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G.R. No.

138051

June 10, 2004

JOSE Y. SONZA, petitioner,


vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari1 assailing the 26
March 1999 Decision2 of the Court of Appeals in CA-G.R. SP No. 49190
dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of
Appeals affirmed the findings of the National Labor Relations Commission
("NLRC"), which affirmed the Labor Arbiters dismissal of the case for lack
of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN")
signed an Agreement ("Agreement") with the Mel and Jay Management
and Development Corporation ("MJMDC"). ABS-CBN was represented by its
corporate officers while MJMDC was represented by SONZA, as President
and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and
Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to
provide SONZAs services exclusively to ABS-CBN as talent for radio and
television. The Agreement listed the services SONZA would render to ABSCBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays
to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m.,
Sundays.3

ABS-CBN agreed to pay for SONZAs services a monthly talent fee


of P310,000 for the first year and P317,000 for the second and third year
of the Agreement. ABS-CBN would pay the talent fees on the 10th and
25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio
Lopez III, which reads:
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the
Department of Labor and Employment, National Capital Region in Quezon
City. SONZA complained that ABS-CBN did not pay his salaries, separation
pay, service incentive leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees Stock Option Plan
("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no
employer-employee relationship existed between the parties. SONZA filed
an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees
through his account at PCIBank, Quezon Avenue Branch, Quezon City. In
July 1996, ABS-CBN opened a new account with the same bank where
ABS-CBN deposited SONZAs talent fees and other payments due him
under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion
to dismiss and directed the parties to file their respective position papers.
The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he
was an employee of respondent company until April 15, 1996 and
that he was not paid certain claims, it is sufficient enough as to
confer jurisdiction over the instant case in this Office. And as to
whether or not such claim would entitle complainant to recover
upon the causes of action asserted is a matter to be resolved only
after and as a result of a hearing. Thus, the respondents plea of

lack of employer-employee relationship may be pleaded only as a


matter of defense. It behooves upon it the duty to prove that there
really is no employer-employee relationship between it and the
complainant.
The Labor Arbiter then considered the case submitted for resolution. The
parties submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper
with Motion to Expunge Respondents Annex 4 and Annex 5 from the
Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro
Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits
that the prevailing practice in the television and broadcast industry is to
treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the
complaint for lack of jurisdiction.6 The pertinent parts of the decision read
as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched
on the "true nature of the contract of a talent," it stands to reason
that a "talent" as above-described cannot be considered as an
employee by reason of the peculiar circumstances surrounding the
engagement of his services.
It must be noted that complainant was engaged by respondent
by reason of his peculiar skills and talent as a TV host and a
radio broadcaster. Unlike an ordinary employee, he was free
to perform the services he undertook to render in
accordance with his own style. The benefits conferred to
complainant under the May 1994 Agreement are certainly very
much higher than those generally given to employees. For one,
complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was

covered by a specific contract. Likewise, he was not bound to render


eight (8) hours of work per day as he worked only for such number
of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was
accorded some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed
arose from specific agreement by the parties and not by
reason of employer-employee relationship. As correctly put by
the respondent, "All these benefits are merely talent fees and other
contractual benefits and should not be deemed as salaries, wages
and/or other remuneration accorded to an employee,
notwithstanding the nomenclature appended to these benefits.
Apropos to this is the rule that the term or nomenclature given to a
stipulated benefit is not controlling, but the intent of the parties to
the Agreement conferring such benefit."
The fact that complainant was made subject to respondents
Rules and Regulations, likewise, does not detract from the
absence of employer-employee relationship. As held by the
Supreme Court, "The line should be drawn between rules that
merely serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such
means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address
both the result and the means to achieve it." (Insular Life Assurance
Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a
Decision affirming the Labor Arbiters decision. SONZA filed a motion for
reconsideration, which the NLRC denied in its Resolution dated 3 July
1998.

On 6 October 1998, SONZA filed a special civil action for certiorari before
the Court of Appeals assailing the decision and resolution of the NLRC. On
26 March 1999, the Court of Appeals rendered a Decision dismissing the
case.8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employeremployee relationship existed between SONZA and ABS-CBN. Adopting
the NLRCs decision, the appellate court quoted the following findings of
the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC
entered into the contract merely as an agent of complainant Sonza,
the principal. By all indication and as the law puts it, the act of the
agent is the act of the principal itself. This fact is made particularly
true in this case, as admittedly MJMDC is a management company
devoted exclusively to managing the careers of Mr. Sonza and his
broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion
to Dismiss)
Clearly, the relations of principal and agent only accrues between
complainant Sonza and MJMDC, and not between ABS-CBN and
MJMDC. This is clear from the provisions of the May 1994 Agreement
which specifically referred to MJMDC as the AGENT. As a matter of
fact, when complainant herein unilaterally rescinded said May 1994
Agreement, it was MJMDC which issued the notice of rescission in
behalf of Mr. Sonza, who himself signed the same in his capacity as
President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN
reveal the fact that historically, the parties to the said agreements
are ABS-CBN and Mr. Sonza. And it is only in the May 1994
Agreement, which is the latest Agreement executed between ABS-

CBN and Mr. Sonza, that MJMDC figured in the said Agreement as
the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only
contractor of ABS-CBN such that there exist[s] employer-employee
relationship between the latter and Mr. Sonza. On the contrary, We
find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of
the talent/contractor Mr. Sonza, as expressly admitted by the latter
and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant
controversy indeed belongs to the regular courts, the same being in
the nature of an action for alleged breach of contractual obligation
on the part of respondent-appellee. As squarely apparent from
complainant-appellants Position Paper, his claims for compensation
for services, 13th month pay, signing bonus and travel allowance
against respondent-appellee are not based on the Labor Code but
rather on the provisions of the May 1994 Agreement, while his
claims for proceeds under Stock Purchase Agreement are based on
the latter. A portion of the Position Paper of complainant-appellant
bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN,
the latter contractually bound itself to pay complainant a
signing bonus consisting of shares of stockswith FIVE
HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month
pay based on an amount not lower than the amount he was
receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant
is entitled to a commutable travel benefit amounting to at
least One Hundred Fifty Thousand Pesos (P150,000.00) per
year.

Thus, it is precisely because of complainant-appellants own


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

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

Evidently, it is precisely by reason of the alleged violation of the


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

No convincing reason exists to warrant a reversal of the decision of the


Court of Appeals affirming the NLRC ruling which upheld the Labor
Arbiters dismissal of the case for lack of jurisdiction.

The Court of Appeals ruled that the existence of an employer-employee


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

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS


DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE
THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND
EVIDENCE TO SUPPORT SUCH A FINDING.14
The Courts Ruling
We affirm the assailed decision.

The present controversy is one of first impression. Although Philippine


labor laws and jurisprudence define clearly the elements of an employeremployee relationship, this is the first time that the Court will resolve the
nature of the relationship between a television and radio station and one
of its "talents." There is no case law stating that a radio and television
program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely
Jose "Jay" Sonza, a known television and radio personality, and ABS-CBN,
one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case
because he was an employee of ABS-CBN. On the other hand, ABS-CBN
insists that the Labor Arbiter has no jurisdiction because SONZA was an
independent contractor.
may, at his discretion and for the purpose of making such
determination, ask clarificatory questions to further elicit facts or
information, including but not limited to the subpoena of relevant
documentary evidence, if any from any party or witness.50

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

employees, the station owners and managers can dictate to the radio and
television hosts what they say in their shows. This is not conducive to
freedom of the press.
WHEREFORE, we DENY the petition. The assailed Decision of the Court
of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED.
Costs against petitioner.
SO ORDERED.

Talents as Independent Contractors


ABS-CBN claims that there exists a prevailing practice in the broadcast
and entertainment industries to treat talents like SONZA as independent
contractors. SONZA argues that if such practice exists, it is void for
violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the
Constitution53 arises only if there is an employer-employee relationship
under labor laws. Not every performance of services for a fee creates an
employer-employee relationship. To hold that every person who renders
services to another for a fee is an employee - to give meaning to the
security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to
offer their services as independent contractors. The right to life and
livelihood guarantees this freedom to contract as independent
contractors. The right of labor to security of tenure cannot operate to
deprive an individual, possessed with special skills, expertise and talent,
of his right to contract as an independent contractor. An individual like an
artist or talent has a right to render his services without any one
controlling the means and methods by which he performs his art or craft.
This Court will not interpret the right of labor to security of tenure to
compel artists and talents to render their services only as employees. If
radio and television program hosts can render their services only as

ANGELITO L. LAZARO, G.R. No. 138254


Proprietor of Royal Star
Marketing, Present:
Petitioner,
PUNO,
Chairman,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO,

SOCIAL SECURITY COMMISSION, Members. ROSALINA LAUDATO,


SOCIAL
SECURITY SYSTEM and THE
HONORABLE COURT OF
APPEALS,
Respondents. Promulgated:

the SSC for compulsory coverage or remit Laudatos social security

July 30, 2004

commission basis. Lazaro also maintained that Laudato was not subjected

contributions.[4]
Lazaro denied that Laudato was a sales supervisor of Royal Star, averring
instead that she was a mere sales agent whom he paid purely on
to definite hours and conditions of work. As such, Laudato could not be

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

deemed an employee of Royal Star.[5]


After the parties submitted their respective position papers, the SSC

DECISION

promulgated a Resolution[6] dated 8 November 1995 ruling in favor of


Laudato.[7] Applying the control test, it held that Laudato was an employee
of Royal Star, and ordered Royal Star to pay the unremitted social security

TINGA, J.:

contributions of Laudato in the amount of Five Thousand Seven Pesos and


Before

us

assailing

Thirty Five Centavos (P5,007.35), together with the penalties totaling

in CA-G.R. Sp.

Twenty Two Thousand Two Hundred Eighteen Pesos and Fifty Four

No. 40956, promulgated on 20 November 1998, which affirmed two

Centavos (P22,218.54). In addition, Royal Star was made liable to pay

rulings of the Social Security Commission (SSC) dated 8 November 1995

damages to the SSC in the amount of Fifteen Thousand Six Hundred

and 24 April 1996.

Eighty Pesos and Seven Centavos (P15,680.07) for not reporting Laudato

the Decision

is
[1]

a Petition

for

Review under

Rule

of the Court of Appeals Fifteenth Division

45,
[2]

Private respondent Rosalina M. Laudato (Laudato) filed a petition before


the SSC for social security coverage and remittance of unpaid monthly

for social security coverage, pursuant to Section 24 of the Social Security


Law.[8]

social security contributions against her three (3) employers. Among the

After Lazaros Motion for Reconsideration before the SSC was denied,

respondents was herein petitioner Angelito L. Lazaro (Lazaro), proprietor

[9]

of Royal Star Marketing (Royal Star), which is engaged in the business of

reiterated that Laudato was merely a sales agent who was paid purely on

selling home appliances.

[3]

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

Lazaro filed a Petition for Review with the Court of Appeals. Lazaro

commission basis, not included in the company payroll, and who neither
observed regular working hours nor accomplished time cards.

In its assailed Decision, the Court of Appeals noted that Lazaros

depends heavily on the particular factual circumstances attending the

arguments were a reprise of those already presented before the SSC.

professional interaction of the parties. The Court is not a trier of

[10]

facts[15] and accords great weight to the factual findings of lower courts or

his petition to show that the Commissions ruling is not supported by

agencies whose function is to resolve factual matters.[16]

Moreover, Lazaro had not come forward with particulars and specifics in

substantial evidence.[11] Thus, the appellate court affirmed the finding that
Lazaros

Laudato was an employee of Royal Star, and hence entitled to coverage

arguments

may

be

dispensed

with

by

applying

precedents. Suffice it to say, the fact that Laudato was paid by way of

under the Social Security Law.

commission does not preclude the establishment of an employerBefore this Court, Lazaro again insists that Laudato was not qualified for

employee relationship. In Grepalife v. Judico,[17] the Court upheld the

social security coverage, as she was not an employee of Royal Star, her

existence of an employer-employee relationship between the insurance

income dependent on a generation of sales and based on commissions.

company and its agents, despite the fact that the compensation that the

[12]

It is argued that Royal Star had no control over Laudatos activities, and

agents on commission received was not paid by the company but by the

that under the so-called control test, Laudato could not be deemed an

investor or the person insured.[18] The relevant factor remains, as stated

employee.[13]

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

It is an accepted doctrine that for the purposes of coverage under


the

Social

Security

Act,

the

determination

of

employer-employee

but also as to the means and methods by which the same is to be


accomplished.[19]

relationship warrants the application of the control test, that is, whether
the employer controls or has reserved the right to control the employee,

Neither does it follow that a person who does not observe normal hours of

not only as to the result of the work done, but also as to the means and

work cannot be deemed an employee. In Cosmopolitan Funeral Homes,

methods by which the same is accomplished. [14] The SSC, as sustained by

Inc. v. Maalat,[20] the employer similarly denied the existence of an

the Court of Appeals, applying the control test found that Laudato was an

employer-employee relationship, as the claimant according to it, was a

employee of Royal Star. We find no reversible error.

supervisor on commission basis who did not observe normal hours of


work. This Court declared that there was an employer-employee

Lazaros arguments are nothing more but a mere reiteration of arguments

relationship, noting that [the] supervisor, although compensated on

unsuccessfully posed before two bodies: the SSC and the Court of

commission basis, [is] exempt from the observance of normal hours of

Appeals. They likewise put to issue factual questions already passed upon

work for his compensation is measured by the number of sales he makes.

twice below, rather than questions of law appropriate for review under a

[21]

Rule 45 petition. The determination of an employer-employee relationship

It should also be emphasized that the SSC, also as upheld by the Court of

Finally, Lazaro invokes our ruling in the 1987 case of Social Security

Appeals, found that Laudato was a sales supervisor and not a mere agent.

System v. Court of Appeals[27] that a person who works for another at his

[22]

As such, Laudato oversaw and supervised the sales agents of the

own pleasure, subject to definite hours or conditions of work, and is

company, and thus was subject to the control of management as to how

compensated according to the result of his effort is not an employee.

she implements its policies and its end results. We are disinclined to

[28]

reverse this finding, in the absence of countervailing evidence from

case, the Court affirmed the employee-employer relationship between a

Lazaro and also in light of the fact that Laudatos calling cards from Royal

sales agent and the cigarette firm whose products he sold. [29] Perhaps

Star indicate that she is indeed a sales supervisor.

Lazaro meant instead to cite our 1969 ruling in the similarly-titled case

The citation is odd for Lazaro to rely upon, considering that in the cited

of Social Security System v. Court of Appeals,[30] also cited in the later


The

finding

of

the

SSC

that

Laudato

employee of Royal Star is supported by substantial

was

an

evidence. The

SSC

[23]

calling

examined the cash vouchers issued by Royal Star to Laudato,

eponymous ruling, whose disposition is more in accord with Lazaros


argument.

cards of Royal Star denominating Laudato as a Sales Supervisor of the


company,

[24]

Yet, the circumstances in the 1969 case are very different from

and Certificates of Appreciation issued by Royal Star to

those at bar. Ruling on the question whether jockeys were considered

Laudato in recognition of her unselfish and loyal efforts in promoting the

employees of the Manila Jockey Club, the Court noted that the jockeys

company.

[25]

On the other hand, Lazaro has failed to present any

were actually subjected to the control of the racing steward, whose

convincing contrary evidence, relying instead on his bare assertions. The

authority in turn was defined by the Games and Amusements Board.

Court of Appeals correctly ruled that petitioner has not sufficiently shown

[31]

that the SSCs ruling was not supported by substantial evidence.

to mutual agreement between the horse owner and the jockey, and

Moreover, the jockeys choice as to which horse to mount was subject

beyond the control of the race club. [32] In the case at bar, there is no
A piece of documentary evidence appreciated by the SSC is

showing that Royal Star was similarly precluded from exerting control or

Memorandum dated 3 May 1980 of Teresita Lazaro, General Manager of

interference over the manner by which Laudato performed her duties. On

Royal Star, directing that no commissions were to be given on all main

the contrary, substantial evidence as found by the SSC and the Court of

office sales from walk-in customers and enjoining salesmen and sales

Appeals have established the element of control determinative of an

supervisors to observe this new policy.

[26]

The Memorandum evinces the

employer-employee relationship. We affirm without hesitation.

fact that, contrary to Lazaros claim, Royal Star exercised control over its
sales supervisors or agents such as Laudato as to the means and methods
through which these personnel performed their work.

WHEREFORE, the Petition is DENIED and the assailed Decision of the


Court of Appeals dated 20 November 1998 is AFFIRMED. Costs against
petitioner.

COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA,


Manager, Petitioners,
vs.
DR. DEAN N. CLIMACO, Respondent.

SO ORDERED.

DECISION
AZCUNA, J.:
This is a petition for review on certiorari of the Decision of the Court of
Appeals1 promulgated on July 7, 2000, and its Resolution promulgated on
January 30, 2001, denying petitioners motion for reconsideration. The
Court of Appeals ruled that an employer-employee relationship exists
between respondent Dr. Dean N. Climaco and petitioner Coca-Cola
Bottlers Phils., Inc. (Coca-Cola), and that respondent was illegally
dismissed.
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by
petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer Agreement
that stated:
WHEREAS, the COMPANY desires to engage on a retainer basis the
services of a physician and the said DOCTOR is accepting such
engagement upon terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
agreement hereinafter contained, the parties agree as follows:
1. This Agreement shall only be for a period of one (1) year
beginning January 1, 1988 up to December 31, 1988. The said term
notwithstanding, either party may terminate the contract upon
giving a thirty (30)-day written notice to the other.

G.R. No. 146881

February 5, 2007

2. The compensation to be paid by the company for the services of


the DOCTOR is hereby fixed at PESOS:Three Thousand Eight
Hundred (P3,800.00) per month. The DOCTOR may charge

professional fee for hospital services rendered in line with his


specialization. All payments in connection with the Retainer
Agreement shall be subject to a withholding tax of ten percent
(10%) to be withheld by the COMPANY under the Expanded
Withholding Tax System. In the event the withholding tax rate shall
be increased or decreased by appropriate laws, then the rate herein
stipulated shall accordingly be increased or decreased pursuant to
such laws.
3. That in consideration of the above mentioned retainers fee, the
DOCTOR agrees to perform the duties and obligations enumerated
in the COMPREHENSIVE MEDICAL PLAN, hereto attached as Annex
"A" and made an integral part of this Retainer Agreement.
4. That the applicable provisions in the Occupational Safety and
Health Standards, Ministry of Labor and Employment shall be
followed.
5. That the DOCTOR shall be directly responsible to the employee
concerned and their dependents for any injury inflicted on, harm
done against or damage caused upon the employee of the
COMPANY or their dependents during the course of his examination,
treatment or consultation, if such injury, harm or damage was
committed through professional negligence or incompetence or due
to the other valid causes for action.
6. That the DOCTOR shall observe clinic hours at the COMPANYS
premises from Monday to Saturday of a minimum of two (2) hours
each day or a maximum of TWO (2) hours each day or treatment
from 7:30 a.m. to8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively
unless such schedule is otherwise changed by the COMPANY as
[the] situation so warrants, subject to the Labor Code provisions on
Occupational Safety and Health Standards as the COMPANY may
determine. It is understood that the DOCTOR shall stay at least two
(2) hours a day in the COMPANY clinic and that such two (2) hours
be devoted to the workshift with the most number of employees. It

is further understood that the DOCTOR shall be on call at all times


during the other workshifts to attend to emergency case[s];
7. That no employee-employer relationship shall exist between the
COMPANY and the DOCTOR whilst this contract is in effect, and in
case of its termination, the DOCTOR shall be entitled only to such
retainer fee as may be due him at the time of termination.2
The Comprehensive Medical Plan,3 which contains the duties and
responsibilities of respondent, adverted to in the Retainer Agreement,
provided:
The Retainer Agreement, which began on January 1, 1988, was renewed
annually. The last one expired on December 31, 1993. Despite the nonrenewal of the Retainer Agreement, respondent continued to perform his
functions as company doctor to Coca-Cola until he received a letter4 dated
March 9, 1995 from petitioner company concluding their retainership
agreement effective 30 days from receipt thereof.
It is noted that as early as September 1992, petitioner was already
making inquiries regarding his status with petitioner company. First, he
wrote a letter addressed to Dr. Willie Sy, the Acting President and
Chairperson of the Committee on Membership, Philippine College of
Occupational Medicine. In response, Dr. Sy wrote a letter5 to the Personnel
Officer of Coca-Cola Bottlers Phils., Bacolod City, stating that respondent
should be considered as a regular part-time physician, having served the
company continuously for four (4) years. He likewise stated that
respondent must receive all the benefits and privileges of an employee
under Article 157 (b)6 of the Labor Code.
Petitioner company, however, did not take any action. Hence, respondent
made another inquiry directed to the Assistant Regional Director, Bacolod
City District Office of the Department of Labor and Employment (DOLE),
who referred the inquiry to the Legal Service of the DOLE, Manila. In his
letter7 dated May 18, 1993, Director Dennis P. Ancheta, Legal Service,
DOLE, stated that he believed that an employer-employee relationship

existed between petitioner and respondent based on the Retainer


Agreement and the Comprehensive Medical Plan, and the application of
the "four-fold" test. However, Director Ancheta emphasized that the
existence of employer-employee relationship is a question of fact. Hence,
termination disputes or money claims arising from employer-employee
relations exceeding P5,000 may be filed with the National Labor Relations
Commission (NLRC). He stated that their opinion is strictly advisory.

Retainer Agreement between the parties. Thus, the Labor Arbiter


dismissed respondents complaint in the first case, RAB Case No. 06-0210138-94. The dispositive portion of the Decision reads:

An inquiry was likewise addressed to the Social Security System (SSS).


Thereafter, Mr. Romeo R. Tupas, OIC-FID of SSS-Bacolod City, wrote a
letter8 to the Personnel Officer of Coca-Cola Bottlers Phils., Inc. informing
the latter that the legal staff of his office was of the opinion that the
services of respondent partake of the nature of work of a regular company
doctor and that he was, therefore, subject to social security coverage.

SO ORDERED.11

Respondent inquired from the management of petitioner company


whether it was agreeable to recognizing him as a regular employee. The
management refused to do so.
On February 24, 1994, respondent filed a Complaint9 before the NLRC,
Bacolod City, seeking recognition as a regular employee of petitioner
company and prayed for the payment of all benefits of a regular
employee, including 13th Month Pay, Cost of Living Allowance, Holiday
Pay, Service Incentive Leave Pay, and Christmas Bonus. The case was
docketed as RAB Case No. 06-02-10138-94.
While the complaint was pending before the Labor Arbiter, respondent
received a letter dated March 9, 1995 from petitioner company concluding
their retainership agreement effective thirty (30) days from receipt
thereof. This prompted respondent to file a complaint for illegal dismissal
against petitioner company with the NLRC, Bacolod City. The case was
docketed as RAB Case No. 06-04-10177-95.
In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N.
Rodriguez, Jr. found that petitioner company lacked the power of control
over respondents performance of his duties, and recognized as valid the

WHEREFORE, premises considered, judgment is hereby rendered


dismissing the instant complaint seeking recognition as a regular
employee.

In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez


dismissed the case for illegal dismissal (RAB Case No. 06-04-10177-95) in
view of the previous finding of Labor Arbiter Jesus N. Rodriguez, Jr. in RAB
Case No. 06-02-10138-94 that complainant therein, Dr. Dean Climaco, is
not an employee of Coca-Cola Bottlers Phils., Inc.
Respondent appealed both decisions to the NLRC, Fourth Division, Cebu
City.
In a Decision13 promulgated on November 28, 1997, the NLRC dismissed
the appeal in both cases for lack of merit. It declared that no employeremployee relationship existed between petitioner company and
respondent based on the provisions of the Retainer Agreement which
contract governed respondents employment.
Respondents motion for reconsideration was denied by the NLRC in a
Resolution14 promulgated on August 7, 1998.
Respondent filed a petition for review with the Court of Appeals.
In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that
an employer-employee relationship existed between petitioner company
and respondent after applying the four-fold test: (1) the power to hire the
employee; (2) the payment of wages; (3) the power of dismissal; and (4)
the employers power to control the employee with respect to the means
and methods by which the work is to be accomplished.

The Court of Appeals held:


The Retainer Agreement executed by and between the parties, when read
together with the Comprehensive Medical Plan which was made an
integral part of the retainer agreements, coupled with the actual services
rendered by the petitioner, would show that all the elements of the above
test are present.
First, the agreements provide that "the COMPANY desires to engage on a
retainer basis the services of a physician and the said DOCTOR is
accepting such engagement x x x" (Rollo, page 25). This clearly shows
that Coca-Cola exercised its power to hire the services of petitioner.
Secondly, paragraph (2) of the agreements showed that petitioner would
be entitled to a final compensation of Three Thousand Eight Hundred
Pesos per month, which amount was later raised to Seven Thousand Five
Hundred on the latest contract. This would represent the element of
payment of wages.

We say that there exists Coca-Colas power to control petitioner because


the particular objectives and activities to be observed and accomplished
by the latter are fixed and set under the Comprehensive Medical Plan
which was made an integral part of the retainer agreement. Moreover, the
times for accomplishing these objectives and activities are likewise
controlled and determined by the company. Petitioner is subject to
definite hours of work, and due to this, he performs his duties to CocaCola not at his own pleasure but according to the schedule dictated by the
company.
In addition, petitioner was designated by Coca-Cola to be a member of its
Bacolod Plants Safety Committee. The minutes of the meeting of the said
committee dated February 16, 1994 included the name of petitioner, as
plant physician, as among those comprising the committee.

Thirdly, it was provided in paragraph (1) of the agreements that the same
shall be valid for a period of one year. "The said term notwithstanding,
either party may terminate the contract upon giving a thirty (30) day
written notice to the other." (Rollo, page 25). This would show that
Coca-Cola had the power of dismissing the petitioner, as it later on did,
and this could be done for no particular reason, the sole requirement
being the formers compliance with the 30-day notice requirement.

It was averred by Coca-Cola in its comment that they exercised no control


over petitioner for the reason that the latter was not directed as to the
procedure and manner of performing his assigned tasks. It went as far as
saying that "petitioner was not told how to immunize, inject, treat or
diagnose the employees of the respondent (Rollo, page 228). We
believe that if the "control test" would be interpreted this strictly, it would
result in an absurd and ridiculous situation wherein we could declare that
an entity exercises control over anothers activities only in instances
where the latter is directed by the former on each and every stage of
performance of the particular activity. Anything less than that would be
tantamount to no control at all.

Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola
exercised the most important element of all, that is, control, over the
conduct of petitioner in the latters performance of his duties as a doctor
for the company.

To our minds, it is sufficient if the task or activity, as well as the means of


accomplishing it, is dictated, as in this case where the objectives and
activities were laid out, and the specific time for performing them was
fixed by the controlling party.15

It was stated in paragraph (3) that the doctor agrees to perform the duties
and obligations enumerated in the Comprehensive Medical Plan referred
to above. In paragraph (6), the fixed and definite hours during which the
petitioner must render service to the company is laid down.

Moreover, the Court of Appeals declared that respondent should be


classified as a regular employee having rendered six years of service as
plant physician by virtue of several renewed retainer agreements. It
underscored the provision in Article 28016 of the Labor Code stating 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." Further, it held that
the termination of respondents services without any just or authorized
cause constituted illegal dismissal.
In addition, the Court of Appeals found that respondents dismissal was an
act oppressive to labor and was effected in a wanton, oppressive or
malevolent manner which entitled respondent to moral and exemplary
damages.
The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, the Decision of the National Labor
Relations Commission dated November 28, 1997 and its Resolution dated
August 7, 1998 are found to have been issued with grave abuse of
discretion in applying the law to the established facts, and are hereby
REVERSED and SET ASIDE, and private respondent Coca-Cola Bottlers,
Phils.. Inc. is hereby ordered to:
1. Reinstate the petitioner with full backwages without loss of
seniority rights from the time his compensation was withheld up to
the time he is actually reinstated; however, if reinstatement is no
longer possible, to pay the petitioner separation pay equivalent to
one (1) months salary for every year of service rendered, computed
at the rate of his salary at the time he was dismissed, plus
backwages.
2. Pay petitioner moral damages in the amount of P50,000.00.
3. Pay petitioner exemplary damages in the amount of P50,000.00.
4. Give to petitioner all other benefits to which a regular employee
of Coca-Cola is entitled from the time petitioner became a regular

employee (one year from effectivity date of employment) until the


time of actual payment.
SO ORDERED.17
Petitioner company filed a motion for reconsideration of the Decision of
the Court of Appeals.
In a Resolution promulgated on January 30, 2001, the Court of Appeals
stated that petitioner company noted that its Decision failed to mention
whether respondent was a full-time or part-time regular employee. It also
questioned how the benefits under their Collective Bargaining Agreement
which the Court awarded to respondent could be given to him considering
that such benefits were given only to regular employees who render a full
days work of not less that eight hours. It was admitted that respondent is
only required to work for two hours per day.
The Court of Appeals clarified that respondent was a "regular part-time
employee and should be accorded all the proportionate benefits due to
this category of employees of [petitioner] Corporation under the CBA." It
sustained its decision on all other matters sought to be reconsidered.
Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The issues are:
1. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW,
IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, CONTRARY TO THE
DECISIONS OF THE HONORABLE SUPREME COURT ON THE MATTER.
2. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW,
IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD

THAT THE WORK OF A PHYSICIAN IS NECESSARY AND DESIRABLE TO


THE BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO
THE RULINGS OF THE SUPREME COURT IN ANALOGOUS CASES.
3. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW,
IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD
THAT THE PETITIONERS EXERCISED CONTROL OVER THE WORK OF
THE RESPONDENT.
4. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW,
IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT
THERE IS EMPLOYER-EMPLOYEE RELATIONSHIP PURSUANT TO
ARTICLE 280 OF THE LABOR CODE.
5. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW,
IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT
THERE EXISTED ILLEGAL DISMISSAL WHEN THE EMPLOYENT OF THE
RESPONDENT WAS TERMINATED WITHOUT JUST CAUSE.
6. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW,
IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE
RESPONDENT IS A REGULAR PART TIME EMPLOYEE WHO IS
ENTITLED TO PROPORTIONATE BENEFITS AS A REGULAR PART TIME
EMPLOYEE ACCORDING TO THE PETITIONERS CBA.
7. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW,
IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE

NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE


RESPONDENT IS ENTITLED TO MORAL AND EXEMPLARY DAMAGES.
The main issue in this case is whether or not there exists an employeremployee relationship between the parties. The resolution of the main
issue will determine whether the termination of respondents employment
is illegal.
The Court, in determining the existence of an employer-employee
relationship, has invariably adhered to the four-fold test: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct,
or the so-called "control test," considered to be the most important
element.18
The Court agrees with the finding of the Labor Arbiter and the NLRC that
the circumstances of this case show that no employer-employee
relationship exists between the parties. The Labor Arbiter and the NLRC
correctly found that petitioner company lacked the power of control over
the performance by respondent of his duties. The Labor Arbiter reasoned
that the Comprehensive Medical Plan, which contains the respondents
objectives, duties and obligations, does not tell respondent "how to
conduct his physical examination, how to immunize, or how to diagnose
and treat his patients, employees of [petitioner] company, in each case."
He likened this case to that ofNeri v. National Labor Relations
Commission,19 which held:
In the case of petitioner Neri, it is admitted that FEBTC issued a job
description which detailed her functions as a radio/telex operator.
However, a cursory reading of the job description shows that what was
sought to be controlled by FEBTC was actually the end result of the task,
e.g., that the daily incoming and outgoing telegraphic transfer of funds
received and relayed by her, respectively, tallies with that of the register.
The guidelines were laid down merely to ensure that the desired end
result was achieved. It did not, however, tell Neri how the radio/telex
machine should be operated.

