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[ G.R. No. 155109, September 29, 2010 ]
C. ALCANTARA & SONS, INC., ETITIONER, VS. CO!RT O"
D E C I S I O N
This case is about a) the consequences of an illegally staged strike
upon the employment status of the union ofcers and its ordinary
members and b) the right of reinstated union members to go back
to work pending the company's appeal from the order reinstating
T&e "'(t) '*+ t&e C')e
C. Alcantara !ons" #nc." $the Company) is a domestic corporation
engaged in the manufacture and processing of plywood.
%agkahiusang &amumuo sa Alsons'!P() $the *nion) is the
e+clusi,e bargaining agent of the Company's rank and -le
employees. The other parties to these cases are the *nion
ofcers./0 and their striking members..10
The Company and the *nion entered into a Collecti,e 2argaining
Agreement $C2A) that bound them to hold no strike and no lockout
in the course of its life. At some point the parties began
negotiating the economic pro,isions of their C2A but this ended in
a deadlock" prompting the *nion to -le a notice of strike. After
e3orts at conciliation by the 4epartment of )abor and 5mployment
$46)5) failed" the *nion conducted a strike ,ote that resulted in an
o,erwhelming ma7ority of its members fa,oring it. The *nion
reported the strike ,ote to the 46)5 and" after the obser,ance of
the mandatory cooling'o3 period" went on strike.
4uring the strike" the Company -led a petition for the issuance of a
writ of preliminary in7unction with prayer for the issuance of a
temporary restraining order $T86) Ex Parte.90with the %ational
)abor 8elations Commission $%)8C) to en7oin the strikers from
intimidating" threatening" molesting" and impeding by barricade the
entry of non'striking employees at the Company's premises. The
%)8C -rst issued a 1:'day T86 and" after hearing" a writ of
preliminary in7unction" en7oining the *nion and its ofcers and
members from performing the acts complained of. 2ut se,eral
attempts to implement the writ failed. 6nly the inter,ention of law
enforcement units made such implementation possible. &eantime"
the *nion -led a petition.;0 with the Court of Appeals $CA)"
questioning the preliminary in7unction order. 6n (ebruary <" /===
the latter court dismissed the petition. The *nion did not appeal
from such dismissal.
The Company" on the other hand" -led a petition with the 8egional
Arbitration 2oard to declare the *nion's strike illegal".>0 citing its
,iolation of the no strike" no lockout" pro,ision of their C2A.
!ubsequently" the Company amended its petition to implead the
named *nion members who allegedly committed prohibited acts
during the strike. (or their part" the *nion" its ofcers" and its
a3ected members -led against the Company a counterclaim for
unfair labor practices" illegal dismissal" and damages. The *nion
also assailed as in,alid the ser,ice of summons on the indi,idual
*nion members included in the amended petition.
6n ?une 1=" /=== the )abor Arbiter rendered a decision"
.@0 declaring the *nion's strike illegal for ,iolating the C2A's no
strike" no lockout" pro,ision. As a consequence" the )abor Arbiter
held that the *nion ofcers should be deemed to ha,e forfeited
their employment with the Company and that they should pay
actual damages of P9"<1>":::.:: plus /:A interest and attorney's
fees. Bith respect to the striking *nion members" -nding no proof
that they actually committed illegal acts during the strike" the
)abor Arbiter ordered their reinstatement without backwages. The
)abor Arbiter denied the *nion's counterclaim for lack of merit.
6n ?une 1=" /=== the terminated *nion members promptly -led a
motion for their immediate reinstatement but the )abor Arbiter did
not act on the same. At any rate" the Company did not reinstate
them. 2oth parties appealed.C0 the )abor Arbiter's decision to the
%)8C. The Company impugned the )abor Arbiter's decision insofar
as it ordered the reinstatement of the terminated *nion members.
The *nion" on the other hand" questioned the declaration of
illegality of the strike as well as the dismissal of its ofcers and the
order for them to pay damages.
6n %o,ember <" /=== the %)8C rendered a decision".<0 afrming
that of the )abor Arbiter insofar as the latter declared the strike
illegal" ordered the *nion ofcers terminated" and directed them to
pay damages to the Company. The %)8C ruled" howe,er" that the
*nion members in,ol,ed" who were identi-ed in the proceedings
held in the case" should also be terminated for ha,ing committed
prohibited and illegal acts.
The *nion -led a petition for certiorari.=0 with the CA" questioning
the %)8C decision. (inding merit in the petition" the CA rendered a
decision on &arch 1:" 1::1"./:0 annulling the %)8C decision and
reinstating that of the )abor Arbiter. The Company and the *nion
with its ofcers and members -led separate petitions for re,iew of
the CA decision in D.8. />>/:= and />>/9>" respecti,ely.
Page 2 of 22
4uring the pendency of these cases" the a3ected *nion members
-led with the )abor Arbiter a motion for reinstatement pending
appeal by the parties and the computation of their backwages
based on the CA decision. After hearing" the )abor Arbiter issued a
resolution dated %o,ember 1/" 1::1".//0 holding that due to the
delay in the resolution of the dispute and the impracticability of
reinstatement owing to the fact that the relations between the
terminated *nion members and the Company had been se,erely
strained by the prolonged litigation" payment of separation pay to
such *nion members was in order. The )abor Arbiter thus
appro,ed the computation and payment of their separation pay
and denied all their other claims.
2oth parties appealed the )abor Arbiter's resolution./10 to the
%)8C. #nitially" in its resolution dated April 9:" 1::9"./90 the %)8C
declared the )abor Arbiter's resolution of %o,ember 1/" 1::1 ,oid
for lack of factual and legal basis but ordered the Company to pay
the a3ected employees' accrued wages and /9th month pay
considering the Company's refusal to reinstate them pending
appeal. 6n motion for reconsideration by both parties" howe,er"
the %)8C issued a resolution on August 1=" 1::9"./;0 modifying its
earlier resolution by deleting the grant of accrued wages and
/9th month pay to the sub7ect employees" thus denying their
motion for computation.
*pon the *nion's petition for certiorari./>0 with the CA" questioning
the %)8C's denial of the terminated *nion members' claim for
separation pay" accrued wages" and other bene-ts" the CA
rendered a decision on (ebruary 1;" 1::>"./@0 dismissing the
petition. The CA ruled that the reinstatement pending appeal
pro,ided under Article 119 of the )abor Code contemplated illegal
dismissal or termination cases and not cases under Article 1@9.
Thus" the CA ruled that the resolution ordering the reinstatement of
the terminated *nion members and the payment of their wages
and other bene-ts had no basis. Aggrie,ed" the *nion sought
inter,ention by this Court.
T&e I)),e) re)e*te+
The issues presented in these cases areE
/. Bhether or not the %)8C properly acquired 7urisdiction o,er the
persons of the indi,idual *nion members impleaded in the caseF
1. Bhether or not the *nion staged an illegal strikeF
9. Assuming the strike to be illegal" whether or not the impleaded
*nion members committed illegal acts during the strike" 7ustifying
their termination from employmentF
;. Bhether or not the terminated *nion members are entitled to
the payment of backwages on account of the Company's refusal to
reinstate them" pending appeal by the parties" from the )abor
Arbiter's decision of ?une 1=" /===F and
>. Bhether or not the terminated *nion members are entitled to
accrued backwages and separation pay.
T&e R,-.*/) o0 t&e Co,rt
O*e. The %)8C acquires 7urisdiction o,er parties in cases before it
either by summons ser,ed on them or by their ,oluntary
appearance before its )abor Arbiter. Gere" while the *nion insists
that summons were not properly ser,ed on the impleaded *nion
members with respect to the Company's amended petition that
sought to declare the strike illegal" the records show that they were
so ser,ed. The 8eturn of !er,ice of !ummons./C0 indicated that C;
out of the </./<0 impleaded *nion members were ser,ed with
summons. 2ut they refused either to accept the summons or to
acknowledge receipt of the same. !uch refusal cannot of course
frustrate the %)8C's acquisition of 7urisdiction o,er them. 2esides"
the a3ected *nion members ,oluntarily entered their appearance
in the case when they sought afrmati,e relief in the course of the
proceedings like an award of damages in their fa,or.
T1o. A strike may be regarded as in,alid although the labor union
has complied with the strict requirements for staging one as
pro,ided in Article 1@9 of the )abor Code when the same is held
contrary to an e+isting agreement" such as a no strike clause or
conclusi,e arbitration clause../=0 Gere" the C2A between the
parties contained a Hno strike" no lockoutH pro,ision that en7oined
both the *nion and the Company from resorting to the use of
economic weapons a,ailable to them under the law and to instead
take recourse to ,oluntary arbitration in settling their disputes.
%o law or public policy prohibits the *nion and the Company from
mutually wai,ing the strike and lockout maces a,ailable to them to
gi,e way to ,oluntary arbitration. #ndeed" no less than the /=<C
Constitution recogniIes in !ection 9" Article J###" preferential use of
,oluntary means to settle disputes. Thus '
T&e St'te )&'-- promote t&e pr.*(.p-e o0 )&'re+
re)po*).b.-.t2 bet1ee* 1or3er) '*+ emp-o2er) '*+ t&e
pre0ere*t.'- ,)e o0 4o-,*t'r2 mo+e) .* )ett-.*/ +.)p,te),
.*(-,+.*/ (o*(.-.'t.o*, '*+ )&'-- e*0or(e t&e.r m,t,'-
(omp-.'*(e t&ere1.t& to 0o)ter .*+,)tr.'- pe'(e.
The Court -nds no compelling reason to depart from the -ndings of
the )abor Arbiter" the %)8C" and the CA regarding the illegality of
the strike. !ocial 7ustice is not one'sided. #t cannot be used as a
badge for not complying with a lawful agreement.
Page 5 of 22
T&ree. !ince the *nion's strike has been declared illegal" the
*nion ofcers can" in accordance with law be terminated from
employment for their actions. This includes the shop stewards.
They cannot be shielded from the co,erage of Article 1@; of the
)abor Code since the *nion appointed them as such and placed
them in positions of leadership and power o,er the men in their
respecti,e work units.
As regards the rank and -le *nion members" Article 1@; of the
)abor Code pro,ides that termination from employment is not
warranted by the mere fact that a union member has taken part in
an illegal strike. #t must be shown that such a union member"
clearly identi-ed" performed an illegal act or acts during the strike.
Gere" although the )abor Arbiter found no proof that the dismissed
rank and -le *nion members committed illegal acts" the %)8C
found following the in7unction hearing in %)8C #C &':::/1@'=< that
the *nion members concerned committed such acts" for which they
had in fact been criminally charged before ,arious courts and the
prosecutors' ofce in 4a,ao City. !ince the CA held that the
e+istence of criminal complaints against the *nion members did
not warrant their dismissal" it becomes necessary for the Court to
go into the records to settle the issue.
The striking *nion members allegedly committed the following
a. They threatened" coerced" and intimidated non'striking
employees" ofcers" suppliers and customersF
b. They obstructed the free ingress to and egress from the
company premisesF and
c. They resisted and de-ed the implementation of the writ of
preliminary in7unction issued against the strikers.
Cornelio Caguiat" 8uben Tungapalan" and 5ufracio 8abusa depicted
the abo,e prohibited acts in their afda,its and testimonies. The
!heri3 of the %)8C said in his 8eport.1/0that" in the course of his
implementation of the writ of in7unction" he obser,ed that the
striking employees blocked the e+it lane of the Alson dri,e with
their tent. Tungapalan" a non'striking employee" identi-ed the
*nion members who threatened and coerced him. #ndeed" he -led
criminal actions against them. )astly" the photos taken of the
strike show the strikers" properly identi-ed" committing the acts
complained of. These constitute substantial e,idence in support of
the termination of the sub7ect *nion members.
