ATTY. ANDREA UY and FELIX YUSAY vs.

ARLENE VILLANUEVA and NLRC

FACTS Countrywide Rural Bank of La Carlota, Inc. is a private banking corporation engaged in rural
banking and other allied services. In 1998, the Bank experienced liquidity problems. The depositors were
alarmed of losing their deposits. Consequently, the depositors holding 70% of the Banks deposit
accounts met and organized themselves into a "Committee of Depositors," for the purpose of protecting
their collective interests and to increase their chances of recovering their deposits. They assumed
temporary administrative control of the remaining Bank operations, with the incumbent BODs consent
and approval. The Committee designated Felix Yusay as Chairman of the Interim BOD, while Atty.
Andrea Uy as Secretary. However, the rehabilitation of the bank had failed and the Committee was
disbanded. BSP placed the bank under receivership and appointed a liquidator. Meanwhile, the PDIC
commenced the processing of claims for return of deposits. Eventually, three separate cases for illegal
dismissal were filed against the Bank before NLRC. These were filed by Amalia Bueno, Amelia Valdez and
Lyn Villa and Private Respondent Arlene Villanueva. 11/16/1999, Labor Arbiter Arturo P. Gamolo
decided in favor of Villanueva and held the Bank, Atty. Andrea Uy and Felix Yusay solidarily liable to pay
the monetary awards and attorneys fees. Upon the filing of the Motion for Execution, the Bank filed an
Opposition through PDIC. Labor Arbiter Gamolo found PDICs opposition to be meritorious and directed
complainants to file their respective money claims as adjudged before the liquidation court for PDICs
approval of inclusion in the Banks Distribution Plan. Petitioners filed with the NLRC: Notice of Appeal
with Memorandum of Appeal but was Dismissed for being filed out of time (11/27/2000 Resolution);
11/27/2000 Resolution (10/10/2001 Resolution) Petitioners filed a petition for certiorari before the CA
to nullify the NLRCs Resolutions, but the CA dismissed the petition for certiorari on technical grounds.
Subsequent Motion for Reconsideration was filed, but it was likewise denied. Hence, the instant
petition. Petitioners Claim Previous decisions of the Court held that technicalities can be relaxed in
order to uphold the substantive rights of the parties


They cannot be held solidarily liable to private respondent because they were mere depositors of the
Bank and not stockholders. Even assuming that they were stockholders, they still cannot be held
individually liable for the Banks obligations

ISSUES 1. WON dismissal of their petition for certiorari on technical grounds deprived them of
substantial justice 2. WON there existed an employer-employee relationship between Petitioners and
Private Respondent
HELD The petition is meritorious. At the outset, we note that the Bank did not appeal the NLRCs
rulings. As to the bank, th
the Rules of Civil Procedure provides that only questions of law shall be raised in an appeal by certiorari
before this Court. However, it admits of certain exceptions, among them are: when there is a grave
abuse of discretion and when the judgment is based on misappreciation of facts. CA committed grave
abuse of discretion in dismissing the petition without examining its merits. In the past, the Court held
that technicalities should not be permitted to stand in the way of equitably and completely resolving the
rights and obligations of the parties. Where the ends of substantial justice would be better served, the
application of technical rules of procedure may be relaxed. Dismissal of appeals purely on technical
grounds is frowned upon and the rules of procedure ought not to be applied in a very rigid, technical
sense, for they are adopted to help secure, not override, substantial justice, and thereby defeat their
very aims. Illegal dismissal presupposes that there was an employer-employee relationship between the
dismissed employee and the persons complained of. The Court has consistently used the "four-fold"
test: (1) whether the alleged employer has the power of selection and engagement of an employee; (2)
whether he has control of the employee with respect to the means and methods by which work is to be
accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages.
Of the four, the control test is the most important element. In this case, all these elements are
attributable to the bank and not to petitioners. As mentioned, the NLRC Decision has become final and

2. NO


executory as to the bank. Its liability for private respondents dismissal is no longer in dispute. However,
the same cannot apply to petitioners because they assumed only limited administrative control of the
bank as part of the "Committee of Depositors." There is no showing that they took over the
management and control of the bank. Even assuming that an employer-employee relationship exist
between petitioners and private respondent, the former still cannot be held liable with Countrywide
Bank for the illegal dismissal of private respondent. Corporate officers are not personally liable for the
money claims of discharged corporate employees, unless they acted with evident malice and bad faith in
terminating their employment. It has been held that an "office" is created by the charter of the
corporation and the officer is elected by the directors or stockholders. On the other hand, an
"employee" usually occupies no office and generally is employed not by action of the directors or
stockholders but by the managing officer of the corporation who also determines the compensation to
be paid to such employee. Petitioners are neither officers nor employees of the bank. They are mere
depositors who sought to manage the bank in order to save it. The doctrine of piercing the veil of
corporate fiction finds no application in the case. For petitioners are not even stockholders of the bank
but mere depositors. They assumed temporary control of the banks administration, but that did not
change the character of their relationship with the Bank. In fact, their bid to convert their interest in the
Bank to that of stockholders failed as the BSP denied their plan to rehabilitate the bank.

DISPOSITION: Petition GRANTED. Decisions of LABOR ARBITER and CA, finding petitioners solidarily
liable, are REVERSED and SET ASIDEUnited Pepsi-Cola Supervisory Union vs Laguesma 288 SCRA 15
Facts: UPSU is a union of supervisory employees. The union filed a petition for certification election on
behalf of the route managers at Pepsi-Cola Products Philippines, Inc. However, its petition was denied
by the med-arbiter and, on appeal, by the Secretary of Labor and Employment, on the ground that the
route managers are managerial employees and, therefore, ineligible for union membership under the
first sentence of Art. 245 of the Labor Code, which says, Managerial employees are not eligible to join,
assist or form any labor organization. Supervisory employees shall not be eligible for membership in a
labor organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own. ISSUE: 1. Whether the route managers at Pepsi-Cola Products Philippines,
Inc. are managerial employees 2. Who are Managerial Employees? HELD: 1. Yes. The employees
concerned are managerial employees within the purview of Art. 212 which provides: (m) "managerial
employee" is one who is vested with powers or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer, effectively recommend such
managerial actions if the exercise of such authority is not merely routinary or clerical in nature but
requires the use of independent judgment. All employees not falling within any of the above definitions
are considered rank-and-file employees for purposes of this Book. Route managers cant be classified as
mere Supervisors because their work not only involves, but goes beyond the simple direction of
operating employees to accomplish objectives set by superiors. Route managers are not mere
functionaries with simple oversight functions, but business administrators in their own rights. They are
therefore properly classified as managerial employees. 1. The term manager generally refers to
anyone who is responsible for subordinates and other organization resources. As a class, managers
constitute three levels of a pyramid: FIRST-LINE MANAGERS The lowest level in an organization at
which individuals are responsible for the work of others is called first-line or first-level management.
First-line managers direct operating employees only; they do not supervise other managers. Example of
first-line managers are the foreman or production supervisor in a manufacturing

plant, the technical supervisor in a rsearch department, and the clerical supervisor in a large office. First-
level managers are often called supervisors. MIDDLE MANAGERS The term middle management can
refer to more than one level in an organization. Middle managers direct the activities of other managers
and sometimes also those of operating employees. Middle managers principal responsibilities are to
direct the activities that implement their organizations policies and to balance the demands of their
superiors with the capacities of their subordinates. A plant manager in an electronics firm is an example
of a middle manager. TOP MANAGERS Composed of a comparatively small group of executives, top
management is responsible for the overall management of the organization. It establishes operating
policies and guides the organizations interactions with its environment. Typical titles of top managers
are chief executive officer, president, and senior vicepresident. Actual titles vary from one
organization to another and are not always a reliable guide to membership in the highest management
classification. What distinguishes them from the rank-and file employees is that they act in the interest
of the employer in supervising such rank-and-file employees. Managerial employees may therefore be
said to fall into two distinct categories: the managers per se, who compose the former group
described above, and the supervisors who form the latter group. Whether they belong to the first or
second category, managers, vis--vis employers, are, likewise, employees. ADDITIONAL INFO: ART. 245.
Ineligibility of managerial employees to join any labor organization; right of supervisory employees. -
Managerial employees are not eligible to join, assist or form any labor organization. Supervisory
employees shall not be eligible for membership in a labor organization of the rank-and-file employees
but may join, assist or form separate labor organizations of their own In the case of Art. 245, there is a
rational basis for prohibiting managerial employees from forming or joining labor organizations. By the
very nature of their functions, they assist and act in a confidential capacity to, or have access to
confidential matters of, persons who exercise managerial functions in the field of labor relations. As
such, the rationale behind the ineligibility of managerial employees to form, assist or joint a labor union
equally applies to them. If these managerial employees would belong to or be affiliated with a Union,
the latter might not be assured of their loyalty to the Union in view of evident conflict of interests. The
Union can also become company-dominated with the presence of managerial employees in Union
membership."

TELEVISION AND PRODUCTION EXPONENTS, INC. (TAPE) vs. SERVAA
rd for the Agro-Commercial Security Agency (ACSA) since 1987. The
then with RPN 9.
-9 expired in 1995, respondent
In 2000, TAPE contracted the services of Sun Shield Security Agency. It then notified Servaa that he is
Dismissal. The Labor Arbiter ruled that Servaas dismissal is valid on the ground of redundancy but
though he was not illegally dismissed he is still entitled to be paid a separation pay which is amounting
appealed and argued that
Servaa is not entitled to receive separation pay for he is considered as a talent and not as a regular
employee; that as such, there is no employee-employer relationship between TAPE and Servaa. The
National Labor Relations Commission ruled in favor of TAPE. It ruled that Servaa is a program
affirmed the LA. The CA further ruled that TAPE and its president Tuviera should pay for nominal
damages amounting to P10,000.00. ISSUE: WON there is an employee-employer relationship existing
between TAPE and Servaa. HELD: Yes. Servaa is a regular employee. In determining Servaas nature
of employment, the Supreme Court employed the Four Fold Test: 1. WON employer conducted the
selection and engagement of the employee.

Servaa was selected and engaged by TAPE when he was absorbed as a talent in 1995. He is not really
a talent, as termed by TAPE, because he performs an activity which is necessary and desirable to TAPEs
business and that is being a security guard. Further, the primary evidence of him being engaged as an
employee is his employee identification card. An identification card is usually provided not just as a
security measure but to mainly identify the holder thereof as a bona fide employee of the firm who
issues it.
2 WON there is payment of wages to the employee by the employer.
Servaa is definitely receiving a fixed amount of monthly compensation. Hes receiving P6,000.00 a
month. 3. WON employer has the power to dismiss employee.
The Memorandum of Discontinuance issued to Servaa to notify him that he is a redundant employee
evidenced TAPEs power to dismiss Servaa. 4. WON the employer has the power of control over the
employee. The control test is the most important. The bundy cards which showed that Servaa was
required to report to work at fixed hours (form 11:30-1:00 pm) of the day manifested that TAPE has
control over him. Otherwise, Servaa could have reported at any time during the day as he may wish.
Precisely, he is being paid for being the security of "Eat Bulaga!" The Daily Time Record is a form of
control by the management of TAPE. Therefore, Servaa is entitled to receive a separation pay. On the
other hand, the Supreme Court ruled that Tuviera, as president of TAPE, should not be held liable for
nominal damages as there was no showing he acted in bad faith in terminating Servaa.
Regular Employee Defined: One having been engaged to perform an activity that is necessary and
desirable to a companys business. Under the control test, there is an employer-employee relationship
when the person for whom the services are performed reserves the right to control not only the end
achieved but also the manner and means used to achieve that end.

REMINGTON INDUSTRIAL SALES CORP V. CASTANEDA 507 SCRA 391 (2006)
FACTS: Castaneda alleged that she started working in August 1983 as company cook with a salary
P4,000/month for Remington, a corporation engaged in the trading business; that she worked for 6 days
a week, starting as early as 6am because she had to do the marketing and would end at 5:30pm or even
later, after most of the employees, if not all, had left the company premises.
1. She continuously worked for Remington until she was unceremoniously prevented from reporting for
work when Remington transferred to a new site in Edsa, Caloocan City. She averred that she reported
for work at the new site on January 15, 1998, only to be informed that Remington no longer needed her
services. Castaneda believed that her dismissal was illegal because she was not given any notice as
required by law. Hence, she filed a complaint for reinstatement without loss of seniority rights, salary
differentials, service incentive leave pay, 13th month pay and fees. 2. Remington denied that it
dismissed Castaneda illegally. It posited that Castaneda was a domestic helper, not a regular employee
and that her work as a cook had nothing to do with Remingtons business of trading in construction
materials. 3. Remington also maintained that it did not exercise any degree of control and/or
supervision over Castanedas work as her only concern was to ensure that the employees lunch and
snacks were available and served at the designated time. 4. Remington also claimed that it was
Castaneda who refused to report for work when the company transferred to the new location
ISSUE: WON CASTANEDA IS A REGULAR EMPLOYEE OF PETITIONER OR MERE DOMESTIC WORKER OF
THE FAMILY TAN
HELD: Yes, Castaneda was a regular employee of petitioner. Under Rule XIII, Section 1(b), Book 3 of the
Labor Code, as amended, the terms house helper or domestic servant are defined as follows: The
term house helper as used herein is synonymous to the term domestic servant and shall refer to any
person, whether male or female, who renders services in and about the employers home and which
services are usually necessary or desirable for the maintenance and enjoyment thereof, and ministers
exclusively to the personal comfort and enjoyment of the employers family. The foregoing definition
clearly contemplates such house helper or domestic servant who is employed in the employers home to
minister exclusively to the personal comfort and enjoyment of the employers family. Such definition
covers family drivers, domestic servants, laundry women, yayas, gardeners, houseboys and similar
house helps. The criteria are the personal comfort and enjoyment of the family of the employer in the
home of said employer. While it may be true that the nature of the work of a house

helper, domestic servant or laundrywoman in a home or in a company staff house may be similar in
nature, the difference in their circumstances is that in the former instance they are actually serving the
family while in the latter case, the mere fact that the house helper or domestic servant is working within
the premises of the business of the employer and in relation to or in connection with its business, as in
its staff houses for its guest or even for its officers and employees, warrants the conclusion that such
house helper or domestic servant is and should be considered as a regular employee of the employer
and not as a mere family house helper or domestic servant as contemplated in Rule XIII, Section 1(b),
Book 3 of the Labor Code, as amended. Clearly, the situs, as well as the nature of respondents work as a
cook, who caters not only to the needs of Mr. Tan and his family but also to that of the petitioners
employees, makes her fall squarely within the definition of a regular employee under the doctrine
enunciated in the Apex Mining case. That she works within company premises, and that she does not
cater exclusively to the personal comfort of Mr. Tan and his family, is reflective of the existence of the
petitioners right of control over her functions, which is the primary indicator of the existence of an
employer-employee relationship. Moreover, it is wrong to say that if the work is not directly related to
the employer's business, then the person performing such work could not be considered an employee of
the latter. The determination of the existence of an employer-employee relationship is defined by law
according to the facts of each case, regardless of the nature of the activities involved. In addition, no less
than the companys corporate secretary has certified that respondent is a bona fide company employee;
she had a fixed schedule and routine of work and was paid a monthly salary of P4,000.00; she served
with the company for 15 years starting in 1983, buying and cooking food served to company employees
at lunch and merienda, and that this service was a regular feature of employment with the company.
In the second issue, abandonment is the deliberate and unjustified refusal of an employee to resume his
employment. It is a form of neglect of duty; hence, a just cause for termination of employment by the
employer under Article 282 Labor Code, which enumerates the just causes for termination by the
employer. For a valid finding of abandonment, these two factors should be present: (1) the failure to
report for work or absence without valid or justifiable reason; and (2) a clear intention to sever
employeremployee relationship, with the second as the more determinative factor which is manifested
by overt acts from which it may be deduced that the employee has no more intention to work. The
intent to discontinue the employment must be shown by clear proof that it was deliberate and
unjustified. In the instant case, Erlindas immediate filing of her complaint with the NLRC negates
abandonment. Indeed, an employee who loses no time in protesting her layoff cannot by any reasoning
be said to have abandoned her work, for it is well-settled that the filing of an employee of a complaint
for illegal dismissal with a prayer for reinstatement is proof enough of her desire to return to work, thus,
negating the employers charge of abandonment. In termination cases, the burden of proof rests upon
the employer to show that the dismissal is for a just and valid cause; failure to do so would necessarily
mean that the dismissal was illegal. The employers case succeeds or fails on the strength of its evidence
and not on the weakness of the employees defense. If doubt exists between the evidence presented by
the employer and the employee, the scales of justice must be tilted in favor of the latter.

MIGUEL vs. JCT GROUP, INC. and VICENTE CUEVAS
FACTS Glorious Sun Garment Manufacturing Companywas a garment exporter until it folded up in
October 1994. De Soliel Apparel Manufacturing Corporation and American InterFashion Corporation
took over Glorious Suns manufacturing plant, facilities and equipment and absorbed its employees,
including the petitioners. After the 1986 EDSA Revolution, the Presidential Commission on Good
Government sequestered De Soleil and AIFC and took over their assets and operations. On 4/24/1989,
JCT Group, Inc. and De Soleil executed a Management and Operating Agreement for the purpose of
servicing De Soleils export quota to ensure its rehabilitation and preserve its viability and profitability.
The MOA expired on 5/1/1990 and in July 1990, De Soleil ceased business operations, terminating
petitioners employment. In April 1993, petitioners filed complaints for illegal dismissal and payment of
backwages and other monetary claims before the NLRC against De Soleil, AIFC, PCGG, Glorious Sun, JCT,
Nemesio Co and Vicente Cuevas III. On 5/26/1993, JCT and Cuevas filed a motion to dismiss founded on
lack of jurisdiction over the subject matter of the action because of the absence of an employer-
employee relationship between them and petitioners. Without resolving the motion to dismiss, Labor
Arbiter Vladimir P.L. Sampang decided in favor of the Petitioners, declaring De Soleil, AIFC, PCGG,
Glorious Sun, JCT, Nemesio Co and Cuevas jointly and severally guilty of illegal dismissal and to pay
complainants monetary awards. Glorious Sun and Respondents appealed the labor arbiters decision.
Petitioners then filed a motion to dismiss both appeals on the ground that the same were not perfected
for failure to post a bond as required. NLRC then modified labor arbiters decision by absolving Glorious
Sun from liability and dismissing respondents appeal. Aggrieved, respondents instituted a special civil
action for certiorari before the SC but the petition was referred to the CA for appropriate action and
disposition. Subsequently, CA reversed the Decision of the NLRC and remanded the case to the labor
arbiter. It found no factual basis for the ruling that JCT had become the employer of petitioners after the
cessation of operations of Glorious Sun and failed to account for the liability of Cuevas in solidum with
AIF, De Soleil and JCT. Hence, this Petition.
ISSUE WON CA erred in remanding the case to the labor arbiter because of lack of factual findings to
prove Employer-Employee relationship between JCT and Miguel which would be the basis of the liability
of JCT
HELD NO. CA did not err in remanding the case for further proceedings. Both the labor arbiter and NLRC
abused their discretion when they ruled in favor of herein petitioners without determining the existence
of an employer-employee relationship between them and respondents. The Decisions were silent on
why JCT and Cuevas were held liable. CA has correctly observed that NLRC made no finding that JCT (on
the supposition that it became petitioners employer pursuant to the MOA dated 4/24/1989) had
assumed the obligations of petitioners previous employers, i.e., Glorious Sun, AIF and De Soleil. The
facts and the law on which decisions are based must be clearly and distinctly expressed. The failure of
the labor arbiter and the NLRC to express the basis for their Decisions was an evasion of their
constitutional duty, an evasion that constituted grave abuse of discretion. The Court has cited Saballa v.
National Labor Relations Commission to explain how the decision of an administrative body must be
drawn: Court previously held that judges and arbiters should draw up their decisions and resolutions
with due care, and make certain that they truly and accurately reflect their conclusions and their final
dispositions. The same thing goes for the findings of fact made by the NLRC, as it is a settled rule that
such findings are entitled to great respect and even finality when supported by substantial evidence;
otherwise, they shall be struck down for being whimsical and capricious and arrived at with grave abuse
of discretion. It is a requirement of due process and fair play that the parties to a litigation be informed
of how it was decided, with an explanation of the factual and legal reasons that led to the conclusions of
the court. The defense of respondents is anchored on an alleged lack of employer-employee relationship
with petitioners as stipulated in the formers MOA with De Soleil. JCT further claims that any
relationship with De Soleil and the latters employees was severed upon the termination of that
Agreement. It is imperative to determine the nature of the MOA -- whether or not it partook only of a
consultancy agreement, in which no employer-employee relationship existed between respondents and
petitioners. The only way to find out whether Respondents JCT and Cuevas are liable to petitioners is by
remanding the case to the lower court. The remand of the case, instead of the dismissal of the
Complaint, was beneficial to petitioners and was made in consideration of the policy to protect and
promote the general welfare of employees. DISPOSITION: Petition is DENIED and the assailed Decision
AFFIRMED.

Wack-wack Golf and Country Club vs NLRC 456 SCRA 280
because of this, the management had to suspend operations of the Food and Beverage department,
requiring the suspension of 54 employees. The Employees Union found the suspension as arbitrary and
constitutive of union-busting, and went on strike. The parties soon after entered into an amicable
settlement, whereby a special separation benefit/ retirement package was formulated. The same
provides for, among other things, a 1 month separation pay for every year of service, and be
considered on priority basis for employment by concessionaires and/or contractors, and even by the
by 3 employees (Cagasan,
Dominguez, and Baluyot), who received large sums of money as Separation pay. Soon after, Wack-wack
entered into a Management Contract with Business Staffing and Management Inc (BSMI), whereby the
latter will provide management services for Wack-wack. Cagasan and Dominguez filed their application
for employment with BMSI. They, by reason of the priority given by the separation package, were
-wack also engaged other contractors in the operations
of the club (like janitorial services, Finance and accounting services). Because of the various
management service contracts, BMSI made an organizational analysis and manpower evaluation to
stream line its operations. It found the positions of Cagasan and Domiguez redundant, and subsequently
terminated them. Cagasan and Dominguez then filed complaints in the NLRC for illegal dismissal against
Wack-wack. NLRC ordered reinstatement.
ISSUE: 1. Whether or not BMSI is an independent contractor or a labor-only contractor
2. Whether or not there was an employer-employee relationship between Wackwack and private
respondents.
HELD: 1. Yes. There is indubitable evidence showing that BSMI is an independent contractor, engaged in
the management of projects, business operations, functions, jobs and other kinds of business ventures,
and has sufficient capital and resources to undertake its principal business. It had provided management
services to various industrial and commercial business establishments.
ndependent contractor is one who undertakes job contracting, i.e., a person who: (a) carries on
an independent business and undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results
thereof; and (b) has substantial capital or investment in the form of tools, equipments, machineries,
work premises and o
holdings are to the effect that in determining the existence of an independent contractor relationship,
several factors may be considered, such as, but not necessarily confined to, whether or not the
contractor is carrying on an independent business; the nature and extent of the work; the skill required;
the term and duration of the relationship; the right to assign the performance of specified pieces of
work; the control and supervision of the work to another; the employers power with respect to the
hiring, firing, and payment of the contractors workers; the control of the premises; the duty to supply
premises, tools, appliances, materials and labor; and the mode, manner and terms of payment. Labor
Secretary Bienvenido Laguesma, recognized BSMI as an independent contractor. As a legitimate job
contractor, there can be no doubt as to the existence of an employer-employee relationship between
the contractor and the workers.
2. No. There being no employer-employee relationship between the petitioner and respondents
Cagasan and Dominguez, the latter have no cause of action for illegal dismissal and damages against the
petitioner. Consequently, the petitioner cannot be validly ordered to reinstate the respondents and pay
them their claims for backwages. BSMI admitted that it employed the respondents, giving the said
retired employees some degree of priority merely because of their work experience with the petitioner.
The respondents were made to sign applications for employment, accepting the condition that they
were hired by BSMI as probationary employees only. Unfortunately, after a study and evaluation of its
personnel organization, BSMI was impelled to terminate the services of the respondents on the ground
of redundancy. This right to hire and fire is another element of the employeremployee relationship
which actually existed between the respondents and BSMI, and not with Wack Wack.

