1. G.R. No.

129315 October 2, 2000

OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO

LACAP, SIMPLICIO PEDELOS, PATRICIA NAS, and TERESITA FLORES,
petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LAO ENTENG COMPANY, INC.
and/or TRINIDAD LAO ONG, respondents.

DECISION

QUISUMBING, J.:

This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public
respondent National Labor Relations Commission (First Division),1 in NLRC NCR Case No. 00-04-03163-
95, and the Resolution dated March 5, 1997 denying the motion for reconsideration. The aforecited
October 17th Resolution affirmed the Decision dated September 28, 1996 of Labor Arbiter Potenciano S.
Cañizares dismissing the petitioners' complaint for illegal dismissal and declaring that petitioners are not
regular employees of private respondent Lao Enteng Company, Inc..

The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro
Tolentino, Manuel Caparas, Elpidio Lacap, and Simplicio Pedelos worked as barbers, while the two female
petitioners, Teresita Flores and Patricia Nas worked as manicurists in New Look Barber Shop located at
651 P. Paterno Street, Quiapo, Manila owned by private respondent Lao Enteng Co. Inc.. Petitioner Nas
alleged that she also worked as watcher and marketer of private respondent.

Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single
proprietorship owned and managed by Mr. Vicente Lao. In or about January 1982, the children of Vicente
Lao organized a corporation which was registered with the Securities and Exchange Commission as Lao
Enteng Co. Inc. with Trinidad Ong as President of the said corporation. Upon its incorporation, the
respondent company took over the assets, equipment, and properties of the New Look Barber Shop and
continued the business. All the petitioners were allowed to continue working with the new company until
April 15, 1995 when respondent Trinidad Ong informed them that the building wherein the New Look
Barber Shop was located had been sold and that their services were no longer needed.2

On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal
dismissal, illegal deduction, separation pay, non-payment of 13th month pay, and salary differentials.
Only petitioner Nas asked for payment of salary differentials as she alleged that she was paid a daily
wage of P25.00 throughout her period of employment. The petitioners also sought the refund of the
P1.00 that the respondent company collected from each of them daily as salary of the sweeper of the
barber shop.

Private respondent in its position paper averred that the petitioners were joint venture partners and were
receiving fifty percent commission of the amount charged to customers. Thus, there was no employer-
employee relationship between them and petitioners. And assuming arguendo, that there was an
employer-employee relationship, still petitioners are not entitled to separation pay because the cessation
of operations of the barber shop was due to serious business losses.

Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her
affidavit dated September 06, 1995 that Lao Enteng Company, Inc. did not take over the management of
the New Look Barber Shop, that after the death Lao Enteng petitioner were verbally informed time and
again that the partnership may fold up anytime because nobody in the family had the time to be at the
barber shop to look after their interest; that New Look Barber Shop had always been a joint venture
partnership and the operation and management of the barber shop was left entirely to petitioners; that
her father's contribution to the joint venture included the place of business, payment for utilities including
electricity, water, etc. while petitioners as industrial partners, supplied the labor; and that the barber
shop was allowed to remain open up to April 1995 by the children because they wanted to give the
partners a chance at making it work. Eventually, they were forced to close the barber shop because they
continued to lose money while petitioners earned from it. Trinidad also added that private respondents
had no control over petitioners who were free to come and go as they wished. Admittedly too by
petitioners they received fifty percent to sixty percent of the gross paid by customers. Trinidad explained
that some of the petitioners were allowed to register with the Social Security System as employees of Lao
Enteng Company, Inc. only as an act of accommodation. All the SSS contributions were made by
petitioners. Moreover, Osias Corporal, Elpidio Lacap and Teresita Flores were not among those registered
with the Social Security System. Lastly, Trinidad avers that without any employee-employer relationship
petitioners claim for 13th month pay and separation pay have no basis in fact and in law.3

In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Cañizares, Jr. ordered the dismissal
of the complaint on the basis of his findings that the complainants and the respondents were engaged in
a joint venture and that there existed no employer-employee relation between them. The Labor Arbiter
also found that the barber shop was closed due to serious business losses or financial reverses and
consequently declared that the law does not compel the establishment to pay separation pay to whoever
were its employees.4

On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of
merit, ratiocinating thus:

Indeed, complainants failed to show the existence of employer-employee relationship under the fourway
test established by the Supreme Court. It is a common practice in the Barber Shop industry that barbers
supply their own scissors and razors and they split their earnings with the owner of the barber shop. The
only capital of the owner is the place of work whereas the barbers provide the skill and expertise in
servicing customers. The only control exercised by the owner of the barber shop is to ascertain the
number of customers serviced by the barber in order to determine the sharing of profits. The barbers
maybe characterized as independent contractors because they are under the control of the barber shop
owner only with respect to the result of the work, but not with respect to the details or manner of
performance. The barbers are engaged in an independent calling requiring special skills available to the
public at large.5

Its motion for reconsideration denied in the Resolution6 dated March 5, 1997, petitioners filed the instant
petition assigning that the NLRC committed grave abuse of discretion in:

I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS WERE

EMPLOYEES OF RESPONDENT COMPANY IN RULING THAT PETITIONERS WERE INDEPENDENT
CONTRACTORS.

II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT AWARDING
THEIR MONEY CLAIMS.7

Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners
were independent contractors. They contend that they were employees of the respondent company and
cannot be considered as independent contractors because they did not carry on an independent business.
They did not cut hair, manicure, and do their work in their own manner and method. They insist they
were not free from the control and direction of private respondents in all matters, and their services were
engaged by the respondent company to attend to its customers in its barber shop. Petitioners also stated
that, individually or collectively, they do not have substantial capital nor investments in tools, equipments,
work premises and other materials necessary in the conduct of the barber shop. What the barbers owned
were merely combs, scissors, and razors, while the manicurists owned only nail cutters, nail polishes,
nippers and cuticle removers. By no standard can these be considered "substantial capital" necessary to
operate a barbers shop.

Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing that
petitioners Pedro Tolentino, Manuel Caparas, Simplicio Pedelos, and Patricia Nas were registered with the
Social Security System as regular employees of the respondent company. The SSS employment records in
common show that the employer's ID No. of Vicente Lao/Barber and Pawn Shop was 03-0606200-1 and
that of the respondent company was 03-8740074-7. All the foregoing entries in the SSS employment
records were painstakingly detailed by the petitioners in their position paper and in their memorandum
appeal but were arbitrarily ignored first by the Labor Arbiter and then by the respondent NLRC which did
not even mention said employment records in its questioned decision.

We found petition is impressed with merit.

In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be
accorded respect and finality on appeal. We have long settled that this Court will not uphold erroneous
conclusions unsupported by substantial evidence.8 We must also stress that where the findings of the
NLRC contradict those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look
into the records of the case and reexamine the questioned findings.9

The issues raised by petitioners boil down to whether or not an employer-employee relationship existed
between petitioners and private respondent Lao Enteng Company, Inc. The Labor Arbiter has concluded
that the petitioners and respondent company were engaged in a joint venture. The NLRC concluded that
the petitioners were independent contractors.

The Labor Arbiter's findings that the parties were engaged in a joint venture is unsupported by any
documentary evidence. It should be noted that aside from the self-serving affidavit of Trinidad Lao Ong,
there were no other evidentiary documents, nor written partnership agreements presented. We have
ruled that even the sharing of proceeds for every job of petitioners in the barber shop does not mean
they were not employees of the respondent company.10

Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors
simply because they supplied their own working implements, shared in the earnings of the barber shop
with the owner and chose the manner of performing their work. They stressed that as far as the result of
their work was concerned the barber shop owner controlled them.

An independent contractor is one who undertakes "job contracting", i.e., a person who (a) 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 (b) has
substantial capital or investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of the business.11

Juxtaposing this provision vis-à-vis the facts of this case, we are convinced that petitioners are not
"independent contractors". They did not carry on an independent business. Neither did they undertake
cutting hair and manicuring nails, on their own as their responsibility, and in their own manner and
method. The services of the petitioners were engaged by the respondent company to attend to the needs
of its customers in its barber shop. More importantly, the petitioners, individually or collectively, did not
have a substantial capital or investment in the form of tools, equipment, work premises and other
materials which are necessary in the conduct of the business of the respondent company. What the
petitioners owned were only combs, scissors, razors, nail cutters, nail polishes, the nippers - nothing else.
By no standard can these be considered substantial capital necessary to operate a barber shop. From the
records, it can be gleaned that petitioners were not given work assignments in any place other than at
the work premises of the New Look Barber Shop owned by the respondent company. Also, petitioners
were required to observe rules and regulations of the respondent company pertaining, among other
things, observance of daily attendance, job performance, and regularity of job output. The nature of work
performed by were clearly directly related to private respondent's business of operating barber shops.
Respondent company did not dispute that it owned and operated three (3) barber shops. Hence,
petitioners were not independent contractors.

Did an employee-employer relationship exist between petitioners and private respondent? The following
elements must be present for an employer-employee relationship to exist: (1) the selection and
engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and
(4) the power to control the worker's conduct, with the latter assuming primacy in the overall
consideration. Records of the case show that the late Vicente Lao engaged the services of the petitioners
to work as barbers and manicurists in the New Look Barber Shop, then a single proprietorship owned by
him; that in January 1982, his children organized a corporation which they registered with the Securities
and Exchange Commission as Lao Enteng Company, Inc.; that upon its incorporation, it took over the
assets, equipment, and properties of the New Look Barber Shop and continued the business; that the
respondent company retained the services of all the petitioners and continuously paid their wages.
Clearly, all three elements exist in petitioners' and private respondent's working arrangements.

Private respondent claims it had no control over petitioners.1âwphi1 The power to control refers to the
existence of the power and not necessarily to the actual exercise thereof, nor is it essential for the
employer to actually supervise the performance of duties of the employee. It is enough that the employer
has the right to wield that power.12 As to the "control test", the following facts indubitably reveal that
respondent company wielded control over the work performance of petitioners, in that: (1) they worked
in the barber shop owned and operated by the respondents; (2) they were required to report daily and
observe definite hours of work; (3) they were not free to accept other employment elsewhere but
devoted their full time working in the New Look Barber Shop for all the fifteen (15) years they have
worked until April 15, 1995; (4) that some have worked with respondents as early as in the 1960's; (5)
that petitioner Patricia Nas was instructed by the respondents to watch the other six (6) petitioners in
their daily task. Certainly, respondent company was clothed with the power to dismiss any or all of them
for just and valid cause. Petitioners were unarguably performing work necessary and desirable in the
business of the respondent company.

While it is no longer true that membership to SSS is predicated on the existence of an employee-
employer relationship since the policy is now to encourage even the self-employed dressmakers,
manicurists and jeepney drivers to become SSS members, we could not agree with private respondents
that petitioners were registered with the Social Security System as their employees only as an
accommodation. As we have earlier mentioned private respondent showed no proof to their claim that
petitioners were the ones who solely paid all SSS contributions. It is unlikely that respondents would
report certain persons as their workers, pay their SSS premium as well as their wages if it were not true
that they were indeed their employees.13

Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was closed
due to serious business losses and respondent company closed its barber shop because the building
where the barber shop was located was sold. An employer may adopt policies or changes or adjustments
in its operations to insure profit to itself or protect investment of its stockholders. In the exercise of such
management prerogative, the employer may merge or consolidate its business with another, or sell or
dispose all or substantially all of its assets and properties which may bring about the dismissal or
termination of its employees in the process.14
Prescinding from the above, we hold that the seven petitioners are employees of the private respondent
company; as such, they are to be accorded the benefits provided under the Labor Code, specifically
Article 283 which mandates the grant of separation pay in case of closure or cessation of employer's
business which is equivalent to one (1) month pay for every year of service.15 Likewise, they are entitled
to the protection of minimum wage statutes. Hence, the separation pay due them may be computed on
the basis of the minimum wage prevailing at the time their services were terminated by the respondent
company. The same is true with respect to the 13th month pay. The Revised Guidelines on the
Implementation of the 13th Month Pay Law states that "all rank and file employees are now entitled to a
13th month pay regardless of the amount of basic salary that they receive in a month. Such employees
are entitled to the benefit regardless of their designation or employment status, and irrespective of the
method by which their wages are paid, provided that they have worked for at least one (1) month during
a calendar year" and so all the seven (7) petitioners who were not paid their 13th month pay must be
paid accordingly.16

Anent the other claims of the petitioners, such as the P10,000.00 as penalty for non-compliance with
procedural process; P10,000.00 as moral damages; refund of P1.00 per day paid to the sweeper; salary
differentials for petitioner Nas; attorney's fees), we find them without basis.

IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision dated October 17,
1996 and Resolution dated March 05, 1997 are SET ASIDE. Private respondents are hereby ordered to
pay, severally and jointly, the seven (7) petitioners their (1) 13th month pay and (2) separation pay
equivalent to one month pay for every year of service, to be computed at the then prevailing minimum
wage at the time of their actual termination which was April 15, 1995.

Costs against private respondents.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

Footnotes

1 Per Commissioner Alberto R. Quimpo and concurred in by Presiding Commissioner Bartolome S.

Carale and Commissioner Vicente S E. Veloso.

