FRANCISCO VS.
NLRC ET AL There are instances when, aside from the employer’s power to control the employee,
FACTS: 1995, Petitioner was hired by Kasei Corporation during its incorporation stage.
She was designated as Accountant and Corporate Secretary and was assigned to handle
all the accounting needs of the company. She was also designated as Liaison Officer to
the City of Makati to secure business permits, construction permits and other licenses
for the initial operation of the company. Although she was designated as Corporate
Secretary, she was not entrusted with the corporate documents; neither did she attend
any board meeting nor required to do so. She never prepared any legal document and
never represented the company as its Corporate Secretary. 1996, petitioner was
designated Acting Manager. Petitioner was assigned to handle recruitment of all
employees and perform management administration functions; represent the company
in all dealings with government agencies, especially with the BIR, SSS and in the city
government of Makati; and to administer all other matters pertaining to the operation
of Kasei Restaurant which is owned and operated by Kasei Corporation.
January 2001, petitioner was replaced by a certain Liza R. Fuentes as Manager. Kasei
Corporation reduced her salary, she was not paid her mid-year bonus allegedly because
the company was not earning well. On October 2001, petitioner did not receive her
salary from the company. She made repeated follow-ups with the company cashier but
she was advised that the company was not earning well. Eventually she was informed
that she is no longer connected with the company. Since she was no longer paid her
salary, petitioner did not report for work and filed an action for constructive dismissal
before the labor arbiter. Private respondents averred that petitioner is not an employee
of Kasei Corporation. They alleged that petitioner was hired in 1995 as one of its
technical consultants on accounting matters and act concurrently as Corporate
Secretary. As technical consultant, petitioner performed her work at her own discretion
without control and supervision of Kasei Corporation. Petitioner had no daily time
record and she came to the office any time she wanted and that her services were only
temporary in nature and dependent on the needs of the corporation. The Labor Arbiter
found that petitioner was illegally dismissed, NLRC affirmed with modification the
Decision of the Labor Arbiter. On appeal, CA reversed the NLRC decision. CA denied
petitioner’s MR, hence, the present recourse.
ISSUES: WON there was an employer-employee relationship between petitioner and
private respondent; and if in the affirmative,
RULING: Generally, courts have relied on the so-called right of control test where the
person for whom the services are performed reserves a right to control not only the end
to be achieved but also the means to be used in reaching such end. In addition to the
standard of right-of-control, the existing economic conditions prevailing between the
parties, like the inclusion of the employee in the payrolls, can help in determining the
existence of an employer-employee relationship.
economic realities of the employment relations help provide a comprehensive analysis
of the true classification of the individual, whether as employee, independent
contractor, corporate officer or some other capacity.
It is better, therefore, to adopt a two-tiered test involving: (1) the employer’s power to
control; and (2) the economic realities of the activity or relationship.
The control test means that there is an employer-employee relationship when the
person for whom the services are performed reserves the right to control not only the
end achieved but also the manner and means used to achieve that end. There has to be
analysis of the totality of economic circumstances of the worker. Thus, the
determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity, such as: (1) the extent to which the
services performed are an integral part of the employer’s business; (2) the extent of the
worker’s investment in equipment and facilities; (3) the nature and degree of control
exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the
amount of initiative, skill, judgment or foresight required for the success of the claimed
independent enterprise; (6) the permanency and duration of the relationship between
the worker and the employer; and (7) the degree of dependency of the worker upon the
employer for his continued employment in that line of business. The proper standard of
economic dependence is whether the worker is dependent on the alleged employer for
his continued employment in that line of business
By applying the control test, it can be said that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji Kamura,
the corporation’s Technical Consultant. She reported for work regularly and served in
various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager
and Corporate Secretary, with substantially the same job functions, that is, rendering
accounting and tax services to the company and performing functions necessary and
desirable for the proper operation of the corporation such as securing business permits
and other licenses over an indefinite period of engagement. Respondent corporation
had the power to control petitioner with the means and methods by which the work is
to be accomplished.
Under the economic reality test, the petitioner can also be said to be an employee of
respondent corporation because she had served the company for 6 yrs. before her
dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th month
pay, bonuses and allowances, as well as deductions and Social Security contributions
from. When petitioner was designated General Manager, respondent corporation made
a report to the SSS. Petitioner’s membership in the SSS evinces the existence of an
employer-employee relationship between petitioner and respondent corporation. The
coverage of Social Security Law is predicated on the existence of an employer-employee
relationship.
SONZA vs. ABS-CBN
Facts: In May 1994, ABS-CBN signed an agreement with the Mel and Jay Management
and Development Corporation (MJMDC). ABS-CBN was represented by its corporate
officers while MJMDC was represented by Sonza, as President and general manager, and
Tiangco as its EVP and treasurer. Referred to in the agreement as agent, MJMDC agreed
to provide Sonza’s services exclusively to ABS-CBN as talent for radio and television.
ABS-CBN agreed to pay Sonza a monthly talent fee of P310, 000 for the first year and
P317, 000 for the second and third year. On April 1996, Sonza wrote a letter to ABS-CBN
where he irrevocably resigned in view of the recent events concerning his program and
career. After the said letter, Sonza filed with the Department of Labor and Employment
a complaint alleging that ABS-CBN did not pay his salaries, separation pay, service
incentive pay,13th month pay, signing bonus, travel allowance and amounts under the
Employees Stock Option Plan (ESOP). ABS-CBN contended that no employee-employer
relationship existed between the parties. However, ABS-CBN continued to remit Sonza’s
monthly talent fees but opened another account for the same purpose. The Labor
Arbiter dismissed the complaint and found that there is no employee-employer
relationship. NLRC affirmed the decision of the Labor Arbiter. CA also affirmed the
decision of NLRC.
Issue: Whether or not there was employer-employee relationship between the parties.
Ruling: Case law has consistently held that the elements of an employee-employer
relationship are selection and engagement of the employee, the payment of wages, the
power of dismissal and the employer’s power to control the employee on the means
and methods by which the work is accomplished. The last element, the so-called
"control test", is the most important element.
Sonza’s services to co-host its television and radio programs are because of his peculiar
talents, skills and celebrity status. Independent contractors often present themselves to
possess unique skills, expertise or talent to distinguish them from ordinary employees.
The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative, but
not conclusive, of an independent contractual relationship. All the talent fees and
benefits paid to SONZA were the result of negotiations that led to the Agreement. For
violation of any provision of the Agreement, either party may terminate their
relationship. Applying the control test to the present case, we find that SONZA is not an
employee but an independent contractor.
The control test is the most important test our courts apply in distinguishing an
employee from an independent contractor. This test is based on the extent of control
the hirer exercises over a worker. The greater the supervision and control the hirer
exercises, the more likely the worker is deemed an employee. The converse holds true
as well – the less control the hirer exercises, the more likely the worker is considered an
independent contractor. To perform his work, SONZA only needed his skills and talent.
How SONZA delivered his lines, appeared on television, and sounded on radio were
outside ABS-CBN’s control. ABS-CBN did not instruct SONZA how to perform his job.
ABS-CBN merely reserved the right to modify the program format and airtime schedule
"for more effective programming." ABS-CBN’s sole concern was the quality of the shows
and their standing in the ratings.
Clearly, ABS-CBN did not exercise control over the means and methods of performance
of Sonza’s work. A radio broadcast specialist who works under minimal supervision is an
independent contractor. Sonza’s work as television and radio program host required
special skills and talent, which SONZA admittedly possesses.
ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like Sonza as independent contractors. The
right of labor to security of tenure as guaranteed in the Constitution arises only if there
is an employer-employee relationship under labor laws. 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.
BITOY JAVIER (DANILO P. JAVIER), Petitioner, v. FLY ACE CORPORATION and
FLORDELYN CASTILLO, Respondents.
FACTS: Javier an employee of Fly Ace performing various work for the latter filed a
complaint before the NLRC for underpayment of salaries and other labor standard
benefits. He alleged that he reported for work from Monday to Saturday from 7:00
oclock in the morning to 5:00 oclock in the afternoon; that during his employment, he
was not issued an identification card and pay slips by the company; that he reported for
work but he was no longer allowed to enter the company premises by the security guard
upon the instruction of Ruben Ong (Mr. Ong), his superior; that after several minutes of
begging to the guard to allow him to enter, he saw Ong whom he approached and asked
why he was being barred from entering the premises; that Ong replied by saying,
Tanunginmoanakmo;that he discovered that Ong had been courting his daughter
Annalyn after the two met at a fiesta celebration in Malabon City; that Annalyn tried to
talk to Ong and convince him to spare her father from trouble but he refused to accede;
that thereafter, Javier was terminated from his employment without notice; and that he
was neither given the opportunity to refute the cause/s of his dismissal from work.
For its part p, Fly Ace denied the existence of employer-employee relationship between
them and Javier as the latter was only called roughly 5 to 6 times only in a month
whenever the vehicle of its contracted hauler, Milmar Hauling Services, was not
available. Labor Arbiter dismissed the complaint ruling that respondent Fly Ace is not
engaged in trucking business but in the importation and sales of groceries. Since there is
a regular hauler to deliver its products, we give credence to Respondents claim that
complainant was contracted on pakiao basis.
On appeal, NLRC reversed the decisin of the LA. It was of the view that a pakyaw-basis
arrangement did not preclude the existence of employer-employee relationship.
Payment by result x xx is a method of compensation and does not define the essence of
the relation. It is a mere method of computing compensation, not a basis for
determining the existence or absence of an employer-employee relationship. The NLRC
further averred that it did not follow that a worker was a job contractor and not an
employee, just because the work he was doing was not directly related to the employers
trade or business or the work may be considered as extra helper as in this case; and that
the relationship of an employer and an employee was determined by law and the same
would prevail whatever the parties may call it. Finding Javier to be a regular employee,
the NLRC ruled that he was entitled to a security of tenure. For failing to present proof
of a valid cause for his termination, Fly Ace was found to be liable for illegal dismissal of
Javier who was likewise entitled to backwages and separation pay in lieu of
reinstatement. However, on appeal, CA reversed the ruling of NLRC
The CA ruled that Javiers failure to present salary vouchers, payslips, or other pieces of
evidence to bolster his contention, pointed to the inescapable conclusion that he was
not an employee of Fly Ace. Further, it found that Javiers work was not necessary and
desirable to the business or trade of the company, as it was only when there were
scheduled deliveries, which a regular hauling service could not deliver, that Fly Ace
would contract the services of Javier as an extra helper. Lastly, the CA declared that the
facts alleged by Javier did not pass the control test. He contracted work outside the
company premises; he was not required to observe definite hours of work; he was not
required to report daily; and he was free to accept other work elsewhere as there was
no exclusivity of his contracted service to the company, the same being co-terminous
with the trip only. Since no substantial evidence was presented to establish an
employer-employee relationship, the case for illegal dismissal could not prosper. Hence,
this appeal.
ISSUE: Does an employer-employee relationship exist between Javier and Fly Ace,
thereby holding the latter guilty of illegal dismissal?
HELD: As the records bear out, the LA and the CA found Javiers claim of employment
with Fly Ace as wanting and deficient. The Court is constrained to agree. Labor officials
are enjoined to use reasonable means to ascertain the facts speedily and objectively
with little regard to technicalities or formalities but nowhere in the rules are they
provided a license to completely discount evidence, or the lack of it. The quantum of
proof required, however, must still be satisfied. Hence, when confronted with
conflicting versions on factual matters, it is for them in the exercise of discretion to
determine which party deserves credence on the basis of evidence received, subject
only to the requirement that their decision must be supported by substantial
evidence.Accordingly, the petitioner needs to show by substantial evidence that he was
indeed an employee of the company against which he claims illegal dismissal.
In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or
substantiate such claim by the requisite quantum of evidence. Whoever claims
entitlement to the benefits provided by law should establish his or her right thereto x xx.
Sadly, Javier failed to adduce substantial evidence as basis for the grant of relief.
By way of evidence on this point, all that Javier presented were his self-serving
statements purportedly showing his activities as an employee of Fly Ace.
Clearly, Javier failed to pass the substantiality requirement to support his claim. Hence,
the Court sees no reason to depart from the findings of the CA. While Javier remains
firm in his position that as an employed stevedore of Fly Ace, he was made to work in
the company premises during weekdays arranging and cleaning grocery items for
delivery to clients, no other proof was submitted to fortify his claim. The lone affidavit
executed by one Bengie Valenzuela was unsuccessful in strengthening Javiers cause.
The Court is of the considerable view that on Javier lies the burden to pass the well-
settled tests to determine the existence of an employer-employee relationship, viz: (1)
the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct. Of these
elements, the most important criterion is whether the employer controls or has
reserved the right to control the employee not only as to the result of the work but also
as to the means and methods by which the result is to be accomplished.
SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO vs. BERSAMIRA
FACTS: Sometime in 1983 and 1984, SanMig entered into contracts for merchandising
services with Lipercon and D'Rite. These companies are independent contractors duly
licensed by the Department of Labor and Employment (DOLE). SanMig entered into
those contracts to maintain its competitive position and in keeping with the imperatives
of efficiency, business expansion and diversity of its operation. In said contracts, it was
expressly understood and agreed that the workers employed by the contractors were to
be paid by the latter and that none of them were to be deemed employees or agents of
SanMig. There was to be no employer-employee relation between the contractors
and/or its workers, on the one hand, and SanMig on the other.
Petitioner San Miguel Corporation Employees Union-PTWGO (the Union, for brevity) is
the duly authorized representative of the monthly paid rank-and-file employees of
SanMig with whom the latter executed a Collective Bargaining Agreement (CBA)
effective 1 July 1986 to 30 June 1989 (Annex A, SanMig's Comment). Section 1 of their
CBA specifically provides that "temporary, probationary, or contract employees and
workers are excluded from the bargaining unit and, therefore, outside the scope of this
Agreement."
In a letter, dated 20 November 1988 (Annex C, Petition), the Union advised SanMig that
some Lipercon and D'Rite workers had signed up for union membership and sought the
regularization of their employment with SMC. The Union alleged that this group of
employees, while appearing to be contractual workers supposedly independent
contractors, have been continuously working for SanMig for a period ranging from six
(6) months to fifteen (15) years and that their work is neither casual nor seasonal as
they are performing work or activities necessary or desirable in the usual business or
trade of SanMig. Thus, it was contended that there exists a "labor-only" contracting
situation. It was then demanded that the employment status of these workers be
regularized.
On 12 January 1989 on the ground that it had failed to receive any favorable response
from SanMig, the Union filed a notice of strike for unfair labor practice, CBA violations,
and union busting (Annex D, Petition).
On 30 January 1989, the Union again filed a second notice of strike for unfair labor
practice (Annex F, Petition).
As in the first notice of strike. Conciliatory meetings were held on the second notice.
Subsequently, the two (2) notices of strike were consolidated and several conciliation
conferences were held to settle the dispute before the National Conciliation and
Mediation Board (NCMB) of DOLE (Annex G, Petition).
Beginning 14 February 1989 until 2 March 1989, series of pickets were staged by
Lipercon and D'Rite workers in various SMC plants and offices.
On 6 March 1989, SMC filed a verified Complaint for Injunction and Damages before
respondent Court to enjoin the Union from:
a. representing and/or acting for and in behalf of the employees of LIPERCON and/or
D'RITE for the purposes of collective bargaining;
b. calling for and holding a strike vote, to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE;
c. inciting, instigating and/or inducing the employees or workers of LIPERCON and
D'RITE to demonstrate and/or picket at the plants and offices of plaintiff within the
bargaining unit referred to in the CBA,...;
d. staging a strike to compel plaintiff to hire the employees or workers of LIPERCON and
D'RITE;
e. using the employees or workers of LIPERCON AND D'RITE to man the strike area
and/or picket lines and/or barricades which the defendants may set up at the plants and
offices of plaintiff within the bargaining unit referred to in the CBA ...;
f. intimidating, threatening with bodily harm and/or molesting the other employees
and/or contract workers of plaintiff, as well as those persons lawfully transacting
business with plaintiff at the work places within the bargaining unit referred to in the
CBA, ..., to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE;
g. blocking, preventing, prohibiting, obstructing and/or impeding the free ingress to, and
egress from, the work places within the bargaining unit referred to in the CBA .., to
compel plaintiff to hire the employees or workers of LIPERCON and D'RITE;
h. preventing and/or disrupting the peaceful and normal operation of plaintiff at the
work places within the bargaining unit referred to in the CBA, Annex 'C' hereof, to
compel plaintiff to hire the employees or workers of LIPERCON and D'RITE. (Annex H,
Petition)
Respondent Court found the Complaint sufficient in form and substance and issued a
Temporary Restraining Order for the purpose of maintaining the status quo, and set the
application for Injunction for hearing.
In the meantime, on 13 March 1989, the Union filed a Motion to Dismiss SanMig's
Complaint on the ground of lack of jurisdiction over the case/nature of the action, which
motion was opposed by SanMig. That Motion was denied by respondent Judge in an
Order dated 11 April 1989.
After several hearings on SanMig's application for injunctive relief, where the parties
presented both testimonial and documentary evidence on 25 March 1989, respondent
Court issued the questioned Order (Annex A, Petition) granting the application and
enjoining the Union from Committing the acts complained of, supra. Accordingly, on 29
March 1989, respondent Court issued the corresponding Writ of Preliminary Injunction
after SanMig had posted the required bond of P100,000.00 to answer for whatever
damages petitioners may sustain by reason thereof.
In issuing the Injunction, respondent Court rationalized:
The absence of employer-employee relationship negates the existence of labor dispute.
Verily, this court has jurisdiction to take cognizance of plaintiff's grievance.
The evidence so far presented indicates that plaintiff has contracts for services with
Lipercon and D'Rite. The application and contract for employment of the defendants'
witnesses are either with Lipercon or D'Rite. What could be discerned is that there is no
employer-employee relationship between plaintiff and the contractual workers
employed by Lipercon and D'Rite. This, however, does not mean that a final
determination regarding the question of the existence of employer-employee
relationship has already been made. To finally resolve this dispute, the court must
extensively consider and delve into the manner of selection and engagement of the
putative employee; the mode of payment of wages; the presence or absence of a power
of dismissal; and the Presence or absence of a power to control the putative employee's
conduct. This necessitates a full-blown trial. If the acts complained of are not restrained,
plaintiff would, undoubtedly, suffer irreparable damages. Upon the other hand, a writ of
injunction does not necessarily expose defendants to irreparable damages.
Evidently, plaintiff has established its right to the relief demanded. (p. 21, Rollo)
Anchored on grave abuse of discretion, petitioners are now before us seeking
nullification of the challenged Writ. On 24 April 1989, we issued a Temporary
Restraining Order enjoining the implementation of the Injunction issued by respondent
Court. The Union construed this to mean that "we can now strike," which it
superimposed on the Order and widely circulated to entice the Union membership to go
on strike. Upon being apprised thereof, in a Resolution of 24 May 1989, we required the
parties to "RESTORE the status quo ante declaration of strike" (p. 2,62 Rollo).
In the meantime, however, or on 2 May 1989, the Union went on strike. Apparently,
some of the contractual workers of Lipercon and D'Rite had been laid off. The strike
adversely affected thirteen (13) of the latter's plants and offices.
On 3 May 1989, the National Conciliation and Mediation Board (NCMB) called the
parties to conciliation. The Union stated that it would lift the strike if the thirty (30)
Lipercon and D'Rite employees were recalled, and discussion on their other demands,
such as wage distortion and appointment of coordinators, were made. Effected
eventually was a Memorandum of Agreement between SanMig and the Union that
"without prejudice to the outcome of G.R. No. 87700 (this case) and Civil Case No.
57055 (the case below), the laid-off individuals ... shall be recalled effective 8 May 1989
to their former jobs or equivalent positions under the same terms and conditions prior
to "lay-off" (Annex 15, SanMig Comment). In turn, the Union would immediately lift the
pickets and return to work.
After an exchange of pleadings, this Court, on 12 October 1989, gave due course to the
Petition and required the parties to submit their memoranda simultaneously, the last of
which was filed on 9 January 1990.
The focal issue for determination is whether or not respondent Court correctly assumed
jurisdiction over the present controversy and properly issued the Writ of Preliminary
Injunction to the resolution of that question, is the matter of whether, or not the case at
bar involves, or is in connection with, or relates to a labor dispute. An affirmative
answer would bring the case within the original and exclusive jurisdiction of labor
tribunals to the exclusion of the regular Courts.
Petitioners take the position that 'it is beyond dispute that the controversy in the
court a quo involves or arose out of a labor dispute and is directly connected or
interwoven with the cases pending with the NCMB-DOLE, and is thus beyond the ambit
of the public respondent's jurisdiction. That the acts complained of (i.e., the mass
concerted action of picketing and the reliefs prayed for by the private respondent) are
within the competence of labor tribunals, is beyond question" (pp. 6-7, Petitioners'
Memo).
On the other hand, SanMig denies the existence of any employer-employee relationship
and consequently of any labor dispute between itself and the Union. SanMig submits, in
particular, that "respondent Court is vested with jurisdiction and judicial competence to
enjoin the specific type of strike staged by petitioner union and its officers herein
complained of," for the reasons that:
A. The exclusive bargaining representative of an employer unit cannot strike to compel
the employer to hire and thereby create an employment relationship with contractual
workers, especially were the contractual workers were recognized by the union, under
the governing collective bargaining agreement, as excluded from, and therefore
strangers to, the bargaining unit.
B. A strike is a coercive economic weapon granted the bargaining representative only in
the event of a deadlock in a labor dispute over 'wages, hours of work and all other and
of the employment' of the employees in the unit. The union leaders cannot instigate a
strike to compel the employer, especially on the eve of certification elections, to hire
strangers or workers outside the unit, in the hope the latter will help re-elect them.
C. Civil courts have the jurisdiction to enjoin the above because this specie of strike does
not arise out of a labor dispute, is an abuse of right, and violates the employer's
constitutional liberty to hire or not to hire. (SanMig's Memorandum, pp. 475-476, Rollo).
We find the Petition of a meritorious character.
A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any
controversy or matter concerning terms and conditions of employment or the
association or representation of persons in negotiating, fixing, maintaining, changing, or
arranging the terms and conditions of employment, regardless of whether the
disputants stand in the proximate relation of employer and employee."
While it is SanMig's submission that no employer-employee relationship exists between
itself, on the one hand, and the contractual workers of Lipercon and D'Rite on the other,
a labor dispute can nevertheless exist "regardless of whether the disputants stand in the
proximate relationship of employer and employee" (Article 212 [1], Labor Code, supra)
provided the controversy concerns, among others, the terms and conditions of
employment or a "change" or "arrangement" thereof (ibid). Put differently, and as
defined by law, the existence of a labor dispute is not negative by the fact that the
plaintiffs and defendants do not stand in the proximate relation of employer and
employee.
That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what
the Union seeks is to regularize the status of the employees contracted by Lipercon and
D'Rite in effect, that they be absorbed into the working unit of SanMig. This matter
definitely dwells on the working relationship between said employees vis-a-vis SanMig.
Terms, tenure and conditions of their employment and the arrangement of those terms
are thus involved bringing the matter within the purview of a labor dispute. Further, the
Union also seeks to represent those workers, who have signed up for Union
membership, for the purpose of collective bargaining. SanMig, for its part, resists that
Union demand on the ground that there is no employer-employee relationship between
it and those workers and because the demand violates the terms of their CBA. Obvious
then is that representation and association, for the purpose of negotiating the
conditions of employment are also involved. In fact, the injunction sought by SanMig
was precisely also to prevent such representation. Again, the matter of representation
falls within the scope of a labor dispute. Neither can it be denied that the controversy
below is directly connected with the labor dispute already taken cognizance of by the
NCMB-DOLE (NCMB-NCR- NS-01- 021-89; NCMB NCR NS-01-093-83).
Whether or not the Union demands are valid; whether or not SanMig's contracts with
Lipercon and D'Rite constitute "labor-only" contracting and, therefore, a regular
employer-employee relationship may, in fact, be said to exist; whether or not the Union
can lawfully represent the workers of Lipercon and D'Rite in their demands against
SanMig in the light of the existing CBA; whether or not the notice of strike was valid and
the strike itself legal when it was allegedly instigated to compel the employer to hire
strangers outside the working unit; — those are issues the resolution of which call for
the application of labor laws, and SanMig'scause's of action in the Court below are
inextricably linked with those issues.
WHEREFORE, the Writ of certiorari is GRANTED and the Orders of respondent Judge of
25 March 1989 and 29 March 1989 are SET ASIDE. The Writ of Prohibition is GRANTED
and respondent Judge is enjoined from taking any further action in Civil Case No. 57055
except for the purpose of dismissing it. The status quo ante declaration of strike ordered
by the Court on 24 May 1989 shall be observed pending the proceedings in the National
Conciliation Mediation Board-Department of Labor and Employment, docketed as
NCMB-NCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No costs.