In effect, the Labor Arbiter held that petitioner company, through the
Comprehensive Medical Plan, provided guidelines merely to ensure that
the end result was achieved, but did not control the means and methods
by which respondent performed his assigned tasks.

The Court also notes that the Retainership Agreement granted to both
parties the power to terminate their relationship upon giving a 30-day
notice. Hence, petitioner company did not wield the sole power of
dismissal or termination.

The NLRC affirmed the findings of the Labor Arbiter and stated that it is
precisely because the company lacks the power of control that the
contract provides that respondent shall be directly responsible to the
employee concerned and their dependents for any injury, harm or
damage caused through professional negligence, incompetence or other
valid causes of action.

The Court agrees with the Labor Arbiter and the NLRC that there is
nothing wrong with the employment of respondent as a retained physician
of petitioner company and upholds the validity of the Retainership
Agreement which clearly stated that no employer-employee relationship
existed between the parties. The Agreement also stated that it was only
for a period of 1 year beginning January 1, 1988 to December 31, 1998,
but it was renewed on a yearly basis.

The Labor Arbiter also correctly found that the provision in the Retainer
Agreement that respondent was on call during emergency cases did not
make him a regular employee. He explained, thus:
Likewise, the allegation of complainant that since he is on call at anytime
of the day and night makes him a regular employee is off-tangent.
Complainant does not dispute the fact that outside of the two (2) hours
that he is required to be at respondent companys premises, he is not at
all further required to just sit around in the premises and wait for an
emergency to occur so as to enable him from using such hours for his own
benefit and advantage. In fact, complainant maintains his own private
clinic attending to his private practice in the city, where he services his
patients, bills them accordingly -- and if it is an employee of respondent
company who is attended to by him for special treatment that needs
hospitalization or operation, this is subject to a special billing. More often
than not, an employee is required to stay in the employers workplace or
proximately close thereto that he cannot utilize his time effectively and
gainfully for his own purpose. Such is not the prevailing situation
here.1awphi1.net
In addition, the Court finds that the schedule of work and the requirement
to be on call for emergency cases do not amount to such control, but are
necessary incidents to the Retainership Agreement.

Considering that there is no employer-employee relationship between the


parties, the termination of the Retainership Agreement, which is in
accordance with the provisions of the Agreement, does not constitute
illegal dismissal of respondent. Consequently, there is no basis for the
moral and exemplary damages granted by the Court of Appeals to
respondent due to his alleged illegal dismissal.
WHEREFORE, the petition is GRANTED and the Decision and Resolution of
the Court of Appeals are REVERSED and SET ASIDE. The Decision and
Resolution dated November 28, 1997 and August 7, 1998, respectively, of
the National Labor Relations Commission are REINSTATED.
No costs.
SO ORDERED.

ABS-CBN BROADCASTING G.R. No. 164156


CORPORATION,
Petitioner, Present

PANGANIBAN, C.J., Chairperson,


YNARES-SANTIAGO,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
MARLYN NAZARENO, Promulgated:
MERLOU GERZON,
JENNIFER DEIPARINE,

and JOSEPHINE LERASAN,


Respondents. September 26, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

the news and public affairs, for various radio programs in the Cebu Broadcasting
Station, with a monthly compensation of P4,000. They were issued ABS-CBN
employees identification cards and were required to work for a minimum of eight
hours a day, including Sundays and holidays. They were made to perform the
following tasks and duties:

DECISION
a)

Prepare, arrange airing of commercial broadcasting based on


the daily operations log and digicart of respondent ABS-CBN;

CALLEJO, SR., J.:


b)

Coordinate, arrange personalities for air interviews;

[1]

Before us is a petition for review on certiorari of the Decision of the Court of


Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for
reconsideration thereof. The CA affirmed the Decision [2] and Resolution[3] of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001
(RAB Case No. VII-10-1661-2001) which likewise affirmed, with modification, the
decision of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou
Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.

c)

Coordinate, prepare schedule of reporters for scheduled news


reporting and lead-in or incoming reports;

The Antecedents

d)

Facilitate, prepare and arrange airtime schedule for public


service announcement and complaints;

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the


broadcasting business and owns a network of television and radio stations,
whose operations revolve around the broadcast, transmission, and relay of
telecommunication signals. It sells and deals in or otherwise utilizes the airtime
it generates from its radio and television operations. It has a franchise as a
broadcasting company, and was likewise issued a license and authority to
operate by the National Telecommunications Commission.

e)

Assist, anchor program interview, etc; and

f)

Record, log clerical reports, man based control radio. [4]

Their respective working hours were as follows:


Petitioner employed respondents Nazareno, Gerzon, Deiparine, and
Lerasan as production assistants (PAs) on different dates. They were assigned at

Name Time No. of Hours


1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7

Miss Nazareno will then be assigned at the Research Dept.


From 8:00 A.M. to 12:00

8:00 A.M.-12:00 noon


2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7

4:30 P.M. 12:00 MN Jennifer Deiparine

3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.


9:00 A.M.-6:00 P.M. (WF) 9 hrs.

Sunday

4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.[5]

5:00 A.M. 1:00 P.M. Jennifer Deiparine

The PAs were under the control and supervision of Assistant Station
Manager Dante J. Luzon, and News Manager Leo Lastimosa.

On December 19, 1996, petitioner and the ABS-CBN Rank-and-File


Employees executed a Collective Bargaining Agreement (CBA) to be effective
during the period fromDecember 11, 1996 to December 11, 1999. However,
since petitioner refused to recognize PAs as part of the bargaining unit,
respondents were not included to the CBA. [6]

On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum


informing the PAs that effective August 1, 2000, they would be assigned to nondrama programs, and that the DYAB studio operations would be handled by the
studio technician. Thus, their revised schedule and other assignments would be
as follows:

Monday Saturday
4:30 A.M. 8:00 A.M. Marlene Nazareno.

1:00 P.M. 10:00 P.M. Joy Sanchez

Respondent Gerzon was assigned as the full-time PA of the TV News Department


reporting directly to Leo Lastimosa.

On October 12, 2000, 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 13 th Month Pay with
Damages against the petitioner before the NLRC. The Labor Arbiter directed the
parties to submit their respective position papers. Upon respondents failure to
file their position papers within the reglementary period, Labor Arbiter Jose G.
Gutierrez
issued
an
Order
dated
April 30, 2001, dismissing the complaint without prejudice for lack of interest to
pursue the case. Respondents received a copy of the Order on May 16, 2001.
[7]
Instead of re-filing their complaint with the NLRC within 10 days from May 16,
2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with
Motion to Admit Position Paper and Motion to Submit Case For Resolution. [8] The
Labor Arbiter granted this motion in an Order dated June 18, 2001, and forthwith

admitted the position paper of the complainants. Respondents made the


following allegations:

4. Unpaid service incentive leave benefits;


5. Sick leave;
6. Holiday pay;

1. Complainants were engaged by respondent ABS-CBN as regular


and full-time employees for a continuous period of more than five
(5) years with a monthly salary rate of Four Thousand (P4,000.00)
pesos beginning 1995 up until the filing of this complaint on
November 20, 2000.

7. Premium pay;
8. Overtime pay;
9. Night shift differential.

Machine copies of complainants ABS-CBN Employees Identification


Card and salary vouchers are hereto attached as follows, thus:

Respondents insisted that they belonged to a work pool from which


petitioner chose persons to be given specific assignments at its discretion, and
were thus under its direct supervision and control regardless of
nomenclature. They prayed that judgment be rendered in their favor, thus:

Complainants further pray of this Arbiter to declare them


regular and permanent employees of respondent ABS-CBN as a
condition precedent for their admission into the existing union and
collective bargaining unit of respondent company where they may
as such acquire or otherwise perform their obligations thereto or
enjoy the benefits due therefrom.

Complainants pray for such other reliefs as are just and


equitable under the premises.[10]
WHEREFORE, premises considered, this Honorable Arbiter is
most respectfully prayed, to issue an order compelling defendants
to pay complainants the following:

1. One Hundred Thousand Pesos (P100,000.00) each


and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;

For its part, petitioner alleged in its position paper that the respondents
were PAs who basically assist in the conduct of a particular program ran by an
anchor or talent.Among their duties include monitoring and receiving incoming
calls from listeners and field reporters and calls of news sources; generally, they
perform leg work for the anchors during a program or a particular production.
They are considered in the industry as program employees in that, as
distinguished from regular or station employees, they are basically engaged by
the station for a particular or specific program broadcasted by the radio station.

Petitioner asserted that as PAs, the complainants were issued talent information
sheets which are updated from time to time, and are thus made the basis to
determine the programs to which they shall later be called on to assist. The
program assignments of complainants were as follows:

Petitioner maintained that PAs, reporters, anchors and talents occasionally


sideline
for
other
programs
they
produce,
such
as
drama
talents in other productions. As program employees, a PAs engagement is
coterminous with the completion of the program, and may be extended/renewed
provided that the program is on-going; a PA may also be assigned to new
programs upon the cancellation of one program and the commencement of
another. As such program employees, their compensation is computed on a
program basis, a fixed amount for performance services irrespective of the time
consumed. At any rate, petitioner claimed, as the payroll will show, respondents
were paid all salaries and benefits due them under the law. [12]
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the
CBA and interpret the same, especially since respondents were not covered by
the bargaining unit.

On July 30, 2001, the Labor Arbiter rendered judgment in favor of the
respondents, and declared that they were regular employees of petitioner; as
such, they were awarded monetary benefits. The fallo of the decision reads:

SO ORDERED.[13]

However, the Labor Arbiter did not award money benefits as provided in the CBA
on his belief that he had no jurisdiction to interpret and apply the agreement, as
the same was within the jurisdiction of the Voluntary Arbitrator as provided in
Article 261 of the Labor Code.

Respondents counsel received a copy of the decision on August 29,


2001. Respondent Nazareno received her copy on August 27, 2001, while the
other respondents received theirs on September 8, 2001. Respondents signed
and filed their Appeal Memorandum on September 18, 2001.

For its part, petitioner filed a motion for reconsideration, which the Labor
Arbiter denied and considered as an appeal, conformably with Section 5, Rule V,
of the NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the
NLRC, while respondents filed a partial appeal.

In its appeal, petitioner alleged the following:

WHEREFORE, the foregoing premises considered, judgment is


hereby rendered declaring the complainants regular employees of
the respondent ABS-CBN Broadcasting Corporation and directing
the same respondent to pay complainants as follows:

1. That the Labor Arbiter erred in reviving or re-opening this case


which had long been dismissed without prejudice for more than
thirty (30) calendar days;

2.

That the Labor Arbiter erred in depriving the respondent of


its Constitutional right to due process of law;
1.

3.

That the Labor Arbiter erred in denying respondents Motion


for Reconsideration on an interlocutory order on the ground
that the same is a prohibited pleading;

To pay complainants of their wage differentials and other


benefits arising from the CBA as of 30 September 2002 in the
aggregate amount of Two Million Five Hundred, Sixty-One
Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:
a. Deiparine, Jennifer - P 716,113.49
b. Gerzon, Merlou - 716,113.49

4.

That the Labor Arbiter erred when he ruled that the


complainants are regular employees of the respondent;

c. Nazareno, Marlyn - 716,113.49


d. Lerazan, Josephine Sanchez - 413,607.75

5.

That the Labor Arbiter erred when he ruled that the


complainants are entitled to 13th month pay, service incentive
leave pay and salary differential; and

Total - P 2,561,948.22

2.
6.

That the Labor Arbiter erred when he


complainants are entitled to attorneys fees. [14]

ruled

that

To deliver to the complainants Two Hundred Thirty-Three (233)


sacks of rice as of 30 September 2002 representing their rice
subsidy in the CBA, broken down as follows:
a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks

On November 14, 2002, the NLRC rendered judgment modifying the decision of
the Labor Arbiter. The fallo of the decision reads:

d. Lerazan, Josephine Sanchez - 53 Sacks


Total 233 Sacks; and

WHEREFORE, premises considered, the decision of Labor


Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and
VACATED and a new one is entered ORDERING respondent ABSCBN Broadcasting Corporation, as follows:

3.

To grant to the complainants all the benefits of the CBA


after 30 September 2002.

SO ORDERED.[15]

The NLRC declared that the Labor Arbiter acted conformably with the
Labor Code when it granted respondents motion to refile the complaint and
admit their position paper. Although respondents were not parties to the CBA
between petitioner and the ABS-CBN Rank-and-File Employees Union, the NLRC
nevertheless granted and computed respondents monetary benefits based on
the 1999 CBA, which was effective until September 2002. The NLRC also ruled
that the Labor Arbiter had jurisdiction over the complaint of respondents
because they acted in their individual capacities and not as members of the
union. Their claim for monetary benefits was within the context of Article 217(6)
of the Labor Code. The validity of respondents claim does not depend upon the
interpretation of the CBA.

The NLRC ruled that respondents were entitled to the benefits under the
CBA because they were regular employees who contributed to the profits of
petitioner through their labor. The NLRC cited the ruling of this Court in New
Pacific Timber & Supply Company v. National Labor Relations Commission.[16]

Petitioner filed a motion for reconsideration, which the NLRC denied.

Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of
Court before the CA, raising both procedural and substantive issues, as follows:
(a) whether the NLRC acted without jurisdiction in admitting the appeal of
respondents; (b) whether the NLRC committed palpable error in scrutinizing the
reopening and revival of the complaint of respondents with the Labor Arbiter
upon due notice despite the lapse of 10 days from their receipt of the July 30,
2001 Order of the Labor Arbiter; (c) whether respondents were regular
employees; (d) whether the NLRC acted without jurisdiction in entertaining and
resolving the claim of the respondents under the CBA instead of referring the
same to the Voluntary Arbitrators as provided in the CBA; and (e) whether the
NLRC acted with grave abuse of discretion when it awarded monetary benefits to
respondents under the CBA although they are not members of the appropriate
bargaining unit.

submit their position paper on time is not a ground to strike out the paper from
the records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents
are not mere project employees, but regular employees who perform tasks
necessary and desirable in the usual trade and business of petitioner and not
just its project employees. Moreover, the CA added, the award of benefits
accorded to rank-and-file employees under the 1996-1999 CBA is a necessary
consequence of the NLRC ruling that respondents, as PAs, are regular
employees.

Finding no merit in petitioners motion for reconsideration, the CA denied


the same in a Resolution[17] dated June 16, 2004.

Petitioner thus filed the instant petition for review on certiorari and raises
the following assignments of error:

1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT


JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE NATIONAL
LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT
NULLITY OF THE LATTERS DECISION AND RESOLUTION.
On February 10, 2004, the CA rendered judgment dismissing the
petition. It held that the perfection of an appeal shall be upon the expiration of
the last day to appeal by all parties, should there be several parties to a case.
Since respondents received their copies of the decision on September 8,
2001 (except respondent Nazareno who received her copy of the decision
on August 27, 2001), they had until September 18, 2001 within which to file their
Appeal Memorandum. Moreover, the CA declared that respondents failure to

2.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN AFFIRMING THE RULING OF THE NLRC FINDING RESPONDENTS
REGULAR EMPLOYEES.

3.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN AFFIRMING THE RULING OF THE NLRC AWARDING CBA BENEFITS
TO RESPONDENTS.[18]

Considering that the assignments of error are interrelated, the Court shall
resolve them simultaneously.

Petitioner asserts that the appellate court committed palpable and serious
error of law when it affirmed the rulings of the NLRC, and entertained
respondents appeal from the decision of the Labor Arbiter despite the admitted
lapse
of
the
reglementary
period
within
which
to
perfect
the same. Petitioner likewise maintains that the 10-day period to appeal must be
reckoned from receipt of a partys counsel, not from the time the party learns of
the decision, that is, notice to counsel is notice to party and not the other way
around. Finally, petitioner argues that the reopening of a complaint which the
Labor Arbiter has dismissed without prejudice is a clear violation of Section 1,
Rule V of the NLRC Rules; such order of dismissal had already attained finality
and can no longer be set aside.

Respondents, on the other hand, allege that their late appeal is a nonissue because it was petitioners own timely appeal that empowered the NLRC to
reopen the case. They assert that although the appeal was filed 10 days late, it
may still be given due course in the interest of substantial justice as an
exception to the general rule that the negligence of a counsel binds the client.
On the issue of the late filing of their position paper, they maintain that this is
not a ground to strike it out from the records or dismiss the complaint.

We find no merit in the petition.

We agree with petitioners contention that the perfection of an appeal


within the statutory or reglementary period is not only mandatory, but also
jurisdictional; failure to do so renders the assailed decision final and executory
and deprives the appellate court or body of the legal authority to alter the final
judgment, much less entertain the appeal. However, this Court has time and
again ruled that in exceptional cases, a belated appeal may be given due course
if greater injustice may occur if an appeal is not given due course than if the

reglementary period to appeal were strictly followed. [19] The Court resorted to
this extraordinary measure even at the expense of sacrificing order and
efficiency if only to serve the greater principles of substantial justice and equity.
[20]

In the case at bar, the NLRC did not commit a grave abuse of its discretion
in giving Article 223[21] of the Labor Code a liberal application to prevent the
miscarriage of justice. Technicality should not be allowed to stand in the way of
equitably and completely resolving the rights and obligations of the parties.
[22]
We have held in a catena of cases that technical rules are not binding in labor
cases and are not to be applied strictly if the result would be detrimental to the
workingman.[23]

Admittedly, respondents failed to perfect their appeal from the decision of


the Labor Arbiter within the reglementary period therefor. However, petitioner
perfected its appeal within the period, and since petitioner had filed a timely
appeal, the NLRC acquired jurisdiction over the case to give due course to its
appeal and render the decision of November 14, 2002. Case law is that the party
who failed to appeal from the decision of the Labor Arbiter to the NLRC can still
participate in a separate appeal timely filed by the adverse party as the situation
is considered to be of greater benefit to both parties. [24]

We find no merit in petitioners contention that the Labor Arbiter abused


his discretion when he admitted respondents position paper which had been
belatedly filed. It bears stressing that the Labor Arbiter is mandated by law to
use every reasonable means to ascertain the facts in each case speedily and
objectively, without technicalities of law or procedure, all in the interest of due
process.[25] Indeed, as stressed by the appellate court, respondents failure to
submit a position paper on time is not a ground for striking out the paper from
the records, much less for dismissing a complaint. [26] Likewise, there is simply no
truth to petitioners assertion that it was denied due process when the Labor
Arbiter admitted respondents position paper without requiring it to file a
comment before admitting said position paper. The essence of due process in

administrative proceedings is simply an opportunity to explain ones side or an


opportunity to seek reconsideration of the action or ruling complained of.
Obviously, there is nothing in the records that would suggest that petitioner had
absolute lack of opportunity to be heard. [27] Petitioner had the right to file a
motion for reconsideration of the Labor Arbiters admission of respondents
position paper, and even file a Reply thereto. In fact, petitioner filed its position
paper on April 2, 2001. It must be stressed that Article 280 of the Labor Code
was encoded in our statute books to hinder the circumvention by unscrupulous
employers of the employees right to security of tenure by indiscriminately and
absolutely ruling out all written and oral agreements inharmonious with the
concept of regular employment defined therein. [28]

We quote with approval the following pronouncement of the NLRC:

The complainants, on the other hand, contend that


respondents assailed the Labor Arbiters order dated 18 June
2001 as violative of the NLRC Rules of Procedure and as such is
violative of their right to procedural due process. That while
suggesting that an Order be instead issued by the Labor Arbiter for
complainants to refile this case, respondents impliedly submit that
there is not any substantial damage or prejudice upon the refiling,
even so, respondents suggestion acknowledges complainants right
to prosecute this case, albeit with the burden of repeating the same
procedure, thus, entailing additional time, efforts, litigation cost and
precious time for the Arbiter to repeat the same process
twice. Respondents suggestion, betrays its notion of prolonging,
rather than promoting the early resolution of the case.

Although the Labor Arbiter in his Order dated 18 June


2001 which revived and re-opened the dismissed case without
prejudice beyond the ten (10) day reglementary period had

inadvertently failed to follow Section 16, Rule V, Rules Procedure of


the NLRC which states:

A party may file a motion to revive or re-open a


case dismissed without prejudice within ten (10)
calendar days from receipt of notice of the order
dismissing the same; otherwise, his only remedy shall
be to re-file the case in the arbitration branch of origin.

the same is not a serious flaw that had prejudiced the respondents
right to due process. The case can still be refiled because it has not
yet prescribed. Anyway, Article 221 of the Labor Code provides:

In any proceedings before the Commission or any of


the Labor Arbiters, the rules of evidence prevailing in
courts of law or equity shall not be controlling and it is
the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters
shall use every and all reasonable means to ascertain
the facts in each case speedily and objectively and
without regard to technicalities of law or procedure, all
in the interest of due process.

The admission by the Labor Arbiter of the complainants Position


Paper and Supplemental Manifestation which were belatedly filed
just only shows that he acted within his discretion as he is enjoined
by law to use every reasonable means to ascertain the facts in each
case speedily and objectively, without regard to technicalities of law
or procedure, all in the interest of due process. Indeed, the failure to
submit a position paper on time is not a ground for striking out the
paper from the records, much less for dismissing a complaint in the

case of the complainant. (University of Immaculate Conception vs.


UIC Teaching and Non-Teaching Personnel Employees, G.R. No.
144702, July 31, 2001).

In admitting the respondents position paper


albeit late, the Labor Arbiter acted within her
discretion. In fact, she is enjoined by law to use every
reasonable means to ascertain the facts in each case
speedily and objectively, without technicalities of law
or procedure, all in the interest of due process. (Panlilio
vs. NLRC, 281 SCRA 53).

The respondents were given by the Labor Arbiter the


opportunity to submit position paper. In fact, the respondents had
filed their position paper on 2 April 2001. What is material in the
compliance of due process is the fact that the parties are given the
opportunities to submit position papers.

Due process requirements are satisfied where


the parties are given the opportunities to submit
position papers. (Laurence vs. NLRC, 205 SCRA 737).

Thus, the respondent was not deprived of its Constitutional


right to due process of law.[29]

We reject, as barren of factual basis, petitioners contention that


respondents are considered as its talents, hence, not regular employees of the
broadcasting company.Petitioners claim that the functions performed by the
respondents are not at all necessary, desirable, or even vital to its trade or
business is belied by the evidence on record.

Case law is that this Court has always accorded respect and finality to the
findings of fact of the CA, particularly if they coincide with those of the Labor
Arbiter and the National Labor Relations Commission, when supported by
substantial evidence.[30] The question of whether respondents are regular or
project employees or independent contractors is essentially factual in nature;
nonetheless, the Court is constrained to resolve it due to its tremendous effects
to the legions of production assistants working in the Philippine broadcasting
industry.

We agree with respondents contention that where a person has rendered


at least one year of service, regardless of the nature of the activity performed, or
where the work is continuous or intermittent, the employment is considered
regular as long as the activity exists, the reason being that a customary
appointment is not indispensable before one may be formally declared as having
attained regular status. Article 280 of the Labor Code provides:

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 the engagement of the employee or


where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season.

In Universal Robina Corporation v. Catapang,[31] the Court reiterated the


test in determining whether one is a regular employee:

The primary standard, therefore, of determining regular


employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual trade or
business of the employer. The test is whether the former is usually
necessary or desirable in the usual business or trade of the
employer. The connection can bedetermined by considering the
nature of work performed and its relation to the scheme of the
particular business or trade in its entirety. Also, 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. [32]

As elaborated by this Court in Magsalin v. National Organization of


Working Men:[33]

Even while the language of law might have been more


definitive, the clarity of its spirit and intent, i.e., to ensure a regular
workers security of tenure, however, can hardly be doubted. In
determining whether an employment should be considered regular
or non-regular, the applicable test is the reasonable connection
between the particular activity performed by the employee in
relation to the usual business or trade of the employer. The
standard, supplied by the law itself, is whether the work undertaken
is necessary or desirable in the usual business or trade of the
employer, a fact that can be assessed by looking into the nature of
the services rendered and its relation to the general scheme under
which the business or trade is pursued in the usual course. It is
distinguished from a specific undertaking that is divorced from the
normal activities required in carrying on the particular business or
trade. But, although the work to be performed is only for a specific
project or seasonal, where a person thus engaged has been
performing the job for at least one year, even if the performance is
not continuous or is merely intermittent, the law deems the
repeated and continuing need for its performance as being
sufficient to indicate the necessity or desirability of that activity to
the business or trade of the employer. The employment of such
person is also then deemed to be regular with respect to such
activity and while such activity exists. [34]

Not considered regular employees are project employees, the completion


or termination of which is more or less determinable at the time of employment,
such as those employed in connection with a particular construction project, and
seasonal employees whose employment by its nature is only desirable for a
limited period of time. Even then, any employee who has rendered at least one
year of service, whether continuous or intermittent, is deemed regular with
respect to the activity performed and while such activity actually exists.

It is of no moment that petitioner hired respondents as talents. The fact


that respondents received pre-agreed talent fees instead of salaries, that they
did not observe the required office hours, and that they were permitted to join
other productions during their free time are not conclusive of the nature of their
employment. Respondents cannot be considered talents because they are not
actors or actresses or radio specialists or mere clerks or utility employees. They
are regular employees who perform several different duties under the control
and direction of ABS-CBN executives and supervisors.

which is distinct and separate, and identifiable as such, from the other
undertakings of the company. Such job or undertaking begins and ends at
determined or determinable times. Second, the term project may also refer to a
particular job or undertaking that is not within the regular business of the
employer. Such a job or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations of the employer. The job
or undertaking also begins and ends at determined or determinable times. [38]

The principal test is whether or not the project employees were assigned
to carry out a specific project or undertaking, the duration and scope of which
were specified at the time the employees were engaged for that project. [39]
Thus, there are two kinds of regular employees under the law: (1) those
engaged to perform activities which are necessary or desirable in the usual
business or trade of the employer; and (2) those casual employees who
have rendered at least one year of service, whether continuous or broken,
with respect to the activities in which they are employed. [35]

The law overrides such conditions which are prejudicial to the interest of
the worker whose weak bargaining situation necessitates the succor of the State.
What determines whether a certain employment is regular or otherwise is not
the will or word of the employer, to which the worker oftentimes acquiesces,
much less the procedure of hiring the employee or the manner of paying the
salary or the actual time spent at work. It is the character of the activities
performed in relation to the particular trade or business taking into account all
the circumstances, and in some cases the length of time of its performance and
its continued existence.[36] It is obvious that one year after they were employed
by petitioner, respondents became regular employees by operation of law.[37]
Additionally, respondents cannot be considered as project or program
employees because no evidence was presented to show that the duration and
scope of the project were determined or specified at the time of their
engagement. Under existing jurisprudence, project could refer to two
distinguishable types of activities. First, a project may refer to a particular job or
undertaking that is within the regular or usual business of the employer, but

In this case, it is undisputed that respondents had continuously performed


the same activities for an average of five years. Their assigned tasks are
necessary or desirable in the usual business or trade of the petitioner. The
persisting need for their services is sufficient evidence of the necessity and
indispensability of such services to petitioners business or trade. [40] While length
of time may not be a sole controlling test for project employment, it can be a
strong factor to determine whether the employee was hired for a specific
undertaking or in fact tasked to perform functions which are vital, necessary and
indispensable to the usual trade or business of the employer.[41] We note further
that petitioner did not report the termination of respondents employment in the
particular project to the Department of Labor and Employment Regional Office
having jurisdiction over the workplace within 30 days following the date of their
separation from work, using the prescribed form on employees termination/
dismissals/suspensions.[42]

As gleaned from the records of this case, petitioner itself is not certain
how to categorize respondents. In its earlier pleadings, petitioner classified
respondents as program employees, and in later pleadings, independent
contractors. Program employees, or project employees, are different from

independent contractors because in the case of the latter, no employeremployee relationship exists.

