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1 ABS-CBN agreed to pay for SONZA’s services a monthly talent fee July 1996, ABS-CBN opened a new account

NZA’s services a monthly talent fee July 1996, ABS-CBN opened a new account with the same bank where
of P310,000 for the first year and P317,000 for the second and third year ABS-CBN deposited SONZA’s talent fees and other payments due him
of the Agreement. ABS-CBN would pay the talent fees on the 10th and under the Agreement.
Republic of the Philippines 25th days of the month.
SUPREME COURT
In his Order dated 2 December 1996, the Labor Arbiter5 denied the
Manila
On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio motion to dismiss and directed the parties to file their respective position
Lopez III, which reads: papers. The Labor Arbiter ruled:
FIRST DIVISION
Dear Mr. Lopez, In this instant case, complainant for having invoked a claim
G.R. No. 138051 June 10, 2004 that he was an employee of respondent company until April
15, 1996 and that he was not paid certain claims, it is
We would like to call your attention to the Agreement dated
JOSE Y. SONZA, petitioner, sufficient enough as to confer jurisdiction over the instant case
May 1994 entered into by your goodself on behalf of ABS-CBN
vs. in this Office. And as to whether or not such claim would
with our company relative to our talent JOSE Y. SONZA.
ABS-CBN BROADCASTING CORPORATION, respondent. entitle complainant to recover upon the causes of action
asserted is a matter to be resolved only after and as a result of
As you are well aware, Mr. Sonza irrevocably resigned in view a hearing. Thus, the respondent’s plea of lack of employer-
DECISION of recent events concerning his programs and career. We employee relationship may be pleaded only as a matter of
consider these acts of the station violative of the Agreement defense. It behooves upon it the duty to prove that there
CARPIO, J.: and the station as in breach thereof. In this connection, we really is no employer-employee relationship between it and the
hereby serve notice of rescission of said Agreement at our complainant.
instance effective as of date.
The Case
The Labor Arbiter then considered the case submitted for resolution. The
Mr. Sonza informed us that he is waiving and renouncing parties submitted their position papers on 24 February 1997.
Before this Court is a petition for review on certiorari1 assailing the 26 recovery of the remaining amount stipulated in paragraph 7 of
March 1999 Decision2 of the Court of Appeals in CA-G.R. SP No. 49190 the Agreement but reserves the right to seek recovery of the
dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper
other benefits under said Agreement.
Appeals affirmed the findings of the National Labor Relations with Motion to Expunge Respondent’s Annex 4 and Annex 5 from the
Commission ("NLRC"), which affirmed the Labor Arbiter’s dismissal of the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s witnesses Soccoro
case for lack of jurisdiction. Thank you for your attention. Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits
that the prevailing practice in the television and broadcast industry is to
Very truly yours, treat talents like SONZA as independent contractors.
The Facts

(Sgd.) The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS- complaint for lack of jurisdiction.6 The pertinent parts of the decision
CBN") signed an Agreement ("Agreement") with the Mel and Jay JOSE Y. SONZA
President and Gen. Manager4 read as follows:
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 On 30 April 1996, SONZA filed a complaint against ABS-CBN before the xxx
("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as Department of Labor and Employment, National Capital Region in
"AGENT," MJMDC agreed to provide SONZA’s services exclusively to ABS- Quezon City. SONZA complained that ABS-CBN did not pay his salaries, While Philippine jurisprudence has not yet, with certainty,
CBN as talent for radio and television. The Agreement listed the services separation pay, service incentive leave pay, 13th month pay, signing touched on the "true nature of the contract of a talent," it
SONZA would render to ABS-CBN, as follows: bonus, travel allowance and amounts due under the Employees Stock stands to reason that a "talent" as above-described cannot be
Option Plan ("ESOP"). considered as an employee by reason of the peculiar
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., circumstances surrounding the engagement of his services.
Mondays to Fridays; On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that
no employer-employee relationship existed between the parties. SONZA It must be noted that complainant was engaged by
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., filed an Opposition to the motion on 19 July 1996. respondent by reason of his peculiar skills and talent
Sundays.3 as a TV host and a radio broadcaster. Unlike an
Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees ordinary employee, he was free to perform the services
through his account at PCIBank, Quezon Avenue Branch, Quezon City. In he undertook to render in accordance with his own

1
style. The benefits conferred to complainant under the May Hence, this petition. appellee are not based on the Labor Code but rather on the
1994 Agreement are certainly very much higher than those provisions of the May 1994 Agreement, while his claims for
generally given to employees. For one, complainant Sonza’s proceeds under Stock Purchase Agreement are based on the
The Rulings of the NLRC and Court of Appeals
monthly talent fees amount to a staggering P317,000. latter. A portion of the Position Paper of complainant-appellant
Moreover, his engagement as a talent was covered by a bears perusal:
specific contract. Likewise, he was not bound to render eight The Court of Appeals affirmed the NLRC’s finding that no employer-
(8) hours of work per day as he worked only for such number employee relationship existed between SONZA and ABS-CBN. Adopting
‘Under [the May 1994 Agreement] with respondent
of hours as may be necessary. the NLRC’s decision, the appellate court quoted the following findings of
ABS-CBN, the latter contractually bound itself to pay
the NLRC:
complainant a signing bonus consisting of shares of
The fact that per the May 1994 Agreement complainant was stocks…with FIVE HUNDRED THOUSAND PESOS
accorded some benefits normally given to an employee is x x x the May 1994 Agreement will readily reveal that MJMDC (P500,000.00).
inconsequential. Whatever benefits complainant enjoyed entered into the contract merely as an agent of complainant
arose from specific agreement by the parties and not Sonza, the principal. By all indication and as the law puts it,
Similarly, complainant is also entitled to be paid 13th
by reason of employer-employee relationship. As the act of the agent is the act of the principal itself. This fact is
month pay based on an amount not lower than the
correctly put by the respondent, "All these benefits are merely made particularly true in this case, as admittedly MJMDC ‘is a
amount he was receiving prior to effectivity of (the)
talent fees and other contractual benefits and should not be management company devoted exclusively to managing the
Agreement’.
deemed as ‘salaries, wages and/or other remuneration’ careers of Mr. Sonza and his broadcast partner, Mrs. Carmela
accorded to an employee, notwithstanding the nomenclature C. Tiangco.’ (Opposition to Motion to Dismiss)
appended to these benefits. Apropos to this is the rule that the Under paragraph 9 of (the May 1994 Agreement),
term or nomenclature given to a stipulated benefit is not complainant is entitled to a commutable travel
Clearly, the relations of principal and agent only accrues
controlling, but the intent of the parties to the Agreement benefit amounting to at least One Hundred Fifty
between complainant Sonza and MJMDC, and not between
conferring such benefit." Thousand Pesos (P150,000.00) per year.’
ABS-CBN and MJMDC. This is clear from the provisions of the
May 1994 Agreement which specifically referred to MJMDC as
The fact that complainant was made subject to the ‘AGENT’. As a matter of fact, when complainant herein Thus, it is precisely because of complainant-appellant’s own
respondent’s Rules and Regulations, likewise, does not unilaterally rescinded said May 1994 Agreement, it was MJMDC recognition of the fact that his contractual relations with ABS-
detract from the absence of employer-employee which issued the notice of rescission in behalf of Mr. Sonza, CBN are founded on the New Civil Code, rather than the Labor
relationship. As held by the Supreme Court, "The line should who himself signed the same in his capacity as President. Code, that instead of merely resigning from ABS-CBN,
be drawn between rules that merely serve as guidelines complainant-appellant served upon the latter a ‘notice of
towards the achievement of the mutually desired result rescission’ of Agreement with the station, per his letter dated
Moreover, previous contracts between Mr. Sonza and ABS-CBN
without dictating the means or methods to be employed in April 1, 1996, which asserted that instead of referring to
reveal the fact that historically, the parties to the said
attaining it, and those that control or fix the methodology and unpaid employee benefits, ‘he is waiving and renouncing
agreements are ABS-CBN and Mr. Sonza. And it is only in the
bind or restrict the party hired to the use of such means. The recovery of the remaining amount stipulated in paragraph 7 of
May 1994 Agreement, which is the latest Agreement executed
first, which aim only to promote the result, create no the Agreement but reserves the right to such recovery of the
between ABS-CBN and Mr. Sonza, that MJMDC figured in the
employer-employee relationship unlike the second, which other benefits under said Agreement.’ (Annex 3 of the
said Agreement as the agent of Mr. Sonza.
address both the result and the means to achieve it." (Insular respondent ABS-CBN’s Motion to Dismiss dated July 10, 1996).
Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484,
November 15, 1989). We find it erroneous to assert that MJMDC is a mere ‘labor-
Evidently, it is precisely by reason of the alleged violation of
only’ contractor of ABS-CBN such that there exist[s] employer-
the May 1994 Agreement and/or the Stock Purchase
employee relationship between the latter and Mr. Sonza. On
x x x (Emphasis supplied)7 Agreement by respondent-appellee that complainant-appellant
the contrary, We find it indubitable, that MJMDC is an agent,
filed his complaint. Complainant-appellant’s claims being
not of ABS-CBN, but of the talent/contractor Mr. Sonza, as
anchored on the alleged breach of contract on the part of
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered expressly admitted by the latter and MJMDC in the May 1994
respondent-appellee, the same can be resolved by reference
a Decision affirming the Labor Arbiter’s decision. SONZA filed a motion Agreement.
to civil law and not to labor law. Consequently, they are within
for reconsideration, which the NLRC denied in its Resolution dated 3 July
the realm of civil law and, thus, lie with the regular courts. As
1998. It may not be amiss to state that jurisdiction over the instant held in the case of Dai-Chi Electronics Manufacturing vs.
controversy indeed belongs to the regular courts, the same Villarama, 238 SCRA 267, 21 November 1994, an action for
On 6 October 1998, SONZA filed a special civil action for certiorari before being in the nature of an action for alleged breach of breach of contractual obligation is intrinsically a civil
the Court of Appeals assailing the decision and resolution of the NLRC. contractual obligation on the part of respondent-appellee. As dispute.9 (Emphasis supplied)
On 26 March 1999, the Court of Appeals rendered a Decision dismissing squarely apparent from complainant-appellant’s Position
the case.8 Paper, his claims for compensation for services, ‘13th month
pay’, signing bonus and travel allowance against respondent-
2
The Court of Appeals ruled that the existence of an employer-employee The existence of an employer-employee relationship is a question of fact. ABS-CBN granted him benefits and privileges "which he would not have
relationship between SONZA and ABS-CBN is a factual question that is Appellate courts accord the factual findings of the Labor Arbiter and the enjoyed if he were truly the subject of a valid job contract."
within the jurisdiction of the NLRC to resolve.10 A special civil action for NLRC not only respect but also finality when supported by substantial
certiorari extends only to issues of want or excess of jurisdiction of the evidence.15 Substantial evidence means such relevant evidence as a
All the talent fees and benefits paid to SONZA were the result of
NLRC.11 Such action cannot cover an inquiry into the correctness of the reasonable mind might accept as adequate to support a conclusion.16 A
negotiations that led to the Agreement. If SONZA were ABS-CBN’s
evaluation of the evidence which served as basis of the NLRC’s party cannot prove the absence of substantial evidence by simply
employee, there would be no need for the parties to stipulate on benefits
conclusion.12 The Court of Appeals added that it could not re-examine pointing out that there is contrary evidence on record, direct or
such as "SSS, Medicare, x x x and 13th month pay"20 which the law
the parties’ evidence and substitute the factual findings of the NLRC with circumstantial. The Court does not substitute its own judgment for that
automatically incorporates into every employer-employee
its own.13 of the tribunal in determining where the weight of evidence lies or what
contract.21 Whatever benefits SONZA enjoyed arose from contract and
evidence is credible.17
not because of an employer-employee relationship.22
The Issue
SONZA maintains that all essential elements of an employer-employee
SONZA’s talent fees, amounting to P317,000 monthly in the second and
relationship are present in this case. Case law has consistently held that
In assailing the decision of the Court of Appeals, SONZA contends that: third year, are so huge and out of the ordinary that they indicate more
the elements of an employer-employee relationship are: (a) the selection
an independent contractual relationship rather than an employer-
and engagement of the employee; (b) the payment of wages; (c) the
employee relationship. ABS-CBN agreed to pay SONZA such huge talent
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE power of dismissal; and (d) the employer’s power to control the
fees precisely because of SONZA’s unique skills, talent and celebrity
NLRC’S DECISION AND REFUSING TO FIND THAT AN employee on the means and methods by which the work is
status not possessed by ordinary employees. Obviously, SONZA acting
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN accomplished.18 The last element, the so-called "control test", is the
alone possessed enough bargaining power to demand and receive such
SONZA AND ABS-CBN, DESPITE THE WEIGHT OF most important element.19
huge talent fees for his services. The power to bargain talent fees way
CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO
above the salary scales of ordinary employees is a circumstance
SUPPORT SUCH A FINDING.14
A. Selection and Engagement of Employee indicative, but not conclusive, of an independent contractual relationship.

The Court’s Ruling


ABS-CBN engaged SONZA’s services to co-host its television and radio The payment of talent fees directly to SONZA and not to MJMDC does
programs because of SONZA’s peculiar skills, talent and celebrity status. not negate the status of SONZA as an independent contractor. The
We affirm the assailed decision. SONZA contends that the "discretion used by respondent in specifically parties expressly agreed on such mode of payment. Under the
selecting and hiring complainant over other broadcasters of possibly Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would
No convincing reason exists to warrant a reversal of the decision of the similar experience and qualification as complainant belies respondent’s have to turn over any talent fee accruing under the Agreement.
Court of Appeals affirming the NLRC ruling which upheld the Labor claim of independent contractorship."
Arbiter’s dismissal of the case for lack of jurisdiction. C. Power of Dismissal
Independent contractors often present themselves to possess unique
The present controversy is one of first impression. Although Philippine skills, expertise or talent to distinguish them from ordinary employees.
For violation of any provision of the Agreement, either party may
labor laws and jurisprudence define clearly the elements of an employer- The specific selection and hiring of SONZA, because of his unique
terminate their relationship. SONZA failed to show that ABS-CBN could
employee relationship, this is the first time that the Court will resolve the skills, talent and celebrity status not possessed by ordinary
terminate his services on grounds other than breach of contract, such as
nature of the relationship between a television and radio station and one employees, is a circumstance indicative, but not conclusive, of an
retrenchment to prevent losses as provided under labor laws.23
of its "talents." There is no case law stating that a radio and television independent contractual relationship. If SONZA did not possess such
program host is an employee of the broadcast station. unique skills, talent and celebrity status, ABS-CBN would not have
entered into the Agreement with SONZA but would have hired him During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent
through its personnel department just like any other employee. fees as long as "AGENT and Jay Sonza shall faithfully and completely
The instant case involves big names in the broadcast industry, namely perform each condition of this Agreement."24 Even if it suffered severe
Jose "Jay" Sonza, a known television and radio personality, and ABS- business losses, ABS-CBN could not retrench SONZA because ABS-CBN
CBN, one of the biggest television and radio networks in the country. In any event, the method of selecting and engaging SONZA does not
remained obligated to pay SONZA’s talent fees during the life of the
conclusively determine his status. We must consider all the
Agreement. This circumstance indicates an independent contractual
circumstances of the relationship, with the control test being the most
SONZA contends that the Labor Arbiter has jurisdiction over the case relationship between SONZA and ABS-CBN.
important element.
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 SONZA admits that even after ABS-CBN ceased broadcasting his
independent contractor. B. Payment of Wages
programs, ABS-CBN still paid him his talent fees. Plainly, ABS-CBN
adhered to its undertaking in the Agreement to continue paying SONZA’s
Employee or Independent Contractor? ABS-CBN directly paid SONZA his monthly talent fees with no part of his talent fees during the remaining life of the Agreement even if ABS-CBN
fees going to MJMDC. SONZA asserts that this mode of fee payment cancelled SONZA’s programs through no fault of SONZA.25
shows that he was an employee of ABS-CBN. SONZA also points out that
3
SONZA assails the Labor Arbiter’s interpretation of his rescission of the is no evidence that WIPR assigned Alberty tasks in addition to Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it
Agreement as an admission that he is not an employee of ABS-CBN. The work related to these tapings. x x x28 (Emphasis supplied) was by the obligation to continue paying in full SONZA’s talent fees, did
Labor Arbiter stated that "if it were true that complainant was really an not amount to control over the means and methods of the performance
employee, he would merely resign, instead." SONZA did actually resign of SONZA’s work. ABS-CBN could not terminate or discipline SONZA even
Applying the control test to the present case, we find that SONZA is
from ABS-CBN but he also, as president of MJMDC, rescinded the if the means and methods of performance of his work - how he delivered
not an employee but an independent contractor. The control test is
Agreement. SONZA’s letter clearly bears this out.26 However, the manner his lines and appeared on television - did not meet ABS-CBN’s approval.
the most important test our courts apply in distinguishing an employee
by which SONZA terminated his relationship with ABS-CBN is immaterial. This proves that ABS-CBN’s control was limited only to the result of
from an independent contractor.29 This test is based on the extent of
Whether SONZA rescinded the Agreement or resigned from work does SONZA’s work, whether to broadcast the final product or not. In either
control the hirer exercises over a worker. The greater the supervision
not determine his status as employee or independent contractor. case, ABS-CBN must still pay SONZA’s talent fees in full until the expiry
and control the hirer exercises, the more likely the worker is deemed an
of the Agreement.
employee. The converse holds true as well – the less control the hirer
D. Power of Control exercises, the more likely the worker is considered an independent
contractor.30 In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court
of Appeals ruled that vaudeville performers were independent
Since there is no local precedent on whether a radio and television
contractors although the management reserved the right to delete
program host is an employee or an independent contractor, we refer to First, SONZA contends that ABS-CBN exercised control over the means
objectionable features in their shows. Since the management did not
foreign case law in analyzing the present case. The United States Court and methods of his work.
have control over the manner of performance of the skills of the artists,
of Appeals, First Circuit, recently held in Alberty-Vélez v. Corporación
it could only control the result of the work by deleting objectionable
De Puerto Rico Para La Difusión Pública ("WIPR")27that a
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services features.37
television program host is an independent contractor. We quote the
specifically to co-host the "Mel & Jay" programs. ABS-CBN did not assign
following findings of the U.S. court:
any other work to SONZA. To perform his work, SONZA only needed his
SONZA further contends that ABS-CBN exercised control over his work
skills and talent. How SONZA delivered his lines, appeared on television,
by supplying all equipment and crew. No doubt, ABS-CBN supplied the
Several factors favor classifying Alberty as an independent and sounded on radio were outside ABS-CBN’s control. SONZA did not
equipment, crew and airtime needed to broadcast the "Mel & Jay"
contractor. First, a television actress is a skilled position have to render eight hours of work per day. The Agreement required
programs. However, the equipment, crew and airtime are not the "tools
requiring talent and training not available on-the-job. x SONZA to attend only rehearsals and tapings of the shows, as well as
and instrumentalities" SONZA needed to perform his job. What SONZA
x x In this regard, Alberty possesses a master’s degree in pre- and post-production staff meetings.31 ABS-CBN could not dictate the
principally needed were his talent or skills and the costumes necessary
public communications and journalism; is trained in dance, contents of SONZA’s script. However, the Agreement prohibited SONZA
for his appearance.38Even though ABS-CBN provided SONZA with the
singing, and modeling; taught with the drama department at from criticizing in his shows ABS-CBN or its interests.32 The clear
place of work and the necessary equipment, SONZA was still an
the University of Puerto Rico; and acted in several theater and implication is that SONZA had a free hand on what to say or discuss in
independent contractor since ABS-CBN did not supervise and control his
television productions prior to her affiliation with "Desde Mi his shows provided he did not attack ABS-CBN or its interests.
work. ABS-CBN’s sole concern was for SONZA to display his talent during
Pueblo." Second, Alberty provided the "tools and
the airing of the programs.39
instrumentalities" necessary for her to
We find that ABS-CBN was not involved in the actual performance that
perform. Specifically, she provided, or obtained sponsors to
produced the finished product of SONZA’s work.33 ABS-CBN did not
provide, the costumes, jewelry, and other image-related A radio broadcast specialist who works under minimal supervision is an
instruct SONZA how to perform his job. ABS-CBN merely reserved the
supplies and services necessary for her appearance. Alberty independent contractor.40 SONZA’s work as television and radio program
right to modify the program format and airtime schedule "for more
disputes that this factor favors independent contractor status host required special skills and talent, which SONZA admittedly
effective programming."34 ABS-CBN’s sole concern was the quality of the
because WIPR provided the "equipment necessary to tape the possesses. The records do not show that ABS-CBN exercised any
shows and their standing in the ratings. Clearly, ABS-CBN did not
show." Alberty’s argument is misplaced. The equipment supervision and control over how SONZA utilized his skills and talent in
exercise control over the means and methods of performance of
necessary for Alberty to conduct her job as host of "Desde Mi his shows.
SONZA’s work.
Pueblo" related to her appearance on the show. Others
provided equipment for filming and producing the show, but
Second, SONZA urges us to rule that he was ABS-CBN’s employee
these were not the primary tools that Alberty used to perform SONZA claims that ABS-CBN’s power not to broadcast his shows proves
because ABS-CBN subjected him to its rules and standards of
her particular function. If we accepted this argument, ABS-CBN’s power over the means and methods of the performance of
performance. SONZA claims that this indicates ABS-CBN’s control "not
independent contractors could never work on collaborative his work. Although ABS-CBN did have the option not to broadcast
only [over] his manner of work but also the quality of his work."
projects because other individuals often provide the equipment SONZA’s show, ABS-CBN was still obligated to pay SONZA’s talent fees...
required for different aspects of the collaboration. x x x Thus, even if ABS-CBN was completely dissatisfied with the means and
methods of SONZA’s performance of his work, or even with the quality or The Agreement stipulates that SONZA shall abide with the rules and
product of his work, ABS-CBN could not dismiss or even discipline standards of performance "covering talents"41 of ABS-CBN. The
Third, WIPR could not assign Alberty work in addition
SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show but Agreement does not require SONZA to comply with the rules and
to filming "Desde Mi Pueblo." Alberty’s contracts with
ABS-CBN must still pay his talent fees in full.35 standards of performance prescribed for employees of ABS-CBN. The
WIPR specifically provided that WIPR hired her "professional
code of conduct imposed on SONZA under the Agreement refers to the
services as Hostess for the Program Desde Mi Pueblo." There
"Television and Radio Code of the Kapisanan ng mga Broadcaster sa
Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as
4
its Code of Ethics."42 The KBP code applies to broadcasters, not to talents as well as the programs they appear in and thus expects that Policy Instruction No. 40 is a mere executive issuance which does not
employees of radio and television stations. Broadcasters are not said talents remain exclusive with the station for a commensurate period have the force and effect of law. There is no legal presumption that
necessarily employees of radio and television stations. Clearly, the rules of time."47 Normally, a much higher fee is paid to talents who agree to Policy Instruction No. 40 determines SONZA’s status. A mere executive
and standards of performance referred to in the Agreement are those work exclusively for a particular radio or television station. In short, the issuance cannot exclude independent contractors from the class of
applicable to talents and not to employees of ABS-CBN. huge talent fees partially compensates for exclusivity, as in the present service providers to the broadcast industry. The classification of workers
case. in the broadcast industry into only two groups under Policy Instruction
No. 40 is not binding on this Court, especially when the classification has
In any event, not all rules imposed by the hiring party on the hired party
no basis either in law or in fact.
indicate that the latter is an employee of the former.43 In this case, MJMDC as Agent of SONZA
SONZA failed to show that these rules controlled his performance. We
find that these general rules are merely guidelines towards the Affidavits of ABS-CBN’s Witnesses
SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC,
achievement of the mutually desired result, which are top-rating
which contracted out his services to ABS-CBN. The Labor Arbiter ruled
television and radio programs that comply with standards of the
that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA also faults the Labor Arbiter for admitting the affidavits of
industry. We have ruled that:
SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is Socorro Vidanes and Rolando Cruz without giving his counsel the
his employer.
Further, not every form of control that a party reserves to himself over
opportunity to cross-examine these witnesses. SONZA brands these
the conduct of the other party in relation to the services being rendered
In a labor-only contract, there are three parties involved: (1) the "labor- witnesses as incompetent to attest on the prevailing practice in the radio
may be accorded the effect of establishing an employer-employee
only" contractor; (2) the employee who is ostensibly under the employ of and television industry. SONZA views the affidavits of these witnesses as
relationship. The facts of this case fall squarely with the case of Insular
the "labor-only" contractor; and (3) the principal who is deemed the real misleading and irrelevant.
Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
employer. Under this scheme, the "labor-only" contractor is the
agent of the principal. The law makes the principal responsible to the
While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never
Logically, the line should be drawn between rules that merely employees of the "labor-only contractor" as if the principal itself directly
prevented from denying or refuting the allegations in the affidavits. The
serve as guidelines towards the achievement of the mutually hired or employed the employees.48 These circumstances are not present
Labor Arbiter has the discretion whether to conduct a formal (trial-type)
desired result without dictating the means or methods to be in this case.
hearing after the submission of the position papers of the parties, thus:
employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of
There are essentially only two parties involved under the Agreement,
such means. The first, which aim only to promote the result, Section 3. Submission of Position Papers/Memorandum
namely, SONZA and ABS-CBN. MJMDC merely acted as SONZA’s agent.
create no employer-employee relationship unlike the second,
The Agreement expressly states that MJMDC acted as the "AGENT" of
which address both the result and the means used to achieve xxx
SONZA. The records do not show that MJMDC acted as ABS-CBN’s agent.
it.44
MJMDC, which stands for Mel and Jay Management and Development
Corporation, is a corporation organized and owned by SONZA and These verified position papers shall cover only those claims
The Vaughan case also held that one could still be an independent TIANGCO. The President and General Manager of MJMDC is SONZA and causes of action raised in the complaint excluding those
contractor although the hirer reserved certain supervision to insure the himself. It is absurd to hold that MJMDC, which is owned, controlled, that may have been amicably settled, and shall be
attainment of the desired result. The hirer, however, must not deprive headed and managed by SONZA, acted as agent of ABS-CBN in entering accompanied by all supporting documents including the
the one hired from performing his services according to his own into the Agreement with SONZA, who himself is represented by MJMDC. affidavits of their respective witnesses which shall take the
initiative.45 That would make MJMDC the agent of both ABS-CBN and SONZA. place of the latter’s direct testimony. x x x

Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the As SONZA admits, MJMDC is a management company Section 4. Determination of Necessity of Hearing. –
most extreme form of control which ABS-CBN exercised over him. devoted exclusively to managing the careers of SONZA and his Immediately after the submission of the parties of their
broadcast partner, TIANGCO. MJMDC is not engaged in any other position papers/memorandum, the Labor Arbiter shall motu
business, not even job contracting. MJMDC does not have any other propio determine whether there is need for a formal trial or
This argument is futile. Being an exclusive talent does not by itself mean
function apart from acting as agent of SONZA or TIANGCO to promote hearing. At this stage, he may, at his discretion and for the
that SONZA is an employee of ABS-CBN. Even an independent contractor
their careers in the broadcast and television industry.49 purpose of making such determination, ask clarificatory
can validly provide his services exclusively to the hiring party. In the
broadcast industry, exclusivity is not necessarily the same as control. questions to further elicit facts or information, including but
Policy Instruction No. 40 not limited to the subpoena of relevant documentary evidence,
if any from any party or witness.50
The hiring of exclusive talents is a widespread and accepted practice in
the entertainment industry.46 This practice is not designed to control the SONZA argues that Policy Instruction No. 40 issued by then Minister of
means and methods of work of the talent, but simply to protect the Labor Blas Ople on 8 January 1979 finally settled the status of workers in The Labor Arbiter can decide a case based solely on the position papers
investment of the broadcast station. The broadcast station normally the broadcast industry. Under this policy, the types of employees in the and the supporting documents without a formal trial.51 The holding of a
spends substantial amounts of money, time and effort "in building up its broadcast industry are the station and program employees. formal hearing or trial is something that the parties cannot demand as a
5
matter of right.52 If the Labor Arbiter is confident that he can rely on the Nature of SONZA’s Claims
documents before him, he cannot be faulted for not conducting a formal
trial, unless under the particular circumstances of the case, the
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month
documents alone are insufficient. The proceedings before a Labor Arbiter
pay, separation pay, service incentive leave, signing bonus, travel
are non-litigious in nature. Subject to the requirements of due process,
allowance, and amounts due under the Employee Stock Option Plan. We
the technicalities of law and the rules obtaining in the courts of law do
agree with the findings of the Labor Arbiter and the Court of Appeals
not strictly apply in proceedings before a Labor Arbiter.
that SONZA’s claims are all based on the May 1994 Agreement and
stock option plan, and not on the Labor Code. Clearly, the present
Talents as Independent Contractors case does not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In effect,
SONZA’s cause of action is for breach of contract which is intrinsically a
ABS-CBN claims that there exists a prevailing practice in the broadcast
civil dispute cognizable by the regular courts.58
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. 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.
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 SO ORDERED.
employer-employee relationship. To hold that every person who renders
services to another for a fee is an employee - to give meaning to the
security of tenure clause - will lead to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to


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

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code ("NIRC")54 in relation to Republic


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

6
2 on commission basis. Lazaro also maintained that Laudato was not Lazaro's arguments are nothing more but a mere reiteration of
subjected to definite hours and conditions of work. As such, Laudato arguments unsuccessfully posed before two bodies: the SSC and the
could not be deemed an employee of Royal Star.5 Court of Appeals. They likewise put to issue factual questions already
Republic of the Philippines passed upon twice below, rather than questions of law appropriate for
SUPREME COURT review under a Rule 45 petition. The determination of an employer-
After the parties submitted their respective position papers, the SSC
Manila employee relationship depends heavily on the particular factual
promulgated a Resolution6 dated 8 November 1995 ruling in favor of
circumstances attending the professional interaction of the parties. The
Laudato.7 Applying the "control test," it held that Laudato was an
SECOND DIVISION Court is not a trier of facts15 and accords great weight to the factual
employee of Royal Star, and ordered Royal Star to pay the unremitted
findings of lower courts or agencies whose function is to resolve factual
social security contributions of Laudato in the amount of Five Thousand
matters.16
G.R. No. 138254 July 30, 2004 Seven Pesos and Thirty Five Centavos (P5,007.35), together with the
penalties totaling Twenty Two Thousand Two Hundred Eighteen Pesos
and Fifty Four Centavos (P22,218.54). In addition, Royal Star was made Lazaro's arguments may be dispensed with by applying precedents.
ANGELITO L. LAZARO, Proprietor of Royal Star liable to pay damages to the SSC in the amount of Fifteen Thousand Six Suffice it to say, the fact that Laudato was paid by way of commission
Marketing, petitioner, Hundred Eighty Pesos and Seven Centavos (P15,680.07) for not does not preclude the establishment of an employer-employee
vs. reporting Laudato for social security coverage, pursuant to Section 24 of relationship. InGrepalife v. Judico,17 the Court upheld the existence of an
SOCIAL SECURITY COMMISSION, ROSALINA LAUDATO, SOCIAL the Social Security Law.8 employer-employee relationship between the insurance company and its
SECURITY SYSTEM and THE HONORABLE COURT OF agents, despite the fact that the compensation that the agents on
APPEALS, respondents. commission received was not paid by the company but by the investor or
After Lazaro's Motion for Reconsideration before the SSC was
the person insured.18 The relevant factor remains, as stated earlier,
denied,9 Lazaro filed a Petition for Review with the Court of Appeals.
whether the "employer" controls or has reserved the right to control the
Lazaro reiterated that Laudato was merely a sales agent who was paid
"employee" not only as to the result of the work to be done but also as
purely on commission basis, not included in the company payroll, and
to the means and methods by which the same is to be accomplished.19
who neither observed regular working hours nor accomplished time
DECISION cards.
Neither does it follow that a person who does not observe normal hours
of work cannot be deemed an employee. In Cosmopolitan Funeral
In its assailed Decision, the Court of Appeals noted that Lazaro's
Homes, Inc. v. Maalat,20 the employer similarly denied the existence of
arguments were a reprise of those already presented before the
an employer-employee relationship, as the claimant according to it, was
SSC.10 Moreover, Lazaro had not come forward with particulars and
a "supervisor on commission basis" who did not observe normal hours of
specifics in his petition to show that the Commission's ruling is not
TINGA, J.: work. This Court declared that there was an employer-employee
supported by substantial evidence.11 Thus, the appellate court affirmed
relationship, noting that "[the] supervisor, although compensated on
the finding that Laudato was an employee of Royal Star, and hence
commission basis, [is] exempt from the observance of normal hours of
Before us is a Petition for Review under Rule 45, assailing entitled to coverage under the Social Security Law.
work for his compensation is measured by the number of sales he
the Decision1 of the Court of Appeals Fifteenth Division2 in CA-G.R. Sp. makes."21
No. 40956, promulgated on 20 November 1998, which affirmed two Before this Court, Lazaro again insists that Laudato was not qualified for
rulings of the Social Security Commission ("SSC") dated 8 November social security coverage, as she was not an employee of Royal Star, her
1995 and 24 April 1996. It should also be emphasized that the SSC, also as upheld by the Court
income dependent on a generation of sales and based on
of Appeals, found that Laudato was a sales supervisor and not a mere
commissions.12 It is argued that Royal Star had no control over Laudato's
agent.22 As such, Laudato oversaw and supervised the sales agents of
Private respondent Rosalina M. Laudato ("Laudato") filed a petition activities, and that under the so-called "control test," Laudato could not
the company, and thus was subject to the control of management as to
before the SSC for social security coverage and remittance of unpaid be deemed an employee.13
how she implements its policies and its end results. We are disinclined to
monthly social security contributions against her three (3) employers. reverse this finding, in the absence of countervailing evidence from
Among the respondents was herein petitioner Angelito L. Lazaro It is an accepted doctrine that for the purposes of coverage under the Lazaro and also in light of the fact that Laudato's calling cards from
("Lazaro"), proprietor of Royal Star Marketing ("Royal Star"), which is Social Security Act, the determination of employer-employee relationship Royal Star indicate that she is indeed a sales supervisor.
engaged in the business of selling home appliances.3 Laudato alleged warrants the application of the "control test," that is, whether the
that despite her employment as sales supervisor of the sales agents for employer controls or has reserved the right to control the employee, not
Royal Star from April of 1979 to March of 1986, Lazaro had failed during The finding of the SSC that Laudato was an employee of Royal Star is
only as to the result of the work done, but also as to the means and
the said period, to report her to the SSC for compulsory coverage or supported by substantial evidence. The SSC examined the cash vouchers
methods by which the same is accomplished.14 The SSC, as sustained by
remit Laudato's social security contributions.4 issued by Royal Star to Laudato,23 calling cards of Royal Star
the Court of Appeals, applying the control test found that Laudato was
denominating Laudato as a "Sales Supervisor" of the company,24 and
an employee of Royal Star. We find no reversible error.
Certificates of Appreciation issued by Royal Star to Laudato in
Lazaro denied that Laudato was a sales supervisor of Royal Star, recognition of her unselfish and loyal efforts in promoting the
averring instead that she was a mere sales agent whom he paid purely company.25 On the other hand, Lazaro has failed to present any

7
convincing contrary evidence, relying instead on his bare assertions. The
Court of Appeals correctly ruled that petitioner has not sufficiently shown
that the SSC's ruling was not supported by substantial evidence.

A piece of documentary evidence appreciated by the SSC is


Memorandum dated 3 May 1980 of Teresita Lazaro, General Manager of
Royal Star, directing that no commissions were to be given on all "main
office" sales from walk-in customers and enjoining salesmen and sales
supervisors to observe this new policy.26 The Memorandum evinces the
fact that, contrary to Lazaro's 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.

Finally, Lazaro invokes our ruling in the 1987 case of Social Security
System v. Court of Appeals27 that a person who works for another at his
own pleasure, subject to definite hours or conditions of work, and is
compensated according to the result of his effort is not an
employee.28 The citation is odd for Lazaro to rely upon, considering that
in the cited case, the Court affirmed the employee-employer relationship
between a sales agent and the cigarette firm whose products he
sold.29 Perhaps Lazaro meant instead to cite our 1969 ruling in the
similarly-titled case of Social Security System v. Court of Appeals,30 also
cited in the later eponymous ruling, whose disposition is more in accord
with Lazaro's argument.

Yet, the circumstances in the 1969 case are very different from those at
bar. Ruling on the question whether jockeys were considered employees
of the Manila Jockey Club, the Court noted that the jockeys were actually
subjected to the control of the racing steward, whose authority in turn
was defined by the Games and Amusements Board.31 Moreover, the
jockey's choice as to which horse to mount was subject to mutual
agreement between the horse owner and the jockey, and beyond the
control of the race club.32 In the case at bar, there is no showing that
Royal Star was similarly precluded from exerting control or interference
over the manner by which Laudato performed her duties. On the
contrary, substantial evidence as found by the SSC and the Court of
Appeals have established the element of control determinative of an
employer-employee relationship. We affirm without hesitation.

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


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

SO ORDERED.

8
3 3. Management and treatment of employees that may and that he "was not dismissed but rather his contract with [PHILCOM]
necessitate hospitalization including emergency cases and ended when said contract was not renewed after December 31, 1996".
accidents;
Republic of the Philippines
On De Vera’s appeal to the NLRC, the latter, in a decision8 dated 23
SUPREME COURT
4. Conduct pre-employment physical check-up of prospective October 2000, reversed (the word used is "modified") that of the Labor
Manila
employees with no additional medical fee; Arbiter, on a finding that De Vera is Philcom’s "regular employee" and
accordingly directed the company to reinstate him to his former position
THIRD DIVISION without loss of seniority rights and privileges and with full backwages
5. Conduct home visits whenever necessary;
from the date of his dismissal until actual reinstatement. We quote the
G.R. No. 157214 June 7, 2005 dispositive portion of the decision:
6. Attend to certain medical administrative function such as
accomplishing medical forms, evaluating conditions of
PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner, WHEREFORE, the assailed decision is modified in that respondent is
employees applying for sick leave of absence and
vs. ordered to reinstate complainant to his former position without loss of
subsequently issuing proper certification, and all matters
RICARDO DE VERA, respondent. seniority rights and privileges with full backwages from the date of his
referred which are medical in nature.
dismissal until his actual reinstatement computed as follows:

DECISION The parties agreed and formalized respondent’s proposal in a document


denominated as RETAINERSHIP CONTRACT4 which will be for a Backwages:
GARCIA, J.: period of one year subject to renewal, it being made clear therein that
respondent will cover "the retainership the Company previously had with a) Basic Salary
Dr. K. Eulau" and that respondent’s "retainer fee" will be at P4,000.00 a From Dec. 31, 1996 to Apr. 10, 2000 =
Before us is this appeal by way of a petition for review on certiorari from month. Said contract was renewed yearly.5 The retainership arrangement 39.33 mos.
the 12 September 2002 Decision1 and the 13 February 2003 went on from 1981 to 1994 with changes in the retainer’s fee. However, P44,400.00 x 39.33 mos. P1,750,185.00
Resolution2 of the Court of Appeals in CA-G.R. SP No. 65178, upholding for the years 1995 and 1996, renewal of the contract was only made
the finding of illegal dismissal by the National Labor Relations verbally. 13th Month Pay:
Commission against petitioner. b) 145,848.75
1/12 of P1,750,185.00
The turning point in the parties’ relationship surfaced in December 1996
As culled from the records, the pertinent facts are: Travelling allowance:
when Philcom, thru a letter6 bearing on the subject boldly written as c) 39,330.00
P1,000.00 x 39.33 mos.
"TERMINATION – RETAINERSHIP CONTRACT", informed De Vera of its
Petitioner Philippine Global Communications, Inc. (PhilCom), is a decision to discontinue the latter’s "retainer’s contract with the Company
corporation engaged in the business of communication services and effective at the close of business hours of December 31, 1996" because GRAND TOTAL P1,935,363.75
allied activities, while respondent Ricardo De Vera is a physician by management has decided that it would be more practical to provide
profession whom petitioner enlisted to attend to the medical needs of its medical services to its employees through accredited hospitals near the
employees. At the crux of the controversy is Dr. De Vera’s status vis a company premises. The decision stands in other aspects.
vis petitioner when the latter terminated his engagement.
On 22 January 1997, De Vera filed a complaint for illegal dismissal SO ORDERED.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May before the National Labor Relations Commission (NLRC), alleging that
1981,3 offered his services to the petitioner, therein proposing his plan of that he had been actually employed by Philcom as its company physician
since 1981 and was dismissed without due process. He averred that he With its motion for reconsideration having been denied by the NLRC in
works required of a practitioner in industrial medicine, to include the
was designated as a "company physician on retainer basis" for reasons its order of 27 February 2001,9 Philcom then went to the Court of
following:
allegedly known only to Philcom. He likewise professed that since he was Appeals on a petition for certiorari, thereat docketed as CA-G.R. SP No.
not conversant with labor laws, he did not give much attention to the 65178, imputing grave abuse of discretion amounting to lack or excess
1. Application of preventive medicine including periodic check- designation as anyway he worked on a full-time basis and was paid a of jurisdiction on the part of the NLRC when it reversed the findings of
up of employees; basic monthly salary plus fringe benefits, like any other regular the labor arbiter and awarded thirteenth month pay and traveling
employees of Philcom. allowance to De Vera even as such award had no basis in fact and in
2. Holding of clinic hours in the morning and afternoon for a law.
total of five (5) hours daily for consultation services to On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out
employees; with a decision7 dismissing De Vera’s complaint for lack of merit, on the On 12 September 2002, the Court of Appeals rendered a
rationale that as a "retained physician" under a valid contract mutually decision,10 modifying that of the NLRC by deleting the award of traveling
agreed upon by the parties, De Vera was an "independent contractor"
9
allowance, and ordering payment of separation pay to De Vera in lieu of As we see it, the parties’ respective submissions revolve on the 3. Management and treatment of employees that
reinstatement, thus: primordial issue of whether an employer-employee relationship exists may necessitate hospitalization including emergency
between petitioner and respondent, the existence of which is, in itself, a cases and accidents;
question of fact13 well within the province of the NLRC. Nonetheless,
WHEREFORE, premises considered, the assailed judgment of public
given the reality that the NLRC’s findings are at odds with those of the
respondent, dated 23 October 2000, isMODIFIED. The award of 4. Conduct pre-employment physical check-up of
labor arbiter, the Court, consistent with its ruling in Jimenez vs. National
traveling allowance is deleted as the same is hereby DELETED. Instead prospective employees with no additional medical
Labor Relations Commission,14 is constrained to look deeper into the
of reinstatement, private respondent shall be paid separation pay fee;
attendant circumstances obtaining in this case, as appearing on record.
computed at one (1) month salary for every year of service computed
from the time private respondent commenced his employment in 1981
5. Conduct home visits whenever necessary;
up to the actual payment of the backwages and separation pay. The In a long line of decisions,15 the Court, in determining the existence of
awards of backwages and 13th month pay STAND. an employer-employee relationship, has invariably adhered to the four-
fold test, to wit: [1] the selection and engagement of the employee; [2] 6. Attend to certain medical administrative functions
the payment of wages; [3] the power of dismissal; and [4] the power to such as accomplishing medical forms, evaluating
SO ORDERED.
control the employee’s conduct, or the so-called "control test", conditions of employees applying for sick leave of
considered to be the most important element. absence and subsequently issuing proper
In time, Philcom filed a motion for reconsideration but was denied by the certification, and all matters referred which are
appellate court in its resolution of 13 February 2003.11 medical in nature.
Applying the four-fold test to this case, we initially find that it was
respondent himself who sets the parameters of what his duties would be
Hence, Philcom’s present recourse on its main submission that - in offering his services to petitioner. This is borne by no less than his 15 On the subject of compensation for the services that I propose to render
May 1981 letter16 which, in full, reads: to the corporation, you may state an offer based on your belief that I
can very well qualify for the job having worked with your organization
THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF
for sometime now.
THE NATIONAL LABOR RELATIONS COMMISSION AND RENDERING THE "May 15, 1981
QUESTIONED DECISION AND RESOLUTION IN A WAY THAT IS NOT IN
ACCORD WITH THE FACTS AND APPLICABLE LAWS AND I shall be very grateful for whatever kind attention you may extend on
Mrs. Adela L. Vicente
JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB this matter and hoping that it will merit acceptance, I remain
Vice President, Industrial Relations
CONTRACTING AGREEMENTS FROM THE EMPLOYER-EMPLOYEE
PhilCom, Paseo de Roxas
RELATIONSHIP.
Makati, Metro Manila Very truly yours,

We GRANT.
Madam: (signed)
RICARDO V. DE VERA, M.D."
Under Rule 45 of the Rules of Court, only questions of law may be
I shall have the time and effort for the position of Company physician
reviewed by this Court in decisions rendered by the Court of Appeals.
with your corporation if you deemed it necessary. I have the necessary Significantly, the foregoing letter was substantially the basis of the labor
There are instances, however, where the Court departs from this rule
qualifications, training and experience required by such position and I arbiter’s finding that there existed no employer-employee relationship
and reviews findings of fact so that substantial justice may be served.
am confident that I can serve the best interests of your employees, between petitioner and respondent, in addition to the following factual
The exceptional instances are where:
medically. settings:

"xxx xxx xxx (1) the conclusion is a finding grounded entirely on


My plan of works and targets shall cover the duties and responsibilities The fact that the complainant was not considered an employee was
speculation, surmise and conjecture; (2) the inference made is
required of a practitioner in industrial medicine which includes the recognized by the complainant himself in a signed letter to the
manifestly mistaken; (3) there is grave abuse of discretion; (4) the
following: respondent dated April 21, 1982 attached as Annex G to the
judgment is based on a misapprehension of facts; (5) the findings of fact
respondent’s Reply and Rejoinder. Quoting the pertinent portion of said
are conflicting; (6) the Court of Appeals went beyond the issues of the
letter:
case and its findings are contrary to the admissions of both appellant 1. Application of preventive medicine including
and appellees; (7) the findings of fact of the Court of Appeals are periodic check-up of employees;
contrary to those of the trial court; (8) said findings of facts are ‘To carry out your memo effectively and to provide a systematic and
conclusions without citation of specific evidence on which they are workable time schedule which will serve the best interests of both the
2. Holding of clinic hours in the morning and
based; (9) the facts set forth in the petition as well as in the petitioner’s present and absent employee, may I propose an extended two-hour
afternoon for a total of five (5) hours daily for
main and reply briefs are not disputed by the respondents; and (10) the service (1:00-3:00 P.M.) during which period I can devote ample time to
consultation services to employees;
findings of fact of the Court of Appeals are premised on the supposed both groups depending upon the urgency of the situation. I shall
absence of evidence and contradicted by the evidence on record."12

10
readjust my private schedule to be available for the herein proposed issues. An ordinary employee would consider the SSS payments employment shall be deemed to be regular where the employee has
extended hours, should you consider this proposal. important and thus make sure they would be paid. The complainant been engaged to perform in the usual business or trade of the employer,
never bothered to ask the respondent to remit his SSS contributions. except where the employment has been fixed for a specific project or
This clearly shows that the complainant never considered himself an undertaking the completion or termination of which has been determined
As regards compensation for the additional time and services that I shall
employee of PHILCOM and thus, respondent need not remit anything to at the time of the engagement of the employee or where the work or
render to the employees, it is dependent on your evaluation of the merit
the SSS in favor of the complainant."18 services to be performed is seasonal in nature and the employment is for
of my proposal and your confidence on my ability to carry out efficiently
the duration of the season.’
said proposal.’
Clearly, the elements of an employer-employee relationship are wanting
in this case. We may add that the records are replete with evidence ‘An employment shall be deemed to be casual if it is not covered
The tenor of this letter indicates that the complainant was proposing to
showing that respondent had to bill petitioner for his monthly by the preceding paragraph: Provided, That, any employee who
extend his time with the respondent and seeking additional
professional fees.19 It simply runs against the grain of common has rendered at least one (1) year of service, whether such is
compensation for said extension. This shows that the respondent
experience to imagine that an ordinary employee has yet to bill his continuous or broken,shall be considered a regular with respect to
PHILCOM did not have control over the schedule of the complainant as it
employer to receive his salary. the activity in which he is employed and his employment shall
[is] the complainant who is proposing his own schedule and asking to be
continue while such activity exists.’
paid for the same. This is proof that the complainant understood that his
relationship with the respondent PHILCOM was a retained physician and We note, too, that the power to terminate the parties’ relationship was
not as an employee. If he were an employee he could not negotiate as mutually vested on both. Either may terminate the arrangement at will, Parenthetically, the position of company physician, in the case of
to his hours of work. with or without cause.20 petitioner, is usually necessary and desirable because the need for
medical attention of employees cannot be foreseen, hence, it is
necessary to have a physician at hand. In fact, the importance and
The complainant is a Doctor of Medicine, and presumably, a well- Finally, remarkably absent from the parties’ arrangement is the element
desirability of a physician in a company premises is recognized by Art.
educated person. Yet, the complainant, in his position paper, is claiming of control, whereby the employer has reserved the right to control the
157 of the Labor Code, which requires the presence of a physician
that he is not conversant with the law and did not give much attention to employee not only as to the result of the work done but also as to the
depending on the number of employees and in the case at bench, in
his job title- on a ‘retainer basis’. But the same complainant admits in his means and methods by which the same is to be accomplished.21
petitioner’s case, as found by public respondent, petitioner employs
affidavit that his service for the respondent was covered by a
more than 500 employees.
retainership contract [which] was renewed every year from 1982 to
Here, petitioner had no control over the means and methods by which
1994. Upon reading the contract dated September 6, 1982, signed by
respondent went about performing his work at the company premises.
the complainant himself (Annex ‘C’ of Respondent’s Position Paper), it Going back to Art. 280 of the Labor Code, it was made therein clear that
He could even embark in the private practice of his profession, not to
clearly states that is a retainership contract. The retainer fee is indicated the provisions of a written agreement to the contrary notwithstanding or
mention the fact that respondent’s work hours and the additional
thereon and the duration of the contract for one year is also clearly the existence of a mere oral agreement, if the employee is engaged in
compensation therefor were negotiated upon by the parties.22 In fine,
indicated in paragraph 5 of the Retainership Contract. The complainant the usual business or trade of the employer, more so, that he rendered
the parties themselves practically agreed on every terms and conditions
cannot claim that he was unaware that the ‘contract’ was good only for service for at least one year, such employee shall be considered as
of respondent’s engagement, which thereby negates the element of
one year, as he signed the same without any objections. The a regular employee. Private respondent herein has been with petitioner
control in their relationship. For sure, respondent has never cited even a
complainant also accepted its renewal every year thereafter until 1994. since 1981 and his employment was not for a specific project or
single instance when petitioner interfered with his work.
As a literate person and educated person, the complainant cannot claim undertaking, the period of which was pre-determined and neither the
that he does not know what contract he signed and that it was renewed work or service of private respondent seasonal. (Emphasis by the CA
on a year to year basis.17 Yet, despite the foregoing, all of which are extant on record, both the itself).
NLRC and the Court of Appeals ruled that respondent is petitioner’s
regular employee at the time of his separation.
The labor arbiter added the indicia, not disputed by respondent, that We disagree to the foregoing ratiocination.
from the time he started to work with petitioner, he never was included
in its payroll; was never deducted any contribution for remittance to the Partly says the appellate court in its assailed decision:
The appellate court’s premise that regular employees are those who
Social Security System (SSS); and was in fact subjected by petitioner to
perform activities which are desirable and necessary for the business of
the ten (10%) percent withholding tax for his professional fee, in Be that as it may, it is admitted that private respondent’s written the employer is not determinative in this case. For, we take it that any
accordance with the National Internal Revenue Code, matters which are ‘retainer contract’ was renewed annually from 1981 to 1994 and the agreement may provide that one party shall render services for and in
simply inconsistent with an employer-employee relationship. In the alleged ‘renewal’ for 1995 and 1996, when it was allegedly terminated, behalf of another, no matter how necessary for the latter’s
precise words of the labor arbiter: was verbal. 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
"xxx xxx xxx After more than ten years of services to PHILCOM, the Article 280 of the Labor code (sic) provides: an agency agreement. Indeed, Article 280 of the Labor Code, quoted by
complainant would have noticed that no SSS deductions were made on the appellate court, is not the yardstick for determining the existence of
his remuneration or that the respondent was deducting the 10% tax for an employment relationship. As it is, the provision merely distinguishes
his fees and he surely would have complained about them if he had ‘The provisions of written agreement to the contrary notwithstanding between two (2) kinds of employees, i.e., regular and casual. It does not
considered himself an employee of PHILCOM. But he never raised those and regardless of the oral agreements of the parties, an
11
apply where, as here, the very existence of an employment relationship certain establishments depending on the number of their employees, No pronouncement as to costs.
is in dispute.23 nothing is there in the law which says that medical practitioners so
engaged be actually hired as employees,24 adding that the law, as
SO ORDERED.
written, only requires the employer "to retain", not employ, a part-time
Buttressing his contention that he is a regular employee of petitioner,
physician who needed to stay in the premises of the non-hazardous
respondent invokes Article 157 of the Labor Code, and argues that he
workplace for two (2) hours.25
satisfies all the requirements thereunder. The provision relied upon
reads:
Respondent takes no issue on the fact that petitioner’s business of
telecommunications is not hazardous in nature. As such, what applies
ART. 157. Emergency medical and dental services. – It shall be the duty
here is the last paragraph of Article 157 which, to stress, provides that
of every employer to furnish his employees in any locality with free
the employer may engage the services of a physician and dentist "on
medical and dental attendance and facilities consisting of:
retained basis", subject to such regulations as the Secretary of Labor
may prescribe. The successive "retainership" agreements of the parties
(a) The services of a full-time registered nurse when the definitely hue to the very statutory provision relied upon by respondent.
number of employees exceeds fifty (50) but not more than
two hundred (200) except when the employer does not
Deeply embedded in our jurisprudence is the rule that courts may not
maintain hazardous workplaces, in which case the services of a
construe a statute that is free from doubt. Where the law is clear and
graduate first-aider shall be provided for the protection of the
unambiguous, it must be taken to mean exactly what it says, and courts
workers, where no registered nurse is available. The Secretary
have no choice but to see to it that the mandate is obeyed.26 As it is,
of Labor shall provide by appropriate regulations the services
Article 157 of the Labor Code clearly and unequivocally allows employers
that shall be required where the number of employees does
in non-hazardous establishments to engage "on retained basis" the
not exceed fifty (50) and shall determine by appropriate order
service of a dentist or physician. Nowhere does the law provide that the
hazardous workplaces for purposes of this Article;
physician or dentist so engaged thereby becomes a regular employee.
The very phrase that they may be engaged "on retained basis", revolts
(b) The services of a full-time registered nurse, a part-time against the idea that this engagement gives rise to an employer-
physician and dentist, and an emergency clinic, when the employee relationship.
number of employees exceeds two hundred (200) but not
more than three hundred (300); and
With the recognition of the fact that petitioner consistently engaged the
services of respondent on a retainer basis, as shown by their various
(c) The services of a full-time physician, dentist and full-time "retainership contracts", so can petitioner put an end, with or without
registered nurse as well as a dental clinic, and an infirmary or cause, to their retainership agreement as therein provided.27
emergency hospital with one bed capacity for every one
hundred (100) employees when the number of employees
We note, however, that even as the contracts entered into by the parties
exceeds three hundred (300).
invariably provide for a 60-day notice requirement prior to termination,
the same was not complied with by petitioner when it terminated on 17
In cases of hazardous workplaces, no employer shall engage the services December 1996 the verbally-renewed retainership agreement, effective
of a physician or dentist who cannot stay in the premises of the at the close of business hours of 31 December 1996.
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
Be that as it may, the record shows, and this is admitted by both
employed on full-time basis. Where the undertaking is nonhazardous in
parties,28 that execution of the NLRC decision had already been made at
nature, the physician and dentist may be engaged on retained basis,
the NLRC despite the pendency of the present recourse. For sure,
subject to such regulations as the Secretary of Labor may prescribe to
accounts of petitioner had already been garnished and released to
insure immediate availability of medical and dental treatment and
respondent despite the previous Status Quo Order29 issued by this Court.
attendance in case of emergency.
To all intents and purposes, therefore, the 60-day notice requirement
has become moot and academic if not waived by the respondent himself.
Had only respondent read carefully the very statutory provision invoked
by him, he would have noticed that in non-hazardous workplaces, the
WHEREFORE, the petition is GRANTED and the challenged decision of
employer may engage the services of a physician "on retained basis." As
the Court of Appeals REVERSED and SET ASIDE. The 21 December 1998
correctly observed by the petitioner, while it is true that the provision
decision of the labor arbiter is REINSTATED.
requires employers to engage the services of medical practitioners in
12
4 a) Prepare, arrange airing of commercial broadcasting based on the daily Monday – Saturday
operations log and digicart of respondent ABS-CBN;
4:30 A.M. – 8:00 A.M. – Marlene Nazareno.
Republic of the Philippines
b) Coordinate, arrange personalities for air interviews;
SUPREME COURT
Manila Miss Nazareno will then be assigned at the Research Dept.
c) Coordinate, prepare schedule of reporters for scheduled news
reporting and lead-in or incoming reports;
FIRST DIVISION From 8:00 A.M. to 12:00

d) Facilitate, prepare and arrange airtime schedule for public service


G.R. No. 164156 September 26, 2006 4:30 P.M. – 12:00 MN – Jennifer Deiparine
announcement and complaints;

ABS-CBN BROADCASTING CORPORATION, petitioner, Sunday


e) Assist, anchor program interview, etc; and
vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, 5:00 A.M. – 1:00 P.M. – Jennifer Deiparine
and JOSEPHINE LERASAN,respondents. f) Record, log clerical reports, man based control radio.4

1:00 P.M. – 10:00 P.M. – Joy Sanchez


DECISION Their respective working hours were as follows:

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


CALLEJO, SR., J.: Name Time No. of Hours
Department reporting directly to Leo Lastimosa.