2 Rollo, pp. 5-7.

3 Rollo, pp. 115-119.

4 Id. at 84-85.

5 Id. at 122.

6 Id. at 128-130.

7 Id. at 11.

8 Anino vs. NLRC, 290 SCRA 489, 499-500 (1998).

9 Paz Martin Jo vs. NLRC, G.R. No. 121605, February 02, 2000, p. 7.

10 Labor Congress of the Philippines vs. NLRC, 290 SCRA 509, 528 (1998); San Miguel Jeepney
Service vs. NLRC, 265 SCRA 35 (1998).

11 Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor Code; Ponce vs.
NLRC, 293 SCRA 366, 374-375 (1998).

12 Paz Martin Jo and Cesar Jo vs. NLRC, G.R. No. 121605, February 02, 2000, p. 5.

13 Nagusara vs. NLRC, 290 SCRA 245, 251 (1998).

14 Associated Labor Unions-VIMCONTU vs. NLRC, 204 SCRA 913, 923 (1991).

15 Phil. Tobacco Flue-Curing & Redrying Corp. vs. NLRC, 300 SCRA 37, 55 (1998)

16 See Sec. 1, P.D. 851; Osias Academy vs. DOLE, 192 SCRA 612, 619 (1990); Dentech Mfg.
Corp. vs. NLRC, 172 SCRA 588 (1989).
2. G.R. No. 199166 April 20, 2015

NELSON V. BEGINO, GENER DEL VALLE, MONINA A. VILA-LLORIN AND MA. CRISTINA
SUMAYAO, petitioners,

VS. ABS-CBN CORPORATION (FORMERLY, ABS-CBN BROADCASTING CORPORATION)

AND AMALIA VILLAFUERTE, respondents.

DECISION

PEREZ, J.:

The existence of an employer-employee relationship is at the heart of this Petition for Review on
Certiorari filed pursuant to Rule 45 of the Rules of Court, primarily assailing the 29 June 2011 Decision [1]
rendered by the Fourth Division of the Court of Appeals (CA) in CA-G.R. SP No. 116928 which ruled out
said relationship between the parties.

The Facts

Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting Corporation) is a television and radio
broadcasting corporation which, for its Regional Network Group in Naga City, employed respondent
Amalia Villafuerte (Villafuerte) as Manager. There is no dispute regarding the fact that, thru Villafuerte,
ABS-CBN engaged the services of petitioners Nelson Begino (Begino) and Gener Del Valle (Del Valle)
sometime in 1996 as Cameramen/Editors for TV Broadcasting. Petitioners Ma. Cristina Sumayao
(Sumayao) and Monina Avila-Llorin (Llorin) were likewise similarly engaged as reporters sometime in
1996 and 2002, respectively. With their services engaged by respondents thru Talent Contracts which,
though regularly renewed over the years, provided terms ranging from three (3) months to one (1) year,
petitioners were given Project Assignment Forms which detailed, among other matters, the duration of a
particular project as well as the budget and the daily technical requirements thereof. In the aforesaid
capacities, petitioners were tasked with coverage of news items for subsequent daily airings in
respondents’ TV Patrol Bicol Program.[2]

While specifically providing that nothing therein shall be deemed or construed to establish an employer-
employee relationship between the parties, the aforesaid Talent Contracts included, among other
matters, provisions on the following matters: (a) the Talent’s creation and performance of work in
accordance with the ABS-CBN’s professional standards and compliance with its policies and guidelines
covering intellectual property creators, industry codes as well as the rules and regulations of the
Kapisanan ng mga Broadcasters sa Pilipinas (KBP) and other regulatory agencies; (b) the Talent’s non-
engagement in similar work for a person or entity directly or indirectly in competition with or adverse to
the interests of ABS-CBN and non-promotion of any product or service without prior written consent; and
(c) the results-oriented nature of the talent’s work which did not require them to observe normal or fixed
working hours.[3] Subjected to contractor’s tax, petitioners’ remunerations were denominated as Talent
Fees which, as of last renewal, were admitted to be pegged per airing day at P273.35 for Begino,
P302.92 for Del Valle, P323.08 for Sumayao and P315.39 for Llorin.[4]

Claiming that they were regular employees of ABS-CBN, petitioners filed against respondents the
complaint[5] docketed as Sub-RAB 05-04-00041-07 before the National Labor Relations Commission’s
(NLRC) Sub- Regional Arbitration Branch No. 5, Naga City. In support of their claims for regularization,
underpayment of overtime pay, holiday pay, 13th month pay, service incentive leave pay, damages and
attorney's fees, petitioners alleged that they performed functions necessary and desirable in ABS-CBN's
business. Mandated to wear company IDs and provided all the equipment they needed, petitioners
averred that they worked under the direct control and supervision of Villafuerte and, at the end of each
day, were informed about the news to be covered the following day, the routes they were to take and,
whenever the subject of their news coverage is quite distant, even the start of their workday. Due to the
importance of the news items they covered and the necessity of their completion for the success of the
program, petitioners claimed that, under pain of immediate termination, they were bound by the
company’s policy on, among others, attendance and punctuality.[6]

Aside from the constant evaluation of their actions, petitioners were reportedly subjected to an annual
competency assessment alongside other ABS-CBN employees, as condition for their continued
employment. Although their work involved dealing with emergency situations at any time of the day or
night, petitioners claimed that they were not paid the labor standard benefits the law extends to regular
employees. To avoid paying what is due them, however, respondents purportedly resorted to the simple
expedient of using said Talent Contracts and/or Project Assignment Forms which denominated petitioners
as talents, despite the fact that they are not actors or TV hosts of special skills. As a result of this
iniquitous situation, petitioners asseverated that they merely earned an average of P7,000.00 to
P8,000.00 per month, or decidedly lower than the P21,773.00 monthly salary ABS-CBN paid its regular
rank-and-file employees. Considering their repeated re-hiring by respondents for ostensible fixed periods,
this situation had gone on for years since TV Patrol Bicol has continuously aired from 1996 onwards. [7]

In refutation of the foregoing assertions, on the other hand, respondents argued that, although it
occasionally engages in production and generates programs thru various means, ABS-CBN is primarily
engaged in the business of broadcasting television and radio content. Not having the full manpower
complement to produce its own program, the company had allegedly resorted to engaging independent
contractors like actors, directors, artists, anchormen, reporters, scriptwriters and various production and
technical staff, who offered their services in relation to a particular program. Known in the industry as
talents, such independent contractors inform ABS- CBN of their availability and were required to
accomplish Talent Information Forms to facilitate their engagement for and appearance on designated
project days. Given the unpredictability of viewer preferences, respondents argued that the company
cannot afford to provide regular work for talents with whom it negotiates specific or determinable
professional fees on a per project, weekly or daily basis, usually depending on the budget allocation for a
project.[8]

Respondents insisted that, pursuant to their Talent Contracts and/or Project Assignment Forms,
petitioners were hired as talents, to act as reporters and/or cameramen for TV Patrol Bicol for designated
periods and rates. Fully aware that they were not considered or to consider themselves as employees of
a particular production or film outfit, petitioners were supposedly engaged on the basis of the skills,
knowledge or expertise they already possessed and, for said reason, required no further training from
ABS-CBN. Although petitioners were inevitably subjected to some degree of control, the same was
allegedly limited to the imposition of general guidelines on conduct and performance, simply for the
purpose of upholding the standards of the company and the strictures of the industry. Never subjected to
any control or restrictions over the means and methods by which they performed or discharged the tasks
for which their services were engaged, petitioners were, at most, briefed whenever necessary regarding
the general requirements of the project to be executed.[9]

Having been terminated during the pendency of the case, Petitioners filed on 10 July 2007 a second
complaint against respondents, for regularization, payment of labor standard benefits, illegal dismissal
and unfair labor practice, which was docketed as Sub-RAB 05-08-00107-07. Upon respondents’ motion,
this complaint was dismissed for violation of the rules against forum shopping in view of the fact that the
determination of the issues in the second case hinged on the resolution of those raised in the first.[10] On
19 December 2007, however, Labor Arbiter Jesus Orlando Quiñones (Labor Arbiter Quiñones) resolved
Sub-RAB 05-04-00041-07 in favor of petitioners who, having rendered services necessary and related to
ABS-CBN’s business for more than a year, were determined to be its regular employees. With said
conclusion found to be buttressed by, among others, the exclusivity clause and prohibitions under
petitioners’ Talent Contracts and/or Project Assignment Forms which evinced respondents’ control over
them,[11] Labor Arbiter Quiñones disposed of the case in the following wise:
WHEREFORE, finding merit in the causes of action set forth by the complainants, judgment is hereby
rendered declaring complainants MONINA AVILA-LLORIN, GENER L. DEL VALLE, NELSON V. BEGINO and
MA. CRISTINA V. SUMAYAO, as regular employees of respondent company, ABS-CBN BROADCASTING
CORPORATION.

Accordingly, respondent ABS-CBN Broadcasting Corporation is hereby ORDERED to pay complainants,

subject to the prescriptive period provided under Article 291 of the Labor Code, however applicable, the
total amount of Php2,440,908.36, representing salaries/wage differentials, holiday pay, service
incentive leave pay and 13th month pay, to include 10% of the judgment award as attorney’s fees of the
judgment award (computation of the monetary awards are attached hereto as integral part of
this decision).

Moreover, respondents are directed to admit back complainants to work under the same terms and
conditions prevailing prior to their separation or, at respondents' option, merely reinstated in the payroll.

Other than the above, all other claims and charges are ordered DISMISSED for lack of merit. [12]
Aggrieved by the foregoing decision, respondents elevated the case on appeal before the NLRC, during
the pendency of which petitioners filed a third complaint against the former, for illegal dismissal,
regularization, non- payment of salaries and 13th month pay, unfair labor practice, damages and
attorney’s fees. In turn docketed as NLRC Case No. Sub-RAB-V-05-03-00039-08, the complaint was
raffled to Labor Arbiter Quiñones who issued an Order dated 30 April 2008, inhibiting himself from the
case and denying respondents’ motion to dismiss on the grounds of res judicata and forum shopping.[13]
Finding that respondents’ control over petitioners was indeed manifest from the exclusivity clause and
prohibitions in the Talent Contracts and/or Project Assignment Forms, on the other hand, the NLRC
rendered a Decision dated 31 March 2010, affirming said Labor Arbiter’s appealed decision.[14] Undeterred
by the NLRC’s 31 August 2010 denial of their motion for reconsideration,[15] respondents filed the Rule 65
petition for certiorari docketed before the CA as CA-G.R. SP No. 116928 which, in addition to taking
exceptions to the findings of the assailed decision, faulted petitioners for violating the rule against forum
shopping.[16]

On 29 June 2011, the CA rendered the herein assailed decision, reversing the findings of the Labor
Arbiter and the NLRC. Ruling out the existence of forum shopping on the ground that petitioners' second
and third complaints were primarily anchored on their termination from employment after the filing of
their first complaint, the CA nevertheless discounted the existence of an employer-employee relation
between the parties upon the following findings and conclusions: (a) petitioners, were engaged by
respondents as talents for periods, work and the program specified in the Talent Contracts and/or Project
Assignment Forms concluded between them; (b) instead of fixed salaries, petitioners were paid talent
fees depending on the budget allocated for the program to which they were assigned; (c) being mainly
concerned with the result, respondents did not exercise control over the manner and method by which
petitioner accomplished their work and, at most, ensured that they complied with the standards of the
company, the KBP and the industry; and, (d) the existence of an employer-employee relationship is not
necessarily established by the exclusivity clause and prohibitions which are but terms and conditions on
which the parties are allowed to freely stipulate.[17]

Petitioners’ motion for reconsideration of the foregoing decision was denied in the CA's 3 October 2011
Resolution,[18] hence, this petition.

The Issues

Petitioners seek the reversal of the CA’s assailed Decision and

Resolution on the affirmative of the following issues:

1. Whether or not the CA seriously and reversibly erred in not dismissing respondents’ petition for
certiorari in view of the fact that they did file a Notice of Appeal at the NLRC level and did not, by
themselves or through their duly authorized representative, verify and certify the Memorandum of Appeal
they filed thereat, in accordance with the NLRC Rules of Procedure; and

2. Whether or not the CA seriously and reversibly erred in brushing aside the determination made by both
the Labor Arbiter and the NLRC of the existence of an employer-employee relationship between the
parties, despite established jurisprudence supporting the same.

The Court's Ruling

The Court finds the petition impressed with merit.