The mere fact that the criminal complaints against the terminated
*nion members were subsequently dismissed for one reason or
another does not e+tinguish their liability under the )abor Code.
%or does such dismissal bar the admission of the afda,its"
documents" and photos presented to establish their identity and
guilt during the hearing of the petition to declare the strike illegal.
The technical grounds that the *nion interposed for denying
admission of the photos are also not binding on the %)8C..110
"o,r. The terminated *nion members contend that" since the
Company refused to reinstate them after the )abor Arbiter
rendered a decision in their fa,or" the Company should be ordered
to pay them their wages during the pendency of the appeals from
the )abor Arbiter's decision.
#t will be recalled that after the )abor Arbiter rendered his decision
on ?une 1=" /===" which decision ordered the reinstatement of the
terminated *nion members" the latter promptly -led a motion for
their reinstatement pending appeal. 2ut the )abor Arbiter did not
for some reason act on the motion. As it happened" after about
four months or on %o,ember <" /===" the %)8C re,ersed the )abor
Arbiter's reinstatement order. #t cannot be said" therefore" that the
Company had resisted a standing order of reinstatement directed
at it at this point.
6f course" on &arch 1:" 1::1 the CA restored the )abor Arbiter's
reinstatement order. And this prompted the a3ected *nion
members to again -le with the )abor Arbiter a motion for their
reinstatement pending appeal. 2ut" acting on the motion" the
)abor Arbiter resol,ed at this point that reinstatement was no
longer practicable because of the se,erely strained relation
between the company and the terminated *nion members. #n
place of reinstatement" the )abor Arbiter ordered the Company to
pay them their separation pays.
2oth parties appealed the )abor Arbiter's abo,e ruling.190 to the
%)8C. 2ut" as it turned out the %)8C did not also fa,or
reinstatement. #t instead ordered the Company to pay the
terminated *nion members their accrued wages and /9th month
pay considering its refusal to reinstate them pending appeal. 6n
motion for reconsideration" howe,er" the %)8C reconsidered and
deleted altogether the grant of accrued wages and /9th month
pay. The *nion appealed the %)8C ruling to the CA on behalf of its
terminated members but the CA denied their appeal.
The CA denied reinstatement for the reason that the reinstatement
pending appeal pro,ided under Article 119 of the )abor Code
contemplated illegal dismissal or termination cases and not cases
Page 6 of 22
under Article 1@;. 2ut this percei,ed distinction does not -nd
support in the pro,isions of the )abor Code.
The grounds for termination under Article 1@; are based on
prohibited acts that employees could commit during a strike. 6n
the other hand" the grounds for termination under Articles 1<1 to
1<; are based on the employee's conduct in connection with his
assigned work. !till" Article 1/C" which de-nes the powers of )abor
Arbiters" ,ests in the latter 7urisdiction o,er all termination cases"
whate,er be the grounds gi,en for the termination of employment.
Consequently" Article 119" which pro,ides that the decision of the
)abor Arbiter reinstating a dismissed employee shall immediately
be e+ecutory pending appeal" cannot but apply to all terminations
irrespecti,e of the grounds on which they are based.
Gere" although the )abor Arbiter failed to act on the terminated
*nion members' motion for reinstatement pending appeal" the
Company had the duty under Article 119 to immediately reinstate
the a3ected employees e,en if it intended to appeal from the
decision ordaining such reinstatement. The Company's failure to
do so makes it liable for accrued backwages until the e,entual
re,ersal of the order of reinstatement by the %)8C on %o,ember <"
/===".1;0 a period of four months and nine days.
".4e. Bhile it is true that generally the grant of separation pay is
not a,ailable to employees who are ,alidly dismissed" there are" in
furtherance of the law's policy of compassionate 7ustice" certain
circumstances that warrant the grant of some relief in fa,or of the
terminated *nion members based on equity.
2itter labor disputes" especially strikes" always generate a throng of
odium and abhorrence that sometimes result in unpleasant"
although unwanted" consequences..1>0Considering this" the
striking employees' breach of certain restrictions imposed on their
concerted actions at their employer's doorsteps cannot be regarded
as so inherently wicked that the employer can totally disregard
their long years of ser,ice prior to such breach..1@0 The records
also fail to disclose any past infractions committed by the
dismissed *nion members. Taking these circumstances in
consideration" the Court regards the award of -nancial assistance
to these *nion members in the form of one'half month salary for
e,ery year of ser,ice to the company up to the date of their
termination as equitable and reasonable.
78ERE"ORE" the Court DENIES the petition of the %agkahiusang
&amumuo sa Alsons'!P() and its ofcers and members in D.8.
/>>/9> for lack of merit" and REVERSESand SETS ASIDE the
decision of the Court of Appeals in CA'D.8. !P >=@:; dated &arch
1:" 1::1. The Court" on the other hand" GRANTS the petition of C.
Alcantara !ons" #nc. in D.8. />>/:= and REINSTATES the
decision of the %ational )abor 8elations Commission in %)8C CA &'
::;==@'== dated %o,ember <" /===.
(urther" the Court ARTIALL9 GRANTS the petition of the
%agkahiusang &amumuo sa Alsons'!P() and their dismissed
members in D.8. /C=11: and ORDERS C. Alcantara !ons" #nc. to
pay the terminated *nion members backwages for four $;) months
and nine $=) days and separation pays equi,alent to one'half month
salary for e,ery year of ser,ice to the company up to the date of
their termination" with interest of /1A per annum from the time
this decision becomes -nal and e+ecutory until such backwages
and separation pays are paid. The Court DENIES all other claims.
[ G.R. No. 1:6;5:, $'*,'r2 20, 2009 ]
$!ANITO A. GARCIA AND AL#ERTO $. D!<AGO, ETITIONERS,
VS. 8ILIINE AIRLINES, INC., RESONDENT.
D E C I S I O N
CARIO <ORALES, $.%
Petitioners ?uanito A. Darcia and Alberto ?. 4umago assail the
4ecember >" 1::9 4ecision and April /@" 1::; 8esolution of the
Court of Appeals
in CA'D.8. !P %o. @=>;: which granted the
petition for certiorari of respondent" Philippine Airlines" #nc. $PA))"
and denied petitioners' &otion for 8econsideration" respecti,ely.
The dispositi,e portion of the assailed 4ecision readsE
BG585(685" premises considered and in ,iew of the foregoing" the
instant petition is hereby D#K5% 4*5 C6*8!5. The assailed
%o,ember 1@" 1::/ 8esolution as well as the ?anuary 1<" 1::1
8esolution of public respondent %ational )abor 8elations
Commission .%)8C0 is hereby A%%*))54 and !5T A!#45 for ha,ing
been issued with gra,e abuse of discretion amounting to lack or
e+cess of 7urisdiction. Consequently" the Brit of 5+ecution and the
%otice of Darnishment issued by the )abor Arbiter are hereby
likewise A%%*))54 and !5T A!#45.
The case stemmed from the administrati,e charge -led by PA)
against its employees'herein petitioners
after they were allegedly
caught in the act of snifng shabu when a team of company
security personnel and law enforcers raided the PA) Technical
Center's Toolroom !ection on ?uly 1;" /==>.
After due notice" PA) dismissed petitioners on 6ctober =" /==> for
transgressing the PA) Code of 4iscipline"
prompting them to -le a
Page 5 of 22
complaint for illegal dismissal and damages which was" by 4ecision
of ?anuary //" /==="
resol,ed by the )abor Arbiter in their fa,or"
thus ordering PA) to" inter alia, immediately comply with the
reinstatement aspect of the decision.
Prior to the promulgation of the )abor Arbiter's decision" the
!ecurities and 5+change Commission $!5C) placed PA) $hereafter
referred to as respondent)" which was su3ering from se,ere
-nancial losses" under an #nterim 8ehabilitation 8ecei,er" who was
subsequently replaced by a Permanent 8ehabilitation 8ecei,er on
?une C" /===.
(rom the )abor Arbiter's decision" respondent appealed to the %)8C
which" by 8esolution of ?anuary 9/" 1:::" re,ersed said decision
and dismissed petitioners' complaint for lack of merit.
Petitioners' &otion for 8econsideration was denied by 8esolution of
April 1<" 1::: and 5ntry of ?udgment was issued on ?uly /9" 1:::.
!ubsequently or on 6ctober >" 1:::" the )abor Arbiter issued a Brit
of 5+ecution $Brit) respecting the reinstatement aspect of his
?anuary //" /=== 4ecision" and on 6ctober 1>" 1:::" he issued a
%otice of Darnishment $%otice). 8espondent thereupon mo,ed to
quash the Brit and to lift the %otice while petitioners mo,ed to
release the garnished amount.
#n a related mo,e" respondent -led an *rgent Petition for #n7unction
with the %)8C which" by 8esolutions of %o,ember 1@" 1::/ and
?anuary 1<" 1::1" afrmed the ,alidity of the Brit and the
%otice issued by the )abor Arbiter but suspended and referred the
action to the 8ehabilitation 8ecei,er for appropriate action.
8espondent ele,ated the matter to the appellate court which
issued the herein challenged 4ecision and 8esolution nullifying the
%)8C 8esolutions on two grounds" essentially espousing thatE =1> a
subsequent -nding of a ,alid dismissal remo,es the basis for
implementing the reinstatement aspect of a labor arbiter's decision
$the -rst ground)" and=2> the impossibility to comply with the
reinstatement order due to corporate rehabilitation pro,ides a
reasonable 7usti-cation for the failure to e+ercise the options under
Article 119 of the )abor Code $the second ground).
2y 4ecision of August 1=" 1::C" this Court PA8T#A))L D8A%T54 the
present petition and e3ecti,ely reinstated the %)8C
8esolutions insofar as it suspended the proceedings"vizE
!ince petitioners' claim against PA) is a money claim for their
wages during the pendency of PA)'s appeal to the %)8C" the same
should ha,e been suspended pending the rehabilitation
proceedings. The )abor Arbiter" the %)8C" as well as the Court of
Appeals should ha,e abstained from resol,ing petitioners' case for
illegal dismissal and should instead ha,e directed them to lodge
their claim before PA)'s recei,er.
Gowe,er" to still require petitioners at this time to re'-le their labor
claim against PA) under peculiar circumstances of the case' that
their dismissal was e,entually held ,alid with only the matter of
reinstatement pending appeal being the issue' this Court deems it
legally e+pedient to suspend the proceedings in this case.
BG585(685" the instant petition is PA8T#A))L D8A%T54 in that the
instant proceedings herein are !*!P5%454 until further notice
from this Court. Accordingly" respondent Philippine Airlines" #nc. is
hereby 4#85CT54 to quarterly update the Court as to the status of
its ongoing rehabilitation. %o costs.
$#talics in the originalF underscoring supplied)
2y &anifestation and Compliance of 6ctober 9:" 1::C" respondent
informed the Court that the !5C" by 6rder of !eptember 1<" 1::C"
granted its request to e+it from rehabilitation proceedings.
#n ,iew of the termination of the rehabilitation proceedings" the
Court now proceeds to resol,e the remaining issue for
consideration" which is 1&et&er pet.t.o*er) m'2 (o--e(t t&e.r
1'/e) +,r.*/ t&e per.o+ bet1ee* t&e L'bor Arb.ter?) or+er
o0 re.*)t'teme*t pe*+.*/ 'ppe'- '*+ t&e NLRC +e(.).o*
o4ert,r*.*/ t&'t o0 t&e L'bor Arb.ter, *o1 t&'t re)po*+e*t
&') e@.te+ 0rom re&'b.-.t't.o* pro(ee+.*/).