PACIFIC CONSULTANTS INTERNATIONAL ASIA, IN
to engage
in consultancy services for water and sanitation in the Philippines and respondent was employed by PCIJ
President, Henrichsen, transmitted a letter of employment to respondent in Canada in which
stated that any question arising between them which can not be settled amicably, is to be settled by the
Court of Arbitration in London.


November to December 1998, and January to August 1999.


his work as sector manager. He reported for work in Manila except for occasional assignments abroad,
and received instructions from Henrichsen.


him
with PPI several money claims, including
unpaid salary, leave pay, air fare from Manila to Canada, and cost of shipment of goods to Canada. PPI
filed a
The Labor Arbiter rendered a decision granting petitioners Motion to Dismiss. And the NLRC likewise
agreed with the disquisitions of the Labor Arbiter.

a petition for certiorari with the CA, the CA declared that respondent was an employee of PPI. And
reversed and set aside the decision of the NLRC. ISSUE: WON there is an employment relationship
existed between petitioners and respondent despite that respondent is a foreign national and was hired


The petition is denied for lack of merit.

een
petitioner PPI and respondent using the four-
the existence of an employment relationship is in dispute, four elements constitute the reliable
yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employers power to control the employees conduct. It is the so-called "control
test" which constitutes the most important index of the existence of the employer-employee
relationshipthat is, whether the employer controls or has reserved the right to control the employee
not only as to the result of the work to be done but also as to the means and methods by which the
same is to be accomplished.


-employee relationship exists where the person for whom the services
are performed reserves the right to control not only the end to be achieved but also the means to be
itioners work
employment relationship was exercised by the President of the respondent company. An employer-
employee relationship may indeed exist even in the absence of a written contract, so long as the four
elements mentioned in the Mafinco case are all present. WHEREFORE, the petition is DENIED. The
Decision of the Court of Appeals is AFFIRMED. This case is REMANDED to the Labor Arbiter for
disposition of the case on the merits.

GABRIEL V. BILON 515 SCRA 29 (2007) FACTS: Respondents Bilon, Brazil and Pagaygay filed separate
complaints for illegal dismissal, illegal deductions and separation pay against petitioner Gabriel with the
NLRC. Respondents alleged that: 1. They were regular drivers of Gabriel Jeepney, driving their respective
units under a boundary system of P400 per day, plying Baclaran to Divisoria via Tondo and vice-versa
since December 1990, November 1984 and November 1991, respectively up to April 30, 1995, driving 5
days a week with an average daily earnings of 400 2. That they were required/forced to pay additional
P55 for the following: P20 police protection, P20 washing, P10 deposit, P5 garage fees 3. There is no law
providing the operator to require the drivers to pay said fees 4. On April 30, 1995, petitioner told them
not to drive anymore and when they went to the garage to report for work the next day, they were not
given a unit to drive 5. That the boundary drivers of passenger jeepneys are considered regular
employees of the jeepneys operators. Being such, they are entitled to security of tenure. Petitioner,
however, dismissed them without factual basis and without due process. Petitioner Gabriel, on the
other hand, contends that: 1. He does not remember if the respondents were under his employ as
jeepneys drivers. However, he is certain that the neither the respondents nor other drivers were ever
dismissed by him. As a matter of fact, some his drivers just stopped reporting for work. 2. He made sure
that none of the jeepneys would stay idle for a day so he could collect his earnings; hence it had been
his practice to establish a pool of drivers. Had the respondents manifested their desire to drive his units,
it would have been immaterial whether they were his former drivers or not so long as they had the
necessary licenses and references, they would have been accommodated 3. The amounts claimed to
have been deducted from the respondents earnings were preposterous. Where there were deductions
made from the earnings of the drivers, it was to pay on installment the advances made to them (e.g. to
pay for traffic violations) 4. LA held in favor of the respondents and ordered Gabriel to pay back wages
and separation pay. NLRC dismissed the case for lack of employer-employee relationship ISSUE; WON
THERE IS A EMPLOYER-EMPLOYEE RELATIONSHIP IN THIS CASE; WON THE RESPONDENTS WERE
ILLEGALLY DISMISSED
HELD: Yes, the respondents were employees of petitioner Gabriel. It has been held in earlier cases that
the relationship between jeepney owners/operators and jeepney drivers under the boundary system is
that of employer-employee and not of lessorlessee because in the lease of chattels the lessor loses
complete control over the chattel leased although the lessee cannot be reckless in the use thereof,
otherwise he would be responsible for the damages to the lessor. In the case of jeepney
owners/operators and jeepney drivers, the former exercises supervision and control over the latter. The
fact that the drivers do not receive fixed wages but get only that in excess of the so-called "boundary"
[that] they pay to the owner/operator is not sufficient to withdraw the relationship between them from
that of employer and employee. Thus, private respondents were employees because they had been
engaged to perform activities which were usually necessary or desirable in the usual business or trade of
the employer. The SC also agreed with LA that respondents were illegally dismissed by petitioner.
Respondents were not accorded due process. Moreover, petitioner failed to show that the cause for
termination falls under any of the grounds enumerated in Article 282 Labor Code. Consequently,
respondents are entitled to reinstatement without loss of seniority rights and other privileges and to
their full back wages computed from the date of dismissal up to the time of their actual reinstatement in
accordance with Article 279 of the Labor Code.

PHILIPPINE GLOBAL COMMUNICATIONS, INC. vs. RICARDO DE VERA FACTS Petitioner Philippine Global
Communications, Inc. is engaged in the business of communication services and allied activities.
Respondent Ricardo De Vera is a physician by profession whom petitioner enlisted to attend to the
medical needs of its employees. On 5/15/1981 De Vera offered his services to the petitioner through a
letter, he proposed his plan of works required of a practitioner in industrial medicine. The parties agreed
and executed a RETAINERSHIP CONTRACT for a period of one year subject to renewal. The retainership
arrangement went on from 1981 to 1994 with changes in the retainer's fee. However, for the years 1995
and 1996, renewal of the contract was only made verbally. In December 1996, through a letter Philcom
informed De Vera that they decided to discontinue the 'retainer's contract effective at the close of
business hours of 12/31/1996. They decided that it would be more practical to provide medical services
to its employees through accredited hospitals near the company premises. On 1/22/1997, De Vera filed
a complaint for illegal dismissal, claiming that since 1981, he has been employed by Philcom as its
company physician and was dismissed without due process. On 12/21/1998, Labor Arbiter Ramon
Valentin C. Reyes dismissed De Vera's complaint for lack of merit. De Vera was an independent
contractor and that he was not dismissed but rather his contract with ended when said contract was not
renewed after 12/31/1996. Upon De Veras appeal to NLRC, the Labor Arbiters decision was reversed
and declared De Vera a regular employee and accordingly directed the company to reinstate him to his
former position without loss of seniority rights and privileges and with full backwages from the date of
his dismissal until actual reinstatement. Philcom filed a motion for reconsideration but it was denied by
the NLRC, prompting it file a petition to CA for certiorari imputing grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of the NLRC. Subsequently, CA modified NLRCs decision. CA
deleted the award of traveling allowance and ordered payment of separation pay to De Vera in lieu of
reinstatement. The companys latest motion for reconsideration was denied. Hence, this petition. ISSUE
WON an employer-employee relationship exists between petitioner and respondent


HELD NO. The Court held that in determining the existence of an employer-employee relationship, has
invariably adhered to the four-fold test, to wit: [1] the selection and engagement of the employee; [2]
the payment of wages; [3] the power of dismissal; and [4] the power to control the employee's conduct,
or the so-called 'control test', considered to be the most important element. Application of the four-fold
test: Selection and engagement of the employee Proposal Letter (5/15/1981) It was respondent
himself who sets the parameters of what his duties would be in offering his services to petitioner. My
plan of works and targets shall cover the duties and responsibilities required of a practitioner in
industrial medicine which includes the following: 1. Application of preventive medicine including
periodic check-up of employees; 2. Holding of clinic hours in the morning and afternoon for a total of
five (5) hours daily for consultation services to employees; 3. Management and treatment of employees
that may necessitate hospitalization including emergency cases and accidents; 4. Conduct pre-
employment physical check-up of prospective employees with no additional medical fee; 5. Conduct
home visits whenever necessary; 6. Attend to certain medical administrative functions such as
accomplishing medical forms, evaluating conditions of employees applying for sick leave of absence and
subsequently issuing proper certification, and all matters referred which are medical in nature. Payment
of wages and power of dismissal Letter dated 4/211982 De Veras proposal for the extension of his
two-hour service indicated that PHILCOM did not control complainants schedule and as to how he is to
be paid for his services. This serves as proof that the complainant understood his relationship with
PHILCOM as a retained physician and not as an employee. If he were an employee he could not
negotiate as to his hours of work. Term of the Contract The contract (9/6/1982) signed by De Vera
clearly states that is it a retainership contract. The retainer fee and duration of the contract for one year
are clearly indicated in paragraph 5 of said Retainership Contract. The complainant cannot claim that he
was unaware of the term, as he signed and accepted its renewal every year until 1994 without any
objections. As a Doctor of Medicine, a literate and educated person, the complainant cannot claim that
he does not know what contract he signed and that it was renewed on a year to year basis. Tax and
SSS Contribution The labor arbiter noted that from the time he started to work for Philcom, he never
was included in its payroll; was never deducted any contribution for remittance to the SSS; and was in
fact subjected by Philcom to the 10% withholding tax for his professional fee, matters which are simply
inconsistent with an employer-employee relationship.

Power to terminate The power to terminate the parties' relationship was mutually vested on both.
Either may terminate the arrangement at will, with or without cause. Control Test Remarkably absent
from the parties' arrangement is the element of control, whereby the employer has reserved the right to
control the employee not only as to the result of the work done but also as to the means and methods
by which the same is to be accomplished. Petitioner had no control over the means and methods by
which respondent went about performing his work at the company premises. De Vera could even
embark in the private practice of his profession, not to mention the fact that respondent's work hours
and the additional compensation were negotiated upon by the parties. The parties themselves
practically agreed on every terms and conditions of respondent's engagement, which thereby negates
the element of control in their relationship. For sure, respondent has never cited even a single instance
when petitioner interfered with his work. DISPOSITION: Petition is GRANTED and CAs is REVERSED and
SET ASIDE. Labor Arbiters decision is REINSTATED.

Lopez vs Metropolitan Waterworks and Sewerage Sy
Agreement, petitioners were engaged by the MWSS as collectorscontractors, wherein the former agreed
to collect from the concessionaires of MWSS, charges, fees, assessments of rents for water, sewer
and/or plumbin
Concession Agreement with Manila Water Service, Inc. and Benpress-Lyonnaise, wherein the collection
of bills was transferred to said private concessionaires, effectively terminating the contracts of service
but not petitioners. Instead, they were refused said benefits, MWSS relying on a resolution of the CSC
that contract collectors of the MWSS are not its employees and therefore not entitled to the benefits
claims, stating that petitioners were engaged by MWSS through a contract of service, which explicitly
provides that a bill collector-contractor is not an MWSS employee. Relying on Part V of CSC
Memorandum Circular No. 38, Series of 1993, the CSC stated that contract services/job orders are not
considered government services, which do not have to be submitted to the CSC for approval, unlike
contractual and plantilla appointments. Moreover, it found that petitioners were unable to show that
they have contractual appointments duly attested by the CSC. In addition, the CSC stated that
petitioners, not being permanent employees of MWSS and not included in the list submitted to the
concessionaire, are not entitled to severance pay. Petitioners claims for retirement benefits and
reconsideration of the CSC Resolution,
affirmed the ruling of the CSC. ISSUE: Whether or not petitioners were employees of the MWSS and,
consequently, entitled to the benefits they claim. HELD: Yes. The Court ruled that the bill collectors were
regular employees of Manila Water. For purposes of determining the existence of employer-employee
relationship, the Court has consistently adhered to the four-fold test, namely: (1) whether the alleged
employer has the power of selection and engagement of an employee; (2) whether he has control of the
employee with respect to the means and methods by which work is to be accomplished; (3) whether he
has the power to dismiss; and (4) whether the employee was paid wages. Of the four, the control test is
the most important element.

A review of the circumstances surrounding the case reveals that petitioners are employees of MWSS.
Despite the obvious attempt of MWSS to categorize petitioners as mere service providers, not
employees, by entering into contracts for services, its actuations show that they are its employees, pure
and simple. MWSS wielded its power of selection when it contracted with the individual petitioners,
undertaking separate contracts or agreements. The same goes true for the power to dismiss. Although
termed as causes for termination of the Agreement, a review of the same shows that the grounds
indicated therein can similarly be grounds for termination of employment. On the issue of
remuneration, MWSS claims that the compensation received by petitioners does not fall under the
definition of wages as provided in Section 2(i) of P.D. 1146, which is the basic pay or salary received by
an employee, pursuant to his employment appointments, excluding per diems, bonuses, overtime pay
and allowances; thus petitioners are not its employees. Petitioners rendered services to MWSS for
which they were paid and given similar benefits due the other employees of MWSS. Significantly, MWSS
granted petitioners benefits usually given to employees, to wit: COLA, meal, emergency, and traveling
allowances, hazard pay, cash gift, and other bonuses. In an unabashed bid to claim credit for itself,
MWSS professes that these additional benefits were its acts of benevolence and generosity. We are not
impressed. The control test merely calls for the existence of the right to control, and not the exercise
thereof. It is not essential for the employer to actually supervise the performance of duties of the
employee, it is enough that the former has a right to wield the power. While petitioners were contract-
collectors of MWSS, they were under the latters direction as to where and how to perform their
collection and were even subject to disciplinary measures. Trainings were in fact conducted to ensure
that petitioners are conversant of the procedures of the MWSS Other manifestations of control are
evident from the records. The power to transfer or reassign employees is a management prerogative
exclusively enjoyed by employers. In this case, MWSS had free reign over the transfer of bill collectors
from one branch to another. MWSS also monitored the performance of the petitioners and determined
their efficiency ratings. The Court has invariably affirmed that it will not hesitate to tilt the scales of
justice to the labor class for no less than the Constitution dictates that the State . . . shall protect the
rights of workers and promote their welfare. It is committed to this policy and has always been quick to
rise to defense in the rights of labor, as in this case.

as a resident physician and after 3 years, he was promoted to Senior Resident Physician.The Ministry of
to the position of Medical Special
1988, the DOH issued Dept. Order 347, which required board certification as a prerequisite for renewal
of Health issued D.O.
478 (amending Sec.4 of D.O. 347) which provided for an extension of appointments of Medical
Specialists in cases where termination of those who failed to meet the requirement for board
certification might result in disruption of hospi
record and performance, the Medical Credentials Committee of the NCMH recommended non-renewal
nd
Service held an emergency meeting to discuss the petitioners case. In the meeting, the overall
consensus among the dept. heads was for petitioners non-renewal where his poor performance,
frequent tardiness and inflexibility were pointed as among the factors responsible for the
the temporary appointment can be terminated any time and that any renewal of such appointment is
authorities to vacate his cottage. Refusing to comply, petitioner filed a petition with the Merit System
Protection Board (MSPB) complaining about the alleged non-renewal of his appointment, the MSPB,
Commission (CSC) which dismissed the same.
ISSUE WON petitioners removal from a permanent position was void for being violative of the
constitutional provision on security of tenure.
HELD:NO A residency or resident physician position in a medical specialty is never a permanent one.
Residency connotes training and temporary status. Promotion to the next post- graduate year is based
on merit and performance determined by periodic evaluations and examinations of knowledge, skills
and bedside manner. Under this system, residents, especially those in university teaching hospitals
enjoy their right to security of tenure only to the extent that they periodically make the grade. While
physicians (or consultants) of specialist rank are not subject to the same stringent evaluation
procedures, specialty societies require continuing education as a requirement for accreditation in good
standing, in addition to peer review processes based on performance, mortality and morbidity audits,
feedback from residents, interns and medical students and research output. The nature of the contracts
of resident physicians meets traditional tests for determining employer employee relationships, but
because the focus of residency is training, they are neither here nor there. Moreover, stringent
standards and requirements for renewal of specialist rank positions or of promotion to the next
postgraduate residency year are necessary because lives are ultimately at stake. From the position of
senior resident physician, the next logical step was his promotion to the rank of Medical Specialist 1, a
position which he apparently accepted. Such status, however, clearly carried with it certain professional
responsibilities including the responsibility of keeping up with the minimum requirements of specialty
rank, the responsibility of keeping abreast with current knowledge in his specialty and in Medicine in
general, and the responsibility of completing board certification requirements within a reasonable
period of time. The evaluation made by petitioner's peers and superiors clearly showed that he was
deficient in a lot of areas, in addition he was not even board-certified. As respondent CSC has correctly
pointed out, the appointment was for a definite and renewable period which, when it was not renewed,
did not involve a dismissal but an expiration of the petitioners term.

TRANSPORT CORP V. EJANDRA 428 SCRA 725 (2004)
FACTS: Rogelio Ejandra worked for petitioner bus company as a driver. On Jan 31 1996, he was
apprehended for obstruction of traffic. His license was confiscated. He reported this to his manager,
Oscar Pasquin, who gave him P500 to redeem the license. He was able to retrieve the license after a
week since the apprehending officer turned it in only then. 1. On Feb 8, 1996, he reported for work. The
company said they were reviewing if they were going to allow him drive again. Also, he was being
blamed for damage to the bus. Ejandra said the bus was damaged during the week he wasnt able to
drive. 2. Petitioner, on the other hand, claims that Ejandra is a habitual absentee and has abandoned his
job. 3. To belie private respondents allegation that his license had been confiscated, petitioner asserted
that, had it been true, he should have presented an apprehension report and informed petitioner of his
problems with the LTO. But he did not. 4. Petitioner further argued that private respondent was not an
employee because theirs was a contract of lease and not of employment, with petitioner being paid on
commission basis. 5. The labor arbiter ruled in favor of Ejandra. It was held that he didnt abandon his
work, since there was valid reason for his 1week absence. He also was not afforded due process. NLRC
and CA affirmed the same.
ISSUE: WON THERE WAS AN EMPLOYER-EMPLOYEE RELATIONSHIP; WON EJANDRA WAS DISMISSED FOR
JUST CAUSE
HELD: Yes. Petitioner is barred to negate the existence of an employer-employee relationship. He has
invoked rulings on the right of an employer to dismiss an employee for just cause. The power to dismiss
an employee is one of the indications that there was such relationship. Also, A97 Labor Code states that
employees can be paid in form of commissions. By adopting said rulings, petitioner impliedly admitted
that it was in fact the employer of private respondent. According to the control test, the power to
dismiss an employee is one of the indications of an employer-employee relationship. Petitioners claim
that private respondent was legally dismissed for abandonment was in fact a negative pregnant: an
acknowledgement that there was no mutual termination of the alleged contract of lease and that
private respondent was its employee. The fact that petitioner paid private respondent on commission
basis did not rule out the presence of an employeeemployer relationship. Article 97(f) of the Labor Code
clearly provides that an employees wages can be in the form of commissions.

To constitute abandonment, two elements must concur: (1) the failure to report for work or absence
without valid or justifiable reason and (2) a clear intention to sever the employer-employee relationship.
Petitioner did not fulfill the requisites. First, Ejandras absence was justified since his license wasnt
release until after a week. Second, Ejandra did not want to sever their relationship when he got his
license back. Third, labor arbiter Yulo correctly observed that, if private respondent really abandoned his
work, petitioner should have reported such fact to the nearest Regional Office of the Department of
Labor and Employment in accordance with Section 7, Rule XXIII, Book V of Department Order No. 9,
series of 1997 (Rules Implementing Book V of the Labor Code). Petitioner made no such report. In
addition, he wasnt also given due process by not giving him notice and hearing.

INSULAR LIFE ASSURANCE CO., LTD. vs. NLRC and MELECIO BASIAO
FACTS On 7/2/1968, Insular Life Assurance Co., Ltd. and Melecio T. Basiao entered into a contract,
stipulating that Basiao (1) would be an authorized agent of the Company; (2) to receive compensation in
the form of commissions; and (3) the Company's Rate Book and its Agent's Manual, as well as all its
circulars will be deemed part of the contract. Other provisions include matters governing the relations of
the parties, the duties of the Agent, the acts prohibited to him, and the modes of termination of the
agreement, viz: RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as
to time, place and means of soliciting insurance. Nothing herein contained shall therefore be construed
to create the relationship of employee and employer between the Agent and the Company. However,
the Agent shall observe and conform to all rules and regulations which the Company may from time to
time prescribe. 4 years later, the parties entered into another contract (April 1972Agency Manager's
Contract) and to implement his end, Basiao organized an agency which he named M. Basiao and
Associates, while concurrently fulfilling his commitments under the first contract with the Company.
However, it was terminated in May 1979. Basiao sought for a reconsideration and later sued the
Company in a civil action. He claimed that this prompted the Company to terminate his engagement
under the first contract and to stop payment of his commissions starting 4/1/1980. Thereafter, Basiao
filed a complaint against the Company and its president. Without contesting the termination of the first
contract, the complaint sought to recover commissions allegedly unpaid, plus attorney's fees. The
Company disputed the Ministry's jurisdiction over Basiao's claim and asserted that he was not a
Company's employee, but an independent contractor. The Company had no obligation to him for unpaid
commissions under the terms and conditions of his contract. The labor arbiters decision had established
an employer-employee relationship between him and the Company, and this conferred jurisdiction on
the Ministry of Labor to adjudicate his claim. On appeal, the decision was affirmed by NLRC. Hence, the
present petition for certiorari and prohibition. Petitioners Defense The terms of the contract the
Company and Basiao entered into expressly conferred to Basiao an independent contractor status. The
Company did not have a hand in determining the time, place and means of soliciting insurance and have
set no accomplishment quotas. The Company only compensated him on the basis of results obtained.
Further, it contends that they do not constitute the decisive determinant of the

nature of his engagement, invoking precedents to the effect that the critical feature distinguishing the
status of an employee from that of an independent contractor is control, that is, whether or not the
party who engages the services of another has the power to control the latter's conduct in rendering
such services.
ISSUES WON Basiao had become the Company's employee by virtue of the contract invoked by him,
placing his claim within the original and exclusive jurisdiction of the labor arbiter under the Labor Code
HELD NO. The Court notes that the provisions of the contract which obliged Basiao to "observe and
conform to all rules and regulations which the Company may from time to time prescribe," as well as to
the fact that the Company prescribed the qualifications of applicants for insurance, processed their
applications and determined the amounts of insurance cover to be issued as indicative of the control,
which made Basiao, in legal contemplation, an employee of the Company. However, in Viana vs. Alejo
Al-Lagadan, it was held that that not every form of control that the hiring party reserves to himself over
the conduct of the party hired in relation to the services rendered may be accorded the effect of
establishing an employer-employee relationship between them in the legal or technical sense of the
term. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party
hired and eschews any intervention whatsoever in his performance of the engagement. Logically, the
line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and
those that control or fix the methodology and bind or restrict the party hired to the use of such means.
The first, which aim only to promote the result, create no employer-employee relationship unlike the
second, which address both the result and the means used to achieve it . The distinction acquires
particular relevance in the case of an enterprise affected with public interest, as is the business of
insurance, and is on that account subject to regulation by the State with respect, not only to the
relations between insurer and insured but also to the internal affairs of the insurance company. The
Insurance Code provides the rules and regulations governing the conduct of the business and these are
enforced by the Insurance Commissioner. It is expected for an insurance company to promulgate a set
of rules to guide its commission agents in selling its policies that are in line with the law. The character
of such rules (e.g. which prescribe the qualifications of persons who may be insured, determination of
the premiums to be paid and the schedules of payment) does not invade the agent's contractual
prerogative to adopt his own selling methods or to sell insurance at his own time and convenience,
hence cannot justifiably be said to establish an employer-employee relationship between him and the
company.
The Company has limited themselves to pointing out that Basiao's contract with the Company bound
him to observe and conform to such rules and regulations as the latter might from time to time
prescribe. There has been no showing that any such rules or regulations were in fact promulgated, much
less that any rules existed or were issued which effectively controlled or restricted his choice of methods
or the methods themselves of selling insurance. Absent such showing, the Court will not speculate
that any exceptions or qualifications were imposed on the express provision of the contract leaving
Basiao "... free to exercise his own judgment as to the time, place and means of soliciting insurance."
The Court rules that under the contract invoked by him, Basiao was not an employee of the petitioner,
but a commission agent, an independent contractor whose claim for unpaid commissions should have
been litigated in an ordinary civil action. DISPOSITION: NLRCs decision is set aside and complaint by
respondent is DISMISSED.