Petitioners reliance on the ruling of this Court in Sonza v. ABS-CBN


Broadcasting Corporation[43] is misplaced. In that case, the Court explained why
Jose Sonza, a well-known television and radio personality, was an independent
contractor and not a regular employee:

A. Selection and Engagement of Employee

ABS-CBN engaged SONZAS services to co-host its television


and radio programs because of SONZAS peculiar skills, talent and
celebrity status. SONZA contends that the discretion used by
respondent in specifically selecting and hiring complainant over
other broadcasters of possibly similar experience and qualification
as complainant belies respondents claim of independent
contractorship.

Independent contractors often present themselves to possess


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

In any event, the method of selecting and engaging SONZA


does not conclusively determine his status. We must consider all
the circumstances of the relationship, with the control test being
the most important element.

B. Payment of Wages

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

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

SONZAs talent fees, amounting to P317,000 monthly in the second


and third year, are so huge and out of the ordinary that they
indicate more an independent contractual relationship rather than
an employer-employee relationship. ABS-CBN agreed to pay SONZA
such huge talent fees precisely because of SONZAS unique skills,
talent and celebrity status not possessed by ordinary
employees.Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for
his services. The power to bargain talent fees way above the salary

scales of ordinary employees is a circumstance indicative, but not


conclusive, of an independent contractual relationship.

The payment of talent fees directly to SONZA and not to MJMDC


does not negate the status of SONZA as an independent
contractor. The parties expressly agreed on such mode of
payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under
the Agreement.[44]

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.[45] The Court will peruse beyond any such
agreement to examine the facts that typify the parties actual relationship. [46]

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. [47] 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:

x x x The award in favor of private respondents of the


benefits accorded to rank-and-file employees of ABS-CBN under the
1996-1999 CBA is a necessary consequence of public respondents
ruling that private respondents as production assistants of
petitioner are regular employees. The monetary award is not
considered as claims involving the interpretation or implementation
of the collective bargaining agreement. The reason why production
assistants were excluded from the said agreement is precisely
because they were 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. Considering that
We have clearly found that private respondents are regular
employees of petitioner, their exclusion from the said CBA on the
misplaced belief of the parties to the said agreement that they are
project employees, is therefore not proper. Finding said private
respondents as regular employees and not as mere project
employees, they must be accorded the benefits due under the said
Collective Bargaining Agreement.

A collective bargaining agreement is a contract entered into


by
the
union
representing
the
employees
and
the
employer. However, even the non-member employees are entitled
to the benefits of the contract. To accord its benefits only to
members of the union without any valid reason would constitute
undue discrimination against non-members. A collective bargaining
agreement is binding on all employees of the company. Therefore,
whatever benefits are given to the other employees of ABS-CBN
must likewise be accorded to private respondents who were regular
employees of petitioner.[48]

Besides, only talent-artists were excluded from the CBA and not
production assistants who are regular employees of the respondents. Moreover,
under Article 1702 of the New Civil Code: In case of doubt, all labor legislation
and all labor contracts shall be construed in favor of the safety and decent living
of the laborer.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for


lack of merit. The assailed Decision and Resolution of the Court of Appeals
in CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner.

SO ORDERED.

DECISION

AUSTRIA-MARTINEZ, J.:

LOLITA LOPEZ,

G.R. No. 155731

Petitioner,
Present:

YNARES-SANTIAGO, J.,
- versus -

Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and

BODEGA CITY (Video-Disco


Kitchen
and/or

of

REYES, JJ.

the Philippines)

ANDRES C. TORRES-YAP,

Promulgated:

Respondents.

September 3, 2007

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

Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court assailing the July 18, 2002 Decision [1] of the Court of
Appeals (CA) in CA-G.R. SP No. 66861, dismissing the petition
for certiorari filed before it and affirming the Decision of the National
Labor Relations Commission (NLRC) in NLRC-NCR Case No. 00-03-0172995; and its Resolution dated October 16, 2002, [2] denying petitioners
Motion for Reconsideration. The NLRC Decision set aside the Decision of
the Labor Arbiter finding that Lolita Lopez (petitioner) was illegally
dismissed by Bodega City and/or Andres C. Torres-Yap (respondents).
Respondent Bodega City (Bodega City) is a corporation duly registered
and existing under and by virtue of the laws of the Republic of
the Philippines, while respondent Andres C. Torres-Yap (Yap) is its owner/
manager. Petitioner was the lady keeper of Bodega City tasked with
manning its ladies comfort room.

In a letter signed by Yap dated February 10, 1995, petitioner was made to
explain why the concessionaire agreement between her and respondents
should not be terminated or suspended in view of an incident that

happened on February 3, 1995, 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 duty.

In a subsequent letter dated February 25, 1995, Yap informed petitioner


that because of the incident that happened on February 3, 1995,
respondents had decided to terminate the concessionaire agreement
between them.

On March 1, 1995, petitioner filed with the Arbitration Branch of the NLRC,
National Capital Region, Quezon City, a complaint for illegal dismissal
against respondents contending that she was dismissed from her
employment without cause and due process.

In their answer, respondents contended that no employer-employee


relationship ever existed between them and petitioner; that the latters
services rendered within the premises ofBodega City was by virtue of a
concessionaire agreement she entered into with respondents.

The complaint was dismissed by the Labor Arbiter for lack of merit.
However, on appeal, the NLRC set aside the order of dismissal and
remanded the case for further proceedings. Upon remand, the case was
assigned to a different Labor Arbiter. Thereafter, hearings were conducted
and the parties were required to submit memoranda and other supporting
documents.

On December 28, 1999, the Labor Arbiter rendered judgment finding that
petitioner was an employee of respondents and that the latter illegally
dismissed her.[3]
Respondents filed an appeal with the NLRC. On March 22, 2001, the NLRC
issued a Resolution, the dispositive portion of which reads as follows:

WHEREFORE, premises duly considered, the Decision


appealed from is hereby ordered SET ASIDE and VACATED,
and in its stead, a new one entered DISMISSING the aboveentitled case for lack of merit.[4]

Petitioner filed a motion for reconsideration of the above-quoted NLRC


Resolution, but the NLRC denied the same.

Aggrieved, petitioner filed a Petition for Certiorari with the CA. On July 18,
2002, the CA promulgated the presently assailed Decision dismissing
her special civil action forcertiorari. Petitioner moved for reconsideration
but her motion was denied.

Hence, herein petition based on the following grounds:

1. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF


APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN
RULING
THAT
THE
NATIONAL
LABOR
RELATIONS
COMMISSION DID NOT COMMIT GRAVE ABUSE OF
DISCRETION IN REVERSING THE DECISION OF THE LABOR

ARBITER FINDING PETITIONER TO HAVE BEEN ILLEGALLY


DISMISSED BY PRIVATE RESPONDENTS.

2. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF


APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN
RULING THAT PETITIONER WAS NOT AN EMPLOYEE OF
PRIVATE RESPONDENTS.[5]

respondents really intended the ID card issued to her to be used simply


for having access to the premises of Bodega City, then respondents
could have clearly indicated such intent on the said ID card.

Moreover, petitioner submits that the fact that she was required to
follow rules and regulations prescribing appropriate conduct while she
was in the premises of Bodega City is clear evidence of the existence of
an employer-employee relationship between her and petitioners.

Petitioner further argues that her receipt of a special allowance from


respondents is a clear evidence that she was an employee of the latter,
as the amount she received was equivalent to the minimum wage at
that time.

On the other hand, respondents contend that the present petition was
filed for the sole purpose of delaying the proceedings of the case;
the grounds relied upon in the instant petition are matters that have
been exhaustively discussed by the NLRC and the CA; the present
petition raises questions of fact which are not proper in a petition for
review oncertiorari under Rule 45 of the Rules of Court; the respective
decisions of the NLRC and the CA are based on evidence presented by
both parties; petitioners compliance with the terms and conditions of
the proposed concessionaire contract for a period of three years is
evidence of her implied acceptance of such proposal; petitioner failed
to present evidence to prove her allegation that the subject
concessionaire agreement was only proposed to her in her 10 th year of
employment with respondent company and after she organized a union
and filed a labor complaint against respondents; petitioner failed to
present competent documentary and testimonial evidence to prove her
contention that she was an employee of respondents since 1985.

Petitioner also contends that her identification card clearly shows that
she was not a concessionaire but an employee of respondents; that if

The main issue to be resolved in the present case is whether or not


petitioner is an employee of respondents.

Petitioner contends that it was wrong for the CA to conclude that even if
she did not sign the document evidencing the concessionaire
agreement, she impliedly accepted and thus bound herself to the terms
and conditions contained in the said agreement when she continued to
perform the task which was allegedly specified therein for a
considerable length of time. Petitioner claims that the concessionaire
agreement was only offered to her during her tenth year of service and
after she organized a union and filed a complaint against
respondents. Prior to all these, petitioner asserts that her job as a lady
keeper was a task assigned to her as an employee of respondents.

The issue of whether or not an employer-employee relationship exists in


a given case is essentially a question of fact.[6]

While it is a settled rule that only errors of law are generally reviewed
by this Court in petitions for review on certiorari of CA decisions,[7] there
are well-recognized exceptions to this rule, as in this case, when the
factual findings of the NLRC as affirmed by the CA contradict those of
the Labor Arbiter.[8] In that event, it is this Courts task, in the exercise of
its equity jurisdiction, to re-evaluate and review the factual issues by
looking into the records of the case and re-examining the questioned
findings.[9]

It is a basic rule of evidence that each party must prove his affirmative
allegation.[10] 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.[11]

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.[12]

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. [13] However,
before a case for illegal dismissal can prosper, an employer-employee
relationship must first be established.[14]

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.[15]

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.

The
Court
applies
the
four-fold
test
in Abante v. Lamadrid Bearing and Parts Corp.,[16] to wit:

expounded

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. The so-called control test is commonly regarded as
the most crucial and determinative indicator of the presence
or absence of an employer-employee relationship. Under the
control test, an employer-employee relationship exists where
the person for whom the services are performed reserves the
right to control not only the end achieved, but also the
manner and means to be used in reaching that end.[17]

To prove the element of payment of wages, petitioner presented a petty


cash voucher showing that she received an allowance for five (5) days.
[18]
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.

terms and conditions in the concessionaire agreement embodied in a


1992 letter of Yap addressed to petitioner, to wit:

January 6, 1992

Dear Ms. Lolita Lopez,


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.

Anent the element of control, petitioners contention that she was an


employee of respondents because she was subject to their control does
not hold water.

Petitioner failed to cite a single instance to prove that she was subject to
the control of respondents insofar as the manner in which she should
perform her job as a lady keeper was concerned.

It is true that petitioner was required to follow rules and regulations


prescribing
appropriate
conduct
while
within
the
premises
of Bodega City. However, this was imposed upon petitioner as part of the

The new owners of Bodega City, 1121 Food Service


Corporation
offers
to
your goodself the
concessionaire/contract to provide independently, customer
comfort services to assist users of the ladies comfort room of
the Club to further enhance its business, under the following
terms and conditions:

1. You will provide at your own expense, all toilet supplies,


useful for the purpose, such as toilet papers, soap, hair pins,
safety pins and other related items or things which in your
opinion is beneficial to the services you will undertake;

2. For the entire duration of this concessionaire contract, and


during the Clubs operating hours, you shall maintain the
cleanliness of the ladies comfort room. Provided, that general
cleanliness, sanitation and physical maintenance of said
comfort rooms shall be undertaken by the owners
of Bodega City;

3. You shall at all times ensure satisfaction and good services


in the discharge of your undertaking. More importantly, you
shall always observe utmost courtesy in dealing with the

persons/individuals using said comfort room and shall refrain


from doing acts that may adversely affect the goodwill and
business standing of Bodega City;

By:
(Sgd.) ANDRES C. TORRES-YAP

4. All remunerations, tips, donations given to you by


individuals/persons utilizing said comfort rooms and/or guests
of Bodega City shall be waived by the latter to your benefit
provided however, that if concessionaire receives tips or
donations per day in an amount exceeding 200% the
prevailing minimum wage, then, she shall remit fifty percent
(50%) of said amount to Bodega City by way of royalty or
concession fees;

5. This contract shall be for a period of one year and shall be


automatically renewed on a yearly basis unless notice of
termination is given thirty (30) days prior to expiration. Any
violation of the terms and conditions of this contract shall be a
ground for its immediate revocation and/or termination.

6. It is hereby understood that no employer-employee


relationship
exists
between
Bodega
City
and/or
1121 FoodService Corporation and your goodself, as you are
an independent contractor who has represented to us that
you possess the necessary qualification as such including
manpower compliment, equipment, facilities, etc. and that
any person you may engage or employ to work with or assist
you in the discharge of your undertaking shall be solely your
own employees and/or agents.

1121 FoodService Corporation


Bodega City

Conforme:
_______________
LOLITA LOPEZ[19]

Petitioner does not dispute the existence of the letter; neither does she
deny that respondents offered her the subject concessionaire
agreement. However, she contends that she could not have entered into
the said agreement with respondents because she did not sign the
document evidencing the same.

Settled is the rule that contracts are perfected by mere consent, upon the
acceptance by the offeree of the offer made by the offeror.[20] For a contract, to
arise, the acceptance must be made known to the offeror.[21] Moreover, the
acceptance of the thing and the cause, which are to constitute a contract, may
be express or implied as can be inferred from the contemporaneous and
subsequent acts of the contracting parties. [22] A contract will be upheld as long
as there is proof of consent, subject matter and cause; it is generally obligatory
in whatever form it may have been entered into. [23]

In the present case, the Court finds no cogent reason to disregard the
findings of both the CA and the NLRC that while petitioner did not affix her
signature to the document evidencing the subject concessionaire

agreement, the fact that she performed the tasks indicated in the said
agreement for a period of three years without any complaint or question
only goes to show that she has given her implied acceptance of or
consent to the said agreement.

Petitioner is likewise estopped from denying the existence of the subject


concessionaire agreement. She should not, after enjoying the benefits of
the concessionaire agreement with respondents, be allowed to later
disown the same through her allegation that she was an employee of the
respondents when the said agreement was terminated by reason of her
violation of the terms and conditions thereof.

The
principle
of estoppel in pais applies
wherein -- by ones acts,
representations or admissions, or silence when one ought to speak
out -- intentionally or through culpable negligence, induces another to
believe certain facts to exist and to rightfully rely and act on such belief,
so as to be prejudiced if the former is permitted to deny the existence
ofthose facts.[24]

Moreover, petitioner failed to dispute the contents of the affidavit [25] as


well as the testimony[26] of Felimon Habitan (Habitan), the concessionaire
of the mens comfort room ofBodega City, that he had personal knowledge
of the fact that petitioner was the concessionaire of the ladies comfort
room of Bodega City.

Petitioner also claims that the concessionaire agreement was offered to


her only in her 10th year of service, after she organized a union and filed a
complaint against respondents.However, petitioner's claim remains to be
an allegation which is not supported by any evidence. It is a basic rule in
evidence that each party must prove his affirmative allegation,[27] that
mere allegation is not evidence.[28]

The Court is not persuaded by petitioners contention that the Labor


Arbiter was correct in concluding that there existed an employeremployee relationship between respondents and petitioner. A perusal of
the Decision[29] of the Labor Arbiter shows that his only basis for arriving
at such a conclusion are the bare assertions of petitioner and the fact
thatthe latter did not sign the letter of Yap containing the proposed
concessionaire agreement. However, as earlier discussed, this Court finds
no error in the findings of the NLRC and the CA that petitioner is deemed
as having given her consent to the said proposal when she continuously
performed the tasks indicated therein for a considerable length of
time.For all intents and purposes, the concessionaire agreement had been
perfected.

Petitioner insists that her ID card is sufficient proof of her


employment. In Domasig v. National Labor Relations Commission,[30] this
Court held that the complainants ID card and the cash vouchers covering
his salaries for the months indicated therein were substantial evidence
that he was an employee of respondents, especially in light of the fact
that the latter failed to deny said evidence. This is not the situation in the
present case. The only evidence presented by petitioner as proof of her

alleged employment are her ID card and one petty cash voucher for a
five-day allowance which were disputed by respondents.

As to the ID card, it is true that the words EMPLOYEES NAME


appear printed below petitioners name.[31] However, she failed to dispute
respondents evidence consisting of Habitans testimony,[32] that he and the
other
contractors
of Bodega City such
as
the
singers
and
band performers, were also issued the same ID cards for the purpose of
enabling them to enter the premises of Bodega City.

The Court quotes, with approval, the ruling of the CA on this matter,
to wit:

Nor can petitioners identification card improve her cause any


better. It is undisputed that non-employees, such
as Felimon Habitan, an admitted concessionaire, musicians,
singers and the like at Bodega Cityare also issued
identification cards. Given this premise, it appears clear
to Us that petitioner's I.D. Card is incompetent proof of an
alleged employer-employee relationship between the herein
parties. Viewed in the context of this case, the card is at best
a passport from management assuring the holder thereof of
his unmolested access to the premises of Bodega City.[33]

With respect to the petty cash voucher, petitioner failed to refute


respondents 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 familys needs.

Hence, going back to the element of control, the concessionaire


agreement merely stated that petitioner shall maintain the cleanliness of
the ladies comfort room and observe courtesy guidelines that would help
her obtain the results they wanted to achieve. There is nothing in the
agreement which specifies the methods by which petitioner should
achieve these results. Respondents did not indicate the manner in which
she should go about in maintaining the cleanliness of the ladies comfort
room. Neither did respondents determine the means and methods by
which petitioner could ensure the satisfaction of respondent companys
customers. In other words, petitioner was given a free hand as to how she
would perform her job as a lady keeper. In fact, the last paragraph of the
concessionaire agreement even allowed petitioner to engage persons to
work with or assist her in the discharge of her functions.[34]

Moreover, petitioner was not subjected to definite hours or conditions of


work. The fact that she was expected to maintain the cleanliness of
respondent companys ladies comfort room during Bodega Citys operating
hours does not indicate that her performance of her job was subject to the
control of respondents as to make her an employee of the latter.Instead,
the
requirement
that
she
had
to
render
her
services
while Bodega City was open for business was dictated simply by the very
nature of her undertaking, which was to give assistance to the users of
the ladies comfort room.

In Consulta v. Court of Appeals,[35] this Court held:

It should, however, be obvious that not every form of control


that the hiring party reserves to himself over the conduct of
the party hired in relation to the services rendered may be
accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of
the term. A line must be drawn somewhere, if the recognized
distinction between an employee and an individual contractor
is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammeled 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.[36]

Lastly, the Court finds that the elements of selection and engagement as
well as the power of dismissal are not present in the instant case.
It has been established that there has been no employer-employee
relationship between respondents and petitioner. Their contractual
relationship was governed by the concessionaire agreement embodied in
the
1992
letter. Thus, petitioner
was
not
dismissed
by
respondents. Instead, as shown by the letter of Yap to her dated February
15, 1995,[37] their contractual relationship was terminated by reason of

respondents' termination of the subject concessionaire agreement, which


was in accordance with the provisions of the agreement in case of
violation of its terms and conditions.

In fine, the CA did not err


for certiorari filed before it by petitioner.

in

dismissing

the

petition

WHEREFORE, the instant petition is DENIED. The assailed Decision and


Resolution of the Court of Appeals are AFFIRMED. Costs against
petitioner.

SO ORDERED.

DECISION

CARPIO MORALES, J.:


The Calamba Medical Center (petitioner),
a
privately-owned
hospital, engaged the services of medical doctors-spouses Ronaldo
Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas (Dr. Merceditha) in
March 1992 and August 1995, respectively, as part of its team of resident
physicians. Reporting at the hospital twice-a-week on twenty-four-hour
shifts, respondents were paid a monthly retainer of P4,800.00 each.[1] It
appears that resident physicians were also given a percentage share out
of fees charged for out-patient treatments, operating room assistance and
discharge billings, in addition to their fixed monthly retainer.[2]

CALAMBA MEDICAL
CENTER, INC.,
Petitioner,

- versus -

G.R. No. 176484


Present:
QUISUMBING, J., Chairperson,
CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.

NATIONAL LABOR
RELATIONS
COMMISSION,
Promulgated:
RONALDO LANZANAS AND
November 25, 2008
*
MERCEDITHA LANZANAS,
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

The work schedules of the members of the team of resident


physicians were fixed by petitioners medical director Dr. Raul Desipeda
(Dr. Desipeda). And they were issued identification cards [3] by petitioner
and were enrolled in the Social Security System (SSS). [4] Income taxes
were withheld from them.[5]
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident
physician at the hospital, inadvertently overheard a telephone
conversation of respondent Dr. Lanzanas with a fellow employee,
Diosdado Miscala, through an extension telephone line. Apparently, Dr.
Lanzanas and Miscala were discussing the low census or admission of
patients to the hospital.[6]

Dr. Desipeda whose attention was called to the above-said


telephone conversation issued to Dr. Lanzanas a Memorandum of March
7, 1998 reading:
As a Licensed Resident Physician employed in
Calamba Medical Center since several years ago, the
hospital management has committed upon you utmost
confidence in the performance of duties pursuant
thereto. This is the reason why you were awarded the
privilege to practice in the hospital and were entrusted
hospital functions to serve the interest of both the hospital
and our patients using your capability for independent
judgment.
Very recently though and unfortunately, you have
committed acts inimical to the interest of the hospital, the
details of which are contained in the hereto attached
affidavit of witness.
You are therefore given 24 hours to explain why
no disciplinary action should be taken against you.
Pending investigation of your case, you are
hereby placed under 30-days [sic] preventive
suspension effective upon receipt hereof.[7] (Emphasis,
italics and underscoring supplied)

Inexplicably, petitioner did not give respondent Dr. Merceditha, who


was not involved in the said incident, any work schedule after sending her
husband Dr. Lanzanas the memorandum,[8] nor inform her the reason
therefor, albeit she was later informed by the Human Resource
Department (HRD) officer that that was part of petitioners cost-cutting
measures.[9]

Responding to the memorandum, Dr. Lanzanas, by letter of March 9,


1998,[10] admitted that he spoke with Miscala over the phone but that their
conversation was taken out of context by Dr. Trinidad.
On March 14, 1998,[11] the rank-and-file employees union of
petitioner went on strike due to unresolved grievances over terms and
conditions of employment.[12]
On March 20, 1998, Dr. Lanzanas filed a complaint for illegal
suspension[13] before the National Labor Relations Commission (NLRC)Regional Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a
complaint for illegal dismissal.[14]
In the meantime, then Sec. Cresenciano Trajano of the Department
of Labor and Employment (DOLE) certified the labor dispute to the NLRC
for compulsory arbitration and issued on April 21, 1998 return-to-work
Order to the striking union officers and employees of petitioner pending
resolution of the labor dispute.[15]
In a memorandum[16] of April 22, 1998, Dr. Desipeda echoed the
April 22, 1998 order of the Secretary of Labor directing all union officers
and members to return-to-work on or April 23, 1998, except those
employees that were already terminated or are serving disciplinary
actions. Dr. Desipeda thus ordered the officers and members of the union
to report for work as soon as possible to the hospitals personnel officer
and administrator for work scheduling, assignments and/or reassignments.

Petitioner later sent Dr. Lanzanas a notice of termination which he


received on April 25, 1998, indicating as grounds therefor his failure to
report back to work despite the DOLE order and his supposed role in the
striking union, thus:
On April 23, 1998, you still did not report for work
despite memorandum issued by the CMC Medical Director
implementing the Labor Secretarys ORDER. The same is
true on April 24, 1998and April 25, 1998,--you still did not
report for work [sic].

Dr. Lanzanas thus amended his original complaint to include illegal


dismissal.[18] His and Dr. Mercedithas complaints were consolidated and
docketed as NLRC CASE NO. RAB-IV-3-9879-98-L.
By Decision[19] of March 23, 1999, Labor Arbiter Antonio R. Macam
dismissed the spouses complaints for want of jurisdiction upon a finding
that there was no employer-employee relationship between the parties,
the fourth requisite or the control test in the determination of an
employment bond being absent.

You are likewise aware that you were observed (re:


signatories [sic] to the Saligang Batas of BMCMC-UWP) to
be unlawfully participating as member in the rank-and-file
unions concerted activities despite knowledge that your
position in the hospital is managerial in nature (Nurses,
Orderlies, and staff of the Emergency Room carry out your
orders
using
your
independent
judgment)
which
participation is expressly prohibited by the New Labor Code
and which prohibition was sustained by the MedArbiters ORDER dated February 24, 1998. (Emphasis and
italics in the original; underscoring partly in the original and
partly supplied)

On appeal, the NLRC, by Decision[20] of May 3, 2002, reversed the


Labor Arbiters findings, disposing as follows:

For these reasons as grounds for termination,


you are hereby terminated for cause from
employment effective today, April 25, 1998, without
prejudice to further action for revocation of your license
before the Philippine [sic] Regulations [sic] Commission.
[17]
(Emphasis and underscoring supplied)

Petitioners motion for reconsideration having been denied, it


brought the case to the Court of Appeals on certiorari.

WHEREFORE, the assailed decision is set aside. The


respondents are ordered to pay the complainants their full
backwages; separation pay of one month salary for every
year of service in lieu of reinstatement; moral damages
of P500,000.00 each; exemplary damages of P250,000.00
each plus ten percent (10%) of the total award as attorneys
fees.
SO ORDERED.[21]

The appellate court, by June 30, 2004 Decision,[22] initially granted


petitioners petition and set aside the NLRC ruling. However, upon a
subsequent motion for reconsideration filed by respondents, it reinstated
the NLRC decision in an Amended Decision [23] dated September 26,
2006 but tempered the award to each of the spouses of moral and

exemplary damages to P100,000.00 and P50,000.00, respectively and


omitted the award of attorneys fees.
In finding the existence of an employer-employee relationship
between the parties, the appellate court held:
x x x. While it may be true that the respondents are
given the discretion to decide on how to treat the
petitioners patients, the petitioner has not denied nor
explained why its Medical Director still has the direct
supervision and control over the respondents. The
fact is the petitioners Medical Director still has to approve
the schedule of duties of the respondents. The
respondents stressed that the petitioners Medical Director
also issues instructions or orders to the respondents
relating to the means and methods of performing
their duties, i.e. admission of patients, manner of
characterizing cases, treatment of cases, etc., and may
even overrule, review or revise the decisions of the
resident physicians. This was not controverted by the
petitioner. The foregoing factors taken together are
sufficient to constitute the fourth element, i.e. control test,
hence,
the
existence
of
the
employer-employee
relationship. In denying that it had control over the
respondents, the petitioner alleged that the respondents
were free to put up their own clinics or to accept other
retainership agreement with the other hospitals. But, the
petitioner failed to substantiate the allegation with
substantial evidence. (Emphasis and underscoring supplied)
[24]

The appellate court thus declared that respondents were illegally


dismissed.

x x x. The petitioners ground for dismissing


respondent Ronaldo Lanzanas was based on his alleged
participation in union activities, specifically in joining the
strike and failing to observe the return-to-work order issued
by the Secretary of Labor. Yet, the petitioner did not adduce
any piece of evidence to show that respondent Ronaldo
indeed participated in the strike. x x x.
In the case of respondent Merceditha Lanzanas, the
petitioners explanation that her marriage to complainant
Ronaldo has given rise to the presumption that her
sympat[hies] are likewise with her husband as a ground for
her dismissal is unacceptable. Such is not one of the
grounds to justify the termination of her employment.
[25]
(Underscoring supplied)

The fallo of the appellate courts decision reads:


WHEREFORE,
the
instant Motion
for
Reconsideration is GRANTED, and the Courts decision
dated June 30, 2004, is SET ASIDE. In lieu thereof, a new
judgment is entered, as follows:
WHEREFORE, the petition is DISMISSED. The assailed
decision
dated May
3,
2002 and
order
dated September 24, 2002 of the NLRC in NLRC
NCR CA No. 019823-99 are AFFIRMED with the
MODIFICATION that the moral and exemplary
damages are reduced to P100,000.00 each
and P50,000.00 each, respectively.
SO ORDERED.[26] (Emphasis and italics in the original;
underscoring supplied)

Preliminarily, the present petition calls for a determination of


whether there exists an employer-employee relationship [27] between
petitioner and the spouses-respondents.
Denying the existence of such relationship, petitioner argues that
the appellate court, as well as the NLRC, overlooked its twice-a-week
reporting arrangement with respondents who are free to practice their
profession elsewhere the rest of the week. And it invites attention to the
uncontroverted allegation that respondents, aside from their monthly
retainers, were entitled to one-half of all suturing, admitting, consultation,
medico-legal and operating room assistance fees.[28] These circumstances,
it stresses, are clear badges of the absence of any employment
relationship between them.
This Court is unimpressed.
Under the control test, an employment relationship exists between
a physician and a hospital if the hospital controls both the means and the
details of the process by which the physician is to accomplish his task.[29]
Where a person who works for another does so more or less at his
own pleasure and is not subject to definite hours or conditions of work,
and is compensated according to the result of his efforts and not the
amount thereof, the element of control is absent.[30]
As priorly stated, private respondents maintained specific workschedules, as determined by petitioner through its medical director, which
consisted of 24-hour shifts totaling forty-eight hours each week and which
were strictly to be observed under pain of administrative sanctions.