Before us is a petition for review on certiorari of the Decision1 of the 1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 ½
On October 12, 2000, respondents filed a Complaint for Recognition of
Court of Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution Regular Employment Status, Underpayment of Overtime Pay, Holiday
denying the motion for reconsideration thereof. The CA affirmed the 8:00 A.M.-12:00 noon Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th
Decision2 and Resolution3 of the National Labor Relations Commission Month Pay with Damages against the petitioner before the NLRC. The
(NLRC) in NLRC Case No. V-000762-2001 (RAB Case No. VII-10-1661- Labor Arbiter directed the parties to submit their respective position
2001) which likewise affirmed, with modification, the decision of the 2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½
papers. Upon respondents’ failure to file their position papers within the
Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou reglementary period, Labor Arbiter Jose G. Gutierrez issued an Order
Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees. 3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs. dated April 30, 2001, dismissing the complaint without prejudice for lack
of interest to pursue the case. Respondents received a copy of the Order
The Antecedents 9:00 A.M.-6:00 P.M. (WF) 9 hrs. on May 16, 2001.7Instead 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
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in 4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5 and Motion to Submit Case For Resolution.8 The Labor Arbiter granted
the broadcasting business and owns a network of television and radio
this motion in an Order dated June 18, 2001, and forthwith admitted the
stations, whose operations revolve around the broadcast, transmission,
The PAs were under the control and supervision of Assistant Station position paper of the complainants. Respondents made the following
and relay of telecommunication signals. It sells and deals in or otherwise
Manager Dante J. Luzon, and News Manager Leo Lastimosa. allegations:
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 On December 19, 1996, petitioner and the ABS-CBN Rank-and-File 1. Complainants were engaged by respondent ABS-CBN as regular and
Commission. Employees executed a Collective Bargaining Agreement (CBA) to be full-time employees for a continuous period of more than five (5) years
effective during the period from December 11, 1996 to December 11, with a monthly salary rate of Four Thousand (P4,000.00) pesos
1999. However, since petitioner refused to recognize PAs as part of the beginning 1995 up until the filing of this complaint on November 20,
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and
bargaining unit, respondents were not included to the CBA.6 2000.
Lerasan as production assistants (PAs) on different dates. They were
assigned at the news and public affairs, for various radio programs in the
Cebu Broadcasting Station, with a monthly compensation of P4,000. On July 20, 2000, petitioner, through Dante Luzon, issued a Machine copies of complainants’ ABS-CBN Employee’s Identification Card
They were issued ABS-CBN employees’ identification cards and were Memorandum informing the PAs that effective August 1, 2000, they and salary vouchers are hereto attached as follows, thus:
required to work for a minimum of eight hours a day, including Sundays would be assigned to non-drama programs, and that the DYAB studio
and holidays. They were made to perform the following tasks and duties: operations would be handled by the studio technician. Thus, their I. Jennifer Deiparine:
revised schedule and other assignments would be as follows:
13
Exhibit "A" - ABS-CBN Employee’s Identification Card IV. Joy Sanchez Lerasan 5. Sick leave;

Exhibit "B", - ABS-CBN Salary Voucher from Nov. Exhibit "F" - ABS-CBN Employee’s Identification Card 6. Holiday pay;

Exhibit "B-1" & 1999 to July 2000 at P4,000.00 Exhibit "F-1" - ABS-CBN Salary Voucher from Aug. 7. Premium pay;

Exhibit "B-2" Exhibit "F-2" & 2000 to Jan. 2001 8. Overtime pay;

Date employed: September 15, 1995 Exhibit "F-3" 9. Night shift differential.

Length of service: 5 years & nine (9) months Exhibit "F-4" - Certification dated July 6, 2000 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
II. Merlou Gerzon - ABS-CBN Employee’s Identification Card Acknowledging regular status of
of respondent company where they may as such acquire or otherwise
perform their obligations thereto or enjoy the benefits due therefrom.
Exhibit "C" Complainant Joy Sanchez Lerasan
Complainants pray for such other reliefs as are just and equitable under
Exhibit "D" Signed by ABS-CBN Administrative the premises.10

Exhibit "D-1" & Officer May Kima Hife 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
Exhibit "D-2" - ABS-CBN Salary Voucher from March Date employed: April 15, 1998 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
1999 to January 2001 at P4,000.00 Length of service: 3 yrs. and one (1) month9 program or a particular production. They are considered in the industry
as "program employees" in that, as distinguished from regular or station
Date employed: September 1, 1995 Respondents insisted that they belonged to a "work pool" from which employees, they are basically engaged by the station for a particular or
petitioner chose persons to be given specific assignments at its specific program broadcasted by the radio station. Petitioner asserted
discretion, and were thus under its direct supervision and control that as PAs, the complainants were issued talent information sheets
Length of service: 5 years & 10 months which are updated from time to time, and are thus made the basis to
regardless of nomenclature. They prayed that judgment be rendered in
their favor, thus: determine the programs to which they shall later be called on to assist.
III. Marlene Nazareno The program assignments of complainants were as follows:

WHEREFORE, premises considered, this Honorable Arbiter is most


Exhibit "E" - ABS-CBN Employee’s Identification Card respectfully prayed, to issue an order compelling defendants to pay a. Complainant Nazareno assists in the programs:
complainants the following:
Exhibit "E" - ABS-CBN Salary Voucher from Nov. 1) Nagbagang Balita (early morning edition)
1. One Hundred Thousand Pesos (P100,000.00) each
Exhibit "E-1" & 1999 to December 2000 2) Infor Hayupan
and by way of moral damages;
Exhibit :E-2" 3) Arangkada (morning edition)
2. Minimum wage differential;
Date employed: April 17, 1996 4) Nagbagang Balita (mid-day edition)
3. Thirteenth month pay differential;
Length of service: 5 years and one (1) month b. Complainant Deiparine assists in the programs:
4. Unpaid service incentive leave benefits;
1) Unzanith
14
2) Serbisyo de Arevalo (a) Siesta Serenata P48,100.00

3) Arangkada (evening edition) (b) Sunday Chismisan plus ten (10%) percent Attorney’s Fees or a TOTAL aggregate amount of
PESOS: FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00).
4) Balitang K (local version) (c) Timbangan sa Hustisya
Respondent Veneranda C. Sy is absolved from any liability.
5) Abante Subu (d) Sayri ang Lungsod
SO ORDERED.13
6) Pangutana Lang (e) Haranahan 11

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
c. Complainant Gerzon assists in the program: Petitioner maintained that PAs, reporters, anchors and talents
the agreement, as the same was within the jurisdiction of the Voluntary
occasionally "sideline" for other programs they produce, such as drama
Arbitrator as provided in Article 261 of the Labor Code.
talents in other productions. As program employees, a PA’s engagement
1) On Mondays and Tuesdays:
is coterminous with the completion of the program, and may be
extended/renewed provided that the program is on-going; a PA may also Respondents’ counsel received a copy of the decision on August 29,
(a) Unzanith be assigned to new programs upon the cancellation of one program and 2001. Respondent Nazareno received her copy on August 27, 2001,
the commencement of another. As such program employees, their while the other respondents received theirs on September 8, 2001.
(b) Serbisyo de Arevalo compensation is computed on a program basis, a fixed amount for Respondents signed and filed their Appeal Memorandum on September
performance services irrespective of the time consumed. At any rate, 18, 2001.
petitioner claimed, as the payroll will show, respondents were paid all
(c) Arangkada (evening edition) salaries and benefits due them under the law.12
For its part, petitioner filed a motion for reconsideration, which the Labor
Arbiter denied and considered as an appeal, conformably with Section 5,
(d) Balitang K (local version) Petitioner also alleged that the Labor Arbiter had no jurisdiction to Rule V, of the NLRC Rules of Procedure. Petitioner forthwith appealed
involve the CBA and interpret the same, especially since respondents the decision to the NLRC, while respondents filed a partial appeal.
(e) Abante Sugbu were not covered by the bargaining unit.
In its appeal, petitioner alleged the following:
(f) Pangutana Lang On July 30, 2001, the Labor Arbiter rendered judgment in favor of the
respondents, and declared that they were regular employees of
1. That the Labor Arbiter erred in reviving or re-opening this case which
petitioner; as such, they were awarded monetary benefits. The fallo of
2) On Thursdays had long been dismissed without prejudice for more than thirty (30)
the decision reads:
calendar days;

Nagbagang Balita WHEREFORE, the foregoing premises considered, judgment is hereby


2. That the Labor Arbiter erred in depriving the respondent of its
rendered declaring the complainants regular employees of the
Constitutional right to due process of law;
3) On Saturdays respondent ABS-CBN Broadcasting Corporation and directing the same
respondent to pay complainants as follows:
3. That the Labor Arbiter erred in denying respondent’s Motion for
(a) Nagbagang Balita Reconsideration on an interlocutory order on the ground that the same is
I - Merlou A. Gerzon P12,025.00
a prohibited pleading;
(b) Info Hayupan
II - Marlyn Nazareno 12,025.00
4. That the Labor Arbiter erred when he ruled that the complainants are
(c) Arangkada (morning edition) regular employees of the respondent;
III - Jennifer Deiparine 12,025.00
(d) Nagbagang Balita (mid-day edition) 5. That the Labor Arbiter erred when he ruled that the complainants are
IV - Josephine Sanchez Lerazan 12,025.00 entitled to 13th month pay, service incentive leave pay and salary
differential; and
4) On Sundays:
_________

15
6. That the Labor Arbiter erred when he ruled that complainants are The NLRC declared that the Labor Arbiter acted conformably with the petitioner and not just its project employees. Moreover, the CA added,
entitled to attorney’s fees.14 Labor Code when it granted respondents’ motion to refile the complaint the award of benefits accorded to rank-and-file employees under the
and admit their position paper. Although respondents were not parties to 1996-1999 CBA is a necessary consequence of the NLRC ruling that
the CBA between petitioner and the ABS-CBN Rank-and-File Employees respondents, as PAs, are regular employees.
On November 14, 2002, the NLRC rendered judgment modifying the
Union, the NLRC nevertheless granted and computed respondents’
decision of the Labor Arbiter. The fallo of the decision reads:
monetary benefits based on the 1999 CBA, which was effective until
Finding no merit in petitioner’s motion for reconsideration, the CA denied
September 2002. The NLRC also ruled that the Labor Arbiter had
the same in a Resolution17 dated June 16, 2004.
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. jurisdiction over the complaint of respondents because they acted in
Gutierrez dated 30 July 2001 is SET ASIDE and VACATED and a new one their individual capacities and not as members of the union. Their claim
is entered ORDERING respondent ABS-CBN Broadcasting Corporation, as for monetary benefits was within the context of Article 217(6) of the Petitioner thus filed the instant petition for review on certiorari and raises
follows: Labor Code. The validity of respondents’ claim does not depend upon the the following assignments of error:
interpretation of the CBA.
1. To pay complainants of their wage differentials and other benefits 1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT
arising from the CBA as of 30 September 2002 in the aggregate amount The NLRC ruled that respondents were entitled to the benefits under the JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE NATIONAL
of Two Million Five Hundred, Sixty-One Thousand Nine Hundred Forty- CBA because they were regular employees who contributed to the profits LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT
Eight Pesos and 22/100 (P2,561,948.22), broken down as follows: of petitioner through their labor. The NLRC cited the ruling of this Court NULLITY OF THE LATTER’S DECISION AND RESOLUTION.
in New Pacific Timber & Supply Company v. National Labor Relations
a. Deiparine, Jennifer - P 716,113.49 Commission.16 2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
AFFIRMING THE RULING OF THE NLRC FINDING RESPONDENTS
Petitioner filed a motion for reconsideration, which the NLRC denied. REGULAR EMPLOYEES.
b. Gerzon, Merlou - 716,113.49

Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of 3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
c. Nazareno, Marlyn - 716,113.49
Court before the CA, raising both procedural and substantive issues, as AFFIRMING THE RULING OF THE NLRC AWARDING CBA BENEFITS TO
follows: (a) whether the NLRC acted without jurisdiction in admitting the RESPONDENTS.18
d. Lerazan, Josephine Sanchez - 413,607.75 appeal of respondents; (b) whether the NLRC committed palpable error
in scrutinizing the reopening and revival of the complaint of respondents Considering that the assignments of error are interrelated, the Court
Total - P 2,561,948.22 with the Labor Arbiter upon due notice despite the lapse of 10 days from shall resolve them simultaneously.
their receipt of the July 30, 2001 Order of the Labor Arbiter; (c) whether
respondents were regular employees; (d) whether the NLRC acted
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks without jurisdiction in entertaining and resolving the claim of the Petitioner asserts that the appellate court committed palpable and
of rice as of 30 September 2002 representing their rice subsidy in the respondents under the CBA instead of referring the same to the serious error of law when it affirmed the rulings of the NLRC, and
CBA, broken down as follows: Voluntary Arbitrators as provided in the CBA; and (e) whether the NLRC entertained respondents’ appeal from the decision of the Labor Arbiter
acted with grave abuse of discretion when it awarded monetary benefits despite the admitted lapse of the reglementary period within which to
a. Deiparine, Jennifer - 60 Sacks to respondents under the CBA although they are not members of the perfect the same. Petitioner likewise maintains that the 10-day period to
appropriate bargaining unit. appeal must be reckoned from receipt of a party’s counsel, not from the
time the party learns of the decision, that is, notice to counsel is notice
b. Gerzon, Merlou - 60 Sacks to party and not the other way around. Finally, petitioner argues that the
On February 10, 2004, the CA rendered judgment dismissing the reopening of a complaint which the Labor Arbiter has dismissed without
petition. It held that the perfection of an appeal shall be upon the prejudice is a clear violation of Section 1, Rule V of the NLRC Rules; such
c. Nazareno, Marlyn - 60 Sacks expiration of the last day to appeal by all parties, should there be several order of dismissal had already attained finality and can no longer be set
parties to a case. Since respondents received their copies of the decision aside.
d. Lerazan, Josephine Sanchez - 53 Sacks 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 Respondents, on the other hand, allege that their late appeal is a non-
Total 233 Sacks; and issue because it was petitioner’s own timely appeal that empowered the
declared that respondents’ failure to submit their position paper on time
is not a ground to strike out the paper from the records, much less NLRC to reopen the case. They assert that although the appeal was filed
3. To grant to the complainants all the benefits of the CBA after 30 dismiss a complaint. 10 days late, it may still be given due course in the interest of substantial
September 2002. 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
Anent the substantive issues, the appellate court stated that respondents paper, they maintain that this is not a ground to strike it out from the
SO ORDERED.15 are not mere project employees, but regular employees who perform records or dismiss the complaint.
tasks necessary and desirable in the usual trade and business of
16
We find no merit in the petition. file a Reply thereto. In fact, petitioner filed its position paper on April 2, interest of due process. Indeed, the failure to submit a position paper on
2001. It must be stressed that Article 280 of the Labor Code was time is not a ground for striking out the paper from the records, much
encoded in our statute books to hinder the circumvention by less for dismissing a complaint in the case of the complainant.
We agree with petitioner’s contention that the perfection of an appeal
unscrupulous employers of the employees’ right to security of tenure by (University of Immaculate Conception vs. UIC Teaching and Non-
within the statutory or reglementary period is not only mandatory, but
indiscriminately and absolutely ruling out all written and oral agreements Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).
also jurisdictional; failure to do so renders the assailed decision final and
inharmonious with the concept of regular employment defined therein.28
executory and deprives the appellate court or body of the legal authority
to alter the final judgment, much less entertain the appeal. However, "In admitting the respondents’ position paper albeit late, the Labor
this Court has time and again ruled that in exceptional cases, a belated We quote with approval the following pronouncement of the NLRC: Arbiter acted within her discretion. In fact, she is enjoined by law to use
appeal may be given due course if greater injustice may occur if an every reasonable means to ascertain the facts in each case speedily and
appeal is not given due course than if the reglementary period to appeal objectively, without technicalities of law or procedure, all in the interest
The complainants, on the other hand, contend that respondents assailed
were strictly followed.19 The Court resorted to this extraordinary measure of due process". (Panlilio vs. NLRC, 281 SCRA 53).
the Labor Arbiter’s order dated 18 June 2001 as violative of the NLRC
even at the expense of sacrificing order and efficiency if only to serve
Rules of Procedure and as such is violative of their right to procedural
the greater principles of substantial justice and equity.20
due process. That while suggesting that an Order be instead issued by The respondents were given by the Labor Arbiter the opportunity to
the Labor Arbiter for complainants to refile this case, respondents submit position paper. In fact, the respondents had filed their position
In the case at bar, the NLRC did not commit a grave abuse of its impliedly submit that there is not any substantial damage or prejudice paper on 2 April 2001. What is material in the compliance of due process
discretion in giving Article 22321 of the Labor Code a liberal application to upon the refiling, even so, respondents’ suggestion acknowledges is the fact that the parties are given the opportunities to submit position
prevent the miscarriage of justice. Technicality should not be allowed to complainants right to prosecute this case, albeit with the burden of papers.
stand in the way of equitably and completely resolving the rights and repeating the same procedure, thus, entailing additional time, efforts,
obligations of the parties.22 We have held in a catena of cases that litigation cost and precious time for the Arbiter to repeat the same
"Due process requirements are satisfied where the parties are given the
technical rules are not binding in labor cases and are not to be applied process twice. Respondent’s suggestion, betrays its notion of prolonging,
opportunities to submit position papers". (Laurence vs. NLRC, 205 SCRA
strictly if the result would be detrimental to the workingman.23 rather than promoting the early resolution of the case.
737).

Admittedly, respondents failed to perfect their appeal from the decision Although the Labor Arbiter in his Order dated 18 June 2001 which
Thus, the respondent was not deprived of its Constitutional right to due
of the Labor Arbiter within the reglementary period therefor. However, revived and re-opened the dismissed case without prejudice beyond the
process of law.29
petitioner perfected its appeal within the period, and since petitioner had ten (10) day reglementary period had inadvertently failed to follow
filed a timely appeal, the NLRC acquired jurisdiction over the case to give Section 16, Rule V, Rules Procedure of the NLRC which states:
due course to its appeal and render the decision of November 14, 2002. We reject, as barren of factual basis, petitioner’s contention that
Case law is that the party who failed to appeal from the decision of the respondents are considered as its talents, hence, not regular employees
"A party may file a motion to revive or re-open a case dismissed without
Labor Arbiter to the NLRC can still participate in a separate appeal timely of the broadcasting company. Petitioner’s claim that the functions
prejudice within ten (10) calendar days from receipt of notice of the
filed by the adverse party as the situation is considered to be of greater performed by the respondents are not at all necessary, desirable, or
order dismissing the same; otherwise, his only remedy shall be to re-file
benefit to both parties.24 even vital to its trade or business is belied by the evidence on record.
the case in the arbitration branch of origin."

We find no merit in petitioner’s contention that the Labor Arbiter abused Case law is that this Court has always accorded respect and finality to
the same is not a serious flaw that had prejudiced the respondents’ right
his discretion when he admitted respondents’ position paper which had the findings of fact of the CA, particularly if they coincide with those of
to due process. The case can still be refiled because it has not yet
been belatedly filed. It bears stressing that the Labor Arbiter is the Labor Arbiter and the National Labor Relations Commission, when
prescribed. Anyway, Article 221 of the Labor Code provides:
mandated by law to use every reasonable means to ascertain the facts in supported by substantial evidence.30 The question of whether
each case speedily and objectively, without technicalities of law or respondents are regular or project employees or independent contractors
procedure, all in the interest of due process.25 Indeed, as stressed by the "In any proceedings before the Commission or any of the Labor Arbiters, is essentially factual in nature; nonetheless, the Court is constrained to
appellate court, respondents’ failure to submit a position paper on time is the rules of evidence prevailing in courts of law or equity shall not be resolve it due to its tremendous effects to the legions of production
not a ground for striking out the paper from the records, much less for controlling and it is the spirit and intention of this Code that the assistants working in the Philippine broadcasting industry.
dismissing a complaint.26 Likewise, there is simply no truth to petitioner’s Commission and its members and the Labor Arbiters shall use every and
assertion that it was denied due process when the Labor Arbiter all reasonable means to ascertain the facts in each case speedily and
We agree with respondents’ contention that where a person has
admitted respondents’ position paper without requiring it to file a objectively and without regard to technicalities of law or procedure, all in
rendered at least one year of service, regardless of the nature of the
comment before admitting said position paper. The essence of due the interest of due process."
activity performed, or where the work is continuous or intermittent, the
process in administrative proceedings is simply an opportunity to explain employment is considered regular as long as the activity exists, the
one’s side or an opportunity to seek reconsideration of the action or The admission by the Labor Arbiter of the complainants’ Position Paper reason being that a customary appointment is not indispensable before
ruling complained of. Obviously, there is nothing in the records that and Supplemental Manifestation which were belatedly filed just only one may be formally declared as having attained regular status. Article
would suggest that petitioner had absolute lack of opportunity to be shows that he acted within his discretion as he is enjoined by law to use 280 of the Labor Code provides:
heard.27 Petitioner had the right to file a motion for reconsideration of every reasonable means to ascertain the facts in each case speedily and
the Labor Arbiter’s admission of respondents’ position paper, and even objectively, without regard to technicalities of law or procedure, all in the
17
ART. 280. REGULAR AND CASUAL EMPLOYMENT.—The provisions of of such person is also then deemed to be regular with respect to such undertaking that is not within the regular business of the employer. Such
written agreement to the contrary notwithstanding and regardless of the activity and while such activity exists.34 a job or undertaking must also be identifiably separate and distinct from
oral agreement of the parties, an employment shall be deemed to be the ordinary or regular business operations of the employer. The job or
regular where the employee has been engaged to perform activities undertaking also begins and ends at determined or determinable times.38
Not considered regular employees are "project employees," the
which are usually necessary or desirable in the usual business or trade of
completion or termination of which is more or less determinable at the
the employer except where the employment has been fixed for a specific
time of employment, such as those employed in connection with a The principal test is whether or not the project employees were assigned
project or undertaking the completion or termination of which has been
particular construction project, and "seasonal employees" whose to carry out a specific project or undertaking, the duration and scope of
determined at the time of the engagement of the employee or where the
employment by its nature is only desirable for a limited period of time. which were specified at the time the employees were engaged for that
work or services to be performed is seasonal in nature and the
Even then, any employee who has rendered at least one year of service, project.39
employment is for the duration of the season.
whether continuous or intermittent, is deemed regular with respect to
the activity performed and while such activity actually exists.
In this case, it is undisputed that respondents had continuously
In Universal Robina Corporation v. Catapang,31 the Court reiterated the
performed the same activities for an average of five years. Their
test in determining whether one is a regular employee:
It is of no moment that petitioner hired respondents as "talents." The assigned tasks are necessary or desirable in the usual business or trade
fact that respondents received pre-agreed "talent fees" instead of of the petitioner. The persisting need for their services is sufficient
The primary standard, therefore, of determining regular employment is salaries, that they did not observe the required office hours, and that evidence of the necessity and indispensability of such services to
the reasonable connection between the particular activity performed by they were permitted to join other productions during their free time are petitioner’s business or trade.40 While length of time may not be a sole
the employee in relation to the usual trade or business of the employer. not conclusive of the nature of their employment. Respondents cannot controlling test for project employment, it can be a strong factor to
The test is whether the former is usually necessary or desirable in the be considered "talents" because they are not actors or actresses or radio determine whether the employee was hired for a specific undertaking or
usual business or trade of the employer. The connection can be specialists or mere clerks or utility employees. They are regular in fact tasked to perform functions which are vital, necessary and
determined by considering the nature of work performed and its relation employees who perform several different duties under the control and indispensable to the usual trade or business of the employer.41We note
to the scheme of the particular business or trade in its entirety. Also, if direction of ABS-CBN executives and supervisors. further that petitioner did not report the termination of respondents’
the employee has been performing the job for at least a year, even if the employment in the particular "project" to the Department of Labor and
performance is not continuous and merely intermittent, the law deems Employment Regional Office having jurisdiction over the workplace
Thus, there are two kinds of regular employees under the law: (1) those
repeated and continuing need for its performance as sufficient evidence within 30 days following the date of their separation from work, using
engaged to perform activities which are necessary or desirable in the
of the necessity if not indispensability of that activity to the business. the prescribed form on employees’ termination/
usual business or trade of the employer; and (2) those casual employees
Hence, the employment is considered regular, but only with respect to dismissals/suspensions.42
who have rendered at least one year of service, whether continuous or
such activity and while such activity exists.32
broken, with respect to the activities in which they are employed.35
As gleaned from the records of this case, petitioner itself is not certain
As elaborated by this Court in Magsalin v. National Organization of how to categorize respondents. In its earlier pleadings, petitioner
The law overrides such conditions which are prejudicial to the interest of
Working Men:33 classified respondents as program employees, and in later pleadings,
the worker whose weak bargaining situation necessitates the succor of
independent contractors. Program employees, or project employees, are
the State. What determines whether a certain employment is regular or
different from independent contractors because in the case of the latter,
Even while the language of law might have been more definitive, the otherwise is not the will or word of the employer, to which the worker
no employer-employee relationship exists.
clarity of its spirit and intent, i.e., to ensure a "regular" worker’s security oftentimes acquiesces, much less the procedure of hiring the employee
of tenure, however, can hardly be doubted. In determining whether an or the manner of paying the salary or the actual time spent at work. It is
employment should be considered regular or non-regular, the applicable the character of the activities performed in relation to the particular Petitioner’s reliance on the ruling of this Court in Sonza v. ABS-CBN
test is the reasonable connection between the particular activity trade or business taking into account all the circumstances, and in some Broadcasting Corporation43 is misplaced. In that case, the Court
performed by the employee in relation to the usual business or trade of cases the length of time of its performance and its continued explained why Jose Sonza, a well-known television and radio personality,
the employer. The standard, supplied by the law itself, is whether the existence.36 It is obvious that one year after they were employed by was an independent contractor and not a regular employee:
work undertaken is necessary or desirable in the usual business or trade petitioner, respondents became regular employees by operation of law.37
of the employer, a fact that can be assessed by looking into the nature
A. Selection and Engagement of Employee
of the services rendered and its relation to the general scheme under
Additionally, respondents cannot be considered as project or program
which the business or trade is pursued in the usual course. It is
employees because no evidence was presented to show that the
distinguished from a specific undertaking that is divorced from the ABS-CBN engaged SONZA’S services to co-host its television and radio
duration and scope of the project were determined or specified at the
normal activities required in carrying on the particular business or trade. programs because of SONZA’S peculiar skills, talent and celebrity status.
time of their engagement. Under existing jurisprudence, project could
But, although the work to be performed is only for a specific project or SONZA contends that the "discretion used by respondent in specifically
refer to two distinguishable types of activities. First, a project may refer
seasonal, where a person thus engaged has been performing the job for selecting and hiring complainant over other broadcasters of possibly
to a particular job or undertaking that is within the regular or usual
at least one year, even if the performance is not continuous or is merely similar experience and qualification as complainant belies respondent’s
business of the employer, but which is distinct and separate, and
intermittent, the law deems the repeated and continuing need for its claim of independent contractorship."
identifiable as such, from the other undertakings of the company. Such
performance as being sufficient to indicate the necessity or desirability of
job or undertaking begins and ends at determined or determinable
that activity to the business or trade of the employer. The employment
times. Second, the term project may also refer to a particular job or
18
Independent contractors often present themselves to possess unique In the case at bar, however, the employer-employee relationship As earlier stated, it is not the will or word of the employer which
skills, expertise or talent to distinguish them from ordinary employees. between petitioner and respondents has been proven. determines the nature of employment of an employee but the nature of
The specific selection and hiring of SONZA, because of his unique skills, the activities performed by such employee in relation to the particular
talent and celebrity status not possessed by ordinary employees, is a business or trade of the employer. Considering that We have clearly
First. In the selection and engagement of respondents, no peculiar or
circumstance indicative, but not conclusive, of an independent found that private respondents are regular employees of petitioner, their
unique skill, talent or celebrity status was required from them because
contractual relationship. If SONZA did not possess such unique skills, exclusion from the said CBA on the misplaced belief of the parties to the
they were merely hired through petitioner’s personnel department just
talent and celebrity status, ABS-CBN would not have entered into the said agreement that they are project employees, is therefore not proper.
like any ordinary employee.
Agreement with SONZA but would have hired him through its personnel Finding said private respondents as regular employees and not as mere
department just like any other employee. project employees, they must be accorded the benefits due under the
Second. The so-called "talent fees" of respondents correspond to wages said Collective Bargaining Agreement.
given as a result of an employer-employee relationship. Respondents did
In any event, the method of selecting and engaging SONZA does not
not have the power to bargain for huge talent fees, a circumstance
conclusively determine his status. We must consider all the A collective bargaining agreement is a contract entered into by the union
negating independent contractual relationship.
circumstances of the relationship, with the control test being the most representing the employees and the employer. However, even the non-
important element. member employees are entitled to the benefits of the contract. To
Third. Petitioner could always discharge respondents should it find their accord its benefits only to members of the union without any valid
work unsatisfactory, and respondents are highly dependent on the reason would constitute undue discrimination against non-members. A
B. Payment of Wages
petitioner for continued work. collective bargaining agreement is binding on all employees of the
company. Therefore, whatever benefits are given to the other employees
ABS-CBN directly paid SONZA his monthly talent fees with no part of his of ABS-CBN must likewise be accorded to private respondents who were
Fourth. The degree of control and supervision exercised by petitioner
fees going to MJMDC. SONZA asserts that this mode of fee payment regular employees of petitioner.48
over respondents through its supervisors negates the allegation that
shows that he was an employee of ABS-CBN. SONZA also points out that
respondents are independent contractors.
ABS-CBN granted him benefits and privileges "which he would not have
Besides, only talent-artists were excluded from the CBA and not
enjoyed if he were truly the subject of a valid job contract."
The presumption is that when the work done is an integral part of the production assistants who are regular employees of the respondents.
regular business of the employer and when the worker, relative to the Moreover, under Article 1702 of the New Civil Code: "In case of doubt,
All the talent fees and benefits paid to SONZA were the result of all labor legislation and all labor contracts shall be construed in favor of
employer, does not furnish an independent business or professional
negotiations that led to the Agreement. If SONZA were ABS-CBN’s the safety and decent living of the laborer."
service, such work is a regular employment of such employee and not an
employee, there would be no need for the parties to stipulate on benefits
independent contractor.45 The Court will peruse beyond any such
such as "SSS, Medicare, x x x and 13th month pay which the law
agreement to examine the facts that typify the parties’ actual IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of
automatically incorporates into every employer-employee contract.
relationship.46 merit. The assailed Decision and Resolution of the Court of Appeals in
Whatever benefits SONZA enjoyed arose from contract and not because
CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner.
of an employer-employee relationship.
It follows then that respondents are entitled to the benefits provided for
in the existing CBA between petitioner and its rank-and-file employees. SO ORDERED.
SONZA’s talent fees, amounting to P317,000 monthly in the second and
As regular employees, respondents are entitled to the benefits granted
third year, are so huge and out of the ordinary that they indicate more
to all other regular employees of petitioner under the CBA.47 We quote
an independent contractual relationship rather than an employer-
with approval the ruling of the appellate court, that the reason why
employee relationship. ABS-CBN agreed to pay SONZA such huge talent
production assistants were excluded from the CBA is precisely because
fees precisely because of SONZA’S unique skills, talent and celebrity
they were erroneously classified and treated as project employees by
status not possessed by ordinary employees. Obviously, SONZA acting
petitioner:
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 x x x The award in favor of private respondents of the benefits accorded
indicative, but not conclusive, of an independent contractual relationship. to rank-and-file employees of ABS-CBN under the 1996-1999 CBA is a
necessary consequence of public respondent’s ruling that private
respondents as production assistants of petitioner are regular
The payment of talent fees directly to SONZA and not to MJMDC does
employees. The monetary award is not considered as claims involving
not negate the status of SONZA as an independent contractor. The
the interpretation or implementation of the collective bargaining
parties expressly agreed on such mode of payment. Under the
agreement. The reason why production assistants were excluded from
Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would
the said agreement is precisely because they were classified and treated
have to turn over any talent fee accruing under the Agreement.44
as project employees by petitioner.

19
5 In 1996, petitioner was designated Acting Manager. The corporation also engaged through a Board Resolution designating her as technical
hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager, consultant. The money received by petitioner from the corporation was
petitioner was assigned to handle recruitment of all employees and her professional fee subject to the 10% expanded withholding tax on
Republic of the Philippines perform management administration functions; represent the company professionals, and that she was not one of those reported to the BIR or
SUPREME COURT in all dealings with government agencies, especially with the Bureau of SSS as one of the company’s employees. 12
Manila Internal Revenue (BIR), Social Security System (SSS) and in the city
government of Makati; and to administer all other matters pertaining to
Petitioner’s designation as technical consultant depended solely upon the
FIRST DIVISION the operation of Kasei Restaurant which is owned and operated by Kasei
will of management. As such, her consultancy may be terminated any
Corporation. 7
time considering that her services were only temporary in nature and
G.R. No. 170087 August 31, 2006 dependent on the needs of the corporation.
For five years, petitioner performed the duties of Acting Manager. As of
December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing
ANGELINA FRANCISCO, Petitioner, To prove that petitioner was not an employee of the corporation, private
allowance and a 10% share in the profit of Kasei Corporation. 8
vs. respondents submitted a list of employees for the years 1999 and 2000
NATIONAL LABOR RELATIONS COMMISSION, KASEI duly received by the BIR showing that petitioner was not among the
CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. employees reported to the BIR, as well as a list of payees subject to
DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and Petitioner alleged that she was required to sign a prepared resolution for expanded withholding tax which included petitioner. SSS records were
RAMON ESCUETA,Respondents. her replacement but she was assured that she would still be connected also submitted showing that petitioner’s latest employer was Seiji
with Kasei Corporation. Timoteo Acedo, the designated Treasurer, Corporation. 13
convened a meeting of all employees of Kasei Corporation and
DECISION announced that nothing had changed and that petitioner was still
The Labor Arbiter found that petitioner was illegally dismissed, thus:
connected with Kasei Corporation as Technical Assistant to Seiji Kamura
YNARES-SANTIAGO, J.: and in charge of all BIR matters. 9
WHEREFORE, premises considered, judgment is hereby rendered as
follows:
This petition for review on certiorari under Rule 45 of the Rules of Court Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month
seeks to annul and set aside the Decision and Resolution of the Court of beginning January up to September 2001 for a total reduction of
Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in P22,500.00 as of September 2001. Petitioner was not paid her mid-year 1. finding complainant an employee of respondent corporation;
CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal bonus allegedly because the company was not earning well. On October
filed by herein petitioner Angelina Francisco. The appellate court 2001, petitioner did not receive her salary from the company. She made 2. declaring complainant’s dismissal as illegal;
reversed and set aside the Decision of the National Labor Relations repeated follow-ups with the company cashier but she was advised that
Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No. 032766- the company was not earning well. 10
3. ordering respondents to reinstate complainant to her former position
02 which affirmed with modification the decision of the Labor Arbiter
without loss of seniority rights and jointly and severally pay complainant
dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding On October 15, 2001, petitioner asked for her salary from Acedo and the her money claims in accordance with the following computation:
that private respondents were liable for constructive dismissal. rest of the officers but she was informed that she is no longer connected
with the company. 11
a. Backwages 10/2001 – 07/2002 275,000.00
In 1995, petitioner was hired by Kasei Corporation during its
incorporation stage. She was designated as Accountant and Corporate Since she was no longer paid her salary, petitioner did not report for
Secretary and was assigned to handle all the accounting needs of the work and filed an action for constructive dismissal before the labor (27,500 x 10 mos.)
company. She was also designated as Liaison Officer to the City of arbiter.
Makati to secure business permits, construction permits and other b. Salary Differentials (01/2001 – 09/2001) 22,500.00
licenses for the initial operation of the company. 5
Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired in 1995 as one of its c. Housing Allowance (01/2001 – 07/2002) 57,000.00
Although she was designated as Corporate Secretary, she was not technical consultants on accounting matters and act concurrently as
entrusted with the corporate documents; neither did she attend any Corporate Secretary. As technical consultant, petitioner performed her
board meeting nor required to do so. She never prepared any legal work at her own discretion without control and supervision of Kasei d. Midyear Bonus 2001 27,500.00
document and never represented the company as its Corporate Corporation. Petitioner had no daily time record and she came to the
Secretary. However, on some occasions, she was prevailed upon to sign office any time she wanted. The company never interfered with her work e. 13th Month Pay 27,500.00
documentation for the company. 6 except that from time to time, the management would ask her opinion
on matters relating to her profession. Petitioner did not go through the
usual procedure of selection of employees, but her services were f. 10% share in the profits of Kasei

20
Corp. from 1996-2001 361,175.00 The appellate court denied petitioner’s motion for reconsideration, The control test initially found application in the case of Viaña v. Al-
hence, the present recourse. Lagadan and Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where
we held that there is an employer-employee relationship when the
g. Moral and exemplary damages 100,000.00
person for whom the services are performed reserves the right to control
The core issues to be resolved in this case are (1) whether there was an
not only the end achieved but also the manner and means used to
employer-employee relationship between petitioner and private
h. 10% Attorney’s fees 87,076.50 achieve that end.
respondent Kasei Corporation; and if in the affirmative, (2) whether
petitioner was illegally dismissed.
P957,742.50 In Sevilla v. Court of Appeals, 21 we observed the need to consider the
existing economic conditions prevailing between the parties, in addition
Considering the conflicting findings by the Labor Arbiter and the National
If reinstatement is no longer feasible, respondents are ordered to pay to the standard of right-of-control like the inclusion of the employee in
Labor Relations Commission on one hand, and the Court of Appeals on
complainant separation pay with additional backwages that would accrue the payrolls, to give a clearer picture in determining the existence of an
the other, there is a need to reexamine the records to determine which
up to actual payment of separation pay. employer-employee relationship based on an analysis of the totality of
of the propositions espoused by the contending parties is supported by
economic circumstances of the worker.
substantial evidence. 17
SO ORDERED. 14
Thus, the determination of the relationship between employer and
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there
employee depends upon the circumstances of the whole economic
On April 15, 2003, the NLRC affirmed with modification the Decision of has been no uniform test to determine the existence of an employer-
activity, 22 such as: (1) the extent to which the services performed are
the Labor Arbiter, the dispositive portion of which reads: employee relation. Generally, courts have relied on the so-called right of
an integral part of the employer’s business; (2) the extent of the
control test where the person for whom the services are performed
worker’s investment in equipment and facilities; (3) the nature and
reserves a right to control not only the end to be achieved but also the
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby degree of control exercised by the employer; (4) the worker’s
means to be used in reaching such end. In addition to the standard of
MODIFIED as follows: opportunity for profit and loss; (5) the amount of initiative, skill,
right-of-control, the existing economic conditions prevailing between the
judgment or foresight required for the success of the claimed
parties, like the inclusion of the employee in the payrolls, can help in
independent enterprise; (6) the permanency and duration of the
1) Respondents are directed to pay complainant separation pay determining the existence of an employer-employee relationship.
relationship between the worker and the employer; and (7) the degree
computed at one month per year of service in addition to full backwages of dependency of the worker upon the employer for his continued
from October 2001 to July 31, 2002; However, in certain cases the control test is not sufficient to give a employment in that line of business. 23
complete picture of the relationship between the parties, owing to the
2) The awards representing moral and exemplary damages and 10% complexity of such a relationship where several positions have been held
The proper standard of economic dependence is whether the worker is
share in profit in the respective accounts of P100,000.00 and by the worker. There are instances when, aside from the employer’s
dependent on the alleged employer for his continued employment in that
P361,175.00 are deleted; power to control the employee with respect to the means and methods
line of business. 24 In the United States, the touchstone of economic
by which the work is to be accomplished, economic realities of the
reality in analyzing possible employment relationships for purposes of
employment relations help provide a comprehensive analysis of the true
3) The award of 10% attorney’s fees shall be based on salary differential the Federal Labor Standards Act is dependency. 25By analogy, the
classification of the individual, whether as employee, independent
award only; benchmark of economic reality in analyzing possible employment
contractor, corporate officer or some other capacity.
relationships for purposes of the Labor Code ought to be the economic
dependence of the worker on his employer.
4) The awards representing salary differentials, housing allowance, mid The better approach would therefore be to adopt a two-tiered test
year bonus and 13th month pay are AFFIRMED. involving: (1) the putative employer’s power to control the employee
By applying the control test, there is no doubt that petitioner is an
with respect to the means and methods by which the work is to be
employee of Kasei Corporation because she was under the direct control
SO ORDERED. 15 accomplished; and (2) the underlying economic realities of the activity or
and supervision of Seiji Kamura, the corporation’s Technical Consultant.
relationship.
She reported for work regularly and served in various capacities as
On appeal, the Court of Appeals reversed the NLRC decision, thus: Accountant, Liaison Officer, Technical Consultant, Acting Manager and
This two-tiered test would provide us with a framework of analysis, Corporate Secretary, with substantially the same job functions, that is,
which would take into consideration the totality of circumstances rendering accounting and tax services to the company and performing
WHEREFORE, the instant petition is hereby GRANTED. The decision of surrounding the true nature of the relationship between the parties. This functions necessary and desirable for the proper operation of the
the National Labor Relations Commissions dated April 15, 2003 is hereby is especially appropriate in this case where there is no written agreement corporation such as securing business permits and other licenses over an
REVERSED and SET ASIDE and a new one is hereby rendered dismissing or terms of reference to base the relationship on; and due to the indefinite period of engagement.
the complaint filed by private respondent against Kasei Corporation, et complexity of the relationship based on the various positions and
al. for constructive dismissal. responsibilities given to the worker over the period of the latter’s
Under the broader economic reality test, the petitioner can likewise be
employment.
said to be an employee of respondent corporation because she had
SO ORDERED. 16
served the company for six years before her dismissal, receiving check
21
vouchers indicating her salaries/wages, benefits, 13th month pay, other than to tell the truth and would make solemn trials a mockery and WHEREFORE, the petition is GRANTED. The Decision and Resolution
bonuses and allowances, as well as deductions and Social Security place the investigation of the truth at the mercy of unscrupulous of the Court of Appeals dated October 29, 2004 and October 7, 2005,
contributions from August 1, 1999 to December 18, 2000. 26 When witnesses. 32 A recantation does not necessarily cancel an earlier respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE.
petitioner was designated General Manager, respondent corporation declaration, but like any other testimony the same is subject to the test The Decision of the National Labor Relations Commission dated April 15,
made a report to the SSS signed by Irene Ballesteros. Petitioner’s of credibility and should be received with caution. 33 2003 in NLRC NCR CA No. 032766-02, isREINSTATED. The case
membership in the SSS as manifested by a copy of the SSS specimen is REMANDED to the Labor Arbiter for the recomputation of petitioner
signature card which was signed by the President of Kasei Corporation Angelina Francisco’s full backwages from the time she was illegally
Based on the foregoing, there can be no other conclusion that petitioner
and the inclusion of her name in the on-line inquiry system of the SSS terminated until the date of finality of this decision, and separation pay
is an employee of respondent Kasei Corporation. She was selected and
evinces the existence of an employer-employee relationship between representing one-half month pay for every year of service, where a
engaged by the company for compensation, and is economically
petitioner and respondent corporation. 27 fraction of at least six months shall be considered as one whole year.
dependent upon respondent for her continued employment in that line of
business. Her main job function involved accounting and tax services
It is therefore apparent that petitioner is economically dependent on rendered to respondent corporation on a regular basis over an indefinite SO ORDERED.
respondent corporation for her continued employment in the latter’s line period of engagement. Respondent corporation hired and engaged
of business. petitioner for compensation, with the power to dismiss her for cause.
More importantly, respondent corporation had the power to control
petitioner with the means and methods by which the work is to be
In Domasig v. National Labor Relations Commission, 28 we held that in a
accomplished.
business establishment, an identification card is provided not only as a
security measure but mainly to identify the holder thereof as a bona fide
employee of the firm that issues it. Together with the cash vouchers The corporation constructively dismissed petitioner when it reduced her
covering petitioner’s salaries for the months stated therein, these salary by P2,500 a month from January to September 2001. This
matters constitute substantial evidence adequate to support a conclusion amounts to an illegal termination of employment, where the petitioner is
that petitioner was an employee of private respondent. entitled to full backwages. Since the position of petitioner as accountant
is one of trust and confidence, and under the principle of strained
relations, petitioner is further entitled to separation pay, in lieu of
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers
reinstatement. 34
its workers with the SSS is proof that the latter were the former’s
employees. The coverage of Social Security Law is predicated on the
existence of an employer-employee relationship. A diminution of pay is prejudicial to the employee and amounts to
constructive dismissal. Constructive dismissal is an involuntary
resignation resulting in cessation of work resorted to when continued
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has
employment becomes impossible, unreasonable or unlikely; when there
clearly established that petitioner never acted as Corporate Secretary
is a demotion in rank or a diminution in pay; or when a clear
and that her designation as such was only for convenience. The actual
discrimination, insensibility or disdain by an employer becomes
nature of petitioner’s job was as Kamura’s direct assistant with the duty
unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-
of acting as Liaison Officer in representing the company to secure
Flores, 36 we ruled that where an employee ceases to work due to a
construction permits, license to operate and other requirements imposed
demotion of rank or a diminution of pay, an unreasonable situation
by government agencies. Petitioner was never entrusted with corporate
arises which creates an adverse working environment rendering it
documents of the company, nor required to attend the meeting of the
impossible for such employee to continue working for her employer.
corporation. She was never privy to the preparation of any document for
Hence, her severance from the company was not of her own making and
the corporation, although once in a while she was required to sign
therefore amounted to an illegal termination of employment.
prepared documentation for the company. 30

In affording full protection to labor, this Court must ensure equal work
The second affidavit of Kamura dated March 7, 2002 which repudiated
opportunities regardless of sex, race or creed. Even as we, in every case,
the December 5, 2001 affidavit has been allegedly withdrawn by Kamura
attempt to carefully balance the fragile relationship between employees
himself from the records of the case. 31 Regardless of this fact, we are
and employers, we are mindful of the fact that the policy of the law is to
convinced that the allegations in the first affidavit are sufficient to
apply the Labor Code to a greater number of employees. This would
establish that petitioner is an employee of Kasei Corporation.
enable employees to avail of the benefits accorded to them by law, in
line with the constitutional mandate giving maximum aid and protection
Granting arguendo, that the second affidavit validly repudiated the first to labor, promoting their welfare and reaffirming it as a primary social
one, courts do not generally look with favor on any retraction or economic force in furtherance of social justice and national development.
recanted testimony, for it could have been secured by considerations

22
6 pregnancy, Dr. Estrada noted an increase in her blood pressure and 130/80 to 60/40 within five minutes. There was continuous profuse
development of leg edema5 indicating preeclampsia,6 which is a vaginal bleeding. The assisting nurse administered hemacel through a
dangerous complication of pregnancy.7 gauge 19 needle as a side drip to the ongoing intravenous injection of
Republic of the Philippines dextrose.
SUPREME COURT
Around midnight of 25 May 1976, Corazon started to experience mild
Manila
labor pains prompting Corazon and Rogelio Nogales ("Spouses Nogales") At 7:45 a.m., Dr. Estrada ordered blood typing and cross matching with
to see Dr. Estrada at his home. After examining Corazon, Dr. Estrada bottled blood. It took approximately 30 minutes for the CMC laboratory,
THIRD DIVISION advised her immediate admission to the Capitol Medical Center ("CMC"). headed by Dr. Perpetua Lacson ("Dr. Lacson"), to comply with Dr.
Estrada's order and deliver the blood.
G.R. No. 142625 December 19, 2006 On 26 May 1976, Corazon was admitted at 2:30 a.m. at the CMC after
the staff nurse noted the written admission request8 of Dr. Estrada. Upon At 8:00 a.m., Dr. Noe Espinola ("Dr. Espinola"), head of the Obstetrics-
ROGELIO P. NOGALES, for himself and on behalf of the minors, Corazon's admission at the CMC, Rogelio Nogales ("Rogelio") executed Gynecology Department of the CMC, was apprised of Corazon's condition
ROGER ANTHONY, ANGELICA, NANCY, and MICHAEL and signed the "Consent on Admission and Agreement"9 and "Admission by telephone. Upon being informed that Corazon was bleeding profusely,
CHRISTOPHER, all surnamed NOGALES, petitioners, Agreement."10 Corazon was then brought to the labor room of the CMC. Dr. Espinola ordered immediate hysterectomy. Rogelio was made to sign
vs. a "Consent to Operation."13
CAPITOL MEDICAL CENTER, DR. OSCAR ESTRADA, DR. ELY Dr. Rosa Uy ("Dr. Uy"), who was then a resident physician of CMC,
VILLAFLOR, DR. ROSA UY, DR. JOEL ENRIQUEZ, DR. PERPETUA conducted an internal examination of Corazon. Dr. Uy then called up Dr. Due to the inclement weather then, Dr. Espinola, who was fetched from
LACSON, DR. NOE ESPINOLA, and NURSE J. Estrada to notify him of her findings. his residence by an ambulance, arrived at the CMC about an hour later
DUMLAO, respondents. or at 9:00 a.m. He examined the patient and ordered some resuscitative
measures to be administered. Despite Dr. Espinola's efforts, Corazon
Based on the Doctor's Order Sheet,11 around 3:00 a.m., Dr. Estrada
died at 9:15 a.m. The cause of death was "hemorrhage, post partum."14
ordered for 10 mg. of valium to be administered immediately by
intramuscular injection. Dr. Estrada later ordered the start of intravenous
administration of syntocinon admixed with dextrose, 5%, in lactated On 14 May 1980, petitioners filed a complaint for damages15 with the
DECISION Ringers' solution, at the rate of eight to ten micro-drops per minute. Regional Trial Court16 of Manila against CMC, Dr. Estrada, Dr. Villaflor,
Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr. Espinola, and a certain Nurse J.
Dumlao for the death of Corazon. Petitioners mainly contended that
According to the Nurse's Observation Notes,12 Dr. Joel Enriquez ("Dr.
defendant physicians and CMC personnel were negligent in the
Enriquez"), an anesthesiologist at CMC, was notified at 4:15 a.m. of
treatment and management of Corazon's condition. Petitioners charged
Corazon's admission. Subsequently, when asked if he needed the
CMC with negligence in the selection and supervision of defendant
services of an anesthesiologist, Dr. Estrada refused. Despite Dr.
CARPIO, J.: physicians and hospital staff.
Estrada's refusal, Dr. Enriquez stayed to observe Corazon's condition.

