of service.
SO ORDERED.

5. G.R. No. 143428

June 25, 2001

SANDOVAL SHIPYARDS, INC. and VICENTE SANDOVAL, petitioners,

vs.
PRISCO PEPITO, FREDELINO SOCO, ALBERTO MONIVA, FLAVIANO CANETE, JOSE JUDILLA,
ARNULFO TRADIO, PRIMO AUMAN, ALEJANDRO TAPDASAN, GERRY CALVO, MARLON ABELLAR,
MANOLO VILLEGAS, BONIFACIO CANO, RODELIO MONDEJAR, RICARDO IBALE, PAULINO LABRA,
ANTONIO ALINSUG, PIO CAPAROSO, MAXIMO PANUGAN, SILVESTRE IGOT, DANILO CASAS, ROLIE
BENOLA, RUDINO MOLATO, LEONARDO QUIMOD, ELPIDIO LINAO, AURELIO GOC-ONG, NESTOR
BASAKA, RODRIGO AUMAN, ILUMINADO ABUCAY, ANASTACIO TRADIO, JR., EDUARDO SUGAROL,
JUAN FORMINTIRA, ROSENDO SOCO, JIMMY MONDIEGO, CELSO JUDAYA, MARCIAL GONZAGA,
APOLONIO ARCENAL, SIMEON ANTOLIJAO, MARCELO SUGAROL, ERNESTO SENO, MARIO BASAKA,
GORGONIO CUYOS, ROGELIO EDAR, JAIME IBALE, PATRICIO CANO, FELIX SARME, WILFREDO
CANTERO, LORETO JUDAYA, CARIS MUSOR, RICKY ERMAC, LUIS MONLEON, CIRILO AGUIPO,
PEDRO QUINAPONDON, CHRISTOPHER JUDAYA, GERRY AUMAN, ALFIN IGOT, NELSON ALIVIO,
LIMUEL LIBERIAGA, DANILO MAQUILAN, DANIEL RIVERA, ROMEO BASAKA, PAULINO FLORES,
JUAN CODENERA, SEVERINO GOMEZ, EDUARDO IBALE, RONITO CAPAROSO, GALO IBALE,
ALEJANDRE MULIG, EUSTAQUIO DIOLA, EUDILO LAURON, ALEXANDER AGUIPO, GILBERTO
DESUCATAN, CRISPULO ENTERINA, FLORINTINO CODINERO, SAMUEL AUMAN, MARGARITO
LABISTE, SERGIO SOCO, SILVERIO IBALE, JOSELITO SUGAROL, GARY IBALE, NONITO GARBO,
LORETO PEPITO, ANRITO MONARES, NICANOR CUYOS, OSCAR ALIMPO-OS, REYNALDO PEPITO,
PEDRO VILLEGAS, JR., REY HENDERSON, JOSE ALEX MAGLASANG, and the HONORABLE COURT
OF APPEALS, respondents.
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure. Petitioners
assail the Decision of the Court of Appeals, Former Fifteenth Division, dated December 20, 1999 in CA-G.R.
SP No. 51729,1 and its resolution, dated May 15, 2000 denying petitioners motion for reconsideration.

The facts of the case are as follows:

Sometime in 1992, the National Federation of Labor (NFL) filed with the Department of Labor and Employment
(DOLE) a petition for certification election, alleging that its members, which included private respondents
Prisco Pepito, et al., were regular employees of petitioner Sandoval Shipyards, Inc. (SSI). Finding that the NFL
members were rank-and-file employees of SSI, the Med-Arbiter issued an order directing that a certification
election be held.
However, in a Resolution dated 25 November 1992, then Undersecretary Bienvenido Laguesma reversed the
Med-Arbiters Order and ruled that there was a valid subcontracting agreement between SSI and its
subcontractors, and that no employer-employee relationship existed between SSI and private respondents,
since the latter were the employees of the subcontractors.2
In 1993, several cases for illegal dismissal were filed by private respondents against SSI and its President,
petitioner Vicente Sandoval. Private respondents alleged that they were employees of SSI and that sometime
in 1985, some sections of the company were temporarily closed while others remained open. Later, some of
them were told to secure a Mayors Permit then were made parties to contracts with SSI stipulating that they
were labor-only contractors. They averred further that after they organized a workers union in 1992 to protect
themselves against SSIs persistent violation of labor standards, the company did not allow them to report for
work. Consequently, SSIs employees, including private respondent, went on strike on March 26, 1992. On
April 6, 1992, SSI accepted its employees back to work, except those who were identified as officers and
members of the union. The company claimed that these persons were not its employees but those of the
contractors. In their complaint, private respondents prayed for reinstatement with backwages, damages and
attorneys fees.
On December 27, 1996, the Labor Arbiter rendered its Decision in the illegal dismissal cases. He found that
while private respondents were illegally dismissed, they were not entitled to reinstatement with backwages,
damages and attorneys fees. The Labor Arbiter ruled that there was no employer-employee relationship
between SSI and private respondents, reasoning that said issue has been laid to rest in the November 25,
1992 resolution of Undersecretary Laguesma in the certification election case.3
Private respondents then appealed the decision of the Labor Arbiter to the National Labor Relations
Commission (NLRC), which affirmed the Labor Arbiters decision.4
Not satisfied with the decision of the NLRC, private respondents appealed the same to the Court of Appeals.
The appellate court reversed the decision of the NLRC and held that SSI is the direct employer of private
respondents.5 Petitioners filed a motion for reconsideration but the same was denied for lack of merit.6
Hence, the present appeal. Petitioners contend that the Court of Appeals erred in applying this Courts
pronouncement in Manila Golf & Country Club vs. Intermediate Appellate Court 7 that a decision in a
certification election case regarding the existence of an employer-employee relationship does not foreclose all
further dispute between the parties as to the existence or non-existence of such relationship. They contend
that such pronouncement is obiter dictum since the issue involved therein was whether or not the persons
rendering caddying services for the golf clubs members and their guests in the clubs courses or premises are
employees of Manila Golf and Country Club and therefore within the compulsory coverage of the Social
Security System, not the correctness of the Med-Arbiters finding in the certification election case that no
employer-employee relationship existed between the golf club and the caddies.8
The Court does not agree with petitioner.

Our pronouncement in the Manila Golf case that the decision in a certification election case, by the very nature
of such proceeding, does not foreclose further dispute regarding the existence or non-existence of an
employer-employee relationship, was not obiter dictum as petitioners suggest, but rather was part of the
resolution of the main issue in said case.
Manila Golf involved three separate proceedings initiated by a group of caddies against Manila Golf and
Country Club, Inc.: (1) a petition for certification election, (2) a petition for compulsory arbitration, and (3) a
petition for compulsory social security coverage. In the certification election proceeding, the Med-Arbiter found
that an employer-employee relationship existed between the golf club and the caddies. On the other hand, the
petition for compulsory arbitration was dismissed by the Labor Arbiter upon finding that no employer-employee
relationship existed between Manila Golf and the caddies, which dismissal was later affirmed by the NLRC.
The Social Security Commission also dismissed the caddies petition for compulsory social security coverage,
stating that the caddies were not employees of the golf club, but this ruling was later reversed by the
Intermediate Appellate Court.9
One of the questions in said case which this Court had to address in order to resolve the main issue was which
of the three proceedings should be recognized as being decisive of the issue regarding the existence of an
employer-employee relationship. It was in this context that the questioned pronouncement in said case was
made.
Clearly, such pronouncement was not obiter dictum since the determination as to whether the finding of the
Med-Arbiter in the certification election case operates as res adjudicata, or bar by prior judgment, was
necessary in resolving the main issue therein.1wphi1.nt
The Court of Appeals correctly applied the ruling in Manila Golf & Country Club vs. IAC that "however final it
may become, the decision in a certification election case, by the very nature of such proceeding, is not such as
to foreclose all further dispute as to the existence, or non-existence of an employer-employee
relationship"10between SSI and private respondents herein.
It is established doctrine that for res adjudicata to apply, the following requisites must concur: (1) the former
judgment or order must be final; (2) the court which rendered said judgment or order must have jurisdiction
over the subject matter and the parties; (3) said judgment or order must be on the merits; and (4) there must
be between the first and second actions identity of parties, subject matter and cause of action.11
This Court further explained in the Manila Golf case:
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, beadversarial, 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," and a certification case is not such a
proceeding, as this Court has already ruled:
"A certification proceeding is not a litigation in the sense in which this term is commonly
understood, but a 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." (Citations omitted.)12

Considering the foregoing, both the Labor Arbiter and the NLRC therefore erred in relying on the
pronouncement of then Undersecretary Laguesma in the certification proceeding that there was no employeremployee relationship between SSI and private respondents.
Moreover, the appellate court found that: (1) the so-called subcontractors do not have a license to engage in
subcontracting; (2) the salaries of private respondents are actually paid by SSI and are given to the
subcontractors who in turn give the salaries to the private respondents; (3) it was SSI which hired the private
respondents and placed them under their respective subcontractors; and (4) private respondents use SSIs
tools and equipment in their work.13
Based on these findings, the Court of Appeals was correct in declaring that the alleged subcontractors are in
effect "labor-only" contractors and are thus mere agents of petitioner SSI. The last paragraph of Article 106 of
the Labor Code is clear on this point:
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recurited and placed by such person are performing activites which arwe
directly related to the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him.
The appellate court properly noted that the issue as to whether private respondents were illegally dismissed,
which was resolved in the affirmative by the Labor Arbiter, was not appealed by petitioners. Such ruling has
therefore attained finality. Thus, SSI, as the direct employer of private respondents, is liable to either reinstate
them and pay them backwages or to pay them separation pay. However, because there is not enough
evidence on this matter, there is a need to remand the case to the Labor Arbiter for further proceedings to
determine whether or not there are jobs still available for private respondents in SSI.
WHEREFORE, the petition is hereby DISMISSED and the decision of respondent Court of Appeals is
herebyAFFIRMED.
SO ORDERED.

6. G.R. No. L-21278

December 27, 1966

FEATI UNIVERSITY, petitioner,

vs.
HON. JOSE S. BAUTISTA, Presiding Judge of the Court of Industrial Relations and FEATI UNIVERSITY
FACULTY CLUB-PAFLU, respondents.
---------------------------------------G.R. No. L-21462

December 27, 1966

FEATI UNIVERSITY, petitioner-appellant,

vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
---------------------------------------G.R. No. L-21500

December 27, 1966

FEATI UNIVERSITY, petitioner-appellant,

vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
Rafael Dinglasan for petitioner.
Cipriano Cid and Associates for respondents.
ZALDIVAR, J.:
This Court, by resolution, ordered that these three cases be considered together, and the parties were allowed
to file only one brief for the three cases.

On January 14, 1963, the President of the respondent Feati University Faculty Club-PAFLU hereinafter
referred to as Faculty Club wrote a letter to Mrs. Victoria L. Araneta, President of petitioner Feati University
hereinafter referred to as University informing her of the organization of the Faculty Club into a registered
labor union. The Faculty Club is composed of members who are professors and/or instructors of the University.
On January 22, 1963, the President of the Faculty Club sent another letter containing twenty-six demands that
have connection with the employment of the members of the Faculty Club by the University, and requesting an
answer within ten days from receipt thereof. The President of the University answered the two letters,
requesting that she be given at least thirty days to study thoroughly the different phases of the demands.
Meanwhile counsel for the University, to whom the demands were referred, wrote a letter to the President of
the Faculty Club demanding proof of its majority status and designation as a bargaining representative. On
February 1, 1963, the President of the Faculty Club again wrote the President of the University rejecting the
latter's request for extension of time, and on the same day he filed a notice of strike with the Bureau of Labor
alleging as reason therefor the refusal of the University to bargain collectively. The parties were called to
conferences at the Conciliation Division of the Bureau of Labor but efforts to conciliate them failed. On
February 18, 1963, the members of the Faculty Club declared a strike and established picket lines in the
premises of the University, resulting in the disruption of classes in the University. Despite further efforts of the
officials from the Department of Labor to effect a settlement of the differences between the management of the
University and the striking faculty members no satisfactory agreement was arrived at. On March 21, 1963, the
President of the Philippines certified to the Court of Industrial Relations the dispute between the management
of the University and the Faculty Club pursuant to the provisions of Section 10 of Republic Act No. 875.
In connection with the dispute between the University and the Faculty Club and certain incidents related to said
dispute, various cases were filed with the Court of Industrial Relations hereinafter referred to as CIR. The
three cases now before this Court stemmed from those cases that were filed with the CIR.
CASE NO. G.R. NO. L-21278
On May 10, 1963, the University filed before this Court a "petition for certiorari and prohibition with writ of
preliminary injunction", docketed as G.R. No. L-21278, praying: (1) for the issuance of the writ of preliminary
injunction enjoining respondent Judge Jose S. Bautista of the CIR to desist from proceeding in CIR Cases Nos.
41-IPA, 1183-MC, and V-30; (2) that the proceedings in Cases Nos. 41-IPA and 1183-MC be annulled; (3) that
the orders dated March 30, 1963 and April 6, 1963 in Case No. 41-IPA, the order dated April 6, 1963 in Case
No. 1183-MC, and the order dated April 29, 1963 in Case No. V-30, all be annulled; and (4) that the respondent
Judge be ordered to dismiss said cases Nos. 41-IPA, 1183-MC and V-30 of the CIR.
On May 10, 1963, this Court issued a writ of preliminary injunction, upon the University's filing a bond of
P1,000.00, ordering respondent Judge Jose S. Bautista as Presiding Judge of the CIR, until further order from
this Court, "to desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V30 of the Court of Industrial Relations)." 1 On December 4, 1963, this Court ordered the injunction bond
increased to P100,000.00; but on January 23, 1964, upon a motion for reconsideration by the University, this
Court reduced the bond to P50,000.00.
A brief statement of the three cases CIR Cases 41-IPA, 1183-MC and V-30 involved in the Case G.R. No.
L-21278, is here necessary.
CIR Case No. 41-IPA, relates to the case in connection with the strike staged by the members of the Faculty
Club. As we have stated, the dispute between the University and the Faculty Club was certified on March 21,
1963 by the President of the Philippines to the CIR. On the strength of the presidential certification, respondent
Judge Bautista set the case for hearing on March 23, 1963. During the hearing, the Judge endeavored to

reconcile the part and it was agreed upon that the striking faculty members would return to work and the
University would readmit them under a status quo arrangement. On that very same day, however, the
University, thru counsel filed a motion to dismiss the case upon the ground that the CIR has no jurisdiction over
the case, because (1) the Industrial Peace Act is not applicable to the University, it being an educational
institution, nor to the members of the Faculty Club, they being independent contractors; and (2) the presidential
certification is violative of Section 10 of the Industrial Peace Act, as the University is not an industrial
establishment and there was no industrial dispute which could be certified to the CIR. On March 30, 1963 the
respondent Judge issued an order denying the motion to dismiss and declaring that the Industrial Peace Act is
applicable to both parties in the case and that the CIR had acquired jurisdiction over the case by virtue of the
presidential certification. In the same order, the respondent Judge, believing that the dispute could not be
decided promptly, ordered the strikers to return immediately to work and the University to take them back
under the last terms and conditions existing before the dispute arose, as per agreement had during the hearing
on March 23, 1963; and likewise enjoined the University, pending adjudication of the case, from dismissing any
employee or laborer without previous authorization from the CIR. The University filed on April 1, 1963 a motion
for reconsideration of the order of March 30, 1963 by the CIR en banc, and at the same time asking that the
motion for reconsideration be first heard by the CIR en banc. Without the motion for reconsideration having
been acted upon by the CIR en banc, respondent Judge set the case for hearing on the merits for May 8,
1963. The University moved for the cancellation of said hearing upon the ground that the court en banc should
first hear the motion for reconsideration and resolve the issues raised therein before the case is heard on the
merits. This motion for cancellation of the hearing was denied. The respondent Judge, however, cancelled the
scheduled hearing when counsel for the University manifested that he would take up before the Supreme
Court, by a petition for certiorari, the matter regarding the actuations of the respondent Judge and the issues
raised in the motion for reconsideration, specially the issue relating to the jurisdiction of the CIR. The order of
March 30, 1963 in Case 41-IPA is one of the orders sought to be annulled in the case, G.R. No. L-21278.
Before the above-mentioned order of March 30, 1963 was issued by respondent Judge, the University had
employed professors and/or instructors to take the places of those professors and/or instructors who had
struck. On April 1, 1963, the Faculty Club filed with the CIR in Case 41-IPA a petition to declare in contempt of
court certain parties, alleging that the University refused to accept back to work the returning strikers, in
violation of the return-to-work order of March 30, 1963. The University filed, on April 5,1963, its opposition to
the petition for contempt, denying the allegations of the Faculty Club and alleging by way of special defense
that there was still the motion for reconsideration of the order of March 30, 1963 which had not yet been acted
upon by the CIR en banc. On April 6, 1963, the respondent Judge issued an order stating that "said
replacements are hereby warned and cautioned, for the time being, not to disturb nor in any manner commit
any act tending to disrupt the effectivity of the order of March 30,1963, pending the final resolution of the
same."2 On April 8, 1963, there placing professors and/or instructors concerned filed, thru counsel, a motion for
reconsideration by the CIR en banc of the order of respondent Judge of April 6, 1963. This order of April 6,
1963 is one of the orders that are sought to be annulled in case G.R. No. L-21278.
CIR Case No. 1183-MC relates to a petition for certification election filed by the Faculty Club on March 8, 1963
before the CIR, praying that it be certified as the sole and exclusive bargaining representative of all the
employees of the University. The University filed an opposition to the petition for certification election and at the
same time a motion to dismiss said petition, raising the very same issues raised in Case No. 41-IPA, claiming
that the petition did not comply with the rules promulgated by the CIR; that the Faculty Club is not a legitimate
labor union; that the members of the Faculty Club cannot unionize for collective bargaining purposes; that the
terms of the individual contracts of the professors, instructors, and teachers, who are members of the Faculty
Club, would expire on March 25 or 31, 1963; and that the CIR has no jurisdiction to take cognizance of the
petition because the Industrial Peace Act is not applicable to the members of the Faculty Club nor to the
University. This case was assigned to Judge Baltazar Villanueva of the CIR. Before Judge Villanueva could act