The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13 SCRA 738)
relied upon by SanMig is not controlling as in that case there was no controversy over
terms, tenure or conditions, of employment or the representation of employees that
called for the application of labor laws. In that case, what the petitioning union
demanded was not a change in working terms and conditions, or the representation of
the employees, but that its members be hired as stevedores in the place of the
members of a rival union, which petitioners wanted discharged notwithstanding the
existing contract of the arrastre company with the latter union. Hence, the ruling
therein, on the basis of those facts unique to that case, that such a demand could hardly
be considered a labor dispute.
Locsin v PLDT
As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor
tribunals. As explicitly provided for in Article 217 of the Labor Code, prior to its The Case
amendment by R.A. No. 6715 on 21 March 1989, since the suit below was instituted on
6 March 1989, Labor Arbiters have original and exclusive jurisdiction to hear and decide This Petition for Review on Certiorari under Rule 45 seeks the reversal of the May 6,
the following cases involving all workers including "1. unfair labor practice cases; 2. 2008 Decision[1] and November 4, 2008 Resolution[2] of the Court of Appeals (CA) in CA-
those that workers may file involving wages, hours of work and other terms and G.R. SP No. 97398, entitled Philippine Long Distance Telephone Company v. National
conditions of employment; ... and 5. cases arising from any violation of Article 265 of Labor Relations Commission, Raul G. Locsin and Eddie B. Tomaquin. The assailed
this Code, including questions involving the legality of striker and lockouts. ..." Article decision set aside the Resolutions of the National Labor Relations Commission (NLRC)
217 lays down the plain command of the law. dated October 28, 2005 and August 28, 2006 which in turn affirmed the Decision
dated February 13, 2004 of the Labor Arbiter. The assailed resolution, on the other
The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of hand, denied petitioners motion for reconsideration of the assailed decision.
the Civil Code would not suffice to keep the case within the jurisdictional boundaries of
regular Courts. That claim for damages is interwoven with a labor dispute existing The Facts
between the parties and would have to be ventilated before the administrative
On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT)
machinery established for the expeditious settlement of those disputes. To allow the
and the Security and Safety Corporation of the Philippines (SSCP) entered into a Security
action filed below to prosper would bring about "split jurisdiction" which is obnoxious to
Services Agreement[3] (Agreement) whereby SSCP would provide armed security guards
the orderly administration of justice (Philippine Communications, Electronics and
to PLDT to be assigned to its various offices.
Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968, 24 SCRA 321).
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other
We recognize the proprietary right of SanMig to exercise an inherent management
security guards, were posted at a PLDT office.
prerogative and its best business judgment to determine whether it should contract out
the performance of some of its work to independent contractors. However, the rights of On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the
all workers to self-organization, collective bargaining and negotiations, and peaceful Agreement effective October 1, 2001.[4]
concerted activities, including the right to strike in accordance with law (Section 3,
Article XIII, 1987 Constitution) equally call for recognition and protection. Those Despite the termination of the Agreement, however, petitioners continued to secure the
contending interests must be placed in proper perspective and equilibrium. premises of their assigned office. They were allegedly directed to remain at their post by
representatives of respondent. In support of their contention, petitioners provided the
Labor Arbiter with copies of petitioner Locsins pay slips for the period of January to
September 2002.[5]
Then, on September 30, 2002, petitioners services were terminated.
Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and
recovery of money claims such as overtime pay, holiday pay, premium pay for holiday
and rest day, service incentive leave pay, Emergency Cost of Living Allowance, and moral
and exemplary damages against PLDT.
The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was
explained in the Decision that petitioners were found to be employees of PLDT and not
of SSCP. Such conclusion was arrived at with the factual finding that petitioners
continued to serve as guards of PLDTs offices. As such employees, petitioners were
entitled to substantive and procedural due process before termination of employment.
The Labor Arbiter held that respondent failed to observe such due process
requirements. The dispositive portion of the Labor Arbiters Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondent
Philippine Long Distance and Telephone Company (PLDT) to pay complainants Raul E.
Locsin and Eddie Tomaquin their separation pay and back wages computed as follows:
NAME SEPARATION PAY BACKWAGES
1. Raul E. Locsin P127,500.00 P240,954.67
2. Eddie B. Tomaquin P127,500.00 P240,954.67
P736,909.34
All other claims are DISMISSED for want of factual basis.
Let the computation made by the Computation and Examination Unit form part of this
decision.
SO ORDERED.
PLDT appealed the above Decision to the NLRC which rendered a Resolution affirming in
toto the Arbiters Decision.
Thus, PDLT filed a Motion for Reconsideration of the NLRCs Resolution which was also
denied.
Consequently, PLDT filed a Petition for Certiorari with the CA asking for the nullification
of the Resolution issued by the NLRC as well as the Labor Arbiters Decision. The CA
rendered the assailed decision granting PLDTs petition and dismissing petitioners
complaint. The dispositive portion of the CA Decision provides:
WHEREFORE, the instant Petition for Certiorari is GRANTED. The Resolutions
dated October 28, 2005 and August 28, 2006 of the National Labor Relations
Commission are ANNULLED and SET ASIDE. Private respondents complaint against
Philippine Long Distance Telephone Company is DISMISSED.
SO ORDERED.
The CA applied the four-fold test in order to determine the existence of an employer-
employee relationship between the parties but did not find such relationship. It
determined that SSCP was not a labor-only contractor and was an independent
contractor having substantial capital to operate and conduct its own business. The CA
further bolstered its decision by citing the Agreement whereby it was stipulated that
there shall be no employer-employee relationship between the security guards and
PLDT.
Anent the pay slips that were presented by petitioners, the CA noted that those were
issued by SSCP and not PLDT; hence, SSCP continued to pay the salaries of petitioners
after the Agreement. This fact allegedly proved that petitioners continued to be
employees of SSCP albeit performing their work at PLDTs premises.
From such assailed decision, petitioners filed a motion for reconsideration which was
denied in the assailed resolution.
Hence, we have this petition.
The Issues
1. Whether or not; complainants extended services to the respondent for one (1)
year from October 1, 2001, the effectivity of the termination of the contract of
complainants agency SSCP, up to September 30, 2002, without a renewed contract,
constitutes an employer-employee relationship between respondent and the
complainants.
2. Whether or not; in accordance to the provision of the Article 280 of the Labor
Code, complainants extended services to the respondent for another one (1) year
without a contract be considered as contractual employment.
3. Whether or not; in accordance to the provision of the Article 280 of the Labor
Code, does complainants thirteen (13) years of service to the respondent with
manifestation to the respondent thirteen (13) years renewal of its security contract with
the complainant agency SSCP, can be considered only as seasonal in nature or fixed as
[specific projects] or undertakings and its completion or termination can be dictated as
[controlled] by the respondent anytime they wanted to.
4. Whether or not; complainants from being an alleged contractual employees of the
respondent for thirteen (13) years as they were then covered by a contract, becomes
regular employees of the respondent as the one (1) year extended services of the
complainants were not covered by a contract, and can be considered as direct
employment pursuant to the provision of the Article 280 of the Labor Code.
5. Whether or not; the Court of Appeals committed grave abuse of discretion when it
set aside and [annulled] the labor [arbiters] decision and of the NLRCs resolution
declaring the dismissal of the complainant as illegal.[6]
The Courts Ruling
This petition is hereby granted.
An Employer-Employee
Relationship Existed Between the Parties
It is beyond cavil that there was no employer-employee relationship between the
parties from the time of petitioners first assignment to respondent by SSCP in 1988 until
the alleged termination of the Agreement between respondent and SSCP. In fact, this
was the conclusion that was reached by this Court in Abella v. Philippine Long Distance
Telephone Company,[7] where we ruled that petitioners therein, including herein
petitioners, cannot be considered as employees of PLDT. It bears pointing out that
petitioners were among those declared to be employees of their respective security
agencies and not of PLDT.
The only issue in this case is whether petitioners became employees of respondent after
the Agreement between SSCP and respondent was terminated.
This must be answered in the affirmative.
Notably, respondent does not deny the fact that petitioners remained in the premises of
their offices even after the Agreement was terminated. And it is this fact that must be
explained.
To recapitulate, the CA, in rendering a decision in favor of respondent, found that: (1)
petitioners failed to prove that SSCP was a labor-only contractor; and (2) petitioners are
employees of SSCP and not of PLDT.
In arriving at such conclusions, the CA relied on the provisions of the Agreement,
wherein SSCP undertook to supply PLDT with the required security guards, while
furnishing PLDT with a performance bond in the amount of PhP 707,000. Moreover, the
CA gave weight to the provision in the Agreement that SSCP warranted that it carry on
an independent business and has substantial capital or investment in the form of
equipment, work premises, and other materials which are necessary in the conduct of
its business.
Further, in determining that no employer-employee relationship existed between the
parties, the CA quoted the express provision of the Agreement, stating that no
employer-employee relationship existed between the parties herein. The CA
disregarded the pay slips of Locsin considering that they were in fact issued by SSCP and
not by PLDT.
From the foregoing explanation of the CA, the fact remains that petitioners remained at
their post after the termination of the Agreement. Notably, in its Comment dated March
10, 2009,[8] respondent never denied that petitioners remained at their post
until September 30, 2002. While respondent denies the alleged circumstances stated by
petitioners, that they were told to remain at their post by respondents Security
Department and that they were informed by SSCP Operations Officer Eduardo Juliano
that their salaries would be coursed through SSCP as per arrangement with PLDT, it does
not state why they were not made to vacate their posts. Respondent said that it did not
know why petitioners remained at their posts.
Rule 131, Section 3(y) of the Rules of Court provides:
SEC. 3. Disputable presumptions.The following presumptions are satisfactory if
uncontradicted, but may be contradicted and overcome by other evidence:
x xxx
(y) That things have happened according to the ordinary course of nature and the
ordinary habits of life.
In the ordinary course of things, responsible business owners or managers would not
allow security guards of an agency with whom the owners or managers have severed
ties with to continue to stay within the business premises. This is because upon the
termination of the owners or managers agreement with the security agency, the
agencys undertaking of liability for any damage that the security guard would cause has
already been terminated. Thus, in the event of an accident or otherwise damage caused
by such security guards, it would be the business owners and/or managers who would
be liable and not the agency. The business owners or managers would, therefore, be
opening themselves up to liability for acts of security guards over whom the owners or
managers allegedly have no control.
At the very least, responsible business owners or managers would inquire or learn why
such security guards were remaining at their posts, and would have a clear
understanding of the circumstances of the guards stay. It is but logical that responsible
business owners or managers would be aware of the situation in their premises.
We point out that with respondents hypothesis, it would seem that SSCP was paying
petitioners salaries while securing respondents premises despite the termination of
their Agreement. Obviously, it would only be respondent that would benefit from such a
situation. And it is seriously doubtful that a security agency that was established for
profit would allow its security guards to secure respondents premises when the
Agreement was already terminated.
From the foregoing circumstances, reason dictates that we conclude that petitioners
remained at their post under the instructions of respondent. We can further conclude
that respondent dictated upon petitioners that the latter perform their regular duties to
secure the premises during operating hours. This, to our mind and under the
circumstances, is sufficient to establish the existence of an employer-employee
relationship. Certainly, the facts as narrated by petitioners are more believable than the
irrational denials made by respondent. Thus, we ruled in Lee Eng Hong v. Court of
Appeals:[9]
Evidence, to be believed, must not only proceed from the mouth of a credible witness,
but it must be credible in itself such as the common experience and observation of
mankind can approve as probable under the circumstances. We have no test of the
truth of human testimony, except its conformity to our knowledge, observation and
experience. Whatever is repugnant to these belongs to the miraculous and is outside
judicial cognizance (Castaares v. Court of Appeals, 92 SCRA 568 [1979]).
To reiterate, while respondent and SSCP no longer had any legal relationship with the
termination of the Agreement, petitioners remained at their post securing the premises
of respondent while receiving their salaries, allegedly from SSCP. Clearly, such a
situation makes no sense, and the denials proffered by respondent do not shed any light
to the situation. It is but reasonable to conclude that, with the behest and, presumably,
directive of respondent, petitioners continued with their services. Evidently, such
are indicia of control that respondent exercised over petitioners.
Such power of control has been explained as the right to control not only the end to be
achieved but also the means to be used in reaching such end. [10] With the conclusion
that respondent directed petitioners to remain at their posts and continue with their
duties, it is clear that respondent exercised the power of control over them; thus, the
existence of an employer-employee relationship.
In Tongko v. The Manufacturers Life Insurance Co. (Phils.) Inc.,[11] we reiterated the oft
repeated rule that control is the most important element in the determination of the
existence of an employer-employee relationship:
In the determination of whether an employer-employee relationship exists between two
parties, this Court applies the four-fold test to determine the existence of the elements
of such relationship. In Pacific Consultants International Asia, Inc. v. Schonfeld, the Court
set out the elements of an employer-employee relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an employment
relationship is in dispute, four elements constitute the reliable yardstick: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employees conduct. It is the so-
called control test which constitutes the most important index of the existence of the
employer-employee relationship that is, whether the employer controls or has reserved
the right to control the employee not only as to the result of the work to be done but
also as to the means and methods by which the same is to be accomplished. Stated
otherwise, an employer-employee relationship exists where the person for whom the
services are performed reserves the right to control not only the end to be achieved but
also the means to be used in reaching such end.
Furthermore, Article 106 of the Labor Code contains a provision on contractors, to wit:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract
with another person for the performance of the formers work, the employees of the
contractor and of the latters subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees
in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed
under the contract, in the same manner and extent that he is liable to employees
directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or
prohibit the contracting-out of labor to protect the rights of workers established under
this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within
these types of contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
There is labor-only contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him. (Emphasis supplied.)
Thus, the Secretary of Labor issued Department Order No. 18-2002, Series of 2002,
implementing Art. 106 as follows:
Section 5. Prohibition against labor-only contracting.Labor-only contracting is hereby
declared prohibited. For this purpose, labor-only contracting shall refer to an
arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any of the following
elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment
which relates to the job, work or service to be performed and the employees recruited,
supplied or placed by such contractor or subcontractor are performing activities which
are directly related to the main business of the principal; or
(ii) the contractor does not exercise the right to control over the performance of the
work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (C)
of the Labor Code, as amended.
Substantial capital or investment refers to capital stocks and subscribed capitalization in
the case of corporations, tools, equipment, implements, machineries and work
premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work or service contracted out.
The right to control shall refer to the right reserved to the person for whom the services
of the contractual workers are performed, to determine not only the end to be
achieved, but also the manner and means to be used in reaching that end.
On the other hand, Sec. 7 of the department order contains the consequence of such
labor-only contracting:
Section 7. Existence of an employer-employee relationship.The contractor or
subcontractor shall be considered the employer of the contractual employee for
purposes of enforcing the provisions of the Labor Code and other social legislation. The
principal, however, shall be solidarily liable with the contractor in the event of any
violation of any provision of the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the
following cases as declared by a competent authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section
6 (Prohibitions) hereof. (Emphasis supplied.)
Evidently, respondent having the power of control over petitioners must be considered
as petitioners employerfrom the termination of the Agreement onwardsas this was the
only time that any evidence of control was exhibited by respondent over petitioners and
in light of our ruling in Abella.[12] Thus, as aptly declared by the NLRC, petitioners were
entitled to the rights and benefits of employees of respondent, including due process
requirements in the termination of their services.
Both the Labor Arbiter and NLRC found that respondent did not observe such due
process requirements. Having failed to do so, respondent is guilty of illegal dismissal.
WHEREFORE, we SET ASIDE the CAs May 6, 2008 Decision and November 4,
2008 Resolution in CA-G.R. SP No. 97398. We hereby REINSTATE the Labor Arbiters
Decision dated February 13, 2004 and the NLRCs Resolutions dated October 28,
2005 and August 28, 2006.
No costs.
People’s Broadcasting Service vs Sec of Labor
In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting Service, Inc.
(Bombo Radyo Phils., Inc.) questioned the Decision and Resolution of the Court of
Appeals (CA) dated October 26, 2006 and June 26, 2007, respectively, in C.A. G.R. CEB-
SP No. 00855.
Private respondent Jandeleon Juezan filed a complaint against petitioner with the
Department of Labor and Employment (DOLE) Regional Office No. VII, Cebu City, for
illegal deduction, nonpayment of service incentive leave, 13th month pay, premium pay
for holiday and rest day and illegal diminution of benefits, delayed payment of wages
and noncoverage of SSS, PAG-IBIG and Philhealth.[1] After the conduct of summary
investigations, and after the parties submitted their position papers, the DOLE Regional
Director found that private respondent was an employee of petitioner, and was entitled
to his money claims.[2] Petitioner sought reconsideration of the Directors Order, but
failed. The Acting DOLE Secretary dismissed petitioners appeal on the ground that
petitioner submitted a Deed of Assignment of Bank Deposit instead of posting a cash or
surety bond. When the matter was brought before the CA, where petitioner claimed
that it had been denied due process, it was held that petitioner was accorded due
process as it had been given the opportunity to be heard, and that the DOLE Secretary
had jurisdiction over the matter, as the jurisdictional limitation imposed by Article 129
of the Labor Code on the power of the DOLE Secretary under Art. 128(b) of the Code
had been repealed by Republic Act No. (RA) 7730.[3]
In the Decision of this Court, the CA Decision was reversed and set aside, and the
complaint against petitioner was dismissed. The dispositive portion of the Decision
reads as follows:
WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the
Resolution dated 26 June 2007 of the Court of Appeals in C.A. G.R. CEB-SP No. 00855
are REVERSED and SET ASIDE. The Order of the then Acting Secretary of the Department
of Labor and Employment dated 27 January 2005 denying petitioners appeal, and the
Orders of the Director, DOLE Regional Office No. VII, dated 24 May 2004 and 27
February 2004, respectively, are ANNULLED. The complaint against petitioner
is DISMISSED.[4]
The Court found that there was no employer-employee relationship between petitioner
and private respondent. It was held that while the DOLE may make a determination of
the existence of an employer-employee relationship, this function could not be co-
extensive with the visitorial and enforcement power provided in Art. 128(b) of the Labor
Code, as amended by RA 7730. The National Labor Relations Commission (NLRC) was
held to be the primary agency in determining the existence of an employer-employee
relationship. This was the interpretation of the Court of the clause in cases where the
relationship of employer-employee still exists in Art. 128(b).[5]
From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of
Decision (with Leave of Court). The PAO sought to clarify as to when the visitorial and
enforcement power of the DOLE be not considered as co-extensive with the power to
determine the existence of an employer-employee relationship.[6] In its Comment,[7] the
DOLE sought clarification as well, as to the extent of its visitorial and enforcement
power under the Labor Code, as amended.
The Court treated the Motion for Clarification as a second motion for reconsideration,
granting said motion and reinstating the petition.[8] It is apparent that there is a need to
delineate the jurisdiction of the DOLE Secretary vis--vis that of the NLRC.
Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized
hearing officers to hear and decide any matter involving the recovery of wages and
other monetary claims and benefits was qualified by the proviso that the complaint not
include a claim for reinstatement, or that the aggregate money claims not exceed PhP
5,000. RA 7730, or an Act Further Strengthening the Visitorial and Enforcement Powers
of the Secretary of Labor, did away with the PhP 5,000 limitation, allowing the DOLE
Secretary to exercise its visitorial and enforcement power for claims beyond PhP
5,000. The only qualification to this expanded power of the DOLE was only that there
still be an existing employer-employee relationship.
It is conceded that if there is no employer-employee relationship, whether it has been
terminated or it has not existed from the start, the DOLE has no jurisdiction. Under Art.
128(b) of the Labor Code, as amended by RA 7730, the first sentence reads,
Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and
in cases where the relationship of employer-employee still exists, the Secretary of Labor
and Employment or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of this Code and other
labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. It is clear and beyond
debate that an employer-employee relationship must exist for the exercise of the
visitorial and enforcement power of the DOLE. The question now arises, may the DOLE
make a determination of whether or not an employer-employee relationship exists, and
if so, to what extent?
The first portion of the question must be answered in the affirmative.
The prior decision of this Court in the present case accepts such answer, but places a
limitation upon the power of the DOLE, that is, the determination of the existence of an
employer-employee relationship cannot be co-extensive with the visitorial and
enforcement power of the DOLE. But even in conceding the power of the DOLE to
determine the existence of an employer-employee relationship, the Court held that the
determination of the existence of an employer-employee relationship is still primarily
within the power of the NLRC, that any finding by the DOLE is merely preliminary.
This conclusion must be revisited.
No limitation in the law was placed upon the power of the DOLE to determine the
existence of an employer-employee relationship. No procedure was laid down where
the DOLE would only make a preliminary finding, that the power was primarily held by
the NLRC. The law did not say that the DOLE would first seek the NLRCs determination
of the existence of an employer-employee relationship, or that should the existence of
the employer-employee relationship be disputed, the DOLE would refer the matter to
the NLRC. The DOLE must have the power to determine whether or not an employer-
employee relationship exists, and from there to decide whether or not to issue
compliance orders in accordance with Art. 128(b) of the Labor Code, as amended by RA
7730.
The DOLE, in determining the existence of an employer-employee relationship, has a
ready set of guidelines to follow, the same guide the courts themselves use. The
elements to determine the existence of an employment relationship are: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; (4) the employers power to control the employees conduct.[9] The use of this
test is not solely limited to the NLRC. The DOLE Secretary, or his or her representatives,
can utilize the same test, even in the course of inspection, making use of the same
evidence that would have been presented before the NLRC.
The determination of the existence of an employer-employee relationship by the DOLE
must be respected. The expanded visitorial and enforcement power of the DOLE granted
by RA 7730 would be rendered nugatory if the alleged employer could, by the simple
expedient of disputing the employer-employee relationship, force the referral of the
matter to the NLRC. The Court issued the declaration that at least a prima facie showing
of the absence of an employer-employee relationship be made to oust the DOLE of
jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and it is
the DOLE that will weigh it, to see if the same does successfully refute the existence of
an employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it
takes cognizance of the matter, to the exclusion of the NLRC. The DOLE would have no
jurisdiction only if the employer-employee relationship has already been terminated, or
it appears, upon review, that no employer-employee relationship existed in the first
place.
The Court, in limiting the power of the DOLE, gave the rationale that such limitation
would eliminate the prospect of competing conclusions between the DOLE and the
NLRC. The prospect of competing conclusions could just as well have been eliminated by
according respect to the DOLE findings, to the exclusion of the NLRC, and this We
believe is the more prudent course of action to take.
cases involving wages, rates of pay, hours of work, and other terms and conditions of
employment, if accompanied by a claim for reinstatement. If a complaint is filed with
the NLRC, and there is still an existing employer-employee relationship, the jurisdiction
is properly with the DOLE. The findings of the DOLE, however, may still be questioned
through a petition for certiorari under Rule 65 of the Rules of Court

This is not to say that the determination by the DOLE is beyond question or
review. Suffice it to say, there are judicial remedies such as a petition for certiorari
under Rule 65 that may be availed of, should a party wish to dispute the findings of the
DOLE.
It must also be remembered that the power of the DOLE to determine the existence of
an employer-employee relationship need not necessarily result in an affirmative
finding. The DOLE may well make the determination that no employer-employee
relationship exists, thus divesting itself of jurisdiction over the case. It must not be
precluded from being able to reach its own conclusions, not by the parties, and certainly
not by this Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully
empowered to make a determination as to the existence of an employer-employee
relationship in the exercise of its visitorial and enforcement power, subject to judicial
review, not review by the NLRC.
In the present case, the finding of the DOLE Regional Director that there was an
employer-employee relationship has been subjected to review by this Court, with the
finding being that there was no employer-employee relationship between petitioner
and private respondent, based on the evidence presented. Private respondent
presented self-serving allegations as well as self-defeating evidence.[10] The findings of
the Regional Director were not based on substantial evidence, and private respondent
failed to prove the existence of an employer-employee relationship. The DOLE had no
jurisdiction over the case, as there was no employer-employee relationship
present. Thus, the dismissal of the complaint against petitioner is proper.
WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED, with
the MODIFICATION that in the exercise of the DOLEs visitorial and enforcement power,
the Labor Secretary or the latters authorized representative shall have the power to
determine the existence of an employer-employee relationship, to the exclusion of the
NLRC. SO ORDERED.

There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730,
there is still a threshold amount set by Arts. 129 and 217 of the Labor Code when money
claims are involved, i.e., that if it is for PhP 5,000 and below, the jurisdiction is with the
regional director of the DOLE, under Art. 129, and if the amount involved exceeds PhP
5,000, the jurisdiction is with the labor arbiter, under Art. 217. The view states that
despite the wording of Art. 128(b), this would only apply in the course of regular
inspections undertaken by the DOLE, as differentiated from cases under Arts. 129 and
217, which originate from complaints. There are several cases, however, where the
Court has ruled that Art. 128(b) has been amended to expand the powers of the DOLE
Secretary and his duly authorized representatives by RA 7730. In these cases, the Court
resolved that the DOLE had the jurisdiction, despite the amount of the money claims
involved. Furthermore, in these cases, the inspection held by the DOLE regional director
was prompted specifically by a complaint. Therefore, the initiation of a case through a
complaint does not divest the DOLE Secretary or his duly authorized representative of
jurisdiction under Art. 128(b).