That petitioner exercised control over respondents gains light from


the undisputed fact that in the emergency room, the operating room, or
any department or ward for that matter, respondents work is monitored
through its nursing supervisors, charge nurses and orderlies. Without the
approval or consent of petitioner or its medical director, no operations can
be undertaken in those areas. For control test to apply, it is not essential
for the employer to actually supervise the performance of duties of the
employee, it being enough that it has the right to wield the power.[31]
With respect to respondents sharing in some hospital fees, this
scheme does not sever the employment tie between them and petitioner
as this merely mirrors additional form or another form of compensation or
incentive similar to what commission-based employees receive as
contemplated in Article 97 (f) of the Labor Code, thus:
Wage paid to any employee shall mean the
remuneration or earning, however designated, capable of
being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which
is payable by an employer to an employee under a written
or unwritten contract of employment for work done or to be
done, or for services rendered or to be rendered and
includes the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. x x
x (Emphasis and underscoring supplied),
Respondents were in fact made subject to petitioner-hospitals Code
of Ethics,[32] the provisions of which cover administrative and disciplinary

measures on negligence of duties, personnel conduct and behavior, and


offenses against persons, property and the hospitals interest.
More importantly, petitioner itself provided incontrovertible proof of
the employment status of respondents, namely, the identification cards it
issued them, the payslips[33]and BIR W-2 (now 2316) Forms which reflect
their status as employees, and the classification as salary of their
remuneration. Moreover, it enrolled respondents in the SSS and Medicare
(Philhealth) program. It bears noting at this juncture that mandatory
coverage under the SSS Law[34] is premised on the existence of
an employer-employee relationship,[35] except in cases of compulsory
coverage of the self-employed. It would be preposterous for an employer
to report certain persons as employees and pay their SSS premiums as
well as their wages if they are not its employees.[36]
And if respondents were not petitioners employees, how does it
account for its issuance of the earlier-quoted March 7, 1998 memorandum
explicitly stating that respondent is employed in it and of the subsequent
termination letter indicating respondent Lanzanas employment status.
Finally, under Section 15, Rule X of Book III of the Implementing
Rules of the Labor Code, an employer-employee relationship exists
between the resident physicians and the training hospitals, unless there is
a training agreement between them, and the training program is duly
accredited or approved by the appropriate government agency. In
respondents case, they were not undergoing any specialization
training. They were considered non-training general practitioners,
[37]
assigned at the emergency rooms and ward sections.

Turning now to the issue of dismissal, the Court upholds the


appellate courts conclusion that private respondents were illegally
dismissed.
Dr. Lanzanas was neither a managerial nor supervisory employee
but part of the rank-and-file. This is the import of the Secretary of Labors
Resolution of May 22, 1998 in OS A-05-15-98 which reads:
xxxx
In the motion to dismiss it filed before the MedArbiter, the employer (CMC) alleged that 24 members of
petitioner are supervisors, namely x x x Rolando
Lanzonas [sic] x x x.
A close scrutiny of the job descriptions of the alleged
supervisors narrated by the employer only proves that
except for the contention that these employees allegedly
supervise, they do not however recommend any managerial
action. At most, their job is merely routinary in nature and
consequently, they cannot be considered supervisory
employees.
They are not therefore barred from membership
in the union of rank[-]and[-]file, which the petitioner
[the union] is seeking to represent in the instant case.
[38]
(Emphasis and underscoring supplied)
xxxx
Admittedly, Dr. Lanzanas was a union member in the hospital, which
is considered indispensable to the national interest. In labor disputes
adversely affecting the continued operation of a hospital, Article 263(g) of
the Labor Code provides:

ART. 263. STRIKES, PICKETING, AND LOCKOUTS.

DOLE Secretary in fact issued a return-to-work Order, failing to comply


with which is punishable by dismissal or loss of employment status.[40]

xxxx
(g) x x x x
x x x x. In labor disputes adversely affecting the
continued operation of such hospitals, clinics or
medical institutions, it shall be the duty of the striking
union or locking-out employer to provide and maintain an
effective skeletal workforce of medical and other health
personnel, whose movement and services shall be
unhampered and unrestricted, as are necessary to insure
the proper and adequate protection of the life and health of
its patients, most especially emergency cases, for the
duration of the strike or lockout. In such cases, the
Secretary of Labor and Employment is mandated to
immediately assume, within twenty-four hours from
knowledge of the occurrence of such strike or lockout,
jurisdiction over the same or certify to the Commission for
compulsory
arbitration. For
this
purpose,
the
contending parties are strictly enjoined to comply
with such orders, prohibitions and/or injunctions as
are issued by the Secretary of Labor and
Employment or the Commission, under pain of
immediate disciplinary action, including dismissal or
loss of employment status or payment by the
locking-out employer of backwages, damages and
other affirmative relief, even criminal prosecution
against either or both of them.
x x x x (Emphasis and underscoring supplied)
An
assumption
or
certification
order
of
the
DOLE
Secretary automatically results in a return-to-work of all striking workers,
whether a corresponding return-to-work order had been issued. [39] The

Participation in a strike and intransigence to a return-to-work


order must, however, be duly proved in order to justify immediate
dismissal in a national interest case. As the appellate court as well as the
NLRC observed, however, there is nothing in the records that would bear
out Dr. Lanzanas actual participation in the strike. And the medical
directors Memorandum[41] of April 22, 1998 contains nothing more than a
general directive to all union officers and members to return-towork. Mere membership in a labor union does not ipso facto mean
participation in a strike.
Dr. Lanzanas claim that, after his 30-day preventive suspension
ended on or before April 9, 1998, he was never given any work
schedule[42] was not refuted by petitioner.Petitioner in fact never released
any findings of its supposed investigation into Dr. Lanzanas alleged
inimical acts.
Petitioner thus failed to observe the two requirements,before
dismissal can be effected notice and hearing which constitute
essential elements of the statutory process; the first to apprise the
employee of the particular acts or omissions for which his dismissal is
sought, and the second to inform the employee of the employer's decision
to dismiss him.[43] Non-observance of these requirements runs afoul of the
procedural mandate.[44]

The termination notice sent to and received by Dr. Lanzanas on April


25, 1998 was the first and only time that he was apprised of the reason
for his dismissal. He was not afforded, however, even the slightest
opportunity to explain his side. His was a termination upon receipt
situation. While he was priorly made to explain on his telephone
conversation with Miscala,[45] he was not with respect to his supposed
participation in the strike and failure to heed the return-to-work order.
As for the case of Dr. Merceditha, her dismissal was worse, it having
been effected without any just or authorized cause and without
observance of due process. In fact, petitioner never proferred any valid
cause for her dismissal except its view that her marriage to [Dr. Lanzanas]
has given rise to the presumption that her sympath[y] [is] with her
husband; [and that when [Dr. Lanzanas] declared that he was going to
boycott the scheduling of their workload by the medical doctor, he was
presumed to be speaking for himself [and] for his wife Merceditha.[46]
Petitioners contention that Dr. Merceditha was a member of the
union or was a participant in the strike remained just that. Its termination
of her employment on the basis of her conjugal relationship is not
analogous to any of the causes enumerated in Article 282 [47] of the Labor
Code. Mere suspicion or belief, no matter how strong, cannot substitute
for factual findings carefully established through orderly procedure.[48]
The Court even notes that after the proceedings at the NLRC,
petitioner never even mentioned Dr. Mercedithas case. There is thus no
gainsaying that her dismissal was both substantively and procedurally
infirm.

Adding insult to injury was the circulation by petitioner of a watchlist


or watch out list[49] including therein the names of respondents. Consider
the following portions of Dr. Mercedithas Memorandum of Appeal:
3. Moreover, to top it all, respondents have circulated
a so called Watch List to other hospitals, one of which [was]
procured from Foothills Hospital in Sto. Tomas, Batangas
[that] contains her name. The object of the said list is
precisely to harass Complainant and malign her good name
and reputation. This is not only unprofessional, but runs
smack of oppression as CMC is trying permanently deprived
[sic] Complainant of her livelihood by ensuring that she is
barred from practicing in other hospitals.
4. Other co-professionals and brothers in the
profession are fully aware of these watch out lists and as
such, her reputation was not only besmirched, but was
damaged, and she suffered social humiliation as it is of
public knowledge that she was dismissed from
work. Complainant came from a reputable and respected
family, her father being a retired full Colonel in the Army,
Col. Romeo A. Vente, and her brothers and sisters are all
professionals, her brothers, Arnold and Romeo Jr., being
engineers. The Complainant has a family protection [sic] to
protect. She likewise has a professional reputation to
protect, being a licensed physician. Both her personal and
professional reputation were damaged as a result of the
unlawful acts of the respondents.[50]

While petitioner does not deny the existence of such list, it pointed
to the lack of any board action on its part to initiate such listing and to
circulate the same, viz:
20. x x x. The alleged watchlist or watch out list, as
termed by complainants, were merely lists obtained by one

Dr. Ernesto Naval of PAMANA Hospital. Said list was given


by a stockholder of respondent who was at the same
time a stockholder of PAMAN[A] Hospital. The giving of
the list was not a Board action. [51] (Emphasis and
underscoring supplied)
The circulation of such list containing names of alleged union
members intended to prevent employment of workers for union activities
similarly constitutes unfair labor practice, thereby giving a right of action
for damages by the employees prejudiced.[52]
A word on the appellate courts deletion of the award of attorneys
fees. There being no basis advanced in deleting it, as exemplary damages
were correctly awarded,[53] the award of attorneys fees should be
reinstated.

Petitioners,

Present:

QUISUMBING, J., Chairperson,


CARPIO MORALES,
- versus -

NACHURA,*
BRION, and
PERALTA,** JJ.

SHANGRI-LAS MACTAN ISLAND Promulgated:


RESORT and DR. JESSICA J.R.
March 4, 2009
PEPITO,
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP


No. 75871 is AFFIRMED with MODIFICATION in that the award by the
National Labor Relations Commission of 10% of the total judgment award
as attorneys fees is reinstated. In all other aspects, the decision of the
appellate court is affirmed.
SO ORDERED.

JEROMIE D. ESCASINAS
EVAN RIGOR SINGCO,

and G.R. No. 178827

DECISION

CARPIO MORALES, J.:


Registered nurses Jeromie D. Escasinas and Evan Rigor Singco
(petitioners) were engaged in 1999 and 1996, respectively, by Dr. Jessica
Joyce R. Pepito (respondent doctor) to work in her clinic at respondent
Shangri-las Mactan Island Resort (Shangri-la) in Cebu of which she was a
retained physician.

In late 2002, petitioners filed with the National Labor Relations


Commission (NLRC) Regional Arbitration Branch No. VII (NLRC-RAB No. VII)
a complaint[1] for regularization, underpayment of wages, non-payment of
holiday pay, night shift differential and 13 th month pay differential against
respondents, claiming that they are regular employees of Shangri-la. The
case was docketed as RAB Case No. 07-11-2089-02.

for their salaries were recommended to Shangri-las Human Resource


Department (HRD); that respondent doctor was Shangri-las in-house
physician, hence, also an employee; and that the MOA between Shangri-la
and respondent doctor was an insidious mechanism in order to
circumvent [the doctors] tenurial security and that of the employees
under her.

Shangri-la claimed, however, that petitioners were not its


employees but of respondent doctor whom it retained via Memorandum of
Agreement (MOA)[2] pursuant to Article 157 of the Labor Code, as
amended.

Shangri-la and respondent doctor appealed to the NLRC. Petitioners


appealed too, but only with respect to the non-award to them of some of
the benefits they were claiming.

Respondent doctor for her part claimed that petitioners were


already working for the previous retained physicians of Shangri-la before
she was retained by Shangri-la; and that she maintained petitioners
services upon their request.

By Decision[3] of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared


petitioners to be regular employees of Shangri-la. The Arbiter thus
ordered Shangri-la to grant them the wages and benefits due them as
regular employees from the time their services were engaged.

In finding petitioners to be regular employees of Shangri-la, the


Arbiter noted that they usually perform work which is necessary and
desirable to Shangri-las business; that they observe clinic hours and
render services only to Shangri-las guests and employees; that payment

By Decision[4] dated March 31, 2005, the NLRC granted Shangri-las and
respondent doctors appeal and dismissed petitioners complaint for lack of
merit, it finding that no employer-employee relationship exists between
petitioner and Shangri-la. In so deciding, the NLRC held that the Arbiter
erred in interpreting Article 157 in relation to Article 280 of the Labor
Code, as what is required under Article 157 is that the employer should
provide the services of medical personnel to its employees, but nowhere
in said article is a provision that nurses are required to be employed; that
contrary to the finding of the Arbiter, even if Article 280 states that if a
worker performs work usually necessary or desirable in the business of
the employer, he cannot be automatically deemed a regular employee;
and that the MOA amply shows that respondent doctor was in fact
engaged by Shangri-la on a retainer basis, under which she could hire her
own nurses and other clinic personnel.

Brushing aside petitioners contention that since their application for


employment was addressed to Shangri-la, it was really Shangri-la which

hired them and not respondent doctor, the NLRC noted that the
applications for employment were made by persons who are not parties to
the case and were not shown to have been actually hired by Shangri-la.

On the issue of payment of wages, the NLRC held that the fact that,
for some months, payment of petitioners wages were recommended by
Shangri-las HRD did not prove that it was Shangri-la which pays their
wages. It thus credited respondent doctors explanation that the
recommendations for payment were based on the billings she prepared
for salaries of additional nurses during Shangri-las peak months of
operation, in accordance with the retainership agreement, the guests
payments for medical services having been paid directly to Shanrgi-la.

Petitioners thereupon brought the case to the Court of Appeals


which, by Decision[5] of May 22, 2007, affirmed the NLRC Decision that no
employer-employee relationship exists between Shangri-la and
petitioners. The appellate court concluded that all aspects of the
employment of petitioners being under the supervision and control of
respondent doctor and since Shangri-la is not principally engaged in the
business of providing medical or healthcare services, petitioners could not
be regarded as regular employees of Shangri-la.

Petitioners insist that under Article 157 of the Labor Code, Shangrila is required to hire a full-time registered nurse, apart from a physician,
hence, their engagement should be deemed as regular employment, the
provisions of the MOA notwithstanding; and that the MOA is contrary to
public policy as it circumvents tenurial security and, therefore, should be
struck down as being void ab initio. At most, they argue, the MOA is a
mere job contract.

And petitioners maintain that respondent doctor is a labor-only


contractor for she has no license or business permit and no business
name registration, which is contrary to the requirements under Sec. 19
and 20 of the Implementing Rules and Regulations of the Labor Code on
sub-contracting.

Petitioners add that respondent doctor cannot be a legitimate


independent contractor, lacking as she does in substantial capital, the
clinic having been set-up and already operational when she took over as
retained physician; that respondent doctor has no control over how the
clinic is being run, as shown by the different orders issued by officers of
Shangri-la forbidding her from receiving cash payments and several
purchase orders for medicines and supplies which were coursed thru
Shangri-las Purchasing Manager, circumstances indubitably showing that
she is not an independent contractor but a mere agent of Shangri-la.

Petitioners motion for reconsideration having been denied by


Resolution[6] of July 10, 2007, they interposed the present recourse.
In its Comment,[7] Shangri-la questions the Special Powers of
Attorneys (SPAs) appended to the petition for being inadequate. On the
merits, it prays for the disallowance of the petition, contending that it

employees exceeds fifty (50) but not

raises factual issues, such as the validity of the MOA, which were never
raised during the proceedings before the Arbiter, albeit passed upon by
him in his Decision; that Article 157 of the Labor Code does not make it
mandatory for a covered establishment to employ health personnel; that
the services of nurses is not germane nor indispensable to its operations;
and that respondent doctor is a legitimate individual independent
contractor who has the power to hire, fire and supervise the work of the
nurses under her.

more than two hundred (200) except


when the employer does not maintain
hazardous workplaces, in which case the
services of a graduate first-aider shall be
provided for the protection of the workers,
where no registered nurse is available. The

The resolution of the case hinges, in the main, on the correct


interpretation of Art. 157 vis a vis Art. 280 and the provisions on
permissible job contracting of the Labor Code, as amended.

Secretary

of

Labor

shall

provide

by

appropriate regulations the services that


shall be required where the number of

The Court holds that, contrary to petitioners postulation, Art. 157


does not require the engagement of full-time nurses as regular
employees of a company employing not less than 50
workers. Thus, the Article provides:

employees does not exceed fifty (50) and


shall

determine

by

appropriate

order

hazardous workplaces for purposes of this


Article;

ART. 157. Emergency medical and dental services. It


shall be the duty of every employer to furnish his
employees in any locality with free medical and dental
attendance and facilities consisting of:

(a)

The services

of

full-time

registered nurse when the number of

(b)

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

(c)

The services of a full-time physician,


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

In cases of hazardous workplaces, no employer shall


engage the services of a physician or dentist who cannot stay
in the premises of the establishment for at least two (2) hours,
in the case of those engaged on part-time basis, and not less
than eight (8) hours in the case of those employed on fulltime basis. Where the undertaking is nonhazardous in
nature, the physician and dentist may be engaged on
retained basis, subject to such regulations as the
Secretary of Labor may prescribe to insure immediate
availability of medical and dental treatment and
attendance in case of emergency. (Emphasis and
underscoring supplied)

Under the foregoing provision, Shangri-la, which employs more than


200 workers, is mandated to furnish its employees with the services of
a full-time registered nurse, a part-time physician and dentist, and an
emergency clinic which means that it should provide or make
available such medical and allied services to its employees, not
necessarily to hire or employ a service provider. As held
in Philippine Global Communications vs. De Vera:[8]

x x x while it is true that the provision


requires employers to engage the services
of
medical
practitioners
in
certain
establishments depending on the number of
their employees, nothing is there in the law
which says that medical practitioners so
engaged be actually hired as employees,
adding that the law, as written, only requires the
employerto retain, not employ, a part-time
physician who needed to stay in the premises of
the non-hazardous workplace for two (2) hours.
(Emphasis and underscoring supplied)

The term full-time in Art. 157 cannot be construed as referring to


the type of employment of the person engaged to provide the services,
for Article 157 must not be read alongside Art. 280[9] in order to vest
employer-employee relationship on the employer and the person so
engaged. So De Vera teaches:

x x x For, we take it that any agreement


may provide that one party shall render services
for and in behalf of another, no matter how
necessary for the latters business, even without
being hired as an employee. This set-up is
precisely true in the case of an independent
contractorship as well as in an agency
agreement. Indeed, Article 280 of the Labor
Code, quoted by the appellate court, is not
the yardstick for determining the existence

of an employment relationship. As it is, the


provision merely distinguishes between two
(2) kinds of employees, i.e., regular and
casual. x x x[10] (Emphasis and underscoring
supplied)

The phrase services of a full-time registered nurse should thus be taken to


refer to the kind of services that the nurse will render in the companys
premises and to its employees, not the manner of his engagement.

As to whether respondent doctor can be considered a legitimate


independent contractor, the pertinent sections of DOLE Department Order
No. 10, series of 1997, illuminate:

Sec. 8. Job contracting. There is job contracting


permissible under the Code if the following conditions are
met:

(1) The contractor carries on an independent business


and undertakes the contract work on his own account under
his own responsibility according to his own manner and
method, free from the control and direction of his employer or
principal in all matters connected with the performance of the
work except as to the results thereof; and

(2) The contractor has substantial capital or investment


in the form of tools, equipment, machineries, work premises,
and other materials which are necessary in the conduct of his
business.

Sec. 9. Labor-only contracting. (a) Any person who


undertakes to supply workers to an employer shall be deemed
to be engaged in labor-only contracting where such person:

(1) Does
not
have
substantial
capital
or
investment in the form of tools, equipment,
machineries, work premises and other materials; and

(2) The workers recruited and placed by such


persons are performing activities which are directly
related to the principal business or operations of the
employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby


prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by
him.

(c) For cases not falling under this Article, the Secretary
of Labor shall determine through appropriate orders whether
or not the contracting out of labor is permissible in the light of
the circumstances of each case and after considering the
operating needs of the employer and the rights of the workers
involved. In such case, he may prescribe conditions and
restrictions to insure the protection and welfare of the
workers. (Emphasis supplied)

The existence of an independent and permissible contractor


relationship is generally established by considering the following
determinants: whether the contractor is carrying on an independent
business; the nature and extent of the work; the skill required; the term
and duration of the relationship; the right to assign the performance of a
specified piece of work; the control and supervision of the work to
another; the employer's power with respect to the hiring, firing and
payment of the contractor's workers; the control of the premises; the duty
to supply the premises, tools, appliances, materials and labor; and the
mode, manner and terms of payment.[11]

On
the
other
hand,
existence
of an
employer- employee relationship is established by the presence of the
following determinants: (1) the selection and engagement of theworkers;
(2) power of dismissal; (3) the payment of wages by whatever means; and
(4) the power to control the worker's conduct, with the latter assuming
primacy in the overall consideration.[12]

Against the above-listed determinants, the Court holds that


respondent doctor is a legitimate independent contractor. That Shangri-la
provides the clinic premises and medical supplies for use of its employees
and guests does not necessarily prove that respondent doctor lacks
substantial capital and investment. Besides, the maintenance of a clinic
and provision of medical services to its employees is required under Art.
157, which are not directly related to Shangri-las principal
business operation of hotels and restaurants.

As to payment of wages, respondent doctor is the one who


underwrites the following: salaries, SSS contributions and other benefits
of the staff[13]; group life, group personal accident insurance and life/death
insurance[14] for the staff with minimum benefit payable at 12 times the
employees last drawn salary, as well as value added taxes and
withholding taxes, sourced from her P60,000.00 monthly retainer fee and
70% share of the service charges from Shangri-las guests who avail of
the clinic services. It is unlikely that respondent doctor would report
petitioners as workers, pay their SSS premium as well as their wages if
they were not indeed her employees.[15]

With respect to the supervision and control of the nurses and clinic
staff, it is not disputed that a document, Clinic Policies and Employee
Manual[16] claimed to have been prepared by respondent doctor exists, to
which petitioners gave their conformity[17] and in which they
acknowledged their co-terminus employment status. It is thus presumed
that said document, and not the employee manual being followed by
Shangri-las regular workers, governs how they perform their respective
tasks and responsibilities.

Contrary to petitioners contention, the various office directives


issued by Shangri-las officers do not imply that it is Shangri-las
management and not respondent doctor who exercises control over them
or that Shangri-la has control over how the doctor and the nurses perform
their work. The letter[18] addressed to respondent doctor dated February 7,
2003 from a certain Tata L. Reyes giving instructions regarding the
replenishment of emergency kits is, at most, administrative in nature,
related as it is to safety matters; while the letter [19] dated May 17, 2004
from Shangri-las Assistant Financial Controller, Lotlot Dagat, forbidding
the clinic from receiving cash payments from the resorts guests is a
matter of financial policy in order to ensure proper sharing of the
proceeds, considering that Shangri-la and respondent doctor share in the
guests payments for medical services rendered.In fine, as Shangri-la does
not control how the work should be performed by petitioners, it is not
petitioners employer.
WHEREFORE, the petition is hereby DENIED. The Decision of the
Court of Appeals dated May 22, 2007 and the Resolution dated July 10,
2007 are AFFIRMED.
SO ORDERED.

GREGORIO V. TONGKO,
Petitioner,

G.R. No. 167622


Present:

CORONA, C.J.,

RESOLUTION

BRION, J.:

CARPIO,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
- versus -

LEONARDO-DE CASTRO,
BRION,
PERALTA,

We resolve petitioner Gregorio V. Tongkos bid, through his Motion for


Reconsideration,[1] to set aside our June 29, 2010 Resolution that
reversed our Decision of November 7, 2008.[2] With the reversal, the
assailed June 29, 2010 Resolution effectively affirmed the Court of
Appeals ruling[3] in CA-G.R. SP No. 88253 that the petitioner was an
insurance agent, not the employee, of the respondent The Manufacturers
Life Insurance Co. (Phils.), Inc. (Manulife).

BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
THE MANUFACTURERS LIFE
INSURANCE CO. (PHILS.), INC.
and RENATO A. VERGEL DE
DIOS,

MENDOZA, and
SERENO, JJ.
Promulgated:

In his Motion for Reconsideration, petitioner reiterates the


arguments he had belabored in his petition and various other
submissions. He argues that for 19 years, he performed administrative
functions and exercised supervisory authority over employees and agents
of Manulife, in addition to his insurance agent functions. [4] In these 19
years, he was designated as a Unit Manager, a Branch Manager and a
Regional Sales Manager, and now posits that he was not only an
insurance agent for Manulife but was its employee as well.

Respondents.
January 25, 2011
x-----------------------------------------------------------------------------------------x

We find no basis or any error to merit the reconsideration of


our June 29, 2010 Resolution.

A.

Labor Law Control = Employment Relationship

Control over the performance of the task of one providing service


both with respect to the means and manner, and the results of the service
is the primary element in determining whether an employment
relationship exists. We resolve the petitioners Motion against his favor
since he failed to show that the control Manulife exercised over him was
the control required to exist in an employer-employee relationship;
Manulifes control fell short of this norm and carried only the characteristic
of the relationship between an insurance company and its agents, as
defined by the Insurance Code and by the law of agency under the Civil
Code.

The petitioner asserts in his Motion that Manulifes labor law control
over him was demonstrated (1) when it set the objectives and sales
targets regarding production, recruitment and training programs; and (2)
when it prescribed the Code of Conduct for Agents and the Manulife
Financial Code of Conduct to govern his activities.[5] We find no merit in
these contentions.

In our June 29, 2010 Resolution, we noted that there are built-in
elements of control specific to an insurance agency, which do not amount
to the elements of control that characterize an employment relationship
governed by the Labor Code. The Insurance Code provides definite
parameters in the way an agent negotiates for the sale of the companys

insurance products, his collection activities and his delivery of the


insurance contract or policy.[6] In addition, the Civil Code defines an agent
as a person who binds himself to do something in behalf of another, with
the consent or authority of the latter. [7] Article 1887 of the Civil Code also
provides that in the execution of the agency, the agent shall act in
accordance with the instructions of the principal.

All these, read without any clear understanding of fine legal


distinctions, appear to speak of control by the insurance company over its
agents. They are, however, controls aimed only at specific results in
undertaking an insurance agency, and are, in fact, parameters set by law
in defining an insurance agency and the attendant duties and
responsibilities an insurance agent must observe and undertake. They do
not reach the level of control into the means and manner of doing an
assigned task that invariably characterizes an employment relationship as
defined by labor law. From this perspective, the petitioners contentions
cannot prevail.

To reiterate, guidelines indicative of labor law control do not merely


relate to the mutually desirable result intended by the contractual
relationship; they must have the nature of dictating the means and
methods to be employed in attaining the result. [8] Tested by this norm,
Manulifes instructions regarding the objectives and sales targets, in
connection with the training and engagement of other agents, are among
the directives that the principal may impose on the agent to achieve the
assigned tasks. They are targeted results that Manulife wishes to attain
through its agents. Manulifes codes of conduct, likewise, do not
necessarily intrude into the insurance agents means and manner of

conducting their sales. Codes of conduct are norms or standards of


behavior rather than employer directives into how specific tasks are to be
done. These codes, as well as insurance industry rules and regulations,
are not per se indicative of labor law control under our jurisprudence.[9]

The duties[10] that the petitioner enumerated in his Motion are not
supported by evidence and, therefore, deserve scant consideration. Even
assuming their existence, however, they mostly pertain to the duties of an
insurance agent such as remitting insurance fees to Manulife, delivering
policies to the insured, and after-sale services. For agents leading other
agents, these include the task of overseeing other insurance agents, the
recruitment of other insurance agents engaged by Manulife as principal,
and ensuring that these other agents comply with the paperwork
necessary in selling insurance. That Manulife exercises the power to
assign and remove agents under the petitioners supervision is in keeping
with its role as a principal in an agency relationship; they are Manulife
agents in the same manner that the petitioner had all along been a
Manulife agent.

The petitioner also questions Manulifes act of investing him with


different titles and positions in the course of their relationship, given the
respondents position that he simply functioned as an insurance agent.
[11]
He also considers it an unjust and inequitable situation that he would
be unrewarded for the years he spent as a unit manager, a branch
manager, and a regional sales manager.[12]

Based on the evidence on record, the petitioners occupation was to


sell Manulifes insurance policies and products from 1977 until the
termination of the Career Agents Agreement (Agreement). The evidence
also shows that through the years, Manulife permitted him to exercise
guiding authority over other agents who operate under their own agency
agreements with Manulife and whose commissions he shared. [13] Under
this
scheme an
arrangement
that
pervades
the
insurance
industry petitioner in effect became a lead agent and his own
commissions increased as they included his share in the commissions of
the other agents;[14] he also received greater reimbursements for
expenses and was allowed to use Manulifes facilities. His designation also
changed from unit manager to branch manager and then to regional sales
manager, to reflect the increase in the number of agents he recruited and
guided, as well as the increase in the area where these agents operated.

As our assailed Resolution concluded and as we now similarly


conclude, these arrangements, and the titles and positions the petitioner
was invested with, did not change his status from the insurance agent
that he had always been (as evidenced by the Agreement that governed
his relationship with Manulife from the start to its disagreeable end). The
petitioner simply progressed from his individual agency to being a lead
agent who could use other agents in selling insurance and share in the
earnings of these other agents.

In sum, we find absolutely no evidence of labor law control, as


extensively discussed in our Resolution of June 29, 2010, granting
Manulifes motion for reconsideration. The Dissent, unfortunately, misses
this point.

B.

No Resulting Inequity

We also do not agree that our assailed Resolution has the effect of
fostering an inequitable or unjust situation. The records show that the
petitioner was very amply paid for his services as an insurance agent,
who also shared in the commissions of the other agents under his
guidance. In 1997, his income was P2,822,620; in 1998, P4,805,166.34; in
1999, P6,797,814.05;
in
2001, P6,214,737.11;
and
in
2002, P8,003,180.38. All these he earned as an insurance agent, as he
failed to ever prove that he earned these sums as an employee. In
technical terms, he could not have earned all these as an employee
because he failed to provide the substantial evidence required in
administrative cases to support the finding that he was a Manulife
employee. No inequity results under this legal situation; what would be
unjust is an award of backwages and separation pay amounts that are not
due him because he was never an employee.