on the motion to dismiss, however, the Faculty Club filed on April 3, 1963 a motion to withdraw the petition on
the ground that the labor dispute (Case No. 41-IPA) had already been certified by the President to the CIR and
the issues raised in Case No. 1183-MC were absorbed by Case No. 41-IPA. The University opposed the
withdrawal, alleging that the issues raised in Case No. 1183-MC were separate and distinct from the issues
raised in Case No. 41-IPA; that the questions of recognition and majority status in Case No. 1183-MC were not
absorbed by Case No. 41-IPA; and that the CIR could not exercise its power of compulsory arbitration unless
the legal issue regarding the existence of employer-employee relationship was first resolved. The University
prayed that the motion of the Faculty Club to withdraw the petition for certification election be denied, and that
its motion to dismiss the petition be heard. Judge Baltazar Villanueva, finding that the reasons stated by the
Faculty Club in the motion to withdraw were well taken, on April 6, 1963, issued an order granting the
withdrawal. The University filed, on April 24, 1963, a motion for reconsideration of that order of April 6, 1963 by
the CIR en banc. This order of April 6, 1963 in Case No. 1183-MC is one of the orders sought to be annulled in
the case, G.R. No. L-21278, now before Us.
CIR Case No. V-30 relates to a complaint for indirect contempt of court filed against the administrative officials
of the University. The Faculty Club, through the Acting Chief Prosecutor of the CIR, filed with the CIR a
complaint docketed as Case No. V-30, charging President Victoria L. Araneta, Dean Daniel Salcedo, Executive
Vice-President Rodolfo Maslog, and Assistant to the President Jose Segovia, as officials of the University, with
indirect contempt of court, reiterating the same charges filed in Case No. 41-IPA for alleged violation of the
order dated March 30, 1963. Based on the complaint thus filed by the Acting Chief Prosecutor of the CIR,
respondent Judge Bautista issued on April 29, 1963 an order commanding any officer of the law to arrest the
above named officials of the University so that they may be dealt with in accordance with law, and the same
time fixed the bond for their release at P500.00 each. This order of April 29, 1963 is also one of the orders
sought to be annulled in the case, G.R. No. L-2l278.
The principal allegation of the University in its petition for certiorari and prohibition with preliminary injunction in
Case G.R. No. L-21278, now before Us, is that respondent Judge Jose S. Bautista acted without, or in excess
of, jurisdiction, or with grave abuse of discretion, in taking cognizance of, and in issuing the questioned orders
in, CIR Cases Nos. 41-IPA 1183-MC and V-30. Let it be noted that when the petition for certiorari and
prohibition with preliminary injunction was filed on May 10, 1963 in this case, the questioned order in CIR
Cases Nos. 41-IPA, 1183-MC and V-30 were still pending action by the CIR en banc upon motions for
reconsideration filed by the University.
On June 10, 1963, the Faculty Club filed its answer to the petition for certiorari and prohibition with preliminary
injunction, admitting some allegations contained in the petition and denying others, and alleging special
defenses which boil down to the contentions that (1) the CIR had acquired jurisdiction to take cognizance of
Case No. 41-IPA by virtue of the presidential certification, so that it had jurisdiction to issue the questioned
orders in said Case No. 41-IPA; (2) that the Industrial Peace Act (Republic Act 875) is applicable to the
University as an employer and to the members of the Faculty Club as employees who are affiliated with a duly
registered labor union, so that the Court of Industrial Relations had jurisdiction to take cognizance of Cases
Nos. 1183-MC and V-30 and to issue the questioned orders in those two cases; and (3) that the petition
for certiorari and prohibition with preliminary injunction was prematurely filed because the orders of the CIR
sought to be annulled were still the subjects of pending motions for reconsideration before the CIR en
banc when said petition for certiorari and prohibition with preliminary injunction was filed before this Court.
CASE G.R. NO. L-21462
This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As already stated Case No. 1183-MC
relates to a petition for certification election filed by the Faculty Club as a labor union, praying that it be certified

as the sole and exclusive bargaining representative of all employees of the University. This petition was
opposed by the University, and at the same time it filed a motion to dismiss said petition. But before Judge
Baltazar Villanueva could act on the petition for certification election and the motion to dismiss the same,
Faculty Club filed a motion to withdraw said petition upon the ground that the issue raised in Case No. 1183MC were absorbed by Case No. 41-IPA which was certified by the President of the Philippines. Judge Baltazar
Villanueva, by order April 6, 1963, granted the motion to withdraw. The University filed a motion for
reconsideration of that order of April 6, 1963 by the CIR en banc. That motion for reconsideration was pending
action by the CIR en banc when the petition forcertiorari and prohibition with preliminary injunction in Case
G.R. no. L-21278 was filed on May 10, 1963. As earlier stated this Court, in Case G.R. No. L-21278, issued a
writ of preliminary injunction on May 10, 1963, ordering respondent Judge Bautista, until further order from this
Court, to desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of
the Court of Industrial Relations).
On June 5, 1963, that is, after this Court has issued the writ of preliminary injunction in Case G.R. No. L21278, the CIR en banc issued a resolution denying the motion for reconsideration of the order of April 6, 1963
in Case No. 1183-MC.
On July 8, 1963, the University filed before this Court a petition for certiorari, by way of an appeal from the
resolution of the CIR en banc, dated June 5, 1963, denying the motion for reconsideration of the order of April
6, 1963 in Case No. 1183-MC. This petition was docketed as G.R. No. L-21462. In its petition for certiorari, the
University alleges (1) that the resolution of the Court of Industrial Relations of June 5, 1963 was null and void
because it was issued in violation of the writ of preliminary injunction issued in Case G.R. No. L-21278; (2) that
the issues of employer-employee relationship, the alleged status as a labor union, majority representation and
designation as bargaining representative in an appropriate unit of the Faculty Club should have been resolved
first in Case No. 1183-MC prior to the determination of the issues in Case No. 41-IPA and therefore the motion
to withdraw the petition for certification election should not have been granted upon the ground that the issues
in the first case have been absorbed in the second case; and (3) the lower court acted without or in excess of
jurisdiction in taking cognizance of the petition for certification election and that the same should have been
dismissed instead of having been ordered withdrawn. The University prayed that the proceedings in Case No.
1183-MC and the order of April 6, 1963 and the resolution of June 5, 1963 issued therein be annulled, and that
the CIR be ordered to dismiss Case No. 1183-MC on the ground of lack of jurisdiction.
The Faculty Club filed its answer, admitting some, and denying other, allegations in the petition for certiorari;
and specially alleging that the lower court's order granting the withdrawal of the petition for certification election
was in accordance with law, and that the resolution of the court en banc on June 5, 1963 was not a violation of
the writ of preliminary injunction issued in Case G.R. No. L-21278 because said writ of injunction was issued
against Judge Jose S. Bautista and not against the Court of Industrial Relations, much less against Judge
Baltazar Villanueva who was the trial judge of Case No. 1183-MC.
CASE G.R. NO. L-21500
This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier stated, Case No. 41-IPA relates to
the strike staged by the members of the Faculty Club and the dispute was certified by the President of the
Philippines to the CIR. The University filed a motion to dismiss that case upon the ground that the CIR has no
jurisdiction over the case, and on March 30, 1963 Judge Jose S. Bautista issued an order denying the motion
to dismiss and declaring that the Industrial Peace Act is applicable to both parties in the case and that the CIR
had acquired jurisdiction over the case by virtue of the presidential certification; and in that same order Judge
Bautista ordered the strikers to return to work and the University to take them back under the last terms and
conditions existing before the dispute arose; and enjoined the University from dismissing any employee or

laborer without previous authority from the court. On April 1, 1963, the University filed a motion for
reconsideration of the order of March 30, 1963 by the CIR en banc. That motion for reconsideration was
pending action by the CIR en banc when the petition for certiorari and prohibition with preliminary injunction in
Case G.R. No. L-21278 was filed on May 10, 1963. As we have already stated, this Court in said case G.R.
No. L-21278, issued a writ of preliminary injunction on May 10, 1963 ordering respondent Judge Jose S.
Bautista, until further order from this Court, to desist and refrain from further proceeding in the premises
(Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations).
On July 2, 1963, the University received a copy of the resolution of the CIR en banc, dated May 7, 1963 but
actually received and stamped at the Office of the Clerk of the CIR on June 28, 1963, denying the motion for
reconsideration of the order dated March 30, 1963 in Case No. 41-IPA.
On July 23, 1963, the University filed before this Court a petition for certiorari, by way of an appeal from the
resolution of the Court of Industrial Relations en banc dated May 7, 1963 (but actually received by said
petitioner on July 2, 1963) denying the motion for reconsideration of the order of March 30, 1963 in Case No.
41-IPA. This petition was docketed as G.R. No. L-21500. In its petition for certiorari the University alleges (1)
that the resolution of the CIR en banc, dated May 7, 1963 but filed with the Clerk of the CIR on June 28, 1963,
in Case No. 41-IPA, is null and void because it was issued in violation of the writ of preliminary injunction
issued by this Court in G.R. No. L-21278; (2) that the CIR, through its Presiding Judge, had no jurisdiction to
take cognizance of Case No. 41-IPA and the order of March 30, 1963 and the resolution dated May 7, 1963
issued therein are null and void; (3) that the certification made by the President of the Philippines is not
authorized by Section 10 of Republic Act 875, but is violative thereof; (4) that the Faculty Club has no right to
unionize or organize as a labor union for collective bargaining purposes and to be certified as a collective
bargaining agent within the purview of the Industrial Peace Act, and consequently it has no right to strike and
picket on the ground of petitioner's alleged refusal to bargain collectively where such duty does not exist in law
and is not enforceable against an educational institution; and (5) that the return-to-work order of March 30,
1963 is improper and illegal. The petition prayed that the proceedings in Case No. 41-IPA be annulled, that the
order dated March 30, 1963 and the resolution dated May 7, 1963 be revoked, and that the lower court be
ordered to dismiss Case 41-IPA on the ground of lack of jurisdiction.
On September 10, 1963, the Faculty Club, through counsel, filed a motion to dismiss the petition
for certiorari on the ground that the petition being filed by way of an appeal from the orders of the Court of
Industrial Relations denying the motion to dismiss in Case No. 41-IPA, the petition for certiorari is not proper
because the orders appealed from are interlocutory in nature.
This Court, by resolution of September 26, 1963, ordered that these three cases (G.R. Nos. L-21278, L-21462
and L-21500) be considered together and the motion to dismiss in Case G.R. No. L-21500 be taken up when
the cases are decided on the merits after the hearing.
Brushing aside certain technical questions raised by the parties in their pleadings, We proceed to decide these
three cases on the merits of the issues raised.
The University has raised several issues in the present cases, the pivotal one being its claim that the Court of
Industrial Relations has no jurisdiction over the parties and the subject matter in CIR Cases 41-IPA, 1183-MC
and V-30, brought before it, upon the ground that Republic Act No. 875 is not applicable to the University
because it is an educational institution and not an industrial establishment and hence not an "employer" in
contemplation of said Act; and neither is Republic Act No. 875 applicable to the members of the Faculty Club
because the latter are independent contractors and, therefore, not employees within the purview of the said
Act.

In support of the contention that being an educational institution it is beyond the scope of Republic Act No. 875,
the University cites cases decided by this Court: Boy Scouts of the Philippines vs. Juliana Araos, L-10091, Jan.
29, 1958; University of San Agustin vs. CIR, et al., L-12222, May 28, 1958; Cebu Chinese High School vs.
Philippine Land-Air-Sea Labor Union, PLASLU, L-12015, April 22, 1959; La Consolacion College, et al. vs.
CIR, et al., L-13282, April 22, 1960; University of the Philippines, et al. vs. CIR, et al., L-15416, April 8,
1960; Far Eastern University vs. CIR, L-17620, August 31, 1962. We have reviewed these cases, and also
related cases subsequent thereto, and We find that they do not sustain the contention of the University. It is
true that this Court has ruled that certain educational institutions, like the University of Santo Tomas, University
of San Agustin, La Consolacion College, and other juridical entities, like the Boy Scouts of the Philippines and
Manila Sanitarium, are beyond the purview of Republic Act No. 875 in the sense that the Court of Industrial
Relations has no jurisdiction to take cognizance of charges of unfair labor practice filed against them, but it is
nonetheless true that the principal reason of this Court in ruling in those cases that those institutions are
excluded from the operation of Republic Act 875 is that those entities are not organized, maintained and
operated for profit and do not declare dividends to stockholders. The decision in the case of University of San
Agustin vs. Court of Industrial Relations, G.R. No. L-12222, May 28, 1958, is very pertinent. We quote a
portion of the decision:
It appears that the University of San Agustin, petitioner herein, is an educational institution conducted
and managed by a "religious non-stock corporation duly organized and existing under the laws of the
Philippines." It was organized not for profit or gain or division of the dividends among its stockholders,
but solely for religious and educational purposes. It likewise appears that the Philippine Association of
College and University Professors, respondent herein, is a non-stock association composed of
professors and teachers in different colleges and universities and that since its organization two years
ago, the university has adopted a hostile attitude to its formation and has tried to discriminate, harass
and intimidate its members for which reason the association and the members affected filed the unfair
labor practice complaint which initiated this proceeding. To the complaint of unfair labor practice,
petitioner filed an answer wherein it disputed the jurisdiction of the Court of Industrial Relations over the
controversy on the following grounds:
"(a) That complainants therein being college and/or university professors were not "industrial"
laborers or employees, and the Philippine Association of College and University Professors
being composed of persons engaged in the teaching profession, is not and cannot be a
legitimate labor organization within the meaning of the laws creating the Court of Industrial
Relations and defining its powers and functions;
"(b) That the University of San Agustin, respondent therein, is not an institution established for
the purpose of gain or division of profits, and consequently, it is not an "industrial" enterprise
and the members of its teaching staff are not engaged in "industrial" employment (U.S.T.
Hospital Employees Association vs. Sto. Tomas University Hospital, G.R. No. L-6988, 24 May
1954; and San Beda College vs. Court of Industrial Relations and National Labor Union, G.R.
No. L-7649, 29 October 1955; 51 O.G. (Nov. 1955) 5636-5640);
"(c) That, as a necessary consequence, alleged controversy between therein complainants and
respondent is not an "industrial" dispute, and the Court of Industrial Relations has no
jurisdiction, notonly on the parties but also over the subject matter of the complaint."
The issue now before us is: Since the University of San Agustin is not an institution established for
profit or gain, nor an industrial enterprise, but one established exclusively for educational purposes, can
it be said that its relation with its professors is one of employer and employee that comes under the

jurisdiction of the Court of Industrial Relations? In other words, do the provisions of the Magna Carta on
unfair labor practice apply to the relation between petitioner and members of respondent association?
The issue is not new. Thus, in the case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L10091, promulgated on January 29, 1958, this Court, speaking thru Mr. Justice Montemayor, answered
the query in the negative in the following wise:
"The main issue involved in the present case is whether or not a charitable institution or one
organized not for profit but for more elevated purposes, charitable, humanitarian, etc., like the
Boy Scouts of the Philippines, is included in the definition of "employer" contained in Republic
Act 875, and whether the employees of said institution fall under the definition of "employee"
also contained in the same Republic Act. If they are included, then any act which may be
considered unfair labor practice, within the meaning of said Republic Act, would come under the
jurisdiction of the Court of Industrial Relations; but if they do not fall within the scope of said
Republic Act, particularly, its definitions of employer and employee, then the Industrial Court
would have no jurisdiction at all.
xxx

xxx

xxx

"On the basis of the foregoing considerations, there is every reason to believe that our labor
legislation from Commonwealth Act No. 103, creating the Court of Industrial Relations, down
through the Eight-Hour Labor Law, to the Industrial Peace Act, was intended by the Legislature
to apply only to industrial employment and to govern the relations between employers engaged
in industry and occupations for purposes of profit and gain, and their industrial employees, but
not to organizations and entities which are organized, operated and maintained not for profit or
gain, but for elevated and lofty purposes, such as, charity, social service, education and
instruction, hospital and medical service, the encouragement and promotion of character,
patriotism and kindred virtues in youth of the nation, etc.
"In conclusion, we find and hold that Republic Act No. 875, particularly, that portion thereof
regarding labor disputes and unfair labor practice, does not apply to the Boy Scouts of the
Philippines, and consequently, the Court of Industrial Relations had no jurisdiction to entertain
and decide the action or petition filed by respondent Araos. Wherefore, the appealed decision
and resolution of the CIR are hereby set aside, with costs against respondent."
There being a close analogy between the relation and facts involved in the two cases, we cannot but
conclude that the Court of Industrial Relations has no jurisdiction to entertain the complaint for unfair
labor practice lodged by respondent association against petitioner and, therefore, we hereby set aside
the order and resolution subject to the present petition, with costs against respondent association.
The same doctrine was confirmed in the case of University of Santo Tomas v. Hon. Baltazar Villanueva, et
al.,G.R. No. L-13748, October 30, 1959, where this Court ruled that:
In the present case, the record reveals that the petitioner University of Santo Tomas is not an industry
organized for profit but an institution of learning devoted exclusively to the education of the youth. The
Court of First Instance of Manila in its decision in Civil Case No. 28870, which has long become final
and consequently the settled law in the case, found as established by the evidence adduced by the
parties therein (herein petitioner and respondent labor union) that while the University collects fees from
its students, all its income is used for the improvement and enlargement of the institution. The
University declares no dividend, and the members of the corporation who founded it, as ordained in its

articles of incorporation, receive no material compensation for the time and sacrifice they render to the
University and its students. The respondent union itself in a case before the Industrial Court (Case No.
314-MC) has averred that "the University of Santo Tomas, like the San Beda College, is an educational
institution operated not for profit but for the sole purpose of educating young men." (See Annex "B" to
petitioner's motion to dismiss.). It is apparent, therefore, that on the face of the record the University of
Santo Tomas is not a corporation created for profit but an educational institution and therefore not an
industrial or business organization.
In the case of La Consolacion College, et al. vs. CIR, et al., G.R. No. L-13282, April 22, 1960, this Court
repeated the same ruling when it said:
The main issue in this appeal by petitioner is that the industry trial court committed an error in holding
that it has jurisdiction to act in this case even if it involves unfair labor practice considering that the La
Consolacion College is not a business enterprise but an educational institution not organized for profit.
If the claim that petitioner is an educational institution not operated for profit is true, which apparently is
the case, because the very court a quo found that it has no stockholder, nor capital . . . then we are of
the opinion that the same does not come under the jurisdiction of the Court of Industrial Relations in
view of the ruling in the case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L-10091,
decided on January 29, 1958.
It is noteworthy that the cases of the University of San Agustin, the University of Santo Tomas, and La
Consolacion College, cited above, all involve charges of unfair labor practice under Republic Act No. 875, and
the uniform rulings of this Court are that the Court of Industrial Relations has no jurisdiction over the charges
because said Act does not apply to educational institutions that are not operated or maintained for profit and do
not declare dividends. On the other hand, in the cases of Far Eastern University v. CIR, et al., G.R. No. L17620, August 31, 1962, this Court upheld the decision of the Court of Industrial Relations finding the Far
Eastern University, also an educational institution, guilty of unfair labor practice. Among the findings of fact in
said case was that the Far Eastern University made profits from the school year 1952-1953 to 1958-1959. In
affirming the decision of the lower court, this Court had thereby ratified the ruling of the Court of Industrial
Relations which applied the Industrial Peace Act to educational institutions that are organized, operated and
maintained for profit.
It is also noteworthy that in the decisions in the cases of the Boy Scouts of the Philippines, the University of
San Agustin, the University of Sto. Tomas, and La Consolacion College, this Court was not unanimous in the
view that the Industrial Peace Act (Republic Act No. 875) is not applicable to charitable, eleemosynary or nonprofit organizations which include educational institutions not operated for profit. There are members of this
Court who hold the view that the Industrial Peace Act would apply also to non-profit organizations or entities
the only exception being the Government, including any political subdivision or instrumentality thereof, in so far
as governmental functions are concerned. However, in the Far Eastern University case this Court is unanimous
in supporting the view that an educational institution that is operated for profit comes within the scope of the
Industrial Peace Act. We consider it a settled doctrine of this Court, therefore, that the Industrial Peace Act is
applicable to any organization or entity whatever may be its purpose when it was created that is operated
for profit or gain.
Does the University operate as an educational institution for profit? Does it declare dividends for its
stockholders? If it does not, it must be declared beyond the purview of Republic Act No. 875; but if it does,
Republic Act No. 875 must apply to it. The University itself admits that it has declared dividends. 3 The CIR in its
order dated March 30, 1963 in CIR Case No. 41-IPA which order was issued after evidence was heard