The Case For failing to file their answer to the complaint despite service of
At 6:00 a.m., Corazon was transferred to Delivery Room No. 1 of the
summons, the trial court declared Dr. Estrada, Dr. Enriquez, and Nurse
CMC. At 6:10 a.m., Corazon's bag of water ruptured spontaneously. At
Dumlao in default.17 CMC, Dr. Villaflor, Dr. Uy, Dr. Espinola, and Dr.
This petition for review1 assails the 6 February 1998 Decision2 and 21 6:12 a.m., Corazon's cervix was fully dilated. At 6:13 a.m., Corazon
Lacson filed their respective answers denying and opposing the
March 2000 Resolution3 of the Court of Appeals in CA-G.R. CV No. started to experience convulsions.
allegations in the complaint. Subsequently, trial ensued.
45641. The Court of Appeals affirmed in toto the 22 November 1993
Decision4 of the Regional Trial Court of Manila, Branch 33, finding Dr. At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of
Oscar Estrada solely liable for damages for the death of his patient, After more than 11 years of trial, the trial court rendered judgment on
magnesium sulfate. However, Dr. Ely Villaflor ("Dr. Villaflor"), who was
Corazon Nogales, while absolving the remaining respondents of any 22 November 1993 finding Dr. Estrada solely liable for damages. The
assisting Dr. Estrada, administered only 2.5 grams of magnesium sulfate.
liability. The Court of Appeals denied petitioners' motion for trial court ruled as follows:
reconsideration.
At 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to
The victim was under his pre-natal care, apparently, his fault
extract Corazon's baby. In the process, a 1.0 x 2.5 cm. piece of cervical
The Facts began from his incorrect and inadequate management and
tissue was allegedly torn. The baby came out in an apnic, cyanotic, weak
lack of treatment of the pre-eclamptic condition of his patient.
and injured condition. Consequently, the baby had to be intubated and
It is not disputed that he misapplied the forceps in causing the
Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was resuscitated by Dr. Enriquez and Dr. Payumo.
delivery because it resulted in a large cervical tear which had
then 37 years old, was under the exclusive prenatal care of Dr. Oscar caused the profuse bleeding which he also failed to control
Estrada ("Dr. Estrada") beginning on her fourth month of pregnancy or At 6:27 a.m., Corazon began to manifest moderate vaginal bleeding with the application of inadequate injection of magnesium
as early as December 1975. While Corazon was on her last trimester of which rapidly became profuse. Corazon's blood pressure dropped from sulfate by his assistant Dra. Ely Villaflor. Dr. Estrada even
23
failed to notice the erroneous administration by nurse Dumlao of Dr. Estrada and Dra. Villaflor. For the Court to assume that For failure of the plaintiffs to adduce evidence to support its
of hemacel by way of side drip, instead of direct intravenous there were errors being committed in the presence of Dr. [sic] allegations against the other defendants, the complaint is
injection, and his failure to consult a senior obstetrician at an Enriquez would be to dwell on conjectures and speculations. hereby ordered dismissed. While the Court looks with disfavor
early stage of the problem. the filing of the present complaint against the other
defendants by the herein plaintiffs, as in a way it has caused
On the civil liability of Dr. Perpetua Lacson, [s]he is a
them personal inconvenience and slight damage on their name
On the part however of Dra. Ely Villaflor, Dra. Rosa Uy, Dr. hematologist and in-charge of the blood bank of the CMC. The
and reputation, the Court cannot accepts [sic] however, the
Joel Enriquez, Dr. Lacson, Dr. Espinola, nurse J. Dumlao and Court cannot accept the theory of the plaintiffs that there was
theory of the remaining defendants that plaintiffs were
CMC, the Court finds no legal justification to find them civilly delay in delivering the blood needed by the patient. It was
motivated in bad faith in the filing of this complaint. For this
liable. testified, that in order that this blood will be made available, a
reason defendants' counterclaims are hereby ordered
laboratory test has to be conducted to determine the type of
dismissed.
blood, cross matching and other matters consistent with
On the part of Dra. Ely Villaflor, she was only taking orders
medical science so, the lapse of 30 minutes maybe considered
from Dr. Estrada, the principal physician of Corazon Nogales.
a reasonable time to do all of these things, and not a delay as SO ORDERED.18
She can only make suggestions in the manner the patient
the plaintiffs would want the Court to believe.
maybe treated but she cannot impose her will as to do so
would be to substitute her good judgment to that of Dr. Petitioners appealed the trial court's decision. Petitioners claimed that
Estrada. If she failed to correctly diagnose the true cause of Admittedly, Dra. Rosa Uy is a resident physician of the Capitol aside from Dr. Estrada, the remaining respondents should be held
the bleeding which in this case appears to be a cervical Medical Center. She was sued because of her alleged failure to equally liable for negligence. Petitioners pointed out the extent of each
laceration, it cannot be safely concluded by the Court that Dra. notice the incompetence and negligence of Dr. Estrada. respondent's alleged liability.
Villaflor had the correct diagnosis and she failed to inform Dr. However, there is no evidence to support such theory. No
Estrada. No evidence was introduced to show that indeed Dra. evidence was adduced to show that Dra. Rosa Uy as a resident
On 6 February 1998, the Court of Appeals affirmed the decision of the
Villaflor had discovered that there was laceration at the physician of Capitol Medical Center, had knowledge of the
trial court.19 Petitioners filed a motion for reconsideration which the
cervical area of the patient's internal organ. mismanagement of the patient Corazon Nogales, and that
Court of Appeals denied in its Resolution of 21 March 2000.20
notwithstanding such knowledge, she tolerated the same to
happen.
On the part of nurse Dumlao, there is no showing that when
Hence, this petition.
she administered the hemacel as a side drip, she did it on her
own. If the correct procedure was directly thru the veins, it In the pre-trial order, plaintiffs and CMC agreed that defendant
could only be because this was what was probably the orders CMC did not have any hand or participation in the selection or Meanwhile, petitioners filed a Manifestation dated 12 April 200221 stating
of Dr. Estrada. hiring of Dr. Estrada or his assistant Dra. Ely Villaflor as that respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse
attending physician[s] of the deceased. In other words, the Dumlao "need no longer be notified of the petition because they are
two (2) doctors were not employees of the hospital and absolutely not involved in the issue raised before the [Court], regarding
While the evidence of the plaintiffs shows that Dr. Noe
therefore the hospital did not have control over their the liability of [CMC]."22 Petitioners stressed that the subject matter of
Espinola, who was the Chief of the Department of Obstetrics
professional conduct. When Mrs. Nogales was brought to the this petition is the liability of CMC for the negligence of Dr. Estrada.23
and Gynecology who attended to the patient Mrs. Nogales, it
hospital, it was an emergency case and defendant CMC had no
was only at 9:00 a.m. That he was able to reach the hospital
choice but to admit her. Such being the case, there is The Court issued a Resolution dated 9 September 200224 dispensing with
because of typhoon Didang (Exhibit 2). While he was able to
therefore no legal ground to apply the provisions of Article the requirement to submit the correct and present addresses of
give prescription in the manner Corazon Nogales may be
2176 and 2180 of the New Civil Code referring to the vicarious respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao.
treated, the prescription was based on the information given
liability of an employer for the negligence of its employees. If The Court stated that with the filing of petitioners' Manifestation, it
to him by phone and he acted on the basis of facts as
ever in this case there is fault or negligence in the treatment should be understood that they are claiming only against respondents
presented to him, believing in good faith that such is the
of the deceased on the part of the attending physicians who CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy who have filed their respective
correct remedy. He was not with Dr. Estrada when the patient
were employed by the family of the deceased, such civil comments. Petitioners are foregoing further claims against respondents
was brought to the hospital at 2:30 o'clock a.m. So, whatever
liability should be borne by the attending physicians under the Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao.
errors that Dr. Estrada committed on the patient before 9:00
principle of "respondeat superior".
o'clock a.m. are certainly the errors of Dr. Estrada and cannot
be the mistake of Dr. Noe Espinola. His failure to come to the The Court noted that Dr. Estrada did not appeal the decision of the Court
hospital on time was due to fortuitous event. WHEREFORE, premises considered, judgment is hereby of Appeals affirming the decision of the Regional Trial Court. Accordingly,
rendered finding defendant Dr. Estrada of Number 13 Pitimini the decision of the Court of Appeals, affirming the trial court's judgment,
St. San Francisco del Monte, Quezon City civilly liable to pay is already final as against Dr. Oscar Estrada.
On the part of Dr. Joel Enriquez, while he was present in the
plaintiffs: 1) By way of actual damages in the amount
delivery room, it is not incumbent upon him to call the
of P105,000.00; 2) By way of moral damages in the amount
attention of Dr. Estrada, Dra. Villaflor and also of Nurse Petitioners filed a motion for reconsideration25 of the Court's 9
of P700,000.00; 3) Attorney's fees in the amount
Dumlao on the alleged errors committed by them. Besides, as September 2002 Resolution claiming that Dr. Enriquez, Dr. Villaflor and
of P100,000.00 and to pay the costs of suit.
anesthesiologist, he has no authority to control the actuations
24
Nurse Dumlao were notified of the petition at their counsels' last known While it found the amount of damages fair and reasonable, the Court of Art. 2176. Whoever by act or omission causes damage to
addresses. Petitioners reiterated their imputation of negligence on these Appeals held that no interest could be imposed on unliquidated claims or another, there being fault or negligence, is obliged to pay for
respondents. The Court denied petitioners' Motion for Reconsideration in damages. the damage done. Such fault or negligence, if there is no pre-
its 18 February 2004 Resolution.26 existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
The Issue
The Court of Appeals' Ruling
Similarly, in the United States, a hospital which is the employer, master,
Basically, the issue in this case is whether CMC is vicariously liable for
or principal of a physician employee, servant, or agent, may be held
In its Decision of 6 February 1998, the Court of Appeals upheld the trial the negligence of Dr. Estrada. The resolution of this issue rests, on the
liable for the physician's negligence under the doctrine of respondeat
court's ruling. The Court of Appeals rejected petitioners' view that the other hand, on the ascertainment of the relationship between Dr.
superior.34
doctrine in Darling v. Charleston Community Memorial Hospital27 applies Estrada and CMC. The Court also believes that a determination of the
to this case. According to the Court of Appeals, the present case differs extent of liability of the other respondents is inevitable to finally and
from the Darling case since Dr. Estrada is an independent contractor- completely dispose of the present controversy. In the present case, petitioners maintain that CMC, in allowing Dr.
physician whereas the Darling case involved a physician and a nurse who Estrada to practice and admit patients at CMC, should be liable for Dr.
were employees of the hospital. Estrada's malpractice. Rogelio claims that he knew Dr. Estrada as an
The Ruling of the Court
accredited physician of CMC, though he discovered later that Dr. Estrada
was not a salaried employee of the CMC.35 Rogelio further claims that he
Citing other American cases, the Court of Appeals further held that the
The petition is partly meritorious. was dealing with CMC, whose primary concern was the treatment and
mere fact that a hospital permitted a physician to practice medicine and
management of his wife's condition. Dr. Estrada just happened to be the
use its facilities is not sufficient to render the hospital liable for the
On the Liability of CMC specific person he talked to representing CMC.36 Moreover, the fact that
physician's negligence.28 A hospital is not responsible for the negligence
CMC made Rogelio sign a Consent on Admission and Admission
of a physician who is an independent contractor.29
Agreement37 and a Consent to Operation printed on the letterhead of
Dr. Estrada's negligence in handling the treatment and management of CMC indicates that CMC considered Dr. Estrada as a member of its
The Court of Appeals found the cases of Davidson v. Corazon's condition which ultimately resulted in Corazon's death is no medical staff.
Conole30 and Campbell v. Emma Laing Stevens Hospital31applicable to longer in issue. Dr. Estrada did not appeal the decision of the Court of
this case. Quoting Campbell, the Court of Appeals stated that where Appeals which affirmed the ruling of the trial court finding Dr. Estrada
solely liable for damages. Accordingly, the finding of the trial court on On the other hand, CMC disclaims liability by asserting that Dr. Estrada
there is no proof that defendant physician was an employee of
Dr. Estrada's negligence is already final. was a mere visiting physician and that it admitted Corazon because her
defendant hospital or that defendant hospital had reason to know that
physical condition then was classified an emergency obstetrics case.38
any acts of malpractice would take place, defendant hospital could not
be held liable for its failure to intervene in the relationship of physician- Petitioners maintain that CMC is vicariously liable for Dr. Estrada's
patient between defendant physician and plaintiff. negligence based on Article 2180 in relation to Article 2176 of the Civil CMC alleges that Dr. Estrada is an independent contractor "for whose
Code. These provisions pertinently state: actuations CMC would be a total stranger." CMC maintains that it had no
control or supervision over Dr. Estrada in the exercise of his medical
On the liability of the other respondents, the Court of Appeals applied
profession.
the "borrowed servant" doctrine considering that Dr. Estrada was an Art. 2180. The obligation imposed by article 2176 is
independent contractor who was merely exercising hospital privileges. demandable not only for one's own acts or omissions, but also
This doctrine provides that once the surgeon enters the operating room for those of persons for whom one is responsible. The Court had the occasion to determine the relationship between a
and takes charge of the proceedings, the acts or omissions of operating hospital and a consultant or visiting physician and the liability of such
room personnel, and any negligence associated with such acts or hospital for that physician's negligence in Ramos v. Court of Appeals,39 to
omissions, are imputable to the surgeon.32 While the assisting physicians xxxx wit:
and nurses may be employed by the hospital, or engaged by the patient,
they normally become the temporary servants or agents of the surgeon Employers shall be liable for the damages caused by their In the first place, hospitals exercise significant control in the
in charge while the operation is in progress, and liability may be imposed employees and household helpers acting within the scope of hiring and firing of consultants and in the conduct of their
upon the surgeon for their negligent acts under the doctrine their assigned tasks, even though the former are not engaged work within the hospital premises. Doctors who apply for
of respondeat superior.33 in any business or industry. "consultant" slots, visiting or attending, are required to submit
proof of completion of residency, their educational
The Court of Appeals concluded that since Rogelio engaged Dr. Estrada xxxx qualifications; generally, evidence of accreditation by the
as the attending physician of his wife, any liability for malpractice must appropriate board (diplomate), evidence of fellowship in most
be Dr. Estrada's sole responsibility. cases, and references. These requirements are carefully
The responsibility treated of in this article shall cease when the scrutinized by members of the hospital administration or by a
persons herein mentioned prove that they observed all the review committee set up by the hospital who either accept or
diligence of a good father of a family to prevent damage.

25
reject the application. This is particularly true with respondent process by which the employee (or the physician) is to accomplish his element is satisfied if the hospital holds itself out as a provider
hospital. task.41 of emergency room care without informing the patient that the
care is provided by independent contractors.
After a physician is accepted, either as a visiting or attending After a thorough examination of the voluminous records of this case, the
consultant, he is normally required to attend clinico- Court finds no single evidence pointing to CMC's exercise of control over The element of justifiable reliance on the part of the plaintiff is
pathological conferences, conduct bedside rounds for clerks, Dr. Estrada's treatment and management of Corazon's condition. It is satisfied if the plaintiff relies upon the hospital to provide
interns and residents, moderate grand rounds and patient undisputed that throughout Corazon's pregnancy, she was under the complete emergency room care, rather than upon a specific
audits and perform other tasks and responsibilities, for the exclusive prenatal care of Dr. Estrada. At the time of Corazon's physician.
privilege of being able to maintain a clinic in the hospital, admission at CMC and during her delivery, it was Dr. Estrada, assisted by
and/or for the privilege of admitting patients into the hospital. Dr. Villaflor, who attended to Corazon. There was no showing that CMC
The doctrine of apparent authority essentially involves two factors to
In addition to these, the physician's performance as a had a part in diagnosing Corazon's condition. While Dr. Estrada enjoyed
determine the liability of an independent-contractor physician.
specialist is generally evaluated by a peer review committee staff privileges at CMC, such fact alone did not make him an employee of
on the basis of mortality and morbidity statistics, and feedback CMC.42 CMC merely allowed Dr. Estrada to use its facilities43 when
from patients, nurses, interns and residents. A consultant Corazon was about to give birth, which CMC considered an emergency. The first factor focuses on the hospital's manifestations and is sometimes
remiss in his duties, or a consultant who regularly falls short of Considering these circumstances, Dr. Estrada is not an employee of CMC, described as an inquiry whether the hospital acted in a manner which
the minimum standards acceptable to the hospital or its peer but an independent contractor. would lead a reasonable person to conclude that the individual who was
review committee, is normally politely terminated. alleged to be negligent was an employee or agent of the hospital.47 In
this regard, the hospital need not make express representations
The question now is whether CMC is automatically exempt from liability
to the patient that the treating physician is an employee of the
In other words, private hospitals, hire, fire and exercise real considering that Dr. Estrada is an independent contractor-physician.
hospital; rather a representation may be general and implied.48
control over their attending and visiting "consultant"
staff. While "consultants" are not, technically
In general, a hospital is not liable for the negligence of an independent
employees, a point which respondent hospital asserts The doctrine of apparent authority is a species of the doctrine of
contractor-physician. There is, however, an exception to this principle.
in denying all responsibility for the patient's condition, estoppel. Article 1431 of the Civil Code provides that "[t]hrough
The hospital may be liable if the physician is the "ostensible" agent of
the control exercised, the hiring, and the right to estoppel, an admission or representation is rendered conclusive upon the
the hospital.44 This exception is also known as the "doctrine of apparent
terminate consultants all fulfill the important person making it, and cannot be denied or disproved as against the
authority."45 In Gilbert v. Sycamore Municipal Hospital,46 the Illinois
hallmarks of an employer-employee relationship, with person relying thereon." Estoppel rests on this rule: "Whenever a party
Supreme Court explained the doctrine of apparent authority in this wise:
the exception of the payment of wages. In assessing has, by his own declaration, act, or omission, intentionally and
whether such a relationship in fact exists, the control deliberately led another to believe a particular thing true, and to act
test is determining. Accordingly, on the basis of the [U]nder the doctrine of apparent authority a hospital can be upon such belief, he cannot, in any litigation arising out of such
foregoing, we rule that for the purpose of allocating held vicariously liable for the negligent acts of a physician declaration, act or omission, be permitted to falsify it."49
responsibility in medical negligence cases, an providing care at the hospital, regardless of whether the
employer-employee relationship in effect exists physician is an independent contractor, unless the patient
In the instant case, CMC impliedly held out Dr. Estrada as a member of
between hospitals and their attending and visiting knows, or should have known, that the physician is an
its medical staff. Through CMC's acts, CMC clothed Dr. Estrada with
physicians. This being the case, the question now arises as independent contractor. The elements of the action have been
apparent authority thereby leading the Spouses Nogales to believe that
to whether or not respondent hospital is solidarily liable with set out as follows:
Dr. Estrada was an employee or agent of CMC. CMC cannot now
respondent doctors for petitioner's condition. repudiate such authority.
"For a hospital to be liable under the doctrine of apparent
The basis for holding an employer solidarily responsible for the authority, a plaintiff must show that: (1) the hospital, or its
First, CMC granted staff privileges to Dr. Estrada. CMC extended its
negligence of its employee is found in Article 2180 of the Civil agent, acted in a manner that would lead a reasonable person
medical staff and facilities to Dr. Estrada. Upon Dr. Estrada's request for
Code which considers a person accountable not only for his to conclude that the individual who was alleged to be
Corazon's admission, CMC, through its personnel, readily accommodated
own acts but also for those of others based on the former's negligent was an employee or agent of the hospital; (2) where
Corazon and updated Dr. Estrada of her condition.
responsibility under a relationship of patria potestas. x x the acts of the agent create the appearance of authority, the
x40 (Emphasis supplied) plaintiff must also prove that the hospital had knowledge of
and acquiesced in them; and (3) the plaintiff acted in reliance Second, CMC made Rogelio sign consent forms printed on CMC
upon the conduct of the hospital or its agent, consistent with letterhead. Prior to Corazon's admission and supposed hysterectomy,
While the Court in Ramos did not expound on the control test, such test CMC asked Rogelio to sign release forms, the contents of which
ordinary care and prudence."
essentially determines whether an employment relationship exists reinforced Rogelio's belief that Dr. Estrada was a member of CMC's
between a physician and a hospital based on the exercise of control over medical staff.50 The Consent on Admission and Agreement explicitly
the physician as to details. Specifically, the employer (or the hospital) The element of "holding out" on the part of the hospital does
provides:
must have the right to control both the means and the details of the not require an express representation by the hospital that the
person alleged to be negligent is an employee. Rather, the

26
KNOW ALL MEN BY THESE PRESENTS: member of CMC Board of Directors, testified that Dr. Estrada was part of upon their own responsibility, no longer reflects the
CMC's surgical staff.53 fact. Present day hospitals, as their manner of
operation plainly demonstrates, do far more than
I, Rogelio Nogales, of legal age, a resident of 1974 M. H. Del
furnish facilities for treatment. They regularly employ
Pilar St., Malate Mla., being the Third, Dr. Estrada's referral of Corazon's profuse vaginal bleeding to Dr.
on a salary basis a large staff of physicians, nurses and
father/mother/brother/sister/spouse/relative/ guardian/or Espinola, who was then the Head of the Obstetrics and Gynecology
internes [sic], as well as administrative and manual
person in custody of Ma. Corazon, and representing his/her Department of CMC, gave the impression that Dr. Estrada as a member
workers, and they charge patients for medical care and
family, of my own volition and free will, do consent and submit of CMC's medical staff was collaborating with other CMC-employed
treatment, collecting for such services, if necessary, by
said Ma. Corazon to Dr. Oscar Estrada (hereinafter referred to specialists in treating Corazon.
legal action. Certainly, the person who avails himself of
as Physician) for cure, treatment, retreatment, or emergency
'hospital facilities' expects that the hospital will
measures, that the Physician, personally or by and
The second factor focuses on the patient's reliance. It is sometimes attempt to cure him, not that its nurses or other
through the Capitol Medical Center and/or its staff,
characterized as an inquiry on whether the plaintiff acted in reliance employees will act on their own responsibility." x x x
may use, adapt, or employ such means, forms or
upon the conduct of the hospital or its agent, consistent with ordinary (Emphasis supplied)
methods of cure, treatment, retreatment, or
care and prudence.54
emergency measures as he may see best and most
expedient; that Ma. Corazon and I will comply with any Likewise unconvincing is CMC's argument that petitioners are estopped
and all rules, regulations, directions, and instructions The records show that the Spouses Nogales relied upon a perceived from claiming damages based on the Consent on Admission and Consent
of the Physician, the Capitol Medical Center and/or its employment relationship with CMC in accepting Dr. Estrada's services. to Operation. Both release forms consist of two parts. The first part gave
staff; and, that I will not hold liable or responsible and hereby Rogelio testified that he and his wife specifically chose Dr. Estrada to CMC permission to administer to Corazon any form of recognized medical
waive and forever discharge and hold free the Physician, the handle Corazon's delivery not only because of their friend's treatment which the CMC medical staff deemed advisable. The second
Capitol Medical Center and/or its staff, from any and all claims recommendation, but more importantly because of Dr. Estrada's part of the documents, which may properly be described as the releasing
of whatever kind of nature, arising from directly or indirectly, "connection with a reputable hospital, the [CMC]."55 In other words, Dr. part, releases CMC and its employees "from any and all claims" arising
or by reason of said cure, treatment, or retreatment, or Estrada's relationship with CMC played a significant role in the Spouses from or by reason of the treatment and operation.
emergency measures or intervention of said physician, the Nogales' decision in accepting Dr. Estrada's services as the obstetrician-
Capitol Medical Center and/or its staff. gynecologist for Corazon's delivery. Moreover, as earlier stated, there is
The documents do not expressly release CMC from liability for injury to
no showing that before and during Corazon's confinement at CMC, the
Corazon due to negligence during her treatment or operation. Neither do
Spouses Nogales knew or should have known that Dr. Estrada was not
x x x x51 (Emphasis supplied) the consent forms expressly exempt CMC from liability for Corazon's
an employee of CMC.
death due to negligence during such treatment or operation. Such
release forms, being in the nature of contracts of adhesion, are
While the Consent to Operation pertinently reads, thus:
Further, the Spouses Nogales looked to CMC to provide the best medical construed strictly against hospitals. Besides, a blanket release in favor of
care and support services for Corazon's delivery. The Court notes that hospitals "from any and all claims," which includes claims due to bad
I, ROGELIO NOGALES, x x x, of my own volition and free will, prior to Corazon's fourth pregnancy, she used to give birth inside a clinic. faith or gross negligence, would be contrary to public policy and thus
do consent and submit said CORAZON NOGALES to Considering Corazon's age then, the Spouses Nogales decided to have void.
Hysterectomy, by the Surgical Staff and Anesthesiologists their fourth child delivered at CMC, which Rogelio regarded one of the
of Capitol Medical Center and/or whatever succeeding best hospitals at the time.56 This is precisely because the Spouses
Even simple negligence is not subject to blanket release in favor of
operations, treatment, or emergency measures as may be Nogales feared that Corazon might experience complications during her
establishments like hospitals but may only mitigate liability depending on
necessary and most expedient; and, that I will not hold liable delivery which would be better addressed and treated in a modern and
the circumstances.58 When a person needing urgent medical attention
or responsible and hereby waive and forever discharge and big hospital such as CMC. Moreover, Rogelio's consent in Corazon's
rushes to a hospital, he cannot bargain on equal footing with the hospital
hold free the Surgeon, his assistants, anesthesiologists, the hysterectomy to be performed by a different physician, namely Dr.
on the terms of admission and operation. Such a person is literally at the
Capitol Medical Center and/or its staff, from any and all claims Espinola, is a clear indication of Rogelio's confidence in CMC's surgical
mercy of the hospital. There can be no clearer example of a contract of
of whatever kind of nature, arising from directly or indirectly, staff.
adhesion than one arising from such a dire situation. Thus, the release
or by reason of said operation or operations, treatment, or
forms of CMC cannot relieve CMC from liability for the negligent medical
emergency measures, or intervention of the Surgeon, his
CMC's defense that all it did was "to extend to [Corazon] its facilities" is treatment of Corazon.
assistants, anesthesiologists, the Capitol Medical Center and/or
untenable. The Court cannot close its eyes to the reality that hospitals,
its staff.52 (Emphasis supplied)
such as CMC, are in the business of treatment. In this regard, the Court
On the Liability of the Other Respondents
agrees with the observation made by the Court of Appeals of North
Without any indication in these consent forms that Dr. Estrada was an Carolina in Diggs v. Novant Health, Inc.,57 to wit:
independent contractor-physician, the Spouses Nogales could not have Despite this Court's pronouncement in its 9 September 200259 Resolution
known that Dr. Estrada was an independent contractor. Significantly, no that the filing of petitioners' Manifestation confined petitioners' claim
"The conception that the hospital does not undertake to treat
one from CMC informed the Spouses Nogales that Dr. Estrada was an only against CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy, who have filed
the patient, does not undertake to act through its doctors and
independent contractor. On the contrary, Dr. Atencio, who was then a their comments, the Court deems it proper to resolve the individual
nurses, but undertakes instead simply to procure them to act

27
liability of the remaining respondents to put an end finally to this more was no evidence of Dr. Enriquez's knowledge of any error committed by administration of hemacel proximately caused Corazon's death. No
than two-decade old controversy. Dr. Estrada and his failure to act upon such observation. evidence linking Corazon's death and the alleged wrongful hemacel
administration was introduced. Therefore, there is no basis to hold Nurse
Dumlao liable for negligence.
a) Dr. Ely Villaflor d) Dr. Perpetua Lacson

On the Award of Interest on Damages


Petitioners blame Dr. Ely Villaflor for failing to diagnose the cause of Petitioners fault Dr. Perpetua Lacson for her purported delay in the
Corazon's bleeding and to suggest the correct remedy to Dr. delivery of blood Corazon needed.64 Petitioners claim that Dr. Lacson was
Estrada.60 Petitioners assert that it was Dr. Villaflor's duty to correct the remiss in her duty of supervising the blood bank staff. The award of interest on damages is proper and allowed under Article
error of Nurse Dumlao in the administration of hemacel. 2211 of the Civil Code, which states that in crimes and quasi-delicts,
interest as a part of the damages may, in a proper case, be adjudicated
As found by the trial court, there was no unreasonable delay in the
in the discretion of the court.68
The Court is not persuaded. Dr. Villaflor admitted administering a lower delivery of blood from the time of the request until the transfusion to
dosage of magnesium sulfate. However, this was after informing Dr. Corazon. Dr. Lacson competently explained the procedure before blood
Estrada that Corazon was no longer in convulsion and that her blood could be given to the patient.65 Taking into account the bleeding time, WHEREFORE, the Court PARTLY GRANTS the petition. The Court
pressure went down to a dangerous level.61 At that moment, Dr. Estrada clotting time and cross-matching, Dr. Lacson stated that it would take finds respondent Capitol Medical Center vicariously liable for the
instructed Dr. Villaflor to reduce the dosage of magnesium sulfate from approximately 45-60 minutes before blood could be ready for negligence of Dr. Oscar Estrada. The amounts of P105,000 as actual
10 to 2.5 grams. Since petitioners did not dispute Dr. Villaflor's transfusion.66 Further, no evidence exists that Dr. Lacson neglected her damages andP700,000 as moral damages should each earn legal interest
allegation, Dr. Villaflor's defense remains uncontroverted. Dr. Villaflor's duties as head of the blood bank. at the rate of six percent (6%) per annum computed from the date of
act of administering a lower dosage of magnesium sulfate was not out of the judgment of the trial court. The Court affirms the rest of the Decision
her own volition or was in contravention of Dr. Estrada's order. dated 6 February 1998 and Resolution dated 21 March 2000 of the Court
e) Dr. Noe Espinola
of Appeals in CA-G.R. CV No. 45641.
b) Dr. Rosa Uy
Petitioners argue that Dr. Espinola should not have ordered immediate
SO ORDERED.
hysterectomy without determining the underlying cause of Corazon's
Dr. Rosa Uy's alleged negligence consisted of her failure (1) to call the bleeding. Dr. Espinola should have first considered the possibility of
attention of Dr. Estrada on the incorrect dosage of magnesium sulfate cervical injury, and advised a thorough examination of the cervix, instead
administered by Dr. Villaflor; (2) to take corrective measures; and (3) to of believing outright Dr. Estrada's diagnosis that the cause of bleeding
correct Nurse Dumlao's wrong method of hemacel administration. was uterine atony.

The Court believes Dr. Uy's claim that as a second year resident Dr. Espinola's order to do hysterectomy which was based on the
physician then at CMC, she was merely authorized to take the clinical information he received by phone is not negligence. The Court agrees
history and physical examination of Corazon.62 However, that routine with the trial court's observation that Dr. Espinola, upon hearing such
internal examination did not ipso facto make Dr. Uy liable for the errors information about Corazon's condition, believed in good faith that
committed by Dr. Estrada. Further, petitioners' imputation of negligence hysterectomy was the correct remedy. At any rate, the hysterectomy did
rests on their baseless assumption that Dr. Uy was present at the not push through because upon Dr. Espinola's arrival, it was already too
delivery room. Nothing shows that Dr. Uy participated in delivering late. At the time, Corazon was practically dead.
Corazon's baby. Further, it is unexpected from Dr. Uy, a mere resident
physician at that time, to call the attention of a more experienced
f) Nurse J. Dumlao
specialist, if ever she was present at the delivery room.

In Moore v. Guthrie Hospital Inc.,67 the US Court of Appeals, Fourth


c) Dr. Joel Enriquez
Circuit, held that to recover, a patient complaining of injuries allegedly
resulting when the nurse negligently injected medicine to him
Petitioners fault Dr. Joel Enriquez also for not calling the attention of Dr. intravenously instead of intramuscularly had to show that (1) an
Estrada, Dr. Villaflor, and Nurse Dumlao about their errors.63 Petitioners intravenous injection constituted a lack of reasonable and ordinary care;
insist that Dr. Enriquez should have taken, or at least suggested, (2) the nurse injected medicine intravenously; and (3) such injection was
corrective measures to rectify such errors. the proximate cause of his injury.

The Court is not convinced. Dr. Enriquez is an anesthesiologist whose In the present case, there is no evidence of Nurse Dumlao's alleged
field of expertise is definitely not obstetrics and gynecology. As such, Dr. failure to follow Dr. Estrada's specific instructions. Even assuming Nurse
Enriquez was not expected to correct Dr. Estrada's errors. Besides, there Dumlao defied Dr. Estrada's order, there is no showing that side-drip
28
7 may charge professional fee for hospital services rendered in The Comprehensive Medical Plan,3 which contains the duties and
line with his specialization. All payments in connection with the responsibilities of respondent, adverted to in the Retainer Agreement,
Retainer Agreement shall be subject to a withholding tax of provided:
Republic of the Philippines ten percent (10%) to be withheld by the COMPANY under the
SUPREME COURT Expanded Withholding Tax System. In the event the
A. OBJECTIVE
Manila 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. These objectives have been set to give full consideration to [the]
FIRST DIVISION
employees’ and dependents’ health:

G.R. No. 146881 February 5, 2007 3. That in consideration of the above mentioned retainer’s fee,
the DOCTOR agrees to perform the duties and obligations 1. Prompt and adequate treatment of occupational and non-
enumerated in the COMPREHENSIVE MEDICAL PLAN, hereto occupational injuries and diseases.
COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, attached as Annex "A" and made an integral part of this
Manager, Petitioners, Retainer Agreement. 2. To protect employees from any occupational health hazard
vs.
by evaluating health factors related to working conditions.
DR. DEAN N. CLIMACO, Respondent.
4. That the applicable provisions in the Occupational Safety
and Health Standards, Ministry of Labor and Employment shall 3. To encourage employees [to] maintain good personal health
DECISION be followed. by setting up employee orientation and education on health,
hygiene and sanitation, nutrition, physical fitness, first aid
AZCUNA, J.: 5. That the DOCTOR shall be directly responsible to the training, accident prevention and personnel safety.
employee concerned and their dependents for any injury
This is a petition for review on certiorari of the Decision of the Court of inflicted on, harm done against or damage caused upon the 4. To evaluate other matters relating to health such as
Appeals1 promulgated on July 7, 2000, and its Resolution promulgated employee of the COMPANY or their dependents during the absenteeism, leaves and termination.
on January 30, 2001, denying petitioner’s motion for reconsideration. course of his examination, treatment or consultation, if such
The Court of Appeals ruled that an employer-employee relationship injury, harm or damage was committed through professional
negligence or incompetence or due to the other valid causes 5. To give family planning motivations.
exists between respondent Dr. Dean N. Climaco and petitioner Coca-Cola
Bottlers Phils., Inc. (Coca-Cola), and that respondent was illegally for action.
dismissed. B. COVERAGE
6. That the DOCTOR shall observe clinic hours at the
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by COMPANY’S premises from Monday to Saturday of a minimum 1. All employees and their dependents are embraced by this
petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer of two (2) hours each day or a maximum of TWO (2) hours program.
Agreement that stated: 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 2. The health program shall cover pre-employment and annual
WHEREAS, the COMPANY desires to engage on a retainer basis the warrants, subject to the Labor Code provisions on p.e., hygiene and sanitation, immunizations, family planning,
services of a physician and the said DOCTOR is accepting such Occupational Safety and Health Standards as the COMPANY physical fitness and athletic programs and other activities such
engagement upon terms and conditions hereinafter set forth; may determine. It is understood that the DOCTOR shall stay at as group health education program, safety and first aid
least two (2) hours a day in the COMPANY clinic and that such classes, organization of health and safety committees.
NOW, THEREFORE, in consideration of the premises and the mutual two (2) hours be devoted to the workshift with the most
agreement hereinafter contained, the parties agree as follows: number of employees. It is further understood that the 3. Periodically, this program will be reviewed and adjusted
DOCTOR shall be on call at all times during the other based on employees’ needs.
workshifts to attend to emergency case[s];
1. This Agreement shall only be for a period of one (1) year
beginning January 1, 1988 up to December 31, 1988. The said C. ACTIVITIES
term notwithstanding, either party may terminate the contract 7. That no employee-employer relationship shall exist between
upon giving a thirty (30)-day written notice to the other. the COMPANY and the DOCTOR whilst this contract is in effect,
and in case of its termination, the DOCTOR shall be entitled 1. Annual Physical Examination.
only to such retainer fee as may be due him at the time of
2. The compensation to be paid by the company for the termination.2 2. Consultations, diagnosis and treatment of occupational and
services of the DOCTOR is hereby fixed at PESOS:Three non-occupational illnesses and injuries.
Thousand Eight Hundred (P3,800.00) per month. The DOCTOR

29
3. Immunizations necessary for job conditions. from employer-employee relations exceeding P5,000 may be filed with Respondent appealed both decisions to the NLRC, Fourth Division, Cebu
the National Labor Relations Commission (NLRC). He stated that their City.
opinion is strictly advisory.
4. Periodic inspections for food services and rest rooms.
In a Decision13 promulgated on November 28, 1997, the NLRC dismissed
An inquiry was likewise addressed to the Social Security System (SSS). the appeal in both cases for lack of merit. It declared that no employer-
5. Conduct health education programs and present education
Thereafter, Mr. Romeo R. Tupas, OIC-FID of SSS-Bacolod City, wrote a employee relationship existed between petitioner company and
materials.
letter8 to the Personnel Officer of Coca-Cola Bottlers Phils., Inc. respondent based on the provisions of the Retainer Agreement which
informing the latter that the legal staff of his office was of the opinion contract governed respondent’s employment.
6. Coordinate with Safety Committee in developing specific that the services of respondent partake of the nature of work of a
studies and program to minimize environmental health regular company doctor and that he was, therefore, subject to social
Respondent’s motion for reconsideration was denied by the NLRC in a
hazards. security coverage.
Resolution14 promulgated on August 7, 1998.

7. Give family planning motivations. Respondent inquired from the management of petitioner company
Respondent filed a petition for review with the Court of Appeals.
whether it was agreeable to recognizing him as a regular employee. The
8. Coordinate with Personnel Department regarding physical management refused to do so.
In a Decision promulgated on July 7, 2000, the Court of Appeals ruled
fitness and athletic programs.
that an employer-employee relationship existed between petitioner
On February 24, 1994, respondent filed a Complaint before the NLRC,
9
company and respondent after applying the four-fold test: (1) the power
9. Visiting and follow-up treatment of Company employees and Bacolod City, seeking recognition as a regular employee of petitioner
to hire the employee; (2) the payment of wages; (3) the power of
their dependents confined in the hospital. company and prayed for the payment of all benefits of a regular
dismissal; and (4) the employer’s power to control the employee with
employee, including 13th Month Pay, Cost of Living Allowance, Holiday
respect to the means and methods by which the work is to be
Pay, Service Incentive Leave Pay, and Christmas Bonus. The case was
The Retainer Agreement, which began on January 1, 1988, was renewed accomplished.
docketed as RAB Case No. 06-02-10138-94.
annually. The last one expired on December 31, 1993. Despite the non-
renewal of the Retainer Agreement, respondent continued to perform his The Court of Appeals held:
functions as company doctor to Coca-Cola until he received a While the complaint was pending before the Labor Arbiter, respondent
letter4 dated March 9, 1995 from petitioner company concluding their received a letter dated March 9, 1995 from petitioner company
concluding their retainership agreement effective thirty (30) days from The Retainer Agreement executed by and between the parties, when
retainership agreement effective 30 days from receipt thereof.
receipt thereof. This prompted respondent to file a complaint for illegal read together with the Comprehensive Medical Plan which was made an
dismissal against petitioner company with the NLRC, Bacolod City. The integral part of the retainer agreements, coupled with the actual services
It is noted that as early as September 1992, petitioner was already case was docketed as RAB Case No. 06-04-10177-95. rendered by the petitioner, would show that all the elements of the
making inquiries regarding his status with petitioner company. First, he above test are present.
wrote a letter addressed to Dr. Willie Sy, the Acting President and
Chairperson of the Committee on Membership, Philippine College of In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N.
Rodriguez, Jr. found that petitioner company lacked the power of control First, the agreements provide that "the COMPANY desires to engage on a
Occupational Medicine. In response, Dr. Sy wrote a letter5 to the
over respondent’s performance of his duties, and recognized as valid the retainer basis the services of a physician and the said DOCTOR is
Personnel Officer of Coca-Cola Bottlers Phils., Bacolod City, stating that
Retainer Agreement between the parties. Thus, the Labor Arbiter accepting such engagement x x x" (Rollo, page 25). This clearly shows
respondent should be considered as a regular part-time physician,
dismissed respondent’s complaint in the first case, RAB Case No. 06-02- that Coca-Cola exercised its power to hire the services of petitioner.
having served the company continuously for four (4) years. He likewise
stated that respondent must receive all the benefits and privileges of an 10138-94. The dispositive portion of the Decision reads:
employee under Article 157 (b)6 of the Labor Code. Secondly, paragraph (2) of the agreements showed that petitioner would
WHEREFORE, premises considered, judgment is hereby rendered be entitled to a final compensation of Three Thousand Eight Hundred
dismissing the instant complaint seeking recognition as a regular Pesos per month, which amount was later raised to Seven Thousand Five
Petitioner company, however, did not take any action. Hence,
employee. Hundred on the latest contract. This would represent the element of
respondent made another inquiry directed to the Assistant Regional
payment of wages.
Director, Bacolod City District Office of the Department of Labor and
Employment (DOLE), who referred the inquiry to the Legal Service of the SO ORDERED.11
DOLE, Manila. In his letter7 dated May 18, 1993, Director Dennis P. Thirdly, it was provided in paragraph (1) of the agreements that the
Ancheta, Legal Service, DOLE, stated that he believed that an employer- same shall be valid for a period of one year. "The said term
In a Decision dated February 24, 1997, Labor Arbiter Benjamin Pelaez
12
employee relationship existed between petitioner and respondent based notwithstanding, either party may terminate the contract upon giving a
dismissed the case for illegal dismissal (RAB Case No. 06-04-10177-95)
on the Retainer Agreement and the Comprehensive Medical Plan, and thirty (30) day written notice to the other." (Rollo, page 25). This
in view of the previous finding of Labor Arbiter Jesus N. Rodriguez, Jr. in
the application of the "four-fold" test. However, Director Ancheta would show that Coca-Cola had the power of dismissing the petitioner,
RAB Case No. 06-02-10138-94 that complainant therein, Dr. Dean
emphasized that the existence of employer-employee relationship is a as it later on did, and this could be done for no particular reason, the
Climaco, is not an employee of Coca-Cola Bottlers Phils., Inc.
question of fact. Hence, termination disputes or money claims arising
30
sole requirement being the former’s compliance with the 30-day notice "any employee who has rendered at least one year of service, whether also questioned how the benefits under their Collective Bargaining
requirement. such service is continuous or broken, shall be considered a regular Agreement which the Court awarded to respondent could be given to
employee with respect to the activity in which he is employed, and his him considering that such benefits were given only to regular employees
employment shall continue while such activity exists." Further, it held who render a full day’s work of not less that eight hours. It was admitted
Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola
that the termination of respondent’s services without any just or that respondent is only required to work for two hours per day.
exercised the most important element of all, that is, control, over the
authorized cause constituted illegal dismissal.
conduct of petitioner in the latter’s performance of his duties as a doctor
for the company. The Court of Appeals clarified that respondent was a "regular part-time
In addition, the Court of Appeals found that respondent’s dismissal was employee and should be accorded all the proportionate benefits due to
an act oppressive to labor and was effected in a wanton, oppressive or this category of employees of [petitioner] Corporation under the CBA." It
It was stated in paragraph (3) that the doctor agrees to perform the
malevolent manner which entitled respondent to moral and exemplary sustained its decision on all other matters sought to be reconsidered.
duties and obligations enumerated in the Comprehensive Medical Plan
damages.
referred to above. In paragraph (6), the fixed and definite hours during
which the petitioner must render service to the company is laid down. Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The dispositive portion of the Decision reads:
We say that there exists Coca-Cola’s power to control petitioner because The issues are:
the particular objectives and activities to be observed and accomplished WHEREFORE, in view of the foregoing, the Decision of the National
by the latter are fixed and set under the Comprehensive Medical Plan Labor Relations Commission dated November 28, 1997 and its Resolution
1. THAT THE HONORABLE COURT OF APPEALS COMMITTED
which was made an integral part of the retainer agreement. Moreover, dated August 7, 1998 are found to have been issued with grave abuse of
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION
the times for accomplishing these objectives and activities are likewise discretion in applying the law to the established facts, and are hereby
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR
controlled and determined by the company. Petitioner is subject to REVERSED and SET ASIDE, and private respondent Coca-Cola Bottlers,
ARBITERS AND THE NATIONAL LABOR RELATIONS
definite hours of work, and due to this, he performs his duties to Coca- Phils.. Inc. is hereby ordered to:
COMMISSION, CONTRARY TO THE DECISIONS OF THE
Cola not at his own pleasure but according to the schedule dictated by
HONORABLE SUPREME COURT ON THE MATTER.
the company.
1. Reinstate the petitioner with full backwages without loss of
seniority rights from the time his compensation was withheld
2. THAT THE HONORABLE COURT OF APPEALS COMMITTED
In addition, petitioner was designated by Coca-Cola to be a member of up to the time he is actually reinstated; however, if
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION
its Bacolod Plant’s Safety Committee. The minutes of the meeting of the reinstatement is no longer possible, to pay the petitioner
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR
said committee dated February 16, 1994 included the name of petitioner, separation pay equivalent to one (1) month’s salary for every
ARBITERS AND THE NATIONAL LABOR RELATIONS
as plant physician, as among those comprising the committee. year of service rendered, computed at the rate of his salary at
COMMISSION, AND HOLDING INSTEAD THAT THE WORK OF
the time he was dismissed, plus backwages.
A PHYSICIAN IS NECESSARY AND DESIRABLE TO THE
It was averred by Coca-Cola in its comment that they exercised no BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO
control over petitioner for the reason that the latter was not directed as 2. Pay petitioner moral damages in the amount of P50,000.00. THE RULINGS OF THE SUPREME COURT IN ANALOGOUS
to the procedure and manner of performing his assigned tasks. It went CASES.
as far as saying that "petitioner was not told how to immunize, inject,
3. Pay petitioner exemplary damages in the amount
treat or diagnose the employees of the respondent (Rollo, page 228).
of P50,000.00. 3. THAT THE HONORABLE COURT OF APPEALS COMMITTED
We believe that if the "control test" would be interpreted this strictly, it
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION
would result in an absurd and ridiculous situation wherein we could
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR
declare that an entity exercises control over another’s activities only in 4. Give to petitioner all other benefits to which a regular
ARBITERS AND THE NATIONAL LABOR RELATIONS
instances where the latter is directed by the former on each and every employee of Coca-Cola is entitled from the time petitioner
COMMISSION, AND HOLDING INSTEAD THAT THE
stage of performance of the particular activity. Anything less than that became a regular employee (one year from effectivity date of
PETITIONERS EXERCISED CONTROL OVER THE WORK OF
would be tantamount to no control at all. employment) until the time of actual payment.
THE RESPONDENT.

