Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-48645 January 7, 1987

"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO

CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON, PATRICIO SERRANO, ANTONIO
B. BOBIAS, VIRGILIO ECHAS, DOMINGO PARINAS, NORBERTO GALANG, JUANITO
NAVARRO, NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO L. EGUIA, CARLOS
SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B. MATIAR, ET
AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, OFFICE OF
THE PRESIDENT, HON. AMADO G. INCIONG, UNDERSECRETARY OF LABOR, SAN MIGUEL
CORPORATION, GENARO OLIVES, ENRIQUE CAMAHORT, FEDERICO OÑATE, ERNESTO
VILLANUEVA, ANTONIO BOCALING and GODOFREDO CUETO, respondents.

Armando V. Ampil for petitioners.

Siguion Reyna, Montecillo and Ongsiako Law Office for private respondents.

GUTIERREZ, JR., J.:

The elemental question in labor law of whether or not an employer-employee relationship exists
between petitioners-members of the "Brotherhood Labor Unit Movement of the Philippines" (BLUM)
and respondent San Miguel Corporation, is the main issue in this petition. The disputed decision of
public respondent Ronaldo Zamora, Presidential Assistant for legal Affairs, contains a brief summary
of the facts involved:

1. The records disclose that on July 11, 1969, BLUM filed a complaint with the now
defunct Court of Industrial Relations, charging San Miguel Corporation, and the
following officers: Enrique Camahort, Federico Ofiate Feliciano Arceo, Melencio
Eugenia Jr., Ernesto Villanueva, Antonio Bocaling and Godofredo Cueto of unfair
labor practice as set forth in Section 4 (a), sub-sections (1) and (4) of Republic Act
No. 875 and of Legal dismissal. It was alleged that respondents ordered the
individual complainants to disaffiliate from the complainant union; and that
management dismissed the individual complainants when they insisted on their union
membership.

On their part, respondents moved for the dismissal of the complaint on the grounds
that the complainants are not and have never been employees of respondent
company but employees of the independent contractor; that respondent company
has never had control over the means and methods followed by the independent
contractor who enjoyed full authority to hire and control said employees; and that the
individual complainants are barred by estoppel from asserting that they are
employees of respondent company.
 While pending with the Court of Industrial Relations CIR pleadings and testimonial
and documentary evidences were duly presented, although the actual hearing was
delayed by several postponements. The dispute was taken over by the National
Labor Relations Commission (NLRC) with the decreed abolition of the CIR and the
hearing of the case intransferably commenced on September 8, 1975.

On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which was
concurred in by the NLRC in a decision dated June 28, 1976. The amount of
backwages awarded, however, was reduced by NLRC to the equivalent of one (1)
year salary.

On appeal, the Secretary in a decision dated June 1, 1977, set aside the NLRC
ruling, stressing the absence of an employer-mployee relationship as borne out by
the records of the case. ...

The petitioners strongly argue that there exists an employer-employee relationship between them
and the respondent company and that they were dismissed for unionism, an act constituting unfair
labor practice "for which respondents must be made to answer."

Unrebutted evidence and testimony on record establish that the petitioners are workers who have
been employed at the San Miguel Parola Glass Factory since 1961, averaging about seven (7) years
of service at the time of their termination. They worked as "cargadores" or "pahinante" at the SMC
Plant loading, unloading, piling or palleting empty bottles and woosen shells to and from company
trucks and warehouses. At times, they accompanied the company trucks on their delivery routes.

The petitioners first reported for work to Superintendent-in-Charge Camahort. They were issued gate
passes signed by Camahort and were provided by the respondent company with the tools,
equipment and paraphernalia used in the loading, unloading, piling and hauling operation.

Job orders emanated from Camahort. The orders are then transmitted to an assistant-officer-in-
charge. In turn, the assistant informs the warehousemen and checkers regarding the same. The
latter, thereafter, relays said orders to the capatazes or group leaders who then give orders to the
workers as to where, when and what to load, unload, pile, pallet or clean.

Work in the glass factory was neither regular nor continuous, depending wholly on the volume of
bottles manufactured to be loaded and unloaded, as well as the business activity of the company.
Work did not necessarily mean a full eight (8) hour day for the petitioners. However, work,at times,
exceeded the eight (8) hour day and necessitated work on Sundays and holidays. For this, they
were neither paid overtime nor compensation for work on Sundays and holidays.

Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the number of
cartons and wooden shells they were able to load, unload, or pile. The group leader notes down the
number or volume of work that each individual worker has accomplished. This is then made the
basis of a report or statement which is compared with the notes of the checker and warehousemen
as to whether or not they tally. Final approval of report is by officer-in-charge Camahort. The pay
check is given to the group leaders for encashment, distribution, and payment to the petitioners in
accordance with payrolls prepared by said leaders. From the total earnings of the group, the group
leader gets a participation or share of ten (10%) percent plus an additional amount from the earnings
of each individual.

The petitioners worked exclusive at the SMC plant, never having been assigned to other companies
or departments of SMC plant, even when the volume of work was at its minimum. When any of the
glass furnaces suffered a breakdown, making a shutdown necessary, the petitioners work was
temporarily suspended. Thereafter, the petitioners would return to work at the glass plant.

Sometime in January, 1969, the petitioner workers — numbering one hundred and forty (140)
organized and affiliated themselves with the petitioner union and engaged in union activities.
Believing themselves entitled to overtime and holiday pay, the petitioners pressed management,
airing other grievances such as being paid below the minimum wage law, inhuman treatment, being
forced to borrow at usurious rates of interest and to buy raffle tickets, coerced by withholding their
salaries, and salary deductions made without their consent. However, their gripes and grievances
were not heeded by the respondents.

On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor Relations
in connection with the dismissal of some of its members who were allegedly castigated for their
union membership and warned that should they persist in continuing with their union activities they
would be dismissed from their jobs. Several conciliation conferences were scheduled in order to
thresh out their differences, On February 12, 1969, union member Rogelio Dipad was dismissed
from work. At the scheduled conference on February 19, 1969, the complainant union through its
officers headed by National President Artemio Portugal Sr., presented a letter to the respondent
company containing proposals and/or labor demands together with a request for recognition and
collective bargaining.

San Miguel refused to bargain with the petitioner union alleging that the workers are not their
employees.

On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter, denied
entrance to respondent company's glass factory despite their regularly reporting for work. A
complaint for illegal dismissal and unfair labor practice was filed by the petitioners.

The case reaches us now with the same issues to be resolved as when it had begun.

The question of whether an employer-employee relationship exists in a certain situation continues to

bedevil the courts. Some businessmen try to avoid the bringing about of an employer-employee
relationship in their enterprises because that judicial relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage, termination pay, and unionism.
(Mafinco Trading Corporation v. Ople, 70 SCRA 139).

In determining the existence of an employer-employee relationship, the elements that are generally
considered are the following: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect
to the means and methods by which the work is to be accomplished. It. is the called "control test"
that is the most important element (Investment Planning Corp. of the Phils. v. The Social Security
System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario Brothers, Inc. v. Ople,
131 SCRA 72).

Applying the above criteria, the evidence strongly indicates the existence of an employer-employee
relationship between petitioner workers and respondent San Miguel Corporation. The respondent
asserts that the petitioners are employees of the Guaranteed Labor Contractor, an independent
labor contracting firm.

The facts and evidence on record negate respondent SMC's claim.

The existence of an independent contractor relationship is generally established by the following
criteria: "whether or not the contractor is carrying on an independent business; the nature and extent
of the work; the skill required; the term and duration of the relationship; the right to assign the
performance of a specified piece of work; the control and supervision of the work to another; the
employer's power with respect to the hiring, firing and payment of the contractor's workers; the
control of the premises; the duty to supply the premises tools, appliances, materials and labor; and
the mode, manner and terms of payment" (56 CJS Master and Servant, Sec. 3(2), 46; See also 27
AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75 ALR 7260727)

None of the above criteria exists in the case at bar.

Highly unusual and suspect is the absence of a written contract to specify the performance of a
specified piece of work, the nature and extent of the work and the term and duration of the
relationship. The records fail to show that a large commercial outfit, such as the San Miguel
Corporation, entered into mere oral agreements of employment or labor contracting where the same
would involve considerable expenses and dealings with a large number of workers over a long
period of time. Despite respondent company's allegations not an iota of evidence was offered to
prove the same or its particulars. Such failure makes respondent SMC's stand subject to serious
doubts.

Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners had worked
continuously and exclusively for the respondent company's shipping and warehousing department.
Considering the length of time that the petitioners have worked with the respondent company, there
is justification to conclude that they were engaged to perform activities necessary or desirable in the
usual business or trade of the respondent, and the petitioners are, therefore regular employees (Phil.
Fishing Boat Officers and Engineers Union v. Court of Industrial Relations, 112 SCRA 159 and RJL
Martinez Fishing Corporation v. National Labor Relations Commission, 127 SCRA 454).

As we have found in RJL Martinez Fishing Corporation v. National Labor Relations Commission
(supra):

... [T]he employer-employee relationship between the parties herein is not

coterminous with each loading and unloading job. As earlier shown, respondents are
engaged in the business of fishing. For this purpose, they have a fleet of fishing
vessels. Under this situation, respondents' activity of catching fish is a continuous
process and could hardly be considered as seasonal in nature. So that the activities
performed by herein complainants, i.e. unloading the catch of tuna fish from
respondents' vessels and then loading the same to refrigerated vans, are necessary
or desirable in the business of respondents. This circumstance makes the
employment of complainants a regular one, in the sense that it does not depend on
any specific project or seasonable activity. (NLRC Decision, p. 94, Rollo). lwphl@itç

so as it with petitioners in the case at bar. In fact, despite past shutdowns of the glass plant for
repairs, the petitioners, thereafter, promptly returned to their jobs, never having been replaced, or
assigned elsewhere until the present controversy arose. The term of the petitioners' employment
appears indefinite. The continuity and habituality of petitioners' work bolsters their claim of employee
status vis-a-vis respondent company,

Even under the assumption that a contract of employment had indeed been executed between
respondent SMC and the alleged labor contractor, respondent's case will, nevertheless, fail.

Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:
 Job contracting. — There is job contracting permissible under the Code if the
following conditions are met:

(1) The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results thereof;
and

(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in
the conduct of his business.

We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor
investment to qualify as an independent contractor under the law. The premises, tools, equipment
and paraphernalia used by the petitioners in their jobs are admittedly all supplied by respondent
company. It is only the manpower or labor force which the alleged contractors supply, suggesting the
existence of a "labor only" contracting scheme prohibited by law (Article 106, 109 of the Labor Code;
Section 9(b), Rule VIII, Book III, Implementing Rules and Regulations of the Labor Code). In fact,
even the alleged contractor's office, which consists of a space at respondent company's warehouse,
table, chair, typewriter and cabinet, are provided for by respondent SMC. It is therefore clear that the
alleged contractors have no capital outlay involved in the conduct of its business, in the maintenance
thereof or in the payment of its workers' salaries.

The payment of the workers' wages is a critical factor in determining the actuality of an employer-
employee relationship whether between respondent company and petitioners or between the alleged
independent contractor and petitioners. It is important to emphasize that in a truly independent
contractor-contractee relationship, the fees are paid directly to the manpower agency in lump sum
without indicating or implying that the basis of such lump sum is the salary per worker multiplied by
the number of workers assigned to the company. This is the rule in Social Security System v. Court
of Appeals (39 SCRA 629, 635).

The alleged independent contractors in the case at bar were paid a lump sum representing only the
salaries the workers were entitled to, arrived at by adding the salaries of each worker which depend
on the volume of work they. had accomplished individually. These are based on payrolls, reports or
statements prepared by the workers' group leader, warehousemen and checkers, where they note
down the number of cartons, wooden shells and bottles each worker was able to load, unload, pile or
pallet and see whether they tally. The amount paid by respondent company to the alleged
independent contractor considers no business expenses or capital outlay of the latter. Nor is the
profit or gain of the alleged contractor in the conduct of its business provided for as an amount over
and above the workers' wages. Instead, the alleged contractor receives a percentage from the total
earnings of all the workers plus an additional amount corresponding to a percentage of the earnings
of each individual worker, which, perhaps, accounts for the petitioners' charge of unauthorized
deductions from their salaries by the respondents.

Anent the argument that the petitioners are not employees as they worked on piece basis, we
merely have to cite our rulings in Dy Keh Beng v. International Labor and Marine Union of the
Philippines (90 SCRA 161), as follows:

"[C]ircumstances must be construed to determine indeed if payment by the piece is

just a method of compensation and does not define the essence of the relation. Units
of time . . . and units of work are in establishments like respondent (sic) just
 yardsticks whereby to determine rate of compensation, to be applied whenever
agreed upon. We cannot construe payment by the piece where work is done in such
an establishment so as to put the worker completely at liberty to turn him out and
take in another at pleasure."

Article 106 of the Labor Code provides the legal effect of a labor only contracting scheme, to wit:

... 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.

Firmly establishing respondent SMC's role as employer is the control exercised by it over the
petitioners that is, control in the means and methods/manner by which petitioners are to go about
their work, as well as in disciplinary measures imposed by it.

Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as to the
means and manner of performing the same is practically nil. For, how many ways are there to load
and unload bottles and wooden shells? The mere concern of both respondent SMC and the alleged
contractor is that the job of having the bottles and wooden shells brought to and from the warehouse
be done. More evident and pronounced is respondent company's right to control in the discipline of
petitioners. Documentary evidence presented by the petitioners establish respondent SMC's right to
impose disciplinary measures for violations or infractions of its rules and regulations as well as its
right to recommend transfers and dismissals of the piece workers. The inter-office memoranda
submitted in evidence prove the company's control over the petitioners. That respondent SMC has
the power to recommend penalties or dismissal of the piece workers, even as to Abner Bungay who
is alleged by SMC to be a representative of the alleged labor contractor, is the strongest indication of
respondent company's right of control over the petitioners as direct employer. There is no evidence
to show that the alleged labor contractor had such right of control or much less had been there to
supervise or deal with the petitioners.

The petitioners were dismissed allegedly because of the shutdown of the glass manufacturing plant.
Respondent company would have us believe that this was a case of retrenchment due to the closure
or cessation of operations of the establishment or undertaking. But such is not the case here. The
respondent's shutdown was merely temporary, one of its furnaces needing repair. Operations
continued after such repairs, but the petitioners had already been refused entry to the premises and
dismissed from respondent's service. New workers manned their positions. It is apparent that the
closure of respondent's warehouse was merely a ploy to get rid of the petitioners, who were then
agitating the respondent company for benefits, reforms and collective bargaining as a union. There
is no showing that petitioners had been remiss in their obligations and inefficient in their jobs to
warrant their separation.

As to the charge of unfair labor practice because of SMC's refusal to bargain with the petitioners, it is
clear that the respondent company had an existing collective bargaining agreement with the IBM
union which is the recognized collective bargaining representative at the respondent's glass plant.

There being a recognized bargaining representative of all employees at the company's glass plant,
the petitioners cannot merely form a union and demand bargaining. The Labor Code provides the
proper procedure for the recognition of unions as sole bargaining representatives. This must be
followed.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel
Corporation is hereby ordered to REINSTATE petitioners, with three (3) years backwages. However,
where reinstatement is no longer possible, the respondent SMC is ordered to pay the petitioners
separation pay equivalent to one (1) month pay for every year of service.

SO ORDERED.

Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-43825 May 9, 1988

CONTINENTAL MARBLE CORP. and FELIPE DAVID, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC); ARBITRATOR JOSE T. COLLADO and
RODITO NASAYAO, respondents.

Benito P. Fabie for petitioners.

Narciso C. Parayno, Jr. for respondents.

PADILLA, J.:

In this petition for mandamus, prohibition and certiorari with preliminary injunction, petitioners seek to annul and set aside the decision
rendered by the respondent Arbitrator Jose T. Collado, dated 29 December 1975, in NLRC Case No. LR-6151, entitled: "Rodito Nasayao,
complainant, versus Continental Marble Corp. and Felipe David, respondents," and the resolution issued by the respondent Commission,
dated 7 May 1976, which dismissed herein petitioners' appeal from said decision.

In his complaint before the NLRC, herein private respondent Rodito Nasayao claimed that sometime
in May 1974, he was appointed plant manager of the petitioner corporation, with an alleged
compensation of P3,000.00, a month, or 25% of the monthly net income of the company, whichever
is greater, and when the company failed to pay his salary for the months of May, June, and July
1974, Rodito Nasayao filed a complaint with the National Labor Relations Commission, Branch IV,
for the recovery of said unpaid varies. The case was docketed therein as NLRC Case No. LR-6151.

Answering, the herein petitioners denied that Rodito Nasayao was employed in the company as
plant manager with a fixed monthly salary of P3,000.00. They claimed that the undertaking agreed
upon by the parties was a joint venture, a sort of partnership, wherein Rodito Nasayao was to keep
the machinery in good working condition and, in return, he would get the contracts from end-users
for the installation of marble products, in which the company would not interfere. In addition, private
respondent Nasayao was to receive an amount equivalent to 25% of the net profits that the
petitioner corporation would realize, should there be any. Petitioners alleged that since there had
been no profits during said period, private respondent was not entitled to any amount.

The case was submitted for voluntary arbitration and the parties selected the herein respondent
Jose T. Collado as voluntary arbitrator. In the course of the proceedings, however, the herein
petitioners challenged the arbitrator's capacity to try and decide the case fairly and judiciously and
asked him to desist from further hearing the case. But, the respondent arbitrator refused. In due
time, or on 29 December 1975, he rendered judgment in favor of the complainant, ordering the
herein petitioners to pay Rodito Nasayao the amount of P9,000.00, within 10 days from notice. 1

Upon receipt of the decision, the herein petitioners appealed to the National Labor Relations
Commission on grounds that the labor arbiter gravely abused his discretion in persisting to hear and
decide the case notwithstanding petitioners' request for him to desist therefrom: and that the
appealed decision is not supported by evidence. 2

On 18 March 1976, Rodito Nasayao filed a motion to dismiss the appeal on the ground that the
decision of the voluntary arbitrator is final, unappealable, and immediately executory;   and, on 23
3

March 1976, he filed a motion for the issuance of a writ of execution. 4

Acting on the motions, the respondent Commission, in a resolution dated 7 May 1976, dismissed the
appeal on the ground that the decision appealed from is final, unappealable and immediately
executory, and ordered the herein petitioners to comply with the decision of the voluntary arbitrator
within 10 days from receipt of the resolution.
5

The petitioners are before the Court in the present recourse. As prayed for, the Court issued a
temporary restraining order, restraining herein respondents from enforcing and/or carrying out the
questioned decision and resolution. 6

The issue for resolution is whether or not the private respondent Rodito Nasayao was employed as
plant manager of petitioner Continental Marble Corporation with a monthly salary of P3,000.00 or
25% of its monthly income, whichever is greater, as claimed by said respondent, or entitled to
receive only an amount equivalent to 25% of net profits, if any, that the company would realize, as
contended by the petitioners.

The respondent arbitrator found that the agreement between the parties was for the petitioner
company to pay the private respondent, Rodito Nasayao, a monthly salary of P3,000.00, and,
consequently, ordered the company to pay Rodito Nasayao the amount of P9,000.00 covering a
period of three (3) months, that is, May, June and July 1974.

The respondent Rodito Nasayao now contends that the judgment or award of the voluntary arbitrator
is final, unappealable and immediately executory, and may not be reviewed by the Court. His
contention is based upon the provisions of Art. 262 of the Labor Code, as amended.

The petitioners, upon the other hand, maintain that "where there is patent and manifest abuse of
discretion, the rule on unappealability of awards of a voluntary arbitrator becomes flexible and it is
the inherent power of the Courts to maintain the people's faith in the administration of justice." The
question of the finality and unappealability of a decision and/or award of a voluntary arbitrator had
been laid to rest in Oceanic Bic Division (FFW) vs. Romero,   and reiterated in Mantrade FMMC
7

Division Employees and Workers Union vs. Bacungan.  The Court therein ruled that it can review the
8

decisions of voluntary arbitrators, thus-

We agree with the petitioner that the decisions of voluntary arbitrators must be given
the highest respect and as a general rule must be accorded a certain measure of
finality. This is especially true where the arbitrator chosen by the parties enjoys the
first rate credentials of Professor Flerida Ruth Pineda Romero, Director of the U.P.
Law Center and an academician of unquestioned expertise in the field of Labor Law.
It is not correct, however, that this respect precludes the exercise of judicial review
over their decisions. Article 262 of the Labor Code making voluntary arbitration
awards final, inappealable, and executory except where the money claims exceed P l
00,000.00 or 40% of paid-up capital of the employer or where there is abuse of
discretion or gross incompetence refers to appeals to the National Labor Relations
Commission and not to judicial review.
 Inspite of statutory provisions making 'final' the decisions of certain administrative
agencies, we have taken cognizance of petitions questioning these decisions where
want of jurisdiction, grave abuse of discretion, violation of due process, denial of
substantial justice, or erroneous interpretation of the law were brought to our
attention. There is no provision for appeal in the statute creating the Sandiganbayan
but this has not precluded us from examining decisions of this special court brought
to us in proper petitions. ...

The Court further said:

A voluntary arbitrator by the nature of her fucntions acts in quasi-judicial capacity.

There is no reason why herdecisions involving interpretation of law should be beyond
this Court's review. Administrative officials are presumed to act in accordance with
law and yet we do hesitate to pass upon their work where a question of law is
involved or where a showing of abuse of authority or discretion in their official acts is
properly raised in petitions for certiorari.

The foregoing pronouncements find support in Section 29 of Republic Act No. 876, otherwise known
as the Arbitration Law, which provides:

Sec. 29. Appeals — An appeal may be taken from an order made in a proceeding
under this Act, or from a judgment entered upon an award through certiorari
proceedings, but such appeals shall be limited to questions of law. The proceedings
upon such an appeal, including the judgment thereon shall be governed by the Rules
of Court in so far as they are applicable.

The private respondent, Rodito Nasayao, in his Answer to the petition,   also claims that the case is
9

premature for non-exhaustion of administrative remedies. He contends that the decision of the
respondent Commission should have been first appealed by petitioners to the Secretary of Labor,
and, if they are not satisfied with his decision, to appeal to the President of the Philippines, before
resort is made to the Court.

The contention is without merit. The doctrine of exhaustion of administrative remedies cannot be
invoked in this case, as contended. In the recent case of John Clement Consultants, Inc. versus
National Labor Relations Commission,   the Court said:
10

As is well known, no law provides for an appeal from decisions of the National Labor
Relations Commission; hence, there can be no review and reversal on appeal by
higher authority of its factual or legal conclusions. When, however, it decides a case
without or in excess of its jurisdiction, or with grave abuse of discretion, the party
thereby adversely affected may obtain a review and nullification of that decision by
this Court through the extraordinary writ of certiorari. Since, in this case, it appears
that the Commission has indeed acted without jurisdiction and with grave abuse of
discretion in taking cognizance of a belated appeal sought to be taken from a
decision of Labor Arbiter and thereafter reversing it, the writ of certiorari will issue to
undo those acts, and do justice to the aggrieved party.