also found that the University is not for strictly educational purposes and that "It realizes profits and parts of
such earning is distributed as dividends to private stockholders or individuals (Exh. A and also 1 to 1-F, 2-x 3-x
and 4-x)"4 Under this circumstance, and in consonance with the rulings in the decisions of this Court, above
cited, it is obvious that Republic Act No. 875 is applicable to herein petitioner Feati University.
But the University claims that it is not an employer within the contemplation of Republic Act No. 875, because it
is not an industrial establishment. At most, it says, it is only a lessee of the services of its professors and/or
instructors pursuant to a contract of services entered into between them. We find no merit in this claim. Let us
clarify who is an "employer" under the Act. Section 2(c) of said Act provides:
Sec. 2. Definitions.As used in this Act
(c) The term employer include any person acting in the interest of an employer, directly or indirectly, but
shall not include any labor organization (otherwise than when acting as an employer) or any one acting
in the capacity or agent of such labor organization.
It will be noted that in defining the term "employer" the Act uses the word "includes", which it also used in
defining "employee". [Sec. 2 (d)], and "representative" [Sec. 2(h)]; and not the word "means" which the Act
uses in defining the terms "court" [Sec. 2(a)], "labor organization" [Sec. 2(e)], "legitimate labor organization
[Sec. 2(f)], "company union" [Sec. 2(g)], "unfair labor practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)], "strike" [Sec.
2(l)] and "lock-out" [Sec. 2(m)]. A methodical variation in terminology is manifest. This variation and distinction
in terminology and phraseology cannot be presumed to have been the inconsequential product of an oversight;
rather, it must have been the result of a deliberate and purposeful act, more so when we consider that as
legislative records show, Republic Act No. 875 had been meticulously and painstakingly drafted and
deliberated upon. In using the word "includes" and not "means", Congress did not intend to give a complete
definition of "employer", but rather that such definition should be complementary to what is commonly
understood as employer. Congress intended the term to be understood in a broad meaning because, firstly, the
statutory definition includes not only "a principal employer but also a person acting in the interest of the
employer"; and, secondly, the Act itself specifically enumerated those who are not included in the term
"employer", namely: (1) a labor organization (otherwise than when acting as an employer), (2) anyone acting in
the capacity of officer or agent of such labor organization [Sec. 2(c)], and (3) the Government and any political
subdivision or instrumentality thereof insofar as the right to strike for the purpose of securing changes or
modifications in the terms and conditions of employment is concerned (Section 11). Among these statutory
exemptions, educational institutions are not included; hence, they can be included in the term "employer". This
Court, however, has ruled that those educational institutions that are not operated for profit are not within the
purview of Republic Act No. 875.5
As stated above, Republic Act No. 875 does not give a comprehensive but only a complementary definition of
the term "employer". The term encompasses those that are in ordinary parlance "employers." What is
commonly meant by "employer"? The term "employer" has been given several acceptations. The lexical
definition is "one who employs; one who uses; one who engages or keeps in service;" and "to employ" is "to
provide work and pay for; to engage one's service; to hire." (Webster's New Twentieth Century Dictionary, 2nd
ed., 1960, p. 595). The Workmen's Compensation Act defines employer as including "every person or
association of persons, incorporated or not, public or private, and the legal representative of the deceased
employer" and "includes the owner or lessee of a factory or establishment or place of work or any other person
who is virtually the owner or manager of the business carried on in the establishment or place of work but who,
for reason that there is an independent contractor in the same, or for any other reason, is not the direct
employer of laborers employed there." [Sec. 39(a) of Act No. 3428.] The Minimum Wage Law states that
"employer includes any person acting directly or indirectly in the interest of the employer in relation to an

employee and shall include the Government and the government corporations". [Rep. Act No. 602, Sec. 2(b)].
The Social Security Act defines employer as "any person, natural or juridical, domestic or foreign, who carries
in the Philippines any trade, business, industry, undertaking, or activity of any kind and uses the services of
another person who is under his orders as regards the employment, except the Government and any of its
political subdivisions, branches or instrumentalities, including corporations owned or controlled by the
Government." (Rep. Act No. 1161, Sec. 8[c]).
This Court, in the cases of the The Angat River Irrigation System, et al. vs. Angat River Workers' Union
(PLUM), et al., G.R. Nos. L-10934 and L-10944, December 28, 1957, which cases involve unfair labor
practices and hence within the purview of Republic Act No. 875, defined the term employer as follows:
An employer is one who employs the services of others; one for whom employees work and who pays
their wages or salaries (Black Law Dictionary, 4th ed., p. 618).
An employer includes any person acting in the interest of an employer, directly or indirectly (Sec. 2-c,
Rep. Act 875).
Under none of the above definitions may the University be excluded, especially so if it is considered that every
professor, instructor or teacher in the teaching staff of the University, as per allegation of the University itself,
has a contract with the latter for teaching services, albeit for one semester only. The University engaged the
services of the professors, provided them work, and paid them compensation or salary for their services. Even
if the University may be considered as a lessee of services under a contract between it and the members of its
Faculty, still it is included in the term "employer". "Running through the word `employ' is the thought that there
has been an agreement on the part of one person to perform a certain service in return for compensation to be
paid by an employer. When you ask how a man is employed, or what is his employment, the thought that he is
under agreement to perform some service or services for another is predominant and paramount." (Ballentine
Law Dictionary, Philippine ed., p. 430, citing Pinkerton National Detective Agency v. Walker, 157 Ga. 548, 35 A.
L. R. 557, 560, 122 S.E. Rep. 202).
To bolster its claim of exception from the application of Republic Act No. 875, the University contends that it is
not state that the employers included in the definition of 2 (c) of the Act. This contention can not be sustained.
In the first place, Sec. 2 (c) of Republic Act No. 875 does not state that the employers included in the definition
of the term "employer" are only and exclusively "industrial establishments"; on the contrary, as stated above,
the term "employer" encompasses all employers except those specifically excluded by the Act. In the second
place, even the Act itself does not refer exclusively to industrial establishments and does not confine its
application thereto. This is patent inasmuch as several provisions of the Act are applicable to non-industrial
workers, such as Sec. 3, which deals with "employees' right to self-organization"; Sections 4 and 5 which
enumerate unfair labor practices; Section 8 which nullifies private contracts contravening employee's rights;
Section 9 which relates to injunctions in any case involving a labor dispute; Section 11 which prohibits strikes in
the government; Section 12 which provides for the exclusive collective bargaining representation for labor
organizations; Section 14 which deals with the procedure for collective bargaining; Section 17 which treats of
the rights and conditions of membership in labor organizations; Sections 18, 19, 20 and 21 which provide
respectively for the establishment of conciliation service, compilation of collective bargaining contracts,
advisory labor-management relations; Section 22 which empowers the Secretary of Labor to make a study of
labor relations; and Section 24 which enumerates the rights of labor organizations. (See Dissenting Opinion of
Justice Concepcion in Boy Scouts of the Philippines v. Juliana Araos, G.R. No. L-10091, January 29, 1958.)
This Court, in the case of Boy Scouts of the Philippines v. Araos, supra, had occasion to state that the
Industrial Peace Act "refers only to organizations and entities created and operated for profits, engaged in a

profitable trade, occupation or industry". It cannot be denied that running a university engages time and
attention; that it is an occupation or a business from which the one engaged in it may derive profit or gain. The
University is not an industrial establishment in the sense that an industrial establishment is one that is engaged
in manufacture or trade where raw materials are changed or fashioned into finished products for use. But for
the purposes of the Industrial Peace Act the University is an industrial establishment because it is operated for
profit and it employs persons who work to earn a living. The term "industry", for the purposes of the application
of our labor laws should be given a broad meaning so as to cover all enterprises which are operated for profit
and which engage the services of persons who work to earn a living.
The word "industry" within State Labor Relations Act controlling labor relations in industry, cover labor
conditions in any field of employment where the objective is earning a livelihood on the one side and
gaining of a profit on the other. Labor Law Sec. 700 et seq. State Labor Relations Board vs.
McChesney, 27 N.Y.S. 2d 866, 868." (Words and Phrases, Permanent Edition, Vol. 21, 1960 edition p.
510).
The University urges that even if it were an employer, still there would be no employer-employee relationship
between it and the striking members of the Faculty Club because the latter are not employees within the
purview of Sec. 2(d) of Republic Act No. 875 but are independent contractors. This claim is untenable.
Section 2 (d) of Republic Act No. 875 provides:
(d) The term "employee" shall include any employee and shall not be limited to the employee of a
particular employer unless the act explicitly states otherwise and shall include any individual whose
work has ceased as a consequence of, or in connection with, any current labor dispute or because of
any unfair labor practice and who has not obtained any other substantially equivalent and regular
employment.
This definition is again, like the definition of the term "employer" [Sec. 2(c)], by the use of the term "include",
complementary. It embraces not only those who are usually and ordinarily considered employees, but also
those who have ceased as employees as a consequence of a labor dispute. The term "employee",
furthermore, is not limited to those of a particular employer. As already stated, this Court in the cases of The
Angat River Irrigation System, et al. v. Angat River Workers' Union (PLUM), et al., supra, has defined the term
"employer" as "one who employs the services of others; one for whom employees work and who pays their
wages or salaries. "Correlatively, an employee must be one who is engaged in the service of another; who
performs services for another; who works for salary or wages. It is admitted by the University that the striking
professors and/or instructors are under contract to teach particular courses and that they are paid for their
services. They are, therefore, employees of the University.
In support of its claim that the members of the Faculty Club are not employees of the University, the latter cites
as authority Francisco's Labor Laws, 2nd ed., p. 3, which states:
While the term "workers" as used in a particular statute, has been regarded as limited to those
performing physical labor, it has been held to embrace stenographers and bookkeepers. Teachers are
not included, however.
It is evident from the above-quoted authority that "teachers" are not to be included among those who perform
"physical labor", but it does not mean that they are not employees. We have checked the source of the
authority, which is 31 Am. Jur., Sec. 3, p. 835, and the latter cites Huntworth v. Tanner, 87 Wash 670, 152 P.
523, Ann Cas 1917 D 676. A reading of the last case confirms Our view.

That teachers are "employees' has been held in a number of cases (Aebli v. Board of Education of City and
County of San Francisco, 145 P. 2d 601, 62 Col. App 2.d 706; Lowe & Campbell Sporting Goods Co. v.
Tangipahoa Parish School Board, La. App., 15 So. 2d 98, 100; Sister Odelia v. Church of St. Andrew, 263 N.
W. 111, 112, 195 Minn. 357, cited in Words and Phrases, Permanent ed., Vol. 14, pp. 806-807). This Court in
the Far Eastern University case, supra, considered university instructors as employees and declared Republic
Act No. 875 applicable to them in their employment relations with their school. The professors and/or
instructors of the University neither ceased to be employees when they struck, for Section 2 of Rep. Act 875
includes among employees any individual whose work has ceased as consequence of, or in connection with a
current labor dispute. Striking employees maintain their status as employees of the employer. (Western
Cartridge Co. v. NLRB, C.C.A. 7, 139 F2d 855, 858).
The contention of the University that the professors and/or instructors are independent contractors, because
the University does not exercise control over their work, is likewise untenable. This Court takes judicial notice
that a university controls the work of the members of its faculty; that a university prescribes the courses or
subjects that professors teach, and when and where to teach; that the professors' work is characterized by
regularity and continuity for a fixed duration; that professors are compensated for their services by wages and
salaries, rather than by profits; that the professors and/or instructors cannot substitute others to do their work
without the consent of the university; and that the professors can be laid off if their work is found not
satisfactory. All these indicate that the university has control over their work; and professors are, therefore,
employees and not independent contractors. There are authorities in support of this view.
The principal consideration in determining whether a workman is an employee or an independent
contractor is the right to control the manner of doing the work, and it is not the actual exercise of the
right by interfering with the work, but the right to control, which constitutes the test. (Amalgamated
Roofing Co. v. Travelers' Ins. Co., 133 N.E. 259, 261, 300 Ill. 487, quoted in Words and Phrases,
Permanent ed., Vol. 14, p. 576).
Where, under Employers' Liability Act, A was instructed when and where to work . . . he is an employee,
and not a contractor, though paid specified sum per square. (Heine v. Hill, Harris & Co., 2 La. App. 384,
390, in Words and Phrases, loc, cit.) .
Employees are those who are compensated for their labor or services by wages rather than by profits.
(People vs. Distributors Division, Smoked Fish Workers Union Local No. 20377, Sup. 7 N. Y. S. 2d 185,
187 in Words and Phrases, loc, cit.)
Services of employee or servant, as distinguished from those of a contractor, are usually characterized
by regularity and continuity of work for a fixed period or one of indefinite duration, as contrasted with
employment to do a single act or a series of isolated acts; by compensation on a fixed salary rather
than one regulated by value or amount of work; . . . (Underwood v. Commissioner of Internal Revenue,
C.C.A., 56 F. 2d 67, 71 in Words and Phrases, op. cit., p. 579.)
Independent contractors can employ others to work and accomplish contemplated result without
consent of contractee, while "employee" cannot substitute another in his place without consent of his
employer. (Luker Sand & Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82 Utah, 188, in Words
and Phrases, Vol. 14, p. 576).
Moreover, even if university professors are considered independent contractors, still they would be covered by
Rep. Act No. 875. In the case of the Boy Scouts of the Philippines v. Juliana Araos, supra, this Court observed
that Republic Act No. 875 was modelled after the Wagner Act, or the National Labor Relations Act, of the
United States, and this Act did not exclude "independent contractors" from the orbit of "employees". It was in

the
subsequent
legislation

the
Labor
Management
Relation
Act
(Taft-Harley
Act) that "independent contractors" together with agricultural laborers, individuals in domestic service of the
home, supervisors, and others were excluded. (See Rothenberg on Labor Relations, 1949, pp. 330-331).
It having been shown that the members of the Faculty Club are employees, it follows that they have a right to
unionize in accordance with the provisions of Section 3 of the Magna Carta of Labor (Republic Act No. 875)
which provides as follows:
Sec. 3. Employees' right to self-organization.Employees shall have the right to self-organization and
to form, join or assist labor organizations of their own choosing for the purpose of collective bargaining
through representatives of their own choosing and to engage in concerted activities for the purpose of
collective bargaining and other mutual aid or protection. . . .
We agree with the statement of the lower court, in its order of March 30, 1963 which is sought to be set aside
in the instant case, that the right of employees to self-organization is guaranteed by the Constitution, that said
right would exist even if Republic Act No. 875 is repealed, and that regardless of whether their employers are
engaged in commerce or not. Indeed, it is Our considered view that the members of the faculty or teaching
staff of private universities, colleges, and schools in the Philippines, regardless of whether the university,
college or school is run for profit or not, are included in the term "employees" as contemplated in Republic Act
No. 875 and as such they may organize themselves pursuant to the above-quoted provision of Section 3 of
said Act. Certainly, professors, instructors or teachers of private educational institutions who teach to earn a
living are entitled to the protection of our labor laws and one such law is Republic Act No. 875.
The contention of the University in the instant case that the members of the Faculty Club can not unionize and
the Faculty Club can not exist as a valid labor organization is, therefore, without merit. The record shows that
the Faculty Club is a duly registered labor organization and this fact is admitted by counsel for the University.5a
The other issue raised by the University is the validity of the Presidential certification. The University contends
that under Section 10 of Republic Act No. 875 the power of the President of the Philippines to certify is subject
to the following conditions, namely: (1) that here is a labor dispute, and (2) that said labor dispute exists in an
industry that is vital to the national interest. The University maintains that those conditions do not obtain in the
instant case. This contention has also no merit.
We have previously stated that the University is an establishment or enterprise that is included in the term
"industry" and is covered by the provisions of Republic Act No. 875. Now, was there a labor dispute between
the University and the Faculty Club?
Republic Act No. 875 defines a labor dispute as follows:
The term "labor dispute" includes any controversy concerning terms, tenure or conditions of
employment, or concerning the association or representation of persons in negotiating, fixing,
maintaining, changing, or seeking to arrange terms or conditions of employment regardless of whether
the disputants stand in proximate relation of employer and employees.
The test of whether a controversy comes within the definition of "labor dispute" depends on whether the
controversy involves or concerns "terms, tenure or condition of employment" or "representation." It is admitted
by the University, in the instant case, that on January 14, 1963 the President of the Faculty Club wrote to the
President of the University a letter informing the latter of the organization of the Faculty Club as a labor union,
duly registered with the Bureau of Labor Relations; that again on January 22, 1963 another letter was sent, to
which was attached a list of demands consisting of 26 items, and asking the President of the University to

answer within ten days from date of receipt thereof; that the University questioned the right of the Faculty Club
to be the exclusive representative of the majority of the employees and asked proof that the Faculty Club had
been designated or selected as exclusive representative by the vote of the majority of said employees; that on
February 1, 1963 the Faculty Club filed with the Bureau of Labor Relations a notice of strike alleging as reason
therefor the refusal of the University to bargain collectively with the representative of the faculty members; that
on February 18, 1963 the members of the Faculty Club went on strike and established picket lines in the
premises of the University, thereby disrupting the schedule of classes; that on March 1, 1963 the Faculty Club
filed Case No. 3666-ULP for unfair labor practice against the University, but which was later dismissed (on April
2, 1963 after Case 41-IPA was certified to the CIR); and that on March 7, 1963 a petition for certification
election, Case No. 1183-MC, was filed by the Faculty Club in the CIR. 6 All these admitted facts show that the
controversy between the University and the Faculty Club involved terms and conditions of employment, and
the question of representation. Hence, there was a labor dispute between the University and the Faculty Club,
as contemplated by Republic Act No. 875. It having been shown that the University is an institution operated
for profit, that is an employer, and that there is an employer-employee relationship, between the University and
the members of the Faculty Club, and it having been shown that a labor dispute existed between the University
and the Faculty Club, the contention of the University, that the certification made by the President is not only
not authorized by Section 10 of Republic Act 875 but is violative thereof, is groundless.
Section 10 of Republic Act No. 875 provides:
When in the opinion of the President of the Philippines there exists a labor dispute in an industry
indispensable to the national interest and when such labor dispute is certified by the President to the
Court of Industrial Relations, said Court may cause to be issued a restraining order forbidding the
employees to strike or the employer to lockout the employees, and if no other solution to the dispute is
found, the Court may issue an order fixing the terms and conditions of employment.
This Court had occasion to rule on the application of the above-quoted provision of Section 10 of Republic Act
No. 875. In the case of Pampanga Sugar Development Co. v. CIR, et al., G.R. No. L-13178, March 24, 1961, it
was held:
It thus appears that when in the opinion of the President a labor dispute exists in an industry
indispensable to national interest and he certifies it to the Court of Industrial Relations the latter
acquires jurisdiction to act thereon in the manner provided by law. Thus the court may take either of the
following courses: it may issue an order forbidding the employees to strike or the employer to lockout its
employees, or, failing in this, it may issue an order fixing the terms and conditions of employment. It has
no other alternative. It can not throw the case out in the assumption that the certification was
erroneous.
xxx

xxx

xxx

. . . The fact, however, is that because of the strike declared by the members of the minority union
which threatens a major industry the President deemed it wise to certify the controversy to the Court of
Industrial Relations for adjudication. This is the power that the law gives to the President the propriety
of its exercise being a matter that only devolves upon him. The same is not the concern of the industrial
court. What matters is that by virtue of the certification made by the President the case was placed
under the jurisdiction of said court. (Emphasis supplied)
To certify a labor dispute to the CIR is the prerogative of the President under the law, and this Court will not
interfere in, much less curtail, the exercise of that prerogative. The jurisdiction of the CIR in a certified case is
exclusive (Rizal Cement Co., Inc. v. Rizal Cement Workers Union (FFW), et al., G.R. No. L-12747, July 30,

