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Grepalife vs Judico................................................................................................................................................................... 2
Ruga vs NLRC ............................................................................................................................................................................ 6
Paguio vs NLRC....................................................................................................................................................................... 13
Jo vs NLRC................................................................................................................................................................................. 19
Besa vs Trajano ...................................................................................................................................................................... 24



Republic of the Philippines



G.R. No. 73887 December 21, 1989



G.A. Fortun and Associates for petitioner.

Corsino B. Soco for private respondent.


Before us is a Petition for certiorari to review the decision of the National Labor Relations Commission (NLRC,
for brevity) dated September 9, 1985 reversing the decision of Labor Arbiter Vito J. Minoria, dated June 9,
1983, by 1) ordering petitioner insurance company, Great Pacific Life Assurance Corporation (Grepalife, for
brevity) to recognize private respondent Honorato Judico, as its regular employee as defined under Art. 281
of the Labor Code and 2) remanding the case to its origin for the determination of private respondent
Judico's money claims.

The records of the case show that Honorato Judico filed a complaint for illegal dismissal against Grepalife, a
duly organized insurance firm, before the NLRC Regional Arbitration Branch No. VII, Cebu City on August 27,
1982. Said complaint prayed for award of money claims consisting of separation pay, unpaid salary and 13th
month pay, refund of cash bond, moral and exemplary damages and attorney's fees.

Both parties appealed to the NLRC when a decision was rendered by the Labor Arbiter dismissing the
complaint on the ground that the employer-employee relations did not exist between the parties but ordered
Grepalife to pay complainant the sum of Pl,000.00 by reason of Christian Charity.

On appeal, said decision was reversed by the NLRC ruling that complainant is a regular employee as defined
under Art. 281 of the Labor Code and declaring the appeal of Grepalife questioning the legality of the
payment of Pl,000.00 to complainant moot and academic. Nevertheless, for the purpose of revoking the
supersedeas bond of said company it ruled that the Labor Arbiter erred in awarding Pl,000.00 to complainant
in the absence of any legal or factual basis to support its payment.

Petitioner company moved to reconsider, which was denied, hence this petition for review raising four legal
issues to wit:


I. Whether the relationship between insurance agents and their principal, the insurance
company, is that of agent and principal to be governed by the Insurance Code and the Civil
Code provisions on agency, or one of employer-employee, to be governed by the Labor

II. Whether insurance agents are entitled to the employee benefits prescribed by the Labor

III. Whether the public respondent NLRC has jurisdiction to take cognizance of a controversy
between insurance agent and the insurance company, arising from their agency relations.

IV. Whether the public respondent acted correctly in setting aside the decision of Labor
Arbiter Vito J. Minoria and in ordering the case remanded to said Labor Arbiter for further
proceedings.(p. 159, Rollo)

The crux of these issues boil down to the question of whether or not employer-employee relationship existed
between petitioner and private respondent.

Petitioner admits that on June 9, 1976, private respondent Judico entered into an agreement of agency with
petitioner Grepalife to become a debit agent attached to the industrial life agency in Cebu City. Petitioner
defines a debit agent as "an insurance agent selling/servicing industrial life plans and policy holders.
Industrial life plans are those whose premiums are payable either daily, weekly or monthly and which are
collectible by the debit agents at the home or any place designated by the policy holder" (p. 156, Rollo). Such
admission is in line with the findings of public respondent that as such debit agent, private respondent Judico
had definite work assignments including but not limited to collection of premiums from policy holders and
selling insurance to prospective clients. Public respondent NLRC also found out that complainant was initially
paid P 200. 00 as allowance for thirteen (13) weeks regardless of production and later a certain percentage
denominated as sales reserve of his total collections but not lesser than P 200.00. Sometime in September
1981, complainant was promoted to the position of Zone Supervisor and was given additional (supervisor's)
allowance fixed at P110.00 per week. During the third week of November 1981, he was reverted to his
former position as debit agent but, for unknown reasons, not paid so-called weekly sales reserve of at least P
200.00. Finally on June 28, 1982, complainant was dismissed by way of termination of his agency contract.

Petitioner assails the findings of the NLRC that private respondent is an employee of the former. Petitioner
argues that Judico's compensation was not based on any fixed number of hours he was required to devote to
the service of petitioner company but rather it was the production or result of his efforts or his work that was
being compensated and that the so-called allowance for the first thirteen weeks that Judico worked as debit
agent, cannot be construed as salary but as a subsidy or a way of assistance for transportation and meal
expenses of a new debit agent during the initial period of his training which was fixed for thirteen (13) weeks.
Stated otherwise, petitioner contends that Judico's compensation, in the form of commissions and bonuses,
was based on actual production, (insurance plans sold and premium collections).

Said contentions of petitioner are strongly rejected by private respondent. He maintains that he received a
definite amount as his Wage known as "sales reserve" the failure to maintain the same would bring him back
to a beginner's employment with a fixed weekly wage of P 200.00 regardless of production. He was assigned
a definite place in the office to work on when he is not in the field; and in addition to canvassing and making
regular reports, he was burdened with the job of collection and to make regular weekly report thereto for
which an anemic performance would mean dismissal. He earned out of his faithful and productive service, a
promotion to Zone Supervisor with additional supervisor's allowance, (a definite or fixed amount of P110.00)


that he was dismissed primarily because of anemic performance and not because of the termination of the
contract of agency substantiate the fact that he was indeed an employee of the petitioner and not an
insurance agent in the ordinary meaning of the term.

That private respondent Judico was an agent of the petitioner is unquestionable. But, as We have held in
Investment Planning Corp. vs. SSS, 21 SCRA 294, an insurance company may have two classes of agents who
sell its insurance policies: (1) salaried employees who keep definite hours and work under the control and
supervision of the company; and (2) registered representatives who work on commission basis. The agents
who belong to the second category are not required to report for work at anytime, they do not have to
devote their time exclusively to or work solely for the company since the time and the effort they spend in
their work depend entirely upon their own will and initiative; they are not required to account for their time
nor submit a report of their activities; they shoulder their own selling expenses as well as transportation; and
they are paid their commission based on a certain percentage of their sales. One salient point in the
determination of employer-employee relationship which cannot be easily ignored is the fact that the
compensation that these agents on commission received is not paid by the insurance company but by the
investor (or the person insured). After determining the commission earned by an agent on his sales the agent
directly deducts it from the amount he received from the investor or the person insured and turns over to
the insurance company the amount invested after such deduction is made. The test therefore 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.

Applying the aforementioned test to the case at bar, We can readily see that the element of control by the
petitioner on Judico was very much present. The record shows that petitioner Judico received a definite
minimum amount per week as his wage known as "sales reserve" wherein the failure to maintain the same
would bring him back to a beginner's employment with a fixed weekly wage of P 200.00 for thirteen weeks
regardless of production. He was assigned a definite place in the office to work on when he is not in the field;
and in addition to his canvassing work he was burdened with the job of collection. In both cases he was
required to make regular report to the company regarding these duties, and for which an anemic
performance would mean a dismissal. Conversely faithful and productive service earned him a promotion to
Zone Supervisor with additional supervisor's allowance, a definite amount of P110.00 aside from the regular
P 200.00 weekly "allowance". Furthermore, his contract of services with petitioner is not for a piece of work
nor for a definite period.