Sevilla vs CA 16
leased the premises belonging to Mrs. Segundina Noguera for the formers use as a branch office. Lina
Sevilla bound herself solidarily liable with TWS for the prompt payment of the monthly rentals thereon.
any fare brought in on the efforts of Sevilla, 4% was to go to Sevilla and 3% was to be withheld by TWS.
to have been informed that Sevilla was connected with a rival firm, the Philippine Travel
This was firmed up by two resolutions of the TWS board of directors to abolish the office of the manager
and VP of the branch office and authorizing the corporate secretary to receive the properties in the said
being
Sevilla nor her employees could enter the locked premises, she filed a complaint against TWS with a
prayer for the issuance of a mandatory preliminary injunct
holding that TWS, being the true lessee, was within its prerogative to terminate the lease and padlock
the premises. It likewise found that Sevilla was a mere employee of TWS and as such, was bound by the
acts of h
between the parties was in the character of employer-employee relationship. HELD: No. We are
convinced, considering the circumstances and from the respondent Court's recital of facts, that the ties
had contemplated a principal agent relationship, rather than a joint managament or a partnership.
When the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist World Service,
Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It is the essence of this
contract that the agent renders services "in representation or on behalf of another. 18 In the case at
bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service,
Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said,
Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's authority as owner
of the business undertaking.

But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible
with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an
interest, the agency having been created for mutual interest, of the agent and the principal. 19 It
appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in
the business entrusted to her. Moreover, she had assumed a personal obligation for the operation
thereof, holding herself solidarily liable for the payment of rentals. She continued the business, using
her own name, after Tourist World had stopped further operations. Her interest, obviously, is not to the
commissions she earned as a result of her business transactions, but one that extends to the very
subject matter of the power of management delegated to her. It is an agency that, as we said, cannot be
revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the
petitioner, Lina Sevilla, to damages. In this jurisdiction, there has been no uniform test to determine the
evidence of an employer-employee relation. In general, we have relied on the so-called right of control
test, "where the person for whom the services are performed reserves a right to control not only the
end to be achieved but also the means to be used in reaching such end." Subsequently, however, we
have considered, in addition to the standard of right-of control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in the payrolls, in determining the
existence of an employeremployee relationship. Lina Sevilla, was not subject to control by the private
respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the means used
in connection therewith. Under the contract of lease covering the Tourist Worlds Ermita office, she had
bound herself in solidum as and for rental payments, an arrangement that would be like claims of a
master-servant relationship. True the respondent Court would later minimize her participation in the
lease as one of mere guaranty, that does not make her an employee of Tourist World, since in any case,
a true employee cannot be made to part with his own money in pursuance of his employer's business,
or otherwise, assume any liability thereof. When the branch office was opened, the same was run by the
herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought
in on the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was
under the control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the business,
obviously relied on her own gifts and capabilities It is further admitted that Sevilla was not in the
company's payroll. For her efforts, she retained 4% in commissions from airline bookings, the remaining
3% going to Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned
compensation in fluctuating amounts depending on her booking successes.

The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's
employee. As we said, employment is determined by the right-of-control test and certain economic
secure business permits, construction permits and other licenses for the initial operation of the
recruitment of all employees and perform management administration functions; represent the
15, 2001, petitioner asked for her salary but she was informed that she is no longer connected with the

that petitioner was illegally dismissed. The NLRC affirmed the Decision of the LA. The CA reversed the
NLRCs decision. ISSUE: WON there was an employer-employee relationship? HELD: There are instances
when, aside from the employers power to control the employee with respect to the means and
methods by which the work is to be accomplished, economic realities of the employment relations help
provide a comprehensive analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity. The better approach would therefore
be to adopt a two-tiered test involving: (1) the putative employers power to control the employee with
respect to the means and methods by which the work is to be accomplished; and (2) the underlying
economic realities of the activity or relationship. This two-tiered test would provide us with a framework
of analysis, which would take into consideration the totality of circumstances surrounding the true
nature of the relationship between the parties. This is especially appropriate in this case where there is
no written agreement or terms of reference to base the relationship on; and due to the

complexity of the relationship based on the various positions and responsibilities given to the worker
over the period of the latters employment. Thus, the determination of the relationship between
employer and employee depends upon the circumstances of the whole economic activity, such as: (1)
the extent to which the services performed are an integral part of the employers business; (2) the
extent of the workers investment in equipment and facilities; (3) the nature and degree of control
exercised by the employer; (4) the workers opportunity for profit and loss; (5) the amount of initiative,
skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer; and (7) the degree
of dependency of the worker upon the employer for his continued employment in that line of business.
The proper standard of economic dependence is whether the worker is dependent on the alleged
employer for his continued employment in that line of business. By applying the control test, there is no
doubt that petitioner is an employee of Kasei Corporation because she was under the direct control and
supervision of Seiji Kamura, the corporations Technical Consultant. She reported for work regularly and
served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and
Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for the proper operation of
the corporation such as securing business permits and other licenses over an indefinite period of
engagement. Under the broader economic reality test, the petitioner can likewise be said to be an
employee of respondent corporation because she had served the company for six years before her
dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses
and allowances, as well as deductions and Social Security contributions from. It is therefore apparent
that petitioner is economically dependent on respondent corporation for her continued employment in
the latters line of business.

CHAVEZ V. NLRC (SUPREME PACKAGING INC) 448 SCRA 478 (2005) FACTS: The respondent company,
Supreme Packaging, Inc. engaged the services of the petitioner, Pedro Chavez, as truck driver on
October 25, 1984. The respondent company furnished the petitioner with a truck. 1. Sometime in 1992,
the petitioner expressed to respondent Alvin Lee, respondent companys plant manager, his (the
petitioners) desire to avail himself of the benefits that the regular employees were receiving such as
overtime pay, nightshift differential pay, and 13th month pay, among others. Although he promised to
extend these benefits to the petitioner, respondent Lee failed to actually do so. 2. On February 20, 1995,
the petitioner filed a complaint for regularization with the Regional Arbitration Branch No. III of the
NLRC in San Fernando, Pampanga. Before the case could be heard, respondent company terminated the
services of the petitioner. 3. Consequently, on May 25, 1995, the petitioner filed an amended complaint
against the respondents for illegal dismissal, unfair labor practice and nonpayment of overtime pay,
nightshift differential pay, and 13th month pay, among others. 4. The respondents, for their part, denied
the existence of an employer-employee relationship between the respondent company and the
petitioner. They averred that the petitioner was an independent contractor as evidenced by the contract
of service which he and the respondent company entered into. The relationship of the respondent
company and the petitioner was allegedly governed by this contract of service. 5. The respondents
insisted that the petitioner had the sole control over the means and methods by which his work was
accomplished. He paid the wages of his helpers and exercised control over them. As such, the petitioner
was not entitled to regularization because he was not an employee of the respondent company. 6. The
respondents, likewise, maintained that they did not dismiss the petitioner. Rather, the severance of his
contractual relation with the respondent company was due to his violation of the terms and conditions
of their contract. ISSUE: WON THERE WAS AN EMPLOYER-EMPLOYEE RELATIONSHIP THAT EXISTED
BETWEEN THE RESPODENT COMPANY AND THE PETITIONER HELD: The elements to determine the
existence of an employment relationship are: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the employers power to control the employees
conduct. The most important element is the employers control of the employees conduct, not only as
to the result of the work to be done, but also as to the means and methods to accomplish it. All the four
elements are present in this case.

Of the four elements of the employer-employee relationship, the control test is the most important.
Although the respondents denied that they exercised control over the manner and methods by which
the petitioner accomplished his work, a careful review of the records shows that the latter performed
his work as truck driver under the respondents supervision and control. Their right of control was
manifested by the following attendant circumstances: 1. The truck driven by the petitioner belonged to
respondent company; 2. There was an express instruction from the respondents that the truck shall be
used exclusively to deliver respondent companys goods; 3. Respondents directed the petitioner, after
completion of each delivery, to park the truck in either of two specific places only, to wit: at its office in
Metro Manila at 2320 Osmea Street, Makati City or at BEPZ, Mariveles, Bataan and; 4. Respondents
determined how, where and when the petitioner would perform his task by issuing to him gate passes
and routing slips. These circumstances, to the Courts mind, prove that the respondents exercised
control over the means and methods by which the petitioner accomplished his work as truck driver of
the respondent company. The contract of service indubitably established the existence of an employer-
employee relationship between the respondent company and the petitioner. It bears stressing that the
existence of an employer-employee relationship cannot be negated by expressly repudiating it in a
contract and providing therein that the employee is an independent contractor when, as in this case, the
facts clearly show otherwise. Indeed, the employment status of a person is defined and prescribed by
law and not by what the parties say it should be. The employer-employee relationship being established,
the Court ruled that private respondent is guilty of illegal dismissal.

SAN MIGUEL CORPORATION vs. ABELLA, et al.
FACTS Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative entered into a one-
year Contract of Services commencing on 1/1/1993, to be renewed on a month to month basis until
terminated by either party. The provisions of the contract provide that: (1) The cooperative shall
perform and/or provide for the company, on a nonexclusive basis for a period of one year the following
services for the Bacolod Shrimp Processing Plant: (a) Messengerial/Janitorial; (b) Shrimp
Harvesting/Receiving; & (c) Sanitation/Washing/Cold Storage (2) Further, as per Section 4 of the
Contract, there is no employer-employee relationship between the company and the cooperative, or the
cooperative and any of its members, or the company and any members of the cooperative. The
cooperative is an association of self-employed members, an independent contractor, and an
entrepreneur. It is subject to the control and direction of the company only as to the result to be
accomplished by the work or services herein specified, and not as to the work herein contracted. The
cooperative and its members recognize that it is taking a business risk in accepting a fixed service fee to
provide the services contracted for and its realization of profit or loss from its undertaking, in relation to
all its other undertakings, will depend on how efficiently it deploys and fields its members and how they
perform the work and manage its operations. Pursuant to the contract, Sunflower engaged private
respondents to SMCs Bacolod Shrimp Processing Plant. The contract was deemed renewed by the
parties every month after its expiration on 1/1/1994 and private respondents continued to perform
their tasks until 9/11/1995. In July 1995, private respondents filed a complaint before the NLRC, praying
to be declared as regular employees of SMC. Subsequently, they filed an Amended Complaint which
includes illegal dismissal as additional cause of action following SMCs closure of its Bacolod Shrimp
Processing Plant on 9/15/1995. SMC filed a Motion for Leave to File Attached Third Party Complaint to
implead Sunflower as Third Party Defendant which was granted by Labor Arbiter Ray Alan T. Drilon. On
9/30/1996, SMC filed before the DOLE a Notice of Closure of its aquaculture operations effective on
even date, citing serious business losses. Labor Arbiter Drilon dismissed private respondents complaint
for lack of merit, sustaining the stand of SMC that it could properly exercise its management prerogative
to contract out the preparation and processing aspects of its aquaculture operations.

Private respondents appealed to the NLRC, but in its Decision dated 12/29/1998, the NLRC dismissed the
appeal for lack of merit, it finding that third party respondent Sunflower was an independent contractor.
Subsequent Motion for Reconsideration filed to NLRC was denied and so they filed a petition for
certiorari before the CA. By Decision of 2/7/2001, CA reversed NLRCs decision based on the following
accounts:
Terms of the non-exclusive contract of service showed a clear intent to abstain from establishing an
employer-employee relationship between SMC and Sunflower or the latters members, the extent to
which the parties successfully realized this intent in the light of the applicable law is the controlling
factor in determining the real and actual relationship between or among the parties Power to control
petitioners conduct a. It appears that Petitioners were under the direct control and supervision of SMC
supervisors. Petitioners working inside the premises of SMC, were under the control and supervision of
SMC both as to the manner and method in discharging their functions and as to the results b. SMC
would never have allowed the petitioners to work within its premises, using its own facilities, equipment
and tools, alongside SMC employees discharging similar or identical activities unless it exercised a
substantial degree of control and supervision over the petitioners not only as to the manner they
performed their functions but also as to the end results of such functions. c. Moreover, the 97
employees is a considerable workforce and raises the suspicion that the non-exclusive service contract
between SMC and Sunflower was designed to evade the obligations inherent in an employer-employee
relationship. The CA held that it cannot allow these two entities through the convenience of a
nonexclusive service contract to stipulate on the existence of employer-employee relation. Such
existence is a question of law which cannot be made the subject of agreement to the detriment of the
petitioners.
ISSUE WON the Respondents are employees of SMC
HELD YES. The Petition lacks merit. SMC insists that private respondents are the employees of
Sunflower, an independent contractor. On the other hand, private respondents assert that Sunflower is
a labor-only contractor. The test to determine the existence of independent contractorship is whether
one claiming to be an independent contractor has contracted to do the work according to his own
methods and without being subject to the control of the employer, except only as to the results of the
work.


In legitimate labor contracting, the law creates an employer-employee relationship for a limited
purpose. The principal employer becomes jointly and severally liable with the job contractor, only for
the payment of the employees



wages whenever the contractor fails to pay the same. Other than that, the principal employer is not
responsible for any claim made by the employees. In labor-only contracting, the statute creates an
employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor
laws. The contractor is considered merely an agent of the principal employer and the latter is
responsible to the employees of the labor-only contractor as if such employees had been directly
employed by the principal employer.

The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the
existence of an employer-employee relationship between SMC and private respondents. The language
of a contract is not, however, determinative of the parties relationship; rather it is the totality of the
facts and surrounding circumstances of the case. A party cannot dictate, by the mere expedient of a
unilateral declaration in a contract, the character of its business (i.e., whether as labor-only contractor
or job contractor), it being crucial that its character be measured in terms of and determined by the
criteria set by statute. What appears from the circumstances of the cases is that, Sunflower does not
have substantial capitalization or investment in the form of tools, equipment, machineries, work
premises and other materials to qualify it as an independent contractor and that during the existence of
its service contract with SMC, did not own a single machinery, equipment, or working tool used in the
processing plant. Everything was owned and provided by respondent SMC. The lot, the building, and
working facilities are owned by respondent SMC. The Court considered the following uncontroverted
allegations of private respondents in the Joint Affidavit:






The job description provided by SMC itself, the work assigned to private respondents was directly
related to the aquaculture operations of SMC. Undoubtedly, the nature of the work performed by
private respondents in shrimp harvesting, receiving and packing formed an integral part of the shrimp
processing operations of SMC. As for janitorial and messengerial services, that they are considered
directly related to the principal business of the employer has been jurisprudentially recognized.
Sunflower did not carry on an independent business or undertake the performance of its service
contract according to its own manner and method, free from the control and supervision of SMC, its
apparent role having been merely to recruit persons to work for SMC. Daily time records were signed by
SMC supervisors, which fact shows that SMC exercised the power of control and supervision over its
employees and control of the premises in which private respondents worked was by SMC. These tend to
disprove the independence of the contractor.

As the CA has observed, Private respondents had been working in the aqua processing plant inside the
SMC compound alongside regular SMC shrimp processing workers performing identical jobs under the
same SMC supervisors. This circumstance is

another indicium of the existence of a labor-only contractorship. And as private respondents alleged in
their Joint Affidavit, Sunflower did not cater to clients other than SMC and with the closure of SMCs
Bacolod Shrimp Processing Plant, Sunflower likewise ceased to exist. All the foregoing considerations
affirm by more than substantial evidence the existence of an employer-employee relationship between
SMC and private respondents. Since private respondents who were engaged in shrimp processing
performed tasks usually necessary or desirable in the aquaculture business of SMC, they should be
deemed regular employees of the latter and as such are entitled to all the benefits and rights
appurtenant to regular employment. They should thus be awarded differential pay corresponding to the
difference between the wages and benefits given them and those accorded SMCs other regular
employees. DISPOSITION: Petition is DENIED. CAs decisions are AFFIRMED with MODIFICATION. Note:
The other issue focused on the validity of the retrenchment. Private Respondents were deemed
employees of SMC. SMC has proven substantial business reverses justifying retrenchment of its
employees. However, SMC merely informed Private Respondents of their dismissal and failed to comply
with the notice requirement. The Court awards each Private Respondents P50,000 as nominal damages.

Agreement, petitioners were engaged by the MWSS as collectorscontractors, wherein the former agreed
to collect from the concessionaires of MWSS, charges, fees, assessments of rents for water, sewer
d into a
Concession Agreement with Manila Water Service, Inc. and Benpress-Lyonnaise, wherein the collection
of bills was transferred to said private concessionaires, effectively terminating the contracts of service
employees of the MWSS were paid their retirement benefits,
but not petitioners. Instead, they were refused said benefits, MWSS relying on a resolution of the CSC
that contract collectors of the MWSS are not its employees and therefore not entitled to the benefits
claims, stating that petitioners were engaged by MWSS through a contract of service, which explicitly
provides that a bill collector-contractor is not an MWSS employee. Relying on Part V of CSC
Memorandum Circular No. 38, Series of 1993, the CSC stated that contract services/job orders are not
considered government services, which do not have to be submitted to the CSC for approval, unlike
contractual and plantilla appointments. Moreover, it found that petitioners were unable to show that
they have contractual appointments duly attested by the CSC. In addition, the CSC stated that
petitioners, not being permanent employees of MWSS and not included in the list submitted to the
concessionaire, are not entitled to severance pay. Petitioners claims for retirement benefits and
ioners filed a petition for review with the Court of Appeals which
affirmed the ruling of the CSC. ISSUE: Whether petitioners are not the employees of MWSS by virtue of
the Agreement. HELD: The petitioners must be considered employees of MWSS, despite the obvious
attempt of MWSS to categorize petitioners as mere service providers, not employees, by entering into
contracts for services Under the Agreement, MWSS may terminate it if the Collector-Contractor does
or fails to do any of the following: Fails to collect = neglect of duty; Erases, alters, or changes any figure
on the bills or remittance receipt for purposes of defrauding either the concessioner or the MWSS
=fraud; discourteous, dishonest, arrogant = misconduct.

Although termed as causes for termination of the Agreement, a review of the same shows that the
grounds indicated therein can similarly be grounds for termination of employment. MWSS makes an
issue out of the proviso in the Agreement that specifically denies the existence of employer-employee
relationship between it and petitioners. It is axiomatic that the existence of an employer-employee
relationship cannot be negated by expressly repudiating it in an agreement and providing therein that
the employee is not an MWSS employee when the terms of the agreement and the surrounding
circumstances show otherwise. The employment status of a person is defined and prescribed by law and
not by what the parties say it should be. The relationship defined by the Agreement cannot fall within
the purview of contract of services or job orders. Payments made by MWSS subscribers are the
lifeblood of the company. Viewed in that context the work rendered by the petitioners is essential to the
companys survival and growth Petitioners are indeed regular employees of the MWSS. The primary
standard of determining regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual business or trade of the employer. The
connection can be determined by considering the nature of the work performed and its relation to the
scheme of the particular business or trade in its entirety. Likewise, the repeated and continuing need for
the performance of the job has been deemed sufficient evidence of the necessity, if not indispensability
of the activity to the business. Some of the petitioners had rendered more than two decades of service
to the MWSS. The continuous and repeated rehiring of these bill collectors indicate the necessity and
desirability of their services, as well as the importance of the role of bill collectors in the MWSS.

SONZA V ABS- -CBN signed Agreement with Mel and Jay
Management and Devt Corp (MJMDC), which agreed to provide Sonzas services exclusively to the
-CBN before the
filed Motion to Dismiss because there was no employer-employee relationship.


to reason that a "talent" cannot be considered as an employee. NLRC affirmed Arbiters decision. Sonza
filed certiorari action with CA, which dismissed the case. Hence this petition. ISSUE WON there was an
employer-employee relationship between ABS-CBN and Sonza? HELD: No employer-employee
relationship. SONZA maintains that all essential elements of an employer-employee relationship are
present in this case. The last element, the so-called control test, is the most important element Power of
Control The Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as
pre- and post-production staff meetings. ABS-CBN could not dictate the contents of SONZAs script.
However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests. The
clear implication is that SONZA had a free hand on what to say or discuss in his shows provided he did
not attack ABS-CBN or its interests. The Agreement stipulates that SONZA shall abide with the rules and
standards of performance covering talents of ABS-CBN. The Agreement does not require SONZA to
comply with the rules and standards of performance prescribed for employees of ABSCBN. In any event,
not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the
former. In this case, SONZA failed to show that these rules controlled his performance. We find that
these general rules are

merely guidelines towards the achievement of the mutually desired result, which are top-rating
television and radio programs that comply with standards of the industry. We have ruled that: Further,
not every form of control that a party reserves to himself over the conduct of the other party in relation
to the services being rendered may be accorded the effect of establishing an employer-employee
relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC.
In said case, we held that: Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim only to promote the result, create
no employer-employee relationship unlike the second, which address both the result and the means
used to achieve it. Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme
form of control which ABS-CBN exercised over him. This argument is futile. Being an exclusive talent
does not by itself mean that SONZA is an employee of ABS-CBN. Even an independent contractor can
validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control. SONZA seeks the recovery of allegedly unpaid talent fees, 13th month
pay, separation pay, service incentive leave, signing bonus, travel allowance, and amounts due under
the Employee Stock Option Plan. These claims are all based on the May 1994 Agreement and stock
option plan, and not on the Labor Code. This case call for an interpretation and implementation of the
May 1994 Agreement. In effect, SONZAs cause of action is for breach of contract which is intrinsically a
civil dispute cognizable by the regular courts.