To recapitulate, if a complaint is brought before the DOLE to give effect to the labor
standards provisions of the Labor Code or other labor legislation, and there is a finding
by the DOLE that there is an existing employer-employee relationship, the DOLE
exercises jurisdiction to the exclusion of the NLRC. If the DOLE finds that there is no
employer-employee relationship, the jurisdiction is properly with the NLRC. If a
complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement, the
jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of the Labor Code,
which provides that the Labor Arbiter has original and exclusive jurisdiction over those
Ymbong vs. ABSCBN
Before us is a Rule 45 Petition seeking to set aside the August 22, 2007 Decision[1] and
September 18, 2008 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 86206
declaring petitioner to have resigned from work and not illegally dismissed.
The antecedent facts follow:
Petitioner Ernesto G. Ymbong started working for ABS-CBN Broadcasting Corporation
(ABS-CBN) in 1993 at its regional station in Cebu as a television talent, co-
anchoringHoyGising and TV Patrol Cebu. His stint in ABS-CBN later extended to radio
when ABS-CBN Cebu launched its AM station DYAB in 1995 where he worked as drama
and voice talent, spinner, scriptwriter and public affairs program anchor.
Like Ymbong, Leandro Patalinghug also worked for ABS-CBN Cebu. Starting 1995, he
worked as talent, director and scriptwriter for various radio programs aired over DYAB.
On January 1, 1996, the ABS-CBN Head Office in Manila issued Policy No. HR-ER-016 or
the Policy on Employees Seeking Public Office. The pertinent portions read:
1. Any employee who intends to run for any public office position, must file his/her
letter of resignation, at least thirty (30) days prior to the official filing of the certificate
of candidacy either for national or local election.
x xxx
3. Further, any employee who intends to join a political group/party or even with no
political affiliation but who intends to openly and aggressively campaign for a
candidate or group of candidates (e.g. publicly speaking/endorsing candidate, recruiting
campaign workers, etc.) must file a request for leave of absence subject to
managements approval. For this particular reason, the employee should file the leave
request at least thirty (30) days prior to the start of the planned leave period.
x xx x[3] [Emphasis and underscoring supplied.]
Because of the impending May 1998 elections and based on his immediate recollection
of the policy at that time, Dante Luzon, Assistant Station Manager of DYAB issued the
following memorandum:
TO : ALL CONCERNED
FROM : DANTE LUZON
DATE : MARCH 25, 1998
SUBJECT : AS STATED
Please be informed that per company policy, any employee/talent who wants to run
for any position in the coming election will have to file a leave of absence the moment
he/she files his/her certificate of candidacy.
The services rendered by the concerned employee/talent to this company will then be
temporarily suspended for the entire campaign/election period.
For strict compliance.[4] [Emphasis and underscoring supplied.]
Luzon, however, admitted that upon double-checking of the exact text of the policy and
subsequent confirmation with the ABS-CBN Head Office, he saw that the policy actually
required suspension for those who intend to campaign for a political party or candidate
and resignation for those who will actually run in the elections.[5]
After the issuance of the March 25, 1998 Memorandum, Ymbong got in touch
with Luzon. Luzon claims that Ymbong approached him and told him that he would
leave radio for a couple of months because he will campaign for the administration
ticket. It was only after the elections that they found out that Ymbong actually ran for
public office himself at the eleventh hour. Ymbong, on the other hand, claims that in
accordance with the March 25, 1998 Memorandum, he informed Luzon through a letter
that he would take a few months leave of absence from March 8, 1998 to May 18, 1998
since he was running for councilor of Lapu-Lapu City.
As regards Patalinghug, Patalinghug approached Luzon and advised him that he will run
as councilor for Naga, Cebu. According to Luzon, he clarified to Patalinghug that he will
be considered resigned and not just on leave once he files a certificate of
candidacy. Thus, Patalinghug wrote Luzon the following letter on April 13, 1998:
Dear Mr. Luzon,
Im submitting to you my letter of resignation as your Drama Production Chief and Talent
due to your companys policy that every person connected to ABS-CBN that should seek
an elected position in the government will be forced to resigned (sic) from his
position. So herewith Im submitting my resignation with a hard heart. But Im still hoping
to be connected again with your prestigious company after the election[s] should you
feel that Im still an asset to your drama production department. Im looking forward to
that day and Im very happy and proud that I have served for two and a half years the
most stable and the most prestigious Radio and TV Network in the Philippines.
As a friend[,] wish me luck and Pray for me. Thank you.
Very Truly Yours,
(Sgd.)
Leandro Boy Patalinghug[6]
Unfortunately, both Ymbong and Patalinghug lost in the May 1998 elections.
Later, Ymbong and Patalinghug both tried to come back to ABS-CBN Cebu. According
to Luzon, he informed them that they cannot work there anymore because of company
policy. This was stressed even in subsequent meetings and they were told that the
company was not allowing any exceptions. ABS-CBN, however, agreed out of pure
liberality to give them a chance to wind up their participation in the radio
drama, NagbabagangLangit, since it was rating well and to avoid an abrupt ending. The
agreed winding-up, however, dragged on for so long prompting Luzon to issue to
Ymbong the following memorandum dated September 14, 1998:
TO : NESTOR YMBONG
FROM : DANTE LUZON
SUBJECT : AS STATED
DATE : 14 SEPT. 1998
Please be reminded that your services as drama talent had already been automatically
terminated when you ran for a local government position last election.
The Management however gave you more than enough time to end your drama
participation and other involvement with the drama department.
It has been decided therefore that all your drama participation shall be terminated
effective immediately. However, your involvement as drama spinner/narrator of the
drama NAGBA[BA]GANG LANGIT continues until its writer/director Mr. Leandro
Patalinghug wraps it up one week upon receipt of a separate memo issued to him.[7]
Ymbong in contrast contended that after the expiration of his leave of absence, he
reported back to work as a regular talent and in fact continued to receive his
salary. On September 14, 1998, he received a memorandum stating that his services are
being terminated immediately, much to his surprise. Thus, he filed an illegal dismissal
complaint[8]against ABS-CBN, Luzon and DYAB Station Manager VenerandaSy. He argued
that the ground cited by ABS-CBN for his dismissal was not among those enumerated in
the Labor Code, as amended. And even granting without admitting the existence of the
company policy supposed to have been violated, Ymbong averred that it was necessary
that the company policy meet certain requirements before willful disobedience of the
policy may constitute a just cause for termination. Ymbong further argued that the
company policy violates his constitutional right to suffrage.[9]
Patalinghug likewise filed an illegal dismissal complaint[10] against ABS-CBN.
ABS-CBN prayed for the dismissal of the complaints arguing that there is no employer-
employee relationship between the company and Ymbong and Patalinghug. ABS-CBN
contended that they are not employees but talents as evidenced by their talent
contracts. However, notwithstanding their status, ABS-CBN has a standing policy on
persons connected with the company whenever they will run for public office.[11]
On July 14, 1999, the Labor Arbiter rendered a decision[12] finding the dismissal of
Ymbong and Patalinghug illegal, thus:
WHEREFORE, in the light of the foregoing, judgment is rendered finding the dismissal of
the two complainants illegal. An order is issued directing respondent ABS[-]CBN to
immediately reinstate complainants to their former positions without loss of seniority
rights plus the payment of backwages in the amount of P200,000.00 to each
complainant.
All other claims are dismissed.
SO ORDERED.[13]
The Labor Arbiter found that there exists an employer-employee relationship between
ABS-CBN and Ymbong and Patalinghug considering the stipulations in their appointment
letters/talent contracts. The Labor Arbiter noted particularly that the appointment
letters/talent contracts imposed conditions in the performance of their work,
specifically on attendance and punctuality, which effectively placed them under the
control of ABS-CBN. The Labor Arbiter likewise ruled that although the subject company
policy is reasonable and not contrary to law, the same was not made known to Ymbong
and Patalinghug and in fact was superseded by another one embodied in the March 25,
1998 Memorandum issued by Luzon. Thus, there is no valid or authorized cause in
terminating Ymbong and Patalinghug from their employment.
In its memorandum of appeal[14] before the National Labor Relations Commission
(NLRC), ABS-CBN contended that the Labor Arbiter has no jurisdiction over the case
because there is no employer-employee relationship between the company
and Ymbong and Patalinghug, and that Sy and Luzon mistakenly assumed that Ymbong
and Patalinghug could just file a leave of absence since they are only talents and not
employees. In its Supplemental Appeal,[15] ABS-CBN insisted that Ymbong and
Patalinghug were engaged as radio talents for DYAB dramas and personality programs
and their contract is one between a self-employed contractor and the hiring party which
is a standard practice in the broadcasting industry. It also argued that the Labor Arbiter
should not have made much of the provisions on Ymbongs attendance and punctuality
since such requirement is a dictate of the programming of the station, the slating of
shows at regular time slots, and availability of recording studios not an attempt to
exercise control over the manner of his performance of the contracted anchor work
within his scheduled spot on air. As for the pronouncement that the company policy has
already been superseded by the March 25, 1998 Memorandum issued by Luzon, the
latter already clarified that it was the very policy he sought to enforce. This matter was
relayed by Luzon to Patalinghug when the latter disclosed his plans to join the 1998
elections while Ymbong only informed the company that he was campaigning for the
administration ticket and the company had no inkling that he will actually run until the
issue was already moot and academic. ABS-CBN further contended that Ymbong and
Patalinghugs reinstatement is legally and physically impossible as the talent positions
they vacated no longer exist. Neither is there basis for the award of back wages since
they were not earning a monthly salary but paid talent fees on a per production/per
script basis. Attached to the Supplemental Appeal is a Sworn Statement[16] of Luzon.
On March 8, 2004, the NLRC rendered a decision[17] modifying the labor arbiters
decision. The fallo of the NLRC decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Nicasio C. Aninon
dated 14 July 1999 is MODIFIED, to wit:
Ordering respondent ABS-CBN to reinstate complainant Ernesto G. Ymbong and to pay
his full backwages computed from 15 September 1998 up to the time of his actual
reinstatement.
SO ORDERED.[18]
The NLRC dismissed ABS-CBNs Supplemental Appeal for being filed out of time. The
NLRC ruled that to entertain the same would be to allow the parties to submit their
appeal on piecemeal basis, which is contrary to the agencys duty to facilitate speedy
disposition of cases. The NLRC also held that ABS-CBN wielded the power of control over
Ymbong and Patalinghug, thereby proving the existence of an employer-employee
relationship between them.
As to the issue of whether they were illegally dismissed, the NLRC treated their cases
differently. In the case of Patalinghug, it found that he voluntarily resigned from
employment on April 21, 1998 when he submitted his resignation letter. The NLRC
noted that although the tenor of the resignation letter is somewhat involuntary, he
knew that it is the policy of the company that every person connected therewith should
resign from his employment if he seeks an elected position in the government. As to
Ymbong, however, the NLRC ruled otherwise. It ruled that the March 25, 1998
Memorandum merely states that an employee who seeks any elected position in the
government will only merit the temporary suspension of his services. It held that under
the principle of social justice, the March 25, 1998 Memorandum shall prevail and ABS-
CBN is estopped from enforcing the September 14, 1998 memorandum issued to
Ymbong stating that his services had been automatically terminated when he ran for an
elective position.
ABS-CBN moved to reconsider the NLRC decision, but the same was denied in a
Resolution dated June 21, 2004.[19]
Imputing grave abuse of discretion on the NLRC, ABS-CBN filed a petition for
certiorari[20] before the CA alleging that:
I.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AND SERIOUSLY
MISAPPRECIATED THE FACTS IN NOT HOLDING THAT RESPONDENT YMBONG IS A
FREELANCE RADIO TALENT AND MEDIA PRACTITIONERNOT A REGULAR EMPLOYEE OF
PETITIONERTO WHOM CERTAIN PRODUCTION WORK HAD BEEN OUTSOURCED BY ABS-
CBN CEBU UNDER AN INDEPENDENT CONTRACTORSHIP SITUATION, THUS RENDERING
THE LABOR COURTS WITHOUT JURISDICTION OVER THE CASE IN THE ABSENCE OF
EMPLOYMENT RELATIONS BETWEEN THE PARTIES.
II.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN DECLARING
RESPONDENT YMBONG TO BE A REGULAR EMPLOYEE OF PETITIONER AS TO CREATE A
CONTRACTUAL EMPLOYMENT RELATION BETWEEN THEM WHEN NONE EXISTS OR HAD
BEEN AGREED UPON OR OTHERWISE INTENDED BY THE PARTIES.
III.
EVEN ASSUMING THE ALLEGED EMPLOYMENT RELATION TO EXIST FOR THE SAKE OF
ARGUMENT, RESPONDENT NLRC IN ANY CASE COMMITTED A GRAVE ABUSE OF
DISCRETION IN NOT SIMILARLY UPHOLDING AND APPLYING COMPANY POLICY NO. HR-
ER-016 IN THE CASE OF RESPONDENT YMBONG AND DEEMING HIM AS RESIGNED AND
DISQUALIFIED FROM FURTHER ENGAGEMENT AS A RADIO TALENT IN ABS-CBN CEBU AS
A CONSEQUENCE OF HIS CANDIDACY IN THE 1998 ELECTIONS, AS RESPONDENT NLRC
HAD DONE IN THE CASE OF PATALINGHUG.
IV.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AND DENIED DUE
PROCESS TO PETITIONER IN REFUSING TO CONSIDER ITS SUPPLEMENTAL APPEAL,
DATED OCTOBER 18, 1999, FOR BEING FILED OUT OF TIME CONSIDERING THAT THE
FILING OF SUCH A PLEADING IS NOT IN ANY CASE PROSCRIBED AND RESPONDENT NLRC
IS AUTHORIZED TO CONSIDER ADDITIONAL EVIDENCE ON APPEAL; MOREOVER,
TECHNICAL RULES OF EVIDENCE DO NOT APPLY IN LABOR CASES.
V.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN GRANTING THE
RELIEF OF REINSTATEMENT AND BACKWAGES TO RESPONDENT YMBONG SINCE HE
NEVER OCCUPIED ANY REGULAR POSITION IN PETITIONER FROM WHICH HE COULD
HAVE BEEN ILLEGALLY DISMISSED, NOR ARE ANY OF THE RADIO PRODUCTIONS IN
WHICH HE HAD DONE TALENT WORK FOR PETITIONER STILL EXISTING. INDEED, THERE IS
NO BASIS WHATSOEVER FOR THE AWARD OF BACKWAGES TO RESPONDENT YMBONG
IN THE AMOUNT OF P200,000.00 CONSIDERING THAT, AS SHOWN BY THE
UNCONTROVERTED EVIDENCE, HE WAS NOT EARNING A MONTHLY SALARY OF
P20,000.00, AS HE FALSELY CLAIMS, BUT WAS PAID TALENT FEES ON A PER
PRODUCTION/PER SCRIPT BASIS WHICH AVERAGED LESS THAN P10,000.00 PER MONTH
IN TALENT FEES ALL IN ALL.[21]
On August 22, 2007, the CA rendered the assailed decision reversing and setting aside
the March 8, 2004 Decision and June 21, 2004 Resolution of the NLRC. The CA declared
Ymbong resigned from employment and not to have been illegally dismissed. The award
of full back wages in his favor was deleted accordingly.
The CA ruled that ABS-CBN is estopped from claiming that Ymbong was not its employee
after applying the provisions of Policy No. HR-ER-016 to him. It noted that said policy is
entitled Policy on Employees Seeking Public Office and the guidelines contained therein
specifically pertain to employees and did not even mention talents or independent
contractors. It held that it is a complete turnaround on ABS-CBNs part to later argue that
Ymbong is only a radio talent or independent contractor and not its employee. By
applying the subject company policy on Ymbong, ABS-CBN had explicitly recognized him
to be an employee and not merely an independent contractor.
The CA likewise held that the subject company policy is the controlling guideline and
therefore, Ymbong should be considered resigned from ABS-CBN. While Luzon has
policy-making power as assistant radio manager, he had no authority to issue a
memorandum that had the effect of repealing or superseding a subsisting
policy. Contrary to the findings of the Labor Arbiter, the subject company policy was
effective at that time and continues to be valid and subsisting up to the present. The CA
cited Patalinghugs resignation letter to buttress this conclusion, noting that Patalinghug
openly admitted in his letter that his resignation was in line with the said company
policy. Since ABS-CBN applied Policy No. HR-ER-016 to Patalinghug, there is no reason
not to apply the same regulation to Ymbong who was on a similar situation as the
former. Thus, the CA found that the NLRC overstepped its area of discretion to a point of
grave abuse in declaring Ymbong to have been illegally terminated. The CA concluded
that there is no illegal dismissal to speak of in the instant case as Ymbong is considered
resigned when he ran for an elective post pursuant to the subject company policy.
Hence, this petition.
Petitioner argues that the CA gravely erred: (1) in upholding Policy No. HR-ER-016; (2) in
upholding the validity of the termination of Ymbongs services; and (3) when it reversed
the decision of the NLRC 4th Division of Cebu City which affirmed the decision of Labor
Arbiter Nicasio C. Anion.[22]
Ymbong argues that the subject company policy is a clear interference and a gross
violation of an employees right to suffrage. He is surprised why it was easy for the CA to
rule that Luzons memorandum ran counter to an existing policy while on the other end,
it did not see that it was in conflict with the constitutional right to suffrage. He also
points out that the issuance of the March 25, 1998 Memorandum was precisely an
exercise of the management power to which an employee like him must respect;
otherwise, he will be sanctioned for disobedience or worse, even terminated. He was
not in a position to know which between the two issuances was correct and as far as he
is concerned, the March 25, 1998 Memorandum superseded the subject company
policy. Moreover, ABS-CBN cannot disown acts of its officers most especially since it
prejudiced his property rights.[23]
As to the validity of his dismissal, Ymbong contends that the ground relied upon by ABS-
CBN is not among the just and authorized causes provided in the Labor Code, as
amended. And even assuming the subject company policy passes the test of validity
under the pretext of the right of the management to discipline and terminate its
employees, the exercise of such right is not without bounds. Ymbong avers that his
automatic termination was a blatant disregard of his right to due process. He was never
asked to explain why he did not tender his resignation before he ran for public office as
mandated by the subject company policy.[24]
Ymbong likewise asseverates that both the Labor Arbiter and the NLRC were consistent
in their findings that he was illegally dismissed. It is settled that factual findings of labor
administrative officials, if supported by substantial evidence, are accorded not only
great respect but even finality.[25]
ABS-CBN, for its part, counters that the validity of policies such as Policy No. HR-ER-016
has long been upheld by this Court which has ruled that a media company has a right to
impose a policy providing that employees who file their certificates of candidacy in any
election shall be considered resigned.[26] Moreover, case law has upheld the validity of
the exercise of management prerogatives even if they appear to limit the rights of
employees as long as there is no showing that management prerogatives were exercised
in a manner contrary to law.[27] ABS-CBN contends that being the largest media and
entertainment company in the country, its reputation stems not only from its ability to
deliver quality entertainment programs but also because of neutrality and impartiality in
delivering news.[28]
ABS-CBN further argues that nothing in the company policy prohibits its employees from
either accepting a public appointive position or from running for public office. Thus, it
cannot be considered as violative of the constitutional right of suffrage. Moreover, the
Supreme Court has recognized the employers right to enforce occupational
qualifications as long as the employer is able to show the existence of a reasonable
business necessity in imposing the questioned policy. Here, Policy No. HR-ER-016 itself
states that it was issued to protect the company from any public misconceptions and
[t]o preserve its objectivity, neutrality and credibility. Thus, it cannot be denied that it is
reasonable under the circumstances.[29]
ABS-CBN likewise opposes Ymbongs claim that he was terminated. ABS-CBN argues that
on the contrary, Ymbongs unilateral act of filing his certificate of candidacy is an overt
act tantamount to voluntary resignation on his part by virtue of the clear mandate found
in Policy No. HR-ER-016. Ymbong, however, failed to file his resignation and in fact
misled his superiors by making them believe that he was going on leave to campaign for
the administration candidates but in fact, he actually ran for councilor. He also claims to
have fully apprised Luzon through a letter of his intention to run for public office, but he
failed to adduce a copy of the same.[30]
As to Ymbongs argument that the CA should not have reversed the findings of the Labor
Arbiter and the NLRC, ABS-CBN asseverates that the CA is not precluded from making its
own findings most especially if upon its own review of the case, it has been revealed
that the NLRC, in affirming the findings of the Labor Arbiter, committed grave abuse of
discretion amounting to lack or excess of jurisdiction when it failed to apply the subject
company policy in Ymbongs case when it readily applied the same to Patalinghug.[31]
Essentially, the issues to be resolved in the instant petition are: (1) whether Policy No.
HR-ER-016 is valid; (2) whether the March 25, 1998 Memorandum issued
by Luzonsuperseded Policy No. HR-ER-016; and (3) whether Ymbong, by seeking an
elective post, is deemed to have resigned and not dismissed by ABS-CBN.
Policy No. HR-ER-016 is valid.
This is not the first time that this Court has dealt with a policy similar to Policy No. HR-
ER-016. In the case of Manila Broadcasting Company v. NLRC,[32] this Court ruled:
What is involved in this case is an unwritten company policy considering any employee
who files a certificate of candidacy for any elective or local office as resigned from the
company. Although 11(b) of R.A. No. 6646 does not require mass media commentators
and announcers such as private respondent to resign from their radio or TV stations but
only to go on leave for the duration of the campaign period, we think that the company
may nevertheless validly require them to resign as a matter of policy. In this case, the
policy is justified on the following grounds:
Working for the government and the company at the same time is clearly
disadvantageous and prejudicial to the rights and interest not only of the company but
the public as well. In the event an employee wins in an election, he cannot fully serve, as
he is expected to do, the interest of his employer. The employee has to serve two (2)
employers, obviously detrimental to the interest of both the government and the
private employer.
In the event the employee loses in the election, the impartiality and cold neutrality of an
employee as broadcast personality is suspect, thus readily eroding and adversely
affecting the confidence and trust of the listening public to employers station. [33]
ABS-CBN, like Manila Broadcasting Company, also had a valid justification for Policy No.
HR-ER-016. Its rationale is embodied in the policy itself, to wit:
Rationale:
ABS-CBN BROADCASTING CORPORATION strongly believes that it is to the best interest
of the company to continuously remain apolitical. While it encourages and supports its
employees to have greater political awareness and for them to exercise their right to
suffrage, the company, however, prefers to remain politically independent and
unattached to any political individual or entity.
Therefore, employees who [intend] to run for public office or accept political
appointment should resign from their positions, in order to protect the company from
any public misconceptions. To preserve its objectivity, neutrality and credibility, the
company reiterates the following policy guidelines for strict implementation.
x xx x[34] [Emphasis supplied.]
We have consistently held that so long as a companys management prerogatives are
exercised in good faith for the advancement of the employers interest and not for the
purpose of defeating or circumventing the rights of the employees under special laws or
under valid agreements, this Court will uphold them.[35] In the instant case, ABS-CBN
validly justified the implementation of Policy No. HR-ER-016. It is well within its rights to
ensure that it maintains its objectivity and credibility and freeing itself from any
appearance of impartiality so that the confidence of the viewing and listening public in it
will not be in any way eroded. Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer to exercise what are clearly
management prerogatives. The free will of management to conduct its own business
affairs to achieve its purpose cannot be denied.[36]
It is worth noting that such exercise of management prerogative has earned a stamp of
approval from no less than our Congress itself when on February 12, 2001, it enacted
Republic Act No. 9006, otherwise known as the Fair Election Act. Section 6.6 thereof
reads:
6.6. Any mass media columnist, commentator, announcer, reporter, on-air
correspondent or personality who is a candidate for any elective public office or is a
campaign volunteer for or employed or retained in any capacity by any candidate or
political party shall be deemed resigned, if so required by their employer, or shall take
a leave of absence from his/her work as such during the campaign
period: Provided, That any media practitioner who is an official of a political party or a
member of the campaign staff of a candidate or political party shall not use his/her time
or space to favor any candidate or political party. [Emphasis and underscoring supplied.]
Policy No. HR-ER-016 was not superseded by the March 25, 1998 Memorandum
The CA correctly ruled that though Luzon, as Assistant Station Manager for Radio of ABS-
CBN, has policy-making powers in relation to his principal task of administering the
networks radio station in the Cebu region, the exercise of such power should be in
accord with the general rules and regulations imposed by the ABS-CBN Head Office to its
employees. Clearly, the March 25, 1998 Memorandum issued by Luzon which only
requires employees to go on leave if they intend to run for any elective position is in
absolute contradiction with Policy No. HR-ER-016 issued by the ABS-CBN Head Office in
Manila which requires the resignation, not only the filing of a leave of absence, of any
employee who intends to run for public office. Having been issued beyond the scope of
his authority, the March 25, 1998 Memorandum is therefore void and did not supersede
Policy No. HR-ER-016.
Also worth noting is that Luzon in his Sworn Statement admitted the inaccuracy of his
recollection of the company policy when he issued the March 25, 1998 Memorandum
and stated therein that upon double-checking of the exact text of the policy statement
and subsequent confirmation with the ABS-CBN Head Office in Manila, he learned that
the policy required resignation for those who will actually run in elections because the
company wanted to maintain its independence. Since the officer who himself issued the
subject memorandum acknowledged that it is not in harmony with the Policy issued by
the upper management, there is no reason for it to be a source of right for Ymbong.

Ymbong is deemed resigned when he ran for councilor.

As Policy No. HR-ER-016 is the subsisting company policy and not Luzons March 25, 1998
Memorandum, Ymbong is deemed resigned when he ran for councilor.

We find no merit in Ymbongs argument that [his] automatic termination x xx was a

blatant [disregard] of [his] right to due process as he was never asked to explain why he
did not tender his resignation before he ran for public office as mandated by [the
subject company policy].[37] Ymbongs overt act of running for councilor of Lapu-
Lapu City is tantamount to resignation on his part. He was separated from ABS-CBN not
because he was dismissed but because he resigned. Since there was no termination to
speak of, the requirement of due process in dismissal cases cannot be applied to
Ymbong. Thus, ABS-CBN is not duty-bound to ask him to explain why he did not tender
his resignation before he ran for public office as mandated by the subject company
policy.

In addition, we do not subscribe to Ymbongs claim that he was not in a position to know
which of the two issuances was correct. Ymbong most likely than not, is fully aware that
the subsisting policy is Policy No. HR-ER-016 and not the March 25, 1998 Memorandum
and it was for this reason that, as stated by Luzon in his Sworn Statement, he only told
the latter that he will only campaign for the administration ticket and not actually run
for an elective post. Ymbong claims he had fully apprised Luzon by letter of his plan to
run and even filed a leave of absence but records are bereft of any proof of said
claim. Ymbong claims that the letter stating his intention to go on leave to run in the
election is attached to his Position Paper as Annex A, a perusal of said pleading attached
to his petition before this Court, however, show that Annex A was not his letter to Luzon
but the September 14, 1998 Memorandum informing Ymbong that his services had
been automatically terminated when he ran for a local government position.

Moreover, as pointed out by ABS-CBN, had Ymbong been truthful to his superiors, they
would have been able to clarify to him the prevailing company policy and inform him of
the consequences of his decision in case he decides to run, as Luzon did in Patalinghugs
case.

WHEREFORE, the petition for review on certiorari is DENIED for lack of merit.

With costs against petitioner.

SO ORDERED.