1960). Once the jurisdiction is acquired pursuant to the presidential certification, the CIR may exercise its
broad powers as provided in Commonwealth Act 103. All phases of the labor dispute and the employeremployee relationship may be threshed out before the CIR, and the CIR may issue such order or orders as
may be necessary to make effective the exercise of its jurisdiction. The parties involved in the case may appeal
to the Supreme Court from the order or orders thus issued by the CIR.
And so, in the instant case, when the President took into consideration that the University "has some 18,000
students and employed approximately 500 faculty members", that `the continued disruption in the operation of
the University will necessarily prejudice the thousand of students", and that "the dispute affects the national
interest",7and certified the dispute to the CIR, it is not for the CIR nor this Court to pass upon the correctness of
the reasons of the President in certifying the labor dispute to the CIR.
The third issue raised by the University refers to the question of the legality of the return-to-work order (of
March 30, 1963 in Case 41-IPA) and the order implementing the same (of April 6, 1963). It alleges that the
orders are illegal upon the grounds: (1) that Republic Act No. 875, supplementing Commonwealth Act No. 103,
has withdrawn from the CIR the power to issue a return-to-work order; (2) that the only power granted by
Section 10 of Republic Act No. 875 to the CIR is to issue an order forbidding the employees to strike or
forbidding the employer to lockout the employees, as the case may be, before either contingency had become
a fait accompli; (3) that the taking in by the University of replacement professors was valid, and the return-towork order of March 30, 1963 constituted impairment of the obligation of contracts; and (4) the CIR could not
issue said order without having previously determined the legality or illegality of the strike.
The contention of the University that Republic Act No. 875 has withdrawn the power of the Court of Industrial
Relations to issue a return-to-work order exercised by it under Commonwealth Act No. 103 can not be
sustained. When a case is certified by the President to the Court of Industrial Relations, the case thereby
comes under the operation of Commonwealth Act No. 103, and the Court may exercise the broad powers and
jurisdiction granted to it by said Act. Section 10 of Republic Act No. 875 empowers the Court of Industrial
Relations to issue an order "fixing the terms of employment." This clause is broad enough to authorize the
Court to order the strikers to return to work and the employer to readmit them. This Court, in the cases of
the Philippine Marine Officers Association vs. The Court of Industrial Relations, Compania Maritima, et al.;
and Compaia Martima, et al. vs. Philippine Marine Radio Officers Association and CIR, et al., G.R. Nos. L10095 and L-10115, October 31, 1957, declared:
We cannot subscribe to the above contention. We agree with counsel for the Philippine Radio Officers'
Association that upon certification by the President under Section 10 of Republic Act 875, the case
comes under the operation of Commonwealth Act 103, which enforces compulsory arbitration in cases
of labor disputes in industries indispensable to the national interest when the President certifies the
case to the Court of Industrial Relations. The evident intention of the law is to empower the Court of
Industrial Relations to act in such cases, not only in the manner prescribed under Commonwealth Act
103, but with the same broad powers and jurisdiction granted by that act. If the Court of Industrial
Relations is granted authority to find a solution to an industrial dispute and such solution consists in the
ordering of employees to return back to work, it cannot be contended that the Court of Industrial
Relations does not have the power or jurisdiction to carry that solution into effect. And of what use is its
power of conciliation and arbitration if it does not have the power and jurisdiction to carry into effect the
solution it has adopted? Lastly, if the said court has the power to fix the terms and conditions of
employment, it certainly can order the return of the workers with or without backpay as a term or
condition of employment.

The foregoing ruling was reiterated by this Court in the case of Hind Sugar Co. v. CIR, et al., G.R. No. L-13364,
July 26, 1960.
When a case is certified to the CIR by the President of the Philippines pursuant to Section 10 of Republic Act
No. 875, the CIR is granted authority to find a solution to the industrial dispute; and the solution which the CIR
has found under the authority of the presidential certification and conformable thereto cannot be questioned
(Radio Operators Association of the Philippines vs. Philippine Marine Radio Officers Association, et al., L10112, Nov. 29, 1957, 54 O.G. 3218).
Untenable also is the claim of the University that the CIR cannot issue a return-to-work order after strike has
been declared, it being contended that under Section 10 of Republic Act No. 875 the CIR can only prevent a
strike or a lockout when either of this situation had not yet occurred. But in the case of Bisaya Land
Transportation Co., Inc. vs. Court of Industrial Relations, et al., No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this
Court declared:
There is no reason or ground for the contention that Presidential certification of labor dispute to the CIR
is limited to the prevention of strikes and lockouts. Even after a strike has been declared where the
President believes that public interest demands arbitration and conciliation, the President may certify
the ease for that purpose. The practice has been for the Court of Industrial Relations to order the
strikers to work, pending the determination of the union demands that impelled the strike. There is
nothing in the law to indicate that this practice is abolished." (Emphasis supplied)
Likewise untenable is the contention of the University that the taking in by it of replacements was valid and the
return-to-work order would be an impairment of its contract with the replacements. As stated by the CIR in its
order of March 30, 1963, it was agreed before the hearing of Case 41-IPA on March 23, 1963 that the strikers
would return to work under the status quo arrangement and the University would readmit them, and the returnto-work order was a confirmation of that agreement. This is a declaration of fact by the CIR which we cannot
disregard. The faculty members, by striking, have not abandoned their employment but, rather, they have only
ceased from their labor (Keith Theatre v. Vachon et al., 187 A. 692). The striking faculty members have not lost
their right to go back to their positions, because the declaration of a strike is not a renunciation of their
employment and their employee relationship with the University (Rex Taxicab Co. vs. CIR, et al., 40 O.G., No.
13, 138). The employment of replacements was not authorized by the CIR. At most, that was a temporary
expedient resorted to by the University, which was subject to the power of the CIR to allow to continue or not.
The employment of replacements by the University prior to the issuance of the order of March 30, 1963 did not
vest in the replacements a permanent right to the positions they held. Neither could such temporary
employment bind the University to retain permanently the replacements.
Striking employees maintained their status as employees of the employer (Western Castridge Co. v.
National Labor Relations Board, C.C.A. 139 F. 2d 855, 858) ; that employees who took the place of
strikers do not displace them as `employees." ' (National Labor Relations Board v. A. Sartorius & Co.,
C.C.A. 2, 140 F. 2d 203, 206, 207.)
It is clear from what has been said that the return-to-work order cannot be considered as an impairment of the
contract entered into by petitioner with the replacements. Besides, labor contracts must yield to the common
good and such contracts are subject to the special laws on labor unions, collective bargaining, strikes and
similar subjects (Article 1700, Civil Code).
Likewise unsustainable is the contention of the University that the Court of Industrial Relations could not issue
the return-to-work order without having resolved previously the issue of the legality or illegality of the strike,
citing as authority therefor the case of Philippine Can Company v. Court of Industrial Relations, G.R. No. L-

3021, July 13, 1950. The ruling in said case is not applicable to the case at bar, the facts and circumstances
being very different. The Philippine Can Company case, unlike the instant case, did not involve the national
interest and it was not certified by the President. In that case the company no longer needed the services of
the strikers, nor did it need substitutes for the strikers, because the company was losing, and it was imperative
that it lay off such laborers as were not necessary for its operation in order to save the company from
bankruptcy. This was the reason of this Court in ruling, in that case, that the legality or illegality of the strike
should have been decided first before the issuance of the return-to-work order. The University, in the case
before Us, does not claim that it no longer needs the services of professors and/or instructors; neither does it
claim that it was imperative for it to lay off the striking professors and instructors because of impending
bankruptcy. On the contrary, it was imperative for the University to hire replacements for the strikers. Therefore,
the ruling in the Philippine Can case that the legality of the strike should be decided first before the issuance of
the return-to-work order does not apply to the case at bar. Besides, as We have adverted to, the return-to-work
order of March 30, 1963, now in question, was a confirmation of an agreement between the University and the
Faculty Club during a prehearing conference on March 23, 1963.
The University also maintains that there was no more basis for the claim of the members of the Faculty Club to
return to their work, as their individual contracts for teaching had expired on March 25 or 31, 1963, as the case
may be, and consequently, there was also no basis for the return-to-work order of the CIR because the
contractual relationships having ceased there were no positions to which the members of the Faculty Club
could return to. This contention is not well taken. This argument loses sight of the fact that when the professors
and instructors struck on February 18, 1963, they continued to be employees of the University for the purposes
of the labor controversy notwithstanding the subsequent termination of their teaching contracts, for Section
2(d) of the Industrial Peace Act includes among employees "any individual whose work has ceased a
consequence of, or in connection with, any current labor dispute or of any unfair labor practice and who has
not obtained any other substantially equivalent and regular employment."
The question raised by the University was resolved in a similar case in the United States. In the case of Rapid
Roller Co. v. NLRB 126 F. 2d 452, we read:
On May 9, 1939 the striking employees, eighty-four in number, offered to the company to return to their
employment. The company believing it had not committed any unfair labor practice, refused the
employees' offer and claimed the right to employ others to take the place of the strikers, as it might see
fit. This constituted discrimination in the hiring and tenure of the striking employees. When the
employees went out on a strike because of the unfair labor practice of the company, their status as
employees for the purpose of any controversy growing out of that unfair labor practice was fixed. Sec. 2
(3) of the Act. Phelps Dodge Corp. v. National Labor Relations Board, 313 U.S. 177, 61 S. Ct. 845, 85.
L. ed. 1271, 133 A.L.R. 1217.
For the purpose of such controversy they remained employees of the company. The company
contended that they could not be their employees in any event since the "contract of their employment
expired by its own terms on April 23, 1939."
In this we think the company is mistaken for the reason we have just pointed out, that the status of the
employees on strike became fixed under Sec. 2 (3) of the Act because of the unfair labor practice of the
company which caused the strike.
The University, furthermore, claims that the information for indirect contempt filed against the officers of the
University (Case No. V-30) as well as the order of April 29, 1963 for their arrest were improper, irregular and
illegal because (1) the officers of the University had complied in good faith with the return-to-work order and in

those cases that they did not, it was due to circumstance beyond their control; (2) the return-to-work order and
the order implementing the same were illegal; and (3) even assuming that the order was legal, the same was
not Yet final because there was a motion to reconsider it.
Again We find no merit in this claim of Petitioner. We have already ruled that the CIR had jurisdiction to issue
the order of March 30, 1963 in CIR Case 41-IPA, and the return-to-work provision of that order is valid and
legal. Necessarily the order of April 6, 1963 implementing that order of March 30, 1963 was also valid and
legal.
Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial Relations of any Judge thereof to
punish direct and indirect contempts as provided in Rule 64 (now Rule 71) of the Rules of Court, under the
same procedure and penalties provided therein. Section 3 of Rule 71 enumerates the acts which would
constitute indirect contempt, among which is "disobedience or resistance to lawful writ, process, order,
judgment, or command of a court," and the person guilty thereof can be punished after a written charge has
been filed and the accused has been given an opportunity to be heard. The last paragraph of said section
provides:
But nothing in this section shall be so construed as to prevent the court from issuing process to bring
the accused party into court, or from holding him in custody pending such proceedings.
The provision authorizes the judge to order the arrest of an alleged contemner (Francisco, et al. v. Enriquez, L7058, March 20, 1954, 94 Phil., 603) and this, apparently, is the provision upon which respondent Judge
Bautista relied when he issued the questioned order of arrest.
The contention of petitioner that the order of arrest is illegal is unwarranted. The return-to-work order allegedly
violated was within the court's jurisdiction to issue.
Section 14 of Commonwealth Act No. 103 provides that in cases brought before the Court of Industrial
Relations under Section 4 of the Act (referring to strikes and lockouts) the appeal to the Supreme Court from
any award, order or decision shall not stay the execution of said award, order or decision sought to be
reviewed unless for special reason the court shall order that execution be stayed. Any award, order or decision
that is appealed is necessarily not final. Yet under Section 14 of Commonwealth Act No. 103 that award, order
or decision, even if not yet final, is executory, and the stay of execution is discretionary with the Court of
Industrial Relations. In other words, the Court of Industrial Relations, in cases involving strikes and lockouts,
may compel compliance or obedience of its award, order or decision even if the award, order or decision is not
yet final because it is appealed, and it follows that any disobedience or non-compliance of the award, order or
decision would constitute contempt against the Court of Industrial Relations which the court may punish as
provided in the Rules of Court. This power of the Court of Industrial Relations to punish for contempt an act of
non-compliance or disobedience of an award, order or decision, even if not yet final, is a special one and is
exercised only in cases involving strikes and lockouts. And there is reason for this special power of the
industrial court because in the exercise of its jurisdiction over cases involving strikes and lockouts the court has
to issue orders or make decisions that are necessary to effect a prompt solution of the labor dispute that
caused the strike or the lockout, or to effect the prompt creation of a situation that would be most beneficial to
the management and the employees, and also to the public even if the solution may be temporary, pending
the final determination of the case. Otherwise, if the effectiveness of any order, award, or decision of the
industrial court in cases involving strikes and lockouts would be suspended pending appeal then it can happen
that the coercive powers of the industrial court in the settlement of the labor disputes in those cases would be
rendered useless and nugatory.

The University points to Section 6 of Commonwealth Act No. 103 which provides that "Any violation of any
order, award, or decision of the Court of Industrial Relations shall after such order, award or decision has
become final, conclusive and executory constitute contempt of court," and contends that only the disobedience
of orders that are final (meaning one that is not appealed) may be the subject of contempt proceedings. We
believe that there is no inconsistency between the above-quoted provision of Section 6 and the provision of
Section 14 of Commonwealth Act No. 103. It will be noted that Section 6 speaks of order, award or decision
that is executory. By the provision of Section 14 an order, award or decision of the Court of Industrial Relations
in cases involving strikes and lockouts are immediately executory, so that a violation of that order would
constitute an indirect contempt of court.
We believe that the action of the CIR in issuing the order of arrest of April 29, 1963 is also authorized under
Section 19 of Commonwealth Act No. 103 which provides as follows:
SEC. 19. Implied condition in every contract of employment.In every contract of employment whether
verbal or written, it is an implied condition that when any dispute between the employer and the
employee or laborer has been submitted to the Court of Industrial Relations for settlement or arbitration
pursuant to the provisions of this Act . . . and pending award, or decision by the Court of such dispute . .
. the employee or laborer shall not strike or walk out of his employment when so enjoined by the Court
after hearing and when public interest so requires, and if he has already done so, that he shall forthwith
return to it, upon order of the Court, which shall be issued only after hearing when public interest so
requires or when the dispute cannot, in its opinion, be promptly decided or settled; and if the employees
or laborers fail to return to work, the Court may authorize the employer to accept other employees or
laborers. A condition shall further be implied that while such dispute . . . is pending, the employer shall
refrain from accepting other employees or laborers, unless with the express authority of the Court, and
shall permit the continuation in the service of his employees or laborers under the last terms and
conditions existing before the dispute arose. . . . A violation by the employer or by the employee or
laborer of such an order or the implied contractual condition set forth in this section shall constitute
contempt of the Court of Industrial Relations and shall be punished by the Court itself in the same
manner with the same penalties as in the case of contempt of a Court of First Instance. . . .
We hold that the CIR acted within its jurisdiction when it ordered the arrest of the officers of the University upon
a complaint for indirect contempt filed by the Acting Special Prosecutor of the CIR in CIR Case V-30, and that
order was valid. Besides those ordered arrested were not yet being punished for contempt; but, having been
charged, they were simply ordered arrested to be brought before the Judge to be dealt with according to law.
Whether they are guilty of the charge or not is yet to be determined in a proper hearing.
Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-30 is being questioned in Case G.R.
No. L-21278 before this Court in a special civil action for certiorari. The University did not appeal from that
order. In other words, the only question to be resolved in connection with that order in CIR Case V-30 is
whether the CIR had jurisdiction, or had abused its discretion, in issuing that order. We hold that the CIR had
jurisdiction to issue that order, and neither did it abuse its discretion when it issued that order.
In Case G.R. No. L-21462 the University appealed from the order of Judge Villanueva of the CIR in Case No.
1183-MC, dated April 6, 1963, granting the motion of the Faculty Club to withdraw its petition for certification
election, and from the resolution of the CIR en banc, dated June 5, 1963, denying the motion to reconsider
said order of April 6, 1963. The ground of the Faculty Club in asking for the withdrawal of that petition for
certification election was because the issues involved in that petition were absorbed by the issues in Case 41IPA. The University opposed the petition for withdrawal, but at the same time it moved for the dismissal of the
petition for certification election.

It is contended by the University before this Court, in G.R. L-21462, that the issues of employer-employee
relationship between the University and the Faculty Club, the alleged status of the Faculty Club as a labor
union, its majority representation and designation as bargaining representative in an appropriate unit of the
Faculty Club should have been resolved first in Case No. 1183-MC prior to the determination of the issues in
Case No. 41-IPA, and, therefore, the motion to withdraw the petition for certification election should not have
been granted upon the ground that the issues in the first case were absorbed in the second case.
We believe that these contentions of the University in Case G.R. No. L-21462 have been sufficiently covered
by the discussion in this decision of the main issues raised in the principal case, which is Case G.R. No. L21278. After all, the University wanted CIR Case 1183-MC dismissed, and the withdrawal of the petition for
certification election had in a way produced the situation desired by the University. After considering the
arguments adduced by the University in support of its petition for certiorari by way of appeal in Case G.R. No.
L-21278, We hold that the CIR did not commit any error when it granted the withdrawal of the petition for
certification election in Case No. 1183-MC. The principal case before the CIR is Case No. 41-IPA and all the
questions relating to the labor disputes between the University and the Faculty Club may be threshed out, and
decided, in that case.
In Case G.R. No. L-21500 the University appealed from the order of the CIR of March 30, 1963, issued by
Judge Bautista, and from the resolution of the CIR en banc promulgated on June 28, 1963, denying the motion
for the reconsideration of that order of March 30, 1963, in CIR Case No. 41-IPA. We have already ruled that
the CIR has jurisdiction to issue that order of March 30, 1963, and that order is valid, and We, therefore, hold
that the CIR did not err in issuing that order of March 30, 1963 and in issuing the resolution promulgated on
June 28, 1963 (although dated May 7, 1963) denying the motion to reconsider that order of March 30, 1963.
IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition with preliminary injunction in Case
G.R. No. L-21278 is dismissed and the writs prayed for therein are denied. The writ of preliminary injunction
issued in Case G.R. No. L-21278 is dissolved. The orders and resolutions appealed from, in Cases Nos. L21462 and L-21500, are affirmed, with costs in these three cases against the petitioner-appellant Feati
University. It is so ordered.
Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P., Sanchez and Castro, JJ., concur.
Reyes, J.B.L., J., concurs but reserves his vote on the teacher's right to strike.