Amplifcation of the First Ground
The appellate court counted on as its -rst ground the ,iew that a
subsequent -nding of a ,alid dismissal remo,es the basis for
implementing the reinstatement aspect of a labor arbiter's
6n this score" the Court's attention is drawn to seemingly di,ergent
decisions concerning reinstatement pending appeal or" particularly"
the opt.o* o0 p'2ro-- re.*)t'teme*t. 6n the one hand is the
7urisprudential trend as e+pounded in a line of cases including Air
Philippines Corp. v. Zamora,
while on the other is the recent case
Page : of 22
of Genuino v. National Labor Relations Commission.
At the core
of the seeming di,ergence is the application of paragraph 9 of
Article 119 of the )abor Code which readsE
#n any e,ent" the decision of the )abor Arbiter reinstating a
dismissed or separated employee" insofar as the re.*)t'teme*t
')pe(t is concerned" shall .mme+.'te-2 be e@e(,tor2, pe*+.*/
'ppe'-. The employee shall either be admitted back to work under
the same terms and conditions pre,ailing prior to his dismissal or
separation or" at the option of the employer" merely reinstated in
the payroll. The posting of a bond by the employer shall not stay
the e+ecution for reinstatement pro,ided herein. $5mphasis and
The ,iew as maintained in a number of cases is thatE
+ + + .E04e* .0 t&e or+er o0 re.*)t'teme*t o0 t&e L'bor
Arb.ter .) re4er)e+ o* 'ppe'-, .t .) ob-./'tor2 o* t&e p'rt o0
t&e emp-o2er to re.*)t'te '*+ p'2 t&e 1'/e) o0 t&e
+.)m.))e+ emp-o2ee +,r.*/ t&e per.o+ o0 'ppe'- ,*t.-
re4er)'- b2 t&e &./&er (o,rt. 6n the other hand" if the employee
has been reinstated during the appeal period and such
reinstatement order is re,ersed with -nality" the employee
is not required to reimburse whate,er salary he recei,ed for he is
entitled to such" more so if he actually rendered ser,ices during the
$5mphasis in the originalF italics and underscoring
#n other words" a dismissed employee whose case was fa,orably
decided by the )abor Arbiter is entitled to recei,e wages pending
appeal upon reinstatement" which is immediately e+ecutory. *nless
there is a restraining order" it is ministerial upon the )abor Arbiter
to implement the order of reinstatement and it is mandatory on the
employer to comply therewith.
The opposite ,iew is articulated in Genuino which statesE
#f the decision of the labor arbiter is later re,ersed on appeal upon
the -nding that the ground for dismissal is ,alid" then t&e
emp-o2er &') t&e r./&t to reA,.re t&e +.)m.))e+
emp-o2ee on payroll reinstatement to re0,*+ t&e )'-'r.e)
)B&e re(e.4e+ while the case was pending appeal" or it can be
deducted from the accrued bene-ts that the dismissed employee
was entitled to recei,e from hisMher employer under e+isting laws"
collecti,e bargaining agreement pro,isions" and company
practices. Gowe,er" if the employee was reinstated to work during
the pendency of the appeal" then the employee is entitled to the
compensation recei,ed for actual ser,ices rendered without need of
Considering that Denuino was not reinstated to work or placed on
payroll reinstatement" and her dismissal is based on a 7ust cause"
then she is not entitled to be paid the salaries stated in item no. 9
of the fallo of the !eptember 9" /==; %)8C 4ecision.
italics and underscoring supplied)
#t has thus been ad,anced that there is no point in releasing the
wages to petitioners since their dismissal was found to be ,alid"
and to do so would constitute un7ust enrichment.
Prior to Genuino" there had been no known similar case containing
a dispositi,e portion where the employee was required to refund
the salaries recei,ed on payroll reinstatement. #n fact" in a catena
the Court did not order the refund of salaries garnished
or recei,ed by payroll'reinstated employees despite a subsequent
re,ersal of the reinstatement order.
The dearth of authority supporting Genuino is not difcult to fathom
for it would otherwise render inutile the rationale of reinstatement
+ + + .T0he law itself has laid down a compassionate policy which"
once more" ,i,i-es and enhances the pro,isions of the /=<C
Constitution on labor and the working man.
+ + + +
These duties and responsibilities of the !tate are imposed not so
much to e+press sympathy for the workingman as to forcefully and
meaningfully underscore labor as a primary social and economic
force" which the Constitution also e+pressly afrms with equal
intensity. )abor is an indispensable partner for the nation's progress
+ + + +
+ + + #n short" with respect to decisions reinstating employees" the
law itself has determined a sufciently o,erwhelming reason for its
e+ecution pending appeal.
+ + + +
+ + + Then" by and pursuant to the same power $police power)" the
!tate may authoriIe an immediate implementation" pending
appeal" of a decision reinstating a dismissed or separated
Page C of 22
employee since that sa,ing act is designed to stop" although
temporarily since the appeal may be decided in fa,or of the
appellant" a continuing threat or danger to the sur,i,al or e,en the
life of the dismissed or separated employee and his family.
T&e )o(.'- D,)t.(e pr.*(.p-e) o0 -'bor -'1 o,t1e./& or re*+er
.*'pp-.('b-e t&e (.4.- -'1 +o(tr.*e o0 ,*D,)t
e*r.(&me*t espoused by ?ustice Presbitero Kelasco" ?r. in his
!eparate 6pinion. The constitutional and statutory precepts portray
the otherwise Hun7ustH situation as a condition a3ording full
protection to labor.
5,en outside the theoretical trappings of the discussion and into
the mundane realities of human e+perience" the Hrefund doctrineH
easily demonstrates how a fa,orable decision by the )abor Arbiter
could harm" more than help" a dismissed employee. The employee"
to make both ends meet" would necessarily ha,e to use up the
salaries recei,ed during the pendency of the appeal" only to end up
ha,ing to refund the sum in case of a -nal unfa,orable decision. #t
is mirage of a stop'gap leading the employee to a risky cli3 of
Ad,isably" the sum is better left unspent. #t becomes more logical
and practical for the employee to refuse payroll reinstatement and
simply -nd work elsewhere in the interim" if any is a,ailable.
%otably" the option of payroll reinstatement belongs to the
employer" e,en if the employee is able and raring to return to work.
Prior to Genuino" it is unthinkable for one to refuse payroll
reinstatement. #n the face of the grim possibilities" the rise of
concerned employees declining payroll reinstatement is on the
(urther" the Genuino ruling not only disregards the social 7ustice
principles behind the rule" but also institutes a scheme unduly
fa,orable to management. *nder such scheme" the salaries
dispensed penente lite merely ser,e as a bond posted in
installment by the employer. (or in the e,ent of a re,ersal of the
)abor Arbiter's decision ordering reinstatement" the employer gets
back the same amount without ha,ing to spend ordinarily for bond
premiums. This circum,ents" if not directly contradicts" the
proscription that the Hposting of a bond .e,en a cash bond0 by the
employer shall not stay the e+ecution for reinstatement.H
#n playing down the stray posture in Genuino requiring the
dismissed employee on payroll reinstatement to refund the salaries
in case a -nal decision upholds the ,alidity of the dismissal" the
Court realigns the proper course of the pre,ailing doctrine on
reinstatement pending appeal ,is'N',is the e3ect of a re,ersal on
8espondent insists that with the re,ersal of the )abor Arbiter's
4ecision" there is no more basis to enforce the reinstatement
aspect of the said decision. #n his !eparate 6pinion" ?ustice
Presbitero Kelasco" ?r. supports this argument and -nds the
pre,ailing doctrine in Air Philippines and allied cases inapplicable
because" unlike the present case" the writ of e+ecution therein was
secured prior to the re,ersal of the )abor Arbiter's decision.
The proposition is tenuous. !irst" the matter is treated as a mere
race against time. The discussion stopped there without
considering the cause of the delay. "econ" it requires the issuance
of a writ of e+ecution despite the immediately e+ecutory nature of
the reinstatement aspect of the decision. #n Pioneer #exturin$ Corp.
which was cited in Panuncillo v. CAP Philippines, %nc."
the Court obser,edE
+ + + The pro,ision of Article 119 is clear that an award .by the
)abor Arbiter0 for reinstatement shall be immeiatel& executor&
even penin$ appeal an the postin$ of a bon b& the emplo&er
shall not sta& the execution for reinstatement. The legislati,e intent
is quite ob,ious" i.e." to make an award of reinstatement
immediately enforceable" e,en pending appeal. To reA,.re t&e
'pp-.('t.o* 0or '*+ .)),'*(e o0 ' 1r.t o0 e@e(,t.o* as
prerequisites for the e+ecution of a reinstatement award 1o,-+
(ert'.*-2 betr'2 '*+ r,* (o,*ter to t&e 4er2 obDe(t '*+
.*te*t o0 Art.(-e 225" i.e." the immediate e+ecution of a
reinstatement order. The reason is simple. An application for a writ
of e+ecution and its issuance could be delayed for numerous
reasons. A mere continuance or postponement of a scheduled
hearing" for instance" or an inaction on the part of the )abor Arbiter
or the %)8C could easily delay the issuance of the writ thereby
setting at naught the strict mandate and noble purpose en,isioned
by Article 119. #n other words" if the requirements of Article
11; .including the issuance of a writ of e+ecution0were to go,ern"
as we so declared in 'arana(" then the e+ecutory nature of a
reinstatement order or award contemplated by Article 119 will be
unduly circumscribed and rendered ine3ectual. #n enacting the law"
the legislature is presumed to ha,e ordained a ,alid and sensible
law" one which operates no further than may be necessary to
achie,e its speci-c purpose. !tatutes" as a rule" are to be construed
in the light of the purpose to be achie,ed and the e,il sought to be
remedied. + + + #n introducing a new rule on the reinstatement
Page ; of 22
aspect of a labor decision under 8epublic Act %o. @C/>" Congress
should not be considered to be indulging in mere semantic
e+ercise. + + +
$#talics in the originalF emphasis and underscoring
The Court reafrms the pre,ailing principle that e,en if the order of
reinstatement of the )abor Arbiter is re,ersed on appeal" it is
obligatory on the part of the employer to reinstate and pay the
wages of the dismissed employee during the period of appeal until
re,ersal by the higher court.
#t settles the ,iew that the )abor
Arbiter's order of reinstatement is immediately e+ecutory and the
employer has to either re'admit them to work under the same
terms and conditions pre,ailing prior to their dismissal" or to
reinstate them in the payroll" and that failing to e+ercise the
options in the alternati,e" employer must pay the employee's
Amplifcation of the Second Ground
The remaining issue" nonetheless" is resol,ed in the negati,e on
the strength of the second ground relied upon by the appellate
court in the assailed issuances. The Court sustains the appellate
court's -nding that the peculiar predicament of a corporate
rehabilitation rendered it impossible for respondent to e+ercise its
option under the circumstances.
The spirit of the rule on reinstatement pending appeal animates the
proceedings once the )abor Arbiter issues the decision containing
an order of reinstatement. The immediacy of its e+ecution needs no
further elaboration. 8einstatement pending appeal necessitates its
immediate e+ecution during the pendency of the appeal" if the law
is to ser,e its noble purpose. At the same time" any attempt on the
part of the employer to e,ade or delay its e+ecution" as obser,ed
in Panuncillo and as what actually transpired in)imberl&,
should not be
A0ter t&e -'bor 'rb.ter?) +e(.).o* .) re4er)e+ b2 ' &./&er
tr.b,*'-, t&e emp-o2ee m'2 be b'rre+ 0rom (o--e(t.*/ t&e
'((r,e+ 1'/e), .0 .t .) )&o1* t&'t t&e +e-'2 .* e*0or(.*/ t&e
re.*)t'teme*t pe*+.*/ 'ppe'- 1') 1.t&o,t 0',-t o* t&e p'rt
o0 t&e emp-o2er.