We also find no merit in the contention of Rodito Nasayao that only questions of law, and not
findings of fact of a voluntary arbitrator may be reviewed by the Court, since the findings of fact of
the voluntary arbitrator are conclusive upon the Court.
While the Court has accorded great respect for, and finality to, findings of fact of a voluntary
arbitrator   and administrative agencies which have acquired expertise in their respective fields, like
11

the Labor Department and the National Labor Relations Commission,   their findings of fact and the
12

conclusions drawn therefrom have to be supported by substantial evidence. ln that instant case, the
finding of the voluntary arbitrator that Rodito Nasayao was an employee of the petitioner corporation
is not supported by the evidence or by the law.

On the other hand, we find the version of the petitioners to be more plausible and in accord with
human nature and the ordinary course of things. As pointed out by the petitioners, it was illogical for
them to hire the private respondent Rodito Nasayao as plant manager with a monthly salary of
P3,000.00, an amount which they could ill-afford to pay, considering that the business was losing, at
the time he was hired, and that they were about to close shop in a few months' time.

Besides, there is nothing in the record which would support the claim of Rodito Nasayao that he was
an employee of the petitioner corporation. He was not included in the company payroll, nor in the list
of company employees furnished the Social Security System.

Most of all, the element of control is lacking. In Brotherhood Labor Unity Movement in the Philippines
vs. Zamora,  the Court enumerated the factors in determining whether or not an employer-employee
13

relationship exists, to wit:

In determining the existence of an employer-employee relationship, the elements that

are generally considered are the following: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee with respect to the means and methods by
which the work is to be accomplished. It is the so-called "control test" that is the most
important element (Investment Planning Corp. of the Phils. vs. The Social Security
System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario Brothers,
Inc. v. Ople, 131 SCRA 72). <äre||anº•1àw>

In the instant case, it appears that the petitioners had no control over the conduct of Rodito Nasayao
in the performance of his work. He decided for himself on what was to be done and worked at his
own pleasure. He was not subject to definite hours or conditions of work and, in turn, was
compensated according to the results of his own effort. He had a free hand in running the company
and its business, so much so, that the petitioner Felipe David did not know, until very much later,
that Rodito Nasayao had collected old accounts receivables, not covered by their agreement, which
he converted to his own personal use. It was only after Rodito Nasayao had abandoned the plant
following discovery of his wrong- doings, that Felipe David assumed management of the plant.

Absent the power to control the employee with respect to the means and methods by which his work
was to be accomplished, there was no employer-employee relationship between the parties. Hence,
there is no basis for an award of unpaid salaries or wages to Rodito Nasayao.

WHEREFORE, the decision rendered by the respondent Jose T. Collado in NLRC Case No. LR-
6151, entitled: "Rodito Nasayao, complainant, versus Continental Marble Corp. and Felipe David,
respondents," on 29 December 1975, and the resolution issued by the respondent National Labor
Relations Commission in said case on 7 May 1976, are REVERSED and SET ASIDE and another
one entered DISMISSING private respondent's complaints. The temporary restraning order
heretofore isued by the Court is made permanent. Without costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 119500 August 28, 1998

PAGUIO TRANSPORT CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and WILFREDO MELCHOR, respondents.

PANGANIBAN, J.:

In dismissing the petition, this Court reiterates the following doctrines: (1) the "boundary system"
used in taxi (and jeepney) operations presupposes an employer-employee relation; (2) the employer
must prove just (or authorized) cause and due process to justify dismissal of an employee; (3)
strained relations must be demonstrated as a fact; and (4) back wages and reinstatement are
necessary consequences of illegal dismissal.

The Case

Before us is a petition for certiorari and prohibition with preliminary injunction, assailing the

December 16, 1994 Decision of the National Labor Relations Commission   in NLRC NCR Case No.
1

00-02-01564-94 entitled "Wilfredo Melchor vs. Paguio Transport Corporation/Serafin Paguio." The
dispositive portion of the challenged Decision reads:

WHEREFORE, premises considered, the appeal insofar as it seeks reversal of the

finding on illegal dismissal is denied for lack of merit. The decision declaring that
complainant was illegally dismissed is affirmed. The decision is however partially
modified insofar as liability therefor is concerned. The liability shall inure against
PAGUIO TRANSPORT CORPORATION, subject to the provision of the Corporation
Code and the Rules of Court on matters taken herein. The backwages as computed
in the assailed decision is set aside, and a new one is hereby provided in the amount
of P86,400.00 as computed in the immediately preceding paragraph.

Petitioner also impugns the February 21, 1995 NLRC Resolution   denying the motion for
2

reconsideration.

The June 28, 1994 Decision of the labor arbiter,   which the NLRC modified as to the amount of back
3

wages, disposed as follows:

WHEREFORE, the respondents are hereby ordered to reinstate the complainant with
full backwages from the time his salaries were withheld from him until his actual
reinstatement.
 The respondents are further ordered to pay him his 13th month pay in the amount of
P5,600.00.

Complainant's backwages up to the date of this Decision as computed by LEILANI E.

CALALANG of the Commission's NLRC NCR Branch is:

11/28/93 - 6/28/94 = 7 mos.

P800.00 x 3 days x 4 weeks = P9,600.00

P9,600.00 x 7 mos. = P67,200.00

The aspect of reinstatement either in the job or payroll at the option of the employers
being immediately executory pursuant to Article 223 of the Labor Code, the
respondents are hereby directed to so reinstate him when he reports for work by
virtue of this Decision.

Other claims are hereby dismissed for lack of evidence.

The Facts

The facts, as summarized in the challenged Decision, are as follows:

Complainant Wilfredo Melchor was hired by respondent company as a taxi driver on

25 December 1992 under the "[b]oundary [s]ystem. He [was] engaged to drive the
taxi unit assigned to him on a 24-hour schedule per trip every two (2) days, for which
he used to earn an average income from P500 to P700 per trip, exclusive of the
P650.00 boundary and other deductions imposed on him. On 24 [sic] November
1993, complainant allegedly met a vehicular accident along Quirino Avenue near the
PNR Station and Plaza Dilao when he accidentally bumped a car which stopped at
the intersection even when the traffic light was green and go. After he submitted the
traffic accident report to the office of respondents, he was allegedly advised to stop
working and have a rest. After several days[,] he allegedly reported for work only to
be told that his service was no longer needed. Hence, the complaint for illegal
dismissal, among others.

Respondent[s] for their part maintained that complainant was not illegally dismissed,
there being in the first place no employer-employee relationship between them. In
amplification, it was argued that the element of control which [was] a paramount test
to determine the existence of such a relationship [was] lacking. So too, it argued the
element of the payment of compensation. Considering that in lieu of the latter,
payment of boundary is instead made allegedly makes the relationship between
them of a "wase-agreement" [sic]. Respondents then argued that even if an
employer-employee relationship were to be presumed as present, still complainant's
termination arose out of a valid cause and after he refused to articulate his stand on
the investigation being conducted on him. Respondents then harped on the
supposed three occasions when complainant figured in a vehicular accident involving
the taxi unit he was driving, viz: On August 3, which resulted in damages to the
respondent in the amount of P150.00; On August 4 which again resulted [in] the
damages to the respondent in the amount of P615.00; and, again on 4 November
1993, the mishap costing the respondents this time P25,370.00 in damages. As a
 result of the alleged compounded damages which the respondents had to shoulder
on account of the supposed reckless driving of the complainant, the former was
allegedly left with no alternative but to ask complainant's explanation why he should
still be allowed to drive. Complainant, despite several chances, allegedly failed to do
so. 4

Ruling of the NLRC

The NLRC held that private respondent was an illegally dismissed employee of petitioner. Upholding
the existence of an employer-employee relationship, it cited Doce v. WCC,   in which the Supreme
5

Court ruled that "the relationship created between the parties operating under a 'boundary system' is
one of an employer and employee, and not of a lessor and a lessee."  6

The NLRC sustained the ruling of the labor arbiter that the private respondent was illegally
dismissed, for he "was not afforded the twin requirements of due process . . . ."   It rejected
7

petitioner's claim that private respondent had figured in three vehicular incidents because of his
reckless driving. It found that "except for petitioner's bare statements, no proof was presented to
establish with particularity the circumstances being claimed. . . . The guilt and culpability of [private
respondent] which would give [petitioner] valid ground to effect his dismissal cannot be established
by a mere allegation of his reckless driving." 8

Public Respondent NLRC found petitioner liable for back wages in the amount of P86,400, and not
P67,200 as computed by the labor arbiter. It found, however, that this liability should be imposed on
Petitioner Corporation only, and not on its president who was also impleaded by private respondent.

Hence, this petition.  9

Issues

Petitioner raises the following issues:

a. Whether or not public respondent Commission acted in excess of jurisdiction

and/or with grave abuse of discretion amounting to lack of jurisdiction in ordering the
reinstatement of private respondent with full backwages, despite its strained relations
with the petitioner and the reinstatement would, in effect, be inimical to the interest of
the latter in particular, and to the riding public in general;

b. Whether or not public respondent acted in excess of jurisdiction and/or with grave
abuse of discretion in refusing to reconsider its decision and resolution complained of
despite the facts prevailing to support the reconsideration.  10

In resolving the petition, we shall address the following points: (1) employer-employee relation, (2)
presence of just cause, (3) due process, (4) strained relationship, and (5) propriety of reinstatement
and backwages.

The Court's Ruling

The petition is not meritorious.

First Issue:
Employer-Employee Relation
Under the "boundary system," private respondent was engaged to drive petitioner's taxi unit on a 24-
hour schedule every two days. On each such trip, private respondent remitted to petitioner a
"boundary" of P650. Whatever he earned in excess of that amount was considered his income.

Petitioner argues that under said arrangement, he had no control over the number of hours private
respondent had to work and the routes he had to take. Therefore, he concludes that the employer-
employee relationship cannot be deemed to exist.

Petitioner's contention is not novel. In Martinez v. National Labor Relations Commission,   this Court
11

already ruled that the relationship of taxi owners and taxi drivers is the same as that between
jeepney owners and jeepney drivers under the "boundary system." In both cases, the employer-
employee relationship was deemed to exist, viz.:

The relationship between jeepney owners/operators on one hand and jeepney

drivers on the other under the boundary system is that of employer-employee and
not of lessor-lessee. . . . In the lease of chattels[,] the lessor loses complete control
over the chattel leased . . . . In the case of jeepney owners/operators and jeepney
drivers, the former exercise supervision and control over the latter. The fact that the
drivers do not receive fixed wages but get only the excess of that so-called boundary
they pay to the owner/operator is not sufficient to withdraw the relationship between
them from that of employer and employee. The doctrine is applicable in the present
case. Thus, private respondents were employees. . . because they had been
engaged to perform activities which were usually necessary or desirable in the usual
trade or business of the employer.  12

Second Issue:
Just Cause

Petitioner also asserts that private respondent's involvement in three vehicular accidents within a
span of several months constitutes just cause for his dismissal. It alleges that, according to the
police report concerning the most recent and serious vehicular mishap, it was private respondent
who was at fault and that the "city prosecutor of Quezon City recommended that an Information for
reckless imprudence resulting in damage to property be filed against him."  13

Petitioner, however, did not submit any proof to support these allegations. Well-settled is the rule
that the employer has the burden of proving that the dismissal of an employee is for a just cause.
The failure of the employer to discharge this burden means that the dismissal is not justified and that
the employee is entitled to reinstatement and backwages.   In this case, petitioner failed to prove
14

any just or authorized cause for his dismissal. Private respondent, therefore, must be deemed
illegally dismissed. 
15

Petitioner contends that he "submitted and presented material and competent documentary
evidence consisting of police reports of vehicular accidents of taxicab units owned by petitioner and
driven by private respondent, the repairs and expenses suffered by the petitioner as a result thereof
and the resolution of the [c]ity [p]rosecutor of Quezon City finding private respondent at fault for the
November 4, 1993 vehicular accident caused by the latter."   Adding that the submission of these
16

documents only on appeal does not diminish their probative value, petitioner cites Article 221 of the
Labor Code which reads:

Art. 221. Technical rules not binding and prior resort to amicable settlement. — In
any proceeding before the Commission or any of the Labor Arbiters, the rules of
procedure prevailing in courts of law and equity shall not be controlling and it is the
 spirit and intention of the Code that the Commission and its members and the Labor
Arbiters shall use every and all reasonable means to ascertain the facts in each case
speedily and objectively without regard to technicalities of law and procedure, all in
the interest of due process. In any proceeding before the Commission or any Labor
Arbiter, the parties may be represented by legal counsel but it shall be the duty of the
Chairman, any Presiding Commissioner or Commissioner or any Labor Arbiter to
exercise complete control of the proceedings at all stages.

Any provision of law to the contrary notwithstanding, the Labor Arbiter shall exert all
efforts towards [t]he amicable settlement of a labor dispute within his jurisdiction on
or before the first hearing. The same rule shall apply to the Commission in the
exercise of its original jurisdiction.

However, a careful examination of both the original Complaint and the Petitioner's Memorandum of
Appeal from the labor arbiter's Decision reveals that said pieces of documentary evidence were not
mentioned or included therein,   but were submitted by petitioner only when he filed his present
17

petition with this Court. These pieces of evidence were attached and referred to as Annexes "G",
"H", "I", "J", "K" and "L" of the said petition. Such factual issues cannot be resolved in a petition
for certiorari like the present case, because the Court's review of NLRC decisions is limited to
questions of jurisdiction and grave abuse of discretion. In PMI Colleges v. NLRC,   the Court held:
18

This Court is definitely not the proper venue to consider this matter for it is not a trier
of facts. . . . Certiorari is a remedy narrow in its scope and inflexible in character. It is
not a general utility tool in the legal workshop. Factual issues are not a proper
subject for certiorari, as the power of the Supreme Court to review labor cases is
limited to the issue of jurisdiction and grave abuse of discretion. . . . .

Of the same tenor was our disquisition in Ilocos Sur Electric Cooperative, Inc. v.
NLRC where we made plain that:

In certiorari proceedings under Rule 65 of the Rules of Court, judicial

review by this Court does not go so far as to evaluate the sufficiency
of evidence upon which the Labor Arbiter and the NLRC based their
determinations, the inquiry being limited essentially to whether or not
said public respondents had acted without or in excess of [their]
jurisdiction or with grave abuse of discretion.

. . . Our deference to the expertise acquired by quasi-judicial agencies and the

limited scope granted us in the exercise of certiorari jurisdiction restrain us from
going so far as to probe into the correctness of a tribunal's evaluation of evidence,
unless there is a palpable mistake and complete disregard thereof in which
case certiorari would be proper. In plain terms, in certiorari proceedings, we are
concerned with mere errors of jurisdiction and not errors of judgment.

Equally devoid of correctness is petitioner's claim that the documents should be considered,
pursuant to Article 221 of the Labor Code which stares that technical rules are not binding in
proceedings before the labor arbiters and the NLRC. The Supreme Court is not a trier of facts; as
earlier stated, its jurisdiction in a petition for certiorari, like the present case, is confined to questions
of jurisdiction and grave abuse of discretion. The unexplained failure of petitioner to present its
evidence before the labor arbiter and the NLRC cannot compel this Court to expand the scope of its
review. Indeed, petitioner has not proffered a sufficient reason for this Court to do so.
Petitioner's reliance on Canete v. National Labor Relations Commission   is misplaced. In that case,
19

the documents were submitted to the NLRC before they were tackled by the Supreme Court.

Private respondent's admission that he was involved in the November 4, 1993 accident did not give
petitioner a just cause to dismiss him. Mere involvement in an accident, absent any showing of fault
or recklessness on the part of an employee, is not a valid ground for dismissal.

Third Issue:
No Due Process

Petitioner insists that private respondent was accorded due process, because he was allowed to
explain his side and to show cause why he should still be allowed to act as one of petitioner's
drivers.

This does not persuade. The Court has consistently held that in the dismissal of employees, the twin
requirements of notice and hearing are essential elements of due process. The employer must
furnish the worker two written notices: (1) one to apprise him of the particular acts or omissions for
which his dismissal is sought and (2) the other to inform him of his employer's decision to dismiss
him. As to the requirement of a hearing, the essence of due process lies simply in an opportunity to
be heard, and not always and indispensably in an actual hearing.  20

In the present case, petitioner failed to present proof, other than its bare allegations, that it had
complied with these requirements.   We reiterate: the burden of proof rests on the employer. Private
21

respondent, in fact, was not given notice that he was being dismissed. When ordered to explain the
vehicular accident that happened on November 4, 1993, he was not informed that petitioner was
contemplating his dismissal and that his involvement in said vehicular accident was the cause
thereof. Private respondent was merely asked to explain the vehicular accident per se, not his
defense against a charge of dismissal arising from the vehicular accident. He became aware of his
employer's intention to dismiss him only when he was actually told not to report for work anymore.

Fourth Issue:
Strained Relations

Notwithstanding its failure to prove just cause and due process in the dismissal of private
respondent, petitioner seeks to bar his reinstatement by invoking the doctrine of strained relations. It
contends that as a result of private respondent's "reckless and incompetent manner of driving . . .,
compounded by the damages suffered by petitioner in terms of repairs, related expenses, and the
institution of the instant case, the relationship between the parties are so strained as to preclude a
harmonious working atmosphere to the prejudice of the petitioner as well as private respondent."  22

We are not persuaded. Strained relations must be demonstrated as a fact. Petitioner failed to do so.
Its allegation that private respondent was incompetent and reckless in his manner of driving, which
led to the his involvement in three vehicular accidents, is not supported by the records. As earlier
noted, no evidence was properly submitted by petitioner to prove or give credence to his assertions.
Thus, Respondent NLRC ruled:

Despite allegation on the matter, not an iota of proof was presented to establish the
claim. This observation equally applies to the allegation that complainants, in three
(3) occasions had figured in [a] vehicular accident due to his reckless driving . . . . 
23
Because the claim of petitioner has no factual basis, the doctrine on strained relations cannot be
applied in this case. Moreover, the filing of the Complaint for illegal dismissal does not by itself justify
the invocation of this doctrine. As the Court held in Capili vs. NLRC:  24

. . . [T]he doctrine on "strained relations" cannot be applied indiscriminately since

every labor dispute almost invariably results in "strained relations"; otherwise,
reinstatement can never be possible simply because some hostility is engendered
between the parties as a result of their disagreement. That is human nature.

Fifth Issue:
Reinstatement and Back Wages

Because he was illegally dismissed, private respondent is entitled to reinstatement and back wages
pursuant to Section 279 of the Labor Code, which reads:

Art. 279. Security of Tenure. — In cases of regular employment, the employer shall
not terminate the services of an employee except for a just cause or when authorized
by this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to
the time of his actual reinstatement.

Interpreting this provision, the Court held in Bustamante v. NLRC   that illegally dismissed
25

employees are entitled to full back wages without conditions or limitations, viz.:

. . . [A] closer adherence to the legislative policy behind Rep. Act No. 6715 points to
"full backwages" as meaning exactly that, i.e., without deducting from backwages the
earnings derived elsewhere by the concerned employee during the period of his
illegal dismissal. In other words, the provision calling for "full backwages" to illegally
dismissed employees is clear, plain and free from ambiguity and, therefore, must be
applied without attempted or strained interpretation.

The labor arbiter awarded back wages in the sum of P67,200 based on the following computation:

11/28/93 - 6/28/94 = 7 mos.

P800.00 x 3 days x 4 weeks = P6,600.00

P9,600 x 7 mos. = P67,200.00  26

In modifying the foregoing award, the NLRC relied on this other formula:

11/28/93 - 11/28/94 = 12 months

P600.00 x 3 days x 4 weeks = P 7,200.00

P7,200 x 12 months = P86,400.00.  27

Although the NLRC adjusted the amount of private respondent's monthly income and the period
during which back wages may be awarded, neither the petitioner nor the private respondent
questioned the new computation. Accordingly we sustain the award but stress that the back wages
ought to be computed from the time of the illegal dismissal to the time of reinstatement, either actual
or in the payroll, without any deduction or qualification.

WHEREFORE, the petition is hereby DISMISSED for utter lack merit, and the assailed Decision and
Resolution are hereby AFFIRMED. Costs against petitioners.

SO ORDERED.

Davide, Jr. and Vitug, JJ., concur.

Bellosillo, J., took no part.

Quisumbing, J., concurs in the result.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 84484 November 15, 1989

INSULAR LIFE ASSURANCE CO., LTD., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.

Tirol & Tirol for petitioner.

Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.

NARVASA, J.:

On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and
Melecio T. Basiao entered into a contract   by which:
1

1. Basiao was "authorized to solicit within the Philippines applications for insurance
policies and annuities in accordance with the existing rules and regulations" of the
Company;

2. he would receive "compensation, in the form of commissions ... as provided in the

Schedule of Commissions" of the contract to "constitute a part of the consideration of
... (said) agreement;" and

3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all
its circulars ... and those which may from time to time be promulgated by it, ..." were
made part of said contract.

The contract also contained, among others, provisions governing the relations of the parties, the
duties of the Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.:

RELATION WITH THE COMPANY. The Agent shall be free to exercise his own
judgment as to time, place and means of soliciting insurance. Nothing herein
contained shall therefore be construed to create the relationship of employee and
employer between the Agent and the Company. However, the Agent shall observe
and conform to all rules and regulations which the Company may from time to time
prescribe.

ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving,

directly or indirectly, rebates in any form, or from making any misrepresentation or
over-selling, and, in general, from doing or committing acts prohibited in the Agent's
Manual and in circulars of the Office of the Insurance Commissioner.
 TERMINATION. The Company may terminate the contract at will, without any
previous notice to the Agent, for or on account of ... (explicitly specified causes). ...

Either party may terminate this contract by giving to the other notice in writing to that
effect. It shall become ipso facto cancelled if the Insurance Commissioner should
revoke a Certificate of Authority previously issued or should the Agent fail to renew
his existing Certificate of Authority upon its expiration. The Agent shall not have any
right to any commission on renewal of premiums that may be paid after the
termination of this agreement for any cause whatsoever, except when the termination
is due to disability or death in line of service. As to commission corresponding to any
balance of the first year's premiums remaining unpaid at the termination of this
agreement, the Agent shall be entitled to it if the balance of the first year premium is
paid, less actual cost of collection, unless the termination is due to a violation of this
contract, involving criminal liability or breach of trust.

ASSIGNMENT. No Assignment of the Agency herein created or of commissions or

other compensations shall be valid without the prior consent in writing of the
Company. ...