7. G.R. No. 119268

February 23, 2000

ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS, LUIS DE LOS
ANGELES, JOEL ORDENIZA and AMADO CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN TAXI (PHILJAMA
INTERNATIONAL, INC.) respondents.
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the decision1 of public respondent promulgated on October
28, 1994, in NLRC NCR CA No. 003883-92, and its resolution 2 dated December 13, 1994 which denied
petitioners motion for reconsideration.
Petitioners were drivers of private respondent, Philjama International Inc., a domestic corporation engaged in
the operation of "Goodman Taxi." Petitioners used to drive private respondent's taxicabs every other day on a
24-hour work schedule under the boundary system. Under this arrangement, the petitioners earned an average
of P400.00 daily. Nevertheless, private respondent admittedly regularly deducts from petitioners, daily earnings
the amount of P30.00 supposedly for the washing of the taxi units. Believing that the deduction is illegal,
petitioners decided to form a labor union to protect their rights and interests.
Upon learning about the plan of petitioners, private respondent refused to let petitioners drive their taxicabs
when they reported for work on August 6, 1991, and on succeeding days. Petitioners suspected that they were
singled out because they were the leaders and active members of the proposed union. Aggrieved, petitioners
filed with the labor arbiter a complaint against private respondent for unfair labor practice, illegal dismissal and
illegal deduction of washing fees. In a decision 3 dated August 31, 1992, the labor arbiter dismissed said
complaint for lack of merit.
On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994, reversed and set aside the
judgment of the labor arbiter. The labor tribunal declared that petitioners are employees of private respondent,
and, as such, their dismissal must be for just cause and after due process. It disposed of the case as follows:
WHEREFORE, in view of all the foregoing considerations, the decision of the Labor Arbiter appealed
from is hereby SET ASIDE and another one entered:
1. Declaring the respondent company guilty of illegal dismissal and accordingly it is directed to reinstate
the complainants, namely, Alberto A. Gonzales, Joel T. Morato, Gavino Panahon, Demetrio L. Calagos,
Sonny M. Lustado, Romeo Q. Clariza, Luis de los Angeles, Amado Centino, Angel Jardin, Rosendo
Marcos, Urbano Marcos, Jr., and Joel Ordeniza, to their former positions without loss of seniority and
other privileges appertaining thereto; to pay the complainants full backwages and other benefits, less
earnings elsewhere, and to reimburse the drivers the amount paid as washing charges; and

2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.

SO ORDERED.4
Private respondent's first motion for reconsideration was denied. Remaining hopeful, private respondent filed
another motion for reconsideration. This time, public respondent, in its decision 5 dated October 28, 1994,
granted aforesaid second motion for reconsideration. It ruled that it lacks jurisdiction over the case as
petitioners and private respondent have no employer-employee relationship. It held that the relationship of the
parties is leasehold which is covered by the Civil Code rather than the Labor Code, and disposed of the case
as follows:
VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under reconsideration is hereby given
due course.
Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994 are hereby SET
ASIDE. The Decision of the Labor Arbiter subject of the appeal is likewise SET ASIDE and a NEW ONE
ENTERED dismissing the complaint for lack of jurisdiction.
No costs.
SO ORDERED.6
Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision which was denied. Hence,
the instant petition.
In this recourse, petitioners allege that public respondent acted without or in excess of jurisdiction, or with
grave abuse of discretion in rendering the assailed decision, arguing that:
I
THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S SECOND MOTION FOR
RECONSIDERATION WHICH IS ADMITTEDLY A PLEADING PROHIBITED UNDER THE NLRC RULES, AND
TO GRANT THE SAME ON GROUNDS NOT EVEN INVOKED THEREIN.
II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES IS ALREADY
A SETTLED ISSUE CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS NO MORE JURISDICTION
TO REVERSE, ALTER OR MODIFY.
III
IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE VIEW THAT
PETITIONERS-TAXI DRIVERS ARE EMPLOYEES OF RESPONDENT TAXI COMPANY.7
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled meaning in the
jurisprudence of procedure. It means such capricious and whimsical exercise of judgment by the tribunal
exercising judicial or quasi-judicial power as to amount to lack of power. 8 In labor cases, this Court has

declared in several instances that disregarding rules it is bound to observe constitutes grave abuse of
discretion on the part of labor tribunal.
In Garcia vs. NLRC,9 private respondent therein, after receiving a copy of the labor arbiter's decision, wrote the
labor arbiter who rendered the decision and expressed dismay over the judgment. Neither notice of appeal was
filed nor cash or surety bond was posted by private respondent. Nevertheless, the labor tribunal took
cognizance of the letter from private respondent and treated said letter as private respondent's appeal. In
a certiorari action before this Court, we ruled that the labor tribunal acted with grave abuse of discretion in
treating a mere letter from private respondent as private respondent's appeal in clear violation of the rules on
appeal prescribed under Section 3(a), Rule VI of the New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,10 we held that the labor arbiter committed grave abuse of discretion when
he failed to resolve immediately by written order a motion to dismiss on the ground of lack of jurisdiction and
the supplemental motion to dismiss as mandated by Section 15 of Rule V of the New Rules of Procedure of the
NLRC.
In Unicane Workers Union-CLUP vs. NLRC,11 we held that the NLRC gravely abused its discretion by allowing
and deciding an appeal without an appeal bond having been filed as required under Article 223 of the Labor
Code.
In Maebo vs. NLRC,12 we declared that the labor arbiter gravely abused its discretion in disregarding the rule
governing position papers. In this case, the parties have already filed their position papers and even agreed to
consider the case submitted for decision, yet the labor arbiter still admitted a supplemental position paper and
memorandum, and by taking into consideration, as basis for his decision, the alleged facts adduced therein
and the documents attached thereto.
In Gesulgon vs. NLRC,13 we held that public respondent gravely abused its discretion in treating the motion to
set aside judgment and writ of execution as a petition for relief of judgment. In doing so, public respondent had,
without sufficient basis, extended the reglementary period for filing petition for relief from judgment contrary to
prevailing rule and case law.
In this case before us, private respondent exhausted administrative remedy available to it by seeking
reconsideration of public respondent's decision dated April 28, 1994, which public respondent denied. With this
motion for reconsideration, the labor tribunal had ample opportunity to rectify errors or mistakes it may have
committed before resort to courts of justice can be had. 14 Thus, when private respondent filed a second motion
for reconsideration, public respondent should have forthwith denied it in accordance with Rule 7, Section 14 of
its New Rules of Procedure which allows only one motion for reconsideration from the same party, thus:
Sec. 14. Motions for Reconsideration. Motions for reconsideration of any order, resolution or
decision of the Commission shall not be entertained except when based on palpable or patent errors,
provided that the motion is under oath and filed within ten (10) calendar days from receipt of the order,
resolution or decision with proof of service that a copy of the same has been furnished within the
reglementary period the adverse party and provided further, that only one such motion from the same
party shall be entertained. [Emphasis supplied]
The rationale for allowing only one motion for reconsideration from the same party is to assist the parties in
obtaining an expeditious and inexpensive settlement of labor cases. For obvious reasons, delays cannot be
countenanced in the resolution of labor disputes. The dispute may involve no less than the livelihood of an
employee and that of his loved ones who are dependent upon him for food, shelter, clothing, medicine, and
education. It may as well involve the survival of a business or an industry.15

As correctly pointed out by petitioner, the second motion for reconsideration filed by private respondent is
indubitably a prohibited pleading16 which should have not been entertained at all. Public respondent cannot just
disregard its own rules on the pretext of "satisfying the ends of justice", 17 especially when its disposition of a
legal controversy ran afoul with a clear and long standing jurisprudence in this jurisdiction as elucidated in the
subsequent discussion. Clearly, disregarding a settled legal doctrine enunciated by this Court is not a way of
rectifying an error or mistake. In our view, public respondent gravely abused its discretion in taking cognizance
and granting private respondent's second motion for reconsideration as it wrecks the orderly procedure in
seeking reliefs in labor cases.
But, there is another compelling reason why we cannot leave untouched the flip-flopping decisions of the public
respondent. As mentioned earlier, its October 28, 1994 judgment is not in accord with the applicable decisions
of this Court. The labor tribunal reasoned out as follows:
On the issue of whether or not employer-employee relationship exists, admitted is the fact that
complainants are taxi drivers purely on the "boundary system". Under this system the driver takes out
his unit and pays the owner/operator a fee commonly called "boundary" for the use of the unit. Now, in
the determination the existence of employer-employee relationship, the Supreme Court in the case
of Sara, et al., vs. Agarrado, et al. (G.R. No. 73199, 26 October 1988) has applied the following fourfold test: "(1) the selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the power of control the employees conduct."
"Among the four (4) requisites", the Supreme Court stresses that "control is deemed the most important
that the other requisites may even be disregarded". Under the control test, an employer-employee
relationship exists if the "employer" has reserved the right to control the "employee" not only as to the
result of the work done but also as to the means and methods by which the same is to be
accomplished. Otherwise, no such relationship exists. (Ibid.)
Applying the foregoing parameters to the case herein obtaining, it is clear that the respondent does not
pay the drivers, the complainants herein, their wages. Instead, the drivers pay a certain fee for the use
of the vehicle. On the matter of control, the drivers, once they are out plying their trade, are free to
choose whatever manner they conduct their trade and are beyond the physical control of the
owner/operator; they themselves determine the amount of revenue they would want to earn in a day's
driving; and, more significantly aside from the fact that they pay for the gasoline they consume, they
likewise shoulder the cost of repairs on damages sustained by the vehicles they are driving.
Verily, all the foregoing attributes signify that the relationship of the parties is more of a leasehold or one
that is covered by a charter agreement under the Civil Code rather than the Labor Code.18
The foregoing ratiocination goes against prevailing jurisprudence.
In a number of cases decided by this Court, 19 we ruled that the relationship between jeepney owners/operators
on one hand and jeepney drivers on the other under the boundary system is that of employer-employee and
not of lessor-lessee. We explained that in the lease of chattels, the lessor loses complete control over the
chattel leased although the lessee cannot be reckless in the use thereof, otherwise he would be responsible for
the damages to the lessor. In the case of jeepney owners/operators and jeepney drivers, the former exercise
supervision and control over the latter. The management of the business is in the owner's hands. The owner as
holder of the certificate of public convenience must see to it that the driver follows the route prescribed by the
franchising authority and the rules promulgated as regards its operation. Now, the fact that the drivers do not
receive fixed wages but get only that in excess of the so-called "boundary" they pay to the owner/operator is
not sufficient to withdraw the relationship between them from that of employer and employee. We have applied

by analogy the abovestated doctrine to the relationships between bus owner/operator and bus
conductor,20 auto-calesa owner/operator and driver,21 and recently between taxi owners/operators and taxi
drivers.22 Hence, petitioners are undoubtedly employees of private respondent because as taxi drivers they
perform activities which are usually necessary or desirable in the usual business or trade of their employer.
As consistently held by this Court, 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. The requirement of notice and hearing is set-out in Article 277 (b) of the said Code. Hence,
petitioners, being employees of private respondent, can be dismissed only for just and authorized cause, and
after affording them notice and hearing prior to termination. In the instant case, private respondent had no valid
cause to terminate the employment of petitioners. Neither were there two (2) written notices sent by private
respondent informing each of the petitioners that they had been dismissed from work. These lack of valid
cause and failure on the part of private respondent to comply with the twin-notice requirement underscored the
illegality surrounding petitioners' dismissal.
Under the law, 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.23 It must be emphasized, though, that recent judicial
pronouncements24 distinguish between employees illegally dismissed prior to the effectivity of Republic Act No.
6715 on March 21, 1989, and those whose illegal dismissals were effected after such date. Thus, employees
illegally dismissed prior to March 21, 1989, are entitled to backwages up to three (3) years without deduction or
qualification, while those illegally dismissed after that date are granted full backwages inclusive of allowances
and other benefits or their monetary equivalent from the time their actual compensation was withheld from
them up to the time of their actual reinstatement. The legislative policy behind Republic Act No. 6715 points to
"full backwages" as meaning exactly that, i.e., without deducting from backwages the earnings derived
elsewhere by the concerned employee during the period of his illegal dismissal. Considering that petitioners
were terminated from work on August 1, 1991, they are entitled to full backwages on the basis of their last daily
earnings.
With regard to the amount deducted daily by private respondent from petitioners for washing of the taxi units,
we view the same as not illegal in the context of the law. We note that after a tour of duty, it is incumbent upon
the driver to restore the unit he has driven to the same clean condition when he took it out. Car washing after a
tour of duty is indeed a practice in the taxi industry and is in fact dictated by fair play. 25 Hence, the drivers are
not entitled to reimbursement of washing charges.1wphi1.nt
WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respondent dated October
28, 1994, is hereby SET ASIDE. The DECISION of public respondent dated April 28, 1994, and its
RESOLUTION dated December 13, 1994, are hereby REINSTATED subject to MODIFICATION. Private
respondent is directed to reinstate petitioners to their positions held at the time of the complained dismissal.
Private respondent is likewise ordered to pay petitioners their full backwages, to be computed from the date of
dismissal until their actual reinstatement. However, the order of public respondent that petitioners be
reimbursed the amount paid as washing charges is deleted. Costs against private respondents.
SO ORDERED.

8. G.R. No. 165881

April 19, 2006

OSCAR VILLAMARIA, JR. Petitioner,

vs.
COURT OF APPEALS and JERRY V. BUSTAMANTE, Respondents
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
Resolution3of the National Labor Relations Commission (NLRC) in NCR-30-08-03247-00, which in turn
affirmed the Decision4of 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 Villamarias 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 boundaryhulog 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 vehicles 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 Complaint7 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 drivers 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. Attorneys 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 vehicles 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, Paraaque 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. Abbas 16 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 judgment 17 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] complaints (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 Villamarias 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
I
IN DISMISSING PETITIONERS APPEAL "FOR REASON NOT STATED IN THE LABOR ARBITERS
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-buyers 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 Bustamantes complaint. Under the
Kasunduan, the relationship between him and Villamaria was dual: that of vendor-vendee and employeremployee. The CA ratiocinated that Villamarias exercise of control over Bustamantes conduct in operating the
jeepney is inconsistent with the formers 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
employees work. In this case, Villamarias 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 Villamarias 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 weeks default in paying the boundary-hulog constituted an
additional cause for terminating Bustamantes 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 boundaryhulog 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 respondents 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. 34 In
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; and
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. Bernardo 41 and Lantaco, Sr. v. Llamas,42 and 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 latters daily earnings are remitted to the
owner/operator less the excess of the boundary which represents the drivers 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 respondents 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 petitioners boundary and respondents 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 [kanikanino] 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 respondents conduct as
driver of the vehicle. As correctly ruled by the CA:
The exercise of control by private respondent over petitioners conduct in operating the jeepney he was driving
is inconsistent with private respondents 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 employeremployee, in view of the overt presence of supervision and control by the employer.56
Neither is such juridical relationship negated by petitioners claim that the terms and conditions in the
Kasunduan relative to respondents behavior and deportment as driver was for his and respondents 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 respondents employer, it was the burden of petitioner to prove that respondents 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 (petitioners) 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 respondents 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 kayat 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 petitioners) (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?
1avvphil.net
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
Petitioners claim that he opted not to terminate the employment of respondent because of magnanimity is
negated by his (petitioners) 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.

9. G.R. No. 120969 January 22, 1998

ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) composed of Presiding
Commissioner RAUL T. AQUINO, Commissioner ROGELIO I. RAYALA and Commissioner VICTORIANO
R. CALAYCAY (Ponente), VIC DEL ROSARIO and VIVA FIMS, respondents.
DAVIDE, JR., J.:
By way of this special civil action for certiorari under Rule 65 of the Rules of Court, petitioners seek to annul
the 10 February 1995 Decision 1 of the National Labor Relations Commission (hereafter NLRC), and its 6 April
1995 Resolution 2 denying the motion to reconsider the former in NLRC-NCR-CA No. 006195-94. The decision
reversed that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-03994-92.
The parties present conflicting sets of facts.
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents on 18 July 1989
as part of the filming crew with a salary of P375.00 per week. About four months later, he was designated
Assistant Electrician with a weekly salary of P400.00, which was increased to P450.00 in May 1990. In June
1991, he was promoted to the rank of Electrician with a weekly salary of P475.00, which was increased to
P539.00 in September 1991.
Petitioner Paulino Enero, on his part, claims that private respondents employed him in June 1990 as a member
of the shooting crew with a weekly salary of P375.00, which was increased to P425.00 in May 1991, then to
P475.00 on 21 December 1991. 3
Petitioners' tasks consisted of loading, unloading and arranging movie equipment in the shooting area as
instructed by the cameraman, returning the equipment to Viva Films' warehouse, assisting in the "fixing" of the
lighting system, and performing other tasks that the cameraman and/or director may assign. 4
Sometime in May 1992, petitioners sought the assistance of their supervisors, Mrs. Alejandria Cesario, to
facilitate their request that private respondents adjust their salary in accordance with the minimum wage law. In
June 1992, Mrs. Cesario informed petitioners that Mr. Vic del Rosario would agree to increase their salary only
if they signed a blank employment contract. As petitioners refused to sign, private respondents forced Enero to
go on leave in June 1992, then refused to take him back when he reported for work on 20 July 1992.
Meanwhile, Maraguinot was dropped from the company payroll from 8 to 21 June 1992, but was returned on
22 June 1992. He was again asked to sign a blank employment contract, and when he still refused, private
respondents terminated his services on 20 July 1992. 5 Petitioners thus sued for illegal dismissal 6 before the
Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the trade name of Viva
Productions, Inc., and that it is primarily engaged in the distribution and exhibition of movies but not in the
business of making movies; in the same vein, private respondent Vic del Rosario is merely an executive
producer,i.e., the financier who invests a certain sum of money for the production of movies distributed and
exhibited by VIVA. 7
Private respondents assert that they contract persons called "producers" also referred to as "associate
producers" 8 to "produce" or make movies for private respondents; and contend that petitioners are project

employees of the association producers who, in turn, act as independent contractors. As such, there is no
employer-employee relationship between petitioners and private respondents.
Private respondents further contend that it was the associate producer of the film "Mahirap Maging Pogi," who
hired petitioner Maraguinot. The movie shot from 2 July up to 22 July 1992, and it was only then that
Maraguinot was released upon payment of his last salary, as his services were no longer needed. Anent
petitioner Enero, he was hired for the movie entitled "Sigaw ng Puso," later re-tired "Narito and Puso." He went
on vacation on 8 June 1992, and by the time he reported for work on 20 July 1992, shooting for the movie had
already been completed.9
After considering both versions of the facts, the Labor Arbiter found as follows:
On the first issue, this Office rules that complainants are the employees of the respondents. The
producer cannot be considered as an independent contractor but should be considered only as
a labor-only contractor and as such, acts as a mere agent of the real employer, the herein
respondent. Respondents even failed to name and specify who are the producers. Also, it is an
admitted fact that the complainants received their salaries from the respondents. The case cited
by the respondents,Rosario Brothers, Inc. vs. Ople, 131 SCRA 72 does not apply in this case.
It is very clear also that complainants are doing activities which are necessary and essential to
the business of the respondents, that of movie-making. Complainant Maraguinot worked as an
electrician while complainant Enero worked as a crew [member]. 10
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:
WHEREFORE, judgment is hereby rendered declaring that complainants were illegally
dismissed.
Respondents are hereby ordered to reinstate complainant to their former positions without loss
[of] seniority rights and pay their backwages starting July 21, 1992 to December 31, 1993
temporarily computed in the amount of P38,000.00 for complainant Paulino Enero and
P46,000.00 for complainant Alejandro Maraguinot, Jr. and thereafter until actually reinstated.
Respondents are ordered to pay also attorney's fees equivalent to ten (10%) and/or P8,400.00
on top of the award. 11
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-94). In its decision
10 February 1995, the NLRC found the following circumstances of petitioners' work "clearly established:"

12

of

1. Complainants [petitioners herein] were hired for specific movie projects and their employment
wasco-terminus with each movie project the completion/termination of which are predetermined, such fact being made known to complainants at the time of their engagement.
xxx xxx xxx
2 Each shooting unit works on one movie project at a time. And the work of the shooting units,
which work independently from each other, are not continuous in nature but depends on the
availability of movie projects.