Professional Services v CA
As the hospital industry changes, so must the laws and jurisprudence governing hospital
liability. The immunity from medical malpractice traditionally accorded to hospitals has
to be eroded if we are to balance the interest of the patients and hospitals under the
present setting.
Before this Court is a motion for reconsideration filed by Professional Services, Inc. (PSI),
petitioner in G.R. No. 126297, assailing the Court’s First Division Decision dated January
31, 2007, finding PSI and Dr. Miguel Ampil, petitioner in G.R. No. 127590, jointly and
severally liable for medical negligence.
A brief revisit of the antecedent facts is imperative.
On April 4, 1984, NatividadAgana was admitted at the Medical City General Hospital
(Medical City) because of difficulty of bowel movement and bloody anal discharge. Dr.
Ampil diagnosed her to be suffering from "cancer of the sigmoid." Thus, on April 11,
1984, Dr. Ampil, assisted by the medical staff1 of Medical City, performed an anterior
resection surgery upon her. During the surgery, he found that the malignancy in her
sigmoid area had spread to her left ovary, necessitating the removal of certain portions
of it. Thus, Dr. Ampil obtained the consent of Atty. Enrique Agana, Natividad’s husband,
to permit Dr. Juan Fuentes, respondent in G.R. No. 126467, to perform hysterectomy
upon Natividad.
Dr. Fuentes performed and completed the hysterectomy. Afterwards, Dr. Ampil took
over, completed the operation and closed the incision. However, the operation
appeared to be flawed. In the corresponding Record of Operation dated April 11, 1984,
the attending nurses entered these remarks:
sponge count lacking 2
announced to surgeon searched done (sic) but to no avail continue for closure.
After a couple of days, Natividad complained of excruciating pain in her anal region. She
consulted both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the
natural consequence of the surgical operation performed upon her. Dr. Ampil
recommended that Natividad consult an oncologist to treat the cancerous nodes which
were not removed during the operation.
On May 9, 1984, Natividad, accompanied by her husband, went to the United States to
seek further treatment. After four (4) months of consultations and laboratory
examinations, Natividad was told that she was free of cancer. Hence, she was advised to
return to the Philippines.
On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains.
Two (2) weeks thereafter, her daughter found a piece of gauze protruding from her
vagina. Dr. Ampil was immediately informed. He proceeded to Natividad’s house where
he managed to extract by hand a piece of gauze measuring 1.5 inches in width. Dr.
Ampil then assured Natividad that the pains would soon vanish.
Despite Dr. Ampil’s assurance, the pains intensified, prompting Natividad to seek
treatment at the Polymedic General Hospital. While confined thereat, Dr. Ramon
Gutierrez detected the presence of a foreign object in her vagina -- a foul-smelling gauze
measuring 1.5 inches in width. The gauze had badly infected her vaginal vault. A recto-
vaginal fistula had formed in her reproductive organ which forced stool to excrete
through the vagina. Another surgical operation was needed to remedy the situation.
Thus, in October 1984, Natividad underwent another surgery.
On November 12, 1984, Natividad and her husband filed with the Regional Trial Court,
Branch 96, Quezon City a complaint for damages against PSI (owner of Medical City), Dr.
Ampil and Dr. Fuentes.
On February 16, 1986, pending the outcome of the above case, Natividad died. She was
duly substituted by her above-named children (the Aganas).
On March 17, 1993, the trial court rendered judgment in favor of spouses Agana finding
PSI, Dr. Ampil and Dr. Fuentes jointly and severally liable. On appeal, the Court of
Appeals, in its Decision dated September 6, 1996, affirmed the assailed judgment with
modification in the sense that the complaint against Dr. Fuentes was dismissed.
PSI, Dr. Ampil and the Aganas filed with this Court separate petitions for review
on certiorari. On January 31, 2007, the Court, through its First Division, rendered a
Decision holding that PSI is jointly and severally liable with Dr. Ampil for the following
reasons: first, there is an employer-employee relationship between Medical City and Dr.
Ampil. The Court relied on Ramos v. Court of Appeals,2 holding that for the purpose of
apportioning responsibility in medical negligence cases, an employer-employee
relationship in effect exists between hospitals and their attending and visiting
physicians; second, PSI’s act of publicly displaying in the lobby of the Medical City the
names and specializations of its accredited physicians, including Dr. Ampil, estopped it
from denying the existence of an employer-employee relationship between them under
the doctrine of ostensible agency or agency by estoppel;and third, PSI’s failure to
supervise Dr. Ampil and its resident physicians and nurses and to take an active step in
order to remedy their negligence rendered it directly liable under the doctrine of
corporate negligence.
In its motion for reconsideration, PSI contends that the Court erred in finding it liable
under Article 2180 of the Civil Code, there being no employer-employee relationship
between it and its consultant, Dr. Ampil. PSI stressed that the Court’s Decision
in Ramos holding that "an employer-employee relationship in effect exists between
hospitals and their attending and visiting physicians for the purpose of apportioning
responsibility" had been reversed in a subsequent Resolution.3 Further, PSI argues
that the doctrine of ostensible agency or agency by estoppelcannot apply because
spouses Agana failed to establish one requisite of the doctrine, i.e., that Natividad relied
on the representation of the hospital in engaging the services of Dr. Ampil. And lastly,
PSI maintains that the doctrine of corporate negligence is misplaced because the
proximate cause of Natividad’s injury was Dr. Ampil’s negligence.
The motion lacks merit.
As earlier mentioned, the First Division, in its assailed Decision, ruled that an employer-
employee relationship "in effect" exists between the Medical City and Dr. Ampil.
Consequently, both are jointly and severally liable to the Aganas. This ruling proceeds
from the following ratiocination in Ramos:
We now discuss the responsibility of the hospital in this particular incident. The unique
practice (among private hospitals) of filling up specialist staff with attending and visiting
"consultants," who are allegedly not hospital employees, presents problems in
apportioning responsibility for negligence in medical malpractice cases. However, the
difficulty is only more apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of
consultants and in the conduct of their work within the hospital premises. Doctors
who apply for "consultant" slots, visiting or attending, are required to submit proof of
completion of residency, their educational qualifications; generally, evidence of
accreditation by the appropriate board (diplomate), evidence of fellowship in most
cases, and references. These requirements are carefully scrutinized by members of the
hospital administration or by a review committee set up by the hospital who either
accept or reject the application. This is particularly true with respondent hospital.
After a physician is accepted, either as a visiting or attending consultant, he is
normally required to attend clinico-pathological conferences, conduct bedside rounds
for clerks, interns and residents, moderate grand rounds and patient audits and
perform other tasks and responsibilities, for the privilege of being able to maintain a
clinic in the hospital, and/or for the privilege of admitting patients into the hospital. In
addition to these, the physician’s performance as a specialist is generally evaluated by
a peer review committee on the basis of mortality and morbidity statistics, and
feedback from patients, nurses, interns and residents. A consultant remiss in his
duties, or a consultant who regularly falls short of the minimum standards acceptable
to the hospital or its peer review committee, is normally politely terminated.
In other words, private hospitals hire, fire and exercise real control over their attending
and visiting "consultant" staff. While "consultants" are not, technically employees, a
point which respondent hospital asserts in denying all responsibility for the patient’s
condition, the control exercised, the hiring, and the right to terminate consultants all
fulfill the important hallmarks of an employer-employee relationship, with the
exception of the payment of wages. In assessing whether such a relationship in fact
exists, the control test is determining. Accordingly, on the basis of the foregoing, we
rule that for the purpose of allocating responsibility in medical negligence cases, an
employer-employee relationship in effect exists between hospitals and their attending
and visiting physicians.This being the case, the question now arises as to whether or not
respondent hospital is solidarily liable with respondent doctors for petitioner’s
condition.
The basis for holding an employer solidarily responsible for the negligence of its
employee is found in Article 2180 of the Civil Code which considers a person
accountable not only for his own acts but also for those of others based on the former’s
responsibility under a relationship of partiaptetas.
Clearly, in Ramos, the Court considered the peculiar relationship between a hospital and
its consultants on the bases of certain factors. One such factor is the "control test"
wherein the hospital exercises control in the hiring and firing of consultants, like Dr.
Ampil, and in the conduct of their work.
Actually, contrary to PSI’s contention, the Court did not reverse its ruling in Ramos.
What it clarified was that the De Los Santos Medical Clinic did not exercise control over
its consultant, hence, there is no employer-employee relationship between them. Thus,
despite the granting of the said hospital’s motion for reconsideration, the doctrine
in Ramos stays, i.e., for the purpose of allocating responsibility in medical negligence
cases, an employer-employee relationship exists between hospitals and their
consultants.
In the instant cases, PSI merely offered a general denial of responsibility, maintaining
that consultants, like Dr. Ampil, are "independent contractors," not employees of the
hospital. Even assuming that Dr. Ampil is not an employee of Medical City, but an
independent contractor, still the said hospital is liable to the Aganas.
In Nograles, et al. v. Capitol Medical Center, et al.,4 through Mr. Justice Antonio T.
Carpio, the Court held:
The question now is whether CMC is automatically exempt from liability considering
that Dr. Estrada is an independent contractor-physician.
In general, a hospital is not liable for the negligence of an independent contractor-
physician. There is, however, an exception to this principle. The hospital may be liable if
the physician is the "ostensible" agent of the hospital. (Jones v. Philpott, 702 F. Supp.
1210 [1988]) This exception is also known as the "doctrine of apparent authority."
(Sometimes referred to as the apparent or ostensible agency theory. [King v. Mitchell,
31 A.D.3rd 958, 819 N.Y. S.2d 169 (2006)].
x xx
The doctrine of apparent authority essentially involves two factors to determine the
liability of an independent contractor-physician.
The first factor focuses on the hospital’s manifestations and is sometimes described as
an inquiry whether the hospital acted in a manner which would lead a reasonable
person to conclude that the individual who was alleged to be negligent was an
employee or agent of the hospital. (Diggs v. Novant Health, Inc., 628 S.E.2d 851 (2006)
citing Hylton v. Koontz, 138 N.C. App. 629 (2000). In this regard, the hospital need not
make express representations to the patient that the treating physician is an
employee of the hospital; rather a representation may be general and implied. (Id.)
The doctrine of apparent authority is a specie of the doctrine of estoppel. Article 1431 of
the Civil Code provides that "[t]hrough estoppel, an admission or representation is
rendered conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon." Estoppel rests on this rule: "Whether a party has,
by his own declaration, act, or omission, intentionally and deliberately led another to
believe a particular thing true, and to act upon such belief, he cannot, in any litigation
arising out of such declaration, act or omission, be permitted to falsify it. (De Castro v.
Ginete, 137 Phil. 453 [1969], citing Sec. 3, par. A, Rule 131 of the Rules of Court. See
also King v. Mitchell, 31 A.D.3rd 958, 819 N.Y.S.2d 169 [2006]).
x xx
The second factor focuses on the patient’s reliance. It is sometimes characterized as an
inquiry on whether the plaintiff acted in reliance upon the conduct of the hospital or
its agent, consistent with ordinary care and prudence. (Diggs v. Novant Health, Inc.)
PSI argues that the doctrine of apparent authority cannot apply to these cases because
spouses Agana failed to establish proof of their reliance on the representation of
Medical City that Dr. Ampil is its employee.
The argument lacks merit.
Atty. Agana categorically testified that one of the reasons why he chose Dr. Ampil was
that he knew him to be a staff member of Medical City, a prominent and known
hospital.
Q Will you tell us what transpired in your visit to Dr. Ampil?
A Well, I saw Dr. Ampil at the Medical City, I know him to be a staff member
there, and I told him about the case of my wife and he asked me to bring my wife over
so she could be examined. Prior to that, I have known Dr. Ampil, first, he was staying in
front of our house, he was a neighbor, second, my daughter was his student in the
University of the East School of Medicine at Ramon Magsaysay; and when my daughter
opted to establish a hospital or a clinic, Dr. Ampil was one of our consultants on how to
establish that hospital. And from there, I have known that he was a specialist when it
comes to that illness.
Atty. Agcaoili
On that particular occasion, April 2, 1984, what was your reason for choosing to contact
Dr. Ampil in connection with your wife’s illness?
A First, before that, I have known him to be a specialist on that part of the body as a
surgeon; second, I have known him to be a staff member of the Medical City which is a
prominent and known hospital. And third, because he is a neighbor, I expect more than
the usual medical service to be given to us, than his ordinary patients.5
Clearly, PSI is estopped from passing the blame solely to Dr. Ampil. Its act of displaying
his name and those of the other physicians in the public directory at the lobby of the
hospital amounts to holding out to the public that it offers quality medical service
through the listed physicians. This justifies Atty. Agana’s belief that Dr. Ampil was a
member of the hospital’s staff. It must be stressed that under the doctrine of apparent
authority, the question in every case is whether the principal has by his voluntary act
placed the agent in such a situation that a person of ordinary prudence, conversant
with business usages and the nature of the particular business, is justified in
presuming that such agent has authority to perform the particular act in question. 6 In
these cases, the circumstances yield a positive answer to the question.
The challenged Decision also anchors its ruling on the doctrine of corporate
responsibility.7 The duty of providing quality medical service is no longer the sole
prerogative and responsibility of the physician. This is because the modern hospital now
tends to organize a highly-professional medical staff whose competence and
performance need also to be monitored by the hospital commensurate with its inherent
responsibility to provide quality medical care.8 Such responsibility includes the proper
supervision of the members of its medical staff. Accordingly, the hospital has the duty
to make a reasonable effort to monitor and oversee the treatment prescribed and
administered by the physicians practicing in its premises.
Unfortunately, PSI had been remiss in its duty. It did not conduct an immediate
investigation on the reported missing gauzes to the great prejudice and agony of its
patient. Dr. Jocson, a member of PSI’s medical staff, who testified on whether the
hospital conducted an investigation, was evasive, thus:
Q We go back to the operative technique, this was signed by Dr. Puruganan, was
this submitted to the hospital?
A Yes, sir, this was submitted to the hospital with the record of the patient.
Q Was the hospital immediately informed about the missing sponges?
A That is the duty of the surgeon, sir.
Q As a witness to an untoward incident in the operating room, was it not your
obligation, Dr., to also report to the hospital because you are under the control and
direction of the hospital?
A The hospital already had the record of the two OS missing, sir.
Q If you place yourself in the position of the hospital, how will you recover.
A You do not answer my question with another question.
Q Did the hospital do anything about the missing gauzes?
A The hospital left it up to the surgeon who was doing the operation, sir.
Q Did the hospital investigate the surgeon who did the operation?
A I am not in the position to answer that, sir.
Q You never did hear the hospital investigating the doctors involved in this case of
those missing sponges, or did you hear something?
x xxxxx
A I think we already made a report by just saying that two sponges were missing, it
is up to the hospital to make the move.
Atty. Agana
Precisely, I am asking you if the hospital did a move, if the hospital did a move.
A I cannot answer that.
Court
By that answer, would you mean to tell the Court that you were aware if there was
such a move done by the hospital?
A I cannot answer that, your honor, because I did not have any more follow-up of
the case that happened until now.9
The above testimony obviously shows Dr. Jocson’s lack of concern for the patients.
Such conduct is reflective of the hospital’s manner of supervision. Not only did PSI
breach its duty to oversee or supervise all persons who practice medicine within its
walls, it also failed to take an active step in fixing the negligence committed. This
renders PSI, not only vicariously liable for the negligence of Dr. Ampil under Article 2180
of the Civil Code, but also directly liable for its own negligence under Article 2176.
Moreover, there is merit in the trial court’s finding that the failure of PSI to conduct an
investigation "established PSI’s part in the dark conspiracy of silence and concealment
about the gauzes." The following testimony of Atty. Agana supports such findings, thus:
Q You said you relied on the promise of Dr. Ampil and despite the promise you were
not able to obtain the said record. Did you go back to the record custodian?
A I did not because I was talking to Dr. Ampil. He promised me.
Q After your talk to Dr. Ampil, you went to the record custodian?
A I went to the record custodian to get the clinical record of my wife, and I was
given a portion of the records consisting of the findings, among them, the entries of
the dates, but not the operating procedure and operative report.10
In sum, we find no merit in the motion for reconsideration.
WHEREFORE, we DENY PSI’s motion for reconsideration with finality.
SO ORDERED.
SOUTH EAST INTERNATIONAL RATTAN INC V. JESUS J. COMING (G.R. NO. 186621)
Facts:
Petitioner South East International Rattan is a domestic corporation engaged in the
business of manufacturing and exporting furniture to various countries. Respondent
Coming was hired by petitioner as Sizing Machine Operator whose work is initially
compensated on ‘pakiao basis’ but sometime was fixed per day and a work schedule of
8:00am to 5:00pm. Without any apparent reason, his employment was interrupted as
he was told by petitioners to resume work in 2 months time but was never called back.
Respondent thus filed a complaint before the regional arbitration branch. The Labor
Arbiter ruled respondent as a regular employee of petitioner SEIRI but on appeal, was
reversed by the NLRC. CA then reversed the NLRC decision and ruled that there existed
an employer-employee relationship between petitioners and respondent.
Issue:
Whether or not there is employer-employee relationship between petitioner and
respondent.
Ruling: YES.
We affirm the CA.
To ascertain the existence of employer-employee relationship jurisprudence has
invariably adhered to the four-fold test, to wit: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee’s conduct, or the so-called “control test.”
x xx As to the “control test”, the following facts indubitably reveal that respondents
wielded control over the work performance of petitioner, to wit: (1) they required him
to work within the company premises; (2) they obliged petitioner to report every day of
the week and tasked him to usually perform the same job; (3) they enforced the
observance of definite hours of work from 8 o’clock in the morning to 5 o’clock in the
afternoon; (4) the mode of payment of petitioner’s salary was under their discretion, at
first paying him on pakiao basis and thereafter, on daily basis; (5) they implemented
company rules and regulations; (6) [Estanislao] Agbay directly paid petitioner’s salaries
and controlled all aspects of his employment and (7) petitioner rendered work
necessary and desirable in the business of the respondent company.
BERNARD A. TENAZAS, JAIME M. FRANCISCO and ISIDRO G. ENDRACA, Petitioners,
vs.
R. VILLEGAS TAXI TRANSPORT and ROMUALDO VILLEGAS, Respondents.
DECISION
REYES, J.:
This is a petition for review on certiorari1 filed under Rule 45 of the Rules of Court,
assailing the Decision2 dated March 11, 2010 and Resolution3 dated June 28, 2010 of the
Court of Appeals (CA) in CA-G.R. SP No. 111150, which affirmed with modification the
Decision4 dated June 23, 2009 of the National Labor Relations Commission (NLRC) in
NLRC LAC Case No. 07-002648-08.
The Antecedent Facts
On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M. Francisco (Francisco) filed a
complaint for illegal dismissal against R. Villegas Taxi Transport and/or Romualdo
Villegas (Romualdo) and Andy Villegas (Andy) (respondents). At that time, a similar case
had already been filed by Isidro G. Endraca (Endraca) against the same respondents. The
two (2) cases were subsequently consolidated.5
In their position paper,6 Tenazas, Francisco and Endraca (petitioners) alleged that they
were hired and dismissed by the respondents on the following dates:
Name Date of Hiring Date of Dismissal Salary
Bernard A. Tenazas 10/1997 07/03/07 Boundary System
Jaime M. Francisco 04/10/04 06/04/07 Boundary System
Isidro G. Endraca 04/2000 03/06/06 Boundary System7
Relaying the circumstances of his dismissal, Tenazas alleged that on July 1, 2007, the taxi
unit assigned to him was sideswiped by another vehicle, causing a dent on the left
fender near the driver seat. The cost of repair for the damage was estimated at ₱500.00.
Upon reporting the incident to the company, he was scolded by respondents Romualdo
and Andy and was told to leave the garage for he is already fired. He was even
threatened with physical harm should he ever be seen in the company’s premises again.
Despite the warning, Tenazas reported for work on the following day but was told that
he can no longer drive any of the company’s units as he is already fired.8
Francisco, on the other hand, averred that his dismissal was brought about by the
company’s unfounded suspicion that he was organizing a labor union. He was
instantaneously terminated, without the benefit of procedural due process, on June 4,
2007.9
Endraca, for his part, alleged that his dismissal was instigated by an occasion when he
fell short of the required boundary for his taxi unit. He related that before he was
dismissed, he brought his taxi unit to an auto shop for an urgent repair. He was charged
the amount of ₱700.00 for the repair services and the replacement parts. As a result, he
was not able to meet his boundary for the day. Upon returning to the company garage
and informing the management of the incident, his driver’s license was confiscated and
was told to settle the deficiency in his boundary first before his license will be returned
to him. He was no longer allowed to drive a taxi unit despite his persistent pleas.10
For their part, the respondents admitted that Tenazas and Endraca were employees of
the company, the former being a regular driver and the latter a spare driver. The
respondents, however, denied that Francisco was an employee of the company or that
he was able to drive one of the company’s units at any point in time.11
The respondents further alleged that Tenazas was never terminated by the company.
They claimed that on July 3, 2007, Tenazas went to the company garage to get his taxi
unit but was informed that it is due for overhaul because of some mechanical defects
reported by the other driver who takes turns with him in using the same. He was thus
advised to wait for further notice from the company if his unit has already been fixed.
On July 8, 2007, however, upon being informed that his unit is ready for release,
Tenazas failed to report back to work for no apparent reason.12
As regards Endraca, the respondents alleged that they hired him as a spare driver in
February 2001. They allow him to drive a taxi unit whenever their regular driver will not
be able to report for work. In July 2003, however, Endraca stopped reporting for work
without informing the company of his reason. Subsequently, the respondents learned
that a complaint for illegal dismissal was filed by Endraca against them. They strongly
maintained, however, that they could never have terminated Endraca in March 2006
since he already stopped reporting for work as early as July 2003. Even then, they
expressed willingness to accommodate Endraca should he wish to work as a spare driver
for the company again since he was never really dismissed from employment anyway.13
On May 29, 2008, the petitioners, by registered mail, filed a Motion to Admit Additional
Evidence.14 They alleged that after diligent efforts, they were able to discover new
pieces of evidence that will substantiate the allegations in their position paper. Attached
with the motion are the following: (a) Joint Affidavit of the petitioners;15 (2) Affidavit of
Good Faith of Aloney Rivera, a co-driver;16 (3) pictures of the petitioners wearing
company shirts;17 and (4) Tenazas’ Certification/Record of Social Security System (SSS)
contributions.18
The Ruling of the Labor Arbiter
On May 30, 2008, the Labor Arbiter (LA) rendered a Decision,19 which pertinently states,
thus:
In the case of complainant Jaime Francisco, respondents categorically denied the
existence of an employer-employee relationship. In this situation, the burden of proof
shifts to the complainant to prove the existence of a regular employment. Complainant
Francisco failed to present evidence of regular employment available to all regular
employees, such as an employment contract, company ID, SSS, withholding tax
certificates, SSS membership and the like.
In the case of complainant Isidro Endraca, respondents claim that he was only an extra
driver who stopped reporting to queue for available taxi units which he could drive. In
fact, respondents offered him in their Position Paper on record, immediate
reinstatement as extra taxi driver which offer he refused.
In case of Bernard Tenazas, he was told to wait while his taxi was under repair but he did
not report for work after the taxi was repaired. Respondents[,] in their Position Paper,
on record likewise, offered him immediate reinstatement, which offer he refused.
We must bear in mind that the complaint herein is one of actual dismissal. But there
was no formal investigations, no show cause memos, suspension memos or termination
memos were never issued. Otherwise stated, there is no proof of overt act of dismissal
committed by herein respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at
bar.
The situations contemplated by law for entitlement to separation pay does [sic] not
apply.
WHEREFORE, premises considered, instant consolidated complaints are hereby
dismissed for lack of merit.
SO ORDERED.20
The Ruling of the NLRC
Unyielding, the petitioners appealed the decision of the LA to the NLRC. Subsequently,
on June 23, 2009, the NLRC rendered a Decision,21 reversing the appealed decision of
the LA, holding that the additional pieces of evidence belatedly submitted by the
petitioners sufficed to establish the existence of employer-employee relationship and
their illegal dismissal. It held, thus:
In the challenged decision, the Labor Arbiter found that it cannot be said that the
complainants were illegally dismissed, there being no showing, in the first place, that
the respondent [sic] terminated their services. A portion thereof reads:
"We must bear in mind that the complaint herein is one of actual dismissal. But there
were no formal investigations, no show cause memos, suspension memos or
termination memos were never issued. Otherwise stated, there is no proof of overt act
of dismissal committed by herein respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at
bar."
Issue: [W]hether or not the complainants were illegally dismissed from employment.
It is possible that the complainants’ Motion to Admit Additional Evidence did not reach
the Labor Arbiter’s attention because he had drafted the challenged decision even
before they submitted it, and thereafter, his staff attended only to clerical matters, and
failed to bring the motion in question to his attention. It is now up to this Commission to
consider the complainants’ additional evidence. Anyway, if this Commission must
consider evidence submitted for the first time on appeal (Andaya vs. NLRC, G.R. No.
157371, July 15, 2005), much more so must it consider evidence that was simply
overlooked by the Labor Arbiter.
Among the additional pieces of evidence submitted by the complainants are the
following: (1) joint affidavit (records, p. 51-52) of the three (3) complainants; (2) affidavit
(records, p. 53) of Aloney Rivera y Aldo; and (3) three (3) pictures (records, p. 54)
referred to by the complainant in their joint affidavit showing them wearing t-shirts
bearing the name and logo of the respondent’s company.
x xxx
WHEREFORE, the decision appealed from is hereby REVERSED. Respondent Rom[u]aldo
Villegas doing business under the name and style Villegas Taxi Transport is hereby
ordered to pay the complainants the following (1) full backwages from the date of their
dismissal (July 3, 2007 for Tena[z]as, June 4, 2004 for Francisco, and March 6, 2006 for
Endraca[)] up to the date of the finality of this decision[;] (2) separation pay equivalent
to one month for every year of service; and (3) attorney’s fees equivalent to ten percent
(10%) of the total judgment awards.
SO ORDERED.22
On July 24, 2009, the respondents filed a motion for reconsideration but the NLRC
denied the same in its Resolution23 dated September 23, 2009.
The Ruling of the CA
Unperturbed, the respondents filed a petition for certiorari with the CA. On March 11,
2010, the CA rendered a Decision,24 affirming with modification the Decision dated June
23, 2009 of the NLRC. The CA agreed with the NLRC’s finding that Tenazas and Endraca
were employees of the company, but ruled otherwise in the case of Francisco for failing
to establish his relationship with the company. It also deleted the award of separation
pay and ordered for reinstatement of Tenazas and Endraca. The pertinent portions of
the decision read as follows:
At the outset, We declare that respondent Francisco failed to prove that an employer-
employee relationship exists between him and R. Transport. If there is no employer-
employee relationship in the first place, the duty of R. Transport to adhere to the labor
standards provisions of the Labor Code with respect to Francisco is questionable.
x xxx
Although substantial evidence is not a function of quantity but rather of quality, the
peculiar environmental circumstances of the instant case demand that something more
should have been proffered. Had there been other proofs of employment, such as
Francisco’s inclusion in R.R.
Transport’s payroll, this Court would have affirmed the finding of employer-employee
relationship.1âwphi1 The NLRC, therefore, committed grievous error in ordering R.
Transport to answer for Francisco’s claims.
We now tackle R. Transport’s petition with respect to Tenazas and Endraca, who are
both admitted to be R. Transport’s employees. In its petition, R. Transport puts forth the
theory that it did not terminate the services of respondents but that the latter
deliberately abandoned their work. We cannot subscribe to this theory.
x xxx
Considering that the complaints for illegal dismissal were filed soon after the alleged
dates of dismissal, it cannot be inferred that respondents Tenazas and Endraca intended
to abandon their employment. The complainants for dismissal are, in themselves, pleas
for the continuance of employment. They are incompatible with the allegation of
abandonment. x xx.
For R. Transport’s failure to discharge the burden of proving that the dismissal of
respondents Tenazas and Endraca was for a just cause, We are constrained to uphold
the NLRC’s conclusion that their dismissal was not justified and that they are entitled to
back wages. Because they were illegally dismissed, private respondents Tenazas and
Endraca are entitled to reinstatement and back wages x xx.
x xxx
However, R. Transport is correct in its contention that separation pay should not be
awarded because reinstatement is still possible and has been offered. It is well[-]settled
that separation pay is granted only in instances where reinstatement is no longer
feasible or appropriate, which is not the case here.
x xxx
WHEREFORE, the Decision of the National Labor Relations Commission dated 23 June
2009, in NLRC LAC Case No. 07-002648-08, and its Resolution dated 23 September 2009
denying reconsideration thereof are AFFIRMED with MODIFICATION in that the award of
Jaime Francisco’s claims is DELETED. The separation pay granted in favor of Bernard
Tenazas and Isidro Endraca is, likewise, DELETED and their reinstatement is ordered
instead.
SO ORDERED.25 (Citations omitted)
On March 19, 2010, the petitioners filed a motion for reconsideration but the same was
denied by the CA in its Resolution26 dated June 28, 2010.
Undeterred, the petitioners filed the instant petition for review on certiorari before this
Court on July 15, 2010.
The Ruling of this Court
The petition lacks merit.
Pivotal to the resolution of the instant case is the determination of the existence of
employer-employee relationship and whether there was an illegal dismissal.
Remarkably, the LA, NLRC and the CA had varying assessment on the matters at hand.
The LA believed that, with the admission of the respondents, there is no longer any
question regarding the status of both Tenazas and Endraca being employees of the
company. However, he ruled that the same conclusion does not hold with respect to
Francisco whom the respondents denied to have ever employed or known. With the
respondents’ denial, the burden of proof shifts to Francisco to establish his regular
employment. Unfortunately, the LA found that Francisco failed to present sufficient
evidence to prove regular employment such as company ID, SSS membership,
withholding tax certificates or similar articles. Thus, he was not considered an employee
of the company. Even then, the LA held that Tenazas and Endraca could not have been
illegally dismissed since there was no overt act of dismissal committed by the
respondents.27
On appeal, the NLRC reversed the ruling of the LA and ruled that the petitioners were all
employees of the company. The NLRC premised its conclusion on the additional pieces
of evidence belatedly submitted by the petitioners, which it supposed, have been
overlooked by the LA owing to the time when it was received by the said office. It
opined that the said pieces of evidence are sufficient to establish the circumstances of
their illegal termination. In particular, it noted that in the affidavit of the petitioners,
there were allegations about the company’s practice of not issuing employment records
and this was not rebutted by the respondents. It underscored that in a situation where
doubt exists between evidence presented by the employer and the employee, the scales
of justice must be tilted in favor of the employee. It awarded the petitioners with: (1)
full backwages from the date of their dismissal up to the finality of the decision; (2)
separation pay equivalent to one month of salary for every year of service; and (3)
attorney’s fees.
On petition for certiorari, the CA affirmed with modification the decision of the NLRC,
holding that there was indeed an illegal dismissal on the part of Tenazas and Endraca
but not with respect to Francisco who failed to present substantial evidence, proving
that he was an employee of the respondents. The CA likewise dismissed the
respondents’ claim that Tenazas and Endraca abandoned their work, asseverating that
immediate filing of a complaint for illegal dismissal and persistent pleas for continuance
of employment are incompatible with abandonment. It also deleted the NLRC’s award of
separation pay and instead ordered that Tenazas and Endraca be reinstated.28
"Well-settled is the rule that the jurisdiction of this Court in a petition for review on
certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors
of law, not of fact, unless the factual findings complained of are completely devoid of
support from the evidence on record, or the assailed judgment is based on a gross
misapprehension of facts."29 The Court finds that none of the mentioned circumstances
is present in this case.
In reviewing the decision of the NLRC, the CA found that no substantial evidence was
presented to support the conclusion that Francisco was an employee of the respondents
and accordingly modified the NLRC decision. It stressed that with the respondents’
denial of employer-employee relationship, it behooved Francisco to present substantial
evidence to prove that he is an employee before any question on the legality of his
supposed dismissal becomes appropriate for discussion. Francisco, however, did not
offer evidence to substantiate his claim of employment with the respondents. Short of
the required quantum of proof, the CA correctly ruled that the NLRC’s finding of illegal
dismissal and the monetary awards which necessarily follow such ruling lacked factual
and legal basis and must therefore be deleted.
The action of the CA finds support in Anonas Construction and Industrial Supply Corp., et
al. v. NLRC, et al.,30where the Court reiterated:
[J]udicial review of decisions of the NLRC via petition for certiorari under Rule 65, as a
general rule, is confined only to issues of lack or excess of jurisdiction and grave abuse
of discretion on the part of the NLRC. The CA does not assess and weigh the sufficiency
of evidence upon which the LA and the NLRC based their conclusions. The issue is
limited to the determination of whether or not the NLRC acted without or in excess of
its jurisdiction, or with grave abuse of discretion in rendering the resolution, except if
the findings of the NLRC are not supported by substantial evidence. 31 (Citation omitted
and emphasis ours)
It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial
proceedings, "the quantum of proof necessary is substantial evidence, or such amount
of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion."32 "[T]he burden of proof rests upon the party who asserts the affirmative of
an issue."33 Corollarily, as Francisco was claiming to be an employee of the respondents,
it is incumbent upon him to proffer evidence to prove the existence of said relationship.
"[I]n 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 employee; (b) the payment of wages; (c) the power of dismissal; and
(d) the employer’s power to control the employee on the means and methods by which
the work is accomplished. The last element, the so-called control test, is the most
important element."34
There is no hard and fast rule designed to establish the aforesaid elements. Any
competent and relevant evidence to prove the relationship may be admitted.
Identification cards, cash vouchers, social security registration, appointment letters or
employment contracts, payrolls, organization charts, and personnel lists, serve as
evidence of employee status.35
In this case, however, Francisco failed to present any proof substantial enough to
establish his relationship with the respondents. He failed to present documentary
evidence like attendance logbook, payroll, SSS record or any personnel file that could
somehow depict his status as an employee. Anent his claim that he was not issued with
employment records, he could have, at least, produced his social security records which
state his contributions, name and address of his employer, as his co-petitioner Tenazas
did. He could have also presented testimonial evidence showing the respondents’
exercise of control over the means and methods by which he undertakes his work. This
is imperative in light of the respondents’ denial of his employment and the claim of
another taxi operator, Emmanuel Villegas (Emmanuel), that he was his employer.
Specifically, in his Affidavit,36 Emmanuel alleged that Francisco was employed as a spare
driver in his taxi garage from January 2006 to December 2006, a fact that the latter
failed to deny or question in any of the pleadings attached to the records of this case.
The utter lack of evidence is fatal to Francisco’s case especially in cases like his present
predicament when the law has been very lenient in not requiring any particular form of
evidence or manner of proving the presence of employer-employee relationship.
In Opulencia Ice Plant and Storage v. NLRC,37 this Court emphasized, thus:
No particular form of evidence is required to prove the existence of an employer-
employee relationship. Any competent and relevant evidence to prove the relationship
may be admitted. For, if only documentary evidence would be required to show that
relationship, no scheming employer would ever be brought before the bar of justice, as
no employer would wish to come out with any trace of the illegality he has authored
considering that it should take much weightier proof to invalidate a written
instrument.38
Here, Francisco simply relied on his allegation that he was an employee of the company
without any other evidence supporting his claim. Unfortunately for him, a mere
allegation in the position paper is not tantamount to evidence. 39Bereft of any evidence,
the CA correctly ruled that Francisco could not be considered an employee of the
respondents.
The CA’s order of reinstatement of Tenazas and Endraca, instead of the payment of
separation pay, is also well in accordance with prevailing jurisprudence. In Macasero v.
Southern Industrial Gases Philippines,40 the Court reiterated, thus:
[A]n illegally dismissed employee is entitled to two reliefs: backwages and
reinstatement.1âwphi1 The two reliefs provided are separate and distinct. In instances
where reinstatement is no longer feasible because of strained relations between the
employee and the employer, separation pay is granted. In effect, an illegally dismissed
employee is entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable, and backwages.
The normal consequences of respondents’ illegal dismissal, then, are reinstatement
without loss of seniority rights, and payment of backwages computed from the time
compensation was withheld up to the date of actual reinstatement. Where
reinstatement is no longer viable as an option, separation pay equivalent to one (1)
month salary for every year of service should be awarded as an alternative. The
payment of separation pay is in addition to payment of backwages.41 (Emphasis
supplied)
Clearly, it is only when reinstatement is no longer feasible that the payment of
separation pay is ordered in lieu thereof. For instance, if reinstatement would only
exacerbate the tension and strained relations between the parties, or where the
relationship between the employer and the employee has been unduly strained by
reason of their irreconcilable differences, it would be more prudent to order payment of
separation pay instead of reinstatement.42
This doctrine of strained relations, however, should not be used recklessly or applied
loosely43 nor be based on impression alone. "It bears to stress that reinstatement is the
rule and, for the exception of strained relations to apply, it should be proved that it is
likely that if reinstated, an atmosphere of antipathy and antagonism would be
generated as to adversely affect the efficiency and productivity of the employee
concerned."44
Moreover, the existence of strained relations, it must be emphasized, is a question of
fact. In Golden Ace Builders v. Talde,45 the Court underscored:
Strained relations must be demonstrated as a fact, however, to be adequately
supported by evidence—substantial evidence to show that the relationship between the
employer and the employee is indeed strained as a necessary consequence of the
judicial controversy.46 (Citations omitted and emphasis ours)
After a perusal of the NLRC decision, this Court failed to find the factual basis of the
award of separation pay to the petitioners. The NLRC decision did not state the facts
which demonstrate that reinstatement is no longer a feasible option that could have
justified the alternative relief of granting separation pay instead.
The petitioners themselves likewise overlooked to allege circumstances which may have
rendered their reinstatement unlikely or unwise and even prayed for reinstatement
alongside the payment of separation pay in their position paper.47 A bare claim of
strained relations by reason of termination is insufficient to warrant the granting of
separation pay. Likewise, the filing of the complaint by the petitioners does not
necessarily translate to strained relations between the parties. As a rule, no strained
relations should arise from a valid and legal act asserting one’s right.48 Although
litigation may also engender a certain degree of hostility, the understandable strain in
the parties’ relation would not necessarily rule out reinstatement which would,
otherwise, become the rule rather the exception in illegal dismissal cases.49 Thus, it was
a prudent call for the CA to delete the award of separation pay and order for
reinstatement instead, in accordance with the general rule stated in Article 27950 of the
Labor Code.
Finally, the Court finds the computation of the petitioners' backwages at the rate of
₱800.00 daily reasonable and just under the circumstances. The said rate is consistent
with the ruling of this Court in Hyatt Taxi Services, Inc. v. Catinoy, 51 which dealt with the