Some four years later, in April 1972, the parties entered into another contract — an Agency
Manager's Contract — and to implement his end of it Basiao organized an agency or office to which
he gave the name M. Basiao and Associates, while concurrently fulfilling his commitments under the
first contract with the Company.  2

In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a
reconsideration, Basiao sued the Company in a civil action and this, he was later to claim, prompted
the latter to terminate also his engagement under the first contract and to stop payment of his
commissions starting April 1, 1980.  3

Basiao thereafter filed with the then Ministry of Labor a complaint   against the Company and its
4

president. Without contesting the termination of the first contract, the complaint sought to recover
commissions allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the
Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an
independent contractor and that the Company had no obligation to him for unpaid commissions
under the terms and conditions of his contract.  5

The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting
agreement had established an employer-employee relationship between him and the Company, and
this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision
directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium
remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in
favor of the respondent company ..." plus 10% attorney's fees.  6

This decision was, on appeal by the Company, affirmed by the National Labor Relations
Commission.   Hence, the present petition for certiorari and prohibition.
7

The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the
Company's employee by virtue of the contract invoked by him, thereby placing his claim for unpaid
commissions within the original and exclusive jurisdiction of the Labor Arbiter under the provisions of
Section 217 of the Labor Code,   or, contrarily, as the Company would have it, that under said
8

contract Basiao's status was that of an independent contractor whose claim was thus cognizable, not
by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and generally accepted
sense existed between it and Basiao, is drawn from the terms of the contract they had entered into,
which, either expressly or by necessary implication, made Basiao the master of his own time and
selling methods, left to his judgment the time, place and means of soliciting insurance, set no
accomplishment quotas and compensated him on the basis of results obtained. He was not bound to
observe any schedule of working hours or report to any regular station; he could seek and work on
his prospects anywhere and at anytime he chose to, and was free to adopt the selling methods he
deemed most effective.

Without denying that the above were indeed the expressed implicit conditions of Basiao's contract
with the Company, the respondents contend that they do not constitute the decisive determinant of
the nature of his engagement, invoking precedents to the effect that the critical feature distinguishing
the status of an employee from that of an independent contractor is control, that is, whether or not
the party who engages the services of another has the power to control the latter's conduct in
rendering such services. Pursuing the argument, the respondents draw attention to the provisions of
Basiao's contract obliging him to "... observe and conform to all rules and regulations which the
Company may from time to time prescribe ...," as well as to the fact that the Company prescribed the
qualifications of applicants for insurance, processed their applications and determined the amounts
of insurance cover to be issued as indicative of the control, which made Basiao, in legal
contemplation, an employee of the Company.  9

It is true that the "control test" expressed in the following pronouncement of the Court in the 1956
case of Viana vs. Alejo Al-Lagadan 10

... In determining the existence of employer-employee relationship, the following

elements are generally considered, namely: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees' conduct — although the latter is the most important element
(35 Am. Jur. 445). ...

has been followed and applied in later cases, some fairly recent.   Indeed, it is without question a
11

valid test of the character of a contract or agreement to render service. It should, however, be
obvious that not every form of control that the hiring party reserves to himself over the conduct of the
party hired in relation to the services rendered may be accorded the effect of establishing an
employer-employee relationship between them in the legal or technical sense of the term. A line
must be drawn somewhere, if the recognized distinction between an employee and an individual
contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives
untrammelled freedom to the party hired and eschews any intervention whatsoever in his
performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed
in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. The
distinction acquires particular relevance in the case of an enterprise affected with public interest, as
is the business of insurance, and is on that account subject to regulation by the State with respect,
not only to the relations between insurer and insured but also to the internal affairs of the insurance
company.   Rules and regulations governing the conduct of the business are provided for in the
12

Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected
for an insurance company to promulgate a set of rules to guide its commission agents in selling its
policies that they may not run afoul of the law and what it requires or prohibits. Of such a character
are the rules which prescribe the qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and also reserve to the Company the
determination of the premiums to be paid and the schedules of payment. None of these really
invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at
his own time and convenience, hence cannot justifiably be said to establish an employer-employee
relationship between him and the company.

There is no dearth of authority holding persons similarly placed as respondent Basiao to be

independent contractors, instead of employees of the parties for whom they worked. In Mafinco
Trading Corporation vs. Ople,   the Court ruled that a person engaged to sell soft drinks for another,
13

using a truck supplied by the latter, but with the right to employ his own workers, sell according to his
own methods subject only to prearranged routes, observing no working hours fixed by the other
party and obliged to secure his own licenses and defray his own selling expenses, all in
consideration of a peddler's discount given by the other party for at least 250 cases of soft drinks
sold daily, was not an employee but an independent contractor.

In Investment Planning Corporation of the Philippines us. Social Security System   a case almost on
14

all fours with the present one, this Court held that there was no employer-employee relationship
between a commission agent and an investment company, but that the former was an independent
contractor where said agent and others similarly placed were: (a) paid compensation in the form of
commissions based on percentages of their sales, any balance of commissions earned being
payable to their legal representatives in the event of death or registration; (b) required to put up
performance bonds; (c) subject to a set of rules and regulations governing the performance of their
duties under the agreement with the company and termination of their services for certain causes;
(d) not required to report for work at any time, nor to devote their time exclusively to working for the
company nor to submit a record of their activities, and who, finally, shouldered their own selling and
transportation expenses.

More recently, in Sara vs. NLRC,   it was held that one who had been engaged by a rice miller to
15

buy and sell rice and palay without compensation except a certain percentage of what he was able
to buy or sell, did work at his own pleasure without any supervision or control on the part of his
principal and relied on his own resources in the performance of his work, was a plain commission
agent, an independent contractor and not an employee.

The respondents limit themselves to pointing out that Basiao's contract with the Company bound him
to observe and conform to such rules and regulations as the latter might from time to time prescribe.
No showing has been made that any such rules or regulations were in fact promulgated, much less
that any rules existed or were issued which effectively controlled or restricted his choice of methods
— or the methods themselves — of selling insurance. Absent such showing, the Court will not
speculate that any exceptions or qualifications were imposed on the express provision of the
contract leaving Basiao "... free to exercise his own judgment as to the time, place and means of
soliciting insurance."

The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the
Company for twenty-five years. Whatever this is meant to imply, the obvious reply would be that
what is germane here is Basiao's status under the contract of July 2, 1968, not the length of his
relationship with the Company.

The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of
the petitioner, but a commission agent, an independent contractor whose claim for unpaid
commissions should have been litigated in an ordinary civil action. The Labor Arbiter erred in taking
cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent
NLRC in affirming the Arbiter's decision. This conclusion renders it unnecessary and premature to
consider Basiao's claim for commissions on its merits.

WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside,
and that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is
dismissed. No pronouncement as to costs.

SO ORDERED.

Cruz, Gancayco, Griño-Aquino, and Medialdea, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 64948 September 27, 1994

MANILA GOLF & COUNTRY CLUB, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.

Bito, Misa & Lozada for petitioner.

Remberto Z. Evio for private respondent.

NARVASA, C.J.:

The question before the Court here is whether or not persons rendering caddying services for
members of golf clubs and their guests in said clubs' courses or premises are the employees of such
clubs and therefore within the compulsory coverage of the Social Security System (SSS).

That question appears to have been involved, either directly or peripherally, in three separate
proceedings, all initiated by or on behalf of herein private respondent and his fellow caddies. That
which gave rise to the present petition for review was originally filed with the Social Security
Commission (SSC) via petition of seventeen (17) persons who styled themselves "Caddies of Manila
Golf and Country Club-PTCCEA" for coverage and availment of benefits under the Social Security
Act as amended, "PTCCEA" being
the acronym of a labor organization, the "Philippine Technical, Clerical, Commercial Employees
Association," with which the petitioners claimed to be affiliated. The petition, docketed as SSC Case
No. 5443, alleged in essence that although the petitioners were employees of the Manila Golf and
Country Club, a domestic corporation, the latter had not registered them as such with the SSS.

At about the same time, two other proceedings bearing on the same question were filed or were
pending; these were:

(1) a certification election case filed with the Labor Relations Division of the Ministry
of Labor by the PTCCEA on behalf of the same caddies of the Manila Golf and
Country Club, the case being titled "Philippine Technical, Clerical, Commercial
Association vs. Manila Golf and Country Club" and docketed as Case No. R4-LRDX-
M-10-504-78; it appears to have been resolved in favor of the petitioners therein by
Med-Arbiter Orlando S. Rojo who was thereafter upheld by Director Carmelo S.
Noriel, denying the Club's motion for reconsideration;  1

(2) a compulsory arbitration case initiated before the Arbitration Branch of the
Ministry of Labor by the same labor organization, titled "Philippine Technical,
Clerical, Commercial Employees Association (PTCCEA), Fermin Lamar and
 Raymundo Jomok vs. Manila Golf and Country Club, Inc., Miguel Celdran, Henry Lim
and Geronimo Alejo;" it was dismissed for lack of merit by Labor Arbiter Cornelio T.
Linsangan, a decision later affirmed on appeal by the National Labor Relations
Commission on the ground that there was no employer-employee relationship
between the petitioning caddies and the respondent Club.  2

In the case before the SSC, the respondent Club filed answer praying for the dismissal of the
petition, alleging in substance that the petitioners, caddies by occupation, were allowed into the Club
premises to render services as such to the individual members and guests playing the Club's golf
course and who themselves paid for such services; that as such caddies, the petitioners were not
subject to the direction and control of the Club as regards the manner in which they performed their
work; and hence, they were not the Club's employees.

Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for
social security coverage, avowedly coming to realize that indeed there was no employment
relationship between them and the Club. The case continued, and was eventually adjudicated by the
SSC after protracted proceedings only as regards the two holdouts, Fermin Llamar and Raymundo
Jomok. The Commission dismissed the petition for lack of merit,   ruling:
3

. . . that the caddy's fees were paid by the golf players themselves and not by
respondent club. For instance, petitioner Raymundo Jomok averred that for their
services as caddies a caddy's Claim Stub (Exh. "1-A") is issued by a player who will
in turn hand over to management the other portion of the stub known as Caddy
Ticket (Exh. "1") so that by this arrangement management will know how much a
caddy will be paid (TSN, p. 80, July 23, 1980). Likewise, petitioner Fermin Llamar
admitted that caddy works on his own in accordance with the rules and regulations
(TSN, p. 24, February 26, 1980) but petitioner Jomok could not state any policy of
respondent that directs the manner of caddying (TSN, pp. 76-77, July 23, 1980).
While respondent club promulgates rules and regulations on the assignment,
deportment and conduct of caddies (Exh. "C") the same are designed to impose
personal discipline among the caddies but not to direct or conduct their actual work.
In fact, a golf player is at liberty to choose a caddy of his preference regardless of the
respondent club's group rotation system and has the discretion on whether or not to
pay a caddy. As testified to by petitioner Llamar that their income depends on the
number of players engaging their services and liberality of the latter (TSN, pp. 10-11,
Feb. 26, 1980). This lends credence to respondent's assertion that the caddies are
never their employees in the absence of two elements, namely, (1) payment of
wages and (2) control or supervision over them. In this connection, our Supreme
Court ruled that in the determination of the existence of an employer-employee
relationship, the "control test" shall be considered decisive (Philippine Manufacturing
Co. vs. Geronimo and Garcia, 96 Phil. 276; Mansal vs. P.P. Coheco Lumber Co., 96
Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila Hotel Co., 101
Phil. 358, LVN Pictures Inc. vs. Phil. Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being made also to
Investment Planning Corporation Phil. vs. SSS 21 SCRA 925).

Records show the respondent club had reported for SS coverage Graciano Awit and
Daniel Quijano, as bat unloader and helper, respectively, including their ground men,
house and administrative personnel, a situation indicative of the latter's concern with
the rights and welfare of its employees under the SS law, as amended. The
unrebutted testimony of Col. Generoso A. Alejo (Ret.) that the ID cards issued to the
 caddies merely intended to identify the holders as accredited caddies of the club and
privilege(d) to ply their trade or occupation within its premises which could be
withdrawn anytime for loss of confidence. This gives us a reasonable ground to state
that the defense posture of respondent that petitioners were never its employees is
well taken.4

From this Resolution appeal was taken to the Intermediate appellate Court by the union representing
Llamar and Jomok. After the appeal was docketed   and some months before decision thereon was
5

reached and promulgated, Raymundo Jomok's appeal was dismissed at his instance, leaving Fermin
Llamar the lone appellant. 6

The appeal ascribed two errors to the SSC:

(1) refusing to suspend the proceedings to await judgment by the Labor Relations
Division of National Capital Regional Office in the certification election case (R-4-
LRD-M-10-504-78) supra, on the precise issue of the existence of employer-
employee relationship between the respondent club and the appellants, it being
contended that said issue was "a function of the proper labor office"; and

(2) adjudicating that self same issue a manner contrary to the ruling of the Director of
the Bureau of Labor Relations, which "has not only become final but (has been)
executed or (become) res adjudicata."  7

The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of the
least importance. Nor, it would appear, did it find any greater merit in the second alleged error.
Although said Court reserved the appealed SSC decision and declared Fermin Llamar an employee
of the Manila Gold and Country Club, ordering that he be reported as such for social security
coverage and paid any corresponding benefits,   it conspicuously ignored the issue of res
8

adjudicata raised in said second assignment. Instead, it drew basis for the reversal from this Court's
ruling in Investment Planning Corporation of the Philippines vs. Social Security System, supra   and
9

declared that upon the evidence, the questioned employer-employee relationship between the Club
and Fermin Llamar passed the so-called "control test," establishment in the case — i.e., "whether
the employer controls or has reserved the right to control the employee not only as to the result of
the work to be done but also as to the means and methods by which the same is to be
accomplished," — the Club's control over the caddies encompassing:

(a) the promulgation of no less than twenty-four (24) rules and regulations just about
every aspect of the conduct that the caddy must observe, or avoid, when serving as
such, any violation of any which could subject him to disciplinary action, which may
include suspending or cutting off his access to the club premises;

(b) the devising and enforcement of a group rotation system whereby a caddy is
assigned a number which designates his turn to serve a player;

(c) the club's "suggesting" the rate of fees payable to the caddies.

Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid by the
players, not by the Club, that they observed no definite working hours and earned no fixed income. It
quoted with approval from an American decision   to the effect that: "whether the club paid the
10

caddies and afterward collected in the first instance, the caddies were still employees of the club."
This, no matter that the case which produced this ruling had a slightly different factual cast,
apparently having involved a claim for workmen's compensation made by a caddy who, about to
leave the premises of the club where he worked, was hit and injured by an automobile then
negotiating the club's private driveway.

That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as already
pointed out, is now among the mainways of the private respondent's defenses to the petition for
review. Considered in the perspective of the incidents just recounted, it illustrates as well as anything
can, why the practice of forum-shopping justly merits censure and punitive sanction. Because the
same question of employer-employee relationship has been dragged into three different fora, willy-
nilly and in quick succession, it has birthed controversy as to which of the resulting adjudications
must now be recognized as decisive. On the one hand, there is the certification case [R4-LRDX-M-
10-504-78), where the decision of the Med-Arbiter found for the existence of employer-employee
relationship between the parties, was affirmed by Director Carmelo S. Noriel, who ordered a
certification election held, a disposition never thereafter appealed according to the private
respondent; on the other, the compulsory arbitration case (NCR Case No. AB-4-1771-79), instituted
by or for the same respondent at about the same time, which was dismissed for lack of merit by the
Labor Arbiter, which was afterwards affirmed by the NLRC itself on the ground that there existed no
such relationship between the Club and the private respondent. And, as if matters were not already
complicated enough, the same respondent, with the support and assistance of the PTCCEA, saw fit,
also contemporaneously, to initiate still a third proceeding for compulsory social security coverage
with the Social Security Commission (SSC Case No. 5443), with the result already mentioned.

Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the
certification case had never become final, being in fact the subject of three pending and unresolved
motions for reconsideration, as well as of a later motion for early resolution.   Unfortunately, none of
11

these motions is incorporated or reproduced in the record before the Court. And, for his part, the
private respondent contends, not only that said decision had been appealed to and been affirmed by
the Director of the BLR, but that a certification election had in fact been held, which resulted in the
PTCCEA being recognized as the sole bargaining agent of the caddies of the Manila Golf and
Country Club with respect to wages, hours of work, terms of employment, etc.   Whatever the truth
12

about these opposing contentions, which the record before the Court does not adequately disclose,
the more controlling consideration would seem to be that, however, final it may become, the decision
in a certification case, by the
very nature of that proceedings, is not such as to foreclose all further dispute between the parties as
to the existence, or non-existence, of employer-employee relationship between them.

It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the
following essential requisites must concur: (1) there must be a final judgment or order; (2) said
judgment or order must be on the merits; (3) the court rendering the same must have jurisdiction
over the subject matter and the parties; and (4) there must be between the two cases identity of
parties, identity of subject matter and identity of cause of action. 
13

Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior
Judgment" that would operate in bar of a subsequent action between the same parties for the same
cause, be adversarial, or contentious, "one having opposing parties; (is) contested, as distinguished
from an ex parte hearing or proceeding. . . . of which the party seeking relief has given legal notice to
the other party and afforded the latter an opportunity to contest it"   and a certification case is not
14

such a proceeding, as this Court already ruled:

A certification proceedings is not a "litigation" in the sense in which the term is

commonly understood, but mere investigation of a non-adversary, fact-finding
character, in which the investigating agency plays the part of a disinterested
investigator seeking merely to ascertain the desires of the employees as to the
 matter of their representation. The court enjoys a wide discretion in determining the
procedure necessary to insure the fair and free choice of bargaining representatives
by the employees. 15

Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested issue of
employer-employee relationship between present petitioner and the private respondent, it would
logically be that rendered in the compulsory arbitration case (NCR Case No. AB-4-771-79, supra),
petitioner having asserted, without dispute from the private respondent, that said issue was there
squarely raised and litigated, resulting in a ruling of the Arbitration Branch (of the same Ministry of
Labor) that such relationship did not exist, and which ruling was thereafter affirmed by the National
Labor Relations Commission in an appeal taken by said respondent.  16

In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to which
of the conflicting ruling just adverted to should be accorded primacy, given the fact that it was he
who actively sought them simultaneously, as it were, from separate fora, and even if the graver
sanctions more lately imposed by the Court for forum-shopping may not be applied to him
retroactively.

Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res
adjudicata; on contrary, it acted correctly in doing so.

Said Court’s holding that upon the facts, there exists (or existed) a relationship of employer and
employee between petitioner and private respondent is, however, another matter. The Court does
not agree that said facts necessarily or logically point to such a relationship, and to the exclusion of
any form of arrangements, other than of employment, that would make the respondent's services
available to the members and guest of the petitioner.

As long as it is, the list made in the appealed decision detailing the various matters of conduct,
dress, language, etc. covered by the petitioner's regulations, does not, in the mind of the Court, so
circumscribe the actions or judgment of the caddies concerned as to leave them little or no freedom
of choice whatsoever in the manner of carrying out their services. In the very nature of things,
caddies must submit to some supervision of their conduct while enjoying the privilege of pursuing
their occupation within the premises and grounds of whatever club they do their work in. For all that
is made to appear, they work for the club to which they attach themselves on sufference but, on the
other hand, also without having to observe any working hours, free to leave anytime they please, to
stay away for as long they like. It is not pretended that if found remiss in the observance of said
rules, any discipline may be meted them beyond barring them from the premises which, it may be
supposed, the Club may do in any case even absent any breach of the rules, and without violating
any right to work on their part. All these considerations clash frontally with the concept of
employment.

The IAC would point to the fact that the Club suggests the rate of fees payable by the players to the
caddies as still another indication of the latter's status as employees. It seems to the Court, however,
that the intendment of such fact is to the contrary, showing that the Club has not the measure of
control over the incidents of the caddies' work and compensation that an employer would possess.

The Court agrees with petitioner that the group rotation system so-called, is less a measure of
employer control than an assurance that the work is fairly distributed, a caddy who is absent when
his turn number is called simply losing his turn to serve and being assigned instead the last number
for the day. 
17

By and large, there appears nothing in the record to refute the petitioner's claim that:
 (Petitioner) has no means of compelling the presence of a caddy. A caddy is not
required to exercise his occupation in the premises of petitioner. He may work with
any other golf club or he may seek employment a caddy or otherwise with any entity
or individual without restriction by petitioner. . . .

. . . In the final analysis, petitioner has no was of compelling the presence of the
caddies as they are not required to render a definite number of hours of work on a
single day. Even the group rotation of caddies is not absolute because a player is at
liberty to choose a caddy of his preference regardless of the caddy's order in the
rotation.

It can happen that a caddy who has rendered services to a player on one day may
still find sufficient time to work elsewhere. Under such circumstances, he may then
leave the premises of petitioner and go to such other place of work that he wishes
(sic). Or a caddy who is on call for a particular day may deliberately absent himself if
he has more profitable caddying, or another, engagement in some other place.
These are things beyond petitioner's control and for which it imposes no direct
sanctions on the caddies. . . . 
18

WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is
reversed and set aside, it being hereby declared that the private respondent, Fermin Llamar, is not
an employee of petitioner Manila Golf and Country Club and that petitioner is under no obligation to
report him for compulsory coverage to the Social Security System. No pronouncement as to costs.

SO ORDERED.

Regalado and Mendoza, JJ., concur.

Padilla, J., is on leave.

Puno, J., took no part.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-32245 May 25, 1979

DY KEH BENG, petitioner,
vs.
INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL., respondents.

A. M Sikat for petitioner.

D. A. Hernandez for respondents.

DE CASTRO, J.:

Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial
Relations dated March 23, 1970 in Case No. 3019-ULP and the Court's Resolution en banc of June
10, 1970 affirming said decision. The Court of Industrial Relations in that case found Dy Keh Beng
guilty of the unfair labor practice acts alleged and order him to

reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from
their respective dates of dismissal until fully reinstated without loss to their right of
seniority and of such other rights already acquired by them and/or allowed by law.  1

Now, Dy Keh Beng assigns the following errors   as having been committed by the Court of Industrial
2

Relations:

RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO

AND TUDLA WERE EMPLOYEES OF PETITIONERS.

II

RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO

AND TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY PETITIONER.

III

RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED

BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A PATTERN OF
DISCRIMINATION BY THE PETITIONER HEREIN.

IV
 RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF
UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE
COMPLAINT.

RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS

TO THEIR FORMER JOBS WITH BACKWAGES FROM THEIR RESPECTIVE
DATES OF DISMISSALS UNTIL FINALLY REINSTATED WITHOUT LOSS TO
THEIR RIGHT OF SENIORITY AND OF SUCH OTHER RIGHTS ALREADY
ACQUIRED BY THEM AND/OR ALLOWED BY LAW.

The facts as found by the Hearing Examiner are as follows:

A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for
discriminatory acts within the meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No.
875,   by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo
3

Tudla for their union activities. After preliminary investigation was conducted, a case was filed in the
Court of Industrial Relations for in behalf of the International Labor and Marine Union of the
Philippines and two of its members, Solano and Tudla In his answer, Dy Keh Beng contended that
he did not know Tudla and that Solano was not his employee because the latter came to the
establishment only when there was work which he did on pakiaw basis, each piece of work being
done under a separate contract. Moreover, Dy Keh Beng countered with a special defense of simple
extortion committed by the head of the labor union, Bienvenido Onayan.

After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the
Court of Industrial Relations. An employee-employer relationship was found to have existed between
Dy Keh Beng and complainants Tudla and Solano, although Solano was admitted to have worked on
piece basis.  The issue therefore centered on whether there existed an employee employer relation
4

between petitioner Dy Keh Beng and the respondents Solano and Tudla .