To our minds, it is sufficient if the task or activity, as well as the means SO ORDERED.17
4. THAT THE HONORABLE COURT OF APPEALS COMMITTED
of accomplishing it, is dictated, as in this case where the objectives and
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION
activities were laid out, and the specific time for performing them was Petitioner company filed a motion for reconsideration of the Decision of OF LAW, IN REVERSING THE FINDINGS OF THE LABOR
fixed by the controlling party.15 the Court of Appeals. ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THERE IS EMPLOYER-
Moreover, the Court of Appeals declared that respondent should be In a Resolution promulgated on January 30, 2001, the Court of Appeals EMPLOYEE RELATIONSHIP PURSUANT TO ARTICLE 280 OF
classified as a regular employee having rendered six years of service as stated that petitioner company noted that its Decision failed to mention THE LABOR CODE.
plant physician by virtue of several renewed retainer agreements. It whether respondent was a full-time or part-time regular employee. It
underscored the provision in Article 28016 of the Labor Code stating that
31
5. THAT THE HONORABLE COURT OF APPEALS COMMITTED In the case of petitioner Neri, it is admitted that FEBTC issued a job notice. Hence, petitioner company did not wield the sole power of
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION description which detailed her functions as a radio/telex operator. dismissal or termination.
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR However, a cursory reading of the job description shows that what was
ARBITERS AND THE NATIONAL LABOR RELATIONS sought to be controlled by FEBTC was actually the end result of the task,
The Court agrees with the Labor Arbiter and the NLRC that there is
COMMISSION, AND FINDING THAT THERE EXISTED ILLEGAL e.g., that the daily incoming and outgoing telegraphic transfer of funds
nothing wrong with the employment of respondent as a retained
DISMISSAL WHEN THE EMPLOYENT OF THE RESPONDENT received and relayed by her, respectively, tallies with that of the register.
physician of petitioner company and upholds the validity of the
WAS TERMINATED WITHOUT JUST CAUSE. The guidelines were laid down merely to ensure that the desired end
Retainership Agreement which clearly stated that no employer-employee
result was achieved. It did not, however, tell Neri how the radio/telex
relationship existed between the parties. The Agreement also stated that
machine should be operated.
6. THAT THE HONORABLE COURT OF APPEALS COMMITTED it was only for a period of 1 year beginning January 1, 1988 to
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION December 31, 1998, but it was renewed on a yearly basis.
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR In effect, the Labor Arbiter held that petitioner company, through the
ARBITERS AND THE NATIONAL LABOR RELATIONS Comprehensive Medical Plan, provided guidelines merely to ensure that
Considering that there is no employer-employee relationship between
COMMISSION, AND FINDING THAT THE RESPONDENT IS A the end result was achieved, but did not control the means and methods
the parties, the termination of the Retainership Agreement, which is in
REGULAR PART TIME EMPLOYEE WHO IS ENTITLED TO by which respondent performed his assigned tasks.
accordance with the provisions of the Agreement, does not constitute
PROPORTIONATE BENEFITS AS A REGULAR PART TIME
illegal dismissal of respondent. Consequently, there is no basis for the
EMPLOYEE ACCORDING TO THE PETITIONERS’ CBA.
The NLRC affirmed the findings of the Labor Arbiter and stated that it is moral and exemplary damages granted by the Court of Appeals to
precisely because the company lacks the power of control that the respondent due to his alleged illegal dismissal.
7. THAT THE HONORABLE COURT OF APPEALS COMMITTED contract provides that respondent shall be directly responsible to the
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION employee concerned and their dependents for any injury, harm or
WHEREFORE, the petition is GRANTED and the Decision and Resolution
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR damage caused through professional negligence, incompetence or other
of the Court of Appeals are REVERSED and SET ASIDE. The Decision and
ARBITERS AND THE NATIONAL LABOR RELATIONS valid causes of action.
Resolution dated November 28, 1997 and August 7, 1998, respectively,
COMMISSION, AND FINDING THAT THE RESPONDENT IS
of the National Labor Relations Commission are REINSTATED.
ENTITLED TO MORAL AND EXEMPLARY DAMAGES.
The Labor Arbiter also correctly found that the provision in the Retainer
Agreement that respondent was on call during emergency cases did not
No costs.
The main issue in this case is whether or not there exists an employer- make him a regular employee. He explained, thus:
employee relationship between the parties. The resolution of the main
issue will determine whether the termination of respondent’s SO ORDERED.
Likewise, the allegation of complainant that since he is on call at anytime
employment is illegal.
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
The Court, in determining the existence of an employer-employee that he is required to be at respondent company’s premises, he is not at
relationship, has invariably adhered to the four-fold test: (1) the all further required to just sit around in the premises and wait for an
selection and engagement of the employee; (2) the payment of wages; emergency to occur so as to enable him from using such hours for his
(3) the power of dismissal; and (4) the power to control the employee’s own benefit and advantage. In fact, complainant maintains his own
conduct, or the so-called "control test," considered to be the most private clinic attending to his private practice in the city, where he
important element.18 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.
The Court agrees with the finding of the Labor Arbiter and the NLRC that
More often than not, an employee is required to stay in the employer’s
the circumstances of this case show that no employer-employee
workplace or proximately close thereto that he cannot utilize his time
relationship exists between the parties. The Labor Arbiter and the NLRC
effectively and gainfully for his own purpose. Such is not the prevailing
correctly found that petitioner company lacked the power of control over
situation here.1awphi1.net
the performance by respondent of his duties. The Labor Arbiter reasoned
that the Comprehensive Medical Plan, which contains the respondent’s
objectives, duties and obligations, does not tell respondent "how to In addition, the Court finds that the schedule of work and the
conduct his physical examination, how to immunize, or how to diagnose requirement to be on call for emergency cases do not amount to such
and treat his patients, employees of [petitioner] company, in each case." control, but are necessary incidents to the Retainership Agreement.
He likened this case to that of Neri v. National Labor Relations
Commission,19 which held:
The Court also notes that the Retainership Agreement granted to both
parties the power to terminate their relationship upon giving a 30-day

32
8 As a Licensed Resident Physician employed in Calamba In a memorandum16 of April 22, 1998, Dr. Desipeda echoed the April 22,
Medical Center since several years ago, the hospital 1998 order of the Secretary of Labor directing all union officers and
management has committed upon you utmost confidence in members to return-to-work "on or April 23, 1998, except those
Republic of the Philippines the performance of duties pursuant thereto. This is the reason employees that were already terminated or are serving disciplinary
SUPREME COURT why you were awarded the privilege to practice in the hospital actions." Dr. Desipeda thus ordered the officers and members of the
Manila and were entrusted hospital functions to serve the interest of union to "report for work as soon as possible" to the hospital's personnel
both the hospital and our patients using your capability for officer and administrator for "work scheduling, assignments and/or re-
SECOND DIVISION independent judgment. assignments."

G.R. No. 176484 November 25, 2008 Very recently though and unfortunately, you have Petitioner later sent Dr. Lanzanas a notice of termination which he
committed acts inimical to the interest of the hospital, the received on April 25, 1998, indicating as grounds therefor his failure to
details of which are contained in the hereto attached affidavit report back to work despite the DOLE order and his supposed role in the
CALAMBA MEDICAL CENTER, INC., petitioner of witness. striking union, thus:
vs.
NATIONAL LABOR RELATIONS COMMISSION, RONALDO
LANZANAS AND MERCEDITHA*LANZANAS, respondents. You are therefore given 24 hours to explain why no On April 23, 1998, you still did not report for work despite
disciplinary action should be taken against you. memorandum issued by the CMC Medical Director
implementing the Labor Secretary's ORDER. The same is true
DECISION on April 24, 1998 and April 25, 1998,--you still did not report
Pending investigation of your case, you are hereby
for work [sic].
placed under 30-days [sic] preventive suspension
CARPIO MORALES, J.: effective upon receipt hereof.7 (Emphasis, italics and
underscoring supplied) You are likewise aware that you were observed (re: signatories
The Calamba Medical Center (petitioner), a privately-owned hospital, [sic] to the Saligang Batas of BMCMC-UWP) to be unlawfully
engaged the services of medical doctors-spouses Ronaldo Lanzanas (Dr. participating as member in the rank-and-file union's
Inexplicably, petitioner did not give respondent Dr. Merceditha, who was
Lanzanas) and Merceditha Lanzanas (Dr. Merceditha) in March 1992 and concerted activities despite knowledge that your position in the
not involved in the said incident, any work schedule after sending her
August 1995, respectively, as part of its team of resident physicians. hospital is managerial in nature (Nurses, Orderlies, and staff of
husband Dr. Lanzanas the memorandum,8 nor inform her the reason
Reporting at the hospital twice-a-week on twenty-four-hour shifts, the Emergency Room carry out your orders using your
therefor, albeit she was later informed by the Human Resource
respondents were paid a monthly "retainer" of P4,800.00 each.1 It independent judgment) which participation is expressly
Department (HRD) officer that that was part of petitioner's cost-cutting
appears that resident physicians were also given a percentage share out prohibited by the New Labor Code and which prohibition was
measures.9
of fees charged for out-patient treatments, operating room assistance sustained by the Med-Arbiter's ORDER dated February 24,
and discharge billings, in addition to their fixed monthly retainer.2 1998. (Emphasis and italics in the original; underscoring partly
Responding to the memorandum, Dr. Lanzanas, by letter of March 9, in the original and partly supplied)
1998,10 admitted that he spoke with Miscala over the phone but that
The work schedules of the members of the team of resident physicians their conversation was taken out of context by Dr. Trinidad.
were fixed by petitioner's medical director Dr. Raul Desipeda (Dr. For these reasons as grounds for termination, you are
Desipeda). And they were issued identification cards3 by petitioner and hereby terminated for cause from employment
were enrolled in the Social Security System (SSS).4 Income taxes were On March 14, 1998,11 the rank-and-file employees union of petitioner effective today, April 25, 1998, without prejudice to
withheld from them.5 went on strike due to unresolved grievances over terms and conditions further action for revocation of your license before the
of employment.12 Philippine [sic] Regulations [sic] Commission.17 (Emphasis and
underscoring supplied)
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident
physician at the hospital, inadvertently overheard a telephone On March 20, 1998, Dr. Lanzanas filed a complaint for illegal
conversation of respondent Dr. Lanzanas with a fellow employee, suspension13 before the National Labor Relations Commission (NLRC)- Dr. Lanzanas thus amended his original complaint to include illegal
Diosdado Miscala, through an extension telephone line. Apparently, Dr. Regional Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a dismissal.18 His and Dr. Merceditha's complaints were consolidated and
Lanzanas and Miscala were discussing the low "census" or admission of complaint for illegal dismissal.14 docketed as NLRC CASE NO. RAB-IV-3-9879-98-L.
patients to the hospital.6
In the meantime, then Sec. Cresenciano Trajano of the Department of By Decision19 of March 23, 1999, Labor Arbiter Antonio R. Macam
Dr. Desipeda whose attention was called to the above-said telephone Labor and Employment (DOLE) certified the labor dispute to the NLRC dismissed the spouses' complaints for want of jurisdiction upon a finding
conversation issued to Dr. Lanzanas a Memorandum of March 7, 1998 for compulsory arbitration and issued on April 21, 1998 return-to-work that there was no employer-employee relationship between the parties,
reading: Order to the striking union officers and employees of petitioner pending the fourth requisite or the "control test" in the determination of an
resolution of the labor dispute.15 employment bond being absent.

33
On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the Labor The appellate court thus declared that respondents were illegally circumstances, it stresses, are clear badges of the absence of any
Arbiter's findings, disposing as follows: dismissed. employment relationship between them.

WHEREFORE, the assailed decision is set aside. The x x x. The petitioner's ground for dismissing respondent This Court is unimpressed.
respondents are ordered to pay the complainants their full Ronaldo Lanzanas was based on his alleged participation in
backwages; separation pay of one month salary for every year union activities, specifically in joining the strike and failing to
Under the "control test," an employment relationship exists between a
of service in lieu of reinstatement; moral damages observe the return-to-work order issued by the Secretary of
physician and a hospital if the hospital controls both the means and the
of P500,000.00 each; exemplary damages ofP250,000.00 each Labor. Yet, the petitioner did not adduce any piece of evidence
details of the process by which the physician is to accomplish his task.29
plus ten percent (10%) of the total award as attorney's fees. to show that respondent Ronaldo indeed participated in the
strike. x x x.
Where a person who works for another does so more or less at his own
SO ORDERED.21
pleasure and is not subject to definite hours or conditions of work, and is
In the case of respondent Merceditha Lanzanas, the
compensated according to the result of his efforts and not the amount
petitioner's explanation that "her marriage to complainant
Petitioner's motion for reconsideration having been denied, it brought thereof, the element of control is absent.30
Ronaldo has given rise to the presumption that her
the case to the Court of Appeals on certiorari.
sympat[hies] are likewise with her husband" as a ground for
her dismissal is unacceptable. Such is not one of the grounds As priorly stated, private respondents maintained specific work-
The appellate court, by June 30, 2004 Decision,22 initially granted to justify the termination of her employment.25 (Underscoring schedules, as determined by petitioner through its medical director,
petitioner's petition and set aside the NLRC ruling. However, upon a supplied) which consisted of 24-hour shifts totaling forty-eight hours each week
subsequent motion for reconsideration filed by respondents, itreinstated and which were strictly to be observed under pain of administrative
the NLRC decision in an Amended Decision23 dated September 26, 2006 sanctions.
The fallo of the appellate court's decision reads:
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
That petitioner exercised control over respondents gains light from the
award of attorney's fees. WHEREFORE, the instant Motion for
undisputed fact that in the emergency room, the operating room, or any
Reconsideration is GRANTED, and the Court's decision dated
department or ward for that matter, respondents' work is monitored
June 30, 2004, is SET ASIDE. In lieu thereof, a new judgment
In finding the existence of an employer-employee relationship between through its nursing supervisors, charge nurses and orderlies. Without the
is entered, as follows:
the parties, the appellate court held: 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
WHEREFORE, the petition is DISMISSED. The essential for the employer to actually supervise the performance of
x x x. While it may be true that the respondents are given the
assailed decision dated May 3, 2002 and order dated duties of the employee, it being enough that it has the right to wield the
discretion to decide on how to treat the petitioner's patients,
September 24, 2002 of the NLRC in NLRC NCR CA power.31
the petitioner has not denied nor explained why its Medical
No. 019823-99 are AFFIRMED with the
Director still has the direct supervision and control over
MODIFICATION that the moral and exemplary
the respondents. The fact is the petitioner's Medical Director With respect to respondents' sharing in some hospital fees, this scheme
damages are reduced to P100,000.00 each
still has to approve the schedule of duties of the does not sever the employment tie between them and petitioner as this
and P50,000.00 each, respectively.
respondents. The respondents stressed that the petitioner's merely mirrors additional form or another form of compensation or
Medical Director also issuesinstructions or orders to the incentive similar to what commission-based employees receive as
respondents relating to the means and methods of SO ORDERED.26 (Emphasis and italics in the original; contemplated in Article 97 (f) of the Labor Code, thus:
performing their duties, i.e. admission of patients, manner underscoring supplied)
of characterizing cases, treatment of cases, etc., and may
"Wage" paid to any employee shall mean the remuneration or
even overrule, review or revise the decisions of the
Preliminarily, the present petition calls for a determination of whether earning, however designated, capable of being expressed in
resident physicians. This was not controverted by the
there exists an employer-employee relationship27 between petitioner and terms of money, whether fixed or ascertained on a time,
petitioner. The foregoing factors taken together are sufficient
the spouses-respondents. task, piece, or commission basis, or other method of
to constitute the fourth element, i.e. control test, hence, the
calculating the same, which is payable by an employer to
existence of the employer-employee relationship. In denying
an employee under a written or unwritten contract of
that it had control over the respondents, the petitioner alleged Denying the existence of such relationship, petitioner argues that the
employment for work done or to be done, or for services
that the respondents were free to put up their own clinics or to appellate court, as well as the NLRC, overlooked its twice-a-week
rendered or to be rendered and includes the fair and
accept other retainership agreement with the other hospitals. reporting arrangement with respondents who are free to practice their
reasonable value, as determined by the Secretary of Labor, of
But, the petitioner failed to substantiate the allegation with profession elsewhere the rest of the week. And it invites attention to the
board, lodging, or other facilities customarily furnished by the
substantial evidence. (Emphasis and underscoring supplied)24 uncontroverted allegation that respondents, aside from their monthly
employer to the employee. x x x (Emphasis and underscoring
retainers, were entitled to one-half of all suturing, admitting,
supplied),
consultation, medico-legal and operating room assistance fees.28 These

34
Respondents were in fact made subject to petitioner-hospital's Code of they do not however recommend any managerial action. At An assumption or certification order of the DOLE Secretary automatically
Ethics,32 the provisions of which cover administrative and disciplinary most, their job is merely routinary in nature and consequently, results in a return-to-work of all striking workers, whether a
measures on negligence of duties, personnel conduct and behavior, and they cannot be considered supervisory employees. corresponding return-to-work order had been issued.39 The DOLE
offenses against persons, property and the hospital's interest. Secretary in fact issued a return-to-work Order, failing to comply with
which is punishable by dismissal or loss of employment status.40
They are not therefore barred from membership in the
More importantly, petitioner itself provided incontrovertible proof of the union of rank[-]and[-]file, which the petitioner [the union]
employment status of respondents, namely, the identification cards it is seeking to represent in the instant case.38 (Emphasis and Participation in a strike and intransigence to a return-to-work
issued them, the payslips33 and BIR W-2 (now 2316) Forms which reflect underscoring supplied) order must, however, be duly proved in order to justify immediate
their status as employees, and the classification as "salary" of their dismissal in a "national interest" case. As the appellate court as well as
remuneration. Moreover, it enrolled respondents in the SSS and the NLRC observed, however, there is nothing in the records that would
xxxx
Medicare (Philhealth) program. It bears noting at this juncture that bear out Dr. Lanzanas' actual participation in the strike. And the medical
mandatory coverage under the SSS Law34 is premised on the existence director's Memorandum41 of April 22, 1998 contains nothing more than a
of an employer-employee relationship,35 except in cases of compulsory Admittedly, Dr. Lanzanas was a union member in the hospital, which is general directive to all union officers and members to return-to-
coverage of the self-employed. It would be preposterous for an employer considered indispensable to the national interest. In labor disputes work. Mere membership in a labor union does not ipso facto mean
to report certain persons as employees and pay their SSS premiums as adversely affecting the continued operation of a hospital, Article 263(g) participation in a strike.
well as their wages if they are not its employees.36 of the Labor Code provides:
Dr. Lanzanas' claim that, after his 30-day preventive suspension ended
And if respondents were not petitioner's employees, how does it account ART. 263. STRIKES, PICKETING, AND LOCKOUTS.– on or before April 9, 1998, he was never given any work schedule42 was
for its issuance of the earlier-quoted March 7, 1998 memorandum not refuted by petitioner. Petitioner in fact never released any findings of
explicitly stating that respondent is "employed" in it and of the xxxx its supposed investigation into Dr. Lanzanas' alleged "inimical acts."
subsequent termination letter indicating respondent Lanzanas'
employment status.
(g) x x x x Petitioner thus failed to observe the two requirements,before dismissal
can be effected ─ notice and hearing ─ which constitute essential
Finally, under Section 15, Rule X of Book III of the Implementing Rules elements of the statutory process; the first to apprise the employee of
of the Labor Code, an employer-employee relationship exists between x x x x. In labor disputes adversely affecting the the particular acts or omissions for which his dismissal is sought, and the
the resident physicians and the training hospitals, unless there is a continued operation of such hospitals, clinics or second to inform the employee of the employer's decision to dismiss
training agreement between them, and the training program is duly medical institutions, it shall be the duty of the striking him.43 Non-observance of these requirements runs afoul of the
accredited or approved by the appropriate government agency. In union or locking-out employer to provide and maintain an procedural mandate.44
respondents' case, they were not undergoing any specialization training. effective skeletal workforce of medical and other health
They were considered non-training general practitioners,37 assigned at personnel, whose movement and services shall be
unhampered and unrestricted, as are necessary to insure the The termination notice sent to and received by Dr. Lanzanas on April 25,
the emergency rooms and ward sections.
proper and adequate protection of the life and health of its 1998 was the first and only time that he was apprised of the reason for
patients, most especially emergency cases, for the duration of his dismissal. He was not afforded, however, even the slightest
Turning now to the issue of dismissal, the Court upholds the appellate the strike or lockout. In such cases, the Secretary of Labor and opportunity to explain his side. His was a "termination upon receipt"
court's conclusion that private respondents were illegally dismissed. Employment is mandated to immediately assume, within situation. While he was priorly made to explain on his telephone
twenty-four hours from knowledge of the occurrence of such conversation with Miscala,45 he was not with respect to his supposed
strike or lockout, jurisdiction over the same or certify to the participation in the strike and failure to heed the return-to-work order.
Dr. Lanzanas was neither a managerial nor supervisory employee but
part of the rank-and-file. This is the import of the Secretary of Labor's Commission for compulsory arbitration. For this purpose,
Resolution of May 22, 1998 in OS A-05-15-98 which reads: the contending parties are strictly enjoined to comply As for the case of Dr. Merceditha, her dismissal was worse, it having
with such orders, prohibitions and/or injunctions as been effected without any just or authorized cause and without
are issued by the Secretary of Labor and Employment observance of due process. In fact, petitioner never proferred any valid
xxxx
or the Commission, under pain of immediate cause for her dismissal except its view that "her marriage to [Dr.
disciplinary action, including dismissal or loss of Lanzanas] has given rise to the presumption that her sympath[y] [is]
In the motion to dismiss it filed before the Med-Arbiter, the employment status or payment by the locking-out with her husband; [and that when [Dr. Lanzanas] declared that he was
employer (CMC) alleged that 24 members of petitioner are employer of backwages, damages and other going to boycott the scheduling of their workload by the medical doctor,
supervisors, namely x x x Rolando Lanzonas [sic] x x x. affirmative relief, even criminal prosecution against he was presumed to be speaking for himself [and] for his wife
either or both of them. Merceditha."46
A close scrutiny of the job descriptions of the alleged
supervisors narrated by the employer only proves that except x x x x (Emphasis and underscoring supplied)
for the contention that these employees allegedly supervise,

35
Petitioner's contention that Dr. Merceditha was a member of the union or was not a Board action.51 (Emphasis and underscoring
was a participant in the strike remained just that. Its termination of her supplied)
employment on the basis of her conjugal relationship is not analogous to
The circulation of such list containing names of alleged union members
any of the causes enumerated in Article 28247 of the Labor Code. Mere intended to prevent employment of workers for union activities similarly
suspicion or belief, no matter how strong, cannot substitute for factual constitutes unfair labor practice, thereby giving a right of action for
findings carefully established through orderly procedure.48 damages by the employees prejudiced.52

The Court even notes that after the proceedings at the NLRC, petitioner A word on the appellate court's deletion of the award of attorney's fees.
never even mentioned Dr. Merceditha's case. There is thus no gainsaying There being no basis advanced in deleting it, as exemplary damages
that her dismissal was both substantively and procedurally infirm. were correctly awarded,53 the award of attorney's fees should be
reinstated.
Adding insult to injury was the circulation by petitioner of a "watchlist" or
"watch out list"49 including therein the names of respondents. Consider WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No.
the following portions of Dr. Merceditha's Memorandum of Appeal: 75871 is AFFIRMED withMODIFICATION in that the award by the
National Labor Relations Commission of 10% of the total judgment
award as attorney's fees is reinstated. In all other aspects, the decision
3. Moreover, to top it all, respondents have circulated a so
of the appellate court is affirmed.
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 SO ORDERED.
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
36
9 In finding petitioners to be regular employees of Shangri-la, the Arbiter respondent doctor and since Shangri-la is not principally engaged in the
noted that they usually perform work which is necessary and desirable to business of providing medical or healthcare services, petitioners could
Shangri-la’s business; that they observe clinic hours and render services not be regarded as regular employees of Shangri-la.
Republic of the Philippines only to Shangri-la’s guests and employees; that payment for their
SUPREME COURT salaries were recommended to Shangri-la’s Human Resource Department
Petitioners’ motion for reconsideration having been denied by
Manila (HRD); that respondent doctor was Shangri-la’s "in-house" physician,
Resolution6 of July 10, 2007, they interposed the present recourse.
hence, also an employee; and that the MOA between Shangri-la and
SECOND DIVISION respondent doctor was an "insidious mechanism in order to circumvent
[the doctor’s] tenurial security and that of the employees under her." Petitioners insist that under Article 157 of the Labor Code, Shangri-la is
required to hire a full-time registered nurse, apart from a physician,
G.R. No. 178827 March 4, 2009 hence, their engagement should be deemed as regular employment, the
Shangri-la and respondent doctor appealed to the NLRC. Petitioners
provisions of the MOA notwithstanding; and that the MOA is contrary to
appealed too, but only with respect to the non-award to them of some of
JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, Petitioners, public policy as it circumvents tenurial security and, therefore, should be
the benefits they were claiming.
vs. struck down as being void ab initio. At most, they argue, the MOA is a
SHANGRI-LA'S MACTAN ISLAND RESORT and DR. JESSICA J.R. mere job contract.
PEPITO, Respondents. By Decision4 dated March 31, 2005, the NLRC granted Shangri-la’s and
respondent doctor’s appeal and dismissed petitioners’ complaint for lack
And petitioners maintain that respondent doctor is a labor-only
of merit, it finding that no employer-employee relationship exists
DECISION contractor for she has no license or business permit and no business
between petitioner and Shangri-la. In so deciding, the NLRC held that
name registration, which is contrary to the requirements under Sec. 19
the Arbiter erred in interpreting Article 157 in relation to Article 280 of
and 20 of the Implementing Rules and Regulations of the Labor Code on
CARPIO MORALES, J.: the Labor Code, as what is required under Article 157 is that the
sub-contracting.
employer should provide the services of medical personnel to its
employees, but nowhere in said article is a provision that nurses are
Registered nurses Jeromie D. Escasinas and Evan Rigor Singco required to be employed; that contrary to the finding of the Arbiter, even Petitioners add that respondent doctor cannot be a legitimate
(petitioners) were engaged in 1999 and 1996, respectively, by Dr. if Article 280 states that if a worker performs work usually necessary or independent contractor, lacking as she does in substantial capital, the
Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at desirable in the business of the employer, he cannot be automatically clinic having been set-up and already operational when she took over as
respondent Shangri-la’s Mactan Island Resort (Shangri-la) in Cebu of deemed a regular employee; and that the MOA amply shows that retained physician; that respondent doctor has no control over how the
which she was a retained physician. respondent doctor was in fact engaged by Shangri-la on a retainer basis, clinic is being run, as shown by the different orders issued by officers of
under which she could hire her own nurses and other clinic personnel. Shangri-la forbidding her from receiving cash payments and several
In late 2002, petitioners filed with the National Labor Relations purchase orders for medicines and supplies which were coursed thru
Commission (NLRC) Regional Arbitration Branch No. VII (NLRC-RAB No. Shangri-la’s Purchasing Manager, circumstances indubitably showing that
Brushing aside petitioners’ contention that since their application for
VII) a complaint1 for regularization, underpayment of wages, non- she is not an independent contractor but a mere agent of Shangri-la.
employment was addressed to Shangri-la, it was really Shangri-la which
payment of holiday pay, night shift differential and 13th month pay hired them and not respondent doctor, the NLRC noted that the
differential against respondents, claiming that they are regular applications for employment were made by persons who are not parties In its Comment,7 Shangri-la questions the Special Powers of Attorneys
employees of Shangri-la. The case was docketed as RAB Case No. 07-11- to the case and were not shown to have been actually hired by Shangri- (SPAs) appended to the petition for being inadequate. On the merits, it
2089-02. la. prays for the disallowance of the petition, contending that it raises
factual issues, such as the validity of the MOA, which were never raised
Shangri-la claimed, however, that petitioners were not its employees but during the proceedings before the Arbiter, albeit passed upon by him in
On the issue of payment of wages, the NLRC held that the fact that, for
of respondent doctor whom it retained via Memorandum of Agreement his Decision; that Article 157 of the Labor Code does not make it
some months, payment of petitioners’ wages were recommended by
(MOA)2 pursuant to Article 157 of the Labor Code, as amended. mandatory for a covered establishment to employ health personnel; that
Shangri-la’s HRD did not prove that it was Shangri-la which pays their
the services of nurses is not germane nor indispensable to its operations;
wages. It thus credited respondent doctor’s explanation that the
and that respondent doctor is a legitimate individual independent
Respondent doctor for her part claimed that petitioners were already recommendations for payment were based on the billings she prepared
contractor who has the power to hire, fire and supervise the work of the
working for the previous retained physicians of Shangri-la before she for salaries of additional nurses during Shangri-la’s peak months of
nurses under her.
was retained by Shangri-la; and that she maintained petitioners’ services operation, in accordance with the retainership agreement, the guests’
upon their request. payments for medical services having been paid directly to Shanrgi-la.
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
By Decision of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared
3 Petitioners thereupon brought the case to the Court of Appeals which, by
permissible job contracting of the Labor Code, as amended.
petitioners to be regular employees of Shangri-la. The Arbiter thus Decision5 of May 22, 2007, affirmed the NLRC Decision that no
ordered Shangri-la to grant them the wages and benefits due them as employer-employee relationship exists between Shangri-la and
regular employees from the time their services were engaged. petitioners. The appellate court concluded that all aspects of the The Court holds that, contrary to petitioners’ postulation, Art. 157 does
employment of petitioners being under the supervision and control of not require the engagement of full-time nurses as regular
37
employees of a company employing not less than 50 workers. the number of their employees, nothing is there in the law which says Sec. 9. Labor-only contracting. – (a) Any person who undertakes to
Thus, the Article provides: that medical practitioners so engaged be actually hired as employees, supply workers to an employer shall be deemed to be engaged in labor-
adding that the law, as written, only requires the employer "to only contracting where such person:
retain", not employ, a part-time physician who needed to stay in the
ART. 157. Emergency medical and dental services. – It shall be the duty
premises of the non-hazardous workplace for two (2) hours. (Emphasis
of every employer to furnish his employees in any locality with free (1) Does not have substantial capital or
and underscoring supplied)1avvphi1
medical and dental attendance and facilities consisting of: investment in the form of tools, equipment,
machineries, work premises and other
The term "full-time" in Art. 157 cannot be construed as referring to the materials; and
(a) The services of a full-time registered nurse when the
type of employment of the person engaged to provide the services, for
number of employees exceeds fifty (50) but not more than
Article 157 must not be read alongside Art. 2809 in order to vest
two hundred (200) except when the employer does not (2) The workers recruited and placed by such
employer-employee relationship on the employer and the person so
maintain hazardous workplaces, in which case the services of a persons are performing activities which are
engaged. So De Vera teaches:
graduate first-aider shall be provided for the protection of the directly related to the principal business or
workers, where no registered nurse is available. The Secretary operations of the employer in which workers
of Labor shall provide by appropriate regulations the services x x x For, we take it that any agreement may provide that one party are habitually employed.
that shall be required where the number of employees does shall render services for and in behalf of another, no matter how
not exceed fifty (50) and shall determine by appropriate order necessary for the latter’s business, even without being hired as an
(b) Labor-only contracting as defined herein is hereby
hazardous workplaces for purposes of this Article; employee. This set-up is precisely true in the case of an independent
prohibited and the person acting as contractor shall be
contractorship as well as in an agency agreement. Indeed, Article 280 of
considered merely as an agent or intermediary of the employer
the Labor Code, quoted by the appellate court, is not the yardstick for
(b) The services of a full-time registered nurse, a part-time who shall be responsible to the workers in the same manner
determining the existence of an employment relationship. As it is, the
physician and dentist, and an emergency clinic, when the and extent as if the latter were directly employed by him.
provision merely distinguishes between two (2) kinds of employees, i.e.,
number of employees exceeds two hundred (200) but not
regular and casual. x x x10 (Emphasis and underscoring supplied)
more than three hundred (300); and
(c) For cases not falling under this Article, the Secretary of
Labor shall determine through appropriate orders whether or
The phrase "services of a full-time registered nurse" should thus be
(c) The services of a full-time physician, dentist and full-time not the contracting out of labor is permissible in the light of
taken to refer to the kind of services that the nurse will render in the
registered nurse as well as a dental clinic, and an infirmary or the circumstances of each case and after considering the
company’s premises and to its employees, not the manner of his
emergency hospital with one bed capacity for every one operating needs of the employer and the rights of the workers
engagement.
hundred (100) employees when the number of employees involved. In such case, he may prescribe conditions and
exceeds three hundred (300). restrictions to insure the protection and welfare of the
As to whether respondent doctor can be considered a legitimate workers. (Emphasis supplied)
independent contractor, the pertinent sections of DOLE Department
In cases of hazardous workplaces, no employer shall engage the services
Order No. 10, series of 1997, illuminate:
of a physician or dentist who cannot stay in the premises of the The existence of an independent and permissible contractor relationship
establishment for at least two (2) hours, in the case of those engaged on is generally established by considering the following determinants:
part-time basis, and not less than eight (8) hours in the case of those Sec. 8. Job contracting. – There is job contracting permissible under the whether the contractor is carrying on an independent business; the
employed on full-time basis. Where the undertaking is nonhazardous in Code if the following conditions are met: nature and extent of the work; the skill required; the term and duration
nature, the physician and dentist may be engaged on retained basis, of the relationship; the right to assign the performance of a specified
subject to such regulations as the Secretary of Labor may prescribe to piece of work; the control and supervision of the work to another; the
(1) The contractor carries on an independent business and
insure immediate availability of medical and dental treatment and employer's power with respect to the hiring, firing and payment of the
undertakes the contract work on his own account under his
attendance in case of emergency. (Emphasis and underscoring supplied) contractor's workers; the control of the premises; the duty to supply the
own responsibility according to his own manner and method,
premises, tools, appliances, materials and labor; and the mode, manner
free from the control and direction of his employer or principal
and terms of payment.11
Under the foregoing provision, Shangri-la, which employs more than 200 in all matters connected with the performance of the work
workers, is mandated to "furnish" its employees with the services of a except as to the results thereof; and
full-time registered nurse, a part-time physician and dentist, and an On the other hand, existence of an employer- employee relationship is
emergency clinic which means that it should provide or make available established by the presence of the following determinants: (1) the
(2) The contractor has substantial capital or investment in the
such medical and allied services to its employees, not necessarily to hire selection and engagement of the workers; (2) power of dismissal; (3)
form of tools, equipment, machineries, work premises, and
or employ a service provider. As held in Philippine Global the payment of wages by whatever means; and (4) the power to control
other materials which are necessary in the conduct of his
Communications vs. De Vera:8 the worker's conduct, with the latter assuming primacy in the overall
business.
consideration.12
x x x while it is true that the provision requires employers to engage the
services of medical practitioners in certain establishments depending on
38
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-la’s 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
staff13; group life, group personal accident insurance and life/death
insurance14 for the staff with minimum benefit payable at 12 times the
employee’s 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-la’s 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 conformity17 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-la’s regular workers, governs how they perform their respective
tasks and responsibilities.

Contrary to petitioners’ contention, the various office directives issued by


Shangri-la’s officers do not imply that it is Shangri-la’s 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 letter18 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 letter19 dated May 17, 2004 from Shangri-la’s
Assistant Financial Controller, Lotlot Dagat, forbidding the clinic from
receiving cash payments from the resort’s 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.
39
10 Company to the Agent for servicing, subject to subsequent confirmation been influenced by developments both from within and without the
of receipt of payment by the Company as evidenced by an Official company.
Receipt issued by the Company directly to the policyholder.
Republic of the Philippines
xxxx
SUPREME COURT
xxxx
Manila
The issues around agent recruiting are central to the intended objectives
The Company may terminate this Agreement for any breach or violation hence the need for a Senior Managers’ meeting earlier last month when
EN BANC
of any of the provisions hereof by the Agent by giving written notice to Kevin O’Connor, SVP-Agency, took to the floor to determine from our
the Agent within fifteen (15) days from the time of the discovery of the senior agency leaders what more could be done to bolster manpower
G.R. No. 167622 June 29, 2010 breach. No waiver, extinguishment, abandonment, withdrawal or development. At earlier meetings, Kevin had presented information
cancellation of the right to terminate this Agreement by the Company where evidently, your Region was the lowest performer (on a per
GREGORIO V. TONGKO, Petitioner, shall be construed for any previous failure to exercise its right under any Manager basis) in terms of recruiting in 2000 and, as of today, continues
vs. provision of this Agreement. to remain one of the laggards in this area.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and
RENATO A. VERGEL DE DIOS,Respondents. Either of the parties hereto may likewise terminate his Agreement at any While discussions, in general, were positive other than for certain
time without cause, by giving to the other party fifteen (15) days notice comments from your end which were perceived to be uncalled for, it
RESOLUTION in writing.2 became clear that a one-on-one meeting with you was necessary to
ensure that you and management, were on the same plane. As gleaned
from some of your previous comments in prior meetings (both in group
BRION, J.: Tongko additionally agreed (1) to comply with all regulations and
and one-on-one), it was not clear that we were proceeding in the same
requirements of Manulife, and (2) to maintain a standard of knowledge
direction.
and competency in the sale of Manulife’s products, satisfactory to
This resolves the Motion for Reconsideration1 dated December 3, 2008 Manulife and sufficient to meet the volume of the new business, required
filed by respondent The Manufacturers Life Insurance Co. (Phils.), Inc. by his Production Club membership.3 Kevin held subsequent series of meetings with you as a result, one of
(Manulife) to set aside our Decision of November 7, 2008. In the assailed which I joined briefly. In those subsequent meetings you reiterated
decision, we found that an employer-employee relationship existed certain views, the validity of which we challenged and subsequently
between Manulife and petitioner Gregorio Tongko and ordered Manulife The second phase started in 1983 when Tongko was named Unit
found as having no basis.
to pay Tongko backwages and separation pay for illegal dismissal. Manager in Manulife’s Sales Agency Organization. In 1990, he became a
Branch Manager. Six years later (or in 1996), Tongko became a Regional
Sales Manager.4 With such views coming from you, I was a bit concerned that the rest of
The following facts have been stated in our Decision of November 7, the Metro North Managers may be a bit confused as to the directions the
2008, now under reconsideration, but are repeated, simply for purposes company was taking. For this reason, I sought a meeting with everyone
of clarity. Tongko’s gross earnings consisted of commissions, persistency income,
in your management team, including you, to clear the air, so to speak.
and management overrides. Since the beginning, Tongko consistently
declared himself self-employed in his income tax returns. Thus, under
The contractual relationship between Tongko and Manulife had two basic oath, he declared his gross business income and deducted his business This note is intended to confirm the items that were discussed at the
phases. The first or initial phase began on July 1, 1977, under a Career expenses to arrive at his taxable business income. Manulife withheld the said Metro North Region’s Sales Managers meeting held at the 7/F
Agent’s Agreement (Agreement) that provided: corresponding 10% tax on Tongko’s earnings.5 Conference room last 18 October.

It is understood and agreed that the Agent is an independent contractor In 2001, Manulife instituted manpower development programs at the xxxx
and nothing contained herein shall be construed or interpreted as regional sales management level. Respondent Renato Vergel de Dios
creating an employer-employee relationship between the Company and wrote Tongko a letter dated November 6, 2001 on concerns that were
the Agent. Issue # 2: "Some Managers are unhappy with their earnings and would
brought up during the October 18, 2001 Metro North Sales Managers
want to revert to the position of agents."
Meeting. De Dios wrote:
xxxx
This is an often repeated issue you have raised with me and with Kevin.
The first step to transforming Manulife into a big league player has been
For this reason, I placed the issue on the table before the rest of your
a) The Agent shall canvass for applications for Life Insurance, Annuities, very clear – to increase the number of agents to at least 1,000 strong for
Region’s Sales Managers to verify its validity. As you must have noted,
Group policies and other products offered by the Company, and collect, a start. This may seem diametrically opposed to the way Manulife was
no Sales Manager came forward on their own to confirm your statement
in exchange for provisional receipts issued by the Agent, money due to run when you first joined the organization. Since then, however,
and it took you to name Malou Samson as a source of the same, an
or become due to the Company in respect of applications or policies substantial changes have taken place in the organization, as these have
allegation that Malou herself denied at our meeting and in your very
obtained by or through the Agent or from policyholders allotted by the presence.
40
This only confirms, Greg, that those prior comments have no solid basis 2. Effective immediately, Kevin and the rest of the Agency Operations Tongko asserted that as Unit Manager, he was paid an annual over-rider
at all. I now believe what I had thought all along, that these allegations will deal with the North Star Branch (NSB) in autonomous fashion. x x x not exceeding P50,000.00, regardless of production levels attained and
were simply meant to muddle the issues surrounding the inability of your exclusive of commissions and bonuses. He also claimed that as Regional
Region to meet its agency development objectives! Sales Manager, he was given a travel and entertainment allowance
I have decided to make this change so as to reduce your span of control
of P36,000.00 per year in addition to his overriding commissions; he was
and allow you to concentrate more fully on overseeing the remaining
tasked with numerous administrative functions and supervisory authority
Issue # 3: "Sales Managers are doing what the company asks them to groups under Metro North, your Central Unit and the rest of the Sales
over Manulife’s employees, aside from merely selling policies and
do but, in the process, they earn less." Managers in Metro North. I will hold you solely responsible for meeting
recruiting agents for Manulife; and he recommended and recruited
the objectives of these remaining groups.
insurance agents subject to vetting and approval by Manulife. He further
xxxx alleges that he was assigned a definite place in the Manulife offices
xxxx when he was not in the field – at the 3rd Floor, Manulife Center, 108
All the above notwithstanding, we had your own records checked and we Tordesillas corner Gallardo Sts., Salcedo Village, Makati City – for which
found that you made a lot more money in the Year 2000 versus 1999. In The above changes can end at this point and they need not go any he never paid any rental. Manulife provided the office equipment he
addition, you also volunteered the information to Kevin when you said further. This, however, is entirely dependent upon you. But you have to used, including tables, chairs, computers and printers (and even office
that you probably will make more money in the Year 2001 compared to understand that meeting corporate objectives by everyone is primary stationery), and paid for the electricity, water and telephone bills. As
Year 2000. Obviously, your above statement about making "less money" and will not be compromised. We are meeting tough challenges next Regional Sales Manager, Tongko additionally asserts that he was
did not refer to you but the way you argued this point had us almost year, and I would want everybody on board. Any resistance or holding required to follow at least three codes of conduct.9
believing that you were spouting the gospel of truth when you were not. back by anyone will be dealt with accordingly.6
xxx B. Manulife’s Case – Agency Relationship with Tongko
Subsequently, de Dios wrote Tongko another letter, dated December 18,
xxxx 2001, terminating Tongko’s services: Manulife argues that Tongko had no fixed wage or salary. Under the
Agreement, Tongko was paid commissions of varying amounts,
All of a sudden, Greg, I have become much more worried about your It would appear, however, that despite the series of meetings and computed based on the premium paid in full and actually received by
ability to lead this group towards the new direction that we have been communications, both one-on-one meetings between yourself and SVP Manulife on policies obtained through an agent. As sales manager,
discussing these past few weeks, i.e., Manulife’s goal to become a major Kevin O’Connor, some of them with me, as well as group meetings with Tongko was paid overriding sales commission derived from sales made
agency-led distribution company in the Philippines. While as you claim, your Sales Managers, all these efforts have failed in helping you align by agents under his unit/structure/branch/region. Manulife also points
you have not stopped anyone from recruiting, I have never heard you your directions with Management’s avowed agency growth policy. out that it deducted and withheld a 10% tax from all commissions
proactively push for greater agency recruiting. You have not been Tongko received; Tongko even declared himself to be self-employed and
proactive all these years when it comes to agency growth. consistently paid taxes as such—i.e., he availed of tax deductions such
xxxx as ordinary and necessary trade, business and professional expenses to
which a business is entitled.
xxxx
On account thereof, Management is exercising its prerogative under
Section 14 of your Agents Contract as we are now issuing this notice of Manulife asserts that the labor tribunals have no jurisdiction over
I cannot afford to see a major region fail to deliver on its developmental termination of your Agency Agreement with us effective fifteen days Tongko’s claim as he was not its employee as characterized in the four-
goals next year and so, we are making the following changes in the from the date of this letter.7 fold test and our ruling in Carungcong v. National Labor Relations
interim: Commission.10
Tongko responded by filing an illegal dismissal complaint with the
1. You will hire at your expense a competent assistant who can unload National Labor Relations Commission (NLRC) Arbitration Branch. He The Conflicting Rulings of the Lower Tribunals
you of much of the routine tasks which can be easily delegated. This essentially alleged – despite the clear terms of the letter terminating his
assistant should be so chosen as to complement your skills and help you Agency Agreement – that he was Manulife’s employee before he was
in the areas where you feel "may not be your cup of tea." illegally dismissed.8 The labor arbiter decreed that no employer-employee relationship
existed between the parties. However, the NLRC reversed the labor
arbiter’s decision on appeal; it found the existence of an employer-
You have stated, if not implied, that your work as Regional Manager may Thus, the threshold issue is the existence of an employment relationship. employee relationship and concluded that Tongko had been illegally
be too taxing for you and for your health. The above could solve this A finding that none exists renders the question of illegal dismissal moot; dismissed. In the petition for certiorari with the Court of Appeals (CA),
problem. a finding that an employment relationship exists, on the other hand, the appellate court found that the NLRC gravely abused its discretion in
necessarily leads to the need to determine the validity of the termination its ruling and reverted to the labor arbiter’s decision that no employer-
of the relationship. employee relationship existed between Tongko and Manulife.
xxxx