same matter.
WHEREFORE, in view of the foregoing disquisition, the petition for review on certiorari is
DENIED. The Decision dated March 11, 2010 and Resolution dated June 28, 2010 of the
Court of Appeals in CA-G.R. SP No. 111150 are AFFIRMED.
SO ORDERED.
Tongko v Manulife
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation
engaged in life insurance business. Renato A. Vergel De Dios was, during the period
material, its President and Chief Executive Officer. Gregorio V. Tongko started his
professional relationship with Manulife on July 1, 1977 by virtue of a Career Agent's
Agreement2 (Agreement) he executed with Manulife.
In the Agreement, it is provided that:
It is understood and agreed that the Agent is an independent contractor and nothing
contained herein shall be construed or interpreted as creating an employer-employee
relationship between the Company and the Agent.
x xxx
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies
and other products offered by the Company, and collect, in exchange for provisional
receipts issued by the Agent, money due or to become due to the Company in respect of
applications or policies obtained by or through the Agent or from policyholders allotted
by the Company to the Agent for servicing, subject to subsequent confirmation of
receipt of payment by the Company as evidenced by an Official Receipt issued by the
Company directly to the policyholder.
x xxx
The Company may terminate this Agreement for any breach or violation of any of the
provisions hereof by the Agent by giving written notice to the Agent within fifteen (15)
days from the time of the discovery of the breach. No waiver, extinguishment,
abandonment, withdrawal or cancellation of the right to terminate this Agreement by
the Company shall be construed for any previous failure to exercise its right under any
provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without
cause, by giving to the other party fifteen (15) days notice in writing. x xx
In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency Organization.
In 1990, he became a Branch Manager. As the CA found, Tongko's gross earnings from
his work at Manulife, consisting of commissions, persistency income, and management
overrides, may be summarized as follows:
January to December 10, 2002 - P 865,096.07
2001 - 6,214,737.11
2000 - 8,003,180.38
1999 - 6,797,814.05
1998 - 4,805,166.34
1997 - 2,822,620.003
The problem started sometime in 2001, when Manulife instituted manpower
development programs in the regional sales management level. Relative thereto, De
Dios addressed a letter dated November 6, 20014 to Tongko regarding an October 18,
2001 Metro North Sales Managers Meeting. In the letter, De Dios stated:
The first step to transforming Manulife into a big league player has been very clear - to
increase the number of agents to at least 1,000 strong for a start. This may seem
diametrically opposed to the way Manulife was run when you first joined the
organization. Since then, however, substantial changes have taken place in the
organization, as these have been influenced by developments both from within and
without the company.
x xxx
The issues around agent recruiting are central to the intended objectives hence the
need for a Senior Managers' meeting earlier last month when Kevin O'Connor, SVP -
Agency, took to the floor to determine from our senior agency leaders what more could
be done to bolster manpower development. At earlier meetings, Kevin had presented
information where evidently, your Region was the lowest performer (on a per Manager
basis) in terms of recruiting in 2000 and, as of today, continues to remain one of the
laggards in this area.
While discussions, in general, were positive other than for certain comments from your
end which were perceived to be uncalled for, it 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 and
one-on-one), it was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined
briefly. In those subsequent meetings you reiterated certain views, the validity of which
we challenged and subsequently found as having no basis.
With such views coming from you, I was a bit concerned that the rest of the Metro
North Managers may be a bit confused as to the directions the company was taking. For
this reason, I sought a meeting with everyone in your management team, including you,
to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North
Region's Sales Managers meeting held at the 7/F Conference room last 18 October.
x xxx
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to
the position of agents."
This is an often repeated issue you have raised with me and with Kevin. For this reason, I
placed the issue on the table before the rest of your Region's Sales Managers to verify
its validity. As you must have noted, no Sales Manager came forward on their own to
confirm your statement and it took you to name Malou Samson as a source of the same,
an allegation that Malou herself denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now
believe what I had thought all along, that these allegations were simply meant to
muddle the issues surrounding the inability of your Region to meet its agency
development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the
process, they earn less."
x xxx
All the above notwithstanding, we had your own records checked and we found that
you made a lot more money in the Year 2000 versus 1999. In addition, you also
volunteered the information to Kevin when you said that you probably will make more
money in the Year 2001 compared to Year 2000. Obviously, your above statement about
making "less money" did not refer to you but the way you argued this point had us
almost believing that you were spouting the gospel of truth when you were not. x xx
x xxx
All of a sudden, Greg, I have become much more worried about your ability to lead this
group towards the new direction that we have been discussing these past few weeks,
i.e., Manulife's goal to become a major agency-led distribution company in the
Philippines. While as you claim, you have not stopped anyone from recruiting, I have
never heard you proactively push for greater agency recruiting. You have not been
proactive all these years when it comes to agency growth.
x xxx
I cannot afford to see a major region fail to deliver on its developmental goals next year
and so, we are making the following changes in the interim:
1. You will hire at your expense a competent assistant who can unload you of much of
the routine tasks which can be easily delegated. This assistant should be so chosen as to
complement your skills and help you in the areas where you feel "may not be your cup
of tea".
You have stated, if not implied, that your work as Regional Manager may be too taxing
for you and for your health. The above could solve this problem.
x xxx
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the
North Star Branch (NSB) in autonomous fashion. x xx
I have decided to make this change so as to reduce your span of control and allow you
to concentrate more fully on overseeing the remaining groups under Metro North, your
Central Unit and the rest of the Sales Managers in Metro North. I will hold you solely
responsible for meeting the objectives of these remaining groups.
x xxx
The above changes can end at this point and they need not go any further. This,
however, is entirely dependent upon you. But you have to understand that meeting
corporate objectives by everyone is primary and will not be compromised. We are
meeting tough challenges next year and I would want everybody on board. Any
resistance or holding back by anyone will be dealt with accordingly.
Subsequently, De Dios wrote Tongko another letter dated December 18,
2001,5 terminating Tongko's services, thus:
It would appear, however, that despite the series of meetings and communications,
both one-on-one meetings between yourself and SVP Kevin O'Connor, some of them
with me, as well as group meetings with your Sales Managers, all these efforts have
failed in helping you align your directions with Management's avowed agency growth
policy.
x xxx
On account thereof, Management is exercising its prerogative under Section 14 of your
Agents Contract as we are now issuing this notice of termination of your Agency
Agreement with us effective fifteen days from the date of this letter.
Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against
Manulife for illegal dismissal. The case, docketed as NLRC NCR Case No. 11-10330-02,
was raffled to Labor Arbiter Marita V. Padolina.
In the Complaint, Tongko, in a bid to establish an employer-employee relationship,
alleged that De Dios gave him specific directives on how to manage his area of
responsibility in the latter's letter dated November 6, 2001. He further claimed that
Manulife exercised control over him as follows:
Such control was certainly exercised by respondents over the herein complainant. It was
Manulife who hired, promoted and gave various assignments to him. It was the
company who set objectives as regards productions, recruitment, training programs and
all activities pertaining to its business. Manulife prescribed a Code of Conduct which
would govern in minute detail all aspects of the work to be undertaken by employees,
including the sales process, the underwriting process, signatures, handling of money,
policyholder service, confidentiality, legal and regulatory requirements and grounds for
termination of employment. The letter of Mr. De Dios dated 06 November 2001 left no
doubt as to who was in control. The subsequent termination letter dated 18 December
2001 again established in no uncertain terms the authority of the herein respondents to
control the employees of Manulife. Plainly, the respondents wielded control not only as
to the ends to be achieved but the ways and means of attaining such ends.6
Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC
(4th Division)7 and Great Pacific Life Assurance Corporation v. NLRC,8 which Tongko
claimed to be similar to the instant case.
Tongko further claimed that his dismissal was without basis and that he was not
afforded due process. He also cited the Manulife Code of Conduct by which his actions
were controlled by the company.
Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003, 9 in
which it alleged that Tongko is not its employee, and that it did not exercise "control"
over him. Thus, Manulife claimed that the NLRC has no jurisdiction over the case.
In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the
complaint for lack of an employer-employee relationship. Padolina found that applying
the four-fold test in determining the existence of an employer-employee relationship,
none was found in the instant case. The dispositive portion thereof states:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the
instant complaint for lack of jurisdiction, there being no employer-employee
relationship between the parties.
SO ORDERED.
Tongko appealed the arbiter's Decision to the NLRC which reversed the same and
rendered a Decision dated September 27, 2004 finding Tongko to have been illegally
dismissed.
The NLRC's First Division, while finding an employer-employee relationship between
Manulife and Tongko applying the four-fold test, held Manulife liable for illegal
dismissal. It further stated that Manulife exercised control over Tongko as evidenced by
the letter dated November 6, 2001 of De Dios and wrote:
The above-mentioned letter shows the extent to which respondents controlled
complainant's manner and means of doing his work and achieving the goals set by
respondents. The letter shows how respondents concerned themselves with the manner
complainant managed the Metro North Region as Regional Sales Manager, to the point
that respondents even had a say on how complainant interacted with other individuals
in the Metro North Region. The letter is in fact replete with comments and criticisms on
how complainant carried out his functions as Regional Sales Manager.
More importantly, the letter contains an abundance of directives or orders that are
intended to directly affect complainant's authority and manner of carrying out his
functions as Regional Sales Manager.10 x xx
Additionally, the First Division also ruled that:
Further evidence of [respondents'] control over complainant can be found in the records
of the case. [These] are the different codes of conduct such as the Agent Code of
Conduct, the Manulife Financial Code of Conduct, and the Manulife Financial Code of
Conduct Agreement, which serve as the foundations of the power of control wielded by
respondents over complainant that is further manifested in the different administrative
and other tasks that he is required to perform. These codes of conduct corroborate and
reinforce the display of respondents' power of control in their 06 November 2001 Letter
to complainant.11
The fallo of the September 27, 2004 Decision reads:
WHEREFORE, premises considered, the appealed Decision is hereby reversed and set
aside. We find complainant to be a regular employee of respondent Manulife and that
he was illegally dismissed from employment by respondents.
In lieu of reinstatement, respondent Manulife is hereby ordered to pay complainant
separation pay as above set forth. Respondent Manulife is further ordered to pay
complainant backwages from the time he was dismissed on 02 January 2002 up to the
finality of this decision also as indicated above.
x xxx
All other claims are hereby dismissed for utter lack of merit.
From this Decision, Manulife filed a motion for reconsideration which was denied by the
NLRC First Division in a Resolution dated December 16, 2004.12
Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253.
Thereafter, the CA issued the assailed Decision dated March 29, 2005, finding the
absence of an employer-employee relationship between the parties and deeming the
NLRC with no jurisdiction over the case. The CA arrived at this conclusion while again
applying the four-fold test. The CA found that Manulife did not exercise control over
Tongko that would render the latter an employee of Manulife. The dispositive portion
reads:
WHEREFORE, premises considered, the present petition is hereby GRANTED and the writ
prayed for accordingly GRANTED. The assailed Decision dated September 27, 2004 and
Resolution dated December 16, 2004 of the National Labor Relations Commission in
NLRC NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 040220-04) are hereby
ANNULLED and SET ASIDE. The Decision dated April 15, 2004 of Labor Arbiter Marita V.
Padolina is hereby REINSTATED.
Hence, Tongko filed this petition and presented the following issues:
A
The Court of Appeals committed grave abuse of discretion in granting respondents'
petition for certiorari.
B on the same findings of fact but differed in their interpretations.
The Court of Appeals committed grave abuse of discretion in annulling and setting aside
the Decision dated September 27, 2004 and Resolution dated December 16, 2004 in
finding that there is no employer-employee relationship between petitioner and
respondent.
C enumerated these "directives" or "orders" as follows:
The Court of Appeals committed grave abuse of discretion in annulling and setting aside
the Decision dated September 27, 2004 and Resolution dated December 16, 2004 which
found petitioner to have been illegally dismissed and ordered his reinstatement with
payment of backwages.13
Restated, the issues are: (1) Was there an employer-employee relationship between
Manulife and Tongko? and (2) If yes, was Manulife guilty of illegal dismissal?
The Court's Ruling
This petition is meritorious.
Tongko Was An Employee of Manulife
The basic issue of whether or not the NLRC has jurisdiction over the case resolves itself
into the question of whether an employer-employee relationship existed between
Manulife and Tongko. If no employer-employee relationship existed between the two
parties, then jurisdiction over the case properly lies with the Regional Trial Court.
In the determination of whether an employer-employee relationship exists between two
parties, this Court applies the four-fold test to determine the existence of the elements
of such relationship. In Pacific Consultants International Asia, Inc. v. Schonfeld, the Court
set out the elements of an employer-employee relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an employment
relationship is in dispute, four elements constitute the reliable yardstick: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the employee's conduct. It is the so-
called "control test" which constitutes the most important index of the existence of the
employer-employee relationship that is, whether the employer controls or has reserved
the right to control the employee not only as to the result of the work to be done but
also as to the means and methods by which the same is to be accomplished. Stated
otherwise, an employer-employee relationship exists where the person for whom the
services are performed reserves the right to control not only the end to be achieved but
also the means to be used in reaching such end.14
The NLRC, for its part, applied the four-fold test and found the existence of all the
elements and declared Tongko an employee of Manulife. The CA, on the other hand,
found that the element of control as an indicator of the existence of an employer-
employee relationship was lacking in this case. The NLRC and the CA based their rulings
The NLRC arrived at its conclusion, first, on the basis of the letter dated November 6,
2001 addressed by De Dios to Tongko. According to the NLRC, the letter contained "an
abundance of directives or orders that are intended to directly affect complainant's
authority and manner of carrying out his functions as Regional Sales Manager." It
1. You will hire at your expense a competent assistant who can unload you of much of
the routine tasks which can be easily delegated. x xx
x xxx
This assistant should be hired immediately.
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the
North Star Branch (NSB) in autonomous fashion x xx.
x xxx
I have decided to make this change so as to reduce your span of control and allow you
to concentrate more fully on overseeing the remaining groups under Metro North, your
Central Unit and the rest of the Sales Managers in Metro North. x xx
3. Any resistance or holding back by anyone will be dealt with accordingly.
4. I have been straightforward in this my letter and I know that we can continue to work
together… but it will have to be on my terms. Anything else is unacceptable!
The NLRC further ruled that the different codes of conduct that were applicable to
Tongko served as the foundations of the power of control wielded by Manulife over
Tongko that is further manifested in the different administrative and other tasks that he
was required to perform.
The NLRC also found that Tongko was required to render exclusive service to Manulife,
further bolstering the existence of an employer-employee relationship.
Finally, the NLRC ruled that Tongko was integrated into a management structure over
which Manulife exercised control, including the actions of its officers. The NLRC held
that such integration added to the fact that Tongko did not have his own agency belied
Manulife's claim that Tongko was an independent contractor.
The CA, however, considered the finding of the existence of an employer-employee
relationship by the NLRC as far too sweeping having as its only basis the letter dated
November 6, 2001 of De Dios. The CA did not concur with the NLRC's ruling that the
elements of control as pointed out by the NLRC are "sufficient indicia of control that
negates independent contractorship and conclusively establish an employer-employee
relationship between"15 Tongko and Manulife. The CA ruled that there is no employer-
employee relationship between Tongko and Manulife.
An impasse appears to have been reached between the CA and the NLRC on the sole
issue of control over an employee's conduct. It bears clarifying that such control not
only applies to the work or goal to be done but also to the means and methods to
accomplish it.16 In Sonza v. ABS-CBN Broadcasting Corporation, we explained that not all
forms of control would establish an employer-employee relationship, to wit:
Further, not every form of control that a party reserves to himself over the conduct of
the other party in relation to the services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of this case fall squarely with
the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means
or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve
it.17 (Emphasis supplied.)
We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular) that:
It is, therefore, usual and expected for an insurance company to promulgate a set of
rules to guide its commission agents in selling its policies that they may not run afoul of
the law and what it requires or prohibits. Of such a character are the rules which
prescribe the qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and also reserve to the
Company the determination of the premiums to be paid and the schedules of payment.
None of these really invades the agent's contractual prerogative to adopt his own selling
methods or to sell insurance at his own time and convenience, hence cannot justifiably
be said to establish an employer-employee relationship between him and the
company.18
Hence, we ruled in Insular that no employer-employee relationship existed therein.
However, such ruling was tempered with the qualification that had there been evidence
that the company promulgated rules or regulations that effectively controlled or
restricted an insurance agent's choice of methods or the methods themselves in selling
insurance, an employer-employee relationship would have existed. In other words, the
Court in Insular in no way definitively held that insurance agents are not employees of
insurance companies, but rather made the same a case-to-case basis. We held:
The respondents limit themselves to pointing out that Basiao's contract with the
Company bound him to observe and conform to such rules and regulations as the latter
might from time to time prescribe. No showing has been made that any such rules or
regulations were in fact promulgated, much less that any rules existed or were issued
which effectively controlled or restricted his choice of methods or the methods
themselves of selling insurance. Absent such showing, the Court will not speculate
that any exceptions or qualifications were imposed on the express provision of the
contract leaving Basiao "... free to exercise his own judgment as to the time, place and
means of soliciting insurance."19 (Emphasis supplied.)
There is no conflict between our rulings in Insular and in Great Pacific Life Assurance
Corporation. We said in the latter case:
[I]t cannot be gain said that Grepalife had control over private respondents'
performance as well as the result of their efforts. A cursory reading of their respective
functions as enumerated in their contracts reveals that the company practically
dictates the manner by which their jobs are to be carried out. For instance, the District
Manager must properly account, record and document the company's funds spot-check
and audit the work of the zone supervisors, conserve the company's business in the
district through ‘reinstatements', follow up the submission of weekly remittance reports
of the debit agents and zone supervisors, preserve company property in good condition,
train understudies for the position of district manager, and maintain his quota of sales
(the failure of which is a ground for termination). On the other hand, a zone supervisor
must direct and supervise the sales activities of the debit agents under him, conserve
company property through "reinstatements", undertake and discharge the functions of
absentee debit agents, spot-check the records of debit agents, and insure proper
documentation of sales and collections by the debit agents. 20 (Emphasis supplied.)
Based on the foregoing cases, if the specific rules and regulations that are enforced
against insurance agents or managers are such that would directly affect the means and
methods by which such agents or managers would achieve the objectives set by the
insurance company, they are employees of the insurance company.
In the instant case, Manulife had the power of control over Tongko that would make
him its employee. Several factors contribute to this conclusion.
In the Agreement dated July 1, 1977 executed between Tongko and Manulife, it is
provided that:
The Agent hereby agrees to comply with all regulations and requirements of the
Company as herein provided as well as maintain a standard of knowledge and
competency in the sale of the Company's products which satisfies those set by the
Company and sufficiently meets the volume of new business required of Production
Club membership.21
Under this provision, an agent of Manulife must comply with three (3) requirements: (1)
compliance with the regulations and requirements of the company; (2) maintenance of
a level of knowledge of the company's products that is satisfactory to the company; and
(3) compliance with a quota of new businesses.
Among the company regulations of Manulife are the different codes of conduct such as
the Agent Code of Conduct, Manulife Financial Code of Conduct, and Manulife Financial
Code of Conduct Agreement, which demonstrate the power of control exercised by the
company over Tongko. The fact that Tongko was obliged to obey and comply with the
codes of conduct was not disowned by respondents.
Thus, with the company regulations and requirements alone, the fact that Tongko was
an employee of Manulife may already be established. Certainly, these requirements
controlled the means and methods by which Tongko was to achieve the company's
goals.
More importantly, Manulife's evidence establishes the fact that Tongko was tasked to
perform administrative duties that establishes his employment with Manulife.
In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005,
Manulife attached affidavits of its agents purportedly to support its claim that Tongko,
as a Regional Sales Manager, did not perform any administrative functions. An
examination of these affidavits would, however, prove the opposite.
In an Affidavit dated April 28, 2003,22 John D. Chua, a Regional Sales Manager of
Manulife, stated:
4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional
Sales Manager ("RSM") for Metro South Region pursuant to an Agency Contract. As such
RSM, I have the following functions:
1. Refer and recommend prospective agents to Manulife
2. Coach agents to become productive
3. Regularly meet with, and coordinate activities of agents affiliated to my region.
While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April
29, 200323that:
3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for the
Metro North Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission agents;
c. Coordinate activities of Agency Managers who, in turn, train and coordinate activites
of other commission agents;
d. Achieve agreed production objectives in terms of Net Annualized Commissions and
Case Count and recruitment goals; and
e. Sell the various products of Manulife to my personal clients.
While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated
April 28, 200324that:
3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks Unit, North Star
Branch, Metro North Region;
4. As such UM, I render the following services:
a. To render or recommend prospective agents to be licensed, trained and contracted to
sell Manulife products and who will be part of my Unit;
b. To coordinate activities of the agents under my Unit in their daily, weekly and
monthly selling activities, making sure that their respective sales targets are met;
c. To conduct periodic training sessions for my agents to further enhance their sales
skills.
d. To assist my agents with their sales activities by way of joint fieldwork, consultations
and one-on- one evaluation and analysis of particular accounts.
e. To provide opportunities to motivate my agents to succeed like conducting promos to
increase sales activities and encouraging them to be involved in company and industry
activities.
f. To provide opportunities for professional growth to my agents by encouraging them
to be a member of the LUCAP (Life Underwriters Association of the Philippines).
A comparison of the above functions and those contained in the Agreement with those
cited in Great Pacific Life Assurance Corporation25 reveals a striking similarity that would
more than support a similar finding as in that case. Thus, there was an employer-
employee relationship between the parties.
Additionally, it must be pointed out that the fact that Tongko was tasked with recruiting
a certain number of agents, in addition to his other administrative functions, leads to no
other conclusion that he was an employee of Manulife.
In his letter dated November 6, 2001, De Dios harped on the direction of Manulife of
becoming a major agency-led distribution company whereby greater agency recruitment
is required of the managers, including Tongko. De Dios made it clear that agent
recruitment has become the primary means by which Manulife intends to sell more
policies. More importantly, it is Tongko's alleged failure to follow this principle of
recruitment that led to the termination of his employment with Manulife. With this, it is
inescapable that Tongko was an employee of Manulife.
Tongko Was Illegally Dismissed
In its Petition for Certiorari dated January 7, 200526 filed before the CA, Manulife argued
that even if Tongko is considered as its employee, his employment was validly
terminated on the ground of gross and habitual neglect of duties, inefficiency, as well as
willful disobedience of the lawful orders of Manulife. Manulife stated:
In the instant case, private respondent, despite the written reminder from Mr. De Dios
refused to shape up and altogether disregarded the latter's advice resulting in his
laggard performance clearly indicative of his willful disobedience of the lawful orders of
his superior. x xx
x xxx
As private respondent has patently failed to perform a very fundamental duty, and that
is to yield obedience to all reasonable rules, orders and instructions of the Company, as
well as gross failure to reach at least minimum quota, the termination of his
engagement from Manulife is highly warranted and therefore, there is no illegal
dismissal to speak of.
It is readily evident from the above-quoted portions of Manulife's petition that it failed
to cite a single iota of evidence to support its claims. Manulife did not even point out
which order or rule that Tongko disobeyed. More importantly, Manulife did not point
out the specific acts that Tongko was guilty of that would constitute gross and habitual
neglect of duty or disobedience. Manulife merely cited Tongko's alleged "laggard
performance," without substantiating such claim, and equated the same to
disobedience and neglect of duty.
We cannot, therefore, accept Manulife's position.
In Quebec, Sr. v. National Labor Relations Commission, we ruled that:
When there is no showing of a clear, valid and legal cause for the termination of
employment, the law considers the matter a case of illegal dismissal and the burden is
on the employer to prove that the termination was for a valid or authorized cause. This
burden of proof appropriately lies on the shoulders of the employer and not on the
employee because a worker's job has some of the characteristics of property rights and
is therefore within the constitutional mantle of protection. No person shall be deprived
of life, liberty or property without due process of law, nor shall any person be denied
the equal protection of the laws.
Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit terms that
the burden of proving the validity of the termination of employment rests on the
employer. Failure to discharge this evidential burden would necessarily mean that the
dismissal was not justified, and, therefore, illegal.27
We again ruled in Times Transportation Co., Inc. v. National Labor Relations
Commission that:
The law mandates that the burden of proving the validity of the termination of
employment rests with the employer. Failure to discharge this evidentiary burden would
necessarily mean that the dismissal was not justified, and, therefore, illegal.
Unsubstantiated suspicions, accusations and conclusions of employers do not provide
for legal justification for dismissing employees. In case of doubt, such cases should be
resolved in favor of labor, pursuant to the social justice policy of our labor laws and
Constitution.28
This burden of proof was clarified in Community Rural Bank of San Isidro (N.E.), Inc. v.
Paez to mean substantial evidence, to wit:
The Labor Code provides that an employer may terminate the services of an employee
for just cause and this must be supported by substantial evidence. The settled rule in
administrative and quasi-judicial proceedings is that proof beyond reasonable doubt is
not required in determining the legality of an employer's dismissal of an employee, and
not even a preponderance of evidence is necessary as substantial evidence is considered
sufficient. Substantial evidence is more than a mere scintilla of evidence or relevant
evidence as a reasonable mind might accept as adequate to support a conclusion, even
if other minds, equally reasonable, might conceivably opine otherwise.29
Here, Manulife failed to overcome such burden of proof. It must be reiterated that
Manulife even failed to identify the specific acts by which Tongko's employment was
terminated much less support the same with substantial evidence. To repeat, mere
conjectures cannot work to deprive employees of their means of livelihood. Thus, it
must be concluded that Tongko was illegally dismissed.
Moreover, as to Manulife's failure to comply with the twin notice rule, it reasons that
Tongko not being its employee is not entitled to such notices. Since we have ruled that
Tongko is its employee, however, Manulife clearly failed to afford Tongko said notices.
Thus, on this ground too, Manulife is guilty of illegal dismissal. In Quebec, Sr., we also
stated:
Furthermore, not only does our legal system dictate that the reasons for dismissing a
worker must be pertinently substantiated, it also mandates that the manner of dismissal
must be properly done, otherwise, the termination itself is gravely defective and may be
declared unlawful.30
For breach of the due process requirements, Manulife is liable to Tongko in the amount
of PhP 30,000 as indemnity in the form of nominal damages.31
Finally, Manulife raises the issue of the correctness of the computation of the award to
Tongko made by the NLRC by claiming that Songco v. National Labor Relations
Commission32 is inapplicable to the instant case, considering that Songco was dismissed
on the ground of retrenchment.
An examination of Songco reveals that it may be applied to the present case. In that
case, Jose Songco was a salesman of F.E. Zuellig (M), Inc. which terminated the services
of Songco on the ground of retrenchment due to financial losses. The issue raised to the
Court, however, was whether commissions are considered as part of wages in order to
determine separation pay. Thus, the fact that Songco was dismissed due to
retrenchment does not hamper the application thereof to the instant case. What is
pivotal is that we ruled in Songco that commissions are part of wages for the
determination of separation pay.
Article 279 of the Labor Code on security of tenure pertinently provides that:
In cases of regular employment the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his compensation
was withheld from him up to the time of his actual reinstatement.
In Triad Security & Allied Services, Inc. v. Ortega, Jr. (Triad), we thus stated that an
illegally dismissed employee shall be entitled to backwages and separation pay, if
reinstatement is no longer viable:
As the law now stands, an illegally dismissed employee is entitled to two reliefs, namely:
backwages and reinstatement. These are separate and distinct from each other.
However, separation pay is granted where reinstatement is no longer feasible because
of strained relations between the employee and the employer. In effect, an illegally
dismissed employee is entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable and backwages.33
Taking into consideration the cases of Songco and Triad, we find correct the
computation of the NLRC that the monthly gross wage of Tongko in 2001 was PhP
518,144.76. For having been illegally dismissed, Tongko is entitled to reinstatement with
full backwages under Art. 279 of the Labor Code. Due to the strained relationship
between Manulife and Tongko, reinstatement, however, is no longer advisable. Thus,
Tongko will be entitled to backwages from January 2, 2002 (date of dismissal) up to the
finality of this decision. Moreover, Manulife will pay Tongko separation pay of one (1)
month salary for every year of service that is from 1977 to 2001 amounting to PhP
12,435,474.24, considering that reinstatement is not feasible. Tongko shall also be
entitled to an award of attorney's fees in the amount of ten percent (10%) of the
aggregate amount of the above awards.
WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005 Decision of
the CA in CA-G.R. SP No. 88253 is REVERSED and SET ASIDE. The Decision dated
September 27, 2004 of the NLRC is REINSTATED with the following modifications:
Manulife shall pay Tongko the following:
(1) Full backwages, inclusive of allowances and other benefits or their monetary
equivalent from January 2, 2002 up to the finality of this Decision;
(2) Separation pay of one (1) month salary for every year of service from 1977 up to
2001 amounting to PhP 12,435,474.24;
(3) Nominal damages of PhP 30,000 as indemnity for violation of the due process
requirements; and
(4) Attorney's fees equivalent to ten percent (10%) of the aforementioned backwages
and separation pay.
Costs against respondent Manulife.
TAPE vs. Servana
Servaña started out as a security for the Agro-Commercial Security Agency (ACSA) since
1987. The agency had a contract with TV network RPN 9.
On the other hand, Television and Production Exponents, Inc (TAPE). is a company in
charge of TV programming and was handling shows like Eat Bulaga! Eat Bulaga! was
then with RPN 9.
In 1995, RPN 9 severed its relations with ACSA. TAPE retained the services of Servaña as
a security guard and absorbed him.
In 2000, TAPE contracted the services of Sun Shield Security Agency. It then notified
Servaña that he is being terminated because he is now a redundant employee.
Servaña then filed a case for illegal Dismissal. The Labor Arbiter ruled that Servaña’s
dismissal is valid on the ground of redundancy but though he was not illegally dismissed
he is still entitled to be paid a separation pay which is amounting to one month pay for
every year of service which totals to P78,000.00.
TAPE appealed and argued that Servaña is not entitled to receive separation pay for he
is considered as a talent and not as a regular employee; that as such, there is no
employee-employer relationship between TAPE and Servaña. The National Labor
Relations Commission ruled in favor of TAPE. It ruled that Servaña is a program
employee. Servaña appealed before the Court of Appeals.
The Court of Appeals reversed the NLRC and affirmed the LA. The CA further ruled that
TAPE and its president Tuviera should pay for nominal damages amounting to
P10,000.00.
ISSUE: Whether or not there is an employee-employer relationship existing between
TAPE and Servaña.
HELD: Yes. Servaña is a regular employee.
In determining Servaña’s nature of employment, the Supreme Court employed the Four
Fold Test:
1. Whether or not employer conducted the selection and engagement of the
employee.
Servaña was selected and engaged by TAPE when he was absorbed as a “talent” in 1995.
He is not really a talent, as termed by TAPE, because he performs an activity which is
necessary and desirable to TAPE’s business and that is being a security guard. Further,
the primary evidence of him being engaged as an employee is his employee
identification card. An identification card is usually provided not just as a security
measure but to mainly identify the holder thereof as a bona fide employee of the firm
who issues it.
2. Whether or not there is payment of wages to the employee by the employer.
Servaña is definitely receiving a fixed amount as monthly compensation. He’s receiving
P6,000.00 a month.
3. Whether or not employer has the power to dismiss employee.
The Memorandum of Discontinuance issued to Servaña to notify him that he is a
redundant employee evidenced TAPE’s power to dismiss Servaña.
4. Whether or not the employer has the power of control over the employee.
The bundy cards which showed that Servaña was required to report to work at fixed
hours of the day manifested the fact that TAPE does have control over him. Otherwise,
Servaña could have reported at any time during the day as he may wish.
Therefore, Servaña is entitled to receive a separation pay.
On the other hand, the Supreme Court ruled that Tuviera, as president of TAPE, should
not be held liable for nominal damages as there was no showing he acted in bad faith in
terminating Servaña.
Regular Employee Defined:One having been engaged to perform an activity that is
necessary and desirable to a company’s business.
ENCYCLOPEDIA BRITANNICA (Philippines), INC. vs. NLRC
264 SCRA 4
Facts: Limjoco was a Sales Divison of Encyclopaedia Britannica and was in charge of
selling the products through some sales representatives. As compensation, he would
receive commissions from the products sold by his agents. He was also allowed to use
the petitioner’s name, goodwill and logo. It was agreed that office expenses would be
deducted from Limjoco’s commissions.
In 1974, Limjoco resigned to pursue his private business and filed a complaint against
petitioner for alleged non-payment of separation pay and other benefits and also illegal
deduction from sales commissions. Petitioner alleged that Limjoco was not an employee
of the company but an independent dealer authorized to promote and sell its products
and in return, received commissions therein. Petitioner also claims that it had no control
and supervision over the complainant as to the manners and means he conducted his
business operations. Limjoco maintained otherwise. He alleged he was hired by the
petitioner and was assigned in the sales department.
The Labor Arbiter ruled that Limjoco was an employee of the company. NLRC also
affirmed the decision and opined that there was no evidence supporting allegation that
Limjoco was an independent contractor or dealer.
Issue: Whether or not there was an employee-employer relationship between the
parties.
Ruling: There was no employee-employer relationship. In determining the relationship,
the following elements must be present: selection and engagement of the employee,
payment of wages, power of dismissal and power to control the employee’s conduct.
The power of control is commonly regarded as the most crucial and determinative
indicator of the presence or absence of an employee-employer relationship. Under the
control test, an employee-employer relationship exists where the person for whom the
services are performed reserves a right to control not only the end to be achieved, but
also the manner and means to be employed in reaching that end.
The issuance of guidelines by the petitioner was merely guidelines on company policies
which sales managers follow and impose on their respective agents. Limjoco was not an
employee of the company since he had the free rein in the means and methods for
conducting the marketing operations. He was merely an agent or an independent dealer
of the petitioner. He was free to conduct his work and he was free to engage in other
means of livelihood.
In ascertaining the employee-employer relationship, the factual circumstances must be
considered. The element of control is absent where a person who works for another
does so more or less at his own pleasure and is not subject to definite hours or
conditions of work, and in turn is compensated in according to the result of his efforts
and not the amount thereof. Hence, there was no employee-employer relationship.
Atok Big-Wedge Company Inc vs Gison
GR No.169510
Facts:
 Jesus P. Gison was engaged as part-time consultant on retainer basis by the
petitioner Atok. Petitioner did not require respondent to its office on a regular
basis, except when occasionally requested by the management to discuss
matters needing his expertise as a consultant. As payment for his services,
respondent received a retainer fee of P3,000.00 which was delivered to him at
his residence or in a local restaurant. The said arrangement continued for the
next eleven years.
 Since the respondent was getting old he requested that petitioner cause his
registration with the SSS but petitioner did not accede his request.
 Respondent filed a complaint with the SSS against petitioner for the latter’s
refusal to cause his registration with the SSS. On the same date the petitioner
issued a memo advising the termination of the respondent’s retainer contract.
Thus he filed for illegal dismissal.
Issue:
 Whether employer-employee relationship exists?
Held:
 No. To ascertain the existence of an employer-employee relationship
jurisprudence has invariably adhered to the four-fold test to wit: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employee’s conduct, or
the so-called “control test”.
 The commonly so called control test is commonly regarded as the most crucial
and determinative indicator of the presence or absence of an employer-
employee relationship. Under the control test, an employer-employee
relationship exists where the person for whom the services are performed
reserves the right to control not only the end achieved, but also the manner
and means to be used in reaching that end.
 Applying the aforementioned test, an employer-employee relationship is
apparently absent in the case at bar. Among other things, respondent was not
required to report everyday during regular office hours of petitioner.
Respondent’s monthly retainer fees were paid to him either at his residence or
a local restaurant. More importantly, petitioner did not prescribe the manner
in which respondent would accomplish any of the tasks in which his expertise
as a liaison officer was needed; respondent was left alone and given the
freedom to accomplish the tasks using his own means and methods.
Respondent was assigned tasks to perform, but petitioner did not control the
manner and methods by which respondent performed these tasks. The
absence of the element of control on the part of the petitioner engenders a
conclusion that he is not an employee of the petitioner.
 In addition, her work was continuous for a period of four years. This repeated
engagement under contract of hire is indicative of the necessity and desirability of the
Dumpit’s work in ABC’s business