Petitioners preliminarily fault the CA for not dismissing respondents’ Rule 65 petition for certiorari in view
of the fact that the latter failed to file a Notice of Appeal from the Labor Arbiter’s decision and to verify
and certify the Memorandum of Appeal they filed before the NLRC. While concededly required under the
NLRC Rules of Procedure, however, these matters should have been properly raised during and
addressed at the appellate stage before the NLRC. Instead, the record shows that the NLRC took
cognizance of respondents’ appeal and proceeded to resolve the same in favor of petitioners by affirming
the Labor Arbiter’s decision. Not having filed their own petition for certiorari to take exception to the
liberal attitude the NLRC appears to have adopted towards its own rules of procedure, petitioners were
hardly in the proper position to raise the same before the CA or, for that matter, before this Court at this
late stage. Aside from the settled rule that a party who has not appealed is not entitled to affirmative
relief other than the ones granted in the decision[19] rendered, liberal interpretation of procedural rules on
appeal had, on occasion, been favored in the interest of substantive justice.[20]

Although the existence of an employer-employee relationship is, on the other hand, a question of fact [21]
which is ordinarily not the proper subject of a Rule 45 petition for review on certiorari like the one at bar,
the conflicting findings between the labor tribunals and the CA justify a further consideration of the
matter.[22] To determine the existence of said relation, case law has consistently applied the four-fold
test, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employer's power to control the employee on the means and methods by which
the work is accomplished.[23] Of these criteria, the so-called “control test” is generally regarded as the
most crucial and determinative indicator of the presence or absence of an employer-employee
relationship. Under this test, an employer-employee relationship is said to exist where the person for
whom the services are performed reserves the right to control not only the end result but also the
manner and means utilized to achieve the same.[24]

In discounting the existence of said relationship between the parties, the CA ruled that Petitioners'
services were, first and foremost, engaged thru their Talent Contracts and/or Project Assignment Forms
which specified the work to be performed by them, the project to which they were assigned, the duration
thereof and their rates of pay according to the budget therefor allocated. Because they are imbued with
public interest, it cannot be gainsaid, however, that labor contracts are subject to the police power of the
state and are placed on a higher plane than ordinary contracts. The recognized supremacy of the law
over the nomenclature of the contract and the stipulations contained therein is aimed at bringing life to
the policy enshrined in the Constitution to afford protection to labor.[25] Insofar as the nature of one’s
employment is concerned, Article 280 of the Labor Code of the Philippines also provides as follows:
ART. 280. Regular and Casual Employment. — The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed
for a specific project or undertaking the completion or termination of which has been determined at the
time of the engagement of the employee or where the work or service to be performed is seasonal in
nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and
his employment shall continue while such actually exists.
It has been ruled that the foregoing provision contemplates four kinds of employees, namely: (a) regular
employees or those who have been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer; (b) project employees or those whose
employment has been fixed for a specific project or undertaking, the completion or termination of which
has been determined at the time of the engagement of the employee; (c) seasonal employees or those
who work or perform services which are seasonal in nature, and the employment is for the duration of
the season; and (d) casual employees or those who are not regular, project, or seasonal employees. [26]
To the foregoing classification of employee, jurisprudence has added that of contractual or fixed term
employee which, if not for the fixed term, would fall under the category of regular employment in view of
the nature of the employee’s engagement, which is to perform activity usually necessary or desirable in
the employer’s business.[27]

The Court finds that, notwithstanding the nomenclature of their Talent Contracts and/or Project
Assignment Forms and the terms and condition embodied therein, petitioners are regular employees of
ABS-CBN. Time and again, it has been ruled that the test to determine whether employment is regular or
not is the reasonable connection between the activity performed by the employee in relation to the
business or trade of the employer.[28] As cameramen/editors and reporters, petitioners were undoubtedly
performing functions necessary and essential to ABS-CBN’s business of broadcasting television and radio
content. It matters little that petitioners’ services were engaged for specified periods for TV Patrol Bicol
and that they were paid according to the budget allocated therefor. Aside from the fact that said program
is a regular weekday fare of the ABS-CBN’s Regional Network Group in Naga City, the record shows that,
from their initial engagement in the aforesaid capacities, petitioners were continuously re-hired by
respondents over the years. To the mind of the Court, respondents’ repeated hiring of petitioners for its
long-running news program positively indicates that the latter were ABS-CBN’s regular employees.

If the employee has been performing the job for at least one year, even if the performance is not
continuous or merely intermittent, the law deems the repeated or continuing performance as sufficient
evidence of the necessity, if not indispensability of that activity in the business. [29] Indeed, an
employment stops being co-terminous with specific projects where the employee is continuously re-hired
due to the demands of the employer’s business.[30] When circumstances show, moreover, that
contractually stipulated periods of employment have been imposed to preclude the acquisition of tenurial
security by the employee, this Court has not hesitated in striking down such arrangements as contrary to
public policy, morals, good customs or public order.[31] The nature of the employment depends, after all,
on the nature of the activities to be performed by the employee, considering the nature of the employer’s
business, the duration and scope to be done, and, in some cases, even the length of time of the
performance and its continued existence.[32] In the same manner that the practice of having fixed-term
contracts in the industry does not automatically make all talent contracts valid and compliant with labor
law, it has, consequently, been ruled that the assertion that a talent contract exists does not necessarily
prevent a regular employment status.[33]

As cameramen/editors and reporters, it also appears that petitioners were subject to the control and
supervision of respondents which, first and foremost, provided them with the equipments essential for
the discharge of their functions. Prepared at the instance of respondents, petitioners’ Talent Contracts
tellingly provided that ABS-CBN retained “all creative, administrative, financial and legal control” of the
program to which they were assigned. Aside from having the right to require petitioners “to attend and
participate in all promotional or merchandising campaigns, activities or events for the Program,” ABS-CBN
required the former to perform their functions “at such locations and Performance/Exhibition Schedules”
it provided or, subject to prior notice, as it chose determine, modify or change. Even if they were unable
to comply with said schedule, petitioners were required to give advance notice, subject to respondents’
approval.[34] However obliquely worded, the Court finds the foregoing terms and conditions
demonstrative of the control respondents exercised not only over the results of petitioners’ work but also
the means employed to achieve the same.

In finding that petitioners were regular employees, the NLRC further ruled that the exclusivity clause and
prohibitions in their Talent Contracts and/or Project Assignment Forms were likewise indicative of
respondents’ control over them. Brushing aside said finding, however, the CA applied the ruling in Sonza
v. ABS-CBN Broadcasting Corporation[35] where similar restrictions were considered not necessarily
determinative of the existence of an employer-employee relationship. Recognizing that independent
contractors can validly provide his exclusive services to the hiring party, said case enunciated that
guidelines for the achievement of mutually desired results are not tantamount to control. As correctly
pointed out by petitioners, however, parallels cannot be expediently drawn between this case and that of
Sonza case which involved a well-known television and radio personality who was legitimately considered
a talent and amply compensated as such. While possessed of skills for which they were modestly
recompensed by respondents, petitioners lay no claim to fame and/or unique talents for which talents like
actors and personalities are hired and generally compensated in the broadcast industry.

Later echoed in Dumpit-Murillo v. Court of Appeals,[36] this Court has rejected the application of the ruling
in the Sonza case to employees similarly situated as petitioners in ABS-CBN Broadcasting Corporation v.
Nazareno.[37] The following distinctions were significantly observed between employees like petitioners
and television or radio personalities like Sonza, to wit:
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity
status was required from them because they were merely hired through petitioner’s personnel
department just like any ordinary employee.

Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-
employee relationship. Respondents did not have the power to bargain for huge talent fees, a
circumstance negating independent contractual relationship.

Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and
respondents are highly dependent on the petitioner for continued work.

Fourth. The degree of control and supervision exercised by petitioner over respondents through its
supervisors negates the allegation that respondents are independent contractors.

The presumption is that when the work done is an integral part of the regular business of the employer
and when the worker, relative to the employer, does not furnish an independent business or professional
service, such work is a regular employment of such employee and not an independent contractor. The
Court will peruse beyond any such agreement to examine the facts that typify the parties’ actual
relationship.[38] (Emphasis omitted)
Rather than the project and/or independent contractors respondents claim them to be, it is evident from
the foregoing disquisition that petitioners are regular employees of ABS-CBN. This conclusion is borne out
by the ineluctable showing that petitioners perform functions necessary and essential to the business of
ABS-CBN which repeatedly employed them for a long-running news program of its Regional Network
Group in Naga City. In the course of said employment, petitioners were provided the equipments they
needed, were required to comply with the Company's policies which entailed prior approval and
evaluation of their performance. Viewed from the prism of these considerations, we find and so hold that
the CA reversibly erred when it overturned the NLRC's affirmance of the Labor Arbiter's finding that an
employer-employee relationship existed between the parties. Given the fact, however, that Sub-RAB-V-
05-03-00039-08 had not been consolidated with this case and appears, for all intents and purposes, to be
pending still, the Court finds that the reinstatement of petitioners ordered by said labor officer and
tribunal should, as a relief provided in case of illegal dismissal, be left for determination in said case.

WHEREFORE, the Court of Appeals' assailed Decision dated 29 June 2011 and Resolution dated 3
October 2011 in CA-G.R. SP No. 116928 are REVERSED and SET ASIDE. Except for the reinstatement
of Nelson V. Begino, Gener Del Valle, Monina Avila-Llorin and Ma. Cristina Sumayao, the National Labor
and Relations· Commission's 31 March 2010 Decision is, accordingly, REINSTATED.

SO ORDERED.

Sereno, C. J., (Chairperson), Leonardo-De Castro, Bersamin, and Perlas-Bernabe, JJ., concur.

Rollo, pp. 28-49; Penned by Associate Justice Josefina Guevara-Salonga with Associate Justices
[1]

Mariflor P. Punzalan-Castillo and Franchito N. Diamante concurring.

[2]
Id. at 255-258; 336-337.

[3]
Id.

[4]
Id. at 198.

[5]
Id. at 362-370.

[6]
Id. at 399-451.

[7]
Id.

[8]
Id. at 372-398.

[9]
Id.

[10]
Id. at 201-202.

[11]
Id. at 69-81.

[12]
Id. at 80.

[13]
Id. at 205-206.

[14]
Id. at 83-90.

[15]
Id. at 91-93.

[16]
Id. at 577-653.

[17]
Id. at 28-48.

[18]
Id. at 66-67.

[19]
Cabatulan v. Buat, 491 Phil. 421, 430 (2005).
[20]
Mabuhay Development Industries v. NLRC, 351 Phil. 227, 234-235 (1998).
[21]
Atok Big Wedge Company, Inc. v. Gison, G.R. No. 169510, 8 August 2011, 655 SCRA 193, 202.
[22]
Maribago Bluewater Beach Resort, Inc. v. Dual, G.R. No. 180660, 20 July 2010, 625 SCRA 147, 155.
[23]
Bernarte v. Philippine Basketball Association, G.R. No. 192084, 14 September 2011, 657 SCRA 745,
754.

[24]
Abante, Jr. v. Lamadrid Bearing & Parts Corp., G.R. No. 159890, 28 May 2004, 430 SCRA 368, 379.
[25]
GMA Network, Inc. v. Pabriga, G.R. No. 176419, 27 November 2013, 710 SCRA 690, 699.

Leyte Geothermnal Power Progressive Employees Union-ALU-TUCP v. Philippine National Oil

[26]

Company-Energy Development Corporation, 662 Phil. 225, 233 (2011).

[27]
Universal Robina Sugar Milling Corporation v. Acibo, G.R. No. 186439, 15 January 2014, 713 SCRA
596, 607.

[28]
Malicdem v. Marulas Industrial Corporation, G.R. No. 204406, 26 February 2014, 717 SCRA 563, 573
citing Integrated Contractor and Plumbing Works, Inc. v. NLRC, 503 Phil. 875 (2005).

[29]
Id.

[30]
D.M. Consunji, Inc. v. Jamin, G.R. No. 192514, 18 April 2012, 670 SCRA 235, 249.
[31]
Caramol v. NLRC, G.R. No. 102973, 24 August 1993, 225 SCRA 582, 586.

Id. at 588 citing Baguio Country Club Corporation v. NLRC, G.R. No. 28 February 1992, 206 SCRA 643,
[32]

649-651.

[33]
Dumpit-Murillo v. CA, 551 Phil. 725, 735 (2007).
[34]
Rollo, p. 256
[35]
G.R. No. 138051, 10 June 2004, 431 SCRA 583, 604.

[36]
Supra note 33.

[37]
534 Phil. 306 (2006).

[38]
Id. at 335-336.
3. G.R. No. 155207 August 13, 2008

WILHELMINA S. OROZCO, petitioner,

vs.
THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS, PHILIPPINE DAILY
INQUIRER, and LETICIA JIMENEZ MAGSANOC, respondents.

DECISION

NACHURA, J.:

The case before this Court raises a novel question never before decided in our jurisdiction – whether a
newspaper columnist is an employee of the newspaper which publishes the column.

In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure, petitioner Wilhelmina S.
Orozco assails the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 50970 dated June 11, 2002
and its Resolution2 dated September 11, 2002 denying her Motion for Reconsideration. The CA reversed
and set aside the Decision3 of the National Labor Relations Commission (NLRC), which in turn had
affirmed the Decision4 of the Labor Arbiter finding that Orozco was an employee of private respondent
Philippine Daily Inquirer (PDI) and was illegally dismissed as columnist of said newspaper.