3. As a consequence of the non-continuous work of the shooting units, the total working hours
logged by complainants in a month show extreme variations. . . For instance, complainant
Maraguinot worked for only 1.45 hours in June 1991 but logged a total of 183.25 hours in
January 1992. Complainant Enero logged a total of only 31.57 hours in September 1991 but
worked for 183.35hours the next month, October 1991.
4. Further shown by respondents is the irregular work schedule of complainants on a daily
basis. Complainant Maraguinot was supposed to report on 05 August 1991 but reported only on
30 August 1991, or a gap of 25 days. Complainant Enero worked on 10 September 1991 and
his next scheduled working day was 28 September 1991, a gap of 18 days.
5. The extremely irregular working days and hours of complainants' work explain the lump sum
payment for complainants' services for each movie project. Hence, complainants were paid a
standard weekly salary regardless of the number of working days and hours they logged in.
Otherwise, if the principle of "no work no pay" was strictly applied, complainants' earnings for
certain weeks would be very negligible.
6. Respondents also alleged that complainants were not prohibited from working with such
movie companies like Regal, Seiko and FPJ Productions whenever they are not working for the
independent movie producers engaged by respondents . . . This allegation was never rebutted
by complainants and should be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances, taken together,
indicated that complainants (herein petitioners) were "project employees."
After their motion for reconsideration was denied by the NLRC in its Resolution 13 of 6 April 1995, petitioners
filed the instant petition, claiming that the NLRC committed grave abuse of discretion amounting to lack or
excess of jurisdiction in: (1) finding that petitioners were project employees; (2) ruling that petitioners were not
illegally dismissed; and (3) reversing the decision of the Labor Arbiter.
To support their claim that they were regular (and not project) employees of private respondents, petitioners
cited their performance of activities that were necessary or desirable in the usual trade or business of private
respondents and added that their work was continuous, i.e., after one project was completed they were
assigned to another project. Petitioners thus considered themselves part of a work pool from which private
respondents drew workers for assignment to different projects. Petitioners lamented that there was no basis for
the NLRC's conclusion that they were project employees, while the associate producers were independent
contractors; and thus reasoned that as regular employees, their dismissal was illegal since the same was
premised on a "false cause," namely, the completion of a project, which was not among the causes for
dismissal allowed by the Labor Code.
Private respondents reiterate their version of the facts and stress that their evidence supports the view that
petitioners are project employees; point to petitioners' irregular work load and work schedule; emphasize the
NLRC's finding that petitioners never controverted the allegation that they were not prohibited from working
with other movie companies; and ask that the facts be viewed in the context of the peculiar characteristics of
the movie industry.
The Office of the Solicitor General (OSG) is convinced that this petition is improper since petitioners raise
questions of fact, particularly, the NLRC's finding that petitioners were project employees, a finding supported
by substantial evidence; and submits that petitioners' reliance on Article 280 of the Labor Code to support their
contention that they should be deemed regular employees is misplaced, as said section "merely distinguishes

between two types of employees, i.e., regular employees and casual employees, for purposes of determining
the right of an employee to certain benefits."
The OSG likewise rejects petitioners' contention that since they were hired not for one project, but for a series
of projects, they should be deemed regular employees. Citing Mamansag v. NLRC, 14 the OSG asserts that
what matters is that there was a time-frame for each movie project made known to petitioners at the time of
their hiring. In closing, the OSG disagrees with petitioners' claim that the NLRC's classification of the movie
producers as independent contractors had no basis in fact and in law, since, on the contrary, the NLRC "took
pains in explaining its basis" for its decision.
As regards the propriety of this action, which the Office of the Solicitor General takes issue with, we rule that a
special civil action for certiorari under Rule 65 of the Rules of Court is the proper remedy for one who
complains that the NLRC acted in total disregard of evidence material to or decisive of the controversy. 15 In the
instant case, petitioners allege that the NLRC's conclusions have no basis in fact and in law, hence the petition
may not be dismissed on procedural or jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the determination of whether an employer-employee
relationship existed between petitioners and private respondents or any one of private respondents. If there
was none, then this petition has no merit; conversely, if the relationship existed, then petitioners could have
been unjustly dismissed.
A related question is whether private respondents are engaged in the business of making motion pictures. Del
Rosario is necessarily engaged in such business as he finances the production of movies. VIVA, on the other
hand, alleges that it does not "make" movies, but merely distributes and exhibits motion pictures. There being
no further proof to this effect, we cannot rely on this self-serving denial. At any rate, and as will be discussed
below, private respondents' evidence even supports the view that VIVA is engaged in the business of making
movies.
We now turn to the critical issues. Private respondents insist that petitioners are project employees of
associate producers who, in turn, act as independent contractors. It is settled that the contracting out of labor is
allowed only in case of job contracting. Section 8, Rule VIII, Book III of the Omnibus Rules Implementing the
Labor Code describes permissible job contracting in this wise:
Sec. 8. Job contracting. There is job contracting permissible under the Code if the following
conditions are met:
(1) The contractor carries on an independent business and
undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the
results thereof; and
(2) The contractor has substantial capital or investment in the form
of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.
Assuming that the associate producers are job contractors, they must then be engaged in the business of
making motion pictures. As such, and to be a job contractor under the preceding description, associate
producers must have tools, equipment, machinery, work premises, and other materials necessary to make

motion pictures. However, the associate producers here have none of these. Private respondents' evidence
reveals that the movie-making equipment are supplied to the producers and owned by VIVA. These include
generators, 16 cables and wooden platforms, 17 cameras and "shooting equipment;" 18 in fact, VIVA likewise
owns the trucks used to transport the equipment. 19 It is thus clear that the associate producer merely leases
the equipment from VIVA. 20 Indeed, private respondents' Formal Offer of Documentary Evidence stated one of
the purposes of Exhibit "148" as:
To prove further that the independent Producers rented Shooting Unit No. 2 from Viva to finish
their films. 21
While the purpose of Exhibits "149," "149-A" and "149-B" was:
[T]o prove that the movies of Viva Films were contracted out to the different independent
Producers who rented Shooting Unit No. 3 with a fixed budget and time-frame of at least 30
shooting days or 45 days whichever comes first. 22
Private respondent further narrated that VIVA's generators broke down during petitioners' last movie project,
which forced the associate producer concerned to rent generators, equipment and crew from another
company.23 This only shows that the associate producer did not have substantial capital nor investment in the
form of tools, equipment and other materials necessary for making a movie. Private respondents in effect admit
that their producers, especially petitioners' last producer, are not engaged in permissible job contracting.
If private respondents insist that the associate producers are labor contractors, then these producers can only
be "labor-only" contractors, defined by the Labor Code as follows:
Art. 106. Contractor or subcontractor. . . .
There is "labor-only" contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such persons are performing
activities which are directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed
by him.
A more detailed description is provided by Section 9, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities
which are directly related to the principal business or operations of the employer
in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited
and the person acting as contractor shall be considered merely as

an agent or intermediary of the employer who shall be responsible

to the workers in the same manner and extent as if the latter were
directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor
shall determine through appropriate orders whether or not the
contracting out of labor is permissible in the light of the
circumstances of each case and after considering the operating
needs of the employer and the rights of the workers involved. In
such case, he may prescribe conditions and restrictions to insure
the protection and welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere
agent or intermediary of the direct employer. But even by the preceding standards, the associate producers of
VIVA cannot be considered labor-only contractors as they did not supply, recruit nor hire the workers. In the
instant case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew
members from an "available group of free-lance workers which includes the complainants Maraguinot and
Enero." 24 And in their Memorandum, private respondents declared that the associate producer "hires the
services of . . . 6) camera crew which includes (a) cameraman; (b) the utility crew; (c) the technical staff; (d)
generator man and electrician; (e) clapper; etc. . . . ." 25 This clearly showed that the associate producers did
not supply the workers required by the movie project.
The relationship between VIVA and its producers or associate producers seems to be that of agency, 26 as the
latter make movies on behalf of VIVA, whose business is to "make" movies. As such, the employment
relationship between petitioners and producers is actually one between petitioners and VIVA, with the latter
being the direct employer.
The employer-employee relationship between petitioners and VIVA can further be established by the "control
test." While four elements are usually considered in determining the existence of an employment relationship,
namely: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control of 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 the same. 27 These four elements are present here. In their position
paper submitted to the Labor Arbiter, private respondents narrated the following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by the company, for as
long as the ultimate finish[ed] product is acceptable to the company . . .
The ensure that qualify films are produced by the PRODUCER who is an independent
contractor, the company likewise employs a Supervising PRODUCER, a Project accountant and
a Shooting unit supervisor. The Company's Supervising PRODUCER is Mr. Eric Cuatico, the
Project accountant varies from time to time, and the Shooting Unit Supervisor is Ms. Alejandria
Cesario.
The Supervising PRODUCER acts as the eyes and ears of the company and of the Executive
Producer to monitor the progress of the PRODUCER's work accomplishment. He is there
usually in the field doing the rounds of inspection to see if there is any problem that the
PRODUCER is encountering and to assist in threshing out the same so that the film project will
be finished on schedule. He supervises about 3 to 7 movie projects simultaneously [at] any
given time by coordinating with each film "PRODUCER". The Project Accountant on the other

hand assists the PRODUCER in monitoring the actual expenses incurred because the company
wants to insure that any additional budget requested by the PRODUCER is really justified and
warranted especially when there is a change of original plans to suit the tast[e] of the company
on how a certain scene must be presented to make the film more interesting and more
commercially viable. (emphasis supplied).
VIVA's control is evident in its mandate that the end result must be a "quality film acceptable to the company."
The means and methods to accomplish the result are likewise controlled by VIVA, viz., the movie project must
be finished within schedule without exceeding the budget, and additional expenses must be justified; certain
scenes are subject to change to suit the taste of the company; and the Supervising Producer, the "eyes and
ears" of VIVA and del Rosario, intervenes in the movie-making process by assisting the associate producer in
solving problems encountered in making the film.
It may not be validly argued then that petitioners are actually subject to the movie director's control, and not
VIVA's direction. The director merely instructs petitioners on how to better comply with VIVA's requirements to
ensure that a quality film is completed within schedule and without exceeding the budget. At bottom, the
director is akin to a supervisor who merely oversees the activities of rank-and-file employees with control
ultimately resting on the employer.
Moreover, appointment slips 28 issued to all crew members state:
During the term of this appointment you shall comply with the duties and responsibilities of your
position as well as observe the rules and regulations promulgated by your superiors and by Top
Management.
The words "supervisors" and "Top Management" can only refer to the "supervisors" and "Top Management" of
VIVA. By commanding crew members to observe the rules and regulations promulgated by VIVA, the
appointment slips only emphasize VIVA's control over petitioners.
Aside from control, the element of selection and engagement is likewise present in the instant case and
exercised by VIVA. A sample appointment slip offered by private respondents "to prove that members of the
shooting crew except the driver are project employees of the Independent Producers" 29 reads as follows:
VIVA PRODUCTIONS, INC.
16 Sct. Albano St.
Diliman, Quezon City
PEDRO NICOLAS Date: June 15, 1992

APPOINTMENT SLIP
You are hereby appointed as SOUNDMAN for the film project entitled "MANAMBIT". This
appointment shall be effective upon the commencement of the said project and shall continue to
be effective until the completion of the same.
For your services you shall receive the daily/weekly/monthly compensation of P812.50.

During the term of this appointment you shall comply with the duties and responsibilities of your
position as well as observe the rules and regulations promulgated by your superiors and by Top
Management.
Very
truly
yours,
(an
illegibl
e
signatu
re)
CONFORME:
_________________
Name of appointee
Signed in the presence of:
___________________
Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer who
hired the crew members; moreover, it is VIVA's corporate name which appears on the heading of the
appointment slip. What likewise tells against VIVA is that it paid petitioners' salaries as evidenced by vouchers,
containing VIVA's letterhead, for that purpose. 30
All the circumstances indicate an employment relationship between petitioners and VIVA alone, thus the
inevitable conclusion is that petitioners are employees only of VIVA.
The next issue is whether petitioners were illegally dismissed. Private respondents contend that petitioners
were project employees whose employment was automatically terminated with the completion of their
respective projects. Petitioners assert that they were regular employees who were illegally dismissed.
It may not be ignored, however, that private respondents expressly admitted that petitioners were part of a
work pool; 31 and, while petitioners were initially hired possibly as project employees, they had attained the
status of regular employees in view if VIVA's conduct.
A project employee or a member of a work pool may acquire the status of a regular employee when the
following concur:
1) There is a continuous rehiring of project employees even after cessation of a project; 32 and
2) The tasks performed by the alleged "project employee" are vital, necessary and indispensable to the usual
business or trade of the employer. 33
However, the length of time during which the employee was continuously re-hired is not controlling, but
merely serves as a badge of regular employment. 34

In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2)
years and engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed for some three
(3) years and worked on at least twenty-three (23) projects. 35 Moreover, as petitioners' tasks involved, among
other chores, the loading, unloading and

FILM

DATE
STARTED

DATE
ASSOCIATE
COMPLETED PRODUCER

LOVE AT FIRST SIGHT

1/3/90

2/16/90

MARIVIC ONG

PAIKOT-IKOT

1/26/90

3/11/90

EDITH MANUEL

ROCKY & ROLLY

2/13/90

3/29/90

M. ONG

PAIKOT-IKOT (addl. 1/2)

3/12/90

4/3/90

E. MANUEL

ROCKY & ROLLY (2nd contract)

4/6/90

5/20/90

M. ONG

NARDONG TOOTHPICK

4/4/90

5/18/90

JUN CHING

BAKIT KAY TAGAL NG SANDALI

6/26/90

10/20/90

E. MANUEL

BAKIT KAY TAGAL (2nd contract)

8/10/90

9/23/90

E. MANUEL

HINUKAY KO NA ANG LIBINGAN 9/6/90

MO

10/20/90

JUN CHING

MAGING SINO KA MAN

10/25/90

12/8/90

SANDY STA. MARIA

M. SINO KA MAN (2nd contract)

12/9/90

1/22/91

SANDY S

NOEL JUICO

1/29/91

3/14/90

JUN CHING

NOEL JUICO (2nd contract)

3/15/91

4/6/91

JUN CHING

ROBIN GOOD

5/7/91

6/20/91

M. ONG

UTOL KONG HOODLUM # 1

6/23/91

8/6/91

JUN CHING

KAPUTOL NG ISANG AWIT

8/18/91

10/2/91

SANDY S.