The test is two'foldE $/) there must be actual delay or the fact that
the order of reinstatement pending appeal was not e+ecuted prior
to its re,ersalF and $1) the delay must not be due to the employer's
un7usti-ed act or omission. #f the delay is due to the employer's
un7usti-ed refusal" the employer may still be required to pay the
salaries notwithstanding the re,ersal of the )abor Arbiter's
#n Genuino" there was no showing that the employer refused to
reinstate the employee" who was the Treasury !ales 4i,ision Gead"
during the short span of four months or from the promulgation on
&ay 1" /==; of the )abor Arbiter's 4ecision up to the promulgation
on !eptember 9" /==; of the %)8C 4ecision. %otably" the former
%)8C 8ules of Procedure did not lay down a mechanism to promptly
e3ectuate the self'e+ecutory order of reinstatement" making it
difcult to establish that the employer actually refused to comply.
#n a situation like that in %nternational Container #erminal "ervices,
%nc. v. NLRC
where it was alleged that the employer was willing
to comply with the order and that the employee opted not to
pursue the e+ecution of the order" the Court upheld the self'
e+ecutory nature of the reinstatement order and ruled that the
salary automatically accrued from notice of the )abor Arbiter's
order of reinstatement until its ultimate re,ersal by the %)8C. #t
was later disco,ered that the employee indeed mo,ed for the
issuance of a writ but was not acted upon by the )abor Arbiter. #n
that scenario where the delay was caused by the )abor Arbiter" it
was ruled that the inaction of the )abor Arbiter who failed to act
upon the employee's motion for the issuance of a writ of e+ecution
may no longer ad,ersely a3ect the cause of the dismissed
employee in ,iew of the self'e+ecutory nature of the order of
The new %)8C 8ules of Procedure" which took e3ect on ?anuary C"
1::@" now require the employer to submit a report of compliance
within /: calendar days from receipt of the )abor Arbiter's decision"
disobedience to which clearly denotes a refusal to reinstate. The
employee need not -le a motion for the issuance of the writ of
e+ecution since the )abor Arbiter shall thereafter motu
proprio issue the writ. 7.t& t&e *e1 r,-e) .* p-'(e, t&ere .)
&'r+-2 '*2 +.E(,-t2 .* +eterm.*.*/ t&e emp-o2er?)
.*tr'*)./e*(e .* .mme+.'te-2 (omp-2.*/ 1.t& t&e or+er.
#n the case at bar" petitioners e+erted e3orts
to e+ecute the
)abor Arbiter's order of reinstatement until they were able to
secure a writ of e+ecution" albeit issued on 6ctober >"
1::: after the re,ersal by the %)8C of the )abor Arbiter's decision.
Technically" there was still actual delay which brings to the question
Page 9 of 22
of whether the delay was due to respondent's un7usti-ed act or
#t is apparent that there was inaction on the part of respondent to
reinstate them" but whether such omission was 7usti-ed depends
on the onset of the e+igency of corporate rehabilitation.
#t is settled that upon appointment by the !5C of a rehabilitation
recei,er" all actions for claims before any court" tribunal or board
against the corporation shall ipso +ure be suspended.
early on" during the pendency of petitioners' complaint before the
)abor Arbiter" the !5C placed respondent under an #nterim
8ehabilitation 8ecei,er. After the )abor Arbiter rendered his
decision" the !5C replaced the #nterim 8ehabilitation 8ecei,er with
a Permanent 8ehabilitation 8ecei,er.
Case law recogniIes that unless there is a restraining order" the
implementation of the order of reinstatement is ministerial and
This in7unction or suspension of claims by legislati,e
partakes of the nature of a restraining order that constitutes
a legal 7usti-cation for respondent's non'compliance with the
reinstatement order. 8espondent's failure to e+ercise the
alternati,e options of actual reinstatement and payroll
reinstatement was thus 7usti-ed. !uch being the case" respondent's
obligation to pay the salaries pending appeal" as the normal e3ect
of the non'e+ercise of the options" did not attach.
Bhile reinstatement pending appeal aims to a,ert the continuing
threat or danger to the sur,i,al or e,en the life of the dismissed
employee and his family" it does not contemplate the period when
the employer'corporation itself is similarly in a +uiciall&
monitore state of being resuscitated in order to sur,i,e.
The parallelism between a 7udicial order of corporation
rehabilitation as a 7usti-cation for the non'e+ercise of its options" on
the one hand" and a claim of actual and imminent substantial
losses as ground for retrenchment" on the other hand" stops at the
red line on the -nancial statements. 2eyond the analogous
condition of -nancial gloom" as discussed by ?ustice )eonardo
Ouisumbing in his !eparate 6pinion" are more salient distinctions.
*nlike the ground of substantial losses contemplated in a
retrenchment case" the state of corporate rehabilitation was
7udicially pre'determined by a competent court and not formulated
for the -rst time in this case by respondent.
&ore importantly" there are legal e3ects arising from a 7udicial
order placing a corporation under rehabilitation. 8espondent was"
during the period material to the case" e3ecti,ely depri,ed of the
alternati,e choices under Article 119 of the )abor Code" not only by
,irtue of the statutory in7unction but also in ,iew of the interim
relinquishment of management control to gi,e way to the full
e+ercise of the powers of the rehabilitation recei,er. Gad there been
no need to rehabilitate" respondent may ha,e opted for actual
physical reinstatement pending appeal to optimiIe the utiliIation of
resources. Then again" though the management may think this
wise" the rehabilitation recei,er may decide otherwise" not to
mention the subsistence of the in7unction on claims.
#n sum" the obligation to pay the employee's salaries upon the
employer's failure to e+ercise the alternati,e options under Article
119 of the )abor Code is not a hard and fast rule" considering the
inherent constraints of corporate rehabilitation.
78ERE"ORE" the petition is ARTIALL9 DENIED. #nsofar as the
Court of Appeals 4ecision of 4ecember >" 1::9 and 8esolution of
April /@" 1::; annulling the %)8C 8esolutions afrming the ,alidity
of the Brit of 5+ecution and the %otice of Darnishment are
concerned" the Court -nds no re,ersible error.
[ G.R. No. 15;051, $,*e 10, 2006 ]
$OSE 9. SONFA, ETITIONER, VS. A#SGC#N #ROADCASTING
D E C I S I O N
2efore this Court is a petition for re,iew on certiorari
1@ &arch /=== 4ecision
of the Court of Appeals in CA'D.8. !P %o.
;=/=: dismissing the petition -led by ?ose L. !onIa $P!6%QAR). The
Page 10 of 22
Court of Appeals afrmed the -ndings of the %ational )abor
8elations Commission $P%)8CR)" which afrmed the )abor ArbiterSs
dismissal of the case for lack of 7urisdiction.
#n &ay /==;" respondent A2!'C2% 2roadcasting Corporation $PA2!'
C2%R) signed an Agreement $PAgreementR) with the &el and ?ay
&anagement and 4e,elopment Corporation $P&?&4CR). A2!'C2%
was represented by its corporate ofcers while &?&4C was
represented by !6%QA" as President and Deneral &anager" and
Carmela Tiangco $PT#A%DC6R)" as 5KP and Treasurer. 8eferred to in
the Agreement as PAD5%T"R &?&4C agreed to pro,ide !6%QASs
ser,ices e+clusi,ely to A2!'C2% as talent for radio and tele,ision.
The Agreement listed the ser,ices !6%QA would render to A2!'
C2%" as followsE
a. Co'host for &el ?ay radio program" <E:: to /:E:: a.m."
&ondays to (ridaysF
b. Co'host for &el ?ay tele,ision program" >E9: to CE:: p.m."
A2!'C2% agreed to pay for !6%QASs ser,ices a monthly talent fee
of P9/:"::: for the -rst year and P9/C"::: for the second and third
year of the Agreement. A2!'C2% would pay the talent fees on the
/:th and 1>th days of the month.
6n / April /==@" !6%QA wrote a letter to A2!'C2%Ss President"
5ugenio )opeI ###" which readsE
4ear &r. )opeI"
Be would like to call your attention to the Agreement dated &ay
/==; entered into by your goodself on behalf of A2!'C2% with our
company relati,e to our talent ?6!5 L. !6%QA.
As you are well aware" &r. !onIa irre,ocably resigned in ,iew of
recent e,ents concerning his programs and career. Be consider
these acts of the station ,iolati,e of the Agreement and the station
as in breach thereof. #n this connection" we hereby ser,e notice of
rescission of said Agreement at our instance e3ecti,e as of date.
&r. !onIa informed us that he is wai,ing and renouncing reco,ery
of the remaining amount stipulated in paragraph C of the
Agreement but reser,es the right to seek reco,ery of the other
bene-ts under said Agreement.
Thank you for your attention.
Kery truly yours"
?6!5 L. !6%QA
President and Den. &anager
6n 9: April /==@" !6%QA -led a complaint against A2!'C2% before
the 4epartment of )abor and 5mployment" %ational Capital 8egion
in OueIon City. !6%QA complained that A2!'C2% did not pay his
salaries" separation pay" ser,ice incenti,e lea,e pay" /9th month
pay" signing bonus" tra,el allowance and amounts due under the
5mployees !tock 6ption Plan $P5!6PR).
6n /: ?uly /==@" A2!'C2% -led a &otion to 4ismiss on the ground
that no employer'employee relationship e+isted between the
parties. !6%QA -led an 6pposition to the motion on /= ?uly /==@.
&eanwhile" A2!'C2% continued to remit !6%QASs monthly talent
fees through his account at PC#2ank" OueIon A,enue 2ranch"
OueIon City. #n ?uly /==@" A2!'C2% opened a new account with the
same bank where A2!'C2% deposited !6%QASs talent fees and
other payments due him under the Agreement.
#n his 6rder dated 1 4ecember /==@" the )abor Arbiter
motion to dismiss and directed the parties to -le their respecti,e
position papers. The )abor Arbiter ruledE
#n this instant case" complainant for ha,ing in,oked a claim that he
was an employee of respondent company until April />" /==@ and
that he was not paid certain claims" it is sufcient enough as to
confer 7urisdiction o,er the instant case in this 6fce. And as to
whether or not such claim would entitle complainant to reco,er
upon the causes of action asserted is a matter to be resol,ed only
after and as a result of a hearing. Thus" the respondentSs plea of
lack of employer'employee relationship may be pleaded only as a
matter of defense. #t behoo,es upon it the duty to pro,e that there
really is no employer'employee relationship between it and the
The )abor Arbiter then considered the case submitted for
resolution. The parties submitted their position papers on 1;
Page 11 of 22
6n // &arch /==C" !6%QA -led a 8eply to 8espondentSs Position
Paper with &otion to 5+punge 8espondentSs Anne+ ; and Anne+ >
from the 8ecords. Anne+es ; and > are afda,its of A2!'C2%Ss
witnesses !occoro Kidanes and 8olando K. CruI. These witnesses
stated in their afda,its that the pre,ailing practice in the
tele,ision and broadcast industry is to treat talents like !6%QA as
The )abor Arbiter rendered his 4ecision dated < ?uly /==C
dismissing the complaint for lack of 7urisdiction.
parts of the decision read as followsE
+ + +
Bhile Philippine 7urisprudence has not yet" with certainty" touched
on the Ptrue nature of the contract of a talent"R it stands to reason
that a PtalentR as abo,e'described cannot be considered as an
employee by reason of the peculiar circumstances surrounding the
engagement of his ser,ices.