On the other hand, an ordinary commission insurance agent works at his own volition or at his own leisure
without fear of dismissal from the company and short of committing acts detrimental to the business interest
of the company or against the latter, whether he produces or not is of no moment as his salary is based on
his production, his anemic performance or even dead result does not become a ground for dismissal.
Whereas, in private respondent's case, the undisputed facts show that he was controlled by petitioner
insurance company not only as to the kind of work; the amount of results, the kind of performance but also
the power of dismissal. Undoubtedly, private respondent, by nature of his position and work, had been a
regular employee of petitioner and is therefore entitled to the protection of the law and could not just be
terminated without valid and justifiable cause.

Premises considered, the appealed decision is hereby AFFIRMED in toto.


Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ ., concur.




Republic of the Philippines



G.R. No. L-72654-61 January 22, 1990

GUZMAN, respondents.

J.C. Espinas & Associates for petitioners.

Tomas A. Reyes for private respondent.


The issue to be resolved in the instant case is whether or not the fishermen-crew members of the trawl
fishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises, and if
so, whether or not they were illegally dismissed from their employment.

Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of several
fishing vessels owned and operated by private respondent De Guzman Fishing Enterprises which is primarily
engaged in the fishing business with port and office at Camaligan, Camarines Sur. Petitioners rendered
service aboard said fishing vessel in various capacities, as follows: Alipio Ruga and Jose Parma patron/pilot;
Eladio Calderon, chief engineer; Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor
Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.

For services rendered in the conduct of private respondent's regular business of "trawl" fishing, petitioners
were paid on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of private
respondent. As agreed upon, they received thirteen percent (13%) of the proceeds of the sale of the fish-
catch if the total proceeds exceeded the cost of crude oil consumed during the fishing trip, otherwise, they
received ten percent (10%) of the total proceeds of the sale. The patron/pilot, chief engineer and master
fisherman received a minimum income of P350.00 per week while the assistant engineer, second fisherman,
and fisherman-winchman received a minimum income of P260.00 per week. 1

On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president
of private respondent, to proceed to the police station at Camaligan, Camarines Sur, for investigation on the
report that they sold some of their fish-catch at midsea to the prejudice of private respondent. Petitioners


denied the charge claiming that the same was a countermove to their having formed a labor union and
becoming members of Defender of Industrial Agricultural Labor Organizations and General Workers Union
(DIALOGWU) on September 3, 1983.

During the investigation, no witnesses were presented to prove the charge against petitioners, and no
criminal charges were formally filed against them. Notwithstanding, private respondent refused to allow
petitioners to return to the fishing vessel to resume their work on the same day, September 11, 1983.

On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment
of 13th month pay, emergency cost of living allowance and service incentive pay, with the then Ministry (now
Department) of Labor and Employment, Regional Arbitration Branch No. V, Legaspi City, Albay, docketed as
Cases Nos. 1449-83 to 1456-83. 2 They uniformly contended that they were arbitrarily dismissed without being
given ample time to look for a new job.

On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman, submitted its
position paper denying the employer-employee relationship between private respondent and petitioners on
the theory that private respondent and petitioners were engaged in a joint venture. 3

After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for joint
hearing furnishing the parties with notice and summons. On December 27, 1983, after two (2) previously
scheduled joint hearings were postponed due to the absence of private respondent, one of the petitioners
herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman II, testified, among others, on the manner the
fishing operations were conducted, mode of payment of compensation for services rendered by the
fishermen-crew members, and the circumstances leading to their dismissal. 4

On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde rendered a
joint decision 5 dismissing all the complaints of petitioners on a finding that a "joint fishing venture" and not one
of employer-employee relationship existed between private respondent and petitioners.

From the adverse decision against them, petitioners appealed to the National Labor Relations Commission.

On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6 affirming the decision
of the labor arbiter that a "joint fishing venture" relationship existed between private respondent and petitioners.

Hence, the instant petition.

Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent and
petitioners is a joint venture arrangement and not an employer-employee relationship. To stress that there is
an employer-employee relationship between them and private respondent, petitioners invite attention to
the following: that they were directly hired by private respondent through its general manager, Arsenio de
Guzman, and its operations manager, Conrado de Guzman; that, except for Laurente Bautu, they had been
employed by private respondent from 8 to 15 years in various capacities; that private respondent, through its
operations manager, supervised and controlled the conduct of their fishing operations as to the fixing of the
schedule of the fishing trips, the direction of the fishing vessel, the volume or number of tubes of the fish-
catch the time to return to the fishing port, which were communicated to the patron/pilot by radio (single
side band); that they were not allowed to join other outfits even the other vessels owned by private
respondent without the permission of the operations manager; that they were compensated on percentage
commission basis of the gross sales of the fish-catch which were delivered to them in cash by private


respondent's cashier, Mrs. Pilar de Guzman; and that they have to follow company policies, rules and
regulations imposed on them by private respondent.

Disputing the finding of public respondent that a "joint fishing venture" exists between private respondent
and petitioners, petitioners claim that public respondent exceeded its jurisdiction and/or abused its
discretion when it added facts not contained in the records when it stated that the pilot-crew members do
not receive compensation from the boat-owners except their share in the catch produced by their own
efforts; that public respondent ignored the evidence of petitioners that private respondent controlled the
fishing operations; that public respondent did not take into account established jurisprudence that the
relationship between the fishing boat operators and their crew is one of direct employer and employee.

Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is now
final and executory for failure of petitioners to file their appeal with the NLRC within 10 calendar days from
receipt of said decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine Services, Inc. vs.
NLRC, 115 SCRA 347 (1982), the Solicitor General claims that the ruling of public respondent that a "joint
fishing venture" exists between private respondent and petitioners rests on the resolution of the Social
Security System (SSS) in a 1968 case, Case No. 708 (De Guzman Fishing Enterprises vs. SSS), exempting De
Guzman Fishing Enterprises, private respondent herein, from compulsory coverage of the SSS on the ground
that there is no employer-employee relations between the boat-owner and the fishermen-crew members
following the doctrine laid down inPajarillo vs. SSS, 17 SCRA 1014 (1966). In applying to the case at bar the
doctrine in Pajarillo vs. SSS, supra, that there is no employer-employee relationship between the boat-owner
and the pilot and crew members when the boat-owner supplies the boat and equipment while the pilot and
crew members contribute the corresponding labor and the parties get specific shares in the catch for their
respective contribution to the venture, the Solicitor General pointed out that the boat-owners in
the Pajarillo case, as in the case at bar, did not control the conduct of the fishing operations and the pilot and
crew members shared in the catch.

We rule in favor of petitioners.

Fundamental considerations of substantial justice persuade Us to decide the instant case on the merits rather
than to dismiss it on a mere technicality. In so doing, we exercise the prerogative accorded to this Court
enunciated in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and Rubber Co. of the
Philippines, Inc., 61 SCRA 340 (1974), thus "the well-settled doctrine is that in labor cases before this Tribunal,
no undue sympathy is to be accorded to any claim of a procedural misstep, the idea being that its power be
exercised according to justice and equity and substantial merits of the controversy."

Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly engaged in
trawl fishing, as in the case of petitioners herein, who spend one (1) whole week or more 7 in the open sea
performing their job to earn a living to support their families, convince Us to adopt a more liberal attitude in
applying to petitioners the 10-calendar day rule in the filing of appeals with the NLRC from the decision of the
labor arbiter.

Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on July
3,1984 by their non-lawyer representative during the arbitration proceedings, Jose Dialogo who received the
decision eight (8) days earlier, or on June 25, 1984. As adverted to earlier, the circumstances peculiar to
petitioners' occupation as fishermen-crew members, who during the pendency of the case understandably
have to earn a living by seeking employment elsewhere, impress upon Us that in the ordinary course of
events, the information as to the adverse decision against them would not reach them within such time
frame as would allow them to faithfully abide by the 10-calendar day appeal period. This peculiar
circumstance and the fact that their representative is a non-lawyer provide equitable justification to conclude


that there is substantial compliance with the ten-calendar day rule of filing of appeals with the NLRC when
petitioners filed on July 10, 1984, or seven (7) days after receipt of the decision, their appeal with the NLRC
through registered mail.

We have consistently ruled that in determining the existence of an employer-employee relationship, the
elements that are generally considered are the following (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee
with respect to the means and methods by which the work is to be accomplished. 8 The employment relation
arises from contract of hire, express or implied. 9 In the absence of hiring, no actual employer-employee relation
could exist.

From the four (4) elements mentioned, We have generally relied on the so-called right-of-control
test 10 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. The test calls merely for the existence of the right to
control the manner of doing the work, not the actual exercise of the right. 11

The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a "joint
fishing venture" existed between private respondent and petitioners is not applicable in the instant case.
There is neither light of control nor actual exercise of such right on the part of the boat-owners in
the Pajarillo case, where the Court found that the pilots therein are not under the order of the boat-owners
as regards their employment; that they go out to sea not upon directions of the boat-owners, but upon their
own volition as to when, how long and where to go fishing; that the boat-owners do not in any way control
the crew-members with whom the former have no relationship whatsoever; that they simply join every trip
for which the pilots allow them, without any reference to the owners of the vessel; and that they only share
in their own catch produced by their own efforts.

The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The conduct of
the fishing operations was undisputably shown by the testimony of Alipio Ruga, the patron/pilot of 7/B
Sandyman II, to be under the control and supervision of private respondent's operations manager. Matters
dealing on the fixing of the schedule of the fishing trip and the time to return to the fishing port were shown
to be the prerogative of private respondent. 12 While performing the fishing operations, petitioners received
instructions via a single-side band radio from private respondent's operations manager who called the patron/pilot
in the morning. They are told to report their activities, their position, and the number of tubes of fish-catch in one
day. 13 Clearly thus, the conduct of the fishing operations was monitored by private respondent thru the
patron/pilot of 7/B Sandyman II who is responsible for disseminating the instructions to the crew members.

The conclusion of public respondent that there had been no change in the situation of the parties since 1968
when De Guzman Fishing Enterprises, private respondent herein, obtained a favorable judgment in Case No.
708 exempting it from compulsory coverage of the SSS law is not supported by evidence on record. It was
erroneous for public respondent to apply the factual situation of the parties in the 1968 case to the instant
case in the light of the changes in the conditions of employment agreed upon by the private respondent and
petitioners as discussed earlier.

Records show that in the instant case, as distinguished from the Pajarillo case where the crew members are
under no obligation to remain in the outfit for any definite period as one can be the crew member of an
outfit for one day and be the member of the crew of another vessel the next day, the herein petitioners, on
the other hand, were directly hired by private respondent, through its general manager, Arsenio de Guzman,
and its operations manager, Conrado de Guzman and have been under the employ of private respondent for
a period of 8-15 years in various capacities, except for Laurente Bautu who was hired on August 3, 1983 as
assistant engineer. Petitioner Alipio Ruga was hired on September 29, 1974 as patron/captain of the fishing


vessel; Eladio Calderon started as a mechanic on April 16, 1968 until he was promoted as chief engineer of
the fishing vessel; Jose Parma was employed on September 29, 1974 as assistant engineer; Jaime Barbin
started as a pilot of the motor boat until he was transferred as a master fisherman to the fishing vessel 7/B
Sandyman II; Philip Cervantes was hired as winchman on August 1, 1972 while Eleuterio Barbin was hired as
winchman on April 15, 1976.

While tenure or length of employment is not considered as the test of employment, nevertheless the hiring
of petitioners to perform work which is necessary or desirable in the usual business or trade of private
respondent for a period of 8-15 years since 1968 qualify them as regular employees within the meaning of
Article 281 of the Labor Code as they were indeed engaged to perform activities usually necessary or
desirable in the usual fishing business or occupation of private respondent. 14

Aside from performing activities usually necessary and desirable in the business of private respondent, it
must be noted that petitioners received compensation on a percentage commission based on the gross sale
of the fish-catch i.e. 13% of the proceeds of the sale if the total proceeds exceeded the cost of the crude oil
consumed during the fishing trip, otherwise only 10% of the proceeds of the sale. Such compensation falls
within the scope and meaning of the term "wage" as defined under Article 97(f) of the Labor Code, thus:

(f) "Wage" paid to any employee shall mean 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, and
included the fair and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the employee. . . .

The claim of private respondent, which was given credence by public respondent, that petitioners get paid in
the form of share in the fish-catch which the patron/pilot as head of the team distributes to his crew
members in accordance with their own understanding 15 is not supported by recorded evidence. Except that
such claim appears as an allegation in private respondent's position paper, there is nothing in the records showing
such a sharing scheme as preferred by private respondent.

Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their fish-
catch at midsea without the knowledge and consent of private respondent, petitioners were unjustifiably not
allowed to board the fishing vessel on September 11, 1983 to resume their activities without giving them the
opportunity to air their side on the accusation against them unmistakably reveals the disciplinary power
exercised by private respondent over them and the corresponding sanction imposed in case of violation of
any of its rules and regulations. The virtual dismissal of petitioners from their employment was characterized
by undue haste when less extreme measures consistent with the requirements of due process should have
been first exhausted. In that sense, the dismissal of petitioners was tainted with illegality.

Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private respondent
virtually resulting in their dismissal evidently contradicts private respondent's theory of "joint fishing
venture" between the parties herein. A joint venture, including partnership, presupposes generally a parity of
standingbetween the joint co-venturers or partners, in which each party has an equal proprietary interest in
the capital or property contributed 16 and where each party exercises equal lights in the conduct of the
business. 17 It would be inconsistent with the principle of parity of standing between the joint co-venturers as
regards the conduct of business, if private respondent would outrightly exclude petitioners from the conduct of
the business without first resorting to other measures consistent with the nature of a joint venture undertaking,
Instead of arbitrary unilateral action, private respondent should have discussed with an open mind the advantages


and disadvantages of petitioners' action with its joint co-venturers if indeed there is a "joint fishing venture"
between the parties. But this was not done in the instant case. Petitioners were arbitrarily dismissed
notwithstanding that no criminal complaints were filed against them. The lame excuse of private respondent that
the non-filing of the criminal complaints against petitioners was for humanitarian reasons will not help its cause

We have examined the jurisprudence on the matter and find the same to be supportive of petitioners' stand.
InNegre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were recruited by one
master fisherman locally known as "maestro" in charge of recruiting others to complete the crew members
are considered employees, not industrial partners, of the boat-owners. In an earlier case of Abong vs. WCC,
54 SCRA 379 (1973) where petitioner therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he
was not the employer of the fishermen crew members because of an alleged partnership agreement
between him, as financier, and Simplicio Panganiban, as his team leader in charge of recruiting said
fishermen to work for him, we affirmed the finding of the WCC that there existed an employer-employee
relationship between the boat-owner and the fishermen crew members not only because they worked for
and in the interest of the business of the boat-owner but also because they were subject to the control,
supervision and dismissal of the boat-owner, thru its agent, Simplicio Panganiban, the alleged "partner" of Dr.
Abong; that while these fishermen crew members were paid in kind, or by "pakiao basis" still that fact did not
alter the character of their relationship with Dr. Abong as employees of the latter.

