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REPUBLIC V. ASIAPRO COOPERATIVE (G.R. NO. 172101)
Facts: Respondent Asiapro Cooperative is composed of
owners-members with primary objectives of providing them
savings and credit facilities and livelihood services. In
discharge of said objectives, Asiapro entered into several
service contracts with Stanfilco. Sometime later, the
cooperative owners-members requested Stanfilco’s help in
registering them with SSS and remitting their contributions.
Petitioner SSS informed Asiapro that being actually a
manpower contractor supplying employees to Stanfilco, it must
be the one to register itself with SSS as an employer and remit
the contributions. Respondent continuously ignoring the
demand of SSS the latter filed before the SSC. Asiapro alleges
that there exists no employer-employee relationship between it
and its owners-members. SSC ruled in favor of SSS. On
appeal, CA reversed the decision.
Issue: Whether or not there is employer-employee relationship
between Asiapro and its owners-members.
Ruling: YES. In determining the existence of an employer-
employee relationship, the following elements are considered:
(1) the selection and engagement of the workers; (2) the
payment of wages by whatever means; (3) the power of
dismissal; and (4) the power to control the worker‘s conduct,
with the latter assuming primacy in the overall consideration.
All the aforesaid elements are present in this case.
The most important element is the employers control of the
employees conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish.
The 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.
First. It is expressly provided in the Service Contracts that it is
the respondent cooperative which has the exclusive discretion
in the selection and engagement of the owners-members as
well as its team leaders who will be assigned at Stanfilco.
Second. It cannot be doubted then that those stipends or
shares in the service surplus are indeed wages, because these
are given to the owners-members as compensation in
rendering services to respondent cooperative‘s client,
Stanfilco.
Third. It is also stated in the above-mentioned Service
Contracts that it is the respondent cooperative which has the
power to investigate, discipline and remove the owners-
members and its team leaders who were rendering services at
Stanfilco.
Control:
Fourth. In the case at bar, it is the respondent cooperative
which has the sole control over the manner and means of
performing the services under the Service Contracts with
Stanfilco as well as the means and methods of work. Also, the
respondent cooperative is solely and entirely responsible for its
owners-members, team leaders and other representatives at
Stanfilco. All these clearly prove that, indeed, there is an
employer-employee relationship between the respondent
cooperative and its owners-members.
In the present case, it is not disputed that the respondent
cooperative had registered itself with the Cooperative
Development Authority, as evidenced by its Certificate of
Registration No. 0-623-2460. In its by-laws, its Board of
Directors directs, controls, and supervises the business and
manages the property of the respondent cooperative. Clearly
then, the management of the affairs of the respondent
cooperative is vested in its Board of Directors and not in its
owners-members as a whole. Therefore, it is completely logical
that the respondent cooperative, as a juridical person
represented by its Board of Directors, can enter into an
employment with its owners-members.
In sum, having declared that there is an employer-employee
relationship between the respondent cooperative and its
owners-member, we conclude that the petitioner SSC has
jurisdiction over the petition-complaint filed before it by the
petitioner SSS. This being our conclusion, it is no longer
necessary to discuss the issue of whether the respondent
cooperative was estopped from assailing the jurisdiction of the
petitioner SSC when it filed its Answer with Motion to Dismiss.
G.R. No. 153511 July 18, 2012
LEGEND HOTEL (MANILA), owned by TITANIUM
CORPORATION, and/or, NELSON NAPUD, in his capacity
as the President of Petitioner Corporation, Petitioner,
vs. HERNANI S. REALUYO, also known as JOEY ROA,
Respondent. [Dave Alano]
Facts: Respondent Pianist, whose stage name was Joey R.
Roa, filed a complaint for alleged unfair labor practice,
constructive illegal dismissal, and the
underpayment/nonpayment of his premium pay for holidays,
separation pay, service incentive leave pay, and 13th month
pay. He prayed for attorney's fees, moral and exemplary
damages.
Respondent averred that he had worked as a pianist at the
Legend Hotel’s Tanglaw Restaurant from September 1992 with
an initial rate of P400.00/night that was given to him after each
night’s performance; that his rate had increased to
P750.00/night; and that during his employment, he could not
choose the time of performance, which had been fixed from
7:00 pm to 10:00 pm for three to six times/week.
Respondent pianist’s arguments that his work is under the
CONTROL of petitioner hotel: He added that the Legend
Hotel’s restaurant manager had required him to conform with
the venue’s motif; that he had been subjected to the rules on
employees’ representation checks and chits, a privilege
granted to other employees; that on July 9, 1999, the
management had notified him that as a cost-cutting measure
his services as a pianist would no longer be required effective
July 30, 1999; that he disputed the excuse, insisting that
Legend Hotel had been lucratively operating as of the filing of
his complaint; and that the loss of his employment made him
bring his complaint.
In its defense, petitioner denied the existence of an employer-
employee relationship with respondent, insisting that he had
been only a talent engaged to provide live music at Legend
Hotel’s Madison Coffee Shop for three hours/day on two days
each week; and stated that the economic crisis that had hit the
country constrained management to dispense with his
services.
LA: Dismissed the labor complaint and ruled in favor of Legend
Hotel; did not find the existence of the EE relationship.
NLRC: Affirmed the decision of the LA; ruled in favor of
Legend Hotel, still not finding the existence of the EE
Relationship.
CA: Reversed the decision of the NLRC, and ruled in favor of
respondent pianist, holding that:
Public respondent failed to take into consideration that in
petitioner’s line of work, he was supervised and controlled by
respondent’s restaurant manager who at certain times would
require him to perform only tagalog songs or music, or wear
barong tagalog to conform with Filipiniana motif of the place
and the time of his performance is fixed by the respondents
from 7:00 pm to 10:00 pm, three to six times a week. Petitioner
could not choose the time of his performance.
Issue: Whether or not respondent pianist Joey Roa is an
employee of petitioner Legend Hotel?
Held: YES. A review of the circumstances reveals that
respondent was, indeed, petitioner’s employee. He was
undeniably employed as a pianist in petitioner’s Madison
Coffee Shop/Tanglaw Restaurant from September 1992 until
his services were terminated on July 9, 1999.
First of all, petitioner actually wielded the power of selection at
the time it entered into the service contract dated September 1,
1992 with respondent.
Secondly, petitioner was paying respondent wages.
Petitioner’s argument that the remuneration denominated as
‘talent fees’ is not wages must fail.
Thirdly, the power of the employer to control the work of the
employee is considered the most significant determinant of the
existence of an employer-employee relationship. This is the
so-called control test, and is premised on whether the person
for whom the services are performed reserves the right to
control both the end achieved and the manner and means
used to achieve that end.
A review of the records shows, however, that respondent
performed his work as a pianist under petitioner’s supervision
and control. Specifically, petitioner’s control of both the end
achieved and the manner and means used to achieve that end
was demonstrated by the following, to wit:
a. He could not choose the time of his performance, which
petitioners had fixed from 7:00 pm to 10:00 pm, three to six
times a week;
b. He could not choose the place of his performance;

c. The restaurant’s manager required him at certain times to
perform only Tagalog songs or music, or to wear barong
Tagalog to conform to the Filipiniana motif; and
d. He was subjected to the rules on employees’ representation
check and chits, a privilege granted to other employees.
Relevantly, it is worth remembering that the employer need not
actually supervise the performance of duties by the employee,
for it sufficed that the employer has the right to wield that
power.
Lastly, petitioner claims that it had no power to dismiss
respondent due to his not being even subject to its Code of
Discipline, and that the power to terminate the working
relationship was mutually vested in the parties, in that either
party might terminate at will, with or without cause.
The claim is contrary to the records. Indeed, the memorandum
informing respondent of the discontinuance of his service
because of the present business or financial condition of
petitioner showed that the latter had the power to dismiss him
from employment.
G.R. No. 179654 September 22, 2014
HACIENDA LEDDY/RICARDO GAMBOA, JR., Petitioner,
vs. PAQUITA VILLEGAS, Respondent.
Facts: Villegas is an employee at the Hacienda Leddy as early
as 1960, when it was still named Hacienda Teresa. Later on
named Hacienda Leddy owned by Ricardo Gamboa Sr., the
same was succeeded by his son Ricardo Gamboa, Jr. During
his employment up to the time of his dismissal, Villegas
performed sugar farming job 8 hours a day, 6 days a week
work, continuously for not less than 302 days a year, and for
which services he was paid ₱45.00 per day. He likewise
worked in petitioner's coconut lumber business where he was
paid ₱34.00 a day for 8 hours work.
Gamboa went to Villegas' house and told him that his services
were no longer needed without prior notice or valid reason.
Hence, Villegas filed the instant complaint for illegal dismissal
with the NLRC.
LA: Ruled in favor of Respondent Villegas. The Labor Arbiter
found that there was illegal dismissal.
NLRC: Ruled in favor of Petitioner Hacienda Leddy. The NLRC
set aside and vacated the Labor Arbiter's decision.
CA: Ruled in favor of Respondent Villegas. The Court of
Appeals granted the petition and annulled and set aside the
NLRC Decision. Hence this petition from Petitioner, who
contends that since Villegas’ job was not necessary or
desirable in the usual business or trade of the hacienda, he
cannot be considered as a regular employee. Petitioner
insisted that it was Villegas who has stopped working in the
hacienda and that he was not dismissed.
Issue: Whether or not there exists an ER-EE relationship
between Petitioner Hacienda Leddy and Respondent Villegas?
/ Whether or not Villegas is a regular employee of petitioner
Hacienda?
Held: YES. Petition is denied.
Article 280 of the Labor Code, describes a regular employee
as one who is either (1) engaged to perform activities which
are necessary or desirable in the usual business or trade of the
employer; and (2) those casual employees who have rendered
at least one year of service, whether continuous or broken,
with respect to the activity in which he is employed.
In Integrated Contractor and Plumbing Works, Inc. v. National
Labor Relations Commission, we held that the test to
determine whether employment is regular or not is the
reasonable connection between the particular activity
performed by the employee in relation to the usual business or
trade of the employer. If the employee has been performing
the job for at least one year, even if the performance is not
continuous or merely intermittent, the law deems the repeated
and continuing need for its performance as sufficient evidence
of the necessity, if not indispensability of that activity to the
business. Clearly, with more than 20 years of service, Villegas,
without doubt, passed this test to attain employment regularity.
While length of time may not be the controlling test to
determine if Villegas is indeed a regular employee, it is vital in
establishing if he was hired to perform tasks which are
necessary and indispensable to the usual business or trade of
the employer. If it was true that Villegas worked in the
hacienda only in the year 1993, specifically February 9,1993
and February 11, 1993, why would then he be given the
benefit to construct his house in the hacienda? More
significantly, petitioner admitted that Villegas had worked in the
hacienda until his father's demise.
Clearly, even assuming that Villegas' employment was only for
a specific duration, the fact that he was repeatedly re-hired
over a long period of time shows that his job is necessary and
indispensable to the usual business or trade of the employer.
3.3 Who has jurisdiction to determine ER-EE relationship:
Secretary of Labor or the NLRC
G.R. No. 179652 May 8, 2009
PEOPLE'S BROADCASTING (BOMBO RADYO PHILS.,
INC.), Petitioner,
vs. THE SECRETARY OF THE DEPARTMENT OF LABOR
AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE
REGION VII, and JANDELEON JUEZAN, Respondents.
[Dave Alano]
Facts: Jandeleon Juezan (respondent) filed against People’s
Broadcasting Service, Inc. (Bombo Radyo Phils., Inc)
(petitioner) a complaint for illegal deduction, non-payment of
service incentive leave, 13th month pay, premium pay for
holiday and rest day and illegal diminution of benefits, delayed
payment of wages and non-coverage of SSS, PAG-IBIG and
Philhealth before the Department of Labor and Employment
(DOLE) Regional Office No. VII, Cebu City.
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DOLE Regional Office: Ruled in favor of private respondent.
DOLE Regional Director Atty. Rodolfo M. Sabulao (Regional
Director) ruled that respondent is an employee of petitioner,
and that the former is entitled to his money claims amounting
to ₱203,726.30.
DOLE Secretary: Affirmed previous decision. On appeal to the
DOLE Secretary, petitioner denied once more the existence of
employer-employee relationship. In its Order dated 27 January
2005, the Acting DOLE Secretary dismissed the appeal on the
ground that petitioner did not post a cash or surety bond and
instead submitted a Deed of Assignment of Bank Deposit
CA: Ruled in favor of private respondent. The Court of Appeals
held that petitioner was not deprived of due process as the
essence thereof is only an opportunity to be heard, which
petitioner had when it filed a motion for reconsideration with
the DOLE Secretary.
Hence this petition. Petitioner argues that the National Labor
Relations Commission (NLRC), and not the DOLE Secretary,
has jurisdiction over respondent’s claim, in view of Articles 217
and 128 of the Labor Code.
Issue: Whether or not the Secretary of Labor has the power to
determine the existence of an employer-employee
relationship?
Held: NO. Article 128 (b) of the Labor Code, as amended by
Republic Act 7730 reads:
Article 128 (b) 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 xxx
The provision is quite explicit that the visitorial and
enforcement power of the DOLE comes into play only "in
cases when the relationship of employer-employee still exists."
It also underscores the avowed objective underlying the grant
of power to the DOLE which is "to give effect to the labor
standard provision of this Code and other labor legislation." Of
course, a person’s entitlement to labor standard benefits under
the labor laws presupposes the existence of employer-
employee relationship in the first place.
Necessarily, the DOLE’s power does not apply in two
instances, namely:
(a) where the employer-employee relationship has ceased;
and
(b) where no such relationship has ever existed.
The first situation (a) is categorically covered by Sec. 3, Rule
11 of the Rules on the Disposition of Labor Standards Cases
issued by the DOLE Secretary. It reads:

Rule II MONEY CLAIMS ARISING FROM
COMPLAINT/ROUTINE INSPECTION
Sec. 3. Complaints where no employer-employee relationship
actually exists. Where employer-employee relationship no
longer exists by reason of the fact that it has already been
severed, claims for payment of monetary benefits fall within the
exclusive and original jurisdiction of the labor arbiters.
Accordingly, if on the face of the complaint, it can be
ascertained that employer-employee relationship no longer
exists, the case, whether accompanied by an allegation of
illegal dismissal, shall immediately be endorsed by the
Regional Director to the appropriate branch of the National
Labor Relations Commission (NLRC).
In the first situation, the claim has to be referred to the NLRC
because it is the NLRC which has jurisdiction in view of the
termination of the employer-employee relationship. The same
procedure has to be followed in the second situation since it is
the NLRC that has jurisdiction in view of the absence of
employer-employee relationship between the evidentiary
parties from the start. Clearly the law accords a prerogative to
the NLRC over the claim when the employer-employee
relationship has terminated or such relationship has not arisen
at all.
In the second situation (b) especially, the existence of an
employer-employee relationship is a matter which is not easily
determinable from an ordinary inspection, necessarily so,
because the elements of such a relationship are not verifiable
from a mere ocular examination. The intricacies and
implications of an employer-employee relationship demand
that the level of scrutiny should be far above the cursory and
the mechanical. While documents, particularly documents
found in the employer’s office are the primary source materials,
what may prove decisive are factors related to the history of
the employer’s business operations, its current state as well as
accepted contemporary practices in the industry.
More often than not, the question of employer-employee
relationship becomes a battle of evidence, the determination of
which should be comprehensive and intensive and therefore
best left to the specialized quasi-judicial body that is the NLRC.
Guidelines for the Jurisdiction of DOLE
Thus, before the DOLE may exercise its powers under Article
128, two important questions must be resolved:
(1) Does the employer-employee relationship still exist, or
alternatively, was there ever an employer-employee
relationship to speak of; and
(2) Are there violations of the Labor Code or of any labor law?
The existence of an employer-employee relationship is a
statutory prerequisite to and a limitation on the power of the
Secretary of Labor, one which the legislative branch is entitled
to impose. The rationale underlying this limitation is to
eliminate the prospect of competing conclusions of the
Secretary of Labor and the NLRC, on a matter fraught with
questions of fact and law, which is best resolved by the quasi-
judicial body, which is the NRLC, rather than an administrative
official of the executive branch of the government. If the
Secretary of Labor proceeds to exercise his visitorial and
enforcement powers absent the first requisite, as the dissent
proposes, his office confers jurisdiction on itself which it cannot
otherwise acquire.
How about in the case at hand?
A mere assertion of absence of employer-employee
relationship does not deprive the DOLE of jurisdiction over the
claim under Article 128 of the Labor Code. At least a prima
facie showing of such absence of relationship, as in this case,
is needed to preclude the DOLE from the exercise of its power.
Without a doubt, petitioner, since the inception of this case had
been consistent in maintaining that respondent is not its
employee. Certainly, a preliminary determination, based on the
evidence offered, and noted by the Labor Inspector during the
inspection as well as submitted during the proceedings before
the Regional Director puts in genuine doubt the existence of
employer-employee relationship. From that point on, the
prudent recourse on the part of the DOLE should have been to
refer respondent to the NLRC for the proper dispensation of
his claims.
G.R. No. 171275, July 13, 2009
Meteoro et al v. Creative Creatures
YNARES-SANTIAGO, J., Chairperson, CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and PERALTA, JJ.
Digested by: Gretchen B. Canedo
FACTS: Respondent is a domestic corporation engaged in the
business of producing, providing, or procuring the production
of set designs and set construction services for television
exhibitions, concerts, theatrical performances, motion pictures
and the like. On the other hand, petitioners were hired by
respondent on various dates as artists, carpenters and
welders.
Sometime in February and March 1999, petitioners filed their
respective complaints for non-payment of salaries and benefits
against respondent, before the Department of Labor and
Employment (DOLE, NCR),
During inspection, the labor inspector noted that the records
were not made available at the time of the inspection and that
respondent claimed that petitioners were contractual
employees and/or independent talent workers. They further
argued that the DOLE-NCR had no jurisdiction over the
complaint of the petitioners because of the absence of an
employer-employee relationship. Petitioners maintained that
they are employees of the respondents and subsequently filed
a complaint for illegal dismissal against petitioner on April 12,
1999.
The Regional Director sustained petitioners claim on the
existence of an employer-employee relationship using the
determinants set forth by the Labor Code and upheld the
DOLE-NCRs jurisdiction to hear and determine cases in
violation of labor standards law. On appeal, then DOLE
Secretary Patricia A. Sto. Tomas affirmed the findings of the
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DOLE Regional Director and upheld the jurisdiction of the
DOLE pursuant to Article 128 of the Labor Code , as amended
by Republic Act (R.A.) No. 7730.
Respondent elevated the matter to the Court of Appeals. The
appellate court declared the order of the Secretary of Labor
NULL and VOID for lack of jurisdiction.
ISSUE: Which body/tribunal has jurisdiction over petitioners
money claims?
HELD:
The Supreme Court sustained the appellate court’s conclusion
that the instant case falls within the exclusive jurisdiction of the
NLRC. The power of the Regional Director to hear and decide
the monetary claims of employees is not absolute. The last
sentence of Article 128 (b) of the Labor Code, otherwise
known as the exception clause, provides an instance when the
Regional Director or his representatives may be divested of
jurisdiction over a labor standards case.
Art. 128. Visitorial and Enforcement Power
(a) The Secretary of Labor or his duly authorized
representatives, including labor regulation officers, shall have
access to employers records and premises at anytime of the
day or night whenever work is being undertaken therein, and
the right to copy therefrom, to question any employee and
investigate any fact, condition or matter which may be
necessary to determine violations or which may aid in the
enforcement of this Code and of any labor law, wage order or
rules and regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Article 129 and 217 of
this Code to the contrary, and in cases where the relationship
of employer-employee relation 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. The Secretary or his duly authorized
representatives shall issue writs of execution, to the
appropriate authority for the enforcement of their orders,
except in cases where the employer contests the findings of
the labor employment and enforcement officer and raises
issues supported by documentary proofs which were not
considered in the course of inspection.
Under prevailing jurisprudence, the so-called exception clause
has the following elements, all of which must concur:
(a) that the employer contests the findings of the labor
regulations officer and raises issues thereon;
(b) that in order to resolve such issues, there is a need to
examine evidentiary matters; and
(c) that such matters are not verifiable in the normal course of
inspection.