The Dissents discussion on this aspect of the case begins with the
wide disparity in the status of the parties that Manulife is a big Canadian
insurance company while Tongko is but a single agent of Manulife. The
Dissent then went on to say that [i]f is but just, it is but right, that the
Court interprets the relationship between Tongko and Manulife as one of
employment under labor laws and to uphold his constitutionally protected
right, as an employee, to security of tenure and entitlement to monetary
award should such right be infringed.[15] We cannot simply invoke the
magical formula by creating an employment relationship even when there

is none because of the unavoidable and inherently weak position of an


individual over a giant corporation.

The Dissent likewise alluded to an ambiguity in the true relationship


of the parties after Tongkos successive appointments. We already pointed
out that the legal significance of these appointments had not been
sufficiently explained and that it did not help that Tongko never bothered
to present evidence on this point. The Dissent recognized this but tried to
excuse Tongko from this failure in the subsequent discussion, as follows:

[o]ther evidence was adduced to show such duties and


responsibilities. For one, in his letter of November 6, 2001,
respondent De Dios addressed petitioner as sales
manager. And as I wrote in my Dissent to the June 29,
2010 Resolution, it is difficult to imagine that Manulife did not
issue promotional appointments to petitioner as unit
manager, branch manager, and, eventually, regional sales
manager. Sound management practice simply requires an
appointment for any upward personnel movement,
particularly when additional functions and the corresponding
increase in compensation are involved. Then, too, the
adverted affidavits of the managers of Manulife as to the
duties and responsibilities of a unit manager, such as
petitioner, point to the conclusion that these managers were
employees of Manulife, applying the four-fold test.[16]

This Court (and all adjudicators for that matter) cannot and should
not fill in the evidentiary gaps in a partys case that the party failed to

support; we cannot and should not take the cudgels for any
party. Tongko failed to support his cause and we should simply view him
and his case as they are; our duty is to sit as a judge in the case that he
and the respondent presented.

To support its arguments on equity, the Dissent uses the


Constitution and the Civil Code, using provisions and principles that are all
motherhood statements. The mandate of the Court, of course, is to
decide cases based on the facts and the law, and not to base its
conclusions on fundamental precepts that are far removed from the
particular case presented before it. When there is no room for their
application, of capacity of principles, reliance on the application of these
fundamental principles is misplaced.

C. Earnings were Commissions

That his earnings were agents commissions arising from his work
as an insurance agent is a matter that the petitioner cannot deny, as
these are the declarations and representations he stated in his income
tax returns through the years. It would be doubly unjust, particularly to
the government, if he would be allowed at this late point to turn around
and successfully claim that he was merely an employee after he declared
himself, through the years, as an independent self-employed insurance
agent with the privilege of deducting business expenses. This aspect of
the case alone considered together with the probative value of income tax
declarations and returns filed prior to the present controversy should be
enough to clinch the present case against the petitioners favor.

D. The Dissents Solution:


Unwieldy and Legally Infirm

The Dissent proposes that Tongko should be considered as part


employee (as manager) and part insurance agent; hence, the original
decision should be modified to pertain only to the termination of his
employment as a manager and not as an insurance agent. Accordingly,
the backwages component of the original award to him should not include
the insurance sales commissions. This solution, according to the line
taken by the Dissent then, was justified on the view that this was made on
a case-to-case basis.

Decisions of the Supreme Court, as the Civil Code provides, form


part of the law of the land. When the Court states that the determination
of the existence of an employment relationship should be on a case-tocase basis, this does not mean that there will be as many laws on the
issue as there are cases. In the context of this case, the four-fold test is
the established standard for determining employer-employee relationship
and the existence of these elements, most notably control, is the basis
upon which a conclusion on the absence of employment relationship was
anchored. This simply means that a conclusion on whether employment
relationship exists in a particular case largely depends on the facts and, in
no small measure, on the parties evidence vis--vis the clearly defined
jurisprudential standards. Given that the parties control what and how the
facts will be established in a particular case and/or how a particular suit is

to be litigated, deciding the issues on a case-to-case basis becomes an


imperative.

Another legal reality, a more important one, is that the duty of a


court is to say what the law is. [17] This is the same duty of the Supreme
Court that underlies the stare decisis principle. This is how the public, in
general and the insurance industry in particular, views the role of this
Court and courts in general in deciding cases. The lower courts and the
bar, most specially, look up to the rulings of this Court for
guidance. Unless extremely unavoidable, the Court must, as a matter of
sound judicial policy, resist the temptation of branding its ruling pro hac
vice.

The compromise solution of declaring Tongko both an employee and


an agent is legally unrealistic, unwieldy and is, in fact, legally infirm, as it
goes against the above basic principles of judicial operation. Likewise, it
does not and cannot realistically solve the problem/issue in this case; it
actually leaves more questions than answers.

As already pointed out, there is no legal basis (be it statutory or


jurisprudential) for the part-employee/part-insurance agent status under
an essentially principal-agent contractual relation which the Dissent
proposes to accord to Tongko. If the Dissent intends to establish one, this
is highly objectionable for this would amount to judicial legislation. A legal
relationship, be it one of employment or one based on a contract other
than employment, exists as a matter of law pursuant to the facts,
incidents and legal consequences of the relationship; it cannot exist

devoid of these legally defined underlying facts and legal consequences


unless the law itself creates the relationship an act that is beyond the
authority of this Court to do.

Additionally, the Dissents conclusion completely ignores an


unavoidable legal reality that the parties are bound by a contract of
agency that clearly subsists notwithstanding the successive designation
of Tongko as a unit manager, a branch manager and a regional sales
manager. (As already explained in our Resolution granting Manulifes
motion for reconsideration, no evidence on record exists to provide the
Court with clues as to the precise impact of all these designations on the
contractual agency relationship.) The Dissent, it must be pointed out,
concludes that Tongkos employment as manager was illegally terminated;
thus, he should be accordingly afforded relief therefor. But, can Tongko be
given the remedies incidental to his dismissal as manager separately from
his status as an insurance agent? In other words, since the respondents
terminated all relationships with Tongko through the termination letter,
can we simply rule that his role as a manager was illegally terminated
without touching on the consequences of this ruling on his status as an
insurance agent? Expressed in these terms, the inseparability of his
contract as agent with any other relationship that springs therefrom can
thus be seen as an insurmountable legal obstacle.

The Dissents compromise approach would also sanction split


jurisdiction. The labor tribunals shall have jurisdiction over Tongkos
employment as manager while another entity shall decide the
issues/cases arising from the agency relationship. If the managerial
employment is anchored on the agency, how will the labor tribunals

decide an issue that is inextricably linked with a relationship that is


outside the loop of their jurisdiction? As already mentioned in the
Resolution
granting
Manulifes
reconsideration,
the DOMINANTrelationship in this case is agency and no other.

In Great Pacific Life, the Ruiz brothers were appointed to positions


different from their original positions as insurance agents, whose duties
were clearly defined in a subsequent contract. Similarly, in Insular, de los
Reyes, a former insurance agent, was appointed as acting unit manager
based on a subsequent contract. In both cases, the Court anchored its
findings of labor control on the stipulations of these subsequent contracts.

E. The Dissents Cited Cases

The Dissent cites the cases of Great Pacific Life Assurance


Corporation v. National Labor Relations Commission [18] and Insular Life
Assurance Co., Ltd. v. National Labor Relations Commission [19] to support
the allegation that Manulife exercised control over the petitioner as an
employer.

In considering these rulings, a reality that cannot but be recognized


is that cases turn and are decided on the basis of their own unique facts;
the ruling in one case cannot simply be bodily lifted and applied to
another, particularly when notable differences exist between the cited
cases and the case under consideration; their respective facts must be
strictly examined to ensure that the ruling in one applies to another. This
is particularly true in a comparison of the cited cases with the present
case. Specifically, care should be taken in reading the cited cases and
applying their rulings to the present case as the cited cases all dealt with
the
proper
legal
characterization
of subsequent
management
contractsthat superseded the original agency contract between the
insurance company and the agent.

In contrast, the present case is remarkable for the absence of


evidence of any change in the nature of the petitioners employment with
Manulife. As previously stated above and in our assailed Resolution, the
petitioner had always been governed by the Agreement from the start
until the end of his relationship with Manulife. His agency status never
changed except to the extent of being a lead agent. Thus, the cited cases
where changes in company-agent relationship expressly changed and
where the subsequent contracts were the ones passed upon by the Court
cannot be totally relied upon as authoritative.

We cannot give credit as well to the petitioners claim of


employment based on the affidavits executed by other Manulife agents
describing their duties, because these same affidavits only affirm their
status as independent agents, not as employees. To quote these various
claims:[20]

1.a. I have no fixed wages or salary since my services are


compensated by way of commissions based on the computed
premiums paid in full on the policies obtained thereat;

1.b. I have no fixed working hours and employ my own


method in soliciting insurance at a time and place I see fit;

1.c. I have my own assistant and messenger who handle my


daily work load;

1.d. I use my own facilities, tools, materials and supplies in


carrying out my business of selling insurance;

xxxx

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


my office;

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


me;

xxxx

9. My commission and incentives are all reported to the


Bureau of Internal Revenue (BIR) as income by a selfemployed individual or professional with a ten (10) percent
creditable withholding tax. I also remit monthly for
professionals.

The petitioner cannot also rely on the letter written by respondent


Renato Vergel de Dios to prove that Manulife exercised control over
him. As we already explained in the assailed Resolution:

Even de Dios letter is not determinative of control as it


indicates the least amount of intrusion into Tongkos exercise
of his role as manager in guiding the sales agents. Strictly
viewed, de Dios directives are merely operational guidelines
on how Tongko could align his operations with Manulifes redirected goal of being a big league player. The method is to
expand coverage through the use of more agents. This
requirement for the recruitment of more agents is not a
means-and-method control as it relates, more than anything
else, and is directly relevant, to Manulifes objective of
expanded business operations through the use of a bigger
sales force whose members are all on a principal-agent
relationship. An important point to note here is that Tongko
was not supervising regular full-time employees of Manulife
engaged in the running of the insurance business; Tongko was
effectively guiding his corps of sales agents, who are bound to
Manulife through the same agreement that he had with
manulife, all the while sharing in these agents commissions
through his overrides.[21]

Lastly, in assailing the Agreement between him and Manulife, the


petitioner cites Paguio v. National Labor Relations Commission [22] on the
claim that the agreement that the parties signed did not conclusively
indicate the legal relationship between them.

The evidentiary situation in the present case, however, shows that


despite the petitioners insistence that the Agreement was no longer
binding between him and Manulife, no evidence was ever adduced to
show that their relationship changed so that Manulife at some point
controlled the means and method of the petitioners work. In fact, his
evidence only further supports the conclusion that he remained an
independent insurance agent a status he admits, subject only to the
qualification that he is at the same time an employee.Thus, we can only
conclude that the Agreement governed his relations with Manulife.

Additionally, it is not lost on us that Paguio is a ruling based on a


different factual setting; it involves a publishing firm and an account
executive, whose repeated engagement was considered as an indication
of employment. Our ruling in the present case is specific to the insurance
industry, where the law permits an insurance company to exercise control
over its agents within the limits prescribed by law, and to engage
independent agents for several transactions and within an unlimited
period of time without the relationship amounting to employment. In light
of these realities, the petitioners arguments on his last argument must
also fail.

The dissent also erroneously cites eight other cases Social Security
System v. Court of Appeals,[23] Cosmopolitan Funeral Homes, Inc. v.
Maalat,[24] Algon Engineering Construction Corporation v. National Labor
Relations Commission,[25] Equitable Banking Corporation v. National Labor
Relations Commission,[26] Lazaro v. Social Security Commission,[27] Dealco
Farms, Inc. v. National Labor Relations Commission,[28] South Davao
Development Company, Inc. v. Gamo,[29] and Abante, Jr. v. Lamadrid

Bearing & Parts Corporation.[30] The dissent cited these cases to support
its allegation that labor laws and jurisprudence should be applied in cases,
to the exclusion of other laws such as the Civil Code or the Insurance
Code, even when the latter are also applicable.

In Social Security System, Cosmopolitan Funeral Homes, Dealco


Farms, and South Davao Development, the issue that repeats itself is
whether complainants were employees or independent contractors; the
legal relationships involved are both labor law concepts and make no
reference to the Civil Code (or even the Insurance Code). The provisions
cited in the Dissent Articles 1458-1637 of the Civil Code [31] and Articles
1713-1720 of the Civil Code [32] do not even appear in the decisions cited.

In Algon, the issue was whether the lease contract should dictate
the legal relationship between the parties, when there was proof of an
employer-employee relationship. In the cited case, the lease provisions on
termination were thus considered irrelevant because of a substantial
evidence of an employment relationship. The cited case lacks the
complexity of the present case; Civil Code provisions on lease do not
prescribe that lessees exercise control over their lessors in the way that
the Insurance Code and the Civil provide that insurance companies and
principals exercised control over their agents.

The issue in Equitable, on the other hand, is whether a lawyer-client


relationship or an employment relationship governs the legal relation
between parties. Again, this case is inapplicable as it does not illustrate
the predominance of labor laws and jurisprudence over other laws, in

general, and the Insurance Code and Civil Code, in particular. It merely
weighed the evidence in favor of an employment relationship over that of
a lawyer-client relationship. Similarly in Lazaro, the Court found ample
proof of control determinative of an employer-employee relationship. Both
cases are not applicable to the present case, which is attended by totally
different factual considerations as the petitioner had not offered any
evidence of the companys control in the means and manner of the
performance of his work.

On the other hand, we find it strange that the dissent


cites Abante as a precedent, since the Court, in this case, held that an
employee-employer relationship is notably absent in this case as the
complainant was a sales agent. This case better supports the majoritys
position that a sales agent, who fails to show control in the concept of
labor law, cannot be considered an employee, even if the company
exercised control in the concept of a sales agent.[33]

It bears stressing that our ruling in this case is not about which law
has primacy over the other, but that we should be able to reconcile these
laws. We are merely saying that where the law makes it mandatory for a
company to exercise control over its agents, the complainant in an illegal
dismissal case cannot rely on these legally prescribed control devices as
indicators of an employer-employee relationship. As shown in our
discussion, our consideration of the Insurance Code and Civil Code
provisions does not negate the application of labor laws and
jurisprudence; ultimately, we dismissed the petition because of its failure
to comply with the control test.

WHEREFORE, premises considered, we hereby DENY the Motion


for Reconsideration WITH FINALITY for lack of merit. No further
pleadings shall be entertained. Let entry of judgment proceed in due
course.

SO ORDERED.

Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

- versus -

Promulgated:
AVELINO REGUALOS,
Respondent.

January 26, 2011

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

Is the policy of suspending drivers pending payment of arrears in


their boundary obligations reasonable? The Court of Appeals (CA)
answered the question in the affirmative in its Decision [1] dated December
14, 2006 and Resolution dated July 16, 2007. In this petition for review
on certiorari, we take a second look at the issue and determine whether
the situation at bar merits the relaxation of the application of the said
policy.

PRIMO E. CAONG, JR., ALEXANDER


J. TRESQUIO, and LORIANO D.
DALUYON,
Petitioners,

G.R. No. 179428


Present:
CARPIO, J.,

Petitioners Primo E. Caong, Jr. (Caong), Alexander J. Tresquio (Tresquio),


and Loriano D. Daluyon (Daluyon) were employed by respondent Avelino
Regualos under a boundary agreement, as drivers of his jeepneys. In
November 2001, they filed separate complaints [2] for illegal dismissal
against respondent who barred them from driving the vehicles due to
deficiencies in their boundary payments.

Caong was hired by respondent in September 1998 and became a


permanent driver sometime in 2000. In July 2001, he was assigned a
brand- new jeepney for a boundary fee of P550.00 per day. He was
suspended on October 9-15, 2001 for failure to remit the full amount of
the boundary. Consequently, he filed a complaint for illegal suspension.
Upon expiration of the suspension period, he was readmitted by
respondent, but he was reassigned to an older jeepney for a boundary fee
of P500.00 per day. He claimed that, on November 9, 2001, due to the
scarcity of passengers, he was only able to remit P400.00 to respondent.
On November 11, 2001, he returned to work after his rest day, but
respondent barred him from driving because of the deficiency in the
boundary payment. He pleaded with respondent but to no avail.[3]
Tresquio was employed by respondent as driver in August 1996. He
became a permanent driver in 1997. In 1998, he was assigned to drive a
new jeepney for a boundary fee of P500.00 per day. On November 6,
2001, due to the scarcity of passengers, he was only able to
remit P450.00. When he returned to work on November 8, 2001 after his
rest day, he was barred by respondent because of the deficiency
of P50.00. He pleaded with respondent but the latter was adamant.[4]
On the other hand, Daluyon started working for respondent in March
1998. He became a permanent driver in July 1998. He was assigned to a
relatively new jeepney for a boundary fee of P500.00 per day. On
November 7, 2001, due to the scarcity of passengers, he was only able to
pay P470.00 to respondent. The following day, respondent barred him
from driving his jeepney. He pleaded but to no avail.[5]

During the mandatory conference, respondent manifested that


petitioners were not dismissed and that they could drive
his jeepneys once they paid their arrears. Petitioners, however, refused to
do so.
Petitioners averred that they were illegally dismissed by respondent
without just cause. They maintained that respondent did not comply with
due process requirements before terminating their employment, as they
were not furnished notice apprising them of their infractions and another
informing them of their dismissal. Petitioners claimed that respondents
offer during the mandatory conference to reinstate them was an insincere
afterthought as shown by the warning given by respondent that, if they
fail to remit the full amount of the boundary yet again, they will be barred
from driving the jeepneys. Petitioners questioned respondents policy of
automatically dismissing the drivers who fail to remit the full amount of
the boundary as it allegedly (a) violates their right to due process; (b)
does not constitute a just cause for dismissal; (c) disregards the reality
that there are days when they could not raise the full amount of the
boundary because of the scarcity of passengers.
In his Position Paper, respondent alleged that petitioners were
lessees of his vehicles and not his employees; hence, the Labor Arbiter
had no jurisdiction. He claimed that he noticed that some of his lessees,
including petitioners, were not fully paying the daily rental of
his jeepneys. In a list which he attached to the Position Paper, it was
shown that petitioners had actually incurred arrears since they started
working. The list showed that Caongs total arrears amounted
to P10,315.00, that of Tresquio was P10,760.00, while that of Daluyon
was P6,890.00. He made inquiries and discovered that his lessees
contracted loans with third parties and used the income of the jeepneys in

paying the loans. Thus, on November 4, 2001, he gathered all the lessees
in a meeting and informed them that, effective November 5, 2001, those
who would fail to fully pay the daily rental would not be allowed to rent
a jeepney on the following day. He explained to them that
the jeepneys were acquired on installment basis, and that he was paying
the monthly amortizations through the lease income. Most of the lessees
allegedly accepted the condition and paid their arrears. Petitioners,
however, did not settle their arrears. Worse, their remittances were again
short of the required boundary fee. Petitioner Daluyons rent payment was
short of P20.00 on November 5, 2001 and P80.00 on November 7, 2001.
On November 6, 2001, it was Tresquio who incurred an arrear of P100.00.
On November 7 and 9, 2001, petitioner Caong was in arrear of P50.00
and P100.00, respectively. Respondent stressed that, during the
mandatory conference, he manifested that he would renew his lease with
petitioners if they would pay the arrears they incurred during the said
dates.[6]

Other claims of complainants are dismissed for lack of merit.


SO ORDERED.[7]
According to the Labor Arbiter, an employer-employee relationship existed
between respondent and petitioners. The latter were not dismissed
considering that they could go back to work once they have paid their
arrears. The Labor Arbiter opined that, as a disciplinary measure, it is
proper to impose a reasonable sanction on drivers who cannot pay their
boundary payments. He emphasized that respondent acquired the
jeepneys on loan or installment basis and relied on the boundary
payments to comply with his monthly amortizations.[8]

On March 31, 2003, the Labor Arbiter decided the case in favor of
respondent, thus:

In its Decision[11] dated December 14, 2006, the CA found no grave abuse
of discretion on the part of the NLRC. According to the CA, the employeremployee relationship of the parties has not been severed, but merely
suspended when respondent refused to allow petitioners to drive
the jeepneys while there were unpaid boundary obligations. The CA
pointed out that the fact that it was within the power of petitioners to
return to work is proof that there was no termination of employment. The
condition that petitioners should first pay their arrears only for the period
of November 5-9, 2001 before they can be readmitted to work is neither
impossible nor unreasonable if their total unpaid boundary obligations and
the need to sustain the financial viability of the employers
enterprisewhich would ultimately redound to the benefit of the
employeesare taken into consideration.[12]

WHEREFORE, judgment is hereby rendered, DISMISSING the


above-entitled cases for lack of merit. However, respondent
Regualos is directed to accept back complainants Caong,
Tresquio and Daluyon, as regular drivers of his passenger
jeepneys, after complainants have paid their respective
arrearages they have incurred in the remittance of their
respective
boundary
payments,
in
the
amount
ofP150.00, P100.00 and P100.00. Complainants, if still
interested to work as drivers, are hereby ordered to report to
respondent Regualos within fifteen (15) days from the finality
of this decision. Otherwise, failure to do so means forfeiture of
their respective employments.

Petitioners appealed the decision to the National Labor Relations


Commission (NLRC). In its resolution[9] dated March 31, 2004, the NLRC
agreed with the Labor Arbiter and dismissed the appeal. It also denied
petitioners motion for reconsideration.[10]
Forthwith, petitioners filed a petition for certiorari with the CA.

The CA went on to rule that petitioners were not denied their right to due
process. It pointed out that the case does not involve a termination of
employment; hence, the strict application of the twin-notice rule is not
warranted. According to the CA, what is important is that petitioners were
given the opportunity to be heard. The meeting conducted by respondent
on November 4, 2001 served as sufficient notice to petitioners. During the
said meeting, respondent informed his employees, including petitioners,
to strictly comply with the policy regarding remittances and warned them
that they would not be allowed to take out the jeepneys if they did not
remit the full amount of the boundary.[13]
Dissatisfied, petitioners filed a motion for reconsideration, but the CA
denied the motion in its Resolution dated July 16, 2007.[14]
Petitioners are now before this Court resolutely arguing that they
were illegally dismissed by respondent, and that such dismissal was made
in violation of the due process requirements of the law.
The petition is without merit.
In an action for certiorari, petitioner must prove not merely
reversible error, but grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of respondent. Mere abuse of discretion is not
enough. It must be shown that public respondent exercised its power in an
arbitrary or despotic manner by reason of passion or personal hostility,
and this must be so patent and so gross as to amount to an evasion of a
positive duty or to a virtual refusal to perform the duty enjoined or to act
at all in contemplation of law.[15]

As correctly held by the CA, petitioners failed to establish that the


NLRC committed grave abuse of discretion in affirming the Labor Arbiters
ruling, which is supported by the facts on record.
It
is
already
settled
that
the
relationship
between jeepney owners/operators
and jeepney drivers
under
the
boundary system is that of employer-employee and not of lessor-lessee.
The fact that the drivers do not receive fixed wages but only get the
amount in excess of the so-called boundary that they pay to the
owner/operator is not sufficient to negate the relationship between them
as employer and employee.[16]
The Labor Arbiter, the NLRC, and the CA uniformly declared that
petitioners were not dismissed from employment but merely suspended
pending payment of their arrears. Findings of fact of the CA, particularly
where they are in absolute agreement with those of the NLRC and the
Labor Arbiter, are accorded not only respect but even finality, and are
deemed binding upon this Court so long as they are supported by
substantial evidence.[17]
We have no reason to deviate from such findings. Indeed,
petitioners suspension cannot be categorized as dismissal, considering
that there was no intent on the part of respondent to sever the employeremployee relationship between him and petitioners. In fact, it was made
clear that petitioners could put an end to the suspension if they only pay
their recent arrears. As it was, the suspension dragged on for years
because of petitioners stubborn refusal to pay. It would have been
different if petitioners complied with the condition and respondent still
refused to readmit them to work. Then there would have been a clear act

of dismissal. But such was not the case. Instead of paying, petitioners
even filed a complaint for illegal dismissal against respondent.
Respondents policy of suspending drivers who fail to remit the full
amount of the boundary was fair and reasonable under the
circumstances. Respondent explained that he noticed that his drivers
were getting lax in remitting their boundary payments and, in fact, herein
petitioners had already incurred a considerable amount of arrears. He had
to put a stop to it as he also relied on these boundary payments to raise
the full amount of his monthly amortizations on the jeepneys.
Demonstrating their obstinacy, petitioners, on the days immediately
following the implementation of the policy, incurred deficiencies in their
boundary remittances.
It is acknowledged that an employer has free rein and enjoys a wide
latitude of discretion to regulate all aspects of employment, including the
prerogative to instill discipline on his employees and to impose penalties,
including dismissal, if warranted, upon erring employees. This is a
management
prerogative.
Indeed,
the
manner
in
which
managementconducts its own affairs to achieve its purpose is within the
managements discretion. The only limitation on the exercise of
management prerogative is that the policies, rules, and regulations on
work-related activities of the employees must always be fair and
reasonable, and the corresponding penalties, when prescribed,
commensurate to the offense involved and to the degree of the infraction.
[18]

Petitioners argue that the policy is unsound as it does not consider


the times when passengers are scarce and the drivers are not able to
raise the amount of the boundary.

Petitioners concern relates to the implementation of the policy,


which is another matter. A company policy must be implemented in such
manner as will accord social justice and compassion to the employee. In
case of noncompliance with the company policy, the employer must
consider the surrounding circumstances and the reasons why the
employee failed to comply. When the circumstances merit the relaxation
of the application of the policy, then its noncompliance must be excused.
In the present case, petitioners merely alleged that there were
only few passengers during the dates in question. Such excuse is not
acceptable without any proof or, at least, an explanation as to why
passengers were scarce at that time. It is simply a bare allegation, not
worthy of belief. We also find the excuse unbelievable considering that
petitioners incurred the shortages on separate days, and it appears that
only petitioners failed to remit the full boundary payment on said dates.
Under a boundary scheme, the driver remits the boundary, which is
a fixed amount, to the owner/operator and gets to earn the amount in
excess thereof. Thus, on a day when there are many passengers along the
route, it is the driver who actually benefits from it. It would be unfair then
if, during the times when passengers are scarce, the owner/operator will
be made to suffer by not getting the full amount of the boundary. Unless
clearly shown or explained by an event that irregularly and negatively
affected the usual number of passengers within the route, the scarcity of
passengers should not excuse the driver from paying the full amount of
the boundary.

Finally, we sustain the CAs finding that petitioners were not denied
the right to due process. We thus quote with approval its discussion on
this matter:
Having established that the case at bench does not
involve termination of employment, We find that the strict,
even rigid, application of the twin-notice rule is not warranted.
But the due process safeguards are nonetheless still
available to petitioners.
Due process is not a matter of strict or rigid or formulaic
process. The essence of due process is simply the opportunity
to be heard, or as applied to administrative proceedings, an
opportunity to explain ones side or an opportunity to seek a
reconsideration of the action or ruling complained of. A formal
or trial-type hearing is not at all times and in all instances
essential, as the due process requirements are satisfied where
the parties are afforded fair and reasonable opportunity to
explain their side of the controversy at hand. x x x.
xxxx
In the case at bench, private respondent, upon finding
that petitioners had consistently failed to remit the full
amount of the boundary, conducted a meeting on November
4, 2001 informing them to strictly comply with the policy
regarding their remittances and warned them to discontinue
driving if they still failed to remit the full amount of the
boundary.[19]

WHEREFORE, premises considered, the petition is DENIED. The


Court of Appeals Decision dated December 14, 2006 and Resolution dated
July 16, 2007 areAFFIRMED.

SO ORDERED.

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION

PERALTA, J.:
This is a petition for review on certiorari seeking to reverse and set
aside the Decision[1] dated May 31, 2005 of the Court of Appeals (CA) in
CA-G.R.

SP

No.

87846,

and

the

Resolution [2] dated August

23,

2005 denying petitioners motion for reconsideration.


The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged


as part-time consultant on retainer basis by petitioner Atok Big Wedge
ATOK BIG WEDGE COMPANY,
INC.,
Petitioner,

versus -

JESUS P. GISON,

G.R. No. 169510

Company, Inc. through its then Asst. Vice-President and Acting Resident

Present:

Manager, Rutillo A. Torres. As a consultant on retainer basis, respondent

CARPIO,* J.,
VELASCO, JR., J., Chairperson,
BRION,**
PERALTA, and
SERENO,*** JJ.
Promulgated:
August 8, 2011

Respondent.

assisted petitioner's retained legal counsel with matters pertaining to the


prosecution of cases against illegal surface occupants within the area
covered by the company's mineral claims. Respondent was likewise
tasked to perform liaison work with several government agencies, which
he said was his expertise.

Petitioner did not require respondent to report to its office on a

13th month pay, vacation pay, and sick leave pay with the National Labor

regular basis, except when occasionally requested by the management to

Relations

discuss matters needing his expertise as a consultant. As payment for his

Cordillera Administrative Region, against petitioner, Mario D. Cera, and

services, respondent received a retainer fee of P3,000.00 a month,

Teofilo R. Asuncion, Jr. The case was docketed as NLRC Case No. RAB-CAR-

[3]

02-0098-03.

which was delivered to him either at his residence or in a local

restaurant. The

parties

executed

retainer

agreement,

but

since

respondent

was

Regional

Arbitration

Branch

(RAB),

Respondent alleged that:

The said arrangement continued for the next eleven years.


thereafter,

(NLRC),

such

agreement was misplaced and can no longer be found.