#t must be noted that (omp-'.*'*t 1') e*/'/e+ b2
re)po*+e*t b2 re')o* o0 &.) pe(,-.'r )3.--) '*+ t'-e*t ') '
TV &o)t '*+ ' r'+.o bro'+(')ter. !*-.3e '* or+.*'r2
emp-o2ee, &e 1') 0ree to per0orm t&e )er4.(e) &e
,*+ertoo3 to re*+er .* '((or+'*(e 1.t& &.) o1* )t2-e. The
bene-ts conferred to complainant under the &ay /==; Agreement
are certainly ,ery much higher than those generally gi,en to
employees. (or one" complainant !onIaSs monthly talent fees
amount to a staggering P9/C":::. &oreo,er" his engagement as a
talent was co,ered by a speci-c contract. )ikewise" he was not
bound to render eight $<) hours of work per day as he worked only
for such number of hours as may be necessary.
The fact that per the &ay /==; Agreement complainant was
accorded some bene-ts normally gi,en to an employee is
inconsequential. 7&'te4er be*eHt) (omp-'.*'*t e*Do2e+
'ro)e 0rom )pe(.H( '/reeme*t b2 t&e p'rt.e) '*+ *ot b2
re')o* o0 emp-o2erGemp-o2ee re-'t.o*)&.p. As correctly put by
the respondent" PAll these bene-ts are merely talent fees and other
contractual bene-ts and should not be deemed as Tsalaries" wages
andMor other remunerationS accorded to an employee"
notwithstanding the nomenclature appended to these bene-ts.
Apropos to this is the rule that the term or nomenclature gi,en to a
stipulated bene-t is not controlling" but the intent of the parties to
the Agreement conferring such bene-t.R
T&e 0'(t t&'t (omp-'.*'*t 1') m'+e ),bDe(t to
re)po*+e*tI) R,-e) '*+ Re/,-'t.o*), -.3e1.)e, +oe) *ot
+etr'(t 0rom t&e 'b)e*(e o0 emp-o2erGemp-o2ee
re-'t.o*)&.p. As held by the !upreme Court" PThe line should be
drawn between rules that merely ser,e as guidelines towards the
achie,ement of the mutually desired result without dictating the
means or methods to be employed in attaining it" and those that
control or -+ the methodology and bind or restrict the party hired
to the use of such means. The -rst" which aim only to promote the
result" create no employer'employee relationship unlike the second"
which address both the result and the means to achie,e it.R $#nsular
)ife Assurance Co." )td. ,s. %)8C" et al." D.8. %o. <;;<;" %o,ember
+ + + $5mphasis supplied)
!6%QA appealed to the %)8C. 6n 1; (ebruary /==<" the %)8C
rendered a 4ecision afrming the )abor ArbiterSs decision. !6%QA
-led a motion for reconsideration" which the %)8C denied in its
8esolution dated 9 ?uly /==<.
6n @ 6ctober /==<" !6%QA -led a special ci,il action for certiorari
before the Court of Appeals assailing the decision and resolution of
the %)8C. 6n 1@ &arch /===" the Court of Appeals rendered a
4ecision dismissing the case.
Gence" this petition.
T&e R,-.*/) o0 t&e NLRC '*+ Co,rt o0 Appe'-)
The Court of Appeals afrmed the %)8CSs -nding that no employer'
employee relationship e+isted between !6%QA and A2!'C2%.
Adopting the %)8CSs decision" the appellate court quoted the
following -ndings of the %)8CE
+ + + the &ay /==; Agreement will readily re,eal that &?&4C
entered into the contract merely as an agent of complainant !onIa"
the principal. 2y all indication and as the law puts it" the act of the
agent is the act of the principal itself. This fact is made particularly
true in this case" as admittedly &?&4C Tis a management company
de,oted e+clusi,ely to managing the careers of &r. !onIa and his
broadcast partner" &rs. Carmela C. Tiangco.S $6pposition to &otion
Clearly" the relations of principal and agent only accrues between
complainant !onIa and &?&4C" and not between A2!'C2% and
&?&4C. This is clear from the pro,isions of the &ay /==;
Page 12 of 22
Agreement which speci-cally referred to &?&4C as the TAD5%TS. As
a matter of fact" when complainant herein unilaterally rescinded
said &ay /==; Agreement" it was &?&4C which issued the notice of
rescission in behalf of &r. !onIa" who himself signed the same in
his capacity as President.
&oreo,er" pre,ious contracts between &r. !onIa and A2!'C2%
re,eal the fact that historically" the parties to the said agreements
are A2!'C2% and &r. !onIa. And it is only in the &ay /==;
Agreement" which is the latest Agreement e+ecuted between A2!'
C2% and &r. !onIa" that &?&4C -gured in the said Agreement as
the agent of &r. !onIa.
Be -nd it erroneous to assert that &?&4C is a mere Tlabor'onlyS
contractor of A2!'C2% such that there e+ist.s0 employer'employee
relationship between the latter and &r. !onIa. 6n the contrary" Be
-nd it indubitable" that &?&4C is an agent" not of A2!'C2%" but of
the talentMcontractor &r. !onIa" as e+pressly admitted by the latter
and &?&4C in the &ay /==; Agreement.
#t may not be amiss to state that 7urisdiction o,er the instant
contro,ersy indeed belongs to the regular courts" the same being in
the nature of an action for alleged breach of contractual obligation
on the part of respondent'appellee. As squarely apparent from
complainant'appellantSs Position Paper" his claims for compensation
for ser,ices" T/9th month payS" signing bonus and tra,el allowance
against respondent'appellee are not based on the )abor Code but
rather on the pro,isions of the &ay /==; Agreement" while his
claims for proceeds under !tock Purchase Agreement are based on
the latter. A portion of the Position Paper of complainant'appellant
T*nder .the &ay /==; Agreement0 with respondent A2!'C2%" the
latter contractually bound itself to pay complainant a signing bonus
consisting of shares of stocksUwith (#K5 G*%4854 TG6*!A%4
!imilarly" complainant is also entitled to be paid /9th month pay
based on an amount not lower than the amount he was recei,ing
prior to e3ecti,ity of $the) AgreementS.
*nder paragraph = of $the &ay /==; Agreement)" complainant is
entitled to a commutable tra,el bene-t amounting to at least 6ne
Gundred (ifty Thousand Pesos $P/>:":::.::) per year.S
Thus" it is precisely because of complainant'appellantSs own
recognition of the fact that his contractual relations with A2!'C2%
are founded on the %ew Ci,il Code" rather than the )abor Code"
that instead of merely resigning from A2!'C2%" complainant'
appellant ser,ed upon the latter a Tnotice of rescissionS of
Agreement with the station" per his letter dated April /" /==@"
which asserted that instead of referring to unpaid employee
bene-ts" The is wai,ing and renouncing reco,ery of the remaining
amount stipulated in paragraph C of the Agreement but reser,es
the right to such reco,ery of the other bene-ts under said
Agreement.S $Anne+ 9 of the respondent A2!'C2%Ss &otion to
4ismiss dated ?uly /:" /==@).
5,idently" it is precisely by reason of the alleged ,iolation of the
&ay /==; Agreement andMor the !tock Purchase Agreement by
respondent'appellee that complainant'appellant -led his complaint.
Complainant'appellantSs claims being anchored on the alleged
breach of contract on the part of respondent'appellee" the same
can be resol,ed by reference to ci,il law and not to labor law.
Consequently" they are within the realm of ci,il law and" thus" lie
with the regular courts. As held in the case of 4ai'Chi 5lectronics
&anufacturing ,s. Killarama" 19< !C8A 1@C" 1/ %o,ember /==;" '*
'(t.o* 0or bre'(& o0 (o*tr'(t,'- ob-./'t.o* .) .*tr.*).('--2 '
The Court of Appeals ruled that the e+istence of an employer'
employee relationship between !6%QA and A2!'C2% is a factual
question that is within the 7urisdiction of the %)8C to resol,e.
special ci,il action for certiorari e+tends only to issues of want or
e+cess of 7urisdiction of the %)8C.
!uch action cannot co,er an
inquiry into the correctness of the e,aluation of the e,idence which
ser,ed as basis of the %)8CSs conclusion.
The Court of Appeals
added that it could not re'e+amine the partiesS e,idence and
substitute the factual -ndings of the %)8C with its own.
#n assailing the decision of the Court of Appeals" !6%QA contends
TG5 C6*8T 6( APP5A)! D8AK5)L 58854 #% A((#8&#%D TG5 %)8CS!
45C#!#6% A%4 85(*!#%D T6 (#%4 TGAT A% 5&P)6L58'5&P)6L55
85)AT#6%!G#P 5J#!T54 25TB55% !6%QA A%4 A2!'C2%" 45!P#T5
TG5 B5#DGT 6( C6%T86))#%D )AB" ?*8#!P8*45%C5 A%4
5K#45%C5 T6 !*PP68T !*CG A (#%4#%D.
T&e Co,rtI) R,-.*/
Be afrm the assailed decision.
Page 15 of 22
%o con,incing reason e+ists to warrant a re,ersal of the decision of
the Court of Appeals afrming the %)8C ruling which upheld the
)abor ArbiterSs dismissal of the case for lack of 7urisdiction.
The present contro,ersy is one of -rst impression. Although
Philippine labor laws and 7urisprudence de-ne clearly the elements
of an employer'employee relationship" this is the -rst time that the
Court will resol,e the nature of the relationship between a
tele,ision and radio station and one of its Ptalents.R There is no
case law stating that a radio and tele,ision program host is an
employee of the broadcast station.
The instant case in,ol,es big names in the broadcast industry"
namely ?ose P?ayR !onIa" a known tele,ision and radio personality"
and A2!'C2%" one of the biggest tele,ision and radio networks in
!6%QA contends that the )abor Arbiter has 7urisdiction o,er the
case because he was an employee of A2!'C2%. 6n the other hand"
A2!'C2% insists that the )abor Arbiter has no 7urisdiction because
!6%QA was an independent contractor.
Employee or Independent Contractor?
The e+istence of an employer'employee relationship is a question
of fact. Appellate courts accord the factual -ndings of the )abor
Arbiter and the %)8C not only respect but also -nality when
supported by substantial e,idence.
!ubstantial e,idence means
such rele,ant e,idence as a reasonable mind might accept as
adequate to support a conclusion.
A party cannot pro,e the
absence of substantial e,idence by simply pointing out that there is
contrary e,idence on record" direct or circumstantial. The Court
does not substitute its own 7udgment for that of the tribunal in
determining where the weight of e,idence lies or what e,idence is
!6%QA maintains that all essential elements of an employer'
employee relationship are present in this case. Case law has
consistently held that the elements of an employer'employee
relationship areE $a) the selection and engagement of the
employeeF $b) the payment of wagesF $c) the power of dismissalF
and $d) the employerSs power to control the employee on the
means and methods by which the work is accomplished.
element" the so'called P(o*tro- te)tR" is the most important
A. Selection and Engagement of Employee
A2!'C2% engaged !6%QASs ser,ices to co'host its tele,ision and
radio programs because of !6%QASs peculiar skills" talent and
celebrity status. !6%QA contends that the Pdiscretion used by
respondent in speci-cally selecting and hiring complainant o,er
other broadcasters of possibly similar e+perience and quali-cation
as complainant belies respondentSs claim of independent
#ndependent contractors often present themsel,es to possess
unique skills" e+pertise or talent to distinguish them from ordinary
employees. The speci-c selection and hiring of !6%QA" because
of his unique sills! talent and celebrity status not
possessed by ordinary employees! is a circumstance indicati,e"
but not conclusi,e" of an independent contractual relationship. #f
!6%QA did not possess such unique skills" talent and celebrity
status" A2!'C2% would not ha,e entered into the Agreement with
!6%QA but would ha,e hired him through its personnel department
7ust like any other employee.