Dumpit Murillo vs. CA

Thelma Dumpit-Murillo was hired by ABC as a newscaster in 1995. Her contract with the
TV station was repeatedly renewed until 1999. She then wrote Jose Javier (VP for News
and Public Affairs of ABC) advising him of her intention to renew the contract.

Javier did not respond.

Dumpit then demanded reinstatement as well as her backwages, service incentive leave
pays and other monetary benefits.

ABC said they could only pay her backwages but her other claims had no basis as she
was not entitled thereto because she is considered as a talent and not a regular
employee.

Dumpit sued ABC. The Labor Arbiter ruled against Dumpit. The National Labor Relations
Commission reversed the LA. The Court of Appeals reversed the NLRC and ruled that as
per the contract between ABC and Dumpit, Dumpit is a fixed term employee.

ISSUE: Whether or not Dumpit is a regular employee. Bernarte v PBA

HELD: Yes. Dumpit was a regular employee under contemplation of law. The practice of
having fixed-term contracts in the industry does not automatically make all talent
contracts valid and compliant with labor law. The assertion that a talent contract exists
does not necessarily prevent a regular employment status.
The duties of Dumpit as enumerated in her employment contract indicate that ABC had
control over the work of Dumpit. Aside from control, ABC also dictated the work
assignments and payment of petitioner’s wages. ABC also had power to dismiss her. All
these being present, clearly, there existed an employment relationship between Dumpit
and ABC.
The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as
follows:
Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to
join the PBA as referees. During the leadership of Commissioner Emilio Bernardino, they
were made to sign contracts on a year-to-year basis. During the term of
Commissioner Eala, however, changes were made on the terms of their employmen
Complainant Bernarte, for instance, was not made to sign a contract during the first
conference of the All-Filipino Cup which was from February 23, 2003 to June 2003. It
was only during the second conference when he was made to sign a one and a half
month contract for the period July 1 to August 5, 2003.
On January 15, 2004, Bernarte received a letter from the Office of the Commissioner
advising him that his contract would not be renewed citing his unsatisfactory
performance on and off the court. It was a total shock for Bernarte who was awarded
Referee of the year in 2003. He felt that the dismissal was caused by his refusal to fix a
game upon order of Ernie De Leon.
On the other hand, complainant Guevarra alleges that he was invited to join the PBA
pool of referees in February 2001. On March 1, 2001, he signed a contract as trainee.
Beginning 2002, he signed a yearly contract as Regular Class C referee. On May 6, 2003,
respondent Martinez issued a memorandum to Guevarra expressing dissatisfaction over
his questioning on the assignment of referees officiating out-of-town games. Beginning
February 2004, he was no longer made to sign a contract.
Respondents aver, on the other hand, that complainants entered into two contracts of
retainer with the PBA in the year 2003. The first contract was for the period January 1,
2003 to July 15, 2003; and the second was for September 1 to December 2003. After the
lapse of the latter period, PBA decided not to renew their contracts.
Complainants were not illegally dismissed because they were not employees of the PBA.
Their respective contracts of retainer were simply not renewed. PBA had the
prerogative of whether or not to renew their contracts, which they knew were fixed.4
In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee
whose dismissal by respondents was illegal. Accordingly, the Labor Arbiter ordered the
reinstatement of petitioner and the payment of backwages, moral and exemplary
damages and attorneys fees, to wit:
WHEREFORE, premises considered all respondents who are here found to have illegally
dismissed complainants are hereby ordered to (a) reinstate complainants within thirty
(30) days from the date of receipt of this decision and to solidarily pay complainants:
JOSE MEL BERNARTE
RENATO GUEVARRA
1. backwages from January 1, 2004 up to the
finality of this Decision, which to date is
P536,250.00 P211,250.00
100,000.00
2. moral damages
50,000.00 100,000.00
3. exemplary damages 50,000.00
4. 10% attorneys fees 68,625.00 36,125.00
TOTAL P754,875.00 P397,375.00
or a total of P1,152,250.00
The rest of the claims are hereby dismissed for lack of merit or basis.
SO ORDERED.7
In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters judgment. The
dispositive portion of the NLRCs decision reads:
WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor
Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED.
SO ORDERED.9
Respondents filed a petition for certiorari with the Court of Appeals, which overturned
the decisions of the NLRC and Labor Arbiter. The dispositive portion of the Court of
Appeals decision reads:
WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28,
2008 and Resolution dated August 26, 2008 of the National Labor Relations Commission
are ANNULLED and SET ASIDE. Private respondents complaint before the Labor Arbiter
is DISMISSED.
SO ORDERED.10
The Court of Appeals Ruling
The Court of Appeals found petitioner an independent contractor since respondents did
not exercise any form of control over the means and methods by which petitioner
performed his work as a basketball referee. The Court of Appeals held:
While the NLRC agreed that the PBA has no control over the referees acts of blowing the
whistle and making calls during basketball games, it, nevertheless, theorized that the
said acts refer to the means and methods employed by the referees in officiating
basketball games for the illogical reason that said acts refer only to the referees skills.
How could a skilled referee perform his job without blowing a whistle and making calls?
Worse, how can the PBA control the performance of work of a referee without
controlling his acts of blowing the whistle and making calls?
Moreover, this Court disagrees with the Labor Arbiters finding (as affirmed by the NLRC)
that the Contracts of Retainer show that petitioners have control over private
respondents.
xxxx
Neither do We agree with the NLRCs affirmance of the Labor Arbiters conclusion that
private respondents repeated hiring made them regular employees by operation of
law.11
The Issues
The main issue in this case is whether petitioner is an employee of respondents, which
in turn determines whether petitioner was illegally dismissed.
Petitioner raises the procedural issue of whether the Labor Arbiters decision has
become final and executory for failure of respondents to appeal with the NLRC within
the reglementary period.
The Ruling of the Court
The petition is bereft of merit.
The Court shall first resolve the procedural issue posed by petitioner.
Petitioner contends that the Labor Arbiters Decision of 31 March 2005 became final
and executory for failure of respondents to appeal with the NLRC within the prescribed
period. Petitioner claims that the Labor Arbiters decision was constructively served on
respondents as early as August 2005 while respondents appealed the Arbiters decision
only on 31 March 2006, way beyond the reglementary period to appeal. Petitioner
points out that service of an unclaimed registered mail is deemed complete five days
from the date of first notice of the post master. In this case three notices were issued by
the post office, the last being on 1 August 2005. The unclaimed registered mail was
consequently returned to sender. Petitioner presents the Postmasters Certification to
prove constructive service of the Labor Arbiters decision on respondents. The
Postmaster certified:
xxx
That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr.,
immediately issued the first registry notice to claim on July 12, 2005 by the addressee.
The second and third notices were issued on July 21 and August 1, 2005, respectively.
That the subject registered letter was returned to the sender (RTS) because the
addressee failed to claim it after our one month retention period elapsed. Said
registered letter was dispatched from this office to Manila CPO (RTS) under bill #6, line
7, page1, column 1, on September 8, 2005.12
Section 10, Rule 13 of the Rules of Court provides:
SEC. 10. Completeness of service. Personal service is complete upon actual delivery.
Service by ordinary mail is complete upon the expiration of ten (10) days after mailing,
unless the court otherwise provides. Service by registered mail is complete upon actual
receipt by the addressee, or after five (5) days from the date he received the first notice
of the postmaster, whichever date is earlier.
The rule on service by registered mail contemplates two situations: (1) actual service
the completeness of which is determined upon receipt by the addressee of the
registered mail; and (2) constructive service the completeness of which is determined
upon expiration of five days from the date the addressee received the first notice of the
postmaster.13
Insofar as constructive service is concerned, there must be conclusive proof that a first
notice was duly sent by the postmaster to the addressee.14 Not only is it required that
notice of the registered mail be issued but that it should also be delivered to and
received by the addressee.15 Notably, the presumption that official duty has been
regularly performed is not applicable in this situation. It is incumbent upon a party who
relies on constructive service to prove that the notice was sent to, and received by, the
addressee.16
The best evidence to prove that notice was sent would be a certification from the
postmaster, who should certify not only that the notice was issued or sent but also as to
how, when and to whom the delivery and receipt was made. The mailman may also
testify that the notice was actually delivered.17
In this case, petitioner failed to present any concrete proof as to how, when and to
whom the delivery and receipt of the three notices issued by the post office was made.
There is no conclusive evidence showing that the post office notices were actually
received by respondents, negating petitioners claim of constructive service of the Labor
Arbiters decision on respondents. The Postmasters Certification does not sufficiently
prove that the three notices were delivered to and received by respondents; it only
indicates that the post office issued the three notices. Simply put, the issuance of the
notices by the post office is not equivalent to delivery to and receipt by the addressee of
the registered mail. Thus, there is no proof of completed constructive service of the
Labor Arbiters decision on respondents.
At any rate, the NLRC declared the issue on the finality of the Labor Arbiters decision
moot as respondents appeal was considered in the interest of substantial justice. We
agree with the NLRC. The ends of justice will be better served if we resolve the instant
case on the merits rather than allowing the substantial issue of whether petitioner is an
independent contractor or an employee linger and remain unsettled due to procedural
technicalities.
The existence of an employer-employee relationship is ultimately a question of fact. As a
general rule, factual issues are beyond the province of this Court. However, this rule
admits of exceptions, one of which is where there are conflicting findings of fact
between the Court of Appeals, on one hand, and the NLRC and Labor Arbiter, on the
other, such as in the present case.18
To determine the existence of an employer-employee relationship, case law has
consistently applied the four-fold test, to wit: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers
power to control the employee on the means and methods by which the work is
accomplished. The so-called control test is the most important indicator of the presence
or absence of an employer-employee relationship.19
In this case, PBA admits repeatedly engaging petitioners services, as shown in the
retainer contracts. PBA pays petitioner a retainer fee, exclusive of per diem or
allowances, as stipulated in the retainer contract. PBA can terminate the retainer
contract for petitioners violation of its terms and conditions.
However, respondents argue that the all-important element of control is lacking in this
case, making petitioner an independent contractor and not an employee of
respondents.
Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents
since the latter exercise control over the performance of his work. Petitioner cites the
following stipulations in the retainer contract which evidence control: (1) respondents
classify or rate a referee; (2) respondents require referees to attend all basketball games
organized or authorized by the PBA, at least one hour before the start of the first game
of each day; (3) respondents assign petitioner to officiate ballgames, or to act as
alternate referee or substitute; (4) referee agrees to observe and comply with all the
requirements of the PBA governing the conduct of the referees whether on or off the
court; (5) referee agrees (a) to keep himself in good physical, mental, and emotional
condition during the life of the contract; (b) to give always his best effort and service,
and loyalty to the PBA, and not to officiate as referee in any basketball game outside of
the PBA, without written prior consent of the Commissioner; (c) always to conduct
himself on and off the court according to the highest standards of honesty or morality;
and (6) imposition of various sanctions for violation of the terms and conditions of the
contract.
The foregoing stipulations hardly demonstrate control over the means and methods by
which petitioner performs his work as a referee officiating a PBA basketball game. The
contractual stipulations do not pertain to, much less dictate, how and when petitioner
will blow the whistle and make calls. On the contrary, they merely serve as rules of
conduct or guidelines in order to maintain the integrity of the professional basketball
league. As correctly observed by the Court of Appeals, how could a skilled referee
perform his job without blowing a whistle and making calls? x x x [H]ow can the PBA
control the performance of work of a referee without controlling his acts of blowing the
whistle and making calls?20
In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the relationship
between a television and radio station and one of its talents, the Court held that not all
rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former. The Court held:
We find that these general rules are merely guidelines towards the achievement of the
mutually desired result, which are top-rating television and radio programs that comply
with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of
the other party in relation to the services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of this case fall squarely with
the case of Insular Life Assurance Co., Ltd. v. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology
and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it.22
We agree with respondents that once in the playing court, the referees exercise their
own independent judgment, based on the rules of the game, as to when and how a call
or decision is to be made. The referees decide whether an infraction was committed,
and the PBA cannot overrule them once the decision is made on the playing court. The
referees are the only, absolute, and final authority on the playing court. Respondents or
any of the PBA officers cannot and do not determine which calls to make or not to make
and cannot control the referee when he blows the whistle because such authority
exclusively belongs to the referees. The very nature of petitioners job of officiating a
professional basketball game undoubtedly calls for freedom of control by respondents.
Moreover, the following circumstances indicate that petitioner is an independent
contractor: (1) the referees are required to report for work only when PBA games are
scheduled, which is three times a week spread over an average of only 105 playing days
a year, and they officiate games at an average of two hours per game; and (2) the only
deductions from the fees received by the referees are withholding taxes.
In other words, unlike regular employees who ordinarily report for work eight hours per
day for five days a week, petitioner is required to report for work only when PBA games
are scheduled or three times a week at two hours per game. In addition, there are no
deductions for contributions to the Social Security System, Philhealth or Pag-Ibig, which
are the usual deductions from employees salaries. These undisputed circumstances
buttress the fact that petitioner is an independent contractor, and not an employee of
respondents.
Furthermore, the applicable foreign case law declares that a referee is an independent
contractor, whose special skills and independent judgment are required specifically for
such position and cannot possibly be controlled by the hiring party
In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of
Illinois held that plaintiff, a soccer referee, is an independent contractor, and not an
employee of defendant which is the statutory body that governs soccer in the United
States. As such, plaintiff was not entitled to protection by the Age Discrimination in
Employment Act. The U.S. District Court ruled:
Generally, if an employer has the right to control and direct the work of an individual,
not only as to the result to be achieved, but also as to details by which the result is
achieved, an employer/employee relationship is likely to exist. The Court must be
careful to distinguish between control[ling] the conduct of another party contracting
party by setting out in detail his obligations consistent with the freedom of contract, on
the one hand, and the discretionary control an employer daily exercises over its
employees conduct on the other.
Yonan asserts that the Federation closely supervised his performance at each soccer
game he officiated by giving him an assessor, discussing his performance, and
controlling what clothes he wore while on the field and traveling. Putting aside that the
Federation did not, for the most part, control what clothes he wore, the Federation did
not supervise Yonan, but rather evaluated his performance after matches. That the
Federation evaluated Yonan as a referee does not mean that he was an
employee. There is no question that parties retaining independent contractors may
judge the performance of those contractors to determine if the contractual relationship
should continue. x x x
It is undisputed that the Federation did not control the way Yonan refereed his games.
He had full discretion and authority, under the Laws of the Game, to call the game as he
saw fit. x x x In a similar vein, subjecting Yonan to qualification standards and
procedures like the Federations registration and training requirements does not create
an employer/employee relationship. x x x
A position that requires special skills and independent judgment weights in favor of
independent contractor status. x x x Unskilled work, on the other hand, suggests an
employment relationship. x x xHere, it is undisputed that soccer refereeing, especially at
the professional and international level, requires a great deal of skill and natural
ability. Yonan asserts that it was the Federations training that made him a top referee,
and that suggests he was an employee. Though substantial training supports an
employment inference, that inference is dulled significantly or negated when the
putative employers activity is the result of a statutory requirement, not the employers
choice. x x x
In McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was
not an agent of the Tennessee Secondary School Athletic Association (TSSAA), so the
players vicarious liability claim against the association should be dismissed. In finding
that the umpire is an independent contractor, the Court of Appeals of Tennesse ruled:
The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games
played between TSSAA member schools. The TSSAA does not supervise regular season
games. It does not tell an official how to conduct the game beyond the framework
established by the rules. The TSSAA does not, in the vernacular of the case law, control
the means and method by which the umpires work.
In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that
petitioner is an employee of the former. For a hired party to be considered an
employee, the hiring party must have control over the means and methods by which the
hired party is to perform his work, which is absent in this case. The continuous rehiring
by PBA of petitioner simply signifies the renewal of the contract between PBA and
petitioner, and highlights the satisfactory services rendered by petitioner warranting
such contract renewal. Conversely, if PBA decides to discontinue petitioners services at
the end of the term fixed in the contract, whether for unsatisfactory services, or
violation of the terms and conditions of the contract, or for whatever other reason, the
same merely results in the non-renewal of the contract, as in the present case. The non-
renewal of the contract between the parties does not constitute illegal dismissal of
petitioner by respondents.
WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of
Appeals.
SO ORDERED.
JARDIN V. NLRC (G.R. NO. 119268)
FACTS:
Petitioners were drivers of private respondent, Philjama International Inc., a domestic
corporation engaged in the operation of "Goodman Taxi." Petitioners used to drive
private respondent’s taxicabs every other day on a 24-hour work schedule under the
boundary system. Under this arrangement, the petitioners earned an average of
P400.00 daily. Nevertheless, private respondent admittedly regularly deducts from
petitioners’ daily earnings the amount of P30.00 supposedly for the washing of the taxi
units. Believing that the deduction is illegal, petitioners decided to form a labor union to
protect their rights and interests.
Upon learning about the plan of petitioners, private respondent refused to let
petitioners drive their taxicabs when they reported for work on August 6, 1991, and on
succeeding days. Petitioners suspected that they were singled out because they were
the leaders and active members of the proposed union. Aggrieved, petitioners filed with
the labor arbiter a complaint against private respondent for unfair labor practice, illegal
dismissal and illegal deduction of washing fees. The labor arbiter dismissed said
complaint for lack of merit. On appeal, the NLRC reversed the decision of the labor
arbiter. Private Respondent then filed a motion for reconsideration but was denied.
Private Respondent filed another motion for reconsideration which eventually was
granted dismissing the complaint of the petitioners for lack of jurisdiction on the ground
that there was no employer-employee relationship. Petitioners sought reconsideration
of the labor tribunal’s latest decision which was denied.
ISSUE:
1. WON an employee-employer relationship exists?
2. WON the petitioners were illegally dismissed?
RULING:
1. Yes. On the issue of whether or not employer-employee relationship exists, admitted
is the fact that complainants are taxi drivers purely on the ‘boundary system’. Under this
system the driver takes out his unit and pays the owner/operator a fee commonly called
‘boundary’ for the use of the unit. Petitioners are undoubtedly employees of private
respondent because as taxi drivers they perform activities which are usually necessary
or desirable in the usual business or trade of their employer. The fact that the drivers do
not receive fixed wages is not sufficient to withdraw the relationship from that of
employer and employee.
2. Yes. The termination of employment must be effectuated in accordance with law. The
just and authorized causes for termination of employment are enumerated under
Articles 282, 283 and 284 of the Labor Code. The requirement of notice and hearing is
set-out in Article 277 (b) of the said Code. Hence, petitioners, being employees of
private respondent, can be dismissed only for just and authorized cause, and after
affording them notice and hearing prior to termination. In the instant case, private
respondent had no valid cause to terminate the employment of petitioners. Neither
were there two (2) written notices sent by private respondent informing each of the
petitioners that they had been dismissed from work. These lack of valid cause and
failure on the part of private respondent to comply with the twin-notice requirement
underscored the illegality surrounding petitioners’ dismissal.
Under the law, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.
With regard to the amount deducted for washing of the taxi units, such was not illegal
as such is indeed a practice in the taxi industry and is dictated by fair play.
Chavez vs NLRC, Supreme Packaging Inc, and Alvin Lee
GR No. 146530 January 17, 2005
Facts:
 The respondent company, Supreme Packaging Inc., is in the business of
manufacturing cartons and other packaging materials for export and
distribution.
 The petitioner, Pedro Chavez, was a truck driver (from October 25, 1984)
tasked to deliver the respondent company’s products to its various customers.
 The respondent furnished petitioner with a truck that all deliveries were made
in accordance with the routing slips issued by the respondent company
indicating the order, time and urgency of delivery.
 On 1992, the petitioner expressed his desire to avail the benefits that a regular
employee were receiving such as overtime pay, nightshift differential pay, and
13th month pay, among others but nothing was complied.
 On February 20, 1995, petitioner filed a complaint for regularization with the
Regional Arbitration Branch No. III of NLRC in San Fernando, Pampanga.
Before the case could be heard, respondent terminated the services of the
petitioner.
 Hence, the petitioner filed an amended complaint for illegal dismissal, unfair
labor practice and non-payment of overtime pay, nightshift differential, and
13th month pay, among others.
Issue: Whether there exists an employer-employee relationship?
Held:
 Yes an employer-employee do exist. The elements to determine the existence
of an employment relationship are: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employer’s power to control the employee’s conduct. The most important
element is the employer’s control of the employee’s conduct, not only as to
the result of the work to be done, but also as to the means and methods to
accomplish it. First. Undeniably, it was the respondents who engaged the
services of the petitioner without the intervention of a third party. Second.
Wages are defined as “remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained
on a time, task, piece or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a written or
 unwritten contract of employment for work done or to be done, or for service
rendered or to be rendered. The petitioner is paid on a per trip basis is not
significant. This is merely a method of computing compensation. Third. The
respondent’s power to dismiss the petitioner was inherent in the fact that
they engaged the services of the petitioner as truck driver. They exercised this
power by terminating the petitioner’s services albeit in the guise of severance
of contractual relation due allegedly to the latter’s breach of his contractual
obligation. Fourth. Compared to an employee, an independent contractor is
one who carries on a distinct and independent business and undertakes to
perform the job, work or service on its own account and under its own
responsibility according to its own manner and method, free from the control
and direction of the principal in all matters connected with the performance of
the work except as to the results thereof. Hence while an independent
contractor enjoys independence and freedom from the control and
supervision of his principal. An employee is subject to the employer’s power to
control the means and methods by which the employee’s work is to be
performed and accomplished. A careful review of the records shows that the
latter performed his work under the respondents’ supervision and control. The
existence of an employer-employee relationship cannot be negated by
expressly repudiating it in a contract and providing therein that the employee
is an independent contractor when the facts clearly show otherwise.
Employment status is defined by law and not by what the parties say it should
be.
COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, Petitioners,
vs.
DR. DEAN N. CLIMACO, Respondent.
FACTS: Respondent Dr. Dean N. Climaco is a medical doctor The Retainer Agreement,
which began on January 1, 1988, was renewed annually (original contract was only good
for one year). The last one expired on December 31, 1993. Despite the non-renewal of
the Retainer Agreement, respondent continued to perform his functions as company
doctor to Coca-Cola until he received a letter4 dated March 9, 1995 from petitioner
company concluding their retainership agreement effective 30 days from receipt
thereof.
It is noted that as early as September 1992, petitioner was already making inquiries
regarding his status with petitioner company. Petitioner company, however, did not
take any action. Hence, respondent made another inquiry with the DOLE and SSS.
Thereafter, respondent inquired from the management of petitioner company whether
it was agreeable to recognizing him as a regular employee. The management refused to
do so.
FILED TWO COMPLAINTS IN THE NLRC: (1) seeking recognition as a regular employee of
petitioner company and prayed for the payment of all benefits of a regular employee,
including 13th Month Pay, Cost of Living Allowance, Holiday Pay, Service Incentive Leave
Pay, and Christmas Bonus; (2) a complaint for illegal dismissal against petitioner
company with the NLRC, Bacolod City.
LABOR ARBITER’S DECISION: Case (1) Dismissed, found that petitioner company lacked
the power of control over respondent’s performance of his duties, and recognized as
valid the Retainer Agreement between the parties; (2) dismissed the case for illegal
dismissal in view of the previous finding of Labor Arbiter that complainant therein,
respondent is not an employee of Coca-Cola Bottlers Phils., Inc.
Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City; Dismissed
for lack of merit. MR denied.
APPEAL WITH THE CA: that an employer-employee relationship existed between
petitioner company and respondent after applying the four-fold test.
MR BY PETITONER: The Court of Appeals clarified that respondent was a “regular part-
time employee and should be accorded all the proportionate benefits due to this
category of employees of [petitioner] Corporation under the CBA.” It sustained its
decision on all other matters sought to be reconsidered. Hence, this petition.
ISSUE: whether or not there exists an employer-employee relationship between the
parties; The resolution of the main issue will determine whether the termination of
respondent’s employment is illegal.
HELD: NO employer-employee relationship.
Four-fold test: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct,
or the so-called “control test,” considered to be the most important element.
The Court agrees with the finding of the Labor Arbiter and the NLRC that the
circumstances of this case show that no employer-employee relationship exists between
the parties. The Labor Arbiter and the NLRC correctly found that petitioner company
lacked the power of control over the performance by respondent of his duties. The
Labor Arbiter reasoned that the Comprehensive Medical Plan, which contains the
respondent’s objectives, duties and obligations, does not tell respondent “how to
conduct his physical examination, how to immunize, or how to diagnose and treat his
patients, employees of [petitioner] company, in each case.”
petitioner company, through the Comprehensive Medical Plan, provided guidelines
merely to ensure that the end result was achieved, but did not control the means and
methods by which respondent performed his assigned tasks.
Because the company lacks the power of control that the contract provides that
respondent shall be directly responsible to the employee concerned and their
dependents for any injury, harm or damage caused through professional negligence,
incompetence or other valid causes of action.