Sometime

Commission

getting

old,

he

requested that petitioner cause his registration with the Social Security
System (SSS), but petitioner did not accede to his request. He later
reiterated his request but it was ignored by respondent considering that
he was only a retainer/consultant. On February 4, 2003, respondent filed a
Complaint[4] with the SSS against petitioner for the latter's refusal to cause
his registration with the SSS.
On the same date, Mario D. Cera, in his capacity as resident
manager of petitioner, issued a Memorandum [5] advising respondent that
within 30 days from receipt thereof, petitioner is terminating his retainer
contract with the company since his services are no longer necessary.
On February 21, 2003, respondent filed a Complaint [6] for illegal
dismissal, unfair labor practice, underpayment of wages, non-payment of

x x x [S]ometime in January 1992, Rutillo A. Torres, then the


resident manager of respondent Atok Big Wedge Co., Inc., or
Atok for brevity, approached him and asked him if he can help
the companys problem involving the 700 million pesos crop
damage claims of the residents living at the minesite of Atok.
He participated in a series of dialogues conducted with the
residents. Mr. Torres offered to pay himP3,000.00 per month
plus representation expenses. It was also agreed upon by him
and Torres that his participation in resolving the problem was
temporary and there will be no employer-employee
relationship between him and Atok. It was also agreed upon
that his compensation, allowances and other expenses will be
paid through disbursement vouchers.
On February 1, 1992 he joined Atok. One week
thereafter, the aggrieved crop damage claimants barricaded
the only passage to and from the minesite. In the early
morning of February 1, 1992, a dialogue was made by Atok
and the crop damage claimants. Unfortunately, Atoks
representatives, including him, were virtually held hostage by
the irate claimants who demanded on the spot payment of
their claims. He was able to convince the claimants to release
the company representatives pending referral of the issue to
higher management.

A case was filed in court for the lifting of the barricades


and the court ordered the lifting of the barricade. While Atok
was prosecuting its case with the claimants, another case
erupted involving its partner, Benguet Corporation. After Atok
parted ways with Benguet Corporation, some properties
acquired by the partnership and some receivables by Benguet
Corporation was the problem. He was again entangled with
documentation, conferences, meetings, planning, execution
and clerical works. After two years, the controversy was
resolved and Atok received its share of the properties of the
partnership, which is about 5 million pesos worth of
equipment and condonation of Atoks accountabilities with
Benguet Corporation in the amount of P900,000.00.

In the succeeding years of his employment, he was


designated as liaison officer, public relation officer and legal
assistant, and to assist in the ejection of illegal occupants in
the mining claims of Atok.

In the meantime, crop damage claimants lost interest in


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

respective pleadings, Labor Arbiter Rolando D. Gambito rendered a

After the crop damage claims and the controversy were


resolved, he was permanently assigned by Atok to take
charge of some liaison matters and public relations
in Baguio and Benguet Province, and to report regularly to
Atoks office in Manila to attend meetings and so he had to
stay in Manila at least one week a month.
Because of his length of service, he invited the attention
of the top officers of the company that he is already entitled
to the benefits due an employee under the law, but
management ignored his requests. However, he continued to
avail of his representation expenses and reimbursement of
company-related expenses. He also enjoyed the privilege of
securing interest free salary loans payable in one year
through salary deduction.

Since he was getting older, being already 56 years old,


he reiterated his request to the company to cause his
registration with the SSS. His request was again ignored and
so he filed a complaint with the SSS. After filing his complaint
with the SSS, respondents terminated his services.[7]

On September 26, 2003, after the parties have submitted their


Decision[8] ruling in favor of the petitioner. Finding no employer-employee
relationship between petitioner and respondent, the Labor Arbiter
dismissed the complaint for lack of merit.
Respondent then appealed the decision to the NLRC.
On July

30,

2004,

the

NLRC,

Second

Division,

issued

Resolution[9] affirming the decision of the Labor Arbiter. Respondent filed a


Motion

for

Reconsideration,

but

it

was

denied

in

the

Resolution[10] dated September 30, 2004.


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

a) Whether or not the Decision of the Honorable Labor Arbiter


and the subsequent Resolutions of the Honorable Public
Respondent affirming the same, are in harmony with the
law and the facts of the case;
b) Whether or not the Honorable Labor Arbiter Committed a
Grave Abuse of Discretion in Dismissing the Complaint of
Petitioner and whether or not the Honorable Public
Respondent Committed a Grave Abuse of Discretion when
it affirmed the said Decision.[11]

In ruling in favor of the respondent, the CA opined, among other


things, that both the Labor Arbiter and the NLRC may have overlooked
Article 280 of the Labor Code, [13]or the provision which distinguishes
between

two

kinds

of

employees, i.e.,

regular

and

casual

employees. Applying the provision to the respondent's case, he is deemed


a regular employee of the petitioner after the lapse of one year from his
employment. Considering also that respondent had been performing
services for the petitioner for eleven years, respondent is entitled to the

On May 31, 2005, the CA rendered the assailed Decision annulling

rights and privileges of a regular employee.

and setting aside the decision of the NLRC, the decretal portion of which
reads:

The CA added that although there was an agreement between the

WHEREFORE,
the
petition
is GRANTED. The
assailed Resolution of
the
National
Labor
Relations
Commission dismissing petitioner's complaint for illegal
dismissal is ANNULLED and SET ASIDE. Private respondent
Atok Big Wedge Company Incorporated is ORDERED to
reinstate petitioner Jesus P. Gison to his former or equivalent
position without loss of seniority rights and to pay him full
backwages, inclusive of allowances and other benefits or their
monetary equivalent computed from the time these were
withheld from him up to the time of his actual and effective
reinstatement. This case is ordered REMANDED to the Labor
Arbiter for the proper computation of backwages, allowances
and other benefits due to petitioner. Costs against private
respondent Atok Big Wedge Company Incorporated.
SO ORDERED.[12]

parties that respondent's employment would only be temporary, it clearly


appears that petitioner disregarded the same by repeatedly giving
petitioner several tasks to perform. Moreover, although respondent may
have waived his right to attain a regular status of employment when he
agreed to perform these tasks on a temporary employment status, still, it
was the law that recognized and considered him a regular employee after
his first year of rendering service to petitioner. As such, the waiver was
ineffective.
Hence, the petition assigning the following errors:
I.
WHETHER OR NOT THE COURT OF APPEALS
DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND
APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
GAVE DUE COURSE TO THE PETITION FOR CERTIORARI
DESPITE THE FACT THAT THERE WAS NO SHOWING THAT THE

NATIONAL LABOR RELATIONS


GRAVE ABUSE OF DISCRETION.

COMMISSION

COMMITTED

Petitioner also posits that the CA erred in applying Article 280 of the
Labor Code in determining whether there was an employer-employee

II.
WHETHER OR NOT THE COURT OF APPEALS
DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO THE LAW
AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN
IT BASED ITS FINDING THAT RESPONDENT IS ENTITLED TO
REGULAR EMPLOYMENT ON A PROVISION OF LAW THAT THIS
HONORABLE COURT HAS DECLARED TO BE INAPPLICABLE IN
CASE
THE
EXISTENCE
OF
AN
EMPLOYER-EMPLOYEE
RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE.
III.
WHETHER OR NOT THE COURT OF APPEALS
DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND
APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
ERRONEOUSLY FOUND THAT RESPONDENT IS A REGULAR
EMPLOYEE OF THE COMPANY.
IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED
QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND
APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
ERRONEOUSLY DIRECTED RESPONDENT'S REINSTATEMENT
DESPITE THE FACT THAT THE NATURE OF THE SERVICES HE
PROVIDED TO THE COMPANY WAS SENSITIVE AND
CONFIDENTIAL.[14]

relationship

between

the

petitioner

and

the

respondent. Petitioner

contends that where the existence of an employer-employee relationship


is in dispute, Article 280 of the Labor Code is inapplicable. The said article
only set the distinction between a casual employee from a regular
employee for purposes of determining the rights of an employee to be
entitled to certain benefits.
Petitioner insists that respondent is not a regular employee and not
entitled to reinstatement.
On his part, respondent maintains that he is an employee of the
petitioner and that the CA did not err in ruling in his favor.
The petition is meritorious.
At the outset, respondent's recourse to the CA was the proper
remedy to question the resolution of the NLRC. It bears stressing that

Petitioner argues that since the petition filed by the respondent

there is no appeal from the decision or resolution of the NLRC. As this

before the CA was a petition for certiorari under Rule 65 of the Rules of

Court enunciated in the case of St. Martin Funeral Home v. NLRC,[15] the

Court, the CA should have limited the issue on whether or not there was

special civil action of certiorari under Rule 65 of the Rules of Civil

grave abuse of discretion on the part of the NLRC in rendering the

Procedure, which is filed before the CA, is the proper vehicle for judicial

resolution affirming the decision of the Labor Arbiter.

review of decisions of the NLRC. The petition should be initially filed


before the Court of Appeals in strict observance of the doctrine on

hierarchy of courts as the appropriate forum for the relief desired. [16] This

conduct, or the so-called "control test."[18] Of these four, the last one is the

Court not being a trier of facts, the resolution of unclear or ambiguous

most important.[19] The so-called control test is commonly regarded as the

factual findings should be left to the CA as it is procedurally equipped for

most crucial and determinative indicator of the presence or absence of an

that purpose. From the decision of the Court of Appeals, an ordinary

employer-employee relationship. Under the control test, an employer-

appeal under Rule 45 of the Rules of Civil Procedure before the Supreme

employee relationship exists where the person for whom the services are

Court may be resorted to by the parties. Hence, respondent's resort to the

performed reserves the right to control not only the end achieved, but

CA was appropriate under the circumstances.

also the manner and means to be used in reaching that end.[20]

Anent the primordial issue of whether or not an employer-employee


relationship exists between petitioner and respondent.

Applying

the

aforementioned

test,

an

employer-employee

relationship is apparently absent in the case at bar. Among other things,


respondent was not required to report everyday during regular office

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

hours of petitioner. Respondent's monthly retainer fees were paid to him

employee relationship is ultimately a question of fact and that the findings

either at his residence or a local restaurant. More importantly, petitioner

thereon by the Labor Arbiter and the NLRC shall be accorded not only

did not prescribe the manner in which respondent would accomplish any

respect but even finality when supported by substantial evidence. [17] Being

of the tasks in which his expertise as a liaison officer was needed;

a question of fact, the determination whether such a relationship exists

respondent was left alone and given the freedom to accomplish the tasks

between petitioner and respondent was well within the province of the

using his own means and method. Respondent was assigned tasks to

Labor Arbiter and the NLRC. Being supported by substantial evidence,

perform, but petitioner did not control the manner and methods by which

such determination should have been accorded great weight by the CA in

respondent performed these tasks. Verily, the absence of the element of

resolving the issue.

control on the part of the petitioner engenders a conclusion that he is not


an employee of the petitioner.

To ascertain the existence of an employer-employee relationship


jurisprudence has invariably adhered to the four-fold test, to wit: (1) the

Moreover, the absence of the parties' retainership agreement

selection and engagement of the employee; (2) the payment of wages;

notwithstanding, respondent clearly admitted that petitioner hired him in

(3) the power of dismissal; and (4) the power to control the employee's

a limited capacity only and that there will be no employer-employee

which are desirable and necessary for the business of the employer is not

relationship between them. As averred in respondent's Position Paper:[21]

determinative in this case. In fact, any agreement may provide that one
party shall render services for and in behalf of another, no matter how

2. For the participation of complainant regarding this


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

necessary for the latter's business, even without being hired as an


employee.[23] Hence, respondent's length of service and petitioner's
repeated act of assigning respondent some tasks to be performed did not
result to respondent's entitlement to the rights and privileges of a regular
employee.
Furthermore, despite the fact that petitioner made use of the
services of respondent for eleven years, he still cannot be considered as a
regular employee of petitioner. Article 280 of the Labor Code, in which the
lower court used to buttress its findings that respondent became a regular

Respondent was well aware of the agreement that he was hired


merely as a liaison or consultant of the petitioner and he agreed to
perform tasks for the petitioner on a temporary employment status
only. However, respondent anchors his claim that he became a regular
employee of the petitioner based on his contention that the temporary
aspect of his job and its limited nature could not have lasted for eleven
years unless some time during that period, he became a regular
employee of the petitioner by continually performing services for the
company.

employee of the petitioner, is not applicable in the case at bar.Indeed, the


Court has ruled that said provision is not the yardstick for determining the
existence of an employment relationship because it merely distinguishes
between two kinds of employees, i.e., regular employees and casual
employees, for purposes of determining the right of an employee to
certain benefits, to join or form a union, or to security of tenure; it does
not apply where the existence of an employment relationship is in
dispute.[24] It is, therefore, erroneous on the part of the Court of Appeals to
rely on Article 280 in determining whether an employer-employee
relationship exists between respondent and the petitioner

Contrary to the conclusion of the CA, respondent is not an


employee, much more a regular employee of petitioner. The appellate
court's premise that regular employees are those who perform activities

Considering that there

is

no employer-employee relationship

between the parties, the termination of respondent's services by the

Present:

petitioner after due notice did not constitute illegal dismissal warranting
his reinstatement and the payment of full backwages, allowances and
- versus - CARPIO, J., Chairperson,

other benefits.

BRION,
WHEREFORE,

premises

considered,

the

petition

DEL CASTILLO,*

is GRANTED. The Decision and the Resolution of the Court of Appeals in

PEREZ, and

CA-G.R. SP No. 87846, are REVERSEDand SET ASIDE. The Resolutions


dated July 30, 2004 and September 30, 2004 of the National Labor

SERENO, JJ.

Relations Commission are REINSTATED.


PHILIPPINE BASKETBALL
SO ORDERED.

ASSOCIATION (PBA), JOSE


EMMANUEL M. EALA, and Promulgated:
PERRY MARTINEZ,
Respondents. September 14, 2011
x-----------------------------------------------------------------------------------------x

DECISION
JOSE MEL BERNARTE, G.R. No. 192084
Petitioner,

CARPIO, J.:

Commissioner Eala, however, changes were made on the terms of


their employment.

The Case

This is a petition for review1 of the 17 December 2009 Decision2 and 5


April 2010 Resolution3 of the Court of Appeals in CA-G.R. SP No. 105406.
The Court of Appeals set aside the decision of the National Labor
Relations Commission (NLRC), which affirmed the decision of the Labor
Arbiter, and held that petitioner Jose Mel Bernarte is an independent
contractor, and not an employee of respondents Philippine Basketball
Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez. The Court
of Appeals denied the motion for reconsideration.

The Facts

The facts, as summarized by the NLRC and quoted by the Court of


Appeals, are as follows:

Complainants (Jose Mel Bernarte and Renato Guevarra) aver that


they were invited to join the PBA as referees. During the leadership
of Commissioner Emilio Bernardino, they were made to sign
contracts on a year-to-year basis. During the term of

Complainant Bernarte, for instance, was not made to sign a contract


during the first conference of the All-Filipino Cup which was from
February 23, 2003 to June 2003. It was only during the second
conference when he was made to sign a one and a half month
contract for the period July 1 to August 5, 2003.

On January 15, 2004, Bernarte received a letter from the Office of


the Commissioner advising him that his contract would not be
renewed citing his unsatisfactory performance on and off the court.
It was a total shock for Bernarte who was awarded Referee of the
year in 2003. He felt that the dismissal was caused by his refusal to
fix a game upon order of Ernie De Leon.

On the other hand, complainant Guevarra alleges that he was


invited to join the PBA pool of referees in February 2001. On March
1, 2001, he signed a contract as trainee. Beginning 2002, he signed
a yearly contract as Regular Class C referee. On May 6, 2003,
respondent Martinez issued a memorandum to Guevarra expressing
dissatisfaction over his questioning on the assignment of referees
officiating out-of-town games. Beginning February 2004, he was no
longer made to sign a contract.

Respondents aver, on the other hand, that complainants entered


into two contracts of retainer with the PBA in the year 2003. The
first contract was for the period January 1, 2003 to July 15, 2003;

and the second was for September 1 to December 2003. After the
lapse of the latter period, PBA decided not to renew their contracts.

100,000.0
0
2. moral damages
50,000.00

Complainants were not illegally dismissed because they were not


employees of the PBA. Their respective contracts of retainer were
simply not renewed. PBA had the prerogative of whether or not to
renew their contracts, which they knew were fixed.4

100,000.0
0

3. exemplary damages
50,000.00
4. 10% attorneys fees

In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an


employee whose dismissal by respondents was illegal. Accordingly, the
Labor Arbiter ordered the reinstatement of petitioner and the payment
of backwages, moral and exemplary damages and attorneys fees, to wit:

TOTAL

68,625.00

36,125.00

P754,875.
00

P397,375.
00

or a total
of P1,152,250.00
WHEREFORE, premises considered all respondents who are here
found to have illegally dismissed complainants are hereby ordered
to (a) reinstate complainants within thirty (30) days from the date of
receipt of this decision and to solidarily pay complainants:

JOSE MEL
BERNARTE
1. backwages from
January 1, 2004 up to the
finality of this Decision,
which to date is

RENATO
GUEVARRA

The rest of the claims are hereby dismissed for lack of merit or basis.

SO ORDERED.7

In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters
judgment. The dispositive portion of the NLRCs decision reads:
P536,250.
00

P211,250.
00

WHEREFORE, the appeal is hereby DISMISSED. The Decision of


Labor Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is
AFFIRMED.

SO ORDERED.9

Respondents filed a petition for certiorari with the Court of Appeals, which
overturned the decisions of the NLRC and Labor Arbiter. The dispositive
portion of the Court of Appeals decision reads:

WHEREFORE, the petition is hereby GRANTED. The


assailed Decision dated January 28, 2008 and Resolution dated
August 26, 2008 of the National Labor Relations Commission
are ANNULLED andSET ASIDE. Private respondents complaint
before the Labor Arbiter is DISMISSED.

The Court of Appeals found petitioner an independent contractor since


respondents did not exercise any form of control over the means and
methods by which petitioner performed his work as a basketball referee.
The Court of Appeals held:

While the NLRC agreed that the PBA has no control over the
referees acts of blowing the whistle and making calls during
basketball games, it, nevertheless, theorized that the said acts refer
to the means and methods employed by the referees in officiating
basketball games for the illogical reason that said acts refer only to
the referees skills. How could a skilled referee perform his job
without blowing a whistle and making calls? Worse, how can the
PBA control the performance of work of a referee without controlling
his acts of blowing the whistle and making calls?

Moreover, this Court disagrees with the Labor Arbiters finding (as
affirmed by the NLRC) that the Contracts of Retainer show that
petitioners have control over private respondents.

SO ORDERED.10
xxxx

The Court of Appeals Ruling

Neither do We agree with the NLRCs affirmance of the Labor


Arbiters conclusion that private respondents repeated hiring made
them regular employees by operation of law.11

The Issues

The main issue in this case is whether petitioner is an employee of


respondents, which in turn determines whether petitioner was illegally
dismissed.

Petitioner contends that the Labor Arbiters Decision of 31 March 2005


became final and executory for failure of respondents to appeal with the
NLRC within the prescribed period. Petitioner claims that the Labor
Arbiters decision was constructively served on respondents as early as
August 2005 while respondents appealed the Arbiters decision only on 31
March 2006, way beyond the reglementary period to appeal. Petitioner
points out that service of an unclaimed registered mail is deemed
complete five days from the date of first notice of the post master. In this
case three notices were issued by the post office, the last being on 1
August 2005. The unclaimed registered mail was consequently returned to
sender. Petitioner presents the Postmasters Certification to prove
constructive service of the Labor Arbiters decision on respondents. The
Postmaster certified:
xxx

Petitioner raises the procedural issue of whether the Labor Arbiters


decision has become final and executory for failure of respondents to
appeal with the NLRC within the reglementaryperiod.

That upon receipt of said registered mail matter, our registry in


charge, Vicente Asis, Jr., immediately issued the first registry notice
to claim on July 12, 2005 by the addressee. The second and third
notices were issued on July 21 and August 1, 2005, respectively.

The Ruling of the Court

The petition is bereft of merit.

The Court shall first resolve the procedural issue posed by petitioner.

That the subject registered letter was returned to the sender (RTS)
because the addressee failed to claim it after our one month
retention period elapsed. Said registered letter was dispatched from
this office to Manila CPO (RTS) under bill #6, line 7, page1, column
1, on September 8, 2005.12

Section 10, Rule 13 of the Rules of Court provides:

SEC. 10. Completeness of service. Personal service is complete


upon actual delivery. Service by ordinary mail is complete upon the
expiration of ten (10) days after mailing, unless the court otherwise
provides. Service by registered mail is complete upon actual receipt
by the addressee, or after five (5) days from the date he received
the first notice of the postmaster, whichever date is earlier.

The rule on service by registered mail contemplates two situations: (1)


actual service the completeness of which is determined upon receipt by
the addressee of the registered mail; and (2) constructive service the
completeness of which is determined upon expiration of five days from
the date the addressee received the first notice of the postmaster. 13

Insofar as constructive service is concerned, there must be conclusive


proof that a first notice was duly sent by the postmaster to the
addressee.14 Not only is it required that notice of the registered mail be
issued but that it should also be delivered to and received by the
addressee.15 Notably, the presumption that official duty has been
regularly performed is not applicable in this situation. It is incumbent
upon a party who relies on constructive service to prove that the notice
was sent to, and received by, the addressee.16

The best evidence to prove that notice was sent would be a certification
from the postmaster, who should certify not only that the notice was
issued or sent but also as to how, when and to whom the delivery and
receipt was made. The mailman may also testify that the notice was
actually delivered.17

In this case, petitioner failed to present any concrete proof as to how,


when and to whom the delivery and receipt of the three notices issued by
the post office was made. There is no conclusive evidence showing that
the post office notices were actually received by respondents, negating
petitioners claim of constructive service of the Labor Arbiters decision on
respondents. The Postmasters Certification does not sufficiently prove
that the three notices were delivered to and received by respondents; it
only indicates that the post office issued the three notices. Simply put, the
issuance of the notices by the post office is not equivalent to delivery to
and receipt by the addressee of the registered mail. Thus, there is no
proof of completed constructive service of the Labor Arbiters decision on
respondents.

At any rate, the NLRC declared the issue on the finality of the Labor
Arbiters decision moot as respondents appeal was considered in the
interest of substantial justice. We agree with the NLRC. The ends of justice
will be better served if we resolve the instant case on the merits rather
than allowing the substantial issue of whether petitioner is an
independent contractor or an employee linger and remain unsettled due
to procedural technicalities.

The existence of an employer-employee relationship is ultimately a


question of fact. As a general rule, factual issues are beyond the province
of this Court. However, this rule admits of exceptions, one of which is
where there are conflicting findings of fact between the Court of Appeals,
on one hand, and the NLRC and Labor Arbiter, on the other, such as in the
present case.18

To determine the existence of an employer-employee relationship, case


law has consistently applied the four-fold test, to wit: (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 employee on the
means and methods by which the work is accomplished. The socalledcontrol test is the most important indicator of the presence or
absence of an employer-employee relationship.19

In this case, PBA admits repeatedly engaging petitioners services, as


shown in the retainer contracts. PBA pays petitioner a retainer fee,
exclusive of per diem or allowances, as stipulated in the retainer contract.
PBA can terminate the retainer contract for petitioners violation of its
terms and conditions.

However, respondents argue that the all-important element of control is


lacking in this case, making petitioner an independent contractor and not
an employee of respondents.

Petitioner contends otherwise. Petitioner asserts that he is an employee of


respondents since the latter exercise control over the performance of his
work. Petitioner cites the following stipulations in the retainer contract

which evidence control: (1) respondents classify or rate a referee; (2)


respondents require referees to attend all basketball games organized or
authorized by the PBA, at least one hour before the start of the first game
of each day; (3) respondents assign petitioner to officiate ballgames, or to
act as alternate referee or substitute; (4) referee agrees to observe and
comply with all the requirements of the PBA governing the conduct of the
referees whether on or off the court; (5) referee agrees (a) to keep himself
in good physical, mental, and emotional condition during the life of the
contract; (b) to give always his best effort and service, and loyalty to the
PBA, and not to officiate as referee in any basketball game outside of the
PBA, without written prior consent of the Commissioner; (c) always to
conduct himself on and off the court according to the highest standards of
honesty or morality; and (6) imposition of various sanctions for violation
of the terms and conditions of the contract.

The foregoing stipulations hardly demonstrate control over the means and
methods by which petitioner performs his work as a referee officiating a
PBA basketball game. The contractual stipulations do not pertain to, much
less dictate, how and when petitioner will blow the whistle and make calls.
On the contrary, they merely serve as rules of conduct or guidelines in
order to maintain the integrity of the professional basketball league. As
correctly observed by the Court of Appeals, how could a skilled referee
perform his job without blowing a whistle and making calls?
x x x [H]ow can the PBA control the performance of work of a referee
without controlling his acts of blowing the whistle and making calls?20

In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the


relationship between a television and radio station and one of its talents,
the Court held that not all rules imposed by the hiring party on the hired
party indicate that the latter is an employee of the former. The Court held:

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 employeremployee relationship. The facts of this case fall squarely with the
case of Insular Life Assurance Co., Ltd. v. 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.22

We agree with respondents that once in the playing court, the referees
exercise their own independent judgment, based on the rules of the
game, as to when and how a call or decision is to be made. The referees
decide whether an infraction was committed, and the PBA cannot overrule
them once the decision is made on the playing court. The referees are the
only, absolute, and final authority on the playing court. Respondents or
any of the PBA officers cannot and do not determine which calls to make
or not to make and cannot control the referee when he blows the whistle
because such authority exclusively belongs to the referees. The very
nature of petitioners job of officiating a professional basketball game
undoubtedly calls for freedom of control by respondents.

Moreover, the following circumstances indicate that petitioner is an


independent contractor: (1) the referees are required to report for work
only when PBA games are scheduled, which is three times a week spread
over an average of only 105 playing days a year, and they officiate games
at an average of two hours per game; and (2) the only deductions from
the fees received by the referees are withholding taxes.

In other words, unlike regular employees who ordinarily report for work
eight hours per day for five days a week, petitioner is required to report
for work only when PBA games are scheduled or three times a week at
two hours per game. In addition, there are no deductions for contributions
to the Social Security System, Philhealth or Pag-Ibig, which are the usual
deductions from employees salaries. These undisputed circumstances
buttress the fact that petitioner is an independent contractor, and not an
employee of respondents.

Furthermore, the applicable foreign case law declares that a referee is an


independent contractor, whose special skills and independent judgment
are required specifically for such position and cannot possibly be
controlled by the hiring party.

In Yonan v. United States Soccer Federation, Inc.,23 the United States


District Court of Illinois held that plaintiff, a soccer referee, is an
independent contractor, and not an employee of defendant which is the
statutory body that governs soccer in the United States. As such, plaintiff
was not entitled to protection by the Age Discrimination in Employment
Act. The U.S. District Court ruled:

Generally, if an employer has the right to control and direct the


work of an individual, not only as to the result to be achieved, but
also as to details by which the result is achieved, an
employer/employee relationship is likely to exist. The Court must be
careful to distinguish between control[ling] the conduct of another
party contracting party by setting out in detail his obligations
consistent with the freedom of contract, on the one hand, and the
discretionary control an employer daily exercises over its employees
conduct on the other.

Yonan asserts that the Federation closely supervised his


performance at each soccer game he officiated by giving him an
assessor, discussing his performance, and controlling what clothes
he wore while on the field and traveling. Putting aside that the
Federation did not, for the most part, control what clothes he wore,
the Federation did not supervise Yonan, but rather evaluated his
performance after matches. That the Federation evaluated Yonan as
a referee does not mean that he was an employee. There is no
question that parties retaining independent contractors may judge
the performance of those contractors to determine if the contractual
relationship should continue. x x x

It is undisputed that the Federation did not control the


way Yonan refereed his games. He had full discretion and authority,
under the Laws of the Game, to call the game as he saw fit. x x x In
a similar vein, subjecting Yonan to qualification standards and
procedures like the Federations registration and training
requirements does not create an employer/employee relationship.
xxx

A position that requires special skills and independent judgment


weights in favor of independent contractor status. x x x Unskilled
work, on the other hand, suggests an employment relationship.
x x x Here, it is undisputed that soccer refereeing, especially at the
professional and international level, requires a great deal of skill and
natural ability. Yonan asserts that it was the Federations training
that made him a top referee, and that suggests he was an
employee. Though substantial training supports an employment
inference, that inference is dulled significantly or negated when the
putative employers activity is the result of a statutory requirement,
not the employers choice. x x x

In McInturff v. Battle Ground Academy of Franklin,24 it was held that the


umpire was not an agent of the Tennessee Secondary School Athletic
Association (TSSAA), so the players vicarious liability claim against the
association should be dismissed. In finding that the umpire is an
independent contractor, the Court of Appeals of Tennesseruled:

The TSSAA deals with umpires to achieve a result-uniform rules for


all baseball games played between TSSAA member schools. The
TSSAA does not supervise regular season games. It does not tell an
official how to conduct the game beyond the framework established
by the rules. The TSSAA does not, in the vernacular of the case law,
control the means and method by which the umpires work.

In addition, the fact that PBA repeatedly hired petitioner does not by itself
prove that petitioner is an employee of the former. For a hired party to be

considered an employee, the hiring party must have control over the
means and methods by which the hired party is to perform his work,
which is absent in this case. The continuous rehiring by PBA of petitioner
simply signifies the renewal of the contract between PBA and petitioner,
and highlights the satisfactory services rendered by petitioner warranting
such contract renewal. Conversely, if PBA decides to discontinue
petitioners services at the end of the term fixed in the contract, whether
for unsatisfactory services, or violation of the terms and conditions of the
contract, or for whatever other reason, the same merely results in the
non-renewal of the contract, as in the present case. The non-renewal of
the contract between the parties does not constitute illegal dismissal of
petitioner by respondents.