A. Tongko’s Case for Employment Relationship Our Decision of November 7, 2008

41
In our Decision of November 7, 2008, we reversed the CA ruling and of conclusions between the CA and the NLRC decisions as Brokers" and specifically defines the agents and brokers relationship with
found that an employment relationship existed between Tongko and confined only to that on "control"; (c) grossly failing to the insurance company and how they are governed by the Code and
Manulife. We concluded that Tongko is Manulife’s employee for the consider the findings and conclusions of the CA on the regulated by the Insurance Commission.
following reasons: majority of the material evidence, especially [Tongko’s]
declaration in his income tax returns that he was a "business
The Insurance Code, of course, does not wholly regulate the "agency"
person" or "self-employed"; and (d) allowing [Tongko] to
1. Our ruling in the first Insular11 case did not foreclose the that it speaks of, as agency is a civil law matter governed by the Civil
repudiate his sworn statement in a public document.
possibility of an insurance agent becoming an employee of an Code. Thus, at the very least, three sets of laws – namely, the Insurance
insurance company; if evidence exists showing that the Code, the Labor Code and the Civil Code – have to be considered in
company promulgated rules or regulations that effectively 2. The November 7[, 2008] Decision contravenes settled rules looking at the present case. Not to be forgotten, too, is the Agreement
controlled or restricted an insurance agent’s choice of methods in contract law and agency, distorts not only the legal (partly reproduced on page 2 of this Dissent and which no one disputes)
or the methods themselves in selling insurance, an employer- relationships of agencies to sell but also distributorship and that the parties adopted to govern their relationship for purposes of
employee relationship would be present. The determination of franchising, and ignores the constitutional and policy context selling the insurance the company offers. To forget these other laws is to
the existence of an employer-employee relationship is thus on of contract law vis-à-vis labor law. take a myopic view of the present case and to add to the uncertainties
a case-to-case basis depending on the evidence on record. that now exist in considering the legal relationship between the
insurance company and its "agents."
3. The November 7[, 2008] Decision ignores the findings of
2. Manulife had the power of control over Tongko, sufficient to the CA on the three elements of the four-fold test other than
characterize him as an employee, as shown by the following the "control" test, reverses well-settled doctrines of law on The main issue of whether an agency or an employment relationship
indicators: employer-employee relationships, and grossly misapplies the exists depends on the incidents of the relationship. The Labor Code
"control test," by selecting, without basis, a few items of concept of "control" has to be compared and distinguished with the
evidence to the exclusion of more material evidence to support "control" that must necessarily exist in a principal-agent relationship. The
2.1 Tongko undertook to comply with Manulife’s
its conclusion that there is "control." principal cannot but also have his or her say in directing the course of
rules, regulations and other requirements, i.e., the
the principal-agent relationship, especially in cases where the company-
different codes of conduct such as the Agent Code
representative relationship in the insurance industry is an agency.
of Conduct, the Manulife Financial Code of Conduct, 4. The November 7[, 2008] Decision is judicial legislation,
and the Financial Code of Conduct Agreement; beyond the scope authorized by Articles 8 and 9 of the Civil
Code, beyond the powers granted to this Court under Article a. The laws on insurance and agency
VIII, Section 1 of the Constitution and contravenes through
2.2 The various affidavits of Manulife’s insurance
judicial legislation, the constitutional prohibition against
agents and managers, who occupied similar The business of insurance is a highly regulated commercial activity in the
impairment of contracts under Article III, Section 10 of the
positions as Tongko, showed that they performed country, in terms particularly of who can be in the insurance business,
Constitution.
administrative duties that established employment who can act for and in behalf of an insurer, and how these parties shall
with Manulife;12 and conduct themselves in the insurance business. Section 186 of the
5. For all the above reasons, the November 7[, 2008] Decision Insurance Code provides that "No person, partnership, or association of
made unsustainable and reversible errors, which should be persons shall transact any insurance business in the Philippines except as
2.3 Tongko was tasked to recruit some agents in
corrected, in concluding that Respondent Manulife and agent of a person or corporation authorized to do the business of
addition to his other administrative functions. De
Petitioner had an employer-employee relationship, that insurance in the Philippines." Sections 299 and 300 of the Insurance
Dios’ letter harped on the direction Manulife
Respondent Manulife illegally dismissed Petitioner, and for Code on Insurance Agents and Brokers, among other provisions,
intended to take, viz., greater agency recruitment as
consequently ordering Respondent Manulife to pay Petitioner provide:
the primary means to sell more policies; Tongko’s
backwages, separation pay, nominal damages and attorney’s
alleged failure to follow this directive led to the
fees.13
termination of his employment with Manulife. Section 299. No insurance company doing business in the Philippines,
nor any agent thereof, shall pay any commission or other compensation
THE COURT’S RULING to any person for services in obtaining insurance, unless such person
The Motion for Reconsideration
shall have first procured from the Commissioner a license to act as an
insurance agent of such company or as an insurance broker as
A. The Insurance and the Civil Codes;
Manulife disagreed with our Decision and filed the present motion for hereinafter provided.
the Parties’ Intent and Established
reconsideration on the following GROUNDS:
Industry Practices
No person shall act as an insurance agent or as an insurance broker in
1. The November 7[, 2008] Decision violates Manulife’s right the solicitation or procurement of applications for insurance, or receive
We cannot consider the present case purely from a labor law
to due process by: (a) confining the review only to the issue of for services in obtaining insurance, any commission or other
perspective, oblivious that the factual antecedents were set in the
"control" and utterly disregarding all the other issues that had compensation from any insurance company doing business in the
insurance industry so that the Insurance Code primarily governs. Chapter
been joined in this case; (b) mischaracterizing the divergence Philippines or any agent thereof, without first procuring a license so to
IV, Title 1 of this Code is wholly devoted to "Insurance Agents and
42
act from the Commissioner x x x The Commissioner shall satisfy himself principal in an agency relationship, on the other hand, also has the The present case at first glance appears aligned with the facts in the
as to the competence and trustworthiness of the applicant and shall prerogative to exercise control over the agent in undertaking the Carungcong, the Grepalife, and the second Insular Life cases. A critical
have the right to refuse to issue or renew and to suspend or revoke any assigned task based on the parameters outlined in the pertinent laws. difference, however, exists as these cited cases dealt with the proper
such license in his discretion.1avvphi1.net legal characterization of a subsequent management contract that
superseded the original agency contract between the insurance company
Under the general law on agency as applied to insurance, an agency
and its agent. Carungcong dealt with a subsequent Agreement making
Section 300. Any person who for compensation solicits or obtains must be express in light of the need for a license and for the designation
Carungcong a New Business Manager that clearly superseded the
insurance on behalf of any insurance company or transmits for a person by the insurance company. In the present case, the Agreement fully
Agreement designating Carungcong as an agent empowered to solicit
other than himself an application for a policy or contract of insurance to serves as grant of authority to Tongko as Manulife’s insurance
applications for insurance. The Grepalife case, on the other hand, dealt
or from such company or offers or assumes to act in the negotiating of agent.17 This agreement is supplemented by the company’s agency
with the proper legal characterization of the appointment of the Ruiz
such insurance shall be an insurance agent within the intent of this practices and usages, duly accepted by the agent in carrying out the
brothers to positions higher than their original position as insurance
section and shall thereby become liable to all the duties, requirements, agency.18 By authority of the Insurance Code, an insurance agency is for
agents. Thus, after analyzing the duties and functions of the Ruiz
liabilities and penalties to which an insurance agent is subject. compensation,19 a matter the Civil Code Rules on Agency presumes in
brothers, as these were enumerated in their contracts, we concluded
the absence of proof to the contrary.20 Other than the compensation, the
that the company practically dictated the manner by which the Ruiz
principal is bound to advance to, or to reimburse, the agent the agreed
The application for an insurance agent’s license requires a written brothers were to carry out their jobs. Finally, the second Insular Life
sums necessary for the execution of the agency.21 By implication at least
examination, and the applicant must be of good moral character and case dealt with the implications of de los Reyes’ appointment as acting
under Article 1994 of the Civil Code, the principal can appoint two or
must not have been convicted of a crime involving moral turpitude.14 The unit manager which, like the subsequent contracts in the Carungcong
more agents to carry out the same assigned tasks,22 based necessarily
insurance agent who collects premiums from an insured person for and the Grepalife cases, was clearly defined under a subsequent
on the specific instructions and directives given to them.
remittance to the insurance company does so in a fiduciary capacity, and contract. In all these cited cases, a determination of the presence of the
an insurance company which delivers an insurance policy or contract to Labor Code element of control was made on the basis of the stipulations
an authorized agent is deemed to have authorized the agent to receive With particular relevance to the present case is the provision that "In the of the subsequent contracts.
payment on the company’s behalf.15 Section 361 further prohibits the execution of the agency, the agent shall act in accordance with the
offer, negotiation, or collection of any amount other than that specified instructions of the principal."23 This provision is pertinent for purposes of
In stark contrast with the Carungcong, the Grepalife, and the second
in the policy and this covers any rebate from the premium or any special the necessary control that the principal exercises over the agent in
Insular Life cases, the only contract or document extant and submitted
favor or advantage in the dividends or benefit accruing from the policy. undertaking the assigned task, and is an area where the instructions can
as evidence in the present case is the Agreement – a pure agency
intrude into the labor law concept of control so that minute consideration
agreement in the Civil Code context similar to the original contract in the
of the facts is necessary. A related article is Article 1891 of the Civil Code
Thus, under the Insurance Code, the agent must, as a matter of first Insular Life case and the contract in the AFPMBAI case. And while
which binds the agent to render an account of his transactions to the
qualification, be licensed and must also act within the parameters of the Tongko was later on designated unit manager in 1983, Branch Manager
principal.
authority granted under the license and under the contract with the in 1990, and Regional Sales Manager in 1996, no formal contract
principal. Other than the need for a license, the agent is limited in the regarding these undertakings appears in the records of the case. Any
way he offers and negotiates for the sale of the company’s insurance B. The Cited Case such contract or agreement, had there been any, could have at the very
products, in his collection activities, and in the delivery of the insurance least provided the bases for properly ascertaining the juridical
contract or policy. Rules regarding the desired results (e.g., the required relationship established between the parties.
The Decision of November 7, 2008 refers to the first Insular and
volume to continue to qualify as a company agent, rules to check on the
Grepalife cases to establish that the company rules and regulations that
parameters on the authority given to the agent, and rules to ensure that
an agent has to comply with are indicative of an employer-employee These critical differences, particularly between the present case and the
industry, legal and ethical rules are followed) are built-in elements of
relationship.24 The Dissenting Opinions of Justice Presbitero Velasco, Jr. Grepalife and the second Insular Life cases, should therefore
control specific to an insurance agency and should not and cannot be
and Justice Conchita Carpio Morales also cite Insular Life Assurance Co. immediately drive us to be more prudent and cautious in applying the
read as elements of control that attend an employment relationship
v. National Labor Relations Commission (second Insular case)25 to rulings in these cases.
governed by the Labor Code.
support the view that Tongko is Manulife’s employee. On the other hand,
Manulife cites the Carungcong case and AFP Mutual Benefit Association,
C. Analysis of the Evidence
On the other hand, the Civil Code defines an agent as a "person [who] Inc. v. National Labor Relations Commission (AFPMBAI case)26 to support
binds himself to render some service or to do something in its allegation that Tongko was not its employee.
representation or on behalf of another, with the consent or authority of c.1. The Agreement
the latter."16 While this is a very broad definition that on its face may
A caveat has been given above with respect to the use of the rulings in
even encompass an employment relationship, the distinctions between
the cited cases because none of them is on all fours with the present The primary evidence in the present case is the July 1, 1977 Agreement
agency and employment are sufficiently established by law and
case; the uniqueness of the factual situation of the present case that governed and defined the parties’ relations until the Agreement’s
jurisprudence.
prevents it from being directly and readily cast in the mold of the cited termination in 2001. This Agreement stood for more than two decades
cases. These cited cases are themselves different from one another; this and, based on the records of the case, was never modified or novated. It
Generally, the determinative element is the control exercised over the difference underscores the need to read and quote them in the context assumes primacy because it directly dealt with the nature of the parties’
one rendering service. The employer controls the employee both in the of their own factual situations. relationship up to the very end; moreover, both parties never disputed
results and in the means and manner of achieving this result. The its authenticity or the accuracy of its terms.
43
By the Agreement’s express terms, Tongko served as an "insurance expenses and was even allowed to use Manulife facilities in his persistent refusal to recognize him as its employee.29 Regrettably, the
agent" for Manulife, not as an employee. To be sure, the Agreement’s interactions with the agents, all of whom were, in the strict sense, dissent has shown no basis for this conclusion, an
legal characterization of the nature of the relationship cannot be Manulife agents approved and certified as such by Manulife with the understandable omission since no evidence in fact exists on this
conclusive and binding on the courts; as the dissent clearly stated, the Insurance Commission. point in the records of the case. In fact, what the evidence shows is
characterization of the juridical relationship the Agreement embodied is a Tongko’s full conformity with, and action as, an independent agent until
matter of law that is for the courts to determine. At the same time, his relationship with Manulife took a bad turn.
That Tongko assumed a leadership role but nevertheless wholly
though, the characterization the parties gave to their relationship in the
remained an agent is the inevitable conclusion that results from the
Agreement cannot simply be brushed aside because it embodies their
reading of the Agreement (the only agreement on record in this case) Another interesting point the dissent raised with respect to the
intent at the time they entered the Agreement, and they were governed
and his continuing role thereunder as sales agent, from the perspective Agreement is its conclusion that the Agreement negated any
by this understanding throughout their relationship. At the very least, the
of the Insurance and the Civil Codes and in light of what Tongko himself employment relationship between Tongko and Manulife so that the
provision on the absence of employer-employee relationship between the
attested to as his role as Regional Sales Manager. To be sure, this commissions he earned as a sales agent should not be considered in the
parties can be an aid in considering the Agreement and its
interpretation could have been contradicted if other agreements had determination of the backwages and separation pay that should be given
implementation, and in appreciating the other evidence on record.
been submitted as evidence of the relationship between Manulife and to him. This part of the dissent is correct although it went on to twist this
Tongko on the latter’s expanded undertakings. In the absence of any conclusion by asserting that Tongko had dual roles in his relationship
The parties’ legal characterization of their intent, although not such evidence, however, this reading – based on the available evidence with Manulife; he was an agent, not an employee, in so far as he sold
conclusive, is critical in this case because this intent is not illegal or and the applicable insurance and civil law provisions – must stand, insurance for Manulife, but was an employee in his capacity as a
outside the contemplation of law, particularly of the Insurance and the subject only to objective and evidentiary Labor Code tests on the manager. Thus, the dissent concluded that Tongko’s backwages should
Civil Codes. From this perspective, the provisions of the Insurance Code existence of an employer-employee relationship. only be with respect to his role as Manulife’s manager.
cannot be disregarded as this Code (as heretofore already noted)
expressly envisions a principal-agent relationship between the insurance
In applying such Labor Code tests, however, the enforcement of the The conclusion with respect to Tongko’s employment as a manager is, of
company and the insurance agent in the sale of insurance to the
Agreement during the course of the parties’ relationship should be course, unacceptable for the legal, factual and practical reasons
public.1awph!1 For this reason, we can take judicial notice that as a
noted. From 1977 until the termination of the Agreement, Tongko’s discussed in this Resolution. In brief, the factual reason is grounded on
matter of Insurance Code-based business practice, an agency
occupation was to sell Manulife’s insurance policies and products. Both the lack of evidentiary support of the conclusion that Manulife exercised
relationship prevails in the insurance industry for the purpose of selling
parties acquiesced with the terms and conditions of the Agreement. control over Tongko in the sense understood in the Labor Code.
insurance. The Agreement, by its express terms, is in accordance with
Tongko, for his part, accepted all the benefits flowing from the The legal reason, partly based on the lack of factual basis, is the
the Insurance Code model when it provided for a principal-agent
Agreement, particularly the generous commissions. erroneous legal conclusion that Manulife controlled Tongko and was thus
relationship, and thus cannot lightly be set aside nor simply be
its employee. The practical reason, on the other hand, is the havoc
considered as an agreement that does not reflect the parties’ true intent.
that the dissent’s unwarranted conclusion would cause the insurance
This intent, incidentally, is reinforced by the system of compensation the Evidence indicates that Tongko consistently clung to the view that he
industry that, by the law’s own design, operated along the lines of
Agreement provides, which likewise is in accordance with the production- was an independent agent selling Manulife insurance products since he
principal-agent relationship in the sale of insurance.
based sales commissions the Insurance Code provides. invariably declared himself a business or self-employed person in his
income tax returns. This consistency with, and action made
pursuant to the Agreement were pieces of evidence that were c.2. Other Evidence of Alleged Control
Significantly, evidence shows that Tongko’s role as an insurance agent
never mentioned nor considered in our Decision of November 7,
never changed during his relationship with Manulife. If changes occurred
2008. Had they been considered, they could, at the very least, serve as
at all, the changes did not appear to be in the nature of their core A glaring evidentiary gap for Tongko in this case is the lack of evidence
Tongko’s admissions against his interest. Strictly speaking, Tongko’s tax
relationship. Tongko essentially remained an agent, but moved up in this on record showing that Manulife ever exercised means-and-manner
returns cannot but be legally significant because he certified under oath
role through Manulife’s recognition that he could use other agents control, even to a limited extent, over Tongko during his ascent in
the amount he earned as gross business income, claimed business
approved by Manulife, but operating under his guidance and in whose Manulife’s sales ladder. In 1983, Tongko was appointed unit manager.
deductions, leading to his net taxable income. This should be evidence of
commissions he had a share. For want of a better term, Tongko perhaps Inexplicably, Tongko never bothered to present any evidence at all on
the first order that cannot be brushed aside by a mere denial. Even on a
could be labeled as a "lead agent" who guided under his wing other what this designation meant. This also holds true for Tongko’s
layman’s view that is devoid of legal considerations, the extent of his
Manulife agents similarly tasked with the selling of Manulife insurance. appointment as branch manager in 1990, and as Regional Sales Manager
annual income alone renders his claimed employment status doubtful.27
in 1996. The best evidence of control – the agreement or directive
relating to Tongko’s duties and responsibilities – was never introduced as
Like Tongko, the evidence suggests that these other agents operated
Hand in hand with the concept of admission against interest in part of the records of the case. The reality is, prior to de Dios’ letter,
under their own agency agreements. Thus, if Tongko’s compensation
considering the tax returns, the concept of estoppel – a legal and Manulife had practically left Tongko alone not only in doing the business
scheme changed at all during his relationship with Manulife, the change
equitable concept28 – necessarily must come into play. Tongko’s previous of selling insurance, but also in guiding the agents under his wing. As
was solely for purposes of crediting him with his share in the
admissions in several years of tax returns as an independent agent, as discussed below, the alleged directives covered by de Dios’ letter,
commissions the agents under his wing generated. As an agent who was
against his belated claim that he was all along an employee, are too heretofore quoted in full, were policy directions and targeted results that
recruiting and guiding other insurance agents, Tongko likewise moved
diametrically opposed to be simply dismissed or ignored. Interestingly, the company wanted Tongko and the other sales groups to realign with
up in terms of the reimbursement of expenses he incurred in the course
Justice Velasco’s dissenting opinion states that Tongko was forced to in their own selling activities. This is the reality that the parties’
of his lead agency, a prerogative he enjoyed pursuant to Article 1912 of
declare himself a business or self-employed person by Manulife’s presented evidence consistently tells us.
the Civil Code. Thus, Tongko received greater reimbursements for his
44
What, to Tongko, serve as evidence of labor law control are the codes of The dissent considers the imposition of administrative and managerial The dissent apparently did not also properly analyze and appreciate the
conduct that Manulife imposes on its agents in the sale of insurance. The functions on Tongko as indicative of labor law control; thus, Tongko as great qualitative difference that exists between:
mere presentation of codes or of rules and regulations, however, is not manager, but not as insurance agent, became Manulife’s employee. It
per se indicative of labor law control as the law and jurisprudence teach drew this conclusion from what the other Manulife managers disclosed in
us. their affidavits (i.e., their enumerated administrative and managerial  the Manulife managers’ role is to coordinate activities of the
functions) and after comparing these statements with the managers in agents under the managers’ Unit in the agents’ daily, weekly,
Grepalife. The dissent compared the control exercised by Manulife over and monthly selling activities, making sure that their respective
As already recited above, the Insurance Code imposes obligations on sales targets are met.
its managers in the present case with the control the managers in the
both the insurance company and its agents in the performance of their
Grepalife case exercised over their employees by presenting the  the District Manager’s duty in Grepalife is to properly
respective obligations under the Code, particularly on licenses and their
following matrix:31 account, record, and document the company's funds, spot-
renewals, on the representations to be made to potential customers, the
check and audit the work of the zone supervisors, conserve
collection of premiums, on the delivery of insurance policies, on the
the company's business in the district through
matter of compensation, and on measures to ensure ethical business Duties of Manulife’s Manager Duties of Grepalife’s Managers/Supervisors
"reinstatements," follow up the submission of weekly
practice in the industry.
remittance reports of the debit agents and zone supervisors,
- to render or recommend prospective agents to be - train understudies forpreserve
the position of district
company manager
property in good condition, train
The general law on agency, on the other hand, expressly allows the licensed, trained and contracted to sell Manulife products understudies for the position of district managers, and
principal an element of control over the agent in a manner consistent and who will be part of my Unit maintain his quota of sales (the failure of which is a ground for
with an agency relationship. In this sense, these control measures termination).
- to coordinate activities of the agents under [the - properly account, record and document the company’s funds,
cannot be read as indicative of labor law control. Foremost among these
managers’] Unit in [the agents’] daily, weekly and monthly 
spot-check and audit thethework
ZoneofSupervisor’s (also inxGrepalife)
the zone supervisors, xx has the duty to
are the directives that the principal may impose on the agent to achieve direct and supervise the reports
sales activities
selling activities, making sure that their respective sales follow up the submission of weekly remittance of the of the debit agents
the assigned tasks, to the extent that they do not involve the means and
targets are met; debit agents and zone under him, conserve company property through
supervisors
manner of undertaking these tasks. The law likewise obligates the agent "reinstatements," undertake and discharge the functions of
to render an account; in this sense, the principal may impose on the absentee debit agents, spot-check the records of debit agents,
agent specific instructions on how an account shall be made, particularly - to conduct periodic training sessions for [the] agents to - direct and supervise the
and sales
insureactivities of the debit agents
proper documentation of sales and collections by
on the matter of expenses and reimbursements. To these extents, further enhance their sales skill; and under him, x x x undertake and agents.
the debit discharge the functions of
control can be imposed through rules and regulations without intruding absentee debit agents, spot-check the record of debit agents,
into the labor law concept of control for purposes of employment. and insure proper documentation of sales and collections of
- to assist [the] agents with their sales activities by way of
debit agents.These job contents are worlds apart in terms of "control." In Grepalife,
joint fieldwork, consultations and one-on-one evaluation the details of how to do the job are specified and pre-determined; in the
From jurisprudence, an important lesson that the first Insular Life case and analysis of particular accounts present case, the operative words are the "sales target," the
teaches us is that a commitment to abide by the rules and regulations of methodology being left undefined except to the extent of being
an insurance company does not ipso facto make the insurance agent an "coordinative." To be sure, a "coordinative" standard for a manager
employee. Neither do guidelines somehow restrictive of the insurance Aside from these affidavits however, no other evidence exists regarding cannot be indicative of control; the standard only essentially describes
agent’s conduct necessarily indicate "control" as this term is defined in the effects of Tongko’s additional roles in Manulife’s sales operations on what a Branch Manager is – the person in the lead who orchestrates
jurisprudence. Guidelines indicative of labor law "control," as the the contractual relationship between them. activities within the group. To "coordinate," and thereby to lead and to
first Insular Life case tells us, should not merely relate to the orchestrate, is not so much a matter of control by Manulife; it is simply a
mutually desirable result intended by the contractual To the dissent, Tongko’s administrative functions as recruiter, trainer, or statement of a branch manager’s role in relation with his agents from the
relationship; they must have the nature of dictating the means or supervisor of other sales agents constituted a substantive alteration of point of view of Manulife whose business Tongko’s sales group carries.
methods to be employed in attaining the result, or of fixing the Manulife’s authority over Tongko and the performance of his end of the
methodology and of binding or restricting the party hired to the use of relationship with Manulife. We could not deny though that Tongko
these means. In fact, results-wise, the principal can impose production A disturbing note, with respect to the presented affidavits and Tongko’s
remained, first and foremost, an insurance agent, and that his additional alleged administrative functions, is the selective citation of the portions
quotas and can determine how many agents, with specific territories, role as Branch Manager did not lessen his main and dominant role as
ought to be employed to achieve the company’s objectives. These are supportive of an employment relationship and the consequent omission
insurance agent; this role continued to dominate the relations between of portions leading to the contrary conclusion. For example, the following
management policy decisions that the labor law element of control Tongko and Manulife even after Tongko assumed his leadership role
cannot reach. Our ruling in these respects in the first Insular Life case portions of the affidavit of Regional Sales Manager John Chua, with
among agents. This conclusion cannot be denied because it proceeds counterparts in the other affidavits, were not brought out in the Decision
was practically reiterated in Carungcong. Thus, as will be shown more from the undisputed fact that Tongko and Manulife never altered their
fully below, Manulife’s codes of conduct,30 all of which do not intrude into of November 7, 2008, while the other portions suggesting labor law
July 1, 1977 Agreement, a distinction the present case has with the control were highlighted. Specifically, the following portions of the
the insurance agents’ means and manner of conducting their sales and contractual changes made in the second Insular Life case. Tongko’s
only control them as to the desired results and Insurance Code norms, affidavits were not brought out:32
results-based commissions, too, attest to the primacy he gave to his role
cannot be used as basis for a finding that the labor law concept of as insurance sales agent.
control existed between Manulife and Tongko.

45
1.a. I have no fixed wages or salary since my services are effectively guiding his corps of sales agents, who are bound to Manulife  was he paid additional compensation as a so-called Area Sales
compensated by way of commissions based on the computed through the same Agreement that he had with Manulife, all the while Manager, apart from the commissions he received from the
premiums paid in full on the policies obtained thereat; sharing in these agents’ commissions through his overrides. This is the insurance sales he generated;
lead agent concept mentioned above for want of a more appropriate
 what can be Manulife’s basis to terminate his status as lead
term, since the title of Branch Manager used by the parties is really a
1.b. I have no fixed working hours and employ my own agent;
misnomer given that what is involved is not a specific regular branch of
method in soliticing insurance at a time and place I see fit;
the company but a corps of non-employed agents, defined in terms of  can Manulife terminate his role as lead agent separately from
covered territory, through which the company sells insurance. Still his agency contract; and
1.c. I have my own assistant and messenger who handle my another point to consider is that Tongko was not even setting policies in  to what extent does Manulife control the means and methods
daily work load; the way a regular company manager does; company aims and objectives of Tongko’s role as lead agent?
were simply relayed to him with suggestions on how these objectives
1.d. I use my own facilities, tools, materials and supplies in can be reached through the expansion of a non-employee sales force. The answers to these questions may, to some extent, be deduced from
carrying out my business of selling insurance; the evidence at hand, as partly discussed above. But strictly speaking,
Interestingly, a large part of de Dios’ letter focused on income, which the questions cannot definitively and concretely be answered through
Manulife demonstrated, in Tongko’s case, to be unaffected by the new the evidence on record. The concrete evidence required to settle these
xxxx
goal and direction the company had set. Income in insurance agency, of questions is simply not there, since only the Agreement and the
course, is dependent on results, not on the means and manner of selling anecdotal affidavits have been marked and submitted as evidence.
6. I have my own staff that handles the day to day operations – a matter for Tongko and his agents to determine and an area into
of my office; which Manulife had not waded. Undeniably, de Dios’ letter contained a Given this anemic state of the evidence, particularly on the requisite
directive to secure a competent assistant at Tongko’s own expense. confluence of the factors determinative of the existence of employer-
7. My staff are my own employees and received salaries from While couched in terms of a directive, it cannot strictly be understood as employee relationship, the Court cannot conclusively find that the
me; an intrusion into Tongko’s method of operating and supervising the relationship exists in the present case, even if such relationship only
group of agents within his delineated territory. More than anything else, refers to Tongko’s additional functions. While a rough deduction can be
the "directive" was a signal to Tongko that his results were made, the answer will not be fully supported by the substantial evidence
xxxx unsatisfactory, and was a suggestion on how Tongko’s perceived needed.
weakness in delivering results could be remedied. It was a solution, with
9. My commission and incentives are all reported to the an eye on results, for a consistently underperforming group; its obvious
Bureau of Internal Revenue (BIR) as income by a self- intent was to save Tongko from the result that he then failed to grasp – Under this legal situation, the only conclusion that can be made is that
employed individual or professional with a ten (10) percent that he could lose even his own status as an agent, as he in fact the absence of evidence showing Manulife’s control over Tongko’s
creditable withholding tax. I also remit monthly for eventually did. contractual duties points to the absence of any employer-employee
professionals. relationship between Tongko and Manulife. In the context of the
established evidence, Tongko remained an agent all along; although his
The present case must be distinguished from the second Insular Life subsequent duties made him a lead agent with leadership role, he was
These statements, read with the above comparative analysis of the case that showed the hallmarks of an employer-employee relationship in nevertheless only an agent whose basic contract yields no evidence of
Manulife and the Grepalife cases, would have readily yielded the the management system established. These were: exclusivity of service, means-and-manner control.
conclusion that no employer-employee relationship existed between control of assignments and removal of agents under the private
Manulife and Tongko. respondent’s unit, and furnishing of company facilities and materials as
well as capital described as Unit Development Fund. All these are This conclusion renders unnecessary any further discussion of the
obviously absent in the present case. If there is a commonality in these question of whether an agent may simultaneously assume conflicting
Even de Dios’ letter is not determinative of control as it indicates the cases, it is in the collection of premiums which is a basic authority that dual personalities. But to set the record straight, the concept of a single
least amount of intrusion into Tongko’s exercise of his role as manager can be delegated to agents under the Insurance Code. person having the dual role of agent and employee while doing the same
in guiding the sales agents. Strictly viewed, de Dios’ directives are task is a novel one in our jurisprudence, which must be viewed with
merely operational guidelines on how Tongko could align his operations caution especially when it is devoid of any jurisprudential support or
with Manulife’s re-directed goal of being a "big league player." The As previously discussed, what simply happened in Tongko’s case was the precedent. The quoted portions in Justice Carpio-Morales’
method is to expand coverage through the use of more agents. This grant of an expanded sales agency role that recognized him as leader dissent,33 borrowed from both the Grepalife and the second Insular Life
requirement for the recruitment of more agents is not a means-and- amongst agents in an area that Manulife defined. Whether this cases, to support the duality approach of the Decision of November 7,
method control as it relates, more than anything else, and is directly consequently resulted in the establishment of an employment 2008, are regrettably far removed from their context – i.e., the cases’
relevant, to Manulife’s objective of expanded business operations relationship can be answered by concrete evidence that factual situations, the issues they decided and the totality of the rulings
through the use of a bigger sales force whose members are all on a corresponds to the following questions: in these cases – and cannot yield the conclusions that the dissenting
principal-agent relationship. An important point to note here is that opinions drew.
Tongko was not supervising regular full-time employees of Manulife
engaged in the running of the insurance business; Tongko was
 as lead agent, what were Tongko’s specific functions and the
terms of his additional engagement;
46
The Grepalife case dealt with the sole issue of whether the Ruiz brothers’ dissent suggests as the dissenting opinions are as factually and as legally
appointment as zone supervisor and district manager made them erroneous as the Decision under reconsideration.
employees of Grepalife. Indeed, because of the presence of the element
of control in their contract of engagements, they were
In light of these conclusions, the sufficiency of Tongko’s failure to
considered Grepalife’s employees. This did not mean, however, that they
comply with the guidelines of de Dios’ letter, as a ground for termination
were simultaneously considered agents as well as employees
of Tongko’s agency, is a matter that the labor tribunals cannot rule upon
of Grepalife; the Court’s ruling never implied that this situation existed
in the absence of an employer-employee relationship. Jurisdiction over
insofar as the Ruiz brothers were concerned. The Court’s statement –
the matter belongs to the courts applying the laws of insurance, agency
the Insurance Code may govern the licensing requirements and other
and contracts.
particular duties of insurance agents, but it does not bar the application
of the Labor Code with regard to labor standards and labor relations –
simply means that when an insurance company has exercised control WHEREFORE, considering the foregoing discussion, we REVERSE our
over its agents so as to make them their employees, the relationship Decision of November 7, 2008, GRANTManulife’s motion for
between the parties, which was otherwise one for agency governed by reconsideration and, accordingly, DISMISS Tongko’s petition. No costs.
the Civil Code and the Insurance Code, will now be governed by the
Labor Code. The reason for this is simple – the contract of agency has SO ORDERED.
been transformed into an employer-employee relationship.

The second Insular Life case, on the other hand, involved the issue of
whether the labor bodies have jurisdiction over an illegal termination
dispute involving parties who had two contracts – first, an original
contract (agency contract), which was undoubtedly one for agency, and
another subsequent contract that in turn designated the agent acting
unit manager (a management contract). Both the Insular Life and the
labor arbiter were one in the position that both were agency contracts.
The Court disagreed with this conclusion and held that insofar as the
management contract is concerned, the labor arbiter has jurisdiction. It
is in this light that we remanded the case to the labor arbiter for further
proceedings. We never said in this case though that the insurance agent
had effectively assumed dual personalities for the simple reason that the
agency contract has been effectively superseded by the management
contract. The management contract provided that if the appointment
was terminated for any reason other than for cause, the acting unit
manager would be reverted to agent status and assigned to any unit.

The dissent pointed out, as an argument to support its employment


relationship conclusion, that any doubt in the existence of an employer-
employee relationship should be resolved in favor of the existence of the
relationship.34This observation, apparently drawn from Article 4 of the
Labor Code, is misplaced, as Article 4 applies only when a doubt exists in
the "implementation and application" of the Labor Code and its
implementing rules; it does not apply where no doubt exists as in a
situation where the claimant clearly failed to substantiate his claim of
employment relationship by the quantum of evidence the Labor Code
requires.

On the dissent’s last point regarding the lack of jurisprudential value of


our November 7, 2008 Decision, suffice it to state that, as discussed
above, the Decision was not supported by the evidence adduced and
was not in accordance with controlling jurisprudence. It should,
therefore, be reconsidered and abandoned, but not in the manner the
47
11 morning depending on the needs of the cockpit. Petitioners had both Following the denial by the NLRC of their Motion for Reconsideration, per
been issued employees’ identification cards5 that they wear every time Resolution dated January 12, 2007, petitioners went to the CA on a
they report for duty. They alleged never having incurred any infraction petition for certiorari. In support of their petition, petitioners argued that
Republic of the Philippines and/or violation of the cockpit rules and regulations. the NLRC gravely abused its discretion in entertaining an appeal that was
SUPREME COURT not perfected in the first place. On the other hand, respondents argued
Manila that the NLRC did not commit grave abuse of discretion, since they
On November 14, 2003, however, petitioners were denied entry into the
eventually posted their appeal bond and that their appeal was so
cockpit upon the instructions of respondents, and were informed of the
THIRD DIVISION meritorious warranting the relaxation of the rules in the interest of
termination of their services effective that date. This prompted
justice.11
petitioners to file a complaint for illegal dismissal against respondents.
G.R. No. 196426 August 15, 2011
In its Decision dated May 29, 2009, the appellate court found for
In answer, respondents denied that petitioners were their employees
respondents, noting that referees and bet-takers in a cockfight need to
MARTICIO SEMBLANTE and DUBRICK PILAR, Petitioners, and alleged that they were associates of respondents’ independent
have the kind of expertise that is characteristic of the game to interpret
vs. contractor, Tomas Vega. Respondents claimed that petitioners have no
messages conveyed by mere gestures. Hence, petitioners are akin to
COURT OF APPEALS, 19th DIVISION, now SPECIAL FORMER regular working time or day and they are free to decide for themselves
independent contractors who possess unique skills, expertise, and talent
19th DIVISION, GALLERA DE MANDAUE / SPOUSES VICENTE whether to report for work or not on any cockfighting day. In times
to distinguish them from ordinary employees. Further, respondents did
and MARIA LUISA LOOT, Respondents. when there are few cockfights in Gallera de Mandaue, petitioners go to
not supply petitioners with the tools and instrumentalities they needed to
other cockpits in the vicinity. Lastly, petitioners, so respondents assert,
perform work. Petitioners only needed their unique skills and talents to
were only issued identification cards to indicate that they were free from
DECISION perform their job as masiador and sentenciador.12 The CA held:
the normal entrance fee and to differentiate them from the general
public.6
VELASCO, JR., J.: In some circumstances, the NLRC is allowed to be liberal in the
interpretation of the rules in deciding labor cases. In this case, the
In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque
appeal bond was filed, although late. Moreover, an exceptional
Before Us is a Petition for Review on Certiorari under Rule 45, assailing found petitioners to be regular employees of respondents as they
circumstance obtains in the case at bench which warrants a relaxation of
and seeking to set aside the Decision1and Resolution2 dated May 29, performed work that was necessary and indispensable to the usual trade
the bond requirement as a condition for perfecting the appeal. This case
2009 and February 23, 2010, respectively, of the Court of Appeals (CA) or business of respondents for a number of years. The Labor Arbiter also
is highly meritorious that propels this Court not to strictly apply the rules
in CA-G.R. SP No. 03328. The CA affirmed the October 18, 2006 ruled that petitioners were illegally dismissed, and so ordered
and thus prevent a grave injustice from being done.
Resolution3 of the National Labor Relations Commission (NLRC), Fourth respondents to pay petitioners their backwages and separation pay.7
Division (now Seventh Division), in NLRC Case No. V-000673-2004.
As elucidated by the NLRC, the circumstances obtaining in this case
Respondents’ counsel received the Labor Arbiter’s Decision on
wherein no actual employer-employee exists between the petitioners and
Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) September 14, 2004. And within the 10-day appeal period, he filed the
the private respondents [constrain] the relaxation of the rules. In this
assert that they were hired by respondents-spouses Vicente and Maria respondents’ appeal with the NLRC on September 24, 2004, but without
regard, we find no grave abuse attributable to the administrative body.
Luisa Loot, the owners of Gallera de Mandaue (the cockpit), as the posting a cash or surety bond equivalent to the monetary award granted
official masiador and sentenciador, respectively, of the cockpit sometime by the Labor Arbiter.8
in 1993. xxxx
It was only on October 11, 2004 that respondents filed an appeal bond
As the masiador, Semblante calls and takes the bets from the gamecock dated October 6, 2004. Hence, in a Resolution9 dated August 25, 2005, Petitioners are duly licensed "masiador" and "sentenciador" in the cockpit
owners and other bettors and orders the start of the cockfight. He also the NLRC denied the appeal for its non-perfection. owned by Lucia Loot. Cockfighting, which is a part of our cultural
distributes the winnings after deducting the arriba, or the commission for heritage, has a peculiar set of rules. It is a game based on the fighting
the cockpit. Meanwhile, as the sentenciador, Pilar oversees the proper ability of the game cocks in the cockpit. The referees and bet-takers
Subsequently, however, the NLRC, acting on respondents’ Motion for
gaffing of fighting cocks, determines the fighting cocks’ physical need to have that kind of expertise that is characteristic of the cockfight
Reconsideration, reversed its Resolution on the postulate that their
condition and capabilities to continue the cockfight, and eventually gambling who can interpret the message conveyed even by mere
appeal was meritorious and the filing of an appeal bond, albeit belated,
declares the result of the cockfight.4 gestures. They ought to have the talent and skill to get the bets from
is a substantial compliance with the rules. The NLRC held in its
numerous cockfighting aficionados and decide which cockerel to put in
Resolution of October 18, 2006 that there was no employer-employee
the arena. They are placed in that elite spot where they can control the
For their services as masiador and sentenciador, Semblante receives PhP relationship between petitioners and respondents, respondents having
game and the crowd. They are not given salaries by cockpit owners as
2,000 per week or a total of PhP 8,000 per month, while Pilar gets PhP no part in the selection and engagement of petitioners, and that no
their compensation is based on the "arriba". In fact, they can offer their
3,500 a week or PhP 14,000 per month. They work every Tuesday, separate individual contract with respondents was ever executed by
services everywhere because they are duly licensed by the GAB. They
Wednesday, Saturday, and Sunday every week, excluding monthly petitioners.10
are free to choose which cockpit arena to enter and offer their expertise.
derbies and cockfights held on special holidays. Their working days start Private respondents cannot even control over the means and methods of
at 1:00 p.m. and last until 12:00 midnight, or until the early hours of the the manner by which they perform their work. In this light, they are akin
48
to independent contractors who possess unique skills, expertise and to control the employee’s conduct, which is the most important
talent to distinguish them from ordinary employees. element.18 1avvphi1

Furthermore, private respondents did not supply petitioners with the As found by both the NLRC and the CA, respondents had no part in
tools and instrumentalities they needed to perform their work. petitioners’ selection and management;19petitioners’ compensation was
Petitioners only needed their talent and skills to be a "masiador" and paid out of the arriba (which is a percentage deducted from the total
"sentenciador". As such, they had all the tools they needed to perform bets), not by petitioners;20 and petitioners performed their functions as
their work. (Emphasis supplied.) masiador and sentenciador free from the direction and control of
respondents.21 In the conduct of their work, petitioners relied mainly on
their "expertise that is characteristic of the cockfight gambling,"22 and
The CA refused to reconsider its Decision. Hence, petitioners came to
were never given by respondents any tool needed for the performance
this Court, arguing in the main that the CA committed a reversible error
of their work.23
in entertaining an appeal, which was not perfected in the first place.

Respondents, not being petitioners’ employers, could never have


Indeed, the posting of a bond is indispensable to the perfection of an
dismissed, legally or illegally, petitioners, since respondents were without
appeal in cases involving monetary awards from the Decision of the
power or prerogative to do so in the first place. The rule on the posting
Labor Arbiter.13 Article 223 of the Labor Code provides:
of an appeal bond cannot defeat the substantive rights of respondents to
be free from an unwarranted burden of answering for an illegal dismissal
Article 223. Appeal. — Decisions, awards, or orders of the Labor Arbiter for which they were never responsible.1avvphi1
are final and executory unless appealed to the Commission by any or
both parties within ten (10) calendar days from receipt of such decisions,
Strict implementation of the rules on appeals must give way to the
awards, or orders. Such appeal may be entertained only on any of the
factual and legal reality that is evident from the records of this
following grounds:
case.24 After all, the primary objective of our laws is to dispense justice
and equity, not the contrary.
xxxx
WHEREFORE, We DENY this petition and AFFIRM the May 29, 2009
In case of a judgment involving a monetary award, an appeal by the Decision and February 23, 2010 Resolution of the CA, and the October
employer may be perfected only upon the posting of a cash or surety 18, 2006 Resolution of the NLRC.
bond issued by a reputable bonding company duly accredited by the
Commission in the amount equivalent to the monetary award in the
SO ORDERED.
judgment appealed from. (Emphasis supplied.)

Time and again, however, this Court, considering the substantial merits
of the case, has relaxed this rule on, and excused the late posting of, the
appeal bond when there are strong and compelling reasons for the
liberality,14such as the prevention of miscarriage of justice extant in the
case15 or the special circumstances in the case combined with its legal
merits or the amount and the issue involved.16 After all, technical rules
cannot prevent courts from exercising their duties to determine and
settle, equitably and completely, the rights and obligations of the
parties.17 This is one case where the exception to the general rule lies.

While respondents had failed to post their bond within the 10-day period
provided above, it is evident, on the other hand, that petitioners are NOT
employees of respondents, since their relationship fails to pass muster
the four-fold test of employment We have repeatedly mentioned in
countless decisions: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the power

49
12 On January 15, 2004, Bernarte received a letter from the Office of the
4. 10% attorney's fees 68,625.00 36,125.00
Commissioner advising him that his contract would not be renewed citing
his unsatisfactory performance on and off the court. It was a total shock TOTAL P754,875.00 P397,375.00
Republic of the Philippines for Bernarte who was awarded Referee of the year in 2003. He felt that
SUPREME COURT the dismissal was caused by his refusal to fix a game upon order of Ernie
Manila De Leon. or a total of P1,152,250.00

SECOND DIVISION On the other hand, complainant Guevarra alleges that he was invited to The rest of the claims are hereby dismissed for lack of merit or basis.
join the PBA pool of referees in February 2001. On March 1, 2001, he
G.R. No. 192084 September 14, 2011 signed a contract as trainee. Beginning 2002, he signed a yearly contract
as Regular Class C referee. On May 6, 2003, respondent Martinez issued SO ORDERED.7
a memorandum to Guevarra expressing dissatisfaction over his
JOSE MEL BERNARTE, Petitioner, questioning on the assignment of referees officiating out-of-town games. In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiter’s
vs. Beginning February 2004, he was no longer made to sign a contract. judgment. The dispositive portion of the NLRC’s decision reads:
PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE
EMMANUEL M. EALA, and PERRY MARTINEZ,Respondents.
Respondents aver, on the other hand, that complainants entered into WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor
two contracts of retainer with the PBA in the year 2003. The first Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED.
DECISION 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. SO ORDERED.9
CARPIO, J.:

Complainants were not illegally dismissed because they were not Respondents filed a petition for certiorari with the Court of Appeals,
The Case
employees of the PBA. Their respective contracts of retainer were simply which overturned the decisions of the NLRC and Labor Arbiter. The
not renewed. PBA had the prerogative of whether or not to renew their dispositive portion of the Court of Appeals’ decision reads:
This is a petition for review1 of the 17 December 2009 Decision2 and 5 contracts, which they knew were fixed.4
April 2010 Resolution3 of the Court of Appeals in CA-G.R. SP No. 105406.
WHEREFORE, the petition is hereby GRANTED. The
The Court of Appeals set aside the decision of the National Labor
In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an assailed Decision dated January 28, 2008 and Resolutiondated August
Relations Commission (NLRC), which affirmed the decision of the Labor
employee whose dismissal by respondents was illegal. Accordingly, the 26, 2008 of the National Labor Relations Commission
Arbiter, and held that petitioner Jose Mel Bernarte is an independent
Labor Arbiter ordered the reinstatement of petitioner and the payment of are ANNULLED and SET ASIDE. Private respondents’ complaint before
contractor, and not an employee of respondents Philippine Basketball
backwages, moral and exemplary damages and attorney’s fees, to wit: the Labor Arbiter is DISMISSED.
Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez. The
Court of Appeals denied the motion for reconsideration.
WHEREFORE, premises considered all respondents who are here found SO ORDERED.10
The Facts to have illegally dismissed complainants are hereby ordered to (a)
reinstate complainants within thirty (30) days from the date of receipt of The Court of Appeals’ Ruling
this decision and to solidarily pay complainants:
The facts, as summarized by the NLRC and quoted by the Court of
Appeals, are as follows: The Court of Appeals found petitioner an independent contractor since
JOSE MEL RENATO respondents did not exercise any form of control over the means and
BERNARTE GUEVARRA methods by which petitioner performed his work as a basketball referee.
Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they
The Court of Appeals held:
were invited to join the PBA as referees. During the leadership of
Commissioner Emilio Bernardino, they were made to sign contracts on a 1. backwages from January P536,250.00 P211,250.00
year-to-year basis. During the term of Commissioner Eala, however, 1, 2004 up to the finality of While the NLRC agreed that the PBA has no control over the referees’
changes were made on the terms of their employment. this Decision, which to date acts of blowing the whistle and making calls during basketball games, it,
is nevertheless, theorized that the said acts refer to the means and
methods employed by the referees in officiating basketball games for the
Complainant Bernarte, for instance, was not made to sign a contract 2. moral damages 100,000.00 50,000.00 illogical reason that said acts refer only to the referees’ skills. How could
during the first conference of the All-Filipino Cup which was from
a skilled referee perform his job without blowing a whistle and making
February 23, 2003 to June 2003. It was only during the second 3. exemplary damages 100,000.00 50,000.00 calls? Worse, how can the PBA control the performance of work of a
conference when he was made to sign a one and a half month contract
referee without controlling his acts of blowing the whistle and making
for the period July 1 to August 5, 2003.
calls?
50
Moreover, this Court disagrees with the Labor Arbiter’s finding (as period elapsed. Said registered letter was dispatched from this office to interest of substantial justice. We agree with the NLRC. The ends of
affirmed by the NLRC) that the Contracts of Retainer show that Manila CPO (RTS) under bill #6, line 7, page1, column 1, on September justice will be better served if we resolve the instant case on the merits
petitioners have control over private respondents. 8, 2005.12 rather than allowing the substantial issue of whether petitioner is an
independent contractor or an employee linger and remain unsettled due
to procedural technicalities.
xxxx Section 10, Rule 13 of the Rules of Court provides:

The existence of an employer-employee relationship is ultimately a


Neither do We agree with the NLRC’s affirmance of the Labor Arbiter’s SEC. 10. Completeness of service. – Personal service is complete upon
question of fact. As a general rule, factual issues are beyond the
conclusion that private respondents’ repeated hiring made them regular actual delivery. Service by ordinary mail is complete upon the expiration
province of this Court. However, this rule admits of exceptions, one of
employees by operation of law.11 of ten (10) days after mailing, unless the court otherwise provides.
which is where there are conflicting findings of fact between the Court of
Service by registered mail is complete upon actual receipt by the
Appeals, on one hand, and the NLRC and Labor Arbiter, on the other,
addressee, or after five (5) days from the date he received the first
The Issues such as in the present case.18
notice of the postmaster, whichever date is earlier.