In the present case, the CA aptly applied the exception clause.
At the earliest opportunity, respondent registered its objection
to the findings of the labor inspector. The labor inspector, in
fact, noted in its report that respondent alleged that petitioners
were contractual workers and/or independent and talent
workers without control or supervision and also supplied with
tools and apparatus pertaining to their job. In its position paper,
respondent again insisted that petitioners were not its
employees. It then questioned the Regional Directors
jurisdiction to entertain the matter before it, primarily because
of the absence of an employer-employee relationship. Finally,
it raised the same arguments before the Secretary of Labor
and the appellate court. It is, therefore, clear that respondent
contested and continues to contest the findings and
conclusions of the labor inspector.
The key requirement for the Regional Director and the DOLE
Secretary to be divested of jurisdiction is that the evidentiary
matters be not verifiable in the course of inspection. Whether
or not petitioners were independent contractors/project
employees/freelance workers is a question of fact that
necessitates the examination of evidentiary matters not
verifiable in the normal course of inspection. Where the
evidence presented was verifiable in the normal course of
inspection, even if presented belatedly by the employer, the
Regional Director, and later the DOLE Secretary, may still
examine it; and these officers are not divested of jurisdiction to
decide the case.
In sum, respondent contested the findings of the labor
inspector during and after the inspection and raised issues the
resolution of which necessitated the examination of evidentiary
matters not verifiable in the normal course of inspection.
Hence, the Regional Director as divested of jurisdiction and
should have endorsed the case to the appropriate Arbitration
Branch of the NLRC.
3.4 Reasonable Causal Connection
G.R. No. 171212, August 4, 2014
Indophil Textile Mills v. Adviento
D E C I S I O N, PERALTA, J.:
Digested by: Gretchen B. Canedo
FACTS:
Petitioner Indophil Textile Mills, Inc. is a domestic corporation
engaged in the business of manufacturing thread for weaving.
On August 21, 1990, petitioner hired respondent Engr.
Salvador Adviento as Civil Engineer to maintain its facilities in
Lambakin, Marilao, Bulacan.
On August 7, 2002, respondent consulted a physician due to
recurring weakness and dizziness. Few days later, he was
diagnosed with Chronic Poly Sinusitis, and thereafter, with
moderate, severe and persistent Allergic Rhinitis.6
Accordingly, respondent was advised by his doctor to totally
avoid house dust mite and textile dust as it will transmute into
health problems.
Distressed, respondent filed a complaint against petitioner with
the National Labor Relations Commission (NLRC), San
Fernando, Pampanga, for alleged illegal dismissal and for the
payment of backwages, separation pay, actual damages and
attorney’s fees. The said case, docketed as NLRC Case No.
RAB-III-05-5834-03, is still pending resolution with the NLRC
at the time the instant petition was filed.
Subsequently, respondent filed another Complaint with the
Regional Trial Court (RTC) of Aparri, Cagayan, alleging that he
contracted such occupational disease by reason of the gross
negligence of petitioner to provide him with a safe, healthy and
workable environment.
In reply, petitioner filed a Motion to Dismiss on the ground that:
(1) the RTC has no jurisdiction over the subject matter of the
complaint because the same falls under the original and
exclusive jurisdiction of the Labor Arbiter (LA) under Article
217(a)(4) of the Labor Code; and
(2) there is another action pending with the Regional
Arbitration Branch III of the NLRC in San Fernando City,
Pampanga, involving the same parties for the same cause.
On December 29, 2003, the RTC issued a Resolution denying
the aforesaid Motion and sustaining its jurisdiction over the
instant case. It held that petitioner’s alleged failure to provide
its employees with a safe, healthy and workable environment
is an act of negligence, a case of quasi-delict. As such, it is not
within the jurisdiction of the LA under Article 217 of the Labor
Code. On the matter of dismissal based on litis pendencia, the
RTC ruled that the complaint before the NLRC has a different
cause of action which is for illegal dismissal and prayer for
back wages, actual damages, attorney’s fees and separation
pay due to illegal dismissal while in the present case, the
cause of action is for quasi-delict.24
ISSUES:
1. Which court has jurisdiction?
2. Is there a reasonable causal connection between the case
filed in the RTC and that with the NLRC?
HELD:
1. The Regular Courts have jurisdiction. The Supreme court
held that jurisdiction rests on the regular courts. The
jurisdiction of the LA and the NLRC is outlined in Article 217 of
the Labor Code, as amended by Section 9 of Republic Act
(R.A.) No. 6715.
ART. 217. Jurisdiction of Labor Arbiters and the Commission--
(a) Except as otherwise provided under this Code the Labor
Arbiter shall have original and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days after the submission of
the case by the parties for decision without extension, even in
the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
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3. If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code
including questions involving the legality of strikes and
lockouts; and
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount
exceeding five thousand pesos (₱5,000.00) regardless of
whether accompanied with a claim for reinstatement.
While the SC upholds the present trend to refer worker-
employer controversies to labor courts in light of the
aforequoted provision, it has also recognized that not all claims
involving employees can be resolved solely by our labor
courts, specifically when the law provides otherwise. For this
reason, the "reasonable causal connection rule," had been
formulated, wherein if there is a reasonable causal connection
between the claim asserted and the employer-employee
relations, then the case is within the jurisdiction of the labor
courts; and in the absence thereof, it is the regular courts that
have jurisdiction.
The pivotal question to the mind of the Court is whether or not
the Labor Code has any relevance to the reliefs sought by the
plaintiffs. For if the Labor Code has no relevance, any
discussion concerning the statutes amending it and whether or
not they have retroactive effect is unnecessary. It is obvious
from the complaint that the plaintiff did not allege any unfair
labor practice. His is a simple action for damages for tortious
acts allegedly committed by the defendant. Such being the
case, the governing statute is the Civil Code and not the Labor
Code.
It is a basic tenet that jurisdiction over the subject matter is
determined upon the allegations made in the complaint,
irrespective of whether or not the plaintiff is entitled to recover
upon the claim asserted therein, which is a matter resolved
only after and as a result of a trial. Neither can jurisdiction of a
court be made to depend upon the defenses made by a
defendant in his answer or motion to dismiss. In this case, a
perusal of the complaint would reveal that the subject matter is
one of claim for damages arising from quasi-delict, which is
within the ambit of the regular court's jurisdiction.
2. No, there is NO REASONABLE CONNECTION. Claims for
damages under Article 217(a)(4) of the Labor Code, to be
cognizable by the LA, must have a reasonable causal
connection with any of the claims provided for in that article.
Only if there is such a connection with the other claims can a
claim for damages be considered as arising from employer-
employee relations.
In the case at bench, we find that such connection is nil.
True, the maintenance of a safe and healthy workplace is
ordinarily a subject of labor cases. More, the acts complained
of appear to constitute matters involving employee-employer

relations since respondent used to be the Civil Engineer of
petitioner. However, it should be stressed that respondent’s
claim for damages is specifically grounded on petitioner’s
gross negligence to provide a safe, healthy and workable
environment for its employees −a case of quasi-delict. This is
easily ascertained from a plain and cursory reading of the
Complaint.
When, as here, the cause of action is based on a quasi-delictor
tort, which has no reasonable causal connection with any of
the claims provided for in Article 217, jurisdiction over the
action is with the regular courts.
QUASI-DELICT REQUISITES
To sustain a claim liability under quasi-delict, the following
requisites must concur:
(a) damages suffered by the plaintiff;
(b) fault or negligence of the defendant, or some other person
for whose acts he must respond; and
(c) the connection of cause and effect between the fault or
negligence of the defendant and the damages incurred by the
plaintiff.
SMART COMMUNICATIONS, INC. vs. REGINA M.
ASTORGA
Ponente: NACHURA, J.
Digested by: Kent John Evangelista
FACTS: Regina M. Astorga (Astorga) was employed by
respondent Smart Communications, Incorporated (SMART) on
May 8, 1997 as District Sales Manager of the Corporate Sales
Marketing Group/ Fixed Services Division (CSMG/FSD). As
District Sales Manager, Astorga enjoyed additional benefits,
namely, annual performance incentive equivalent to 30% of
her annual gross salary, a group life and hospitalization
insurance coverage, and a car plan in the amount of
P455,000.00.
In February 1998, SMART launched an organizational
realignment to achieve more efficient operations. This was
made known to the employees on February 27, 1998. Part of
the reorganization was the outsourcing of the marketing and
sales force. Thus, SMART entered into a joint venture
agreement with NTT of Japan, and formed SMART-NTT
Multimedia, Incorporated (SNMI). Since SNMI was formed to
do the sales and marketing work, SMART abolished the
CSMG/FSD, Astorga’s division.
SNMI agreed to absorb the CSMG personnel who would be
recommended by SMART. SMART then conducted a
performance evaluation of CSMG personnel and those who
garnered the highest ratings were favorably recommended to
SNMI. Astorga landed last in the performance evaluation, thus,
she was not recommended by SMART. SMART, nonetheless,
offered her a supervisory position in the Customer Care
Department, but she refused the offer because the position
carried lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued
reporting for work. But on March 3, 1998, SMART issued a
memorandum advising Astorga of the termination of her
employment on ground of redundancy, effective April 3, 1998.
Astorga received it on March 16, 1998.
The termination of her employment prompted Astorga to file a
Complaint for illegal dismissal, non-payment of salaries and
other benefits with prayer for moral and exemplary damages
against SMART and Ann Margaret V. Santiago (Santiago).
On May 18, 1998, SMART sent a letter to Astorga demanding
that she pay the current market value of the Honda Civic
Sedan which was given to her under the company’s car plan
program, or to surrender the same to the company for proper
disposition. Astorga, however, failed and refused to do either,
thus prompting SMART to file a suit for replevin with the
Regional Trial Court of Makati (RTC) on August 10, 1998. The
case was docketed as Civil Case No. 98-1936 and was raffled
to Branch 57.
Astorga moved to dismiss the complaint on grounds of (i) lack
of jurisdiction; (ii) failure to state a cause of action; (iii) litis
pendentia; and (iv) forum-shopping. Astorga posited that the
regular courts have no jurisdiction over the complaint because
the subject thereof pertains to a benefit arising from an
employment contract; hence, jurisdiction over the same is
vested in the labor tribunal and not in regular courts.
Meanwhile, SMART also appealed the unfavorable ruling of
the Labor Arbiter in the illegal dismissal case to the National
Labor Relations Commission (NLRC).
Labor Arbiter Ruling: Rendered a decision declaring the
dismissal of Astorga illegal and and unjust. While recognizing
Smart’s right to abolish any of its departments.
RTC Ruling: Issued an order denying Astorga’s motion to
dismiss the replevin case due to lack of merit.
CA Ruling regarding Astorga’s appeal for the denial of her MR
by the RTC: Reversed the RTC ruling, granting the petition of
Astorga and dismissing the replevin case on the ground that
the case is intertwined with Astorga’s complaint for illegal
dismissal.
NLRC Ruling about the appeal of SMART regarding the
unfavourable ruling of the Labor Arbiter: Reversed the decision
of Labor Arbiter and declaring the abolition of CSMG and the
creation of SNMI to do the sales and marketing services of
SMART a valid organizational action.
NOTE: Astorga filed a motion for reconsideration, but the
NLRC denied it.
ISSUES:
1. Whether or not the dismissal of Regina Astorga was
illegal
2. Whether or not RTC has jurisdiction over the
complaint for recovery of the car.
HELD:
5
1. Yes. Astorga was terminated due to redundancy,
which is one of the authorized causes for the dismissal of an
employee. Redundancy in an employer’s personnel force
necessarily or even ordinarily refers to duplication of work. The
characterization of an employee’s services as superfluous or
no longer necessary and, therefore, properly terminable, is an
exercise of business judgment on the part of the employer. An
employer is not precluded from adopting a new policy
conducive to a more economical and effective management
even if it is not experiencing economic reverses. Neither does
the law require that the employer should suffer financial losses
before he can terminate the services of the employee on the
ground of redundancy. But while tilting the scales of justice in
favor of workers, the fundamental law also guarantees the right
of the employer to reasonable returns for his investment. In
this light, we must acknowledge the prerogative of the
employer to adopt such measures as will promote greater
efficiency, reduce overhead costs and enhance prospects of
economic gains, albeit always within the framework of existing
laws.
However, SMART failed to comply with the mandated one (1)
month notice prior to termination. The record is clear that
Astorga received the notice of termination only on March 16,
1998 or less than a month prior to its effectively on April 3,
1998. Likewise, the Department of Labor and Employment was
notified of the redundancy program only on March 6, 1998.
Article 283 of the Labor Code clearly provides that the
employer may also terminate the employment of any employee
due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month
before the intended date thereof.
2. The RTC rightfully assumed jurisdiction over the suit
and acted well within its discretion in denying Astorga’s motion
to dismiss. SMART’s demand for payment of the market value
of the car or, in the alternative, the surrender of the car, is not
a labor, but a civil, dispute. It involves the relationship of debtor
and creditor rather than employee-employer relations. As such,
the dispute falls within the jurisdiction of the regular courts.
Replevin is a possessory action, the gist of which is the right of
possession in the plaintiff. The primary relief sought therein is
the return of the property in specie wrongfully detained by
another person. It is an ordinary statutory proceeding to
adjudicate rights to the title or possession of personal property.
The question of whether or not a party has the right of
possession over the property involved and if so, whether or not
the adverse party has wrongfully taken and detained said
property as to require its return to plaintiff, is outside the pale
of competence of a labor tribunal and beyond the field of
specialization of Labor Arbiters.
Definition of Replevin
· Replevin is an action whereby the owner or person
entitled to repossession of goods or chattels may recover
those goods or chattels from one who has wrongfully
distrained or taken, or who wrongfully detains such goods or