INSULAR LIFE ASSURANCE CO. LTD V. NLRC 287 SCRA (1998) FACTS: On 21 August 1992 petitioner
entered into an agency contract with respondent Pantaleon de los Reyes authorizing the latter to solicit
within the Philippines applications for life insurance and annuities for which he would be paid
compensation in the form of commissions. The contract was prepared by petitioner in its entirety and
De los Reyes merely signed his conformity thereto. 1. It contained the stipulation that no employer-
employee relationship shall be created between the parties and that the agent shall be free to exercise
his own judgment as to time, place and means of soliciting insurance. 2. De los Reyes however was
prohibited by petitioner from working for any other life insurance company, and violation of this
stipulation was sufficient ground for termination of the contract. 3. Aside from soliciting insurance for
the petitioner, private respondent was required to submit to the former all completed applications for
insurance within ninety (90) consecutive days, deliver policies, receive and collect initial premiums and
balances of first year premiums, renewal premiums, deposits on applications and payments on policy
loans. Private respondent was also bound to turn over to the company immediately any and all sums of
money collected by him. 4. On 1 March 1993 petitioner and private respondent entered into another
contract where the latter was appointed as Acting Unit Manager under its office at the Cebu DSO V. It
was similarly provided in the management contract that the relation of the acting unit manager and/or
the agents of his unit to the company shall be that of independent contractor. If the appointment was
terminated for any reason other than for cause, the acting unit manager would be reverted to agent
status and assigned to any unit. 5. As in the previous agency contract, De los Reyes together with his
unit force was granted freedom to exercise judgment as to time, place and means of soliciting insurance.
The agents and underwriters recruited and trained by the acting unit manager would be attached to the
unit but petitioner reserved the right to determine if such assignment would be made or, for any reason,
to reassign them elsewhere. De los Reyes was also expressly obliged to participate in the company's
conservation program and to accept moneys duly receipted on agent's receipts provided the same were
turned over to the company. As long as he was unit manager in an acting capacity, De los Reyes was
prohibited from working for other life insurance companies or with the government. He could not also
accept a managerial or supervisory position in any firm doing business in the Philippines without the
written consent of petitioner. 6. Private respondent worked concurrently as agent and Acting Unit
Manager until he was notified by petitioner on 18 November 1993 that his services were terminated
effective 18 December 1993. He filed a complaint before the Labor Arbiter on the ground that he was
illegally dismissed and that he was not paid his salaries and separation pay.

ISSUE: WON THERE WAS AN EMPLOYER-EMPLOYEE RELATIONSHIP IN THIS CASE HELD: Yes, there was an
employer-employee relationship. It is axiomatic that the existence of an employer-employee
relationship cannot be negated by expressly repudiating it in the management contract and providing
therein that the "employee" is an independent contractor when the terms of the agreement clearly
show otherwise. For, the employment status of a person is defined and prescribed by law and not by
what the parties say it should be. In determining the status of the management contract, the "four-fold
test" on employment 1. Selection and engagement of employee A look at the provisions of the
contract shows that private respondent was appointed as Acting Unit Manager only upon
recommendation of the District Manager. This indicates that private respondent was hired by petitioner
because of the favorable endorsement of its duly authorized officer. The very designation of the
appointment of private respondent as "acting" unit manager obviously implies a temporary employment
status which may be made permanent only upon compliance with company standards such as those
enumerated under the management contract. 2. Payment of wages Under Art. 97 Labor Code, "wage"
shall mean "however designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, price or commission basis 3. Power of dismissal and Power of control
The management contract, however, prescribes reveals that the company practically dictates the
manner by which their jobs are to be carried out particularly exclusivity of service, control of
assignments and removal of agents under private respondent's unit, collection of premiums, furnishing
of company facilities and materials as well as capital described as UDF. These are but hallmarks of the
management system in which herein private respondent worked. This obtaining, there is no escaping
the conclusion that private respondent Pantaleon de los Reyes was an employee of herein petitioner.

TELEVISION AND PRODUCTION EXPONENTS, INC. and/or ANTONIO P. TUVIERA vs. ROBERTO C. SERVAA
FACTS TAPE is a domestic corporation engaged in the production of television programs, such as the
long-running variety program, "Eat Bulaga!" Its president is Antonio P. Tuviera. Respondent Roberto C.
Servaa had served as a security guard for TAPE from March 1987 until he was terminated on 3 March
2000. Respondent filed a complaint for illegal dismissal and nonpayment of benefits against TAPE,
alleging the following: He was first connected with Agro-Commercial Security Agency but was later on
absorbed by TAPE as a regular company guard, detailed at Broadway Centrum. On 3/2/2000, he
received a memorandum about his impending dismissal. At the time of his termination, he was
receiving a monthly salary of P6,000.00 and that holiday pay, unpaid vacation and sick leave benefits
and other monetary considerations were withheld from him. Dismissal was undertaken without due
process and violative of existing labor laws, aggravated by nonpayment of separation pay. In a Motion to
dismiss, TAPE averred that the labor arbiter had no jurisdiction over the case in the absence of an
employer-employee relationship between the parties and that respondent was an independent
contractor falling under the talent group category and was working under a special arrangement which
is recognized in the industry. TAPE made the following assertions: (1) that respondent was initially
employed as a security guard for Radio Philippines Network (RPN-9); (2) that he was tasked to assist
TAPE during its live productions, specifically, to control the crowd; (3) that when RPN-9 severed its
relationship with the security agency, TAPE engaged respondents services, as part of the support group
and thus a talent, to provide security service to production staff, stars and guests of "Eat Bulaga!" as
well as to control the audience during the one-and-a-half hour noontime program; (4) that it was agreed
that complainant would render his services until such time that respondent company shall have engaged
the services of a professional security agency; (5) that in 1995, when his contract with RPN-9 expired,
respondent was retained as a talent and a member of the support group, until such time that TAPE shall
have engaged the services of a professional security agency; (6) that respondent was not prevented
from seeking other employment, whether or not related to security services, before or after attending
to his "Eat Bulaga!" functions; (7) that sometime in late 1999, TAPE started negotiations for the
engagement of a professional security agency, the Sun Shield Security Agency; and (8) that on 2 March
2000, TAPE issued memoranda to all talents, whose functions would be rendered redundant by the
engagement of the security agency, informing them of the managements decision to terminate their
services.

On 6/29/2001, Labor Arbiter Daisy G. Cauton-Barcelona declared respondent to be a regular employee
of TAPE. The Labor Arbiter relied on the nature of the work of respondent, which is securing and
maintaining order in the studio, as necessary and desirable in the usual business activity of TAPE, but
declared the termination to be valid. Thereby ordering, the payment of respondents separation pay
equivalent to 1month pay for every year of service. On appeal, the NLRC (4/22/2002) reversed the Labor
Arbiters decision and considered respondent a mere program employee. Respondent filed a motion for
reconsideration but it was denied. Subsequently, Respondent filed a petition for certiorari with the CA
contending that the NLRC acted with grave abuse of discretion amounting to lack or excess of
jurisdiction when it reversed the decision of the Labor Arbiter. Respondent asserted that he was a
regular employee considering the nature and length of service rendered. Reversing the decision of the
NLRC, CA found respondent to be a regular employee. Finding TAPEs motion for reconsideration
without merit, CA issued a Resolution (4/8/2005) denying said motion. Hence, the instant petition. ISSUE
WON an employer-employee relationship exists between TAPE and respondent HELD YES. Jurisprudence
is abound with cases that recite the factors to be considered in determining the existence of employer-
employee relationship, namely: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to
the means and method by which the work is to be accomplished. The Control Test being the most
important factor. Under the control test, there is an employer-employee relationship when the person
for whom the services are performed reserves the right to control not only the end achieved but also
the manner and means used to achieve that end. The Court affirmed the conclusions of the CA that
Servana was an employee of TAPE:
The selection and hiring of Servana was done by TAPE. They engaged the

services of petitioner only in 1995 after TAPE severed its relations with RPN Channel 9. By informing
petitioner through the Memo, that his services will be terminated as soon as the services of the newly
hired security agency begins, TAPE acknowledged petitioner to be their employee. For the right to hire
and fire is another important element of the employer-employee relationship. Also, it has been in held
that in a business establishment, an I.D. is usually provided not just as a security measure but to mainly
identify the holder as a bona fide employee of the firm who issues it.

Payment of wages is one of the four factors to be considered in determining the

existence of employer-employee relation and payment admitted by TAPE was given by them on a
monthly basis at a rate of P5,444.44. Of the four elements of the employer-employee relationship, the
"control test" is the most important. a. The bundy cards representing the time petitioner had reported
for work are evident proofs of TAPEs control over petitioner, particularly with the time he is required to
report for work during the noontime program of "Eat Bulaga!" b. He is being paid for being the security
of "Eat Bulaga!" The daily time cards of petitioner are not just for mere record purposes as claimed by
private respondents. It is a form of control by the management of private respondent TAPE. c. To negate
the element of control, TAPE presented a certification from MZet Productions to prove that respondent
also worked as a studio security guard for said company. Notably, the said certificate categorically stated
that respondent reported for work on Thursdays from 1992 to 1995. It can be recalled that during said
period, respondent was still working for RPN-9. As admitted by TAPE, it absorbed respondent in late
1995. On the TAPEs assertion that Servana is a program employee and equating him to independent
contractor as per Policy Instruction No. 40, CA held that evidences submitted by TAPE are insufficient to
prove that Servana is an independent contractor and that its reliance on such policy is misplaced. An
independent contractor is not an employee of the employer, while a talent or program employee is an
employee. The only difference between a talent or program employee and a regular employee is the
fact that a regular employee is entitled to all the benefits that are being prayed for. Regardless of
whether or not respondent had been performing work that is necessary or desirable to TAPEs usual
business, respondent is still considered a regular employee under Article 280 of the Labor Code. Servana
had been continuously under the employ of TAPE from 1995 until his termination in March 2000, or for
a span of 5 years. In sum, the Court found no reversible error committed by the CA in its decision.
However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any showing that
he acted with malice or bad faith in terminating respondent, he cannot be held solidarily liable with
TAPE. Thus, the CAs ruling on this point has to be modified. DISPOSITION: CAs Decision and Resolution
are AFFIRMED with MODIFICATION. Note: Dismissal is also valid (due to decision of management to
professionalize the service in its operations). However, the Severanas services were severed less than
the month requirement by the law. Thus, entitling him to nominal damages. Art. 280. Regular and
Casual Employment.The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an

employment shall be deemed to be regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer, except where
the employment has been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of engagement of the employee or where the work or service to
be performed is seasonal in nature and employment is for the duration of the season. An employment
shall be deemed to be casual if it is not covered by the preceding paragraph. Provided, that, any
employee who has rendered at least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists.

Dumpit-Murillo vs CA 524 SCRA 290 FACTS: Dumpit was hired by ABC as a newscaster in 1995. Her
contract with the TV station was repeatedly renewed until 1999. She then wrote Jose Javier (VP for
News and Public Affairs of ABC) advising him of her intention to renew the contract. Javier did not
respond. Dumpit then demanded reinstatement as well as her backwages, service incentive leave pays
and other monetary benefits. ABC said they could only pay her backwages but her other claims had no
basis as she was not entitled thereto because she is considered as a talent and not a regular employee.
Dumpit sued ABC. The Labor Arbiter ruled against Dumpit. The National Labor Relations Commission
reversed the LA. The Court of Appeals reversed the NLRC and ruled that as per the contract between
ABC and Dumpit, Dumpit is a fixed term employee. ISSUE: 1. Whether or not there exists an employer
employee relationship between Dumpit and ABC. 2. Whether or not Dumpit is a regular employee.
HELD: 1. Yes. The Court agree to the petitioner when it said that an employer-employee relationship was
created when the private respondents started to merely renew the contracts repeatedly fifteen times or
for four consecutive years. In Manila Water Company, Inc. v. Pena, we said that the elements to
determine the existence of an employment relationship are: (a) the selection and engagement of the
employee, (b) the payment of wages, (c) the power of dismissal, and (d) the employers power to
control. The most important element is the employers control of the employees conduct, not only as to
the result of the work to be done, but also as to the means and methods to accomplish it. The duties of
petitioner as enumerated in her employment contract indicate that ABC had control over the work of
petitioner. Aside from control, ABC also dictated the work assignments and payment of petitioners
wages. ABC also had power to dismiss her. All these being present, clearly, there existed an employment
relationship between petitioner and ABC. 2. Yes. Petitioner was a regular employee under
contemplation of law. The practice of having fixed-term contracts in the industry does not automatically
make all talent

contracts valid and compliant with labor law. The assertion that a talent contract exists does not
necessarily prevent a regular employment status. Concerning regular employment, the law provides for
two kinds of employees, namely: (1) those who are engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered
at least one year of service, whether continuous or broken, with respect to the activity in which they are
employed. In other words, regular status arises from either the nature of work of the employee or the
duration of his employment. In Benares v. Pancho, we very succinctly said: *T+he primary standard for
determining regular employment is the reasonable connection between the particular activity
performed by the employee vis--vis the usual trade or business of the employer. This connection can
be determined by considering the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. If the employee has been performing the job for at least a
year, even if the performance is not continuous and merely intermittent, the law deems repeated and
continuing need for its performance as sufficient evidence of the necessity if not indispensability of that
activity to the business. Hence, the employment is considered regular, but only with respect to such
activity and while such activity exists. In our view, the requisites for regularity of employment have been
met in the instant case. Gleaned from the description of the scope of services aforementioned,
petitioners work was necessary or desirable in the usual business or trade of the employer which
includes, as a pre-condition for its enfranchisement, its participation in the governments news and
public information dissemination. In addition, her work was continuous for a period of four years. This
repeated engagement under contract of hire is indicative of the necessity and desirability of the
petitioners work in private respondent ABCs business. While this Court has recognized the validity of
fixed-term employment contracts in a number of cases, it has consistently emphasized that when the
circumstances of a case show that the periods were imposed to block the acquisition of security of
tenure, they should be struck down for being contrary to law, morals, good customs, public order or
public policy.

ABS-
Lerasan as production assistants.


the -CBN
employees IDs and were required to work for a minimum of eight hours a day, including Sundays and
1996, petitioner and the ABS-CBN Rank-and-
Respondents filed a Complaint for Recognition of Regular Employment Status, Underpayment of
Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay
their position papers
-filing their
complaint with the NLRC within 10 days, they filed an Earnest Motion to Refile Complaint with Motion
to Admit Position Paper and Motion to Submit Case For Resolution. The Labor Arbiter granted this
that respondents are entitled to the benefits of the CBA. The CA found that respondents are not project
employees but regular employees. ISSUE: WON respondents are regular or project employees HELD: In
the case at bar, however, the employer-employee relationship between petitioner and respondents has
been proven.

First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity
status was required from them because they were merely hired through petitioners personnel
department just like any ordinary employee. Second. The so-called "talent fees" of respondents
correspond to wages given as a result of an employer-employee relationship. Respondents did not have
the power to bargain for huge talent fees, a circumstance negating independent contractual
relationship. Third. Petitioner could always discharge respondents should it find their work
unsatisfactory, and respondents are highly dependent on the petitioner for continued work. Fourth. The
degree of control and supervision exercised by petitioner over respondents through its supervisors
negates the allegation that respondents are independent contractors. The presumption is that when the
work done is an integral part of the regular business of the employer and when the worker, relative to
the employer, does not furnish an independent business or professional service, such work is a regular
employment of such employee and not an independent contractor. The Court will peruse beyond any
such agreement to examine the facts that typify the parties actual relationship. It follows then that
respondents are entitled to the benefits provided for in the existing CBA between petitioner and its
rank-and-file employees. As regular employees, respondents are entitled to the benefits granted to all
other regular employees of petitioner under the CBA. We quote with approval the ruling of the
appellate court, that the reason why production assistants were excluded from the CBA is precisely
because they were erroneously classified and treated as project employees by petitioner. As earlier
stated, it is not the will or word of the employer which determines the nature of employment of an
employee but the nature of the activities performed by such employee in relation to the particular
business or trade of the employer.

ALMIREZ V. INFINITE LOOP TECHNOLOGY CORP 481 SCRA 364 (2006) FACTS: Almirez was hired as a
Refinery Senior Process Design Engineer for a specific project by respondent Infinite Loop Technology
Corporation through its General Manager Rubino. 1. September 30, 1999 Details were furnished to
Almirez regarding her designation in the company as well as the scope of her services. The scope of the
services was to commence on October 18, 1999 and had a guarantee of 12 continuous months. 2. The
senior process design engineer was to work together with the Process Design Consultant in performing
the scope of the services which included preparing the process terms of reference or basis of design for
the BPSD Petroleum Refinery, to review and revise as necessary the existing conceptual process block
diagram of the process flow scheme, implement new process technologies, participate in discussions,
make recommendation reports to the company management team, represent the company in meetings
and perform other related works. 3. She was to be paid a professional fee of US$2,000 per month (net of
tax) to be 50/50 split in US dollars or equivalent peso every 15th of the month. She also had other
benefits and bonuses along with equipment such as a laptop computer. 4. Almirez received a total of
P77,000. Almirez then wrote a letter to the company, expressing her disappointment because she was
receiving less than expected. She had expected the amount to be net of taxes but she was receiving less
because of SSS deductions and tax deductions. 5. She asked that her SSS dues be not deducted from her
salary because she was voluntarily paying such obligations on her own. She further stated that she was
willing to render her services at Infinite Loop based on the contract and that she was willing to serve as
technical consultant on other relevant projects. 6. Rabino said that Almirezs letter was different from
what they had previously agreed upon. According to him, the BPSD project, like any other project, could
be deferred and that since the engineering design for the proposed project was not yet available, it
would be prudent to suspend the professional services of Almirez as Senior Process Design Engineer
effective February 2007. 7. Almirez, through counsel, wrote a letter to Rabino, asking that she be
properly compensated with the total amount of her contract because the contract stated that her
tenure would last for 12 months but she had already been suspended by February of 2000. 8. Rabino
responded by explaining to Almirez that the company and its partner corporations were all experiencing
financial difficulties with their projects and asked her to bear with them. 9. December 12, 2000
Almirez filed a complaint against Infinite Loop for breach of contract of employment. 10. Infinite Loop
countered by saying that the NLRC had no jurisdiction to hear the case because there was no employer-
employee relationship and the contract was one of services, not employment.

ISSUE: WON THERE WAS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PETITIONER AND
RESPONDENT COMPANY HELD: No. Under the control test, an employer-employee relationship exists
where the person for whom the services are performed reserves the right to control not only the end
achieved but also the manner and means to be used in reaching the end. The Court has consistently held
a four tier test to evaluate the existence of an employeremployee relationship which include: 1) manner
of selection of engagement, 2) payment of wages, 3) presence or absence of power of dismissal and 4)
presence or absence of power of control. The last test is known as the control test and is regarded as
the most crucial and determinative indicator of the presence of absence of an employer-employee
relationship. There is no showing of a controlling power of Infinite Loop over Almirez. They only
specified what she needed to achieve but now how she was go on about it. The company had hired her
based on her expertise but the company naturally had to appraised of the work progress. The deduction
for SSS and tax do not bolster Almirezs contention that there was an employee-employer relationship.
However, only one pay slip was issued (January 1631, 2000) and the rest were in cash vouchers. As such,
the payslip cannot be considered as proof of an employer-employee relationship. The use of the word
salary is not determinative of such a relationship either. Salary is defined as remuneration for services
given. The contract details her salary and it serves between the parties was the law governing them. But
the contract, as pointed out earlier, is bereft of proof of control of Infinite Loop over Almirez.

ANGELITO L. LAZARO vs. SSS, ROSALINA LAUDATO, and CA
FACTS Private respondent Rosalina M. Laudato filed a petition before the SSC for social security
coverage and remittance of unpaid monthly social security contributions against her employers. Among
the respondents was herein petitioner Angelito L. Lazaro, proprietor of Royal Star Marketing. Laudato
alleged that Lazaro had failed to report her to the SSC for compulsory coverage or remit Laudatos social
security contributions from April of 1979 to March of 1986. Lazaro denied that Laudato was a sales
supervisor of Royal Star and averred that she was a mere sales agent paid on commission basis. He
maintained tha Laudato was not subjected to definite hours and conditions of work. As such, Laudato
could not be deemed an employee of Royal Star. SSC promulgated a Resolution ruling in favor of
Laudato. Applying the control test, it held that Laudato was an employee of Royal Star and ordered
Royal Star to pay the unremitted social security contributions of Laudato. In addition, Royal Star was
made liable to pay damages to the SSC for not reporting Laudato for social security coverage, pursuant
to Section 24 of the Social Security Law. After Lazaros Motion for Reconsideration before the SSC was
denied, Lazaro filed a Petition for Review with the CA. Lazaro reiterated that Laudato was merely a sales
agent who was paid purely on commission basis, not included in the company payroll, and who neither
observed regular working hours nor accomplished time cards. CA affirmed SSCs Decision that Laudato
was an employee of Royal Star, and hence entitled to coverage under the Social Security Law. Noting
that Lazaros arguments were the same as those already presented before the SSC and he failed to
substantiate his allegations.
ISSUE WON Laudato is an employee of Royal Star
HELD YES. It is an accepted doctrine that for the purposes of coverage under the Social Security Act, the
determination of employer-employee relationship warrants the application of the control test,
whether the employer controls or has reserved the right to control the employee, not only as to the
result of the work done, but also as to the means and methods by which the same is accomplished. The
Court found no error in CAs decision, applying the control test found that Laudato was an employee of
Royal Star. Lazaros arguments are nothing more but a mere reiteration of arguments unsuccessfully
posed before two bodies: the SSC and the CA. The issue was already passed upon twice. The
determination of an employer-employee relationship depends heavily on the particular factual
circumstances attending the professional interaction of the parties. Lazaros arguments may be
dispensed with by applying precedents:
The fact that Laudato was paid by way of commission does not preclude the establishment of an
employer-employee relationship. In Grepalife v. Judico, the Court upheld the existence of an employer-
employee relationship between the insurance company and its agents, despite the fact that the
compensation that the agents on commission received was not paid by the company but by the investor
or the person insured. The relevant factor remains, as stated earlier, whether the "employer" controls or
has reserved the right to control the "employee" not only as to the result of the work to be done but
also as to the means and methods by which the same is to be accomplished.
It does not follow that a person who does not observe normal hours of work cannot be deemed an
employee. In Cosmopolitan Funeral Homes, Inc. v. Maalat, the employer similarly denied the existence
of an employer-employee relationship, as the claimant according to it, was a supervisor on commission
basis who did not observe normal hours of work. This Court declared that there was an employer-
employee relationship, noting that the supervisor, although compensated on commission basis, is
exempt from the observance of normal hours of work for his compensation is measured by the number
of sales he makes. The finding of the SSC that Laudato was an employee of Royal Star is supported by
substantial evidence. The SSC examined the cash vouchers issued by Royal Star to Laudato, calling cards
of Royal Star denominating Laudato as a Sales Supervisor of the company, and Certificates of
Appreciation issued by Royal Star to Laudato in recognition of her unselfish and loyal efforts in
promoting the company. On the other hand, Lazaro has failed to present any convincing contrary
evidence, relying instead on his bare assertions. The CA correctly ruled that petitioner has not
sufficiently shown that the SSCs ruling was not supported by substantial evidence. Lazaros invocation
of our ruling in the 1987 case of Social Security System v. Court of Appeals, that a person who works for
another at his own pleasure, subject to definite hours or conditions of work and is compensated
according to the result of his effort is not an employee, is misplaced, considering that in the cited case ,
the Court affirmed the employee-employer relationship between a sales agent and the cigarette firm
whose products he sold. DISPOSITION: The Petition is DENIED and CAs decision is AFFIRMED.