DARNA

10/4/91

11/18/91

E. MANUEL

DARNA (addl. 1/2)

11/20/91

12/12/91

E. MANUEL

MAGNONG REHAS

12/13/91

1/27/92

BOBBY GRIMALT

M. REHAS (2nd contract)

1/28/92

3/12/92

B. GRIMALT

HIRAM NA MUKHA

3/15/92

4/29/92

M. ONG

HIRAM (2nd contract)

5/1/92

6/14/92

M. ONG

KAHIT AKO'Y BUSABOS

5/28/92

7/7/92

JERRY OHARA

SIGAW NG PUSO

7/1/92

8/4/92

M. ONG

SIGAW (addl. 1/2)

8/15/92

9/5/92

M. ONG

NGAYON AT KAILANMAN

9/6/92

10/20/92

SANDY STA. MARIA

While Maraguinot was a member of Shooting Unit III, which made the following movies (Annex "4-A" of
Respondents' Position Paper; OR, 29):

FILM

DATE
STARTED

DATE
ASSOCIATE
COMPLETED PRODUCER

GUMAPANG KA SA LUSAK

1/27/90

3/12/90

JUN CHING

PETRANG KABAYO

2/19/90

4/4/90

RUTH GRUTA

LUSAK (2nd contract)

3/14/90

4/27/90

JUN CHING

P. KABAYO (Addl 1/2 contract)

4/21/90

5/13/90

RUTH GRUTA

BADBOY

6/15/90

7/29/90

EDITH MANUEL

BADBOY (2nd contract)

7/30/90

8/21/90

E. MANUEL

ANAK NI BABY AMA

9/2/90

10/16/90

RUTH GRUTA

A.B. AMA (addl 1/2)

10/17/90

11/8/90

RUTH GRUTA

A.B. AMA (addl 2nd 1/2)

11/9/90

12/1/90

R. GRUTA

BOYONG MANALAC

11/30/90

1/14/91

MARIVIC ONG

HUMANAP KA NG PANGET

1/20/91

3/5/91

EDITH MANUEL

H. PANGET(2nd contract)

3/10/91

4/23/91

E. MANUEL

B. MANALAC (2nd contract)

5/22/91

7/5/91

M. ONG

ROBIN GOOD (2nd contract)

7/7/91

8/20/91

M. ONG

PITONG GAMOL

8/30/91

10/13/91

M. ONG

P. GAMOL (2nd contract)

10/14/91

11/27/91

M. ONG

GREASE GUN GANG

12/28/91

2/10/92

E. MANUEL

ALABANG GIRLS (1/2 contract)

3/4/92

3/26/92

M. ONG

BATANG RILES

3/9/92

3/30/92

BOBBY GRIMALT

UTOL KONG HOODLUM (part 2)

3/22/92

5/6/92

B. GRIMALT

UTOL (addl. 1/2 contract)

5/7/92

5/29/92

B. GRIMALT

MANDURUGAS (2nd contract)

5/25/92

7/8/92

JERRY OHARA

MAHIRAP MAGING POGI

7/2/92

8/15/92

M. ONG

arranging of movie equipment in the shooting area as instructed by the cameramen, returning the
equipment to the Viva Films' warehouse, and assisting in the "fixing" of the lighting system, it may not
be gainsaid that these tasks were vital, necessary and indispensable to the usual business or trade of
the employer. As regards the underscored phrase, it has been held that this is ascertained by
considering the nature of the work performed and its relation to the scheme of the particular business or
trade in its entirety. 36
A recent pronouncement of this Court anent project or work pool employees who had attained the status of
regular employees proves most instructive:
The denial by petitioners of the existence of a work pool in the company because their projects
were not continuous is amply belied by petitioners themselves who admit that: . . .
A work pool may exist although the workers in the pool do not receive salaries and are free to
seek other employment during temporary breaks in the business, provided that the worker shall

be available when called to report of a project. Although primarily applicable to regular seasonal
workers, this set-up can likewise be applied to project workers insofar as the effect of temporary
cessation of work is concerned. This is beneficial to both the employer and employee for it
prevents the unjust situation of "coddling labor at the expense of capital" and at the same time
enables the workers to attain the status of regular employees. Clearly, the continuous rehiring of
the same set of employees within the framework of the Lao Group of Companies is strongly
indicative that private respondents were an integral part of a work pool from which petitioners
drew its workers for its various projects.
In a final attempt to convince the Court that private respondents were indeed project employees,
petitioners point out that the workers were not regularly maintained in the payroll and were free
to offer their services to other companies when there were no on-going projects. This argument
however cannot defeat the workers' status of regularity. We apply by analogy the vase
of Industrial-Commercial-Agricultural Workers Organization v. CIR [16 SCRA 526, 567-568
(1966)] which deals with regular seasonal employees. There we held: . . .
Truly, the cessation of construction activities at the end of every project is a foreseeable
suspension of work. Of course, no compensation can be demanded from the employer because
the stoppage of operations at the end of a project and before the start of a new one is regular
and expected by both parties to the labor relations. Similar to the case of regular seasonal
employees, the employment relation is not severed by merely being suspended. [citing Manila
Hotel Co. v. CIR, 9 SCRA 186 (1963)] The employees are, strictly speaking, not separated from
services but merely on leave of absence without pay until they are reemployed. Thus we cannot
affirm the argument that non-payment of salary or non-inclusion in the payroll and the
opportunity to seek other employment denote project employment. 37 (emphasis supplied)
While Lao admittedly involved the construction industry, to which Policy Instruction No. 20/Department Order
No. 19 38 regarding work pools specifically applies, there seems to be no impediment to applying the underlying
principles to industries other than the construction industry. 39 Neither may it be argued that a substantial
distinction exists between the projects undertaken in the construction industry and the motion picture industry.
On the contrary, the raison d' etre of both industries concern projects with a foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly burdens an employer by imposing a duty to rehire a project employee even after completion of the project for which he was hired. The import of this decision
is not to impose a positive and sweeping obligation upon the employer to re-hire project employees. What this
decision merely accomplishes is a judicial recognition of the employment status of a project or work pool
employee in accordance with what is fait accompli, i.e., the continuous re-hiring by the employer of project or
work pool employees who perform tasks necessary or desirable to the employer's usual business or trade. Let
it not be said that this decision "coddles" labor, for as Lao has ruled, project or work pool employees who have
gained the status of regular employees are subject to the "no work-no pay" principle, to repeat:
A work pool may exist although the workers in the pool do not receive salaries and are free to seek other
employment during temporary breaks in the business, provided that the worker shall be available when called
to report for a project. Although primarily applicable to regular seasonal workers, this set-up can likewise be
applied to project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial
to both the employer and employee for it prevents the unjust situation of "coddling labor at the expense of
capital" and at the same time enables the workers to attain the status of regular employees.

The Court's ruling here is meant precisely to give life to the constitutional policy of strengthening the labor
sector,40 but, we stress, not at the expense of management. Lest it be misunderstood, this ruling does not
mean that simply because an employee is a project or work pool employee even outside the construction
industry, he is deemed, ipso jure, a regular employee. All that we hold today is that once a project or work pool
employee has been: (1) continuously, as opposed to intermittently, re-hired by the same employer for the same
tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual business or
trade of the employer, then the employee must be deemed a regular employee, pursuant to Article 280 of the
Labor Code and jurisprudence. To rule otherwise would allow circumvention of labor laws in industries not
falling within the ambit of Policy Instruction No. 20/Department Order No. 19, hence allowing the prevention of
acquisition of tenurial security by project or work pool employees who have already gained the status of regular
employees by the employer's conduct.
In closing then, as petitioners had already gained the status of regular employees, their dismissal was
unwarranted, for the cause invoked by private respondents for petitioners' dismissal, viz.: completion of project,
was not, as to them, a valid cause for dismissal under Article 282 of the Labor Code. As such, petitioners are
now entitled to back wages and reinstatement, without loss of seniority rights and other benefits that may have
accrued. 41 Nevertheless, following the principles of "suspension of work" and "no pay" between the end of one
project and the start of a new one, in computing petitioners' back wages, the amounts corresponding to what
could have been earned during the periods from the date petitioners were dismissed until their reinstatement
when petitioners' respective Shooting Units were not undertaking any movie projects, should be deducted.
Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was already in effect.
Pursuant to Section 34 thereof which amended Section 279 of the Labor Code of the Philippines
and Bustamante v. NLRC,42 petitioners are entitled to receive full back wages from the date of their dismissal
up to the time of their reinstatement, without deducting whatever earnings derived elsewhere during the period
of illegal dismissal, subject however, to the above observations.
WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor Relations
Commission in NLRC NCR CA No. 006195-94 dated 01 February 1995, as well as its Resolution dated 6 April
1995, are hereby ANNULLED and SET ASIDE for having been rendered with grave abuse of discretion, and
the decision of the Labor Arbiter in NLRC NCR Case No. 00-07-03994-92 is REINSTATED, subject, however,
to the modification above mentioned in the computation of back wages.
No pronouncement as to costs.
SO ORDERED.

10. G.R. No. 113542. February 24, 1998

CAURDANETAAN PIECE WORKERS UNION, represented by JUANITO P. COSTALES, JR. in his capacity
as union president,petitioner, vs. UNDERSECRETARY BIENVENIDO E. LAGUESMA and CORFARM
GRAINS, INC., respondents.
G.R. No. 114911. February 24, 1998

CAURDANETAAN PIECE WORKERS ASSOCIATION as represented by JUANITO P. COSTALES, JR.,

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

Statement of the Case

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

First Case
In G.R. No. 113542, hereafter referred to as the First Case, Petitioner Caurdanetaan Piece Workers
Union/Association (CPWU) prays for the nullification and reversal of Undersecretary Laguesmas Order dated
January 4, 1994 in OS-MA-A-8-119-93 (RO100-9207-RU-001), which granted Respondent Corfarms motion
for reconsideration and dismissed petitioners prayer for certification election. The dispositive portion of the
assailed Order reads as follows:[1]
WHEREFORE, the questioned Order is hereby set aside and a new one issued dismissing the
petition for certification election for lack of merit.
In his earlier Order dated September 7, 1993, Laguesma affirmed Med-Arbiter Sinamar E. Limos order of
March 18, 1993 which disposed as follows:[2]
IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, the above-entitled petition is hereby
granted. Consequently, the motion to dismiss filed by Corfarm Grains, Inc. is denied.
Let a certification election be conducted among the rank-and-file employees of Corfarm Grains, Inc.,
within ten (10) days from receipt hereof, with the following choices:
1.

Caurdanetaan Piece Workers Union;

2.

No Union
A pre-election conference is hereby set on March 29, 1993 at 2:00 o clock in the afternoon at the
DOLE, Dagupan District Office, Mayombo District, Dagupan City to thresh out the mechanics of the
Certification Election. Employer Corfarm Grains, Inc. is hereby directed to present its employment
records for the period covering January to June 1992 evidencing payment of salaries of its
employees.
Let the parties be notified accordingly.

Aggrieved by Respondent Laguesmas subsequent Order dated January 27, 1994 [3] denying its motion for
reconsideration, petitioner filed this recourse before this Court.

Second Case
In G.R. No. 114911, hereafter referred to as the Second Case, petitioner assails the Resolution
promulgated on February 16, 1994 in NLRC CA No. L-001109 [4] by the National Labor Relations Commission
(Respondent NLRC),[5] the dispositive portion of which reads:[6]
WHEREFORE, the Decision of the Labor Arbiter dated 14 September 1993 is hereby SET
ASIDE. Let the records of the case be REMANDED to the Arbitration Branch of origin for immediate
appropriate proceedings.
The labor arbiters decision that was reversed by Respondent NLRC disposed as follows:[7]
WHEREFORE, judgment is hereby rendered as follows:
1.
2.
3.

Declaring individual complainants dismissal illegal;

Declaring respondent guilty of unfair labor practice;
Ordering respondent to pay the 92[8] complainants the following:
a)

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

b)

service incentive leave pay in the amount of P855.00 each for three years;

c)

underpaid wages covering the period June 1989 to June 1992 which amount to
P47,040.00 each;

d)

backwages reckoned from June 1992, the date of dismissal[,] to September 1993, the
date of promulgation of the decision or a period of 14 months, in the amount of
P22,344.00 each;

e)

refund of P12.00/day deduction limited to three years which amounts to P12,096 each;
and

f)
4.

to pay the complainants P1,000.00 each as damages.

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

All other claims are hereby dismissed for lack of merit.

In a Resolution promulgated on March 28, 1994, Respondent NLRC denied petitioners motion for
reconsideration.[9]

The Facts
In his Consolidated Memorandum, the solicitor general recited the following pertinent facts, which we find
amply supported by the records:[10]
Petitioner union has ninety-two (92) members who worked as cargador at the warehouse and
ricemills of private respondent [referring to Respondent Corfarm] at Umingan, Pangasinan since
1982. As cargadores, they loaded, unloaded and piled sacks of palay from the warehouse to the
cargo trucks and those brought by cargo trucks for delivery to different places. They were paid by
private respondent on a piece rate basis. When private respondent denied some benefits to these
cargadores, the latter organized petitioner union. Upon learning of its formation, private respondent
barred its members from working with them and replaced [them] with non-members of the union
sometime in the middle of 1992.

On July 9, 1992, petitioner filed [a petition] for certification election before the Regional Office No. I of
the Department of Labor and Employment, San Fernando, La Union docketed as RO100-9207-RU001.
While this petition for certification election was pending, petitioner also filed on November 16, 1992, a
complaint for illegal dismissal, unfair labor practice, refund of illegal deductions, payment of wage
differentials, various pecuniary benefits provided by laws, damages, legal interest, reinstatement and
attorneys fees, against private respondent before the Regional Arbitration Branch No. 1 of Dagupan
City, docketed as NLRC RAB Case No. 01-117-0184-92.
On November 24, 1992, Labor Arbiter Ricardo Olairez in NLRC Case No. Sub-Rab 01-117-0184-92,
directed the parties to submit position paper on or before December 14, 1992, and to appear for
hearing on the said date. Only the complainant petitioner submitted its position paper on December 3,
1992.
Likewise in the scheduled hearing on December 14, 1992, private respondent did not appear[;] thus
Labor Arbiter Olairez allowed the president of petitioner union Juanito Costales to testify and present
its evidence ex-parte.
On December 16 1992, another notice was sent to the parties to appear on [the] January 7, 1993
hearing by Labor Arbiter Emiliano de Asis.
Before the scheduled hearing on January 7, 1993, complainant petitioner filed a motion to amend
complaint and to admit amended complaint. It also filed the following:
1.

Affidavit of Juanito Costales, Jr., dated November 24, 1992;

2.

Joint affidavit of Ricardo Aban, Armando Casing, Benjamin Corpuz, Danny Margadejas,
Fidel Fortunato, Henry de los Reyes, Anthony de Luna, Warlito Arguilles, Dominador
Aguda, Marcelino Cayuda, Jr., Jaime Costales and Juanito Mendenilla dated December
30, 1992;

3.

Joint affidavit of Juanito Costales and Armando Casing dated January 7, 1993;

4.

Affidavit signed by individual union members.

On March 18, 1993, Med-Arbiter Sinamar E. Limos issued an Order granting the petition for
certification election earlier filed.
Meanwhile, Labor Arbiter Rolando D. Gambito in the illegal dismissal case issued the May 20, 1993
Order, the dispositive portion [of] which reads:
WHEREFORE, respondents are hereby ordered to submit their position paper, together
with their documentary evidence, if any, within TEN (10) days from receipt of the order,
otherwise we will be constrained to resolve this case based on available evidence on record.
On September 7, 1993, public respondent Laguesma issued a Resolution denying the appeal filed by
private respondent against the order of Med-Arbiter Limos granting the petition for certification
election.
Acting on said denial, private respondent filed a motion for reconsideration which was granted in an
Order dated January 4, 1994 by public respondent Laguesma dismissing the petition for certification
election for lack of employer-employee relationship.
Petitioner in turn filed a motion for reconsideration of the January 4, 1994, Order but it was denied by
public respondent Laguesma in his January 27, 1994 Order which reaffirmed the dismissal of petition
for certification election.
Thus, the union filed its first petition for certiorari assailing the Orders of January 4 and 27, 1994 of
public respondent Laguesma dismissing the petition for certification election. The said petition is
captioned as Caurdanetaan Piece Workers Union, petitioner, vs. Hon. Bienvenido Laguesma, et al.,
respondents, docketed as G.R. No. 113542 and raffled to the Second Division of this Honorable
Court.

On September 14, 1993, Labor Arbiter Rolando D. Gambito issued his decision finding the dismissal of
petitioners members illegal. On appeal by both parties, Respondent NLRC -- as earlier stated -- set aside the
appealed decision and remanded the case to the labor arbiter for further proceedings. Petitioners motion for
reconsideration was later denied.
The solicitor general, who was supposed to represent both public respondents, joined petitioner and filed a
Manifestation and Motion (In Lieu of Comment) dated July 25, 1994, praying that the petition in the First Case
be granted and that judgment be rendered annulling[11] the assailed Orders of Respondent Laguesma. The
Republics counsel likewise filed another Manifestation and Motion (In Lieu of Comment) dated October 4,
1994 in the Second Case, praying that judgment be rendered annulling the resolution of Public Respondent
NLRC dated February 16, 1994 and March 28, 1994 and order[ing] public respondent to proceed with the case
instead of remanding the same to the labor arbiter of origin.[12]
In a Resolution dated March 29, 1995,[13] this Court ordered the consolidation of the two cases.[14]

Public Respondents Rulings

In the First Case

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

In the Second Case

On the other hand, Respondent NLRC ordered the remand of the case to the arbitration branch for further
proceedings because the issues at hand need further threshing out. Stressing the principle that allegations
must be proved by competent and credible evidence, it held:[16]
There is no question that under the Rules of the Commission, complaints may be resolved on the
basis of the Position Papers submitted by the parties and that the parties may be deemed to have
waived their right to present evidence after they have been given an opportunity to do so. These
procedural rules, however should be read in conjunction with the time[-]honored principle that
allegations must be proved and established by competent and credible evidence. In other words,
mere allegations would not suffice despite the absence of evidence to the contrary.

In subject case, complainants-appellants allegations that they are laborers of respondents-appellants

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

The Issues
In its Consolidated Memorandum dated September 19, 1995 filed before us, petitioner raises the following
grounds in support of its petition:[17]
1.

Grave abuse of discretion or acting in excess of jurisdiction, which is equivalent to lack of

jurisdiction on the part of public respondent in setting aside the labor arbiters decision and
in remanding this case to the office of origin for further proceedings is not necessary when
in fact the mandatory requirements of due process have been observed by the labor arbiter
in rendering decision on the case;

2.

Remand of the case to office of origin for further proceedings on matters already passed
upon properly by the labor arbiter is contrary to the rule of speedy labor justice and the [sic]
social justice and to afford protection to labor policy of the Philippine Constitution, which is a
command that should not be disregarded by the courts in resolving labor cases;

3.

Remand of the case to the labor arbiter would only prolong social unrest and the suffering
of injurious effects of illegal dismissal by the 92 illegally dismissed workers[;] hence, said
remand of the case without justification constitutes an oppressive act committed by public
respondent.

Simply put, the issues are as follows:

1. Whether Respondent Laguesma acted with grave abuse of discretion in ordering the dismissal of
the petition for certification election

2 Whether Respondent NLRC acted with grave abuse of discretion in remanding the illegal dismissal
case to the labor arbiter for further proceedings.
The present controversy hinges on whether an employer-employee relationship between the CPWU
members and Respondent Corfarm has been established by substantial evidence.

The Courts Ruling

The two petitions are meritorious.