#n any e,ent" the method of selecting and engaging !6%QA does
not conclusi,ely determine his status. Be must consider all the
circumstances of the relationship" with the control test being the
most important element.
". #ayment of $ages
A2!'C2% directly paid !6%QA his monthly talent fees with no part
of his fees going to &?&4C. !6%QA asserts that this mode of fee
payment shows that he was an employee of A2!'C2%. !6%QA also
points out that A2!'C2% granted him bene-ts and pri,ileges Pwhich
he would not ha,e en7oyed if he were truly the sub7ect of a ,alid 7ob
All the talent fees and bene-ts paid to !6%QA were the result of
negotiations that led to the Agreement. #f !6%QA were A2!'C2%Ss
employee" there would be no need for the parties to stipulate on
bene-ts such as P!!!" &edicare" + + + and /9th month
which the law automatically incorporates into e,ery
Bhate,er bene-ts !6%QA en7oyed
arose from contract and not because of an employer'employee
Page 16 of 22
!6%QASs talent fees" amounting to P9/C"::: monthly in the second
and third year" are so huge and out of the ordinary that they
indicate more an independent contractual relationship rather than
an employer'employee relationship. A2!'C2% agreed to pay !6%QA
such huge talent fees precisely because of !6%QASs unique skills"
talent and celebrity status not possessed by ordinary employees.
6b,iously" !6%QA acting alone possessed enough bargaining
power to demand and recei,e such huge talent fees for his
ser,ices. The power to bargain talent fees way abo,e the salary
scales of ordinary employees is a circumstance indicati,e" but not
conclusi,e" of an independent contractual relationship.
The payment of talent fees directly to !6%QA and not to &?&4C
does not negate the status of !6%QA as an independent contractor.
The parties e+pressly agreed on such mode of payment. *nder the
Agreement" &?&4C is the AD5%T of !6%QA" to whom &?&4C would
ha,e to turn o,er any talent fee accruing under the Agreement.
C. #o%er of &ismissal
(or ,iolation of any pro,ision of the Agreement" either party may
terminate their relationship. !6%QA failed to show that A2!'C2%
could terminate his ser,ices on grounds other than breach of
contract" such as retrenchment to pre,ent losses as pro,ided under
4uring the life of the Agreement" A2!'C2% agreed to pay !6%QASs
talent fees as long as PAD5%T and ?ay !onIa shall faithfully and
completely perform each condition of this Agreement.R
5,en if it
su3ered se,ere business losses" A2!'C2% could not retrench
!6%QA because A2!'C2% remained obligated to pay !6%QASs
talent fees during the life of the Agreement. This circumstance
indicates an independent contractual relationship between !6%QA
!6%QA admits that e,en after A2!'C2% ceased broadcasting his
programs" A2!'C2% still paid him his talent fees. Plainly" A2!'C2%
adhered to its undertaking in the Agreement to continue paying
!6%QASs talent fees during the remaining life of the Agreement
e,en if A2!'C2% cancelled !6%QASs programs through no fault of
!6%QA assails the )abor ArbiterSs interpretation of his rescission of
the Agreement as an admission that he is not an employee of A2!'
C2%. The )abor Arbiter stated that Pif it were true that complainant
was really an employee" he would merely resign" instead.R !6%QA
did actually resign from A2!'C2% but he also" as president of
&?&4C" rescinded the Agreement. !6%QASs letter clearly bears this
Gowe,er" the manner by which !6%QA terminated his
relationship with A2!'C2% is immaterial. Bhether !6%QA rescinded
the Agreement or resigned from work does not determine his status
as employee or independent contractor.
&. #o%er of Control
!ince there is no local precedent on whether a radio and tele,ision
program host is an employee or an independent contractor" we
refer to foreign case law in analyIing the present case. The *nited
!tates Court of Appeals" (irst Circuit" recently held in A-bert2G
VJ-eK 4. Corpor'(.L* De ,erto R.(o 'r' L' D.0,).L*
that a tele,ision program host is an
independent contractor. Be quote the following -ndings of the *.!.
!e,eral factors fa,or classifying Alberty as an independent
contractor. ".r)t, ' te-e4.).o* '(tre)) .) ' )3.--e+ po).t.o*
reA,.r.*/ t'-e*t '*+ tr'.*.*/ *ot '4'.-'b-e o*Gt&eGDob. + + +
#n this regard" Alberty possesses a masterSs degree in public
communications and 7ournalismF is trained in dance" singing" and
modelingF taught with the drama department at the *ni,ersity of
Puerto 8icoF and acted in se,eral theater and tele,ision productions
prior to her afliation with P4esde &i Pueblo.RSe(o*+, A-bert2
pro4.+e+ t&e Ntoo-) '*+ .*)tr,me*t'-.t.e)O *e(e))'r2 0or
&er to per0orm. !peci-cally" she pro,ided" or obtained sponsors
to pro,ide" the costumes" 7ewelry" and other image'related supplies
and ser,ices necessary for her appearance. Alberty disputes that
this factor fa,ors independent contractor status because B#P8
pro,ided the Pequipment necessary to tape the show.R AlbertySs
argument is misplaced. The equipment necessary for Alberty to
conduct her 7ob as host of P4esde &i PuebloR related to her
appearance on the show. 6thers pro,ided equipment for -lming
and producing the show" but these were not the primary tools that
Alberty used to perform her particular function. #f we accepted this
argument" independent contractors could ne,er work on
collaborati,e pro7ects because other indi,iduals often pro,ide the
equipment required for di3erent aspects of the collaboration. + + +
T&.r+, 7IR (o,-+ *ot '))./* A-bert2 1or3 .* '++.t.o* to
H-m.*/ NDe)+e <. ,eb-o.R AlbertySs contracts with B#P8
speci-cally pro,ided that B#P8 hired her Pprofessional ser,ices as
Gostess for the Program 4esde &i Pueblo.R There is no e,idence
Page 15 of 22
that B#P8 assigned Alberty tasks in addition to work related to
these tapings. + + +
Applying the (o*tro- test to the present case" we -nd that !6%QA
is not an employee but an independent contractor. The control test
is the mo)t .mport'*t test our courts apply in distinguishing an
employee from an independent contractor.
This test is based on
the e+tent of control the hirer e+ercises o,er a worker. The greater
the super,ision and control the hirer e+ercises" the more likely the
worker is deemed an employee. The con,erse holds true as well V
the less control the hirer e+ercises" the more likely the worker is
considered an independent contractor.
!irst, !6%QA contends that A2!'C2% e+ercised control o,er the
means and methods of his work.
!6%QASs argument is misplaced. A2!'C2% engaged !6%QASs
ser,ices speci-cally to co'host the P&el ?ayR programs. A2!'C2%
did not assign any other work to !6%QA. To perform his work"
!6%QA only needed his skills and talent. Gow !6%QA deli,ered his
lines" appeared on tele,ision" and sounded on radio were outside
A2!'C2%Ss control. !6%QA did not ha,e to render eight hours of
work per day. The Agreement required !6%QA to attend only
rehearsals and tapings of the shows" as well as pre' and post'
production sta3 meetings.
A2!'C2% could not dictate the
contents of !6%QASs script. Gowe,er" the Agreement prohibited
!6%QA from criticiIing in his shows A2!'C2% or its interests.
clear implication is that !6%QA had a free hand on what to say or
discuss in his shows pro,ided he did not attack A2!'C2% or its
Be -nd that A2!'C2% was not in,ol,ed in the actual performance
that produced the -nished product of !6%QASs work.
did not instruct !6%QA how to perform his 7ob. A2!'C2% merely
reser,ed the right to modify the program format and airtime
schedule Pfor more e3ecti,e programming.R
concern was the quality of the shows and their standing in the
ratings. Clearly" A2!'C2% did not e+ercise control o,er the means
and methods of performance of !6%QASs work.
!6%QA claims that A2!'C2%Ss power not to broadcast his shows
pro,es A2!'C2%Ss power o,er the means and methods of the
performance of his work. Although A2!'C2% did ha,e the option not
to broadcast !6%QASs show" A2!'C2% was still obligated to pay
!6%QASs talent fees... Thus" e,en if A2!'C2% was completely
dissatis-ed with the means and methods of !6%QASs performance
of his work" or e,en with the quality or product of his work" A2!'
C2% could not dismiss or e,en discipline !6%QA. All that A2!'C2%
could do is not to broadcast !6%QASs show but A2!'C2% must still
pay his talent fees in full.
Clearly" A2!'C2%Ss right not to broadcast !6%QASs show" burdened
as it was by the obligation to continue paying in full !6%QASs talent
fees" did not amount to control o,er the means and methods of the
performance of !6%QASs work. A2!'C2% could not terminate or
discipline !6%QA e,en if the means and methods of performance of
his work ' how he deli,ered his lines and appeared on tele,ision '
did not meet A2!'C2%Ss appro,al. This pro,es that A2!'C2%Ss
control was limited only to the result of !6%QASs work" whether to
broadcast the -nal product or not. #n either case" A2!'C2% must
still pay !6%QASs talent fees in full until the e+piry of the
#n 'aughan! et al. (. $arner! et al.!
the *nited !tates Circuit
Court of Appeals ruled that ,aude,ille performers were
independent contractors although the management reser,ed the
right to delete ob7ectionable features in their shows. !ince the
management did not ha,e control o,er the manner of performance
of the skills of the artists" it could only control the result of the work
by deleting ob7ectionable features.
!6%QA further contends that A2!'C2% e+ercised control o,er his
work by supplying all equipment and crew. %o doubt" A2!'C2%
supplied the equipment" crew and airtime needed to broadcast the
P&el ?ayR programs. Gowe,er" the equipment" crew and airtime
are not the Ptools and instrumentalitiesR !6%QA needed to perform
his 7ob. Bhat !6%QA principally needed were his talent or skills and
the costumes necessary for his appearance.
5,en though A2!'
C2% pro,ided !6%QA with the place of work and the necessary
equipment" !6%QA was still an independent contractor since A2!'
C2% did not super,ise and control his work. A2!'C2%Ss sole concern
was for !6%QA to display his talent during the airing of the
A radio broadcast specialist who works under minimal super,ision
is an independent contractor.
!6%QASs work as tele,ision and
radio program host required special skills and talent" which !6%QA
admittedly possesses. The records do not show that A2!'C2%
e+ercised any super,ision and control o,er how !6%QA utiliIed his
skills and talent in his shows.
Page 1: of 22
"econ, !6%QA urges us to rule that he was A2!'C2%Ss employee
because A2!'C2% sub7ected him to its rules and standards of
performance. !6%QA claims that this indicates A2!'C2%Ss control
Pnot only .o,er0 his manner of work but also the quality of his
The Agreement stipulates that !6%QA shall abide with the rules
and standards of performance Pcoverin$ talentsR
The Agreement does not require !6%QA to comply with the rules
and standards of performance prescribed for employees of A2!'
C2%. The code of conduct imposed on !6%QA under the Agreement
refers to the PTele,ision and 8adio Code of the Wapisanan ng mga
2roadcaster sa Pilipinas $W2P)" which has been adopted by the
C6&PA%L $A2!'C2%) as its Code of 5thics.R
The W2P code applies
to broadcasters" not to employees of radio and tele,ision stations.
2roadcasters are not necessarily employees of radio and tele,ision
stations. Clearly" the rules and standards of performance referred
to in the Agreement are those applicable to talents and not to
employees of A2!'C2%.