In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA 159 (1982),
we held that the employer-employee relationship between the crew members and the owners of the fishing
vessels engaged in deep sea fishing is merely suspended during the time the vessels are drydocked or
undergoing repairs or being loaded with the necessary provisions for the next fishing trip. The said ruling is
premised on the principle that all these activities i.e., drydock, repairs, loading of necessary provisions, form
part of the regular operation of the company fishing business.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the National
Labor Relations Commission dated May 30,1985 is hereby REVERSED and SET ASIDE. Private respondent is
ordered to reinstate petitioners to their former positions or any equivalent positions with 3-year backwages
and other monetary benefits under the law. No pronouncement as to costs.


Gutierrez, Jr., Bidin and Cortés, JJ., concur.

Feliciano, J., concurs in the result.


1 p. 3, Joint Decision, Labor Arbiter, p. 40, Rollo.

2 pp. 1-8, Records.

3 pp. 28-30, Ibid.

4 pp. 54-101, Ibid.


5 Annex "D" Petition, pp. 40-46, Rollo.

6 pp. 61-65, Rollo.

7 p. 23, T.S.N., p. 78, Records.

8 Hydro-Resources Contractor Corporation vs. Labor Arbiter Pagalilauan G.R. No. 62909,
April 18, 1989; Tabas, et al. vs. California Mfg. Co. et. al., G.R. No. 80680, January 26, 1989;
Continental Marble Corporation vs. NLRC, 161 SCRA 151; Bautista vs. Inciong, 158 SCRA 665;
Broadway Motors, Inc. vs. NLRC, 156 SCRA 522; Besa vs. Trajano, 146 SCRA 501; Rosario
Brothers, Inc. vs. Ople, 131 SCRA 72; Shipside Inc. vs. NLRC, 118 SCRA 99; Mafinco Trading
Corporation vs. Ople, 70 SCRA 139.

9 Yu Chuck vs. Kong Li Po, 46 Phil. 608 (1924).

10 LVN Pictures, Inc. vs. Philippine Musicians Guild, l SCRA 132, 173 (1961), citing Alabama
Highway Express, Co. vs. Local, 612, 108 S. 2d. 350.

11 Dy Keh Beng vs. International Labor and Marine Union of the Philippines, 90 SCRA 161

12 pp. 7-8, T.S.N., pp. 61-62, Records.

13 p. 7. T.S.N., p. 61, Records.

14 Ochoco vs. NLRC., 120 SCRA 774 (1983); Mansol vs. P.P. Gocheco Lumber Co., 96 Phil. 941

15 p. 2, Private Respondent's Position Paper, p. 22, Records; p. 2, Memorandum for Private

Respondent, p. 131, Rollo.

16 Sevilla vs. Court of Appeals, 160 SCRA 171 (1988), citing Bautista Treatise on Philippine
Partnership Law, p. 34.

17 Ibid. p. 37.



Republic of the Philippines



G.R. No. 147816 May 9, 2003

EFREN P. PAGUIO, petitioner,



On 22 June 1992, respondent Metromedia Times Corporation entered, for the fifth time, into an agreement
with petitioner Efren P. Paguio, appointing the latter to be an account executive of the firm.1 Again,
petitioner was to solicit advertisements for "The Manila Times," a newspaper of general circulation,
published by respondent company. Petitioner, for his efforts, was to receive compensation consisting of a
15% commission on direct advertisements less withholding tax and a 10% commission on agency
advertisements based on gross revenues less agency commission and the corresponding withholding tax. The
commissions, released every fifteen days of each month, were to be given to petitioner only after the clients
would have paid for the advertisements. Apart from commissions, petitioner was also entitled to a monthly
allowance of P2,000.00 as long as he met the P30,000.00-monthly quota. Basically, the contentious points
raised by the parties had something to do with the following stipulations of the agreement; viz:

"12. You are not an employee of the Metromedia Times Corporation nor does the company have any
obligations towards anyone you may employ, nor any responsibility for your operating expenses or
for any liability you may incur. The only rights and obligations between us are those set forth in this
agreement. This agreement cannot be amended or modified in any way except with the duly
authorized consent in writing of both parties.

"13. Either party may terminate this agreement at any time by giving written notice to the other,
thirty (30) days prior to effectivity of termination."2

On 15 August 1992, barely two months after the renewal of his contract, petitioner received the
following notice from respondent firm -

"Dear Mr. Paguio,

"Please be advised of our decision to terminate your services as Account Executive of Manila Times
effective September 30, 1992.

"This is in accordance with our contract signed last July 1, 1992."3


Apart from vague allegations of misconduct on which he was not given the opportunity to defend
himself, i.e., pirating clients from his co-executives and failing to produce results, no definite cause for
petitioner's termination was given. Aggrieved, petitioner filed a case before the labor arbiter, asking that his
dismissal be declared unlawful and that his reinstatement, with entitlement to backwages without loss of
seniority rights, be ordered. Petitioner also prayed that respondent company officials be held accountable for
acts of unfair labor practice, for P500,000.00 moral damages and for P200,000.00 exemplary damages.

In their defense, respondent Metromedia Times Corporation asserted that it did not enter into any
agreement with petitioner outside of the contract of services under Articles 1642 and 1644 of the Civil Code
of the Philippines.4Asserting their right to terminate the contract with petitioner, respondents pointed to the
last provision thereof stating that both parties could opt to end the contract provided that either party would
serve, thirty days prior to the intended date of termination, the corresponding notice to the other.

The labor arbiter found for petitioner and declared his dismissal illegal. The arbiter ordered respondent
Metromedia Times Corporation and its officers to reinstate petitioner to his former position, without loss of
seniority rights, and to pay him his commissions and other remuneration accruing from the date of dismissal
on 15 August 1992 up until his reinstatement. He likewise adjudged that Liberato I. Gomez, general manager
of respondent corporation, be held liable to petitioner for moral damages in the amount of P20,000.00.

On appeal, the National Labor Relations Commission (NLRC) reversed the ruling of the labor arbiter and
declared the contractual relationship between the parties as being for a fixed-term employment. The NLRC
declared a fixed-term employment to be lawful as long as "it was agreed upon knowingly and voluntarily by
the parties, without any force, duress or improper pressure being brought to bear upon the worker and
absent any other circumstances vitiating his consent."5 The finding of the NLRC was primarily hinged on the
assumption that petitioner, on account of his educated stature, having indeed personally prepared his
pleadings without the aid of counsel, was an unlikely victim of a lopsided contract. Rejecting the assertion of
petitioner that he was a regular employee, the NLRC held: "The decisive determinant would not be the
activities that the employee (was) called upon to perform but rather, the day certain agreed upon by the
parties for the commencement and termination of their employment relationship, a day certain being
understood to be that which (would) necessarily come, although it (might) not be known when."6

Petitioner appealed the ruling of the NLRC before the Court of Appeals which upheld in toto the findings of
the commission. In his petition for review on certiorari, petitioner raised the following issues for resolution:





The crux of the matter would entail the determination of the nature of contractual relationship between
petitioner and respondent company - was it or was it not one of regular employment?