According to the Hearing Examiner, the evidence for the complainant Union tended to show that
Solano and Tudla became employees of Dy Keh Beng from May 2, 1953 and July 15,
1955,   respectively, and that except in the event of illness, their work with the establishment was
5

continuous although their services were compensated on piece basis. Evidence likewise showed
that at times the establishment had eight (8) workers and never less than five (5); including the
complainants, and that complainants used to receive ?5.00 a day. sometimes less.  6

According to Dy Keh Beng, however, Solano was not his employee for the following reasons:

(1) Solano never stayed long enought at Dy's establishment;

(2) Solano had to leave as soon as he was through with the

(3) order given him by Dy;

(4) When there were no orders needing his services there was nothing for him to do;

(5) When orders came to the shop that his regular workers could not fill it was then
that Dy went to his address in Caloocan and fetched him for these orders; and
 (6) Solano's work with Dy's establishment was not continuous. ,  7

According to petitioner, these facts show that respondents Solano and Tudla are only piece workers,
not employees under Republic Act 875, where an employee   is referred to as
8

shall include any employee and shag not be limited to the employee of a particular
employer unless the Act explicitly states otherwise and shall include any individual
whose work has ceased as a consequence of, or in connection with any current labor
dispute or because of any unfair labor practice and who has not obtained any other
substantially equivalent and regular employment.

while an employer  9

includes any person acting in the interest of an employer, directly or indirectly but
shall not include any labor organization (otherwise than when acting as an employer)
or anyone acting in the capacity of officer or agent of such labor organization.

Petitioner really anchors his contention of the non-existence of employee-employer relationship on

the control test. He points to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et
al., L-13130, October 31, 1959, where the Court ruled that:

The test ... of the existence of employee and employer relationship is whether there
is an understanding between the parties that one is to render personal services to or
for the benefit of the other and recognition by them of the right of one to order and
control the other in the performance of the work and to direct the manner and method
of its performance.

Petitioner contends that the private respondents "did not meet the control test in the fight of the ...
definition of the terms employer and employee, because there was no evidence to show that
petitioner had the right to direct the manner and method of respondent's work.   Moreover, it is
10

argued that petitioner's evidence showed that "Solano worked on a pakiaw basis" and that he stayed
in the establishment only when there was work.

While this Court upholds the control test   under which an employer-employee relationship exists
11

"where the person for whom the services are performed reserves a right to control not only the end
to be achieved but also the means to be used in reaching such end, " it finds no merit with
petitioner's arguments as stated above. It should be borne in mind that the control test calls merely
for the existence of the right to control the manner of doing the work, not the actual exercise of the
right.   Considering the finding by the Hearing Examiner that the establishment of Dy Keh Beng is
12

"engaged in the manufacture of baskets known as kaing,   it is natural to expect that those working
13

under Dy would have to observe, among others, Dy's requirements of size and quality of the kaing.
Some control would necessarily be exercised by Dy as the making of the kaing would be subject to
Dy's specifications. Parenthetically, since the work on the baskets is done at Dy's establishments, it
can be inferred that the proprietor Dy could easily exercise control on the men he employed.

As to the contention that Solano was not an employee because he worked on piece basis, this Court
agrees with the Hearing Examiner that

circumstances must be construed to determine indeed if payment by the piece is just

a method of compensation and does not define the essence of the relation. Units of
time ... and units of work are in establishments like respondent (sic) just yardsticks
 whereby to determine rate of compensation, to be applied whenever agreed upon.
We cannot construe payment by the piece where work is done in such an
establishment so as to put the worker completely at liberty to turn him out and take in
another at pleasure.

At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras
who penned the decision in "Sunrise Coconut Products Co. v. Court of Industrial Relations" (83
Phil..518, 523), opined that

judicial notice of the fact that the so-called "pakyaw" system mentioned in this case
as generally practiced in our country, is, in fact, a labor contract -between employers
and employees, between capitalists and laborers.

Insofar as the other assignments of errors are concerned, there is no showing that the Court of
Industrial Relations abused its discretion when it concluded that the findings of fact made by the
Hearing Examiner were supported by evidence on the record. Section 6, Republic Act 875 provides
that in unfair labor practice cases, the factual findings of the Court of Industrial Relations are
conclusive on the Supreme Court, if supported by substantial evidence. This provision has been put
into effect in a long line of decisions where the Supreme Court did not reverse the findings of fact of
the Court of Industrial Relations when they were supported by substantial evidence.  14

Nevertheless, considering that about eighteen (18) years have already elapsed from the time the
complainants were dismissed,   and that the decision being appealed ordered the payment of
15

backwages to the employees from their respective dates of dismissal until finally reinstated, it is
fitting to apply in this connection the formula for backwages worked out by Justice Claudio
Teehankee in "cases not terminated sooner."   The formula cans for fixing the award of backwages
16

without qualification and deduction to three years, "subject to deduction where there are mitigating
circumstances in favor of the employer but subject to increase by way of exemplary damages where
there are aggravating circumstances.   Considering there are no such circumstances in this case,
17

there is no reason why the Court should not apply the abovementioned formula in this instance.

WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein
modified to an award of backwages for three years without qualification and deduction at the
respective rates of compensation the employees concerned were receiving at the time of dismissal.
The execution of this award is entrusted to the National Labor Relations Commission. Costs against
petitioner.

SO ORDERED.

Teehankee, Makasiar, Guerrero, and Melencio-Herrera, JJ., concur.

Fernandez, J., took no part.

 
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 118101 September 16, 1996

EDDIE DOMASIG, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), CATA GARMENTS
CORPORATION and/or OTTO ONG and CATALINA CO., respondents.

PADILLA, J.:

This petition for certiorari under Rule 65 of the Rules of Court seeks to nullify and set aside
the Resolution   of respondent National Labor Relations Commission (NLRC) rendered on 20
1

September 1994 remanding the records of the case to the arbitration branch of origin for further
proceedings.

The antecedent facts as narrated by public respondent in the assailed resolution are as follows:

The complaint was instituted by Eddie Domasig against respondent Cata Garments
Corporation, a company engaged in garments business and its owner/manager Otto
Ong and Catalina Co for illegal dismissal, unpaid commission and other monetary
claim[s]. Complainant alleged that he started working with the respondent on July 6,
1986 as Salesman when the company was still named Cato Garments Corporation;
that three (3) years ago, because of a complaint against respondent by its workers,
its changed its name to Cata Garments Corporation; and that on August 29, 1992, he
was dismissed when respondent learned that he was being pirated by a rival
corporation which offer he refused. Prior to his dismissal, complainant alleged that he
was receiving a salary of P1,500.00 a month plus commission. On September 3,
1992 he filed the instant complaint.

Respondent denied complainant's claim that he is a regular employee contending

that he is a mere commission agent who receives a commission of P5.00 per piece
of article sold at regular price and P2.50 per piece sold in [sic] bargain price; that in
addition to commission, complainant received a fixed allowance of P1,500.00 a
month; that he had no regular time schedule; and that the company come [sic] into
existence only on September 17, 1991. In support of its claim that complainant is a
commission agent, respondent submitted as Annexes "B" and "B-1" the List of Sales
Collections, Computation of Commission due, expenses incurred, cash advances
received for the month of January and March 1992 (Rollo, p. 22-27). Respondent
further contends that complainant failed to turn over to the respondent his collection
from two (2) buyers as per affidavit executed by these buyers (Rollo p. 28-29) and
 for which, according to respondent it initiated criminal proceedings against the
complainant.

The Labor Arbiter held that complainant was illegally dismissed and entitled to
reinstatement and backwages as well as underpayment of salary; 13th month pay;
service incentive leave and legal holiday. The Arbiter also awarded complainant his
claim for unpaid commission in the amount of P143,955.00.  2

Private respondents appealed the decision of the labor arbiter to public respondent. As aforesaid,
the NLRC resolved to remand the case to the labor arbiter for further proceeding. It declared as
follows:

We find the decision of the Labor Arbiter not supported by evidence on record. The
issue of whether or not complainant was a commission agent was not fully resolved
in the assailed decision. It appears that the Labor Arbiter failed to appreciate the
evidences submitted by respondent as Annexes "B" and "B-1" (Rollo p. 22-27) in
support of its allegation as regard[s] the nature of complainant's employment. Neither
is there a showing that the parties were required to adduce further to support their
respective claim. The resolution of the nature of complainant's employment is vital to
the case at bar considering that it would be determinative to his entitlement of
monetary benefits. The same is similarly true as regard the claim [sic] for unpaid
commission. The amount being claim [sic] for unpaid commission as big as it is
requires substantial proof to establish the entitlement of the complainant proof to
establish the entitlement of the complainant to the same. We take not of the
respondent's claim that "while they admit that complainant has an unpaid
commission due him, the same is only for his additional sale of 4,027 pieces at
regular price and 1,047 pieces at bargain price for a total sum of (P20,135.00 +
2,655.00) or P22,820.00 as appearing in the list of Sales and unpaid commission"
(Annex "C" and "C-1" Appeal, Rollo p. 100-102). Said amount according to
respondent is being withheld by them pending the accounting of money collected by
complainant from his two (2) buyers which was not remitted to them. Considering the
conflicting version of the parties regarding the issues on hand, it was incumbent on
the Labor Arbiter to conduct further proceedings thereon. The ends of justice would
better be served if both partied are given the opportunity to ventilate further their
positions. 3

In their comment on the petition at bar, private respondents agree with the finding of the NLRC that
the nature of petitioner's employment with private respondents is vital to the case as it will determine
the monetary benefits to which he is entitled. They further aver that the evidence presented upon
which the labor arbiter based her decision is insufficient, so that the NLRC did not commit grave
abuse of discretion in remanding the case to the arbitration branch of origin for further proceedings.

The comment of the Solicitor General is substantially the same as that of private respondents, i.e.,
there is no sufficient evidence to prove employer-employee relationship between the parties.
Furthermore, he avers that the order of the NLRC to the labor arbiter for further proceedings does
not automatically translate to a protracted trial on the merits for such can be faithfully complied with
through the submission of additional documents or pleadings only.

The only issue to be resolved in this petition is whether or not the NLRC gravely abused its
discretion in vacating and setting aside the decision of the labor arbiter and remanding the case to
the arbitration branch of origin for further proceedings.
In essence, respondent NLRC was not convinced that the evidence presented by the petitioner,
consisting of the identification card issued to him by private respondent corporation and the cash
vouchers reflecting his monthly salaries covering the months stated therein, settled the issue of
employer-employee relationship between private respondents and petitioner.

It has long been established that in administrative and quasi-judicial proceedings, substantial
evidence is sufficient as a basis for judgment on the existence of employer-employee relationship.
No particular form of evidence is required is required to prove the existence of such employer-
employee relationship. Any competent and relevant evidence to prove the relationship may be
admitted. 4

Substantial evidence has been defined to be such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion, and its absence is not shown by stressing that there is
contrary evidence on record, direct or circumstantial, for the appellate court cannot substitute its own
judgment or criterion for that of the trial court in determining wherein lies the weight of evidence or
what evidence is entitled to belief. 5

In a business establishment, an identification card is usually provided not only as a security measure
but mainly to identify the holder thereof as a bona fide employee of the firm that issues it. Together
with the cash vouchers covering petitioner's salaries for the months stated therein, we agree with the
labor arbiter that these matters constitute substantial evidence adequate to support a conclusion that
petitioner was indeed an employee of private respondent.

Section 4, Rule V of the Rules of Procedure of the National Labor Relations Commission provides
thus:

Sec. 4. Determination of Necessity of Hearing. — Immediately after the submission

of the parties of their position papers/memoranda, the Labor Arbiter shall motu
propio determine whether there is need for a formal trial or hearing. At this stage, he
may, at his discretion and for the purpose of making such determination, ask
clarificatory questions to further elicit facts or information, including but not limited to
the subpoena of relevant documentary evidence, if any, from any party or witness.

It is clear from the law that it is the arbiters who are authorized to determine whether
or not there is a necessity for conducting formal hearings in cases brought before
them for adjudication. Such determination is entitled to great respect in the absence
of arbitrariness. 
6

In the case at bar, we do not believe that the labor arbiter acted arbitrarily. Contrary to the finding of
the NLRC, her decision at least on the existence of an employer-employee relationship between
private respondents and petitioner, is supported by substantial evidence on record.

The list of sales collection including computation of commissions due, expenses incurred and cash
advances received (Exhibits "B" and "B-1") which, according to public respondent, the labor arbiter
failed to appreciate in support of private respondents" allegation as regards the nature of petitioner's
employment as a commission agent, cannot overcome the evidence of the ID card and salary
vouchers presented petitioner which private respondents have not denied. The list presented by
private respondents would even support petitioner's allegations that, aside from a monthly salary of
P1,500.00, he also received commissions for his work as a salesman of private respondents.

Having been in the employ of private respondents continuously for more than one year, under the
law, petitioner is considered a regular employee. Proof beyond reasonable doubt is not required as a
basis for judgment on the legality of an employer's dismissal of an employee, nor even
preponderance of evidence for that matter, substantial evidence being sufficient.   Petitioner's
7

contention that private respondents terminated his employment due to their suspicion that he was
being enticed by another firm to work for it was not refuted by private respondents. The labor
arbiter's conclusion that petitioner's dismissal is therefore illegal, is not necessarily arbitrary or
erroneous. It is entitled to great weight and respect.

It was error and grave abuse of discretion for the NLRC to remand the case for further proceedings
to determine whether or not petitioner was private respondents' employee. This would only prolong
the final disposition of the complaint. It is stressed that, in labor cases, simplification of procedures,
without regard to technicalities and without sacrificing the fundamental requisites of due process, is
mandated to ensure the speedy administration of justice.  8

After all, Article 218 of the Labor Code grants the Commission and the labor arbiter broad powers,
including issuance of subpoena, requiring the attendance and testimony of witnesses or the
production of such documentary evidence as may be material to a just determination of the matter
under investigation.

Additionally, the National Labor Relations Commission and the labor arbiter have authority under the
Labor Code to decide a case based on the position papers and documents submitted without
resorting to the technical rules of evidence. 9

However, in view of the need for further and correct computation of the petitioner's commissions in
the light of the exhibits presented and the dismissal of the criminal cases filed against petitioner, the
labor arbiter is required to undertake a new computation of the commissions to which petitioner may
be entitled, within thirty (30) days from the submission by the partied of all necessary documents.

WHEREFORE, the resolutions of the public respondent dated 20 September 1994 and 9 November
1994 are SET ASIDE. The decision of the labor arbiter dated 19 may 1993 us REINSTATED and
AFFIRMED subject to the modification above-stated as regards a re-computation by the labor arbiter
of the commissions to which petitioner maybe actually entitled.

SO ORDERED.

Bellosillo, Vitug, Kapunan and Hermosisisma, Jr., JJ., concur.

 FIRST DIVISION

G.R. No. 165881             April 19, 2006

OSCAR VILLAMARIA, JR. Petitioner,

vs.
COURT OF APPEALS and JERRY V. BUSTAMANTE, Respondents

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of Court
assailing the Decision1 and Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 78720 which
set aside the Resolution3 of the National Labor Relations Commission (NLRC) in NCR-30-08-03247-
00, which in turn affirmed the Decision4 of the Labor Arbiter dismissing the complaint filed by
respondent Jerry V. Bustamante.

Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship engaged in
assembling passenger jeepneys with a public utility franchise to operate along the Baclaran-Sucat
route. By 1995, Villamaria stopped assembling jeepneys and retained only nine, four of which he
operated by employing drivers on a "boundary basis." One of those drivers was respondent
Bustamante who drove the jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a day to
Villamaria as boundary and kept the residue of his daily earnings as compensation for driving the
vehicle. In August 1997, Villamaria verbally agreed to sell the jeepney to Bustamante under the
"boundary-hulog scheme," where Bustamante would remit to Villarama P550.00 a day for a period of
four years; Bustamante would then become the owner of the vehicle and continue to drive the same
under Villamaria’s franchise. It was also agreed that Bustamante would make a downpayment of
P10,000.00.

On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng Bilihan ng Sasakyan sa

Pamamagitan ng Boundary-Hulog" 5 over the passenger jeepney with Plate No. PVU-660, Chassis
No. EVER95-38168-C and Motor No. SL-26647. The parties agreed that if Bustamante failed to pay
the boundary-hulog for three days, Villamaria Motors would hold on to the vehicle until Bustamante
paid his arrears, including a penalty of P50.00 a day; in case Bustamante failed to remit the daily
boundary-hulog for a period of one week, the Kasunduan would cease to have legal effect and
Bustamante would have to return the vehicle to Villamaria Motors.

Under the Kasunduan, Bustamante was prohibited from driving the vehicle without prior authority
from Villamaria Motors. Thus, Bustamante was authorized to operate the vehicle to transport
passengers only and not for other purposes. He was also required to display an identification card in
front of the windshield of the vehicle; in case of failure to do so, any fine that may be imposed by
government authorities would be charged against his account. Bustamante further obliged himself to
pay for the cost of replacing any parts of the vehicle that would be lost or damaged due to his
negligence. In case the vehicle sustained serious damage, Bustamante was obliged to notify
Villamaria Motors before commencing repairs. Bustamante was not allowed to wear slippers, short
pants or undershirts while driving. He was required to be polite and respectful towards the
passengers. He was also obliged to notify Villamaria Motors in case the vehicle was leased for two
or more days and was required to attend any meetings which may be called from time to time. Aside
from the boundary-hulog, Bustamante was also obliged to pay for the annual registration fees of the
vehicle and the premium for the vehicle’s comprehensive insurance. Bustamante promised to strictly
comply with the rules and regulations imposed by Villamaria for the upkeep and maintenance of the
jeepney.

Bustamante continued driving the jeepney under the supervision and control of Villamaria. As
agreed upon, he made daily remittances of P550.00 in payment of the purchase price of the vehicle.
Bustamante failed to pay for the annual registration fees of the vehicle, but Villamaria allowed him to
continue driving the jeepney.

In 1999, Bustamante and other drivers who also had the same arrangement with Villamaria Motors
failed to pay their respective boundary-hulog. This prompted Villamaria to serve a
"Paalala,"6 reminding them that under the Kasunduan, failure to pay the daily boundary-hulog for one
week, would mean their respective jeepneys would be returned to him without any complaints. He
warned the drivers that the Kasunduan would henceforth be strictly enforced and urged them to
comply with their obligation to avoid litigation.

On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and barred the latter from
driving the vehicle.

On August 15, 2000, Bustamante filed a Complaint 7 for Illegal Dismissal against Villamaria and his
wife Teresita. In his Position Paper,8 Bustamante alleged that he was employed by Villamaria in July
1996 under the boundary system, where he was required to remit P450.00 a day. After one year of
continuously working for them, the spouses Villamaria presented the Kasunduan for his signature,
with the assurance that he (Bustamante) would own the jeepney by March 2001 after paying
P550.00 in daily installments and that he would thereafter continue driving the vehicle along the
same route under the same franchise. He further narrated that in July 2000, he informed the
Villamaria spouses that the surplus engine of the jeepney needed to be replaced, and was assured
that it would be done. However, he was later arrested and his driver’s license was confiscated
because apparently, the replacement engine that was installed was taken from a stolen vehicle. Due
to negotiations with the apprehending authorities, the jeepney was not impounded. The Villamaria
spouses took the jeepney from him on July 24, 2000, and he was no longer allowed to drive the
vehicle since then unless he paid them P70,000.00.

Bustamante prayed that judgment be rendered in his favor, thus:

WHEREFORE, in the light of the foregoing, it is most respectfully prayed that judgment be rendered
ordering the respondents, jointly and severally, the following:

1. Reinstate complainant to his former position without loss of seniority rights and execute a
Deed of Sale in favor of the complainant relative to the PUJ with Plate No. PVU-660;

2. Ordering the respondents to pay backwages in the amount of P400.00 a day and other
benefits computed from July 24, 2000 up to the time of his actual reinstatement;

3. Ordering respondents to return the amount of P10,000.00 and P180,000.00 for the
expenses incurred by the complainant in the repair and maintenance of the subject jeep;

4. Ordering the respondents to refund the amount of One Hundred (P100.00) Pesos per day
counted from August 7, 1997 up to June 2000 or a total of P91,200.00;
 5. To pay moral and exemplary damages of not less than P200,000.00;

6. Attorney’s fee[s] of not less than 10% of the monetary award.

Other just and equitable reliefs under the premises are also being prayed for. 9

In their Position Paper,10 the spouses Villamaria admitted the existence of the Kasunduan, but
alleged that Bustamante failed to pay the P10,000.00 downpayment and the vehicle’s annual
registration fees. They further alleged that Bustamante eventually failed to remit the requisite
boundary-hulog of P550.00 a day, which prompted them to issue the Paalaala. Instead of complying
with his obligations, Bustamante stopped making his remittances despite his daily trips and even
brought the jeepney to the province without permission. Worse, the jeepney figured in an accident
and its license plate was confiscated; Bustamante even abandoned the vehicle in a gasoline station
in Sucat, Parañaque City for two weeks. When the security guard at the gasoline station requested
that the vehicle be retrieved and Teresita Villamaria asked Bustamante for the keys, Bustamante
told her: "Di kunin ninyo." When the vehicle was finally retrieved, the tires were worn, the alternator
was gone, and the battery was no longer working.

Citing the cases of Cathedral School of Technology v. NLRC11 and Canlubang Security Agency
Corporation v. NLRC,12 the spouses Villamaria argued that Bustamante was not illegally dismissed
since the Kasunduan executed on August 7, 1997 transformed the employer-employee relationship
into that of vendor-vendee. Hence, the spouses concluded, there was no legal basis to hold them
liable for illegal dismissal. They prayed that the case be dismissed for lack of jurisdiction and patent
lack of merit.

In his Reply,13 Bustamante claimed that Villamaria exercised control and supervision over the
conduct of his employment. He maintained that the rulings of the Court in National Labor Union v.
Dinglasan,14 Magboo v. Bernardo,15 and Citizen's League of Free Workers v. Abbas 16 are germane to
the issue as they define the nature of the owner/operator-driver relationship under the boundary
system. He further reiterated that it was the Villamaria spouses who presented the Kasunduan to
him and that he conformed thereto only upon their representation that he would own the vehicle after
four years. Moreover, it appeared that the Paalala was duly received by him, as he, together with
other drivers, was made to affix his signature on a blank piece of paper purporting to be an
"attendance sheet."

On March 15, 2002, the Labor Arbiter rendered judgment 17 in favor of the spouses Villamaria and
ordered the complaint dismissed on the following ratiocination:

Respondents presented the contract of Boundary-Hulog, as well as the PAALALA, to prove their
claim that complainant violated the terms of their contract and afterwards abandoned the vehicle
assigned to him. As against the foregoing, [the] complaint’s (sic) mere allegations to the contrary
cannot prevail.