Respondent is not at all further required to just sit around in the premises and wait for
an emergency to occur so as to enable him from using such hours for his own benefit
and advantage. In fact, complainant maintains his own private clinic attending to his
private practice in the city, where he services his patients, bills them accordingly — and
if it is an employee of respondent company who is attended to by him for special
treatment that needs hospitalization or operation, this is subject to a special billing.

An employee is required to stay in the employer’s workplace or proximately close

thereto that he cannot utilize his time effectively and gainfully for his own purpose.
Such is not the prevailing situation here.1awphi1. Court finds that the schedule of work
and the requirement to be on call for emergency cases do not amount to such control,
but are necessary incidents to the Retainership Agreement.

The Court also notes that the Retainership Agreement granted to both parties the
power to terminate their relationship upon giving a 30-day notice. Hence, petitioner
company did not wield the sole power of dismissal or termination.
Gabriel vs. Bilon
Considering that there is no employer-employee relationship between the parties, the
termination of the Retainership Agreement, which is in accordance with the provisions Nelson Bilon, Angel Brazil and Ernesto Pagaygay were jeepney drivers of jeepneys
of the Agreement, does not constitute illegal dismissal of respondent. owned by Melencio Gabriel. They are paying P400/day for their boundary. Later, the
drivers were required to pay an additional P50.00 to cover police protection, car wash,
PETITION GRANTED.
deposit fee, and garage fees.

The three drivers refused to pay the additional P50.00. On April 30, 1995, when the
drivers reported to work, they were not given any jeepney to drive. Eventually, they
were dismissed. The three drivers sued Gabriel for illegal dismissal.

The Labor Arbiter ruled in favor of the drivers and ordered Gabriel to pay the drivers
their backwages and their separation pay amounting to about a total of P1.03M.

On April 18, 1997, the LA promulgated its decision and on the same day sent a copy
thereof to Gabriel but Flordeliza (wife of Gabriel) refused to receive the copy.
Apparently, Gabriel died on April 4, 1997. The copy was re-sent via registered mail on
May 28, 1997. Flordeliza appealed to the LA on June 5, 1997.

The LA dismissed the appeal; it ruled that the appeal was not on time because the
promulgation was made on April 18, 1997 and that the appeal on June 5, 1997 was
already beyond the ten day period required for appeal.

The National Labor Relations Commission reversed the LA. It ruled that there was no
employee-employer relationship between the drivers and Gabriel. The Court of Appeals
reversed the NLRC but it ruled that the separation pay should not be awarded but
rather, the employees should be reinstated.
ISSUES:
1. Whether or not the appeal before the LA was made on time.
2. Whether or not there was an employer-employee relationship between the drivers
and Gabriel.
3. Whether or not there was a strained relation between Gabriel and the drivers.
HELD:
1. Yes. The appeal was made on time because when the promulgation was made Gabriel
is already dead. The ten day requirement to make an appeal is not applicable in this
situation because Gabriel was not yet properly substituted by the wife. The counting of
the period should be made starting from the date when the copy was sent via registered
mail. Therefore, the appeal filed on June 5 was made on time.
2. Yes. There exists an employer-employee relationship between the drivers and Gabriel.
The fact that the drivers do not receive fixed wages but get only whatever exceeds the
so-called “boundary” [that] they pay to the owner/operator is not sufficient to withdraw
the relationship between them from that of employer and employee.
3. No. The award of the separation pay is not proper. It was not shown that there was a
strained relationship between Gabriel and the drivers so as to cause animosity if they
are reinstated. The Strained Relations Principle is only applied if it is shown that
reinstatement would only cause antagonism between the employer and the employee;
and that the only solution is separation and the payment of separation pay.
Felix vs. Buenaseda
Taking advantage of this Court's decisions involving the removal of various civil servants
pursuant to the general reorganization of the government after the EDSA Revolution,
petitioner assails his dismissal as Medical Specialist I of the National Center for Mental
Health (formerly the National Mental Hospital) as illegal and violative of the
constitutional provision on security of tenure allegedly because his removal was made
pursuant to an invalid reorganization.
In Mendoza vs. Quisumbing1 and the consolidated cases involving the reorganization of
various government departments and agencies we held:
We are constrained to set aside the reorganizations embodied in these consolidated
petitions because the heads of departments and agencies concerned have chosen to
rely on their own concepts of unlimited discretion and "progressive" ideas on
reorganization instead of showing that they have faithfully complied with the clear letter
and spirit of the two Constitutions and the statutes affecting reorganization.2
In De Guzman vs. CSC3 , we upheld the principle, laid down by Justice J.B.L. Reyes in Cruz
vs. Primicias4 that a valid abolition of an office neither results in a separation or removal,
likewise upholding the corollary principle that "if the abolition is void, the incumbent is
deemed never to have ceased to hold office," in sustaining therein petitioner's right to
the position she held prior to the reorganization.
The instant petition on its face turns on similar facts and issues, which is, that
petitioner's removal from a permanent position in the National Center for Mental
Health as a result of the reorganization of the Department of Health was void.
However, a closer look at the facts surrounding the instant petition leads us to a
different conclusion.
After passing the Physician's Licensure Examinations given by the Professional
Regulation Commission in June of 1979, petitioner, Dr. Alfredo B. Felix, joined the
National Center for Mental Health (then the National Mental Hospital) on May 26, 1980
as a Resident Physician with an annual salary of P15,264.00.5 In August of 1983, he was
promoted to the position of Senior Resident Physician6 a position he held until the
Ministry of Health reorganized the National Center for Mental Health (NCMH) in January
of 1988, pursuant to Executive Order No. 119.
Under the reorganization, petitioner was appointed to the position of Senior Resident
Physician in a temporary capacity immediately after he and other employees of the
NCMH allegedly tendered their courtesy resignations to the Secretary of Health. 7 In
August of 1988, petitioner was promoted to the position of Medical Specialist I
(Temporary Status), which position was renewed the following year.8
In 1988, the Department of Health issued Department Order No. 347 which required
board certification as a prerequisite for renewal of specialist positions in various medical
centers, hospitals and agencies of the said department. Specifically, Department Order
No. 347 provided that specialists working in various hospitals and branches of the
Department of Health be recognized as "Fellows" of their respective specialty societies
and/or "Diplomates" of their specialty boards or both. The Order was issued for the
purpose of upgrading the quality of specialties in DOH hospitals by requiring them to
pass rigorous theoretical and clinical (bedside) examinations given by recognized
specialty boards, in keeping up with international standards of medical practice.
Upon representation of the Chiefs of Hospitals of various government hospitals and
medical centers, (then) Secretary of Health Alfredo Bengzon issued Department Order
No. 347 providing for an extension of appointments of Medical Specialist positions in
cases where the termination of medical specialist who failed to meet the requirement
for board certification might result in the disruption of hospital services. Department
Order No. 478 issued the following guidelines:
1. As a general policy, the provision of Department Order No. 347, Sec. 4 shall apply
unless the Chief of Hospital requests for exemption, certifies that its application will
result in the disruption of the delivery service together with the steps taken to
implement Section 4, and submit a plan of action, lasting no more than 3-years, for the
eventual phase out of non-Board certified medical specialties.
2. Medical specialist recommended for extension of appointment shall meet the
following minimum criteria:
a. DOH medical specialist certified
b. Has been in the service of the Department at least three (3) years prior to December
1988.
c. Has applied or taken the specialty board examination.
3. Each recommendation for extension of appointment must be individually justified to
show not only the qualification of the recommendee, but also what steps he has taken
to be board certified.
4. Recommendation for extension of appointment shall be evaluated on a case to case
basis.
5. As amended, the other provisions of Department Order No. 34/s. 1988 stands.
Petitioner was one of the hundreds of government medical specialist who would have
been adversely affected by Department Order No. 347 since he was no yet accredited by
the Psychiatry Specialty Board. Under Department Order No. 478, extension of his
appointment remained subject to the guidelines set by the said department order. On
August 20, 1991, after reviewing petitioner's service record and performance, the
Medical Credentials Committee of the National Center for Mental Health recommended
non-renewal of his appointment as Medical Specialist I, informing him of its decision on
August 22, 1991. He was, however, allowed to continue in the service, and receive his
salary, allowances and other benefits even after being informed of the termination of
his appointment.
On November 25, 1991, an emergency meeting of the Chiefs of Service was held to
discuss, among other matters, the petitioner's case. In the said meeting Dr. Vismindo de
Grecia, petitioner's immediate supervisor, pointed out petitioner's poor performance,
frequent tardiness and inflexibility as among the factors responsible for the
recommendation not to renew his appointment.9 With one exception, other
department heads present in the meeting expressed the same opinion, 10 and the
overwhelming concensus was for non-renewal. The matter was thereafter referred to
the Civil Service Commission, which on February 28, 1992 ruled that "the temporary
appointment (of petitioner) as Medical Specialist I can be terminated at any time . . ."
and that "[a]ny renewal of such appointment is within the discretion of the appointing
authority." 11 Consequently, in a memorandum dated March 25, 1992 petitioner was
advised by hospital authorities to vacate his cottage since he was no longer with said
memorandum petitioner filed a petition with the Merit System Protection Board (MSPB)
complaining about the alleged harassment by respondents and questioning the non-
renewal of his appointment. In a Decision rendered on July 29, 1992, the (MSPB)
dismissed petitioner's complaint for lack of merit, finding that:
As an apparent incident of the power to appoint, the renewal of a temporary
appointment upon or after its expiration is a matter largely addressed to the sound
discretion of the appointing authority. In this case, there is no dispute that Complainant
was a temporary employee and his appointment expired on August 22, 1991. This being
the case, his re-appointment to his former position or the renewal of his temporary
appointment would be determined solely by the proper appointing authority who is the
Secretary, Department of Health upon the favorable recommendation of the Chief of
Hospital III, NCMH. The Supreme Court in the case of Central Bank vs. Civil Service
Commission G.R. Nos. 80455-56 dated April 10, 1989, held as follows:
The power of appointment is essentially a political question involving considerations of
wisdom which only the appointing authority can decide.
In this light, Complainant therefore, has no basis in law to assail the non-renewal of his
expired temporary appointment much less invoke the aid of this Board cannot
substitute its judgment to that of the appointing authority nor direct the latter to issue
an appointment in the complainant's favor.
Regarding the alleged Department Order secured by the complainant from the
Department of Health (DOH), the Board finds the same inconsequential. Said
Department Order merely allowed the extension of tenure of Medical Specialist I for a
certain period but does not mandate the renewal of the expired appointment.
The Board likewise finds as baseless complainant's allegation of harassment. It should be
noted that the subsistence, quarters and laundry benefits provided to the Complainant
were in connection with his employment with the NCMH. Now that his employment ties
with the said agency are severed, he eventually loses his right to the said benefits.
Hence, the Hospital Management has the right to take steps to prevent him from the
continuous enjoyment thereof, including the occupancy of the said cottage, after his
cessation form office.
In sum, the actuations of Dr. Buenaseda and Lt. Col. Balez are not shown to have been
tainted with any legal infirmity, thus rendering as baseless, this instant complaint.
Said decision was appealed to the Civil Service Commission which dismissed the same in
its Resolution dated December 1, 1992. Motion for Reconsideration was denied in CSC
Resolution No. 93-677 dated February 3, 1993, hence this appeal, in which petitioner
interposes the following assignments of errors:
I periodically make the grade, making the situation quite unique as far as physicians
THE PUBLIC RESPONDENT CIVIL SERVICE COMMISSION ERRED IN HOLDING THAT BY
SUBMITTING HIS COURTESY RESIGNATION AND ACCEPTING HIS TEMPORARY
APPOINTMENT PETITIONER HAD EFFECTIVELY DIVESTED HIMSELF OF HIS SECURITY OF
TENURE, CONSIDERING THE CIRCUMSTANCES OF SUCH COURTESY RESIGNATION AND
ACCEPTANCE OF APPOINTMENT.
II
THE RESPONDENT COMMISSION IN NOT DECLARING THAT THE CONVERSION OF THE
PERMANENT APPOINTMENT OF PETITIONER TO TEMPORARY WAS DONE IN BAD FAITH
IN THE GUISE OF REORGANIZATION AND THUS INVALID, BEING VIOLATIVE OF THE
PETITIONER'S RIGHT OF SECURITY OF TENURE.
Responding to the instant petition, 12 the Solicitor General contends that 1) the
petitioner's temporary appointment after the reorganization pursuant to E.O. No. 119
were valid and did not violate his constitutional right of security of tenure; 13 2)
petitioner is guilty of estoppel or laches, having acquiesced to such temporary
appointments from 1988 to 1991; 14 and 3) the respondent Commission did not act with
grave abuse of discretion in affirming the petitioner's non-renewal of his appointment at
the National Center for Mental Hospital.15
We agree.
The patent absurdity of petitioner's posture is readily obvious. A residency or resident
physician position in a medical specialty is never a permanent one. Residency connotes
training and temporary status. It is the step taken by a physician right after post-
graduate internship (and after hurdling the Medical Licensure Examinations) prior to his
recognition as a specialist or sub-specialist in a given field.
A physician who desires to specialize in Cardiology takes a required three-year
accredited residency in Internal Medicine (four years in DOH hospitals) and moves on to
a two or three-year fellowship or residency in Cardiology before he is allowed to take
the specialty examinations given by the appropriate accrediting college. In a similar
manner, the accredited Psychiatrist goes through the same stepladder process which
culminates in his recognition as a fellow or diplomate (or both) of the Psychiatry
Specialty Board. 16 This upward movement from residency to specialist rank,
institutionalized in the residency training process, guarantees minimum standards and
skills and ensures that the physician claiming to be a specialist will not be set loose on
the community without the basic knowledge and skills of his specialty. Because
acceptance and promotion requirements are stringent, competitive, and based on
merit. acceptance to a first year residency program is no guaranty that the physician will
complete the program. Attribution rates are high. Some programs are pyramidal.
Promotion to the next post-graduate year is based on merit and performance
determined by periodic evaluations and examinations of knowledge, skills and bedside
manner. 17 Under this system, residents, specialty those in university teaching
hospitals 18 enjoy their right to security of tenure only to the extent that they
undergoing post-graduate residencies and fellowships are concerned. While physicians
(or consultants) of specialist rank are not subject to the same stringent evaluation
procedures, 19 specialty societies require continuing education as a requirement for
accreditation for good standing, in addition to peer review processes based on
performance, mortality and morbidity audits, feedback from residents, interns and
medical students and research output. The nature of the contracts of resident
physicians meet traditional tests for determining employer-employee relationships, but
because the focus of residency is training, they are neither here nor there. Moreover,
stringent standards and requirements for renewal of specialist-rank positions or for
promotion to the next post-graduate residency year are necessary because lives are
ultimately at stake.
Petitioner's insistence on being reverted back to the status quo prior to the
reorganizations made pursuant to Executive Order No. 119 would therefore be akin to a
college student asking to be sent back to high school and staying there. From the
position of senior resident physician, which he held at the time of the government
reorganization, the next logical step in the stepladder process was obviously
his promotion to the rank of Medical Specialist I, a position which he apparently
accepted not only because of the increase in salary and rank but because of the prestige
and status which the promotion conferred upon him in the medical community. Such
status, however, clearly carried with it certain professional responsibilities including the
responsibility of keeping up with the minimum requirements of specialty rank, the
responsibility of keeping abreast with current knowledge in his specialty rank, the
responsibility of completing board certification requirements within a reasonable period
of time. The evaluation made by the petitioner's peers and superiors clearly showed
that he was deficient in a lot of areas, in addition to the fact that at the time of his non-
renewal, he was not even board-certified.
It bears emphasis that at the time of petitioner's promotion to the position of Medical
Specialist I (temporary) in August of 1988, no objection was raised by him about the
change of position or the temporary nature of designation. The pretense of objecting to
the promotion to specialist rank apparently came only as an afterthought, three years
later, following the non-renewal of his position by the Department of Health.
We lay stress to the fact that petitioner made no attempt to oppose earlier renewals of
his temporary Specialist I contracts in 1989 and 1990, clearly demonstrating his
acquiescence to — if not his unqualified acceptance of the promotion (albeit of a
temporary nature) made in 1988. Whatever objections petitioner had against the earlier
change from the status of permanent senior resident physician to temporary senior
physician were neither pursued nor mentioned at or after his designation as Medical
Specialist I (Temporary). He is therefore estopped from insisting upon a right or claim government physician of specialist rank: 1.) has completed all necessary requirements at
which he had plainly abandoned when he, from all indications, enthusiastically accepted least assure the public at large that those in government centers who claim to be
the promotion. His negligence to assert his claim within a reasonable time, coupled with specialists in specific areas of Medicine possess the minimum knowledge and skills
his failure to repudiate his promotion to a temporary position, warrants a presumption, required to fulfill that first and foremost maxim, embodied in the Hippocratic Oath, that
in the words of this Court in Tijam vs. Sibonghanoy, 20that he "either abandoned (his they do their patients no harm. Primium non nocere.
claim) or declined to assert it."
Finally, it is crystal clear, from the facts of the case at bench, that the petitioner
There are weighty reasons of public policy and convenience which demand that any accepted a temporary appointment (Medical Specialist I). As respondent Civil Service
claim to any position in the civil service, permanent, temporary of otherwise, or any Commission has correctly pointed out 23, the appointment was for a definite and
claim to a violation of the constitutional provision on security of tenure be made within renewable period which, when it was not renewed, did not involve a dismissal but an
a reasonable period of time. An assurance of some degree of stability in the civil service expiration of the petitioner's term.
is necessary in order to avoid needless disruptions in the conduct of public business.
Delays in the statement of a right to any position are strongly discouraged. 21 In the ACCORDINGLY, the petition is hereby DISMISSED, for lack of merit.
same token, the failure to assert a claim or the voluntary acceptance of another position
in government, obviously without reservation, leads to a presumption that the civil
servant has either given up his claim of has already settled into the new position. This is
the essence of laches which is the failure or neglect, for an unreasonable and
unexplained length of time to do that which, by exercising due diligence, could or should
have been done earlier; it is the negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. 22 Auto Bus Transport vs Bautista