A "regular employment," whether it is one or not, is aptly gauged from the concurrence, or the non-
concurrence, of the following factors - a) the manner of selection and engagement of the putative employee,
b) the mode of payment of wages, c) the presence or absence of the power of dismissal; and d) the presence
or absence of the power to control the conduct of the putative employee or the power to control the
employee with respect to the means or methods by which his work is to be accomplished.8 The "control test"


assumes primacy in the overall consideration. Under this test, an employment relation obtains where work is
performed or services are rendered under the control and supervision of the party contracting for the
service, not only as to the result of the work but also as to the manner and details of the performance

An indicum of regular employment, rightly taken into account by the labor arbiter, was the reservation by
respondent Metromedia Times Corporation not only of the right to control the results to be achieved but
likewise the manner and the means used in reaching that end.10 Metromedia Times Corporation exercised
such control by requiring petitioner, among other things, to submit a daily sales activity report and also a
monthly sales report as well. Various solicitation letters would indeed show that Robina Gokongwei,
company president, Alda Iglesia, the advertising manager, and Frederick Go, the advertising director, directed
and monitored the sales activities of petitioner.

The Labor Code, in Article 280 thereof, provides:

"ART. 280. Regular and Casual Employment. – The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the employment
has been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.

"An employment shall be deemed to be casual if it is not covered by the proceeding paragraph:
Provided, That, any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such activity exists."

Thus defined, a regular employee is one who is engaged to perform activities which are necessary and
desirable in the usual business or trade of the employer as against those which are undertaken for a specific
project or are seasonal. Even in these latter cases, where such person has rendered at least one year of
service, regardless of the nature of the activity performed or of whether it is continuous or intermittent, the
employment is considered regular as long as the activity exists, it not being indispensable that he be first
issued a regular appointment or be formally declared as such before acquiring a regular status.11

That petitioner performed activities which were necessary and desirable to the business of the employer, and
that the same went on for more than a year, could hardly be denied. Petitioner was an account executive in
soliciting advertisements, clearly necessary and desirable, for the survival and continued operation of the
business of respondent corporation. Robina Gokongwei, its President, herself admitted that the income
generated from paid advertisements was the lifeblood of the newspaper's existence. Implicitly, respondent
corporation recognized petitioner's invaluable contribution to the business when it renewed, not just once
but five times, its contract with petitioner.

Respondent company cannot seek refuge under the terms of the agreement it has entered into with
petitioner. The law, in defining their contractual relationship, does so, not necessarily or exclusively upon the
terms of their written or oral contract, but also on the basis of the nature of the work petitioner has been
called upon to perform.12 The law affords protection to an employee, and it will not countenance any attempt
to subvert its spirit and intent. A stipulation in an agreement can be ignored as and when it is utilized to
deprive the employee of his security of tenure.13 The sheer inequality that characterizes employer-employee


relations, where the scales generally tip against the employee, often scarcely provides him real and better

The real question that should thus be posed is whether or not petitioner has been justly dismissed from
service. A lawful dismissal must meet both substantive and procedural requirements; in fine, the dismissal
must be for a just or authorized cause and must comply with the rudimentary due process of notice and
hearing. It is not shown that respondent company has fully bothered itself with either of these requirements
in terminating the services of petitioner. The notice of termination recites no valid or just cause for the
dismissal of petitioner nor does it appear that he has been given an opportunity to be heard in his defense.

The evidence, however, found by the appellate court is wanting that would indicate bad faith or malice on
the part of respondents, particularly by respondent Liberato I. Gomez, and the award of moral damages must
thus be deleted.

WHEREFORE, the instant petition is GRANTED. The decision of the Court of Appeals in C.A. G.R. SP No.
527773 and that of the National Labor Relations Commission are hereby SET ASIDE and that of the Labor
Arbiter is REINSTATED except with respect to the P20,000.00 moral damages adjudged against respondent
Liberato I. Gomez which award is deleted.


Davide, Jr., C.J., Ynares-Santiago, Carpio, and Azcuna, JJ., concur.


The letter contract dated 22 June 1992 read -

Dear Mr. Paguio:

This letter is to appoint you as Account Executive for The Manila Times for a period of twelve
(12) months effective July 1, 1992 to June 30, 1993, and to set forth the terms and
conditions of your contract.

1. As account executive, you will use your best efforts to obtain advertisements exclusively
for us and for such projects that The Manila Times may decide to do from time to time.

2. You are authorized to solicit advertisements and quote advertising rates in accordance
with and subject to all the terms and conditions in our rate cards.

3. All advertisements are subject to acceptance by us and we reserve the right in our
absolute discretion to reject or omit any advertisements.

4. You will be paid fifteen (15) percent commission on direct advertisements less
corresponding withholding tax.


5. You will be paid ten (10) percent commission on agency advertisements based on gross ad
revenues less agency commission and corresponding withholding tax.

6. Walk-in advertisements, not solicited by the Advertising staff, are not commissionable.

7. All payments must be paid direct to Metromedia Times Corporation. In no case, however,
will commission be paid until and unless the advertisements, whether agency or direct, have
been paid for, subject to the corresponding withholding taxes authorized by law.

8. Commissions earned on paid advertisements covering the period from the first (1st) to the
fifteenth (15) of every month shall be payable at the end of the same month; commissions
earned on paid advertisements covering the period from the sixteenth (16th ) to the end of
the month shall be payable on the fifteenth (15) of the succeeding month.

9. You will be entitled to a monthly allowance of P2,000.00 provided that you meet a
monthly quota of P30,000.00 in advertising lineage. But should you fail to meet your quota,
your allowance shall be charged against your future account.

10 For all ex-deal arrangements, the barter agreement and your commission will be subject
to the written approval of the President and Treasurer on a case-to-case basis.

11. You will be paid your approved commission only after the payment for the liquidation
(sold and/or consumed) of the goods received from the advertiser has been completed.

12. You are not an employee of Metromedia Times Corporation nor does the Company have
any obligations towards anyone you may employ, nor any responsibility for your operating
expenses or for any liability you may incur. The only rights and obligations between us are
those set forth in this agreement. This agreement cannot be amended or modified in any
way except with the duly authorized consent in writing of both parties.

13. Either party may terminate this agreement at any time by giving written notice to the
other thirty (30) days prior to the effectivity of termination.

If these terms and conditions are acceptable to you, please indicate your conformity by
signing below. (Rollo, pp. 41-42.)

Rollo, p. 42.

Rollo, p. 43.

Article 1642 of the Civil Code provides: "The contract of lease may be of things, or of work and

Article 1644 provides: "In the lease of work or service, one of the parties binds himself to execute a
piece of work or to render to the other some service for a price certain, but the relation of principal
and agent does not exist between them."

Rollo, NLRC Decision dated 15 December 1998, p. 82.


Rollo, p. 85.

Rollo, p. 18.

Hijos de F. Escano, Inc., vs. NLRC G.R. No. 59229, 22 August 1991, 201 SCRA 63; Ecal vs. NLRC, G.R.
Nos. 92777-78, 13 March 1991, 195 SCRA 224.