Not having been illegally dismissed, complainant is not entitled to damages and attorney's fees. 18

Bustamante appealed the decision to the NLRC,19 insisting that the Kasunduan did not extinguish the
employer-employee relationship between him and Villamaria. While he did not receive fixed wages,
he kept only the excess of the boundary-hulog which he was required to remit daily to Villamaria
under the agreement. Bustamante maintained that he remained an employee because he was
engaged to perform activities which were necessary or desirable to Villamaria’s trade or business.
The NLRC rendered judgment20 dismissing the appeal for lack of merit, thus:

WHEREFORE, premises considered, complainant's appeal is hereby DISMISSED for reasons not
stated in the Labor Arbiter's decision but mainly on a jurisdictional issue, there being none over the
subject matter of the controversy.21

The NLRC ruled that under the Kasunduan, the juridical relationship between Bustamante and
Villamaria was that of vendor and vendee, hence, the Labor Arbiter had no jurisdiction over the
complaint. Bustamante filed a Motion for Reconsideration, which the NLRC resolved to deny on May
30, 2003.22

Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that the NLRC erred

IN DISMISSING PETITIONER’S APPEAL "FOR REASON NOT STATED IN THE LABOR

ARBITER’S DECISION, BUT MAINLY ON JURISDICTIONAL ISSUE;"

II

IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT DECLARED THAT

THE RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN PETITIONER AND THE PRIVATE
RESPONDENT WAS DEFINITELY A MATTER WHICH IS BEYOND THE PROTECTIVE MANTLE
OF OUR LABOR LAWS.23

Bustamante insisted that despite the Kasunduan, the relationship between him and Villamaria
continued to be that of employer-employee and as such, the Labor Arbiter had jurisdiction over his
complaint. He further alleged that it is common knowledge that operators of passenger jeepneys
(including taxis) pay their drivers not on a regular monthly basis but on commission or boundary
basis, or even the boundary-hulog system. Bustamante asserted that he was dismissed from
employment without any lawful or just cause and without due notice.

For his part, Villamaria averred that Bustamante failed to adduce proof of their employer-employee
relationship. He further pointed out that the Dinglasan case pertains to the boundary system and not
the boundary-hulog system, hence inapplicable in the instant case. He argued that upon the
execution of the Kasunduan, the juridical tie between him and Bustamante was transformed into a
vendor-vendee relationship. Noting that he was engaged in the manufacture and sale of jeepneys
and not in the business of transporting passengers for consideration, Villamaria contended that the
daily fees which Bustmante paid were actually periodic installments for the the vehicle and were not
the same fees as understood in the boundary system. He added that the boundary-hulog plan was
basically a scheme to help the driver-buyer earn money and eventually pay for the unit in full, and for
the owner to profit not from the daily earnings of the driver-buyer but from the purchase price of the
unit sold. Villamaria further asserted that the apparently restrictive conditions in the Kasunduan did
not mean that the means and method of driver-buyer’s conduct was controlled, but were mere ways
to preserve the vehicle for the benefit of both parties: Villamaria would be able to collect the agreed
purchase price, while Bustamante would be assured that the vehicle would still be in good running
condition even after four years. Moreover, the right of vendor to impose certain conditions on the
buyer should be respected until full ownership of the property is vested on the latter. Villamaria
insisted that the parallel circumstances obtaining in Singer Sewing Machine Company v. Drilon 24 has
analogous application to the instant issue.
In its Decision25 dated August 30, 2004, the CA reversed and set aside the NLRC decision. The fallo
of the decision reads:

UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions of the NLRC must be,
as they are hereby are, REVERSED AND SET ASIDE, and judgment entered in favor of petitioner:

1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante
separation pay computed from the time of his employment up to the time of termination
based on the prevailing minimum wage at the time of termination; and,

2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante
back wages computed from the time of his dismissal up to March 2001 based on the
prevailing minimum wage at the time of his dismissal.

Without Costs.

SO ORDERED.26

The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamante’s complaint. Under
the Kasunduan, the relationship between him and Villamaria was dual: that of vendor-vendee and
employer-employee. The CA ratiocinated that Villamaria’s exercise of control over Bustamante’s
conduct in operating the jeepney is inconsistent with the former’s claim that he was not engaged in
the transportation business. There was no evidence that petitioner was allowed to let some other
person drive the jeepney.

The CA further held that, while the power to dismiss was not mentioned in the Kasunduan, it did not
mean that Villamaria could not exercise it. It explained that the existence of an employment
relationship did not depend on how the worker was paid but on the presence or absence of control
over the means and method of the employee’s work. In this case, Villamaria’s directives (to drive
carefully, wear an identification card, don decent attire, park the vehicle in his garage, and to inform
him about provincial trips, etc.) was a means to control the way in which Bustamante was to go
about his work. In view of Villamaria’s supervision and control as employer, the fact that the
"boundary" represented installment payments of the purchase price on the jeepney did not remove
the parties’ employer-employee relationship.

While the appellate court recognized that a week’s default in paying the boundary-hulog constituted
an additional cause for terminating Bustamante’s employment, it held that the latter was illegally
dismissed. According to the CA, assuming that Bustamante failed to make the required payments as
claimed by Villamaria, the latter nevertheless failed to take steps to recover the unit and waited for
Bustamante to abandon it. It also pointed out that Villamaria neither submitted any police report to
support his claim that the vehicle figured in a mishap nor presented the affidavit of the gas station
guard to substantiate the claim that Bustamante abandoned the unit.

Villamaria received a copy of the decision on September 8, 2004, and filed, on September 17, 2004,
a motion for reconsideration thereof. The CA denied the motion in a Resolution 27 dated November 2,
2004, and Villamaria received a copy thereof on November 8, 2004.

Villamaria, now petitioner, seeks relief from this Court via petition for review on certiorari under Rule
65 of the Rules of Court, alleging that the CA committed grave abuse of its discretion amounting to
excess or lack of jurisdiction in reversing the decision of the Labor Arbiter and the NLRC. He claims
that the CA erred in ruling that the juridical relationship between him and respondent under the
Kasunduan was a combination of employer-employee and vendor-vendee relationships. The terms
and conditions of the Kasunduan clearly state that he and respondent Bustamante had entered into
a conditional deed of sale over the jeepney; as such, their employer-employee relationship had been
transformed into that of vendor-vendee. Petitioner insists that he had the right to reserve his title on
the jeepney until after the purchase price thereof had been paid in full.

In his Comment on the petition, respondent avers that the appropriate remedy of petitioner was an
appeal via a petition for review on certiorari under Rule 45 of the Rules of Court and not a special
civil action of certiorari under Rule 65. He argues that petitioner failed to establish that the CA
committed grave abuse of its discretion amounting to excess or lack of jurisdiction in its decision, as
the said ruling is in accord with law and the evidence on record.

Respondent further asserts that the Kasunduan presented to him by petitioner which provides for a
boundary-hulog scheme was a devious circumvention of the Labor Code of the Philippines.
Respondent insists that his juridical relationship with petitioner is that of employer-employee
because he was engaged to perform activities which were necessary or desirable in the usual
business of petitioner, his employer.

In his Reply, petitioner avers that the Rules of Procedure should be liberally construed in his favor;
hence, it behooves the Court to resolve the merits of his petition.

We agree with respondent’s contention that the remedy of petitioner from the CA decision was to file
a petition for review on certiorari under Rule 45 of the Rules of Court and not the independent action
of certiorari under Rule 65. Petitioner had 15 days from receipt of the CA resolution denying his
motion for the reconsideration within which to file the petition under Rule 45. 28 But instead of doing
so, he filed a petition for certiorari under Rule 65 on November 22, 2004, which did not, however,
suspend the running of the 15-day reglementary period; consequently, the CA decision became final
and executory upon the lapse of the reglementary period for appeal. Thus, on this procedural lapse,
the instant petition stands to be dismissed.29

It must be stressed that the recourse to a special civil action under Rule 65 of the Rules of Court is
proscribed by the remedy of appeal under Rule 45. As the Court elaborated in Tomas Claudio
Memorial College, Inc. v. Court of Appeals: 30

We agree that the remedy of the aggrieved party from a decision or final resolution of the CA is to
file a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, on questions
of facts or issues of law within fifteen days from notice of the said resolution. Otherwise, the decision
of the CA shall become final and executory. The remedy under Rule 45 of the Rules of Court is a
mode of appeal to this Court from the decision of the CA. It is a continuation of the appellate process
over the original case. A review is not a matter of right but is a matter of judicial discretion. The
aggrieved party may, however, assail the decision of the CA via a petition for certiorari under Rule
65 of the Rules of Court within sixty days from notice of the decision of the CA or its resolution
denying the motion for reconsideration of the same. This is based on the premise that in issuing the
assailed decision and resolution, the CA acted with grave abuse of discretion, amounting to excess
or lack of jurisdiction and there is no plain, speedy and adequate remedy in the ordinary course of
law. A remedy is considered plain, speedy and adequate if it will promptly relieve the petitioner from
the injurious effect of the judgment and the acts of the lower court.

The aggrieved party is proscribed from filing a petition for certiorari if appeal is available, for the
remedies of appeal and certiorari are mutually exclusive and not alternative or successive. The
aggrieved party is, likewise, barred from filing a petition for certiorari if the remedy of appeal is lost
through his negligence. A petition for certiorari is an original action and does not interrupt the course
of the principal case unless a temporary restraining order or a writ of preliminary injunction has been
issued against the public respondent from further proceeding. A petition for certiorari must be based
on jurisdictional grounds because, as long as the respondent court acted within its jurisdiction, any
error committed by it will amount to nothing more than an error of judgment which may be corrected
or reviewed only by appeal.31

However, we have also ruled that a petition for certiorari under Rule 65 may be considered as filed
under Rule 45, conformably with the principle that rules of procedure are to be construed liberally,
provided that the petition is filed within the reglementary period under Section 2, Rule 45 of the
Rules of Court, and where valid and compelling circumstances warrant that the petition be resolved
on its merits.32 In this case, the petition was filed within the reglementary period and petitioner has
raised an issue of substance: whether the existence of a boundary-hulog agreement negates the
employer-employee relationship between the vendor and vendee, and, as a corollary, whether the
Labor Arbiter has jurisdiction over a complaint for illegal dismissal in such case.

We resolve these issues in the affirmative.

The rule is that, the nature of an action and the subject matter thereof, as well as, which court or
agency of the government has jurisdiction over the same, are determined by the material allegations
of the complaint in relation to the law involved and the character of the reliefs prayed for, whether or
not the complainant/plaintiff is entitled to any or all of such reliefs. 33 A prayer or demand for relief is
not part of the petition of the cause of action; nor does it enlarge the cause of action stated or
change the legal effect of what is alleged. 34 In determining which body has jurisdiction over a case,
the better policy is to consider not only the status or relationship of the parties but also the nature of
the action that is the subject of their controversy. 35

Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive original jurisdiction
only over the following:

x x x (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
wage, 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 the
employer-employee relations;

5. Cases arising from 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 relationship, 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.
 (b) The Commission shall have exclusive appellate jurisdiction over all cases decided
by Labor Arbiters.

(c) Cases arising from the interpretation or implementation of collective bargaining

agreements, and those arising from the interpretation or enforcement of company
personnel policies shall be disposed of by the Labor Arbiter by referring the same to
the grievance machinery and voluntary arbitration as may be provided in said
agreements.

In the foregoing cases, an employer-employee relationship is an indispensable jurisdictional

requisite.36 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. 37 Not
every dispute between an employer and employee involves matters that only the Labor Arbiter and
the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. Actions between
employers and employees where the employer-employee relationship is merely incidental is within
the exclusive original jurisdiction of the regular courts.38 When the principal relief is to be granted
under labor legislation or a collective bargaining agreement, the case falls within the exclusive
jurisdiction of the Labor Arbiter and the NLRC even though a claim for damages might be asserted
as an incident to such claim.39

We agree with the ruling of the CA that, under the boundary-hulog scheme incorporated in the
Kasunduan, a dual juridical relationship was created between petitioner and respondent: that of
employer-employee and vendor-vendee. The Kasunduan did not extinguish the employer-employee
relationship of the parties extant before the execution of said deed.

As early as 1956, the Court ruled in National Labor Union v. Dinglasan 40 that the jeepney
owner/operator-driver relationship under the boundary system is that of employer-employee and not
lessor-lessee. This doctrine was affirmed, under similar factual settings, in Magboo v. Bernardo 41 and
Lantaco, Sr. v. Llamas,42 and was analogously applied to govern the relationships between auto-
calesa owner/operator and driver,43 bus owner/operator and conductor, 44 and taxi owner/operator and
driver.45

The boundary system is a scheme by an owner/operator engaged in transporting passengers as a

common carrier to primarily govern the compensation of the driver, that is, the latter’s daily earnings
are remitted to the owner/operator less the excess of the boundary which represents the driver’s
compensation. Under this system, the owner/operator exercises control and supervision over the
driver. It is unlike in lease of chattels where the lessor loses complete control over the chattel leased
but the lessee is still ultimately responsible for the consequences of its use. The management of the
business is still in the hands of the owner/operator, who, being the holder of the certificate of public
convenience, must see to it that the driver follows the route prescribed by the franchising and
regulatory authority, and the rules promulgated with regard to the business operations. The fact that
the driver does not receive fixed wages but only the excess of the "boundary" given to the
owner/operator is not sufficient to change the relationship between them. Indubitably, the driver
performs activities which are usually necessary or desirable in the usual business or trade of the
owner/operator.46

Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount
which represented the boundary of petitioner as well as respondent’s partial payment (hulog) of the
purchase price of the jeepney.
Respondent was entitled to keep the excess of his daily earnings as his daily wage. Thus, the daily
remittances also had a dual purpose: that of petitioner’s boundary and respondent’s partial payment
(hulog) for the vehicle. This dual purpose was expressly stated in the Kasunduan. The well-settled
rule is that an obligation is not novated by an instrument that expressly recognizes the old one,
changes only the terms of payment, and adds other obligations not incompatible with the old
provisions or where the new contract merely supplements the previous one. 47 The two obligations of
the respondent to remit to petitioner the boundary-hulog can stand together.

In resolving an issue based on contract, this Court must first examine the contract itself, keeping in
mind that when the terms of the agreement are clear and leave no doubt as to the intention of the
contracting parties, the literal meaning of its stipulations shall prevail. 48 The intention of the
contracting parties should be ascertained by looking at the words used to project their intention, that
is, all the words, not just a particular word or two or more words standing alone. The various
stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense
which may result from all of them taken jointly.49 The parts and clauses must be interpreted in
relation to one another to give effect to the whole. The legal effect of a contract is to be determined
from the whole read together.50

Under the Kasunduan, petitioner retained supervision and control over the conduct of the
respondent as driver of the jeepney, thus:

Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary hulog ay ang mga
sumusunod:

1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang sasakyan

ipinagkatiwala sa kanya ng TAUHAN NG UNANG PANIG.

2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG IKALAWANG PANIG

sa paghahanapbuhay bilang pampasada o pangangalakal sa malinis at maayos na
pamamaraan.

3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG IKALAWANG PANIG sa

mga bagay na makapagdudulot ng kahihiyan, kasiraan o pananagutan sa TAUHAN NG
UNANG PANIG.

4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG PANIG.

5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay ng ID Card sa

harap ng windshield upang sa pamamagitan nito ay madaliang malaman kung ang
nagmamaneho ay awtorisado ng VILLAMARIA MOTORS o hindi.

6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa kung sakaling
mahuli ang sasakyang ito na hindi nakakabit ang ID card sa wastong lugar o anuman
kasalanan o kapabayaan.

7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o piyesa na

papalitan ng nasira o nawala ito dahil sa kanyang kapabayaan.

8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang hinuhulugan pa rin ng

TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob ng TAUHAN
NG UNANG PANIG, ang TAUHAN NG IKALAWANG PANIG ay obligadong itawag ito muna
sa VILLAMARIA MOTORS bago ipagawa sa alin mang Motor Shop na awtorisado ng
VILLAMARIA MOTORS.

10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon ng

pamamasada na ang nagmamaneho ay naka-tsinelas, naka short pants at nakasando
lamang. Dapat ang nagmamaneho ay laging nasa maayos ang kasuotan upang igalang ng
mga pasahero.

11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver ay

magpapakita ng magandang asal sa mga pasaheros at hindi dapat magsasalita ng masama
kung sakali man may pasaherong pilosopo upang maiwasan ang anumang kaguluhan na
maaaring kasangkutan.

12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang TAUHAN NG

IKALAWANG PANIG sa loob ng tatlong (3) araw ay ang opisina ng VILLAMARIA MOTORS
ang may karapatang mangasiwa ng nasabing sasakyan hanggang matugunan ang lahat ng
responsibilidad. Ang halagang dapat bayaran sa opisina ay may karagdagang multa ng
P50.00 sa araw-araw na ito ay nasa pangangasiwa ng VILLAMARIA MOTORS.

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY

HULOG sa loob ng isang linggo ay nangangahulugan na ang kasunduang ito ay wala ng
bisa at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa
TAUHAN NG UNANG PANIG.

14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro, comprehensive

insurance taon-taon at kahit anong uri ng aksidente habang ito ay hinuhulugan pa sa
TAUHAN NG UNANG PANIG.

15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa pangkalahatang

pagpupulong ng VILLAMARIA MOTORS sa tuwing tatawag ang mga tagapangasiwa nito
upang maipaabot ang anumang mungkahi sa ikasusulong ng samahan.

16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga patakaran na

magkakaroon ng pagbabago o karagdagan sa mga darating na panahon at hindi magiging
hadlang sa lahat ng mga balakin ng VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at
ikakatibay ng Samahan.

17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa pasahero

upang hindi kainisan ng kapwa driver at maiwasan ang pagkakasangkot sa anumang gulo.

18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan lalo na sa umaga
bago pumasada, at sa hapon o gabi naman ay sisikapin mapanatili ang kalinisan nito.

19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng dalawa o higit pang
araw sa lalawigan ay dapat lamang na ipagbigay alam muna ito sa VILLAMARIA MOTORS
upang maiwasan ang mga anumang suliranin.

20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-unahan sa

kaninumang sasakyan upang maiwasan ang aksidente.
 21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa VILLAMARIA
MOTORS mabuti man or masama ay iparating agad ito sa kinauukulan at iwasan na
iparating ito kung [kani-kanino] lamang upang maiwasan ang anumang usapin. Magsadya
agad sa opisina ng VILLAMARIA MOTORS.

22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong sinasang-ayunan
at buong sikap na pangangalagaan ng TAUHAN NG IKALAWANG PANIG ang nasabing
sasakyan at gagamitin lamang ito sa paghahanapbuhay at wala nang iba pa. 51

The parties expressly agreed that petitioner, as vendor, and respondent, as vendee, entered into a
contract to sell the jeepney on a daily installment basis of P550.00 payable in four years and that
petitioner would thereafter become its owner. A contract is one of conditional sale, oftentimes
referred to as contract to sell, if the ownership or title over the

property sold is retained by the vendor, and is not passed to the vendee unless and until there is full
payment of the purchase price and/or upon faithful compliance with the other terms and conditions
that may lawfully be stipulated.52 Such payment or satisfaction of other preconditions, as the case
may be, is a positive suspensive condition, the failure of which is not a breach of contract, casual or
serious, but simply an event that would prevent the obligation of the vendor to convey title from
acquiring binding force.53 Stated differently, the efficacy or obligatory force of the vendor's obligation
to transfer title is subordinated to the happening of a future and uncertain event so that if the
suspensive condition does not take place, the parties would stand as if the conditional obligation had
never existed.54 The vendor may extrajudicially terminate the operation of the contract, refuse
conveyance, and retain the sums or installments already received, where such rights are expressly
provided for.55

Under the boundary-hulog scheme, petitioner retained ownership of the jeepney although its
material possession was vested in respondent as its driver. In case respondent failed to make his
P550.00 daily installment payment for a week, the agreement would be of no force and effect and
respondent would have to return the jeepney to petitioner; the employer-employee relationship
would likewise be terminated unless petitioner would allow respondent to continue driving the
jeepney on a boundary basis of P550.00 daily despite the termination of their vendor-vendee
relationship.

The juridical relationship of employer-employee between petitioner and respondent was not negated
by the foregoing stipulation in the Kasunduan, considering that petitioner retained control of
respondent’s conduct as driver of the vehicle. As correctly ruled by the CA:

The exercise of control by private respondent over petitioner’s conduct in operating the jeepney he
was driving is inconsistent with private respondent’s claim that he is, or was, not engaged in the
transportation business; that, even if petitioner was allowed to let some other person drive the unit, it
was not shown that he did so; that the existence of an employment relation is not dependent on how
the worker is paid but on the presence or absence of control over the means and method of the
work; that the amount earned in excess of the "boundary hulog" is equivalent to wages; and that the
fact that the power of dismissal was not mentioned in the Kasunduan did not mean that private
respondent never exercised such power, or could not exercise such power.

Moreover, requiring petitioner to drive the unit for commercial use, or to wear an identification card,
or to don a decent attire, or to park the vehicle in Villamaria Motors garage, or to inform Villamaria
Motors about the fact that the unit would be going out to the province for two days of more, or to
drive the unit carefully, etc. necessarily related to control over the means by which the petitioner was
to go about his work; that the ruling applicable here is not Singer Sewing Machine but National Labor
Union since the latter case involved jeepney owners/operators and jeepney drivers, and that the fact
that the "boundary" here represented installment payment of the purchase price on the jeepney did
not withdraw the relationship from that of employer-employee, in view of the overt presence of
supervision and control by the employer. 56

Neither is such juridical relationship negated by petitioner’s claim that the terms and conditions in the
Kasunduan relative to respondent’s behavior and deportment as driver was for his and respondent’s
benefit: to insure that respondent would be able to pay the requisite daily installment of P550.00, and
that the vehicle would still be in good condition despite the lapse of four years. What is primordial is
that petitioner retained control over the conduct of the respondent as driver of the jeepney.

Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is entitled to exercise
supervision and control over the respondent, by seeing to it that the route provided in his franchise,
and the rules and regulations of the Land Transportation Regulatory Board are duly complied with.
Moreover, in a business establishment, an identification card is usually provided not just as a
security measure but to mainly identify the holder thereof as a bona fide employee of the firm who
issues it.57

As respondent’s employer, it was the burden of petitioner to prove that respondent’s termination
from employment was for a lawful or just cause, or, at the very least, that respondent failed to make
his daily remittances of P550.00 as boundary. However, petitioner failed to do so. As correctly ruled
by the appellate court:

It is basic of course that termination of employment must be effected in accordance with law. The
just and authorized causes for termination of employment are enumerated under Articles 282, 283
and 284 of the Labor Code.

Parenthetically, given the peculiarity of the situation of the parties here, the default in the remittance
of the boundary hulog for one week or longer may be considered an additional cause for termination
of employment. The reason is because the Kasunduan would be of no force and effect in the event
that the purchaser failed to remit the boundary hulog for one week. The Kasunduan in this case
pertinently stipulates:

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY

HULOG sa loob ng isang linggo ay NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa
at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG
UNANG PANIG na wala ng paghahabol pa.

Moreover, well-settled is the rule that, the employer has the burden of proving that the dismissal of
an employee is for a just cause. The failure of the employer to discharge this burden means that the
dismissal is not justified and that the employee is entitled to reinstatement and back wages.