In March 1990, PDI engaged the services of petitioner to write a weekly column for its Lifestyle section.
She religiously submitted her articles every week, except for a six-month stint in New York City when she,
nonetheless, sent several articles through mail. She received compensation of P250.00 – later increased
to P300.00 – for every column published.5

On November 7, 1992, petitioner’s column appeared in the PDI for the last time. Petitioner claims that
her then editor, Ms. Lita T. Logarta,6 told her that respondent Leticia Jimenez Magsanoc, PDI Editor in
Chief, wanted to stop publishing her column for no reason at all and advised petitioner to talk to
Magsanoc herself. Petitioner narrates that when she talked to Magsanoc, the latter informed her that it
was PDI Chairperson Eugenia Apostol who had asked to stop publication of her column, but that in a
telephone conversation with Apostol, the latter said that Magsanoc informed her (Apostol) that the
Lifestyle section already had many columnists.7

On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle section editor to
discuss how to improve said section. They agreed to cut down the number of columnists by keeping only
those whose columns were well-written, with regular feedback and following. In their judgment,
petitioner’s column failed to improve, continued to be superficially and poorly written, and failed to meet
the high standards of the newspaper. Hence, they decided to terminate petitioner’s column. 8

Aggrieved by the newspaper’s action, petitioner filed a complaint for illegal dismissal, backwages, moral
and exemplary damages, and other money claims before the NLRC.

On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in favor of petitioner,
the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered, finding complainant to be an employee of

respondent company; ordering respondent company to reinstate her to her former or equivalent
position, with backwages.

Respondent company is also ordered to pay her 13th month pay and service incentive leave pay.
 Other claims are hereby dismissed for lack of merit.

SO ORDERED.9

The Labor Arbiter found that:

[R]espondent company exercised full and complete control over the means and method by which
complainant’s work – that of a regular columnist – had to be accomplished. This control might
not be found in an instruction, verbal or oral, given to complainant defining the means and
method she should write her column. Rather, this control is manifested and certained (sic) in
respondents’ admitted prerogative to reject any article submitted by complainant for publication.

By virtue of this power, complainant was helplessly constrained to adopt her subjects and style of
writing to suit the editorial taste of her editor. Otherwise, off to the trash can went her articles.

Moreover, this control is already manifested in column title, "Feminist Reflection" allotted
complainant. Under this title, complainant’s writing was controlled and limited to a woman’s
perspective on matters of feminine interests. That respondent had no control over the subject
matter written by complainant is strongly belied by this observation. Even the length of
complainant’s articles were set by respondents.

Inevitably, respondents would have no control over when or where complainant wrote her
articles as she was a columnist who could produce an article in thirty (3) (sic) months or three
(3) days, depending on her mood or the amount of research required for an article but her
actions were controlled by her obligation to produce an article a week. If complainant did not
have to report for work eight (8) hours a day, six (6) days a week, it is because her task was
mainly mental. Lastly, the fact that her articles were (sic) published weekly for three (3) years
show that she was respondents’ regular employee, not a once-in-a-blue-moon contributor who
was not under any pressure or obligation to produce regular articles and who wrote at his own
whim and leisure.10

PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the NLRC Second Division
dismissed the appeal thereby affirming the Labor Arbiter’s Decision. The NLRC initially noted that PDI
failed to perfect its appeal, under Article 223 of the Labor Code, due to non-filing of a cash or surety
bond. The NLRC said that the reason proffered by PDI for not filing the bond – that it was difficult or
impossible to determine the amount of the bond since the Labor Arbiter did not specify the amount of the
judgment award – was not persuasive. It said that all PDI had to do was compute based on the amount it
was paying petitioner, counting the number of weeks from November 7, 1992 up to promulgation of the
Labor Arbiter’s decision.11

The NLRC also resolved the appeal on its merits. It found no error in the Labor Arbiter’s findings of fact
and law. It sustained the Labor Arbiter’s reasoning that respondent PDI exercised control over petitioner’s
work.

PDI then filed a Petition for Review12 before this Court seeking the reversal of the NLRC Decision.
However, in a Resolution13 dated December 2, 1998, this Court referred the case to the Court of Appeals,
pursuant to our ruling in St. Martin Funeral Homes v. National Labor Relations Commission .14

The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC Decision and dismissed
petitioner’s Complaint. It held that the NLRC misappreciated the facts and rendered a ruling wanting in
substantial evidence. The CA said:
 The Court does not agree with public respondent NLRC’s conclusion. First, private respondent
admitted that she was and [had] never been considered by petitioner PDI as its employee.
Second, it is not disputed that private respondent had no employment contract with petitioner
PDI. In fact, her engagement to contribute articles for publication was based on a verbal
agreement between her and the petitioner’s Lifestyle Section Editor. Moreover, it was evident
that private respondent was not required to report to the office eight (8) hours a day. Further, it
is not disputed that she stayed in New York for six (6) months without petitioner’s permission as
to her leave of absence nor was she given any disciplinary action for the same. These undisputed
facts negate private respondent’s claim that she is an employee of petitioner.

Moreover, with regards (sic) to the control test, the public respondent NLRC’s ruling that the
guidelines given by petitioner PDI for private respondent to follow, e.g. in terms of space
allocation and length of article, is not the form of control envisioned by the guidelines set by the
Supreme Court. The length of the article is obviously limited so that all the articles to be featured
in the paper can be accommodated. As to the topic of the article to be published, it is but logical
that private respondent should not write morbid topics such as death because she is contributing
to the lifestyle section. Other than said given limitations, if the same could be considered
limitations, the topics of the articles submitted by private respondent were all her choices. Thus,
the petitioner PDI in deciding to publish private respondent’s articles only controls the result of
the work and not the means by which said articles were written.

As such, the above facts failed to measure up to the control test necessary for an employer-
employee relationship to exist.15

Petitioner’s Motion for Reconsideration was denied in a Resolution dated September 11, 2002. She then
filed the present Petition for Review.

In a Resolution dated April 29, 2005, the Court, without giving due course to the petition, ordered the
Labor Arbiter to clarify the amount of the award due petitioner and, thereafter, ordered PDI to post the
requisite bond. Upon compliance therewith, the petition would be given due course. Labor Arbiter
Amansec clarified that the award under the Decision amounted to P15,350.00. Thus, PDI posted the
requisite bond on January 25, 2007.16

We shall initially dispose of the procedural issue raised in the Petition.

Petitioner argues that the CA erred in not dismissing outright PDI’s Petition for Certiorari for PDI’s failure
to post a cash or surety bond in violation of Article 223 of the Labor Code.

This issue was settled by this Court in its Resolution dated April 29, 2005. 17 There, the Court held:

But while the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to
the perfection of an appeal, there is a plethora of jurisprudence recognizing exceptional instances
wherein the Court relaxed the bond requirement as a condition for posting the appeal.

xxxx

In the case of Taberrah v. NLRC, the Court made note of the fact that the assailed decision of the
Labor Arbiter concerned did not contain a computation of the monetary award due the
employees, a circumstance which is likewise present in this case. In said case, the Court stated,
 As a rule, compliance with the requirements for the perfection of an appeal within the
reglamentary (sic) period is mandatory and jurisdictional. However, in National
Federation of Labor Unions v. Ladrido as well as in several other cases, this Court relaxed
the requirement of the posting of an appeal bond within the reglementary period as a
condition for perfecting the appeal. This is in line with the principle that substantial
justice is better served by allowing the appeal to be resolved on the merits rather than
dismissing it based on a technicality.

The judgment of the Labor Arbiter in this case merely stated that petitioner was entitled to
backwages, 13th month pay and service incentive leave pay without however including a
computation of the alleged amounts.

xxxx

In the case of NFLU v. Ladrido III, this Court postulated that "private respondents cannot be
expected to post such appeal bond equivalent to the amount of the monetary award when the
amount thereof was not included in the decision of the labor arbiter." The computation of the
amount awarded to petitioner not having been clearly stated in the decision of the labor arbiter,
private respondents had no basis for determining the amount of the bond to be posted.

Thus, while the requirements for perfecting an appeal must be strictly followed as they are
considered indispensable interdictions against needless delays and for orderly discharge of
judicial business, the law does admit of exceptions when warranted by the circumstances.
Technicality should not be allowed to stand in the way of equitably and completely resolving the
rights and obligations of the parties. But while this Court may relax the observance of
reglementary periods and technical rules to achieve substantial justice, it is not prepared to give
due course to this petition and make a pronouncement on the weighty issue obtaining in this
case until the law has been duly complied with and the requisite appeal bond duly paid by private
respondents.18

Records show that PDI has complied with the Court’s directive for the posting of the bond;19 thus, that
issue has been laid to rest.

We now proceed to rule on the merits of this case.

The main issue we must resolve is whether petitioner is an employee of PDI, and if the answer be in the
affirmative, whether she was illegally dismissed.

We rule for the respondents.

The existence of an employer-employee relationship is essentially a question of fact.20 Factual findings of

quasi-judicial agencies like the NLRC are generally accorded respect and finality if supported by
substantial evidence.21

Considering, however, that the CA’s findings are in direct conflict with those of the Labor Arbiter and
NLRC, this Court must now make its own examination and evaluation of the facts of this case.

It is true that petitioner herself admitted that she "was not, and [had] never been considered
respondent’s employee because the terms of works were arbitrarily decided upon by the respondent." 22
However, the employment status of a person is defined and prescribed by law and not by what the
parties say it should be.23
This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-
employee relationship between parties.24 The four elements of an employment 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’s conduct.25

Of these four elements, it is the power of control which is the most crucial26 and most determinative
factor,27 so important, in fact, that the other elements may even be disregarded. 28 As this Court has
previously held:

the significant factor in determining the relationship of the parties is the presence or absence of
supervisory authority to control the method and the details of performance of the service being
rendered, and the degree to which the principal may intervene to exercise such control. 29

In other words, the test is whether the employer controls or has reserved the right to control the
employee, not only as to the work done, but also as to the means and methods by which the same is
accomplished.30

Petitioner argues that several factors exist to prove that respondents exercised control over her and her
work, namely:

a. As to the Contents of her Column – The PETITIONER had to insure that the contents of her
column hewed closely to the objectives of its Lifestyle Section and the over-all principles that the
newspaper projects itself to stand for. As admitted, she wanted to write about death in relation
to All Souls Day but was advised not to.

b. As to Time Control – The PETITIONER, as a columnist, had to observe the deadlines of the
newspaper for her articles to be published. These deadlines were usually that time period when
the Section Editor has to "close the pages" of the Lifestyle Section where the column in located.
"To close the pages" means to prepare them for printing and publication.

As a columnist, the PETITIONER’s writings had a definite day on which it was going to appear. So
she submitted her articles two days before the designated day on which the column would come
out.

This is the usual routine of newspaper work. Deadlines are set to fulfill the newspapers’
obligations to the readers with regard to timeliness and freshness of ideas.

c. As to Control of Space – The PETITIONER was told to submit only two or three pages of article
for the column, (sic) "Feminist Reflections" per week. To go beyond that, the Lifestyle editor
would already chop off the article and publish the rest for the next week. This shows that
PRIVATE RESPONDENTS had control over the space that the PETITIONER was assigned to fill.

d. As to Discipline – Over time, the newspaper readers’ eyes are trained or habituated to look for
and read the works of their favorite regular writers and columnists. They are conditioned, based
on their daily purchase of the newspaper, to look for specific spaces in the newspapers for their
favorite write-ups/or opinions on matters relevant and significant issues aside from not being late
or amiss in the responsibility of timely submission of their articles.

The PETITIONER was disciplined to submit her articles on highly relevant and significant issues
on time by the PRIVATE RESPONDENTS who have a say on whether the topics belong to those
considered as highly relevant and significant, through the Lifestyle Section Editor. The
 PETITIONER had to discuss the topics first and submit the articles two days before publication
date to keep her column in the newspaper space regularly as expected or without miss by its
readers.31

Given this discussion by petitioner, we then ask the question: Is this the form of control that our labor
laws contemplate such as to establish an employer-employee relationship between petitioner and
respondent PDI?

It is not.

Petitioner has misconstrued the "control test," as did the Labor Arbiter and the NLRC.

Not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the
former. Rules which serve as general guidelines towards the achievement of the mutually desired result
are not indicative of the power of control.32 Thus, this Court has explained:

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. x x x.33

The main determinant therefore is whether the rules set by the employer are meant to control not just
the results of the work but also the means and method to be used by the hired party in order to achieve
such results. Thus, in this case, we are to examine the factors enumerated by petitioner to see if these
are merely guidelines or if they indeed fulfill the requirements of the control test.

Petitioner believes that respondents’ acts are meant to control how she executes her work. We do not
agree. A careful examination reveals that the factors enumerated by the petitioner are inherent
conditions in running a newspaper. In other words, the so-called control as to time, space, and discipline
are dictated by the very nature of the newspaper business itself.

We agree with the observations of the Office of the Solicitor General that:

The Inquirer is the publisher of a newspaper of general circulation which is widely read
throughout the country. As such, public interest dictates that every article appearing in the
newspaper should subscribe to the standards set by the Inquirer, with its thousands of readers in
mind. It is not, therefore, unusual for the Inquirer to control what would be published in the
newspaper. What is important is the fact that such control pertains only to the end result, i.e.,
the submitted articles. The Inquirer has no control over [petitioner] as to the means or method
used by her in the preparation of her articles. The articles are done by [petitioner] herself
without any intervention from the Inquirer.34
Petitioner has not shown that PDI, acting through its editors, dictated how she was to write or produce
her articles each week. Aside from the constraints presented by the space allocation of her column, there
were no restraints on her creativity; petitioner was free to write her column in the manner and style she
was accustomed to and to use whatever research method she deemed suitable for her purpose. The
apparent limitation that she had to write only on subjects that befitted the Lifestyle section did not
translate to control, but was simply a logical consequence of the fact that her column appeared in that
section and therefore had to cater to the preference of the readers of that section.