Lazaro vs SSS 435 SCRA 472
FACTS:
coverage and remittance of unpaid monthly social security contributions against her three employers.
Among the respondents was herein petitioner Angelito L. Lazaro, proprietor of Royal Star Marketing,
which is engaged in the business of selling home appliances. Laudato alleged that despite her
employment as sales supervisor of the sales agents for Royal Star from April of 1979 to March of 1986,
Lazaro had failed during the said period, to report her to the SSC for compulsory coverage or remit
Star, averring instead that she was a mere sales agent whom he paid purely on commission basis. Lazaro
also maintained that Laudato was not subjected to definite hours and conditions of work. As such,
"control test," it held that Laudato was an employee of Royal Star, and ordered Royal Star to pay the
unremitted social security contributions of Laudato in the amount of P5,007.35, together with the
penalties totaling P22,218.54. In addition, Royal Star was made liable to pay damages to the SSC in the
amount of P15,680.07 for not reporting Laudato for social security coverage, pursuant to Section 24 of
the Social Security Law. Lazaro's MR was denied, prompting him to file a petition for review with the CA.
However, the CA affirmed the finding that Laudato was an employee of Royal Star, and hence entitled to
security coverage, as she was not an employee of Royal Star, her income dependent on a generation of
sales and based on commissions; that Royal Star had no control over Laudato's activities, and that under
the so-called "control test," Laudato could not be deemed an employee.
ISSUE: Whether or not Laudato is an employee of Royal Star.
HELD: Yes. Laudato was an employee of Royal Stars. It is an accepted doctrine that for the purposes of
coverage under the Social Security Act, the determination of employer-employee relationship warrants
the application of the control test, that is, whether the employer controls or has reserved the right to
control the employee, not only as to the result of the work done, but also as to the means and methods
by which the same is accomplished. The SSC, as sustained by the Court of Appeals, applying the control
test found that Laudato was an employee of Royal Star. The determination of an employer-employee
relationship depends heavily on the particular factual circumstances attending the professional
interaction of the parties. Laudato was a sales supervisor and not a mere agent. As such, Laudato

oversaw and supervised the sales agents of the company, and thus was subject to the control of
management as to how she implements its policies and its end results. It doesnt follow that a person
who does not observe normal hours of work cannot be deemed an employee. In Cosmopolitan Funeral
Homes, Inc. v. Maalat, the employer similarly denied the existence of an employer-employee
relationship, as the claimant according to it, was a supervisor on commission basis who did not
observe normal hours of work. This Court declared that there was an employer-employee relationship,
noting that *the+ supervisor, although compensated on commission basis, *is+ exempt from the
observance of normal hours of work for his compensation is measured by the number of sales he
makes.

guard for the Agro-Commercial Security Agency (ACSA) since 1987. The agency had a contract with TV
netwo

-
In 2000, TAPE contracted the services of Sun Shield Security Agency. It then notified Servaa that he is
Dismissal. The Labor Arbiter ruled that Servaas dismissal is valid on the ground of redundancy but
though he was not illegally dismissed he is still entitled to be paid a separation pay which is amounting
Servaa is not entitled to receive separation pay for he is considered as a talent and not as a regular
employee; that as such, there is no employee-employer relationship between TAPE and Servaa. The
National Labor Relations Commission ruled in favor of TAPE. It ruled that Servaa is a program
employee. Servaa appealed before t
affirmed the LA. The CA further ruled that TAPE and its president Tuviera should pay for nominal
damages amounting to P10,000.00. ISSUE: WON there is an employee-employer relationship existing
between TAPE and Servaa. HELD: Yes. Servaa is a regular employee. In determining Servaas nature
of employment, the Supreme Court employed the Four Fold Test: 1. WON employer conducted the
selection and engagement of the employee.

Servaa was selected and engaged by TAPE when he was absorbed as a talent in 1995. He is not really
a talent, as termed by TAPE, because he performs an activity which is necessary and desirable to TAPEs
business and that is being a security guard. Further, the primary evidence of him being engaged as an
employee is his

employee identification card. An identification card is usually provided not just as a security measure
but to mainly identify the holder thereof as a bona fide employee of the firm who issues it. 2 WON there
is payment of wages to the employee by the employer.

Servaa is definitely receiving a fixed amount of monthly compensation. Hes receiving P6,000.00 a
month. 3. WON employer has the power to dismiss employee.

The Memorandum of Discontinuance issued to Servaa to notify him that he is a redundant employee
evidenced TAPEs power to dismiss Servaa. 4. WON the employer has the power of control over the
employee. The control test is the most important. The bundy cards which showed that Servaa was
required to report to work at fixed hours (form 11:30-1:00 pm) of the day manifested that TAPE has
control over him. Otherwise, Servaa could have reported at any time during the day as he may wish.
Precisely, he is being paid for being the security of "Eat Bulaga!" The Daily Time Record is a form of
control by the management of TAPE. Therefore, Servaa is entitled to receive a separation pay. On the
other hand, the Supreme Court ruled that Tuviera, as president of TAPE, should not be held liable for
nominal damages as there was no showing he acted in bad faith in terminating Servaa. TAPE failed to
adduce any evidence to prove that it complied with the requirements laid down in Policy Instruction No.
40 for Servaa to qualify as Independent contractor. (did not present contract , did not comply with
contract registration requirement) Regular Employee Defined: One having been engaged to perform an
activity that is necessary and desirable to a companys business. Under the control test, there is an
employer-employee relationship when the person for whom the services are performed reserves the
right to control not only the end achieved but also the manner and means used to achieve that end.

LOPEZ V. BODEGA CITY 532 SCRA 56 (2007) FACTS: Bodega City is a corporation duly registered in the
Philippines with Yap as owner/manager, while petitioner Lopez worked as a lady keeper of Bodega
City tasked with manning its ladies comfort room. 1. Petitioner received a notice of explanation from
Yap, requiring the former to explain why the concessionaire agreement between her and Bodega City
should not be terminated or suspended in view of the incident on February 3, 1995; petitioner allegedly
acted in a hostile manner against a lady customer who informed the management that she saw Lopez
sleeping while on duty. 2. In a subsequent letter, Yap informed petitioner that the concessionaire
agreement between them was terminated on the account of the February 3 incident 3. Petitioner, then,
filed a complaint for illegal dismissal against respondent company with LA, contending that she was
dismissed from her employment without cause and due process. 4. Respondent, however, claimed that
no employer-employee relationship ever existed between them and petitioner since the Lopez services
in Bodega City was by virtue of a concessionaire agreement she entered into with respondents. 5.
Petitioners arguments: a. CA erred in concluding that in not signing the document evidencing the
concessionaire agreement, she impliedly accepted and thus bound herself to the terms and conditions
of the same when she continued to perform the task which was specifically contained in said agreement
and that said agreement was only offered to her on her 10th year of service b. Her receipt of special
allowance from respondents is a clear indication that she was an employee of the latter, as the amount
she received was equivalent to minimum wage at the time c. Her ID clearly shows that she was not a
concessionaire but an employee d. That she was required to follow rules and regulations prescribing
appropriate conduct while she was within the premises of Bodega City is clear evidence of an employer-
employee relationship between her and the company. ISSUE: WHO HAS THE BURDEN OF PROOF IN
PROVING THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP HELD: The test for determining
on whom the burden of proof lies is found in the result of an inquiry as to which party would be
successful if no evidence of such matters were given.

In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an
employee was for a valid cause. However, before a case for illegal dismissal can prosper, an employer-
employee relationship must first be established. In filing a complaint before the Labor Arbiter for illegal
dismissal based on the premise that she was an employee of respondent, it is incumbent upon
petitioner to prove the employee-employer relationship by substantial evidence. The NLRC and the CA
found that petitioner failed to discharge this burden, and the Court finds no cogent reason to depart
from their findings. Indeed, if petitioner was really an employee of respondents for that length of time,
she should have been able to present salary vouchers or pay slips and not just a single petty cash
voucher. The Court agrees with respondents that petitioner could have easily shown other pieces of
evidence such as a contract of employment, SSS or Medicare forms, or certificates of withholding tax on
compensation income; or she could have presented witnesses to prove her contention that she was an
employee of respondents. Petitioner failed to do so.

MCLEOD vs NLRC 512 SCRA 222 FACTS In 1956, John F. McLeod was hired by Universal Textiles, Inc. till
1980 under its President, Patricio Lim. In 1978 Patricio Lim formed Peggy Mills, Inc. (PMI) with
respondent Filsyn having controlling interest. McLeod was absorbed by PMI as its Vice President and
Plant Manager of the Sta. Rosa, Laguna plant. On 8/19/1989 to July 1992, PMIs rank-and-file employees
staged a strike, which serious business losses and which prompted PMI to stop permanently plant
operations and to send a notice of closure to DOLE on 7/21/1992. Subsequently, a contract between
PMI and Sta. Rosa Textile Inc. (SRTI) was executed on 6/15/1992. Wherein, Filsyn sold Peggy Mills, Inc.
to Far Eastern Textile Mills, Inc. (renamed as Sta. Rosa Textile Inc.), with Patricio Lim as Chairman and
President. McLeods service to PMI was extended until 12/31/1992 and thereafter, worked for SRTI as a
consultant until his resignation in 11/30/1993. He applied for retirement and wrote letters to Patricio
Lim requesting for his retirement pay and other benefits. In the last quarter of 1994, respondents
offered McLeod a compromise settlement of only P300,000.00. McLeod rejected the offer, alleging that
at the time of his retirement, he was receiving P60,000.00 monthly with vacation and sick leave benefits,
13th month pay, holiday pay and two round trip business class tickets on a Manila-London-Manila
itinerary every three years which is convertible to cash if unused. He wrote a letter reiterating his
demand for full payment of all benefits and to no avail, he filed a complaint, claiming that he is entitled
to all his money claims pursuant to law. Labor Arbiters decision was in favor of McLeod. The
respondents were held jointly and solidarily liable for McLeods money claims. However, when the
decision was appealed to NLRC, it was reversed. NLRC ordered respondent PMI to pay McLeod his
retirement pay equivalent to 22.5 days for every year of service for his 12 years of service from 1980-
1992 based on a salary rate of P50,495.00 a month. McLeod filed a motion for reconsideration, but NLRC
denied it. Later he filed a petition for certiorari before the CA assailing the decision and resolution of the
NLRC. On 6/15/2000, the CA affirmed and modified the decision of NLRC, holding respondent Patricio
Lim jointly and solidarily liable with Peggy Mills, Inc. The CA rejected McLeods theory that all
respondent corporations are the same corporate entity which should be held solidarily liable for the
payment of his monetary claims. Hence, this petition. ISSUES Whether an employer-employee
relationship exists between the private respondents and McLeod RULING

McLeod was an employee only of PMI. PMI hired McLeod as its acting Vice President and General
Manager on 6/20/1980. PMI confirmed McLeods appointment as Vice President/Plant Manager in the
Special Meeting of its Board of Directors on 2/10/1981. McLeod himself testified during the hearing
before the Labor Arbiter that his "regular employment" was with PMI. After the strike, PMI informed its
employees, including McLeod, of the closure of the plant. PMI paid its employees, including managerial
employees, except McLeod, their unpaid wages, sick leave, vacation leave, prorated 13th month pay,
and separation pay. Under the compromise agreement between PMI and its employees, the employer-
employee relationship between them ended on 11/25/1992. The extension of McLeods employment
until December 1992 was only due to business matters concerning PMI. McLeod testified on cross-
examination that he received his last salary from PMI in December 1992. It is clear that McLeod was a
managerial employee of PMI from 6/20/1980 to 12/31/1992. The contract between PMI and SRTI was
dation in payment with lease. PMI conveyed to SRTC all of its rights, title and interest in and to the
Assets by way of a dation in payment. There was also no merger or consolidation of PMI and SRTI. As a
rule, a corporation that purchases the assets of another will not be liable for the debts of the selling
corporation, provided the former acted in good faith and paid adequate consideration for such assets,
except when: (1) where the purchaser expressly or impliedly agrees to assume the debts, (2) where the
transaction amounts to a consolidation or merger of the corporations, (3) where the purchasing
corporation is merely a continuation of the selling corporation, and (4) where the selling corporation
fraudulently enters into the transaction to escape liability for those debts. However, none of the
foregoing exceptions is present in this case. PMI transferred its assets to SRTI to settle its obligation to
SRTI in the sum of P210,000,000. We are not convinced that PMI fraudulently transferred these assets
to escape its liability for any of its debts. PMI had already paid its employees, except McLeod, their
money claims. There is no showing that the subject dation in payment involved any corporate merger or
consolidation. Neither is there any showing of those indicative factors that SRTI is a mere
instrumentality of PMI. Moreover, SRTI did not expressly or impliedly agree to assume any of PMIs
debts. Hence, it is not correct for McLeod to treat PMI and SRTI as the same entity. Respondent
corporations assert that SRTI hired McLeod as consultant after PMI stopped operations. On the other
hand, McLeod asserts that he was respondent corporations employee from 1980 to 11/30/1993.
However, McLeod failed to present any proof of employer-employee relationship between him and
Filsyn, SRTI, or FETMI. McLeod could have presented evidence to support his allegation of
employeremployee relationship between him and any of Filsyn, SRTI, and FETMI, but he did not.
Appointment letters or employment contracts, payrolls, organization

charts, SSS registration, personnel list, as well as testimony of co-employees, may serve as evidence of
employee status. It is a basic rule in evidence that parties must prove their affirmative allegations. While
technical rules are not strictly followed in the NLRC, this does not mean that the rules on proving
allegations are entirely ignored. Bare allegations are not enough. They must be supported by substantial
evidence at the very least. At any rate, the existence of interlocking incorporators, directors, and officers
is not enough justification to pierce the veil of corporate fiction, in the absence of fraud or other public
policy considerations. The Court ruled that substantial identity of the incorporators of corporations does
not necessarily imply fraud. In light of the foregoing, and there being no proof of employer-employee
relationship between McLeod and respondent corporations and Eric Hu, McLeods cause of action is
only against his former employer, PMI. On Patricios personal liability, it is settled that in the absence of
malice, bad faith, or specific provision of law, a stockholder or an officer of a corporation cannot be
made personally liable for corporate liabilities. Personal liability of corporate directors, trustees or
officers attaches only when (1) they assent to a patently unlawful act of the corporation, or when they
are guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest
resulting in damages to the corporation, its stockholders or other persons; (2) they consent to the
issuance of watered down stocks or when, having knowledge of such issuance, do not forthwith file with
the corporate secretary their written objection; (3) they agree to hold themselves personally and
solidarily liable with the corporation; or (4) they are made by specific provision of law personally
answerable for their corporate action. Considering that McLeod failed to prove any of the foregoing
exceptions in the present case, McLeod cannot hold Patricio solidarily liable with PMI. The records are
bereft of any evidence that Patricio acted with malice or bad faith . There is nothing substantial on
record to show that Patricio acted in bad faith in terminating McLeods services to warrant Patricios
personal liability. PMI had no other choice but to stop plant operations. The work stoppage therefore
was by necessity. The company could no longer continue with its plant operations because of the
serious business losses that it had suffered. The mere fact that Patricio was president and director of
PMI is not a ground to conclude that he should be held solidarily liable with PMI for McLeods money
claims. DISPOSITION: The petition was DENIED and CAS decision was AFFIRMED and MODIFIED.

D
respondents Cata Garments Corporation, a company engaged in garments business and its
owner/manager Otto Ong and Catalina Co for illegal dismissal, unpaid commission and other monetary
Salesman; three (3) years ago, because of a complaint against respondent by its workers, the company
changed its name to Cata Garments Corporation; and that on August 29, 1992, he was dismissed when
Arbiter held that complainant was illegally dismissed and entitled to reinstatement and backwages as
well as underpayment of salary; 13th month pay; service incentive leave and legal holiday. The Arbiter
s Claim > Petitioner claims he was an employee,
mere commission worker, and not a regular employee (which would warrant backwages). ISSUE:
Whether or not there existed an employer-employee relationship between the parties. (Under the topic
of proof of employment) HELD: Yes. The existence of an employer-employee relationship between
private respondents and petitioner is supported by substantial evidence on record. Substantial evidence
is sufficient as a basis for judgment on the existence of employeremployee relationship. No particular
form of evidence is required to prove the existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may be admitted. Substantial evidence has
been defined to be such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion, and its absence is not shown by stressing that there is contrary evidence on record, direct or
circumstantial, for the appellate court cannot substitute its own judgment or criterion for that of the
trial court in determining wherein lies the weight of evidence or what evidence is entitled to belief.

In a business establishment, an identification card is usually provided not only as a security measure but
mainly to identify the holder thereof as a bona fide employee of the firm that issues it. Together with
the cash vouchers covering petitioners salaries for the months stated therein, we agree with the labor
arbiter that these matters constitute substantial evidence adequate to support a conclusion that
petitioner was indeed an employee of private respondent. Having been in the employ of private
respondents continuously for more than one year, under the law, petitioner is considered a regular
employee. Proof beyond reasonable doubt is not required as a basis for judgment on the legality of an
employers dismissal of an employee, nor even preponderance of evidence for that matter, substantial
evidence being sufficient. The National Labor Relations Commission and the labor arbiter have authority
under the Labor Code to decide a case based on the position papers and documents submitted without
resorting to the technical rules of evidence.

explain why the concessionaire agreement between her and respondents should not be terminated or
suspended in view of an incident wherein petitioner was seen to have acted in a hostile manner against
a lady customer of Bodega City who informed the management that she saw petitioner sleeping while
on
d that no employer-employee relationship ever
existed between them and petitioner; that the latter's services rendered was by virtue of a
concessionaire agreement she entered into with respondents.
C opposed the decision

of the LA. The CA dismissed petitioners special civil action for certiorari. ISSUE: WON petitioner is an
employee of respondent? HELD: It is a basic rule of evidence that each party must prove his affirmative
allegation. If he claims a right granted by law, he must prove his claim by competent evidence, relying
on the strength of his own evidence and not upon the weakness of that of his opponent. The test for
determining on whom the burden of proof lies is found in the result of an inquiry as to which party
would be successful if no evidence of such matters were given. In filing a complaint before the Labor
Arbiter for illegal dismissal based on the premise that she was an employee of respondent, it is
incumbent upon petitioner to prove the employee-employer relationship by substantial evidence.

To prove the element of payment of wages, petitioner presented a petty cash voucher showing that she
received an allowance for five (5) days. The CA did not err when it held that a solitary petty cash voucher
did not prove that petitioner had been receiving salary from respondents or that she had been
respondents' employee for 10 years. Indeed, if petitioner was really an employee of respondents for
that length of time, she should have been able to present salary vouchers or pay slips and not just a
single petty cash voucher. The Court agrees with respondents that petitioner could have easily shown
other pieces of evidence such as a contract of employment, SSS or Medicare forms, or certificates of
withholding tax on compensation income; or she could have presented witnesses to prove her
contention that she was an employee of respondents. Anent the element of control, petitioner's
contention that she was an employee of respondents because she was subject to their control. Rules
and regulations to be followed by petitioner was imposed upon petitioner as part of the terms and
conditions in the concessionaire agreement. Petitioner insists that her ID card is sufficient proof of her
employment. As to the ID card, it is undisputed that non-employees, are also issued identification cards
that serve as a "passport" from management assuring the holder thereof of his unmolested access to
the premises of Bodega City. With respect to the petty cash voucher, petitioner failed to refute
respondent's claim that it was not given to her for services rendered or on a regular basis, but simply
granted as financial assistance to help her temporarily meet her family's needs.

ABANTE V. LAMADRID 430 SCRA 368 (2004) FACTS: Petitioner was employed by respondent company
Lamadrid Bearing and Parts Corporation sometime in June 1985 as a salesman covering the whole area
of Mindanao. His average monthly income was more or less P16,000, but later was increased to
approximately P20,269.50. Aside from selling the merchandise of the respondent corporation, he was
also tasked to collect payments from his various customers. 1. Sometime in 1998, petitioner
encountered five customers/clients with bad accounts. 2. Petitioner was confronted by respondent
Lamadrid over the bad accounts and warned that if he does not issue his own checks to cover the said
bad accounts, his commissions will not be released and he will lose his job. Not contented with the
issuance of the foregoing checks as security for the bad accounts, respondents "tricked" petitioner into
signing two documents, which he later discovered to be a Promissory Note and a Deed of Real Estate
Mortgage. 3. Due to financial difficulties, petitioner inquired about his membership with the SSS in order
to apply for a salary loan. To his dismay, he learned that he was not covered by the SSS and therefore
was not entitled to any benefit. 4. While doing his usual rounds as commission salesman, petitioner was
handed by his customers a letter from the respondent company warning them not to deal with
petitioner since it no longer recognized him as a commission salesman. 5. Petitioner thus filed a
complaint for illegal dismissal with money claims against respondent company and its president, Jose
Lamadrid, before the NLRC. ISSUE: WON THERE EXISTS AN EMPLOYER-EMPLOYEE RELATIONSHIP

HELD: No, there is no employer-employee relationship in this case. To ascertain the existence of an
employer-employee relationship, jurisprudence has invariably applied the four-fold test, namely: (1) the
manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the
power of dismissal; and (4) the presence or absence of the power of control. Of these four, the last one
is the most important. Under the control test, an employer-employee relationship exists where the
person for whom the services are performed reserves the right to control not only the end achieved, but
also the manner and means to be used in

reaching that end. Where a person who works for another does so more or less at his own pleasure and
is not subject to definite hours or conditions of work, and in turn is compensated according to the result
of his efforts and not the amount thereof, no relationship of employer-employee exists. Petitioner
Abante was a commission salesman who received 3% commission of his gross sales. No quota was
imposed on him by the respondent. He was not required to report to the office at any time or submit
any periodic written report on his sales performance and activities. He was not designated by
respondent to conduct his sales activities at any particular or specific place. He pursued his selling
activities without interference or supervision from respondent company and relied on his own resources
to perform his functions. Respondent company did not prescribe the manner of selling the merchandise;
he was left alone to adopt any style or strategy to entice his customers. Moreover, petitioner was free
to offer his services to other companies engaged in similar or related marketing activities as evidenced
by the certifications issued by various customers.