#n any e,ent" not all rules imposed by the hiring party on the hired
party indicate that the latter is an employee of the former.
case" !6%QA failed to show that these rules controlled his
performance. Be -nd that these general rules are merely
guidelines towards the achie,ement of the mutually desired result"
which are top'rating tele,ision and radio programs that comply with
standards of the industry. Be ha,e ruled thatE
(urther" not e,ery form of control that a party reser,es to himself
o,er the conduct of the other party in relation to the ser,ices being
rendered may be accorded the e3ect of establishing an employer'
employee relationship. The facts of this case fall squarely with the
case of #nsular )ife Assurance Co." )td. ,s. %)8C. #n said case" we
)ogically" the line should be drawn between rules that merely ser,e
as guidelines towards the achie,ement of the mutually desired
result without dictating the means or methods to be employed in
attaining it" and those that control or -+ the methodology and bind
or restrict the party hired to the use of such means. The -rst" which
aim only to promote the result" create no employer'employee
relationship unlike the second" which address both the result and
the means used to achie,e it.
The 'aughan case also held that one could still be an independent
contractor although the hirer reser,ed certain super,ision to insure
the attainment of the desired result. The hirer" howe,er" must not
depri,e the one hired from performing his ser,ices according to his
Lastl&, !6%QA insists that the Pe+clusi,ity clauseR in the Agreement
is the most e+treme form of control which A2!'C2% e+ercised o,er
This argument is futile. 2eing an e+clusi,e talent does not by itself
mean that !6%QA is an employee of A2!'C2%. 5,en an
independent contractor can ,alidly pro,ide his ser,ices e+clusi,ely
to the hiring party. #n the broadcast industry" e+clusi,ity is not
necessarily the same as control.
The hiring of e+clusi,e talents is a widespread and accepted
practice in the entertainment industry.
This practice is not
designed to control the means and methods of work of the talent"
but simply to protect the in,estment of the broadcast station. The
broadcast station normally spends substantial amounts of money"
time and e3ort Pin building up its talents as well as the programs
they appear in and thus e+pects that said talents remain e+clusi,e
with the station for a commensurate period of time.R
much higher fee is paid to talents who agree to work e+clusi,ely for
a particular radio or tele,ision station. #n short" the huge talent fees
partially compensates for e+clusi,ity" as in the present case.
)*)&C as Agent of S+,-A
!6%QA protests the )abor ArbiterSs -nding that he is a talent of
&?&4C" which contracted out his ser,ices to A2!'C2%. The )abor
Arbiter ruled that as a talent of &?&4C" !6%QA is not an employee
of A2!'C2%. !6%QA insists that &?&4C is a Plabor'onlyR contractor
and A2!'C2% is his employer.
#n a labor'only contract" there are three parties in,ol,edE $/) the
Plabor'onlyR contractorF $1) the employee who is ostensibly under
the employ of the Plabor'onlyR contractorF and $9) the principal who
is deemed the real employer. *nder this scheme" t&e N-'borG
o*-2O (o*tr'(tor .) t&e '/e*t o0 t&e pr.*(.p'-. The law makes
the principal responsible to the employees of the Plabor'only
contractorR as if the principal itself directly hired or employed the
These circumstances are not present in this case.
There are essentially only two parties in,ol,ed under the
Agreement" namely" !6%QA and A2!'C2%. &?&4C merely acted as
!6%QASs agent. The Agreement e+pressly states that &?&4C acted
as the PAD5%TR of !6%QA. The records do not show that &?&4C
Page 1C of 22
acted as A2!'C2%Ss agent. &?&4C" which stands for &el and ?ay
&anagement and 4e,elopment Corporation" is a corporation
organiIed and owned by !6%QA and T#A%DC6. The President and
Deneral &anager of &?&4C is !6%QA himself. #t is absurd to hold
that &?&4C" which is owned" controlled" headed and managed by
!6%QA" acted as agent of A2!'C2% in entering into the Agreement
with !6%QA" who himself is represented by &?&4C. That would
make &?&4C the agent of both A2!'C2% and !6%QA.
As !6%QA admits" &?&4C is a management company
de,oted e@(-,).4e-2 to managing the careers of !6%QA and his
broadcast partner" T#A%DC6. &?&4C is not engaged in any other
business" not e,en 7ob contracting. &?&4C does not ha,e any other
function apart from acting as agent of !6%QA or T#A%DC6 to
promote their careers in the broadcast and tele,ision industry.
#olicy Instruction ,o. ./
!6%QA argues that Policy #nstruction %o. ;: issued by then &inister
of )abor 2las 6ple on < ?anuary /=C= -nally settled the status of
workers in the broadcast industry. *nder this policy" the types of
employees in the broadcast industry are the station and program
Policy #nstruction %o. ;: is a mere e+ecuti,e issuance which does
not ha,e the force and e3ect of law. There is no legal presumption
that Policy #nstruction %o. ;: determines !6%QASs status. A mere
e+ecuti,e issuance cannot e+clude independent contractors from
the class of ser,ice pro,iders to the broadcast industry. The
classi-cation of workers in the broadcast industry into only two
groups under Policy #nstruction %o. ;: is not binding on this Court"
especially when the classi-cation has no basis either in law or in
A0da(its of A"S1C",2s $itnesses
!6%QA also faults the )abor Arbiter for admitting the afda,its of
!ocorro Kidanes and 8olando CruI without gi,ing his counsel the
opportunity to cross'e+amine these witnesses. !6%QA brands these
witnesses as incompetent to attest on the pre,ailing practice in the
radio and tele,ision industry. !6%QA ,iews the afda,its of these
witnesses as misleading and irrele,ant.
Bhile !6%QA failed to cross'e+amine A2!'C2%Ss witnesses" he was
ne,er pre,ented from denying or refuting the allegations in the
afda,its. The )abor Arbiter has the discretion whether to conduct
a formal $trial'type) hearing after the submission of the position
papers of the parties" thusE
!ection 9. !ubmission of Position PapersM&emorandum
+ + +
These ,eri-ed position papers shall co,er only those claims and
causes of action raised in the complaint e+cluding those that may
ha,e been amicably settled" and shall be accompanied by all
supporting documents including the afda,its of their respecti,e
witnesses which shall take the place of the latterSs direct testimony.
+ + +
!ection ;. 4etermination of %ecessity of Gearing. V #mmediately
after the submission of the parties of their position
papersMmemorandum" the )abor Arbiter shall motu propio
determine whether there is need for a formal trial or hearing. At
this stage" he may" at his discretion and for the purpose of making
such determination" ask clari-catory questions to further elicit facts
or information" including but not limited to the subpoena of
rele,ant documentary e,idence" if any from any party or witness.
The )abor Arbiter can decide a case based solely on the position
papers and the supporting documents without a formal trial.
holding of a formal hearing or trial is something that the parties
cannot demand as a matter of right.
#f the )abor Arbiter is
con-dent that he can rely on the documents before him" he cannot
be faulted for not conducting a formal trial" unless under the
particular circumstances of the case" the documents alone are
insufcient. The proceedings before a )abor Arbiter are non'litigious
in nature. !ub7ect to the requirements of due process" the
technicalities of law and the rules obtaining in the courts of law do
not strictly apply in proceedings before a )abor Arbiter.
3alents as Independent Contractors
A2!'C2% claims that there e+ists a pre,ailing practice in the
broadcast and entertainment industries to treat talents like !6%QA
as independent contractors. !6%QA argues that if such practice
e+ists" it is ,oid for ,iolating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the
arises only if there is an employer'employee
relationship under labor laws. %ot e,ery performance of ser,ices for
a fee creates an employer'employee relationship. To hold that
Page 1; of 22
e,ery person who renders ser,ices to another for a fee is an
employee ' to gi,e meaning to the security of tenure clause ' will
lead to absurd results.
#ndi,iduals with special skills" e+pertise or talent en7oy the freedom
to o3er their ser,ices as independent contractors. The right to life
and li,elihood guarantees this freedom to contract as independent
contractors. The right of labor to security of tenure cannot operate
to depri,e an indi,idual" possessed with special skills" e+pertise and
talent" of his right to contract as an independent contractor. An
indi,idual like an artist or talent has a right to render his ser,ices
without any one controlling the means and methods by which he
performs his art or craft. This Court will not interpret the right of
labor to security of tenure to compel artists and talents to render
their ser,ices only as employees. #f radio and tele,ision program
hosts can render their ser,ices only as employees" the station
owners and managers can dictate to the radio and tele,ision hosts
what they say in their shows. This is not conduci,e to freedom of
&i4erent 3a5 3reatment of 3alents and "roadcasters
The %ational #nternal 8e,enue Code $P%#8CR)
in relation to
8epublic Act %o. CC/@"
as amended by 8epublic Act %o. <1;/"
treats talents" tele,ision and radio broadcasters di3erently.
*nder the %#8C" these professionals are sub7ect to the /:A ,alue'
added ta+ $PKATR) on ser,ices they render. 5+empted from the KAT
are those under an employer'employee relationship.
di3erent ta+ treatment accorded to talents and broadcasters
bolters our conclusion that they are independent contractors"
pro,ided all the basic elements of a contractual relationship are
present as in this case.
,ature of S+,-A2s Claims
!6%QA seeks the reco,ery of allegedly unpaid talent fees" /9th
month pay" separation pay" ser,ice incenti,e lea,e" signing bonus"
tra,el allowance" and amounts due under the 5mployee !tock
6ption Plan. Be agree with the -ndings of the )abor Arbiter and the
Court of Appeals that !6%QASs claims are '-- b')e+ o* t&e <'2
1996 A/reeme*t '*+ )to(3 opt.o* p-'*, '*+ *ot o* t&e
L'bor Co+e. Clearly" the present case does not call for an
application of the )abor Code pro,isions but an interpretation and
implementation of the &ay /==; Agreement. #n e3ect" !6%QASs
cause of action is for breach of contract which is intrinsically a ci,il
dispute cogniIable by the regular courts.
78ERE"ORE, we DEN9 the petition. The assailed 4ecision of the
Court of Appeals dated 1@ &arch /=== in CA'D.8. !P %o. ;=/=:
is A""IR<ED. Costs against petitioner.
. D.8. %o. />/9C<" &arch 1<" 1::> 0
?AWA (664 P86C5!!#%D C68P68AT#6%" P5T#T#6%58" K!. 4A8B#%
PAC6T" 86258T PA86G#%6D" 4AK#4 2#!%A8" &A8)6% 46&#%D6"
8G65) )5!CA%6 A%4 ?6%ATGA% CADA2CA2" 85!P6%45%T!.
4 5 C # ! # 6 %
Assailed and sought to be set aside in this appeal by way of a
petition for re,iew on certiorari under rule ;> of the 8ules of Court
are the following issuances of the Court of Appeals in CA'D.8. !P.
%o. >=<;C" to witE
/. 4ecision dated /@ %o,ember 1::/"./0 re,ersing and setting
aside an earlier decision of the %ational )abor 8elations
Commission $%)8C)F and
1. 8esolution dated < ?anuary 1::1".10 denying petitionerSs
motion for reconsideration.
The material facts may be brieXy stated" as followsE
8espondents 4arwin Pacot" 8obert Parohinog" 4a,id 2isnar" &arlon
4omingo" 8hoel )escano and ?onathan Cagabcab were earlier hired
by petitioner ?AWA (oods Processing Corporation $?AWA" for short)
Page 19 of 22
until the latter terminated their employment on August 1=" /==C
because the corporation was Pin dire -nancial straitsR. #t is not
disputed" howe,er" that the termination was e3ected without ?AWA
complying with the requirement under Article 1<9 of the )abor
Code regarding the ser,ice of a written notice upon the employees
and the 4epartment of )abor and 5mployment at least one $/)
month before the intended date of termination.