The perceived constraint on petitioner’s column was dictated by her own choice of her column’s
perspective. The column title "Feminist Reflections" was of her own choosing, as she herself admitted,
since she had been known as a feminist writer.35 Thus, respondent PDI, as well as her readers, could
reasonably expect her columns to speak from such perspective.

Contrary to petitioner’s protestations, it does not appear that there was any actual restraint or limitation
on the subject matter – within the Lifestyle section – that she could write about. Respondent PDI did not
dictate how she wrote or what she wrote in her column. Neither did PDI’s guidelines dictate the kind of
research, time, and effort she put into each column. In fact, petitioner herself said that she received "no
comments on her articles…except for her to shorten them to fit into the box allotted to her column."
Therefore, the control that PDI exercised over petitioner was only as to the finished product of her
efforts, i.e., the column itself, by way of either shortening or outright rejection of the column.

The newspaper’s power to approve or reject publication of any specific article she wrote for her column
cannot be the control contemplated in the "control test," as it is but logical that one who commissions
another to do a piece of work should have the right to accept or reject the product. The important factor
to consider in the "control test" is still the element of control over how the work itself is done, not just
the end result thereof.

In contrast, a regular reporter is not as independent in doing his or her work for the newspaper. We note
the common practice in the newspaper business of assigning its regular reporters to cover specific
subjects, geographical locations, government agencies, or areas of concern, more commonly referred to
as "beats." A reporter must produce stories within his or her particular beat and cannot switch to another
beat without permission from the editor. In most newspapers also, a reporter must inform the editor
about the story that he or she is working on for the day. The story or article must also be submitted to
the editor at a specified time. Moreover, the editor can easily pull out a reporter from one beat and ask
him or her to cover another beat, if the need arises.

This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she was not
precluded from submitting her column ahead of time or from submitting columns to be published at a
later time. More importantly, respondents did not dictate upon petitioner the subject matter of her
columns, but only imposed the general guideline that the article should conform to the standards of the
newspaper and the general tone of the particular section.

Where a person who works for another performs his job more or less at his own pleasure, in the manner
he sees fit, not subject to definite hours or conditions of work, and is compensated according to the
result of his efforts and not the amount thereof, no employer-employee relationship exists.36

Aside from the control test, this Court has also used the economic reality test. The economic realities
prevailing within the activity or between the parties are examined, taking into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties.37 This is especially
appropriate when, as in this case, there is no written agreement or contract on which to base the
relationship. In our jurisdiction, the benchmark of economic reality in analyzing possible employment
relationships for purposes of applying the Labor Code ought to be the economic dependence of the
worker on his employer.38

Petitioner’s main occupation is not as a columnist for respondent but as a women’s rights advocate
working in various women’s organizations.39 Likewise, she herself admits that she also contributes articles
to other publications.40 Thus, it cannot be said that petitioner was dependent on respondent PDI for her
continued employment in respondent’s line of business.41

The inevitable conclusion is that petitioner was not respondent PDI’s employee but an independent
contractor, engaged to do independent work.

There is no inflexible rule to determine if a person is an employee or an independent contractor; thus,

the characterization of the relationship must be made based on the particular circumstances of each
case.42 There are several factors43 that may be considered by the courts, but as we already said, the right
to control is the dominant factor in determining whether one is an employee or an independent
contractor.44

In our jurisdiction, the Court has held that an independent contractor is one who carries on a distinct and
independent business and undertakes to perform the job, work, or service on one’s own account and
under one’s own responsibility according to one’s own manner and method, free from the control and
direction of the principal in all matters connected with the performance of the work except as to the
results thereof.45

On this point, Sonza v. ABS-CBN Broadcasting Corporation46 is enlightening. In that case, the Court
found, using the four-fold test, that petitioner, Jose Y. Sonza, was not an employee of ABS-CBN, but an
independent contractor. Sonza was hired by ABS-CBN due to his "unique skills, talent and celebrity status
not possessed by ordinary employees," a circumstance that, the Court said, was indicative, though not
conclusive, of an independent contractual relationship. Independent contractors often present themselves
to possess unique skills, expertise or talent to distinguish them from ordinary employees.47 The Court also
found that, as to payment of wages, Sonza’s talent fees were the result of negotiations between him and
ABS-CBN.48 As to the power of dismissal, the Court found that the terms of Sonza’s engagement were
dictated by the contract he entered into with ABS-CBN, and the same contract provided that either party
may terminate the contract in case of breach by the other of the terms thereof.49 However, the Court
held that the foregoing are not determinative of an employer-employee relationship. Instead, it is still the
power of control that is most important.

On the power of control, the Court found that in performing his work, Sonza only needed his skills and
talent – how he delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN’s
control.50 Thus:

We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZA’s work. ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN
merely reserved the right to modify the program format and airtime schedule "for more effective
programming." ABS-CBN’s sole concern was the quality of the shows and their standing in the
ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance
of SONZA’s work.

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.

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., 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.

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. 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.

A radio broadcast specialist who works under minimal supervision is an independent contractor.
SONZA’s work as television and radio program host required special skills and talent, which
SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision
and control over how SONZA utilized his skills and talent in his shows.51

The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her talent, skill,
experience, and her unique viewpoint as a feminist advocate. How she utilized all these in writing her
column was not subject to dictation by respondent. As in Sonza, respondent PDI was not involved in the
actual performance that produced the finished product. It only reserved the right to shorten petitioner’s
articles based on the newspaper’s capacity to accommodate the same. This fact, we note, was not unique
to petitioner’s column. It is a reality in the newspaper business that space constraints often dictate the
length of articles and columns, even those that regularly appear therein.

Furthermore, respondent PDI did not supply petitioner with the tools and instrumentalities she needed to
perform her work. Petitioner only needed her talent and skill to come up with a column every week. As
such, she had all the tools she needed to perform her work.

Considering that respondent PDI was not petitioner’s employer, it cannot be held guilty of illegal
dismissal.

WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 50970 are hereby AFFIRMED.

SO ORDERED.
 ANTONIO EDUARDO B. NACHURA
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

RUBEN T. REYES
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify
that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes

1
Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate Justices Eugenio S. Labitoria
and Teodoro P. Regino, concurring; rollo, pp. 101-106.

2
Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate Justices Teodoro P. Regino
and Remedios Salazar-Fernando, concurring; id. at 107.

3
Id. at 89-98.
4
Id. at 83-88.

5
Position Paper for Complainant, CA rollo, p. 39.

6
Also named in parts of the records as "Lolita" or "Lita."

7
Reply to Respondent’s Position Paper, CA rollo, p. 40.

8
Petition for Certiorari, G.R. No. 117605, CA rollo, p. 4.

9
Rollo, p. 88.

10
Id. at 86-87.

11
Id. at 96.

12
Docketed as G.R. No. 117605, CA rollo, pp. 2-18.

13
CA rollo, p. 209.

14
356 Phil. 811 (1998).

15
Supra note 1.

16
Manifestation and Compliance, rollo, pp. 410-416.

17
Penned by Associate Justice Dante O. Tinga, with Associate Justices Reynato S. Puno (now
Chief Justice), Ma. Alicia Austria-Martinez, Romeo J. Callejo, Sr. (now retired), and Minita V.
Chico-Nazario, concurring; id. at 380-393.

18
Id. at 387-392. (Citations omitted.)

19
Supra note 16.

20
Lopez v. Bodega City, G.R. No. 155731, September 3, 2007, 532 SCRA 56, 64, citing Manila
Water Company, Inc. v. Peña, 434 SCRA 53, 58 (2004).

21
The Peninsula Manila, et al. v. Alipio, G.R. No. 167310, June 17, 2008, citing Trendline
Employees Association-Southern Philippines Federation of Labor v. NLRC, 272 SCRA 172, 179
(1997).

22
Reply to Respondent’s Position Paper, CA rollo, p. 40.

23
Insular Life Assurance, Inc. v. National Labor Relations Commission, G.R. No. 119930, March
12, 1993, 287 SCRA 476, 483, citing Industrial Timber Corporation v. NLRC, 169 SCRA 341
(1989).

24
Lopez v. Metropolitan Waterworks and Sewage System, G.R. No. 154472, June 30, 2005, 462
SCRA 428, 442.
25
Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng Manggagawang Promo ng
Burlingame v. Burlingame Corporation, G.R. No. 162833, June 15, 2007 524 SCRA 690, 695,
citing Sy v. Court of Appeals, 398 SCRA 301, 307-308 (2003); Pacific Consultants International
Asia, Inc. v. Schonfeld, G.R. No. 166920, February 19, 2007, 516 SCRA 209, 228.

26
Abante, Jr. v. Lamadrid Bearing and Parts Corporation, G.R. No. 159890, May 28, 2004, 430
SCRA 368, 379.

27
Sandigan Savings and Loan Bank, Inc v. National Labor Relations Commission, 324 Phil. 358
(1996), citing Ruga v. NLRC, 181 SCRA 266, 273 (1990). See also Coca Cola Bottlers (Phils.), Inc.
v. Climaco, G.R. No. 146881, February 5, 2007, 514 SCRA 164, 177.

28
Sandigan Savings and Loan Bank, Inc., v. National Labor Relations Commission, supra, citing
Sara v. Agarrado, 166 SCRA 625, 630 (1988).

29
AFP Mutual Benefit Association, Inc. v. National Labor Relations Commission, 334 Phil. 712,
721-722 (1997).

30
Lazaro v. Social Security Commission, 479 Phil. 385, 389-390 (2004), citing Investment
Planning Corporation v. Social Security System, 21 SCRA 924, 928-929 (1967). See also Abante,
Jr. v. Lamadrid Bearing and Parts Corporation, supra note 26.

31
Rollo, pp. 75-76.

32
Manila Electric Company v. Benamira, G.R. No. 145271, July 14, 2005, 463 SCRA 331, 352-
353. (Citations omitted.)

33
Insular Life Assurance Co., Ltd. v. National Labor Relations Commission, G.R. No. 84484,
November 15, 1989, 179 SCRA 459, 464-465; Consulta v. Court of Appeals, G.R. No. 145443,
March 18, 2005, 453 SCRA 732, 740-741; Manila Electric Company v. Benamira, supra.

34
Manifestation and Motion of the Office of the Solicitor General, rollo, p. 192.

35
Reply to Position Paper of Respondents, CA rollo, p. 43.

36
Abante, Jr. v. Lamadrid Bearing and Parts Corporation, supra note 26, citing Encyclopedia
Britannica (Philippines), Inc. v. NLRC, 264 SCRA 1, 7 (1996).

37
Francisco v. National Labor Relations Commission, G.R. No. 170087, August 31, 2006, 500
SCRA 690, 697.

38
Id. at 699.

39
CA rollo, p. 200.

40
Reply to Respondent’s Position Paper, CA rollo, p. 43.

41
See Francisco v. National Labor Relations Commission, supra note 37.

42
Arkansas Transit Homes, Inc. v. Aetna Life & Casualty, 341 Ark. 317, 16 S.W.3d 545 (2000).
43
The court in Arkansas lists the following factors to be considered in determining whether one is
an employee or independent contractor:

(a) the extent of control which, by the agreement, the master may exercise over the
details of the work;

(b) whether or not the one employed is engaged in a distinct occupation or business;

(c) the kind of occupation, with reference to whether in the locality, the work is usually
done under the direction of the employer or by a specialist without supervision;

(d) the skill required in the particular occupation;

(e) whether the employer or the workman supplies the instrumentalities, tools, and the
place of work for the person doing the work;

(f) the length of time for which the person is employed;

(g) the method of payment, whether by the time or by the job;

(h) whether or not the work is a part of the regular business of the employer;

(i) whether or not the parties believe they are creating the relation of master and
servant; and

(j) whether the principal is or is not in business.

44
Arkansas Transit Homes, Inc. v. Aetna Life & Casualty, supra note 42.

45
Chavez v. National Labor Relations Commission, G.R. No. 146530, January 17, 2005, 448 SCRA
478, 491, citing Tan v. Lagrama, 387 SCRA 393 (2002).

46
G.R. No. 138051, June 10, 2004, 431 SCRA 583.

47
Sonza v. ABS-CBN Broadcasting Corporation, id. at 595.

48
Id. at 595-596.

49
Id. at 597.

50
Id. at 600.

51
Id. at 600-603. (Citations omitted.)
4. 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 certiorari1 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 Arbiter5 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 x 28 (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.

Footnotes

1
Under Rule 45 of the Rules of Court.

2
Penned by Associate Justice Eugenio S. Labitoria with Associate Justices Jesus M. Elbinias and
Marina L. Buzon concurring.