In the case at bench, private respondent in his position paper before the Labor Arbiter, alleged that
petitioner failed to pay the miscellaneous fee of P10,000.00 and the yearly registration of the unit;
that petitioner also stopped remitting the "boundary hulog," prompting him (private respondent) to
issue a "Paalala," which petitioner however ignored; that petitioner even brought the unit to his
(petitioner’s) province without informing him (private respondent) about it; and that petitioner
eventually abandoned the vehicle at a gasoline station after figuring in an accident. But private
respondent failed to substantiate these allegations with solid, sufficient proof. Notably, private
respondent’s allegation viz, that he retrieved the vehicle from the gas station, where petitioner
abandoned it, contradicted his statement in the Paalala that he would enforce the provision (in the
Kasunduan) to the effect that default in the remittance of the boundary hulog for one week would
result in the forfeiture of the unit. The Paalala reads as follows:

"Sa lahat ng mga kumukuha ng sasakyan

"Sa pamamagitan ng ‘BOUNDARY HULOG’

"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na ang paragrapo 13
na nagsasaad na kung hindi kayo makapagbigay ng Boundary Hulog sa loob ng isang linggo ay
kusa ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng wala ng paghahabol pa.

"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong ipatutupad ang
nasabing Kasunduan kaya’t aking pinaaalala sa inyong lahat na tuparin natin ang nakalagay sa
kasunduan upang maiwasan natin ito.

"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo makaabot pa sa
korte kung sakaling hindi ninyo isasauli ang inyong sasakyan na hinuhulugan na ang mga
magagastos ay kayo pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan ang
naging dahilan ng pagsampa ng kaso.

"Sumasainyo

"Attendance: 8/27/99

"(The Signatures appearing herein

include (sic) that of petitioner’s) (Sgd.)

OSCAR VILLAMARIA, JR."

If it were true that petitioner did not remit the boundary hulog for one week or more, why did private
respondent not forthwith take steps to recover the unit, and why did he have to wait for petitioner to
abandon it? 1avvphil.net

On another point, private respondent did not submit any police report to support his claim that
petitioner really figured in a vehicular mishap. Neither did he present the affidavit of the guard from
the gas station to substantiate his claim that petitioner abandoned the unit there. 58

Petitioner’s claim that he opted not to terminate the employment of respondent because of
magnanimity is negated by his (petitioner’s) own evidence that he took the jeepney from the
respondent only on July 24, 2000.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals
in CA-G.R. SP No. 78720 is AFFIRMED. Costs against petitioner.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice
WE CONCUR:

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. Nos. 83380-81 November 15, 1989

MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G. INOCENCIO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor Arbiter,
Department of Labor and Employment, National Capital Region), SANDIGAN NG
MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP and its members, JACINTO GARCIANO,
ALFREDO C. BASCO, VICTORIO Y. LAURETO, ESTER NARVAEZ, EUGENIO L. ROBLES,
BELEN N. VISTA, ALEJANDRO A. ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA
ESTRABO, LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY, LILY OPINA,
JANET SANGDANG, JOSEFINA ALCOCEBA and MARIA ANGELES, respondents.

Ledesma, Saludo & Associates for petitioners.

Pablo S. Bernardo for private respondents.

FERNAN, C.J.:

This petition for certiorari involving two separate cases filed by private respondents against herein
petitioners assails the decision of respondent National Labor Relations Commission in NLRC CASE
No. 7-2603-84 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v.
Makati Haberdashery and/or Toppers Makati, et al." and NLRC CASE No. 2-428-85 entitled
"Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Toppers Makati, et al.",
affirming the decision of the Labor Arbiter who jointly heard and decided aforesaid cases, finding: (a)
petitioners guilty of illegal dismissal and ordering them to reinstate the dismissed workers and (b) the
existence of employer-employee relationship and granting respondent workers by reason thereof
their various monetary claims.

The undisputed facts are as follows:

Individual complainants, private respondents herein, have been working for petitioner Makati
Haberdashery, Inc. as tailors, seamstress, sewers, basters (manlililip) and "plantsadoras". They are
paid on a piece-rate basis except Maria Angeles and Leonila Serafina who are paid on a monthly
basis. In addition to their piece-rate, they are given a daily allowance of three (P 3.00) pesos
provided they report for work before 9:30 a.m. everyday.
Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m. from
Monday to Saturday and during peak periods even on Sundays and holidays.

On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the respondent
workers, filed a complaint docketed as NLRC NCR Case No. 7-2603-84 for (a) underpayment of the
basic wage; (b) underpayment of living allowance; (c) non-payment of overtime work; (d) non-
payment of holiday pay; (e) non-payment of service incentive pay; (f) 13th month pay; and (g)
benefits provided for under Wage Orders Nos. 1, 2, 3, 4 and 5. 1

During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro Pelobello left
with Salvador Rivera, a salesman of petitioner Haberdashery, an open package which was
discovered to contain a "jusi" barong tagalog. When confronted, Pelobello replied that the same was
ordered by respondent Casimiro Zapata for his customer. Zapata allegedly admitted that he copied
the design of petitioner Haberdashery. But in the afternoon, when again questioned about said
barong, Pelobello and Zapata denied ownership of the same. Consequently a memorandum was
issued to each of them to explain on or before February 4, 1985 why no action should be taken
against them for accepting a job order which is prejudicial and in direct competition with the business
of the company.   Both respondents allegedly did not submit their explanation and did not report for
2

work.   Hence, they were dismissed by petitioners on February 4, 1985. They countered by filing a
3

complaint for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 on February 5, 1985.  4

On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive portion of
which reads:

WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-85

finding respondents guilty of illegal dismissal and ordering them to reinstate Dioscoro
Pelobello and Casimiro Zapata to their respective or similar positions without loss of
seniority rights, with full backwages from July 4, 1985 up to actual reinstatement. The
charge of unfair labor practice is dismissed for lack of merit.

In NLRC NCR Case No. 7-26030-84, the complainants' claims for underpayment re
violation of the minimum wage law is hereby ordered dismissed for lack of merit.

Respondents are hereby found to have violated the decrees on the cost of living
allowance, service incentive leave pay and the 13th Month Pay. In view thereof, the
economic analyst of the Commission is directed to compute the monetary awards
due each complainant based on the available records of the respondents retroactive
as of three years prior to the filing of the instant case.

SO ORDERED.  5

From the foregoing decision, petitioners appealed to the NLRC. The latter on March 30, 1988
affirmed said decision but limited the backwages awarded the Dioscoro Pelobello and Casimiro
Zapata to only one (1) year.  6

After their motion for reconsideration was denied, petitioners filed the instant petition raising the
following issues:

I
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTS BETWEEN PETITIONER HABERDASHERY AND RESPONDENTS
WORKERS.

II

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS WORKERS

ARE ENTITLED TO MONETARY CLAIMS DESPITE THE FINDING THAT THEY ARE NOT
ENTITLED TO MINIMUM WAGE.

III

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS PELOBELLO

AND ZAPATA WERE ILLEGALLY DISMISSED.  7

The first issue which is the pivotal issue in this case is resolved in favor of private respondents. We
have repeatedly held in countless decisions that the test of employer-employee relationship is four-
fold: (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. It is the so called "control test" that is
the most important element.   This simply means the determination of whether the employer controls
8

or has reserved the right to control the employee not only as to the result of the work but also as to
the means and method by which the same is to be accomplished.  9

The facts at bar indubitably reveal that the most important requisite of control is present. As gleaned
from the operations of petitioner, when a customer enters into a contract with the haberdashery or its
proprietor, the latter directs an employee who may be a tailor, pattern maker, sewer or "plantsadora"
to take the customer's measurements, and to sew the pants, coat or shirt as specified by the
customer. Supervision is actively manifested in all these aspects — the manner and quality of
cutting, sewing and ironing.

Furthermore, the presence of control is immediately evident in this memorandum issued by Assistant
Manager Cecilio B. Inocencio, Jr. dated May 30, 1981 addressed to Topper's Makati Tailors which
reads in part:

4. Effective immediately, new procedures shall be followed:

A. To follow instruction and orders from the undersigned Roger Valderama, Ruben
Delos Reyes and Ofel Bautista. Other than this person (sic) must ask permission to
the above mentioned before giving orders or instructions to the tailors.

B. Before accepting the job orders tailors must check the materials, job orders, due
dates and other things to maximize the efficiency of our production. The materials
should be checked (sic) if it is matched (sic) with the sample, together with the
number of the job order.

C. Effective immediately all job orders must be finished one day before the due date.
This can be done by proper scheduling of job order and if you will cooperate with
your supervisors. If you have many due dates for certain day, advise Ruben or Ofel
at once so that they can make necessary adjustment on due dates.
 D. Alteration-Before accepting alteration person attending on customs (sic) must ask
first or must advise the tailors regarding the due dates so that we can eliminate what
we call 'Bitin'.

E. If there is any problem regarding supervisors or co-tailor inside our shop, consult
with me at once settle the problem. Fighting inside the shop is strictly prohibited. Any
tailor violating this memorandum will be subject to disciplinary action.

For strict compliance.  10

From this memorandum alone, it is evident that petitioner has reserved the right to control its
employees not only as to the result but also the means and methods by which the same are to be
accomplished. That private respondents are regular employees is further proven by the fact that they
have to report for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional
allowance of P 3.00 daily if they report for work before 9:30 a.m. and which is forfeited when they
arrive at or after 9:30 a.m. 
11

Since private respondents are regular employees, necessarily the argument that they are
independent contractors must fail. As established in the preceding paragraphs, private respondents
did not exercise independence in their own methods, but on the contrary were subject to the control
of petitioners from the beginning of their tasks to their completion. Unlike independent contractors
who generally rely on their own resources, the equipment, tools, accessories, and paraphernalia
used by private respondents are supplied and owned by petitioners. Private respondents are totally
dependent on petitioners in all these aspects.

Coming now to the second issue, there is no dispute that private respondents are entitled to the
Minimum Wage as mandated by Section 2(g) of Letter of Instruction No. 829, Rules Implementing
Presidential Decree No. 1614 and reiterated in Section 3(f), Rules Implementing Presidential Decree
1713 which explicitly states that, "All employees paid by the result shall receive not less than the
applicable new minimum wage rates for eight (8) hours work a day, except where a payment by
result rate has been established by the Secretary of Labor. ..."   No such rate has been established
12

in this case.

But all these notwithstanding, the question as to whether or not there is in fact an underpayment of
minimum wages to private respondents has already been resolved in the decision of the Labor
Arbiter where he stated: "Hence, for lack of sufficient evidence to support the claims of the
complainants for alleged violation of the minimum wage, their claims for underpayment re violation of
the Minimum Wage Law under Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce fall."  13

The records show that private respondents did not appeal the above ruling of the Labor Arbiter to the
NLRC; neither did they file any petition raising that issue in the Supreme Court. Accordingly, insofar
as this case is concerned, that issue has been laid to rest. As to private respondents, the judgment
may be said to have attained finality. For it is a well-settled rule in this jurisdiction that "an appellee
who has not himself appealed cannot obtain from the appellate court-, any affirmative relief other
than the ones granted in the decision of the court below. "  14

As a consequence of their status as regular employees of the petitioners, they can claim cost of
living allowance. This is apparent from the provision defining the employees entitled to said
allowance, thus: "... All workers in the private sector, regardless of their position, designation or
status, and irrespective of the method by which their wages are paid. "  15
Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules
and Regulations Implementing P.D. No. 851 which provides:

Section 3. Employers covered. — The Decree shall apply to all employers except to:

xxx xxx xxx

(e) Employers of those who are paid on purely commission, boundary, or task basis,
and those who are paid a fixed amount for performing a specific work, irrespective of
the time consumed in the performance thereof, except where the workers are paid
on piece-rate basis in which case the employer shall be covered by this issuance
insofar as such workers are concerned. (Emphasis supplied.)

On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th Month
Pay, they are not entitled to service incentive leave pay because as piece-rate workers being paid at
a fixed amount for performing work irrespective of time consumed in the performance thereof, they
fall under one of the exceptions stated in Section 1(d), Rule V, Implementing Regulations, Book III,
Labor Code. For the same reason private respondents cannot also claim holiday pay (Section 1(e),
Rule IV, Implementing Regulations, Book III, Labor Code).

With respect to the last issue, it is apparent that public respondents have misread the evidence, for it
does show that a violation of the employer's rules has been committed and the evidence of such
transgression, the copied barong tagalog, was in the possession of Pelobello who pointed to Zapata
as the owner. When required by their employer to explain in a memorandum issued to each of them,
they not only failed to do so but instead went on AWOL (absence without official leave), waited for
the period to explain to expire and for petitioner to dismiss them. They thereafter filed an action for
illegal dismissal on the far-fetched ground that they were dismissed because of union activities.
Assuming that such acts do not constitute abandonment of their jobs as insisted by private
respondents, their blatant disregard of their employer's memorandum is undoubtedly an open
defiance to the lawful orders of the latter, a justifiable ground for termination of employment by the
employer expressly provided for in Article 283(a) of the Labor Code as well as a clear indication of
guilt for the commission of acts inimical to the interests of the employer, another justifiable ground
for dismissal under the same Article of the Labor Code, paragraph (c). Well established in our
jurisprudence is the right of an employer to dismiss an employee whose continuance in the service is
inimical to the employer's interest. 
16

In fact the Labor Arbiter himself to whom the explanation of private respondents was submitted gave
no credence to their version and found their excuses that said barong tagalog was the one they got
from the embroiderer for the Assistant Manager who was investigating them, unbelievable.

Under the circumstances, it is evident that there is no illegal dismissal of said employees. Thus, We
have ruled that:

No employer may rationally be expected to continue in employment a person whose

lack of morals, respect and loyalty to his employer, regard for his employer's rules,
and appreciation of the dignity and responsibility of his office, has so plainly and
completely been bared.

That there should be concern, sympathy, and solicitude for the rights and welfare of
the working class, is meet and proper. That in controversies between a laborer and
his master, doubts reasonably arising from the evidence, or in the interpretation of
agreements and writings should be resolved in the former's favor, is not an
 unreasonable or unfair rule. But that disregard of the employer's own rights and
interests can be justified by that concern and solicitude is unjust and unacceptable.
(Stanford Microsystems, Inc. v. NLRC, 157 SCRA 414-415 [1988] ).

The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of
the employer.   More importantly, while the Constitution is committed to the policy of social justice
17

and the protection of the working class, it should not be supposed that every labor dispute will
automatically be decided in favor of labor.  18

Finally, it has been established that the right to dismiss or otherwise impose discriplinary sanctions
upon an employee for just and valid cause, pertains in the first place to the employer, as well as the
authority to determine the existence of said cause in accordance with the norms of due process.  19

There is no evidence that the employer violated said norms. On the contrary, private respondents
who vigorously insist on the existence of employer-employee relationship, because of the
supervision and control of their employer over them, were the very ones who exhibited their lack of
respect and regard for their employer's rules.

Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to terminate
the services of private respondents.

WHEREFORE, the decision of the National Labor Relations Commission dated March 30, 1988 and
that of the Labor Arbiter dated June 10, 1986 are hereby modified. The complaint filed by Pelobello
and Zapata for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack of
factual and legal bases. Award of service incentive leave pay to private respondents is deleted.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

 
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 129076 November 25, 1998

ORLANDO FARMS GROWERS ASSOCIATION/GLICERIO AÑOVER, petitioner,

vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION (FIFTH DIVISION), ANTONIO
PAQUIT, ESTHER BONGGOT, FRANCISCO BAUG, LEOCADIO ORDONO, REBECCA MOREN,
MARCELINA HONTIVEROS, MARTIN ORDONO, TITO ORDONO, FE ORDONO, ERNIE COLON,
EUSTIQUIO GELDO, DANNY SAM, JOEL PIAMONTE, FEDERICO PASTOLERO, VIRGINIA
BUSANO, EDILMIRO ALDION, EUGENIO BETICAN, JR. and BERNARDO OPERIO, respondents.

ROMERO, J.:

It is a settled doctrine that an employer-employee relationship can be deduced from the existence of
the following elements: (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.

The principal issue to be resolved in the instant petition is whether or not an unregistered association
may be an employer independent of the respective members it represents.

The evidence reveals the ensuing facts:

Petitioner Orlando Farms Growers Association, with co-petitioner Glicerio Añover as its President, is
an association of landowners engaged in the production of export quality bananas located in
Kinamayan, Sto. Tomas, Davao del Norte, established for the sole purpose of dealing collectively
with Stanfilco on matters concerning technical services, canal maintenance, irrigation and pest
control, among others. Respondents, on the other hand, were hired as farm workers by several
member-landowners but; nonetheless, were made to perform functions as packers and harvesters in
the plantation of petitioner association.

After respondents were dismissed on various dates from January 8, 1993 to July 30, 1994, several
complaints were filed against petitioner for illegal dismissal and monetary benefits. Based on similar
grounds, the same were consolidated in the office of Labor Arbiter Newton R. Sancho who, in a
decision dated September 6, 1995, ordered their reinstatement, viz:
 WHEREFORE, judgment is hereby rendered declaring the dismissal of the 20 above-
named complainants ILLEGAL, and ordering respondents Orlando Farms Growers
Association/Glicerio Anover to REINSTATE them immediately to their former or
equivalent positions, and to PAY individual complainants their respective backwages
and other benefits (wage differentials, 13th month pay and holiday pay) appearing
opposite their names above set forth, including moral damages and attorney's fees,
in the total amount of P1,047,720.92 only.

All other claims are dismissed for lack of merit.

As becoming a collective association, respondents liabilities to complainants are joint

and solidary, with its responsible officers.

The case of Loran Paquit and Lovilla Dorlones  is dropped for having been amicably
1

settled.

In case of appeal, backwages and other benefits shall accrue but in no case
exceeding 3 years, without any qualification or deduction.

SO ORDERED.  2

On appeal, the National Labor Relations Commission (NLRC) affirmed the same in toto in a decision
dated December 26, 1996. Its motion for reconsideration having been denied on February 25, 1997,
petitioner filed the instant petition for certiorari.

Petitioner alleged that the NLRC erred in finding that respondents were its employees and not of the
individual landowners which fact can easily be deduced from the payments made by the latter of
respondent's Social Security System (SSS) contributions. Moreover, it could have never exercised
the power of control over them with regard to the manner and method by which the work was to be
accomplished, which authority remain vested with the landowners despite becoming members
thereof.

The arguments adduced before us do not warrant the nullification of the findings made by the Labor
Arbiter and the NLRC as the determination of the existence of an employer-employee relationship
between the party-litigants, being a question of fact, is amply supported by substantial evidence, as
can be gathered from a perfunctory reading, not only of the pleadings submitted, but from the
assailed decision, as well. Thus, the authority of this Court to review the findings of the NLRC is
limited to allegations of lack of jurisdiction or grave abuse of discretion.

The contention that petitioner, being an unregistered association and having been formed solely to
serve as an effective medium for dealing collectively with Stanfilco, does not exist in law and,
therefore, cannot be considered an employer, is misleading. This assertion can easily be dismissed
by reference to Article 212 (e) of the Labor Code, as amended, which defines an employer as any
person acting in the interest of an employer, directly or indirectly. Following a careful scrutiny of the
said provision, the Court concludes that the law does not require an employer to be registered
before he may come within the purview of the Labor Code, consistent with the established rule in
statutory construction that when the law does not distinguish, we should not distinguish. To do
otherwise would bring about a situation whereby employees are denied, not only redress of their
grievances, but, more importantly, the protection and benefits accorded to them by law if their
employer happens to be an unregistered association.
To reiterate, as held in the case of Filipinas Broadcasting Network, Inc. v. NLRC,   the following are
3

generally considered in the determination of the existence of an employer-employee relationship; (1)

the manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of
the power of dismissal; and (4) the presence or absence of the power of control; of these four, the
last one being the most important.

In the instant case, the following circumstances which support the existence of employer-employee
relations cannot be denied. During the subsistence of the association, several circulars and
memoranda were issued concerning, among other things, absences without formal request, loitering
in the work area and disciplinary measures with which every worker is enjoined to comply.
Furthermore, the employees were issued identification cards which the Court, in the case
of Domasig v. NLRC,  construed, not only as a security measure but mainly to identify the
4

holder as a bonafide employee of the firm. However, what makes the relationship explicit is
the power of the petitioner to enter into compromise agreements involving money claims
filed by three of its employees, namely: Lorna Paquit, Lovella Dorlones and Jasmine
Espanola. If petitioner's disclaimer were to be believed, what benefit would accrue to it in
settling an employer-employee dispute to which it allegedly lay no claim?

In spite of the overwhelming evidence sufficient to justify a conclusion that respondents

were indeed employees of petitioner, the latter, nevertheless, maintain the preposterous
claim that the ID card, circulars and memoranda were issued merely to facilitate the efficient
use of common resources, as well as to promote uniform rules in the work establishment. On
this score, we defer to the observations made by the NLRC when it ruled that, while the
original purpose of the formation of the association was merely to provide the landowners a
unified voice in dealing with Stanfilco, petitioner however exceeded its avowed intentions
when its subsequent actions reenforced only too clearly its admitted role of employer. As
reiterated all too often, factual findings of the NLRC, particularly when they coincide with
those of the Labor Arbiter, are accorded respect, even finality, and will not be disturbed for
as long as such findings are supported by substantial evidence.  5

Prescinding from the foregoing, we now address the issue of whether or not petitioner had a
valid ground to dismiss respondents from their respective employment.

It is settled that in termination disputes, the employer bears the burden of proving that the
dismissal is for just cause, failing which it would mean that the dismissal is not justified and
the employer is entitled to reinstatement.  The dismissal of employees must be made within
6

the parameters of the law and pursuant to the basic tenets of equity, justice and fair
play.  In Brahm Industries, Inc. v. NLRC,  the Court explained that there are two (2) facets of
7 8

valid termination of employment; (a) the legality of the act of dismissal, i.e., the dismissal
must be under any of the just causes provided under Art. 282  of the Labor Code; and (b) the
9

legality of the manner of dismissal, which means that there must be observance of the
requirements of due process, otherwise known as the two-notice rule. Thus, "the employer is
required to furnish the employee with a written notice containing a statement of the cause for
termination and to afford said employee ample opportunity to be heard and to defend himself
with the assistance of his representative, if he so desires. The employer is also required to
notify the worker in writing of the decision to dismiss him, stating clearly the reasons
therefore." 10

In the instant case, petitioner severed employment relations when it whimsically dismissed
the respondents in utter disregard of the safeguards underscored in the Constitution, as well
as in the Labor Code. Petitioner failed to controvert the allegation that it was responsible for
the dismissal of the employees. Instead of denying the same or otherwise imputing liability
on its member-landowner by naming the employees allegedly in his employ, petitioner was
silent on the issue and harped on the non-existence of employer-employee relationship
between the parties, which contention we find to be tangential. However related the issue
might seem, it would have been more relevant for the petitioner to have presented ample
evidence before the NLRC and this Court to justify its exoneration from liability. Having failed
in this respect, we deem it fatal to its defense.

For having been dismissed without a valid cause and for non-observance of the due process
requirement, respondents, consistent with recent jurisprudence laid down in the case
of Bustamante v. NLRC,   are entitled to receive full backwages from the date of their
11

dismissal up to the time of their reinstatement. The order, therefore, of the labor arbiter
limiting backwages to a period of three (3) years in the event of an appeal, is erroneous.

WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED and the decision of
the National Labor Relations Commission dated September 6, 1995 is AFFIRMED subject to
the deletion of the award of moral damages and attorney's fees. The Court, however, is
remanding this case to Labor Arbiter Newton R. Sancho to specify in the dispositive portion
of his decision the names of the respondents and the amount that each is entitled to.

SO ORDERED.