Iloilo Chinese Commercial School vs. Fabrigar, L-16600, 27 December 1961, 3 SCRA 712.

Cosmopolitan Funeral Homes, Inc., vs. Maalat, G.R. No. 86693, 02 July 1990, 187 SCRA 108.

Article 280, Labor Code.

A.M. Oreta and Co., Inc., vs. NLRC, et al., G.R. No. 74004, 10 August 1989, 176 SCRA 218.

Cielo vs. NLRC, G.R. No. 78693, 28 January 1991, 193 SCRA 410.



Republic of the Philippines



G.R. No. 121605 February 2, 2000

PAZ MARTIN JO and CESAR JO, petitioners,



This petition for certiorari seeks to set aside the Decision1 of National Labor Relations Commission (Fifth
Division) promulgated on November 21, 1994, and its Resolution dated June 7, 1995, which denied
petitioners' motion for reconsideration.

Private respondent Peter Mejila worked as barber on a piece rate basis at Dina's Barber Shop. In 1970, the
owner, Dina Tan, sold the barbershop to petitioners Paz Martin Jo and Cesar Jo. All the employees, including
private respondent, were absorbed by the new owners. The name of the barbershop was changed to
Windfield Barber Shop.

The owners and the barbers shared in the earnings of the barber shop. The barbers got two-thirds (2/3) of
the fee paid for every haircut or shaving job done, while one-third (1/3) went to the owners of the shop.

In 1977, petitioners designated private respondent as caretaker of the shop because the former caretaker
became physically unfit. Private respondent's duties as caretaker, in addition to his being a barber, were: (1)
to report to the owners of the barbershop whenever the airconditioning units malfunctioned and/or
whenever water or electric power supply was interrupted, (2) to call the laundry woman to wash dirty linen;
(3) to recommend applicants for interview and hiring; (4) to attend to other needs of the shop. For this
additional job, he was given an honorarium equivalent to one-third (1/3) of the net income of the shop. 1âwphi1.nêt

When the building occupied by the shop was demolished in 1986, the barbershop closed. But soon a place
nearby was rented by petitioners and the barbershop resumed operations as Cesar's Palace Barbershop and
Massage Clinic. In this new location, private respondent continued to be a barber and caretaker, but with a
fixed monthly honorarium as caretaker, to wit: from February 1986 to 1990 — P700; from February 1990 to
March 1991 — P800; and from July 1992 P1,300.

In November 1992, private respondent had an altercation with his co-barber, Jorge Tinoy. The bickerings,
characterized by constant exchange of personal insults during working hours, became serious so that private
respondent reported the matter to Atty. Allan Macaraya of the labor department. The labor official
immediately summoned private respondent and petitioners to a conference. Upon investigation, it was found
out that the dispute was not between private respondent and petitioners; rather, it was between the former
and his fellow barber. Accordingly, Atty. Macaraya directed petitioners' counsel, Atty. Prudencio Abragan, to
thresh out the problem.


During the mediation meeting held at Atty. Abragan's office a new twist was added. Despite the assurance
that he was not being driven out as caretaker-barber, private respondent demanded payment for several
thousand pesos as his separation pay and other monetary benefits. In order to give the parties enough time
to cool off, Atty. Abragan set another conference but private respondent did not appear in such meeting

Meanwhile, private respondent continued reporting for work at the barbershop. But, on January 2, 1993, he
turned over the duplicate keys of the shop to the cashier and took away all his belongings therefrom. On
January 8, 1993, he began working as a regular barber at the newly opened Goldilocks Barbershop also in
Iligan City.

On January 12, 1993, private respondent filed a complaint2 for illegal dismissal with prayer for payment of
separation pay, other monetary benefits, attorney's fees and damages. Significantly, the complaint did not
seek reinstatement as a positive relief.

In a Decision dated June 15, 1993, the Labor Arbiter found that private respondent was an employee of
petitioners, and that private respondent was not dismissed but had left his job voluntarily because of his
misunderstanding with his co-worker.3 The Labor Arbiter dismissed the complaint, but ordered petitioners to
pay private respondent his 13th month pay and attorney's fees.

Both parties appealed to the NLRC. In a Decision dated November 21, 1994, it set aside the labor arbiter's
judgment. The NLRC sustained the labor arbiter's finding as to the existence of employer-employee
relationship between petitioners and private respondent, but it ruled that private respondent was illegally
dismissed. Hence, the petitioners were ordered to reinstate private respondent and pay the latter's
backwages, 13th month pay, separation pay and attorney's fees, thus:

For failure of respondents to observe due process before dismissing the complainant, We rule and
hold that he was illegally terminated. Consequently, he should be reinstated and paid his backwages
starting from January 1, 1993 up , the time of his reinstatement and payment of separation pay,
should reinstatement not be feasible on account of a strained employer-employee relationship.

As complainant's income was mixed, (commission and caretaker), he becomes entitled to 13th
month pay only in his capacity as caretaker at the last rate pay given to him.

With respect to separation pay, even workers paid on commission are given separation pay as they
are considered employees of the company. Complainant should be adjudged entitled to separation
pay reckoned from 1970 up to the time he was dismissed on December 31, 1992 at one-half month
pay of his earnings as a barbers; and as a caretaker the same should be reckoned from 1977 up to
December 31, 1992.

As complainant has been assisted by counsel not only in the preparation of the complaint, position
paper but in hearings before the Labor Arbiter a quo attorney's fees equivalent to 10% of the money
awards should likewise be paid to complainant.

WHEREFORE, the decision appealed from is Vacated and Set Aside and a new one entered in
accordance with the above-findings and awards.



Its motion for reconsideration having been denied in a Resolution dated June 7, 1995, petitioners filed the
instant petition.

The issues for resolution are as follows:

1. Whether or not there exists an employee-employee relationship between petitioners and private

2. Whether or not private respondent was dismissed from or had abandoned his employment.

Petitioners contend that public respondent gravely erred in declaring that private respondent was their
employee. They claim that private respondent was their "partner in trade" whose compensation was based
on a sharing arrangement per haircut or shaving job done. They argue that private respondent's task as
caretaker could be considered an employment because the chores are very minimal.

At the outset, we reiterate the doctrine that the existence of an employer-employee relationship is ultimately
a question of fact and that the findings thereon by the labor arbiter and the NLRC shall be accorded not only
respect but even finality when supported by ample evidence.5

In determining the existence of an employer-employee relationship, the following elements are considered:
(1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by
whatever means; and (4) the power to control the worker's conduct, with the latter assuming primacy in the
overall consideration. The power of control refers to the existence of the power and not necessarily to the
actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of
the employee; it is enough that the employer has the right to wield that power.6

Absent a clear showing that petitioners and private respondent had intended to pursue a relationship of
industrial partnership, we entertain no doubt that private respondent was employed by petitioners as
caretaker-barber. Initially, petitioners, as new owners of the barbershop, hired private respondent as barber
by absorbing the latter in their employ. Undoubtedly, the services performed by private respondent as
barber is related to, and in the pursuit of the principal business activity of petitioners. Later on, petitioners
tapped private respondent to serve concurrently as caretaker of the shop. Certainly, petitioners had the
power to dismiss private respondent being the ones who engaged the services of the latter. In fact, private
respondent sued petitioners for illegal dismissal, albeit contested by the latter. As a caretaker, private
respondent was paid by petitioners wages in the form of honorarium, originally, at the rate of one-third (1/3)
of the shop's net income but subsequently pegged at a fixed amount per month. As a barber, private
respondent earned two-thirds (2/3) of the fee paid per haircut or shaving job done. Furthermore, the
following facts indubitably reveal that petitioners controlled private respondent's work performance, in that:
(1) private respondent had to inform petitioners of the things needed in the shop; (2) he could only
recommend the hiring of barbers and masseuses, with petitioners having the final decision; (3) he had to be
at the shop at 9:00 a.m. and could leave only at 9:00 p.m. because he was the one who opened and closed it,
being the one entrusted with the key.7 These duties were complied with by the private respondent upon
instructions of petitioners. Moreover, such task was far from being negligible as claimed by petitioners. On
the contrary, it was crucial to the business operation of petitioners as shown in the preceding discussion.
Hence, there was enough basis to declare private respondent an employee of petitioners. Accordingly, there
is no cogent reason to disturb the findings of the labor arbiter and NLRC on the existence of employer-
employee relationship between herein private parties.