chattels. It is designed to permit one having right to possession
to recover property in specie from one who has wrongfully
taken or detained the property. The term may refer either to
the action itself, for the recovery of personality, or to the
provisional remedy traditionally associated with it, by which
possession of the property may be obtained by the plaintiff and
retained during the pendency of the action.
In Basaya, Jr. v. Militante,34 this Court, in upholding the
jurisdiction of the RTC over the replevin suit, explained:
Replevin is a possessory action, the gist of which is the right of
possession in the plaintiff. The primary relief sought therein is
the return of the property in specie wrongfully detained by
another person. It is an ordinary statutory proceeding to
adjudicate rights to the title or possession of personal property.
The question of whether or not a party has the right of
possession over the property involved and if so, whether or not
the adverse party has wrongfully taken and detained said
property as to require its return to plaintiff, is outside the pale
of competence of a labor tribunal and beyond the field of
specialization of Labor Arbiters.
GRANDTEQ INDUSTRIAL STEEL PRODUCTS, INC. and
ABELARDO M. GONZALES vs. EDNA MARGALLO
Ponente: CHICO-NAZARIO, J.:
Digested by: Kent John Evangelista
FACTS: Grandteq is a domestic corporation engaged in the
business of selling welding electrodes, alloy steels, aluminum
and copper alloys.5 Gonzales is the President/Owner of
Grandteq.6 Grandteq employed Margallo as Sales Engineer
beginning 3 August 1999.
Margallo claimed that on an unstated date, she availed herself
of the car loan program offered to her by Grandteq as a reward
for being "Salesman of the Year." She paid the down payment
on a brand new Toyota Corolla, amounting to ₱201,000.00, out
of her own pocket. The monthly amortization for the car was
₱10,302.00, of which ₱5,302.00 was to be her share and
₱5,000.00 was to be the share of Grandteq.
On 29 December 2003, Margallo received a letter signed by
Gonzales and Rolando de Leon (De Leon), Vice-President for
Administration of Grandteq. She responded with a letter-reply
dated December 30, 2003 denying all the accusations.
Margallo then averred that in January 2004, De Leon asked
her to just resign, promising that if she did, she would still be
paid her commissions and other benefits, as well as be
reimbursed her car loan payments. Relying on De Leon’s
promise, Margallo tendered on 13 January 2004, her
irrevocable resignation, effective immediately.
Labor Arbiter Ruling: Dismissed the case filed by Margallo due
to lack of merit and was not able to prove by substanstial
evidence of her entitlement to the sales commission. Labor
Arbiter also found that Margallo had no right to reimbursement
of car loan payments under her car loan agreement with
Grandteq.
NLRC Ruling: Modified the decision of Labor Arbiter, granting
Margallo her claim for sales commission, reimbursement of her
car loan payments, and attorney’s fees.
CA Ruling: Affirmed the decision of the NLRC that Margallo
had a right to be reimbursed her car loan payments, and the
terms of the car loan agreement between Margallo and
Grandteq. And also affirmed the order of the NLRC that
Grandteq and Gonzales pay Margallo her sales commission.
ISSUE: Whether or not Margallo is entitled to the
reimbursement of her car loan payments.
HELD: Yes, SC upheld NLRC and CA decision. The
questionable provision in the car loan agreement between
Grandteq and Margallo provides: "In case of resignation, of the
personnel from the company, all payments made by the
personnel shall be forfeited in favor of the company."30
Connected thereto is the provision in the same car loan
agreement, which reads: The COMPANY shall have the right
to regain the possession of the car before the expiration of the
term of the loan in the event of any of the following: a. The
PERSONNEL resigns from the COMPANY during the
effectivity of this agreement.
The principle that no person may unjustly enrich oneself at the
expense of another (Nemo cum alteris detrimento locupletari
potest) is embodied in Article 22 of the New Civil Code, to wit:
ART. 22. Every person who through an act of performance by
another, or any other means, acquires or comes into
possession of something at the expense of the latter without
just or legal ground, shall return the same to him.
There is unjust enrichment when (1) a person is unjustly
benefited, and (2) such benefit is derived at the expense of or
with damages to another. The main objective of the principle of
unjust enrichment is to prevent one from enriching oneself at
the expense of another.
The principle against unjust enrichment obliges Grandteq and
Gonzales to refund to Margallo the car loan payments she had
made, since she has not actually acquired the car. To relieve
Grandteq and Gonzales of their obligation to reimburse
Margallo would, indeed, be to sanction unjust enrichment in
favor of the first two and cause unjust poverty to the latter. The
Court rigorously disapproves contracts that demonstrate a
clear attempt to exploit the employee and deprive him of the
protection sanctioned by both the Constitution and the Labor
Code.The Constitution and the Labor Code mandate the
protection of labor.
Counterclaim involving transfer of ownership of company car
falls within the ambit of the Labor Arbiter’s jurisdiction.
G.R. No. 154376 September 30, 2005
ROBERTO T. DOMONDON, Petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION, VAN MELLE PHILS.,
INC. and NIELS H.B. HAVE, Respondent.
FACTS: On November 20, 1998, petitioner Roberto T.
Domondon filed a complaint before the Regional Arbitration
6
Branch of the NLRC, Quezon City, against private respondent
Van Melle Phils., Inc. (VMPI) and its President and General
Manager, private respondent Niels H.B. Have. He claimed
illegal dismissal and prayed for reinstatement, payment of full
backwages inclusive of allowances, 14th month pay, sick and
vacation leaves, share in the profits, moral and exemplary
damages and attorney’s fees.
Petitioner alleged that private respondent VMPI hired him as
Materials Manager. Petitioner claimed that things worked out
well for him in the beginning until he was transferred to China
and was replaced by private respondent Have, a Dutch
national. According to petitioner, private respondent Have
requested his courtesy resignation. Petitioner further alleged
that private respondent Have offered financial assistance if
petitioner would leave peacefully but the offer must be
accepted immediately or it would be withdrawn. Thus,
petitioner signed a "ready-made" resignation letter without
deliberation and evaluation of the consequences.
On the other hand, private respondents stated that petitioner
informed them about his intention to resign and requested a
"soft landing" financial support in the amount of ₱300,000.00.
Private respondents granted the request. Subsequently,
however, petitioner proposed the transfer of ownership of the
car assigned to him in lieu of the financial assistance from the
company. Since company policy prohibits disposition of assets
without valuable consideration, the parties agreed that
petitioner shall pay for the car with the ₱300,000.00 "soft
landing" financial assistance from private respondent VMPI.
Private respondents averred that petitioner effected the
registration of the car in his name. On July 30, 1998,
₱300,000.00 was credited to petitioner’s payroll account but he
did not use it to pay for the car as agreed upon. Repeated
demands for payment were unheeded.
The Labor Arbiter ruled in favor of private respondents with
respect to their counterclaims. The Labor Arbiter gave the
petitioner the option to reconvey to respondents the car sold to
him and thus retain full credit of the ₱300,000.00 "soft landing"
assistance, or retain ownership of the car by paying
respondents the purchase price of ₱300,000.00 minus any
amount due him corresponding to his accrued benefits that has
been applied by respondents as partial payment for the car.
The NLRC affirmed the Decision of the Labor Arbiter.
Petitioner questions the jurisdiction of the Labor Arbiter to
resolve the issue of the transfer of car-ownership by private
respondents. He contends that it is the regular courts that have
jurisdiction over the question and not the Labor Arbiter.
ISSUE: Whether the Labor Arbiter has the
jurisdiction to hear and decide the question on the transfer of
ownership of the car assigned to petitioner.
RULING: YES.
The jurisdiction of Labor Arbiters is provided under Article
217(a) of the Labor Code, as amended, viz:
(a) Except as otherwise provided under this Code the Labor
Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without

extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and
lockouts;
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.
In all these instances, the matrix is the existence of an
employer-employee relationship. In the case at bar, there is no
dispute that petitioner is an employee of the respondents.
Presently, and as amended by R.A. 6715, the jurisdiction of
Labor Arbiters and the NLRC in Article 217 is comprehensive
enough to include claims for all forms of damages "arising from
the employer-employee relations."
The Supreme Court in a number of occasions had applied the
jurisdictional provisions of Article 217 to claims of damages
filed by employees. By the designating clause "arising from the
employer-employee relations" Article 217 should apply with
equal force to the claim of an employer for actual damages
against its dismissed employee, where the basis for the claim
arises from or is necessarily connected with the fact of
termination, and should be entered as a counterclaim in the
illegal dismissal case.
This is in accord with paragraph 6 of Article 217(a), which
covers "all other claims, arising from employer-employee
relations," viz:
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.
In the case at bar, petitioner claims illegal dismissal and prays
for reinstatement, payment of full backwages inclusive of
allowances, 14th month pay, sick and vacation leaves, share in
the profits, moral and exemplary damages and attorney’s fees.
These causes of action clearly fall within the jurisdiction of the
Labor Arbiter, specifically under paragraphs 2, 3 and 4 of
Article 217(a). On the other hand, private respondents made a
counterclaim involving the transfer of ownership of a company
car to petitioner. They maintain that he failed to pay for the car
in accordance with their agreement. The issue is whether this
claim of private respondents arose from the employer-
employee relationship of the parties pursuant to paragraph 6 of
Article 217(a) under the general clause as quoted above.
The records show that the initial agreement of the parties was
that petitioner would be extended a "soft-landing" financial
assistance in the amount of ₱300,000.00 on top of his accrued
benefits at the time of the effectivity of his resignation.
However, petitioner later changed his mind. He requested that
he be allowed to keep the car assigned to him in lieu of the
financial assistance. However, company policy prohibits
transfer of ownership of property without valuable
consideration. Thus, the parties agreed that petitioner shall still
be extended the ₱300,000.00 financial support, which he shall
use to pay for the subject car. On July 30, 1998, private
respondent VMPI deposited the agreed amount in petitioner’s
account. Despite having registered the car in his name and
repeated demands from private respondents, petitioner failed
to pay for it as agreed upon. Petitioner did not also return the
car. Without doubt, the transfer of the ownership of the
company car to petitioner is connected with his resignation and
arose out of the parties’ employer-employee relations.
Accordingly, private respondents’ claim for damages falls
within the jurisdiction of the Labor Arbiter.
3.5 Corporate Officer or Employee?
G.R. No. 141093. February 20, 2001
PRUDENTIAL BANK and TRUST COMPANY, petitioner,
vs. CLARITA T. REYES, respondent.
Doctrine:
An employee is regular because of the nature of the work and
the length of service, not because of the mode or even the
reason for hiring him.
Facts:
Clarita Tan Reyes filed a complaint for illegal suspension and
illegal dismissal against Prudential Bank and Trust Company
(the Bank) before the labor arbiter. Prior to her dismissal,
private respondent Reyes held the position of Assistant Vice
President in the foreign department of the Bank, tasked with
the duties, among others, to collect checks drawn against
overseas banks payable in foreign currency and to ensure the
collection of foreign bills or checks purchased, including the
signing of transmittal letters covering the same.
Prudential Bank: Reyes’ ground of dismissal was when she
deliberately held the clearing of Checks of Hongkong and
Shanghai Banking Corporation in the total amount of
US$224,650.00 by giving instructions to the collection clerk not
to send the checks for collection. And when the said checks
were finally sent to clearing after the lapse of 15 months from
receipt of said checks, they were returned for the reason
‘Account closed.’ To date, the value of said checks have not
been paid.
Labor Arbiter: found that the dismissal of Reyes was without
factual and legal basis. It ordered the respondent bank to pay
her back wages for three (3) years, and pay her separation
pay.
Issue:
Whether or not the amount of backwages and separation pay
was awarded properly
7
Held:
Yes because contrary to the the bank’s contention that she
merely holds an elective position and that in effect she is not a
regular employee is belied by the nature of her work and her
length of service with the Bank. The Supreme Court held that
an employee is regular because of the nature of the work and
the length of service, not because of the mode or even the
reason for hiring him.
It appears that private respondent was appointed Accounting
Clerk by the Bank on July 14, 1963. From that position she
rose to become supervisor. Then in 1982, she was appointed
Assistant Vice-President which she occupied until her illegal
dismissal on July 19, 1991. The bank’s contention that she
merely holds an elective position and that in effect she is not a
regular employee is belied by the nature of her work and her
length of service with the Bank. As earlier stated, she rose
from the ranks and has been employed with the Bank since
1963 until the termination of her employment in 1991. As
Assistant Vice President of the Foreign Department of the
Bank, she is tasked, among others, to collect checks drawn
against overseas banks payable in foreign currency and to
ensure the collection of foreign bills or checks purchased,
including the signing of transmittal letters covering the same.
It has been stated that “the primary standard of determining
regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the
usual trade or business of the employer.
Additionally, “an employee is regular because of the nature of
work and the length of service, not because of the mode or
even the reason for hiring them.”
As Assistant Vice-President of the Foreign Department of the
Bank she performs tasks integral to the operations of the bank
and her length of service with the bank totaling 28 years
speaks volumes of her status as a regular employee of the
bank. In fine, as a regular employee, she is entitled to security
of tenure; that is, her services may be terminated only for a just
or authorized cause. This being in truth a case of illegal
dismissal, it is no wonder then that the Bank endeavored to the
very end to establish loss of trust and confidence and serious
misconduct on the part of private respondent but, as will be
discussed later, to no avail.
Locsin vs. Nissan Lease Phils. Inc and Banson Gr No. 185567,
Oct 20, 2010 KAYE LAURENTE
G.R. No. 185567. October 20, 2010
ARSENIO Z. LOCSIN, petitioner,
vs. NISSAN LEASE PHILS., INC. and LUIS BANSON,
respondents.
Facts:
On January 1, 1992, Petitioner Arsenio Locsin was elected
Executive Vice President and Treasurer (EVP/Treasurer) of
Respondent NISSAN LEASE PHILS., INC (NCLPI). As
EVP/Treasurer.

Locsin held this position for 13 years, having been re-elected
every year since 1992, until January 21, 2005, when he was
nominated and elected Chairman of NCLPI’s Board of
Directors.
On August 5, 2005, the NCLPI Board during their meeting
conducted an election of a new set of officers. Unfortunately,
Locsin was neither re-elected Chairman nor reinstated to his
previous position as EVP/Treasurer.
On June 19, 2007, Locsin filed a complaint for illegal dismissal
with prayer for reinstatement, payment of backwages,
damages and attorney’s fees before the Labor Arbiter against
NCLPI and Banson, who was then President of NCLPI.
Issue:
Whether Locsin’s position as Executive Vice-President/
Treasurer makes him a corporate officer thereby excluding him
from the coverage of the Labor Code?
Held:
Yes. Even as Executive Vice-President/Treasurer, Locsin
already acted as a corporate officer because the position of
Executive Vice-President/Treasurer is provided for in Nissan’s
By-Laws. Article IV, Section 4 of these By-Laws specifically
provides for this position, as follows:
ARTICLE IV
Officers
“Section 1. Election and Appointment.—The Board of
Directors at their first meeting, annually thereafter, shall elect
as officers of the Corporation a Chairman of the Board, a
President, an Executive Vice-President/Treasurer, a Vice-
President/General Manager and a Corporate Secretary. The
other Senior Operating Officers of the Corporation shall be
appointed by the Board upon the recommendation of the
President.
In this case, Locsin was elected by the NCLPI Board, in
accordance with the Amended By-Laws of the corporation. The
unrebutted fact remains that private respondent held the
position of Executive Vice-President/Treasurer of petitioner
corporation, a position provided for in the latter’s by-laws, by
virtue of election by the Board of Directors, and has functioned
as such Executive Vice-President/Treasurer pursuant to the
provisions of the said By-Laws. Private respondent knew very
well that he was simply not re-elected to the said position
during the August 5, 2005 board meeting, but he had objected
to the election of a new set of officers held at the time upon the
advice of his lawyer that he cannot be “terminated” or replaced
as Executive Vice-President/Treasurer as he had attained
tenurial security.”
Given Locsin’s status as a corporate officer, the RTC, not the
Labor Arbiter or the NLRC, has jurisdiction to hear the legality
of the termination of his relationship with Nissan. A corporate
officer’s dismissal is always a corporate act, or an intra-
corporate controversy which arises between a stockholder and
a corporation. In the context of the present case, the Labor
Arbiter does not have jurisdiction over the termination dispute
Locsin brought, and should not be allowed to continue to act
on the case after the absence of jurisdiction has become
obvious, based on the records and the law. In more practical
terms, a contrary ruling will only cause substantial delay and
inconvenience as well as unnecessary expenses, to the point
of injustice, to the parties.
G.R. No. 168757. January 19, 2011.*
RENATO REAL, petitioner,
vs. SANGU PHILIPPINES, INC. and/or KIICHI ABE,
respondents.
Facts:
Renato Real, the petitioner, was the Manager of Sangu
Philippines, Inc., the respondent, which was a corporation
engaged in the business of providing manpower for general
services like janitors and other maintenance personnel.
In 2001, Real was removed from his position as Manager
through a board resolution of adopted by Sangu Philippine’s
Board of Directors. Thus, he filed a complaint for illegal
dismissal.
Real claimed that he was not notified of the said board meeting
where the said resolution was passed nor was he formally
charged of any infraction. He claims that he just received a
letter stating that he has been terminated from service for the
following reasons: (1) continuous absences at his post at
Ogino Philippines Inc. for several months which was
detrimental to the corporation’s operation; (2) loss of trust and
confidence; and, (3) to cut down operational expenses to
reduce further losses being experienced by respondent
corporation.
Sangu Philippine claims that Real committed gross acts of
misconduct detrimental to the company since 2000. They claim
that Real was frequently absent and had neglected to
supervise the employees resulting to several client complaints,
so the termination of services.
Labor Arbiter: Held that there was illegal dismissal
NLRC: There was no illegal dismissal because Real was a
stockholder (as evidenced by the GIS) and was occupying a
managerial position, hence, action against him was an intra-
corporate controversy over which the Labor Arbiter has no
jurisdiction.
CA: Affirmed the decision of the NLRC
Issue:
Whether the petitioner’s complaint for illegal dismissal is an
intra-corporate controversy thus beyond the jurisdiction of the
Labor Arbiter
Ruling:
No. The present case is not an intra-corporate controversy,
thus it is a termination dispute well within the jurisdiction of the
Labor Arbiter.
The SC deemed it proper to determine whether the case
involves an intra-corporate controversy before resolving the
case of illegal dismissal.
In Speed Distribution Inc. v. Court of Appeals:
‘To determine whether a case involves an intra-corporate
controversy and is to be heard and decided by the branches of
8
the RTC specifically designated by the Court to try and decide
such cases, two elements must concur: (a) the status or
relationship of the parties, and (2) the nature of the question
that is the subject of their controversy.
The first element requires that the controversy must arise out
of intra-corporate or partnership relations between any or all of
the parties and the corporation, partnership, or association of
which they are not stockholders, members or associates,
between any or all of them and the corporation, partnership or
association of which they are stockholders, members or
associates, respectively; and between such corporation,
partnership, or association and the State insofar as it concerns
the individual franchises. The second element requires that the
dispute among the parties be intrinsically connected with the
regulation of the corporation. If the nature of the controversy
involves matters that are purely civil in character, necessarily,
the case does not involve an intra-corporate controversy.’
As guided by such jurisprudence, the SC held that the fact
alone that petitioner is a stockholder and director of the
corporation automatically classifies this case as an intra-
corporate controversy. To reiterate, not all conflicts between
the stockholders and the corporation are classified as intra-
corporate. There are other factors to consider in determining
whether the dispute involves corporate matters as to consider
them as intra-corporate controversies.
Moreover, Sangu Philippines failed to prove that Real was
appointed by the board of directors as the Manager under the
corporation’s by-laws. Thus, the SC did not subscribe to the
claim that Real was indeed a corporate officer. Additionally, the
reasons for the dismissal of Real have something to do with
being a manager of the corporation and has nothing to do with
being a director or stockholder.
With the elements of intra-corporate controversy being absent
in this case, the SC held that petitioner’s complaint for illegal
dismissal against respondents is not intra-corporate. Rather, it
is a termination dispute and, consequently, falls under the
jurisdiction of the Labor Arbiter pursuant to Section 21730 of
the Labor Code.
Illegal Dismissal
In an illegal dismissal case, the onus probandi rests on the
employer to prove that the dismissal of an employee is for a
valid cause.” Here, as correctly observed by the Labor Arbiter,
respondents failed to produce any convincing proof to support
the grounds for which they terminated the petitioner.
Moreover, petitioner’s dismissal was effected without due
process of law. “The twin requirements of notice and hearing
constitute the essential elements of due process. The law
requires the employer to furnish the employee sought to be
dismissed with two written notices before termination of
employment can be legally effected: (1) a written notice
apprising the employee of the particular acts or omissions for
which his dismissal is sought in order to afford him an
opportunity to be heard and to defend himself with the
assistance of counsel, if he desires, and (2) a subsequent
notice informing the employee of the employer’s decision to