In fine, this petition, on its surface, seems to be an ordinary challenge against the G.R. No. 156367. May 16, 2005
validity of the conversion of petitioner's position from permanent resident physician
status to that of a temporary resident physician pursuant to the government Facts:
reorganization after the EDSA Revolution. What is unique to petitioner's averments is
Bautista, a driver-conductor of the Autobus transport, was dismissed after his failure to
the fact that he hardly attempts to question the validity of his removal from his position
pay an amount demanded by the company for the repair of the bus damaged in an
of Medical Specialist I (Temporary) of the National Center for Mental Health, which is
accident caused by him.
plainly the pertinent issue in the case at bench. The reason for this is at once apparent,
for there is a deliberate and dishonest attempt to a skirt the fundamental issue first, by He receives compensation by way of commission per travel.
falsely claiming that petitioner was forced to submit his courtesy resignation in 1987
when he actually did not; and second, by insisting on a right of claim clearly abandoned Bautista complained for illegal dismissal with money claims for nonpayment of
by his acceptance of the position of Medical Specialist I (Temporary), which is hence 13th month pay and service incentive leave pay against Autobus.
barred by laches.
Auto Bus’ Defenses:
The validity of the government reorganization of the Ministry of Health pursuant to E.O.
1. Bautista’s employment was replete with offenses involving reckless
119 not being the real issue in the case at bench, we decline to make any further
imprudence, gross negligence, and dishonesty supported with copies of
pronouncements relating to petitioner's contentions relating to the effect on him of the
letters, memos, irregularity reports, warrants of arrest;
reorganization except to say that in the specific case of the change in designation from
permanent resident physician to temporary resident physician, a change was necessary, 2. In the exercise of management prerogative, Bautista was terminated only
overall, to rectify a ludicrous situation whereby some government resident physicians after providing for an opportunity to explain:
were erroneously being classified as permanent resident physicians in spite of the
inherently temporary nature of the designation. The attempts by the Department of Labor Arbiter dismissed the complaint however awarded Bautista his 13thmonth pay
Health not only to streamline these positions but to make them conform to current and service incentive leave pay.
standards of specialty practice is a step in a positive direction. The patient who consults
Auto Bus appealed. NLRC deleted the 13th month pay award. In the CA, NLRC’s decision
with a physician of specialist rank should at least be safe in the assumption that the
was affirmed.
Issue: Whether or not respondent is entitled to service incentive leave pay.
Held: Yes.
Under Article 95 of the Labor Code, every employee who has rendered at least one year
or service shall be entitled to a yearly service incentive leave of five days with pay. In
Section 1, Rule V, Book III of the Implementing Rules and Regulations of the Labor Code,
the rule shall apply to all, except… (d) Field personnel and other employees whose
performance is unsupervised by the employer including those who are engaged on task
or contract basis, purely commission basis, or those who are paid in a fixed amount for
performing work irrespective of the time consumed in the performance thereof.
Petitioner’s contention that Bautista is not entitled to service incentive leave because he
is paid on a purely commission basis must fail. The phrase following “Field personnel”
should not be construed as a separate classification of employees but is merely an
amplification of the definition of field personnel defined under the Labor Code.
Bautista neither falls under the category field personnel. As defined, field personnel are
those whose performance of service is unsupervised by the employer, the workplace
being away from the principal place of business and whose hours and days of work
cannot be determined with reasonable certainty. Bus companies have ways of
determining the hours worked by their drivers and conductors with reasonable
certainty. The courts have taken judicial notice of the following:
1. Along the routes traveled, there are inspectors assigned at strategic places
who board the bus to inspect the passengers, the punched tickets, and the
conductor’s reports;
2. There is a mandatory once-a week car barn or shop day, where the bus is
regularly checked;
3. The drivers and conductors must be at specified place and time, as they
observe prompt departure and arrival;
4. At every depot, there is always a dispatcher whose function is to see to it that
the bus and crew leaves and arrives at the estimated proper time.
By these reasons, drivers and conductors are therefore under constant supervision while
in the performance of their work.
David vs. Macasio
We resolve in this petition for review on certiorari1 the challenge to the November 22,
2010 decision2 and the January 31, 2011 resolution3 of the Court of Appeals (CA) in CA-
G.R. SP No. 116003. The CA decision annulled and set aside the May 26, 2010
decision4 of the National Labor Relations Commission (NLRC)5 which, in turn, affirmed
the April 30, 2009 Decision6 of the Labor Arbiter (LA). The LA's decision dismissed
respondent John G. Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L.
David, doing business under the name and style "Yiels Hog Dealer," for non-payment of
overtime pay, holiday pay and 13th month pay. He also claimed payment for moral and
exemplary damages and attorney’s fees. Macasio also claimed payment for service
incentive leave (SIL).8
Macasio alleged9 before the LA that he had been working as a butcher for David since
January 6, 1995. Macasio claimed that David exercised effective control and supervision
over his work, pointing out that David: (1) set the work day, reporting time and hogs to
be chopped, as well as the manner by which he was to perform his work; (2) daily paid
his salary of ₱700.00, which was increased from ₱600.00 in 2007, ₱500.00 in 2006 and
₱400.00 in 2005; and (3) approved and disapproved his leaves. Macasio added that
David owned the hogs delivered for chopping, as well as the work tools and implements;
the latter also rented the workplace. Macasio further claimed that David employs about
twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and that
he only has ten employees. He alleged that he hired Macasio as a butcher or chopper on
"pakyaw" or task basis who is, therefore, not entitled to overtime pay, holiday pay and
13th month pay pursuant to the provisions of the Implementing Rules and Regulations
(IRR) of the Labor Code. David pointed out that Macasio: (1) usually starts his work at
10:00 p.m. and ends at 2:00 a.m. of the following day or earlier, depending on the
volume of the delivered hogs; (2) received the fixed amount of ₱700.00 per
engagement, regardless of the actual number of hours that he spent chopping the
delivered hogs; and (3) was not engaged to report for work and, accordingly, did not
receive any fee when no hogs were delivered.
Macasio disputed David’s allegations.11 He argued that, first, David did not start his
business only in 2005. He pointed to the Certificate of Employment12 that David issued
in his favor which placed the date of his employment, albeit erroneously, in January
2000. Second, he reported for work every day which the payroll or time record could
have easily proved had David submitted them in evidence.
Refuting Macasio’s submissions,13 David claims that Macasio was not his employee as he
hired the latter on "pakyaw" or task basis. He also claimed that he issued the Certificate
of Employment, upon Macasio’s request, only for overseas employment purposes. He
pointed to the "PinagsamangSinumpaang Salaysay,"14 executed by Presbitero Solano
and Christopher (Antonio Macasio’s co-butchers), to corroborate his claims.
In the April 30, 2009 decision,15 the LA dismissed Macasio’s complaint for lack of merit.
The LA gave credence to David’s claim that he engaged Macasio on "pakyaw" or task
basis. The LA noted the following facts to support this finding: (1) Macasio received the
fixed amount of ₱700.00 for every work done, regardless of the number of hours that he
spent in completing the task and of the volume or number of hogs that he had to chop
per engagement; (2) Macasio usually worked for only four hours, beginning from 10:00
p.m. up to 2:00 a.m. of the following day; and (3) the ₱700.00 fixed wage far exceeds
the then prevailing daily minimum wage of ₱382.00. The LA added that the nature of
David’s business as hog dealer supports this "pakyaw" or task basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not
entitled to overtime, holiday, SIL and 13th month pay.
The NLRC’s Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed
that David did not require Macasio to observe an eight hour work schedule to earn the
fixed ₱700.00 wage; and that Macasio had been performing a non-time work, pointing
out that Macasio was paid a fixed amount for the completion of the assigned task,
irrespective of the time consumed in its performance. Since Macasio was paid by result
and not in terms of the time that he spent in the workplace, Macasio is not covered by
the Labor Standards laws on overtime, SIL and holiday pay, and 13th month pay under
the Rules and Regulations Implementing the 13th month pay law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11,
2010 resolution,20 prompting Macasio to elevate his case to the CA via a petition for
certiorari.21
The CA’s Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasio’s certiorari petition
and reversed the NLRC’s ruling for having been rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis employee,
it nevertheless found Macasio entitled to his monetary claims following the doctrine laid
down in Serrano v. Severino Santos Transit.23 The CA explained that as a task basis
employee, Macasio is excluded from the coverage of holiday, SIL and 13th month pay
only if he is likewise a "field personnel." As defined by the Labor Code, a "field
personnel" is one who performs the work away from the office or place of work and
whose regular work hours cannot be determined with reasonable certainty. In Macasio’s
case, the elements that characterize a "field personnel" are evidently lacking as he had
been working as a butcher at David’s "Yiels Hog Dealer" business in Sta. Mesa, Manila
under David’s supervision and control, and for a fixed working schedule that starts at
10:00 p.m.
Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th month pay for
three years, with 10% attorney’s fees on the total monetary award. The CA, however,
denied Macasio’s claim for moral and exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration24 in
the CA’s January 31, 2011 resolution.25
The Petition
In this petition,26 David maintains that Macasio’s engagement was on a "pakyaw" or task
basis. Hence, the latter is excluded from the coverage of holiday, SIL and 13th month
pay. David reiterates his submissions before the lower tribunals27 and adds that he
never had any control over the manner by which Macasio performed his work and he
simply looked on to the "end-result." He also contends that he never compelled Macasio
to report for work and that under their arrangement, Macasio was at liberty to choose
whether to report for work or not as other butchers could carry out his tasks. He points
out that Solano and Antonio had, in fact, attested to their (David and Macasio’s)
established "pakyawan" arrangement that rendered a written contract unnecessary. In
as much as Macasio is a task basis employee – who is paid the fixed amount of ₱700.00
per engagement regardless of the time consumed in the performance – David argues
that Macasio is not entitled to the benefits he claims. Also, he posits that because he
engaged Macasio on "pakyaw" or task basis then no employer-employee relationship
exists between them.
Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain
finality especially when, as in this case, they are supported by substantial evidence.
Hence, David posits that the CA erred in reversing the labor tribunals’ findings and
granting the prayed monetary claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel" as David
would have this Court believe.28 He reiterates his arguments before the lower tribunals
and adds that, contrary to David’s position, the ₱700.00 fee that he was paid for each
day that he reported for work does not indicate a "pakyaw" or task basis employment as
this amount was paid daily, regardless of the number or pieces of hogs that he had to
chop. Rather, it indicates a daily-wage method of payment and affirms his regular
employment status. He points out that David did not allege or present any evidence as
regards the quota or number of hogs that he had to chop as basis for the "pakyaw" or
task basis payment; neither did David present the time record or payroll to prove that
he worked for less than eight hours each day. Moreover, David did not present any
contract to prove that his employment was on task basis. As David failed to prove the
alleged task basis or "pakyawan" agreement, Macasio concludes that he was David’s
employee. Procedurally, Macasio points out that David’s submissions in the present
petition raise purely factual issues that are not proper for a petition for review on
certiorari. These issues – whether he (Macasio) was paid by result or on "pakyaw" basis;
whether he was a "field personnel"; whether an employer-employee relationship
existed between him and David; and whether David exercised control and supervision
over his work – are all factual in nature and are, therefore, proscribed in a Rule 45
petition. He argues that the CA’s factual findings bind this Court, absent a showing that
such findings are not supported by the evidence or the CA’s judgment was based on a
misapprehension of facts. He adds that the issue of whether an employer-employee
relationship existed between him and David had already been settled by the LA29 and
the NLRC30 (as well as by the CA per Macasio’s manifestation before this Court dated
November 15, 2012),31 in his favor, in the separate illegal case that he filed against
David.
The Issue
The issue revolves around the proper application and interpretation of the labor law
provisions on holiday, SIL and 13th month pay to a worker engaged on "pakyaw" or task
basis. In the context of the Rule 65 petition before the CA, the issue is whether the CA
correctly found the NLRC in grave abuse of discretion in ruling that Macasio is entitled to
these labor standards benefits.
The Court’s Ruling
We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CA’s decision rendered under a
Rule 65 proceeding, this Court’s power of review is limited to resolving matters
pertaining to any perceived legal errors that the CA may have committed in issuing the
assailed decision. This is in contrast with the review for jurisdictional errors, which we
undertake in an original certiorari action. In reviewing the legal correctness of the CA
decision, we examine the CA decision based on how it determined the presence or
absence of grave abuse of discretion in the NLRC decision before it and not on the basis
of whether the NLRC decision on the merits of the case was correct. 32 In other words,
we have to be keenly aware that the CA undertook a Rule 65 review, not a review on
appeal, of the NLRC decision challenged before it.33
Moreover, the Court’s power in a Rule 45 petition limits us to a review of questions of
law raised against the assailed CA decision.34
In this petition, David essentially asks the question – whether Macasio is entitled to
holiday, SIL and 13th month pay. This one is a question of law. The determination of this
question of law however is intertwined with the largely factual issue of whether
Macasio falls within the rule on entitlement to these claims or within the exception. In
either case, the resolution of this factual issue presupposes another factual matter, that
is, the presence of an employer-employee relationship between David and Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he
engaged the latter on "pakyaw" or task basis. Very noticeably, David confuses
engagement on "pakyaw" or task basis with the lack of employment relationship.
Impliedly, David asserts that their "pakyawan" or task basis arrangement negates the
existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or
task basis does not characterize the relationship that may exist between the parties, i.e.,
whether one of employment or independent contractorship. Article 97(6) of the Labor
Code defines wages as "xxx the remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the same, which is payable
by an employer to an employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be rendered[.]" 35 In relation
to Article 97(6), Article 10136 of the Labor Code speaks of workers paid by results or
those whose pay is calculated in terms of the quantity or quality of their work output
which includes "pakyaw" work and other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or
task basis negates employer-employee relationship, David would want the Court to
engage on a factual appellate review of the entire case to determine the presence or
existence of that relationship. This approach however is not authorized under a Rule 45
petition for review of the CA decision rendered under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasio’s claim not because of the absence of an
employer-employee but because of its finding that since Macasio is paid on pakyaw or
task basis, then he is not entitled to SIL, holiday and 13th month pay. Second, we
consider it crucial, that in the separate illegal dismissal case Macasio filed with the LA,
the LA, the NLRC and the CA uniformly found the existence of an employer-employee
relationship.37
In other words, aside from being factual in nature, the existence of an employer-
employee relationship is in fact a non-issue in this case. To reiterate, in deciding a Rule
45 petition for review of a labor decision rendered by the CA under 65, the narrow
scope of inquiry is whether the CA correctly determined the presence or absence of
grave abuse of discretion on the part of the NLRC. In concrete question form, "did the
NLRC gravely abuse its discretion in denying Macasio’s claims simply because he is paid
on a non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employer-
employee relationship exists baseless. Employing the control test,38 we find that such a
relationship exist in the present case.
Even a factual review shows that Macasio is David’s employee
To determine the existence of an employer-employee relationship, four elements
generally need to be considered, namely: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee’s conduct. These elements or indicators comprise the so-called
"four-fold" test of employment relationship. Macasio’s relationship with David satisfies
this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection
and engagement of the employee." David categorically confirmed this fact when, in his
"SinumpaangSalaysay," he stated that "nag apply posiyasa akin at kinuhakosiyana
chopper[.]"39 Also, Solano and Antonio stated in their "PinagsamangSinumpaang
Salaysay"40 that "[k]amipo ay nagtratrabahosaYiels xxx napag-aarini Ariel David bilang
butcher" and "kilalanaminsi xxx Macasionaisa ring butcher xxx ni xxx David at
kasamanaminsiyasaamingtrabaho."
Second, David paid Macasio’swages.Both David and Macasio categorically stated in their
respective pleadings before the lower tribunals and even before this Court that the
former had been paying the latter ₱700.00 each day after the latter had finished the
day’s task. Solano and Antonio also confirmed this fact of wage payment in their
"PinagsamangSinumpaang Salaysay."41 This satisfies the element of "payment of
wages."
Third, David had been setting the day and time when Macasio should report for work.
This power to determine the work schedule obviously implies power of control. By
having the power to control Macasio’s work schedule, David could regulate Macasio’s
work and could even refuse to give him any assignment, thereby effectively dismissing
him.
And fourth, David had the right and power to control and supervise Macasio’s work as
to the means and methods of performing it. In addition to setting the day and time
when Macasio should report for work, the established facts show that David rents the
place where Macasio had been performing his tasks. Moreover, Macasio would leave
the workplace only after he had finished chopping all of the hog meats given to him for
the day’s task. Also, David would still engage Macasio’s services and have him report for
work even during the days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally
be expected to observe certain rules and requirements and David would necessarily
exercise some degree of control as the chopping of the hog meats would be subject to
his specifications. Also, since Macasio performed his tasks at David’s workplace, David
could easily exercise control and supervision over the former. Accordingly, whether or
not David actually exercised this right or power to control is beside the point as the law
simply requires the existence of this power to control 4243 or, as in this case, the
existence of the right and opportunity to control and supervise Macasio.44
In sum, the totality of the surrounding circumstances of the present case sufficiently
points to an employer-employee relationship existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals – the LA, the NLRC and the CA – found that
Macasio was engaged or paid on "pakyaw" or task basis. This factual finding binds the
Court under the rule that factual findings of labor tribunals when supported by the
established facts and in accord with the laws, especially when affirmed by the CA, is
binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to
straight-hour wage payment, is the non-consideration of the time spent in working. In a
task-basis work, the emphasis is on the task itself, in the sense that payment is reckoned
in terms of completion of the work, not in terms of the number of time spent in the
completion of work.45 Once the work or task is completed, the worker receives a fixed
amount as wage, without regard to the standard measurements of time generally used
in pay computation.
In Macasio’s case, the established facts show that he would usually start his work at
10:00 p.m. Thereafter, regardless of the total hours that he spent at the workplace or of
the total number of the hogs assigned to him for chopping, Macasio would receive the
fixed amount of ₱700.00 once he had completed his task. Clearly, these circumstances
show a "pakyaw" or task basis engagement that all three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by
applying the "four-fold" test; engagement on "pakyaw" or task basis does not determine
the parties’ relationship as it is simply a method of pay computation. Accordingly,
Macasio is David’s employee, albeit engaged on "pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue of
whether Macasio is entitled to holiday, 13th month, and SIL pay.
On the issue of Macasio’s entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasio’s claims pursuant to Article 94 of the Labor Code in relation to
Section 1, Rule IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well
as Presidential Decree (PD) No. 851. The NLRC, on the other hand, relied on Article 82 of
the Labor Code and the Rules and Regulations Implementing PD No. 851. Uniformly,
these provisions exempt workers paid on "pakyaw" or task basis from the coverage of
holiday, SIL and 13th month pay.
In reversing the labor tribunals’ rulings, the CA similarly relied on these provisions, as
well as on Section 1, Rule V of the IRR of the Labor Code and the Court’s ruling in
Serrano v. Severino Santos Transit.46 These labor law provisions, when read together
with the Serrano ruling, exempt those engaged on "pakyaw" or task basis only if they
qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the correct
interpretation of these labor code provisions and the implementing rules; although, to
conclude that the worker is exempted or covered depends on the facts and in this sense,
is a question of fact: first, whether Macasio is a "field personnel"; and second, whether
those engaged on "pakyaw" or task basis, but who are not "field personnel," are
exempted from the coverage of holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA
decision rendered under Rule 65 and framed in question form, the legal question is
whether the CA correctly ruled that it was grave abuse of discretion on the part of the
NLRC to deny Macasio’s monetary claims simply because he is paid on a non-time basis
without determining whether he is a field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III
of the Labor Code - provisions governing working conditions and rest periods.
Art. 82. Coverage.— The provisions of [Title I] shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
xxxx
"Field personnel" shall refer to non-agricultural employees who regularly perform their
duties away from the principal place of business or branch office of the employer and
whose actual hours of work in the field cannot be determined with reasonable certainty.
[emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the
Labor Code) and SIL pay (under Article 95 of the Labor Code). Under Article 82,"field
personnel" on one hand and "workers who are paid by results" on the other hand, are
not covered by the Title I provisions. The wordings of Article82 of the Labor Code
additionally categorize workers "paid by results" and "field personnel" as separate and
distinct types of employees who are exempted from the Title I provisions of the Labor
Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in
the IRR47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments regularly employing less
than (10) workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. – This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised
by the employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof. [emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the
IRR48 pertinently provides:
Art. 95. Right to service incentive. (a) Every employee who has rendered at least one
year of service shall be entitled to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein
provided, those enjoying vacation leave with pay of at least five days and those
employed in establishments regularly employing less than ten employees or in
establishments exempted from granting this benefit by the Secretary of Labor and
Employment after considering the viability or financial condition of such establishment.
[emphases ours]
xxxx
Section 1. Coverage. – This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely commission
basis, or those who are paid a fixed amount for performing work irrespective of the time
consumed in the performance thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all
employees. To be excluded from their coverage, an employee must be one of those that
these provisions expressly exempt, strictly in accordance with the exemption. Under the
IRR, exemption from the coverage of holiday and SIL pay refer to "field personnel and
other employees whose time and performance is unsupervised by the employer
including those who are engaged on task or contract basis[.]" Note that unlike Article 82
of the Labor Code, the IRR on holiday and SIL pay do not exclude employees "engaged
on task basis" as a separate and distinct category from employees classified as "field
personnel." Rather, these employees are altogether merged into one classification of
exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to
mean that those who are engaged on task basis, per se, are excluded from the SIL and
holiday payment since this is what the Labor Code provisions, in contrast with the IRR,
strongly suggest. The arguable interpretation of this rule may be conceded to be within
the discretion granted to the LA and NLRC as the quasi-judicial bodies with expertise on
labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the
phrase "those who are engaged on task or contract basis" in the rule has already been
interpreted to mean as follows:
[the phrase] should however, be related with "field personnel" applying the rule on
ejusdem generis that general and unlimited terms are restrained and limited by the
particular terms that they follow xxx Clearly, petitioner's teaching personnel cannot be
deemed field personnel which refers "to non-agricultural employees who regularly
perform their duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim
that private respondents are not entitled to the service incentive leave benefit cannot
therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to
exclude one from the coverage of SIL and holiday pay. They are exempted from the
coverage of Title I (including the holiday and SIL pay) only if they qualify as "field
personnel." The IRR therefore validly qualifies and limits the general exclusion of
"workers paid by results" found in Article 82 from the coverage of holiday and SIL pay.
This is the only reasonable interpretation since the determination of excluded workers
who are paid by results from the coverage of Title I is "determined by the Secretary of
Labor in appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport
Systems, Inc., v. Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of
service incentive leave has been delimited by the Implementing Rules and Regulations
of the Labor Code to apply only to those employees not explicitly excluded by Section 1
of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply
to employees classified as "field personnel." The phrase "other employees whose
performance is unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be granted. Rather,
it serves as an amplification of the interpretation of the definition of field personnel
under the Labor Code as those "whose actual hours of work in the field cannot be
determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract
basis, purely commission basis." Said phrase should be related with "field personnel,"
applying the rule on ejusdem generis that general and unlimited terms are restrained
and limited by the particular terms that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited
in support of granting Macasio’s petition.
In Serrano, the Court, applying the rule on ejusdem generis50 declared that "employees
engaged on task or contract basis xxx are not automatically exempted from the grant of
service incentive leave, unless, they fall under the classification of field
personnel."51 The Court explained that the phrase "including those who are engaged on
task or contract basis, purely commission basis" found in Section 1(d), Rule V of Book III
of the IRR should not be understood as a separate classification of employees to which
SIL shall not be granted. Rather, as with its preceding phrase - "other employees whose
performance is unsupervised by the employer" - the phrase "including those who are
engaged on task or contract basis" serves to amplify the interpretation of the Labor
Code definition of "field personnel" as those "whose actual hours of work in the field
cannot be determined with reasonable certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still
interpreted the Labor Code provisions and the IRR as exempting an employee from the
coverage of Title I of the Labor Code based simply and solely on the mode of payment of
an employee. The NLRC’s utter disregard of this consistent jurisprudential ruling is a
clear act of grave abuse of discretion.52 In other words, by dismissing Macasio’s
complaint without considering whether Macasio was a "field personnel" or not, the
NLRC proceeded based on a significantly incomplete consideration of the case. This
action clearly smacks of grave abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had
only taken counsel from Serrano and earlier cases, they would have correctly reached a
similar conclusion regarding the payment of holiday pay since the rule exempting "field
personnel" from the grant of holiday pay is identically worded with the rule exempting
"field personnel" from the grant of SIL pay. To be clear, the phrase "employees engaged
on task or contract basis "found in the IRR on both SIL pay and holiday pay should be
read together with the exemption of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled
to holiday and SIL pay, the presence (or absence) of employer supervision as regards the
worker’s time and performance is the key: if the worker is simply engaged on pakyaw or
task basis, then the general rule is that he is entitled to a holiday pay and SIL pay unless
exempted from the exceptions specifically provided under Article 94 (holiday pay) and
Article95 (SIL pay) of the Labor Code. However, if the worker engaged on pakyaw or task
basis also falls within the meaning of "field personnel" under the law, then he is not
entitled to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that
Macasio does not fall under the definition of "field personnel." The CA’s finding in this
regard is supported by the established facts of this case: first, Macasio regularly
performed his duties at David’s principal place of business; second, his actual hours of
work could be determined with reasonable certainty; and, third, David supervised his
time and performance of duties. Since Macasio cannot be considered a "field
personnel," then he is not exempted from the grant of holiday, SIL pay even as he was
engaged on "pakyaw" or task basis.

Not being a "field personnel," we find the CA to be legally correct when it reversed the
NLRC’s ruling dismissing Macasio’s complaint for holiday and SIL pay for having been
rendered with grave abuse of discretion.

Entitlement to 13th month pay

With respect to the payment of 13th month pay however, we find that the CA legally
erred in finding that the NLRC gravely abused its discretion in denying this benefit to
Macasio.1âwphi1

The governing law on 13th month pay is PD No. 851.53

As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an
employee must be one of those expressly enumerated to be exempted. Section 3 of the
Rules and Regulations Implementing P.D. No. 85154enumerates the exemptions from the
coverage of 13th month pay benefits. Under Section 3(e), "employers of those who are
paid on xxx task basis, and those who are paid a fixed amount for performing a specific
work, irrespective of the time consumed in the performance thereof"55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the
Rules and Regulations Implementing PD No. 851 exempts employees "paid on task
basis" without any reference to "field personnel." This could only mean that insofar as
payment of the 13th month pay is concerned, the law did not intend to qualify the
exemption from its coverage with the requirement that the task worker be a "field
personnel" at the same time.

WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition

insofar as the payment of 13th month pay to respondent is concerned. In all other
aspects, we AFFIRM the decision dated November 22, 2010 and the resolution dated Begino vs ABSCBN
January 31, 2011 of the Court of Appeals in CA-G.R. SP No. 116003.

SO ORDERED. Respondent ABS-CBN, through Respondent Villafuerte, engaged the services of

Petitioners as cameramen, editors or reporters for TV Broadcasting. Petitioners signed
regularly renewed Talent Contracts (3 months - 1 year) and Project Assignment Forms
which detailed the duration, budget and daily technical requirements of a particular
project. Petitioners were tasked with coverage of news items for subsequent daily
airings in Respondents’ TV Patrol Bicol Program.
The Talent Contract has an exclusivity clause and provides that nothing therein shall be
deemed or construed to establish an employer-employee relationship between the
parties.
Petitioners filed against Respondents a complaint for regularization before the NLRC's
Arbitration branch.
In support of their complaint, Petitioners claimed that they worked under the direct
control of Respondent Villafuerte - they were mandated to wear company IDs, they
were provided the necessary equipment, they were informed about the news to be
covered the following day, and they were bound by the company’s policy on attendance
and punctuality.
Respondents countered that, pursuant to their Talent Contracts and Project Assignment
Forms, Petitioners were hired as talents to act as reporters, editors and/or cameramen.
Respondents further claimed they never imposed control as to how Petitioners
discharged their duties. At most, they were briefed regarding the general requirements
of the project to be executed.
While the case was pending, Petitioners contracts were terminated, prompting the
latter to file a second complaint for illegal dismissal.
The Arbitration Branch ruled that Petitioners were regular employees, and ordered
Respondents to reinstate the Petitioners.
The NLRC affirmed the ruling, but the CA overturned the decision.

ISSUE: W/N Petitioners are regular employees of Respondents.

RULING: Yes.
Of the criteria to determine whether there is an employer-employee relationship, the
so-called "control test" is generally regarded as the most crucial and determinative
indicator of the said relationship.
Under this test, an employer-employee relationship is said to exist where the person for
whom the services are performed reserves the right to control not only the end result
but also the manner and means utilized to achieve the same.
Notwithstanding the nomenclature of their Talent Contracts and/or Project Assignment
Forms and the terms and condition embodied therein, petitioners are regular
employees of ABS-CBN.
As cameramen, editors and reporters, it appears that Petitioners were subject to the
control and supervision of Respondents which provided them with the equipment
essential for the discharge of their functions. The exclusivity clause and prohibitions in
their Talent Contract were likewise indicative of Respondents' control over them,
however obliquely worded.
Also,the presumption is that when the work done is an integral part of the regular
business of the employer and when the worker does not furnish an independent
business or professional service, such work is a regular employment of such employee
and not an independent contractor.