The main issue in this case is whether petitioner is an employee of To determine the existence of an employer-employee relationship, case
The rule on service by registered mail contemplates two situations: (1)
respondents, which in turn determines whether petitioner was illegally law has consistently applied the four-fold test, to wit: (a) the selection
actual service the completeness of which is determined upon receipt by
dismissed. and engagement of the employee; (b) the payment of wages; (c) the
the addressee of the registered mail; and (2) constructive service the
power of dismissal; and (d) the employer’s power to control the
completeness of which is determined upon expiration of five days from
Petitioner raises the procedural issue of whether the Labor Arbiter’s employee on the means and methods by which the work is
the date the addressee received the first notice of the postmaster.13
decision has become final and executory for failure of respondents to accomplished. The so-called "control test" is the most important
appeal with the NLRC within the reglementary period. indicator of the presence or absence of an employer-employee
Insofar as constructive service is concerned, there must be conclusive relationship.19
proof that a first notice was duly sent by the postmaster to the
The Ruling of the Court addressee.14 Not only is it required that notice of the registered mail be
In this case, PBA admits repeatedly engaging petitioner’s services, as
issued but that it should also be delivered to and received by the
shown in the retainer contracts. PBA pays petitioner a retainer fee,
The petition is bereft of merit. addressee.15 Notably, the presumption that official duty has been
exclusive of per diem or allowances, as stipulated in the retainer
regularly performed is not applicable in this situation. It is incumbent
contract. PBA can terminate the retainer contract for petitioner’s violation
upon a party who relies on constructive service to prove that the notice
The Court shall first resolve the procedural issue posed by petitioner. of its terms and conditions.
was sent to, and received by, the addressee.16

Petitioner contends that the Labor Arbiter’s Decision of 31 March 2005 However, respondents argue that the all-important element of control is
The best evidence to prove that notice was sent would be a certification
became final and executory for failure of respondents to appeal with the lacking in this case, making petitioner an independent contractor and not
from the postmaster, who should certify not only that the notice was
NLRC within the prescribed period. Petitioner claims that the Labor an employee of respondents.
issued or sent but also as to how, when and to whom the delivery and
Arbiter’s decision was constructively served on respondents as early as receipt was made. The mailman may also testify that the notice was
August 2005 while respondents appealed the Arbiter’s decision only on actually delivered.17 Petitioner contends otherwise. Petitioner asserts that he is an employee
31 March 2006, way beyond the reglementary period to appeal. of respondents since the latter exercise control over the performance of
Petitioner points out that service of an unclaimed registered mail is his work. Petitioner cites the following stipulations in the retainer
deemed complete five days from the date of first notice of the post In this case, petitioner failed to present any concrete proof as to how,
contract which evidence control: (1) respondents classify or rate a
master. In this case three notices were issued by the post office, the last when and to whom the delivery and receipt of the three notices issued
referee; (2) respondents require referees to attend all basketball games
being on 1 August 2005. The unclaimed registered mail was by the post office was made. There is no conclusive evidence showing
organized or authorized by the PBA, at least one hour before the start of
consequently returned to sender. Petitioner presents the Postmaster’s that the post office notices were actually received by respondents,
the first game of each day; (3) respondents assign petitioner to officiate
Certification to prove constructive service of the Labor Arbiter’s decision negating petitioner’s claim of constructive service of the Labor Arbiter’s
ballgames, or to act as alternate referee or substitute; (4) referee agrees
on respondents. The Postmaster certified: decision on respondents. The Postmaster’s Certification does not
to observe and comply with all the requirements of the PBA governing
xxx sufficiently prove that the three notices were delivered to and received
the conduct of the referees whether on or off the court; (5) referee
That upon receipt of said registered mail matter, our registry in charge, by respondents; it only indicates that the post office issued the three
agrees (a) to keep himself in good physical, mental, and emotional
Vicente Asis, Jr., immediately issued the first registry notice to claim on notices. Simply put, the issuance of the notices by the post office is not
condition during the life of the contract; (b) to give always his best effort
July 12, 2005 by the addressee. The second and third notices were equivalent to delivery to and receipt by the addressee of the registered
and service, and loyalty to the PBA, and not to officiate as referee in any
issued on July 21 and August 1, 2005, respectively. mail. Thus, there is no proof of completed constructive service of the
basketball game outside of the PBA, without written prior consent of the
Labor Arbiter’s decision on respondents.
Commissioner; (c) always to conduct himself on and off the court
That the subject registered letter was returned to the sender (RTS) according to the highest standards of honesty or morality; and (6)
because the addressee failed to claim it after our one month retention At any rate, the NLRC declared the issue on the finality of the Labor imposition of various sanctions for violation of the terms and conditions
Arbiter’s decision moot as respondents’ appeal was considered in the of the contract.
51
The foregoing stipulations hardly demonstrate control over the means Moreover, the following circumstances indicate that petitioner is an It is undisputed that the Federation did not control the way Yonan
and methods by which petitioner performs his work as a referee independent contractor: (1) the referees are required to report for work refereed his games.1âwphi1 He had full discretion and authority, under
officiating a PBA basketball game. The contractual stipulations do not only when PBA games are scheduled, which is three times a week spread the Laws of the Game, to call the game as he saw fit. x x x In a similar
pertain to, much less dictate, how and when petitioner will blow the over an average of only 105 playing days a year, and they officiate vein, subjecting Yonan to qualification standards and procedures like the
whistle and make calls. On the contrary, they merely serve as rules of games at an average of two hours per game; and (2) the only Federation’s registration and training requirements does not create an
conduct or guidelines in order to maintain the integrity of the deductions from the fees received by the referees are withholding taxes. employer/employee relationship. x x x
professional basketball league. As correctly observed by the Court of
Appeals, "how could a skilled referee perform his job without blowing a
In other words, unlike regular employees who ordinarily report for work A position that requires special skills and independent judgment weights
whistle and making calls? x x x [H]ow can the PBA control the
eight hours per day for five days a week, petitioner is required to report in favor of independent contractor status. x x x Unskilled work, on the
performance of work of a referee without controlling his acts of blowing
for work only when PBA games are scheduled or three times a week at other hand, suggests an employment relationship. x x x Here, it is
the whistle and making calls?"20
two hours per game. In addition, there are no deductions for undisputed that soccer refereeing, especially at the professional and
contributions to the Social Security System, Philhealth or Pag-Ibig, which international level, requires "a great deal of skill and natural ability."
In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the are the usual deductions from employees’ salaries. These undisputed Yonan asserts that it was the Federation’s training that made him a top
relationship between a television and radio station and one of its talents, circumstances buttress the fact that petitioner is an independent referee, and that suggests he was an employee. Though substantial
the Court held that not all rules imposed by the hiring party on the hired contractor, and not an employee of respondents. training supports an employment inference, that inference is dulled
party indicate that the latter is an employee of the former. The Court significantly or negated when the putative employer’s activity is the
held: result of a statutory requirement, not the employer’s choice. x x x
Furthermore, the applicable foreign case law declares that a referee is an
independent contractor, whose special skills and independent judgment
We find that these general rules are merely guidelines towards the are required specifically for such position and cannot possibly be In McInturff v. Battle Ground Academy of Franklin,24 it was held that the
achievement of the mutually desired result, which are top-rating controlled by the hiring party. umpire was not an agent of the Tennessee Secondary School Athletic
television and radio programs that comply with standards of the Association (TSSAA), so the player’s vicarious liability claim against the
industry. We have ruled that: association should be dismissed. In finding that the umpire is an
In Yonan v. United States Soccer Federation, Inc.,23 the United States
independent contractor, the Court of Appeals of Tennesse ruled:
District Court of Illinois held that plaintiff, a soccer referee, is an
Further, not every form of control that a party reserves to himself over independent contractor, and not an employee of defendant which is the
the conduct of the other party in relation to the services being rendered statutory body that governs soccer in the United States. As such, plaintiff The TSSAA deals with umpires to achieve a result-uniform rules for all
may be accorded the effect of establishing an employer-employee was not entitled to protection by the Age Discrimination in Employment baseball games played between TSSAA member schools. The TSSAA
relationship. The facts of this case fall squarely with the case of Insular Act. The U.S. District Court ruled: does not supervise regular season games. It does not tell an official how
Life Assurance Co., Ltd. v. NLRC. In said case, we held that: to conduct the game beyond the framework established by the rules.
The TSSAA does not, in the vernacular of the case law, control the
Generally, "if an employer has the right to control and direct the work of
means and method by which the umpires work.
Logically, the line should be drawn between rules that merely serve as an individual, not only as to the result to be achieved, but also as to
guidelines towards the achievement of the mutually desired result details by which the result is achieved, an employer/employee
without dictating the means or methods to be employed in attaining it, relationship is likely to exist." The Court must be careful to distinguish In addition, the fact that PBA repeatedly hired petitioner does not by
and those that control or fix the methodology and bind or restrict the between "control[ling] the conduct of another party contracting party by itself prove that petitioner is an employee of the former. For a hired
party hired to the use of such means. The first, which aim only to setting out in detail his obligations" consistent with the freedom of party to be considered an employee, the hiring party must have control
promote the result, create no employer-employee relationship unlike the contract, on the one hand, and "the discretionary control an employer over the means and methods by which the hired party is to perform his
second, which address both the result and the means used to achieve daily exercises over its employee’s conduct" on the other. work, which is absent in this case. The continuous rehiring by PBA of
it.22 petitioner simply signifies the renewal of the contract between PBA and
petitioner, and highlights the satisfactory services rendered by petitioner
Yonan asserts that the Federation "closely supervised" his performance
warranting such contract renewal. Conversely, if PBA decides to
We agree with respondents that once in the playing court, the referees at each soccer game he officiated by giving him an assessor, discussing
discontinue petitioner’s services at the end of the term fixed in the
exercise their own independent judgment, based on the rules of the his performance, and controlling what clothes he wore while on the field
contract, whether for unsatisfactory services, or violation of the terms
game, as to when and how a call or decision is to be made. The referees and traveling. Putting aside that the Federation did not, for the most
and conditions of the contract, or for whatever other reason, the same
decide whether an infraction was committed, and the PBA cannot part, control what clothes he wore, the Federation did not supervise
merely results in the non-renewal of the contract, as in the present case.
overrule them once the decision is made on the playing court. The Yonan, but rather evaluated his performance after matches. That the
The non-renewal of the contract between the parties does not constitute
referees are the only, absolute, and final authority on the playing court. Federation evaluated Yonan as a referee does not mean that he was an
illegal dismissal of petitioner by respondents.
Respondents or any of the PBA officers cannot and do not determine employee. There is no question that parties retaining independent
which calls to make or not to make and cannot control the referee when contractors may judge the performance of those contractors to
he blows the whistle because such authority exclusively belongs to the determine if the contractual relationship should continue. x x x WHEREFORE, we DENY the petition and AFFIRM the assailed decision
referees. The very nature of petitioner’s job of officiating a professional of the Court of Appeals. SO ORDERED.
basketball game undoubtedly calls for freedom of control by
respondents.
52
13 Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he was was entitled only to 20% of the net profit, and not of the gross sales of
required to work half-day only, but most of the time, he still rendered the album, and that the salaries he received and would continue to
eight hours of work or more. All the employees of petitioner, including receive as studio manager of Celkor would be deducted from the said
Republic of the Philippines respondent, rendered overtime work almost everyday, but petitioner 20% net profit share. Respondent objected and insisted that he be
SUPREME COURT never kept a daily time record to avoid paying the employees overtime properly compensated. On March 14, 2002, petitioner verbally
Manila pay. terminated respondent’s services, and he was instructed not to report for
work.
THIRD DIVISION Respondent stated that a few days after he started working as a studio
manager, petitioner approached him and told him about his project to Respondent asserts that he was illegally dismissed as he was terminated
G.R. No. 169757 November 23, 2011 produce an album for his 15-year-old daughter, Celine Mei Lirio, a former without any valid grounds, and no hearing was conducted before he was
talent of ABS-CBN Star Records. Petitioner asked respondent to compose terminated, in violation of his constitutional right to due process. Having
and arrange songs for Celine and promised that he (Lirio) would draft a worked for more than six months, he was already a regular employee.
CESAR C. LIRIO, doing business under the name and style of contract to assure respondent of his compensation for such services. As Although he was a so called "studio manager," he had no managerial
CELKOR AD SONICMIX, Petitioner, agreed upon, the additional services that respondent would render powers, but was merely an ordinary employee.
vs. included composing and arranging musical scores only, while the
WILMER D. GENOVIA, Respondent. technical aspect in producing the album, such as digital editing, mixing
Respondent prayed for his reinstatement without loss of seniority rights,
and sound engineering would be performed by respondent in his
or, in the alternative, that he be paid separation pay, backwages and
DECISION capacity as studio manager for which he was paid on a monthly basis.
overtime pay; and that he be awarded unpaid commission in the amount
Petitioner instructed respondent that his work on the album as composer
ofP2,000.00 for services rendered as a studio technician as well as moral
and arranger would only be done during his spare time, since his other
PERALTA, J.: and exemplary damages.
work as studio manager was the priority. Respondent then started
working on the album.
This is a petition for review on certiorari of the decision of the Court of Respondent’s evidence consisted of the Payroll dated July 31, 2001 to
Appeals in CA-G.R. SP No. 88899 dated August 4, 2005 and its March 15, 2002, which was certified correct by petitioner,2 and Petty
Respondent alleged that before the end of September 2001, he
Resolution dated September 21, 2005, denying petitioner’s motion for Cash Vouchers3 evidencing receipt of payroll payments by respondent
reminded petitioner about his compensation as composer and arranger
reconsideration. from Celkor.
of the album. Petitioner verbally assured him that he would be duly
compensated. By mid-November 2001, respondent finally finished the
The Court of Appeals reversed and set aside the resolution of the NLRC, compositions and musical arrangements of the songs to be included in In defense, petitioner stated in his Position Paper4 that respondent was
and reinstated the decision of the Labor Arbiter with modification, finding the album. Before the month ended, the lead and back-up vocals in the not hired as studio manager, composer, technician or as an employee in
that respondent is an employee of petitioner, and that respondent was ten (10) songs were finally recorded and completed. From December any other capacity of Celkor. Respondent could not have been hired as a
illegally dismissed and entitled to the payment of backwages and 2001 to January 2002, respondent, in his capacity as studio manager, studio manager, since the recording studio has no personnel except
separation pay in lieu of reinstatement. worked on digital editing, mixing and sound engineering of the vocal and petitioner. Petitioner further claimed that his daughter Celine Mei Lirio, a
instrumental audio files. 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
The facts are as follows: decided to produce an album for his daughter and established a
Thereafter, respondent was tasked by petitioner to prepare official
recording studio, which he named Celkor Ad Sonicmix Recording Studio.
correspondence, establish contacts and negotiate with various radio
On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against He looked for a composer/arranger who would compose the songs for
stations, malls, publishers, record companies and manufacturers, record
petitioner Cesar Lirio and/or Celkor Ad Sonicmix Recording Studio for the said album. In July 2001, Bob Santiago, his son-in-law, introduced
bars and other outlets in preparation for the promotion of the said
illegal dismissal, non-payment of commission and award of moral and him to respondent, who claimed to be an amateur composer, an
album. By early February 2002, the album was in its manufacturing
exemplary damages. arranger with limited experience and musician without any formal
stage. ELECTROMAT, manufacturer of CDs and cassette tapes, was
musical training. According to petitioner, respondent had no track record
tapped to do the job. The carrier single of the album, which respondent
as a composer, and he was not known in the field of music.
In his Position Paper,1 respondent Genovia alleged, among others, that composed and arranged, was finally aired over the radio on February 22,
Nevertheless, after some discussion, respondent verbally agreed with
on August 15, 2001, he was hired as studio manager by petitioner Lirio, 2002.
petitioner to co-produce the album based on the following terms and
owner of Celkor Ad Sonicmix Recording Studio (Celkor). He was conditions: (1) petitioner shall provide all the financing, equipment and
employed to manage and operate Celkor and to promote and sell the On February 26, 2002, respondent again reminded petitioner about the recording studio; (2) Celine Mei Lirio shall sing all the songs; (3)
recording studio's services to music enthusiasts and other prospective contract on his compensation as composer and arranger of the album. respondent shall act as composer and arranger of all the lyrics and the
clients. He received a monthly salary of P7,000.00. They also agreed that Petitioner told respondent that since he was practically a nobody and music of the five songs he already composed and the revival songs; (4)
he was entitled to an additional commission of P100.00 per hour as had proven nothing yet in the music industry, respondent did not petitioner shall have exclusive right to market the album; (5) petitioner
recording technician whenever a client uses the studio for recording, deserve a high compensation, and he should be thankful that he was was entitled to 60% of the net profit, while respondent and Celine Mei
editing or any related work. He was made to report for work from given a job to feed his family. Petitioner informed respondent that he Lirio were each entitled to 20% of the net profit; and (6) respondent

53
shall be entitled to draw advances of P7,000.00 a month, which shall be 3) To pay him moral and exemplary damages in the combined and SET ASIDE. Accordingly, the decision dated October 31, 2003
deductible from his share of the net profits and only until such time that amount of P75,000.00. of the Labor Arbiter is REINSTATED, with the modification that the
the album has been produced. awards of commission and damages are deleted.11(Emphasis supplied.)
Other monetary claims of complainant are dismissed for lack of merit.7
According to petitioner, they arrived at the foregoing sharing of profits Petitioner’s motion for reconsideration was denied for lack of merit by
based on the mutual understanding that respondent was just an amateur the Court of Appeals in its Resolution12dated September 21, 2005.
The Labor Arbiter stated that petitioner’s denial of the employment
composer with no track record whatsoever in the music industry, had no
relationship cannot overcome respondent’s positive assertion and
definite source of income, had limited experience as an arranger, had no
documentary evidence proving that petitioner hired respondent as his Hence, petitioner Lirio filed this petition.
knowledge of the use of sound mixers or digital arranger and that
employee.8
petitioner would help and teach him how to use the studio equipment;
that petitioner would shoulder all the expenses of production and provide Petitioner states that respondent appealed to the Court of Appeals via a
the studio and equipment as well as his knowledge in the use thereof; Petitioner appealed the decision of the Labor Arbiter to the National petition for certiorari under Rule 65, which will prosper only if there is a
and Celine Mei Lirio would sing the songs. They embarked on the Labor Relations Commission (NLRC). showing of grave abuse of discretion or an act without or in excess of
production of the album on or about the third week of August 2002. 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
In a Resolution7 dated October 14, 2004, the NLRC reversed and set
applicable rulings of this Court as petitioner could not find any portion in
Petitioner asserted that from the aforesaid terms and conditions, his aside the decision of the Labor Arbiter. The dispositive portion of the
the Decision of the Court of Appeals ruling that the NLRC acted without
relationship with respondent is one of an informal partnership under Resolution reads:
or in excess of jurisdiction or with grave abuse of discretion amounting
Article 17675 of the New Civil Code, since they agreed to contribute
to lack or excess of jurisdiction. Petitioner submits that the Court of
money, property or industry to a common fund with the intention of WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, Appeals could not review an error of judgment by the NLRC raised
dividing the profits among themselves. Petitioner had no control over the the Decision appealed from is REVERSED and, hence, SET ASIDE and a before it on a petition for certiorari under Rule 65 of the 1997 Rules of
time and manner by which respondent composed or arranged the songs, new one ENTERED dismissing the instant case for lack of merit.9 Civil Procedure. Moreover, petitioner contends that it was error on the
except on the result thereof. Respondent reported to the recording
part of the Court of Appeals to review the finding of facts of the NLRC on
studio between 10:00 a.m. and 12:00 noon. Hence, petitioner contended
The NLRC stated that respondent failed to prove his employment tale whether there exists an employer-employee relationship between the
that no employer-employee relationship existed between him and the
with substantial evidence. Although the NLRC agreed that respondent parties.
respondent, and there was no illegal dismissal to speak of.
was able to prove that he received gross pay less deduction and net pay,
with the corresponding Certification of Correctness by petitioner, Petitioner’s argument lacks merit.
On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a covering the period from July 31, 2001 to March 15, 2002, the NLRC
decision,6 finding that an employer-employee relationship existed held that respondent failed to proved with substantial evidence that he
between petitioner and respondent, and that respondent was illegally It is noted that respondent correctly sought judicial review of the
was selected and engaged by petitioner, that petitioner had the power to
dismissed. The dispositive portion of the decision reads: decision of the NLRC via a petition for certiorari under Rule 65 of the
dismiss him, and that they had the power to control him not only as to
Rules of Court filed before the Court of Appeals in accordance with the
the result of his work, but also as to the means and methods of
decision of the Court in St. Martin Funeral Home v. NLRC,14 which held:
WHEREFORE, premises considered, we find that respondents CELKOR accomplishing his work.
AD SONICMIX RECORDING STUDIO and/ or CESAR C. LIRIO (Owner),
have illegally dismissed complainant in his status as regular employee Therefore, all references in the amended Section 9 of B.P. No. 129 to
Respondent’s motion for reconsideration was denied by the NLRC in a
and, consequently, ORDERING said respondents: supposed appeals from the NLRC to the Supreme Court are interpreted
Resolution9 dated December 14, 2004.
and hereby declared to mean and refer to petitions for certiorari under
Rule 65. Consequently, all such petitions should henceforth be initially
1) To pay him full backwages from date of illegal dismissal on Respondent filed a petition for certiorari before the Court of Appeals. filed in the Court of Appeals in strict observance of the doctrine on the
March 14, 2002 until finality of this decision and, in lieu of
hierarchy of courts as the appropriate forum for the relief desired.15
reinstatement, to [pay] his separation pay of one (1) month
pay per year of service reckoned from [the] date of hire on On August 4, 2005, the Court of Appeals rendered a decision10 reversing
August 15, 2001 until finality of this decision, which as of date and setting aside the resolution of the NLRC, and reinstating the decision The Court of Appeals stated in its decision that the issue it had to resolve
amounts to full backwages total of of the Labor Arbiter, with modification in regard to the award of was "whether or not the public respondent [NLRC] committed grave
145,778.6 (basic P7,000.00 x 19.6 mos.=P133,000.00 + 1/12 commission and damages. The Court of Appeals deleted the award of abuse of discretion when it declared that no employer-employee
thereof as 13th month pay of P11,083.33 + SILP P7,000/32.62 commission, and moral and exemplary damages as the same were not relationship exists between the petitioner and the private respondents,
days=P214.59/day x 5=P1,072.96 x 1.58 substantiated. The dispositive portion of the Court of Appeals’ decision since the petitioner failed to prove such fact by substantial evidence."16
yrs.=P1,695.27);separation pay of P22,750.00 (P7,000.00 reads:
x 3.25 yrs.); Errors of judgment, as distinguished from errors of jurisdiction, are not
WHEREFORE, the petition is GRANTED and the assailed resolutions within the province of a special civil action for certiorari, which is merely
2) To pay complainant's unpaid commission of P2,000.00; dated October 14, 2004 and December 14, 2004 are hereby REVERSED confined to issues of jurisdiction or grave abuse of discretion.17 By grave

54
abuse of discretion is meant such capricious and whimsical exercise of and clients, proven by his receipt for this purpose from said respondent The elements to determine the existence of an employment relationship
judgment as is equivalent to lack of jurisdiction, and it must be shown a fixed monthly compensation of P7,000.00, with commission of P100.00 are: (a) the selection and engagement of the employee; (b) the payment
that the discretion was exercised arbitrarily or despotically.18 per hour when serving as recording technician, shown by the payroll of wages; (c) the power of dismissal; and (d) the employer’s power to
from July 31, 2001-March 15, 2002. The said evidence points to control the employee’s conduct. The most important element is the
complainant's hiring as employee so that the case comes within the employer’s control of the employee’s conduct, not only as to the result of
The Court of Appeals, therefore, could grant the petition for certiorari if
purview of our jurisdiction on labor disputes between an employer and the work to be done, but also as to the means and methods to
it finds that the NLRC, in its assailed decision or resolution, committed
an employee. x x x. accomplish it.28
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 Respondent Lirio's so-called existence of a partnership It is settled that no particular form of evidence is required to prove the
of the parties.19 Necessarily, the appellate court can only evaluate the agreement was not substantiated and his assertion thereto, in existence of an employer-employee relationship.29 Any competent and
materiality or significance of the evidence, which is alleged to have been the face of complainant's evidence, constitute but a self-serving relevant evidence to prove the relationship may be admitted.30
capriciously, whimsically, or arbitrarily disregarded by the NLRC, in assertion, without probative value, a mere invention to justify
relation to all other evidence on record.20 Thus, contrary to the the illegal dismissal.
In this case, the documentary evidence presented by respondent to
contention of petitioner, the Court of Appeals can review the finding of
prove that he was an employee of petitioner are as follows: (a) a
facts of the NLRC and the evidence of the parties to determine whether
xxxx document denominated as "payroll" (dated July 31, 2001 to March 15,
the NLRC gravely abused its discretion in finding that no employer-
2002) certified correct by petitioner,31 which showed that respondent
employee relationship existed between petitioner and respondent.21
received a monthly salary of P7,000.00 (P3,500.00 every 15th of the
Indeed, we find credible that what caused complainant's dismissal on
month and another P3,500.00 every 30th of the month) with the
March 14, 2002 was due to his refusal to respondent's Lirio's insistences
Respondent raised before the Court of Appeals the following issues: corresponding deductions due to absences incurred by respondent; and
on merely giving him 20% based on net profit on sale of the album
(2) copies of petty cash vouchers,32 showing the amounts he received
which he composed and arranged during his free time and, moreover,
and signed for in the payrolls.
I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION that salaries which he received would be deducted therefrom, which
COMMITTED GRAVE ABUSE OF DISCRETION IN SHIFTING THE BURDEN obviously, soured the relations from the point of view of respondent
OF PROVING THAT EMPLOYMENT RELATIONS EXISTED BETWEEN THE Lirio.23 The said documents showed that petitioner hired respondent as an
PETITIONER AND THE PRIVATE RESPONDENTS TO THE FORMER, IN employee and he was paid monthly wages ofP7,000.00. Petitioner
VIOLATION OF ESTABLISHED PROVISION OF LAWS AND wielded the power to dismiss as respondent stated that he was verbally
Hence, based on the finding above and the doctrine that "if doubt exists
JURISPRUDENCE. dismissed by petitioner, and respondent, thereafter, filed an action for
between the evidence presented by the employer and the employee, the
illegal dismissal against petitioner. The power of control refers merely to
scales of justice must be tilted in favor of the latter,"24 the Court of
the existence of the power.33 It is not essential for the employer to
II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION Appeals reversed the resolution of the NLRC and reinstated the decision
actually supervise the performance of duties of the employee, as it is
COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT NO of the Labor Arbiter with modification. Even if the Court of Appeals was
sufficient that the former has a right to wield the power.34Nevertheless,
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE remiss in not stating it in definite terms, it is implied that the Court of
petitioner stated in his Position Paper that it was agreed that he would
PETITIONER AND THE PRIVATE RESPONDENTS. Appeals found that the NLRC gravely abused its discretion in finding that
help and teach respondent how to use the studio equipment. In such
no employer-employee relationship existed between petitioner and
case, petitioner certainly had the power to check on the progress and
respondent based on the evidence on record.
III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION work of respondent.
COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING THE
PETITIONER'S PAYROLL AND THE PETTY CASH VOUCHERS AS AN We now proceed to the main issue raised before this Court: Whether or
On the other hand, petitioner failed to prove that his relationship with
INDICIA OF EMPLOYMENT RELATIONS BETWEEN PETITIONER AND THE not the decision of the Court of Appeals is in accordance with law, or
respondent was one of partnership.1âwphi1 Such claim was not
PRIVATE RESPONDENTS.22 whether or not the Court of Appeals erred in reversing and setting aside
supported by any written agreement. The Court notes that in the payroll
the decision of the NLRC, and reinstating the decision of the Labor
dated July 31, 2001 to March 15, 2002,35 there were deductions from the
Arbiter with modification.
Between the documentary evidence presented by respondent and the wages of respondent for his absence from work, which negates
mere allegation of petitioner without any proof by way of any document petitioner’s claim that the wages paid were advances for respondent’s
evincing their alleged partnership agreement, the Court of Appeals In petitions for review, only errors of law are generally reviewed by this work in the partnership. In Nicario v. National Labor Relations
agreed with the Labor Arbiter that petitioner failed to substantiate his Court. This rule, however, is not ironclad.25Where the issue is shrouded Commission,36 the Court held:
claim that he had a partnership with respondent, citing the Labor by a conflict of factual perceptions by the lower court or the lower
Arbiter’s finding, thus: administrative body, in this case, the NLRC, this Court is constrained to
It is a well-settled doctrine, that if doubts exist between the evidence
review the factual findings of the Court of Appeals.26
presented by the employer and the employee, the scales of justice must
In this case, complainant's evidence is substantial enough to prove the be tilted in favor of the latter. It is a time-honored rule that in
employment relationship that on August 14, 2001, he was hired as Before a case for illegal dismissal can prosper, it must first be controversies between a laborer and his master, doubts reasonably
'Studio manager' by respondent Lirio to manage and operate the established that an employer-employee relationship existed between arising from the evidence, or in the interpretation of agreements and
recording studio and to promote and sell its services to music enthusiasts petitioner and respondent.27 writing should be resolved in the former’s favor. The policy is to extend
55
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 x37

Based on the foregoing, the Court agrees with the Court of Appeals that
the evidence presented by the parties showed that an employer-
employee 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 Code39 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 employee’s 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 Arbiter’s 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.

No costs.

SO ORDERED.

56
14 to oversee BCC’s finances and business operations and to look after record, the private respondent was not included in the petitioner
SFC’s interests or investments in BCC.5 company’s payroll during the time of his alleged employment with the
former. True, the name of the private respondent Charlie Jao appears in
Republic of the Philippines the payroll however it does not prove that he has received his
Although Labor Arbiter Felipe Pati ruled in favor of petitioner on June 24,
SUPREME COURT remuneration for his services. Notably, his name was not among the
1996,6 the NLRC vacated the ruling and remanded the case for further
Baguio employees who will receive their salaries as represented by the payrolls.
proceedings.7 Thereafter, Labor Arbiter Jovencio Ll. Mayor rendered a
Instead, it appears therein as a comptroller who is authorized to approve
new decision on September 20, 2001, dismissing petitioner’s complaint
FIRST DIVISION the same. Suffice it to state that it is rather obscure for a certified public
for want of an employer-employee relationship between the
accountant doing the functions of a comptroller from September 1995 up
parties.8 Petitioner appealed the September 20, 2001 decision of Labor
to December 1995 not to receive his salary during the said period. Verily,
G.R. No. 163700 April 18, 2012 Arbiter Mayor.
such scenario does not conform with the usual and ordinary experience
of man. Coming now to the most controlling factor, the records
CHARLIE JAO, Petitioner, On July 31, 2002, the NLRC rendered a decision reversing Labor Arbiter indubitably reveal the undisputed fact that the petitioner company did
vs. Mayor’s decision, and declaring that petitioner had been illegally not have nor did not exercise the power of control over the private
BCC PRODUCTS SALES INC., and TERRANCE TY, Respondents. dismissed. It ordered the payment of unpaid salaries, backwages and respondent. It did not prescribe the manner by which the work is to be
13th month pay, separation pay and attorney’s fees.9 Respondents carried out, or the time by which the private respondent has to report for
moved for the reconsideration of the NLRC decision, but their motion for and leave from work. As already stated, the power of control is such an
DECISION reconsideration was denied on September 30, 2002.10 Thence, important factor that other requisites may even be disregarded.
respondents assailed the NLRC decision on certiorari in the CA. In Sevilla v. Court of Appeals, the Supreme Court emphatically held,
BERSAMIN, J.: thus:
Ruling of the CA
The issue is whether petitioner was respondents’ employee or not. "The "control test," under which the person for whom the
Respondents denied an employer-employee relationship with petitioner, On February 27, 2004, the CA promulgated its assailed services are rendered reserves the right to direct not only the
who insisted the contrary. decision,11 holding: end to be achieved but also the means for reaching such end, is
generally relied on by the courts."
Through his petition for review on certiorari, petitioner appeals the After a judicious review of the records vis-à-vis the respective posturing
decision promulgated by the Court of Appeals (CA) on February 27, of the contending parties, we agree with the finding that no employer- We have carefully examined the evidence submitted by the private
2004,1 finding no employee-employer relationship between him and employee relationship existed between petitioner BCC and the private respondent in the formal offer of evidence and unfortunately, other than
respondents, thereby reversing the ruling by the National Labor respondent. On this note, the conclusion of the public respondent must the bare assertions of the private respondent which he miserably failed
Relations Commission (NLRC) to the effect that he was the employee of be reversed for being issued with grave abuse of discretion. to substantiate, we find nothing therein that would decisively indicate
respondents. that the petitioner BCC exercised the fundamental power of control over
the private respondent in relation to his employment—not even the ID
"Etched in an unending stream of cases are the four (4) standards in issued to the private respondent and the affidavits executed by Bertito
Antecedents determining the existence of an employer-employee relationship, Jemilla and Rogelio Santias. At best, these pieces of documents merely
namely, (a) the manner of selection and engagement of the putative suggest the existence of employer-employee relationship as intimated by
Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and employee; (b) the mode of payment of wages; (c) the presence or the NLRC. On the contrary, it would appear that the said sworn
its President, respondent Terrance Ty (Ty), employed him as comptroller absence of power of dismissal; and, (d) the presence or absence of statement provided a substantial basis to support the contention that the
starting from September 1995 with a monthly salary of P20,000.00 to control of the putative employee’s conduct." Of these powers the power private respondent worked at the petitioner BCC as SFC’s representative,
handle the financial aspect of BCC’s business;2 that on October 19,1995, of control over the employee’s conduct is generally regarded as being its major creditor and supplier of goods and merchandise.
the security guards of BCC, acting upon the instruction of Ty, barred him determinative of the existence of the relationship. Moreover, as clearly pointed out by the petitioner in his Reply to the
from entering the premises of BCC where he then worked; that his private respondent’s Comment, it is unnatural for SFC to still employ the
attempts to report to work in November and December 12, 1995 were Apparently, in the case before us, all these four elements are absent. private respondent "to oversee and supervise collections of account
frustrated because he continued to be barred from entering the premises First, there is no proof that the services of the private respondent were receivables due SFC from its customers or clients" like the herein
of BCC;3 and that he filed a complaint dated December 28, 1995 for engaged to perform the duties of a comptroller in the petitioner petitioner BCC on a date later than December, 1995 considering that a
illegal dismissal, reinstatement with full backwages, non-payment of company. There is no proof that the private respondent has undergone a criminal complaint has already been instituted against him.
wages, damages and attorney’s fees.4 selection procedure as a standard requisite for employment, especially
with such a delicate position in the company. Neither is there any proof Sadly, the private respondent failed to sufficiently discharge the burden
Respondents countered that petitioner was not their employee but the of his appointment nor is there any showing that the parties entered into of showing with legal certainty that employee-employer relationship
employee of Sobien Food Corporation (SFC), the major creditor and an employment contract, stipulating thereof that he will receive existed between the parties. On the other hand, it was clearly shown by
supplier of BCC; and that SFC had posted him as its comptroller in BCC P20,000.00/month salary as comptroller, before the private respondent the petitioner that it neither exercised control nor supervision over the
commenced with his work as such. Second, as clearly established on
57
conduct of the private respondent’s employment. Hence, the allegation Here, the findings of the NLRC differed from those of the Labor Arbiter 3. Despite such admission of an arrangement, or agreement
that there is employer-employee relationship must necessarily fail. and the CA. This conflict among such adjudicating offices compels the insofar as BCC-checks were delivered to, or turned over in
Court’s exercise of its authority to review and pass upon the evidence favor of SFC, Mr. Terrance Ty, in a desire to blemish my
presented and to draw its own conclusions therefrom. reputation or to cause me dishonor as well as to impute unto
Consequently, a discussion on the issue of illegal dismissal therefore
myself the commission of a crime, state in another public
becomes unnecessary.
instrument executed therefor in that:
To prove his employment with BCC, petitioner offered the following: (a)
BCC Identification Card (ID) issued to him stating his name and his
WHEREFORE, premises considered, the petition is GRANTED. The
position as "comptroller," and bearing his picture, his signature, and the "3. That all the said 158 checks were unlawfully appropriated by a
assailed Decision of the public respondent NLRC dated July 31, 2002 and
signature of Ty; (b) a payroll of BCC for the period of October 1-15, certain Charlie Jao absolutely without any authority from BCC and the
the Resolution dated September 30, 2002 are REVERSED and SET
1996 that petitioner approved as comptroller; (c) various bills and same were reportedly turned over by said Mr. Jao to a person who is not
ASIDE. Accordingly, the decision of the Labor Arbiter dated September
receipts related to expenditures of BCC bearing the signature of an agent or is not authorized representative of BCC."
20, 2001 is hereby REINSTATED.
petitioner; (d) various checks carrying the signatures of petitioner and
Ty, and, in some checks, the signature of petitioner alone; (e) a court
xerox copy of which document (Affidavit) is hereto attached, duly
SO ORDERED. order showing that the issuing court considered petitioner’s ID as proof
marked as Annex "B" and made integral part hereof. (emphasis supplied)
of his employment with BCC; (f) a letter of petitioner dated March 1,
After the CA denied petitioner’s motion for reconsideration on May 14, 1997 to the Department of Justice on his filing of a criminal case for
estafa against Ty for non-payment of wages; (g) affidavits of some and that the affidavit constituted petitioner’s admission of the
2004,12 he filed a motion for extension to file petition for review, which
employees of BCC attesting that petitioner was their co-employee in arrangement or agreement between BCC and SFC for the latter to
the Court denied through the resolution dated July 7, 2004 for failure to
BCC; and (h) a notice of raffle dated December 5, 1995 showing that appoint a comptroller to oversee the former’s operations.
render an explanation on why the service of copies of the motion for
extension on respondents was not personally made.13The denial petitioner, being an employee of BCC, received the notice of raffle in
notwithstanding, he filed his petition for review on certiorari. The Court behalf of BCC.18 Petitioner counters, however, that the affidavit did not establish the
denied the petition on August 18, 2004 in view of the denial of the absence of an employer-employee relationship between him and
motion for extension of time and the continuing failure of petitioner to Respondents denied that petitioner was BCC’s employee. They affirmed respondents because it had been executed in March 1996, or after his
render the explanation as to the non-personal service of the petition on that SFC had installed petitioner as its comptroller in BCC to oversee and employment with respondents had been terminated on December 12,
respondents.14 However, upon a motion for reconsideration, the Court supervise SFC’s collections and the account of BCC to protect SFC’s 1995; and that the affidavit referred to his subsequent employment by
reinstated the petition for review on certiorari and required respondents interest; that their issuance of the ID to petitioner was only for the SFC following the termination of his employment by BCC.21
to comment.15 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 We cannot side with petitioner.
Issue should not be considered as evidence of petitioner’s employment in
BCC;19 that petitioner executed an affidavit in March 1996,20 stating,
among others, as follows: Our perusal of the affidavit of petitioner compels a conclusion similar to
The sole issue is whether or not an employer-employee relationship that reached by the CA and the Labor Arbiter to the effect that the
existed between petitioner and BCC. A finding on the existence of an affidavit actually supported the contention that petitioner had really
employer-employee relationship will automatically warrant a finding of 1. I am a CPA (Certified Public Accountant) by profession but worked in BCC as SFC’s representative. It does seem more natural and
illegal dismissal, considering that respondents did not state any valid presently associated with, or employed by, Sobien Food more believable that petitioner’s affidavit was referring to his
grounds to dismiss petitioner. Corporation with the same business address as abovestated; 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
2. In the course of my association with, or employment by, to still post him to oversee and supervise the collections of accounts
Ruling
Sobien Food Corporation (SFC, for short), I have been receivables due from BCC beyond December 1995 if, as he insisted, BCC
entrusted by my employer to oversee and supervise collections had already illegally dismissed him and had even prevented him from
The petition lacks merit. on account of receivables due SFC from its customers or entering the premises of BCC. Given the patent animosity and strained
clients; for instance, certain checks due and turned over by relations between him and respondents in such circumstances, indeed,
The existence of an employer-employee relationship is a question of fact. one of SFC’s customers is BCC Product Sales, Inc., operated or how could he still efficiently perform in behalf of SFC the essential
Generally, a re-examination of factual findings cannot be done by the run by one Terrance L. Ty, (President and General manager), responsibility to "oversee and supervise collections" at BCC? Surely,
Court acting on a petition for review on certiorari because the Court is pursuant to, or in accordance with, arrangements or respondents would have vigorously objected to any arrangement with
not a trier of facts but reviews only questions of law. Nor may the Court agreement thereon; such arrangement or agreement is duly SFC involving him.
be bound to analyze and weigh again the evidence adduced and confirmed by said Terrance Ty, as shown or admitted by him
considered in the proceedings below.16 This rule is not absolute, in a public instrument executed therefor, particularly par. 2 of We note that petitioner executed the affidavit in March 1996 to refute a
however, and admits of exceptions. For one, the Court may look into that certain Counter-Affidavit executed and subscribed on statement Ty himself made in his own affidavit dated December 11,
factual issues in labor cases when the factual findings of the Labor December 11, 1995, xerox copy of which is hereto attached, 1995 to the effect that petitioner had illegally appropriated some checks
Arbiter, the NLRC, and the CA are conflicting.17 duly marked as Annex "A" and made integral part hereof. without authority from BCC.22 Petitioner thereby sought to show that he
58
had the authority to receive the checks pursuant to the arrangements In addition, petitioner presented no document setting forth the terms of
between SFC and BCC. This showing would aid in fending off the his employment by BCC.1âwphi1 The failure to present such agreement
criminal charge respondents filed against him arising from his on terms of employment may be understandable and expected if he was
mishandling of the checks. Naturally, the circumstances petitioner a common or ordinary laborer who would not jeopardize his employment
adverted to in his March 1996 affidavit concerned those occurring before by demanding such document from the employer, but may not square
December 11, 1995, the same period when he actually worked as well with his actual status as a highly educated professional.
comptroller in BCC.
Petitioner’s admission that he did not receive his salary for the three
Further, an affidavit dated September 5, 2000 by Alfredo So, the months of his employment by BCC, as his complaint for illegal dismissal
President of SFC, whom petitioner offered as a rebuttal witness, lent and non-payment of wages25 and the criminal case for estafa he later
credence to respondents’ denial of petitioner’s employment. So declared filed against the respondents for non-payment of wages26 indicated,
in that affidavit, among others, that he had known petitioner for being further raised grave doubts about his assertion of employment by BCC. If
"earlier his retained accountant having his own office but did not hold the assertion was true, we are puzzled how he could have remained in
office" in SFC’s premises; that Ty had approached him (So) "looking for BCC’s employ in that period of time despite not being paid the first salary
an accountant or comptroller to be employed by him (Ty) in [BCC’s] of P20,000.00/month. Moreover, his name did not appear in the payroll
distribution business" of SFC’s general merchandise, and had later asked of BCC despite him having approved the payroll as comptroller.
him on his opinion about petitioner; and that he (So) had subsequently
learned that "Ty had already employed [petitioner] as his comptroller as
Lastly, the confusion about the date of his alleged illegal dismissal
of September 1995."23
provides another indicium of the insincerity of petitioner’s assertion of
employment by BCC. In the petition for review on certiorari, he averred
The statements of So really supported respondents’ position in that that he had been barred from entering the premises of BCC on October
petitioner’s association with SFC prior to his supposed employment by 19, 1995,27 and thus was illegally dismissed. Yet, his complaint for illegal
BCC went beyond mere acquaintance with So. That So, who had earlier dismissal stated that he had been illegally dismissed on December 12,
merely "retained" petitioner as his accountant, thereafter employed 1995 when respondents’ security guards barred him from entering the
petitioner as a "retained" accountant after his supposed illegal dismissal premises of BCC,28 causing him to bring his complaint only on December
by BCC raised a doubt as to his employment by BCC, and rather 29, 1995, and after BCC had already filed the criminal complaint against
confirmed respondents’ assertion of petitioner being an employee of SFC him. The wide gap between October 19, 1995 and December 12, 1995
while he worked at BCC. 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.
Moreover, in determining the presence or absence of an employer-
employee relationship, the Court has consistently looked for the
following incidents, to wit: (a) the selection and engagement of the With all the grave doubts thus raised against petitioner’s claim, we need
employee; (b) the payment of wages; (c) the power of dismissal; and not dwell at length on the other proofs he presented, like the affidavits
(d) the employer’s power to control the employee on the means and of some of the employees of BCC, the ID, and the signed checks, bills
methods by which the work is accomplished. The last element, the so- and receipts. Suffice it to be stated that such other proofs were easily
called control test, is the most important element.24 explainable by respondents and by the aforestated circumstances
showing him to be the employee of SFC, not of BCC.
Hereunder are some of the circumstances and incidents occurring while
petitioner was supposedly employed by BCC that debunked his claim WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals;
against respondents. and ORDERS petitioner to pay the costs of suit.

It can be deduced from the March 1996 affidavit of petitioner that SO ORDERED.
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.

59
15 engaged to provide live music at Legend Hotel’s Madison Coffee Shop for On February 11, 2002, the CA set aside the decision of the
three hours/day on two days each week; and stated that the economic NLRC,6 holding:
crisis that had hit the country constrained management to dispense with
Republic of the Philippines his services.
xxx
SUPREME COURT
Manila
On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint
Applying the above-enumerated elements of the employee-employer
for lack of merit upon finding that the parties had no employer-employee
relationship in this case, the question to be asked is, are those elements
FIRST DIVISION relationship.3 The LA explained thusly:
present in this case?

G.R. No. 153511 July 18, 2012 xxx


The answer to this question is in the affirmative.

LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, On the pivotal issue of whether or not there existed an employer-
xxx
and/or, NELSON NAPUD, in his capacity as the President of employee relationship between the parties, our finding is in the negative.
Petitioner Corporation, Petitioner, The finding finds support in the service contract dated September 1,
vs. 1992 xxx. Well settled is the rule that of the four (4) elements of employer-
HERNANI S. REALUYO, also known as JOEY ROA, Respondent. employee relationship, it is the power of control that is more decisive.
xxx
DECISION In this regard, public respondent failed to take into consideration that in
petitioner’s line of work, he was supervised and controlled by
Even if we grant the initial non-existence of the service contract, as
respondent’s restaurant manager who at certain times would require him
BERSAMIN, J.: complainant suggests in his reply (third paragraph, page 4), the picture
to perform only tagalog songs or music, or wear barong tagalog to
would not change because of the admission by complainant in his letter
conform with Filipiniana motif of the place and the time of his
This labor case for illegal dismissal involves a pianist employed to dated October 8, 1996 (Annex "C") that what he was receiving was
performance is fixed by the respondents from 7:00 pm to 10:00 pm,
perform in the restaurant of a hotel. On August 9, 1999, respondent, talent fee and not salary.
three to six times a week. Petitioner could not choose the time of his
whose stage name was Joey R. Roa, filed a complaint for alleged unfair performance. xxx.
labor practice, constructive illegal dismissal, and the This is reinforced by the undisputed fact that complainant received his
underpayment/nonpayment of his premium pay for holidays, separation talent fee nightly, unlike the regular employees of the hotel who are paid
As to the status of petitioner, he is considered a regular employee of
pay, service incentive leave pay, and 13111 month pay. He prayed for by monthly xxx.
private respondents since the job of the petitioner was in furtherance of
attorney's fees, moral damages off P100,000.00 and exemplary damages
the restaurant business of respondent hotel. Granting that petitioner was
for P100,000.00.1
xxx initially a contractual employee, by the sheer length of service he had
rendered for private respondents, he had been converted into a regular
Respondent averred that he had worked as a pianist at the Legend employee xxx.
And thus, absent the power to control with respect to the means and
Hotel’s Tanglaw Restaurant from September 1992 with an initial rate of
methods by which his work was to be accomplished, there is no
P400.00/night that was given to him after each night’s performance; that
employer-employee relationship between the parties xxx. xxx
his rate had increased to P750.00/night; and that during his
employment, he could not choose the time of performance, which had
been fixed from 7:00 pm to 10:00 pm for three to six times/week. He xxx xxx In other words, the dismissal was due to retrenchment in order to
added that the Legend Hotel’s restaurant manager had required him to avoid or minimize business losses, which is recognized by law under
conform with the venue’s motif; that he had been subjected to the rules Article 283 of the Labor Code, xxx.
WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of
on employees’ representation checks and chits, a privilege granted to merit.
other employees; that on July 9, 1999, the management had notified xxx
him that as a cost-cutting measure his services as a pianist would no
longer be required effective July 30, 1999; that he disputed the excuse, SO ORDERED.4
insisting that Legend Hotel had been lucratively operating as of the filing WHEREFORE, foregoing premises considered, this petition is GRANTED.
of his complaint; and that the loss of his employment made him bring his xxx.7
Respondent appealed, but the National Labor Relations Commission
complaint.2 (NLRC) affirmed the LA on May 31, 2001.5
Issues
In its defense, petitioner denied the existence of an employer-employee Respondent assailed the decision of the NLRC in the Court of Appeals
relationship with respondent, insisting that he had been only a talent (CA) on certiorari. In this appeal, petitioner contends that the CA erred:

60
I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF The appeal fails. and re-evaluate the factual issues and to look into the records of the
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE case and re-examine the questioned findings.13
PETITIONER HOTEL AND RESPONDENT ROA.
Procedural Issue:
A review of the circumstances reveals that respondent was, indeed,
II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND petitioner’s employee. He was undeniably employed as a pianist in
Certiorari was a proper recourse
THAT THE TERMINATION OF HIS SERVICES WAS ILLEGAL. petitioner’s Madison Coffee Shop/Tanglaw Restaurant from September
THE CA LIKEWISE ERRED WHEN IT DECLARED THE 1992 until his services were terminated on July 9, 1999.
REINSTATEMENT OF ROA TO HIS FORMER POSITION OR BE Petitioner contends that respondent’s petition for certiorari was improper
GIVEN A SEPARATION PAY EQUIVALENT TO ONE MONTH FOR as a remedy against the NLRC due to its raising mainly questions of fact
First of all, petitioner actually wielded the power of selection at the time
EVERY YEAR OF SERVICE FROM SEPTEMBER 1999 UNTIL and because it did not demonstrate that the NLRC was guilty of grave
it entered into the service contract dated September 1, 1992 with
JULY 30, 1999 CONSIDERING THE ABSENCE OF AN abuse of discretion.
respondent. This is true, notwithstanding petitioner’s insistence that
EMPLOYMENT RELATIONSHIP BETWEEN THE PARTIES.
respondent had only offered his services to provide live music at
The contention is unwarranted. There is no longer any doubt that a petitioner’s Tanglaw Restaurant, and despite petitioner’s position that
III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO petition for certiorari brought to assail the decision of the NLRC may what had really transpired was a negotiation of his rate and time of
BACKWAGES, SERVICE INCENTIVE LEAVE AND OTHER raise factual issues, and the CA may then review the decision of the availability. The power of selection was firmly evidenced by, among
BENEFITS CONSIDERING THAT THERE IS NO EMPLOYER NLRC and pass upon such factual issues in the process.8 The power of others, the express written recommendation dated January 12, 1998 by
EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES. the CA to review factual issues in the exercise of its original jurisdiction Christine Velazco, petitioner’s restaurant manager, for the increase of his
to issue writs of certiorari is based on Section 9 of Batas Pambansa Blg. remuneration.14
129, which pertinently provides that the CA "shall have the power to try
IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31,
cases and conduct hearings, receive evidence and perform any and all
2001 IN NLRC NCR CA NO. 023404-2000 OF THE NLRC AS Petitioner could not seek refuge behind the service contract entered into
acts necessary to resolve factual issues raised in cases falling within its
WELL AS ITS RESOLUTION DATED JUNE 29, 2001 IN FAVOR with respondent. It is the law that defines and governs an employment
original and appellate jurisdiction, including the power to grant and
OF HEREIN PETITIONER HOTEL WHEN HEREIN RESPONDENT relationship, whose terms are not restricted to those fixed in the written
conduct new trials or further proceedings."
ROA FAILED TO SHOW PROOF THAT THE NLRC AND THE contract, for other factors, like the nature of the work the employee has
LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF been called upon to perform, are also considered. The law affords
DISCRETION OR LACK OF JURISDICTION IN THEIR Substantive Issue No. 1: protection to an employee, and does not countenance any attempt to
RESPECTIVE DECISIONS. subvert its spirit and intent. Any stipulation in writing can be ignored
Employer-employee relationship existed between the parties when the employer utilizes the stipulation to deprive the employee of his
security of tenure. The inequality that characterizes employer-employee
V. XXX WHEN IT OVERLOOKED THE FACT THAT THE
relations generally tips the scales in favor of the employer, such that the
PETITION WHICH ROA FILED IS IMPROPER SINCE IT RAISED We next ascertain if the CA correctly found that an employer-employee employee is often scarcely provided real and better options.15
QUESTIONS OF FACT. relationship existed between the parties.
Secondly, petitioner argues that whatever remuneration was given to
VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION The issue of whether or not an employer-employee relationship existed respondent were only his talent fees that were not included in the
FILED BY ROA WHEN IT IS CLEARLY IMPROPER AND SHOULD between petitioner and respondent is essentially a question of fact.9 The definition of wage under the Labor Code; and that such talent fees were
HAVE BEEN DISMISSED OUTRIGHT CONSIDERING THAT A factors that determine the issue include who has the power to select the but the consideration for the service contract entered into between
PETITION FOR CERTIORARI UNDER RULE 65 IS LIMITED employee, who pays the employee’s wages, who has the power to them.
ONLY TO QUESTIONS OR ISSUES OF GRAVE ABUSE OF dismiss the employee, and who exercises control of the methods and
DISCRETION OR LACK OF JURISDICTION COMMITTED BY results by which the work of the employee is accomplished.10 Although
THE NLRC OR THE LABOR ARBITER, WHICH ISSUES ARE NOT no particular form of evidence is required to prove the existence of the The argument is baseless.
PRESENT IN THE CASE AT BAR. relationship, and any competent and relevant evidence to prove the
relationship may be admitted,11 a finding that the relationship exists Respondent was paid P400.00 per three hours of performance from 7:00
The assigned errors are divided into the procedural issue of whether or must nonetheless rest on substantial evidence, which is that amount of pm to 10:00 pm, three to six nights a week. Such rate of remuneration
not the petition for certiorari filed in the CA was the proper recourse; relevant evidence that a reasonable mind might accept as adequate to was later increased to P750.00 upon restaurant manager Velazco’s
and into two substantive issues, namely: (a) whether or not respondent justify a conclusion.12 recommendation. There is no denying that the remuneration
was an employee of petitioner; and (b) if respondent was petitioner’s denominated as talent fees was fixed on the basis of his talent and skill
employee, whether he was validly terminated. Generally, the Court does not review factual questions, primarily because and the quality of the music he played during the hours of performance
the Court is not a trier of facts. However, where, like here, there is a each night, taking into account the prevailing rate for similar talents in
conflict between the factual findings of the Labor Arbiter and the NLRC, the entertainment industry.16
Ruling
on the one hand, and those of the CA, on the other hand, it becomes
proper for the Court, in the exercise of its equity jurisdiction, to review
61
Respondent’s remuneration, albeit denominated as talent fees, was still petitioner, through its manager, required him to play at certain times a Validity of the Termination
considered as included in the term wage in the sense and context of the particular music or song, the music, songs, or arrangements, including
Labor Code, regardless of how petitioner chose to designate the the beat or tempo, were under his discretion, control and direction; (d)
Having established that respondent was an employee whom petitioner
remuneration. Anent this, Article 97(f) of the Labor Code clearly states: the requirement for him to wear barong Tagalog to conform with the
terminated to prevent losses, the conclusion that his termination was by
Filipiniana motif of the venue whenever he performed was by no means
reason of retrenchment due to an authorized cause under the Labor
evidence of control; (e) petitioner could not require him to do any other
xxx wage paid to any employee shall mean the remuneration or Code is inevitable.
work in the restaurant or to play the piano in any other places, areas, or
earnings, however designated, capable of being expressed in terms of
establishments, whether or not owned or operated by petitioner, during
money, whether fixed or ascertained on a time, task, piece, or
the three hour period from 7:00 pm to 10:00 pm, three to six times a Retrenchment is one of the authorized causes for the dismissal of
commission basis, or other method of calculating the same, which is
week; and (f) respondent could not be required to sing, dance or play employees recognized by the Labor Code. It is a management
payable by an employer to an employee under a written or unwritten
another musical instrument. prerogative resorted to by employers to avoid or to minimize business
contract of employment for work done or to be done, or for services
losses. On this matter, Article 283 of the Labor Code states:
rendered or to be rendered, and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board, lodging, or other A review of the records shows, however, that respondent performed his
facilities customarily furnished by the employer to the employee. work as a pianist under petitioner’s supervision and control. Specifically, Article 283. Closure of establishment and reduction of personnel. – The
petitioner’s control of both the end achieved and the manner and means employer may also terminate the employment of any employee due to
used to achieve that end was demonstrated by the following, to wit: the installation of labor-saving devices, redundancy, retrenchment to
Clearly, respondent received compensation for the services he rendered
prevent losses or the closing or cessation of operation of the
as a pianist in petitioner’s hotel. Petitioner cannot use the service
establishment or undertaking unless the closing is for the purpose of
contract to rid itself of the consequences of its employment of a. He could not choose the time of his performance, which
circumventing the provisions of this Title, by serving a written notice on
respondent. There is no denying that whatever amounts he received for petitioners had fixed from 7:00 pm to 10:00 pm, three to six
the workers and the Ministry of Labor and Employment at least one (1)
his performance, howsoever designated by petitioner, were his wages. times a week;
month before the intended date thereof. xxx. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of
It is notable that under the Rules Implementing the Labor Code and as b. He could not choose the place of his performance; establishment or undertaking not due to serious business losses or
held in Tan v. Lagrama,17 every employer is required to pay his financial reverses, the separation pay shall be equivalent to one (1)
employees by means of a payroll, which should show in each case, month pay or at least one-half (1/2) month pay for every year of service,
c. The restaurant’s manager required him at certain times to
among others, the employee’s rate of pay, deductions made from such whichever is higher. A fraction of at least six (6) months shall be
perform only Tagalog songs or music, or to wear barong
pay, and the amounts actually paid to the employee. Yet, petitioner did considered one (1) whole year.
Tagalog to conform to the Filipiniana motif; and
not present the payroll of its employees to bolster its insistence of
respondent not being its employee.
The Court has laid down the following standards that an employer
d. He was subjected to the rules on employees’ representation
should meet to justify retrenchment and to foil abuse, namely:
check and chits, a privilege granted to other employees.
That respondent worked for less than eight hours/day was of no
consequence and did not detract from the CA’s finding on the existence
(a) The expected losses should be substantial and not merely
of the employer-employee relationship. In providing that the " normal Relevantly, it is worth remembering that the employer need not actually
de minimis in extent;
hours of work of any employee shall not exceed eight (8) hours a day," supervise the performance of duties by the employee, for it sufficed that
Article 83 of the Labor Code only set a maximum of number of hours as the employer has the right to wield that power.
"normal hours of work" but did not prohibit work of less than eight (b) The substantial losses apprehended must be reasonably
hours. imminent;
Lastly, petitioner claims that it had no power to dismiss respondent due
to his not being even subject to its Code of Discipline, and that the
Thirdly, the power of the employer to control the work of the employee power to terminate the working relationship was mutually vested in the (c) The retrenchment must be reasonably necessary and likely
is considered the most significant determinant of the existence of an parties, in that either party might terminate at will, with or without to effectively prevent the expected losses; and
employer-employee relationship.18 This is the so-called control test, and cause.
is premised on whether the person for whom the services are performed (d) The alleged losses, if already incurred, and the expected
reserves the right to control both the end achieved and the manner and The claim is contrary to the records. Indeed, the memorandum informing imminent losses sought to be forestalled must be proved by
means used to achieve that end.19 respondent of the discontinuance of his service because of the present sufficient and convincing evidence.22
business or financial condition of petitioner20 showed that the latter had
Petitioner submits that it did not exercise the power of control over the power to dismiss him from employment.21
Anent the last standard of sufficient and convincing evidence, it ought to
respondent and cites the following to buttress its submission, namely: be pointed out that a less exacting standard of proof would render too
(a) respondent could beg off from his nightly performances in the Substantive Issue No. 2: easy the abuse of retrenchment as a ground for termination of services
restaurant for other engagements; (b) he had the sole prerogative to of employees.23
play and perform any musical arrangements that he wished; (c) although

62
Was the retrenchment of respondent valid?

In termination cases, the burden of proving that the dismissal was for a
valid or authorized cause rests upon the employer. Here, petitioner did
not submit evidence of the losses to its business operations and the
economic havoc it would thereby imminently sustain. It only claimed that
respondent’s termination was due to its "present business/financial
condition." This bare statement fell short of the norm to show a valid
retrenchment. Hence, we hold that there was no valid cause for the
retrenchment of respondent.

Indeed, not every loss incurred or expected to be incurred by an


employer can justify retrenchment.1âwphi1 The employer must prove,
among others, that the losses are substantial and that the retrenchment
is reasonably necessary to avert such losses. Thus, by its failure to
present sufficient and convincing evidence to prove that retrenchment
was necessary, respondent’s termination due to retrenchment is not
allowed.

The Court realizes that the lapse of time since the retrenchment might
have rendered respondent's reinstatement to his former job no longer
feasible. If that should be true, then petitioner should instead pay to him
separation pay at the rate of one. month pay for every year of service
computed from September 1992 (when he commenced to work for the
petitioners) until the finality of this decision, and full backwages from the
time his compensation was withheld until the finality of this decision.

WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM


the decision of the Court of Appeals promulgated on February 11, 2002,
subject to the modification that should reinstatement be no longer
feasible, petitioner shall pay to respondent separation pay of one month
for every year of service computed from September 1992 until the
finality of this decision, and full backwages from the time his
compensation was withheld until the finality of this decision.

Costs of suit to be paid by the petitioners.

SO ORDERED.

63
16 necessary and desirable in the trade or business of petitioners and under The petitioners' motion for reconsideration having been denied in the
their direct control and supervision. In support of his claim, he Resolution11 dated December 15, 2009, they filed a petition for
submitted, among others, copies of his time cards, Official Business certiorari12 before the CA raising the following errors:
Republic of the Philippines Itinerary Slips, Daily Attendance Sheets and other documents prescribing
SUPREME COURT the manner in which his tasks were to be accomplished under the control
(1) the complaint should have been dismissed against
Manila of the petitioners and acknowledging his status as a regular employee of
petitioner Jennifer M. Eñano-Bote absent any showing of bad
the corporation.
faith;
SECOND DIVISION
On the other hand, petitioners, in their position paper,8 asserted that
(2) respondent Dakila is not a regular employee;
G.R. No. 199547 September 24, 2012 respondent Dakilawas a consultant and not their regular employee. The
latter was not included in petitioners' payroll and paid a fixed amount
under the consultancy contract. He was not required to observe regular (3) respondent was not illegally dismissed as it was the
THE NEW PHILIPPINE SKYLANDERS, INC. and/or JENNIFER M. working hours and was free to adopt means and methods to accomplish respondent who resigned; and
ENANO-BOTE, Petitioners, his task except as to the results of the work required of him. Hence, no
vs. employer-employee relationship existed between them. Moreover, (4) theLA’s monetary award has no basis.
FRANCISCO N. DAKILA, Respondent. respondentDakila terminated his contract in a letter dated April 19, 2007,
thus, negating his dismissal.
Ruling of the CA
RESOLUTION
Ruling of the Labor Arbiter
In the Resolution13 dated August 31, 2011, the CA dismissed the petition
PERLAS-BERNABE, J.:
for failure to show that the NLRC committed grave abuse of discretion in
On May 28, 2008, Labor Arbiter Thomas T. Que, Jr. rendered a affirming the LA's Decision. It found the factual findings of the LA and
The Petition for Review on Certiorari1 assails the August 31, 20112 and Decision9 finding respondent Dakila to have been illegally dismissed and the NLRC to be supported by substantial evidence and thus, should be
November 23, 20113 Resolutions of the Court of Appeals (CA) in CA-G.R. ordered his reinstatement with full backwages computed from the time accorded respect and finality. Petitioners' motion for reconsideration
SP No. 113015 which affirmed the September 10, 2009 Decision4 and of his dismissal on May 1, 2007 until his actual reinstatement as well as therefrom was likewise denied in the Resolution14 dated November 23,
December 15, 2009 Resolution5 of the National Labor Relations the payment of his unpaid benefits under the Collective Bargaining 2011.
Commission (NLRC) finding respondent Francisco N.Dakila (respondent Agreement (CBA). He declared respondent Dakila to be a regular
Dakila) to have been illegally dismissed. employee on the basis of the unrebutted documentary evidence showing
that he was under the petitioners' direct control and supervision and Hence, the instant petition reiterating the arguments raised before the
performed tasks that were either incidental or usually desirable and CA.
The Factual Antecedents necessary in the trade or business of petitioner corporation for a period
of ten years. Having been dismissed without cause and notice, Ruling of the Court
Respondent Dakila was employed by petitionercorporation as early as respondent Dakila was awarded moral and exemplary damages in the
1987 and terminated for cause in April 1997 when the corporation was amount of P 50,000.00 each. He is also entitled to avail of
thecorporation's retirement benefits upon his reinstatement. The issue of illegal dismissal is premised on the existence of an
sold. In May 1997, he was rehired as consultant by the petitioners under
employer-employee relationship between the parties herein. It is
a Contract for Consultancy Services6 dated April 30, 1997.
essentially a question of fact, beyond the ambit of a petition for review
Ruling of the NLRC on certiorari under Rule 45 of the Rules of Court unless there is a clear
Thereafter, in a letter7 dated April 19, 2007, respondent Dakila informed showing of palpable error or arbitrary disregard of evidence which does
petitioners of his compulsory retirement effective May 2, 2007 and On appeal, the NLRC sustained the Labor Arbiter's (LA) finding that not obtain in this case. Records reveal that both the LA and the NLRC, as
sought for the payment of his retirement benefits pursuant to the respondent Dakila was a regular employee and that his dismissal was affirmed by the CA, have found substantial evidence to show that
Collective Bargaining Agreement. His request, however, was not acted illegal. However, it noted that since he was already beyond the respondent Dakila was a regular employee who was dismissed without
upon. Instead, he was terminated from service effective May 1, 2007. retirement age, his reinstatement was no longer feasible. As such, it cause.
ordered the payment of his retirement pay to be computed from 1997
Consequently, respondent Dakila filed a complaint for constructive illegal until the date of the decision. Moreover, it found respondent Dakila Following Article 279 of the Labor Code, an employee who is unjustly
dismissal, non-payment of retirement benefits, under/non-payment of entitled to reinstatement wages from the time petitioners received a dismissed from work is entitled to reinstatement without loss of seniority
wages and other benefits of a regular employee, and damages against copy of the LA’s Decision on July 7, 2008 up to the date of the NLRC's rights and other privileges and to his full backwages computed from the
petitioners, The New Philippine Skylanders, Inc. and its President and decision. Thus, it ordered the petitioners to pay respondent Dakila the time he was illegally dismissed. However, considering that respondent
General Manager, Jennifer M. Eñano-Bote, before the NLRC. He averred, additional amount of P 278,508.33representing reinstatement wages and Dakila was terminated on May 1, 2007, or one (1) day prior to his
among others, that the consultancy contract was a scheme to deprive retirement pay.10 compulsory retirement on May 2, 2007, his reinstatement is no longer
him of the benefits of regularization, claiming to have assumed tasks feasible. Accordingly, the NLRC correctly held him entitled to the

64
payment of his retirement benefits pursuant to the CBA. On the other
hand, his backwages should be computed only for days prior to his
compulsory retirement which in this case is only a day. Consequently,
the award of reinstatement wages pending appeal must be deleted for
lack of basis.

Similarly, the Court finds no basis to hold petitioner Jennifer M. Eñano-


Bote, President and General Manager of The New Philippine Skylanders,
Inc., jointly and severally liable with the corporation for the payment of
the monetary awards. The mere lack of authorized or just cause to
terminate one's employment and the failure to observe due process do
not ipso facto mean that the corporate officer acted with malice or bad
faith.15 There must be independent proof of malice or bad faith which
was not established in this case. Perforce, petitioner Jennifer M. Eñano-
Bote cannot be made personally liable for the liabilities of the corporation
which, by legal fiction, has a personality separate and distinct from its
officers, stockholders and members. Moreover, for lack of factual and
legal bases, the awards of moral and exemplary damages cannot also be
sustained.161âwphi1

WHEREFORE, premises considered, the petition is PARTLY GRANTED.


The assailed August 31, 2011 and November 23, 2011 Resolutions of the
Court of Appeals in CA-G.R. SP No. 113015 are MODIFIED as follows:

(1) petitioner Jennifer M. Eñano-Bote is ABSOLVED from


liability for payment of respondent Francisco N. Dakila's
monetary awards;

(2) the awards of reinstatement wages pending appeal as well


as the moral and exemplary damages are ordered DELETED;
and

(3) the computation of backwages should be limited only for a


day prior to his compulsory retirement.

The rest of the decision stands.

SO ORDERED.

65
17 them. Consequently, Bandag terminated their respective SFA. different parts of the country, they knew that this substantially changed
their former relationships. They were to cease working as Bandag’s
Aggrieved, petitioners filed a complaint for constructive dismissal, non– salesmen, the positions they occupied before they ventured into running
payment of wages, incentive pay, 13th month pay and damages against separate Bandag branches. They were to cease receiving salaries or
Bandag with the National Labor Relations Commission (NLRC). commissions. Their incomes were to depend on the profits they made.
Petitioners contend that, notwithstanding the execution of the SFAs, they Yet, petitioners did not then complain of constructive dismissal. They
remained to be Bandag’s employees, the SFAs being but a circumvention took their chances, ran their branches, Gregorio Sharp in La Union for
of their status as regular employees. several months and Ashmor Tesoro in Baguio and Pedro Ang in
Pangasinan for over a year. Clearly, their belated claim of constructive
For its part, Bandag pointed out that petitioners freely resigned from dismissal is quite hollow.
their employment and decided to avail themselves of the opportunity to
THIRD DIVISION be independent entrepreneurs under the franchise scheme that Bandag It is pointed out that Bandag continued, like an employer, to exercise
had. Thus, no employer–employee relationship existed between control over petitioners’ work. It points out that Bandag: (a) retained the
G.R. No. 171482, March 12, 2014 petitioners and Bandag. right to adjust the price rates of products and services; (b) imposed
minimum processed tire requirement (MPR); (c) reviewed and regulated
On March 14, 2003 the Labor Arbiter rendered a Decision, dismissing the credit applications; and (d) retained the power to suspend petitioners’
ASHMOR M. TESORO, PEDRO ANG AND GREGORIO complaint on the ground that no employer–employee relationship existed services for failure to meet service standards.
SHARP, Petitioners, v. METRO MANILA RETREADERS, INC. between Bandag and petitioners. Upon petitioners’ appeal to the NLRC
(BANDAG) AND/OR NORTHERN LUZON RETREADERS, INC. the latter affirmed on June 30, 2003 the Labor Arbiter’s Decision. It also But uniformity in prices, quality of services, and good business practices
(BANDAG) AND/OR POWER TIRE AND RUBBER CORP. denied petitioners’ motion for reconsideration. Undaunted, petitioners are the essence of all franchises. A franchisee will damage the
(BANDAG), Respondents. filed a petition for certiorari under Rule 65 with the Court of Appeals franchisor’s business if he sells at different prices, renders different or
(CA) ascribing grave abuse of discretion. On July 29, 2005 the CA inferior services, or engages in bad business practices. These business
DECISION rendered a Decision,1 dismissing the petition for lack of merit. It also constraints are needed to maintain collective responsibility for faultless
denied their motion for reconsideration on February 7, 2006. and reliable service to the same class of customers for the same prices.
ABAD, J.: This is not the “control” contemplated in employer–employee
Issue of the Case
relationships. Control in such relationships addresses the details of day
This case concerns the effect on the status of employment of employees The only issue presented in this case is whether or not petitioners to day work like assigning the particular task that has to be done,
who entered into a Service Franchise Agreement with their employer. remained to be Bandag’s salesmen under the franchise scheme it monitoring the way tasks are done and their results, and determining the
entered into with them. time during which the employee must report for work or accomplish his
The Facts and the Case assigned task.
Ruling of the Court
On various dates between 1991 and 1998, petitioners Ashmor M. Tesoro, Franchising involves the use of an established business expertise,
Pedro Ang, and Gregorio Sharp used to work as salesmen for trademark, knowledge, and training. As such, the franchisee is required
Franchising is a business method of expansion that allows an individual
respondents Metro Manila Retreaders, Inc., Northern Luzon Retreaders, to follow a certain established system. Accordingly, the franchisors may
or group of individuals to market a product or a service and to use of the
Inc., or Power Tire and Rubber Corporation, apparently sister companies, impose guidelines that somehow restrict the petitioners’ conduct which
patent, trademark, trade name and the systems prescribed by the
collectively called “Bandag.” Bandag offered repair and retread services do not necessarily indicate “control.” The important factor to consider is
owner.2 In this case, Bandag’s SFAs created on their faces an
for used tires. In 1998, however, Bandag developed a franchising still the element of control over how the work itself is done, not just its
arrangement that gave petitioners the privilege to operate and maintain
scheme that would enable others to operate tire and retreading end result.4
Bandag branches in the way of franchises, providing tire repair and
businesses using its trade name and service system. retreading services, with petitioners earning profits based on the
The Court held, in Tongko v. The Manufacturers Life Insurance Co.
performance of their branches.
Petitioners quit their jobs as salesmen and entered into separate Service (Phils.), Inc.,5 that, results–wise, the insurance company, as principal,
Franchise Agreements (SFAs) with Bandag for the operation of their can impose production quotas upon its independent agents and
The question is: did petitioners remain to be Bandag’s employees after
respective franchises. Under the SFAs, Bandag would provide funding determine how many individual agents, with specific territories, such
they began operating those branches? The tests for determining
support to the petitioners subject to a regular or periodic liquidation of independent agents ought to employ to achieve the company’s
employer–employee relationship are: (a) the selection and engagement
their revolving funds. The expenses out of these funds would be objectives. These are management policy decisions that the labor law
of the employee; (b) the payment of wages; (c) the power of dismissal;
deducted from petitioners’ sales to determine their incomes. element of control cannot reach. Petitioners’ commitment to abide by
and (d) the employer’s power to control the employee with respect to
Bandag’s policy decisions and implementing rules, as franchisees does
the means and methods by which the work is to be accomplished. The
At first, petitioners managed and operated their respective franchises not make them its employees.
last is called the “control test,” the most important element.3
without any problem. After a length of time, however, they began to
default on their obligations to submit periodic liquidations of their Petitioners cannot use the revolving funds feature of the SFAs as
When petitioners agreed to operate Bandag’s franchise branches in
operational expenses in relation to the revolving funds Bandag provided evidence of their employer–employee relationship with Bandag. These
66
funds do not represent wages. They are more in the nature of capital
advances for operations that Bandag conceptualized to attract
prospective franchisees. Petitioners’ incomes depended on the profits
they make, controlled by their individual abilities to increase sales and
reduce operating costs.

The Labor Arbiter, the NLRC, and the CA, are unanimous that petitioners
were no longer “route salesmen, bringing previously ordered supplies
and goods to dealers, taking back returned items, collecting payments,
remitting them, etc. They were themselves then the dealers, getting
their own supply and bringing these to their own customers and sub–
dealers, if any.”

The rule in labor cases is that the findings of fact of quasi–judicial


bodies, like the NLRC, are to be accorded with respect, even finality, if
supported by substantial evidence. This is particularly true when passed
upon and upheld by the CA.6

WHEREFORE, the instant petition is DENIED. The Decision dated July


29, 2005 and Resolution dated February 7, 2006 of the Court of Appeals
in CA–G.R. SP 82447 are AFFIRMED.

SO ORDERED.

67
18 January 1 to December 31, 2003 where he held the position of Division 5 threw a despedidaparty in his honor and, subsequently, appointed a new
Vice-President-Sales.8 independent contractor. Two months after herelinquished his post,
however, Alcantara appeared in Royale Homes and submitted a letter
Republic of the Philippines claiming that he was illegally dismissed.
Proceedings before the Labor Arbiter
SUPREME COURT
Manila
Ruling of the Labor Arbiter
On December 17, 2003, Alcantara filed a Complaint for Illegal
Dismissal9 against Royale Homes and its President Matilde Robles,
SECOND DIVISION
Executive Vice-President for Administration and Finance Ma. Melinda On September 7, 2005,the Labor Arbiter rendered a Decision11 holding
Bernardino, and Executive Vice- President for Sales Carmina Sotto. that Alcantara is an employee of Royale Homes with a fixed-term
G.R. No. 195190 July 28, 2014 Alcantara alleged that he is a regular employee of Royale Homes since employment period from January 1 to December 31, 2003 and that the
he is performing tasks that are necessary and desirable to its business; pre-termination of his contract was against the law.Hence, Alcantara is
ROYALE HOMES MARKETING CORPORATION, Petitioner, that in 2003 the company gave him P1.2 million for the services he entitled to an amount which he may have earned on the average for the
vs. rendered to it; that in the first week of November 2003, however, the unexpired portion of the contract. With regard to the impleaded
FIDEL P. ALCANTARA [deceased], substituted by his executive officers of Royale Homes told him that they were wondering corporate officers, the Labor Arbiter absolved them from any liability.
heirs, Respondent. why he still had the gall to come to office and sit at his table;10 and that
the actsof the executive officers of Royale Homes amounted to his
The dispositive portion of the Labor Arbiter’s Decision reads:
dismissal from work without any valid or just cause and in gross
DECISION disregard of the proper procedure for dismissing employees. Thus, he
alsoimpleaded the corporate officers who, he averred, effected his WHEREFORE, premises considered, judgment is hereby rendered
DEL CASTILLO, J.: dismissal in bad faith and in an oppressive manner. ordering the respondent Royale Homes Marketing Corp. to pay the
complainant the total amount of TWO HUNDRED SEVENTY SEVEN
THOUSAND PESOS (P277,000.00) representing his
Not every form of control that a hiring party imposes on the hired party Alcantara prayed to be reinstated tohis former position without loss of
compensation/commission for the unexpired term of his contract.
is indicative of employee-employer relationship. Rules and regulations seniority rights and other privileges, as well as to be paid backwages,
that merely serve as guidelines towards the achievement of a mutually moral and exemplary damages, and attorney’s fees. He further sought
desired result without dictating the means and methods of accomplishing that the ownership of the Mitsubishi Adventure with Plate No. WHD-945 All other claims are dismissed for lack of merit.
it do not establish employer-employee relationship.1 be transferred to his name.
SO ORDERED.12
This Petition for Review on Certiorari2 assails the June 23, 2010 Royale Homes, on the other hand, vehemently denied that Alcantara is
Decision3 of the Court of Appeals (CA) in CA-G.R. SP No. 109998 which its employee. It argued that the appointment paper of Alcantara isclear Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale
(i) reversed and set aside the February 23, 2009 Decision4 of the that it engaged his services as an independent sales contractorfor a fixed Homes claimed that the Labor Arbiter grievously erred inruling that there
National Labor Relations Commission (NLRC), (ii) ordered petitioner term of one year only. He never received any salary, 13th month pay, exists an employer-employee relationship between the parties. It insisted
Royale Homes Marketing Corporation (Royale Homes) to pay respondent overtime pay or holiday pay from Royale Homes as hewas paid purely on that the contract between them expressly statesthat Alcantara is an
Fidel P. Alcantara (Alcantara) backwages and separation pay, and (iii) commission basis. In addition, Royale Homes had no control on how independent contractor and not an ordinary employee. Ithad no control
remanded the case to the Labor Arbiter for the proper determination and Alcantara would accomplish his tasks and responsibilities as he was free over the means and methods by which he performed his work.
computation of said monetary awards. to solicit sales at any time and by any manner which he may deem RoyaleHomes likewise assailed the award of P277,000.00 for lack of
appropriateand necessary. He is even free to recruit his own sales basis as it did not pre-terminate the contract. It was Alcantara who
personnel to assist him in pursuance of his sales target. chose not to finish the contract.
Also assailed in this Petition isthe January 18, 2011 Resolution5 of the CA
denying Royale Homes’ Motion for Reconsideration,6 as well as its
Supplemental7 thereto. According to Royale Homes, Alcantara decided to leave the company Alcantara, for his part, argued that the Labor Arbiter erred in ruling that
after his wife, who was once connectedwith it as a sales agent, had his employment was for a fixed-term and that he is not entitled to
formed a brokerage company that directly competed with its business, backwages, reinstatement, unpaid commissions, and damages.
Factual Antecedents and even recruited some of its sales agents. Although this was against
the exclusivity clause of the contract, Royale Homes still offered to
In 1994, Royale Homes, a corporation engaged in marketing real accept Alcantara’s wife back so she could continue to engage in real Ruling of the National LaborRelations Commission
estates, appointed Alcantara asits Marketing Director for a fixed period of estate brokerage, albeit exclusively for Royale Homes. In a special
one year. His work consisted mainly of marketing Royale Homes’ management committee meeting on October 8,2003, however, Alcantara On February 23, 2009, the NLRC rendered its Decision,13 ruling that
realestate inventories on an exclusive basis. Royale Homes reappointed announced publicly and openly that he would leave the company by the Alcantara is not an employee but a mere independent contractor of
him for several consecutive years, the last of which covered the period end of October 2003 and that he would no longer finish the unexpired Royale Homes. It based its ruling mainly on the contract which does not
term of his contract. He has decided to join his wifeand pursue their own require Alcantara to observe regular working hours. He was also free to
brokerage business. Royale Homes accepted Alcantara’s decision. It then
68
adopt the selling methods he deemed most effective and can even WHEREFORE, in view of the foregoing, the instant PETITION is Royale Homes contends that its contract with Alcantara is clear and
recruit sales agents to assist him in marketing the inventories of Royale GRANTED. The assailed decision of the National Labor Relations unambiguous −it engaged his services as an independent contractor.
Homes. The NLRC also considered the fact that Alcantara was not Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA NO. This can be readily seen from the contract stating that no employer-
receiving monthly salary, but was being paid on commission basis as 046104-05 dated February 23, 2009 as well as the Resolution dated May employee relationship exists between the parties; that Alcantara was
stipulated in the contract. Being an independent contractor, the NLRC 29, 2009 are hereby SET ASIDE and a new one is entered ordering the free to solicit sales at any time and by any manner he may deem
concluded that Alcantara’s Complaint iscognizable by the regular courts. respondent company to pay petitioner backwages which shall be appropriate; that he may recruit sales personnel to assist him in
computed from the time of his illegal termination in October 2003 up to marketing Royale Homes’ inventories; and, thathis remunerations are
the finality of this decision, plus separation pay equivalent to one month dependent on his sales performance.
The falloof the NLRC Decision reads:
salary for every year of service. This case is REMANDED to the Labor
Arbiter for the proper determination and computation of back wages,
Royale Homes likewise argues that the CA grievously erred in ruling that
WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores separation pay and other monetary benefits that petitioner is entitled to.
it exercised control over Alcantara based on a shallow ground that his
Peralta-Beley dated September 5, 2005 is REVERSED and SET ASIDE and
performance is subject to company rules and regulations, code of ethics,
a NEW ONE rendered dismissing the complaint for lack of jurisdiction.
SO ORDERED.19 periodic evaluation, and exclusivity clause of contract. RoyaleHomes
maintains that it is expected to exercise some degree of control over its
SO ORDERED.14 independent contractors,but that does not automatically result in the
Royale Homes filed a Motion for Reconsideration20 and a Supplemental
existence ofemployer-employee relationship. For control to be
Motion for Reconsideration.21 In a Resolution22 dated January 18, 2011,
Alcantara moved for reconsideration.15 In a Resolution16 dated May 29, consideredas a proof tending to establish employer-employee
however, the CA denied said motions.
2009, however, the NLRC denied his motion. relationship, the same mustpertain to the means and method of
performing the work; not on the relationship of the independent
Issues contractors among themselves or their persons or their source of living.
Alcantara thus filed a Petition for Certiorari17 with the CA imputing grave
abuse of discretion on the partof the NLRC in ruling that he is not an
Hence, this Petition where Royale Homes submits before this Court the Royale Homes further asserts that it neither hired nor wielded the power
employee of Royale Homes and that it is the regular courts which have
following issues for resolution: to dismiss Alcantara. It was Alcantara who openly and publicly declared
jurisdiction over the issue of whether the pre-termination of the contract
is valid. that he was pre-terminating his fixed-term contract.
A.
Ruling of the Court of Appeals The pivotal issue to be resolved in this case is whether Alcantara was an
WHETHER THE COURT OF APPEALS HAS DECIDED THE independent contractor or anemployee of Royale Homes.
INSTANT CASE NOT IN ACCORD WITH LAW AND APPLICABLE
On June 23, 2010, the CA promulgated its Decision18 granting Alcantara’s
DECISIONS OF THE SUPREME COURT WHEN IT REVERSED Our Ruling
Petition and reversing the NLRC’s Decision. Applying the four-fold and
THE RULING OF THE NLRC DISMISSING THE COMPLAINT OF
economic reality tests, it held thatAlcantara is an employee of Royale
RESPONDENT FOR LACK OF JURISDICTION AND
Homes. Royale Homes exercised some degree of control over Alcantara The Petition is impressed with merit.
CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS
since his job, as observed by the CA, is subject to company rules,
ILLEGALLY DISMISSED[.]
regulations, and periodic evaluations. He was also bound by the
The determination of whether a party who renders services to another is
company code of ethics. Moreover, the exclusivity clause of the contract
an employee or an independent contractor involves an evaluation of
has made Alcantara economically dependent on Royale Homes, B.
factual matters which, ordinarily, is not within the province of this Court.
supporting the theory that he is anemployee of said company.
In view of the conflicting findings of the tribunals below, however, this
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS Court is constrained to go over the factual matters involved in this
The CA further held that Alcantara’s termination from employment was ERROR OF LAW IN DISREGARDING THE EN BANCRULING OF case.24
without any valid or just cause, and it was carried out in violation of his THIS HONORABLE COURT IN THE CASEOF TONGKO VS.
right to procedural due process. Thus, the CA ruled that he isentitled to MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE
The juridical relationship of the parties based on their written contract
backwages and separation pay, in lieu of reinstatement. RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]
Considering,however, that the CA was not satisfied with the
proofadduced to establish the amount of Alcantara’s annual salary, it The primary evidence of the nature of the parties’ relationship in this
C.
remanded the caseto the Labor Arbiter to determine the same and the case is the written contract that they signed and executed in
monetary award he is entitled to. With regard to the corporate officers, pursuanceof their mutual agreement. While the existence of employer-
the CA absolved them from any liability for want of clear proof that they WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS employee relationship is a matter of law, the characterization made by
assented to the patently unlawful acts or that they are guilty of bad faith ERROR OF LAW IN DENYING THE MOTION FOR the parties in their contract as to the nature of their juridical relationship
orgross negligence. Thus: RECONSIDERATION OF PETITIONER AND IN REFUSING TO cannot be simply ignored, particularly in this case where the parties’
CORRECT ITSELF[.]23 written contractunequivocally states their intention at the time they

69
entered into it. In Tongko v. The Manufacturers LifeInsurance Co. attendance of which shall be a condition precedent for their accreditation and engagement of the employee; (2) the payment of wages; (3) the
(Phils.), Inc.,25 it was held that: by us. power of dismissal; and (4) the employer’s power to control the
employee with respect to the means and methods by which the work is
to be accomplished.29 Among the four, the most determinative factor in
To be sure, the Agreement’s legal characterization of the nature of the That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled
ascertaining the existence of employeremployee relationship is the "right
relationship cannot be conclusive and binding on the courts; x x x the to:
of control test".30 "It is deemed to be such an important factor that the
characterization of the juridical relationship the Agreement embodied is a
other requisites may even be disregarded."31 This holds true where the
matter of law that is for the courts to determine. At the same time,
1. Commission override of 0.5% for all option sales beginning issues to be resolved iswhether a person who performs work for another
though, the characterization the parties gave to their relationship in the
January 1, 2003 booked by your sales agents. is the latter’s employee or is an independent contractor,32 as in this case.
Agreement cannot simply be brushed aside because it embodiestheir
For where the person for whom the services are performed reserves the
intent at the time they entered the Agreement, and they were governed
2. Budget allocation depending on your division’s sale right to control not only the end to beachieved, but also the means by
by this understanding throughout their relationship. At the very least, the
performance as per our budget guidelines. which such end is reached, employer-employee relationship is deemed to
provision on the absence of employer- employee relationship between
exist.33
the parties can be an aid in considering the Agreement and its
implementation, and in appreciating the other evidence on record.26 3. Sales incentive and other forms of company support which
may be granted from time to time. It is understood, however, In concluding that Alcantara is an employee of RoyaleHomes, the CA
that no employer-employee relationship exists between us, ratiocinated that since the performance of his tasks is subject to
In this case, the contract, duly signed and not disputed by the parties,
27

that of your sales personnel/agents, and that you shall hold company rules, regulations, code of ethics, and periodic evaluation, the
conspicuously provides that "no employer-employee relationship exists
our company x x x, its officers and directors, free and element of control is present.
between" Royale Homes and Alcantara, as well as his sales agents. It is
clear that they did not want to be bound by employer-employee harmless from any and all claims of liability and damages
relationship atthe time ofthe signing of the contract. Thus: arising from and/or incident to the marketing of our real estate The Court disagrees.
inventories.
January 24, 2003 Not every form of control is indicative of employer-employee
We reserve, however, our right to terminate this agreement in case of relationship.1âwphi1 A person who performs work for another and is
violation of any company rules and regulations, policies and code of subjected to its rules, regulations, and code of ethics does not
MR. FIDEL P. ALCANTARA
ethics upon notice for justifiable reason. necessarily become an employee.34 As long as the level of control does
not interfere with the means and methods of accomplishing the assigned
13 Rancho I tasks, the rules imposed by the hiring party on the hired party do not
Your performance shall be subject toperiodic evaluation based on factors
which shall be determined by the management. amount to the labor law concept of control that is indicative of employer-
Marikina City employee relationship. In Insular Life Assurance Co., Ltd. v. National
Labor Relations Commission35 it was pronounced that:
If you are amenable to the foregoing terms and conditions, please
Dear Mr. Alcantara, indicate your conformity by signing on the space provided below and
return [to] us a duplicate copy of this letter, duly accomplished, to Logically, the line should be drawn between rules that merely serve as
constitute as our agreement on the matter.(Emphasis ours) guidelines towards the achievement of the mutually desired result
This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES without dictating the means or methods to be employed in attaining it,
of ROYALE HOMES MARKETING CORPORATION effective January 1, and those that control or fix the methodology and bind or restrict the
2003 to December 31, 2003. Since "the terms of the contract are clear and leave no doubt upon the party hired to the use of such means. The first, which aim only to
intention of the contracting parties, the literal meaning of itsstipulations promote the result, create no employeremployee relationship unlike the
should control."28 No construction is even needed asthey already second, which address both the result and the means used to achieve it.
Your appointment entails marketing our real estate inventories on an
expressly state their intention. Also, this Court adopts the observation of x x x36
EXCLUSIVE BASIS under such price, terms and condition to be provided
the NLRC that it is rather strange on the part of Alcantara, an educated
to you from time to time.
man and a veteran sales broker who claimed to be receiving P1.2 million
as his annual salary, not to have contested the portion of the contract In this case, the Court agrees with Royale Homes that the rules,
As such, you can solicit sales at any time and by any manner which you expressly indicating that he is not an employee of Royale Homes if their regulations, code of ethics, and periodic evaluation alluded to
deem appropriate and necessary to market our real estate inventories true intention were otherwise. byAlcantara do not involve control over the means and methods by
subject to rules, regulations and code of ethics promulgated by the which he was to performhis job. Understandably, Royale Homes has to
company. Further, you are free to recruit sales personnel/agents to fix the price, impose requirements on prospective buyers, and lay down
The juridical relationship of the parties based on Control Test the terms and conditionsof the sale, including the mode of payment,
assist you in marketing of our inventories provided that your
personnel/agents shall first attend the required seminars and briefing to which the independent contractors must follow. It is also necessary for
be conducted by us from time to time for the purpose of familiarizing In determining the existence of an employer-employee relationship, this Royale Homes to allocateits inventories among its independent
them of terms and conditionsof sale, the natureof property sold, etc., Court has generally relied on the four-fold test, to wit: (1) the selection contractors, determine who has priority in selling the same, grant
commission or allowance based on predetermined criteria, and regularly
70
monitor the result of their marketing and sales efforts. But tothe mind of Neither does the repeated hiring of Alcantara prove the existence of WHEREFORE, the instant Petition is hereby GRANTED. The June 23,
this Court, these do not pertain to the means and methods of how employer-employee relationship.41 As discussed above, the absence of 2010 Decision of the Court of Appeals in CA-G.R. SP No. 109998 is
Alcantara was to perform and accomplish his task of soliciting sales. control over the means and methodsdisproves employer-employee REVERSED and SET ASIDE. The February 23, 2009 Decision of the
They do not dictate upon him the details of how he would solicit sales or relationship. The continuous rehiring of Alcantara simply signifies the National Labor Relations Commission is REINSTATED and AFFIRMED. SO
the manner as to how he would transact business with prospective renewal of his contract with Royale Homes, and highlights his ORDERED.
clients. In Tongko, this Court held that guidelines or rules and satisfactory services warranting the renewal of such contract. Nor does
regulations that do notpertain to the means or methodsto be employed the exclusivity clause of contract establish the existence of the labor law
in attaining the result are not indicative of control as understood inlabor concept of control. In Consulta v. Court of Appeals,42 it was held that
law. Thus: exclusivity of contract does not necessarily result in employer-employee
relationship, viz:
From jurisprudence, an important lesson that the first Insular Lifecase
teaches us is that a commitment to abide by the rules and regulations of x x x However, the fact that the appointment required Consulta to solicit
an insurance company does not ipso factomake the insurance agent an business exclusively for Pamana did not mean that Pamana exercised
employee. Neither do guidelines somehow restrictive of the insurance control over the means and methods of Consulta’s work as the term
agent’s conduct necessarily indicate "control" as this term is defined in control is understood in labor jurisprudence. Neither did it make Consulta
jurisprudence. Guidelines indicative of labor law "control," as the first an employee of Pamana. Pamana did not prohibit Consulta from
Insular Lifecase tells us, should not merely relate to the mutually engaging in any other business, or from being connected with any other
desirable result intended by the contractual relationship; they must have company, for aslong as the business [of the] company did not compete
the nature of dictating the means or methods to beemployed in attaining with Pamana’s business.43
the result, or of fixing the methodology and of binding or restricting the
party hired to the use of these means.In fact, results-wise, the principal
The same scenario obtains in this case. Alcantara was not prohibited
can impose production quotas and can determine how many agents,
from engaging in any other business as long as he does not sell projects
with specific territories, ought to be employed to achieve the company’s
of Royale Homes’ competitors. He can engage in selling various other
objectives. These are management policy decisions that the labor law
products or engage in unrelated businesses.
element of control cannot reach. Our ruling in these respects in the first
Insular Lifecase was practically reiterated in Carungcong. Thus, as will be
shown more fully below, Manulife’s codes of conduct, all of which do not Payment of Wages
intrude into the insurance agents’ means and manner of conducting their
sales and only control them as to the desired results and Insurance Code The element of payment of wages is also absent in thiscase. As provided
norms, cannot be used as basis for a finding that the labor law concept in the contract, Alcantara’s remunerations consist only of commission
of control existed between Manulife and Tongko.37 (Emphases in the override of 0.5%, budget allocation, sales incentive and other forms of
original) company support. There is no proof that he received fixed monthly
salary. No payslip or payroll was ever presented and there is no proof
As the party claiming the existence of employer-employee relationship, it that Royale Homes deducted from his supposed salary withholding tax or
behoved upon Alcantara to prove the elements thereof, particularly that it registered him with the Social Security System, Philippine Health
Royale Homes’ power of control over the means and methods of Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint merely
accomplishing the work.38 He, however, failed to cite specificrules, states a ballpark figure of his alleged salary of P100,000.00, more or
regulations or codes of ethics that supposedly imposed control on his less. All of these indicate an independent contractual
means and methods of soliciting sales and dealing with prospective relationship.44 Besides, if Alcantara indeed consideredhimself an
clients. On the other hand, this case is replete with instances that negate employee of Royale Homes, then he, an experienced and professional
the element of control and the existence of employer-employee broker, would have complained that he was being denied statutorily
relationship. Notably, Alcantara was not required to observe definite mandated benefits. But for nine consecutive years, he kept mum about
working hours.39 Except for soliciting sales, RoyaleHomes did not assign it, signifying that he has agreed, consented, and accepted the fact that
other tasks to him. He had full control over the means and methods of he is not entitled tothose employee benefits because he is an
accomplishing his tasks as he can "solicit sales at any time and by any independent contractor.
manner which [he may] deem appropriate and necessary." He
performed his tasks on his own account free from the control and This Court is, therefore,convinced that Alcantara is not an employee of
direction of Royale Homes in all matters connected therewith, except as Royale Homes, but a mere independent contractor. The NLRC is,
to the results thereof.40 therefore, correct in concluding that the Labor Arbiter has no jurisdiction
over the case and that the same is cognizable by the regular courts.