Main Issue: Employer-Employee Relationship

First Case: Certification Election
Petitioner contends that Respondent Laguesma committed grave abuse of discretion in dismissing the
petition for certification election by relying on private respondents bare allegation, in its motion for
reconsideration, of lack of employer-employee relationship. [18] According to petitioner, Respondent Laguesma
cannot reverse his Decision in the absence of a concomitant change in his factual findings. [19] Petitioner insists
that all its members were employees of private respondent, viz.:[20]
The 92 workers, who are all union members of petitioner herein, have been rendering actual manual
services as cargadores in the warehouse and rice mills of private respondent, performing activities
usually related to or desirable by [sic] the business or trade of private respondent who is engaged in
the buy and sell of palay as well as warehousing of said commodity and milling the same for sale to
customers in the form of milled rice. The 92 workers have performed their activities for the last ten
(10) years prior to their having been illegally dismissed from employment on June 18, 1992 or
thereabouts.
Petitioner adds that many of its members received Christmas bonuses from private respondent.[21]
On the other hand, Respondent Corfarm describes the contentions of petitioner as
off-tangent, if not irrelevant. -First, the authority of the DOLE Secretary to decide appeals in representation cases is
undeniable (see e.g., Sections 9 and 10 of Rule V, Book V, of the Implementing Rules and
Regulations of the Labor Code; also Art. 259, appeal from certification election orders, labor
code). Second, petitioner completely misses the point that the granting and denial of a motion for
reconsideration involves the exercise of discretion. As submitted by the Public Respondent in its
Comment, among the ends to which a Motion for Reconsideration is addressed, one is precisely to
convince the court that its ruling is erroneous and improper, contrary to law or the evidence, x x x
(Emphasis found in the original.)
Corfarm insists that the challenged Order of Respondent Laguesma dated January 4, 1994 rests on solid
findings of fact which should be accorded respect and finality.[22] It attacks the petitioners allegation -- that it
has 92 workers who worked as cargador at its warehouses -- as gratuitous and not supported by any
evidence x x x [because] as late as this time of day in the litigation of this case, who exactly are those 92
workers cannot be known from the records.[23](Emphasis in original.)
Private respondent further argues that RJL Martinez Fishing Corp. vs. NLRC, [24] cited by the solicitor
general, has a factual situation different from the case at bar. Waiting time, unlike that in RJL Martinez
Fishing Corp., does not obtain here.[25] Likewise allegedly inapplicable are the rulings in Villavilla vs. Court of
Appeals[26] and in Brotherhood Labor Unity Movement vs. Zamora.[27]
Respondent Corfarm denies that it had the power of control, rationalizing that petitioners members were
street-hired workers engaged from time to time to do loading and unloading work x x x[;] [t]here [was] no

superintendent-in-charge x x x to give orders x x x[;] [and] there [were] no gate passes issued, nor tools,
equipment and paraphernalia issued by Corfarm for loading/unloading x x x. [28] It attributes error to the solicitor
generals reliance on Article 280[29] of the Labor Code. Citing Brent School, Inc. vs. Zamora,[30] private
respondent asserts that a literal application of such article will result in absurdity, where petitioners members
will be regular employees not only of respondents but also of several other rice mills, where they were
allegedly also under service. Finally, Corfarm submits that the OSGs position is negated by the fact that
petitioners members contracted for loading and unloading services with respondent company when such
work was available and when they felt like it x x x.[31]
We rule for petitioners. Section 5, Rule 133 of the Rules of Court mandates that in cases filed before
administrative or quasi-judicial bodies, like the Department of Labor, a fact may be established by substantial
evidence, i.e. that amount of evidence which a reasonable mind might accept as adequate to justify a
conclusion.[32] Also fundamental is the rule granting not only respect but even finality to factual findings of the
Department of Labor, if supported by substantial evidence. Such findings are binding upon this Court, unless
petitioner is able to show that the secretary of labor (or the undersecretary acting in his place) has arbitrarily
disregarded or misapprehended evidence before him to such an extent as to compel a contrary conclusion if
such evidence were properly appreciated. This is rooted in the principle that this Court is not a trier of facts,
and that the determinations made by administrative bodies on matters falling within their respective fields of
specialization or expertise are accorded respect.[33] Also well-settled is the doctrine that the existence of an
employer-employee relationship is ultimately a question of fact and that the findings thereon by the labor
authorities shall be accorded not only respect but even finality when supported by substantial evidence.
[34]
Finally, in certiorari proceedings under Rule 65, this Court does not, as a rule, evaluate the sufficiency of
evidence upon which the labor officials based their determinations. The inquiry is essentially limited to whether
they acted without or in excess of jurisdiction or with grave abuse of discretion. [35] However, this doctrine is not
absolute. Where the labor officers findings are contrary to those of the med-arbiter, the Court -- in the exercise
of its equity jurisdiction -- may wade into and reevaluate such findings, [36] which we now embark on in this case.
[37]

To determine the existence of an employer-employee relation, this Court has consistently applied the
four-fold test which has the following elements: (1) the power to hire, (2) the payment of wages, (3) the power
to dismiss, and (4) the power to control -- the last being the most important element.[38]
Our examination of the case records indubitably shows the presence of an employer-employee
relationship. Relying on the evidence adduced by the petitioners, Respondent Laguesma himself affirmed the
presence of such connection. Thus, in his Order dated September 7, 1993, he astutely held:[39]
Anent the first issue, we find the annexes submitted by the respondent company not enough to prove
that herein petitioner is indeed an independent contractor. The existence of an independent
contractor relationship is generally established by the following criteria. The contractor is carrying on
an independent business; [the] nature and extent of the work; the skill required; the term and duration
of the relationship; the right to assign the performance of a specified piece of work; the control and
supervision over the workers; payment of the contractors workers; the control and the supervision
over the workers; the control of the premises; the duty to supply the premises, tools, appliances,
materials and laborers, and the mode, manner and terms of payment. [Brotherhood Labor Unity
Movement of the Philippines vs. Zamora, 147 SCRA 49 (198) [sic] ].
None of the above criteria exists in the case at bar. The absence of a written contract which specifies
the performance of a specified piece of work, the nature and extent of the work and the term and
duration of the relationship between herein petitioner and respondent company belies the latters [sic]
allegation that the former is indeed and [sic] independent contractor.
Also, respondent failed to show by clear and convincing proof that herein respondent has the
substantial capital or investment to qualify as an independent contractor under the law. The premises,
tools, equipments [sic] and paraphernalia are all supplied by respondent company. It is only the
manpower or labor force which the alleged contractor supplies, suggesting the existence of a labor
only contracting scheme which is prohibited by law. Further, if herein petitioner is indeed an
independent contractor, it should have offered its services to other companies and not to work [sic]
exclusively for the respondent company. It is therefore, clear that the alleged J.P. Costales, Jr.
Cargador Services cannot be considered as an independent contractor as defined by law.

In his subsequent order, Respondent Laguesma inexplicably reversed his above ruling and held that there
was no employer-employee relationship on the ground that Respondent Corfarm exercised no power of control
over the alleged employees.
It may be asked, why the sudden change of mind on the part of Respondent Laguesma? No additional
pieces of evidence were adduced and no existing ones were identified by Laguesma to support such strange
reversal. The unblemished fact is that private respondent was the recruiter and employer of petitioners
members.
Shoppers Gain Supermart vs. NLRC[40] provides the standard to determine whether a worker is an
independent contractor:
The applicable law is not Article 280 of the Labor Code which is cited by petitioners, but Art. 106,
which provides:
Art. 106. Contractor or subcontractor. -- Whenever an employer enters into a contract with
another person for the performance of the formers work, the employees of the contractor and
of the latters subcontractor, if any, shall be paid in accordance with the provisions of this
Code.
xxx

xxx

xxx

xxx

xxx

xxx

There is labor-only contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such persons are
performing activities which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him. (emphasis supplied)
In accordance with the above provision, petitioner corporation is deemed the direct employer of the private
respondents and thus liable for all benefits to which such workers are entitled, like wages, separation benefits
and so forth. There is no denying the fact that private respondents work as merchandisers, cashiers, baggers,
check-out personnel, sales ladies, warehousemen and so forth were directly related, necessary and vital to the
day-to-day operations of the supermarket; their jobs involved normal and regular functions in the ordinary
business of the petitioner corporation. Given the nature of their functions and responsibilities, it is improbable
that petitioner did not exercise direct control over their work. Moreover, there is no evidence--as in fact,
petitioners do not even allege--that aside from supplying the manpower, the labor agencies have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others.
It is undeniable that petitioners members worked as cargadores for private respondent. They loaded,
unloaded and piled sacks of palay from the warehouses to the cargo trucks and from the cargo trucks to the
buyers. This work is directly related, necessary and vital to the operations of Corfarm. Moreover, Corfarm did
not even allege, much less prove, that petitioners members have substantial capital or investment in the form
of tools, equipment, machineries, [and] work premises, among others. Furthermore, said respondent did not
contradict petitioners allegation that it paid wages directly to these workers without the intervention of any
third-party independent contractor. It also wielded the power of dismissal over petitioners; in fact, its exercise
of this power was the progenitor of the Second Case. Clearly, the workers are not independent contractors.
Applying Article 280[41] of the Labor Code, we hold that the CPWU members were regular employees of
private respondent. Their tasks were essential in the usual business of private respondent.
As we have ruled in an earlier case, the question of whether an employer-employee relationship exists in a
certain situation has bedevilled the courts. Businessmen, with the aid of lawyers, have tried to avoid or
sidestep such relationship, because that juridical vinculum engenders obligations connected with workmens
compensation, social security, medicare, minimum wage, termination pay and unionism.[42] All too familiarly,
Respondent Corfarm sought refuge from these obligations. However, the records of this case clearly support
the existence of the juridical vinculum.

RJL Martinez Fishing Corporation,[43] cited by the solicitor general, is relevant because petitioners
members were also made to wait for loading and unloading of cavans of palay to and from the storage areas
and to and from the milling areas. [44] This waiting time does not denigrate the regular employment of
petitioners members. As ruled in that case:[45]
x x x Besides, the continuity of employment is not the determining factor, but rather whether the work
of the laborer is part of the regular business or occupation of the employer.(fn: Article 281, Labor
Code, as amended; Philippine Fishing Boat Officers and Engineer[s] Union vs. Court of Industrial
Relations, 112 SCRA 159 (1982). We are thus in accord with the findings of respondent NLRC in this
regard.
Although it may be that private respondents alternated their employment on different vessels when
they were not assigned to petitioners boats, that did not affect their employee status. The evidence
also establishes that petitioners had a fleet of fishing vessels with about 65 ship captains, and as
private respondents contended, when they finished with one vessel they were instructed to wait for the
next. As respondent NLRC had found:
We further find that the employer-employee relationship between the parties herein is not coterminous with each loading and unloading job. As earlier shown, respondents are engaged
in the business of fishing. For this purpose, they have a fleet of fishing vessels. Under this
situation, respondents activity of catching fish is a continuous process and could hardly be
considered as seasonal in nature. So that the activities performed by herein complainants,
i.e. unloading the catch of tuna fish from respondents vessels and then loading the same to
refrigerated vans, are necessary or desirable in the business of respondents. This
circumstance makes the employment of complainants a regular one, in the sense that it does
not depend on any specific project or seasonal activity. (fn: NLRC Decision, p. 94, Rollo.)
Alleged Admission of Lack of
Employer-Employee Relationship
Respondent Corfarm argues that some of petitioners members including its president, Juanito P.
Costales, Jr.[,] admitted that they work for various rice mills in Pangasinan and that there is no employeremployee relations between them and private respondents. It adds that the solicitor general, by arguing that
there was an employer-employee relationship, attempts to substitute [his] judgment [with] that of public
respondent undersecretary x x x who found such admissions against self-interest on the part of petitioners
members x x x.[46]
These arguments are negligible. The alleged admissions cannot be taken against petitioners
cause. First, the contents of the admissions are highly suspect. The records reveal that the admissions of
Juanito Costales, Jr.,[47] Carlito Costales[48] and Juanito Medenilla[49] were in the form of affidavits[50] of adhesion
which were identical in content, differentiated only by the typewritten names and the signatures of the
workers. Second, only three of the workers executed such affidavits. Clearly, the admissions in such affidavits
cannot work against petitioner unions cause. Such pro forma and identical affidavits do not prove lack of
employer-employee relationship against all members of petitioner. Third, the employer-employee relationship
is clearly proven by substantial evidence. Corfarm sorely failed to show that petitioners members were
independent contractors. We rule that no particular form of proof is required to prove the existence of an
employer-employee relationship. Any competent and relevant evidence may show the relationship. If only
documentary evidence would be required to demonstrate that relationship, no scheming employer would ever
be brought before the bar of justice. [51] Fourth, and in any event, the alleged admissions of the three workers
that they worked with other rice mills do not work against them. Assuming arguendo that they did work with
other rice mills, this was required by the imperative of meeting their basic needs.[52]
The employer-employee relationship having been duly established, the holding of a certification election
necessarily follows. It bears stressing that there should be no unnecessary obstacle to the holding of such
election,[53] for it is a statutory policy that should not be circumvented. [54] We have held that, in the absence of a
legal impediment, the holding of a certification election is the most democratic method of determining the
employees choice of their bargaining representative. It is the best means to settle controversies and disputes
involving union representation. Indeed, it is the keystone of industrial democracy.[55]

Second Case: Illegal Dismissal

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

Procedural Due Process Observed

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

Labor Arbiters Decision Based

on Credible, Competent and Substantial Evidence
Contrary to the conclusions of the NLRC and the arguments of private respondent, the findings of the
labor arbiter on the question of illegal dismissal were based on credible, competent and substantial evidence.
It is to be borne in mind that proceedings before labor agencies merely require the parties to submit their
respective affidavits and position papers. Adversarial trial is addressed to the sound discretion of the labor
arbiter. To establish a cause of action, only substantial evidence is necessary, i.e., such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, even if other minds equally reasonable
might conceivably opine otherwise.[65]As ruled in Manalo vs. Roldan-Confesor:[66]
Clear and convincing proof is x x x more than mere preponderance, but not to extent of such
certainty as is required beyond reasonable doubt as in criminal cases x x x (fn: Blacks Law
Dictionary, 5th Ed., p. 227, citing Fred C. Walker Agency, Inc. v. Lucas, 215 Va. 535, 211 S.E. 2d 88,
92) while substantial evidence x x x consists of more than a mere scintilla of evidence but may be
somewhat less than a preponderance x x x x (fn: Ibid., p. 1281, citing Marker v. Finch, D.C. Del., 322
F. Supp. 905, 910) Consequently, in the hierarchy of evidentiary values, We find proof beyond
reasonable doubt at the highest level, followed by clear and convincing evidence, preponderance of
evidence, and substantial evidence, in that order.
Evidence to determine the validity of petitioners claims, which the labor arbiter relied upon, was available
to Respondent NLRC. These pieces of evidence are in the case records, as aptly pointed out by the solicitor
general:[67]
[Regarding] the quoted second sentence of public respondent NLRCs Resolution that allegations
must be proved and established by competent evidence, and that mere allegations would not suffice
despite the absence of evidence to the contrary, suffice it to say that there is ample evidence on
record to support the Labor Arbiters decision, to wit: 1) Narrative report of DOLE inspector Crisanto
Rey Dingle noting some violation of underpayment of minimum wage and underpayment of 13th
month pay (page 10, record); 2) affidavit of union officers and individual union members, stating their
various claims (page 80-195, Record). Despite such evidence and an opportunity afforded to private
respondent to present its evidence and position paper as borne out by the notice of hearing issued by
Labor Arbiter Olairez dated November 14, 1992, with advice to the parties to submit their position
paper (p. 14 Record) and the Order issued by Labor Arbiter Gambito dated May 20, 1993; requiring
private respondents to submit their position paper, together with their documentary evidence (p. 247,
record), private respondent failed to submit its position paper and countervailing evidence which
should have met squarely the allegations and evidence adduced by the petitioner. Thus, in the

absence of private respondents position paper and countervailing evidence, the Labor Arbiter cannot
be faulted in deciding the case based on the available evidence on record.
It must be stressed that labor laws mandate the speedy administration of justice, with least attention to
technicalities but without sacrificing the fundamental requisites of due process. In this light, the NLRC, like the
labor arbiter, is authorized to decide cases based on the position papers and other documents submitted,
without resorting to the technical rules of evidence. [68] Verily, Respondent NLRC noted several documentary
evidence sufficient to arrive at a just decision. Indeed, the evidence on record clearly supports the conclusion
of the labor arbiter that the petitioners were employees of respondent, and that they were illegally dismissed.[69]
The NLRC points to conflicts and inconsistencies in the evidence on record. We are not
convinced. These alleged inconsistencies are too flimsy and too tenuous to preclude a just decision. The
finding that Juanito Costales, Jr. was an employee of respondent was allegedly inconsistent with his admission
that he was the owner of Carcado Contracting Services. As earlier observed, the inconsistency is
irrelevant. Juan Costales, Jr. was an employee of Corfarm. Owning this alleged outfit is not inconsistent with
such employment. The NLRC also questioned the amount of the employees compensation. In one instance,
the workers stated that they were receiving P45.00 per days work of eight hours. In another, they claimed
that they were paid P0.12 per sack or cavan. These allegedly differ from their allegation that Corfarm used to
be obliged to pay P57.00 per days earning. The alleged inconsistencies are more apparent than
real. Records reveal that the P57 was the promised compensation; however, there was an unauthorized
deduction of P12; thus, the amount of P45 per day.[70] The claim of P0.12 per sack or cavan is the basic
computation of how workers or haulers earn their wage for the day.[71] In any event, the alleged inconsistencies
do not affect or diminish the established fact that petitioners members were regular employees who were
illegally dismissed.
Why Respondent NLRC refused to rule directly on the appeal escapes us. The remand of a case or an
issue to the labor arbiter for further proceedings is unnecessary, considering that the NLRC was in a position to
resolve the dispute based on the records before it and particularly where the ends of justice would be served
thereby.[72] Remanding the case would needlessly delay the resolution of the case which has been pending
since 1992.[73] As already observed, the evidence on record clearly supports the findings of the labor arbiter.
Pursuant to the doctrine that this Court has a duty to settle, whenever possible, the entire controversy in a
single proceeding, leaving no root or branch to bear the seeds of future litigation, we now resolve all issues.[74]
It is axiomatic that in illegal dismissal cases, the employer always has the burden of proof, [75] and his
failure to discharge this duty results in a finding that the dismissal was unjustified. [76] Having defaulted from
filing its position paper, Respondent Corfarm is deemed to have waived its right to present evidence and
counter the allegations of petitioners members.
In the same light, we sustain the labor arbiters holding in respect of unfair labor practice. [77] As ruled by
Labor Arbiter Rolando D. Gambito:[78]
The last issue: Instead of sitting down with the individual complainants or the union officers to
discuss their demands, respondents resorted to mass lay-off of all the members of the union and
replaced them with outsiders. This is clearly a case of union busting which Art. 248 of the Labor Code
prohibits. Art. 248 provides that It shall be unlawful for an employer to commit any of the following
unfair labor practice (a) To interfere with, restrain or coerce employees in the exercise of their right to
self-organization; (b) x x x (c) To contract out service or functions being performed by union members
when such will interfere with, restrain or coerce employees in the exercise of their rights to selforganization.
In view of recent jurisprudence,[79] we are correcting some items in the labor arbiters decision. The
thirteenth month pay awarded should be computed for each year of service from the time each employee was
hired up to the date of his actual reinstatement. The same computation applies to the award of the service
incentive leave[80] and underpaid wages. Each employee is to be paid the remaining underpaid wages from the
date of his or her hiring in accordance with the then prevailing wage legislations. Likewise, a refund of P12
shall be computed for each day of service of each employee, to be reckoned from the date such employee was
hired. The damages awarded should be sustained because the employer acted in bad faith. [81] Back wages
are to be computed from the date of dismissal up to the date of actual reinstatement without any deductions or
conditions. This is in consonance with Fernandez, et al. vs. National Labor Relations Commission:[82]

x x x Accordingly, the award to petitioners of backwages for three years should be modified in
accordance with Article 279 of the Labor Code, as amended by R.A. 6715, by giving them full
backwages without conditions and limitations, the dismissals having occurred after the effectivity of
the amendatory law on March 21, 1989. Thus, the Court held in Bustamante:
The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more benefits to
workers than was previously given them under theMercury Drug rule or the deduction of
earnings elsewhere rule. Thus, a closer adherence to the legislative policy behind Rep. Act
No. 6715 points to full backwages as meaning exactly that, i.e., without deducting from
backwages the earnings derived elsewhere by the concerned employee during the period of
his illegal dismissal.
WHEREFORE, both petitions are GRANTED. In G.R. No. 113542, Respondent Laguesmas Orders dated
January 4, 1994 and January 27, 1994 areREVERSED and SET ASIDE; whereas his Order dated September
7, 1993 is REINSTATED. In G.R. No. 114911, Respondent NLRCs Resolutions promulgated on February 16,
1994 and March 28, 1994 are likewise REVERSED AND SET ASIDE. The Labor Arbiters decision dated
September 14, 1993 is reinstated withMODIFICATIONS as set out in this Decision. Respondent NLRC
is ORDERED to COMPUTE the monetary benefits awarded in accordance with this Decision and to submit its
compliance thereon within thirty days from notice of this Decision.
SO ORDERED.