Petitioner,

Present:

VELASCO, JR., J., Chairperson,


PERALTA,
- versus -

ABAD,
PEREZ,* and
MENDOZA, JJ.

Promulgated:
WHEREFORE, we DENY the petition and AFFIRM the assailed decision
of the Court of Appeals.

WILMER D. GENOVIA,
Respondent.

November 23, 2011

x----------------------------------------------------------------------------------------x
SO ORDERED.
DECISION

PERALTA, J.:

CESAR
C.
LIRIO,
doing G.R. No. 169757
business under the name and
style of CELKOR AD SONICMIX,

This is a petition for review on certiorari of the decision of the Court


of Appeals in CA-G.R. SP No. 88899 dated August 4, 2005 and its
Resolution dated September 21, 2005, denying petitioners motion for
reconsideration.

The Court of Appeals reversed and set aside the resolution of the
NLRC, and reinstated the decision of the Labor Arbiter with modification,
finding that respondent is an employee of petitioner, and that respondent
was illegally dismissed and entitled to the payment of backwages and
separation pay in lieu of reinstatement.

The facts are as follows:

On July 9, 2002, respondent Wilmer D. Genovia filed a complaint


against petitioner Cesar Lirio and/or Celkor Ad Sonicmix Recording Studio
for illegal dismissal, non-payment of commission and award of moral and
exemplary damages.

In his Position Paper,[1] respondent Genovia alleged, among others,


that on August 15, 2001, he was hired as studio manager by petitioner
Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor). He was
employed to manage and operate Celkor and to promote and sell the
recording studio's services to music enthusiasts and other prospective
clients. He received a monthly salary of P7,000.00. They also agreed that

he was entitled to an additional commission of P100.00 per hour as


recording technician whenever a client uses the studio for recording,
editing or any related work. He was made to report for work from Monday
to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he was required to work
half-day only, but most of the time, he still rendered eight hours of work
or more. All the employees of petitioner, including respondent, rendered
overtime work almost everyday, but petitioner never kept a daily time
record to avoid paying the employees overtime pay.

Respondent stated that a few days after he started working as a


studio manager, petitioner approached him and told him about his project
to produce an album for his 15-year-old daughter, Celine Mei Lirio, a
former talent of ABS-CBN Star Records. Petitioner asked respondent to
compose and arrange songs for Celine and promised that he (Lirio) would
draft a contract to assure respondent of his compensation for such
services. As agreed upon, the additional services that respondent would
render included composing and arranging musical scores only, while the
technical aspect in producing the album, such as digital editing, mixing
and sound engineering would be performed by respondent in his capacity
as studio manager for which he was paid on a monthly basis. Petitioner
instructed respondent that his work on the album as composer and
arranger would only be done during his spare time, since his other work
as studio manager was the priority. Respondent then started working on
the album.

Respondent alleged that before the end of September 2001, he


reminded petitioner about his compensation as composer and arranger of
the album. Petitioner verbally assured him that he would be duly
compensated. By mid-November 2001, respondent finally finished the
compositions and musical arrangements of the songs to be included in
the album. Before the month ended, the lead and back-up vocals in the
ten (10) songs were finally recorded and completed. From December
2001 to January 2002, respondent, in his capacity as studio manager,
worked on digital editing, mixing and sound engineering of the vocal and
instrumental audio files.

Thereafter, respondent was tasked by petitioner to prepare official


correspondence, establish contacts and negotiate with various radio
stations, malls, publishers, record companies and manufacturers, record
bars and other outlets in preparation for the promotion of the said album.
By early February 2002, the album was in its manufacturing stage.
ELECTROMAT, manufacturer of CDs and cassette tapes, was tapped to do
the job. The carrier single of the album, which respondent composed and
arranged, was finally aired over the radio on February 22, 2002.

On February 26, 2002, respondent again reminded petitioner about


the contract on his compensation as composer and arranger of the
album. Petitioner told respondent that since he was practically a nobody
and had proven nothing yet in the music industry, respondent did not
deserve a high compensation, and he should be thankful that he was
given a job to feed his family. Petitioner informed respondent that he was

entitled only to 20% of the net profit, and not of the gross sales of the
album, and that the salaries he received and would continue to receive as
studio manager of Celkor would be deducted from the said 20% net profit
share. Respondent objected and insisted that he be properly
compensated. On March 14, 2002, petitioner verbally terminated
respondents services, and he was instructed not to report for work.

Respondent asserts that he was illegally dismissed as he was


terminated without any valid grounds, and no hearing was conducted
before he was terminated, in violation of his constitutional right to due
process. Having worked for more than six months, he was already a
regular employee. Although he was a so called studio manager, he had no
managerial powers, but was merely an ordinary employee.

Respondent prayed for his reinstatement without loss of seniority


rights, or, in the alternative, that he be paid separation pay, backwages
and overtime pay; and that he be awarded unpaid commission in the
amount of P2,000.00 for services rendered as a studio technician as well
as moral and exemplary damages.

Respondents evidence consisted of the Payroll dated July 31, 2001


to March 15, 2002, which was certified correct by petitioner, [2] and Petty
Cash Vouchers[3] evidencing receipt of payroll payments by respondent
from Celkor.

In defense, petitioner stated in his Position Paper [4] that respondent


was not hired as studio manager, composer, technician or as an
employee in any other capacity of Celkor. Respondent could not have
been hired as a studio manager, since the recording studio has no
personnel except petitioner. Petitioner further claimed that his daughter
Celine Mei Lirio, a former contract artist of ABS-CBN Star Records, failed
to come up with an album as the latter aborted its project to produce
one. Thus, he decided to produce an album for his daughter and
established a recording studio, which he named Celkor Ad Sonicmix
Recording Studio. He looked for a composer/arranger who would compose
the songs for the said album. In July 2001, Bob Santiago, his son-in-law,
introduced him to respondent, who claimed to be an amateur composer,
an arranger with limited experience and musician without any formal
musical training. According to petitioner, respondent had no track record
as a composer, and he was not known in the field of music. Nevertheless,
after some discussion, respondent verbally agreed with petitioner to coproduce the album based on the following terms and conditions: (1)
petitioner shall provide all the financing, equipment and recording
studio; (2) Celine Mei Lirio shall sing all the songs; (3) respondent shall
act as composer and arranger of all the lyrics and the music of the five
songs he already composed and the revival songs; (4) petitioner shall
have exclusive right to market the album; (5) petitioner was entitled to
60% of the net profit, while respondent and Celine Mei Lirio were each
entitled to 20% of the net profit; and (6) respondent shall be entitled to
draw advances of P7,000.00 a month, which shall be deductible from his
share of the net profits and only until such time that the album has been
produced.

According to petitioner, they arrived at the foregoing sharing of


profits based on the mutual understanding that respondent was just an
amateur composer with no track record whatsoever in the music industry,
had no definite source of income, had limited experience as an arranger,
had no knowledge of the use of sound mixers or digital arranger and that
petitioner would help and teach him how to use the studio equipment;
that petitioner would shoulder all the expenses of production and provide
the studio and equipment as well as his knowledge in the use thereof; and
Celine Mei Lirio would sing the songs. They embarked on the production of
the album on or about the third week of August 2002.

Petitioner asserted that from the aforesaid terms and conditions, his
relationship with respondent is one of an informal partnership under
Article 1767[5] of the New Civil Code, since they agreed to contribute
money, property or industry to a common fund with the intention of
dividing the profits among themselves. Petitioner had no control over the
time and manner by which respondent composed or arranged the songs,
except on the result thereof. Respondent reported to the recording studio
between 10:00 a.m. and 12:00 noon. Hence, petitioner contended that no
employer-employee relationship existed between him and the respondent,
and there was no illegal dismissal to speak of.

On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered


a decision,[6] finding that an employer-employee relationship existed
between petitioner and respondent, and that respondent was illegally
dismissed. The dispositive portion of the decision reads:

WHEREFORE, premises considered, we find that


respondents CELKOR AD SONICMIX RECORDING STUDIO and/
or CESAR C. LIRIO (Owner), have illegally dismissed
complainant in his status as regular employee and,
consequently, ORDERING said respondents:

1)

To pay him full backwages from date


of illegal dismissal on March 14, 2002 until
finality of this decision and, in lieu of
reinstatement, to [pay] his separation pay of
one (1) month pay per year of service
reckoned from [the] date of hire on August
15, 2001 until finality of this decision, which
as of date amounts to full backwages
total of 145,778.6 (basicP7,000.00 x 19.6
mos.=P133,000.00 + 1/12
thereof
as
th
13 month
pay
of P11,083.33 + SILP P7,000/32.62
days=P214.59/day x 5=P1,072.96 x 1.58
yrs.=P1,695.27);separation
pay
of P22,750.00 (P7,000.00 x 3.25 yrs.);

2)

To pay complainant's unpaid


commission of P2,000.00;

3)

To pay him moral and exemplary damages


in the combined amount of P75,000.00.

Other monetary claims of complainant are dismissed for


lack of merit.[7]

The Labor Arbiter stated that petitioners denial of the employment


relationship cannot overcome respondents positive assertion and
documentary evidence proving that petitioner hired respondent as his
employee.[8]

Petitioner appealed the decision of the Labor Arbiter to the National


Labor Relations Commission (NLRC).

In a Resolution7 dated October 14, 2004, the NLRC reversed and set
aside the decision of the Labor Arbiter. The dispositive portion of the
Resolution reads:

WHEREFORE, premises considered, the Appeal is


GRANTED. Accordingly, the Decision appealed from is
REVERSED and, hence, SET ASIDE and a new one ENTERED
dismissing the instant case for lack of merit.[9]

The NLRC stated that respondent failed to prove his employment


tale with substantial evidence. Although the NLRC agreed that respondent

was able to prove that he received gross pay less deduction and net pay,
with the corresponding Certification of Correctness by petitioner, covering
the period from July 31, 2001 to March 15, 2002, the NLRC held
that respondent failed to proved with substantial evidence that he was
selected and engaged by petitioner, that petitioner had the power to
dismiss him, and that they had the power to control him not only as to the
result of his work, but also as to the means and methods of accomplishing
his work.

Respondents motion for reconsideration was denied by the NLRC in


a Resolution9 dated December 14, 2004.

WHEREFORE, the
petition
is GRANTED and
the
assailed resolutions dated October 14, 2004 and December
14, 2004 are hereby REVERSED and SET ASIDE.
Accordingly, the decision dated October 31, 2003 of the
Labor Arbiter is REINSTATED, with the modification that the
awards
of
commission
and
damages
are deleted.
[11]
(Emphasis supplied.)

Petitioners motion for reconsideration was denied for lack of merit


by the Court of Appeals in its Resolution[12] dated September 21, 2005.

Hence, petitioner Lirio filed this petition.


Respondent filed a petition for certiorari before the Court of
Appeals.

On August 4, 2005, the Court of Appeals rendered a


decision[10] reversing and setting aside the resolution of the NLRC, and
reinstating the decision of the Labor Arbiter, with modification in regard to
the award of commission and damages. The Court of Appeals deleted the
award of commission, and moral and exemplary damages as the same
were not substantiated. The dispositive portion of the Court of Appeals
decision reads:

Petitioner states that respondent appealed to the Court of


Appeals via a petition for certiorari under Rule 65, which will prosper only
if there is a showing of grave abuse of discretion or an act without or in
excess of jurisdiction on the part of the NLRC. [13] However, petitioner
contends that the Court of Appeals decided the case not in accordance
with law and applicable rulings of this Court as petitioner could not find
any portion in the Decision of the Court of Appeals ruling that the NLRC
acted without or in excess of jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction. Petitioner submits that the
Court of Appeals could not review an error of judgment by the NLRC raised
before it on a petition for certiorari under Rule 65 of the 1997 Rules of
Civil Procedure. Moreover, petitioner contends that it was error on the part
of the Court of Appeals to review the finding of facts of the NLRC on

whether there exists an employer-employee relationship between the


parties.

Petitioners argument lacks merit.

It is noted that respondent correctly sought judicial review of the


decision of the NLRC via a petition for certiorari under Rule 65 of the Rules
of Court filed before the Court of Appeals in accordance with the decision
of the Court in St. Martin Funeral Home v. NLRC,[14] which held:
Therefore, all references in the amended Section 9 of
B.P. No. 129 to supposed appeals from the NLRC to the
Supreme Court are interpreted and hereby declared to mean
and refer to petitions for certiorari under Rule 65.
Consequently, all such petitions should henceforth be
initially filed in the Court of Appeals in strict observance
of the doctrine on the hierarchy of courts as the appropriate
forum for the relief desired.[15]

The Court of Appeals stated in its decision that the issue it had to
resolve
was whether
or
not
the
public
respondent
[NLRC]
committed grave abuse of discretion when it declared that no
employer-employee relationship exists between the petitioner and the
private respondents, since the petitioner failed to prove such fact by
substantial evidence.[16]

Errors of judgment, as distinguished from errors of jurisdiction, are


not within the province of a special civil action for certiorari, which is
merely confined to issues of jurisdiction or grave abuse of discretion. [17] By
grave abuse of discretion is meant such capricious and whimsical exercise
of judgment as is equivalent to lack of jurisdiction, and it must be shown
that the discretion was exercised arbitrarily or despotically.[18]

The Court of Appeals, therefore, could grant the petition


for certiorari if it finds that the NLRC, in its assailed decision or resolution,
committed grave abuse of discretion by capriciously, whimsically, or
arbitrarily disregarding evidence that is material to or decisive of the
controversy; and it cannot make this determination without looking into
the evidence of the parties.[19] Necessarily, the appellate court can only
evaluate the materiality or significance of the evidence, which is alleged
to have been capriciously, whimsically, or arbitrarily disregarded by the
NLRC, in relation to all other evidence on record. [20] Thus, contrary to the
contention of petitioner, the Court of Appeals can review the finding of
facts of the NLRC and the evidence of the parties to determine whether
the NLRC gravely abused its discretion in finding that no employeremployee relationship existed between petitioner and respondent.[21]

Respondent raised before the Court of Appeals the following issues:

I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION


COMMITTED GRAVE ABUSE OF DISCRETION IN SHIFTING THE
BURDEN OF PROVING THAT EMPLOYMENT RELATIONS EXISTED
BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENTS
TO THE FORMER, IN VIOLATION OF ESTABLISHED PROVISION
OF LAWS AND JURISPRUDENCE.

II. RESPONDENT
NATIONAL
LABOR
RELATIONS
COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN
HOLDING THAT NO EMPLOYER-EMPLOYEE RELATIONSHIP
EXISTED BETWEEN THE PETITIONER AND THE PRIVATE
RESPONDENTS.

III. RESPONDENT
NATIONAL
LABOR
RELATIONS
COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN
DISREGARDING THE PETITIONER'S PAYROLL AND THE PETTY
CASH VOUCHERS AS AN INDICIA OF EMPLOYMENT RELATIONS
BETWEEN PETITIONER AND THE PRIVATE RESPONDENTS.[22]

Between the documentary evidence presented by respondent and


the mere allegation of petitioner without any proof by way of any
document evincing their alleged partnership agreement, the Court of
Appeals agreed with the Labor Arbiter that petitioner failed to
substantiate his claim that he had a partnership with respondent, citing
the Labor Arbiters finding, thus:

In this case, complainant's evidence is substantial


enough to prove the employment relationship that on August
14, 2001, he was hired as 'Studio manager' by respondent
Lirio to manage and operate the recording studio and to
promote and sell its services to music enthusiasts and clients,
proven by his receipt for this purpose from said respondent a
fixed monthly compensation of P7,000.00, with commission
of P100.00 per hour when serving as recording technician,
shown by the payroll from July 31, 2001-March 15, 2002. The
said evidence points to complainant's hiring as employee so
that the case comes within the purview of our jurisdiction on
labor disputes between an employer and an employee. x x x.
Respondent Lirio's so-called existence of a
partnership agreement was not substantiated and his
assertion thereto, in the face of complainant's
evidence, constitute but a self-serving assertion,
without probative value, a mere invention to justify
the illegal dismissal.
xxxx

Indeed, we find credible that what caused complainant's


dismissal on March 14, 2002 was due to his refusal to
respondent's Lirio's insistences on merely giving him 20%
based on net profit on sale of the album which he composed
and arranged during his free time and, moreover, that
salaries which he received would be deducted therefrom,
which obviously, soured the relations from the point of view of
respondent Lirio.[23]

Hence, based on the finding above and the doctrine that 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, [24] the
Court of Appeals reversed the resolution of the NLRC and reinstated the
decision of the Labor Arbiter with modification. Even if the Court of
Appeals was remiss in not stating it in definite terms, it is implied that the
Court of Appeals found that the NLRC gravely abused its discretion in
finding that no employer-employee relationship existed between
petitioner and respondent based on the evidence on record.

We now proceed to the main issue raised before this Court: Whether
or not the decision of the Court of Appeals is in accordance with law, or
whether or not the Court of Appeals erred in reversing and setting aside
the decision of the NLRC, and reinstating the decision of the Labor Arbiter
with modification.

In petitions for review, only errors of law are generally reviewed by


this Court. This rule, however, is not ironclad. [25] Where the issue is
shrouded by a conflict of factual perceptions by the lower court or the
lower administrative body, in this case, the NLRC, this Court is constrained
to review the factual findings of the Court of Appeals.[26]

Before a case for illegal dismissal can prosper, it must first be


established that an employer-employee relationship existed between
petitioner and respondent.[27]

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.[28]

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


the existence of an employer-employee relationship. [29] Any competent
and relevant evidence to prove the relationship may be admitted. [30]

In this case, the documentary evidence presented by respondent to


prove that he was an employee of petitioner are as follows: (a) a
document denominated as "payroll" (dated July 31, 2001 to March 15,
2002) certified correct by petitioner,[31] which showed that respondent
received a monthly salary of P7,000.00 (P3,500.00 every 15th of the
month and another P3,500.00 every 30th of the month) with the
corresponding deductions due to absences incurred by respondent; and
(2) copies of petty cash vouchers, [32]showing the amounts he received and
signed for in the payrolls.

The said documents showed that petitioner hired respondent as an


employee and he was paid monthly wages of P7,000.00. Petitioner
wielded the power to dismiss as respondent stated that he was verbally
dismissed by petitioner, and respondent, thereafter, filed an action for
illegal dismissal against petitioner. The power of control refers merely to
the existence of the power.[33] It is not essential for the employer to
actually supervise the performance of duties of the employee, as it is
sufficient that the former has a right to wield the power. [34] Nevertheless,
petitioner stated in his Position Paper that it was agreed that he would
help and teach respondent how to use the studio equipment. In such
case, petitioner certainly had the power to check on the progress and
work of respondent.

On the other hand, petitioner failed to prove that his relationship


with respondent was one of partnership. Such claim was not supported by
any written agreement. The Court notes that in the payroll dated July 31,
2001 to March 15, 2002,[35] there were deductions from the wages of
respondent for his absence from work, which negates petitioners claim
that the wages paid were advances for respondents work in the
partnership. In Nicario v. National Labor Relations Commission,
[36]
the Court held:

It is a well-settled doctrine, that if doubts exist between


the evidence presented by the employer and the employee,
the scales of justice must be tilted in favor of the latter. It is a
time-honored rule that in controversies between a laborer and
his master, doubts reasonably arising from the evidence, or in
the interpretation of agreements and writing should be

resolved in the formers favor. The policy is to extend the


doctrine to a greater number of employees who can avail of
the benefits under the law, which is in consonance with the
avowed policy of the State to give maximum aid and
protection of labor. This rule should be applied in the case at
bar, especially since the evidence presented by the private
respondent company is not convincing. x x x[37]

Based on the foregoing, the Court agrees with the Court of Appeals
that the evidence presented by the parties showed that an employeremployee relationship existed between petitioner and respondent.
In termination cases, the burden is upon the employer to show by
substantial evidence that the termination was for lawful cause and validly
made.[38] Article 277 (b) of the Labor Code [39] puts the burden of proving
that the dismissal of an employee was for a valid or authorized cause on
the employer, without distinction whether the employer admits or does
not admit the dismissal.[40] For an employees dismissal to be valid, (a) the
dismissal must be for a valid cause, and (b) the employee must be
afforded due process.[41]Procedural due process requires the employer to
furnish an employee with two written notices before the latter is
dismissed: (1) the notice to apprise the employee of the particular acts or
omissions for which his dismissal is sought, which is the equivalent of a
charge; and (2) the notice informing the employee of his dismissal, to be
issued after the employee has been given reasonable opportunity to
answer and to be heard on his defense.[42] Petitioner failed to comply with
these legal requirements; hence, the Court of Appeals correctly affirmed
the Labor Arbiters finding that respondent was illegally dismissed, and

entitled to the payment of backwages, and separation pay in lieu of


reinstatement.

WHEREFORE, the petition is DENIED. The Decision of the Court of


Appeals in CA-G.R. SP No. 88899, dated August 4, 2005, and its Resolution
dated September 21, 2005, are AFFIRMED.

- versus -

CORONA, C.J., Chairperson,


LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

BCC PRODUCTS SALES INC.,


Promulgated:
and TERRANCE TY,
April 18, 2012
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION

No costs.

BERSAMIN, J.:

SO ORDERED.

The issue is whether petitioner was respondents employee or not.


Respondents denied an employer-employee relationship with petitioner,
who insisted the contrary.
Through his petition for review on certiorari, petitioner appeals the
decision promulgated by the Court of Appeals (CA) on February 27, 2004,
[1]
finding no employee-employer relationship between him and
respondents, thereby reversing the ruling by the National Labor Relations
Commission (NLRC) to the effect that he was the employee of
respondents.

CHARLIE JAO,
Petitioner,

G.R. No. 163700


Present:

Antecedents
Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and
its President, respondent Terrance Ty (Ty), employed him as comptroller

starting from September 1995 with a monthly salary of P20,000.00 to


handle the financial aspect of BCCs business; [2] that on October 19,1995,
the security guards of BCC, acting upon the instruction of Ty, barred him
from entering the premises of BCC where he then worked; that his
attempts to report to work in November and December 12, 1995 were
frustrated because he continued to be barred from entering the premises
of BCC;[3] and that he filed a complaint dated December 28, 1995 for
illegal dismissal, reinstatement with full backwages, non-payment of
wages, damages and attorneys fees.[4]
Respondents countered that petitioner was not their employee but the
employee of Sobien Food Corporation (SFC), the major creditor and
supplier of BCC; and that SFC had posted him as its comptroller in BCC to
oversee BCCs finances and business operations and to look after SFCs
interests or investments in BCC.[5]
Although Labor Arbiter Felipe Pati ruled in favor of petitioner on June
24, 1996,[6] the NLRC vacated the ruling and remanded the case for
further proceedings.[7]Thereafter, Labor Arbiter Jovencio Ll. Mayor
rendered a new decision on September 20, 2001, dismissing petitioners
complaint for want of an employer-employee relationship between the
parties.[8] Petitioner appealed the September 20, 2001 decision of Labor
Arbiter Mayor.
On July 31, 2002, the NLRC rendered a decision reversing Labor
Arbiter Mayors decision, and declaring that petitioner had been illegally
dismissed. It ordered the payment of unpaid salaries, backwages and
13th month pay, separation pay and attorneys fees. [9] Respondents moved
for the reconsideration of the NLRC decision, but their motion for

reconsideration was denied on September 30, 2002.[10] Thence,


respondents assailed the NLRC decision on certiorari in the CA.
Ruling of the CA
On February 27, 2004, the CA promulgated its assailed decision,
[11]
holding:
After a judicious review of the records vis--vis the respective
posturing of the contending parties, we agree with the finding
that no employer-employee relationship existed between
petitioner BCC and the private respondent. On this note, the
conclusion of the public respondent must be reversed for
being issued with grave abuse of discretion.
Etched in an unending stream of cases are the four (4)
standards in determining the existence of an employeremployee relationship, namely, (a) the manner of selection
and engagement of the putative employee; (b) the mode of
payment of wages; (c) the presence or absence of power of
dismissal; and, (d) the presence or absence of control of the
putative employees conduct. Of these powers the power of
control over the employees conduct is generally regarded as
determinative of the existence of the relationship.
Apparently, in the case before us, all these four elements are
absent. First, there is no proof that the services of the private
respondent were engaged to perform the duties of a
comptroller in the petitioner company. There is no proof that
the private respondent has undergone a selection procedure
as a standard requisite for employment, especially with such a
delicate position in the company. Neither is there any proof of
his appointment nor is there any showing that the parties
entered into an employment contract, stipulating thereof that
he will receive P20,000.00/month salary as comptroller, before
the private respondent commenced with his work as
such. Second, as clearly established on record, the private

respondent was not included in the petitioner companys


payroll during the time of his alleged employment with the
former. True, the name of the private respondent Charlie Jao
appears in the payroll however it does not prove that he has
received his remuneration for his services. Notably, his name
was not among the employees who will receive their salaries
as represented by the payrolls. Instead, it appears therein as
a comptroller who is authorized to approve the same. Suffice
it to state that it is rather obscure for a certified public
accountant doing the functions of a comptroller from
September 1995 up to December 1995 not to receive his
salary during the said period. Verily, such scenario does not
conform with the usual and ordinary experience of
man. Coming now to the most controlling factor, the records
indubitably reveal the undisputed fact that the petitioner
company did not have nor did not exercise the power of
control over the private respondent. It did not prescribe the
manner by which the work is to be carried out, or the time by
which the private respondent has to report for and leave from
work. As already stated, the power of control is such an
important factor that other requisites may even be
disregarded. In Sevilla v. Court of Appeals, the Supreme
Court emphatically held, thus:
The control test, under which the person for
whom the services are rendered reserves the
right to direct not only the end to be achieved
but also the means for reaching such end, is
generally relied on by the courts.
We have carefully examined the evidence submitted by the
private respondent in the formal offer of evidence and
unfortunately, other than the bare assertions of the private
respondent which he miserably failed to substantiate, we find
nothing therein that would decisively indicate that the
petitioner BCC exercised the fundamental power of control
over the private respondent in relation to his employmentnot
even the ID issued to the private respondent and the

affidavits executed by Bertito Jemilla and Rogelio Santias. At


best, these pieces of documents merely suggest the existence
of employer-employee relationship as intimated by the
NLRC. On the contrary, it would appear that the said sworn
statement provided a substantial basis to support the
contention that the private respondent worked at the
petitioner BCC as SFCs representative, being its major creditor
and supplier of goods and merchandise. Moreover, as clearly
pointed out by the petitioner in his Reply to the private
respondents Comment, it is unnatural for SFC to still employ
the private respondent to oversee and supervise collections of
account receivables due SFC from its customers or clients like
the herein petitioner BCC on a date later than December,
1995 considering that a criminal complaint has already been
instituted against him.
Sadly, the private respondent failed to sufficiently discharge
the burden of showing with legal certainty that employeeemployer relationship existed between the parties. On the
other hand, it was clearly shown by the petitioner that it
neither exercised control nor supervision over the conduct of
the private respondents employment. Hence, the allegation
that there is employer-employee relationship must necessarily
fail.
Consequently, a discussion on the issue of illegal dismissal
therefore becomes unnecessary.
WHEREFORE, premises considered, the petition is
GRANTED. The assailed Decision of the public respondent
NLRC dated July 31, 2002 and the Resolution dated September
30, 2002 are REVERSED and SET ASIDE. Accordingly, the
decision of the Labor Arbiter dated September 20, 2001 is
hereby REINSTATED.
SO ORDERED.

After the CA denied petitioners motion for reconsideration on May 14,


2004,[12] he filed a motion for extension to file petition for review, which
the Court denied through the resolution dated July 7, 2004 for failure to
render an explanation on why the service of copies of the motion for
extension on respondents was not personally made.[13] The denial
notwithstanding, he filed his petition for review on certiorari. The Court
denied the petition on August 18, 2004 in view of the denial of the motion
for extension of time and the continuing failure of petitioner to render the
explanation as to the non-personal service of the petition on respondents.
[14]
However, upon a motion for reconsideration, the Court reinstated the
petition for review on certiorari and required respondents to comment.[15]
Issue
The sole issue is whether or not an employer-employee relationship
existed between petitioner and BCC. A finding on the existence of an
employer-employee relationship will automatically warrant a finding of
illegal dismissal, considering that respondents did not state any valid
grounds to dismiss petitioner.
Ruling
The petition lacks merit.
The existence of an employer-employee relationship is a question of fact.
Generally, a re-examination of factual findings cannot be done by the
Court acting on a petition for review on certiorari because the Court is not
a trier of facts but reviews only questions of law. Nor may the Court be
bound to analyze and weigh again the evidence adduced and considered
in the proceedings below.[16] This rule is not absolute, however, and admits

of exceptions. For one, the Court may look into factual issues in labor
cases when the factual findings of the Labor Arbiter, the NLRC, and the CA
are conflicting.[17]
Here, the findings of the NLRC differed from those of the Labor Arbiter and
the CA. This conflict among such adjudicating offices compels the Courts
exercise of its authority to review and pass upon the evidence presented
and to draw its own conclusions therefrom.
To prove his employment with BCC, petitioner offered the following: (a)
BCC Identification Card (ID) issued to him stating his name and his
position as comptroller, and bearing his picture, his signature, and the
signature of Ty; (b) a payroll of BCC for the period of October 1-15, 1996
that petitioner approved as comptroller; (c) various bills and receipts
related to expenditures of BCC bearing the signature of petitioner; (d)
various checks carrying the signatures of petitioner and Ty, and, in some
checks, the signature of petitioner alone; (e) a court order showing that
the issuing court considered petitioners ID as proof of his employment
with BCC; (f) a letter of petitioner dated March 1, 1997 to the Department
of Justice on his filing of a criminal case for estafa against Ty for nonpayment of wages; (g) affidavits of some employees of BCC attesting that
petitioner was their co-employee in BCC; and (h) a notice of raffle dated
December 5, 1995 showing that petitioner, being an employee of BCC,
received the notice of raffle in behalf of BCC.[18]
Respondents denied that petitioner was BCCs employee. They affirmed
that SFC had installed petitioner as its comptroller in BCC to oversee and
supervise SFCs collections and the account of BCC to protect SFCs
interest; that their issuance of the ID to petitioner was only for the
purpose of facilitating his entry into the BCC premises in relation to his

work of overseeing the financial operations of BCC for SFC; that the ID
should not be considered as evidence of petitioners employment in BCC;
[19]
that petitioner executed an affidavit in March 1996, [20] stating, among
others, as follows:
1.