Narvasa, C.J., Kapunan, Purisima and Pardo, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 120969 January 22, 1998

ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) composed of Presiding
Commissioner RAUL T. AQUINO, Commissioner ROGELIO I. RAYALA and Commissioner
VICTORIANO R. CALAYCAY (Ponente), VIC DEL ROSARIO and VIVA FIMS, respondents.

DAVIDE, JR., J.:

By way of this special civil action for certiorari under Rule 65 of the Rules of Court, petitioners seek
to annul the 10 February 1995 Decision   of the National Labor Relations Commission (hereafter
1

NLRC), and its 6 April 1995 Resolution   denying the motion to reconsider the former in NLRC-NCR-
2

CA No. 006195-94. The decision reversed that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-
03994-92.

The parties present conflicting sets of facts.

Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents on 18
July 1989 as part of the filming crew with a salary of P375.00 per week. About four months later, he
was designated Assistant Electrician with a weekly salary of P400.00, which was increased to
P450.00 in May 1990. In June 1991, he was promoted to the rank of Electrician with a weekly salary
of P475.00, which was increased to P539.00 in September 1991.

Petitioner Paulino Enero, on his part, claims that private respondents employed him in June 1990 as
a member of the shooting crew with a weekly salary of P375.00, which was increased to P425.00 in
May 1991, then to P475.00 on 21 December 1991. 3

Petitioners' tasks consisted of loading, unloading and arranging movie equipment in the shooting
area as instructed by the cameraman, returning the equipment to Viva Films' warehouse, assisting in
the "fixing" of the lighting system, and performing other tasks that the cameraman and/or director
may assign. 4
Sometime in May 1992, petitioners sought the assistance of their supervisors, Mrs. Alejandria
Cesario, to facilitate their request that private respondents adjust their salary in accordance with the
minimum wage law. In June 1992, Mrs. Cesario informed petitioners that Mr. Vic del Rosario would
agree to increase their salary only if they signed a blank employment contract. As petitioners refused
to sign, private respondents forced Enero to go on leave in June 1992, then refused to take him back
when he reported for work on 20 July 1992. Meanwhile, Maraguinot was dropped from the company
payroll from 8 to 21 June 1992, but was returned on 22 June 1992. He was again asked to sign a
blank employment contract, and when he still refused, private respondents terminated his services
on 20 July 1992.   Petitioners thus sued for illegal dismissal  before the Labor Arbiter.
5 6

On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the trade
name of Viva Productions, Inc., and that it is primarily engaged in the distribution and
exhibition of movies — but not in the business of making movies; in the same vein, private
respondent Vic del Rosario is merely an executive producer, i.e., the financier who invests a
certain sum of money for the production of movies distributed and exhibited by VIVA. 7

Private respondents assert that they contract persons called "producers" — also referred to
as "associate producers"  — to "produce" or make movies for private respondents; and
8

contend that petitioners are project employees of the association producers who, in turn, act
as independent contractors. As such, there is no employer-employee relationship between
petitioners and private respondents.

Private respondents further contend that it was the associate producer of the film "Mahirap
Maging Pogi," who hired petitioner Maraguinot. The movie shot from 2 July up to 22 July
1992, and it was only then that Maraguinot was released upon payment of his last salary, as
his services were no longer needed. Anent petitioner Enero, he was hired for the movie
entitled "Sigaw ng Puso," later re-tired "Narito and Puso." He went on vacation on 8 June
1992, and by the time he reported for work on 20 July 1992, shooting for the movie had
already been completed. 9

After considering both versions of the facts, the Labor Arbiter found as follows:

On the first issue, this Office rules that complainants are the employees of the
respondents. The producer cannot be considered as an independent
contractor but should be considered only as a labor-only contractor and as
such, acts as a mere agent of the real employer, the herein respondent.
Respondents even failed to name and specify who are the producers. Also, it is
an admitted fact that the complainants received their salaries from the
respondents. The case cited by the respondents, Rosario Brothers,
Inc. vs. Ople, 131 SCRA 72 does not apply in this case.

It is very clear also that complainants are doing activities which are necessary
and essential to the business of the respondents, that of movie-making.
Complainant Maraguinot worked as an electrician while complainant Enero
worked as a crew [member].  10

Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:

WHEREFORE, judgment is hereby rendered declaring that complainants were

illegally dismissed.
 Respondents are hereby ordered to reinstate complainant to their former
positions without loss [of] seniority rights and pay their backwages starting
July 21, 1992 to December 31, 1993 temporarily computed in the amount of
P38,000.00 for complainant Paulino Enero and P46,000.00 for complainant
Alejandro Maraguinot, Jr. and thereafter until actually reinstated.

Respondents are ordered to pay also attorney's fees equivalent to ten (10%)
and/or P8,400.00 on top of the award. 11

Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-94). In its
decision   of 10 February 1995, the NLRC found the following circumstances of petitioners'
12

work "clearly established:"

1. Complainants [petitioners herein] were hired for specific movie projects and
their employment was co-terminus with each movie project the
completion/termination of which are pre-determined, such fact being made
known to complainants at the time of their engagement.

x x x           x x x          x x x

2 Each shooting unit works on one movie project at a time. And the work of the
shooting units, which work independently from each other, are not continuous
in nature but depends on the availability of movie projects.

3. As a consequence of the non-continuous work of the shooting units, the

total working hours logged by complainants in a month show extreme
variations. . . For instance, complainant Maraguinot worked for only 1.45 hours
in June 1991 but logged a total of 183.25 hours in January 1992. Complainant
Enero logged a total of only 31.57 hours in September 1991 but worked
for 183.35 hours the next month, October 1991.

4. Further shown by respondents is the irregular work schedule of

complainants on a daily basis. Complainant Maraguinot was supposed to
report on 05 August 1991 but reported only on 30 August 1991, or a gap of 25
days. Complainant Enero worked on 10 September 1991 and his next
scheduled working day was 28 September 1991, a gap of 18 days.

5. The extremely irregular working days and hours of complainants' work

explain the lump sum payment for complainants' services for each movie
project. Hence, complainants were paid a standard weekly salary regardless of
the number of working days and hours they logged in. Otherwise, if the
principle of "no work no pay" was strictly applied, complainants' earnings for
certain weeks would be very negligible.

6. Respondents also alleged that complainants were not prohibited from

working with such movie companies like Regal, Seiko and FPJ Productions
whenever they are not working for the independent movie producers engaged
by respondents . . . This allegation was never rebutted by complainants and
should be deemed admitted.
 The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances,
taken together, indicated that complainants (herein petitioners) were "project
employees."

After their motion for reconsideration was denied by the NLRC in its Resolution   of 6 April
13

1995, petitioners filed the instant petition, claiming that the NLRC committed grave abuse of
discretion amounting to lack or excess of jurisdiction in: (1) finding that petitioners were
project employees; (2) ruling that petitioners were not illegally dismissed; and (3) reversing
the decision of the Labor Arbiter.

To support their claim that they were regular (and not project) employees of private
respondents, petitioners cited their performance of activities that were necessary or
desirable in the usual trade or business of private respondents and added that their work was
continuous, i.e., after one project was completed they were assigned to another project.
Petitioners thus considered themselves part of a work pool from which private respondents
drew workers for assignment to different projects. Petitioners lamented that there was no
basis for the NLRC's conclusion that they were project employees, while the associate
producers were independent contractors; and thus reasoned that as regular employees, their
dismissal was illegal since the same was premised on a "false cause," namely, the
completion of a project, which was not among the causes for dismissal allowed by the Labor
Code.

Private respondents reiterate their version of the facts and stress that their evidence
supports the view that petitioners are project employees; point to petitioners' irregular work
load and work schedule; emphasize the NLRC's finding that petitioners never controverted
the allegation that they were not prohibited from working with other movie companies; and
ask that the facts be viewed in the context of the peculiar characteristics of the movie
industry.

The Office of the Solicitor General (OSG) is convinced that this petition is improper since
petitioners raise questions of fact, particularly, the NLRC's finding that petitioners were
project employees, a finding supported by substantial evidence; and submits that petitioners'
reliance on Article 280 of the Labor Code to support their contention that they should be
deemed regular employees is misplaced, as said section "merely distinguishes between two
types of employees, i.e., regular employees and casual employees, for purposes of
determining the right of an employee to certain benefits."

The OSG likewise rejects petitioners' contention that since they were hired not for one
project, but for a series of projects, they should be deemed regular employees.
Citing Mamansag v. NLRC,   the OSG asserts that what matters is that there was a time-frame
14

for each movie project made known to petitioners at the time of their hiring. In closing, the
OSG disagrees with petitioners' claim that the NLRC's classification of the movie producers
as independent contractors had no basis in fact and in law, since, on the contrary, the NLRC
"took pains in explaining its basis" for its decision.

As regards the propriety of this action, which the Office of the Solicitor General takes issue
with, we rule that a special civil action for certiorari under Rule 65 of the Rules of Court is the
proper remedy for one who complains that the NLRC acted in total disregard of evidence
material to or decisive of the controversy.   In the instant case, petitioners allege that the
15

NLRC's conclusions have no basis in fact and in law, hence the petition may not be
dismissed on procedural or jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the determination of whether an
employer-employee relationship existed between petitioners and private respondents or any
one of private respondents. If there was none, then this petition has no merit; conversely, if
the relationship existed, then petitioners could have been unjustly dismissed.

A related question is whether private respondents are engaged in the business of making
motion pictures. Del Rosario is necessarily engaged in such business as he finances the
production of movies. VIVA, on the other hand, alleges that it does not "make" movies, but
merely distributes and exhibits motion pictures. There being no further proof to this effect,
we cannot rely on this self-serving denial. At any rate, and as will be discussed below, private
respondents' evidence even supports the view that VIVA is engaged in the business of
making movies.

We now turn to the critical issues. Private respondents insist that petitioners are project
employees of associate producers who, in turn, act as independent contractors. It is settled
that the contracting out of labor is allowed only in case of job contracting. Section 8, Rule
VIII, Book III of the Omnibus Rules Implementing the Labor Code describes permissible job
contracting in this wise:

Sec. 8. Job contracting. — There is job contracting permissible under the Code
if the following conditions are met:

(1) The contractor carries on an independent

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

(2) The contractor has substantial capital or

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

Assuming that the associate producers are job contractors, they must then be engaged in the
business of making motion pictures. As such, and to be a job contractor under the preceding
description, associate producers must have tools, equipment, machinery, work premises,
and other materials necessary to make motion pictures. However, the associate producers
here have none of these. Private respondents' evidence reveals that the movie-making
equipment are supplied to the producers and owned by VIVA. These include
generators,   cables and wooden platforms,   cameras and "shooting equipment;"   in fact,
16 17 18

VIVA likewise owns the trucks used to transport the equipment.   It is thus clear that the
19

associate producer merely leases the equipment from VIVA.   Indeed, private respondents'
20

Formal Offer of Documentary Evidence stated one of the purposes of Exhibit "148" as:

To prove further that the independent Producers rented Shooting Unit No. 2
from Viva to finish their films. 
21

While the purpose of Exhibits "149," "149-A" and "149-B" was:

 [T]o prove that the movies of Viva Films were contracted out to the different
independent Producers who rented Shooting Unit No. 3 with a fixed budget
and time-frame of at least 30 shooting days or 45 days whichever comes first.  22

Private respondent further narrated that VIVA's generators broke down during petitioners'
last movie project, which forced the associate producer concerned to rent generators,
equipment and crew from another company.   This only shows that the associate producer
23

did not have substantial capital nor investment in the form of tools, equipment and other
materials necessary for making a movie. Private respondents in effect admit that their
producers, especially petitioners' last producer, are not engaged in permissible job
contracting.

If private respondents insist that the associate producers are labor contractors, then these
producers can only be "labor-only" contractors, defined by the Labor Code as follows:

Art. 106. Contractor or subcontractor. — . . .

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 persons 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.

A more detailed description is provided by Section 9, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code:

Sec. 9. Labor-only contracting. — (a) Any person who undertakes to supply

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

(1) Does not have substantial capital or investment in the form of

tools, equipment, machineries, work premises and other
materials; and

(2) The workers recruited and placed by such person are

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

(b) Labor-only contracting as defined herein is

hereby prohibited and the person acting as
contractor shall be considered merely as an agent
or intermediary of the employer who shall be
responsible to the workers in the same manner
and extent as if the latter were directly employed
by him.
 (c) For cases not falling under this Article, the
Secretary of Labor shall determine through
appropriate orders whether or not the contracting
out of labor is permissible in the light of the
circumstances of each case and after considering
the operating needs of the employer and the
rights of the workers involved. In such case, he
may prescribe conditions and restrictions to
insure the protection and welfare of the workers.

As labor-only contracting is prohibited, the law considers the person or entity engaged in the
same a mere agent or intermediary of the direct employer. But even by the preceding
standards, the associate producers of VIVA cannot be considered labor-only contractors as
they did not supply, recruit nor hire the workers. In the instant case, it was Juanita Cesario,
Shooting Unit Supervisor and an employee of VIVA, who recruited crew members from an
"available group of free-lance workers which includes the complainants Maraguinot and
Enero."   And in their Memorandum, private respondents declared that the associate
24

producer "hires the services of . . . 6) camera crew which includes (a) cameraman; (b) the
utility crew; (c) the technical staff; (d) generator man and electrician; (e) clapper;
etc. . . . ."   This clearly showed that the associate producers did not supply the workers
25

required by the movie project.

The relationship between VIVA and its producers or associate producers seems to be that of
agency,   as the latter make movies on behalf of VIVA, whose business is to "make" movies.
26

As such, the employment relationship between petitioners and producers is actually one
between petitioners and VIVA, with the latter being the direct employer.

The employer-employee relationship between petitioners and VIVA can further be established
by the "control test." While four elements are usually considered in determining the
existence of an employment relationship, namely: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's
power to control of the employee's conduct, the most important element is the employer's
control of the employee's conduct, not only as to the result of the work to be done but also as
to the means and methods to accomplish the same.   These four elements are present here.
27

In their position paper submitted to the Labor Arbiter, private respondents narrated the
following circumstances:

[T]he PRODUCER has to work within the limits of the budget he is given by the
company, for as long as the ultimate finish[ed] product is acceptable to the
company . . .

The ensure that qualify films are produced by the PRODUCER who is an
independent contractor, the company likewise employs a Supervising
PRODUCER, a Project accountant and a Shooting unit supervisor. The
Company's Supervising PRODUCER is Mr. Eric Cuatico, the Project accountant
varies from time to time, and the Shooting Unit Supervisor is Ms. Alejandria
Cesario.

The Supervising PRODUCER acts as the eyes and ears of the company and of
the Executive Producer to monitor the progress of the PRODUCER's work
accomplishment. He is there usually in the field doing the rounds of inspection
to see if there is any problem that the PRODUCER is encountering and to
 assist in threshing out the same so that the film project will be finished on
schedule. He supervises about 3 to 7 movie projects simultaneously [at] any
given time by coordinating with each film "PRODUCER". The Project
Accountant on the other hand assists the PRODUCER in monitoring the actual
expenses incurred because the company wants to insure that any additional
budget requested by the PRODUCER is really justified and warranted
especially when there is a change of original plans to suit the tast[e] of the
company on how a certain scene must be presented to make the film more
interesting and more commercially viable. (emphasis supplied).

VIVA's control is evident in its mandate that the end result must be a "quality film acceptable
to the company." The means and methods to accomplish the result are likewise controlled by
VIVA, viz., the movie project must be finished within schedule without exceeding the budget,
and additional expenses must be justified; certain scenes are subject to change to suit the
taste of the company; and the Supervising Producer, the "eyes and ears" of VIVA and del
Rosario, intervenes in the movie-making process by assisting the associate producer in
solving problems encountered in making the film.

It may not be validly argued then that petitioners are actually subject to the movie director's
control, and not VIVA's direction. The director merely instructs petitioners on how to better
comply with VIVA's requirements to ensure that a quality film is completed within schedule
and without exceeding the budget. At bottom, the director is akin to a supervisor who merely
oversees the activities of rank-and-file employees with control ultimately resting on the
employer.

Moreover, appointment slips   issued to all crew members state:

28

During the term of this appointment you shall comply with the duties and
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.

The words "supervisors" and "Top Management" can only refer to the "supervisors" and
"Top Management" of VIVA. By commanding crew members to observe the rules and
regulations promulgated by VIVA, the appointment slips only emphasize VIVA's control over
petitioners.

Aside from control, the element of selection and engagement is likewise present in the
instant case and exercised by VIVA. A sample appointment slip offered by private
respondents "to prove that members of the shooting crew except the driver are project
employees of the Independent Producers"   reads as follows:
29

VIVA PRODUCTIONS, INC.

16 Sct. Albano St.
Diliman, Quezon City

PEDRO NICOLAS Date: June 15, 1992

APPOINTMENT SLIP
 You are hereby appointed as SOUNDMAN for the film project entitled
"MANAMBIT". This appointment shall be effective upon the commencement of
the said project and shall continue to be effective until the completion of the
same.

For your services you shall receive the daily/weekly/monthly compensation of

P812.50.

During the term of this appointment you shall comply with the duties and
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.

Very
truly
yours,

(an
illegibl
e
signatu
re)

CONFORME:

_________________

Name of appointee

Signed in the presence of:

___________________

Notably, nowhere in the appointment slip does it appear that it was the producer or associate
producer who hired the crew members; moreover, it is VIVA's corporate name which appears
on the heading of the appointment slip. What likewise tells against VIVA is that it paid
petitioners' salaries as evidenced by vouchers, containing VIVA's letterhead, for that
purpose. 30

All the circumstances indicate an employment relationship between petitioners and VIVA
alone, thus the inevitable conclusion is that petitioners are employees only of VIVA.

The next issue is whether petitioners were illegally dismissed. Private respondents contend
that petitioners were project employees whose employment was automatically terminated
with the completion of their respective projects. Petitioners assert that they were regular
employees who were illegally dismissed.

It may not be ignored, however, that private respondents expressly admitted that petitioners
were part of a work pool;   and, while petitioners were initially hired possibly as project
31

employees, they had attained the status of regular employees in view if VIVA's conduct.
A project employee or a member of a work pool may acquire the status of a regular employee
when the following concur:

1) There is a continuous rehiring of project employees even after cessation of a project;  and
32

2) The tasks performed by the alleged "project employee" are vital, necessary and
indispensable to the usual business or trade of the employer. 33

However, the length of time during which the employee was continuously re-hired is
not controlling, but merely serves as a badge of regular employment. 34

In the instant case, the evidence on record shows that petitioner Enero was employed for a
total of two (2) years and engaged in at least eighteen (18) projects, while petitioner
Maraguinot was employed for some three (3) years and worked on at least twenty-three (23)
projects.   Moreover, as petitioners' tasks involved, among other chores, the loading,
35

unloading and

FILM DATE DATE ASSOCIATE

STARTED COMPLETED PRODUCER

LOVE AT FIRST SIGHT 1/3/90 2/16/90 MARIVIC ONG

PAIKOT-IKOT 1/26/90 3/11/90 EDITH MANUEL

ROCKY & ROLLY 2/13/90 3/29/90 M. ONG

PAIKOT-IKOT (addl. 1/2) 3/12/90 4/3/90 E. MANUEL

ROCKY & ROLLY (2nd contract) 4/6/90 5/20/90 M. ONG

NARDONG TOOTHPICK 4/4/90 5/18/90 JUN CHING

BAKIT KAY TAGAL NG SANDALI 6/26/90 10/20/90 E. MANUEL

BAKIT KAY TAGAL (2nd contract) 8/10/90 9/23/90 E. MANUEL

HINUKAY KO NA ANG LIBINGAN 9/6/90 10/20/90 JUN CHING

MO

MAGING SINO KA MAN 10/25/90 12/8/90 SANDY STA. MARIA

M. SINO KA MAN (2nd contract) 12/9/90 1/22/91 SANDY S

NOEL JUICO 1/29/91 3/14/90 JUN CHING

NOEL JUICO (2nd contract) 3/15/91 4/6/91 JUN CHING

ROBIN GOOD 5/7/91 6/20/91 M. ONG

UTOL KONG HOODLUM # 1 6/23/91 8/6/91 JUN CHING

KAPUTOL NG ISANG AWIT 8/18/91 10/2/91 SANDY S.

DARNA 10/4/91 11/18/91 E. MANUEL

 DARNA (addl. 1/2) 11/20/91 12/12/91 E. MANUEL

MAGNONG REHAS 12/13/91 1/27/92 BOBBY GRIMALT

M. REHAS (2nd contract) 1/28/92 3/12/92 B. GRIMALT

HIRAM NA MUKHA 3/15/92 4/29/92 M. ONG

HIRAM (2nd contract) 5/1/92 6/14/92 M. ONG

KAHIT AKO'Y BUSABOS 5/28/92 7/7/92 JERRY OHARA

SIGAW NG PUSO 7/1/92 8/4/92 M. ONG

SIGAW (addl. 1/2) 8/15/92 9/5/92 M. ONG

NGAYON AT KAILANMAN 9/6/92 10/20/92 SANDY STA. MARIA

While Maraguinot was a member of Shooting Unit III, which made the following movies
(Annex "4-A" of Respondents' Position Paper; OR, 29):

FILM DATE DATE ASSOCIATE

STARTED COMPLETED PRODUCER
GUMAPANG KA SA LUSAK 1/27/90 3/12/90 JUN CHING
PETRANG KABAYO 2/19/90 4/4/90 RUTH GRUTA
LUSAK (2nd contract) 3/14/90 4/27/90 JUN CHING
P. KABAYO (Addl 1/2 contract) 4/21/90 5/13/90 RUTH GRUTA
BADBOY 6/15/90 7/29/90 EDITH MANUEL
BADBOY (2nd contract) 7/30/90 8/21/90 E. MANUEL
ANAK NI BABY AMA 9/2/90 10/16/90 RUTH GRUTA
A.B. AMA (addl 1/2) 10/17/90 11/8/90 RUTH GRUTA
A.B. AMA (addl 2nd 1/2) 11/9/90 12/1/90 R. GRUTA
BOYONG MANALAC 11/30/90 1/14/91 MARIVIC ONG
HUMANAP KA NG PANGET 1/20/91 3/5/91 EDITH MANUEL
H. PANGET(2nd contract) 3/10/91 4/23/91 E. MANUEL
B. MANALAC (2nd contract) 5/22/91 7/5/91 M. ONG
ROBIN GOOD (2nd contract) 7/7/91 8/20/91 M. ONG
PITONG GAMOL 8/30/91 10/13/91 M. ONG
P. GAMOL (2nd contract) 10/14/91 11/27/91 M. ONG
GREASE GUN GANG 12/28/91 2/10/92 E. MANUEL
ALABANG GIRLS (1/2 contract) 3/4/92 3/26/92 M. ONG
BATANG RILES 3/9/92 3/30/92 BOBBY GRIMALT
UTOL KONG HOODLUM (part 2) 3/22/92 5/6/92 B. GRIMALT
UTOL (addl. 1/2 contract) 5/7/92 5/29/92 B. GRIMALT
MANDURUGAS (2nd contract) 5/25/92 7/8/92 JERRY OHARA
MAHIRAP MAGING POGI 7/2/92 8/15/92 M. ONG
 arranging of movie equipment in the shooting area as instructed by the cameramen,
returning the equipment to the Viva Films' warehouse, and assisting in the "fixing" of
the lighting system, it may not be gainsaid that these tasks were vital, necessary and
indispensable to the usual business or trade of the employer. As regards the
underscored phrase, it has been held that this is ascertained by considering the
nature of the work performed and its relation to the scheme of the particular business
or trade in its entirety. 36

A recent pronouncement of this Court anent project or work pool employees who had
attained the status of regular employees proves most instructive:

The denial by petitioners of the existence of a work pool in the company

because their projects were not continuous is amply belied by petitioners
themselves who admit that: . . .