3
Rollo, p. 150.

4
Ibid., p. 204.

5
Donato G. Quinto, Jr.

6
Rollo, pp. 114-130.

7
Ibid., pp. 123-125.

8
Ibid., p. 39.
9
Rollo, pp. 37-39.

10
Ibid., p. 39.

11
Ibid.

12
Ibid.

13
Ibid.

14
Ibid., p. 269.

15
Fleischer Company, Inc. v. National Labor Relations Commission, G.R. No. 121608, 26 March
2001, 355 SCRA 105; AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, 28 January
1997, 267 SCRA 47; Cathedral School of Technology v. NLRC, G.R. No. 101438, 13 October 1992,
214 SCRA 551. See also Ignacio v. Coca-Cola Bottlers Phils., Inc., 417 Phil. 747 (2001); Gonzales
v. National Labor Relations Commission, G.R. No. 131653, 26 March 2001, 355 SCRA 195;
Sandigan Savings and Loan Bank, Inc. v. NLRC, 324 Phil. 348 (1996); Magnolia Dairy Products
Corporation v. NLRC, 322 Phil. 508 (1996).

16
Madlos v. NLRC, 324 Phil. 498 (1996).

17
Domasig v. National Labor Relations Commission, G.R. No. 118101, 16 September 1996, 261
SCRA 779.

18
De Los Santos v. NLRC, 423 Phil. 1020 (2001); Traders Royal Bank v. NLRC, 378 Phil. 1081
(1999); Aboitiz Shipping Employees Association v. National Labor Relations Commission, G.R. No.
78711, 27 June 1990, 186 SCRA 825; Ruga v. National Labor Relations Commission, G.R. Nos.
72654-61, 22 January 1990, 181 SCRA 266.

19
Ibid.

20
Paragraph 10 of the Agreement provides: "The COMPANY shall provide him with the following
benefits: SSS, Medicare, Healthcare, executive life and accident insurance, and a 13th-month pay
based on an amount not lower than the amount he was receiving prior to the effectivity of this
Agreement."

21
Presidential Decree No. 851 (Requiring All Employers to Pay their Employees a 13th-month
Pay) for the 13th month pay; Republic Act No. 1161 (Social Security Law) for the SSS benefits;
and Republic Act No. 7875 (National Health Insurance Act of 1995) for the Philhealth insurance.

22
Article 1157 of the Civil Code explicitly provides:

Obligations arise from:

(1) Law;

(2) Contracts;

(3) Quasi-contracts;
 (4) Acts or omissions punished by law; and

(5) Quasi-delicts. (Emphasis supplied)

23
See Article 283, Labor Code.

24
Paragraph 7 of the Agreement states: "Provided that the AGENT and Jay Sonza shall faithfully
and completely perform each condition of this Agreement for and in consideration of the
aforesaid services by the AGENT and its talent, the COMPANY agrees to pay the AGENT for the
first year of this Agreement the amount of THREE HUNDRED TEN THOUSAND PESOS ONLY
(₱310,000.00) per month, payable on the 10th and 25th of each month. For the second and third
year of this Agreement, the COMPANY shall pay the amount of THREE HUNDRED SEVENTEEN
THOUSAND PESOS ONLY (₱317,000.00) per month, payable likewise on the 10th and 25th of the
each month."

25
Paragraph 11 of the Agreement states: " In the event of cancellation of this Agreement
through no fault of the AGENT and its talent, COMPANY agrees to pay the full amount specified
in this Agreement for the remaining period covered by this Agreement, provided that the talent
shall not render any service for or in any other radio or television production of any person, firm,
corporation or any entity competing with the COMPANY until the expiry hereof."

26
The opening sentence of the second paragraph of SONZA’s letter reads:

"As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
concerning his programs and career. xxx"

27
361 F.3d 1, 2 March 2004.

28
See also Spirides v. Reinhardt, 486 F. Supp. 685 (1980).

29
In the United States, aside from the right of control test, there are the "economic reality" test
and the "multi-factor test." The tests are drawn from statutes, regulations, rules, policies, rulings,
case law and the like. The "right of control" test applies under the federal Internal Revenue Code
("IRC"). The "economic reality" test applies to the federal Fair Labor Standards Act ("FLSA").[29]
The California Division of Labor Standards Enforcement ("DLSE") uses a hybrid of these two tests
often referred to as the "multi-factor test" in determining who an employee is.

Most courts in the United States have utilized the control test to determine whether one
is an employee. Under this test, a court must consider the hiring party’s right to control
the manner and means by which the product is accomplished. Among other factors
relevant to this inquiry are the skills required; the source of the instrumentalities and
tools; the location of the work; the duration of the relationship between the parties;
whether the hiring party has the right to assign additional projects to the hired party; the
extent of the hired party’s discretion over when and how long to work; the method of
payment; the hired party’s role in hiring and paying assistants; whether the work is part
of the regular business of the hiring party; whether the hiring party is in business; the
provision of employee benefits; and the tax treatment of the hired party.
(www.piercegorman.com, quoted from the article entitled "Management-side
employment law advice for the entertainment industry" with subtitle "Classification of
Workers: Independent Contractors versus Employee" by David Albert Pierce, Esq.)
30
www.piercegorman.com, quoted from the article entitled "Management-side employment law
advice for the entertainment industry" with subtitle "Classification of Workers: Independent
Contractors versus Employee" by David Albert Pierce, Esq.

31
Paragraph 4 of the Agreement provides: "AGENT will make available Jay Sonza for rehearsals
and tapings of the Programs on the day and time set by the producer and director of the
Programs and to attend pre and post production staff meetings."

32
Paragraph 15 of the Agreement provides: "AGENT, talent shall not use the Programs as a
venue to broadcast or announce any criticism on any operational, administrative, or legal
problems, situations or other matter which may occur, exist or alleged to have occurred or
existed within the COMPANY. Likewise, AGENT, talent shall, in accordance with good broadcast
management and ethics, take up with the proper officers of the COMPANY suggestions or
criticisms on any matter or condition affecting the COMPANY or its relation to the public or third
parties."

33
In Zhengxing v. Nathanson, 215 F.Supp.2d 114, citing Redd v. Summers, 232 F.3d 933
(D.C. Cir.), plaintiff’s superior was not involved in the actual performance that produced the final
product.

34
Paragraph 3 of the Agreement provides: "The COMPANY reserves the right to modify the
program format and likewise change airtime schedule for more effective programming."

35
The right not to broadcast an independent contractor’s show also gives the radio and television
station protection in case it deems the contents of the show libelous.

36
157 F.2d 26, 8 August 1946.

37
Ibid.

38
In Zhengxing v. Nathanson, 215 F.Supp.2d 114, 5 August 2002, plaintiff was also provided
with the place of work and equipment to be used.

39
In the Alberty case, the US Court of Appeals rejected Alberty’s contention that WIPR provided
the "equipment necessary to tape the show." The court held there that "the equipment necessary
for Alberty to conduct her job as program host 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." Since Alberty provided, or obtained
sponsors to provide, the costumes, jewelry, and other image-related supplies and services
necessary for her appearance, she provided the "tools and instrumentalities" necessary for her to
perform. The US Court of Appeals added that if it accepted Alberty’s argument, independent
contractors could never work on collaborative projects because other individuals often provide
the equipment required for different aspects of the collaboration.

The Alberty case further ruled that "while ‘control’ over the manner, location, and hours
of work is often critical to the independent contractor/employee analysis, it must be
considered in light of the work performed and the industry at issue. Considering the
tasks that an actor performs, the court does not believe that the sort of control identified
by Alberty necessarily indicates employee status."
40
In Zhengxing, a Chinese language broadcaster and translator was deemed an independent
contractor because she worked under minimal supervision. The U.S. court also found that
plaintiff was required to possess specialized knowledge before commencing her position as a
broadcaster.

41
Paragraph 13 of the Agreement provides: "AGENT agrees that talent shall abide by the rules,
regulations and standards of performance of the COMPANY covering talents, and that talent is
bound to comply with the Television and Radio Code of the Kapisanan ng mga Broadcaster sa
Pilipinas (KBP), which has been adopted by the COMPANY as its Code of Ethics. AGENT shall
perform and keep all of the duties and obligations assumed or entered by the AGENT hereunder
using its best talents and abilities. Any violation of or non-conformity with this provision by talent
shall be a valid and sufficient ground for the immediate termination of the Agreement."
(Emphasis supplied)

42
Ibid.

43
AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, 28 January 1997, 267 SCRA
47.

44
Ibid.

45
Supra note 36.

46
Rollo, p. 302.

47
Ibid.

48
The second paragraph of Article 106 of the Labor Code reads:

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.

49
Rollo, p. 90.

50
New Rules of Procedure of the National Labor Relations Commission, as amended by
Resolution 3-99, series of 1999.

51
University of the Immaculate Concepcion v. U.I.C. Teaching and Non-Teaching Personnel and
Employees Union, 414 Phil. 522 (2001).

52
Columbus Philippine Bus Corp. v. NLRC, 417 Phil. 81 (2001).

53
Section 3, Article XIII of the Constitution.

54
Republic Act No. 8424. BIR Revenue Regulations No. 19-99 also provides the following:
 SECTION 1. Scope. — Pursuant to the provisions of Sections 244 and 108 of the National
Internal Revenue Code of 1997, in relation to Section 17 of Republic Act No. 7716, as
amended by Section 11 of Republic Act 8241, these Regulations are hereby promulgated
to govern the imposition of value-added tax on sale of services by persons engaged in
the practice of profession or calling and professional services rendered by general
professional partnerships; services rendered by actors, actresses, talents, singers and
emcees, radio and television broadcasters and choreographers; musical, radio,
movie, television and stage directors; and professional athletes.

SECTION 2. Coverage. — Beginning January 1, 2000, general professional partnerships,

professionals and persons described above shall be governed by the provisions of
Revenue Regulation No. 7-95, as amended, otherwise known as the "Consolidated Value-
Added Tax Regulations". xxx

55
Otherwise known as the Expanded Value-Added Tax Law.

56
Act amending Republic Act No. 7716, otherwise known as the Expanded Value-Added Tax Law
and other pertinent provisions of the National Internal Revenue Code, as amended (December
20, 1996).

57
Section 109 of the NIRC provides:

Exempt transactions. – The following shall be exempt from the value-added tax:

xxx

(o) Services rendered by individuals pursuant to an employer-employee

relationship; xxx

58
Singapore Airlines Ltd. v. Hon. Cruz, etc., et al., 207 Phil. 585 (1983).
5. G.R. No. 192998 April 2, 2014

BERNARD A. TENAZAS, JAIME M. FRANCISCO and ISIDRO G. ENDRACA,

Petitioners,
vs.
R. VILLEGAS TAXI TRANSPORT and ROMUALDO VILLEGAS, Respondents.

DECISION

REYES, J.:

This is a petition for review on certiorari1 filed under Rule 45 of the Rules of Court, assailing the
Decision2 dated March 11, 2010 and Resolution3 dated June 28, 2010 of the Court of Appeals (CA) in CA-
G.R. SP No. 111150, which affirmed with modification the Decision4 dated June 23, 2009 of the National
Labor Relations Commission (NLRC) in NLRC LAC Case No. 07-002648-08.

The Antecedent Facts

On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M. Francisco (Francisco) filed a complaint for
illegal dismissal against R. Villegas Taxi Transport and/or Romualdo Villegas (Romualdo) and Andy
Villegas (Andy) (respondents). At that time, a similar case had already been filed by Isidro G. Endraca
(Endraca) against the same respondents. The two (2) cases were subsequently consolidated.5

In their position paper,6 Tenazas, Francisco and Endraca (petitioners) alleged that they were hired and
dismissed by the respondents on the following dates:

Name Date of Hiring Date of Dismissal Salary

Bernard A. Tenazas 10/1997 07/03/07 Boundary System
Jaime M. Francisco 04/10/04 06/04/07 Boundary System
Isidro G. Endraca 04/2000 03/06/06 Boundary System7

Relaying the circumstances of his dismissal, Tenazas alleged that on July 1, 2007, the taxi unit assigned
to him was sideswiped by another vehicle, causing a dent on the left fender near the driver seat. The
cost of repair for the damage was estimated at ₱500.00. Upon reporting the incident to the company, he
was scolded by respondents Romualdo and Andy and was told to leave the garage for he is already fired.
He was even threatened with physical harm should he ever be seen in the company’s premises again.
Despite the warning, Tenazas reported for work on the following day but was told that he can no longer
drive any of the company’s units as he is already fired.8

Francisco, on the other hand, averred that his dismissal was brought about by the company’s unfounded
suspicion that he was organizing a labor union. He was instantaneously terminated, without the benefit of
procedural due process, on June 4, 2007.9

Endraca, for his part, alleged that his dismissal was instigated by an occasion when he fell short of the
required boundary for his taxi unit. He related that before he was dismissed, he brought his taxi unit to
an auto shop for an urgent repair. He was charged the amount of ₱700.00 for the repair services and the
replacement parts. As a result, he was not able to meet his boundary for the day. Upon returning to the
company garage and informing the management of the incident, his driver’s license was confiscated and
was told to settle the deficiency in his boundary first before his license will be returned to him. He was no
longer allowed to drive a taxi unit despite his persistent pleas.10

For their part, the respondents admitted that Tenazas and Endraca were employees of the company, the
former being a regular driver and the latter a spare driver. The respondents, however, denied that
Francisco was an employee of the company or that he was able to drive one of the company’s units at
any point in time.11

The respondents further alleged that Tenazas was never terminated by the company. They claimed that
on July 3, 2007, Tenazas went to the company garage to get his taxi unit but was informed that it is due
for overhaul because of some mechanical defects reported by the other driver who takes turns with him
in using the same. He was thus advised to wait for further notice from the company if his unit has
already been fixed. On July 8, 2007, however, upon being informed that his unit is ready for release,
Tenazas failed to report back to work for no apparent reason.12

As regards Endraca, the respondents alleged that they hired him as a spare driver in February 2001. They
allow him to drive a taxi unit whenever their regular driver will not be able to report for work. In July
2003, however, Endraca stopped reporting for work without informing the company of his reason.
Subsequently, the respondents learned that a complaint for illegal dismissal was filed by Endraca against
them. They strongly maintained, however, that they could never have terminated Endraca in March 2006
since he already stopped reporting for work as early as July 2003. Even then, they expressed willingness
to accommodate Endraca should he wish to work as a spare driver for the company again since he was
never really dismissed from employment anyway.13

On May 29, 2008, the petitioners, by registered mail, filed a Motion to Admit Additional Evidence.14 They
alleged that after diligent efforts, they were able to discover new pieces of evidence that will substantiate
the allegations in their position paper. Attached with the motion are the following: (a) Joint Affidavit of
the petitioners;15 (2) Affidavit of Good Faith of Aloney Rivera, a co-driver;16 (3) pictures of the
petitioners wearing company shirts;17 and (4) Tenazas’ Certification/Record of Social Security System
(SSS) contributions.18

The Ruling of the Labor Arbiter

On May 30, 2008, the Labor Arbiter (LA) rendered a Decision,19 which pertinently states, thus:

In the case of complainant Jaime Francisco, respondents categorically denied the existence of an
employer-employee relationship. In this situation, the burden of proof shifts to the complainant to prove
the existence of a regular employment. Complainant Francisco failed to present evidence of regular
employment available to all regular employees, such as an employment contract, company ID, SSS,
withholding tax certificates, SSS membership and the like.