dismiss him. This procedure is mandatory and its absence
taints the dismissal with illegality.”
Since in this case, petitioner’s dismissal was effected through
a board resolution and all that petitioner received was a letter
informing him of the board’s decision to terminate him, the due
process requirement was clearly not complied with. All told, the
SC agrees with the findings of the Labor Arbiter that petitioner
has been illegally dismissed. And, as an illegally dismissed
employee is entitled to the two reliefs of backwages and
reinstatement.
G.R. No. 201298. February 5, 2014.*
RAUL C. COSARE, petitioner,
vs. BROADCOM ASIA, INC. and DANTE AREVALO,
respondents.
Facts:
In April 1993, Raul Cosare was employed as a salesman by
Dante Arevalo who was then in the business of selling
broadcast equipment needed by television networks and
production houses.
In December 2000, Arevalo set up the company Broadcom,
still to continue the business of trading communication and
broadcast equipment. Cosare was named an incorporator of
Broadcom, having been assigned 100 shares of stock with par
value of P1.00 per share. In October 2001, Cosare was
promoted to the position of Assistant Vice President for Sales
(AVP for Sales) and Head of the Technical Coordination,
having a monthly basic net salary and average commissions of
P18,000.00 and P37,000.00, respectively
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as
Broadcom’s Vice President for Sales and thus, became
Cosare’s immediate superior. On March 23, 2009, Cosare sent
a confidential memo to Arevalo to inform him of the anomalies
which were allegedly being committed by Abiog. Cosare ended
his memo by clarifying that he was not interested in Abiog’s
position, but only wanted Arevalo to know of the irregularities
for the corporation’s sake.
Apparently, Arevalo failed to act on Cosare’s accusations.
Cosare claimed that he was instead called for a meeting by
Arevalo on March 25, 2009, wherein he was asked to tender
his resignation in exchange for “financial assistance” in the
amount of P300,000.00. Cosare refused to comply with the
directive, as signified in a letter dated March 26, 2009 which he
sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal
(Villareal), Broadcom’s Manager for Finance and
Administration, a memo signed by Arevalo, charging him of
serious misconduct and willful breach of trust.
On April 2, 2009, Cosare was totally barred from entering the
company premises.
Issues:
1. Whether the case instituted by Cosare was an intra-
corporate dispute that was within the original jurisdiction of the
RTC and not of the Labor Arbiter
2. Whether Cosare was constructively and illegally
dismissed from employment
Ruling:
1. No.
The SC held that it is the Labor Arbiter, and not the regular
courts, which has the original jurisdiction over the subject
controversy.
An intra-corporate controversy, which falls within the
jurisdiction of regular courts, has been regarded in its broad
sense to pertain to disputes that involve any of the following
relationships: (1) between the corporation, partnership or
association and the public; (2) between the corporation,
partnership or association and the state in so far as its
franchise, permit or license to operate is concerned; (3)
between the corporation, partnership or association and its
stockholders, partners, members or officers; and (4) among
the stockholders, partners or associates, themselves.[29]
Settled jurisprudence, however, qualifies that when the dispute
involves a charge of illegal dismissal, the action may fall under
the jurisdiction of the LAs upon whose jurisdiction, as a rule,
falls termination disputes and claims for damages arising from
employer-employee relations as provided in Article 217 of the
Labor Code. Consistent with this jurisprudence, the mere fact
that Cosare was a stockholder and an officer of Broadcom at
the time the subject controversy developed failed to
necessarily make the case an intra-corporate dispute.
Applying such to the present case, the LA had the original
jurisdiction over the complaint for illegal dismissal because
Cosare, although an officer of Broadcom for being its AVP for
Sales, was not a “corporate officer” as the term is defined by
law.
2. Yes.
The SC affirms the NLRC’s ruling that Cosare has been
illegally dismissed from employment.
It is also worth mentioning that a few days before the issuance
of the memo dated March 30, 2009, Cosare was allegedly
summoned to Arevalo’s office and was asked to tender his
immediate resignation from the company, in exchange for a
financial assistance of P300,000.00. The directive was said to
be founded on Arevalo’s choice to retain Abiog’s employment
with the company. The respondents failed to refute these
claims.
Given the circumstances, the Court agrees with Cosare’s claim
of constructive and illegal dismissal. “Constructive dismissal
occurs when there is cessation of work because continued
employment is rendered impossible, unreasonable, or unlikely
as when there is a demotion in rank or diminution in pay or
when a clear discrimination, insensibility, or disdain by an
employer becomes unbearable to the employee leaving the
latter with no other option but to quit.”
Thus, it is clear from the circumstances that the respondents
already rejected Cosare’s continued involvement with the
company. Even their refusal to accept the explanation which
Cosare tried to tender on April 2, 2009 further evidenced the
9
resolve to deny Cosare of the opportunity to be heard prior to
any decision on the termination of his employment.
3.6 Effect when NO employer-employee relationship
exists, or when the main issue does not involve ER-EE
relationship; Jurisdiction devolves with the regular courts
G.R. No. 92598 May 20, 1994
PURIFICACION Y. MANLIGUEZ, ANTONINA Y. LUIS and
BENJAMIN C. YBANEZ vs. THE COURT OF APPEALS, ET
AL.,
FACTS: The case at bench finds its roots in the
Decision of the Department of Labor and Employment (Region
VII), ordering Inductocast Cebu to pay its former employees a
total of P232,908.00. As a consequence of the judgment, the
labor department's regional sheriff levied the buildings and
improvements standing on Lot 109, Plan 11-5121-Amd., at
Tipolo, Mandaue City. The levied properties (hereinafter
referred to as the "Tipolo properties") were subsequently sold
at public auction to said employees.
Petitioners filed with the RTC a Complaint which sought the
lifting of the levy over, and annulment of the sale of, the Tipolo
properties. The Complaint was docketed as Civil Case No.
Ceb-6917. Petitioners therein alleged that: they are the owners
of the Lot 109; they entered into a lease agreement with
Inductocast Cebu over Lot 109; the lease contract provided
that, except for machineries and equipment, all improvements
introduced in the leased premises shall automatically be
owned by the Lessor (petitioners) upon the
expiration/termination of the contract; the lease agreement was
terminated by petitioners in November, 1980 due to non-
payment of rentals by Inductocast Cebu; thereafter, petitioners
took actual possession of and occupied the Tipolo properties.
Atty. Danilo Pilapil filed a motion to dismiss on the
ground that the trial court had no jurisdiction over the case.
The buyers of the Tipolo properties, as intervenors, also filed a
motion to dismiss on the same ground.
The trial court granted the motion and dismissed Civil Case
No. Ceb-6917. It held it had no jurisdiction over the case since
the levy and sale "are connected with the case within the
exclusive jurisdiction of the Department of Labor and
Employment."
Petitioners questioned the dismissal of their Complaint to the
respondent Court of Appeals. The appellate court denied the
petition, as it held that he Department of Labor is the agency
upon which devolves the jurisdiction over disputes emanating
from and in relation with labor controversies to the exclusion of
the regular courts.
ISSUE: Whether the regular courts have
jurisdiction over the case filed by the petitioners.
RULING: YES. The regular courts have jurisdiction
over the case filed by the petitioners.
Respondent court erred in holding that the trial court
does not have jurisdiction over the case filed by petitioners. It
is at once evident that the Civil Case No. Ceb-6917 is not a

labor case. No employer-employee relationship exists between
petitioners and the other parties, and no issue is involved
which may be resolved by reference to the Labor Code, other
labor statutes, or any collective bargaining agreement. Neither
can we characterize petitioner's action before the trial court as
arising out of a labor dispute. It was not brought to reverse or
modify the judgment of the Department of Labor and
Employment (DOLE). Neither did it question the validity of, or
pray for, the quashal of the writ of execution against
Inductocast.
What is to be litigated in Civil Case No. Ceb-6917 is the issue
of ownership over the Tipolo properties. Clearly, it is the RTC
and not the labor department which can take cognizance of the
case, as provided by B.P. Blg. 129 ("An Act Reorganizing the
Judiciary, Appropriating Funds Therefor, and For Other
Purposes"), thus:
Sec. 19. Jurisdiction in civil case. — Regional Trial Courts shall
exercise exclusive original jurisdiction:
xxx xxx xxx
(2) In all civil actions which involve the title to, or possession of
real property, or any interest therein, except actions for forcible
entry into and unlawful detainer of lands or buildings, original
jurisdiction over which is conferred upon Metropolitan Trial
Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts;
xxx xxx xxx
The action taken by petitioners before the RTC asserting their
ownership over the levied properties is mandated by Section
17, Rule 39 of the Revised Rules of Court. Time and again, we
have held that:
Under Section 17, Rule 39, a third person who claims property
levied upon on execution may vindicate such claim by action. .
. . The right of a person who claims to be the owner of property
levied upon on execution to file a third-party claim with the
sheriff is not exclusive, and he may file an action to vindicate
his claim even if the judgment creditor files an indemnity bond
in favor of the sheriff to answer for any damages that may be
suffered by the third-party claimant. By "action", as stated in
the Rule, what is meant is a separate and independent action.
G.R. No. 109272 August 10, 1994
GEORG GROTJAHN GMBH & CO. vs. HON. LUCIA
VIOLAGO ISNANI, Presiding Judge, Regional Trial Court,
Makati, Br. 59; ROMANA R. LANCHINEBRE; and TEOFILO
A. LANCHINEBRE
FACTS: Private respondent Romana R.
Lanchinebre was a sales representative of petitioner GEORG
GROTJAHN GMBH & CO. from 1983 to mid-1992. On March
12, 1992, she secured a loan of twenty-five thousand pesos
(P25,000.00) from petitioner. On March 26 and June 10, 1992,
she made additional cash advances in the sum of ten
thousand pesos (P10,000.00). Of the total amount, twelve
thousand one hundred seventy pesos and thirty-seven
centavos (P12,170.37) remained unpaid. Despite demand,
private respondent Romana failed to settle her obligation with
petitioner.
Private respondent Romana Lanchinebre filed with
the Arbitration Branch of the National Labor Relations
Commission (NLRC) in Manila, a Complaint for illegal
suspension, dismissal and non-payment of commissions
against petitioner. Petitioner in turn filed against private
respondent a Complaint for damages amounting to one
hundred twenty thousand pesos (P120,000.00) also with the
NLRC Arbitration Branch (Manila).
Petitioner filed another Complaint for collection of sum of
money against private respondents spouses Romana and
Teofilo Lanchinebre which was docketed as Civil Case No. 92-
2486 and raffled to the sala of respondent judge. Private
respondents moved to dismiss the Complaint. Respondent
judge granted the motion to dismiss. The respondent judge
ruled that the said cash advances were made pursuant to the
employer-employee relationship between the (petitioner) and
the said (private respondent) and as such, within the original
and exclusive jurisdiction of the National Labor Relations
Commission.
ISSUE: Whether the regular courts have
jurisdiction over the case filed by the petitioner.
RULING: YES. The regular courts have jurisdiction
over the case filed by the petitioner.
The trial court should not have held itself without
jurisdiction over Civil Case No. 92-2486. It is true that the loan
and cash advances sought to be recovered by petitioner were
contracted by private respondent Romana Lanchinebre while
she was still in the employ of petitioner. Nonetheless, it does
not follow that Article 217 of the Labor Code covers their
relationship.
Not every dispute between an employer and employee
involves matters that only labor arbiters and the NLRC can
resolve in the exercise of their adjudicatory or quasi-judicial
powers. The jurisdiction of labor arbiters and the NLRC under
Article 217 of the Labor Code is limited to disputes arising from
an employer-employee relationship which can only be resolved
by reference to the Labor Code, other labor statutes, or their
collective bargaining agreement. Although a controversy is
between an employer and an employee, the Labor Arbiters
have no jurisdiction if the Labor Code is not involved.
Where the claim to the principal relief sought is to be resolved
not by reference to the Labor Code or other labor relations
statute or a collective bargaining agreement but by the general
civil law, the jurisdiction over the dispute belongs to the regular
courts of justice and not to the Labor Arbiter and the NLRC. In
such situations, resolutions of the dispute requires expertise,
not in labor management relations nor in wage structures and
other terms and conditions of employment, but rather in the
application of the general civil law. Clearly, such claims fall
outside the area of competence or expertise ordinarily ascribed
to Labor Arbiters and the NLRC and the rationale for granting
jurisdiction over such claims to these agencies disappears.
Civil Case No. 92-2486 is a simple collection of a sum of
money brought by petitioner, as creditor, against private
respondent Romana Lanchinebre, as debtor. The fact that they
were employer and employee at the time of the transaction
10
does not negate the civil jurisdiction of the trial court. The case
does not involve adjudication of a labor dispute but recovery of
a sum of money based on our civil laws on obligation and
contract.
EDUARDO G. EVIOTA vs CA
G.R. No. 152121. July 29, 2003
Facts:
Sometime on January 26, 1998, the respondent Standard
Chartered Bank and petitioner Eduardo G. Eviota executed a
contract of employment under which the petitioner was
employed by the respondent bank as Compensation and
Benefits Manager, VP (M21). However, the petitioner abruptly
resigned from the respondent bank barely a month after his
employment and rejoined his former employer.
On June 19, 1998, the respondent bank filed a complaint
against the petitioner with the RTC. That Eviota indicated his
conformity with the Banks Offer of Employment by signing a
written copy of such in an Employment Contract and the Bank
promptly proceeded to carry out the terms of the Employment
Contract as well as to facilitate his integration into the
workforce. The Bank: (a) renovated and refurbished the room
which was to serve as Eviotas office; (b) purchased a 1998
Honda CR-V for Eviotas use; (c) purchased a desktop IBM
computer for Eviotas use; (d) arranged the takeout of Eviotas
loans with Eviotas former employer; (e) released Eviotas
signing bonus in the net amount of P300,000.00; (f) booked
Eviotas participation in a Singapore conference on Y2K project
scheduled on March 10 and 11, 1998; and (g) introduced
Eviota to the local and regional staff and officers of the Bank
via personal introductions and electronic mail. In addition, the
Bank allowed Eviota access to certain sensitive and
confidential information and documents concerning the Banks
operations.
After leading the Bank to believe that he had come to stay,
Eviota suddenly resigned his employment with immediate
effect to re-join his previous employer. His resignation, which
did not comply with the 30-day prior notice rule under the law
and under the Employment Contract, was so unexpected that it
disrupted plans already in the pipeline.
Standard alleged that assuming arguendo that Eviota had the
right to terminate his employment with the Bank for no reason,
the manner in and circumstances under which he exercised
the same are clearly abusive and contrary to the rules
governing human relations, governed by the Civil Code.
Further, Standard alleged that petitioner also violated the
Labor Code when he terminated his employment without one
(1) notice in advance. This stipulation was also provided in the
employment contract of Eviota with Standard, which would
also constitute breach of contract.
ISSUE: Which court has the jurisdiction of the case?
RULING: The SC held that the RTC has jurisdiction. Case law
has it that the nature of an action and the subject matter
thereof, as well as which court has jurisdiction over the same,