With regard to the second issue, jurisprudence has laid out the rules and valid ground for termination of
employment. To constitute abandonment, there must be concurrence of the intention to abandon and some
overt acts from which it may be inferred that the employee concerned has no more interest in working.8 In
other words, there must be a clear, deliberate and unjustified refusal to resume employment and a clear
intention to sever the employer-employee relationship on the part of the employee.9

In the case at bar, the labor arbiter was convinced that private respondent was not dismissed but left his
work on his own volition because he could no longer bear the incessant squabbles with his co-worker.
Nevertheless, public respondent did not give credence to petitioners' claim that private respondent
abandoned his job. On this score, public respondent gravely erred as hereunder discussed.

At the outset, we must stress that where the findings of the NLRC contradict those of the labor arbiter, the
Court, in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the
questioned findings.10

In this case, the following circumstances clearly manifest private respondent's intention to sever his ties with
petitioners. First, private respondent even bragged to his co-workers his plan to quit his job at Cesar's Palace
Barbershop and Massage Clinic as borne out by the affidavit executed by his former co-workers.11 Second, he
surrendered the shop's keys and took away all his things from the shop. Third, he did not report anymore to
the shop without giving any valid and justifiable reason for his absence. Fourth, he immediately sought a
regular employment in another barbershop, despite previous assurance that he could remain in petitioners'
employ. Fifth, he filed a complaint for illegal dismissal without praying for reinstatement.

Moreover, public respondent's assertion that the institution of the complaint for illegal dismissal manifests
private respondent's lack of intention to abandon his job12 is untenable. The rule that abandonment of work
is inconsistent with the filing of a complainant for illegal dismissal is not applicable in this case. Such rule
applies where the complainant seeks reinstatement as a relief. Corollarily, it has no application where the
complainant does not pray for reinstatement and just asks for separation pay instead13 as in the present case.
It goes without saying that the prayer for separation pay, being the alternative remedy to
reinstatement,14 contradicts private respondent's stance. That he was illegally dismissed is belied by his own
pleadings as well as contemporaneous conduct.

We are, therefore, constrained to agree with the findings of the Labor Arbiter that private respondent left his
job voluntarily for reasons not attributable to petitioners. It was error and grave abuse of discretion for the
NLRC to hold petitioners liable for illegal dismissal of private respondent.

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of public respondent NLRC are
reversed and set aside. The decision of the Labor Arbiter dated June 15, 1993, is hereby reinstated. No costs.

SO ORDERED. 1âwphi1.nêt

Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.



Penned by Commissioner Oscar M. Abella, and concurred by Presiding Commissioner Musib M.
Buat and Commissioner Leon G. Gonzaga Jr.

Rollo, pp. 34-37.

Id. at 60-61.

Id. at 84.

AFP Mutual Benefit Association Inc., NLRC, 267 SCRA 47, 56 (1997); North Davao Mining Corp. v.
NLRC, 254 SCRA 721, 731 (1996); Inter-Orient Maritime Enterprises Inc. v. NLRC, 235 SCRA 268, 277
(1994); Loadstar Shipping Co. Inc. v. Gallo, 229 SCRA 654, 660 (1994); Great Pacific Life Assurance
Corp. v. NLRC, 187 SCRA 694, 699 (1990).

Equitable Banking Corporation v. NLRC, 273 SCRA 352, 371 (1997); MAM Realty Development
Corporation v. NLRC, 244 SCRA 797, 800-801 (1995); Zanotte Shoes v. NLRC, 241 SCRA 261, 265

Id. at 56-38.

A Prime Security Services Inc. v. NLRC, 220 SCRA 142, 145 (1993); Dagupan Bus Co. Inc., v. NLRC,
191 SCRA 328, 331 (1990).

Tan v. NLRC, 271 SCRA 216, 221 (1997); Cañete v. NLRC, 250 SCRA 259, 267 (1995); Reno Foods Inc.
v. NLRC, 249 SCRA 379, 386 (1995); Labor v. NLRC, 248 SCRA 183, 198 (1995); International School of
Speech v. NLRC. 242 SCRA 382, 389 (1995); Santos v. NLRC, 166 SCRA 759, 764 (1988); Velasco v.
Inciong, 164 SCRA 67, 74 (1988).

Industrial Timber Corporation v. NLRC, 273 SCRA 200, 209 (1997); Magcalas v. NLRC, 269 SCRA 453,
463 (1997).

Rollo, p. 61.

Id. at 83.

A' Prime Security Services Inc. v. NLRC, supra, p. 145.

Bombase v. NLRC, 245 SCRA 496, 500 (1995).



Republic of the Philippines



G.R. No. 72409 December 29, 1986

MAMERTO S. BESA, doing business under the name and style of BESA'S CUSTOMBUILT SHOES,petitioner,
KATIPUNAN), respondents.

De Asis and Hernando Law Office for petitioner.

Estebal M. Mendoza for private respondent.


This petition questions the decision of the Director of the Bureau of Labor Relations in BLR Case No. A-8-165-
85, which affirmed the appealed order of the Med-Arbiter, Labor Relations Division, NCR in NCR-LRD-M-1-
044-85, a certification election case. More specifically, petitioner seeks the resolution of the question as to
whether or not an employer-employee relationship exists between herein petitioner and the seventeen (17)
shoeshiners-members of the respondent union, who, if the relationship does exist, should be entitled to the
rights, privileges and benefits of an employee as provided in the Labor Code.

Sometime in January, 1985, private respondent Kaisahan ng Mangagawang Pilipino KAMPIL for short) a
legitimate labor union duly registered with the Ministry of Labor and Employment (MOLE, for short), filed a
Petition for Certification Election, docketed as NCR-LRD-M-1-044-85 in the National Labor Relations Division
of the National Capital Region. Petitioner opposed it alleging that —

1. There is no employer-employee relationship between Besa's and the petitioners-signatories to the


2. The subject of the present petition had previously been decided by the defunct Court of Industrial
Relations, and is therefore barred under the principle of res judicata;

3. The petition fails to comply with the mandatory formal requirements under Sec. 2, Book V, of the
Omnibus Rules Implementing the Labor Code; and

4. This Hon. Commission has no jurisdiction over the subject matter and parties to the petition.


Acting on the Petition, the Opposition thereto, and the Reply to the Opposition, the Med-Arbiter on June 27,
1985, issued an order declaring that there was an employer-employee relationship between the parties and
directed that an election be conducted.