In the case of complainant Isidro Endraca, respondents claim that he was only an extra driver who
stopped reporting to queue for available taxi units which he could drive. In fact, respondents offered him
in their Position Paper on record, immediate reinstatement as extra taxi driver which offer he refused.

In case of Bernard Tenazas, he was told to wait while his taxi was under repair but he did not report for
work after the taxi was repaired. Respondents[,] in their Position Paper, on record likewise, offered him
immediate reinstatement, which offer he refused.

We must bear in mind that the complaint herein is one of actual dismissal. But there was no formal
investigations, no show cause memos, suspension memos or termination memos were never issued.
Otherwise stated, there is no proof of overt act of dismissal committed by herein respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at bar.

The situations contemplated by law for entitlement to separation pay does [sic] not apply.

WHEREFORE, premises considered, instant consolidated complaints are hereby dismissed for lack of
merit.

SO ORDERED.20

The Ruling of the NLRC

Unyielding, the petitioners appealed the decision of the LA to the NLRC. Subsequently, on June 23, 2009,
the NLRC rendered a Decision,21 reversing the appealed decision of the LA, holding that the additional
pieces of evidence belatedly submitted by the petitioners sufficed to establish the existence of employer-
employee relationship and their illegal dismissal. It held, thus:

In the challenged decision, the Labor Arbiter found that it cannot be said that the complainants were
illegally dismissed, there being no showing, in the first place, that the respondent [sic] terminated their
services. A portion thereof reads:

"We must bear in mind that the complaint herein is one of actual dismissal. But there were no formal
investigations, no show cause memos, suspension memos or termination memos were never issued.
Otherwise stated, there is no proof of overt act of dismissal committed by herein respondents.

We are therefore constrained to rule that there was no illegal dismissal in the case at bar."

Issue: [W]hether or not the complainants were illegally dismissed from employment.

It is possible that the complainants’ Motion to Admit Additional Evidence did not reach the Labor Arbiter’s
attention because he had drafted the challenged decision even before they submitted it, and thereafter,
his staff attended only to clerical matters, and failed to bring the motion in question to his attention. It is
now up to this Commission to consider the complainants’ additional evidence. Anyway, if this Commission
must consider evidence submitted for the first time on appeal (Andaya vs. NLRC, G.R. No. 157371, July
15, 2005), much more so must it consider evidence that was simply overlooked by the Labor Arbiter.

Among the additional pieces of evidence submitted by the complainants are the following: (1) joint
affidavit (records, p. 51-52) of the three (3) complainants; (2) affidavit (records, p. 53) of Aloney Rivera y
Aldo; and (3) three (3) pictures (records, p. 54) referred to by the complainant in their joint affidavit
showing them wearing t-shirts bearing the name and logo of the respondent’s company.

xxxx

WHEREFORE, the decision appealed from is hereby REVERSED. Respondent Rom[u]aldo Villegas doing
business under the name and style Villegas Taxi Transport is hereby ordered to pay the complainants the
following (1) full backwages from the date of their dismissal (July 3, 2007 for Tena[z]as, June 4, 2004 for
Francisco, and March 6, 2006 for Endraca[)] up to the date of the finality of this decision[;] (2)
separation pay equivalent to one month for every year of service; and (3) attorney’s fees equivalent to
ten percent (10%) of the total judgment awards.

SO ORDERED.22
On July 24, 2009, the respondents filed a motion for reconsideration but the NLRC denied the same in its
Resolution23 dated September 23, 2009.

The Ruling of the CA

Unperturbed, the respondents filed a petition for certiorari with the CA. On March 11, 2010, the CA
rendered a Decision,24 affirming with modification the Decision dated June 23, 2009 of the NLRC. The CA
agreed with the NLRC’s finding that Tenazas and Endraca were employees of the company, but ruled
otherwise in the case of Francisco for failing to establish his relationship with the company. It also
deleted the award of separation pay and ordered for reinstatement of Tenazas and Endraca. The
pertinent portions of the decision read as follows:

At the outset, We declare that respondent Francisco failed to prove that an employer-employee
relationship exists between him and R. Transport. If there is no employer-employee relationship in the
first place, the duty of R. Transport to adhere to the labor standards provisions of the Labor Code with
respect to Francisco is questionable.

xxxx

Although substantial evidence is not a function of quantity but rather of quality, the peculiar
environmental circumstances of the instant case demand that something more should have been
proffered. Had there been other proofs of employment, such as Francisco’s inclusion in R.R.

Transport’s payroll, this Court would have affirmed the finding of employer-employee
relationship.1âwphi1 The NLRC, therefore, committed grievous error in ordering R. Transport to answer
for Francisco’s claims.

We now tackle R. Transport’s petition with respect to Tenazas and Endraca, who are both admitted to be
R. Transport’s employees. In its petition, R. Transport puts forth the theory that it did not terminate the
services of respondents but that the latter deliberately abandoned their work. We cannot subscribe to this
theory.

xxxx

Considering that the complaints for illegal dismissal were filed soon after the alleged dates of dismissal, it
cannot be inferred that respondents Tenazas and Endraca intended to abandon their employment. The
complainants for dismissal are, in themselves, pleas for the continuance of employment. They are
incompatible with the allegation of abandonment. x x x.

For R. Transport’s failure to discharge the burden of proving that the dismissal of respondents Tenazas
and Endraca was for a just cause, We are constrained to uphold the NLRC’s conclusion that their
dismissal was not justified and that they are entitled to back wages. Because they were illegally
dismissed, private respondents Tenazas and Endraca are entitled to reinstatement and back wages x x x.

xxxx

However, R. Transport is correct in its contention that separation pay should not be awarded because
reinstatement is still possible and has been offered. It is well[-]settled that separation pay is granted only
in instances where reinstatement is no longer feasible or appropriate, which is not the case here.

xxxx
WHEREFORE, the Decision of the National Labor Relations Commission dated 23 June 2009, in NLRC LAC
Case No. 07-002648-08, and its Resolution dated 23 September 2009 denying reconsideration thereof are
AFFIRMED with MODIFICATION in that the award of Jaime Francisco’s claims is DELETED. The separation
pay granted in favor of Bernard Tenazas and Isidro Endraca is, likewise, DELETED and their
reinstatement is ordered instead.

SO ORDERED.25 (Citations omitted)

On March 19, 2010, the petitioners filed a motion for reconsideration but the same was denied by the CA
in its Resolution26 dated June 28, 2010.

Undeterred, the petitioners filed the instant petition for review on certiorari before this Court on July 15,
2010.

The Ruling of this Court

The petition lacks merit.

Pivotal to the resolution of the instant case is the determination of the existence of employer-employee
relationship and whether there was an illegal dismissal. Remarkably, the LA, NLRC and the CA had
varying assessment on the matters at hand. The LA believed that, with the admission of the respondents,
there is no longer any question regarding the status of both Tenazas and Endraca being employees of the
company. However, he ruled that the same conclusion does not hold with respect to Francisco whom the
respondents denied to have ever employed or known. With the respondents’ denial, the burden of proof
shifts to Francisco to establish his regular employment. Unfortunately, the LA found that Francisco failed
to present sufficient evidence to prove regular employment such as company ID, SSS membership,
withholding tax certificates or similar articles. Thus, he was not considered an employee of the company.
Even then, the LA held that Tenazas and Endraca could not have been illegally dismissed since there was
no overt act of dismissal committed by the respondents.27

On appeal, the NLRC reversed the ruling of the LA and ruled that the petitioners were all employees of
the company. The NLRC premised its conclusion on the additional pieces of evidence belatedly submitted
by the petitioners, which it supposed, have been overlooked by the LA owing to the time when it was
received by the said office. It opined that the said pieces of evidence are sufficient to establish the
circumstances of their illegal termination. In particular, it noted that in the affidavit of the petitioners,
there were allegations about the company’s practice of not issuing employment records and this was not
rebutted by the respondents. It underscored that in a situation where doubt exists between evidence
presented by the employer and the employee, the scales of justice must be tilted in favor of the
employee. It awarded the petitioners with: (1) full backwages from the date of their dismissal up to the
finality of the decision; (2) separation pay equivalent to one month of salary for every year of service;
and (3) attorney’s fees.

On petition for certiorari, the CA affirmed with modification the decision of the NLRC, holding that there
was indeed an illegal dismissal on the part of Tenazas and Endraca but not with respect to Francisco who
failed to present substantial evidence, proving that he was an employee of the respondents. The CA
likewise dismissed the respondents’ claim that Tenazas and Endraca abandoned their work, asseverating
that immediate filing of a complaint for illegal dismissal and persistent pleas for continuance of
employment are incompatible with abandonment. It also deleted the NLRC’s award of separation pay and
instead ordered that Tenazas and Endraca be reinstated.28

"Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari under Rule
45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual
findings complained of are completely devoid of support from the evidence on record, or the assailed
judgment is based on a gross misapprehension of facts."29 The Court finds that none of the mentioned
circumstances is present in this case.

In reviewing the decision of the NLRC, the CA found that no substantial evidence was presented to
support the conclusion that Francisco was an employee of the respondents and accordingly modified the
NLRC decision. It stressed that with the respondents’ denial of employer-employee relationship, it
behooved Francisco to present substantial evidence to prove that he is an employee before any question
on the legality of his supposed dismissal becomes appropriate for discussion. Francisco, however, did not
offer evidence to substantiate his claim of employment with the respondents. Short of the required
quantum of proof, the CA correctly ruled that the NLRC’s finding of illegal dismissal and the monetary
awards which necessarily follow such ruling lacked factual and legal basis and must therefore be deleted.

The action of the CA finds support in Anonas Construction and Industrial Supply Corp., et al. v. NLRC, et
al.,30 where the Court reiterated:

[J]udicial review of decisions of the NLRC via petition for certiorari under Rule 65, as a general rule, is
confined only to issues of lack or excess of jurisdiction and grave abuse of discretion on the part of the
NLRC. The CA does not assess and weigh the sufficiency of evidence upon which the LA and the NLRC
based their conclusions. The issue is limited to the determination of whether or not the NLRC acted
without or in excess of its jurisdiction, or with grave abuse of discretion in rendering the resolution,
except if the findings of the NLRC are not supported by substantial evidence.31 (Citation omitted and
emphasis ours)

It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial proceedings,
"the quantum of proof necessary is substantial evidence, or such amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion."32 "[T]he burden of proof rests upon
the party who asserts the affirmative of an issue."33 Corollarily, as Francisco was claiming to be an
employee of the respondents, it is incumbent upon him to proffer evidence to prove the existence of said
relationship.

"[I]n determining the presence or absence of an employer-employee relationship, the Court has
consistently looked for the following incidents, to wit: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the
employee on the means and methods by which the work is accomplished. The last element, the so-called
control test, is the most important element."34

There is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant
evidence to prove the relationship may be admitted. Identification cards, cash vouchers, social security
registration, appointment letters or employment contracts, payrolls, organization charts, and personnel
lists, serve as evidence of employee status.35

In this case, however, Francisco failed to present any proof substantial enough to establish his
relationship with the respondents. He failed to present documentary evidence like attendance logbook,
payroll, SSS record or any personnel file that could somehow depict his status as an employee. Anent his
claim that he was not issued with employment records, he could have, at least, produced his social
security records which state his contributions, name and address of his employer, as his co-petitioner
Tenazas did. He could have also presented testimonial evidence showing the respondents’ exercise of
control over the means and methods by which he undertakes his work. This is imperative in light of the
respondents’ denial of his employment and the claim of another taxi operator, Emmanuel Villegas
(Emmanuel), that he was his employer. Specifically, in his Affidavit,36 Emmanuel alleged that Francisco
was employed as a spare driver in his taxi garage from January 2006 to December 2006, a fact that the
latter failed to deny or question in any of the pleadings attached to the records of this case. The utter
lack of evidence is fatal to Francisco’s case especially in cases like his present predicament when the law
has been very lenient in not requiring any particular form of evidence or manner of proving the presence
of employer-employee relationship.