are determined by the material allegations of the complaint and
the reliefs prayed for in relation to the law involved. Not every
controversy or money claim by an employee against the
employer or vice-versa is within the exclusive jurisdiction of the
labor arbiter. A money claim by a worker against the employer
or vice-versa is within the exclusive jurisdiction of the labor
arbiter only if there is a “reasonable causal connection”
between the claim asserted and employee-employer relation.
Absent such a link, the complaint will be cognizable by the
regular courts of justice.
Actions between employees and employer where the
employer-employee relationship is merely incidental and the
cause of action precedes from a different source of obligation
is within the exclusive jurisdiction of the regular court. The
jurisdiction of the Labor Arbiter under Article 217 of the Labor
Code, as amended, is limited to disputes arising from an
employer-employee relationship which can only be resolved by
reference to the Labor Code of the Philippines, other labor
laws or their collective bargaining agreements.
Jurisprudence has evolved the rule that claims for damages
under paragraph 4 of Article 217, to be cognizable by the
Labor Arbiter, must have a reasonable causal connection with
any of the claims provided for in that article. Only if there is
such a connection with the other claims can the claim for
damages be considered as arising from employer-employee
relations.
In this case, the private respondent’s first cause of action for
damages is anchored on the petitioner’s employment of deceit
and of making the private respondent believe that he would
fulfill his obligation under the employment contract with
assiduousness and earnestness. The petitioner volte face
when, without the requisite thirty-day notice under the contract
and the Labor Code of the Philippines, as amended, he
abandoned his office and rejoined his former employer; thus,
forcing the private respondent to hire a replacement. The
private respondent was left in a lurch, and its corporate plans
and program in jeopardy and disarray. Moreover, the
petitioner took off with the private respondent’s computer
diskette, papers and documents containing confidential
information on employee compensation and other bank
matters. On its second cause of action, the petitioner simply
walked away from his employment with the private respondent
sans any written notice, to the prejudice of the private
respondent, its banking operations and the conduct of its
business. Anent its third cause of action, the petitioner made
false and derogatory statements that the private respondent
reneged on its obligations under their contract of employment;
thus, depicting the private respondent as unworthy of trust.
The primary relief sought is for liquidated damages for breach
of a contractual obligation. The other items demanded are not
labor benefits demanded by workers generally taken
cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed
are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.
It is evident that the causes of action of the private respondent
against the petitioner do not involve the provisions of the Labor
Code of the Philippines and other labor laws but the New Civil
Code. Thus, the said causes of action are intrinsically civil.
There is no causal relationship between the causes of action of
the private respondent’s causes of action against the petitioner
and their employer-employee relationship. The fact that the
private respondent was the erstwhile employer of the petitioner
under an existing employment contract before the latter
abandoned his employment is merely incidental.
4.1 Management prerogative to contract out of services
[G.R. No. 131108. March 25, 1999]
ASIAN ALCOHOL CORPORATION, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION, FOURTH
DIVISION, CEBU CITY and ERNESTO A. CARIAS,
ROBERTO C. MARTINEZ, RAFAEL H. SENDON, CARLOS
A. AMACIO, LEANDRO O. VERAYO and ERENEO S.
TORMO, respondents. [Zusmitha]
FACTS: In September, 1991, the Parsons family, who
originally owned the controlling stocks in Asian Alcohol, were
driven by mounting business losses to sell their majority rights
to prior Holdings, Inc which took over its management and
operation the following month.
To thwart further losses, Prior Holdings implemented a
reorganizational plan and other cost-saving measures.117
employees out of a total workforce 360 were separated. 72 of
them occupied redundant positions that were abolished. Of
these positions, 21 were held by union members and 51 by
non-union members. The six (6) private respondents are
among those union members whose positions were abolished
due to redundancy.
In October, 1992, they received individual notices of
termination effective November 30, 1992 as well as the
monetary equivalent of the services that they rendered. All of
them executed sworn releases, waivers and quitclaims. Except
for Verayo and Tormo, they all signed sworn statements of
conformity to the company retrenchment program. And except
for Martinez, they all tendered letters of resignation
On December 18, 1992, the six (6) private respondents files
with the NLRC complaints for illegal dismissal. They alleged
that Asian Alcohol used the retrenchment program as a
subterfuge for the union busting. They claimed that they were
singled out for separation by reason for their active
participation in the union. They also asseverated that Asian
Alcohol was not bankrupt as it has engaged in an aggressive
scheme of contractual hiring.
The Executive Labor Arbiter dismissed the complaints. He
explained that the fact that respondents AAC incurred losses in
its business operations was not seriously challenged by the
complainants and that the law allows an employer to retrench
some of its employees to prevent losses.
Private respondents appealed to the NLRC. The latter ruled in
favor of the private respondents.
ISSUE: Whether or not retrenchment is within the ambit of
management prerogative.
11
HELD: The right of management to dismiss workers during
periods of business recession and to install labor saving
devices to prevent losses is governed by Art. 283 of the Labor
Code, as amended. It provides:
Art. 283. Closure of establishment and reduction of personnel.-
-The employer may also terminate the employment of any
employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least
one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or
to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses
and in case of closures or cessation of operations of
establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year.
Out of its concern for those with less privilege in life, this Court
has inclined towards the worker and upheld his cause in his
conflicts with the employer. This favored treatment is directed
by the social justice policy of the Constitution. But while tilting
the scales of justice in favor of workers, the fundamental law
also guarantees the right of the employer to reasonable returns
from his investments.Corollarily, the law allows an employer to
downsize his business to meet clear and continuing economic
threats. Thus, this Court has upheld reductions in the work
force to forestall business losses or stop the hemorrhaging of
capital. The right of management to dismiss workers during
periods of business recession and to instl labor saving devices
to prevent losses is governed by Art. 283 of the Labor Code,
as amended.
G.R. No. 127598 February 22, 2000
MANILA ELECTRIC COMPANY, petitioner,
vs. Hon. SECRETARY OF LABOR LEONARDO
QUISUMBING and MERALCO EMPLOYEES and
WORKERS ASSOCIATION (MEWA), respondent.
RESOLUTION
YNARES-SANTIAGO, J.: |MISHING ALABA|
Facts: In January 27, 1999, the SC promulgated a decision
directing the parties to execute a CBA which provided for
increase in wages and retroactive application of arbitral
awards.
Meralco filed this petition arguing that an increase in wages will
result in higher rates of electricity which will be passed to the
consumers. The union asked for reconsideration in so far as
the 1999 decision denied them the benefit of being granted
loans to set up a cooperative. The union also questioned the
right given to Mercalco in contracting out jobs without need to
consult the union.

Issue: W/N contracting out of services is an exercise of
management prerogative
Ruling: YES
The added requirement of consultation imposed by the
Secretary in cases of contracting out for six (6) months or more
has been rejected by the Court. Suffice it to say that the
employer is allowed to contract out services for six months or
more. However, a line must be drawn between management
prerogatives regarding business operations per se and those
which affect the rights of employees, and in treating the latter,
the employer should see to it that its employees are at least
properly informed of its decision or modes of action in order to
attain a harmonious labor-management relationship and
enlighten the workers concerning their rights. Hiring of workers
is within the employer's inherent freedom to regulate and is a
valid exercise of its management prerogative subject only to
special laws and agreements on the matter and the fair
standards of justice. The management cannot be denied the
faculty of promoting efficiency and attaining economy by a
study of what units are essential for its operation. It has the
ultimate determination of whether services should be
performed by its personnel or contracted to outside agencies.
While there should be mutual consultation, eventually
deference is to be paid to what management decides.
Contracting out of services is an exercise of business
judgment or management prerogative. Absent proof that
management acted in a malicious or arbitrary manner, the
Court will not interfere with the exercise of judgment by an
employer.
As mentioned in the January 27, 1999 Decision, the law
already sufficiently regulates this matter. Jurisprudence also
provides adequate limitations, such that the employer must be
motivated by good faith and the contracting out should not be
resorted to circumvent the law or must not have been the
result of malicious or arbitrary actions. These are matters that
may be categorically determined only when an actual suit on
the matter arises.
OTHER ISSUES:
Issue: Whether or not increase in wages will result in higher
prices of electricity
Ruling: This is a non sequitur. The Court cannot be threatened
with such a misleading argument. An increase in the prices of
electric current needs the approval of the appropriate
regulatory government agency and does not automatically
result from a mere increase in the wages of petitioner's
employees.
Issue on the retroactivity of the CBA arbitral award
CBA Arbitral awards granted after six months from the
expiration of the last CBA shall retroact to such time agreed
upon by both employer and the employees of their union.
Absent such an agreement as to retroactivity, the award shall
retroact to the first day after the six-month period following the
expiration of the last day of the CBA.
· Therefore, in the absence of a specific provision of law
prohibiting retroactivity of the effectivity of arbitral awards
issued by the Secretary of Labor pursuant to Article 263(g) of
the Labor Code, such as herein involved, public respondent
[Secretary of Labor] is deemed vested with plenary and
discretionary powers to determine the effectivity thereof.
Issue on the allegation concerning the grant of loan to a
cooperative.
· There is no merit in the union's claim that it is no
different from housing loans granted by the employer. The
award of loans for housing is justified because it pertains to a
basic necessity of life. It is part of a privilege recognized by the
employer and allowed by law.
· In contrast, providing seed money for the establishment
of the employee's cooperative is a matter in which the
employer has no business interest or legal obligation. Courts
should not be utilized as a tool to compel any person to grant
loans to another nor to force parties to undertake an obligation
without justification. On the contrary, it is the government that
has the obligation to render financial assistance to
cooperatives and the Cooperative Code does not make it an
obligation of the employer or any private individual.
G.R. No. 160506 June 6, 2011
ALIVIADO et. al.
vs. PROCTER & GAMBLE PHILS., INC., and PROMM-GEM
INC., Respondents.
DEL CASTILLO, J.: |MISHING ALABA|
Principle: Labor laws expressly prohibit "labor-only"
contracting. To prevent its circumvention, the Labor Code
establishes an employer-employee relationship between the
employer and the employees of the ‘labor-only’ contractor.
Facts: Petitioners worked as merchandisers of P&G from
various dates. They all individually signed employment
contracts with either Promm-Gem or SAPS for periods of more
or less five months at a time.5 They were assigned at different
outlets, supermarkets and stores where they handled all the
products of P&G. They received their wages from Promm-Gem
or SAPS.6 SAPS and Promm-Gem imposed disciplinary
measures on erring merchandisers for reasons such as
habitual absenteeism, dishonesty or changing day-off without
prior notice.7
P&G is principally engaged in the manufacture and production
of different consumer and health products, which it sells on a
wholesale basis to various supermarkets and distributors.8 To
enhance consumer awareness and acceptance of the
products, P&G entered into contracts with Promm-Gem and
SAPS for the promotion and merchandising of its products.9
In December 1991, petitioners filed a complaint10 against P&G
for regularization, service incentive leave pay and other
benefits with damages. The complaint was later amended11 to
include the matter of their subsequent dismissal.
Rulings of the LA, NLRC and CA [same]: There was no
employer-employee relationship between petitioners and P&G.
The selection and engagement of the petitioners, the payment
of their wages, the power of dismissal and control with respect
to the means and methods by which their work was
12
accomplished, were all done and exercised by Promm-
Gem/SAPS. Promm-Gem and SAPS were legitimate
independent job contractors.
CONTENTIONS:
Petitioners assert that Promm-Gem and SAPS are labor-only
contractors providing services of manpower to their client.
They claim that the contractors have neither substantial capital
nor tools and equipment to undertake independent labor
contracting. Petitioners insist that since they had been
engaged to perform activities which are necessary or desirable
in the usual business or trade of P&G, then they are its regular
employees.20
On the other hand, P&G argues that there is no employment
relationship between it and petitioners. It was Promm-Gem or
SAPS that (1) selected petitioners and engaged their services;
(2) paid their salaries; (3) wielded the power of dismissal; and
(4) had the power of control over their conduct of work.
P&G also contends that the Labor Code neither defines nor
limits which services or activities may be validly outsourced.
Thus, an employer can farm out any of its activities to an
independent contractor, regardless of whether such activity is
peripheral or core in nature. It insists that the determination of
whether to engage the services of a job contractor or to
engage in direct hiring is within the ambit of management
prerogative.
Issues
Whether P&G is the employer of petitioners - YES
Whether petitioners were illegally dismissed - YES
Whether petitioners are entitled for payment of actual, moral
and exemplary damages as well as litigation costs and
attorney’s fees.[see ruling]
RULING: The petition has merit.
1st Issue: Labor-only contracting and job contracting
In order to resolve the issue of whether P&G is the employer of
petitioners, it is necessary to first determine whether Promm-
Gem and SAPS are labor-only contractors or legitimate job
contractors.
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 and underscoring
supplied.)
To emphasize, there is labor-only contracting when the
contractor or sub-contractor merely recruits, supplies or places
workers to perform a job, work or service for a principal25 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.
(Underscoring supplied)
Under the circumstances, Promm-Gem cannot be considered
as a labor-only contractor. We find that it is a legitimate
independent contractor.
"Where ‘labor-only’ contracting exists, the Labor Code itself
establishes an employer-employee relationship between the
employer and the employees of the ‘labor-only’ contractor."
The statute establishes this relationship for a comprehensive
purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal
employer and the latter is responsible to the employees of the
labor-only contractor as if such employees had been directly
employed by the principal employer.40
Consequently, the following petitioners, having been recruited
and supplied by SAPS41 -- which engaged in labor-only
contracting -- are considered as the employees of P&G and
Promm-Gem.
2nd Issue: Termination of services
In cases of regular employment, the employer shall not
terminate the services of an employee except for a just43 or
authorized44 cause.
In the instant case, the termination letters given by Promm-
Gem to its employees uniformly specified the cause of
dismissal as grave misconduct and breach of trust.
Misconduct has been defined as improper or wrong conduct;
the transgression of some established and definite rule of
action, a forbidden act, a dereliction of duty, unlawful in
character implying wrongful intent and not mere error of
judgment. The misconduct to be serious must be of such grave
and aggravated character and not merely trivial and
unimportant.46 To be a just cause for dismissal, such
misconduct (a) must be serious; (b) must relate to the
performance of the employee’s duties; and (c) must show that
the employee has become unfit to continue working for the
employer.47
It is equally important and required that the act or conduct
must have been performed with wrongful intent.48 In the
instant case, petitioners-employees of Promm-Gem may have
committed an error of judgment in claiming to be employees of
P&G, but it cannot be said that they were motivated by any
wrongful intent in doing so. As such, we find them guilty of only
simple misconduct for assailing the integrity of Promm-Gem as
a legitimate and independent promotion firm. A misconduct
which is not serious or grave, as that existing in the instant
case, cannot be a valid basis for dismissing an employee.
Meanwhile, loss of trust and confidence, as a ground for
dismissal, must be based on the willful breach of the trust
reposed in the employee by his employer. Ordinary breach will
not suffice. Loss of trust and confidence, as a cause for
termination of employment, is premised on the fact that the
employee concerned holds a position of responsibility or of
trust and confidence. The petitioners-employees of Promm-
Gem have not been shown to be occupying positions of
responsibility or of trust and confidence. Neither is there any
evidence to show that they are unfit to continue to work as
merchandisers for Promm-Gem.
All told, we find no valid cause for the dismissal of petitioners-
employees of Promm-Gem.
While Promm-Gem had complied with the procedural aspect of
due process in terminating the employment of petitioners-
employees, i.e., giving two notices and in between such
notices, an opportunity for the employees to answer and rebut
the charges against them, it failed to comply with the
substantive aspect of due process as the acts complained of
neither constitute serious misconduct nor breach of trust.
Hence, the dismissal is illegal.
It must be emphasized that the onus probandi to prove the
lawfulness of the dismissal rests with the employer.53 In
termination cases, the burden of proof rests upon the employer
to show that the dismissal is for just and valid cause.54 In the
instant case, P&G failed to discharge the burden of proving the
legality and validity of the dismissals of those petitioners who
are considered its employees. Hence, the dismissals
necessarily were not justified and are therefore illegal.
3rd issue: Damages
With regard to the employees of Promm-Gem, there being no
evidence of bad faith, fraud or any oppressive act on the part
of the latter, we find no support for the award of damages.
As for P&G, the records show that it dismissed its employees
through SAPS in a manner oppressive to labor. The sudden
and peremptory barring of the concerned petitioners from
work, and from admission to the work place, after just a one-
day verbal notice, and for no valid cause bellows oppression
and utter disregard of the right to due process of the
concerned petitioners. Hence, an award of moral damages is
called for. Attorney’s fees may likewise be awarded to the
concerned petitioners who were illegally dismissed in bad faith
and were compelled to litigate or incur expenses to protect
their rights by reason of the oppressive acts56 of P&G.
Lastly, under Article 279 of the Labor Code, an employee who
is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other
privileges, inclusive of allowances, and other benefits or their
monetary equivalent from the time the compensation was
withheld up to the time of actual reinstatement.57 Hence, all
the petitioners, having been illegally dismissed are entitled to
reinstatement without loss of seniority rights and with full back
wages and other benefits from the time of their illegal dismissal
up to the time of their actual reinstatement.
G.R. No. 170054 : January 21, 2013
GOYA, INC., Petitioner, v. GOYA, INC. EMPLOYEES
UNION-FFW, Respondent. [Zusmitha Salcedo]
FACTS: Petitioner Goya, Inc., a domestic corporation, hired
contractual employees from PESO Resources Development
13
Corporation (PESO) to perform temporary and occasional
services in its factory. This prompted respondent Goya, Inc.
Employees UnionFFW (Union) to request for a grievance
conference on the ground that the contractual workers do not
belong to the categories of employees stipulated in the existing
Collective Bargaining Agreement (CBA). When the matter
remained unresolved, the grievance was referred to the
National Conciliation and Mediation Board (NCMB) for
voluntary arbitration.
The Union asserted that the hiring of contractual employees
from PESO is not a management prerogative and in gross
violation of the CBA tantamount to unfair labor practice (ULP).
It noted that the contractual workers engaged have been
assigned to work in positions previously handled by regular
workers and Union members, in effect violating Section 4,
Article I of the CBA. In its answer, one of its arguments is that
Section 4, Article I of the CBA merely provides for the definition
of the categories of employees and does not put a limitation on
the Company’s right to engage the services of job contractors
or its management prerogative to address
temporary/occasional needs in its operation.
On October 26, 2004, VA Laguesma dismissed the Unions
charge of ULP for being purely speculative and for lacking in
factual basis, but the Company was directed to observe and
comply with its commitment under the CBA. While the Union
moved for partial reconsideration of the VA Decision, the
Company immediately filed a petition for review before the
Court of Appeals (CA) arguing that the hiring of contractual
employees is a valid exercise of management prerogative. The
CA dismissed the petition.
ISSUE: Whether or not the hiring of contractual employees a
valid exercise of management prerogative.
HELD: Yes, the company’s engagement of PESO was indeed
a management prerogative.
In justifying its act, the Company posits that its engagement of
PESO was a management prerogative. It bears stressing that
a management prerogative refers to the right of the employer
to regulate all aspects of employment, such as the freedom to
prescribe work assignments, working methods, processes to
be followed, regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and dismissal
and recall of work, presupposing the existence of employer-
employee relationship.
This management prerogative of contracting out services,
however, is not without limitation. In contracting out services,
the management must be motivated by good faith and the
contracting out should not be resorted to circumvent the law or
must not have been the result of malicious arbitrary actions. In
the case at bench, the CBA of the parties has already provided
for the categories of the employees in the Company’s
establishment. These categories of employees particularly with
respect to casual employees serve as limitation to the
Company’s prerogative to outsource parts of its operations
especially when hiring contractual employees. As stated
earlier, the work to be performed by PESO was similar to that
of the casual employees. With the provision on casual
employees, the hiring of PESO contractual employees,