2.

3.

I am a CPA (Certified Public Accountant) by profession


but presently associated with, or employed by,
Sobien Food Corporation with the same business
address as abovestated;
In the course of my association with, or
employment by, Sobien Food Corporation (SFC, for
short), I have been entrusted by my employer to
oversee and supervise collections on account of
receivables due SFC from its customers or clients;
for instance, certain checks due and turned over by
one of SFCs customers is BCC Product Sales, Inc.,
operated or run by one Terrance L. Ty, (President
and General manager), pursuant to, or in
accordance with, arrangements or agreement
thereon; such arrangement or agreement is duly
confirmed by said Terrance Ty, as shown or admitted by
him in a public instrument executed therefor, particularly
par. 2 of that certain Counter-Affidavit executed and
subscribed on December 11, 1995, xerox copy of which is
hereto attached, duly marked as Annex A and made
integral part hereof.
Despite such admission of an arrangement, or
agreement insofar as BCC-checks were delivered to, or
turned over in favor of SFC, Mr. Terrance Ty, in a desire
to blemish my reputation or to cause me dishonor as well
as to impute unto myself the commission of a crime, state
in another public instrument executed therefor in that:
3. That all the said 158 checks were unlawfully
appropriated by a certain Charlie Jao absolutely

without any authority from BCC and the same were


reportedly turned over by said Mr. Jao to a person
who is not an agent or is not authorized
representative of BCC.
xerox copy of which document (Affidavit) is hereto
attached, duly marked as Annex B and made integral part
hereof. (emphasis supplied)
and that the affidavit constituted petitioners admission of the
arrangement or agreement between BCC and SFC for the latter to appoint
a comptroller to oversee the formers operations.
Petitioner counters, however, that the affidavit did not establish the
absence of an employer-employee relationship between him and
respondents because it had been executed in March 1996, or after his
employment with respondents had been terminated on December 12,
1995; and that the affidavit referred to his subsequent employment by
SFC following the termination of his employment by BCC.[21]
We cannot side with petitioner.
Our perusal of the affidavit of petitioner compels a conclusion
similar to that reached by the CA and the Labor Arbiter to the effect that
the affidavit actually supported the contention that petitioner had really
worked in BCC as SFCs representative. It does seem more natural and
more believable that petitioners affidavit was referring to his employment
by SFC even while he was reporting to BCC as a comptroller in behalf of
SFC. As respondents pointed out, it was implausible for SFC to still post
him to oversee and supervise the collections of accounts receivables due
from BCC beyond December 1995 if, as he insisted, BCC had already
illegally dismissed him and had even prevented him from entering the

premises of BCC. Given the patent animosity and strained relations


between him and respondents in such circumstances, indeed, how could
he still efficiently perform in behalf of SFC the essential responsibility to
oversee and supervise collections at BCC? Surely, respondents would
have vigorously objected to any arrangement with SFC involving him.
We note that petitioner executed the affidavit in March 1996 to
refute a statement Ty himself made in his own affidavit dated December
11, 1995 to the effect that petitioner had illegally appropriated some
checks without authority from BCC. [22] Petitioner thereby sought to show
that he had the authority to receive the checks pursuant to the
arrangements between SFC and BCC. This showing would aid in fending
off the criminal charge respondents filed against him arising from his
mishandling of the checks. Naturally, the circumstances petitioner
adverted to in his March 1996 affidavit concerned those occurring
before December 11, 1995, the same period when he actually worked as
comptroller in BCC.
Further, an affidavit dated September 5, 2000 by Alfredo So, the
President of SFC, whom petitioner offered as a rebuttal witness, lent
credence to respondents denial of petitioners employment. So declared in
that affidavit, among others, that he had known petitioner for being
earlier his retained accountant having his own office but did not hold
office in SFCs premises; that Ty had approached him (So) looking for an
accountant or comptroller to be employed by him (Ty) in [BCCs]
distribution business of SFCs general merchandise, and had later asked
him on his opinion about petitioner; and that he (So) had subsequently
learned that Ty had already employed [petitioner] as his comptroller as of
September 1995.[23]

The statements of So really supported respondents position in that


petitioners association with SFC prior to his supposed employment by BCC
went beyond mere acquaintance with So. That So, who had earlier merely
retained petitioner as his accountant, thereafter employed petitioner as a
retained accountant after his supposed illegal dismissal by BCC raised a
doubt as to his employment by BCC, and rather confirmed respondents
assertion of petitioner being an employee of SFC while he worked at BCC.
Moreover, in determining the presence or absence of an employeremployee relationship, the Court has consistently looked for the following
incidents, to wit: (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 employee on the means and methods by which the
work is accomplished. The last element, the so-called control test, is the
most important element.[24]
Hereunder are some of the circumstances and incidents occurring
while petitioner was supposedly employed by BCC that debunked his
claim against respondents.
It can be deduced from the March 1996 affidavit of petitioner that
respondents challenged his authority to deliver some 158 checks to SFC.
Considering that he contested respondents challenge by pointing to the
existing arrangements between BCC and SFC, it should be clear that
respondents did not exercise the power of control over him, because he
thereby acted for the benefit and in the interest of SFC more than of BCC.
In addition, petitioner presented no document setting forth the terms of
his employment by BCC. The failure to present such agreement on terms
of employment may be understandable and expected if he was a common

or ordinary laborer who would not jeopardize his employment by


demanding such document from the employer, but may not square well
with his actual status as a highly educated professional.
Petitioners admission that he did not receive his salary for the three
months of his employment by BCC, as his complaint for illegal dismissal
and non-payment of wages[25]and the criminal case for estafa he later filed
against the respondents for non-payment of wages [26] indicated, further
raised grave doubts about his assertion of employment by BCC. If the
assertion was true, we are puzzled how he could have remained in BCCs
employ in that period of time despite not being paid the first salary
of P20,000.00/month. Moreover, his name did not appear in the payroll of
BCC despite him having approved the payroll as comptroller.
Lastly, the confusion about the date of his alleged illegal dismissal
provides another indicium of the insincerity of petitioners assertion of
employment by BCC. In the petition for review on certiorari, he averred
that he had been barred from entering the premises of BCC on October
19, 1995,[27] and thus was illegally dismissed. Yet, his complaint for illegal
dismissal stated that he had been illegally dismissed on December 12,
1995 when respondents security guards barred him from entering the
premises of BCC,[28] causing him to bring his complaint only on December
29, 1995, and after BCC had already filed the criminal complaint against
him. The wide gap between October 19, 1995 and December 12,
1995 cannot be dismissed as a trivial inconsistency considering that the
several incidents affecting the veracity of his assertion of employment by
BCC earlier noted herein transpired in that interval.
With all the grave doubts thus raised against petitioners claim, we need
not dwell at length on the other proofs he presented, like the affidavits of
some of the employees of BCC, the ID, and the signed checks, bills and

receipts. Suffice it to be stated that such other proofs were easily


explainable by respondents and by the aforestated circumstances
showing him to be the employee of SFC, not of BCC.
WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals;
and ORDERS petitioner to pay the costs of suit.
SO ORDERED.

EXPONENTS, INC. (PRIME) AND JC ATHLETES, INC.


(JCA),Respondents.
DECISION
BRION, J.:
We resolve petitioner Marites R. Cusap's appeal1 from the September 21,
2011 decision2 and February 20, 2012 resolution3 of the Court of Appeals
in CA-G.R. SP No. 104725.
The Antecedents
On January 21, 2003, the petitioner and 27 other employees
(complainants) filed a complaint for illegal dismissal4 against
the respondents Adidas Philippines Inc. (Adidas) and Promotion
Resources Inter-Marketing Exponents, Inc. (PRIME). The complainants later
amended the complaint to include JC Athletes, Inc. (JCA), as a
respondent.5 They prayed for reinstatement with back wages, separation
pay (should reinstatement be no longer feasible), 13th month pay, service
incentive leave pay, and damages.
Through their "Magkasanib na Sinumpaang Salaysay,"6 the complainants
alleged that they were regular employees of Adidas after having worked
as promo girls and stockmen at the company's various rented outlets for
years, ranging from one year to seven years; the earliest employed (June
1, 1995) was Nova Toque while the latest was Aquilino Banaag
(September 21, 2000). The petitioner was hired on October 28,
1995.7ChanRoblesVirtualawlibrary

G.R. No. 201494, July 29, 2015


MARITES R. CUSAP, Petitioner, v. ADIDAS PHILIPPINES, INC.,
(ADIDAS), PROMOTION RESOURCES & INTER-MARKETING

The record shows that Adidas is engaged in the manufacture and


marketing of different lines of shoes and other sporting goods and apparel
in the Philippines.8 After its contract with its former distributor, World
Sports, Inc. (WOSI) allegedly expired, it contracted9 JCA to be its exclusive
distributor nationwide for one year or from January 1, 2002 to December
31, 2002. In turn, JCA entered into a Promotional Contract10 with PRIME to
meet the promotional requirements in the distribution of Adidas products.
PRIME supposedly assigned the complainants to JCA for the purpose.

The complainants claimed that they were dismissed from employment on


December 9, 2002, when the service contract between PRIME and JCA
was terminated. This notwithstanding, they argued that Adidas was their
real employer, not PRIME which, they believed, was merely a recruitment
agency supplying Adidas with manpower. PRIME was being used, they
further claimed, to conceal the actual employment relationship between
them and Adidas.
They pointed out that for the years that they were employed, they worked
for Adidas, under the supervision and control of Adidas and JCA personnel.
They stressed that their work was related to and in pursuit of Adidas'
principal business activity (the marketing of its products), thereby making
them regular employees of the company. This was their reason for
demanding their regularization by Adidas.
Further, the complainants maintained that JCA was a mere alter ego of
Adidas and was being used to further muddle the employment
relationship between them and Adidas. JCA's actual role as a dummy
(together with PRIME) for Adidas, the complainants explained, was
evidenced by the fact that JCA and Adidas occupied the same office. JCA
took the place of WOSI as distributor of Adidas products.
Elaborating on their "muddled" employment status in relation with Adidas,
the complainants bewailed that JCA was erroneously identified as
"distributor" of Adidas products as no evidence showed that JCA
purchased the Adidas products they were selling.11 Under their supposed
Distribution Agreement, the "Distributor shall purchase the Products only
from Adidas or any other sources expressly designated by Adidas and sell
the Products in its own name and for its own account x x
x."12ChanRoblesVirtualawlibrary
The complainants asserted that the products they were selling at various
outlets remained the property and under the control of Adidas - it was
Adidas that provided the warehouse where the products were stored, that
leased the outlets from department stores, and that provided regular
training to them.13 Also, the proceeds of the sales were directly deposited
to the bank account of Adidas. Moreover, their salaries and other

monetary benefits supposedly paid by PRIME were charged to the account


of Adidas, as indicated in their payslips.14 They argued that if JCA
purchased the products being sold and were already its property, there
was no point to still charge complainants' wages and benefits to the
Adidas' account.
These circumstances, complainants stressed, confirmed their position that
JCA and PRIME were only intermediaries of Adidas and were used to
conceal Adidas' identity as their real employer.
To substantiate their assertion that PRIME was just an intermediary of
Adidas, they submitted documentary proof that it was not even a
registered corporation, labor recruiter, or agency when it supposedly
entered into a contract with JCA; neither with the Securities and Exchange
Commission15nor with the Department of Trade and Industry.16 It was
registered as a "job contractor/subcontractor" only on May 20,
2002.17 They thus maintained that PRIME was just a labor-only contractor
at the time it claimed it had employed them for its supposed undertaking
with JCA.
In defense, Adidas argued that in 2002, it amended its Articles of
Incorporation18 to enable it to engage in the retail business
without the need to contract the services of distributors such as
JCA, following the approval by the Board of Investments of the application
of its mother company, Adidas Solomon AG, to operate as a foreign
retailer in the country. As a consequence, it no longer renewed
its Distribution Agreement with JCA when it expired on December 31,
2002.
Necessarily, it maintained, the Promotion Contract between JCA and
PRIME was also terminated, resulting in the complainants' dismissal.
However, for purposes of proper inventory, accounting and turnover of
products, it agreed with JCA for a hold-over period of three months ending
March 31, 2003.
Also, Adidas turned down the complainants' demand for regularization as
they were employees of PRIME. It claimed it was PRIME who exercised
control over their work; at most, the supervision it exercised over the

complainants was only to provide them guidelines in aid of their


marketing work. It added that neither could it satisfy their money claims
because they were legally dismissed when their contracts with PRIME
expired.

shown that it paid their 13th month pay and service incentive leave pay.
However, for reasons of equity and humanitarian considerations, LA
Salinas awarded the petitioner and the complainants financial assistance
of one-half month's salary for every year of service.

For its part, JCA prayed for the dismissal of the complaint as far as it was
concerned in view of what it claimed - its valid job contract with PRIME,
the complainants' employer. It averred that it was PRIME who exercised
the power to select, engage, and dismiss the complainants, and who
assumed the obligation to pay their wages. To bolster its position, JCA
presented quitclaim and release papers executed by some employees in
favor ofPRIME.19ChanRoblesVirtualawlibrary

The petitioner and 15 of the other complainants appealed. The 15


however moved to withdraw their appeal, which the National Labor
Relations Commission (NLRC) granted in its decision24 of January 23, 2008,
leaving only the petitioner to pursue the case. Eventually, NLRC denied
the appeal. It also denied the petitioner's motion for reconsideration,
prompting her to seek recourse from the CA through a petition
for certiorari. She charged the NLRC with grave abuse of discretion in
rejecting her appeal and motion for reconsideration; as it was, she
lamented, contrary to law and jurisprudence.

JCA added that whatever liability it had with the complainants was limited
to satisfying their unpaid wages to the extent of the work performed
under its Promotion Contract with PRIME. However, PRIME'S payment of
its monetary obligations to the complainants extinguished its liability
towards them.
As its co-respondents did, PRIME denied liability, contending that it hired
the complainants as contractual employees for its project with JCA to
promote Adidas products. It maintained that their employment was
terminated when its contract with JCA expired and was not renewed. Thus,
the petitioner and the other complainants were not illegally dismissed and
were not therefore entitled to reinstatement and back wages. On the
issue of its legal personality as an independent contractor, it submitted
certificates of registration from the DTI,20 DOLE,21 and SEC22 to establish
that it had been in operation earlier than May 20, 2002.
The Rulings on Compulsory Arbitration
In a decision23 dated February 23, 2004, Labor Arbiter (LA) Elias H. Salinas
dismissed the complaint for lack of merit, holding that PRIME was the
complainants' employer as it was PRIME who hired them to work under
its Promotions Contract with JCA. LA Salinas found the complainants'
dismissal valid in view of the termination and nonrenewal of the contract.
LA Salinas denied the complainants' money claims, finding that PRIME had

The CA Decision
Before the CA, the petitioner reiterated her position in compulsory
arbitration that Adidas was her employer, not JCA or PRIME, since the two
entities were mere dummies/intermediaries or were labor-only contractors
of Adidas. She insisted that JCA and PRIME carried out - under their
respective contracts - Adidas' merchandising activities using Adidas'
premises and equipment with PRIME'S purported employees working
under the supervision and control of Adidas' personnel.
The CA 10th Division denied the petition in its September 21,
201125 decision and affirmed the assailed NLRC rulings as they were not
rendered with grave abuse of discretion. It held that the rulings were
supported by evidence establishing PRIME to be a "legitimate job
contractor" as it possessed substantial capital to finance its promotions
undertaking with JCA. The evidence, the CA explained, consisted of
remittances to Philhealth, SSS and Pag-ibig26 which showed that PRIME
fulfilled its obligations toward its employees under the government's
welfare programs.
Applying the four-fold employer-employee relationship test,27 the CA found
PRIME to be the complainants' and the petitioner's employer as it was
PRIME which (1) hired the complainants;28 (2) paid their wages;29 (3)

dismissed them upon the expiration of the contract for which they were
hired; and (4) exercised control over them with respect to the conduct of
the work to be performed.30ChanRoblesVirtualawlibrary
Consequently, the CA brushed aside the random certificates of
attendance in Adidas seminars31 of some of the complainants to prove
that Adidas was their employer, agreeing with NLRC finding that the
"certificates only establish the fact that complainants attended the
seminars for product knowledge, service quality, and retail
service."32ChanRoblesVirtualawlibrary
The petitioner moved for reconsideration of the CA decision, to no avail,
as the CA denied the motion in its February 20, 2012
resolution.33ChanRoblesVirtualawlibrary
The Petition
The petitioner now asks this Court to reverse the CA rulings, contending
that the appeals court seriously erred and gravely abused its discretion
when it held that she was an employee of PRIME, not of Adidas, and was
validly dismissed, contrary to law and applicable jurisprudence.
Before the Court, the petitioner reiterates the arguments she presented to
the CA, particularly the following factual narration:
chanRoblesvirtualLawlibrary
1. She applied at Adidas in its former address at Estrata 200,
Emerald Avenue, Ortigas Center City. After the interviews
made by Ms. Cornelia Indon (Head Concession, World of
Sports Inc.) and Mr. Enrique Victoria (Adidas Sales Manager),
they ordered her to proceed to the office of PRIME and from
there she was given a letter of introduction ("intro letter")
addressed to the outlet where she was assigned.

2. She was assigned to different Adidas outlets and she, together


with her co-employees, were supervised by Adidas managers
and supervisors Cornelia Indon, Sonny Niebres (Managing
Director) and Philip Go (President). It was not PRIME who
supervised them; neither was it JCA.
3. The sales in the outlets were deposited directly to the bank
account of Adidas and not to JCA or PRIME bank accounts.
4. The products being sold and the tools she used in the
performance of her duty were owned by Adidas. Adidas was
also the one that paid the rents in the stores where it has
concessions.
5. She continued to work in different Adidas outlets for more
than seven years.
The petitioner submits that Adidas, JCA and PRIME failed to refute the
above narration or to present any evidence to the contrary. Citing Lakas
sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng
Manggawang Promo ng Burlingame v. Burlingame Corporation,34 she
argues that as promo girl, her work is directly related to Adidas' principal
business or operations, which makes her a regular employee of the
company.
On the other hand, she points out, JCA and PRIME did not carry on an
independent business or undertook the performance of their service
contracts according to their own manner and methods, free from the
control and supervision of the principal Adidas. The two entities, she
insists, were mere labor-only contractors.
It is thus clear, the petitioner submits, that an employer-employee
relationship existed between her and Adidas. Accordingly, she prays that:
(1) she be declared a regular employee of Adidas; (2) Adidas be ordered
(a) to reinstate her with full back wages or to pay her back wages and
separation pay if reinstatement is no longer feasible; (b) to grant her
moral and exemplary damages, plus attorney's fees; and (3) JCA and

PRIME be declared jointly and solidarity liable with Adidas for all her other
money claims.
The Case for the Respondents
In its Comment35 filed on June 7, 2012, Adidas asks for the dismissal of the
petition, arguing principally that the petitioner failed to present any
cogent reason to reverse the CA factual conclusions upholding the labor
tribunals' ruling that the petitioner was an employee of PRIME and was
not illegally dismissed.
To support its position, Adidas submits that the arguments relied upon by
the petitioner are substantially identical with those raised in
her certiorari petition with the CA, which do not merit further
consideration as they had already been correctly passed upon by the
appellate court.
Adidas bewails the petitioner's repeated reference to her regular
employment with it and not with PRIME, "adducing in evidence only her
self-serving Salaysay which simply stated her baseless claims."36 On the
other hand, it was able to present proof, together with JCA and PRIME,
showing that PRIME was the petitioner's employer, it being, like JCA, an
independent and distinct business entity.
The respondents JCA and PRIME opted not to comment on the petition,
despite being required by the Court to do so.37ChanRoblesVirtualawlibrary
The Court's Ruling
We find merit in the petition based on the evidence on record.
The evidence relied upon by LA Salinas, the NLRC, and the CA was
insufficient to support their conclusion that the petitioner was an
employee of PRIME. On the contrary, the evidence points to Adidas as
the petitioner's and the complainants' real employer.
PRIME is a labor-only contractor; JCA an agent/intermediary of
Adidas

One of the criteria the CA cited as a basis of its conclusion that PRIME was
a legitimate job contractor was its possession of "substantial capital to
finance its undertakings,"38 yet it was silent on what these undertakings
were. It merely said: "We reached this conclusion based on records which
showed PRIME has fulfilled its obligations towards its employees as
regards remittances to Philhealth, the SSS and Pag-ibig."39 The CA
conclusion, to our mind, fell short of establishing that PRIME satisfied the
substantial-capital requirement for legitimate job contractors under the
law and the rules.
Article 106 of the Labor Code provides that "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 the employer. In such cases, the
person or intermediary shall be considered merely an agent of
the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by
him. (emphasis supplied)
Sec. 5. Department Order No. 18-02, s. of 2002, implementing Articles
106 to 109 of the Labor Code,prohibits labor-only contracting and
defines it as "an arrangement where the contractor or sub-contractor
merely recruits, supplies or places workers to perform a job, work or
service for a principal, and any of the following is present: (i) The
contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and
the workers recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the
principal business of the employer; or (ii) the contractor does not exercise
the right to control over the performance of the work of the contractual
employee, x x x'substantial capital or investment' refers to capital
stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work premises,
actually and directly used by the contractor or subcontractor in
the performance or completion of the job, work or service

contracted out." (emphasis supplied)


Aside from PRIME'S remittances of employee contributions to Philhealth,
SSS, and Pag-ibig and the payment for the complainants' and the
petitioner's wages, we find no indication, except mostly general
statements from Adidas, PRIME and JCA, that PRIME possessed
substantial capital or investment to operate as a legitimate job contractor
or subcontractor.
According to Adidas, not only did PRIME have substantial capital or
investment to run its own business operations independent of its clients, it
also has sufficient capability to control and supervise its employees. Yet it
offered no proof to substantiate its claim,40 other than its recognition of
PRIME'S capability to fulfill its obligations towards its employees.
The same thing is true with PRIME. It likewise offered no proof of how or in
what manner its purported substantial capital financed its "promotional
and inter-marketing business"41 with JCA, except to say that in the pursuit
of its business operations, "it has complied with all the requirements of
law anent the rights, privileges and benefits of its
employees."42ChanRoblesVirtualawlibrary
For its part, JCA relied principally on its promotional contract with PRIME to
avoid liability, saying that the terms of their service agreement
demonstrate the earmarks of an employer under the four-fold employeremployee relationship test.43 It also presented no proof of how or in what
manner PRIME carried out its undertaking under the contract; although
like Adidas, it acknowledged PRIME'S payment of the petitioners' and the
complainants' wages, and remittances to Philhealth, SSS, and Pag-ibig.
While the payment of wages and workers' benefits is one of the
determinants of an employer-employee relationship, we do not find it a
reliable basis in this case. In fact, a closer look at the payslips44 of PRIME'S
supposed employees reveals that the complainants' salaries and benefits
were under the account of Adidas,45 giving credence to their claim that
their compensation was charged to Adidas. If indeed JCA and PRIME were
an independent contractor and a subcontractor, respectively, why would
the name "ADIDAS" still appear on the payslips of PRIME'S employees.

The answer lies in the fact that Adidas avoided being identified as the
complainants' direct employer so that it would not have to bear the
consequences of the complainants' and the petitioner's regularization.
Notably, the records show46 that these complainants and the petitioner
were engaged not only in 2002, but much earlier; some were even hired
in 1995, including the petitioner, who started selling Adidas products on
October 28, 1995. In fact, LA Salinas relied on the complainants' several
years of service of selling Adidas products in awarding financial assistance
to them.
Under these circumstances, we have reason to believe that PRIME, the
supposed JCA subcontractor, just assumed the act of paying the
complainants' wages and benefits on behalf of Adidas, indicating thereby
that it was a mere agent of Adidas or a labor-only
contractor.47ChanRoblesVirtualawlibrary
In the light of the complete absence of proof that PRIME applied its
"substantial capital or investment" in performing the promotional job it
contracted with JCA, we find credence in the petitioner's submission that
the products she was selling remained to be the property and under the
control of Adidas; that it was Adidas who owned the warehouse where
they were stored; that leased the sales outlets from department stores;
and that provided regular training to her and to the other
complainants. The record shows that this particular claim by the
petitioner had not been disputed by either Adidas or JCA.
Moreover, if in fact Adidas entered a distribution agreement with JCA, we
wonder why the products the petitioner and the other supposed
"contractual employees" were selling were retained and remained to be
under the control of Adidas, and also, why the proceeds of the sales went
into Adidas' bank account. The answer is because JCA itself is not an
independent contractor. It was merely an agent or intermediary of Adidas,
despite the distribution agreement between them which they did not even
honor since, as required under Section 2.2 of the agreement,48 the
distributor shall purchase the Adidas products and sell them in its own
name and for its own account.

Although Adidas claims that by virtue of the agreement, JCA did not
purchase but rather had in its custody and safekeeping different Adidas
products, for distribution to different sales outlets in the
country,49 nowhere in the record does it appear that the agreement had
been amended to allow such arrangement. Neither has it been shown how
or in what manner the distribution was to be done. It was not also shown
who managed and provided the storage places and the sales outlets for
the products.
Again, in the absence of evidence that JCA had the wherewithal to
undertake its distribution agreement with Adidas, except to enter into a
promotions contract with PRIME, we find merit in the petitioner's
contention that Adidas and JCA, at a time, held office in the same address;
and that Adidas provided the storage places and the outlets for the
distribution of its products, not PRIME or JCA. As the petitioner points out,
formerly it was WOSI and later JCA which acted as agent of Adidas. The
record bears out her observations.
The petitioner performed activities necessary to the principal
business of Adidas
Thus, the petitioner and the complainants (who withdrew from the case)
were performing activities that were necessary to market the products
that Adidas itself manufactured. They sold these products for several
years, starting in June 1995 until December 9, 2000. While Adidas
explains that it amended its articles of incorporation in October 2002 to
engage in retail, it cannot be denied that in 1995 it was already in the
retail business through its agents WOSI and JCA and labor-only contractor
PRIME. Thus, the petitioner had become an Adidas regular employee a
long time before she was supposedly made a "contractual employee" of
PRIME.
Adidas exercised control and supervision over the performance of
the petitioner's work
In the absence of evidence showing how or in what manner PRIME carried
out its promotion work under its contract with JCA and how it provided the
necessary requirements for such undertaking (such as the maintenance of

storage areas and engagement of sales outlets), we likewise find merit in


the petitioner's submission that it was Adidas who exercised control and
supervision over the petitioner's work performance, through its Sales
Manager Sonny Niebres, its President Philip Go, and even Cornelia Indon,
head of the WOSI concession.
In sum, we hold that PRIME failed to satisfy the four-fold employeremployee relationship test,50making it a labor-only contractor under the
law and the rules. Like JCA, it was merely an agent of Adidas,
notwithstanding the quitclaims of some of the complainants in its favor.
Adidas, therefore, is petitioner's real employer who shall be responsible to
her in the same manner and extent as if she were directly
employed by the company.51 In this light, we find the petitioner to
have been illegally dismissed, there being obviously no valid
cause to and absent due process in her dismissal.
Consequently, the petitioner is entitled under the law52 to reinstatement,
without loss of seniority rights and other privileges, and with full back
wages. Should reinstatement no longer be feasible, she shall be entitled
to full back wages and separation pay at one month's pay for every year
of service. However, her claim for other monetary benefits is denied as
she failed to refute LA Salinas' ruling that she had been paid her 13th
month pay and service incentive leave pay.
Further, we find the respondents to have shown bad faith in the
petitioner's dismissal as it resulted from the prohibited labor-only
contracting arrangement imposed on her since October 28, 1995. Thus,
the petitioner is also entitled to damages and to attorney's fees as she
was compelled to litigate to protect her rights. Under the circumstances,
we deem an award to the petitioner of P50,000.00 each in moral and
exemplary damages, plus ten percent attorney's fees reasonable, to be
paid jointly and solidarity by Adidas, PRIME, and JCA.
WHEREFORE, premises considered, the petition is GRANTED. The
assailed decision and resolution of the Court of Appeals are SET ASIDE.
The respondent Adidas Philippines, Inc., is ORDERED to reinstate the
petitioner Marites R. Cusap to her former position without loss of seniority
rights and other privileges, and to pay her back wages from her illegal

dismissal on December 9, 2002, up to her actual reinstatement; and


should reinstatement no longer be feasible, to pay her back wages and
separation pay at one month's pay for every year of service.
Adidas Philippines, Inc., Promotion Resources & Inter-Marketing
Exponents, Inc., and JC Athletes Inc., are ORDERED to pay the petitioner,
jointly and solidarity, moral damages of P50,000.00, exemplary damages
of P50,000.00 and 10% of all the sums due under this Decision as
attorney's fees.
SO ORDERED.cralawlawli