R TRANSPORT CORPORATION vs. ROGELIO EJANDRA
FACTS Rogelio Ejandra worked as a bus driver for Petitioner, from 7/15/1990 to 131/1996. He plied the
route Muntilupa-Alabang-Malanday-Monumento-UE-Letre-Sangandaan from 5:00 a.m. up to 2:00 a.m.
the next day and was paid 10% of his daily earnings. On 1/31/1996, a LTO officer apprehended him for
obstruction of traffic for which license was confiscated. He immediately reported the incident to his
manager, Oscar Pasquin, who gave him P500 to redeem his license. He went to LTO following day to
claim it, but he was told that it had not yet been turned over by officer who apprehended him. He was
able to retrieve his license only after a week. his Mr. the the On 2/8/1996, Ejandra reported for work.
However, he was told that the company was still studying whether to allow him to drive again. Ejandra
was likewise accused of causing damage to the bus he used to drive. Denying the charge, Ejandra
blamed the person who drove the said bus during his absence, considering that the damage was
sustained during the week that he did not drive the bus. Mr. Pacquin nonetheless told him to take a
vacation. When respondent asked how long he had to rest, the manager did not give a definite time.
Petitioner denied the allegations and claimed that Ejandra abandoned his job. Petitioner asserted that if
Ejandras license had really been confiscated, the apprehension report should have been presented by
the latter and informed petitioner of his problems with the LTO. Petitioner further argued that private
respondent was not an employee because theirs was a contract of lease and not of employment, with
petitioner being paid on commission basis. On 2/23/1997, labor arbiter Rogelio Yulo rendered his
decision in favor of Ejandra, ordering for his reinstatement, giving no weight to petitioners claim that
private respondent abandoned his work. The one-week absence did not constitute abandonment of
work because it took him the whole week to reclaim his license. Ejandra could not retrieve it unless and
until the apprehending officer first transmitted it to their office. The inability to drive for petitioner was
therefore not his fault and petitioner could be held liable for illegal dismissal. Due process was not
accorded to private respondent who was never given the opportunity to contest the charge of
abandonment. Upon appeal, the NLRC affirmed the decision of the labor arbiter. In addition, appellants
defense of denying the existence of employer-employee relationship with the complainant based on the
manner by which complainant was being paid his salary, cannot hold water. While employees paid on
piece-rate and commission basis are not covered by the provisions of the Labor Code, as amended, on
hours of work, these employees however, for all intents and purposes, are employees of their
employers. Petitioner filed in the CA a petition for certiorari on the ground that the NLRC committed
grave abuse of discretion in affirming the decision of the labor arbiter, but the petition was dismissed for
lack of merit. CA also ruled that petitioner was barred from denying the existence of an
employeremployee relationship because petitioner invoked its rights under the law and jurisprudence as
an employer in dismissing private respondent. Hence, this appeal.
ISSUE WON the court erred in not finding (1) that Ejandra abandoned his work resulting to his dismissal
for just cause and (2) that the agreement was for a contract of lease of services, negating the existence
of employer-employee relationship
HELD NO. NLRC and the CA did not err and were unanimous in their findings. The Court has no reason
to disturb all these factual findings because they are amply supported by substantial evidence. 1. To
constitute ABANDONMENT, two elements must concur: (1) the failure to report for work or absence
without valid or justifiable reason and (2) a clear intention to sever the employer-employee relationship.
The second element is the more determinative factor and should be manifested by some overt acts.
Mere absence is not sufficient. It is the employer who has the burden of proof to show a deliberate and
unjustified refusal of the employee to resume his employment without any intention of returning.
However, petitioner fell short of proving the requisites. Denying the existence of an employer-employee
relationship, petitioner insists that the parties agreement was for a contract of lease of services. We
disagree. Petitioner is barred to negate the existence of an employeremployee relationship. For in its
petition filed before this Court, petitioner invoked our rulings on the right of an employer to dismiss an
employee for just cause. Consistently, petitioner maintained that private respondent was justifiably
dismissed due to abandonment of work. By adopting said rulings, petitioner impliedly admitted that it
was in fact the employer of private respondent. According to the control test, the power to dismiss an
employee is one of the indications of an employer-employee relationship. The claim that private
respondent was legally dismissed for abandonment was in fact a NEGATIVE PREGNANT: an
acknowledgement that there was no mutual termination of the alleged contract of lease and that
private respondent was its employee. The fact that petitioner paid private respondent on commission
basis did not rule out the presence of an employee-employer relationship.
2.
3. The fact that petitioner had no valid cause to terminate private respondent from work, it violated the
latters right to procedural due process by not giving him the required notice and hearing. DISPOSITION:
Association (MEWA) is a duly recognized labor organization of the rank-and-file employees of MERALCO.
On Sept. 7, 1995, it informed MERALCO of its intention to renegotiate the terms and conditions of their
existing1992-97 CBA covering the remaining period of 2 years starting from December 1, 1995 to
-negotiate through a letter and formed a
CBA negotiating panel for the purpose. Bargaining negotiations proceeded. However, despite the series
of meetings bet. The negotiating panels, the parties failed to arrive at "terms and conditions acceptable
Branch of the National Conciliation and Mediation Board (NCMB) of the Department of Labor and
Employment (DOLE) on the grounds of bargaining deadlock and unfair labor practices. The NCMB then
conducted a series of conciliation meetings but the parties failed to reach an amicable settlement. Faced
with the imminence of a strike, MERALCO filed an urgent petition with the DOLE praying the Secretary
to assume jurisdiction over the labor dispute and to enjoin the striking employees to go back to work.
The Secretary did so and conducted conciliation conferences between the parties to bridge their
differences. Thereafter, the parties submitted their respective memoranda and on August 19, 1996, the
contending that the Sec. of Labor gravely abused its discretion in awarding wage increases and other
economic benefits (like 2 months Christmas bonus, loan for the employees cooperative, signing hours,
40- day union leave, sick leave, etc.), in expanding the scope of the bargaining unit to all regular rank
and file employees, in exercising discretion in determining the retroactivity of the CBA, etc. ISSUE:
Whether or not the Secretary of Labor gravely abuse his discretion in ordering that MERALCO should
consult the union before any contracting out for more than 6months HELD: We recognize that
contracting out is not unlimited; rather, it is a prerogative that management enjoys subject to well-
defined legal limitations. As we have previously held, the company can determine in its best business
judgment whether it should contract out the performance of some of its work for as long as the
employer is motivated by good faith, and the contracting out must not have been resorted to
circumvent the law or must not have been the result of malicious or arbitrary action. The

Labor Code and its implementing rules also contain specific rules governing contracting out (Department
of Labor Order No. 10, May 30, 1997, Sections. 1-25). Given these realities, we recognize that a balance
already exist in the parties relationship with respect to contracting out; MERALCO has its legally defined
and protected management prerogatives while workers are guaranteed their own protection through
specific labor provisions and the recognition of limits to the exercise of management prerogatives. From
these premises, we can only conclude that the Secretarys added requirement only introduces an
imbalance in the parties collective bargaining relationship on a matter that the law already sufficiently
regulates. Hence, we rule that the Secretarys added requirement, being unreasonable, restrictive and
potentially disruptive should be struck down. Proceeding from our ruling in San Miguel Employees
Union-PTGWO vs Bersamina, (where we recognized that contracting out of work is a proprietary right of
the employer in the exercise of an inherent management prerogative) We note that the Secretary
himself has considered that management should not be hampered in the operations of its business
when he said that: We feel that the limitations imposed by the union advocates are too specific and
may not be applicable to the situations that the company and the union may face in the future. To our
mind, the greater risk with this type of limitation is that it will tend to curtail rather than allow the
business growth that the company and the union must aspire for. Hence, we are for the general
limitations we have stated above because they will allow a calibrated response to specific future
situations the company and the union may face.

PAL v LIGAN
titioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as
contractor and . . . that there would be no employer-employee relationship between CONTRACTOR
main job is to load and unload baggage and cargo of passengers is directly related to the main business
of petitioner.
appear to have been assigned by Synergy to petitioner following the execution of
the Agreement, filed complaints against petitioner, Synergy for underpayment, non-payment of
premium pay for holidays, premium pay for rest days, service incentive leave pay, 13th month pay and
allowances, and for regularization of employment status with petitioner
Synergy jointly and severally to pay all the complainants. The NLRC set aside the decision of the LA and
declared Synergy to be a 'labor-only' contractor and ordered PAL to accept, as its regular employees, all
the complainants.The CA affirmed the Decision of the NLRC.
ISSUE: WON Synergy is a job-only contractor or a legitimate contractor.
HELD: Synergy is a labor-only contractor. While petitioner claimed that it was Synergy's supervisors who
actually supervised respondents, it failed to present evidence thereon. It did not even identify who were
the Synergy supervisors assigned at the workplace. Likewise, petitioner failed to present evidences that
synergy has a substantial capital to engage in legitimate contracting. The importance of this decision is,
If Synergy is found to be a mere job-only contractor, respondents could be considered as regular
employees of petitioner as Synergy would then be a mere agent of petitioner; otherwise, if Synergy is
found to be a legitimate contractor, respondents' claims against petitioner must fail as they would then
be considered employees of Synergy.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, AND the workers recruited and placed by such person are performing activities which are
directly related to the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him. Trilateral relationship in
contracting arrangements. In legitimate contracting, there exists a trilateral relationship under which
there is a contract for a specific job, work or service between the principal and the contractor or
subcontractor, and a contract of employment between the contractor or subcontractor and its workers.
Hence, there are three parties involved in these arrangements, the principal which decides to farm out a
job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity
to independently undertake the performance of the job, work or service, and the contractual workers
engaged by the contractor or subcontractor to accomplish the job, work or service. (Emphasis and
underscoring supplied) Labor-only contracting is hereby declared prohibited. One who claims to be an
independent contractor has to prove that he contracted to do the work according to his own methods
and without being subject to the employer's control except only as to the results. The express provision
in the Agreement that Synergy was an independent contractor and there would be "no employer-
employee relationship between [Synergy] and/or its employees on one hand, and [petitioner] on the
other hand" is not legally binding and conclusive as contractual provisions are not valid determinants of
the existence of such relationship. For it is the totality of the facts and surrounding circumstances of the
case which is determinative of the parties' relationship.

PAL V. LIGAN 547 SCRA 181 (2008)
FACTS: PAL and Synergy Services Corp entered into an agreement whereby Synergy undertook to
provide loading, unloading, delivery of baggage and cargo and other related services from PALs aircraft
at the Mactan station. 1. It was expressly stipulated in the contract that Synergy was an independent
contractor and there would be no employer-employee relationship between the Contractor (Synergy)
and/or its employees and PAL. 2. It was also specified that should PAL find the services provided by
Synergy to be unsatisfactory, Synergy has 15 days to improve its services otherwise PAL has the right the
terminate its agreement immediately and without notice 3. Respondents filed a complaint for
underpayment, nonpayment of premium pay for holidays, service incentive leave pay, 13th month pay
and allowances and for regularization of employment status with PAL 4. LA found Synergy an
independent contractor and dismissed the respondents complaint for regularization against petitioner
but granted their money claims 5. NLRC reversed LA decision and declared Synergy to be a labor-only
contractor and ordered PAL to accept as regular employees, all complainants and give each of the
salaries and benefits provided for in the CBA 6. PAL argued that the law does not prohibit an employer
from engaging an independent contractor like Synergy, which has substantial capital in carrying on an
independent business of contracting, to perform specific jobs. Petitioner also maintained that its
contracting out to Synergy services like janitorial, baggagehandling etc, which are directly related to its
business, does not make respodents its employees 7. PAL also averred that none of the 4 elements of an
employer-employee relationship between petitioner and respondents, i.e., selection and engagement of
an employee, payment of wages, power of dismissal, and the power to control employees conduct,
were present in the case.
ISSUE: WON SYNERGY IS A MERE JOB-ONLY CONTRACTOR OR A LEGITIMATE CONTRACTOR
HELD: Synergy is a mere labor-only contractor. There is "labor-only" contracting where the person
supplying workers to an employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, AND the workers recruited and placed by such
person are performing activities which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly employed by
him.
One who claims to be an independent contractor has to prove that he contracted to do the work
according to his own methods and without being subject to the employer's control except only as to the
results. While petitioner claimed that it was Synergy's supervisors who actually supervised respondents,
it failed to present evidence thereon. It did not even identify who were the Synergy supervisors assigned
at the workplace. Respondents having performed tasks which are usually necessary and desirable in the
air transportation business of petitioner, they should be deemed its regular employees and Synergy as a
labor-only contractor.

BIG AA MANUFACTURER vs. EUTIQUIO ANTONIO, JAY ANTONIO, FELICISIMO ANTONIO, and LEONARDO
ANTONIO, SR. FACTS Petitioner is a sole proprietorship registered in the name of its proprietor, Enrico E.
Alejo. On 1/13/2000, respondents Eutiquio Antonio, Jay Antonio, Felicisimo Antonio, Leonardo Antonio,
Sr. and Roberto Fabian filed a complaint for illegal lay-off and illegal deductions before the NLRCs
Regional Arbitration Branch No. III. They claimed that they were dismissed on 1/11/2000 and sought
separation pay from petitioner. The amicable settlement during the mandatory conference failed, the
parties were required to file their position papers. The Labor Arbiter did not dismiss the complaint with
respect to Roberto Fabian, despite his failure to file a position paper. Neither did the Labor Arbiters
decision concern Roberto Fabian. Hence, this petition shall apply only to Eutiquio, Jay, Felicisimo, and
Leonardo, Sr., all surnamed Antonio, the respondents herein. Respondents alleged that as regular
employees, they worked from 8:00 a.m. to 5:00 p.m. at petitioners premises using petitioners tools and
equipment and they received P250 per day. According to respondents, they were dismissed without just
cause and due process; hence, their prayer for reinstatement and full backwages. They also impleaded
one Hermie Alejo, a relative of the petitioners owner, as co-respondent in their complaint. Petitioner
Big AA Manufacturer, affirmed it is a sole proprietorship registered in the name of Enrico Alejo and
engaged in manufacturing office furniture. Petioner claims that: Respondents are not regular
employees and Eutiquio Antonio was one of its independent contractors who used the services of the
other respondents. There was no employer-employee relationship between petitioner and
respondents. However, petitioner stated it allowed respondents to use its facilities to meet job orders.
Respondents were not laid-off, since they were project employees only. It added that since Eutiquio
Antonio had refused a job order of office tables, their contractual relationship ended. Petitioner
surmised that Eutiquio resented the 1/10/2000 Implementing Guidelines it issued to improve efficiency
and performance. In Respondents reply to the allegations of Petition, it stated that Enrico Alejo should
be impleaded as a proper or indispensable party as sole proprietor of Big AA. They also pointed out that
petitioners payroll shows that Eutiquio Antonio was assigned in its

carpentry section and obtained advances on salaries on various dates. The Implementing Guidelines and
written warnings addressed to Eutiquio Antonio also prove that respondents were under petitioners
control and supervision. On 6/1/2000, the Labor Arbiter ruled that:




Respondents were regular employees because their work as carpenters was necessary and desirable in
petitioners business. Eutiquio worked in petitioners premises and was without substantial capital or
investment in the form of tools, equipment, machinery or work premises. Thus, he could not qualify as
an independent contractor. Noting the absence of contracts providing the duration of respondents
employment and of reports of project completion to the DOLE, Respondents cannot be considered as
project employees. They were constructively dismissed when the Implementing Guidelines changed
their status from regular employees to project employees.

Both parties appealed to the NLRC. Petitioner claimed that the Labor Arbiter committed errors in his
findings of facts. It also prayed that (1) Eutiquio Antonio be declared a labor-only contractor; (2) Hermie
Alejo be dropped from the case; (3) respondents be ordered to report back to work; and (4) the
respondents claim for separation pay and backwages be dismissed. The NLRC modified the Labor
Arbiters decision. It ordered petitioner to reinstate respondents to their former positions or to pay
them separation pay in case reinstatement was no longer feasible, with full backwages in either case.
The NLRC ruled that respondents were regular employees, not independent contractors. It further held
that petitioner failed to justify its reason for terminating respondents and its failure to comply with the
due process requirements. Upon denial of the parties motions for reconsideration, petitioner filed a
petition for certiorari before the CA, which dismissed the petition but affirmed the NLRC decision.
Hence, this petition with prayer for TRO. ISSUES WON respondents are regular employees of petitioner?
HELD YES. Respondents were employed for more than one year and their work as carpenters was
necessary or desirable in petitioners usual trade or business of manufacturing office furniture. Under
Article 280 of the Labor Code, the applicable test to determine whether an employment should be
considered regular or non-regular is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer.

Certain forms of employment require the performance of usual or desirable functions and exceed one
year but do not necessarily result to regular employment under Article 280 of the Labor Code. However,
specific exceptions include project or seasonal employment, but in this case, respondents cannot be
considered project employees. Petitioner had neither shown that respondents were hired for a specific
project the duration of which was determined at the time of their hiring nor identified the specific
project or phase thereof for which respondents were hired. We also agree that Eutiquio was not an
independent contractor for he does not carry a distinct and independent business, and he does not
possess substantial capital or investment in tools, equipment, machinery or work premises. He works
within petitioners premises using the latters tools and materials, as admitted by petitioner. Eutiquio is
also under petitioners control and supervision . It is supported by the fact that petitioner allowed
respondents to use its facilities for the "proper implementation" of job orders. Moreover, the
Implementing Guidelines regulating attendance, overtime, deadlines, penalties; providing petitioners
right to fire employees or "contractors"; requiring the carpentry division to join petitioners exercise
program; and providing rules on machine maintenance, all reflect control and supervision over
respondents. DISPOSITION: Petition is DENIED for lack of merit. Note: Other issues include (1) Valid
termination & (2) abandonment by the Respondents [Petitioner failed to establish valid cause of
termination. Charge of abandonment was based only on Petitioners presumption that Respondents
resented its issuance of the Implementing Guidelines. The Respondents filing the complaint for illegal
dismissal within two days manifested intention against severing employment relationship with
petitioner and abandoning their jobs.]

Lakas vs Burlingame Corp 524 SCRA 690 FACTS: Petitioner in this case sought to represent all rank-and-
file promo employees of respondent. It alleged that said group of employees is not represented by a
Union. So, they filed a petition for certification election before the Department of Labor and
Employment. Respondent, however, opposed said petition on the ground that there exists no employer-
employee relation between the parties. Respondent here further claimed that the employees sought to
be represented by petitioner are not their employees but the employees of F. Garil Manpower Services,
a duly licensed local employment agency. ISSUE: Whether or not F. Garil Manpower services is an
independent contractor or a labor-only contractor. HELD: F. Garil is not an independent contractor. F.
Garil does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises, and other materials, to qualify as an independent contractor. No proof was
adduced to show F. Garils capitalization. The work of the promo-girls was directly related to the
principal business or operation of Burlingame. Marketing and selling of products is an essential activity
to the main business of the principal. F. Garil did not carry on an independent business or undertake the
performance of its service contract according to its own manner and method, free from the control and
supervision of its principal, Burlingame. F. Garil was engaged in labor-only contracting, and as such, is
considered merely an agent of Burlingame. In labor-only contracting, the law creates an employer-
employee relationship to prevent a circumvention of labor laws. The contractor is considered merely an
agent of the principal employer and the latter is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the principal employer.21 Since F. Garil
is a labor-only contractor, the workers it supplied should be considered as employees of Burlingame in
the eyes of the law. The "four-fold test" will show that respondent is the employer of petitioners
members. The elements to determine the existence of an employment relationship are: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power of

dismissal; and (d) the employers power to control the employees conduct. The most important
element is the employers control of the employees conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it. The involvement of F. Garil in the hiring
process was only with respect to the recruitment aspect, i.e. the screening, testing and pre-selection of
the personnel it provided to Burlingame. The actual hiring itself was done through the deployment of
personnel to establishments by Burlingame. The contract states that Burlingame would pay the workers
through F. Garil, stipulating that Burlingame shall pay F. Garil a certain sum per worker on the basis of
eight-hour work every 15th and 30th of each calendar month. The contract states that Burlingame
would pay the workers through F. Garil, stipulating that Burlingame shall pay F. Garil a certain sum per
worker on the basis of eight-hour work every 15th and 30th of each calendar month. The contract also
provides that "any personnel found to be inefficient, troublesome, uncooperative and not observing the
rules and regulations set forth by Burlingame shall be reported to F. Garil and may be replaced upon
request." Corollary to this circumstance would be the exercise of control and supervision by Burlingame
over workers supplied by F. Garil in order to establish the inefficient, troublesome, and uncooperative
nature of undesirable personnel. Also implied in the provision on replacement of personnel carried upon
request by Burlingame is the power to fire personnel. F. Garil was not left alone in the supervision and
control of its alleged employees. Consequently, it can be concluded that F. Garil was not an independent
contractor.

Manila Electric Co. vs Benamira FACTS: Benamira et al are security guards who worked for PSI. PSI was
the security agency contracted by MERALCO. The contract between PSI and MEC expired. MERALCO
subsequently contracted ASDAI as its new security agency. ASDAI absorbed Benamira et al upon
MERALCOs advice. After two years, the contract between ASDAI and MERALCO expired. MERALCO
subsequently contracted AFSISI. AFSISI did not schedule any work for Benamira et al. It was interpreted
as a constructive dismissal. Benamira sued MERALO, ASDAI, and AFSISI. The Labor Arbiter ruled that
ASDAI should reinstate Benamira et al and that MERALCO is solidarily liable. No liability for AFSISI. NLRC
affirmed LA. The CA reversed the lower courts. The CA ruled that the employer is actually MERALCO.
ISSUE: Whether or not MERALCO is the employer of the fired security guards. HELD: No. Under the
contract between ASDAI and MERALCO, it can be seen that ASDAI is indeed the employer of the guards.
Applying the 4 Fold Test: ASDAI employed the guards when it absorbed them from PSI. ASDAI provided
the salaries of the guards (MERALCO merely pays ASDAI for providing the guards). ASDAI has control
over the guards because they are being inspected (MERALCO has the right to conduct its own inspection
as per contract with ASDAI only). ASDAI has the power to terminate the guards, as when they did not
provide any tours or schedules to them. The individual respondents cannot be considered as regular
employees of the MERALCO for, although security services are necessary and desirable to the business
of MERALCO, it is not directly related to its principal business and may even be considered unnecessary
in the conduct of MERALCOs principal business, which is the distribution of electricity. The fact that the
individual respondents filed their claim for unpaid monetary benefits against ASDAI is a clear indication
that the individual respondents acknowledge that ASDAI is their employer. AFSISI is not the employer of
the guards as well (as claimed by the guards) because AFSISI never absorbed them nor was there any
evidence showing otherwise. ASDAI and AFSISI are not labor-only contractors. There is labor only
contract when the person acting as contractor is considered merely as an agent or intermediary

of the principal who is responsible to the workers in the same manner and to the same extent as if they
had been directly employed by him. On the other hand, job (independent) contracting is present if the
following conditions are met: (a) the contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal in all matters connected with
the performance of the work except to the result thereof; and (b) the contractor has substantial capital
or investments in the form of tools, equipment, machineries, work premises and other materials which
are necessary in the conduct of his business.[29] Given the above distinction and the provisions of the
security service agreements entered into by petitioner with ASDAI and AFSISI, we are convinced that
ASDAI and AFSISI were engaged in job contracting.

COCA-COLA BOTTLERS PHIL INC V. NLRC 307 SCRA 131 (1999)
FACTS: On April 7, 1986 Coca-Cola entered into a contract of janitorial services with Bacolod Janitorial
Services (BJS) as an independent contractor. 1. Private respondent Ramon Canonicato was hired as a
janitor by the Bacolod Janitorial Services (BJS). He was assigned at the Coca Cola Bottlers, Inc.
considering his familiarity with its premises, having been previous casual employee there. 2. Goaded by
information that COCA COLA employed previous BJS employees who filed a complaint against the
company for regularization pursuant to a compromise agreement, Canonicato submitted a similar
complaint against COCA COLA to the Labor Arbiter on 8 June 1993 and consequently did not report for
work. 3. On September 28,1993, BJS sent him a letter advising him to report to work within 3 days from
receipt, otherwise he would be terminated. 4. On July 23, 1993, respondent filed with LA a complaint for
illegal dismissal and underpayment of wages. He included BJS therein as a co-respondent. The Labor
Arbiter dismissed the complaint and ruled that a) there was no employeremployee relationship between
Canonicato and Coca Cola (b) BJS was a legitimate job contractor, hence, any liability of COCA COLA as to
Canonicato's salary or wage differentials was solidary with BJS in accordance with pars. 1 and 2 of Art.
106, Labor Code; (c) COCA COLA and BJS must jointly and severally pay Canonicato his wage differentials
amounting toP2,776.80 and his 13th month salary of P1,068.00, including ten (10%) percent attorney's
fees in the sum of P384.48. 5. The NLRC rejected the decision of LA on the ground that the janitorial
services of Canonicato were found to be necessary in the usual trade of Coca Cola. In so holding, NLRC
applied Art.280 Labor Code and declared that Canonito was a regular employee of Coca-Cola. Its motion
for reconsideration having been denied, Coca Cola filed this petition.
ISSUE: WON CANONICATO IS A REGULAR EMPLOYEE OF PETITIONER COMPANY
HELD: No, in Kimberly Independent Labor Union v. Drilon where the Court took judicial notice of the
practice adopted in several government and private institutions and industries of hiring janitorial
services on an "independent contractor basis." In this respect, although janitorial services may be
considered directly related to the principal business of an employer, as with every business, we deemed
them unnecessary in the conduct of the employer's principal business. This judicial notice, of course,
rests on the assumption that the independent contractor is a legitimate job contractor so that there can
be no doubt as to the existence of an employer-employee relationship between contractor and the
worker. In this situation, the only pertinent question that may arise will no longer deal with whether
there exists an employment bond but whether the employee may be considered regular or casual as to
deserve the application of Art. 280 of the Labor Code. It was error therefore for the NLRC to apply Art.
280 of the Labor Code in determining the existence of an employment relationship of the parties herein,
especially in light of our explicit holding in Singer Sewing Machine Company v. Drilon that The Court
agrees with the petitioner's argument that Article 280 is not the yardstick for determining the existence
of an employment relationship because it merely distinguishes between two kinds of employees, i.e.,
regular employees and casual employees, for purposes of determining the right of an employee to
certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the
existence of an employment relationship is in dispute In determining the existence of an employer-
employee relationship it is necessary to determine whether the following factors are present: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power to dismiss; and, (d)
the power to control the employee's conduct. Notably, these are all found in the relationship between
BJS and Canonicato and not between Canonicato and petitioner COCA COLA. BJS satisfied all the
requirements of a job-contractor under the law, namely, (a) the ability to carry on an independent
business and undertake the contract work on its own account under its own responsibility according to
its manner and method, free from the control and direction of its principal or client in all matters
connected with the performance of the work except as to the results thereof; and, (b) the substantial
capital or investment in the form of tools, equipment, machinery, work premises, and other materials
which are necessary in the conduct of its business. All told, there being no employer-employee
relationship between Canonicato and COCA COLA, the latter cannot be validly ordered to reinstate the
former and pay him back wages.