therefore, is not in keeping with the spirit and intent of their
CBA.
In this case, Section 4, Article I (on categories of employees)
of the CBA between the Company and the Union must be read
in conjunction with its Section 1, Article III (on union security).
Both are interconnected and must be given full force and
effect. Also, these provisions are clear and unambiguous. The
terms are explicit and the language of the CBA is not
susceptible to any other interpretation. Hence, the literal
meaning should prevail. As repeatedly held, the exercise of
management prerogative is not unlimited; it is subject to the
limitations found in law, collective bargaining agreement or the
general principles of fair play and justice. Evidently, this case
has one of the restrictions- the presence of specific CBA
provisions
4.2 Independent Contractor / Job Contracting v. Labor
Only Contracting
FONTERRA BRANDS PHILS., INC., Petitioner,
vs. LEONARDO LARGADO and TEOTIMO ESTRELLADO,
Respondents
G.R. No. 205300
March 18, 2015
Digested by: Jean Marie Abellana
FACTS Petitioner Fonterra Brands Phils., Inc.contracted the
services of Zytron Marketing and Promotions Corp. for the
marketing and promotion of its milk and dairy products.
Pursuant to the contract, Zytron provided Fonterra with trade
merchandising representatives (TMRs), including respondents
Leonardo Largadoand TeotimoEstrellado. The engagement of
their services began on September 15, 2003 and May 27,
2002, respectively, and ended on June 6, 2006. On May 3,
2006, Fonterra sent Zytron a letter terminating its promotions
contract, effective June 5, 2006.
The respondents were no longer interested in continuing their
employment with Zytron.FonterraBrands Phils., Inc. then
entered into an agreement for manpower supply with A.C.
Sicat Marketing and Promotional Services. Desirous of
continuing their work as TMRs, respondents submitted their
job applications with A.C. Sicat, which hired them for a term of
five (5) months, beginning June 7, 2006 up to November 6,
2006.
When respondents’ 5-month contracts with A.C. Sicat were
about to expire, they allegedly sought renewal thereof, but
were allegedly refused. This prompted them to file complaints
for illegal dismissal, regularization, non-payment of service
incentive leave and 13th month pay, and actual and moral
damages, against petitioner, Zytron, and A.C. Sicat.
Labor Arbiter Ruling
The Labor Arbiter dismissed the complaint and ruled that: (1)
respondents were not illegally dismissed. As a matter of fact,
they were the ones who refused to renew their contract and
that they voluntarily complied with the requirements for them to
claim their corresponding monetary benefits in relation thereto;
and (2) they were consecutively employed by Zytron and A.C.
Sicat, not by Fonterra.
NLRC Ruling
The NLRC affirmed the Labor Arbiter, finding that respondents’
separation from Zytron was brought about by the execution of
the contract between Fonterra and A.C. Sicat where the
parties agreed to absorb Zytron’s personnel, including
respondents. Too, respondents failed to present any evidence
that they protested this set-up. Furthermore, respondents
failed to refute the allegation that they voluntarily refused to
renew their contract with A.C. Sicat. Also, respondents did not
assert any claim against Zytron and A.C. Sicat.
CA Ruling
Ruling on the petition, the CA, in the questioned Decision,
found that A.C. Sicat satisfies the requirements of legitimate
job contracting, but Zytron does not. According to the CA: (1)
Zytron’s paid-in capital of 250,000 cannot be considered as
substantial capital; (2) its Certificate of Registration was issued
by the DOLE months after respondents’ supposed employment
ended; and (3) its claim that it has the necessary tools and
equipment for its business is unsubstantiated. Therefore,
according to the CA, respondents were Fonterra’s employees.
Additionally, the CA held that respondents were illegally
dismissed since Fonterra itself failed to prove that their
dismissal is lawful. However, the illegal dismissal should be
reckoned from the termination of their supposed employment
with Zytron on June 6, 2006. Furthermore, respondents’
transfer to A.C. Sicat is tantamount to a completely new
engagement by another employer. Lastly, the termination of
their contract with A.C. Sicat arose from the expiration of their
respective contracts with the latter. The CA, thus, ruled that
Fonterra is liable to respondents and ordered the
reinstatement of respondents without loss of seniority rights,
with full backwages, and other benefits from the time of their
illegal dismissal up to the time of their actual reinstatement.
ISSUE
1. Whether or not Zytronand A.C. Sicatare labor-only
contractors making Fonterra the employer of herein
respondents.
2. Whether or not respondents were illegally dismissed (** I
included this issue just in case mapangutanani sir)
RULING
1. Yes. In labor-only contracting, the law creates an employer-
employee relationship between the principal and the labor-only
contractor’s employee as if such employees are directly
employed by the principal employer, and considers the
contractor as merely the agent of the principal.
A person is considered engaged in legitimate job contracting or
subcontracting if the following conditions concur:
1.The contractor or subcontractor 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, and free from the
14
control and direction of the principal in all matters connected
with the performance of the work except as to the results
thereof;
2.The contractor or subcontractor has substantial capital or
investment; and
3.The agreement between the principal and contractor or
subcontractor assures the contractual employees entitlement
to all labor and occupational safety and health standards, free
exercise of the right to self-organization, security of tenure, and
social and welfare benefits.
On the other hand, contracting is prohibited when the
contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal and if
any of the following elements are present, thus:
1.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
2.The contractor does not exercise the right to control over the
performance of the work of the contractual employee.
Thus, A.C. Sicat is engaged in legitimate job contracting and
was able to prove its status as a legitimate job contractor for
having substantial capital, that is, having assets totalling to
5.9M presented and presenting the following evidence
1.Certificate of Business Registration;
2.Certificate of Registration with the Bureau of Internal
Revenue;
3.Mayor’s Permit;
4.Certificate of Membership with the Social Security System;
5.Certificate of Registration with the Department of Labor and
Employment;
6.Company Profile; and
7.Certifications issued by its clients.
The appellate court further correctly held that Fonterra’s
issuance of Merchandising Guidelines, stock monitoring and
inventory forms, and promo mechanics, for compliance and
use of A.C. Sicat’s employees assigned to them, does not
establish that Fonterra exercises control over A.C. Sicat. We
agree with the CA’s conclusion that these were imposed only
to ensure the effectiveness of the promotion services to be
rendered by the merchandisers as it would be risky, if not
imprudent, for any company to completely entrust the
performance of the operations it has contracted out.
These sufficiently show that A.C. Sicat carries out its
merchandising and promotions business, independent of
Fonterra’s business.

2. No. The termination of respondents’ employment with was
simply brought about by the expiration of their employment
contracts.
Foremost, respondents were fixed-term employees. As
previously held by this Court, fixed-term employment contracts
are not limited, as they are under the present Labor Code, to
those by nature seasonal or for specific projects with
predetermined dates of completion; they also include those to
which the parties by free choice have assigned a specific date
of termination.The determining factor of such contracts is not
the duty of the employee but the day certain agreed upon by
the parties for the commencement and termination of the
employment relationship.
Respondents, by accepting the conditions of the contract with
A.C. Sicat, were well aware of and even acceded to the
condition that their employment thereat will end on said pre-
determined date of termination. They cannot now argue that
they were illegally dismissed by the latter when it refused to
renew their contracts after its expiration. This is so since the
non-renewal of their contracts by A.C. Sicat is a management
prerogative, and failure of respondents to prove that such was
done in bad faith militates against their contention that they
were illegally dismissed. The expiration of their contract with
A.C. Sicat simply caused the natural cessation of their fixed-
term employment thereat. We, thus, see no reason to disturb
the ruling of the CA in this respect.
Alilin vs. Petron, GR No. 177592, June 9, 2014 ANGELO
Facts:
Romualdo D. Gindang Contractor started recruiting laborers for
fielding to Petron’s Mandaue Bulk Plant. Romeo his son
through RDG, took over the business and continued to
provide manpower services to Petron. Petitioners were among
those recruited by Romualdo D. Gindang Contractor and RDG
to work in the premises of the said bulk plant.
RDG and Petron entered into Contract for Services and such
Contract was further extended until Sept 2002. Upon expiration
thereof,no further renewal of service contract was done.
Petitioners filed a complaint for illegal dismissal against petron
and RDG when the said petitioners were barred from
continuing their services on October 16,2002.
RDG denied liability over petitioners’ claim of illegal dismissal
and further argued that Petron cannot capitalized on the
service contract to escape liability.
Petron, on the other hand, maintained that RDG is an
independent contractor and the real employer of the
petitioners. It was RDG which hired and selected petitioners,
paid their salaries and wages, and directly supervised their
work.
Issue: WON Petron is the real Employer of the Petitioners
Ruling:
YES.
The SC differentiate Labor-only contracting and Permissible
job contracting.
In distinguishing between Labor-only and Permissible job
contracting, the totality of the facts and the surrounding
circumstances of the case shall be considered.
Generally the contractor is presumed to be a labor-only
contractor, unless such contractor overcomes the burden of
proving that it has the substantial capital, investment, tool and
the like. However where the principal is the one claiming that
the contractor is a legitimate contractor, as in the present case,
said principal has the burden of proving. It is thus incumbent
upon Petron,and not upon petitioners as Petron insist, to prove
the RDG is an independent contractor.
In the case at bench Petron failed to discharge the burden of
proving that RDG is a Legitimate Contractor.
Furthermore Petron’s power of control over the petitioners
exist in this case. In the four-fold test it is the power to control it
is the power of control which is the most crucial and most
determinative factor, in fact, the other elements may even be
disregarded.
One manifestation of the power of control is the power to
transfer Ees from one work assignment to another. Here,
Petron could order petitioners to do work outside their regular
maintenance/utility job. Also petitioners were required to
report for work everyday at the bulk plant, observe a daily work
schedule and wear proper uniform and safety helmets. All
these imply control.
naturally , supervision by Petronis essential in every aspect of
its produxt handling in order to compromise the integrity,
quality, and safety of the products that is distributed to the
consuming public. Petitioners already attained regular status
as employees of Petron.
RDG merely acted as an agent of Petron.
Preliminary Presumption is that contractor is Labor-Only
Contracting
Garden of Memories Park and Life Plan vs. NLRC 2nd
Division, GR No. 160278, Feb. 8, 2012, 665 SCRA 293
ANGELO
Facts:
Petitioner is engaged in a business of operating a memorial
park. Respondent on the other hand worked at the petitioner’s
Memorial Park as a utility worker from aug 1991 until her
termination in feb 1998.
Respondent filed a complaint for illegal dismissal before the
DOLE.
Upon the motion of the petitioner Requio was impleaded as
respondent on the alleged ground that she was its service
contractor and the Employer of Cruz.
15
Sometime in feb 1998 cruz had misunderstanding with a co-
worker. When the misunderstanding came to the knowledge of
Requio the latter instructed them to go home and not to return
anymore. 3 days after cruz return to work but she was told that
she had been replaced by another worker.
Cruz argued that as a regular employee she could not be
terminated without just or valid cause.
Garden of Memories denied liability and asserted that she was
not its employee but that of Requio, its independent service
contractor. It insisted that there was no Er-Ee relationship
between them because she was employed by its service
contractor.
LA ruled that Requio was not an independent contractor but a
labor-only contractor.
On appeal to the NLRC it affirmed the decision of LA stating
that Requio had no substantial capital or investments in the
form of tools, equipment, machineries, and work premises,
among others, for her to qualify as an independent contractor.
Issue: WON the Petitioner is the real Employer of Cruz
Ruling:
YES.
Generally, the presumption is that the contractor is a labor-only
contracting unless such contractor overcomes the burden of
proving that it has the substantial capital, investment, tools and
the like. In the present case, though Garden of memories is not
the contractor, it has the burden of proving that Requio has
sufficient capital or investment since it is claiming the
supposed status of Requio as independent contractor. Garden
of Memories, however, failed to adduce evidence purporting to
show that Requio had sufficient capitalization. Neither did it
show that she invested in the form of tools, equipment,
machineries, work premise and other materials which are
necessary in the completion of the service contract.
Furthermore, Requio was not a licensed contractor. Her
explanation her business was a mere livelihood program akin
to a cottage industry provided by Garden of Memories as part
of its contribution to the upliftment of the underprivileged
residing near the memorial park prive that her capital
investment was not substantial.
7K Corporation vs. NLRC
GR 148490
Nov. 22, 2006
DOCTRINE: The presumption is that a contractor is a labor-
only contractor unless such contractor overcomes the burden
of proving that it has substantial capital, investment, tools and
the like. The employees, in this case, private respondents,
should not be expected to prove the negative fact that the
contractor does not have substantial capital, investment and
tools to engage in job-contracting.
FACTS:
In February of 1997, 7K Corporation (petitioner) and Universal
Janitorial and Allied Services (Universal) entered into a service