In Opulencia Ice Plant and Storage v. NLRC,37 this Court emphasized, thus:

No particular form of evidence is required to prove the existence of an employer-employee relationship.

Any competent and relevant evidence to prove the relationship may be admitted. For, if only
documentary evidence would be required to show that relationship, no scheming employer would ever be
brought before the bar of justice, as no employer would wish to come out with any trace of the illegality
he has authored considering that it should take much weightier proof to invalidate a written
instrument.38

Here, Francisco simply relied on his allegation that he was an employee of the company without any
other evidence supporting his claim. Unfortunately for him, a mere allegation in the position paper is not
tantamount to evidence.39 Bereft of any evidence, the CA correctly ruled that Francisco could not be
considered an employee of the respondents.

The CA’s order of reinstatement of Tenazas and Endraca, instead of the payment of separation pay, is
also well in accordance with prevailing jurisprudence. In Macasero v. Southern Industrial Gases
Philippines,40 the Court reiterated, thus:

[A]n illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. 1âwphi1 The
two reliefs provided are separate and distinct. In instances where reinstatement is no longer feasible
because of strained relations between the employee and the employer, separation pay is granted. In
effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable, and backwages.

The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of
seniority rights, and payment of backwages computed from the time compensation was withheld up to
the date of actual reinstatement. Where reinstatement is no longer viable as an option, separation pay
equivalent to one (1) month salary for every year of service should be awarded as an alternative. The
payment of separation pay is in addition to payment of backwages.41 (Emphasis supplied)

Clearly, it is only when reinstatement is no longer feasible that the payment of separation pay is ordered
in lieu thereof. For instance, if reinstatement would only exacerbate the tension and strained relations
between the parties, or where the relationship between the employer and the employee has been unduly
strained by reason of their irreconcilable differences, it would be more prudent to order payment of
separation pay instead of reinstatement.42

This doctrine of strained relations, however, should not be used recklessly or applied loosely43 nor be
based on impression alone. "It bears to stress that reinstatement is the rule and, for the exception of
strained relations to apply, it should be proved that it is likely that if reinstated, an atmosphere of
antipathy and antagonism would be generated as to adversely affect the efficiency and productivity of
the employee concerned."44

Moreover, the existence of strained relations, it must be emphasized, is a question of fact. In Golden Ace
Builders v. Talde,45 the Court underscored:
Strained relations must be demonstrated as a fact, however, to be adequately supported by evidence—
substantial evidence to show that the relationship between the employer and the employee is indeed
strained as a necessary consequence of the judicial controversy.46 (Citations omitted and emphasis ours)

After a perusal of the NLRC decision, this Court failed to find the factual basis of the award of separation
pay to the petitioners. The NLRC decision did not state the facts which demonstrate that reinstatement is
no longer a feasible option that could have justified the alternative relief of granting separation pay
instead.

The petitioners themselves likewise overlooked to allege circumstances which may have rendered their
reinstatement unlikely or unwise and even prayed for reinstatement alongside the payment of separation
pay in their position paper.47 A bare claim of strained relations by reason of termination is insufficient to
warrant the granting of separation pay. Likewise, the filing of the complaint by the petitioners does not
necessarily translate to strained relations between the parties. As a rule, no strained relations should
arise from a valid and legal act asserting one’s right.48 Although litigation may also engender a certain
degree of hostility, the understandable strain in the parties’ relation would not necessarily rule out
reinstatement which would, otherwise, become the rule rather the exception in illegal dismissal cases.49
Thus, it was a prudent call for the CA to delete the award of separation pay and order for reinstatement
instead, in accordance with the general rule stated in Article 27950 of the Labor Code.

Finally, the Court finds the computation of the petitioners' backwages at the rate of ₱800.00 daily
reasonable and just under the circumstances. The said rate is consistent with the ruling of this Court in
Hyatt Taxi Services, Inc. v. Catinoy,51 which dealt with the same matter.

WHEREFORE, in view of the foregoing disquisition, the petition for review on certiorari is DENIED. The
Decision dated March 11, 2010 and Resolution dated June 28, 2010 of the Court of Appeals in CA-G.R. SP
No. 111150 are AFFIRMED.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of
the Court's Division.
MARIA LOURDES P. A. SERENO
Chief Justice

Footnotes

1 Rollo, pp. 15-23.

2 Penned by Associate Justice Ricardo R. Rosario, with Associate Justices Jose C. Reyes, Jr. and
Amy C. Lazaro-Javier, concurring; id. at 81-90.

3 Id. at 92-93.

4 Id. at 66-76.

5 Id. at 59.

6 Id. at 29-34.

7 Id. at 29.

8 Id. at 30.

9 Id.

10 Id.

11 Id. at 36-37.

12 Id. at 37-38.

13 Id. at 37.

14 Id. at 49-50.

15 Id. at 51-52.

16 Id. at 53.

17 Id. at 54.

18 Id. at 55-56.

19 Issued by LA Edgardo M. Madriaga; id. at 59-65.

20 Id. at 64-65.

21 Id. at 66-76.
22 Id. at 71-72, 75.

23 Id. at 77-79.

24 Id. at 81-90.

25 Id. at 84-90.

26 Id. at 92-93.

27 Id. at 64-65.

28 Id. at 87-89.

29 "J" Marketing Corporation v. Taran, G.R. No. 163924, June 18, 2009, 589 SCRA 428, 437,
citing Ramos v. Court of Appeals, G.R. No. 145405, June 29, 2004, 433 SCRA 177, 182.

30 590 Phil. 400 (2008).

31 Id. at 406.

32 Antiquina v. Magsaysay Maritime Corporation, G.R. No. 168922, April 13, 2011, 648 SCRA
659, 675, citing National Union of Workers in Hotels, Restaurants and Allied Industries-Manila
Pavillion Hotel Chapter v. NLRC, G.R. No. 179402, September 30, 2008, 567 SCRA 291, 305.

33 Id.

34 Jao v. BCC Products Sales, Inc., G.R. No. 163700, April 18, 2012, 670 SCRA 38, 49, citing
Abante, Jr. v. Lamadrid Bearing & Parts Corp., G.R. No. 159890, May 28, 2004, 430 SCRA 368,
379.

35 Meteoro v. Creative Creatures, Inc., G.R. No. 171275, July 13, 2009, 592 SCRA 481, 492.

36 CA rollo, p. 106.

37 G.R. No. 98368, December 15, 1993, 228 SCRA 473.

38 Id. at 478.

39 Martinez v. NLRC, 339 Phil. 176, 183 (1997).

40 G.R. No. 178524, January 30, 2009, 577 SCRA 500.

41 Id. at 507, citing Mt. Carmel College v. Resuena, 561 Phil. 620, 644 (2007).

42 Cabigting v. San Miguel Foods, Inc., G.R. No. 167706, November 5, 2009, 605 SCRA 14, 23.

43 Pentagon Steel Corporation v. Court of Appeals, G.R. No. 174141, June 26, 2009, 591 SCRA
160, 176.
44 Supra note 42, at 25-26.

45 G.R. No. 187200, May 5, 2010, 620 SCRA 283.

46 Id. at 290.

47 Rollo, p. 33.

48 Supra note 42, at 24, citing Globe-Mackay Cable and Radio Corporation v. NLRC, G.R. No.
82511, March 3, 1992, 206 SCRA 701, 712.

49 Leopard Security and Investigation Agency v. Quitoy, G.R. No. 186344, February 20, 2013,
691 SCRA 440, 452.

50 Article 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.

51 412 Phil. 295 (2001).

6. 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 Complaint7 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. Abbas16 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
 I

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. Drilon24 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:

ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Asscociate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
above decision were reached in consultation before the case was assigned to the writer of the opinion of
the Court’s Division.

ARTEMIO V. PANGANIBAN
Chief Justice

Footnotes

1
Penned by Associate Justice Renato C. Dacudao, with Associate Justices Lucas P. Bersamin and
Celia C. Librea-Leagogo, concurring; rollo, pp. 20-36.
2
Rollo, p. 38.

3
Penned by Presiding Commissioner Raul T. Aquino, with Commissioners Victoriano R. Calaycay
and Angelita A. Gacutan, concurring.

4
Penned by Labor Arbiter Edgardo M. Madriaga.

5
CA rollo, pp. 68-70.

6
Id. at 71.

7
Id. at 52.

8
Id. at 53-62.

9
Id. at 59-60.

10
Id. at 63-67.

11
G.R. No. 101438, October 13, 1992, 214 SCRA 551.

12
G.R. No. 97492, December 8, 1992, 216 SCRA 280.

13
CA rollo, pp. 73-78.

14
98 Phil. 649 (1956).

15
117 Phil. 966 (1963).

16
124 Phil. 638 (1966).

17
CA rollo, pp. 46-50.

18
Id. at 50.

19
Id. at 81-95.

20
Id. at 30-42.

21
Id. at 41-42.

22 Id. at 44-45.

23
Id. at 15.

24
G.R. No. 91307, January 24, 1991, 193 SCRA 270.

25
CA rollo, pp. 175-191.
26
Id. at 190.

27
Rollo, p. 38.

28
Section 2, Rule 45, Rules of Court.

29
Nippon Paint Employees Union-Olalia v. Court of Appeals, G.R. No. 159010, November 19,
2004, 443 SCRA 286, 292.

30
G.R. No. 152568, February 16, 2004, 423 SCRA 122.

31
Id. at 132.

32
Nippon Paint Employees Union-Olalia v. Court of Appeals, supra note 29.

33
Capiral v. Valenzuela, 440 Phil. 458, 465 (2002); Herrera v. Bollos, 424 Phil. 850, 856 (2002).

34
Regalado, Remedial Law Compendium, Vol. I, 6th ed., 141.

35
Bernardo, Sr. v. Court of Appeals, 331 Phil. 962, 980 (1996).

36
Philippine Airlines, Inc. v. NLRC, 331 Phil. 937, 958 (1996).

37
Georg Grotjahn GMBH & Co. v. Isnani, G.R. No. 109272, August 10, 1994, 235 SCRA 216, 221.

38
Eviota v. Court of Appeals, 455 Phil. 118, 129 (2003).

39
Tolosa v. NLRC, 449 Phil. 271, 282 (2003).

40
Supra note 14.

41
Supra note 15.

42
195 Phil. 325 (1981).

43
Citizens’ League of Freeworkers v. Abbas, 124 Phil. 638 (1966).

44
Doce v. Workmen's Compensation Commission, 104 Phil. 946 (1958).

45
Jardin v. NLRC, 383 Phil. 187 (2000); Paguio Transport Corporation v. NLRC, G.R. No. 119500.
August 28, 1998, 294 SCRA 657; Martinez vs. NLRC, G.R. No. 117495, May 29, 1997, 272 SCRA
793.

46
Jardin vs. NLRC, supra, at 197-198.

47
California Bus Lines, Inc. v. State Investment House, Inc., G.R. No. 147950, December 11,
2003, 418 SCRA 297, 309-310.

48
Milwaukee Industries Corporation v. Pampanga III Electric Cooperative, Inc., G.R. No. 152569,
May 31, 2004, 430 SCRA 389, 396.
49
Article 1374, New Civil Code.

50
Rivera v. Espiritu, 425 Phil. 169, 184 (2002).

51
CA rollo, pp. 68-70.

52
Republic v. David, G.R. No. 155634, August 16, 2004, 436 SCRA 577, 590-591; Philippine
National Bank v. Court of Appeals, 330 Phil. 1048, 1065-1066 (1996).

53
Laforteza v. Machuca, 389 Phil. 167, 180 (2000); Heirs of Pedro Escanlar v. Court of Appeals,
346 Phil. 158, 171 (1997); Odyssey Park, Inc. v. Court of Appeals, 345 Phil. 475, 484 (1997);
Philippine National Bank v. Court of Appeals, supra; Adelfa Properties, Inc. v. Court of Appeals,
310 Phil. 623, 637 (1995); Pingol v. Court of Appeals, G.R. No. 102909, September 6, 1993, 226
SCRA 118; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 150 Phil. 114, 125-126
(1972).

54
Philippine National Bank v. Court of Appeals, supra.

55
Valarao v. Court of Appeals, G.R. No. 130347, March 3, 1999, 304 SCRA 155, 162-165; Heirs of
Pedro Escanlar v. Court of Appeals, supra; Odyssey Park, Inc. v. Court of Appeals, supra, at 485;
Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., supra, at 130.

56
Rollo, pp. 31-32.

57
Domasig v. National Labor Relations Commission, 330 Phil. 518, 524 (1996).

58
Rollo, pp. 32-33.