Petitioner appealed the order to the Director of BLR citing among others the following reasons —

1. That the subject of the present petition has previously been decided by the defunct Court of
Industrial Relations, and is therefore barred under the principle of res judicata (CIR Case Nos. 2783,
2751 and 2949 ULP December 21, 1965);

2. That on May 28, 1985, Director Severo Pucan of the Ministry of Labor and Employment, in
dismissing the case for underpayment of commissions and non-payment of ECOLA, filed by the
shoeshiners against Besas Custombuilt Shoes, for lack of jurisdiction petition, declared that there
was no employer-employee relationship between the shoeshiners and petitioner Besas (Order in

Director Pucan's findings were based on a letter-opinion of the Director of the Bureau of Working
Conditions of the MOLE (Annex "B-2", Petition for Certiorari). The legal ground therein cited was res

xxx xxx xxx

Appeal was dismissed by the Director of BLR as contained in his decision dated Sept. 27, 1985 upholding the
finding of the Med-Arbiter that supervisors were appointed to oversee the bootblacks' performance. It
declared that such is a finding of fact that is entitled to respect and that res judicata does not he as the
parties and the causes of action in the certification election case are different from the parties and causes of
action in CIR Cases Nos. 2783-ULP 2751-ULP and 2949 ULP

Thus the Petition of the Union (KAMPIL) before the Med-Arbiter for the holding of the certification election
was granted. While the pre-election conference was in progress, petitioner herein BESAS filed with Us with
petition for certiorari with Prohibition and simultaneously filed with the Med-Arbiter a motion to suspend the
pre-election conference. The petition filed before Us was dismissed for lack of merit but was reconsidered
upon Motion of petitioner. In its Motion for Reconsideration, petitioner raised the following grounds:












The main thrust of the instant petition is the question of employer-employee relationship between petitioner
BESAS and 17 of the members of the herein respondent Union who are designated as shoeshiners. During the
certification election held on Nov. 26, 1985 at BESAS of the 53 eligible voters, 49 cast their votes. 33 voted for
the union while 16 voted for no union. Among the 33 voters who opted for a union 17 persons are
shoeshiners while 16 persons are non-shoeshiners.

The question of employer-employee relationship became a primodial consideration in resolving whether or

not the subject shoeshiners have the juridical personality and standing to present a petition for certification
election as well as to vote i therein. It is the position of petitioner that if the shoeshiners are not considered
as employees of Besa's the basic petition for certification election must necessarily be dismissed for failure to
comply with the mandatory requirements of the Labor Code, as amended, that at least thirty (30%) percent
of the employees must support the petition for certification election and that in order to be certified as the
sole and exclusive bargaining agent, the union must be obtained a majority of the valid votes cast by eligible
voters. In the instant case, if the 17 shoeshiners are declared ineligible and their votes are consequently
nullified the result of the certification election would be 16 "Yes" votes (33 minus 17) and 16 "No" votes,
which is a tie. Since the respondent union did not obtain a clear majority for the "Yes" votes as required
under Rule IV Sec. 8(f) of the Omnibus Rules of the Labor Code, it necessarily follows that the respondent
union cannot be certified as the sole and exclusive bargaining agent of the workers of Besa's.

The present petition merits Our consideration. The records of the case reveal that an employer-employee
relationship does not exist between the 17 shoeshiners and petitioner.

Be it noted that the defunct CIR in dismissing the cases for unfair labor practice filed by the shoeshiners
against herein petitioner BESA declared in its Decision dated December 21, 1965 that:

The shoe shiner is distinct from a piece worker because while the latter is paid for work
accomplished, he does not, however, contribute anything to the capital of the employer other than
his service. It is the employer of the piece worker who pays his wages, while the shoe shiner in this
instance is paid directly by his customer. The piece worker is paid for work accomplished without
regard or concern to the profit as derived by his employer, but in the case of the shoe shiners, the


proceeds derived from the trade are always divided share and share alike with respondent BESA. The
shoe shiner can take his share of the proceeds everyday if he wanted to or weekly as is the practice
of qqqBesas The employer of the piece worker supervises and controls his work, but in the case of
the shoe shiner, respondent BESA does not exercise any degree of control or supervision over their
person and their work. All these are not obtaining in the case of a piece worker as he is in fact an
employee in contemplation of law, distinct from the shoe shiner in this instance who, in relation to
respondent MAMERTO B. BESA, is a partner in the trade. Consequently, employer-employee
relationship between members of the Petitioning union and respondent MAMERTO B. BESA being
absent the latter could not be held guilty of the unfair tabor practice acts imputed against him. (p. 6,
Annex "B1 " of said Decision).<äre||anº•1àw>

Then too on Dec. 27, 1983, then Director Augusto Sanchez of the Bureau of Working Conditions, MOLE, in
response to a letter of petitioner relative to the implementation of wage Order No. 2 which provided for an
increase both in minimum wage and cost of living allowance, opined as follows:

Entitlement of the minimum requirements of the law particularly on wages and allowances
presupposes the existence of employer-employee relationship which is determined by the
concurrence of the following conditions:

1. right to hire

2. payment of wages

3. right to fire; and

4. control and supervision

The most important condition to be considered is the exercise of control and supervision over the
employees, per our conversation, the persons concerned under your query are the shoe shiners and
based on the decision rendered by Associate Judge Emiliano Tabigne of the defunct Court of
Industrial Relations, these shoe shiners are not employees of the company, but are partners instead.
This is due to the fact that the owner/manager does not exercise control and supervision over the
shoe shiners. That the shiners have their own customers from whom they charge the fee and divide
the proceeds equally with the owner, which make the owner categorized them as on purely
commission basis. The attendant circumstances clearly show that there is no employer-employee
relationship existing, and such the owner/manager is not by law, under obligation to extend to those
on purely commission basis the benefit of Wage Order No. 2. However, the law does not preclude
the employer in giving such benefit to all its employees including those which may not be covered by
the mandate of the law.

(Letter dated December 27, 1985 addressed to petitioner Annex B-2, Petition)

The Office of the Solicitor General as counsel for public respondent agrees that in the present case, no
employer-employee relationship exists.

The Supreme Court in the Rosario Brothers case ruled that;

A basic factor underlying the exercise of rights under the Labor Code is the status of employment. It
is important in the determination of who shall be included in a proposed bargaining unit because it


is sine qua non. The fundamental and essential condition that a bargaining unit be composed of
employees. Failure to establish this juridical relationship between the union members and the
employer affects the legality of the union itself. It means the ineligibility of the union members to
present a petition for certification election as well as to vote therein.

Existence of employer-employee relationship is determined by the following elements, namely, a]

selection and engagement of the employee; b] payment of wages; c] powers of dismissal; and d]
power to control the employee's conduct although the latter is the most important element (Rosario
Brothers Inc, vs. Ople, 131 SCRA 72, 1984)

WHEREFORE, judgment is hereby rendered giving due course to the Petition and declaring VOID the decision
of the Director of the Bureau of Labor Relations dated September 27, 1985. The Petition in BLR Case No. A-8-
165-85 (NCR-LRD-M1-044-85) is therefore hereby DISMISSED.


Feria (Chairman), Fernan, Alampay, Gutierrez, Jr., JJ., concur.