contract where Universal bound itself to provide petitioner with
drivers at the rate of P4,637.00 per driver a month.
A controversy arose when the overtime paid by the accounting
department of petitioner was short of the actual overtime
rendered by the private respondents. Private respondents
time-cards reflected overtime of up to 70 hours, however, the
accounting personnel reduced them to only 20 hours. After
their grievances were repeatedly ignored, respondents filed
separate complaints for illegal dismissal, payment of salary
differentials, unpaid overtime, and reinstatement with
backwages, against Universal and/or petitioner before the
Labor Arbiter
LABOR ARBITER
LA Declared the Universal Janitorial & Allied
Services as the employer of complainants and termination of
complainants as illegal and awarding them six months
backwages plus separation pay.
NLRC
The NLRC found that Universal is a labor-only contractor since
it does not have substantial capital or investment in the form of
tools, equipments, machineries and the like, and the workers
recruited are performing activities which are directly related to
the principal business of the employer. The NLRC further held
that since Universal is a labor-only contractor, petitioner as the
principal employer, is solidarily liable with Universal for all the
rightful claims of private respondents. There was also no illegal
dismissal as the LA failed to identify who dismissed the
complainants.
CA
Petitioner went to the CA on a petition for certiorari claiming
that the NLRC gravely abused its discretion when it implicated
petitioner which was not a party to the appealed case, and by
ignoring the fact that the LA decision has already become final
and executory.
The CA dismissed the petition and ruled that universal is a
labor-only contractor as defined under Art. 106, par. 4 of the
Labor Code; Universal admitted such fact in its appeal
memorandum when it stated that the power of control over
complainants was vested in and exercised by petitioner;
ISSUE: WON Universal is a labor-only contractor, hence
petitioner is the employer and therefore solidary liable.
RULING:
YES. Petitioners main argument is that since there is
no proof that Universal does not have substantial capital, then
Universal should be considered as a legitimate job contractor
and not a labor-only contractor. Such contention is incorrect.
The presumption is that a contractor is a labor-only contractor
unless such contractor overcomes the burden of proving that it
has substantial capital, investment, tools and the like.The
employees, in this case, private respondents, should not be
expected to prove the negative fact that the contractor does
not have substantial capital, investment and tools to engage in
job-contracting.
Since neither petitioner nor Universal was able to adduce
evidence that Universal had any substantial capital, investment
or assets to perform the work contracted for, the presumption
that Universal is a labor-only contractor stands.
Thus, petitioner, the principal employer, is solidarily liable with
Universal, the labor-only contractor, for the rightful claims of
the employees. Under this set-up, Universal, as the labor-only
contractor, is deemed an agent of the principal, herein
petitioner, and the law makes the principal responsible to the
employees of the labor-only contractor as if the principal itself
directly hired or employed the employees.
Petitioner is therefore solidarily liable with Universal for the
payment of holiday pay, 13th month pay and salary
differentials in the amount of P4,040.37 per respondent, as
awarded by the NLRC and affirmed by the CA.
WHEREFORE, the petition is DENIED for lack of merit
Fuji Television Network, Inc. vs. Arlene S. Espiritu,
GR No. 204944-45
December 3, 2014
DOCTRINE: It is the burden of the employer to prove that a
person whose services it pays for is an independent contractor
rather than a regular employee with or without a fixed term.
That a person has a disease does not per se entitle the
employer to terminate his or her services. Termination is the
last resort. At the very least, a competent public health
authority must certify that the disease cannot be cured within
six ( 6) months, even with appropriate treatment.
FACTS:
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji
Television Network, Inc. ("Fuji") asa news
correspondent/producer "tasked to report Philippine news to
Fuji through its Manila Bureau field office." Arlene’s
employment contract initially provided for a term of one (1)
year but was successively renewed on a yearly basis with
salary adjustment upon every renewal. Sometime in January
2009, Arlenewas diagnosed with lung cancer. She informed
Fuji about her condition. In turn, the Chief of News Agency of
Fuji, Yoshiki Aoki, informed Arlene "that the company will have
a problem renewing her contract" since it would be difficult for
her to perform her job. She "insisted that she was still fit to
work as certified by her attending physician."
After several verbal and written communications, Arlene and
Fuji signed a non-renewal contract on May 5, 2009 where it
was stipulated that her contract would no longer be renewed
after its expiration on May 31, 2009. The contract also
provided that the parties release each other from liabilities and
responsibilities under the employment contract.
In consideration of the non-renewal contract, Arlene
"acknowledged receipt of the total amount of US$18,050.00
representing her monthly salary from March 2009 to May 2009,
year-end bonus, mid-year bonus, and separation pay."13
However, Arlene affixed her signature on the nonrenewal
contract with the initials "U.P." for "under protest."
16
On May 6, 2009, the day after Arlene signed the non-renewal
contract, she filed a complaint for illegal dismissal and
attorney’s fees with the National Capital Region Arbitration
Branch of the National Labor Relations Commission. She
alleged that she was forced to sign the non-renewal contract
when Fuji came to know of her illness and that Fuji withheld
her salaries and other benefits for March and April 2009 when
she refused to sign.
LABOR ARBITER
LA dismissed her complaint citing Sonza vs ABS-
CBN , applying four-fold test and held Arlene is not an
employee of FUJI but an independent contractor.
NLRC
NLRC reversed the decision of the LA. It held that
Arlene was a regular employee with respect to the activities for
which she was employed since she continuously rendered
services that were deemed necessary and desirable to Fuji’s
business.
CA
In arriving at the decision, the Court of Appeals held that
Arlene was a regular employee because she was engaged to
perform work that was necessary or desirable in the business
of Fuji, and the successive renewals of her fixed-term contract
resulted in regular employment. Hence this petition for review
on certiorari.
ISSUE: WON Arlene was a regular employee, not an
independent contractor
RULING:
Yes. Arlene is not an independent contractor. Fuji’s argument
that Arlene was an independent contractor under a fixed-term
contract is contradictory. Employees under fixed-term
contracts cannot be independent contractors because in fixed-
term contracts, an employer-employee relationship exists. The
test in this kind of contract is not the necessity and desirability
of the employee’s activities, "but the day certain agreed upon
by the parties for the commencement and termination of the
employment relationship." For regular employees, the
necessity and desirability of their work in the usual course of
the employer’s business are the determining factors. On the
other hand, independent contractors do not have employer-
employee relationships with their principals. Hence, before the
status of employment can be determined, the existence of an
employer-employee relationship must be established.
IN RE BURDEN OF PROOF
In labor cases, the quantum of proof required is substantial
evidence. "Substantial evidence" has been defined as "such
amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion."
If Arlene was a regular employee, we then determine whether
she was illegally dismissed. In complaints for illegal dismissal,
the burden of proof is on the employee to prove the fact of
dismissal. Once the employee establishes the fact of
dismissal, supported by substantial evidence, the burden of
proof shifts to the employer to show that there was a just or

authorized cause for the dismissal and that due process was
observed.
WHEREFORE, the petition is DENIED4.3 Example
Semblante vs. CA, GR No. 196426, Aug. 15, 2011 JANINE
MARTICIO SEMBLANTE and DUBRICK PILAR v. COURT
OF APPEALS
G.R. No. 196426
August 15, 2011
Velasco, Jr., J.
Facts:
Petitioners Marticio Semblante and Dubrick Pilar assert that
they were hired by respondents-spouses Vicente and Maria
Luisa Loot, the owners of Gallera de Mandaue (the cockpit), as
the official masiador and sentenciador. For their services,
Semblante receives PhP 8,000 per month, while Pilar gets
PhP 14,000 per month. They work every week starting at 1:00
p.m. until the early hours of the morning depending on the
needs of the cockpit. Petitioners had both been issued
employees’ identification cards whenever they report for duty.
On November 14, 2003, petitioners were denied entry into the
cockpit and were informed of the termination of their services
effective that date. This prompted petitioners to file a complaint
for illegal dismissal against respondents.
Respondents on their answer denied that petitioners were their
employees and alleged that they were associates of
respondents’ independent contractor, Tomas Vega.
Respondents claimed that petitioners have no regular working
time or day and they are free to decide for themselves whether
to report for work or not on any cockfighting day. Lastly,
respondents assert, that petitioners were only issued
identification cards to indicate that they were free from the
normal entrance fee and to differentiate them from the general
public.
In a Decision made by the Labor Arbiter, it found petitioners to
be regular employees of respondents as they performed work
that was necessary and indispensable to the usual trade or
business of respondents for a number of years. The Labor
Arbiter also ruled that petitioners were illegally dismissed.
However, the NLRC held that there was no employer-
employee relationship between petitioners and respondents,
respondents having no part in the selection and engagement
of petitioners, and that no separate individual contract with
respondents was ever executed by petitioners.
Issue:
Whether an employer- employee relationship exists between
herein Petitioners and Respondents?
Held:
No, petitioners are not employees of respondents, since their
relationship fails to pass the four-fold test of employment: (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, which is the most
important element.
As found by both the NLRC and the CA, respondents had no
part in petitioners’ selection and management; Petitioners’
compensation was paid out of the arriba (which is a
percentage deducted from the total bets), not by respondents;
and Petitioners performed their functions as masiador and
sentenciador free from the direction and control of
respondents. In the conduct of their work, petitioners relied
mainly on their "expertise that is characteristic of the cockfight
gambling," and were never given by respondents any tool
needed for the performance of their work.
Respondents, not being petitioners’ employers, could never
have dismissed, legally or illegally, petitioners, since
respondents were without power or prerogative to do so in the
first place.
MANUFACTURING COMPANY VS. FORWARDING AGENT
G.R. No. 186965. December 23, 2009.*
TEMIC AUTOMOTIVE PHILIPPINES, INC., petitioner,
vs. TEMIC AUTOMOTIVE PHILIPPINES, INC. EMPLOYEES
UNION-FFW, respondent.
Facts:
Temic Automotive Phils Inc., petitioner, is a corporation
engaged in the manufacture of electronic brake systems and
comfort body electronics for automotive vehicles. While Temic
Automotive Philippines, Inc. Employees Union-FFW (union) is
the exclusive bargaining agent of the petitioner’s rank-and-file
employees. On May 6, 2005, the petitioner and the union
executed a collective bargaining agreement (CBA) for the
period January 1, 2005 to December 31, 2009.
The corporation has several departments, but the union
members are regular-rank and file employees working in the
sections as clerks, material handlers, system encoders and
general clerks.
By practice established since 1998, the petitioner contracts out
some of the work in the warehouse department, specifically
those in the receiving and finished goods sections, to three
independent service providers or forwarders (forwarders). The
regular employees of the petitioner and those of the forwarders
share the same work area and use the same equipment, tools
and computers all belonging to the petitioner.
This arrangement gave rise to a union grievance on the issue
of the scope and coverage of the collective bargaining unit,
specifically to the question of “whether or not the functions of
the forwarders’ employees are functions being performed by
the regular rank-and-file employees covered by the bargaining
unit.”
The union thus demanded that the forwarders’ employees be
absorbed into the petitioner’s regular employee force and be
given positions within the bargaining unit. The corporation, on
the other hand, posited that the contracting arrangement with
the forwarders is a valid exercise of management prerogatives.
And union’s stand against it is a clear violation of such right.
Issue:
17
Whether or not the company validly contracted out or
outsourced the services involving forwarding, packing, loading
and clerical activities related thereto
Ruling:Yes.
The voluntary arbitration decision itself established, without
objection from the parties, the description of the work of
forwarding as a basic premise for its ruling. The SC found the
description acceptable and thus adopted it as a starting point
in considering the nature of the service contracted out when
the petitioner entered into its forwarding agreements with
Diversified, Airfreight and KNI.
To quote the voluntary arbitration decision: “As forwarders they
act as travel agents for cargo. They specialize in arranging
transport and completing required shipping documentation of
respondent’s company’s finished products. They provide
custom crating and packing designed for specific needs of
respondent company. These freight forwarders are actually
acting as agents for the company in moving cargo to an
overseas destination. These agents are familiar with the import
rules and regulations, the methods of shipping, and the
documents related to foreign trade. They recommend the
packing methods that will protect the merchandise during
transit. Freight forwarders can also reserve for the company
the necessary space on a vessel, aircraft, train or truck. They
also prepare the bill of lading and any special required
documentation. Freight forwarders can also make arrangement
with customs brokers overseas that the goods comply with
customs export documentation regulations. They have the
expertise that allows them to prepare and process the
documentation and perform related activities pertaining to
international shipments. As an analogy, freight forwarders
have been called travel agents for freight.”
Significantly, both the voluntary arbitrator and the CA
recognized that the petitioner was within its right in entering the
forwarding agreements with the forwarders as an exercise of
its management prerogative. The petitioner’s declared
objective for the arrangement is to achieve greater economy
and efficiency in its operations—a universally accepted
business objective and standard that the union has never
questioned. In Meralco v. Quisumbing, the SC joined this
universal recognition of outsourcing as a legitimate activity
when it was held that a company can determine in its best
judgment whether it should contract out a part of its work for as
long as the employer is motivated by good faith; the
contracting is not for purposes of circumventing the law; and
does not involve or be the result of malicious or arbitrary
action.
The job of forwarding consists not only of a single activity but
of several services that complement one another and can best
be viewed as one whole process involving a package of
services. These services include packing, loading, materials
handling and support clerical activities, all of which are directed
at the transport of company goods, usually to foreign
destinations. It is in the appreciation of these forwarder
services as one whole package of inter-related services that
we discern a basic misunderstanding that results in the error of
equating the functions of the forwarders’ employees with those
of regular rank-and-file employees of the company. A clerical
job, for example, may similarly involve typing and paper

pushing activities and may be done on the same company
products that the forwarders’ employees and company
employees may work on, but these similarities do not
necessarily mean that all these employees work for the
company. The regular company employees, to be sure, work
for the company under its supervision and control, but
forwarder employees work for the forwarder in the forwarder’s
own operation that is itself a contracted work from the
company. The company controls its employees in the means,
method and results of their work, in the same manner that the
forwarder controls its own employees in the means, manner
and results of their work. Complications and confusion result
because the company at the same time controls the forwarder
in the results of the latter’s work, without controlling however
the means and manner of the forwarder employees’ work. This
interaction is best exemplified by the adduced evidence,
particularly the affidavits of petitioner’s warehouse manager
Gregorio and Section Head Bawar discussed below.
From the perspective of the union in the present case, the SC
noted that the forwarding agreements were already in place
when the current CBA was signed. In this sense, the union
accepted the forwarding arrangement, albeit implicitly, when it
signed the CBA with the company. Thereby, the union agreed,
again implicitly by its silence and acceptance, that jobs related
to the contracted forwarding activities are not regular company
activities and are not to be undertaken by regular employees
falling within the scope of the bargaining unit but by the
forwarders’ employees. Thus, the skills requirements and job
content between forwarders’ jobs and bargaining unit jobs may
be the same, and they may even work on the same company
products, but their work for different purposes and for different
entities completely distinguish and separate forwarder and
company employees from one another. A clerical job,
therefore, if undertaken by a forwarders’ employee in support
of forwarding activities, is not a CBA-covered undertaking or a
regular company activity.
4.3 Television company v. Talent
[G.R. No. 138051. June 10, 2004]
JOSE Y. SONZA, petitioner, vs. ABS-CBN
BROADCASTING CORPORATION, respondent.
FACTS: Respondent ABS-CBN Broadcasting
Corporation (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 Carmela Tiangco (TIANGCO), as EVP
and Treasurer. Referred to in the Agreement as AGENT,
MJMDC agreed to provide SONZAs services exclusively to
ABS-CBN as talent for radio and television. Sonza agreed to
co-host Mel & Jay radio and television programs.
SONZA wrote a letter to ABS-CBNs President
expressing his intent to rescind their Agreement but Sonza
reserves the right to seek recovery of the other benefits under
said Agreement. Prior to the said letter, Sonza already
resigned.
SONZA filed a complaint against ABS-CBN before the
Department of Labor and Employment. SONZA complained
that ABS-CBN did not pay his salaries, separation pay, service
incentive leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees Stock
Option Plan (ESOP). ABS-CBN filed a Motion to Dismiss on
the ground that no employer-employee relationship existed
between the parties.
The Labor Arbiter dismissed the complaint for lack of
jurisdiction. The NLRC affirmed the decision of the Labor
Arbiter. The Court of Appeals affirmed the NLRCs finding that
no employer-employee relationship existed between SONZA
and ABS-CBN.
SONZA contends that the Labor Arbiter has jurisdiction over
the case because he was an employee of ABS-CBN. On the
other hand, ABS-CBN insists that the Labor Arbiter has no
jurisdiction because SONZA was an independent contractor.
ISSUE: Whether an employer-employee
relationship existed between petitioner Sonza and respondent
ABS-CBN.
RULING: NO employer-employee relationship
existed between SONZA and ABS-CBN.
The elements of an employer-employee relationship are: (a)
the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee on the means and
methods by which the work is accomplished.
A. Selection and Engagement of Employee
Independent contractors often present themselves to possess
unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of
SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of an independent
contractual relationship. If SONZA did not possess such
unique skills, talent and celebrity status, ABS-CBN would not
have entered into the Agreement with SONZA but would have
hired him through its personnel department just like any other
employee.
B. Payment of Wages
All the talent fees and benefits paid to SONZA were the result
of negotiations that led to the Agreement. If SONZA were ABS-
CBNs employee, there would be no need for the parties to
stipulate on benefits such as SSS, Medicare, x x x and 13th
month pay which the law automatically incorporates into every
employer-employee contract. Whatever benefits SONZA
enjoyed arose from contract and not because of an employer-
employee relationship.
SONZAs talent fees, amounting to P317,000 monthly in the
second and third year, are so huge and out of the ordinary that
they indicate more an independent contractual relationship
rather than an employer-employee relationship. The power to
18
bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of
an independent contractual relationship.
The payment of talent fees directly to SONZA and not to
MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such
mode of payment.
C. Power of Dismissal
For violation of any provision of the Agreement, either party
may terminate their relationship. SONZA failed to show that
ABS-CBN could terminate his services on grounds other than
breach of contract, such as retrenchment to prevent losses as
provided under labor laws.
During the life of the Agreement, ABS-CBN agreed to pay
SONZAs talent fees as long as AGENT and Jay Sonza shall
faithfully and completely perform each condition of this
Agreement. Even if it suffered severe business losses, ABS-
CBN could not retrench SONZA because ABS-CBN remained
obligated to pay SONZAs talent fees during the life of the
Agreement. This circumstance indicates an independent
contractual relationship between SONZA and ABS-CBN.
D. Power of Control
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.
First, ABS-CBN engaged SONZAs services
specifically to co-host the Mel & Jay programs. ABS-CBN did
not assign any other work to SONZA. 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-CBNs control. ABS-CBN could not
dictate the contents of SONZAs script. The clear implication is
that SONZA had a free hand on what to say or discuss in his
shows provided he did not attack ABS-CBN or its interests.
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. Clearly, ABS-CBN did not exercise control over
the means and methods of performance of SONZAs work.
A radio broadcast specialist who works under
minimal supervision is an independent contractor. SONZAs
work as television and radio program host required special
skills and talent, which SONZA admittedly possesses. The
records do not show that ABS-CBN exercised any supervision
and control over how SONZA utilized his skills and talent in his
shows.
Second, the Agreement stipulates that SONZA shall abide with
the rules and standards of performance covering talents of
ABS-CBN. The Agreement does not require SONZA to comply
with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on
SONZA under the Agreement refers to the Television and

Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas
(KBP), which has been adopted by the COMPANY (ABS-CBN)
as its Code of Ethics. The KBP code applies to broadcasters,
not to employees of radio and television stations. Broadcasters
are not necessarily employees of radio and television stations.
Clearly, the rules and standards of performance referred to in
the Agreement are those applicable to talents and not to
employees of ABS-CBN. In any event, not all rules imposed by
the hiring party on the hired party indicate that the latter is an
employee of the former. In this case, SONZA failed to show
that these rules controlled his performance.
Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve
it.
Lastly, being an exclusive talent does not by itself mean that
SONZA is an employee of ABS-CBN. Even an independent
contractor can validly provide his services exclusively to the
hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control.
G.R. No. 164156 September 26, 2006
ABS-CBN BROADCASTING CORPORATION, petitioner, vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER
DEIPARINE, and JOSEPHINE LERASAN, respondents.
FACTS: Petitioner employed respondents
Nazareno, Gerzon, Deiparine, and Lerasan as production
assistants (PAs). They were made to perform the following
tasks and duties: a) Prepare, arrange airing of commercial
broadcasting based on the daily operations log and digicart of
respondent ABS-CBN; b) Coordinate, arrange personalities for
air interviews; c) Coordinate, prepare schedule of reporters for
scheduled news reporting and lead-in or incoming reports; d)
Facilitate, prepare and arrange airtime schedule for public; f)
Record, log clerical reports, man based control radio.
Petitioner and the ABS-CBN Rank-and-File
Employees executed a Collective Bargaining Agreement.
However, since petitioner refused to recognize PAs as part of
the bargaining unit, respondents were not included to the CBA.
Respondents filed a Complaint for Recognition of Regular
Employment Status, Underpayment of Overtime Pay, Holiday
Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay,
and 13th Month Pay with Damages against the petitioner
before the NLRC.
The Labor Arbiter rendered judgment in favor of the
respondents, and declared that they were regular employees
of petitioner. The NLRC also ruled that the respondents were
regular employees of the petitioner. The appellate court also
stated that respondents are not mere project employees, but
regular employees who perform tasks necessary and desirable
in the usual trade and business of petitioner and not just its
project employees.
Petitioner ABS-CBN contends that respondents are considered
as its talents, hence, not regular employees of the
broadcasting company. Petitioner claims that the functions
performed by the respondents are not at all necessary,
desirable, or even vital to its trade or business.
ISSUE: Whether respondents were regular
employees of petitioner.
RULING: YES, respondents were regular
employees of petitioner.
Where a person has rendered at least one year of service,
regardless of the nature of the activity performed, or where the
work is continuous or intermittent, the employment is
considered regular as long as the activity exists, the reason
being that a customary appointment is not indispensable
before one may be formally declared as having attained
regular status. Article 280 of the Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.—The
provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of
the employer except where the employment has been fixed for
a specific project or undertaking the completion or termination
of which has been determined at the time of the engagement
of the employee or where the work or services to be performed
is seasonal in nature and the employment is for the duration of
the season.
The test in determining whether one is a regular employee:
The primary standard, therefore, of determining regular
employment is the reasonable connection between the
particular activity performed by the employee in relation to the
usual trade or business of the employer. The test is whether
the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be
determined by considering the nature of work performed and
its relation to the scheme of the particular business or trade in
its entirety. Also, if the employee has been performing the job
for at least a year, even if the performance is not continuous
and merely intermittent, the law deems repeated and
continuing need for its performance as sufficient evidence of
the necessity if not indispensability of that activity to the
business. Hence, the employment is considered regular, but
only with respect to such activity and while such activity exists.
In this case, it is of no moment that petitioner hired
respondents as "talents." The fact that respondents received
pre-agreed "talent fees" instead of salaries, that they did not
observe the required office hours, and that they were permitted
to join other productions during their free time are not
conclusive of the nature of their employment. Respondents
cannot be considered "talents" because they are not actors or
actresses or radio specialists or mere clerks or utility
19
employees. They are regular employees who perform several
different duties under the control and direction of ABS-CBN
executives and supervisors.
Thus, there are two kinds of regular employees under the law:
(1) those engaged to perform activities which are necessary or
desirable in the usual business or trade of the employer; and
(2) those casual employees who have rendered at least one
year of service, whether continuous or broken, with respect to
the activities in which they are employed.
The law overrides such conditions which are prejudicial to the
interest of the worker whose weak bargaining situation
necessitates the succor of the State. What determines whether
a certain employment is regular or otherwise is not the will or
word of the employer, to which the worker oftentimes
acquiesces, much less the procedure of hiring the employee or
the manner of paying the salary or the actual time spent at
work. It is the character of the activities performed in relation to
the particular trade or business taking into account all the
circumstances, and in some cases the length of time of its
performance and its continued existence. It is obvious that one
year after they were employed by petitioner, respondents
became regular employees by operation of law.
Additionally, respondents cannot be considered as
project or program employees because no evidence was
presented to show that the duration and scope of the project
were determined or specified at the time of their engagement.
In this case, it is undisputed that respondents had continuously
performed the same activities for an average of five years.
Their assigned tasks are necessary or desirable in the usual
business or trade of the petitioner. The persisting need for their
services is sufficient evidence of the necessity and
indispensability of such services to petitioner’s business or
trade. While length of time may not be a sole controlling test
for project employment, it can be a strong factor to determine
whether the employee was hired for a specific undertaking or
in fact tasked to perform functions which are vital, necessary
and indispensable to the usual trade or business of the
employer.
Farley Fulache et al vs. ABS-CBN, GR 183810, Jan .21,
2010 LUCKY MEE
FACTS:
Two cases were filed. First the Regularization case. Second
was the Illegal Dismissal case (dismissal happened during the
pendency of the First Case when petitioners refused to sign up
contracts of employment offered by ABS-CBN in a service
contractor agency).
Petitioners were drivers/ cameramen/ editors/ PA
/Teleprompter Operator-Editing, and a VTR man/ editor filed
two separate complaints for regularization, unfair labor practice
and several money claims against ABS-CBN. That ABS-CBN
executed a collective bargaining agreement (CBA) considering
them temporary employees, in violation of the Labor Code.
That they had already rendered more than a year of service in
the company and, therefore, should have been recognized as
regular employees.

ABS-CBN alleged these contracted persons are called talents
and are considered independent contractors paid in a pre-
arranged talent fee taken from the budget of a particular
program. Their contracts are terminated once the program is
completed. That talents were not entitled to regularization in
these capacities.
Labor Arbiter Rendoque rendered his decision holding that the
petitioners were regular employees but dismissed the illegal
dismissal case.
ABS-CBN appealed to the NLRC. NLRC ruled that petitioners
were regular employees entitled to the benefits and privileges.
Though it declared valid dismissal due to redundancy.
CA ruled that the petitioners failed to prove their claim to CBA
benefits. On the illegal dismissal issue, the CA upheld the
NLRC decision that petitioners were not illegally dismissed.
ISSUE:
Whether the petitioners are regular employees entitled to the
CBA benefits. YES!
Whether petitioners were illegally dismissed. YES!
RULING:
YES. Petitioners a regular employees and As regular
employees, the petitioners fall within the coverage of the
bargaining unit and are therefore entitled to CBA benefits as a
matter of law and contract.
The benefits and privileges arise from entitlements under the
law (specifically, the Labor Code and its related laws), and
from their employment contract as regular ABS-CBN
employees, part of which is the CBA if they fall within the
coverage of this agreement. Thus, what only needs to be
resolved as an issue for purposes of implementation of the
decision is whether the petitioners fall within CBA coverage.
CBA provided in its Article 1 Section 1 that the parties agree
that the appropriate bargaining unit shall be regular rank-and-
file employees of ABS-CBN.
2) YES. Their dismissal was unjust and in bad faith since it
dismissed the petitioners already recognized as regular
employees for refusing to sign up with its service contractor.
ABS-CBN took matters into its own hands and terminated the
petitioners services, cited redundancy as an exercise of its
management prerogative.
ABS-CBNs intent was to transfer the petitioners and their
activities to a service contractor without paying any attention to
the requirements of our labor laws. It forgot that by claiming
redundancy as authorized cause for dismissal, it impliedly
admitted that the petitioners were regular employees whose
services, by law, can only be terminated for the just and
authorized causes defined under the Labor Code.
Likewise ABS-CBN forgot that it had an existing CBA with a
union, which agreement must be respected in any move
affecting the security of tenure of affected employees. It
similarly forgot that an exercise of management prerogative
can be valid only if it is undertaken in good faith and with no
intent to defeat or circumvent the rights of its employees under
the laws or under valid agreements.
“The errors and omissions do not belong to ABS-CBN alone.
The labor arbiter himself who handled both cases did not see
the totality of the company’s actions for what they were. He
appeared to have blindly allowed what he granted the
petitioners with his left hand, to be taken away with his right
hand, unmindful that the company already exhibited a badge of
bad faith in seeking to terminate the services of the petitioners
whose regular status had just been recognized. He should
have recognized the bad faith from the timing alone of ABS-
CBNs conscious and purposeful moves to secure the ultimate
aim of avoiding the regularization of its so-called talents.”
NELSON BENIGNO, et al vs ABS-CBN
G.R. No. 199166, 20 April 2015
PEREZ, J.:
FACTS:
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.
20
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.
4.6 Effect of DOLE Certification as legitimate job
contractor
G.R. No. 179807 July 31, 2009
RAMY GALLEGO, Petitioner, vs. BAYER PHILIPPINES,
INC., DANPIN GUILLERMO, PRODUCT IMAGE
MARKETING, INC., and EDGARDO BERGONIA,
Respondents.
Facts: Ramy Gallego (petitioner) was contracted in April 1992
by Bayer Philippines, Inc. (BAYER) as crop protection
technician to promote and market BAYER products.
Petitioner’s employment with BAYER came to a halt,
prompting him to seek employment with another company.
BAYER eventually reemployed petitioner, however, in 1997
through Product Image and Marketing Services, Inc.
(PRODUCT IMAGE) of which respondent Edgardo Bergonia
(Bergonia) was the President and General Manager,
performing the same task as that of crop protection technician
– promoting BAYER products to farmers and dealers in Panay
Island – solely for the benefit of BAYER.
Petitioner alleges that he was directed to submit a resignation
letter, but he refused. He was again, was ordered to quit his
employment which called for him to return all pieces of service
equipment issued to him, but that again he refused.

He then received a memorandum that his area of responsibility
would be transferred to Luzon, of which memorandum he
sought reconsideration but to no avail; and that Guillermo and
Bergonia spread rumors that reached the dealers in Antique to
the effect that he was not anymore connected with BAYER and
any transaction with him would no longer be honored.
Hence petitioner instituted a complaint for illegal dismissal with
the National Labor Relations Commission (NLRC) against
herein respondents.
Respondents BAYER and Guillermo denied the existence of
an employer-employee relationship between BAYER and
petitioner. They added that as an independent contractor,
PRODUCT IMAGE retained the exclusive power of control
over petitioner as it assigned full-time supervisors to exercise
control and supervision over its employees assigned at
BAYER.
Respondents PRODUCT IMAGE and Bergonia, on the other
hand, admitted that petitioner was hired as an employee of
PRODUCT IMAGE. They alleged that petitioner was a field
worker who had no fixed hours and worked under minimal
supervision, his performance being gauged only by his
accomplishment reports duly certified to by BAYER acting as
his de facto supervisor; that petitioner was originally assigned
to Iloilo but later transferred to Antique; that petitioner was not
dismissed, but went on official leave but stopped reporting for
work thereafter.
LA: Held in favor of Gallego. Held that there was an employer-
employee relationship between BAYER and petitioner since
BAYER furnished petitioner the needed facilities and
paraphernalia, and fixed the methodology to be used in the
performance of his work.
NLRC: Held in favor of respondent Bayer. Reversed decision
Holding that as an independent contractor, PRODUCT IMAGE
was the employer of petitioner but there was no evidence that
petitioner was dismissed by either PRODUCT IMAGE or
BAYER, and that it was petitioner who abandoned his work
with PRODUCT.
CA: Affirmed NLRC decision. Dismissed petitioner’s petition for
failure to attach to it the complaint and the parties’ respective
position papers filed with the Labor Arbiter.
Issue (1): Whether or not PRODUCT IMAGE is a labor-only
contractor and BAYER should be deemed petitioner’s principal
employer
Held (1): NO. Rather, the Court finds substantial evidence that
PRODUCT IMAGE is a legitimate job contractor. This is
evidenced by a Certificate of Registration Numbered NCR-8-
0602-176 issued by DOLE denoting PRODUCT IMAGE as
such.
The DOLE certificate having been issued by a public officer, it
carries with it the presumption that it was issued in the regular
performance of official duty. Petitioner’s bare assertions fail to
rebut this presumption. Further, since the DOLE is the agency
primarily responsible for regulating the business of
21
independent job contractors, the Court can presume, in the Compare with: Coca Cola Bottlers vs. Dela Cruz, supra; and
absence of evidence to the contrary, that it had thoroughly DAVE
evaluated the requirements submitted by PRODUCT IMAGE
before issuing the Certificate of Registration. Coca Cola Bottlers vs. Agito, GR No. 179546, Feb. 13, 2009
GRETCHEN
Issue (2): Whether or not PRODUCT IMAGE illegally
dismissed petitioner
Held (2): NO. Petitioner unilaterally stopped reporting for work
before filing a complaint for illegal dismissal, based on his
belief that Guillermo and Bergonia had spread rumors that his
transactions on behalf of BAYER would no longer be honored
as of April 30, 2002. This belief remains unsubstantiated.
While in cases of illegal dismissal, the employer bears the
burden of proving that the dismissal is for a valid or authorized
cause, the employee must first establish by substantial
evidence the fact of dismissal.
Notes: (Permissible Job Contracting vs Labor-Only
Contracting)
(Just in case sir asks)
Permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to farm out with a
contractor or subcontractor the performance of a specific job,
work, or service within a definite or predetermined period,
regardless of whether such job, work or, service is to be
performed or completed within or outside the premises of the
principal. Under this arrangement, the following conditions
must be met: (a) the contractor carries on a distinct and
independent business and undertakes the contract work on his
account under his own responsibility according to his own
manner and method, free from the control and direction of his
employer or principal in all matters connected with the
performance of his work except as to the results thereof; (b)
the contractor has substantial capital or investment; and (c) the
agreement between the principal and contractor or
subcontractor assures the contractual employees’ entitlement
to all labor and occupational safety and health standards, free
exercise of the right to self-organization, security of tenure, and
social welfare benefits.
In legitimate job contracting, the law creates an employer-
employee relationship for a limited purpose, i.e., to ensure that
the employees are paid their wages. The principal employer
becomes jointly and severally liable with the job contractor only
for the payment of the employees’ wages whenever the
contractor fails to pay the same. Other than that, the principal
employer is not responsible for any claim made by the
employees.
On the other hand, in labor-only contracting, the statute
creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor
laws. The contractor is considered merely an agent of the
principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees
had been directly employed by the principal employer. The
principal employer therefore becomes solidarity liable with the
labor-only contractor for all the rightful claims of the
employees.