ROMMEL C. OREGAS, DARWIN R. HILARIO AND SHERWIN A. ARBOLEDA vs. NLRC, DUSIT HOTEL NIKKO,
PHILIPPINE HOTELIER'S INCORPORATED and FVA MANPOWER TRAINING CENTER & SERVICES FACTS
Petitioners Rommel C. Oregas, Darwin R. Hilario and Sherwin A. Arboleda worked as valet parking and
door attendants in respondent Dusit Hotel Nikko. They have employment contracts with respondent
FVA. In 2000, FVA recalled petitioners from Dusit. Petitioners then instituted a complaint for illegal
dismissal, regularization, premium pay for holiday and rest day, holiday pay, service incentive leave pay,
13th month pay and attorney's fees against respondents Dusit, Philippine Hotelier's, Inc. and FVA.
Petitioners alleged that despite the length of their service, Dusit never granted them the status and
benefits of a regular employee. Thus, when the rank and file employees' union of Dusit learned that
petitioners were entitled to regularization, Dusit immediately terminated their services due to "end of
contract." On 3/6/2001, Labor Arbiter Potenciano S. Canizares, Jr. dismissed the complaint for lack of
merit. Petitioners failed to prove that they were employees of Dusit. Petitioners admitted that they
transferred to FVA after their previous placement agencies terminated their contracts of services with
Dusit. Labor Arbiter Canizares also noted that petitioners signed application and employment contracts
with FVA and were under its payrolls and accounts. Thus, FVA was petitioners' employer. Finally, he
ruled that petitioners were merely recalled and not dismissed from the service by FVA. On appeal, the
NLRC issued a Resolution dated August 25, 2003, modifying the decision of Labor Arbiter. The NLRC
observed that the four-fold test in determining the existence of an employer-employee relationship is
present in petitioners' relationship with FVA. On the matter of selection and engagement, records
showed that petitioners applied with and were employed by FVA. Although they were required to test
drive by Dusit, it was done only to verify if they had the necessary skills and competence required by the
job. On the matter of control, it was established that petitioners maintained their daily time records
with FVA. On the matter of dismissal, FVA exercised its power to dismiss when it recalled petitioners
from Dusit. Finally, on the matter of payment of wages, it is undisputed that petitioners were under the
payrolls and accounts of FVA. Nevertheless, the NLRC noted that after petitioners' recall, they were no
longer given new assignments. Since more than six months have already lapsed,

petitioners were deemed to have been constructively dismissed and therefore entitled to separation
pay of one-half month pay for every year of service. Petitioners elevated the case to the CA which
affirmed the NLRC resolution. Reconsideration having been denied, petitioners raises the instant
petition. ISSUES WON Respondent FVA is an independent contractor WON there an EMPLOYER-
EMPLOYEE RELATIONSHIP exists between Petitioners and Respondent Hotel HELD
1. YES. the Labor Arbiter, NLRC and the CA were unanimous in finding that FVA

was a legitimate job contractor. Among the circumstances that established the status of FVA as a
legitimate job contractor are: (1) FVA is registered with the DOLE and the DTI; (2) FVA has a Contract for
Services with Dusit for the supply of valet parking and door attendant services; (3) FVA has an
independent business and provides valet parking and door attendant services to other clients like
Mandarin Oriental, Manila Hotel, Peninsula Manila Hotel, Westin Philippine Plaza, Golden B Hotel, Pan
Pacific Manila Hotel, and Strikezone Bowling Lane; and (4) FVA's total assets from 1997 to 1999 amount
to P1,502,597.70 to P9,021,335.13. In addition, it provides the uniforms and lockers of its employees. 2.
NO. By applying the four-fold test used in determining an employeremployee relationship, the status of
FVA as the employer of petitioners is indubitably established. a. Petitioners applied and signed
employment contracts with FVA. They were merely assigned to Dusit conformably with the Contract for
Services between FVA and Dusit. b. FVA assigned a supervisor in Dusit to monitor petitioners'
attendance, leaves of absence, performance and conduct. Petitioners also maintained their daily time
records with FVA. c. Petitioners were duly notified by FVA that they would be assigned to Dusit for five
months only. Thereafter, they may either be recalled for transfer to other clients or be reassigned to
Dusit depending on the result of FVA's evaluation of their performance. In this case, FVA opted to recall
petitioners from Dusit. d. While FVA billed Dusit for the services rendered, it was actually FVA which
paid petitioners' salaries. Worthy of note, FVA registered petitioners with the Bureau of Internal
Revenue and the Social Security System as its employees. In summary, this Court accepts as established
the fact that FVA is a legitimate job contractor and, in contemplation of law, the employer of
petitioners. DISPOSITION: The instant petition is DENIED for lack of merit. CAs decision is AFFIRMED.

Mercury Drug Corp. vs Libuna
friend bought some items at Mercury. He paid for his purchase and placed his receipt in his pocket. As
they exited, they were accosted by Sido, the security guard. Sido was armed with a service gun, and was
20 pounds heavier than Libunao. He held Libunaos upper right arm and demanded to see the receipt.
Libunao searched but it took time because Sido was holding his right arm. Sido then said Wala yatang
resibo yan! Libunao finally found it, and asked Sido, Satisfied ka na? Sido reacted by lunging at him
and saying Putang ina mo! Sido was able to hit lubnao on the face, nose, chin, and mouth. He then
pointed his revolver at Libunao and said Putang ina mo, pag hindi kayo lumabas ditto papuputukin ko
to sa iyo! Libunao eventually filed a criminal complaint against Sido. He was traumatized by the event,
he had to consult a psychiatrist, and was found to be suffering from posttraumatic depression
ido, the security guard at Mercury, noticed Libunao exiting
the store with a plastic bag, and that no receipt was stapled to it. He asked for the receipt, but was given
the plastic bag. He found no receipt, and when Libunao finally found the receipt and shoved it in his
face, he just explained he was doing hisduty. Libunao said Baka hindi mo ako kilala, security guard ka
lang! Ano ba talaga ang problema mo? A violent argument ensued. - The court rendered judgment in
favor of the plaintiff, that the defendants Sido, Mercurly Drug Corporation, and Store Manager Vilma
Santos, pay the plaintiff moral and exemplary damages to discourage disrespect of the public by such
acts as were committed by defendants. ISSUE: Whether or not the remedy of the petitioner is proper
that Mercury Drug be liable for Sidos actions HELD: No. The petitioner was not Sidos employer; hence,
Article 2180 of the Civil Code should not be applied against petitioner. The respondent was burdened to
prove that the petitioner was the employer of Sido but failed to discharge this burden. The respondents
counsel admitted Sido was not employed by the petitioner. Store manager Santos testified that Sido was
not an employee of the petitioner, but of BSSC, Black Shield Agency. The petitioner adduced in evidence
its contract with the BSSC, which contained the following provisions: 1. THE AGENCY shall provide the
CLIENT with the necessary number of armed, uniformed and qualified security guards properly licensed
by the Chief of Philippine

Constabulary; who shall provide security services to the CLIENT at its establishment at These security
guards during the life of the Agreement shall be assigned in accordance with arrangements to be made
between the CLIENT and the AGENCY. ... 6. The AGENCY assumes full responsibility for any claim or
cause of action which may accrue in favor of any security guard by reason of employment with the
AGENCY, it being understood that security guards are employees of the AGENCY and not of the CLIENT.
Therefore, the respondent had no cause of action against the petitioner for damages for Sidos illegal
and harmful acts. The respondent should have sued Sido and the BSSC for damages, conformable to
Article 2180. In Soliman, Jr. v. Tuazon the court held that where the security agency recruits, hires and
assigns the works of its watchmen orsecurity guards to a client, the employer of such guards or
watchmen is such agency, and not the client, since the latter has no hand in selecting the security
guards. Thus, the duty to observe the diligence of a good father of a family cannot be demanded from
the said client The petitioner had assigned Sido to help the management open and close the door of the
drug store; inspect the bags of customers as they enter the store; and, check the receipts issued by the
cashier to said customers for their purchases. Such circumstances do not automatically make the
security guard the employee of the petitioner, and, as such, liable for the guard's tortious acts. The fact
that a client company may give instructions or directions to the security guards assigned to it, does not,
by itself, render the client responsible as an employer of the security guards concerned and liable for
their wrongful acts or omissions.

PHILIPPINE AIRLINES, INC., v. NLRC
FACT
workers were under the supervision of
STELLARs supervisors/foremen and timekeepers and it also furnished with janitorial supplies, such as
then called for the bidding of its janitorial requirements. STELLAR exerted efforts to maintain its
formally informed STELLAR that the service agreement between them
the complainants separation pay. NLRC declared that separation pay is sole liability of PAL.
ISSUE/s: 1) Whether petitioner was a labor-only contractor; and (2) Whether the individual private
respondents became regular employees of PAL because they were allowed to continue working for
petitioner after the expiration of the service contract.
HELD: First Issue: Janitorial Service Agreement Is Not Labor-Only Contracting The Court finds no basis
for holding that PAL engaged in labor-only contracting. The true nature of the individual private
respondents employment is evident from the service agreement between petitioner and STELLAR.
Aside from these stipulations in the service agreement, other pieces of evidence support the conclusion
that STELLAR, not PAL, was the employer of the individual private respondents:
1.A contract of employment existed between STELLAR and the individual private respondents.
2. It was also STELLAR which dismissed them, as evidenced by Complainant termination letter, which
was signed by the VP for operations and comptroller of STELLAR.
3. Likewise, they worked under STELLARs own supervisors. STELLAR even had its own collective
bargaining agreement with its employees, including the individual private respondents.
4. Moreover, PAL had no power of control and dismissal over them.
In fact, STELLAR claims that it has sufficient capital in the form of tools and equipment, like vacuum
cleaners and polishers, and substantial capitalization as proven by its financial statements. Further,
STELLAR has clients other than petitioner. The janitorial service agreement between petitioner and
STELLAR is definitely a case of permissible job contracting. Extension of Service Contract is Not a Source
of Employer-Employee Relation Petitioner did not become the successor-employer of the individual
private respondents when the service contract expired. There was no transfer of the business of
STELLAR in this particular case. The separate undertakings of petitioner and STELLAR continued even
after the expiration of the service contract and the dismissal of individual private respondents. Second
Issue: STELLAR Is Liable for Separation Pay. No Employer-Employee Relation Between Complainants and
PAL. In the case at bar, the service agreement was not a project because its duration was not
determined or determinable. While the service agreement may have had a specific term, STELLAR
disregarded it, repeatedly renewed the service agreement, and continued hiring the individual private
respondents for thirteen consecutive years. Had STELLAR won the bidding, the alleged project would
have never ended. Again, we must emphasize that the main business of STELLAR is the supply
manpower to perform janitorial services for its clients, and the individual private respondents were
janitors engaged to perform activities that were necessary and desirable to STELLARs enterprise. In this
case, we hold that the individual private respondents were STELLARs regular employees, and there was
no valid cause for their dismissal.

JAGUAR V. SALES 552 SCRA 295 (2008) FACTS: Petitioner Jaguar Security and Investigation Agency is a
private corporation engaged in the business of providing security services to its clients, one of whom is
Delta Milling Industries Inc. 1. Respondents Sales et al were hired as security guards by Jaguar. They
were assigned at the premises of Delta, Libis. Sales et al alleged that they were terminated by Jaguar
and that their dismissals were arbitrary and illegal. All guard-employees claim monetary benefits 2. LA
held in favor of Sales et al and ordered Jaguar to pay Sales et al, wage differentials, overtime pay
differentials, rest day pay, holiday pay, premium holiday pay, 13th month pay etc. 3. Jaguar averred that
Delta was solidarily liable with petitioner. NLRC dismissed the appeal since Jaguar was the direct
employer of the security guards, it is the one principally liable to the employees ISSUE: WON DELTA IS
SOLIDARILY LIABLE TO PAY WITH JAGUAR THE MONETARY BENEFITS CLAIMED BY RESPONDENTS HELD:
There is no question as regards the respective liabilities of petitioner and Delta Milling. Under Articles
106, 107 and 109 Labor Code, the joint and several liability of the contractor and the principal is
mandated to assure compliance of the provisions therein including the statutory minimum wage. The
contractor, petitioner in this case, is made liable by virtue of his status as direct employer. On the other
hand, Delta Milling, as principal, is made the indirect employer of the contractor's employees for
purposes of paying the employees their wages should the contractor be unable to pay them. This joint
and several liability facilitates, if not guarantees, payment of the workers' performance of any work,
task, job or project, thus giving the workers ample protection as mandated by the 1987 Constitution. In
the event that petitioner pays his obligation to the guard employees pursuant to the Decision of the
Labor Arbiter, as affirmed by the NLRC and CA, petitioner has the right of reimbursement from Delta
Milling under Article 1217 Civil Code, which provides: Art. 1217. Payment made by one of the solidary
debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may
choose which offer to accept.

He who made the payment may claim from his co-debtors only the share which corresponds to each,
with the interest for the payment already made. If the payment is made before the debt is due, no
interest for the intervening period may be demanded. The action is within the realm of civil law hence
jurisdiction over the case belongs to the regular courts. While the resolution of the issue involves the
application of labor laws, reference to the labor code was only for the determination of the solidary
liability of the petitioner to the respondent where no employer-employee relation exists. In the present
case, there exists no employer-employee relationship between petitioner and Delta Milling. The liability
of Delta Milling to reimburse petitioner will only arise if and when petitioner actually pays its employees
the adjudged liabilities.

Meralco Industrial Engineering Services Corporation (MIESCOR) vs NLRC and OPLGS FACTS On
11/7/1984, MIESCOR and OPLGS executed a contract wherein OPLGS would supply the MIESCOR
janitorial services at its Rockwell Thermal Plant in Makati City. Pursuant thereto, 49 employees were
assigned as janitors to petitioners Rockwell Thermal Plant. On 9/20/1989, the 49 employees
(complainants) lodged a Complaint for illegal deduction, underpayment, non-payment of overtime pay,
legal holiday pay, premium pay for holiday and rest day and night differentials against the private
respondents before the Labor Arbiter. In view of the enactment of Republic Act No. 6727, the contract
between the petitioner and the private respondents was amended for the 10th time on 11/3/1989 to
increase the minimum daily wage per employee from P63.55 to P89.00 or P2,670.00 per month. On
1/2/1990, MIESCOR sent a letter to OPLGS informing them that MIESCO was terminating the contract,
effective at the close of business hours on 1/31/1990. Accordingly, the complainants were pulled out
from their work. Thus, on 2/27/1990, complainants amended their Complaint to include the charge of
illegal dismissal and to implead the petitioner as a party respondent therein. Thereafter, a Decision was
rendered by the Labor Arbiter on 3/26/1991, dismissing the Complaint against the petitioner for lack of
merit, but ordering the private respondents to pay the complainants the total amount of P487,287.07.
All other claims of the complainants against the private respondents were dismissed. Private
respondents appealed the aforesaid Decision to the NLRC. Private respondents alleged, among other
things, that: the petitioner, being the principal, was solidarily liable with the private respondents for
failure to make an adjustment on the wages of the complainants. On 5/28/1993, NLRC affirmed the
Labor Arbiters Decision with the modification that the petitioner was solidarily liable with the private
respondents. MIESCOR and OPLGS separately moved for reconsideration. The NLRC issued an Order
noting that based on the records of the case, the judgment award in the amount of P487,287.07 was
secured by a surety bond posted by the private respondents. Resultantly, the NLRC denied OPLGS
Motion for Reconsideration. The NLRC likewise directed the Labor Arbiter to enforce the monetary
award against the OPLGS surety bond and to determine who should finally shoulder the liability
therefor.

On 1/30/1996, the NLRC issued an Order which declared the solidarily liability of OPLGS and MIESCOR
on the underpayment and on the non-payment of the overtime pay and the sole liability of OPLGS on
the payment of separation pay. Thus, an alias writ of execution was issued pursuant thereto. On appeal
to CA, the Court rendered the assailed Decision which modified the Decision of the NLRC and holding
the petitioner solidarily liable with the private respondents for the satisfaction of the laborers
separation pay . Hence, this petition. ISSUE Whether or not MIESCOR should be held solidarily liable
with OPLGS for the satisfaction of the laborers separation pay RULING NO. The Court of Appeals erred
when it ruled that the MIESCOR was jointly and solidarily liable with the OPLGS as regards the payment
of separation pay. The appellate court used as basis Article 109 of the Labor Code, as amended, in
holding the petitioner solidarily liable with the private respondents for the payment of separation pay:
ART. 109. Solidary Liability. - The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code . For purposes of determining the extent of their civil liability
under this Chapter, they shall be considered as direct employers. However, the afore-quoted provision
must be read in conjunction with Articles 106 and 107 of the Labor Code, as amended. Article 107 of the
Labor Code, as amended, defines an indirect employer as any person, partnership, association or
corporation which, not being an employer, contracts with an independent contractor for the
performance of any work, task, job or project. To ensure that the contractors employees are paid their
appropriate wages, Article 106 of the Labor Code, as amended, provides: ART. 106. CONTRACTOR OR
SUBCONTRACTOR. x x x. In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under the contract,
in the same manner and extent that he is liable to employees directly employed by him.

Taken together, an indirect employer can only be held solidarily liable with the independent contractor
or subcontractor in the event that the latter fails to pay the wages of its employees. While it is true that
the petitioner was the indirect employer of the complainants, it cannot be held liable in the same way as
the employer in every respect. The petitioner may be considered an indirect employer only for purposes
of unpaid wages. There is no question that private respondents are operating as an independent
contractor and that the complainants were their employees. There was no employeremployee
relationship that existed between the petitioner and the complainants. Thus, the former could not have
dismissed the latter from employment. Only private respondents, as the employer, can terminate their
services and should be held liable. The only instance when the principal can also be held liable with the
independent contractor or subcontractor for the backwages and separation pay of the latters employees
is when there is proof that the principal conspired with the independent contractor or subcontractor in
the illegal dismissal of the employees. It is the established fact of conspiracy that will tie the principal or
indirect employer to the illegal dismissal of the contractor or subcontractors employees. In the present
case, there is no allegation and proof presented, that the petitioner conspired with private respondents
in the illegal dismissal of the latters employees. Hence, it cannot be held liable for the same. Neither can
the liability for the separation pay of the complainants be extended to the petitioner based on contract.
Contract executed between the MIESCOR and OPLGS contains no provision for separation pay upon
termination of contract. A contract is the law between the parties and the stipulations therein shall be
binding as between the parties. Hence, if the contract does not provide for such a liability, the Court
cannot just read the same into the contract without possibly violating the intention of the parties.
Although MIESCOR is not liable for separation pay, the Court conforms to the consistent findings that
the petitioner is solidarily liable with OPLGS for the judgment awards for underpayment of wages and
non-payment of overtime pay. In this case, however, OPLGS had already posted a surety bond sufficient
to cover all the judgment awards due the complainants, including those for underpayment of wages and
non-payment of overtime pay. The joint and several liability of the principal with the contractor and
subcontractor were enacted to ensure compliance with the provisions of the Labor Code. This liability
facilitates, if not guarantees, payment of the workers compensation. With OPLGS surety bond, the
interests of the complainants are already adequately protected. Consequently, it will be futile to
continuously hold the petitioner jointly and solidarily liable with the private respondents for the
judgment awards for underpayment of wages and non-payment of overtime pay. But while this Court
had previously ruled that the indirect employer can recover whatever amount it had paid to the
employees in accordance with the terms of the service contract between itself and the contractor, the
said ruling cannot be applied in

reverse to this case as to allow the OPLGS (the independent contractor), who paid for the judgment
awards in full, to recover from the MIESCOR (the indirect employer). MIESCOR had already handed over
to OPLGS the wages and other benefits of the complainants. Records reveal that it had complied with
complainants salary increases in accordance with the minimum wage set by Republic Act No. 6727 by
faithfully adjusting the contract price for the janitorial services. Having already received from petitioner
the correct amount of wages and benefits, but having failed to turn them over to the complainants,
OPLGS should now solely bear the liability for the underpayment of wages and non-payment of the
overtime pay. DISPOSITION: The petition is GRANTED. The Decision and Resolution of the Court of
Appeals are REVERSED AND SET ASIDE.

Eparwa Security vs Liceo de Cagayan University (LDCU) 508 SCRA 370 [2007] Facts: On 1 December
1997, Eparwa and LDCU, through their representatives, entered into a Contract for Security Services. On
21 December 1998, 11 security guards whom Eparwa assigned to LDCU filed a complaint before the
NLRC, against both Eparwa and LDCU for underpayment of salary, legal holiday pay, 13th month pay,
rest day, service incentive leave, night shift differential, overtime pay, and payment for attorneys fees.
The Labor Arbiter found that the security guards are entitled to wage differentials and premium for
holiday and rest day work. The Labor Arbiter held Eparwa and LDCU solidarily liable pursuant to Article
109 of the Labor Code. LDCU filed an appeal before the NLRC. The NLRC found that the security guards
are entitled to wage differentials and premium for holiday and rest day work. Although the NLRC held
Eparwa and LDCU solidarily liable for the wage differentials and premium for holiday and rest day work,
the NLRC did not require Eparwa to reimburse LDCU for its payments to the security guards. Eparwa and
LDCU again filed separate motions for partial reconsideration, LDCU questioned the NLRCs deletion of
LDCUs entitlement to reimbursement by Eparwa. Eparwa, on the other hand, prayed that LDCU be
made to reimburse Eparwa for whatever amount it may pay to the security guards. The NLRC declared
that although Eparwa and LDCU are solidarily liable to the security guards for the monetary award, LDCU
alone is ultimately liable. LDCU filed a petition for certiorari before the CA, LDCU stated that this would
free Eparwa from any liability for payment of the security guards money claims. CA also allowed LDCU
to claim reimbursement from Eparwa. ISSUE: Is LDCU alone ultimately liable to the security guards for
the wage differentials and premium for holiday and rest day pay? HELD: LDCUs ultimate liability comes
into play because of the expiration of the Contract for Security Services. There is no privity of contract
between the security guards and LDCU, but LDCUs liability to the security guards remains because of
Articles 106, 107 and 109 of the Labor Code. Eparwa is already precluded from asking LDCU for an
adjustment in the contract price because of the expiration of the contract, but Eparwas

liability to the security guards remains because of their employer-employee relationship. In lieu of an
adjustment in the contract price, Eparwa may claim reimbursement from LDCU for any payment it may
make to the security guards. However, LDCU cannot claim any reimbursement from Eparwa for any
payment it may make to the security guards. For the security guards, the actual source of the payment
of their wage differentials and premium for holiday and rest day work does not matter as long as they
are paid. This is the import of Eparwa and LDCUs solidary liability. Creditors, such as the security guards,
may collect from anyone of the solidary debtors. Solidary liability does not mean that, as between
themselves, two solidary debtors are liable for only half of the payment. Articles 106, 107 and 109 of the
Labor Code read: Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract
with another person for the performance of the formers work, the employees of the contractor and of
the latters subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the
event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that
he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate
regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-
only contracting and job contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the employer for purposes of this Code,
to prevent any violation or circumvention of any provision of this Code. There is "labor-only" contracting
where the person supplying workers to an employer does not have substantial capital or investment in
the form of tools, equipment, machineries, work premises, among others, and the workers recruited
and placed by such persons are performing activities which are directly related to the principal business
of the employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him. Article 107. Indirect employer. The provisions of the immediately
preceding Article shall likewise apply to any person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor for the performance of any work, task, job
or project.