A work pool may exist although the workers in the pool do not receive salaries
and are free to seek other employment during temporary breaks in the
business, provided that the worker shall be available when called to report of a
project. Although primarily applicable to regular seasonal workers, this set-up
can likewise be applied to project workers insofar as the effect of temporary
cessation of work is concerned. This is beneficial to both the employer and
employee for it prevents the unjust situation of "coddling labor at the expense
of capital" and at the same time enables the workers to attain the status of
regular employees. Clearly, the continuous rehiring of the same set of
employees within the framework of the Lao Group of Companies is strongly
indicative that private respondents were an integral part of a work pool from
which petitioners drew its workers for its various projects.

In a final attempt to convince the Court that private respondents were indeed
project employees, petitioners point out that the workers were not regularly
maintained in the payroll and were free to offer their services to other
companies when there were no on-going projects. This argument however
cannot defeat the workers' status of regularity. We apply by analogy the vase
of Industrial-Commercial-Agricultural Workers Organization v. CIR [16 SCRA
526, 567-568 (1966)] which deals with regular seasonal employees. There we
held: . . .

Truly, the cessation of construction activities at the end of every project is a

foreseeable suspension of work. Of course, no compensation can be
demanded from the employer because the stoppage of operations at the end
of a project and before the start of a new one is regular and expected by both
parties to the labor relations. Similar to the case of regular seasonal
employees, the employment relation is not severed by merely being
suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)] The employees
are, strictly speaking, not separated from services but merely on leave of
absence without pay until they are reemployed. Thus we cannot affirm the
argument that non-payment of salary or non-inclusion in the payroll and the
opportunity to seek other employment denote project
employment.   (emphasis supplied)
37

While Lao admittedly involved the construction industry, to which Policy Instruction No.

20/Department Order No. 19   regarding work pools specifically applies, there seems to be no
38
impediment to applying the underlying principles to industries other than the construction
industry.   Neither may it be argued that a substantial distinction exists between the projects
39

undertaken in the construction industry and the motion picture industry. On the contrary,
the raison d' etre of both industries concern projects with a foreseeable suspension of work.

At this time, we wish to allay any fears that this decision unduly burdens an employer by
imposing a duty to re-hire a project employee even after completion of the project for which
he was hired. The import of this decision is not to impose a positive and sweeping obligation
upon the employer to re-hire project employees. What this decision merely accomplishes is a
judicial recognition of the employment status of a project or work pool employee in
accordance with what is fait accompli, i.e., the continuous re-hiring by the employer of
project or work pool employees who perform tasks necessary or desirable to the employer's
usual business or trade. Let it not be said that this decision "coddles" labor, for as Lao has
ruled, project or work pool employees who have gained the status of regular employees are
subject to the "no work-no pay" principle, to repeat:

A work pool may exist although the workers in the pool do not receive salaries and are free to
seek other employment during temporary breaks in the business, provided that the worker
shall be available when called to report for a project. Although primarily applicable to regular
seasonal workers, this set-up can likewise be applied to project workers insofar as the effect
of temporary cessation of work is concerned. This is beneficial to both the employer and
employee for it prevents the unjust situation of "coddling labor at the expense of capital" and
at the same time enables the workers to attain the status of regular employees.

The Court's ruling here is meant precisely to give life to the constitutional policy of
strengthening the labor sector,   but, we stress, not at the expense of management. Lest it be
40

misunderstood, this ruling does not mean that simply because an employee is a project or
work pool employee even outside the construction industry, he is deemed, ipso jure, a
regular employee. All that we hold today is that once a project or work pool employee has
been: (1) continuously, as opposed to intermittently, re-hired by the same employer for the
same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to
the usual business or trade of the employer, then the employee must be deemed a regular
employee, pursuant to Article 280 of the Labor Code and jurisprudence. To rule otherwise
would allow circumvention of labor laws in industries not falling within the ambit of Policy
Instruction No. 20/Department Order No. 19, hence allowing the prevention of acquisition of
tenurial security by project or work pool employees who have already gained the status of
regular employees by the employer's conduct.

In closing then, as petitioners had already gained the status of regular employees, their
dismissal was unwarranted, for the cause invoked by private respondents for petitioners'
dismissal, viz.: completion of project, was not, as to them, a valid cause for dismissal under
Article 282 of the Labor Code. As such, petitioners are now entitled to back wages and
reinstatement, without loss of seniority rights and other benefits that may have
accrued.   Nevertheless, following the principles of "suspension of work" and "no pay"
41

between the end of one project and the start of a new one, in computing petitioners' back
wages, the amounts corresponding to what could have been earned during the periods from
the date petitioners were dismissed until their reinstatement when petitioners' respective
Shooting Units were not undertaking any movie projects, should be deducted.

Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was
already in effect. Pursuant to Section 34 thereof which amended Section 279 of the Labor
Code of the Philippines and Bustamante v. NLRC,   petitioners are entitled to receive full
42
back wages from the date of their dismissal up to the time of their reinstatement, without
deducting whatever earnings derived elsewhere during the period of illegal dismissal, subject
however, to the above observations.

WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor
Relations Commission in NLRC NCR CA No. 006195-94 dated 01 February 1995, as well as its
Resolution dated 6 April 1995, are hereby ANNULLED and SET ASIDE for having been
rendered with grave abuse of discretion, and the decision of the Labor Arbiter in NLRC NCR
Case No. 00-07-03994-92 is REINSTATED, subject, however, to the modification above
mentioned in the computation of back wages.

No pronouncement as to costs.

SO ORDERED.

Bellosillo, Vitug and Kapunan, JJ., concur.

FIRST DIVISION

G.R. No. 138051             June 10, 2004

JOSE Y. SONZA, petitioner,
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION

CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari 1 assailing the 26 March 1999 Decision2 of the
Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza
("SONZA"). The Court of Appeals affirmed the findings of the National Labor Relations Commission
("NLRC"), which affirmed the Labor Arbiter’s dismissal of the case for lack of jurisdiction.

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement

("Agreement") with the Mel and Jay Management and Development Corporation ("MJMDC"). ABS-
CBN was represented by its corporate officers while MJMDC was represented by SONZA, as
President and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer.
Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZA’s services exclusively
to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would
render to ABS-CBN, as follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays. 3

ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for the first year and
₱317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on
the 10th and 25th days of the month.

On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by your
goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning
his programs and career. We consider these acts of the station violative of the Agreement
and the station as in breach thereof. In this connection, we hereby serve notice of rescission
of said Agreement at our instance effective as of date.

Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the
other benefits under said Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and
Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did not
pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees Stock Option Plan ("ESOP").

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee
relationship existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996.

Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his account at
PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with
the same bank where ABS-CBN deposited SONZA’s talent fees and other payments due him under
the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter 5 denied the motion to dismiss and directed
the parties to file their respective position papers. The Labor Arbiter ruled:

In this instant case, complainant for having invoked a claim that he was an employee of
respondent company until April 15, 1996 and that he was not paid certain claims, it is
sufficient enough as to confer jurisdiction over the instant case in this Office. And as to
whether or not such claim would entitle complainant to recover upon the causes of action
asserted is a matter to be resolved only after and as a result of a hearing. Thus, the
respondent’s plea of lack of employer-employee relationship may be pleaded only as a
matter of defense. It behooves upon it the duty to prove that there really is no employer-
employee relationship between it and the complainant.

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their
position papers on 24 February 1997.

On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper with Motion to Expunge
Respondent’s Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s
witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the
prevailing practice in the television and broadcast industry is to treat talents like SONZA as
independent contractors.

The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of
jurisdiction.6 The pertinent parts of the decision read as follows:

xxx

While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the
contract of a talent," it stands to reason that a "talent" as above-described cannot be
considered as an employee by reason of the peculiar circumstances surrounding the
engagement of his services.

It must be noted that complainant was engaged by respondent by reason of his peculiar

skills and talent as a TV host and a radio broadcaster. Unlike an ordinary employee,
he was free to perform the services he undertook to render in accordance with his
own style. The benefits conferred to complainant under the May 1994 Agreement are
certainly very much higher than those generally given to employees. For one, complainant
Sonza’s monthly talent fees amount to a staggering ₱317,000. Moreover, his engagement as
a talent was covered by a specific contract. Likewise, he was not bound to render eight (8)
hours of work per day as he worked only for such number of hours as may be necessary.

The fact that per the May 1994 Agreement complainant was accorded some benefits
normally given to an employee is inconsequential. Whatever benefits complainant
enjoyed arose from specific agreement by the parties and not by reason of employer-
employee relationship. As correctly put by the respondent, "All these benefits are merely
talent fees and other contractual benefits and should not be deemed as ‘salaries, wages
and/or other remuneration’ accorded to an employee, notwithstanding the nomenclature
appended to these benefits. Apropos to this is the rule that the term or nomenclature given to
a stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring
such benefit."

The fact that complainant was made subject to respondent’s Rules and Regulations,
likewise, does not detract from the absence of employer-employee relationship. As
 held by the Supreme Court, "The line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first, which
aim only to promote the result, create no employer-employee relationship unlike the second,
which address both the result and the means to achieve it." (Insular Life Assurance Co., Ltd.
vs. NLRC, et al., G.R. No. 84484, November 15, 1989).

x x x (Emphasis supplied)7

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the
Labor Arbiter’s decision. SONZA filed a motion for reconsideration, which the NLRC denied in its
Resolution dated 3 July 1998.

On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals
assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals
rendered a Decision dismissing the case.8

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRC’s finding that no employer-employee relationship existed
between SONZA and ABS-CBN. Adopting the NLRC’s decision, the appellate court quoted the
following findings of the NLRC:

x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract
merely as an agent of complainant Sonza, the principal. By all indication and as the law puts
it, the act of the agent is the act of the principal itself. This fact is made particularly true in this
case, as admittedly MJMDC ‘is a management company devoted exclusively to managing
the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.’ (Opposition
to Motion to Dismiss)

Clearly, the relations of principal and agent only accrues between complainant Sonza and
MJMDC, and not between ABS-CBN and MJMDC. This is clear from the provisions of the
May 1994 Agreement which specifically referred to MJMDC as the ‘AGENT’. As a matter of
fact, when complainant herein unilaterally rescinded said May 1994 Agreement, it was
MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed the
same in his capacity as President.

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that
historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in
the May 1994 Agreement, which is the latest Agreement executed between ABS-CBN and
Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere ‘labor-only’ contractor of ABS-CBN

such that there exist[s] employer-employee relationship between the latter and Mr. Sonza.
On the contrary, We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the
talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994
Agreement.
 It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to
the regular courts, the same being in the nature of an action for alleged breach of contractual
obligation on the part of respondent-appellee. As squarely apparent from complainant-
appellant’s Position Paper, his claims for compensation for services, ‘13th month pay’,
signing bonus and travel allowance against respondent-appellee are not based on the Labor
Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds
under Stock Purchase Agreement are based on the latter. A portion of the Position Paper of
complainant-appellant bears perusal:

‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually
bound itself to pay complainant a signing bonus consisting of shares of stocks…with
FIVE HUNDRED THOUSAND PESOS (₱500,000.00).

Similarly, complainant is also entitled to be paid 13th month pay based on an amount
not lower than the amount he was receiving prior to effectivity of (the) Agreement’.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a

commutable travel benefit amounting to at least One Hundred Fifty Thousand Pesos
(₱150,000.00) per year.’

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

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

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

The Issue

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

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC’S DECISION

AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED
 BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW,
JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.14

The Court’s Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming
the NLRC ruling which upheld the Labor Arbiter’s dismissal of the case for lack of jurisdiction.

The present controversy is one of first impression. Although Philippine labor laws and jurisprudence
define clearly the elements of an employer-employee relationship, this is the first time that the Court
will resolve the nature of the relationship between a television and radio station and one of its
"talents." There is no case law stating that a radio and television program host is an employee of the
broadcast station.

The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known
television and radio personality, and ABS-CBN, one of the biggest television and radio networks in
the country.

SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee
of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because
SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts accord

the factual findings of the Labor Arbiter and the NLRC not only respect but also finality when
supported by substantial evidence. 15 Substantial evidence means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion. 16 A party cannot prove the
absence of substantial evidence by simply pointing out that there is contrary evidence on record,
direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in
determining where the weight of evidence lies or what evidence is credible. 17

SONZA maintains that all essential elements of an employer-employee relationship are present in
this case. Case law has consistently held that 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 employer’s power to control the employee on the means and methods by
which the work is accomplished.18 The last element, the so-called "control test", is the most
important element.19

A. Selection and Engagement of Employee

ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of
SONZA’s peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by
respondent in specifically selecting and hiring complainant over other broadcasters of possibly
similar experience and qualification as complainant belies respondent’s claim of independent
contractorship."

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

In any event, the method of selecting and engaging SONZA does not conclusively determine his
status. We must consider all the circumstances of the relationship, with the control test being the
most important element.

B. Payment of Wages

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

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBN’s employee, there would be no need for the parties to
stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay"20 which the law
automatically incorporates into every employer-employee contract.21 Whatever benefits SONZA
enjoyed arose from contract and not because of an employer-employee relationship. 22

SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year, are so huge and
out of the ordinary that they indicate more an independent contractual relationship rather than an
employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely
because of SONZA’s unique skills, talent and celebrity status not possessed by ordinary employees.
Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such
huge talent fees for his services. The power to bargain talent fees way above the salary scales of
ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual
relationship.

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

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.23

During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long as "AGENT
and Jay Sonza shall faithfully and completely perform each condition of this Agreement." 24 Even if it
suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained
obligated to pay SONZA’s talent fees during the life of the Agreement. This circumstance indicates
an independent contractual relationship between SONZA and ABS-CBN.

SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him
his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying
SONZA’s talent fees during the remaining life of the Agreement even if ABS-CBN cancelled
SONZA’s programs through no fault of SONZA.25

SONZA assails the Labor Arbiter’s interpretation of his rescission of the Agreement as an admission
that he is not an employee of ABS-CBN. The Labor Arbiter stated that "if it were true that
complainant was really an employee, he would merely resign, instead." SONZA did actually resign
from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZA’s letter
clearly bears this out.26 However, the manner by which SONZA terminated his relationship with ABS-
CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not
determine his status as employee or independent contractor.

D. Power of Control

Since there is no local precedent on whether a radio and television program host is an employee or
an independent contractor, we refer to foreign case law in analyzing the present case. The United
States Court of Appeals, First Circuit, recently held in Alberty-Vélez v. Corporación De Puerto
Rico Para La Difusión Pública ("WIPR")27 that a television program host is an independent
contractor. We quote the following findings of the U.S. court:

Several factors favor classifying Alberty as an independent contractor. First, a television

actress is a skilled position requiring talent and training not available on-the-job. x x x
In this regard, Alberty possesses a master’s degree in public communications and
journalism; is trained in dance, singing, and modeling; taught with the drama department at
the University of Puerto Rico; and acted in several theater and television productions prior to
her affiliation with "Desde Mi Pueblo." Second, Alberty provided the "tools and
instrumentalities" necessary for her to perform. Specifically, she provided, or obtained
sponsors to provide, the costumes, jewelry, and other image-related supplies and services
necessary for her appearance. Alberty disputes that this factor favors independent contractor
status because WIPR provided the "equipment necessary to tape the show." Alberty’s
argument is misplaced. The equipment necessary for Alberty to conduct her job as host of
"Desde Mi Pueblo" related to her appearance on the show. Others provided equipment for
filming and producing the show, but these were not the primary tools that Alberty used to
perform her particular function. If we accepted this argument, independent contractors could
never work on collaborative projects because other individuals often provide the equipment
required for different aspects of the collaboration. x x x

Third, WIPR could not assign Alberty work in addition to filming "Desde Mi
Pueblo." Alberty’s contracts with WIPR specifically provided that WIPR hired her
"professional services as Hostess for the Program Desde Mi Pueblo." There is no evidence
that WIPR assigned Alberty tasks in addition to work related to these tapings. x x
x28 (Emphasis supplied)

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. 29 This test is based on the extent of
control the hirer exercises over a worker. The greater the supervision and control the hirer exercises,
the more likely the worker is deemed an employee. The converse holds true as well – the less
control the hirer exercises, the more likely the worker is considered an independent contractor. 30

First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s 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-CBN’s control. SONZA did not have to render eight hours
of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the
shows, as well as pre- and post-production staff meetings. 31 ABS-CBN could not dictate the contents
of SONZA’s script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-
CBN or its interests.32 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.

We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZA’s work.33 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."34 ABS-CBN’s sole concern was the quality of the shows and their standing in the
ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of
SONZA’s work.

SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over
the means and methods of the performance of his work. Although ABS-CBN did have the option not
to broadcast SONZA’s show, ABS-CBN was still obligated to pay SONZA’s talent fees... Thus, even
if ABS-CBN was completely dissatisfied with the means and methods of SONZA’s performance of
his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even
discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show but ABS-CBN
must still pay his talent fees in full. 35

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to
continue paying in full SONZA’s talent fees, did not amount to control over the means and methods
of the performance of SONZA’s work. ABS-CBN could not terminate or discipline SONZA even if the
means and methods of performance of his work - how he delivered his lines and appeared on
television - did not meet ABS-CBN’s approval. This proves that ABS-CBN’s control was limited only
to the result of SONZA’s work, whether to broadcast the final product or not. In either case, ABS-
CBN must still pay SONZA’s talent fees in full until the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the right to
delete objectionable features in their shows. Since the management did not have control over the
manner of performance of the skills of the artists, it could only control the result of the work by
deleting objectionable features.37

SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment
and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the
"Mel & Jay" programs. However, the equipment, crew and airtime are not the "tools and
instrumentalities" SONZA needed to perform his job. What SONZA principally needed were his
talent or skills and the costumes necessary for his appearance. 38 Even though ABS-CBN provided
SONZA with the place of work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBN’s sole concern was for
SONZA to display his talent during the airing of the programs. 39

A radio broadcast specialist who works under minimal supervision is an independent

contractor.40 SONZA’s 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, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected
him to its rules and standards of performance. SONZA claims that this indicates ABS-CBN’s control
"not only [over] his manner of work but also the quality of his work."

The Agreement stipulates that SONZA shall abide with the rules and standards of performance
"covering talents"41 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."42 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.43 In this case, SONZA failed to show that these rules controlled his
performance. We find that these general rules are merely guidelines towards the achievement of
the mutually desired result, which are top-rating television and radio programs that comply with
standards of the industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party
in relation to the services being rendered may be accorded the effect of establishing an employer-
employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance
Co., Ltd. vs. NLRC. In said case, we held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards
the achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create
no employer-employee relationship unlike the second, which address both the result and the
means used to achieve it.44

The Vaughan case also held that one could still be an independent contractor although the hirer
reserved certain supervision to insure the attainment of the desired result. The hirer, however, must
not deprive the one hired from performing his services according to his own initiative. 45

Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of
control which ABS-CBN exercised over him.

This argument is futile. 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.

The hiring of exclusive talents is a widespread and accepted practice in the entertainment
industry.46 This practice is not designed to control the means and methods of work of the talent, but
simply to protect the investment of the broadcast station. The broadcast station normally spends
substantial amounts of money, time and effort "in building up its talents as well as the programs they
appear in and thus expects that said talents remain exclusive with the station for a commensurate
period of time."47 Normally, a much higher fee is paid to talents who agree to work exclusively for a
particular radio or television station. In short, the huge talent fees partially compensates for
exclusivity, as in the present case.
MJMDC as Agent of SONZA

SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which contracted out his
services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an
employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is his
employer.

In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the
employee who is ostensibly under the employ of the "labor-only" contractor; and (3) the principal
who is deemed the real employer. Under this scheme, the "labor-only" contractor is the agent of
the principal. 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. 48 These circumstances
are not present in this case.

There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-
CBN. MJMDC merely acted as SONZA’s agent. The Agreement expressly states that MJMDC acted
as the "AGENT" of SONZA. The records do not show that MJMDC acted as ABS-CBN’s agent.
MJMDC, which stands for Mel and Jay Management and Development Corporation, is a corporation
organized and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is
SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed
by SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is
represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and SONZA.

As SONZA admits, MJMDC is a management company devoted exclusively to managing the

careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other function apart from acting as
agent of SONZA or TIANGCO to promote their careers in the broadcast and television industry. 49

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8
January 1979 finally settled the status of workers in the broadcast industry. Under this policy, the
types of employees in the broadcast industry are the station and program employees.

Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of
law. There is no legal presumption that Policy Instruction No. 40 determines SONZA’s status. A
mere executive issuance cannot exclude independent contractors from the class of service providers
to the broadcast industry. The classification of workers in the broadcast industry into only two groups
under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no
basis either in law or in fact.

Affidavits of ABS-CBN’s Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando
Cruz without giving his counsel the

opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to

attest on the prevailing practice in the radio and television industry. SONZA views the affidavits of
these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never prevented from denying
or refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a
formal (trial-type) hearing after the submission of the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx

These verified position papers shall cover only those claims and causes of action raised in
the complaint excluding those that may have been amicably settled, and shall be
accompanied by all supporting documents including the affidavits of their respective
witnesses which shall take the place of the latter’s direct testimony. x x x

Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the

parties of their position papers/memorandum, the Labor Arbiter shall motu propio determine
whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and
for the purpose of making such determination, ask clarificatory questions to further elicit facts
or information, including but not limited to the subpoena of relevant documentary evidence, if
any from any party or witness.50

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

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries
to treat talents like SONZA as independent contractors. SONZA argues that if such practice exists, it
is void for violating the right of labor to security of tenure.

The right of labor to security of tenure as guaranteed in the Constitution 53 arises only if there is an
employer-employee relationship under labor laws. Not every performance of services for a fee
creates an employer-employee relationship. To hold that every person who renders services to
another for a fee is an employee - to give meaning to the security of tenure clause - will lead to
absurd results.

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

The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716, 55 as amended
by Republic Act No. 8241,56 treats talents, television and radio broadcasters differently. Under the
NIRC, these professionals are subject to the 10% value-added tax ("VAT") on services they render.
Exempted from the VAT are those under an employer-employee relationship. 57 This different tax
treatment accorded to talents and broadcasters bolters our conclusion that they are independent
contractors, provided all the basic elements of a contractual relationship are present as in this case.

Nature of SONZA’s Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service
incentive leave, signing bonus, travel allowance, and amounts due under the Employee Stock
Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that SONZA’s
claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor
Code. Clearly, the present case does not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In effect, SONZA’s cause of action is
for breach of contract which is intrinsically a civil dispute cognizable by the regular courts. 58

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26

March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.

SO ORDERED.

Davide, Jr., Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.