#n time" respondents separately -led with the regional Arbitration
2ranch of the %ational )abor 8elations Commission $%)8C)
complaints for illegal dismissal" underpayment of wages and
nonpayment of ser,ice incenti,e lea,e and /9th month pay against
?AWA and its G84 &anager" 8osana Castelo.
After due proceedings" the )abor Arbiter rendered a
decision.90 declaring the termination illegal and ordering ?AWA and
its G84 &anager to reinstate respondents with full backwages" and
separation pay if reinstatement is not possible. &ore speci-cally
the decision dispositi,ely readsE
BG585(685" 7udgment is hereby rendered declaring as illegal the
termination of complainants and ordering respondents to reinstate
them to their positions with full backwages which as of ?uly 9:"
/==< ha,e already amounted to P99="C@<.::. 8espondents are
also ordered to pay complainants the amount of P1"CC>.::
representing the unpaid ser,ice incenti,e lea,e pay of Parohinog"
)escano and Cagabcab an the amount of P/="19=.=@ as payment
for /==C /9th month pay as alluded in the abo,e computation.
#f complainants could not be reinstated" respondents are ordered to
pay them separation pay equi,alent to one month salary for ,ery
$sic) year of ser,ice.
Therefrom" ?AWA went on appeal to the %)8C" which" in a decision
dated August 9:" /===".;0 afrmed in toto that of the )abor Arbiter.
?AWA -led a motion for reconsideration. Acting thereon" the %)8C
came out with another decision dated ?anuary 1<" 1:::".>0 this
time modifying its earlier decision" thusE
BG585(685" premises considered" the instant motion for
reconsideration is hereby D8A%T54 and the challenged decision of
this Commission .dated0 9: August /=== and the decision of the
)abor Arbiter +++ are hereby modi-ed by re,ersing an setting aside
the awards of backwages" ser,ice incenti,e lea,e pay. 5ach of the
complainants'appellees shall be entitled to a separation pay
equi,alent to one month. #n addition" respondents'appellants is
$sic) ordered to pay each of the complainants'appellees the sum of
P1":::.:: as indemni-cation for its failure to obser,e due process
in e3ecting the retrenchment.
Their motion for reconsideration ha,ing been denied by the %)8C in
its resolution of April 1<" 1:::".@0 respondents went to the Court of
Appeals ,ia a petition for certiorari" thereat docketed as CA'D.8. !P
As stated at the outset hereof" the Court of Appeals" in a decision
dated %o,ember /@" 1:::" applying the doctrine laid down by this
Court in !errano ,s. %)8C".C0 re,ersed and set aside the %)8CSs
decision of ?anuary 1<" 1:::" thusE
BG585(685" the decision dated ?anuary 1<" 1::: of the %ational
)abor 8elations Commission is 85K58!54 and !5T A!#45 and
another one entered ordering respondent ?AWA (oods Processing
Corporation to pay petitioners separation pay equi,alent to one $/)
month salary" the proportionate /9th month pay and" in addition"
full backwages from the time their employment was terminated on
August 1=" /==C up to the time the 4ecision herein becomes -nal.
This time" ?AWA mo,ed for a reconsideration but its motion was
denied by the appellate court in its resolution of ?anuary <" 1::1.
Gence" ?AWASs present recourse" submitting" for our consideration"
the following issuesE
Page 20 of 22
P#. BG5TG58 68 %6T TG5 C6*8T 6( APP5A)! C6885CT)L
ABA8454 T(*)) 2ACWBAD5!S T6 85!P6%45%T!.
##. BG5TG58 68 %6T TG5 A!!A#)54 45C#!#6% C6885CT)L
ABA8454 !5PA8AT#6% PAL T6 85!P6%45%T!R.
As we see it" there is only one question that requires
resolution" i.e. what are the legal implications of a situation where
an employee is dismissed for cause but such dismissal was e3ected
without the employerSs compliance with the notice requirement
under the )abor Code.
This" certainly" is not a case of -rst impression. #n the ,ery recent
case of Agabon ,s. %)8C".<0 we had the opportunity to resol,e a
similar question. Therein" we found that the employees committed
a gra,e o3ense" i.e." abandonment" which is a form of a neglect of
duty which" in turn" is one of the 7ust causes enumerated under
Article 1<1 of the )abor Code. #n said case" we upheld the ,alidity
of the dismissal despite non'compliance with the notice
requirement of the )abor Code. Gowe,er" we required the
employer to pay the dismissed employees the amount of
P9:":::.::" representing nominal damages for non'compliance
with statutory due process" thusE
PBhere the dismissal is for a 7ust cause" as in the instant case" the
lack of statutory due process should not nullify the dismissal" or
render it illegal" or ine3ectual. Gowe,er" the employer should
indemnify the employee for the ,iolation of his statutory rights" as
ruled in 8eta ,s. %ational )abor 8elations Commission. The
indemnity to be imposed should be sti3er to discourage the
abhorrent practice of Tdismiss now" pay later"S which we sought to
deter in the !errano ruling. The sanction should be in the nature of
indemni-cation or penalty and should depend on the facts of each
case" taking into special consideration the gra,ity of the due
process ,iolation of the employer.
+++ +++ +++
The ,iolation of petitionersS right to statutory due process by the
pri,ate respondent warrants the payment of indemnity in the form
of nominal damages. The amount of such damages is addressed to
the sound discretion of the court" taking into account the rele,ant
circumstances. Considering the pre,ailing circumstances in the
case at bar" we deem it proper to -+ it at P9:":::.::. Be belie,e
this form of damages would ser,e to deter employers from future
,iolations of the statutory due process rights of employees. At the
,ery least" it pro,ides a ,indication or recognition of this
fundamental right granted to the latter under the )abor Code and
its #mplementing 8ules"R $5mphasis supplied).
The di3erence between Agabon and the instant case is that in the
former" the dismissal was based on a 7ust cause under Article 1<1
of the )abor Code while in the present case" respondents were
dismissed due to retrenchment" which is one of the authoriIed
causes under Article 1<9 of the same Code.
At this point" we note that there are di,ergent implications of a
dismissal for 7ust cause under Article 1<1" on one hand" and a
dismissal for authoriIed cause under Article 1<9" on the other.
A dismissal for 7ust cause under Article 1<1 implies that the
employee concerned has committed" or is guilty of" some ,iolation
against the employer" i.e. the employee has committed some
serious misconduct" is guilty of some fraud against the employer"
or" as in Agabon" he has neglected his duties. Thus" it can be said
that the employee himself initiated the dismissal process.
6n another breath" a dismissal for an authoriIed cause under
Article 1<9 does not necessarily imply delinquency or culpability on
the part of the employee. #nstead" the dismissal process is initiated
by the employerSs e+ercise of his management
prerogati,e" i.e. when the employer opts to install labor sa,ing
de,ices" when he decides to cease business operations or when" as
in this case" he undertakes to implement a retrenchment program.
The clear'cut distinction between a dismissal for 7ust cause under
Article 1<1 and a dismissal for authoriIed cause under Article 1<9
is further reinforced by the fact that in the -rst" payment of
separation pay" as a rule" is not required" while in the second" the
Page 21 of 22
law requires payment of separation pay..=0
(or these reasons" there ought to be a di3erence in treatment when
the ground for dismissal is one of the 7ust causes under Article 1<1"
and when based on one of the authoriIed causes under Article 1<9.
Accordingly" it is wise to hold thatE $/) if the dismissal is based on a
7ust cause under Article 1<1 but the employer failed to comply with
the notice requirement" the sanction to be imposed upon him
should be tempered because the dismissal process was" in e3ect"
initiated by an act imputable to the employeeF and $1) if the
dismissal is based on an authoriIed cause under Article 1<9 but the
employer failed to comply with the notice requirement" the
sanction should be sti3er because the dismissal process was
initiated by the employerSs e+ercise of his management
The records before us re,eal that" indeed" ?AWA was su3ering from
serious business losses at the time it terminated respondentsS
employment. As aptly found by the %)8CE
PA careful study of the e,idence presented by the respondent'
appellant corporation shows that the audited (inancial !tatement of
the corporation for the periods /==@" /==C and /==< were
submitted by the respondent'appellant corporation" The !tatement
of #ncome and 4e-cit found in the Audited (inancial !tatement of
the respondent'appellant corporation clearly shows the following in
/==@" the de-cit of the respondent'appellant corporation was
P/<<"1/<";/=.:: or =;.//A of the stockholderSs .sic0 equity which
amounts to P1::":::":::.::. #n /==C when the retrenchment
program of respondent'appellant corporation was undertaken" the
de-cit ballooned to P1;C"111">@=.:: or /19.@/A of the
stockholdersS equity" thus a capital de-ciency or impairment of
equity ensued. #n /==<" the de-cit grew to P9>>"C=;"<=C.:: or
/CCA of the stockholdersS equity. (rom /==@ to /==C" the de-cit
grew by more that $sic) 9/A while in /==< the de-cit grew by more
The !tatement of #ncome and 4e-cit of the respondent'appellant
corporation to pro,e its alleged losses was prepared by an
independent auditor" !DK Co. #t con,incingly showed that the
respondent'appellant corporation was in dire -nancial straits" which
the complainants'appellees failed to dispute. The losses incurred
by the respondent'appellant corporation are clearly substantial and
sufciently pro,en with clear and satisfactory e,idence. )osses
incurred were adequately shown with respondent'appellantSs
audited -nancial statement. Ga,ing established the loss incurred
by the respondent'appellant corporation" it necessarily necessarily
$sic) follows that the ground in support of retrenchment e+isted at
the time the complainants'appellees were terminated. Be cannot
therefore sustain the -ndings of the )abor Arbiter that the alleged
losses of the respondent'appellant was .sic0 not well substantiated
by substantial proofs. #t is therefore logical for the corporation to
implement a retrenchment program to pre,ent further losses.R./:0
%oteworthy it is" moreo,er" to state that herein respondents did not
assail the foregoing -nding of the %)8C which" incidentally" was
also afrmed by the Court of Appeals.
#t is" therefore" established that there was ground for respondentsS
dismissal" i.e." retrenchment" which is one of the authoriIed causes
enumerated under Article 1<9 of the )abor Code. )ikewise" it is
established that ?AWA failed to comply with the notice requirement
under the same Article. Considering the factual circumstances in
the instant case and the abo,e ratiocination" we" therefore" deem it
proper to -+ the indemnity at P>:":::.::.
Be likewise -nd the Court of Appeals to ha,e been in error when it
ordered ?AWA to pay respondents separation pay equi,alent to one
$/) month salary for e,ery year of ser,ice. This is because in 8eahs
Corporation ,s. %)8C".//0 we made the following declarationE
PThe rule" therefore" is that in all cases of business closure or
cessation of operation or undertaking of the employer" the a3ected
employee is entitled to separation pay. This is consistent with the
state policy of treating labor as a primary social economic force"
a3ording full protection to its rights as well as its welfare. The
e+ception is when the closure of business or cessation of operations
is due to serious business losses or -nancial re,ersesF duly pro,ed"
Page 22 of 22
in which case" the right of a3ected employees to separation pay is
lost for ob,ious reasons. +++R. $5mphasis supplied)
BG585(685" the instant petition is D8A%T54. Accordingly" the
assailed decision and resolution of the Court of Appeals
respecti,ely dated %o,ember /@" 1::/ and ?anuary <" 1::1 are
hereby !5T A!#45 and a new one entered upholding the legality of
the dismissal but ordering petitioner to pay each of the
respondents the amount of P>:":::.::" representing nominal
damages for non'compliance with statutory due process.
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