71
19 31, 2009. The contract also provided that the parties release each other of the National Labor Relations Commission, both parties filed separate
from liabilities and responsibilities under the employment contract.12 petitions for certiorari27 before the Court of Appeals. The Court of
Appeals consolidated the petitions and considered the following issues
Republic of the Philippines for resolution:
In consideration of the non-renewal contract, Arlene "acknowledged
SUPREME COURT
receipt of the total amount of US$18,050.00 representing her monthly
Manila
salary from March 2009 to May 2009, year-end bonus, mid-year bonus, 1) Whether or not Espirituis a regular employee or a fixed-
and separation pay."13 However, Arlene affixed her signature on the term contractual employee;
SECOND DIVISION nonrenewal contract with the initials "U.P." for "under protest."14
2) Whether or not Espiritu was illegally dismissed; and
G.R. No. 204944-45 December 3, 2014 On May 6, 2009, the day after Arlene signed the non-renewal contract,
she filed a complaint for illegal dismissal and attorney’s fees with the
3) Whether or not Espirituis entitled to damages and attorney’s
FUJI TELEVISION NETWORK, INC., Petitioner, National Capital Region Arbitration Branch of the National Labor
fees.28
vs. Relations Commission. She alleged that she was forced to sign the
ARLENE S. ESPIRITU, Respondent. nonrenewal contract when Fuji came to know of her illness and that Fuji
withheld her salaries and other benefits for March and April 2009 when In the assailed decision, the Court of Appeals affirmed the
she refused to sign.15 National Labor Relations Commission with the modification
DECISION that Fuji immediately reinstate Arlene to her position as News
Producer without loss of seniority rights, and pay her
Arlene claimed that she was left with no other recourse but to sign the
LEONEN, J.: backwages, 13th-month pay, mid-year and year-end bonuses,
non-renewal contract, and it was only upon signing that she was given
sick leave and vacation leave with pay until reinstated, moral
her salaries and bonuses, in addition to separation pay equivalent to four
damages, exemplary damages, attorney’sfees, and legal
It is the burden of the employer to prove that a person whose services it (4) years.16
interest of 12% per annum of the total monetary
pays for is an independent contractor rather than a regular employee awards.29 The Court of Appeals ruled that:
with or without a fixed term. That a person has a disease does not per In the decision17 dated September 10, 2009, Labor Arbiter Corazon C.
se entitle the employer to terminate his or her services. Termination is Borbolla dismissed Arlene’s complaint.18Citing Sonza v. ABS-CBN19 and
the last resort. At the very least, a competent public health authority WHEREFORE, for lack of merit, the petition of Fuji Television Network,
applying the four-fold test, the Labor Arbiter held that Arlene was not
must certify that the disease cannot be cured within six ( 6) months, Inc. and Yoshiki Aoki is DENIED and the petition of Arlene S. Espiritu is
Fuji’s employee but an independent contractor.20
even with appropriate treatment. GRANTED. Accordingly, the Decision dated March 5, 2010 of the National
Labor Relations Commission, 6th Division in NLRC NCR Case No. 05-
Arlene appealed before the National Labor Relations Commission. In its 06811-09 and its subsequent Resolution dated April 26, 2010 are hereby
We decide this petition for review1 on certiorari filed by Fuji Television decision dated March 5, 2010, the National Labor Relations Commission AFFIRMED with MODIFICATIONS, as follows:
Network, Inc., seeking the reversal of the Court of Appeals’ reversed the Labor Arbiter’s decision.21 It held that Arlene was a regular
Decision2 dated June 25, 2012, affirming with modification the employee with respect to the activities for which she was employed since
decision3 of the National Labor Relations Commission. Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE
she continuously rendered services that were deemednecessary and
Arlene S. Espiritu to her position as News Producer without loss of
desirable to Fuji’s business.22 The National Labor Relations Commission
seniority rights and privileges and to pay her the following:
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television ordered Fuji to pay Arlene backwages, computed from the date of her
Network, Inc. ("Fuji") asa news correspondent/producer4 "tasked to illegal dismissal.23 The dispositive portion of the decision reads:
report Philippine news to Fuji through its Manila Bureau field 1. Backwages at the rate of $1,900.00 per month computed
office."5 Arlene’s employment contract initially provided for a term of one from May 5, 2009 (the date of dismissal), until reinstated;
WHEREFORE, premises considered, judgment is hereby rendered
(1) year but was successively renewed on a yearly basis with salary GRANTING the instant appeal. The Decision of the Labor Arbiter dated
adjustment upon every renewal.6 Sometime in January 2009, Arlenewas 19 September 2009 is hereby REVERSED and SET ASIDE, and a new one 2. 13th Month Pay at the rate of $1,900.00 per annum from
diagnosed with lung cancer.7She informed Fuji about her condition. In is issued ordering respondents-appellees to pay complainant-appellant the date of dismissal, until reinstated;
turn, the Chief of News Agency of Fuji, Yoshiki Aoki, informed Arlene backwages computed from the date of her illegal dismissal until finality
"that the company will have a problem renewing her contract"8 since it of this Decision. 3. One and a half (1 1/2) months pay or $2,850.00 as midyear
would be difficult for her to perform her job.9She "insisted that she was
bonus per year from the date of dismissal, until reinstated;
still fit to work as certified by her attending physician."10
SO ORDERED.24
4. One and a half (1 1/2) months pay or $2,850.00 as year-
After several verbal and written communications,11 Arlene and Fuji
Arlene and Fuji filed separat emotions for reconsideration.25 Both end bonus per year from the date of dismissal, until
signed a non-renewal contract on May 5, 2009 where it was stipulated
motions were denied by the National Labor Relations Commission for reinstated;
that her contract would no longer be renewed after its expiration on May
lack of merit in the resolution dated April 26, 2010.26 From the decision

72
5. Sick leave of 30 days with pay or $1,900.00 per year from Aggrieved, Fuji filed this petition for review and argued that the Court of interested to work for Fuji.59 For Fuji, Arlene’s e-mail showed that she
the date of dismissal, until reinstated; and Appeals erred in affirming with modification the National Labor Relations had the power to bargain.60
Commission’s decision, holding that Arlene was a regular employee and
that she was illegally dismissed. Fuji also questioned the award of
6. Vacation leave with pay equivalent to 14 days or $1,425.00 Fuji then posits that the Court of Appeals erred when it held that the
monetary claims, benefits, and damages.39
per annum from date of dismissal, until reinstated. elements of an employer-employee relationship are present, particularly
that of control;61 that Arlene’s separation from employment upon the
Fuji points out that Arlene was hired as a stringer, and it informed her expiration of her contract constitutes illegal dismissal;62 that Arlene is
7. The amount of P100,000.00 as moral damages;
that she would remain one.40 She was hired as an independent entitled to reinstatement;63 and that Fuji is liable to Arlene for damages
contractor as defined in Sonza.41 Fuji had no control over her work.42 The and attorney’s fees.64
8. The amount of P50,000.00 as exemplary damages; employment contracts were executed and renewed annually upon
Arlene’s insistence to which Fuji relented because she had skills that
This petition for review on certiorari under Rule 45 was filed on February
9. Attorney’s fees equivalent to 10% of the total monetary distinguished her from ordinary employees.43 Arlene and Fuji dealt on
8, 2013.65 On February 27, 2013, Arlene filed a manifestation66 stating
awards herein stated; and equal terms when they negotiated and entered into the employment
that this court may not take jurisdiction over the case since Fuji failed to
contracts.44 There was no illegal dismissal because she freely agreed not
authorize Corazon E. Acerden to sign the verification.67 Fuji filed a
to renew her fixed-term contract as evidenced by her e-mail
10. Legal interest of twelve percent (12%) per annum of the comment on the manifestation68 on March 9, 2013.
correspondences with Yoshiki Aoki.45 In fact, the signing of the non-
total monetary awards computed from May 5, 2009, until their renewal contract was not necessary to terminate her employment since
full satisfaction. "such employment terminated upon expiration of her contract."46 Finally, Based on the arguments of the parties, there are procedural and
Fuji had dealt with Arlene in good faith, thus, she should not have been substantive issues for resolution:
The Labor Arbiter is hereby DIRECTED to make another recomputation awarded damages.47
of the above monetary awards consistent with the above directives. I. Whether the petition for review should be dismissed as
Fuji alleges that it did not need a permanent reporter since the news Corazon E. Acerden, the signatory of the verification and
SO ORDERED.30 reported by Arlene could easily be secured from other entities or from certification of non forum shopping of the petition, had no
the internet.48 Fuji "never controlled the manner by which she performed authority to sign the verification and certification on behalf of
her functions."49 It was Arlene who insisted that Fuji execute yearly Fuji;
In arriving at the decision, the Court of Appeals held that Arlene was a fixed-term contracts so that she could negotiate for annual increases in
regular employee because she was engaged to perform work that was her pay.50
necessary or desirable in the business of Fuji,31 and the successive II. Whether the Court of Appeals correctly determined that no
renewals of her fixed-term contract resulted in regular employment.32 grave abuse of discretion was committed by the National
Fuji points out that Arlene reported for work for only five (5) days in Labor Relations Commission when it ruled that Arlene was a
February 2009, three (3) days in March 2009, and one (1) day in April regular employee, not an independent contractor, and that she
According to the Court of Appeals, Sonzadoes not apply in order to 2009.51 Despite the provision in her employment contract that sick leaves was illegally dismissed; and
establish that Arlene was an independent contractor because she was in excess of 30 days shall not be paid, Fuji paid Arlene her entire salary
not contracted on account of any peculiar ability, special talent, or for the months of March, April, and May; four(4) months of separation
skill.33 The fact that everything used by Arlene in her work was owned by III. Whether the Court of Appeals properly modified the
pay; and a bonus for two and a half months for a total of National Labor Relations Commission’s decision by awarding
Fuji negated the idea of job contracting.34 US$18,050.00.52 Despite having received the amount of US$18,050.00, reinstatement, damages, and attorney’s fees.
Arlene still filed a case for illegal dismissal.53
The Court of Appeals also held that Arlene was illegally dismissed
because Fuji failed to comply with the requirements of substantive and The petition should be dismissed.
Fuji further argues that the circumstances would show that Arlene was
procedural due process necessary for her dismissal since she was a not illegally dismissed. The decision tonot renew her contract was
regular employee.35 mutually agreed upon by the parties as indicated in Arlene’s e- I
mail54 dated March 11, 2009 where she consented to the non-renewal of
The Court of Appeals found that Arlene did not sign the non-renewal her contract but refused to sign anything.55 Aoki informed Arlene in an e- Validity of the verification and certification against forum shopping
contract voluntarily and that the contract was a mere subterfuge by Fuji mail56 dated March 12, 2009 that she did not need to sign a resignation
to secure its position that it was her choice not to renew her contract. letter and that Fuji would pay Arlene’s salary and bonus until May 2009
as well as separation pay.57 In its comment on Arlene’s manifestation, Fuji alleges that Corazon was
She was left with no choice since Fuji was decided on severing her
authorized to sign the verification and certification of non-forum
employment.36
shopping because Mr. Shuji Yano was empowered under the secretary’s
Arlene sent an e-mail dated March 18, 2009 with her version of the non- certificate to delegate his authority to sign the necessary pleadings,
Fuji filed a motion for reconsideration that was denied in the renewal agreement that she agreed to sign this time.58 This attached including the verification and certification against forum shopping.69
resolution37 dated December 7, 2012 for failure to raise new matters.38 version contained a provision that Fuji shall re-hire her if she was still

73
On the other hand, Arlene points outthat the authority given to Mr. Shuji shall constitute indirect contempt ofcourt, without prejudice to the In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted the
Yano and Mr. Jin Eto in the secretary’s certificate is only for the petition corresponding administrative and criminalactions. If the acts of the party required certification one day after filing his electoral protest.80 This
for certiorari before the Court of Appeals.70 Fuji did not attach any board or his counsel clearly constitute willful and deliberate forum shopping, court considered the subsequent filing as substantial compliance since
resolution authorizing Corazon orany other person tofile a petition for the same shall be ground for summary dismissal with prejudice and shall the purpose of filing the certification is to curtail forum shopping.81
review on certiorari with this court.71 Shuji Yano and Jin Eto could not re- constitute direct contempt, as well as a cause for administrative
delegate the power thatwas delegated to them.72 In addition, the special sanctions.
In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Peña signed the
power of attorney executed by Shuji Yano in favor of Corazon indicated
verification and certification against forum shopping but failed to attach
that she was empowered to sign on behalf of Shuji Yano, and not on
Section 4(e) of Rule 4574 requires that petitions for review should the board resolution indicating her authority to sign.83 In a motion for
behalf of Fuji.73
"contain a sworn certification against forum shopping as provided in the reconsideration, LDP Marketing attached the secretary’s certificate
last paragraph of section 2, Rule 42." Section 5 of the same rule provides quoting the board resolution that authorized Dela Peña.84 Citing Shipside,
The Rules of Court requires the that failure to comply with any requirement in Section 4 is sufficient this court deemed the belated submission as substantial compliance
submission of verification and ground to dismiss the petition. since LDP Marketing complied with the requirement; what it failed to do
certification against forum shopping was to attach proof of Dela Peña’s authority to sign.85 Havtor
Management Phils., Inc. v. National Labor Relations Commission86 and
Effects of non-compliance
General Milling Corporation v. National Labor Relations
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the
Commission87 involved petitions that were dismissed for failure to attach
requirement of verification, while Section 5 of the same rule provides the
Uy v. Landbank75 discussed the effect of non-compliance with regard to any document showing that the signatory on the verification and
requirement of certification against forum shopping. These sections
verification and stated that: certification against forum-shopping was authorized.88 In both cases, the
state:
secretary’s certificate was attached to the motion for
[t]he requirement regarding verification of a pleading is formal, not reconsideration.89 This court considered the subsequent submission of
SEC. 4. Ver if ica tio n. — Except when otherwise specifically required by proof indicating authority to sign as substantial compliance.90 Altres v.
jurisdictional. Such requirement is simply a condition affecting the form
law or rule, pleadings need not be under oath, verified or accompanied Empleo91 summarized the rules on verification and certification against
of pleading, the non-compliance of which does not necessarily render the
by affidavit. forum shopping in this manner:
pleading fatally defective. Verification is simply intended to secure an
assurance that the allegations in the pleading are true and correct and
A pleading is verified by an affidavit that the affiant has read the not the product of the imagination or a matter of speculation, and that For the guidance of the bench and bar, the Court restates in capsule
pleading and that the allegations therein are true and correct of his the pleading is filed in good faith. The court may order the correction of form the jurisprudential pronouncements . . . respecting non-compliance
knowledge and belief. the pleading if the verification is lacking or act on the pleading although with the requirement on, or submission of defective, verification and
it is not verified, if the attending circumstances are such that strict certification against forum shopping:
compliance with the rules may be dispensed with inorder that the ends
A pleading required to be verifiedwhich containsa verification based on
of justice may thereby be served.76 (Citations omitted)
"information and belief," or upon "knowledge, information and belief," or 1) A distinction must be made between non-compliance with
lacks a proper verification, shall be treated as an unsigned pleading. the requirement on or submission of defective verification, and
Shipside Incorporated v. Court of Appeals cited the discussion in Uy
77
noncompliance with the requirement on or submission of
and differentiated its effect from non-compliance with the requirement of defective certification against forum shopping.
SEC. 5. Certification against forum shopping.— The plaintiff or principal
certification against forum shopping:
party shall certify under oath in the complaint orother initiatory pleading
asserting a claim for relief or in a sworn certification annexed thereto 2) As to verification, non-compliance therewith or a defect
and simultaneously filed therewith: (a) that he has not theretofore On the other hand, the lack of certification against forum shopping is therein does not necessarily render the pleading fatally
commenced any action or filed any claim involving the same issues in generally not curable by the submission thereof after the filing of the defective. The court may order its submission or correction or
any court, tribunal or quasi-judicial agency and, to the best of his petition. Section 5, Rule 45 of the 1997 Rules of Civil Procedure provides act on the pleading if the attending circumstances are such
knowledge, no such other action or claim is pending therein; (b) if there that the failure of the petitioner tosubmit the required documents that that strict compliance with the Rule may be dispensed with in
is such other pending action or claim, a complete statement of the should accompany the petition, including the certification against forum order that the ends of justice may be served thereby.
present status thereof; and (c) if he should thereafter learn that the shopping, shall be sufficient ground for the dismissal thereof. The same
same or similar action or claim has been filed or is pending, he shall rule applies to certifications against forum shopping signed by a person
3) Verification is deemed substantially complied with when one
report that fact within five (5) days therefrom to the court wherein his on behalf of a corporation which are unaccompanied by proof that said
who has ample knowledge to swear to the truth of the
aforesaid complaint or initiatory pleading has been filed. signatory is authorized to file a petition on behalf of the
allegations in the complaint or petition signs the verification,
corporation.78 (Emphasis supplied) Effects of substantial compliance with
and when matters alleged in the petition have been made in
the requirement of verification and certification against forum shopping
Failure to comply with the foregoing requirements shall not be curable good faith or are true and correct.
by mere amendment of the complaint or other initiatory pleading but
shall be cause for the dismissal of the case without prejudice, unless Although the general rule is that failure to attach a verification and
4) As to certification against forum shopping, non-compliance
otherwise provided, upon motion and after hearing. The submission of a certification against forum shopping isa ground for dismissal, there are
therewith or a defect therein, unlike in verification, is generally
false certification or non-compliance with any of the undertakings therein cases where this court allowed substantial compliance.
74
not curable by its subsequent submission or correction thereof, Quoting the board resolution dated May 13, 2010, the secretary's Shuji Yano executed a special power of attorney appointing Ms. Ma.
unless there is a need to relax the Rule on the ground of certificate states: Corazon E. Acerden and Mr. Moises A. Rollera as his attorneys-in-
"substantial compliance" or presence of "special circumstances fact.100 The special power of attorney states:
or compelling reasons."
(a) The Corporation shall file a Petition for Certiorari with the
Court of Appeals, against Philippines’ National Labor Relations That I, SHUJI YANO, of legal age, Japanese national, with office address
5) The certification against forum shopping must be signed by Commission ("NLRC") and Arlene S. Espiritu, pertaining to at 2-4-8 Daiba, Minato-Ku, Tokyo, 137-8088 Japan, and being the
all the plaintiffs or petitioners in a case; otherwise, those who NLRC-NCR Case No. LAC 00-002697-09, RAB No. 05-06811-00 representative of Fuji TV, INc., [sic] (evidenced by the attached
did not sign will be dropped as parties to the case. Under and entitled "Arlene S. Espiritu v. Fuji Television Network, Secretary’s Certificate) one of the respondents in NLRC-NCR Case No.
reasonable or justifiable circumstances, however, as when all Inc./Yoshiki Aoki", and participate in any other subsequent 05-06811-00 entitled "Arlene S. Espiritu v. Fuji Television Network,
the plaintiffs or petitioners share a common interest and proceeding that may necessarily arise therefrom, including but Inc./Yoshiki Aoki", and subsequently docketed before the Court of
invoke a common cause of action or defense, the signature of not limited to the filing of appeals in the appropriate venue; Appeals asC.A. G.R. S.P. No. 114867 (Consolidated with SP No. 114889)
only one of them inthe certification against forum shopping do hereby make, constitute and appoint Ms. Ma. Corazon E. Acerden and
substantially complies with the Rule. Mr. Moises A. Rolleraas my true and lawful attorneys-infact for me and
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are
my name, place and stead to act and represent me in the above-
hereby authorized, to verify and execute the certification
mentioned case, with special power to make admission/s and stipulations
6) Finally, the certification against forum shopping must be against nonforum shopping which may be necessary or
and/or to make and submit as well as to accept and approve
executed by the party-pleader, not by his counsel. If, however, required to be attached to any pleading to [sic] submitted to
compromise proposals upon such terms and conditions and under such
for reasonable or justifiable reasons, the party-pleader is the Court of Appeals; and the authority to so verify and certify
covenants as my attorney-in-fact may deem fit, and to engage the
unable to sign, he must execute a Special Power of Attorney for the Corporation in favor of the said persons shall subsist
services of Villa Judan and Cruz Law Officesas the legal counsel to
designating his counsel of record to sign on his behalf.92 and remain effective until the termination of the said case;
represent the Company in the Supreme Court;

There was substantial compliance ....


The said Attorneys-in-Fact are hereby further authorized to make, sign,
by Fuji Television Network, Inc.
execute and deliver such papers ordocuments as may be necessary in
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are furtherance of the power thus granted, particularly to sign and execute
Being a corporation, Fuji exercises its power to sue and be sued through hereby authorized, to represent and appear on behalf the [sic] the verification and certification of non-forum shopping needed to be
its board of directors or duly authorized officers and agents. Thus, the Corporation in all stages of the [sic] this case and in any other filed.101 (Emphasis in the original)
physical act of signing the verification and certification against forum proceeding that may necessarily arise thereform [sic], and to
shopping can only be done by natural persons duly authorized either by act in the Corporation’s name, place and stead to determine,
In its comment102 on Arlene’s manifestation, Fuji argues that Shuji Yano
the corporate by-laws or a board resolution.93 propose, agree, decide, do, and perform any and all of the
could further delegate his authority because the board resolution
following:
empowered him to "act in the Corporation’s name, place and stead to
In its petition for review on certiorari, Fuji attached Hideaki Ota’s determine, propose, agree, decided [sic], do and perform any and all of
secretary’s certificate,94 authorizing Shuji Yano and Jin Eto to represent 1. The possibility of amicable settlement or of the following: . . . such other matters as may aid in the prompt
and sign for and on behalf of Fuji.95 The secretary’s certificate was duly submission to alternative mode of dispute disposition of the action."103 To clarify, Fuji attached a verification and
authenticated96by Sulpicio Confiado, Consul-General of the Philippines in resolution; certification against forum shopping, but Arlene questions Corazon’s
Japan. Likewise attached to the petition is the special power of attorney authority to sign. Arlene argues that the secretary’s certificate
executed by Shuji Yano, authorizing Corazon to sign on his behalf.97 The empowered Shuji Yano to file a petition for certiorari before the Court of
2. The simplification of the issue;
verification and certification against forum shopping was signed by Appeals, and not a petition for review before this court, and that since
Corazon.98 Shuji Yano’s authority was delegated to him, he could not further
3. The necessity or desirability of amendments to delegate such power. Moreover, Corazon was representing Shuji Yano in
the pleadings; his personal capacity, and not in his capacity as representative of Fuji.
Arlene filed the manifestation dated February 27, 2013, arguing that the
petition for review should be dismissed because Corazon was not duly
authorized to sign the verification and certification against forum 4. The possibility of obtaining stipulation or A review of the board resolution quoted in the secretary’s certificate
shopping. admission of facts and documents; and shows that Fuji shall "file a Petition for Certiorari with the Court of
Appeals"104 and "participate in any other subsequent proceeding that
Fuji filed a comment on Arlene’s manifestation, stating that Corazon was 5. Such other matters as may aid in the prompt may necessarily arise therefrom, including but not limited to the filing of
properly authorized to sign. On the basis of the secretary’s certificate, disposition of the action.99 (Emphasis in the original; appeals in the appropriate venue,"105 and that Shuji Yano and Jin Eto are
Shuji Yano was empowered to delegate his authority. Italics omitted) authorized to represent Fuji "in any other proceeding that may
necessarily arise thereform [sic]."106As pointed out by Fuji, Shuji Yano
and Jin Eto were also authorized to "act in the Corporation’s name, place
and stead to determine, propose, agree, decide, do, and perform anyand

75
all of the following: . . . 5. Such other matters as may aid in the prompt Corazon’s affidavit111 states that she is the "office manager and resident Appeals correctly determined the presence or absence of grave abuse of
disposition of the action."107 interpreter of the Manila Bureau of Fuji Television Network, Inc."112 and discretion and deciding other jurisdictional errors of the National Labor
that she has "held the position for the last twenty-three years."113 Relations Commission.119
Considering that the subsequent proceeding that may arise from the
petition for certiorari with the Court of Appeals is the filing of a petition As the office manager for 23 years,Corazon can be considered as having In Odango v. National Labor Relations Commission,120 this court
for review with this court, Fuji substantially complied with the procedural knowledge of all matters in Fuji’s Manila Bureau Office and is in a explained that a petition for certiorari is an extraordinary remedy that is
requirement. position to verify "the truthfulness and the correctness of the allegations "available only and restrictively in truly exceptional cases"121 and that its
in the Petition."114 sole office "is the correction of errors of jurisdiction including commission
of grave abuse of discretion amounting to lack or excess of
On the issue of whether Shuji Yano validly delegated his authority to
jurisdiction."122 A petition for certiorari does not include a review of
Corazon, Article 1892 of the Civil Code of the Philippines states: Thus, Fuji substantially complied with the requirements of verification
findings of fact since the findings of the National Labor Relations
and certification against forum shopping.
Commission are accorded finality.123 In cases where the aggrieved party
ART. 1892. The agent may appoint a substitute if the principal has not assails the National Labor Relations Commission’s findings, he or she
prohibited him from doing so; but he shall be responsible for the acts of Before resolving the substantive issues in this case, this court will discuss must be able to show that the Commission "acted capriciously and
the substitute: the procedural parameters of a Rule 45 petition for review in labor cases. whimsically or in total disregard of evidence material to the
controversy."124
(1) When he was not given the power to appoint one; II
When a decision of the Court of Appeals under a Rule 65 petition is
(2) When he was given such power, but without designating Procedural parameters of petitions for review in labor cases brought to this court by way of a petition for review under Rule 45, only
the person, and the person appointed was notoriously questions of law may be decided upon. As held in Meralco Industrial v.
incompetent or insolvent. All acts of the substitute appointed National Labor Relations Commission:125
Article 223 of the Labor Code115 does not provide any mode of appeal for
against the prohibition of the principal shall be void.
decisions of the National Labor Relations Commission. It merely states
that "[t]he decision of the Commission shall be final and executory after This Court is not a trier of facts. Well-settled is the rule that the
The secretary’s certificate does not state that Shuji Yano is prohibited ten (10) calendar days from receipt thereof by the parties." Being final, it jurisdiction of this Court ina petition for review on certiorari under Rule
from appointing a substitute. In fact, heis empowered to do acts that will is no longer appealable. However, the finality of the National Labor 45 of the Revised Rules of Court is limited to reviewing only errors of
aid in the resolution of this case. Relations Commission’s decisions does not mean that there is no more law, not of fact, unless the factual findings complained of are completely
recourse for the parties. devoid of support from the evidence on record, or the assailed judgment
is based on a gross misapprehension of facts. Besides, factual findings of
This court has recognized that there are instances when officials or quasi-judicial agencies like the NLRC, when affirmed by the Court of
employees of a corporation can sign the verification and certification In St. Martin Funeral Home v. National Labor Relations Appeals, are conclusive upon the parties and binding on this Court.126
against forum shopping without a board resolution. In Cagayan Valley Commission,116 this court cited several cases117 and rejected the notion
Drug Corporation v. CIR,108 it was held that: that this court had no jurisdiction to review decisions of the National
Labor Relations Commission. It stated that this court had the power to Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is
review the acts of the National Labor Relations Commission to see if it instructive on the parameters of judicial review under Rule 45:
In sum, we have held that the following officials or employees of the
kept within its jurisdiction in deciding cases and alsoas a form of check
company can sign the verification and certification without need of a
and balance.118This court then clarified that judicial review of National As a rule, only questions of law may be raised in a Rule 45 petition. In
board resolution: (1) the Chairperson of the Board of Directors, (2) the
Labor Relations Commission decisions shall be by way of a petition for one case, we discussed the particular parameters of a Rule 45 appeal
President of a corporation, (3) the General Manager or Acting General
certiorari under Rule 65. Citing the doctrine of hierarchy of courts, it from the CA’s Rule 65 decision on a labor case, as follows:
Manager, (4) Personnel Officer, and (5) an Employment Specialist in a
further ruled that such petitions shall be filed before the Court of
labor case.
Appeals. From the Court of Appeals, an aggrieved party may file a
In a Rule 45 review, we consider the correctness of the assailed CA
petition for review on certiorari under Rule 45.
While the above cases109 do not provide a complete listing of authorized decision, in contrast with the review for jurisdictional error that we
signatories to the verification and certification required by the rules, the undertake under Rule 65. Furthermore, Rule 45 limits us to the review of
A petition for certiorari under Rule 65 is an original action where the questions of law raised against the assailed CA decision. In ruling for
determination of the sufficiency of the authority was done on a case to
issue is limited to grave abuse of discretion. As an original action, it legal correctness, we have to view the CA decision in the same context
case basis. The rationale applied in the foregoing cases is to justify the
cannot be considered as a continuation of the proceedings of the labor that the petition for certiorari it ruled upon was presented to it; we have
authority of corporate officers or representatives of the corporation to
tribunals. to examine the CA decision from the prism of whether it correctly
sign the verification or certificate against forum shopping, being ‘in a
position to verify the truthfulness and correctness of the allegations in determined the presence or absence of grave abuse of discretion in the
the petition.’110 On the other hand, a petition for review on certiorari under Rule 45 is a NLRC decision before it, not on the basis of whether the NLRC decision
mode of appeal where the issue is limited to questions of law. In labor on the merits of the case was correct. In other words, we have to be
cases, a Rule 45 petition is limited toreviewing whether the Court of keenly aware that the CA undertook a Rule 65 review, not a review on

76
appeal, of the NLRC decision challenged before it.129 (Emphasis in the If the facts of this case vis-à-vis the four-fold test show that an a plain reporter for Fuji, unlike Jay Sonza who was a news anchor, talk
original) employer-employee relationship existed, we then determine the status of show host, and who enjoyed a celebrity status.146 On her illness, Arlene
Arlene’s employment, i.e., whether she was a regular employee. Relative points outthat it was not a ground for her dismissal because her
to this, we shall analyze Arlene’s fixed-term contract and determine attending physician certified that she was fit to work.147
Justice Brion’s dissenting opinion in Abott Laboratories, PhiIippines v.
whether it supports her argument that she was a regular employee, or
Aicaraz130 discussed that in petitions for review under Rule 45, "the Court
the argument of Fuji that she was an independent contractor. We shall
simply determines whether the legal correctness of the CA’s finding that Arlene admits that she signed the non-renewal agreement with
scrutinize whether the nature of Arlene’s work was necessary and
the NLRC ruling . . . had basis in fact and in Iaw."131 In this kind of quitclaim, not because she agreed to itsterms, but because she was not
desirable to Fuji’s business or whether Fuji only needed the output of her
petition, the proper question to be raised is, "Did the CA correctly in a position to reject the non-renewal agreement. Further, she badly
work. If the circumstances show that Arlene’s work was necessary and
determine whether the NLRC committed grave abuse of discretion in needed the salary withheld for her sustenance and medication.148 She
desirable to Fuji, then she is presumed to be a regular employee. The
ruling on the case?"132 posits that her acceptance of separation pay does not bar filing of a
burden of proving that she was an independent contractor lies with Fuji.
complaint for illegal dismissal.149
Justice Brion’s dissenting opinion also laid down the following guidelines:
In labor cases, the quantum of proof required is substantial
Article 280 of the Labor Code provides that:
evidence.136 "Substantial evidence" has been defined as "such amount of
If the NLRC ruling has basis in the evidence and the applicable law and relevant evidence which a reasonable mind might accept as adequate to
jurisprudence, then no grave abuse of discretion exists and the CA justify a conclusion."137 Art. 280. Regular and casual employment.The provisions of written
should so declare and, accordingly, dismiss the petition. If grave abuse agreement to the contrary notwithstanding and regardless of the oral
of discretion exists, then the CA must grant the petition and nullify the agreement of the parties, an employment shall be deemed to be regular
If Arlene was a regular employee, we then determine whether she was
NLRC ruling, entering at the same time the ruling that isjustified under where the employee has been engaged to perform activities which are
illegally dismissed. In complaints for illegal dismissal, the burden of proof
the evidence and the governing law, rules and jurisprudence. In our Rule usually necessary or desirable in the usual business or trade of the
is on the employee to prove the fact of dismissal.138 Once the employee
45 review, this Court must denythe petition if it finds that the CA employer, except where the employment has been fixed for a specific
establishes the fact of dismissal, supported by substantial evidence, the
correctly acted.133 (Emphasis in the original) project or undertaking the completion or termination of which has been
burden of proof shifts tothe employer to show that there was a just or
determined at the time of the engagement of the employee or where the
authorized cause for the dismissal and that due process was observed.139
work or services to be performed is seasonal in nature and the
These parameters shall be used in resolving the substantive issues in this
employment is for the duration of the season.
petition.
IV
An employment shall be deemed to be casual if it is not covered by the
III
Whether the Court of Appeals correctly affirmed the National Labor preceding paragraph; Provided, That, any employee who has rendered
Relations Commission’s finding that Arlene was a regular employee at least one year of service, whether such service is continuous or
Determination of employment status; burden of proof broken, shall be considered a regular employee with respect to the
activity in which heis employed and his employment shall continue while
Fuji alleges that Arlene was anindependent contractor, citing Sonza v.
In this case, there is no question thatArlene rendered services to Fuji. such activity exist.
ABS-CBN and relying on the following facts: (1) she was hired because
However, Fuji alleges that Arlene was an independent contractor, while of her skills; (2) her salary was US$1,900.00, which is higher than the
Arlene alleges that she was a regular employee. To resolve this issue, we normal rate; (3) she had the power to bargain with her employer; and This provision classifies employees into regular, project, seasonal, and
ascertain whether an employer-employee relationship existed between (4) her contract was for a fixed term. According to Fuji, the Court of casual. It further classifies regular employees into two kinds: (1) those
Fuji and Arlene. Appeals erred when it ruled that Arlene was forcedto sign the non- "engaged to perform activities which are usually necessary or desirable
renewal agreement, considering that she sent an email with another in the usual business or trade of the employer"; and (2) casual
This court has often used the four-fold test to determine the existence of version of the non-renewal agreement.140 Further, she is not entitled employees who have "rendered at least one year of service, whether
an employer-employee relationship. Under the four-fold test, the "control tomoral damages and attorney’s fees because she acted in bad faith such service is continuous or broken."
test" is the most important.134 As to how the elements in the four-fold when she filed a labor complaint against Fuji after receiving
test are proven, this court has discussed that: US$18,050.00 representing her salary and other benefits.141 Arlene
Another classification of employees, i.e., employees with fixed-term
argues that she was a regular employee because Fuji had control and
contracts, was recognized in Brent School, Inc. v. Zamora150 where this
supervision over her work. The news events that she covered were all
[t]here is no hard and fast rule designed to establish the aforesaid court discussed that:
based on the instructions of Fuji.142 She maintains that the successive
elements. Any competent and relevant evidence to prove the relationship renewal of her employment contracts for four (4) years indicates that
may be admitted. Identification cards, cash vouchers, social security her work was necessary and desirable.143 In addition, Fuji’s payment of Logically, the decisive determinant in the term employment should not
registration, appointment letters or employment contracts, payrolls, separation pay equivalent to one (1) month’s pay per year of service be the activities that the employee is called upon to perform, but the day
organization charts, and personnel lists, serve as evidence of employee indicates that she was a regular employee.144 To further support her certain agreed upon by the parties for the commencement and
status.135 argument that she was not an independent contractor, she states that termination of their employment relationship, a day certainbeing
Fuji owns the laptop computer and mini-camera that she used for understood to be "that which must necessarily come, although it may
work.145 Arlene also argues that Sonza is not applicable because she was not be known when."151 (Emphasis in the original)
77
This court further discussed that there are employment contracts where and desirable in the usual business ofrespondent company, they were contracting and job contracting as well as differentiations within these
"a fixed term is an essential and natural appurtenance"152 such as employed temporarily only, during periods when there was heightened types of contracting and determine who among the parties involved shall
overseas employment contracts and officers in educational institutions.153 demand for production. Consequently, there could have been no illegal be considered the employer for purposes of this Code, to prevent any
dismissal when their services were terminated on expiration of their violation or circumvention of any provision of this Code.
contracts. There was even no need for notice of termination because
Distinctions among fixed-term
they knew exactly when their contracts would end. Contracts of
employees, independent contractors, There is "labor-only" contracting where the person supplying workers to
employment for a fixed period terminate on their own at the end of such
and regular employees an employer does not have substantial capital or investment in the form
period.
of tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities
GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed term
Contracts of employment for a fixed period are not unlawful. What is which are directly related to the principal business of such employer. In
contracts laid down in Brentin the following manner:
objectionable is the practice of some scrupulous employers who try to such cases, the person or intermediary shall be considered merely as an
circumvent the law protecting workers from the capricious termination of agent of the employer who shall be responsible to the workers in the
Cognizant of the possibility of abuse in the utilization of fixed term employment.157 (Citation omitted) same manner and extent as if the latterwere directly employed by him.
employment contracts, we emphasized in Brentthat where from the
circumstances it is apparent that the periods have been imposed to
Caparoso v. Court of Appeals158 upheld the validity of the fixed-term In Department Order No. 18-A, Seriesof 2011, of the Department of
preclude acquisition of tenurial security by the employee, they should be
contract of employment. Caparoso and Quindipan were hired as delivery Labor and Employment, a contractor is defined as having:
struck down as contrary to public policy or morals. We thus laid down
men for three (3) months. At the end of the third month, they were
indications or criteria under which "term employment" cannot be said to
hired on a monthly basis. In total, they were hired for five (5) months.
be in circumvention of the law on security of tenure, namely: Section 3. . . .
They filed a complaint for illegal dismissal.159 This court ruled that there
was no evidence indicating that they were pressured into signing the
1) The fixed period of employment was knowingly and voluntarily agreed fixed-term contracts. There was likewise no proof that their employer ....
upon by the parties without any force, duress, or improper pressure was engaged in hiring workers for five (5) months onlyto prevent
being brought to bear upon the employee and absent any other regularization. In the absence of these facts, the fixed-term contracts (c) . . . an arrangement whereby a principal agrees to put out or farm
circumstances vitiating his consent; or were upheld as valid.160 On the other hand, an independent contractor is out with a contractor the performance or completion of a specific job,
defined as: work or service within a definite or predetermined period, regardless of
2) It satisfactorily appears that the employer and the employee dealt whether such job, work or service is to be performed or completed
with each other on more or less equal terms with no moral dominance . . . one who carries on a distinct and independent business and within oroutside the premises of the principal.
exercised by the former or the latter. undertakes to perform the job, work, or service on its own account and
under one’s own responsibility according to one’s own manner and This department order also states that there is a trilateral relationship in
These indications, which must be read together, make the Brent doctrine method, free from the control and direction of the principal in all matters legitimate job contracting and subcontracting arrangements among the
applicable only in a few special cases wherein the employer and connected with the performance of the work except as to the results principal, contractor, and employees of the contractor. There is no
employee are on more or less in equal footing in entering into the thereof.161 employer-employee relationship between the contractor and principal
contract. The reason for this is evident: whena prospective employee, on who engages the contractor’s services, but there is an employer-
account of special skills or market forces, is in a position to make In view of the "distinct and independent business" of independent employee relationship between the contractor and workers hired to
demands upon the prospective employer, such prospective employee contractors, no employer-employee relationship exists between accomplish the work for the principal.162
needs less protection than the ordinary worker. Lesser limitations on the independent contractors and their principals. Independent contractors
parties’ freedom of contract are thus required for the protection of the are recognized under Article 106 of the Labor Code: Jurisprudence has recognized another kind of independent contractor:
employee.155 (Citations omitted)
individuals with unique skills and talents that set them apart from
Art. 106. Contractor or subcontractor. Whenever an employer enters into ordinary employees. There is no trilateral relationship in this case
For as long as the guidelines laid down in Brentare satisfied, this court a contract with another person for the performance of the former’s work, because the independent contractor himself or herself performs the work
will recognize the validity of the fixed-term contract. the employees of the contractor and of the latter’s subcontractor, if any, for the principal. In other words, the relationship is bilateral.
shall be paid in accordance with the provisions of this Code.
In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixedterm In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for
employment of petitioners because from the time they were hired, they .... the Philippine Daily Inquirer. This court ruled that she was an
were informed that their engagement was for a specific period. This independent contractor because of her "talent, skill, experience, and her
court stated that: unique viewpoint as a feminist advocate."164 In addition, the Philippine
The Secretary of Labor and Employment may, by appropriate
Daily Inquirer did not have the power of control over Orozco, and she
regulations, restrict or prohibit the contracting-out of labor to protect the
worked at her own pleasure.165
[s]imply put, petitioners were notregular employees. While their rights of workers established under this Code. In so prohibiting or
employment as mixers, packers and machine operators was necessary restricting, he may make appropriate distinctions between labor-only
78
Semblante v. Court of Appeals166 involved a masiador167 and a It shall guarantee the rights of all workers to self-organization, collective The level of protection to labor mustbe determined on the basis of the
sentenciador.168 This court ruled that "petitioners performed their bargaining and negotiations, and peaceful concerted activities, including nature of the work, qualifications of the employee, and other relevant
functions as masiadorand sentenciador free from the direction and the right to strike in accordance with law. They shall be entitled to circumstances.
control of respondents"169 and that the masiador and sentenciador security of tenure, humane conditions of work, and a living wage. They
"relied mainly on their ‘expertise that is characteristic of the cockfight shall also participate in policy and decision-making processes affecting
For example, a prospective employee with a bachelor’s degree cannot be
gambling.’"170 Hence, no employer-employee relationship existed. their rights and benefits as may be provided by law.
said to be on equal footing witha grocery bagger with a high school
diploma. Employees who qualify for jobs requiring special qualifications
Bernarte v. Philippine Basketball Association171 involved a basketball The State shall promote the principle of shared responsibility between such as "[having] a Master’s degree" or "[having] passed the licensure
referee. This court ruled that "a referee is an independent contractor, workers and employers and the preferential use of voluntary modes in exam" are different from employees who qualify for jobs that require
whose special skills and independent judgment are required specifically settling disputes, including conciliation, and shall enforce their mutual "[being a] high school graduate; withpleasing personality." In these
for such position and cannot possibly be controlled by the hiring compliance therewith to foster industrial peace. situations, it is clear that those with special qualifications can bargain
party."172 with the employer on equal footing. Thus, the level of protection
afforded to these employees should be different.
The State shall regulate the relations between workers and employers,
In these cases, the workers were found to be independent contractors recognizing the right of labor to its just share in the fruits of production
because of their unique skills and talents and the lack of control over the and the right of enterprises to reasonable returns on investments, and to Fuji’s argument that Arlene was an independent contractor under a
means and methods in the performance of their work. expansion and growth. fixed-term contract is contradictory. Employees under fixed-term
contracts cannot be independent contractors because in fixed-term
contracts, an employer-employee relationship exists. The test in this kind
In other words, there are different kinds of independent contractors: Apart from the constitutional guarantee of protection to labor, Article
of contract is not the necessity and desirability of the employee’s
those engaged in legitimate job contracting and those who have unique 1700 of the Civil Code states:
activities, "but the day certain agreed upon by the parties for the
skills and talents that set them apart from ordinary employees.
commencement and termination of the employment relationship."179 For
ART. 1700. The relations between capital and labor are not merely regular employees, the necessity and desirability of their work in the
Since no employer-employee relationship exists between independent contractual. They are so impressed with public interest that labor usual course of the employer’s business are the determining factors. On
contractors and their principals, their contracts are governed by the Civil contracts must yield to the common good. Therefore, such contracts are the other hand, independent contractors do not have employer-
Code provisions on contracts and other applicable laws.173 subject to the special laws on labor unions, collective bargaining, strikes employee relationships with their principals. Hence, before the status of
and lockouts, closed shop, wages, working conditions, hours of labor and employment can be determined, the existence of an employer-employee
similar subjects. relationship must be established.
A contract is defined as "a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something
or to render some service."174 Parties are free to stipulate on terms and In contracts of employment, the employer and the employee are not on The four-fold test180 can be used in determining whether an
conditions in contracts as long as these "are not contrary to law, morals, equal footing. Thus, it is subject to regulatory review by the labor employeremployee relationship exists. The elements of the four-fold test
good customs, public order, or public policy."175 This presupposes that tribunals and courts of law. The law serves to equalize the unequal. The are the following: (1) the selection and engagement of the employee;
the parties to a contract are on equal footing. Theycan bargain on terms labor force is a special class that is constitutionally protected because of (2) the payment of wages; (3) the power of dismissal; and (4) the power
and conditions until they are able to reach an agreement. the inequality between capital and labor.176 This presupposes that the of control, which is the most important element.181
labor force is weak. However, the level of protection to labor should vary
from case to case; otherwise, the state might appear to be too
On the other hand, contracts of employment are different and have a The "power of control" was explained by this court in Corporal, Sr. v.
paternalistic in affording protection to labor. As stated in GMA Network,
higher level of regulation because they are impressed with public National Labor Relations Commission:182
Inc. v. Pabriga, the ruling in Brent applies in cases where it appears that
interest. Article XIII, Section 3 of the 1987 Constitution provides full
the employer and employee are on equal footing.177 This recognizes the
protection to labor:
fact that not all workers are weak. To reiterate the discussion in GMA The power to control refers to the existence of the power and not
Network v. Pabriga: necessarily to the actual exercise thereof, nor is it essential for the
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS employer to actually supervise the performance of duties of the
employee. It is enough that the employer has the right to wield that
The reason for this is evident: when a prospective employee, on account
.... power.183 (Citation omitted)
of special skills or market forces, is in a position to make demands upon
the prospective employer, such prospective employee needs less
LABOR protection than the ordinary worker. Lesser limitations on the parties’ Orozco v. Court of Appeals further elucidated the meaning of "power of
freedom of contract are thus required for the protection of the control" and stated the following:
employee.178
Section 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full employment and Logically, the line should be drawn between rules that merely serve as
equality of employment opportunities for all. guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it,
79
and those that control or fix the methodology and bind or restrict the Application of the four-fold test The test for determining regular employment is whether there is a
party hired to the use of such means. The first, which aim only to reasonable connection between the employee’s activities and the usual
promote the result, create no employer-employee relationship unlike the business of the employer. Article 280 provides that the nature of work
The Court of Appeals did not err when it relied on the ruling in Dumpit-
second, which address both the result and the means used to achieve it. must be "necessary or desirable in the usual business or trade of the
Murillo and affirmed the ruling of the National Labor Relations
. . .184 (Citation omitted) employer" as the test for determining regular employment. As stated in
Commission finding that Arlene was a regular employee. Arlene was
ABS-CBN Broadcasting Corporation v. Nazareno:204
hired by Fuji as a news producer, but there was no showing that she
In Locsin, et al. v. Philippine Long Distance Telephone Company,185 the was hired because of unique skills that would distinguish her from
"power of control" was defined as "[the] right to control not only the end ordinary employees. Neither was there any showing that she had a In determining whether an employment should be considered regular or
to be achieved but also the means to be used in reaching such end."186 celebrity status. Her monthly salary amounting to US$1,900.00 appears non-regular, the applicable test is the reasonable connection between
tobe a substantial sum, especially if compared to her salary whenshe the particular activity performed by the employee in relation to the usual
was still connected with GMA.199 Indeed, wages may indicate whether business or trade of the employer. The standard, supplied by the law
Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo
oneis an independent contractor. Wages may also indicate that an itself, is whether the work undertaken is necessary or desirable in the
v. Court of Appeals187 in determining whether Arlene was an independent
employee is able to bargain with the employer for better pay. However, usual business or trade of the employer, a fact that can be assessed by
contractor or a regular employee.
wages should not be the conclusive factor in determining whether one is looking into the nature of the services rendered and its relation to the
an employee or an independent contractor. general scheme under which the business or trade is pursued in the
In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. usual course. It is distinguished from a specific undertaking that is
Both cases involved newscasters and anchors. However, Sonza was held divorced from the normal activities required incarrying on the particular
Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of
to be an independent contractor, while Dumpit-Murillo was held to be a business or trade.205
her professional employment contract.200Her contract also indicated that
regular employee.
Fuji had control over her work because she was required to work for
eight (8) hours from Monday to Friday, although on flexible However, there may be a situation where an employee’s work is
Comparison of the Sonza and time.201 Sonza was not required to work for eight (8) hours, while necessary but is not always desirable inthe usual course of business of
Dumpit-Murillo cases using Dumpit-Murillo had to be in ABC to do both on-air and off-air tasks. the employer. In this situation, there is no regular employment.
the four-fold test
On the power to control, Arlene alleged that Fuji gave her instructions on In San Miguel Corporation v. National Labor Relations
Sonza was engaged by ABS-CBN in view of his "unique skills, talent and what to report.202 Even the mode of transportation in carrying out her Commission,206 Francisco de Guzman was hired to repair furnaces at San
celebrity status not possessed by ordinary employees."188 His work was functions was controlled by Fuji. Paragraph 6 of her contract states: Miguel Corporation’s Manila glass plant. He had a separate contract for
for radio and television programs.189 On the other hand, Dumpit-Murillo every furnace that he repaired. He filed a complaint for illegal dismissal
was hired by ABC as a newscaster and co-anchor.190 Sonza’s talent fee three (3) years after the end of his last contract.207 In ruling that de
6. During the travel to carry out work, if there is change of place or
amounted to P317,000.00 per month, which this court found to be a Guzman did not attain the status of a regular employee, this court
change of place of work, the train, bus, or public transport shall be used
substantial amount that indicatedhe was an independent contractor explained:
for the trip. If the Employee uses the private car during the work and
rather than a regular employee.191 Meanwhile, Dumpit-Murillo’s monthly
there is an accident the Employer shall not be responsible for the
salary was P28,000.00, a very low amount compared to what Sonza
damage, which may be caused to the Employee.203 Note that the plant where private respondent was employed for only
received.192
seven months is engaged in the manufacture of glass, an integral
component of the packaging and manufacturing business of petitioner.
Thus, the Court of Appeals did not err when it upheld the findings of the
Sonza was unable to prove that ABS-CBN could terminate his services The process of manufacturing glass requires a furnace, which has a
National Labor Relations Commission that Arlene was not an
apart from breach of contract. There was no indication that he could be limited operating life. Petitioner resorted to hiring project or fixed term
independent contractor.
terminated based on just or authorized causes under the Labor Code. In employees in having said furnaces repaired since said activity is not
addition, ABS-CBN continued to pay his talent fee under their regularly performed. Said furnaces are to be repaired or overhauled only
agreement, even though his programs were no longer Having established that an employer-employee relationship existed in case of need and after being used continuously for a varying period of
broadcasted.193 Dumpit-Murillo was found to have beenillegally dismissed between Fuji and Arlene, the next questions for resolution are the five (5) to ten (10) years. In 1990, one of the furnaces of petitioner
by her employer when they did not renew her contract on her fourth following: Did the Court of Appeals correctly affirm the National Labor required repair and upgrading. This was an undertaking distinct and
year with ABC.194 Relations Commission that Arlene had become a regular employee? Was separate from petitioner's business of manufacturing glass. For this
the nature of Arlene’s work necessary and desirable for Fuji’s usual purpose, petitioner must hire workers to undertake the said repair and
course of business? upgrading. . . .
In Sonza, this court ruled that ABS-CBN did not control how Sonza
delivered his lines, how he appeared on television, or how he sounded
on radio.195 All that Sonza needed was his talent.196 Further, "ABS-CBN Arlene was a regular employee ....
could not terminate or discipline SONZA even if the means and methods with a fixed-term contract
of performance of his work . . . did not meet ABS-CBN’s approval."197 In
Clearly, private respondent was hired for a specific project that was not
Dumpit-Murillo, the duties and responsibilities enumerated in her
within the regular business of the corporation. For petitioner is not
contract was a clear indication that ABC had control over her work.198
80
engaged in the business of repairing furnaces. Although the activity was Moreover, the Court of Appeals explained that Fuji’s argument that no Whether the Court of Appeals correctly affirmed
necessary to enable petitioner to continue manufacturing glass, the employer-employee relationship existed in view of the fixed-term
necessity therefor arose only when a particular furnace reached the end contract does not persuade because fixed-term contracts of employment
the National Labor Relations Commission’s finding of illegal dismissal
of its life or operating cycle. Or, as in the second undertaking, when a are strictly construed.222 Further, the pieces of equipment Arlene used
particular furnace required an emergency repair. In other words, the were all owned by Fuji, showing that she was a regular employee and
undertakings where private respondent was hired primarily as not an independent contractor.223 Fuji argues that the Court of Appeals erred when it held that Arlene was
helper/bricklayer have specified goals and purposes which are fulfilled illegally dismissed, in view of the non-renewal contract voluntarily
once the designated work was completed. Moreover, such undertakings executed by the parties. Fuji also argues that Arlene’s contract merely
The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-
were also identifiably separate and distinct from the usual, ordinary or expired; hence, she was not illegally dismissed.231
term contracts that were successively renewed for four (4) years.224 This
regular business operations of petitioner, which is glass manufacturing.
court held that "[t]his repeated engagement under contract of hire is
These undertakings, the duration and scope of which had been Arlene alleges that she had no choice but to sign the non-renewal
indicative of the necessity and desirability of the petitioner’s work in
determined and made known to private respondent at the time of his contract because Fuji withheldher salary and benefits.
private respondent ABC’s business."225
employment, clearly indicated the nature of his employment as a project
employee.208
With regard to Fuji’s argument that Arlene’s contract was for a fixed With regard to this issue, the Court of Appeals held:
term, the Court of Appeals cited Philips Semiconductors, Inc. v.
Fuji is engaged in the business of broadcasting, including news
209
Fadriquela226 and held that where an employee’s contract "had been We cannot subscribe to Fuji’s assertion that Espiritu’s contract merely
programming.210 It is based in Japan211 and has overseas offices to cover
continuously extended or renewed to the same position, with the same expired and that she voluntarily agreed not to renew the same. Even a
international news.212
duties and remained in the employ without any interruption,"227 then cursory perusal of the subject Non-Renewal Contract readily shows that
such employee is a regular employee. The continuous renewal is a the same was signed by Espiritu under protest. What is apparent is that
Based on the record, Fuji’s Manila Bureau Office is a small unit213 and scheme to prevent regularization. On this basis, the Court of Appeals the Non-Renewal Contract was crafted merely as a subterfuge to secure
has a few employees.214 As such, Arlene had to do all activities related to ruled in favor of Arlene. Fuji’s position that it was Espiritu’s choice not to renew her contract.232
news gathering. Although Fuji insists that Arlene was a stringer, it
alleges that her designation was "News Talent/Reporter/Producer."215
As stated in Price, et al. v. Innodata Corp., et al.:228 As a regular employee, Arlene was entitled to security of tenure and
could be dismissed only for just or authorized causes and after the
A news producer "plans and supervises newscast . . . [and] work[s] with observance of due process.
The employment status of a person is defined and prescribed by law and
reporters in the field planning and gathering information. . . ."216 Arlene’s
not by what the parties say it should be. Equally important to consider is
tasks included "[m]onitoring and [g]etting [n]ews [s]tories, [r]eporting
that a contract of employment is impressed with public interest such that The right to security of tenureis guaranteed under Article XIII, Section 3
interviewing subjects in front of a video camera,"217 "the timely
labor contracts must yield to the common good. Thus, provisions of of the 1987 Constitution: ARTICLE XIII. SOCIAL JUSTICE AND HUMAN
submission of news and current events reports pertaining to the
applicable statutes are deemed written into the contract, and the parties RIGHTS
Philippines[,] and traveling [sic] to [Fuji’s] regional office in
are not at liberty to insulate themselves and their relationships from the
Thailand."218 She also had to report for work in Fuji’s office in Manila
impact of labor laws and regulations by simply contracting with each
from Mondays to Fridays, eight (8) hours per day.219 She had no ....
other.229 (Citations omitted)
equipment and had to use the facilities of Fuji to accomplish her tasks.

Arlene’s contract indicating a fixed term did not automatically mean that LABOR
The Court of Appeals affirmed the finding of the National Labor Relations
she could never be a regular employee. This is precisely what Article 280
Commission that the successive renewals of Arlene’s contract indicated
seeks to avoid. The ruling in Brent remains as the exception rather than ....
the necessity and desirability of her work i