Article 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purposes of determining the extent of their civil liability
under this Chapter, they shall be considered as direct employers. This joint and several liability of the
contractor and the principal is mandated by the Labor Code to assure compliance of the provisions
therein including the statutory minimum wage [Article 99, Labor Code]. The contractor is made liable by
virtue of his status as direct employer. The principal, on the other hand, is made the indirect employer
of the contractors employees for purposes of paying the employees their wages should the contractor
be unable to pay them. This joint and several liability facilitates, if not guarantees, payment of the
workers performance of any work, task, job or project, thus giving the workers ample protection as
mandated by the 1987 Constitution [See Article II Sec. 18 and Article XIII Sec. 3].

MANDAUE etc. v. ANDALES
mallosons Traders, Inc. (GTI) are
business entities engaged in rattan furniture manufacturing for export.
l dismissal and non-
payment of 13th month pay and service incentive leave pay. His other co-workers numbering 260 filed a
similar complaint against petitioner MGTI only.
denied the existence of employer-employee relationship with complainants, claiming that they
are workers of independent contractors whose services were engaged temporarily and seasonally when
the demands for its products are high and could not be met by its regular workforce; the independent
contractors recruited and hired the complainants, prepared the payroll and paid their wages, supervised
and directed their work, and had authority to dismiss them.
made to perform functions which are necessary to MGTI's rattan furniture manufacturing business and
s
that labor-only contracting and not jobcontracting was present since the alleged contractors did not
have substantial capital in the form of equipment, mac
the findings of the NLRC.
ISSUE: WON the CA committed grave abuse and irreversible error in considering the respondents as
employees of the petitioner.
HELD: The Court sees no reason to disturb the findings of fact of the NLRC and the CA. Based on Article
106 of the Labor Code and Sections 5 and 7 of the Implementing Rules, "labor-only" contracting exists
when the following criteria are present: (1) where the contractor or subcontractor supplying workers to
an employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among other things; and the workers recruited and placed by the
contractor or subcontractor are performing activities which are directly related to the principal business
of such employer; or (2) where the contractor does not exercise the right to control the performance of
the work of the contractual employee. In the present case, petitioners' claim that their contractors are
independent contractors, and, therefore, this case is one of permissible job contracting, is without basis.
First, respondents' work as weavers, grinders, sanders and finishers is directly related to MGTI's principal
business of rattan furniture manufacturing. Where the employees are tasked to undertake activities
usually desirable or necessary in the usual business of the employer, the contractor is considered as a
"labor-only" contractor and such employees are considered as regular employees of the employer.
Second, MGTI was unable to present any proof that its contractors had substantial capital. There was no
evidence pertaining to the contractors' capitalization; nor to their investment in tools, equipment or
implements actually used in the performance or completion of the job, work, or service that they were
contracted to render. The law casts the burden on the contractor to prove that it has substantial capital,
investment, tools, etc. Employees, on the other hand, need not prove that the contractor does not have
substantial capital, investment, and tools to engage in job-contracting. Thus, the contractors are "labor-
only" contractors since they do not have substantial capital or investment which relates to the service
performed and respondents performed activities which were directly related to MGTI's main business.
MGTI, the principal employer, is solidarily liable with the labor-only contractors, for the rightful claims of
the employees. Under this set-up, "labor-only" contractors are deemed agents of the principal, MGTI,
and the law makes the principal responsible to the employees of the "labor-only" contractor as if the
principal itself directly hired or employed the employees. In prohibiting "labor-only" contracting and
creating an employer-employee relationship between the principal and the supposed contractor's
employees, the law intends to prevent employers from circumventing labor laws intended to protect
employees.

ABOITIZ HAULERS INC V. DIMAPATOI 502 SCRA 271 (2006) REQUISITES AND PROHIBITION OF LABOR
CONTRACTOR ONLY FACTS: Petitioner Aboitiz Haulers Inc is a domestic corporation principally engaged
in nationwide and overseas forwarding and distribution of cargo. Private respondents Dimapatoi,
Agawin et al worked as checkers in the Mega Warehouse, owned by Aboitiz Haulers. 1. Petitioner
claimed respondents are not its employees but the employees of Grigio Security Agency, a manpower
agency that supplies security guards, checkers, and stuffers. It allegedly entered into a contract of
service with Grigio March 1994 where Grigio was to supply the petitioner with security guards, checkers
and stuffers. Among the checkers assigned to the petitioners warehouse were the private respondents
2. Aboitiz averred that Grigio retained control over the respondents by providing their own supervisors
to oversee Grigios personnel, as well as time cards to monitor the attendance of its personnel 3.
Petitioner also alleged that on May 9, 1996, the respondents left the warehouse and did not report to
work thereafter. As a result of the respondents sudden abandonment of work, there was no orderly
turnover of papers and other company property in connection with the termination of the contract for
services 4. Whereas the respondents claimed that they have been employed by Aboitiz Haulers even
before March 1994 5. Dimapatoi et al maintain that during their employment with petitioner, they were
not paid their regular holiday pay, nightshift differential, 5 day service incentive leave and OT premium.
They also averred that illegal deductions were being made on their wages, particularly for a mutual
assistance fund, a cash bond and claims for damaged and misrouted cargo incurred by petitioner 6.
Respondents alleged that on May 15, 1996, Aboitiz Haulers dismissed them on the pretext that the
written contract of service between Grigio and petitioner had been terminated 7. Respondents filed a
complaint for non-payment of wages and other benefits and illegal deductions. LA held in favor of
Aboitiz Haulers since respondents were unable to offer any evidence to show that Grigio had no
substantial capital (Grigio was held to be a legitimate independent job contractor). NLRC affirmed the
same

8. CA reversed the decision citing that Grigio was not an independent job contractor, despite its claim
that it has sufficient capital. Grigio does not carry on an independent business, since the respondents
work as warehouse checkers is necessary and desirable to the petitioners business of forwarding and
distribution of cargo. ISSUE: WON GRIGIO IS A LABOR ONLY CONTRACTOR HELD: No, Grigio is not a
labor only contractor. In determining whether or not a "labor-only" contracting exists, Art. 106 of the
Labor Code and Section 5 of the Rules Implementing Articles 106 to 109 of the Labor Code, as amended,
provides the following criteria: (1) where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
other things; (2) the workers recruited and placed by such persons are performing activities which are
directly related to the principal business of such employer; and (3) the contractor does not exercise the
right to control the performance of the work of the contractual employee. In order that one is
considered by law as a "labor-only" contractor, all three aforementioned criteria need not be present. If
the contractor enters into an arrangement characterized by any one of the criteria provided, this would
be a clear case of "labor-only contracting." The clear phrasing of Section 5 of the Rules Implementing
Articles 106 to 109 of the Labor Code, as amended, support this interpretation. The allegation of the
petitioner that Grigio is an independent job contractor, and, therefore, this case is one of permissible
job contracting, is without basis. In this case, the respondents work, as warehouse checkers, is directly
related to the principal business of the petitioner. Petitioner also exercises the right to control and
determines not only the end to be achieved, but also the manner and means to be used in reaching that
end. Lastly, petitioner failed to sufficiently prove that Grigio had "substantial capital or investment." The
respondents, as checkers, were employed to check and inspect these cargoes,28 a task which is clearly
necessary for the petitioners business of forwarding and distributing of cargoes. The petitioner did not
dispute the fact that the respondents were hired as checkers as early as 1992. The fact that they were
employed before the Written Contract of Services took effect on 24 February 1994, and continued with
their jobs until 1996, after the said contract had already expired on 24 February 1995, indicates that the
respondents work was indeed necessary for the petitioners business. In a similar case, Guarin v.
National Labor Relations Commission, the workers contracts were repeatedly renewed to perform
services necessary for the employers business

Thus, Grigio is obviously a "labor-only contractor since it did not have substantial capital or investment
which relates to the service performed; the respondents performed activities which were directly
related to the main business of the petitioner; and Grigio did not exercise control over the performance
of the work of the respondents. Consequently, the petitioner is considered as the employer of the
respondents.

ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO vs. NLRC, VIC DEL ROSARIO and VIVA FILMS FACTS
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents as part of
the filming crew a salary of P375.00 per week. About 4 months later, he was designated Asst. Electrician
and later, he was then promoted to the rank of Electrician. On the other hand, Petitioner Paulino Enero
claims that private respondents employed him as a member of the shooting crew. The tasks of
Petitioners include the loading, unloading and arranging movie equipment in the shooting area as
instructed by the cameraman, returning the equipment to Viva Films warehouse, assisting in the
fixing of the lighting system, and performing other tasks that the cameraman and/or director may
assign. In May 1992, Petitioners sought the assistance of their supervisor, Mrs. Alejandria Cesario, to
facilitate their request that private respondents adjust their salary in accordance with the minimum
wage law. They were then informed that Mr. Vic del Rosario would agree to increase their salary only if
they signed a blank employment contract. Petitioners refused to sign, private respondents forced Enero
to go on leave then refused to take him back when he reported for work. Meanwhile, Maraguinot was
dropped from the company payroll but was returned and again asked to sign a blank employment
contract, and when he still refused, private respondents terminated his services. Petitioners thus sued
for illegal dismissal before the Labor Arbiter. Private Respondents assert that they contract persons
called producers -- also referred to as associate producers -- to produce or make movies for
private respondents; and contend that petitioners are project employees of the associate producers
who, in turn, act as independent contractors. As such, there is no employer-employee relationship
between petitioners and private respondents; that it was the associate producer of a film who hired
Maraguinot and he was released upon payment of his last salary, as his services were no longer needed;
that Enero was hired for a movie, went on vacation and by the time he reported back to work the move
had been completed.

The Labor Arbiter ruled that Complainants are the employees of the respondents. The producer cannot
be considered as an independent contractor but should be considered only as a labor-only contractor
and acts as a mere agent of the real employer. Also, it is an admitted fact that the complainants received
their salaries from the respondents for activities which are necessary and essential to the business of
the respondents, that of moviemaking. Complainant Maraguinot worked as an electrician, while
complainant Enero worked as a crew member. Hence, the complainants were illegally dismissed. Private
Respondents appealed to the NLRC and the latter reversed the Labor Arbiters decision, concluding that
upon circumstances, taken together, indicated that complainants were project employees. Mainly,
Complainants were hired for specific movie projects and their employment was co-terminus with each
movie project the completion/termination of which are pre-determined, such fact being made known to
complainants at the time of their engagement. Petitioners alleged that, in supporting their claim that
they were regular (and not project) employees of private respondents, petitioners cited their
performance of activities that were necessary or desirable in the usual trade or business of private
respondents and added that their work was continuous. Petitioners thus considered themselves part of
a work pool from which private respondents drew workers for assignment to different projects.
Petitioners lamented that there was no basis for the NLRCs conclusion that they were project
employees Private respondents reiterate their version of the facts and stress that their evidence
supports the view that petitioners are project employees; point to petitioners irregular work load and
work schedule; emphasize the NLRCs finding that petitioners never controverted the allegation that
they were not prohibited from working with other movie companies; and ask that the facts be viewed in
the context of the peculiar characteristics of the movie industry. The OSG is convinced that this petition
is improper since petitioners raise questions of fact; and submits that petitioners reliance on Article 280
of the Labor Code to support their contention that they should be deemed regular employees is
misplaced, as said section merely distinguishes between two types of employees, i.e., regular
employees and casual employees, for purposes of determining the right of an employee to certain
benefits. The OSG likewise rejects petitioners contention that since they were hired not for one
project, but for a series of projects, they should be deemed regular employees. In closing, the OSG
disagrees with petitioners claim that the NLRCs classification of the movie producers as independent
contractors had no basis in fact and in law, since, on the contrary, the NLRC took pains in explaining its
basis for its decision. ISSUES 1. WON this is a proper action 2. WON an employer-employee relationship
existed between the petitioners and private respondents or any one of them

HELD 1. YES. A special civil action for certiorari under Rule 65 of the Rules of Court is the proper remedy
for one who complains that the NLRC acted in total disregard of evidence material to or decisive of the
controversy. In the instant case, petitioners allege that the NLRCs conclusions have no basis in fact and
in law, hence the petition may not be dismissed on procedural or jurisdictional grounds.
2. YES. The relationship between VIVA and its producers or associate producers

seems to be that of agency, as the latter make movies on behalf of VIVA, whose business is to make
movies. As such, the employment relationship between petitioners and producers is actually one
between petitioners and VIVA, with the latter being the direct employer. Job Contracting o It is settled
that the contracting out of labor is allowed only in case of job contracting and if contractor has
substantial capital or investment in the form of tools, equipment, machineries, work premises and other
materials which are necessary in the conduct of his business o Assuming that the associate producers
are job contractors, they must then be engaged in the business of making motion pictures. As such, and
to be a job contractor under the preceding description, associate producers must have tools,
equipment, machinery, work premises, and other materials necessary to make motion pictures.
However, the associate producers here have none of these. Private respondents evidence reveals that
the movie-making equipment are supplied to the producers and owned by VIVA. If private respondents
insist that their associate producers are labor contractors, then these producers can only be labor-only
contractors. Labor-only contracting o There is labor-only contracting where the person supplying
workers to an employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such persons are
performing activities which are directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed by
him. o As labor-only contracting is prohibited, the law considers the person or entity engaged in the
same a mere agent or intermediary of the direct employer. But even by the preceding standards, the
associate producers of VIVA cannot be considered labor-only contractors as they did not supply, recruit
nor hire the workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and an
employee of VIVA, who



recruited crew members from an available group of free-lance workers which includes the
complainants Maraguinot and Enero. The employer-employee relationship between petitioners and
VIVA can be further established by the control test. While four elements are usually considered in
determining the existence of an employment relationship, namely: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to
control the employees conduct, the most important element is the employers control of the
employees conduct, not only as to the result of the work to be done but also as to the means and
methods to accomplish the same. Control Test o VIVAs control is evident in its mandate that the end
result must be a quality film acceptable to the company. The means and methods to accomplish the
result are likewise controlled by VIVA, viz., the movie project must be finished within schedule without
exceeding the budget, and additional expenses must be justified; certain scenes are subject to change to
suit the taste of the company; and the Supervising Producer, the eyes and ears of VIVA and del
Rosario, intervenes in the moviemaking process by assisting the associate producer in solving problems
encountered in making the film. o It may not be validly argued then that petitioners are actually subject
to the movie directors control, and not VIVAs direction. The director merely instructs petitioners on
how to better comply with VIVAs requirements to ensure that a quality film is completed within
schedule and without exceeding the budget. At bottom, the director is akin to a supervisor who merely
oversees the activities of rank-and-file employees with control ultimately resting on the employer. o
Appointment Slips issued to all crew members state: During the term of this appointment you shall
comply with the duties and responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management. o The words superiors and Top
Management can only refer to the superiors and Top Management of VIVA. By commanding crew
members to observe the rules and regulations promulgated by VIVA, the appointment slips only
emphasize VIVAs control over petitioners. o Aside from control, the element of selection and
engagement is present. A sample appointment slip was offered by private respondents to prove that
members of the shooting crew except the driver are project employees of the Independent Producers.
Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer
who hired the crew members. It is VIVAs corporate name which appears on the heading of the
appointment slip. What likewise tells against VIVA is that it paid petitioners salaries as evidenced by
vouchers, containing VIVAs letterhead, for that purpose.

DISPOSITION: Petition is GRANTED.

Mandaue etc. vs Andales 548 SCRA 17 [2008]
Facts: Petitioners Mandaue Galleon Trade, Inc. (MGTI) and Gamallosons Traders, Inc. (GTI) are business
entities engaged in rattan furniture manufacturing for export, with principal place of business at
Cabangcalan, Mandaue City. Respondent Vicente Andales (Andales) filed a complaint with (LA) against
both petitioners for illegal dismissal and non-payment of 13th month pay and service incentive leave
pay. His other co-workers numbering 260 filed a similar complaint against petitioner MGTI only. The
complainants alleged that MGTI hired them on various dates as weavers, grinders, sanders and finishers;
these workers were told that they could no longer work because theres no work for them; thus they
were dismissed without just notice and just cause. MGTI denied the existence of employer-employee
relationship with complainants, claiming that they are workers of independent contractors whose
services were engaged temporarily and seasonally when the demands for its products are high and
could not be met by its regular workforce. The LA rendered a Decision holding that 183 complainants
are regular piece-rate employees of MGTI since they were made to perform functions which are
necessary to MGTI's rattan furniture manufacturing business. The NLRC affirmed the LA's finding of
employer-employee relationship. It held that labor-only contracting and not job-contracting was present
since the alleged contractors did not have substantial capital in the form of equipment, machineries and
work premises. The CA affirmed the findings of the NLRC. It held that MGTI is liable to the respondents
because the alleged contractors are not independent contractors but labor-only contractors; that
respondents were constructively dismissed when they were unilaterally transferred to another
contractor; and that the allegation of retrenchment was not proven.
ISSUE: What is the effect of the finding that the contractor was a labor-only contractor?
HELD: AUTOMATIC DECLARATION OF EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP A finding that
a contractor is a "labor-only" contractor is equivalent to declaring that there is an employer-employee
relationship between the principal and the employees of the supposed contractor and the "labor-only"
contractor is considered as a mere agent of the principal, the real employer. The effect of this is the
immediate application of Labor Standards, Security of Tenure, etc. between the employees and the
principal. ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with
another person for the performance of the former's work, the employees of the contractor and of the
latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event
that the contractor or subcontractor fails to pay the wages of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that
he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate
regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-
only contracting and job contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the employer for purposes of this Code,
to prevent any violation or circumvention of any provision of this Code. There is "labor-only" contracting
where the person supplying workers to an employer does not have substantial capital or investment in
the form of tools, equipment, machineries, work premises, among others, and the workers recruited
and placed by such persons are performing activities which directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him.

against San Miguel Corporation (SMC) and Maerc Integrated Services, Inc., for illegal dismissal,
underpayment of wages et
washed and segregated various kinds of empty bottles used by SMC to sell and distribute its beer
segregation activities due to the installation of l
was a labor-only contractor and that complainants were employees of SMC. The NLRC also held that
whether MAERC was a job contractor or a labor-only contractor, SMC was still solidarily liable with
ision of the NLRC. ISSUE : WON the
complainants are employees of petitioner SMC or of respondent MAERC HELD: We find no basis to
overturn the Court of Appeals and the NLRC.

Well-established is the principle that findings of fact of quasi-judicial bodies, like the NLRC, are accorded
with respect, even finality, if supported by substantial evidence. Particularly when passed upon and
upheld by the Court of Appeals, they are binding and conclusive upon the Supreme Court and will not
normally be disturbed. Evidence discloses that petitioner played a large and indispensable part in the
hiring of MAERC's workers. It also appears that majority of the complainants had already been working
for SMC long before the signing of the service contract between SMC and MAERC. The NLRC found that
when MAERC was organized into a corporation, SMC gave instructions through its supervisors to make it
appear that complainants were hired by MAERC. This was testified to by two (2) of the workers who
were segregator and forklift operator who had been working with SMC under a purported contractor
since March 1979 and March 1981, respectively. Both witnesses also testified that together with other
complainants they continued working for SMC without break from Jopard Services to MAERC. As for the
payment of workers' wages, the memoranda of the labor rates reveals that SMC assumed the
responsibility of paying for the mandated overtime, holiday and rest day pays of the MAERC workers.
SMC also paid the employer's share of the SSS and Medicare contributions, the 13th month pay,
incentive leave pay and maternity benefits. In the lump sum received, MAERC earned a marginal
amount representing the contractors share. These lend credence that MAERC merely acted as an agent
of SMC. In deciding the question of control, viewed alongside the findings of the Labor Arbiter the
responsibility of watching over the MAERC workers by MAERC personnel became superfluous with the
presence of additional checkers from SMC. Another are letters by SMC to the MAERC management, the
letters named three (3) workers who were responsible for the rejection of several bottles then
recommended the penalty to be imposed. Evidently, these workers were reported by the SMC checkers
to the SMC inspector. These showed the right of petitioner to recommend disciplinary measures over
MAERC employees. Also, the minutes of the meeting held by the SMC officers which discussed to pass
the eye examination to be done by SMC EENT company doctor and a review of compensation/incentive
system for segregators to improve the segregation activities. But the most telling evidence is a letter by
Vice-President of MAERC addressed to SMC President and Chief Executive Officer, asking the latter to
reconsider the phasing out of SMCs segregation activities in Mandaue City.

In comparison, MAERC, as earlier discussed, displayed the characteristics of a laboronly contractor.

ABOITIZ HAULERS INC V. DIMAPATOI 502 SCRA 271 (2006) EFFECTS OF BINDING FACTS: Petitioner
Aboitiz Haulers Inc is a domestic corporation principally engaged in nationwide and overseas forwarding
and distribution of cargo. Private respondents Dimapatoi, Agawin et al worked as checkers in the Mega
Warehouse, owned by Aboitiz Haulers. 1. Petitioner claimed respondents are not its employees but the
employees of Grigio Security Agency, a manpower agency that supplies security guards, checkers, and
stuffers. It allegedly entered into a contract of service with Grigio March 1994 where Grigio was to
supply the petitioner with security guards, checkers and stuffers. Among the checkers assigned to the
petitioners warehouse were the private respondents 2. Aboitiz averred that Grigio retained control over
the respondents by providing their own supervisors to oversee Grigios personnel, as well as time cards
to monitor the attendance of its personnel 3. Petitioner also alleged that on May 9, 1996, the
respondents left the warehouse and did not report to work thereafter. As a result of the respondents
sudden abandonment of work, there was no orderly turnover of papers and other company property in
connection with the termination of the contract for services 4. Whereas the respondents claimed that
they have been employed by Aboitiz Haulers even before March 1994 5. Dimapatoi et al maintain that
during their employment with petitioner, they were not paid their regular holiday pay, nightshift
differential, 5 day service incentive leave and OT premium. They also averred that illegal deductions
were being made on their wages, particularly for a mutual assistance fund, a cash bond and claims for
damaged and misrouted cargo incurred by petitioner 6. Respondents alleged that on May 15, 1996,
Aboitiz Haulers dismissed them on the pretext that the written contract of service between Grigio and
petitioner had been terminated 7. Respondents filed a complaint for non-payment of wages and other
benefits and illegal deductions. LA held in favor of Aboitiz Haulers since respondents were unable to
offer any evidence to show that Grigio had no substantial capital (Grigio was held to be a legitimate
independent job contractor). NLRC affirmed the same

8. CA reversed the decision citing that Grigio was not an independent job contractor, despite its claim
that it has sufficient capital. Grigio does not carry on an independent business, since the respondents
work as warehouse checkers is necessary and desirable to the petitioners business of forwarding and
distribution of cargo. ISSUE: WHAT IS THE EFFECT OF DETERMINING IF A COMPANY IS A LABOR ONLY
CONTRACTOR

HELD: Generally, the findings of fact made by the labor arbiter and the NLRC, as the specialized agencies
presumed to have the expertise on matters within their respective fields, are accorded much respect
and even finality, when supported by ample evidence. However, when the findings of the labor arbiter
and the NLRC are contrary to the evidence on record, this Court shall lay aside such erroneous findings.